Good day, everyone, and welcome to today's PJT Partners Second Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Sharon Pearson, Head of Investor Relations. Ms. Pearson, please go ahead, ma'am.

Thank you very much. Good morning, and welcome to the PJT Partners Second Quarter and 6-months 2025 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' 2024 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 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. Thank you for joining us today. This is a day that puts things like earnings calls in perspective, the sad and challenging day as we mourn in the loss of life from yesterday's senseless active violence in Midtown Manhattan, just steps from our office. We grieve for those who lost their lives, pray for healing for those injured and offer comfort to the families, friends and colleagues of those impacted. And we expressed gratitude to our first responders who worked tirelessly to keep us all safe. And now we'll turn to our earnings. This morning, we reported record-setting results as revenues, adjusted pretax income and adjusted EPS all set record highs for both 3- and 6-month periods. Second quarter revenues were $407 million, up 13%. Adjusted pretax income was $80 million, up 22% and adjusted EPS was $1.54, up 29% from year ago levels. For the 6 months, revenues increased 6%, adjusted pretax income increased 13% and adjusted EPS increased 19% from year ago levels. Since our last earnings report, the market backdrop has improved appreciably. Equity valuations have come up. Market volatility has come down. Business confidence has rebounded, capital is more readily available. Last quarter's tariff uncertainties spark concerns about the potential for such dislocations to chill investment, trigger an economic slowdown and fan inflationary pressures. Today, market concerns regarding these risks are much diminished. Throughout all this tumult, we continue to invest for the long term. Our firm's commitment to investing is unshakable through bull and bear markets alike. Our North Star remains building the best advisory firm, period, one built on excellence, integrity and an unwavering commitment to client service. Nearly 10 years into this journey, we are ever closer to that goal. After Helen takes you through our financial results, I will review our business performance and outlook in greater detail. Helen?

Thank you, Paul. Good morning. Beginning with revenues. Total revenues for the second quarter were $407 million, up 13% year- over-year. For the 6 months ended June 30, total revenues were $731 million, up 6% year-over-year. Revenue growth for the second quarter and first half was primarily driven by Strategic Advisory, which was up meaningfully for both periods. Restructuring revenues rose modestly in the second quarter and were up slightly for the first half, while PJT Park Hill revenues decreased year-over-year for both periods. Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8-K. So it's adjusted compensation expense. We accrued compensation expense at 67.5% of revenues for the first half of the year compared to 69.5% for the first half of 2024. This ratio represents our current best estimate for the full year 2025. Turning to adjusted noncompensation expense. Total adjusted noncompensation expense was $52 million in the second quarter, up 18% year-over-year and $101 million for the first half, up 13.5% year-over-year. As a percentage of revenues, 12.8% in the second quarter and 13.9% in the first half. The main drivers of the expense increase for the first half of the year were higher occupancy costs and higher travel and related expenses. Overall, for the full year, we continue to expect that our non-comp expense will grow at a rate similar to our 2024 growth rate of 12%. We reported adjusted pretax income of $80 million in the second quarter and $136 million for the first 6 months. Our -- adjusted pretax margin for the second quarter was 19.7% compared to 18.2% for the same period last year and 18.6% for the first 6 months compared to 17.5% for the same period last year. Provisions to taxes as with prior quarters, we have 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 the first half of 2025 was 16.5%, and this is our current estimate for the full year. Our adjusted if-converted earnings were $1.54 per share for the second quarter, up 29% and $2.59 per share for the first 6 months, up 19% from the same period last year. For the quarter, our weighted average share count was 43.4 million shares, up 1% versus a year ago. During the second quarter, we repurchased the equivalent of approximately 642,000 shares, primarily through open market repurchases. Our repurchases in the first 6 months of the year totaled approximately 2.1 million shares. On the balance sheet, we ended the quarter with $318 million in cash, cash equivalents and short-term investments and $461 million in net working capital, and we had no funded debt outstanding. And finally, the Board has approved a quarterly dividend of $0.25 per share. I'll now turn back to Paul.

