Good day, and welcome to the PJT Partners Fourth Quarter 2023 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.

Thank you very much, Todd, and good morning, and welcome to the PJT Partners full year and fourth quarter 2023 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 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' 2022 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 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 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.

Thank you, Sharon, and thank you all for joining us this morning. Today, we reported financial results for quarter end, and full year 2023. Revenues were the highest in our firm's history at $1.15 billion, up 12% year-over-year. For the full year, adjusted pretax income was $183 million, and adjusted EPS was $3.27 per share. In a very challenging operating environment, we delivered differentiated results, as strong absolute performance in restructuring, coupled with strong relative performance in strategic advisory were the drivers of our record revenues. This was also a record year for senior recruiting as we added 19 partners and Managing Directors, principally in strategic advisory. Many of these hires bring key industry expertise and relationships, which will significantly augment the depth and breadth of our industry footprint. Total strategic advisory partner and MD headcount increased 20% this year, while firm-wide headcount grew 12%. This considerable hiring has weighed on our operating margins, but we are confident that in time, our shareholders will be rewarded for this investment. During the year, we repurchased almost 2.2 million share equivalents. Even with these significant share repurchases, we ended the year with more than $435 million of cash on hand, and the strongest balance sheet in our firm's history. Given the strength of our balance sheet, and our continued emphasis, on mitigating dilution resulting from our continuing investment in the franchise. Our Board has authorized a new $500 million share repurchase program, which supersedes the current repurchase authorization. After Helen takes you through our financial results, I will review our business performance, recruiting initiatives and outlook in greater detail. Helen?

Thank you, Paul. Good morning. Beginning with revenues. For the full year 2023, total revenues were $1.153 billion, up 12% year-over-year, with a significant increase in restructuring more than offsetting a significant decline in PJT Park Hill and a modest decline in strategic advisory revenues, compared to year ago levels. For the fourth quarter, total revenues were $329 million, up 17% year-over-year, with a significant increase in restructuring and a modest increase in strategic advisory revenues more than offsetting declines in PJT Park Hill. Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments. These adjustments are more fully described in our 8-K. First, adjusted compensation expense. Full year adjusted compensation expense was $805 million, up 23% year-over-year with a compensation ratio of 69.8%. Given we accrued compensation at 69.5% - through the first nine months of the year, the resulting fourth quarter ratio was 70.7%. We will provide guidance on our accrual for compensation expense for 2024, when we report our first quarter results. Turning to adjusted non-compensation expense. Total adjusted non-compensation expense was $165 million for the full year 2023 and $43 million for the fourth quarter. As a percentage of revenues, our adjusted non-comp expense was 14.3% for the full year 2023 and 13.2% for the fourth quarter. Adjusted non-compensation expense grew 12% in 2023 year-over-year, driven primarily by higher professional fees and higher occupancy costs. Looking ahead, we expect our total non-comp expense in 2024, to grow at a similar rate, compared to 2023. This will primarily be driven, by a step function increase in our occupancy costs, as we recently renegotiated a 15-year lease in our office space in New York. We are taking on some additional space in other regions that, we will grow into, over the next several…

Thank you, Helen. Beginning with restructuring. We saw significant growth in restructuring activity in 2023, driven by sharply higher interest rates, dislocated capital markets and slowing economic growth around the globe. Our restructuring business capitalized on this favorable backdrop, delivering stellar results for the fourth quarter, and record results for the full year. We were increasingly active, across both liability management and in-court restructuring assignments, as we continue to be the go-to advisor for complex liability management engagements. For full year 2023, we ranked number one in announced restructurings in both the U.S. and globally, and we renamed Global Restructuring Advisor of the Year by IFR for the fourth year in a row. Turning to PJT Park Hill. After record fundraising in 2021 and 2022, the 2023 environment, for alternative investments, proved to be extraordinarily difficult. The dearth of M&A and IPO activity, led to a significant reduction in capital return, leaving many alternatives investors over allocated, to the asset class and highly restrained, in making new commitments. Last year's environment was best characterized as one of elongated fundraising time lines, and downward revisions to fund size targets with an uptick in the number of postponed fundraises. Against this difficult backdrop, our fourth quarter and full year revenues in PJT Park Hill declined significantly year-on-year. On the positive side, the gap between public and private valuations has narrowed, and we now see some early signs of a more constructive fundraising environment. Turning to Strategic Advisory. 2023 marked the second year in a row of meaningfully below trend global M&A activity, with announced global M&A volumes, declining to levels not seen in a decade. The uncertainty caused by volatile markets, sharply higher interest rates, and greater economic and geopolitical uncertainty, all weighed on the pace of strategic activity. Our fourth quarter…

[Operator Instructions] Our first question will come from Devin Ryan with JMP Securities. Please go ahead.

