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PJT Partners Inc. Reports Second Quarter 2020 Results

July 28, 2020 6:50 AM

Second Quarter Overview

Six Month Overview

Paul J. Taubman, Chairman and Chief Executive Officer, said, “The strength of our second quarter and first half results further demonstrates our significant progress in building a premier global advisory firm. While the depth and duration of this crisis remain uncertain, we view this as a unique time to continue investing in our clients, our people, our capabilities and our communities. We remain optimistic about both our near- and long-term prospects.”

NEW YORK--(BUSINESS WIRE)-- PJT Partners Inc. (the “Company” or “PJT Partners”) (NYSE: PJT) today reported Total Revenues of $232.6 million for second quarter 2020 compared with $166.7 million for the prior year quarter. GAAP Net Income and Adjusted Net Income, If-Converted were $40.9 million and $41.1 million, respectively, for the current quarter compared with $10.0 million and $21.0 million, respectively, for the prior year quarter. GAAP Diluted EPS and Adjusted EPS were $0.86 and $1.00, respectively, for the current quarter compared with $0.20 and $0.51, respectively, for the prior year quarter.

Total Revenues for the six months ended June 30, 2020 were $432.7 million compared with $294.8 million for the same period in 2019. GAAP Net Income and Adjusted Net Income, If-Converted were $72.9 million and $70.2 million, respectively, for the six months compared with $11.0 million and $32.4 million, respectively, for the same period in 2019. GAAP Diluted EPS and Adjusted EPS were $1.61 and $1.72, respectively, for the six months compared with $0.24 and $0.79, respectively, for the same period in 2019.

Revenues

The following table sets forth revenues for the three and six months ended June 30, 2020 and 2019:

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

% Change

2020

2019

% Change

(Dollars in Millions)

Revenues

Advisory

$

192.5

$

133.0

45

%

$

349.1

$

237.5

47

%

Placement

35.3

28.7

23

%

74.3

52.0

43

%

Interest Income & Other

4.8

5.0

(4

%)

9.4

5.3

78

%

Total Revenues

$

232.6

$

166.7

40

%

$

432.7

$

294.8

47

%

Three Months Ended

Total Revenues increased 40% to $232.6 million for second quarter 2020 compared with $166.7 million for the prior year quarter.

Advisory Revenues increased 45% to $192.5 million for the current quarter compared with $133.0 million for the prior year quarter. Advisory Revenues increased due to a significant increase in strategic advisory revenues.

Placement Revenues increased 23% to $35.3 million for the current quarter compared with $28.7 million for the prior year quarter. The increase in Placement Revenues was principally driven by increased corporate private placement activity.

Six Months Ended

Total Revenues increased 47% to $432.7 million for the six months ended June 30, 2020 compared with $294.8 million for the same period a year ago.

Advisory Revenues increased 47% to $349.1 million for the six months compared with $237.5 million for the same period a year ago. Advisory Revenues principally benefited from an increase in strategic advisory revenues.

Placement Revenues increased 43% to $74.3 million for the six months compared with $52.0 million for the same period a year ago. The increase in Placement Revenues was principally driven by increased corporate private placement activity.

Interest Income & Other was $9.4 million for the six months compared with $5.3 million for the same period a year ago. The increase in Interest Income & Other was primarily driven by unrealized foreign currency gains as well as increased reimbursable expenses billed to clients.

Expenses

The following tables set forth information relating to the Company’s expenses for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

2020

2019

GAAP

As Adjusted

GAAP

As Adjusted

(Dollars in Millions)

Expenses

Compensation and Benefits

$

154.7

$

151.1

$

119.2

$

106.7

% of Revenues

66.5

%

65.0

%

71.5

%

64.0

%

Non-Compensation

$

28.2

$

26.2

$

33.9

$

31.9

% of Revenues

12.1

%

11.3

%

20.4

%

19.2

%

Total Expenses

$

182.9

$

177.3

$

153.1

$

138.6

% of Revenues

78.6

%

76.3

%

91.8

%

83.1

%

Pretax Income

$

49.7

$

55.2

$

13.6

$

28.1

% of Revenues

21.4

%

23.7

%

8.2

%

16.9

%

Six Months Ended June 30,

2020

2019

GAAP

As Adjusted

GAAP

As Adjusted

(Dollars in Millions)

