PJT Partners Q4 2024 Earnings Report

PJT Partners EPS Results

• Actual EPS: $1.90
• Consensus EPS: $1.19
• Beat/Miss: Beat by +$0.71
• One Year Ago EPS: $0.96

PJT Partners Revenue Results

• Actual Revenue: $477.30 million
• Expected Revenue: $384.64 million
• Beat/Miss: Beat by +$92.66 million
• YoY Revenue Growth: +45.30%

PJT Partners Announcement Details

• Quarter: Q4 2024
• Date: 2/4/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, February 4, 2025
• Conference Call Time: 8:30AM ET

PJT Partners (NYSE:PJT), an investment bank, provides various strategic and capital markets advisory, restructuring and special situations, and shareholder advisory services to corporations, financial sponsors, institutional investors, and governments worldwide. It offers advisory services to clients on various transactions, including mergers and acquisitions (M&A), spin-offs, activism defense, contested M&A, joint ventures, minority investments, and divestitures. The company also advises private and public company boards and management teams on strategies for building productive investor relationships with a focus on shareholder engagement; and strategic investor relations; environmental, social, and governance matters; and other investor-related matters. In addition, it provides advisory services related to debt and acquisition financings; structured product offerings; public equity raises, including initial public offering and SPAC offerings; and private capital raises for early and later stage companies, as well as other capital structure related matters. Further, the company offers advisory services in financial restructurings and reorganizations; liability management; distressed mergers and acquisitions; and to management teams, corporate boards, sponsors and creditors. Additionally, it provides private fund advisory and fundraising services for a range of investment strategies; and advisory services to general and partners on liquidity and other structured solutions. The company was formerly known as Blackstone Advisory Inc. and changed its name to PJT Partners Inc. in March 2015. PJT Partners Inc. was incorporated in 2014 and is headquartered in New York, New York.

PJT Partners Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the PJT Partners 4th Quarter 2024 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma'am.

[Sharon Pearson, Head, Investor Relations at PJT Partners]

Thank you very much, and good morning, and welcome to the PJT Partners full year and Q4 2024 earnings conference call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners and joining me today is Paul Taubman, our Chairman and Chief Executive Officer and Helen Mapes, our Chief Financial Officer. Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward looking statements. These forward looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2023 Form 10 ks, which is available on our website at pjtpartners dotcom.

[Sharon Pearson, Head, Investor Relations at PJT Partners]

I want to remind you that the company assumes no duty to update any forward looking statements and that the presentation we make today contains non GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these non GAAP metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website. And with that, I'll turn the call over to Paul.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Thank you, Sharon. Thank you all for joining us today. Earlier this morning, we reported record setting full year 2024 results. Highlights include record revenues, record adjusted pre tax income and record adjusted EPS. For the full year 2024, revenues were 1,490,000,000 dollars up 29% year on year.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Adjusted pretax income was $278,000,000 up 52% year on year and adjusted EPS was $5.02 per share, up 54% year on year. This strong performance was broad based as PJT Park Hill, restructuring and strategic advisory all delivered record performance. Our substantial free cash flow generation enabled us to direct a record $333,000,000 to share repurchases, while still ending the year with a record cash balance of $547,000,000 Our 2024 performance reflects continued progress in building the best advisory focused investment bank through sustained disciplined investment and a competitively advantaged culture. We remain committed to building upon the strong momentum through further investment. After Helen takes you through our financial results, I will review our business performance, recruiting initiatives and outlook in greater detail.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Helen?

[Helen Meates, CFO at PJT Partners]

Thank you, Paul. Good morning. Beginning with revenues. For the full year 2024, total revenues were $1,493,000,000 up 29% year over year. And as Paul mentioned, we had record revenues in all of our businesses.

