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Edited Transcript of PJT earnings conference call or presentation 28-Apr-20 12:30pm GMT

Q1 2020 PJT Partners Inc Earnings Call

NEW YORK May 10, 2020 (Thomson StreetEvents) -- Edited Transcript of PJT Partners Inc earnings conference call or presentation Tuesday, April 28, 2020 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Helen Therese Meates

PJT Partners Inc. - CFO

* Paul Jeffrey Taubman

PJT Partners Inc. - Founding Partner, Chairman & CEO

* Sharon Pearson

PJT Partners Inc. - MD & Head of Investor & External Relations

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Conference Call Participants

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* Devin Patrick Ryan

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Sumeet Mody

Piper Sandler & Co., Research Division - Director

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Presentation

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Operator [1]

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Good day, and welcome to the PJT Partners Q1 2020 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead.

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Sharon Pearson, PJT Partners Inc. - MD & Head of Investor & External Relations [2]

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Thanks very much, Sandra. Good morning, and welcome to the PJT Partners First Quarter 2020 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 our actual outcomes could differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2019 Form 10-K, which is available on our website at pjtpartners.com.

I want to remind you that the company assumes no duty to update any forward-looking statements. And also the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these non-GAAP metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website.

And with that, I'll turn the call over to Paul.

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [3]

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Good morning, and thank you all for joining us today. We hope all of you who are listening in are doing well under the circumstances. I think as you all can imagine, we're conducting this call remotely. Sharon, Helen and I are all calling in from different locations. So please forgive us in advance if we experience any technical glitches.

It is nearly impossible to convey the extent to which the world has changed since our last earnings report in early February. The enormity of this health crisis and the severity of its economic impact continues to unfold in real time. The loss of life and livelihood is hard to fathom. And yet in this darkness, we have seen extraordinary heroism from health care professionals as well as an untold number of essential workers across industries. On behalf of our entire firm, I would like to express our collective gratitude to all those who are serving on the front lines.

In our own small way, we have tried to do our part. At the outset, we identified those nonemployee support staff who would be most economically impacted by the closing of our offices and work to make sure that they continue to receive paychecks. We donated all of the N95 masks we had to local hospitals. We had previously procured these masks as part of our business continuity planning. We are donating more than $2 million from the firm and its partners to COVID-related causes with $1 million of that amount coming from the firm. And consistent with our firm's civic focus, we have restructured our summer internship programs to ensure that our interns devote meaningful time to community service.

Since this crisis began, our firm has remained fully operational and client centric with almost all of our employees working remotely. Our firm's insights, expertise and collaborative approach to problem solving have never been more differentiated or more highly valued by clients as managements and Boards seek advice on how to best prepare for an uncertain future. From the outset, we have been focused on a variety of employee initiatives to support our colleagues' health, well-being and safety. We have stepped up an already high level of communication and engagement in order to maintain our differentiated culture, even in the absence of physical presence. Our ongoing commitment to partnership and teamwork has been an essential element in enabling our firm to navigate these challenging times.

Turning to our financial results. These first quarter results reflect our significant momentum heading into 2020. Revenues grew 56%, adjusted pretax income grew 160%, and adjusted earnings per share grew 154% compared to a year ago.

Turning to each of our businesses in a bit more detail. In Restructuring, our Restructuring revenues rose significantly in the first quarter versus a year ago and more modestly on a sequential basis. Since the onset of the economic shutdown resulting from the pandemic, we've experienced a dramatic increase in restructuring activity. This significant uplift in activity has continued into the second quarter. And while our first quarter Restructuring results do not reflect this increased level of activity, we do, however, expect our financial results to reflect this elevated activity over time. In this volatile environment, the level of cross-divisional collaboration has never been greater. Clients are turning to us for advice on a wide array of liability management and liquidity issues arising from the crisis. Combining the expertise of our Restructuring team with the capabilities of our Capital Markets Advisors as well as the industry expertise and relationships of our Advisory bankers is a difference maker for clients. I have often spoken about the benefits of having 3 highly synergistic and complementary businesses, all working together to better serve clients. Our leading Restructuring practice has always been a critical differentiator for the firm now, more than ever before.