Expenses

Compensation and Benefits

$

288.8

$

281.3

$

214.3

$

188.6

% of Revenues

66.7

%

65.0

%

72.7

%

64.0

%

Non-Compensation

$

60.7

$

56.8

$

66.9

$

62.9

% of Revenues

14.0

%

13.1

%

22.7

%

21.3

%

Total Expenses

$

349.5

$

338.1

$

281.3

$

251.5

% of Revenues

80.8

%

78.1

%

95.4

%

85.3

%

Pretax Income

$

83.2

$

94.6

$

13.5

$

43.2

% of Revenues

19.2

%

21.9

%

4.6

%

14.7

%

Compensation and Benefits Expense

Three Months Ended

GAAP Compensation and Benefits Expense was $154.7 million for second quarter 2020 compared with $119.2 million for the prior year quarter. Adjusted Compensation and Benefits Expense was $151.1 million for the current quarter compared with $106.7 million for the prior year quarter. The increase in Compensation and Benefits Expense was principally the result of higher revenues during the current quarter.

Six Months Ended

GAAP Compensation and Benefits Expense was $288.8 million for the six months ended June 30, 2020 compared with $214.3 million for the same period a year ago. Adjusted Compensation and Benefits Expense was $281.3 million for the six months compared with $188.6 million for the same period a year ago. The increase in Compensation and Benefits Expense was principally the result of higher revenues during the current six month period.

Non-Compensation Expense

Three Months Ended

GAAP Non-Compensation Expense was $28.2 million for second quarter 2020 compared with $33.9 million for the prior year quarter. Adjusted Non-Compensation Expense was $26.2 million for the current quarter compared with $31.9 million for the prior year quarter.

GAAP and Adjusted Non-Compensation Expense decreased during the current quarter compared with the prior year quarter, primarily driven by a decrease in Travel and Related due to reduced travel and entertainment activity stemming from the global health crisis.

Six Months Ended

GAAP Non-Compensation Expense was $60.7 million for the six months ended June 30, 2020 compared with $66.9 million for the same period a year ago. Adjusted Non-Compensation Expense was $56.8 million for the six months compared with $62.9 million for the same period a year ago.

GAAP and Adjusted Non-Compensation Expense decreased during the six months compared with the same period a year ago, primarily driven by decreases in Travel and Related as well as Professional Fees, and partially offset by an increase in Occupancy and Related. Travel and Related decreased due to reduced travel and entertainment activity stemming from the global health crisis. Professional Fees decreased primarily due to lower legal and lower recruiting costs. Occupancy and Related increased due to increased occupancy expense in certain locations.

Provision for Taxes

As of June 30, 2020, PJT Partners Inc. owned 61.1% of PJT Partners Holdings LP. PJT Partners Inc. is subject to corporate U.S. federal and state income tax while PJT Partners Holdings LP is subject to New York City unincorporated business tax and other entity-level taxes imposed by certain state and foreign jurisdictions. Please refer to Note 12. “Stockholders’ Equity (Deficit)” in the “Notes to Consolidated Financial Statements” in “Part II. Item 8. Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for further information about the corporate ownership structure.

In calculating Adjusted Net Income, If-Converted, the Company has assumed that all outstanding Class A partnership units in PJT Partners Holdings LP (“Partnership Units”) (excluding the unvested partnership units that have yet to satisfy certain market conditions) have been exchanged into shares of the Company’s Class A common stock, subjecting all of the Company’s income to corporate-level tax.

The effective tax rate for Adjusted Net Income, If-Converted for the six months ended June 30, 2020 was 25.8% compared with 25.5% for full year 2019. This tax rate excludes the tax benefits of the adjustments for transaction-related compensation expense, amortization expense, tax benefit recorded pursuant to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) as well as certain payments to The Blackstone Group Inc. (“Blackstone”) resulting from the October 1, 2015 spin-off.

Capital Management and Balance Sheet

As of June 30, 2020, the Company held cash, cash equivalents and short-term investments of $247.0 million, and had no funded debt.

On April 24, 2019, the Company’s Board of Directors authorized the repurchase of shares of the Company’s Class A common stock in an amount up to $100 million. As of June 30, 2020, the Company’s remaining repurchase authorization was $59.9 million.

During the second quarter 2020, the Company repurchased 176,929 Partnership Units for cash pursuant to the quarterly exchange program. In aggregate during second quarter 2020, the Company repurchased an equivalent of 177,294 shares at an average price of $49.59 per share.

The Company intends to repurchase 202,384 Partnership Units for cash on August 4, 2020 at a price to be determined by the volume-weighted average price per share of the Company’s Class A common stock on July 30, 2020.

Dividend

The Board of Directors of PJT Partners Inc. has declared a quarterly dividend of $0.05 per share of Class A common stock. The dividend will be paid on September 16, 2020 to Class A common stockholders of record on September 2, 2020.