Thanks. Good morning, everyone.

Good morning, Devin. Good morning.

Good morning. So just want to, Paul, start maybe on some of the outlook commentary and just talk a little bit about the interplay between restructuring and the strategic advisory M&A advisory business. And I'm curious, does this feel like a 2020 to 2021 environment, where you had a record 2020, with your restructuring strength. And then into 2021, you kind of saw a normalizing restructuring, and that was then offset by kind of the M&A growth and recovery. So do you kind of see that scenario? Or based on what you're seeing today, do you see a scenario where maybe both businesses are working - and then the M&A part of the business is recovering to the extent that kind of macro environment you laid out plays out?

Yes, I think it's a far different bridge from 2021 versus '23, '24. So let's look at restructuring first. Restructuring was an incredibly accelerated, but abbreviated cycle in 2020 and the time frame for these executions all compressed, just given the urgency of the situation. And then it stopped raining, the sun came out and all of the wet grounds dried up seemingly overnight. And we went from incredibly active, to inactive on a dime. Here, what we have seen, and we've been talking about this for some period of time, is a multiyear restructuring wave, and we have caught that wave early. We have caught it earlier than most. And we have done a very good job, in leveraging the increased footprint in strategic advisory, to go hand-in-hand with our restructuring capabilities, to continue to build out and expand our footprint. I expect that this cycle is a multiyear cycle. Clearly, if the economy strengthens to such an extent and rates come all the way back down, it will have some effect on this restructuring cycle. But as we look out at '24, as we look at even further than '24, we think that we're in - we're in the early to middle innings of what should be an extended restructuring cycle. And then I'd also make the point that the default rates that we've experienced for the better part of the decade were so far below trend that simply getting default rates to trend, can have a major impact on the quantum of restructuring. That's point number one. Point number two, is that if you look at, what's going on in terms of innovation, creative destruction, industries being created overnight, and having profound effects on others. There can't be winners, without there also being losers. Technology helps, but…

Yes. Got it. Okay. Thanks for all that color, Paul. And then just a follow-up question here, just on the comp ratio. In 2023, you obviously meaningfully grew the headcount we're also operating in an environment where two out of the three businesses that you're in were incredibly subdued, and then there was competitive dynamics as well. So just trying to think about relative to that 69.8% 2023 comp ratio. How you guys would frame, kind of the comp ratio in a more normalized environment for all three businesses. And maybe there's another way to, kind of explain it from just like incremental margins from here? Thanks.

Sure. Look, to me, it's a pretty simple issue, which is, we have made very significant investments in our strategic advisory business. And while it was record levels in 2023, it didn't start in 2023. And if you just look at the quantum of headcount that, we have added over the last three years. We are a demonstrably stronger, more formidable, more complete firm, as we build out these verticals, where the opportunities are extraordinary. And if you're doing that in an environment where M&A is down for two years in a row, you have this conflict between significant investment where you know you're going to get a meaningful return. But in the short-term, you don't have a return for it and it pressures margins. And as that investment begins to earn a return and the principal gaining item as you need more constructive M&A markets. And it's not just announcements, you need to get to closings, before you see it in the comp ratio, it's going to take a little bit of time. But that's pretty much what we've been doing. We're looking at all of these investments, and we're quite confident with the return, but you don't oftentimes make investment and get a day one payback. We are going to get a long-term payback, and we're going to amply reward our shareholders. And in the short-term, we're going to see our comp ratios go up. And I would just - it would be remiss of me not to add. It's not as if we're the only ones, who are seeing our comp ratios move higher, but we're doing it with complete confidence that it's the right thing. This is not where we expect the business to be, when it hits its normal stride, but it's part of the journey. And on the other side of this, there's a lot of attractive return.

Got it. I mean, is there any way to just drill down a little bit more, into like where the comp ratio could revert to, or like any way to quantify in the numbers around like where you see it going, as the businesses are either more mature, or just the backdrop is, call it "normal"?