Thank you, Helen. Beginning with restructuring. We continue to experience elevated levels of liability management activity as an expanding quantum of outstanding debt, elevated interest rates and increasing economic and technological dislocations have increased demand for best-in-class liability management and restructuring advice. In this period of heightened activity, our restructuring team continued its market leadership, ranking #1 in announced and completed U.S. and global restructurings for the first half of 2025. Our restructuring team also continued its track record of exceptional financial results with first half revenues bettering last year's record performance. Our current expectation is for full year restructuring results to at least match last year's record levels. Turning to PJT Park Hill. The primary fundraising environment remains challenged as historically low levels of capital return, coupled with a market increase in first-time fund launches have contributed to a significant supply-demand imbalance. In contrast, the environment for private capital solutions is far more favorable where increased demand for alternative liquidity vehicles from GPs and LPs is better matched with investor appetite for these asset classes. For PJT Park Hill, both second quarter and first half revenues were below last year's results, principally due to timing of closings. However, we expect our strong pipeline in both primary and private capital solutions to result in stronger performance in the second half. Turning to Strategic Advisory. Our Strategic Advisory business delivered record performance in both the second quarter and first half as we benefited from increased transaction closings and increased fee realizations. While there are indications that M&A activity is picking up, the year-to-date data is mixed. Although annualized global announced M&A volumes are up 20%, the annualized number of transactions is down 15%. Of greater consequence global M&A activity remains near record lows when measured relative to total equity market capitalization or GDP. We've consistently maintained that in a world that is speeding up, companies need to respond more quickly to changes in their operating and competitive environment. This, in turn, requires companies to be more active strategically. Elevated economic and regulatory uncertainty has impeded much of this strategic interest from being active upon. As some of this uncertainty has dissipated and the business environment has become more favorable, we now see a more constructive environment for companies to pursue their strategic ambitions and our preannounced strategic advisory pipeline now stands at record levels. We continue to position ourselves for a return to more normalized levels of M&A activity. This quarter, 4 new strategic advisory partners will be joining. As we look ahead, reiterating our prior commentary, strategic advisory will be up strongly from 2024's record levels while restructuring and PJT Park Hill are expected to deliver results in line with last year's record levels. As before, we remain confident in our near intermediate and long-term growth prospects. And with that, we will now take your questions.

[Operator Instructions] We'll go first this morning to James Yaro of Goldman Sachs.

Paul, maybe I could just start with the sponsor M&A. Sponsors have remained slower in transacting, but obviously, do have a lot to sell or IPO. In your analysis, do many of these assets now have enough EBITDA that they can actually be sold for a gain? And maybe you could just comment based on your dialogues when you expect sponsor sell sides to start to come back?

Well, I think we're seeing an increase in sponsor activity across the board. And it's been challenged for a variety of reasons, and the release valves are starting to evidence themselves across the board. So while the IPO market is far from robust, it's been meaningfully more receptive to initial public offerings in recent months, which has created an opportunity to create liquidity events on portfolio companies. That's the first point. That's a necessary condition to get the return of capital right. And what we've always said is you've got to get the return of capital right, so that there is the confidence to deploy increasing quantums of capital. The second is the credit markets have become more accommodative. There's been more evidence of dividend recap transactions, which have also been a release valve. I think the third is strategic interest in a number of portfolio companies, which have been expressed, but then sort of retreated around Liberation day because of all of the uncertainties created by the proposed tariffs. As that uncertainty recedes, I think strategics are taking a pressure look at some of those portfolio companies. And then continuation vehicles remain very active and effective means of creating liquidity. So we're seeing more bids, more interest from strategics. But we're also seeing that in the portfolio effect with lots of different levers to pull that sponsors are starting to be able to increase the pace of return of capital, which I do believe is going to make them buyers of additional quantums. And when you think about selling portfolio companies of sponsors, sometimes the buyers are strategic, sometimes there are other sponsors and being able to have robust processes where you have greater confidence that other sponsors will play. And now that some of the clouds of Liberation Day have lifted greater strategic interest, it's setting up better. It's still far from perfect. But I think that healing process has begun and it portends ever-increasing levels of M&A, we believe, but slowly as we return to a more normalized cadence.

Makes a lot of sense. An adjacent question. The secondary -- or the continuation fund business, I would imagine likely slows in terms of growth with the return of regular way sponsor M&A and IPOs. Have you given any thought to what that particular dynamic means for the growth rate of continuation funds? What -- I guess, what portion of assets should be in continuation fund vehicles versus they're being put in them right now because regular way exit strategies are not available?