[Helen Meates, CFO at PJT Partners]

For the Q4, total revenues were $477,000,000 up 45% year over year, also reflecting year over year growth across all of the businesses. Turning to expenses, consistent with prior quarters, we've presented the expenses with certain non GAAP adjustments, which are more fully described in our 8 ks. 1st, adjusted compensation expense. Full year adjusted compensation expense was $1,030,000,000 representing a compensation ratio of 69%, which compares to 69.8% for the full year 2023. Given the higher compensation accrual for the 1st 9 months of the year, we accrued compensation at 67.9% for the Q4.

[Helen Meates, CFO at PJT Partners]

We expect our full year compensation ratio will decline in 2025 and we will provide more specific guidance when we report our Q1 results. Turning to adjusted non compensation expense. Total adjusted non compensation expense was $185,000,000 for the full year 2024, up 12% year over year. The largest driver of the year over year increase was higher occupancy costs. The increase also reflects higher travel and related expense and continued investment in Communications and Information Services.

[Helen Meates, CFO at PJT Partners]

In the Q4, total adjusted non compensation expense was $47,000,000 up 8% year over year. And as a percentage of revenues, our adjusted non compensation expense was 12.4% for the full year and 9.8% for the Q4. Overall, we expect our total non compensation expense in 2025 to grow at a similar rate to 2024, with the highest contribution to growth coming from travel expense driven by increased business related activity as well as continued investment in our technology and data infrastructure. Turning to adjusted pretax income. We reported adjusted pretax income of $278,000,000 for the full year 2024 and $107,000,000 for the Q4.

[Helen Meates, CFO at PJT Partners]

Our adjusted pretax margin was 18.6% for the full year and 22.4% for the 4th quarter. The provision for taxes as with prior quarters we presented our results as if all partnership units had been converted to shares and that all of our income was taxed at a corporate tax rate. Our effective tax rate for full year was 20.6 percent as we realized a significant tax benefit from the delivery of vested shares. The 20.6% rate was slightly below our previous estimate of 21%. We expect our 2025 effective tax rate to be at or below 2024 level given the continuing tax benefit from the delivery of vested shares, and we will provide a refined view at the end of the Q1.

[Helen Meates, CFO at PJT Partners]

Earnings per share, our adjusted as converted earnings were $5.02 per share for the full year compared with $3.27 in $23 and $1.90 for the 4th quarter compared with $0.96 for the Q4 of 2023. On the share count for the year ended 2024, our weighted average share count was 44,100,000 shares, which grew by about 2,300,000 shares or 6% year over year. The increase in the share count was due to both the share price increase and the achievement of price hurdles for Performance Awards. During the year, as Paul mentioned, we repurchased 3,100,000 share and share equivalents, including the repurchase of 489,000 share and share equivalents in the Q4. In terms of our fully diluted share count, we ended 2024 with 46,700,000 shares, up just over 1% year over year.

[Helen Meates, CFO at PJT Partners]

We are in receipt of exchange notices for an additional 324,000 partnership units and we intend to exchange these units for cash. And consistent with our capital priorities, we will continue to invest in the franchise while using excess cash to over time reduce our share count. On the balance sheet, we ended with a record $547,000,000 in cash, cash equivalents and short term investments and $490,000,000 in net working capital and we continue to have no funded debt outstanding. Finally, the Board has approved a dividend of $0.25 per share. The dividend will be paid on March 19, 2025 to Class A common shareholders of record as of March 5, 2025.