Well look, again, part of the challenge is what's normal. And I think one of the things we've always said is anyone who talks about one comp ratio for all conditions, it's just not - it's not realistic, which is you need to overlay. Are you in a bull market? Are you in a bear market? Are you in a normalized market, as your hiring leveled out. There's no reason why our comp ratios should not be in line with peer ratios in time. But you need to sort of assume a set of circumstances. The reality is that, most firms who came well before us were operating in the circa 60% comp ratio, some a little higher, some a little bit lower. So unless until we have other evidence, to suggest that that's not the right ratio. That's pretty much where this should trend over time.

Got it. Okay. That's all I need. Thank you, guys.

Sure.

Thank you. Our next question comes from James Yaro with Goldman Sachs. Please go ahead.

Good morning, and thanks for taking my questions. Paul, maybe - just to start…?

Good morning, James.

Good morning. Just to start, with sort of a bigger picture macro one. I think we're seeing generally mix, but generally, somewhat better industry announced M&A trends. I'd love to get your mark-to-market on how you are thinking about the macro, and how that's factoring into conversations, in corporate boardrooms. And then separately, how are M&A dialogues evolving with sponsors?

Right. Well, look, it's - I'm not sure that there's a one-size-fits-all answer to that. It depends on geography. It depends on industry, it's size of transaction. It's whether you're talking about strategics or sponsors. Let's just talk about sponsors first. Let's double-click on sponsors. Sponsors, people tend to focus on sponsors, as creating demand for M&A as buyers of assets. But the reality is, given their immense portfolios, they're also potential sources of supply and sellers of assets. And when you look at sponsor activity, it gets created when sponsors monetize portfolio investments, as well as when they reload and they make new investments. And the reality is, with many of their portfolio companies on the books, because they were acquired in a near zero interest rate environment. The math may not work in the very near term, to sell those assets in order for them, to get maximum value. And one of the things about, the alts world and private equity sponsors is they are incredibly adroit, at timing exits and without an incredible impetus. I think you're seeing more restrained exits, which is dampening M&A. And because you are having more restrained exits and because there is less DPI for investors. And because this flywheel is slightly out of balance, I think at the margin, their willingness to commit capital has also been subdued. And I have said that when rates actually start to be cut, as opposed to when they have crested, is when you're likely to see that market heat up in a meaningful way. And that most likely will be sometime in the middle of 2024. And on the strategic side, what I've always pointed to is, even with these very challenging conditions, company's desires to pursue M&A, to use M&A as a tool…

That's very clear. As my follow-up, somewhat related question, to what you just spoke to on the sponsor side. Fundraising remains muted, and I do appreciate your constructive commentary on Park Hill improving. But maybe you could just update us on what you're hearing from sponsors on their ability, to accelerate fundraising at this point relative to 2023, and over the course of 2024. And then what this means for the time line for Park Hill revenue to fully normalize. Is that a 2024 event or something that's more of a medium-term expectation?

I think the direction of travel begins in a positive direction in '24. But I don't think it gets fully back to normal levels in '24. I would defer that for the moment to say '25, we'll revisit that. But I think it's probably a two-year process to get to where we got to. We saw some weakening in the marketplace in the latter half of '22. It carried over to '23. I think in a similar vein to the M&A commentary. I think we've touched bottom and it's now more constructive, but that will take some time. And one of the challenges is, a little bit of an affordability issue, which is you're pulling all this capital and you're not returning a lot of capital. And with the IPO market still not really fully open and vibrant as a monetization tool. And with subdued M&A that has put a damper on it But the lack of capital that's been called, is one of the ways in, which the system gets back into equilibrium. Also, the credit markets, they're ripping tighter. You're starting to see the early signs of some dividend recap deals and the like. So, I think liquidity, is beginning to flow back in the marketplace. And I think that's all very positive for the Park Hill business in the intermediate term. But clearly, '24 will be an up year.

Okay. Thank you so much.

Thank you. Our next question will come from Steven Chubak with Wolfe Research. Please go ahead.

Hi, good morning, Paul. Good morning, Helen.

Good morning. Hello.

Good morning.

Hello, Paul, you flagged election risk in a recent interview as a potential overhang on deal activity. Admittedly, I've asked that of other management and they've been fairly dismissive of the impact. And so, I was hoping you could maybe walk through some of the election game theory, how this overhang, is going to impact deal activity across different sectors. And just what you're hearing from corporates generally, ahead of the upcoming election?