Yes. I don't know if it's a substitution effect. I think it -- I think every day that goes by, there's greater acceptance of continuation funds as an appropriate means to manage liquidity. I also think that there are many instances where these are assets where there's still meaningful upside and there's a desire to continue to operate and manage the asset, but there is a desire on the part of some, but by no means all of the LPs to create liquidity events. So I think of it as a tool in the toolkit that if you go back 5 years, was barely understood and rarely used. Now it's much better understood and used. And the biggest governor on using that as a tool today is simply that the dedicated pools of capital for continuation funds is relatively modest in the context of the interest on the part of asset managers to deploy continuation funds. So right now, the governor is there's just not enough dedicated capital to the asset class. And if you believe, as we do, that the returns over time will prove to be attractive returns and that this is a class of asset that should have appeal to a lot of investors. One obvious advantage is you identify the asset and you're investing in it immediately as opposed to a blind pool concept. Another advantage is you're making the investment commit and the drawdown of the funds is happening at the same time, which is not the case with the fund structure. And I can go on, but there are other benefits. So we think that it's here to stay. It has room to grow. And probably what it does is it substitutes for some of what historically would have been regular way IPO. As a problem with the regular way IPO is there's oftentimes the IPO at considerable discounts, the funds are almost inevitably used to realign the capital structure to pay down debt to make it a more normalized capital structure for a public company, then you've got to wait for the expiry of lockups and it starts to be a very long goodbye. And this may in fact be something that competes more directly with the IPO alternative.

We'll go next now to Jim Mitchell of Seaport Global Securities.

Paul, just I know one area of focus has been leveraging kind of the Park Hill franchise to build out coverage of financial sponsors on the M&A side. Can you just give us an update on where you think you are in terms of moving along that spectrum and kind of getting more into the middle market deals with financial sponsors and leveraging that Park Hill relationships?

Yes. We're still in the early days of that, but we're -- there are many different ways in which those relationships come together. So with the best-in-class primary distribution and really being the fund placement agent of choice, what we increasingly want to do is for clients to develop a holistic relationship with our firm where there's a recognition that if we're going to do the primary raise, we're also going to be the adviser of choice on the continuation funds and the like. And that's just an adjacency where having a holistic conversation with the fund manager makes all the sense in the world. And then on top of that, as we are increasingly sought after to do capital raises that oftentimes are difficult to raise the quantum of capital that might have been desired. So there's a recognition that we can deliver more capital than anyone else. It's to have those more holistic conversations about ways in which our strategic advisory colleagues can jointly cover that client and then also have dialogues related to how they think about the GP itself stake sales, liquidity events and the like. So we're increasingly having those holistic conversations, and I think it's begun to bear fruit. But when I think about where we are, we're meaningfully advanced from what we started the firm. We still have an awful lot of ground to cover before we fully mine that opportunity. So I still think we're early days.

Okay. That's helpful. And maybe, obviously seeing good growth on the Strategic Advisory side, where a lot of the hiring has been concentrated in the last few years. So does that give you a little more -- I mean, I know your comp ratios set -- your best guess is now 67.5%. But does it give you more confidence with a record pipeline in strategic advisory revenue growth picking up that you're sort of lapping the growth in strategic headcount with revenues and we can start to see some progress in the next 1 year or 2 on the comp ratio?

I think based on the indicated ratio, you're already seeing some progress. [indiscernible] I know you'd like more on all dimensions than I've got to just constantly just ask myself what's around the bend and what's around the bend could be, what's around the bend in terms of additional hiring opportunities? Or what's around the bend is competitive dynamic changing. So we're just going to be thoughtful and cautious. I've always said that as we get more productivity, we know where the direction of... [Technical Difficulty]

Mr. Taubman, it appears we have lost you on the main line, if you could switch to the backup line. Again, Mr. Taubman, Ms. Meates, we did lose your audio on the main line. Mr. Taubman, I believe we have you back, sir.

Yes.

Thank you.

Is there another question?

We do, Mr. Taubman. We'll go next now to Brendan O'Brien with Wolfe Research.

I'm sorry, I was on mute. Can you hear me?

Yes. Yes.

