Good morning, everyone, and welcome to the Perella Weinberg Partners Second Quarter 2025 Earnings Conference Call. [Operator Instructions]. And please be advised that today's call is being recorded. I will now turn the call over to Taylor Reinhardt, Head of Communications and Marketing. Ms. Reinhardt, please go ahead.

Thank you, operator, and welcome all. Joining me today are Andrew Bednar, Chief Executive Officer; and Alex Gottschalk, Chief Financial Officer. Before we begin, I'd like to note that this call may contain forward-looking statements, including Perella Weinberg's expectations of future financial and business performance and conditions and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guarantees of future events or performance. Please refer to Perella Weinberg's most recent SEC filings for a discussion of certain of these risks and uncertainties. The forward- looking statements are based on our current beliefs and expectations, and the firm undertakes no obligation to update any forward- looking statements. During the call, there will also be a discussion of some metrics, which are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. Perella Weinberg has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8-K, which can be found on the company's website. I will now turn the call over to Andrew Bednar to discuss our results.

Thank you, Taylor, and good morning. Today, we reported second quarter revenues of $155 million and first half revenues of $367 million. While we experienced some variance in reported results this past quarter, the leading indicators in our business, specifically our active engagement count and our gross revenue pipeline are at peak levels. Our first half revenues were flat year-over-year, though with a notable difference in composition. In the first 6 months of 2024, we had 2 transactions account for over 35% of revenue, which contributed to our record second quarter last year. In the first half of 2025, our business broadened out by industry, product and geography, and we recorded a higher average fee per engagement. These are encouraging trends, reflecting improved client targeting, prudent business selection and the overall value add we deliver to our clients. Without a doubt, we ended the quarter in a better environment than we experienced in April and May. Our teams are extremely busy with the level of client dialogue and related mandates growing, though conversion into announcements, especially for large transactions has been taking longer. Today, we're still seeing some transactions sit on the edge of announcement due to a variety of factors, including some financing challenges, valuation gaps between buyers and sellers or in certain industries, operating weakness due to a more cautious consumer. That said, with many active mandates currently in the red zone, we are confident that a broader acceleration in announcements is coming. We are business builders no matter the environment. And to that end, we have made significant investments in our senior talent through both hiring and promotions. And we have more than made up for what I noted last year was a gap in senior hiring. Between now and year-end, we have 6 partners and 3…

Thank you, Andrew. Our second quarter revenues of $155 million included $28 million related to closings that occurred within the first few days of the third quarter and which in accordance with relevant accounting principles were recorded in the second quarter. Consistent with our first quarter, our adjusted compensation margin remained at 67% of revenues. We will evaluate our accrual level in the back half of the year as we gain clarity on full year revenue and the current impact of talent investment. Our adjusted non- compensation expense of $36 million for the quarter was a meaningful drop from the prior year and prior quarter and was largely driven by the expected decline in litigation-related costs. For the first half of the year, noncompensation expenses totaled $86 million, up 9.5% from the same period last year. Given a lower anticipated run rate, we are now modeling a mid-single-digit increase for the full year, which is lower than previously indicated. Our adjusted tax rate for the first half, excluding the benefit from stock-based compensation vesting at a higher price than grant date was 30% and is in line with our expectation for the remainder of the year. Turning to capital management. In the second quarter, we returned an additional $24 million to equity holders through the net settlement of RSUs, open market purchases and dividends. In the first half of the year, we repurchased 1.7 million Class A common shares as we continue to look for opportunities to offset dilution from the vesting of stock-based compensation. Since entering the public markets 4 years ago, we have returned over $675 million to equity holders, including the repurchase of more than 32 million shares and share equivalents. At the end of the second quarter, we had 63 million shares of Class A common stock and 25 million partnership units outstanding, and we closed the quarter with $145 million in cash and no debt. This morning, we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions.

[Operator Instructions]. We will go first this morning to Devin Ryan of Citizens.

So a question on the comment about peak level of gross fee backlog, I think, is what I heard. Just want to make sure, is that including announced deals? Or is it off of announced deals? And I hate to overly focus on the backlog, but the Dealogic data that some people look at shows it down, I think, a fair amount from the beginning of the year. So maybe just talk a little bit more about what you're seeing in the backlog, just describing it, but then also the momentum and engagement that you've seen just kind of evolve here in recent months. You've given a little bit of detail in the prepared remarks, but just any more color there? And then just how it feels today with some of this complexity relative to maybe even, say, a year ago?