[Helen Meates, CFO at PJT Partners]

And with that, I'll turn it back to Paul.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Thank you,

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Helen. Beginning with restructuring, liability management continues to be the principal driver of activity as corporates and sponsors confront elevated interest rates, challenged business models, technological disruption and changing consumer preferences. Our Global Restructuring business again ranked number 1 in announced restructurings globally and in the U. S. And again delivered record results surpassing 2023's prior record performance.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Turning to PJT Park Hill. While global primary fundraising volumes declined for the 3rd straight year, Our performance ran counter to this trend with meaningful increases in capital raised and revenues realized. In Private Capital Solutions, our business benefited from both a strong macro environment as well as market share gains. Differentiated performance in both primary fundraising and private capital solutions enabled PJT Park Hill to deliver record revenues in 2024, besting our previous record results achieved in 2022. Turning to Strategic Advisory.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Our Strategic Advisory business also delivered record results in 2024, surpassing our previous high watermark set in 2021. Even with 2024 worldwide completed volumes down nearly 50% from 2021 levels, we achieved this record performance through significant market share gains as we benefited from an expanded industry and geographic footprint, enhanced capabilities and greater brand recognition. On the talent front, we had another strong recruiting year in 2024, expanding our industry and geographic coverage as well as enhancing our overall advisory capabilities through a sustained influx of senior hires. We intend to remain forward leaning in our recruiting efforts as we continue to build out our strategic advisory franchise. Over the past 5 years, our steadfast efforts to attract best in class talent have resulted in a 50% increase in partner count, furthering our coverage footprint and contributing to the substantial growth in firm wide revenues.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

As we look ahead, we expect the macro backdrop for primary fundraising to remain challenging in 2025, while the Private Capital Solutions business should continue to experience secular growth. In restructuring, we continue to believe we are in a multiyear cycle of elevated activity in liability management and we expect 2025 to be another active year for our liability management team. In Strategic Advisory, we expect to see higher levels of global M and A activity in 2025 as activity levels continue to normalize. We remain focused on further expanding our firm wide capabilities by broadening our industry and geographic reach. We continue to focus on providing clients with differentiated advice and differentiated outcomes.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And as before, we remain confident in our near, intermediate and long term growth prospects. With that, we will now take your questions.

[Operator]

And we will take our first question from Devin Ryan with Citizens JMP Securities. Please go ahead.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Hey, good morning, Paul. Good morning, Helen. How are you?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Good morning. Very well. Good morning, Devin.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Great. I want to start with a question that touches on both the environment and productivity. And I appreciate that partner productivity is just an output, but $13,000,000 per year end banking partner in 2024 was a new record just above 2020. Restructuring bankers, roughly 15% of the partners were obviously well above average, maybe pushing 2 times of productivity is kind of our estimate. So maybe a little bit of upside there, but they're doing great and pulling the average up.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

And then Strategic Advisory had a record year, as you mentioned, but seemingly still has a lot of upside as productivity and the environment improves. And so just thinking about the broader backdrop for productivity, how would you frame where each business is today relative to its potential, just given that you have brought in so many bankers and then you have the environment, particularly in areas like M and A and for Park Hill recovering from tough levels?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Well, you asked a question where I can give you some general guardrails, but it's hard to be overly prescriptive because a lot of this is a function of the operating environment that is presented to you. And clearly, as the environment becomes more active, all else equal, you're going to see an increase in productivity. So what we focus in on is, 4, So if we were to go back and rerun 2024 today, my expectation would be that we would be more powerful rerunning those conditions of 2024 than we were a year ago. Why? Because more of our partially built networks are now built.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

We have greater footprint. We have more continuity. We have greater brand recognition. We have a lot of attributes today that we didn't have 12 months ago. And I expect 12 months from now, we'll have more of those attributes.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

So I never like to talk about a dollar number for a couple of reasons. Our bankers aren't producing widgets. They're giving best in class advice. And sometimes you can make progress, but there's no crystallizing event, not because there's an issue with the platform, but because it's not the right time either for your clients or it's not the right macro environment. But if you said to me what's the direction of travel, it's up into the right.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Now if you then said, where do you expect the greatest upside to be? Not surprisingly, it's in the least mature of our businesses, which would be Strategic Advisory.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Okay. Thanks, Paul. Appreciate that. And then the follow-up, I'll maybe try for 1 on the comp ratio. And I also appreciate there's a lot of variables that will go into that as we think about for 2025 in that analysis.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