I cut out. I don't know if that was everybody issue, but I'm -- Paul, I guess to kick things off, I just wanted to get an update on the regulatory front. There's obviously a lot of optimism around the outlook for large cap M&A. Do the expectation for lighter regulatory touch under the current administration? And it feels like that's warranted based on the recent decisions by the FCC. However, just based on your conversations thus far, would you say that C-suites are now more willing to push forward with large-scale transactions than they were before? Or has some of the volatility and macro uncertainty been too big of a stumbling block?

I don't know if the available answer is all of the above because it might be all of the above. So let's parse that a little bit. There's no doubt that in totality, the regulatory approach of this administration is more conducive to M&A consolidation combinations than the prior administration. That's good news. Number two, I think there is more willingness on the part of this administration to negotiate remedies as opposed to having an up or down approach to some combination. So there is the sense that for the right package of negotiated points, the right behavioral remedies, you can secure approval. That's a good thing. On the other hand, there are industries, I believe, where they are consumer-facing where they may well affect the price consumers pay, where there continues to be a very heightened sensitivity, things like certain retail consolidation and the like. I think media continues to be its own area of inquiry from the SEC -- from the SEC and the like. So it's not clear that all industries are demonstrably easier to have line of sight to consolidation transactions than before, but the direction of travel is definitely better. The other sort of overlay here is until there really is a sense that the time lines from signing to closing are demonstrably shorter. And it's difficult for this administration to really deal with that directly because in many of these situations, you're dealing with many regulatory bodies around the world who have their ability to put their voice out there. You're seeing still what are by historic lenses long closing periods. And in a world that moves around quite a bit, that is volatile, having the commitment to acquire businesses where even if you have a high degree of confidence, you'll ultimately be able to complete the acquisition. If you have elongated processes and prolonged delays, the type of business momentum that you start out with at closing may be very different than what you anticipated. And I think that, that has suddenly made on some of these big deals, just getting the right price where there's enough risk reduction reflected in the price because of the fact that even if the acquisition makes sense, you may end up with 12 to 18 months where here in no man's land that, that does harm the health of the business that's received. I think that, that's complicated things in a subtle way. So bottom line, we're in a better place than where we were in the prior administration. We have clarity. There's a greater sense of willingness to negotiate remedies, more industries, more situations are likely to go through on an expedited basis. But it's still in certain industries or in certain politically sensitive areas that may also invite regulatory scrutiny from other areas of the globe. It still makes large transactions quite complicated to effect.

That's helpful color. And I guess for my follow-up, there's been a lot of optimism on the potential for a meaningful ramp in M&A in the back half now that we seem to be heading towards a resolution on tariffs and getting greater clarity on the macro outlook. But just wanted to get your views on what the trajectory of that recovery could look like, given it feels like there's significant pent-up demands for transactions, specifically on the sponsor side, but it does feel like there's still a few big question marks out there on both trade as well as interest rates and the like?

Okay. I'm going to try and rephrase the question because you came across a little glitchy. And I think it was really just saying, look, there seems to be a general sense that the direction of travel for M&A is up and to the right. But can you sort of draw it out a little bit as to what that trajectory is likely to be. I think it's going to be a gradual plus. And gradual in the sense that I think all of these clouds are lifting slowly but surely. And that would suggest that it's going to be a prolonged period of this slow gradual improvement. The plus is I've always said that what makes M&A different as many things, not least of which is the competitive responses and in situations where your competitor makes a bold strategic move, the likelihood that there's a competitive response and a follow-on transaction in an industry is high. So I kind of think that this is a gradual build as it relates to some of these storm clouds continuing to lift. And every day, it seems recently, there's just a little bit more clarity, a little less volatility and a little bit more comfort. But I think that plus is I expect that in certain industries and the like, you're not going to see one transaction that's been on the drawing board. You're going to see the second and maybe even the third as competitors were more comfortable with the status quo when no one was moving. But if there's a competitive response, the need to respond in kind is probably greater.

We'll go next now to Alex Bond of KBW.

Maybe just moving back to Park Hill and the fundraising business. So your placement fees were up quarter-over-quarter, but you did call out that the broader fundraising backdrop remains challenging. So just curious, to what extent that you may have seen an improvement here in the recent weeks as the macro backdrop has improved there? And then you also mentioned that you expect both the primary and private capital contribution to improve for Park Hill in the second half. But just trying to get a sense of if you think that contribution might be more weighted towards the private capital side given the challenging fundraising backdrop.