Yes. Good question, Devin. Let me start with some nomenclature just to make sure we're level set on what we define as pipeline versus backlog. So backlog, we think of as just the announced and pending, and I'm not going to comment on the specifics of what Dealalogic or any other third-party vendor provides, but we think about backlog as just the announced and pending. Our pipeline is all the activity that we have throughout the firm, which involves engagement letters and also situations where we believe we will be mandated. And that on an unrisk-adjusted basis is trending at peak levels right now. As I said in my remarks upfront, we have had some longer duration to convert some of our transactions to announcement. But the flow from clients, the new business reviews that I see on my dashboard are growing and they're up. Our engagement letter executions are growing and they're up. And the client activity as I do course sampling around the firm in different industries and geographies, everyone is reporting extremely busy conditions on the ground, but just challenges in getting things announced. I think the tone has changed dramatically from the end of that the middle of the second quarter, as I said, April and May were pretty tough months overall just to get people focused on getting transactions announced. I think that was an air pocket. And already in July, we have seen a reversion back to a typical -- more typical announcement cadence that looks more like the first quarter than the second quarter. So we feel good about -- looking ahead, every time we get on these calls, it's always hard to measure our progress by 1 quarter, whether it's a great quarter or a quarter that may not have hit our expectations, but we're building a business for the long term. It's just very, very challenging to get these closing dates exactly to line up with the end of the quarter. But the leading indicators I look at, Devon, looks very, very strong.

Yes. That's great color, Andrew. I appreciate the nuance there, but -- good to hear that. And then a follow-up here on the acquisition this morning, Devon Park Advisors, obviously, like the name there. But maybe more importantly, in terms of what it does for your firm. So I'm curious, I mean, obviously, it's a small deal, but does kind of push you into private capital in a more meaningful way. So just talk a little bit about how you're thinking about the private capital opportunity for the firm. Is this the backbone to then build more capabilities off of? And if that's the case, where do you want to go next? Or where are the kind of the most immediate opportunities? And then are there areas within private capital that you guys don't want to go into that maybe some of your peers are big in or maybe those are much further down the line?

Yes. Thanks, Devin. So look, Devon Park is a small firm with a big impact. They're a lot like us. They've got more of a workshop mentality than a factory. We're not in the high-volume business. We're very client-centric and very focused on making sure we get superior outcomes for our clients. And with that added value on large-scale transactions, we tend to earn a very significant fee. So we feel good about the strategic and cultural fit. Financially, it's not material to our balance sheet or income statement, but it's going to have a significant impact on how we think about and pursue opportunities with our alternative asset manager clients. And as I said upfront, it sort of ranges from traditional financial sponsors, but also private credit, infrastructure, venture and real estate. All of these aspects of alternative asset management have liquidity needs. You have private capital extending duration across the growth curve of many, many companies that, in some cases, obviates the need to go public. And in some cases, there's not an opportunity to sell. And so these liquidity needs are really driving the growth of this market, which has been quite extraordinary, and we watched it for a while and have decided that it's just too important to our clients not to be in the business. And a lot of our thinking around this transaction really emanated from reverse inquiry coming from our clients asking us if we can help with GP-led secondaries. And so this is a hand-in-glove fit for our strategy and serving the needs of our alternative asset manager clients. We think we've got a great cultural fit and the team at Devon Park has done a great job in building their business in a way that we've built our business. So we're very excited about the combination.

That's great. If I can just sneak in one more on the partner headcount. I'm not sure if you gave that, but if you could give it for where it ended June and then I heard the comment about the 6 partner promotions and then the 6 external hires. So I'm assuming that would be additive to the -- to whatever the number is in June.

Yes. We ended June at 64. Today, we're at 70, and we expect at least 76 towards the end of the year, given the new hires that we've made, subject to any types of retirements or movements. But right now, we're expecting 76 at the end of the year.

We go next now to Brendan O'Brien of Wolfe Research.