Yes. I think just - let me be really clear. What I said was that, no one was focusing on the election right now. But that come summer, that's all people are going to be talking about. And therefore, what is not a risk today, they will be a risk tomorrow. And therefore, I'm not at all surprised, to hear you say that in some of your conversations, people are not assigning that, as a principal risk today, because it's not. But I do believe that as we get into the election and as the rhetoric heats up, and as we have competing policy initiatives. And as we - I expect to have a very close election, where it is unclear where we're going to be in terms of policies, tax immigration, China relations, and the like that, that may have a freezing effect. I've also said, I think there is some possibility for some foreign intervention, to create mischief near the election. So when people talk about geopolitical risk, that's geopolitical risk, but it comes in the form of an election. And then I've made the point that, since we've had two razor thin elections that, have been decided by literally tens of thousands of votes that goes down to a county or two or three, I don't expect this third time around to be any different. And therefore, the possibility of a disputed election and what that brings, which is another form of geopolitical risk. So, I don't want to be a naysayer. I'm just simply pointing out that, I think something that is not on people's radar screens today will get on people's radar screens at some point. And we've seen that with things like the debt ceiling, where no one talks about it and then all of a sudden, they can't stop talking about it. So that would be my perspective.

Very helpful color, Paul. And just for my follow-up on capital management. Certainly a meaningful uptick in the repurchase authorization. Certainly nice to see that. Just want to better understand how we should think about the cadence of buyback, and the share count trajectory in the year ahead, given some of the impact of prior year awards, which Helen had alluded to in her prepared remarks?

Look, we are a big believers in our company and in our prospects. And we also feel an obligation to our shareholders to be good stewards of capital, and those two things go hand-in-hand. So you should expect us to continue, certainly relative to others, to be very aggressive in using our capital to buyback our stock, because we can capture value and we can avoid dilution for our shareholders. And if you look back over the last eight years, how well we've accomplished that goal, that's the playbook we intend to use for the next eight years, and eight years after that and beyond. What we've also said, is we happen to come into this year with our best balance sheet in the firm's history and you measure it on any basis, whether it's cash, cash less comp payable net working capital, any dimension. And therefore, we have more firepower now than we've ever had. So, you should expect our open market purchases to be as robust, if not more robust than they've ever been. The other thing that we're also mindful of is, if we're going to repurchase, we've typically tried to do it in the front half of the year, more so just, because we can match repurchases better with awards that get issued. But there's no there's no black box algorithm. It's just a basic philosophy, which is always be prudent with the balance sheet. Always put shareholders first and all else equal, probably bigger buyers in the first half of the year than in the second half of the year just, because it's easier for us to do matching.

I would just add, if you look over the last two years, our repurchases have pretty closely matched, what we issued as part of year-end comp. And as you mentioned, there's additional shares that are coming into the share count, it will be about 1.3 million shares. And it will be our intention, to go get those back, but we may not perfectly match when they come into the account.

Great, color. Thanks so much for taking my questions.

Thanks, Steven.

Our next question will come from Brennan Hawken with UBS. Please go ahead.

Good morning. Thanks for taking my questions.

Absolutely. Good morning.

Good morning, Paul. So Helen, you touched on this in your prepared remarks, but hoping to drill down a little bit. You touched on hitting the performance metrics. I believe it was a VWAP target. I think you guys hit that in December. So, if you could confirm that. And then, I think what you said was that, impacted the fully diluted average shares, but there's more to come. Could you give us a sense of how much more we should expect, in the first quarter from that averaging in? And did it also impact the compensation expense in 2023 as well?

It did not - I'll answer that question first, it did not impact the compensation expense in 2023, the crystallization of those units. And in terms of sizing of the 1.3 million, 600,000 came in in Q4. And so another 700,000 will come in Q1.

Excellent. Thank you for that.

I'm sorry. And just to clarify, the triggering of the award in no way affected the comp ratio. But clearly, the granting of the award back in '22, was expensed beginning in '22 and it continues for a number of years. But it's not the triggering of the vesting event.

Understood. Thank you for clarifying that. Staying on expenses. So under totally appreciate that trying to predict the comp ratio, is really challenging, right, because you've got revenue and you've got expenses, and it's very hard to predict revenue in February, or beginning of February. So, if we were to just maybe lay out a scenario, right? If you were to see total revenue in 2024 grow by 10%, and you were to hire no more bankers, right? So all you had was, the existing base of employees. What sort of magnitude could we expect comp expense, to grow in a scenario like that for 2024?

