Good day and welcome to the PJT Partners Q1 2020 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.

Thanks very much, Sandra and good morning and welcome to the PJT Partners first quarter 2020 earnings conference call. I am Sharon Pearson, Head of Investor Relations at PJT Partners and joining me today is Paul Taubman, our Chairman and Chief Executive Officer; and Helen Meates, 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 2019 Form 10-K, which is available on our website at pjtpartners.com. I want to remind you that the company assumes no duty to update any forward-looking statements and also 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.

Good morning and thank you all for joining us today. We hope all of you who are listening in are doing well under the circumstances because you all can imagine we are conducting this call remotely. Sharon, Helen, and I are all calling in from different locations so please forgive us in advance if we experience any technical glitches. It is nearly impossible to convey the extent to which the world has changed since our last earnings report in early February. The enormity of this health crisis and the severity of its economic impact continues to unfold in real time. The loss of life and livelihood is hard to fathom and yet in this darkness we have seen extraordinary heroism from healthcare professionals as well as untold number of essential workers across industries. On behalf of our entire firm I would like to express our collective gratitude to all those who are serving on the frontlines. And in our own small way we have tried to do our part. At the outset we identified those non-employee support staff who would be most economically impacted by the closing of our offices and work to make sure that they continued to receive paychecks. We donated all of the N95 masks we had to local hospitals, we had previous procured these masks as part of our business continuity plan. We are donating more than $2 million from the firm and its partners to COVID related causes with $1 million of that amount coming from the firm. And consistent with our firm's civic focus we have restructured our summer internship programs to ensure that our interns devote meaningful time to community service. Since this crisis began our firm has remained fully operational and client centric with almost all of our employees working remotely. Our…

Thank you Paul, good morning. Beginning with revenues, total revenues for the quarter were 200 million up 56% year-over-year. The breakdown of revenues, advisory revenues were 157 million up 50% year-over-year with significant increases in both strategic advisory and restructuring revenues. Placement revenues of 39 million up 67% year-over-year reflecting strong corporate private placement activity and an increase in some placement revenues. Turning to expenses, consistent with prior quarters we have presented the expenses with certain non-GAAP adjustments and these adjustments more fully described in our 8-K to suggested compensation expense. We accrued adjusted compensation expense at 65% of revenues for the first quarter compared with 64% in the first quarter of 2019. Given the highly uncertain macro economic backdrop we raised our accrual rate modestly and we will refresh this accrual at the end of the second quarter. Turning to adjusted non-compensation expense, total adjusted non-compensation expense was 31 million in the first quarter 2020 down slightly from the first quarter 2019 and down 7% from the fourth quarter 2019. As a percentage of revenues our non-compensation expense was 15.3% in the first quarter down from 24.2% in the first quarter 2019. We experienced a large decline in traveling related costs down 24% year-over-year as a direct impact of COVID-19. Net reduction in travelling related was highly concentrated in the last few weeks of the quarter. We also had lower professional fees in the quarter. Off taking these declines were higher occupancy costs related to the additional space we took on last year in London and the U.S. as well as higher spend in communications and IT. In response to COVID-19 we made investments to enhance our remote computing infrastructure and we provided additional support to many of our employees to help them in their transition to working remotely…

Thank you very much. We will now take our first question from David Ryan, JP Securities. Please go ahead.

Great, good morning. I am Devin Ryan with JMP. How are you guys?

We are fine Devin. Nice to hear your voice.

Yeah, you as well. I guess the first question on restructuring, and PJT clearly has leading if not the leading restructuring practice and so I think that business clearly will provide some balance in this environment. So just if you can Paul maybe try to give us some more context on how the restructuring business performed in the prior cycle, the company wasn't public but any context in terms of how the business performed, how it scaled, did it double or more in revenues or anything you can give perspective around that? And then how we should be thinking about maybe the handoff here between restructuring and M&A advisory, I appreciate M&A advisory is not going away but to the extent we see some decline in activity relative to what was expected but restructuring is accelerating and how to think about the two dynamics there on revenues? And then just the last piece of the question just around restructuring being kind of a longer tailed business towards closing, are you seeing any evidence that the cycle could be different and revenues could come in more quickly, so just some context there would be helpful?