But can you give us a sense of whether you were able to bring down deferrals after a really good record 2024, if there's anything else that would help structurally? And then just more broadly, how we should think about the relationship of revenue growth versus comp expense growth as we look into the next year? Thanks.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Well, I think I said, I think I look back just in preparation and I look back on what we said after the Q2, what we said after the Q3. I think we've been remarkably consistent that we're set up very well to deliver comp leverage beginning in 2025. I think we delivered, if you will, a little early sign of what's to come in the Q4. But I'm not trying to manage this business on a quarter to quarter basis. What I've suggested from the very beginning is if you go back and you need to look at your comp expense over a multiyear period, because when there are onboarding costs through buyouts and the like, those get amortized over a period of time.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

You then have bankers who are on the platform, who are just ramping up. There's a mismatch and it doesn't go away the moment of the quarter or even the year after they're on boarded. And you need to look at the totality of the investment and you need to look at where the revenue recognition is and you need to take a multiyear lens to all of that. And what I've said consistently is, if you go back to 2021, the good news is we have surpassed our 2021 Strategic Advisory Revenues in 2024. But the reality is we have a lot more individuals on the platform today and whatever revenue growth you've observed over 3 years pales in comparison to the growth in headcount over those 3 years.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I think when we move forward and we don't look at a 2021, 2024, we look at a 2021 to 2025 that starts to change meaningfully and that's why we've said, you should expect to see meaningful comp leverage beginning in 2025. But it's just too early to determine exactly how much, but we've been on a journey. We said when we hit 69.8% that we thought that was as high as it would go that we had swam as far offshore. And it wouldn't necessarily get better, but it certainly wouldn't gap out further from there. I think we held to that.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Then we got into this year and we said we think we're starting to swim slightly closer to shore and we had an accrual that was just a bit better. I think we finished the year a little bit better. But as you look at the arc of all this, it is going to be 25 and beyond where you start to see us return to a more normalized levels.

[Helen Meates, CFO at PJT Partners]

And then, Devin, you'd asked about deferrals. The deferral rates vary year to year. But if you look over the last few years and you look at the average, in 2024, we would say the deferrals were below average. In 2023, they were probably above average. So we definitely had a lower deferral rate in 2024, but nothing significant in terms of changing the philosophy or the

[Helen Meates, Chief Financial Officer at PJT Partners]

structure.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

We're managing this business for the long term. We're not going to kind of just start tweaking things just to hit numbers and the like.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Yes, yes. I appreciate that. Okay. Well, thanks so much and congrats on a record year. Great year.

[Devin Ryan, Director of Financial Technology Research at Citizen JMP]

Thank you.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Thank you.

[Operator]

Thank you. And we will take our next question from James Yaro with Goldman Sachs. Please go ahead.

[James Yaro, Vice President Equity Research at Goldman Sachs]

Hi, good morning and thanks for taking my questions. Paul, I'd just like to touch on the economic growth dichotomy between the U. S. And Europe and the ramifications of that for M and A. So GDP seems to be falling slightly in Europe versus growing fairly well in the U.

[James Yaro, Vice President Equity Research at Goldman Sachs]

S. And rates are falling as a result faster in Europe, but less so in the U. S. Weighing up these impacts, maybe you could just compare and contrast the health of the M and A backdrop and outlook for each jurisdiction?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Well, I think clearly the U. S. Economy is the envy of the world and it's a remarkable growth engine. And certainly when you compare it to other countries that continues to be the case. So when you ask though about M and A activity, presumably it's from where we are today and what do the vectors, where are they pointing.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And if you said to me from where they are today, I actually think a case could be made for a meaningful uptick in European activity. Now some of that is there's a meaningful valuation disconnect between U. S. And rest of world. And at some point, notwithstanding the stronger prospects for growth, the larger uniform market in which U.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