I just want to touch on the revenue outlook for the remainder of the year. I recognize the tough year-on-year comps for revenues, especially as you alluded to the 2 sizable transactions that contributed to the results last year. But just given your constructive outlook for the back half, could you speak to your confidence in your ability to meet or exceed that record 2024 revenues? Or is it just too uncertain at this juncture just given the timing of conversion and the like?

Yes. Thanks for the question. As you know, we don't give revenue guidance, so I'll stay away from that. We're very happy with our record year last year. It's always hard to replicate those types of fee events, but we're doing a good job given that we're only down 2% in the first half versus last year, which included the record second quarter. I'm very pleased with the broadening out of the business so that we're less reliant on large fee events. We always like large fee events, but we don't like being reliant on them. So I'm very happy that we broadened out the revenue base. I feel very good about engagement take-up and client receptivity. I'm super excited, as you can tell by the addition of the capabilities with the Devon Park team. Again, a lot of that reflected reverse inquiry from our clients coming in. So we feel like we'll have an immediate impact as soon as we get that transaction closed, which we expect in October. Whether transactions announce and close within a certain accounting period, as I've said, I know ad nauseam here on these calls over time. It's just very hard to predict when transactions will actually close. We are looking forward to more announcements. We've already seen a better trend in July. And exactly when things close, that's usually in someone else's hands. And so we will do our best to serve our clients and get transactions that they want announced and then we wait for the closing. So it's very hard in our business line to predict quarter-to-quarter. So I'll stay away from that. But again, the leading indicators are all quite positive.

That's helpful color. And for my follow-up, I've touched you on recruiting for a few quarters now. So it was really nice to see the pickup in hiring this quarter. So I just want to get an update as to what you're still -- like what the recruiting pipeline looks like today and how you're thinking about balancing your hiring ambitions with managing the comp ratio this year?

Yes. We're very, very pleased with our recruiting to date. It also -- as we've gone through this now since being public 4-plus years, it has a cumulative impact. So as we're hiring more people and the quality of the people we're hiring, it tends to attract more people. And so we've got a very, very steady flow and growing flow of candidates who we think could be interesting for us and exciting to add to our platform. We don't rush into those things. We're still very deliberate. We've got a process that we go through. We also are very sensitive to the integration and to the cultural impact that people will have and too many people might have on the organization. So we're still a steady grower in that sense. As I mentioned last year on the third quarter call, I do think we missed recruiting a bit last year, but we were so busy and ended up producing a record year. So we switched a little bit of our time toward recruiting, and I think we have really good results. And that, as you well know, and you've been a proponent of this, I know have questioned us in the past, so thank you for that. But as you know, this is built in growth now. So we have an opportunity now with our new team, new teammates joining the firm to add revenue that is inherent now in the base of the business. We're excited about that. On comp margin, it's just too early. We usually have a reflection of that in the fourth quarter. Right now, we're accruing where we were in the first quarter, and that's our best estimate for the year, and we're managing through our investments and sort of watching our revenue development, but it's just too early in the year to make a move on that.

We go next now to Alex Bond of KBW.

Just curious on your view related to the large cap deal outlook specifically. We've seen a number of large strategic tie-ups here announced in the past couple of weeks and seems like momentum there is building. But do you think conversations or activity levels in this part of the market are back to or maybe close to the pre-April levels? Or is there still somewhat of a maybe a wait-and-see element of some C-suite wanting to have a bit more macro clarity or maybe see how some of these recently announced deals progress before committing to a deal themselves?

Yes. Thanks for the question, Alex. I think for sure, in not just large-scale transactions, but really across the board, the [ price ] I thought on that already. And I think there's an outlook and I look forward rather than a look behind. I think people have managed through all the tariff turmoil and believe that we're going to come through that fine. It won't be without impact, but it will be fine. I described the word that most of our executives and clients are using in that regard. And you saw -- we've seen a very significant increase in large-scale transactions. They were in some industries that were not present. So that happens when you're a smaller scale player as we are. We're working on our scaling. As you know, that's a significant part of our strategy to scale up the business. But those transactions are, I think, a green light to other companies considering larger-scale transactions. So we're in a market where typically transactions beget transactions. So that trending is a very positive thing, not just for large-scale transactions, but for the broader market.