Okay, well there's a lot in that question so let me let me try and answer it to the best of my abilities. And then please feel free to follow up so we can make sure that we're getting at all of your questions. The reality is in the last economic downturn there was a tremendous uptick in restructuring activity but I don't really pay much mind to what the predecessor business looked like at that time because we're entirely different firms today. We have nearly 50 very senior strategic advisory partners who are working hand in glove with our restructuring team and are really the arms and legs and the front end and the relationship managers providing industry expertise and real capital markets input alongside their restructuring brethren. So I think about it as we have 65 or so liability management and restructuring partners who are engaging with clients which is certainly not something that happened previously and clearly the entire world is open to us today in a way that it was a decade or more ago. So what I'm seeing is a couple of things, one, every client from the largest to the most financially secure to smaller companies now needs to think about capital structure and liquidity. It's a core strategic imperative to make sure that you have the appropriate capitalization, that you have adequate liquidity, and since no one really knows what the shape of the curve is going to be and how long until we start crawling back to normal and what's going to be the pace of the recovery and the like it causes a whole series of strategic conversation to occur that heretofore did not occur. And we are I believe uniquely positioned to have that because we built out not only…

Okay, I appreciate that color. And I'm also curious, I mean, these moments, it is important they are in terms of just the backdrop they do to your point, Paul, maybe create situations where having many capabilities around advice become more important. And so I'm just curious in terms of the conversations you're having today, it sounds like you're still quite active just in advising clients or are you seeing more companies that you maybe haven't worked with before, request to speak or how are you interacting with maybe firms that you haven't interacted with before, kind of since the pandemic started and is there more interest from firms to talk to you just given the holistic type of advice that you provide?

Yeah, and again there's a lot in that question too. I think, this has been a shock to the system to virtually every company. And the fact that we are singularly focused on giving advice that we've been operational the entire time that we're not -- we're not distracted by our own issues about capital allocation, balance sheet lending or other businesses has enabled us to be laser focused on clients. And in a world where we're operating 100% outward facing and clients are trying to make sense of the world, not surprisingly we're getting more traction with more clients. And then there are more clients who now recognize that they've got issues to deal with that heretofore they've not had to confront. And all of a sudden, I think advice is seen less as a commodity and more as a differentiating factor. So, our number of mandates and our number of dialogues are up considerably. Now, the reality is there may not be much to do in the way of actual transactions or to monetize that, but we're fine with that because we've always thought about building our business for the long-term. And the more clients that we can engage with and the more dialogues that we can have, we are confident that we're going to show very well. So we view that as a good thing and inevitably that will lead to good things. And then I think the last point I would make is, as we're all trying to adjust to a world in which we're working exclusively remotely, I will say that I think all of us find that we're probably working harder and spending more time engaging with clients because we don't have all of these other distractions. We're not traveling, we're not spending all this time coordinating meetings, we're just getting on phone calls, video conferences, exchanging messages with clients. And I think we're able to spend a lot more time for every minute of every hour and every hour of every day engaging with clients without any wasted time. So I think it's also enabled us to be far more intense and far more efficient.

Okay, great. And then just last one for me, appreciate the outlook commentary and just the update there, and I appreciate that it's difficult to be overly specific, especially just given the uncertainty in the environment. So I guess, just trying to get at you still expect revenues to be up year-over-year and so I guess, what level of -- or maybe there is another way, what could change that, here we're evolving pretty quickly in the backdrop and so what would it take to kind of change that view that revenues actually grow year-over-year?

I think I would start by saying we see the environment as it is today. So this is where we sit with four months of the year done and dusted, eight months to go. We obviously have a lot of our business in CamberView and then restructuring has a heavy retainer bed to it. So we have a lot of visibility. We have a strong backlog of announced and not yet closed transactions where while nothing is guaranteed in this world we would certainly have heightened visibility on that. And we've experienced what has been an incredibly difficult six weeks. So I don't make that comment lightly. But at the end of the day, we're dealing with such uncertain times. When I step way back, I feel that our restructuring business this year is moving upward in to the right. Our strategic advisory business in 2020 is moving upward and to the right. We have a strong CamberView business and the Park Hill business, however, will be directly impacted this year as transactions get pushed out. And when I look at the totality of that, that is what we expect is for consolidated revenues to grow for the year. And I just don't want to try and put too fine a point on it in a world where we gave more specific guidance at the beginning of the year, but that was in more normal times. I think I've tried to underpin it and let's just see how the year develops.

Yep, appreciate it very much, Paul. And thanks for taking the questions. I'll get back in the queue.

Thank you, Devin.

Thank you very much. We will now take our last question from Sumeet Mody from Piper Sandler Associates Existed [ph] Research.

Alright, great, thank you very much. Can you talk a little bit more about the appetite levels between strategic and sponsor M&A activity on either the targeted or acquired side conversations you're having for that?

On the -- I'm sorry, on the strategic advisory side was sort of, strategic conversations are being had?

Yeah.

I think it's -- sorry, go ahead.

Oh, no, no, I was just going to say I just posted on the strategic and the sponsor side, and if there's any differences kind of today in this environment that's maybe January and February, just kind of contrasting?