S. Companies operate versus a lot of small European markets that aren't fully stitched together through the EU and then you've got the U. K. Standing separate and distinct. At some point, you have to ask yourself whether that valuation disconnect over penalizes European companies.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And just to be a bit contrarian, I am of the view that that probably starts to narrow maybe not instantaneously, but I think there's a perception that there's greater value to be had in Europe. So I think that potentially creates a little bit of a catalyst to activity in Europe. I also think that European governments are keenly aware that they need to stand up stronger European champions. I wonder whether or not we're going to see a more constructive view on consolidation and mergers within Europe from European company combining with other European companies to better compete on the global stage. And I think that that's a positive.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And then the reality is there are a lot of European companies that want to increase their exposure and access to the U. S. Market. So all of those things, I think suggest that all is not lost in Europe and that's one of the reasons why we've made a concerted continued effort to build out our franchise in Europe. We've had great success, but we're not looking at that investment with a view towards what happens next quarter or next year.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

But it's an integral part of the global stage. And as you have more and more multinational companies who are in each other's markets, you cannot have a leading practice without having a leading European franchise. And with every passing day, we are further along in that journey and we are quite proud of what we've built in Europe.

[James Yaro, Vice President Equity Research at Goldman Sachs]

Fascinating. Thanks so much, Paul. Maybe just one more on advisory here. Obviously, very strong results in the quarter. You talked about stronger strategic advisory being the driver there.

[James Yaro, Vice President Equity Research at Goldman Sachs]

But any additional color you could just give on the drivers of the strength? I am estimating the highest multiplier on deal electric revenues this quarter since 2019. And then separately on secondaries, I think there was I've seen some industry estimates that secondary volumes up 40% in 2024, but slowing to a central case of only 15% growth in 2025. Maybe you could just comment on the secondary's contribution in this quarter, but then on your expectations for whether the growth rate could slow in secondaries in 2025?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I think this quarter, the standout for this quarter was Strategic Advisory, no matter how you

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

look at it. If you look at it

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

sequentially or you look at it year on year, it was Strategic Advisory. If you look at it over the entire year, all of the businesses were standout performers. I think on a percentage increase, clearly the Park Hill business was up the most on a percentage increase, but not necessarily on a dollar increase. But we benefited from strength across all of our businesses. There's only 2 years in our 9 year history with all three of our businesses were up year on year.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

It was 2019 2024. And you start to see a bit of the power of the franchise. But we're not really operating in anywhere near ideal strategic advisory conditions. We're still looking at M and A activity levels that are far down from peak levels, far down based on traditional metrics of activity to GDP or to global market capitalization. As I mentioned before, the primary fundraising business continues to be quite challenged.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

There's no doubt that secondaries is a great spot. It's a very important part of our business and we are a leader in that business and I expect that to continue. I don't spend a lot of time focusing on what some report suggests is going to be up or not because reality is no one knows for sure. But as I look out further, I get greater clarity. So I could look out 3 years, 5 years and I think there's many compelling reasons as to why our Private Capital Solutions business should benefit from both long term secular trends as owners of assets in the private market want to add other liquidity alternatives to portfolios.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I continue to think that IPOs for many of these companies become less attractive options and this presents another quite attractive option that is ever more interesting to the owners of these assets. I think the issue has been that the amount of capital that's dedicated to this asset class pales in comparison to the ultimate demand. And as you marry that capability with our best in class fundraising distribution efforts through the PJT Park Hill business, we have unique abilities to attract more capital to the class and to have a superior track record in terms of being able to execute on these transactions. So it's kind of all of the above.

[James Yaro, Vice President Equity Research at Goldman Sachs]

That's very clear. Thanks so much.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Thank you, James.

[Operator]

Thank you. And we will take our next question from Brennan Hawken with UBS. Please go ahead.