Turning to Strategic Advisory. In Strategic Advisory, revenues increased significantly in the quarter compared to the prior year, reflecting increasing returns on our consistent and deliberate investment in the business. We entered 2020 with a strong backlog of announced, but not yet closed transactions, and we announced a number of significant transactions in the first quarter prior to the market dislocations. While there has been a dearth of announced transactions post-COVID, our client dialogues have expanded in both depth and breadth and are increasingly focused on capital structure and liquidity, opportunistic M&A, sponsor-related activity, shareholder engagement and shareholder activism. As a result, our number of active client mandates has increased significantly. We have always believed that in difficult times such as these, the ability to deliver extraordinarily high quality advice from an integrated team of experienced bankers would increasingly serve as a point of differentiation for our firm. In today's environment, more and more clients are gravitating towards us, and our traction with key decision-makers around the globe has never been greater.

In the first quarter, we added 3 partners, bringing the total number of Strategic Advisory partners to 49. And consistent with prior updates, we continue to be in active discussions with a broad group of highly talented senior bankers to join our platform. While our desire to expand our Strategic Advisory franchise with the highest quality individuals remains undiminished, it will be incrementally more challenging to successfully recruit and onboard individuals as long as we are in an entirely remote work environment. We expect the pace of recruiting to slow, but not to stop, until things return closer to normal.

Turning to PJT Park Hill. In PJT Park Hill, revenues increased modestly in the quarter versus year ago levels. Looking forward, we expect many fundraisings to be delayed as a result of these market dislocations. Until there is greater market stability, including increased clarity as to recalibrated asset values, we do not expect the fundraising cycle to return to more normalized levels. In light of the significant delays in completing many of these fundraisings, we expect PJT Park Hill's revenues to be down significantly in 2020.

Reviewing our capital priorities on our 2020 outlook. Before I turn it over to Helen, I wanted to review all of them. We have the benefit of a balanced group of very attractive, leading businesses that are all highly cash generative. We have always been conservatively capitalized, and we ended the period debt free and with our largest first quarter cash balance since inception. We expect these cash balances to grow throughout the year, and we expect to end 2020 in our strongest financial position ever. In light of the uncertain economic backdrop and the significant share repurchases we affected in the first quarter, we are unlikely to be very active with our repurchase program for the balance of the year.

Turning to our 2020 outlook. We have always said that we are built to grow in most any market environment. 4 year -- 4 months into 2020, and we are not operating in most any environment, rather we are operating in unprecedented times. Notwithstanding this extraordinary backdrop and the abrupt changes in market conditions since we last reported, we continue to expect our revenues to increase in 2020. However, any sense of specificity beyond that is no longer appropriate given the historic uncertainties we are all facing.

And with that, I will now turn it over to Helen to review our financial results.

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Helen Therese Meates, PJT Partners Inc. - CFO [4]

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Thank you, Paul. Good morning. Beginning with revenues. Total revenues for the quarter were $200 million, up 56% year-over-year. The breakdown of revenues. Advisory revenues were $157 million, up 50% year-over-year with significant increases in both Strategic Advisory and Restructuring revenues. Placement revenues were $39 million, up 67% year-over-year, reflecting strong corporate private placement activity and an increase in fund placement revenues.

Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments, and these adjustments are more fully described in our 8-K. First, adjusted compensation expense. We accrued adjusted compensation expense at 65% of revenues for the first quarter compared with 64% in the first quarter 2019. Given the highly uncertain macroeconomic backdrop, we raised our accrual rate modestly, and we will refresh this accrual at the end of the second quarter.

Turning to adjusted noncompensation expense. Total adjusted noncompensation expense was $31 million in the first quarter 2020, down slightly from the first quarter 2019 and down 7% from the fourth quarter 2019. As a percentage of revenues, our noncompensation expense was 15.3% in the first quarter, down from 24.2% in the first quarter 2019. We experienced a large decline in travel and related costs, down 24% year-over-year as a direct impact of COVID-19. Net reduction in travel and related was highly concentrated in the last few weeks of the quarter. We also had lower professional fees in the quarter. Offsetting these declines were higher occupancy costs related to the additional space we took on last year in London and the U.S. as well as higher spend in communications and IT. In response to COVID-19, we made investments to enhance our remote computing infrastructure, and we provided additional support to many of our employees to help them in their transition to working remotely.