COVID-19 Impact on Operations and Outlook

Quarterly Investor Call Details

PJT Partners will host a conference call on July 28, 2020 at 8:30 a.m. ET to discuss its second quarter 2020 results. The conference call can be accessed via the internet on www.pjtpartners.com or by dialing +1 (800) 458-4121 (U.S. domestic) or +1 (720) 543-0206 (international), passcode 9178152. For those unable to listen to the live broadcast, a replay will be available following the call at www.pjtpartners.com or by dialing +1 (888) 203-1112 (U.S. domestic) or +1 (719) 457-0820 (international), passcode 9178152.

About PJT Partners

PJT Partners is a premier global advisory-focused investment bank. Our team of senior professionals delivers a wide array of strategic advisory, strategic capital markets, restructuring and special situations, shareholder advisory, and private fund advisory and fundraising services to corporations, financial sponsors, institutional investors and governments around the world. We offer a unique portfolio of advisory services designed to help our clients achieve their strategic objectives. We also provide, through PJT Park Hill, private fund advisory and fundraising services for alternative investment managers, including private equity funds, real estate funds and hedge funds. To learn more about PJT Partners, please visit our website at www.pjtpartners.com.

Forward-Looking Statements

Certain material presented herein contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include certain information concerning future results of operations, business strategies, acquisitions, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “opportunity,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations, and assumptions regarding the future of its business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, many of which are outside the Company’s control. The Company’s actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance upon any of these forward-looking statements. Important factors that could cause the Company’s actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (a) changes in governmental regulations and policies; (b) the possibility of cyberattacks, security vulnerabilities, and internet disruptions, including breaches of data security and privacy leaks, data loss, and business interruptions; (c) the possibility of failure of the Company’s computer systems or communication systems during a catastrophic event, including the outbreak of COVID-19; (d) the impact of catastrophic events, such as COVID-19, on the U.S. and the global economy, including business disruptions, reductions in employment and an increase in business failures; (e) the impact of catastrophic events, such as COVID-19, on the Company’s employees and the Company’s ability to provide services to its clients and respond to their needs; (f) the failure of third-party service providers to perform their functions; and (g) volatility in the political and economic environment.

The risk factors discussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the United States Securities and Exchange Commission (“SEC”), as such factors may be updated from time to time in the Company's periodic filings with the SEC, accessible on the SEC’s website at www.sec.gov, could cause the Company’s results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that the Company is unable to predict at this time or that are not currently expected to have a material adverse effect on its business. Any such risks could cause the Company’s results to differ materially from those expressed in forward-looking statements.

Non-GAAP Financial Measures

The following represent key performance measures that management uses in making resource allocation and/or compensation decisions. These measures should not be considered substitutes for, or superior to, financial measures prepared in accordance with GAAP.

Management believes the following non-GAAP measures, when presented together with comparable GAAP measures, are useful to investors in understanding the Company’s operating results: Adjusted Pretax Income; Adjusted Net Income; Adjusted Net Income, If-Converted, in total and on a per-share basis; Adjusted Earnings Per Share; Adjusted Compensation and Benefits Expense and Adjusted Non-Compensation Expense. These non-GAAP measures, presented and discussed in this earnings release, remove the significant accounting impact of: (a) transaction-related compensation expense, including expense related to Partnership Units with both time-based vesting and market conditions as well as equity-based and cash awards granted in connection with the spin-off from Blackstone and acquisition of CamberView Partners Holdings, LLC (“CamberView”); (b) intangible asset amortization associated with Blackstone’s initial public offering (“IPO”), the acquisition of PJT Capital LP, and the acquisition of CamberView; and (c) the amount the Company has agreed to pay Blackstone related to the net realized cash benefit from certain compensation-related tax deductions. Reconciliations of the non-GAAP measures to their most directly comparable GAAP measures and further detail regarding the adjustments are provided in the Appendix.

To help investors understand the effect of the Company’s ownership structure on its Adjusted Net Income, the Company has presented Adjusted Net Income, If-Converted. This measure illustrates the impact of taxes on Adjusted Pretax Income, assuming all Partnership Units (excluding the unvested partnership units that have yet to satisfy certain market conditions) were exchanged for shares of the Company’s Class A common stock, resulting in all of the Company’s income becoming subject to corporate-level tax, considering both current and deferred income tax effects. This tax rate excludes the tax benefits of the adjustments for transaction-related compensation expense, amortization expense, tax benefit recorded pursuant to the CARES Act as well as certain payments to Blackstone resulting from the October 1, 2015 spin-off.