Right. I think it's both. I think we're just dealing with the fact that there is lumpiness in these capital raises. And if things get pushed out a little bit, they don't show up in Q2. They're showing up in Q3 and Q4. So we look much more at all the transactions, whether they're private PCS transactions or fund placement on the primary side as to how many fundraisers are in flight, and that number continues to build on both sides, notwithstanding the challenging conditions on the primary side. So we think that because of just the cadence of transactions and transaction closings, it's likely to be more in the back half of the year than in the first half of the year. But I also think that structurally, the secondary business is just in a better place because there is a better matching of supply demand. And what you're seeing on the primary side continues to be that everyone wants to fundraise and in fact, there are even more managers out trying to fund raise, but allocated capital to the asset class is diminished. And as a result, it's made fundraisings more challenging. It's taken longer to get deals done, and it's less likely to have an oversubscription than it would have been before. So the opportunity for positive surprises is reduced. The flip side is, in a world where it's more difficult to raise primary capital and primary capital is the lifeblood of the alternative asset managers, then the flight to quality is greater, and that's been a benefit for our PJT Park Hill team.

We go next now to Devin Ryan of Citizens.

Just kind of a bigger picture question, Paul, just around kind of the PJT franchise today, and you guys have built over the past handful of years. Obviously, the firm looks different than in 2021 on the prior kind of peak cycle and a number of groups that you have today are much bigger from an industry perspective than they were kind of during that time. So I'd love to just maybe get a little bit of sense of where you feel like you're really getting some net effects on that scaling [indiscernible] whether it's industries or the sectors or geographies, kind of where you feel like you're seeing evidence of network effects? And then maybe areas where you feel like there's been a lot of investments made. The momentum maybe hasn't come through yet to the public, but you're really optimistic about?

Sure. Well, the reality is every day, there's evidence of the network effect, literally every day. So I just -- if I go through my e-mails every single day, there is a connecting of dots. The call comes into one area. There's expertise, there's a relationship. They'd like to be introduced to partners at another part of our business. We identify situations. We're trying to connect dots. And where in earlier days, we might have had a relationship with the C-suite. Now we have a relationship with the C-suite and the Board, and it's more likely than we've presented to one of the companies where one of the Board members has recently experienced our advice and capabilities. So that network effect is an evidence every day. But like everything else, it takes time for it to fully be developed. So we see it every day in our ability to collaborate across geographies, across industries, across different touch points and companies. We're seeing more conflict adjudication because we may have opportunities to represent a group of creditors. At the same time, we have a strong relationship with the debtor. We're getting all of that benefit, but I still think we're really early days compared to what our vision for this franchise can be. And when you think about it by geography or industry, there are places where we really haven't made any effort at all. So that's just complete white space. There are areas where we have made small investments, and we've gotten outsized returns. And I would just highlight as one of those examples, Japan, where we've made very modest commitment of resources, but we've received outsized returns in terms of our connectivity to some of the most consequential Japanese companies and opportunities to really showcase the firm, and we're…

Great. And then can you just touch on the restructuring opportunity outside the U.S. and just kind of initiatives to scale the footprint? And I appreciate probably need a lot of headcount, but just kind of where that may go over the next couple of years?

Well, a lot of that, if you just -- we couldn't agree more. And if you just look at the increased investment that we've made in various European countries, the opportunity to do more in France, to do more in Germany, to do more across Europe. As our footprint grows, as our strategic connectivity increases, the opportunity to do more on the liability management side in Europe increases. We have significant commitment to the Gulf region. The opportunity in the Gulf to do more is considerable. We have a small but highly successful commitment to non-Japan Asia. And those opportunities have already produced great results. There's an opportunity to do more, and there's an opportunity to do more in Japan. So everywhere we have had footprint and connectivity and success outside of liability management, we're now spending time trying to make sure that those opportunities were in front of and that we're bringing our teams to those opportunities. And as a result, I think there's opportunities for us to take that liability management practice that's outside the U.S. and make it multiples the size of what it is today.

Thank you. Ladies and gentlemen, that does conclude our question-and-answer period. I would now like to turn the call back over to Mr. Taubman for any closing comments.

All right. Well, hopefully, you all could hear us, and we appreciate your support and your interest in our company, and we look forward to reconvening in 3 months when we'll report our third quarter results. So again, thank you for your support and your interest, and we wish you a good day.