Turning to adjusted pretax income. We reported adjusted pretax income of $39 million for the first quarter, up significantly compared with $15 million last year. And our adjusted pretax margin was 19.7% for the first quarter compared with 11.8% for the same period last year.

Provision for taxes. As with prior quarters, we 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. We've also annualized the benefit relating to the delivery of vested shares during the first quarter. Our resulting effective tax rate for the full year is expected to be 26%, which is the rate we applied in the first quarter. Our adjusted if-converted earnings were $0.71 per share for the first quarter, up significantly compared with $0.28 per share in the first quarter last year.

On the share count, for the quarter, our weighted average share count was 40.9 million shares. During the first quarter, we repurchased the equivalent of approximately 1 million shares through a combination of open market repurchases, exchanges and net share settlements of employee tax obligations. We repurchased approximately 540,000 shares in the open market, which included 325,000 shares from Corsair. We're currently in receipt of exchange notices for approximately 177,000 partnership units. And as we have done in the past, we will exchange these units for cash.

On the balance sheet, we ended the quarter with $113 million in cash, cash equivalents and short-term investments and $208 million in net working capital. We have no debt outstanding, and our full line of credit is available to us. And as Paul referenced earlier, we expect to end the year with our strongest cash position ever.

Finally, the Board has approved a dividend of $0.05 per share. The dividend will be paid on June 17, 2020, to Class A common shareholders of record as of June 3.

And with that, we will now take your questions.

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Questions and Answers

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Operator [1]

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Thank you very much. We will now take our first question from David Ryan (sic) [Devin Ryan], JP Securities (sic) [JMP Securities].

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Devin Patrick Ryan, JMP Securities LLC, Research Division - MD and Senior Research Analyst [2]

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This is Devin Ryan with JMP. I guess first question on Restructuring. And PJT clearly has a leading, if not the leading, restructuring practice. And so I think that business clearly will provide some ballast in this environment. So if you can, Paul, maybe try to give us some more context on how the Restructuring business performed in the prior cycle? The company wasn't public, but any context in terms of how the business performed, how it scaled did it double or more in revenues? Or anything you can give perspective around that? And then how we should be thinking about maybe the handoff here between Restructuring and M&A advisory? And I appreciate M&A advisory is not going away, but to the extent we see some decline in activity relative to what was expected, but Restructuring is accelerating, kind of how to think about the 2 dynamics there on revenues?

And then just the last piece of the question, just around Restructuring being kind of a longer-tailed business towards closing. Are you seeing any evidence that this cycle could be different that revenues could come in more quickly? So just some context there would be helpful.

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [3]

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Okay. Well, there's a lot in that question. So let me try and answer it to the best of my abilities. And then please feel free to follow up, so we can make sure that we're getting at all of your questions. The reality is in the last economic downturn, there was a tremendous uptick in restructuring activity. But I don't really pay much mind to what the predecessor business looked like at that time because we're an entirely different firm today, we have nearly 50 very senior Strategic Advisory partners who are working hand in glove with our Restructuring team and are really the arms and legs and the front end and the relationship managers providing industry expertise and real capital markets input alongside their Restructuring brethren. So I think about it as we have 65-or-so liability management and Restructuring partners who are engaging with clients, which is certainly not something that happened previously. And clearly, the entire world is open to us today in a way that it wasn't a decade or more ago. So what I'm seeing is a couple of things. One, every client from the largest or the most financially secure to smaller companies now needs to think about capital structure and liquidity. It's a core strategic imperative to make sure that you have the appropriate capitalization, that you have adequate liquidity. And since no one really knows what the shape of the curve is going to be and how long until we start crawling back to normal and what's going to be the pace of the recovery and the like, it causes a whole series of strategic conversations to occur that year -- Q4 did not occur. And we are, I believe, uniquely positioned to have that because we've built out not only a very robust Strategic Advisory business, we've built out a very strong, leading-edge Capital Markets Advisory business. And then we have a leading Restructuring business. So I suspect that what you're going to see here is -- this is the first wave.