Appendix

GAAP Condensed Consolidated Statements of Operations (unaudited)

Reconciliations of GAAP to Non-GAAP Financial Data (unaudited)

Summary of Shares Outstanding (unaudited)

Footnotes

PJT Partners Inc.

GAAP Condensed Consolidated Statements of Operations (unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Revenues

Advisory

$

192,539

$

133,035

$

349,130

$

237,502

Placement

35,260

28,695

74,252

52,007

Interest Income and Other

4,764

4,974

9,352

5,251

Total Revenues

232,563

166,704

432,734

294,760

Expenses

Compensation and Benefits

154,730

119,165

288,754

214,316

Occupancy and Related

8,659

7,802

17,313

14,938

Travel and Related

537

6,721

5,833

13,680

Professional Fees

5,540

5,667

10,063

11,469

Communications and Information Services

3,594

3,493

7,140

6,706

Depreciation and Amortization

3,709

3,635

7,529

7,255

Other Expenses

6,117

6,629

12,866

12,891

Total Expenses

182,886

153,112

349,498

281,255

Income Before Provision for Taxes

49,677

13,592

83,236

13,505

Provision for Taxes

8,760

3,566

10,310

2,542

Net Income

40,917

10,026

72,926

10,963

Net Income Attributable to Non-Controlling Interests

19,247

5,200

32,396

5,036

Net Income Attributable to PJT Partners Inc.

$

21,670

$

4,826

$

40,530

$

5,927

Net Income Per Share of Class A Common Stock

Basic

$

0.88

$

0.20

$

1.66

$

0.24

Diluted

$

0.86

$

0.20

$

1.61

$

0.24

Weighted-Average Shares of Class A Common Stock Outstanding

Basic

24,636,534

24,572,535

24,367,124

24,157,671

Diluted

25,462,235

24,572,535

40,374,694

24,157,671

PJT Partners Inc.

Reconciliations of GAAP to Non-GAAP Financial Data (unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

GAAP Net Income

$

40,917

$

10,026

$

72,926

$

10,963

Less: GAAP Provision for Taxes

8,760

3,566

10,310

2,542

GAAP Pretax Income

49,677

13,592

83,236

13,505

Adjustments to GAAP Pretax Income

Transaction-Related Compensation Expense(1)

3,591

12,475

7,477

25,670

Amortization of Intangible Assets(2)

1,927

1,984

3,855

3,968

Spin-Off-Related Payable Due to Blackstone(3)

24

39

53

85

Adjusted Pretax Income

55,219

28,090

94,621

43,228

Adjusted Taxes(4)

9,373

4,767

10,782

6,265

Adjusted Net Income

45,846

23,323

83,839

36,963

If-Converted Adjustments

Less: Adjusted Taxes(4)

(9,373

)

(4,767

)

(10,782

)

(6,265

)

Add: If-Converted Taxes(5)

14,165

7,054

24,421

10,827

Adjusted Net Income, If-Converted

$

41,054

$

21,036

$

70,200

$

32,401

GAAP Net Income Per Share of Class A Common Stock

Basic

$

0.88

$

0.20

$

1.66

$

0.24

Diluted

$

0.86

$

0.20

$

1.61

$

0.24

GAAP Weighted-Average Shares of Class A

Common Stock Outstanding

Basic

24,636,534

24,572,535

24,367,124

24,157,671

Diluted

25,462,235

24,572,535

40,374,694

24,157,671

Adjusted Net Income, If-Converted Per Share

$

1.00

$

0.51

$

1.72

$

0.79

Weighted-Average Shares Outstanding, If-Converted

40,965,990

41,144,783

40,847,925

41,081,533

PJT Partners Inc.

Reconciliations of GAAP to Non-GAAP Financial Data – continued (unaudited)

(Dollars in Thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

GAAP Compensation and Benefits Expense

$

154,730

$

119,165

$

288,754

$

214,316

Transaction-Related Compensation Expense(1)

(3,591

)

(12,475

)

(7,477

)

(25,670

)

Adjusted Compensation and Benefits Expense

$

151,139

$

106,690

$

281,277

$

188,646

Non-Compensation Expenses

Occupancy and Related

$

8,659

$

7,802

$

17,313

$

14,938

Travel and Related

537

6,721

5,833

13,680

Professional Fees

5,540

5,667

10,063

11,469

Communications and Information Services

3,594

3,493

7,140

6,706

Depreciation and Amortization

3,709

3,635

7,529

7,255

Other Expenses

6,117

6,629

12,866

12,891

GAAP Non-Compensation Expense

28,156

33,947

60,744

66,939

Amortization of Intangible Assets(2)

(1,927

)

(1,984

)

(3,855

)

(3,968

)

Spin-Off-Related Payable Due to Blackstone(3)

(24

)

(39

)

(53

)

(85

)

Adjusted Non-Compensation Expense

$

26,205

$

31,924

$

56,836

$

62,886

PJT Partners Inc.