[Marc Palucci, Associate Director - Equity Research at UBS Group]

Good morning. This is Mark Pelucci on for Brennan Hawken. Thanks for taking my questions. You had a record year in restructuring and I was hoping you can help us understand how much that was up versus 2023? And do you still believe revenue growth in 2025 and restructuring is feasible?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

That's absolutely feasible. I'm not prepared to guarantee it, but it's certainly feasible. I mean, we're in a multiyear wave of extended activity and liability management. If you look at 2019 to 2024, one thing that may surprise you is default rates are pretty much on top of one another. What's changed is the quantum of debt outstanding.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

So if you take a similar percentage and apply to a much larger debt stack, guess what, you have a lot more activity. It doesn't look as if rates are coming down nearly as fast as others, including myself, had thought. It's a bit stubborn on the long end. It doesn't appear as if the Fed is likely to be more accommodative in the short term. You have all of this economic uncertainty, tariffs and the like.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I imagine that the amount of pain or number of companies who find themselves wrong footed either to a different trade and tariff framework or technological change or consumer preference changes and the like, they're not going away. And I think it's a very important part of our business and I expect it to be a very important part of our business going forward. And we knew going into the year it would be active, but it could have been down a bit and still been highly active and near record. It turned out it was yet another record. I think it was comfortably another record, but probably the growth rate in that business was slower up than our other two businesses this year, but that's just a reflection of the other businesses having a different mix of opportunities in front of them.

[Marc Palucci, Associate Director - Equity Research at UBS Group]

Great. And then just for my follow-up, we've seen mixed performance in IPOs recently. What's your sense of how sponsors are reacting to the volatility? And what do you expect to be the implication that sponsors don't have that option for monetization? Thank you.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Well, I appreciate the question. I think it goes back to what I said a few moments ago on the last question. I think it probably feeds into greater interest and deployment of fund continuation vehicles and the like to create liquidity for assets. And probably at some point, it creates more impetus for there to be outright sales of companies rather than taking them public. And one of the challenges is that there are so many assets that are owned by sponsors that are very large and that still have large amounts of leverage.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And as a result, it means that a lot of the primary capital where you do IPO it is likely to go for debt reduction rather than monetization of the GP ownership. And then it means given the size of the business, the long period of time it might take to go public, I mean to be fully out of the business just as you have future sell downs. And then when you think about the number of companies that are all competing to be taken public and with a somewhat mixed record of IPOs, I just think it makes that option less attractive and it means more M and A of portfolio companies if possible. And to the extent you have companies that are perhaps too large for other sponsors to acquire, I think that fits very, very nicely into the narrative of greater fund continuation activity.

[Marc Palucci, Associate Director - Equity Research at UBS Group]

Great. Thanks for taking my questions.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Absolutely. Thank you, Mark.

[Operator]

Thank you. And we will take our next question from Brendon O'Brien with Wolfe Research. Please go ahead.

[Brendan O'Brien, Senior Vice President at Wolfe Research]

Good morning and thanks for taking my questions. To start on the advisory business, you had previously spoken about your expectation that 2024 would be more of a transition year for activity with a more significant acceleration in 2025. And while you're certainly correct on 2024, quarter to date announced M and A volumes are tracking down about 10% year on year. So I just wanted to get a sense as to what is driving the disconnect between some of the optimistic outlook commentary from you as well as many of your peers and the trends that we're actually seeing in announcements quarter to date and when we could actually begin to see activity for the broader begin to accelerate more meaningfully?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Well, first of all, I'm optimistic about our business and I've always said we're a micro story more than we are a macro story and I think we have tremendous flight space in front of us and opportunity to grow our coverage footprint and to interface with more clients and to serve more clients. And even if volumes are flat, I think our business can grow materially and can do so for an extended period of time. But on the macro, I do believe that we are heading towards a normalization of M and A activity. And if you go back and look at where we've been, 2021 was aberrational in terms of level of activity and I don't suspect we're getting back anytime soon to 2021. But after 2 punishing years of 2022 and 2023, if you recall, we had the view that it would be a modest slow recovery.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And I believe the market ended up approximately 14% in 2024. But as I just said a few moments ago, on almost every metric, it is well below historical norms. And we think that there are a lot of constructive conditions that suggest that we should get more of a normalization trade. And that's not just a 'twenty, a 'twenty five 'twenty four I mean, sorry, 'twenty five phenomenon, but that's 'twenty five and continuing. Now as far as the data, everybody has their own data sources.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

