Perella Weinberg Partners (NASDAQ:PWP) Q4 2023 Earnings Call Transcript
Perella Weinberg Partners (NASDAQ:PWP) Q4 2023 Earnings Call Transcript February 8, 2024
Perella Weinberg Partners beats earnings expectations. Reported EPS is $0.08, expectations were $0.04. Perella Weinberg Partners isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning and welcome to the Perella Weinberg Full Year and Fourth Quarter 2023 Earnings Conference Call. During today's discussion, all callers will be placed in listen only mode and following management's prepared remarks, the conference call will be open for question from the research community. This conference call is being recorded. At this time, I'd like to turn the conference over to Taylor Reinhardt, Head of Communications and Marketing. Please go ahead.
Taylor Reinhardt: 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 PWP'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 PWP'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. PWP 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.
Andrew Bednar: Thank you, Taylor and good morning. Today we reported 2023 full year revenues of $649 million, up 3% from a year ago, with fourth quarter revenues of $213 million, up 16% from a year ago, and a large contributor to our strong full year performance. We're pleased with how we navigated 2023's challenging market environment, growing our revenue while the M&A market globally saw closings down 30%. Three factors drove our outperformance compared to the broader market. Our relative scale, our weighting towards corporate clients and our broader service offering. Our business model demonstrated not only resilience but an ability to outperform as clients continued to seek and value our advice through cycles. Our financial performance was supported across our industries with nearly all of our sectors experiencing growth year-over-year and by a number of large deals with higher fees, especially within our M&A business.
Early signs of improvement in market conditions [indiscernible] which we saw begin in the second quarter of 2023, have given way to a broader market inflection, which has driven activity and dialogue levels and today our announced impending backlog stands at a record high. We expect the speed at which we recognize this backlog into revenue, especially for some of the larger deals to still be slower than our historical norms. Nevertheless, a resumption of growth in the traditional M&A markets has begun. Our financing and capital solutions business, which includes restructuring made terrific progress during 2023 and client activity remains at elevated levels. The need for restructuring and liability management advice is high and growing. A response in part to the higher interest rate environment and increasing complexity in financing markets and also a result of structural challenges in certain industries such as in telecom and technology.
In addition to several large mandates, including our lead role in the largest crypto exchange bankruptcy, there has been a considerable uptick in recent activity which is fueling our 2024 pipeline. Our integrated and collaborative model has proven valuable, with many recent restructuring mandates requiring deep industry subject matter expertise, generating better client outcomes and often leading to future M&A activity. In our capital markets business, the level of dialogue around financing and private credit in particular, has increased substantially as our financing and debt advisory team has now integrated fully and seamlessly into our platform. Talent, development and acquisition remain essential ingredients to our success and growth. We are adding industry subject matter services and capabilities that matter to our clients.
In 2023, we added seven new advisory partners and seven new managing directors, increasing our industry knowledge and coverage in technology, business services and in shareholder analytics and activism. In 2024, we intend to remain active in recruiting senior bankers in strategically attractive segments while remaining disciplined in our admissions criteria. Already in 2024, we have welcomed the managing director to our team in Europe and have a US based partner expected to join the firm during the second quarter. Our journey to a billion in revenue and achieving scale continues. With our progress measured by top line results and much more. Our current team is stronger and more diversified than a year ago, with the in-place capacity to increase the firm's revenue and per partner productivity.
Our client relationships have deepened and expanded, as evidenced by recent high profile transactions in which we were exclusive or lead advisor, including in two of the five largest announced transactions in January. One in financials and one in industrials. These factors, combined with the inflection in the market, are beginning to create a tailwind for our business in 2024. Alex, I'll now turn the call over to you to review our expenses and capital management.
Alex Gottschalk: Thank you, Andrew. Our adjusted compensation expense represented 70% of revenues in 2023. Exactly as we indicated in December, approximately 3% above 2022 and we believe appropriate given the industry response to market conditions and our continued targeted investment in talent through cycles. Our adjusted non-compensation expense was $144 million for the full year 2023, up 17% from a year ago and within the expected range we provided at the start of 2023. For 2024, we expect the percentage increase in non-comp spend to abate and be in the single digit range with the increase driven by elevated depreciation expense and some investment spend related to T&E and IT. We continue to carefully manage our expenses and as we scale up revenue, our operating leverage will be evident.
As we expect non-comp as a percentage of revenue to fall in time as revenue grows. We maintain a strong capital position with $338 million in cash in short term investments and no debt. We are committed to returning excess capital to shareholders and managing our share count to mitigate dilution from stock based compensation. In 2023, we returned a total of $65 million to investors through repurchases, net settlement in lieu of share issuances, dividends and distributions. Additionally, this morning we declared a quarterly dividend of $0.07 per share. With that operator, please open the line for questions.
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