Summary of Shares Outstanding (unaudited)

The following table provides a summary of weighted-average shares outstanding for the three and six months ended June 30, 2020 and 2019 for both basic and diluted shares. The table also provides a reconciliation to If-Converted Shares Outstanding assuming that all Partnership Units and unvested PJT Partners Inc. restricted stock units (“RSUs”) were converted to shares of the Company’s Class A common stock:

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Weighted-Average Shares Outstanding - GAAP

Shares of Class A Common Stock Outstanding

24,075,203

23,458,031

23,732,430

23,207,749

Vested, Undelivered RSUs

561,331

1,114,504

634,694

949,922

Basic Shares Outstanding, GAAP

24,636,534

24,572,535

24,367,124

24,157,671

Dilutive Impact of Unvested Common RSUs(6)

825,701

—

876,883

—

Dilutive Impact of Partnership Units(7)

—

—

15,130,687

—

Diluted Shares Outstanding, GAAP

25,462,235

24,572,535

40,374,694

24,157,671

Weighted-Average Shares Outstanding - If-Converted

Shares of Class A Common Stock Outstanding

24,075,203

23,458,031

23,732,430

23,207,749

Vested, Undelivered RSUs

561,331

1,114,504

634,694

949,922

Conversion of Unvested Common RSUs(6)

825,701

566,311

876,883

898,124

Conversion of Participating RSUs

26,472

54,762

26,477

53,294

Conversion of Partnership Units

15,477,283

15,951,175

15,577,441

15,972,444

If-Converted Shares Outstanding

40,965,990

41,144,783

40,847,925

41,081,533

As of June 30,

2020

2019

Fully-Diluted Shares Outstanding(8)(9)

44,448,705

43,996,462

As of June 30, 2020, there were 3.6 million Partnership Units and 0.4 million RSUs subject to market conditions that are not included in fully-diluted shares outstanding.

Footnotes

(1)

This adjustment adds back to GAAP Pretax Income transaction-related compensation expense for Partnership Units with both time-based vesting and market conditions as well as equity-based and cash awards granted in connection with the spin-off from Blackstone and the acquisition of CamberView.

(2)

This adjustment adds back to GAAP Pretax Income amounts for the amortization of intangible assets that are associated with Blackstone’s IPO, the acquisition of PJT Capital LP on October 1, 2015 and the acquisition of CamberView on October 1, 2018.

(3)

This adjustment adds back to GAAP Pretax Income the amount the Company has agreed to pay Blackstone related to the net realized cash benefit from certain compensation-related tax deductions. Such expense is reflected in Other Expenses in the Condensed Consolidated Statements of Operations.

(4)

Represents taxes on Adjusted Pretax Income, considering both current and deferred income tax effects for the current ownership structure.

(5)

Represents taxes on Adjusted Pretax Income, assuming all Partnership Units (excluding the unvested partnership units that have yet to satisfy market conditions) were exchanged for shares of the Company’s Class A common stock, resulting in all of the Company’s income becoming subject to corporate-level tax, considering both current and deferred income tax effects. This tax rate excludes the tax benefits of the adjustments for transaction-related compensation expense, amortization expense, tax benefit recorded pursuant to the CARES Act as well as certain payments to Blackstone resulting from the October 1, 2015 spin-off.

(6)

Represents the dilutive impact under the treasury method of unvested, non-participating RSUs that have a remaining service requirement.

(7)

Represents the number of shares assuming the conversion of vested Partnership Units as well as the dilutive impact of unvested Partnership Units with a remaining service requirement.

(8)

Excludes 3.6 million unvested Partnership Units and 0.4 million RSUs as of June 30, 2020 that have yet to satisfy certain market conditions.

(9)

Assumes all Partnership Units and unvested participating RSUs have been converted to shares of the Company’s Class A common stock.

Note: Amounts presented in tables above may not add or recalculate due to rounding.

Media Relations: Julie Oakes

Joele Frank, Wilkinson Brimmer Katcher

Tel: +1 212.355.4449

[email protected]

Investor Relations: Sharon Pearson

PJT Partners Inc.

Tel: +1 212.364.7120

[email protected]

Source: PJT Partners Inc.

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