When I look at January, I make 2 observations. Number 1 is January is typically a slow month for activity levels. And if you go back 10 years and you take January and you multiply it by 12, I think 7 out of 10 or 8 out of 10 times, you end up with an annualized level that's less than what the actual year is. So I don't want to make too much of January. That would be number 1.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Number 2, I actually think that January, if you just look at the month of January, was marginally up from a year ago. So I don't take much stock one way or the other. I do recognize though that the news flow that we're experiencing every day as it relates to tariffs and the like, it will take some time to clarify and I do think that is having a short term impact. And my expectation is this is the storm before the calm. And I think that being the case, I would expect that as we get further into the year, you're likely to see an acceleration of activity.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And I think a lot of the debates we're having are how much better than the baseline of 2024. So while we can debate how restrictive antitrust review will be competition commission evaluation of deals, what I think almost everyone can agree on is taken in its entirety, it's going to be more favorable than what we experienced in 2024. We can just debate the magnitude of it. So I continue to think we're in a multiyear normalization trade here because there are a whole host of companies who are quite desirous to transform their businesses. They either need to be out of certain businesses where they no longer are scale players or they need to double down.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I think there's a more favorable environment in this administration than there was in the last administration. I think at some point, it's less an issue about where rates are and more an appreciation that the rate environment is likely to stay. And when people talk about our rates too high or rates too low, I think what they miss is the most difficult time to do M and A is when rates are high and everyone thinks they're coming down, because when everyone thinks they're coming down, sellers don't sell. And where we're getting to now is probably a new normal. So all of this in my mind leads to a normalization trade, but I'm not counting on a runaway year in 2025, but I still have every expectation it will be an up year and it will be just another continuation of that normalization.

[Brendan O'Brien, Senior Vice President at Wolfe Research]

That's helpful. And for my follow-up, also I guess on the Strategic Advisory business. Now Paul, when you entered last year with what you, I believe, categorized as an abnormally depressed backlog, but yet you were able to deliver record results in Strategic Advisory, which would imply that you've seen a pretty significant improvement in the velocity or the turnover of that backlog. So it'd be great to get a sense as to where we are today in terms of time to close transactions relative to what you would categorize as more normal levels. And given many of your peers have continued to cite this elongation of deal timelines, why would you be seeing a more significant improvement here relative to your peers?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I mean, I can't really comment on anyone other than ourselves. We came in the last year with a historically low level of announced pending close, but I also said that we had a very robust pre announced pipeline. And I think what ended up happening was we had a lot of transactions that had yet to be announced that were announced, were announced relatively early in the year and completed during the year. And we had a very broad base of assignments. And there weren't that many very large deals that closed in the year for us.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I think we have a much bigger backlog of large transactions that we expect to close in 2025. So that's kind of our story. And you are correct that as the year went on, we became more optimistic about 2024. We've always been optimistic about 2025 and beyond. That continues, but I think we had an added bonus that we were able to deliver record results in 2024.

[Brendan O'Brien, Senior Vice President at Wolfe Research]

Great. That's great color. Thank you for taking my questions.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Absolutely. Thank you.

[Operator]

Thank you. And we will take our next question from Aidan Holl with KBW. Please go ahead.

[Aidan Hall, Vice President at Keefe, Bruyette & Woods (KBW)]

Great. Good morning, everyone. Thanks for taking my questions. Sure. Maybe just a follow-up on Brendan's question, but more on the backlog of activity for restructuring.