And the first wave is all of a sudden with markets seizing up and with many businesses effectively shutdown, liquidity issues come to the fore. And you're dealing with those companies, first and foremost, because they have an immediate need to address these issues. Otherwise, they literally will run out of cash. Then you have other companies who stand on higher ground, but are unsure as to how high the water level is rising too. And they're looking at their own capitalization, and they're asking themselves whether they need to affect certain liability management actions to give themselves more runway.

And then I think you're going to have a third wave, where depending upon how quick the snapback is, we may be in reduced economic environment with lower consumer spend, lower business spend for an extended period of time. And if that's the case, you will see certain companies who today are standing on very firm footing, needing to address these issues going forward. So I think there's just a very long cycle of activity here, and we're going to do everything we can to serve our clients and make sure that we're able to be forward leaning and having those conversations and being there to provide that advice to our client base.

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Devin Patrick Ryan, JMP Securities LLC, Research Division - MD and Senior Research Analyst [4]

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

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [5]

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Yes. And again, there's a lot in that question, too. I think this has been a shock to the system to virtually every company. And the fact that we are singularly focused on giving advice that we've been operational the entire time that we're not distracted by our own issues about capital allocation, balance sheet, lending or other businesses has enabled us to be laser-focused on clients. And in a world where we're operating 100% outward facing, and clients are trying to make sense to the world, not surprisingly, we're getting more traction with more clients. And then there are more clients who now recognize that they've got issues to deal with that heretofore they've not had to confront. And all of a sudden, I think advice is seen less as a commodity and more as a differentiating factor. So our number of mandates and our number of dialogues are up considerably. Now the reality is there may not be much to do in the way of actual transactions or to monetize that, but we're fine with that because we've always thought about building our business for the long term. And the more clients that we can engage with and the more dialogues that we can have, we are confident that we're going to show very well. So we view that as a good thing. And inevitably, that will lead to good things.

And then I think the last point I would make is, as we're all trying to adjust to a world in which we are working exclusively remotely, I will say that I think all of us find that we're probably working harder and spending more time engaging with clients because we don't have all of these other distractions. We're not traveling, we're not spending all the time coordinating meetings. We're just getting on phone calls, video conferences, exchanging messages with clients. And I think we're able to spend a lot more time for every minute of every hour and every hour of every day engaging with clients without any wasted time. So I think it's also enabled us to be far more intense and far more efficient.

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Devin Patrick Ryan, JMP Securities LLC, Research Division - MD and Senior Research Analyst [6]

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

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [7]

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I think I'd start by saying we see the environment as it is today. So this is where we sit with 4 months of the year, done and dusted, 8 months to go. We obviously have a lot of our business in CamberView and in Restructuring has a heavy retainer bed to it. So we have a lot of visibility. We have a strong backlog of announced and not-yet-closed transactions where -- while nothing is guaranteed in this world, we certainly have heightened visibility on that. And we've experienced what has been an incredibly difficult 6 weeks. So I don't make that comment lightly. But at the end of the day, we're dealing with such uncertain times. When I step way back, I feel that our Restructuring business this year is moving upward into the right. Our Strategic Advisory business in 2020 is moving upward and to the right. We have a strong CamberView business and the Park Hill business, however, will be directly impacted this year as transactions get pushed out. And when I looked at the totality of that, that is what we expect is for our consolidated revenues to grow for the year. And I just don't want to try and put too fine a point on it in a world where -- we gave more specific guidance at the beginning of the year, but that was in more normal times. I think I've tried to underpin it, and let's just see how the year develops.

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Operator [8]

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We will now take our last question from Sumeet Mody from Piper Sandler Research.

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Sumeet Mody, Piper Sandler & Co., Research Division - Director [9]

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All right. Great. Can you talk a little bit more about the appetite levels between strategic and sponsor M&A activity on either the target or acquirer sides of conversations you're having for that?

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [10]

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On the -- I'm sorry, on the Strategic Advisory side, what sort of strategic conversations are being had?