So look, we're just trying to clarify your assumptions. Revenues are up 10%. Is that what you said and no hiring?

Revenue is up 10%, headcount bunch. What kind of operating leverage? I'm just trying to get a sense of the operating leverage that is embedded, given how much recruiting you guys have done and how much the comp ratio was impacted?

Yes. I mean I guess my first reaction to that is, it's really hard to answer hypotheticals because you've got to start to then say, okay, if revenues were up 10%, how is that distributed amongst our three businesses? Are they all up 10% - you start to get there. Then you get into what's the broader macro environment for talent and compensation? What are the fixed costs at the more junior levels? Or what's the associate and VP and on? What's the pyramid cost going to be? If we have a inflation or deflation, then you've got the next issue, which is, it up 10%, because the next year looks like it's going to be where the business takes off, or is it up 10%, but then you think you have a lot could come right back down there. You start to get into so many hypotheticals. If you want to talk about the comp leverage, the way I think about it is, over the last three years, we have added 35% headcount, and we've not grown our revenues near 35%. And that's what the drag is. And we're making an investment where we're confident that over time, that headcount is going to be reflected in the bottom line, and it's less about at 10% in one year, it's really sort of trying to get step function change in our revenue. As those individuals who we know are going to be quite productive on the platform, or not only productive on the platform in a relative sense, but they actually have a constructive M&A backdrop in, which to translate client progress into revenues. And then this all kind of gets back to normal. But exactly kind of how it sort of drifts back in to reduce the ratio. It's very hard to answer a hypothetical like that. You got to really sit down with all the facts at the end of year, which is why I'm confident that where we are is certainly elevated relative to trend. And I'm confident that it will return to a more normal level. But fundamentally, that's just getting the investment, to begin to show a financial return. We see a return by what these individuals are doing and how they're expanding our practice, well before you all see it in the P&L, and that's the lag effect.

Yes. No, I totally appreciate all that, Paul. I just - it'd be great maybe - I know it's sort of challenging to come up with on the slide. But it'd be great if you could try and help - because this is a one question that investors struggle with is, how do you think about the leverage that's embedded into the platform and how much is from this expansion? And so maybe you guys could consider adding some, more granular color around compensation leverage in the future? I would really appreciate that? Thanks.

More than happy to revisit it. But as I've said, that here's the paradox of the business. When M&A is going gangbusters and it's easiest financially to absorb new investment, it's hardest to attract the new investment. When M&A markets are dislocated and it's the worst possible time to absorb that investment into your P&L, is when you get the best opportunities to build the franchise. And we're just simply trying to - make the most out of it. If I learned in drivers and many decades ago was aim high in the steering wheel, look far down the road. That's what we're doing. And we're constantly measuring it to make sure we're doing the right things. But that's really where we're at. And that's the paradox, which is we invested at the depth of the market, because that's when you could get the best talent. That's when people were most willing to move. I think that continues into '24, but consistent with my commentary, as the M&A market is slowly heal. I expect that, that environment will still be quite attractive by historic levels. But not as attractive as '23 was, and then as this market begins to rebound as we know it will, for deal making, so then these ratios start to quickly return to more normal levels.

Am I last in the queue, because I had one more question, but I can requeue if there's somebody still there?

No, that's fine. Go ahead.

Okay. Great. I would love to ask about Park Hill. So Park Hill has been struggling. You spoke a good deal about, the headwinds to that business broadly and the environment. So, I totally appreciate that. But we just had a competitor of your speed to strength in their prior private asset advisory business. And that they actually were seeing revenue growth. So are you losing share in that business? Is there - so maybe some indexing to certain asset classes like real estate that happens that's causing Park Hill to show a bit of weakness when others are showing some more resilience. Could you speak to maybe consolidation in the industry, creating some problems? What do you think might be causing those divergent data points? Thank you.