Yeah, I think with respect to sponsors, we've always had a different view of the world than maybe others, which is there's been all this talk about dry powder being an accelerant to M&A activity. And I think you've heard us consistently be somewhat dismissive of that view that is often espoused. And the reason for that is if you look back empirically, sponsors tend to be very much attuned to valuations. And therefore, we did see that in a bull market with high valuations sponsors were going to take activity levels to even higher levels. What we have always believed and I think it's starting to prove out is that all of that dry powder is a very helpful and healthy shock absorber in the system, which is as valuations are pressured, that all of a sudden sponsors will start to step into some of that void and deploy capital. And we're starting to see some of that. But in the very near term, in order to have sponsor activity, you need a few things. You need motivated sellers, you need attractive valuations for buyers, and very importantly you need confidence that if you're making an investment that with that money, the company's capital structure will be sufficiently righted that it won't need to go back to the well. When you try and triangulate all of those things that universe is not that large today because there's so much uncertainty in the world. I suspect that as the full extent of the economic damage to some of these companies is better known and there is a more sober assessment of what these companies need to either survive or get to the next level, there's a new evaluation paradigm, a new equilibrium. You'll see increasing levels of sponsor activity. So…

Yes, that's really helpful. Thanks for all that color, Paul. And I just wanted to pivot over to restructuring for a moment if I could. Notice the partner count hasn't changed much since 2016. You know, it's kind of the last time we saw a spike in the energy sector. I just wanted to ask with scope of today's dislocations being a little bit wider have you had any issues keeping up with the demand in this environment, was the team kind of able to kind of cater to all the clients, how should we think about capacity there and how you deal with that?

Well, as I said before, and I do mean this, I view us as having 65 restructuring partners because at the end of the day, capital structure, liquidity, balance sheet, those are strategic issues. And those dialogues are happening from the biggest companies down to the smallest. So we've increased our number of partners in restructuring. We've increased the headcount in restructuring. But most of the increase has come about as we have created this capital markets advisory capability that really sets between strategic advisory and restructuring. And many and now most and ultimately all of our strategic advisory partners are quite experienced as it relates to liability management issues, capital structure issues, capital raising and are intimately involved in these transactions. So whereas we might have had nearly half of our restructuring assignments that were cross staffed, I don't have the exact numbers, but I'm quite confident that today it's far more than half and its heading towards nearly 100%. And the issue with capacity is just making sure that you're focused on the right companies with the right relationship and the right economics, because clearly you can find yourself spending a lot of time on situations that don't amount to much. So it's really no different than any other business. You always have to be very disciplined, very focused on making sure that you're spending your time wisely. But we're quite confident that we have the capabilities and the resources to deal with a restructuring environment that turns out to be much larger and that persist for a much longer period of time.

Alright, thanks. And just one last one for me, thanks for the color on the hiring expectations and for that pace to maybe slow a little bit through this quarantine but I just wanted to follow up and I know it's still early days, but the last crisis we had kind of a unique opportunity for some of that high performing talent at the bulge bracket and boutique competitors kind of ship moving around. Just wondering if you guys expect to see those same opportunities this cycle, maybe after the quarantine starts to be lifted, that's what they'll be looking out for?

Look, we have maintained for a long time that the caliber of individual who is prepared to leave a bulge bracket firm to come to a firm like ours has grown over time. And the reason for that is this business model is far more accepted and embedded in the thinking of corporations around the globe today than it was 5 or 10 years ago. So the proof of concept exists in a way today that it did not 10 years ago. And I've always maintained that the caliber of individual that is prepared to come to a firm like ours is dramatically greater today than the talent on average that was available leaving big firms 10 years ago. And therefore, this crisis doesn't change that. And I suspect that over time there will be a continuing steady flow of talent that that moves because increasingly that's where clients want their talented bankers to reside in smaller advisory focused firms, where advice is the main event and we intend to continue to grow in that regard. I was making the point, which is in a world that is entirely remote it is more difficult to have individuals really get a feel for our firm. But it's all Zoom calls and the like than it is spending a few hours together in a social environment and meeting far more people rather than doing it remotely. And the ability of on boarding individuals is greater. And we're still going to hire because there are individuals who are known to us and we know quite well and have expressed a strong interest in joining. So we're going to continue to add individuals. But I need to be realistic and let everyone know that all else equal the degree of difficulty in getting individuals fully vetted by the partners and having those individuals completely confident that they understand what it's like to work at our firm has to be more difficult in a completely remote environment. So in the near term, I suspect it slows that in no way should be viewed as an indicator about what our long term objectives or aspirations are.

Got it, great, thanks for taking my questions Paul.

Great, well thank you all for listening in today. And we wish that all of you stay safe and that the next time we get together we are experiencing the healing process in our country and the world. And we thank you for your time and support and look forward to speaking to you in our next earnings report. Thank you.

This concludes today's call. Thank you for your participation, you may now disconnect.