[Aidan Hall, Vice President at Keefe, Bruyette & Woods (KBW)]

It sounds like the pipeline for advisory is considerably higher, Park Hill and kind of both lines of business there continues to see strong momentum. But curious how you would characterize like the restructuring backlog relative to maybe this time last year, so like flat or slightly lower? Anything to kind of help contextualize that would be appreciated.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I just say broadly consistent. I mean, we were quite active last year. We're quite active now. We think we're in a multiyear period of extended activity. And if you go back, I think most of the investor concerns about that business for us was that it was somehow kind of come plummeting back to earth.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

And we've said consistently that's not the case. That continues not to be the case. But when year in and year out, you're delivering record results, it's very hard to calibrate, is it going to be yet another record? It may well be. I'm not suggesting that it couldn't be.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I'm just not prepared to tell you it will be. And what I am prepared to tell you is that it's very robust activity. We are a market leader. And as I look at the macro conditions out there, I don't see them becoming less hospitable to liability management.

[Aidan Hall, Vice President at Keefe, Bruyette & Woods (KBW)]

Got it. Okay. I appreciate that color. Maybe just as my follow-up on kind of talent and the outlook for 2025. I appreciate you guys have a lot of white space in advisory, but any main areas of focus you're trying to really focus on right now or teams that you think you're on the cusp of being at critical mass that you may need a couple more bankers in?

[Aidan Hall, Vice President at Keefe, Bruyette & Woods (KBW)]

And then just as a base case, any way to be thinking about hiring expectations in 2025?

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Look, on the hiring expectations, we've got the micro is helping us and the macro is hurting us. So the micro is like every day that goes by that we deliver success and we deliver success for clients and that we have more folks who come over from other platforms and see that this is a differentiated platform. It's a better place to work and it's better positioned to support their clients. Just makes our story easier. So every day that goes by, we have an easier story to communicate to potential hires.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

I've also said though that when the world heats up, that makes it harder from a macro perspective for talent to leave their incumbent position whether they're happy or not just because when they're sitting atop a lot of activity, no one really enjoys having to take their gardening leave and the like. So I think we've got the micro tailwinds. We have the macro headwinds. That's one of the reasons why we were so focused on continuing the recruiting in the depths of the M and A market in 2022 and 2023. We're going to continue to do it.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

We have a long pipeline of highly attractive candidates that we're in discussions with. And I expect to see meaningful conversions of those, but the timing and pacing of that is hard to know. And as far as where we have white space, I mean, my sort of answer is pretty clear. It's almost everywhere. There's almost no place where we wouldn't benefit from more talent.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

If you have a firm that's built on intellectual capital, rule number 1 is make sure you have more intellectual capital and better intellectual capital than anyone else. That is our investment philosophy and that is unchanging.

[Aidan Hall, Vice President at Keefe, Bruyette & Woods (KBW)]

I'll leave it there. Appreciate the color, Paul.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Thank you.

[Operator]

Thank you. That concludes our question and answer period. I would now like to turn the call back over to Mr. Taubman for closing remarks.

[Paul Taubman, Founder, Chairman & CEO at PJT Partners]

Once again, we thank everyone for their interest in our company and their support and we look forward to doing this again in 3 months when we report our Q1 results. Thank you all very much.

Participants

Executives

• Sharon Pearson, Head, Investor Relations
• Paul Taubman, Founder, Chairman & CEO
• Helen Meates, CFO
• Helen Meates, Chief Financial Officer

Analysts

• Devin Ryan, Director of Financial Technology Research at Citizen JMP
• James Yaro, Vice President Equity Research at Goldman Sachs
• Marc Palucci, Associate Director - Equity Research at UBS Group
• Brendan O'Brien, Senior Vice President at Wolfe Research
• Aidan Hall, Vice President at Keefe, Bruyette & Woods (KBW)