It's always hard to mix and match everything, but I'll make a few observations. Number one, Park Hill had another record year in 2022. So just to put this in perspective, after setting record after record after record, you've got to look at that. So sometimes, it's easy for someone to have "growth", it's all a question of what your base is. So, we're dealing with record results in 2022, number one. Number two, you've got to look at the composition within that business as to how much of it is primary versus secondary and how the firms are weighted one versus the other. And the third is, it's not unlike the M&A business, particularly with fundraisers that are long tailed and all, timing plays a very important role and there's an idiosyncratic nature to this as to, what actually gets closed in the year, what gets pushed into the next year. And I think, if you've listened to my earlier commentary, you've no doubt heard that we - are quite constructive on a rebound in our results in 2024, which I think, just again emphasize the fact that with a slightly longer lens a lot of things that appear to be important moves one way or the other, tend to be more noise than anything else.

Okay. Does Park Hill have a pretty large real estate business, though, could you give some texture around some of the different asset classes?

Well, as a real estate business, but its principal, its largest primary fundraising business, is on the PE side and probably second largest, would be hedge funds, credit funds, and the like.

Got it. Thank you.

Absolutely.

Our next question comes from Michael Brown with KBW. Please go ahead.

Hi great. Good morning, everyone.

Good morning.

So Paul, I wanted to ask about the ramping potential here from the talent base. So maybe you could dive into where you see the productivity expansion as greatest. And I assume the expansion potential for the strategic advisory would be higher than restructuring. And so if you focus on the strategic advisory side - where is the opportunity, the highest as a recent higher season on the PJT platform? And what would be - would it be possible to get back to kind of the 2020 peak, which I think was the peak for you guys in terms of advisory revenue per partner?

I'm doing this set new benchmarks for the firm, not to go back to old benchmark. So my goal would be to be more productive, than we were in 2020. So there's absolutely no reason why we can't be and that we won't be at some point. So that's - but in order to do that, it's a function of what's the macro environment and it's a function of how much harvesting you're doing with established partners versus how much investing you're doing with new partners. So you need all of those things. But absolutely, I don't view that as the ceiling at all on what we're all about. I would observe, though, that in that period of time over the last three years, we haven't exactly seen growth in the M&A marketplace. So it's great that you pick 2020 I think the overall M&A market is pretty much flattish, plus or minus. It went up in '21, and they came down in '22, and they came back down to '23. And it was more or less a round trip. But over that period of time, we've added significant headcount. That would be the first thing. I think the second is, ultimately, where you want to be, is you want to be where the biggest wallets are. And those wallets have historically been technology, healthcare, consumer or industrials, among others. But you can't start a firm and then just focus on where the biggest wallets are. Because if you do that, you may end up fishing in the best waters in terms of wallet opportunity, but you get the best bankers. If you want to get the best bankers, you've got to be opportunistic about when those opportunities present themselves. And that's why it takes time, and that's why we…

Okay. Maybe just a quick one for Helen on the non-comp guide. I understand that the occupancy sounds like that's going up as your business grows, that makes sense. Is this increase that you talked about for 2024? Is that a kind of one year, or a transitory impact, or that essentially a permanent increase? Essentially, is there kind of a double rent impact that's impacting the guidance?

So in 2024, there will be a step function increase in occupancy costs, and it will stay elevated. So it's not a one-time increase. It's not a double occupancy issue. So, we're just pointing out that, that increase is more significant in 2024, and then it will level out a bit beyond that. And the majority of that increase has come from, the fact that we've renegotiated these leases, as I mentioned. It's a 15-year lease. So rents are higher. We also had some sublease income that was below market. So that's being mark-to-market. We are taking on some additional space. And then there is an accounting straight lining of that 15-year lease, which means in the early years we're expensing more than our cash outlay, that that's just an accounting issue. So, we're just trying to highlight that. As I mentioned, as we sit here today and look at the non-comps overall, we expect that growth will be around the growth that we had in 2023, and we'll refine that as we get further into the year.

I mean, by the way the way I think about it simply is the bad news is, we get a step function jump in our real estate expense. The good news is, we have a lot of space to grow without having to make additional commitments and that rent from an accounting perspective, just stays fixed at that number and doesn't grow. So over time, we have the same nominal debt expense - and as we add more and more people to that space, we use it more efficiently and effectively. So, we kind of take our lumps on the front end and then we get the benefit over time.

Okay. Great. Good luck continuing to fill up the space. Look forward to hearing more.

We appreciate that. Thank you.

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

I just again want to thank everyone for their interest and their support, and I look forward to visiting with all of you when we report first quarter earnings in the spring. Thank you very much, and have a great day.