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Sumeet Mody, Piper Sandler & Co., Research Division - Director [11]

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Yes. And then maybe...

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [12]

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

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Sumeet Mody, Piper Sandler & Co., Research Division - Director [13]

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No. No. I was just going to say, yes, just both on the strategic and the sponsor side. And if there's any differences kind of today in this environment as maybe January and February, just kind of contrasting.

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [14]

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Yes. I think with respect to sponsors, we've always had a different view of the world than maybe others, which is there's been all this talk about dry powder being an accelerant to M&A activity. And I think you've heard us consistently be somewhat dismissive of that view that is often espoused. And the reason for that is, if you look back, empirically, sponsors tend to be very much attuned to valuations. And therefore, we didn't see that in a bull market with high valuations, sponsors were going to take activity levels to even higher levels. What we have always believed, and I think it's starting to prove out, is that all of that dry powder is a very helpful and healthy shock absorber in the system, which is as valuations are pressured, that all of a sudden, sponsors will start to step into some of that void and deploy capital. And we're starting to see some of that.

But in the very near term, in order to have sponsor activity, you need a few things. You need motivated sellers, you need attractive valuations for buyers, and very importantly, you need confidence that if you're making an investment that with that money the company's capital structure will be sufficiently righted that it won't need to go back to the well. When you try and triangulate all of those things, that universe is not that large today because there's so much uncertainty in the world. I suspect that as the full extent of the economic damage to some of these companies is better known and there is a more sober assessment of what these companies need to either survive will get to the next level. There's a new valuation paradigm, a new equilibrium. You'll see increasing levels of sponsor activity. So we're having many of those conversations. Unclear how many of them get affected in the very near term, but I suspect that over time, you'll see increasing momentum in that regard.

And with respect to M&A. I'll give you just a couple of thoughts. This global health crisis, this economic shutdown, these are going to have very far-reaching, long-lasting effects, and there are going to be lots of scars, and there are going to be certain industries that are going to come out of this severely compromised. There are going to be other industries that are going to come out of this strengthened. And then there are going to be others who will -- just be a lot of navigating to get to safer and higher ground. And I suspect that what you're going to see here is, across the board, companies are going to ask themselves, do they have the right capital structure? Do they have enough of a rainy day fund? Do they have enough of a buffer or a cushion? And I suspect that the conclusion on average will be that most companies will try and take some leverage out of the system. And the way you do that is you either raise equity or you delever by selling assets. And I suspect you'll see both. And I think that latter point will be a meaningful catalyst to M&A activity. And then I suspect that there'll be a lot of companies who recognize that the world is consolidating for a variety of reasons that we've talked about consistently. And they will conclude that having been set back these number of years, it's no longer realistic for them to spend the money and the dollars to create the necessary scale, and they will probably be more willing to be consolidated by others. And I think that will probably increase the level of M&A activity over time.

I think on -- the other dimension here is the geopolitical dimension, and I suspect that increasingly, U.S. companies are going to want to rethink their supply chain and where their suppliers are domiciled. And I suspect that countries around the globe are going to take a more expansive view of what industries or what companies are important from a national security perspective, and that may reduce some cross-border activity. So I think there's going to be a changing nature in face of activity. Some of these conversations are starting to occur. But I think the reality is that for most companies, they're just trying to understand what does the new paradigm look like, what does it mean for their company? Is there capital structure, the appropriate capital structure? What do they need to do operationally? How do they embrace their employees? How do they start to think about the inevitable reopening of the economy? And over time, more of the conversations that I've just talked about will probably move to the fore. I think they're more in the background today, but they will, over time, as the ground ceases to shift as dramatically as it has and starts to stabilize, I suspect you'll see more of those dialogues that move to the front of the line. I hope that's helpful.

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Sumeet Mody, Piper Sandler & Co., Research Division - Director [15]

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

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [16]

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

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Sumeet Mody, Piper Sandler & Co., Research Division - Director [17]

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

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Paul Jeffrey Taubman, PJT Partners Inc. - Founding Partner, Chairman & CEO [18]

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

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

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Operator [19]

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