Got it. That makes sense. And then maybe just for my follow-up, specifically on the restructuring outlook through year-end. Just given obviously, the changing backdrop that we've seen since April, you had mentioned on the previous call that you're seeing heightened activity levels there kind of during that tariff uncertainty. But obviously, the backdrop has changed since then. So wondering if you could run through how you've seen activity levels or how you have seen activity levels evolve in that space in the month since.

The restructuring business is part of our broader financing and capital solutions business. And when I think about that business combined, it's trending toward a record year. So they're doing extremely well, very busy. That was one business that was uninterrupted during April and May. That trending has continued. I think generally, you go through some periods of what I would just describe as ingestion and digestion. So you have moments where you're incredibly busy on executing and then moments where you have to get back out and market. And so we go through that -- those periods of time. But generally, the trends in that business still look very strong, and we haven't seen the historic cyclicality hit yet. I'm not sure it will. I think the base of that business is generally just a higher base with less volatility and the amplitude, I think, has been reduced over time where that business just creates a pretty steady ballast for the rest of our activity around M&A and now in fund advisory.

We go next now to James Yaro with Goldman Sachs.

So you obviously substantially increased hirings here both organically and through the acquisition announced this morning. What is the scale you believe you could achieve from a senior banker base over the next few years? And any way for us to sensitize that growth or think about how much growth you could achieve? And then longer term, is there a ramification you would expect to the comp ratio from that growth?

Yes. Thanks, James. Right now, we have no limitation on hiring more partners and managing directors. It's really for us a question of whether they're the right fit, whether they have the caliber of expertise and client coverage that makes sense for us strategically and financially. So we'll continue to apply the same criteria to enter new people onto our platform. We're, again, excited about that pipeline. And so that looks very, very promising. We're also just cautious culturally in adding too many people and wanting to make sure that we're not just simply adding to headcount, but we're adding the right people and that they're going to help create value for our firm and for all of our stakeholders. So I think what we said at IPO time back in 2021 is somewhere around 5 to 7 hires, and then you probably have some retirements. So we were looking at 4 to 5 net. We'll be way above trend this year, which makes up a bit for last year. So that feels good. But generally, we're still in that same zone. That might trend upward a little bit as we grow, but also we're working very hard to make sure that we have a fair number of internal promotes. And this year, we've got a terrific class of internal partner promotes with the 6 individuals that we've previously announced. And so there's a mix of growing the partner base through internal hires as well as external hires. So we'll continue to have that mix. But as we head into the year-end, it's going to be back to about 1/3 of our partnership will have been here less than 3 years. So that's an exciting embedded growth for us that we're going to hopefully get returns on as we head into '26 and beyond.

That's great. Any update that you could provide around capital return aspirations going forward, given the scale of the organic investment and obviously, that consumes some of that capital that could otherwise be returned to investors?

Yes. We're always thinking about our share count. We're laser-focused on making sure we're growing EPS through taking down the share count. We obviously have stock-based compensation every year that naturally increases that share count. So we look to mitigate that and still will look to mitigate that. We also have natural opportunities to buy in share equivalents through net settlement as well as through our partnership exchanges, which happen every quarter. So we've got opportunities to buy in those equity positions. More recently, we have invested in the business. I think on balance, if we can invest more in the business and generate revenue and return, that is a prudent -- a very prudent use of our capital. But we won't do that to exclude the opportunity to return capital to our shareholders. But right now, it is a more attractive use of our capital to build the business with the opportunities that we have seen now in the last quarter or 2 with new hires, but also with the Devon Park transaction. So there'll be moments where we are a little heavier on investment and a little lighter on return. That's probably the zone we're in now. But we're still always mindful. As you know, we are large owners of our shares, and we do look to mitigate the impact of our stock- based comp issuance. And dividend, as you heard today, we have it maintained at $0.07.

And it appears we have no further questions this morning. Mr. Bednar, I'd like to turn things back to you, sir, for any closing comments.

Okay. Thank you very much. As you can sense from our comments, we're very excited about our future prospects. We welcome the Devon Park team to our Perella Weinberg team. I appreciate everyone joining the call today, and we'll catch up again in a few months. Thank you.

Thank you. Again, ladies and gentlemen, that will conclude today's Perella Weinberg Partners Second Quarter 2025 Earnings Call and Webcast. You may disconnect your line at this time, and have a wonderful day. Goodbye.