Perella Weinberg Partners (PWP) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Perella Weinberg Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I will now turn the call over to Ms. Taylor Reinhardt, Head of Communications and Marketing. Please go ahead, ma'am.

Thank you, operator, and welcome all. Joining me today are Andrew Bednar, Chief Executive Officer and Chairman; and Alex Gottschalk, Chief Financial Officer and Chief Operating 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 $157 million, up 1% from a year ago, bringing our first half revenues to $305 million, down 17% compared to last year. Our booked revenue does not yet reflect the momentum we're seeing across our business. Announced transactions have picked up significantly. We're running ahead of where we were at this point in 2025, and the pace has accelerated this summer with nearly 40% of our year-to-date announcements occurring since the start of June. Our announcements are M&A weighted with recent elevated activity in our health care, industrials, energy and TMT businesses. In addition, our restructuring and liability management pipeline continues to grow with new mandates and with 10 transactions announced in the quarter. The number of companies facing significant 2028 and 2029 maturities and increasing rating agency pressure is larger than ever, and we expect the environment for our financing and capital solutions business to remain robust. We also reached an important milestone this quarter by closing transactions in our private funds advisory business. We're encouraged by the pipeline we're building in that business, and we're pleased with how quickly this capability is gaining traction with our teams and with our clients. There are 2 metrics that are the strongest leading indicators of our business, our announced and pending backlog, and this metric is up nearly 2.5x from a year ago. And adding that to booked revenue, our total booked plus announced and pending backlog is up over 30% year-over-year as of today. The A&P backlog includes a number of large fee events, which won't all show up in our 2026 results, but we feel great about the direction of travel and our setup into the back half of '26 and into 2027. As we indicated on the first quarter call, we expected the year to be back half weighted, and that is exactly what we are seeing. And we continue to invest in talent to scale our business. We have 6 partners joining in the coming months from the Gleacher Shacklock acquisition and from continued lateral hiring. And we announced a new class of 8 partner promotes earlier this week. Today, our internally promoted partners represent roughly 45% of our overall partnership, which is a real testament to the depth of talent we developed and our ability to grow leaders from within. These are important features of our brand. Congratulations to our new partners, and it's also a very well-deserved recognition. Looking at the partnership as a whole, more than a 1/3 are in the ramp-up stage with under 3 years as a partner, which gives us meaningful runway as that group seasons on our platform. Taken together, the acceleration in announcements, the related growth in revenue backlog, our continued investment in partner-led talent and the build-out of new capabilities in private funds advisory, along with broader coverage in the U.K., our platform continues to strengthen, and this gives us great confidence in our business heading into the back half of the year and well beyond. With that, I'll now turn the call over to Alex to review our financial results and capital management in more detail.

Thank you, Andrew. Starting with expenses. Our adjusted compensation ratio was 71% for the first half of the year. With revenue weighted to the back half, we expect that ratio to come down towards our full year target of 67% as additional revenue is recognized. Our adjusted non-compensation expense of $31 million for the quarter was down $5 million from the prior year period and $6 million from the prior quarter period, driven in part by an insurance recovery and lower bad debt expense. For the first half, adjusted non-compensation expenses totaled $69 million, down 20% from the same period last year. While we expect higher spend in the back half of the year, we remain on track for a single-digit percent decrease in full year adjusted noncomp versus 2025. As it relates to taxes, we expect our underlying adjusted tax rate, excluding the benefit from RSU vesting to be in the low to mid-30% range for the remainder of 2026. Turning to capital management. Year-to-date, we have returned $73 million to equity holders through a combination of dividends, distributions and RSV settlements. In our 5 years as a public company, we returned over $765 million in aggregate, including the retirement of 40 million shares or share equivalents. We remain committed to delivering value to our shareholders through prudent capital management. We ended the quarter with $116 million in cash, no debt and 74 million Class A shares and 20 million partnership units outstanding. This morning, we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions.

[Operator Instructions] We'll go first this morning to Devin Ryan of Citizens Bank.

I wanted to just maybe start on the backlog commentary and just, Andrew, the momentum that you talked about and heard the comment that I think 40% of the year-to-date announced activity has occurred since June. So obviously, things have been picking up quite a bit over the last couple of months here. So, can you just talk about maybe what is changing to move conversations to announcement or speed things up? Is it conditions shifting? Or is it just the way these specific deals are evolving? And then if you just can give a little bit more color around what you're seeing across kind of both the spectrum of kind of large deals versus smaller deals? And anything from a geographic perspective, too, would be helpful.

Sure. Thanks, Devin. It's more idiosyncratic, I think, just to the nature of our investments and the boots that we have on the ground. So, we're not really tethered to the broader market as other firms might be where they're market share leaders, we're market share takers and growing our market share. So for us, it's all about where we've made investments. Those investments, as you know, take time. They're not light switch operations. And so we've been very dogged in thinking about our client coverage. We've been very disciplined. I think we've made very good investments in our industrial business, in our consumer business, healthcare, especially and around some of our infrastructure and tech franchises. And those bankers have been on the platform now for a while and these transactions and relationships and then transactions follow. It just takes time. That curve for us is very evident we just feel very good about the people we have on the ground now and the progress they're making. So less about something that's fundamentally changed. We haven't really changed what we're doing. It's more just the investments we've made in those particular client segments, they've been active, and we see, again, really great progress in particular in the last 6 weeks or so, and the backlog has built up very nicely. On the question of large versus small, I think that when you look at the broader markets, you don't need me to tell you this. You can look at the data, but the transactions over $10 billion are accounting for a pretty large percentage of overall volume. I think the $1 billion to $5 billion category on transaction count is down a bit. Again, because we're not tethered to the broader market stats, we continue to feel good about the investments we've made. We've had transactions in the over $20 billion level. We've had transactions in the $700 million to $2 billion level, and those are all good fee events for us. And again, building our franchise in a market where transactions get transactions as you increase your relevance, it does have a compounding effect. So we're just in that stage of our investment cycle. In terms of the question about United States or North America versus rest of world, for us, the mix is pretty much the same as it's always been, something around 80-20. We're not seeing much divergence there. And we're seeing the same pace of activity in both of our key markets. A lot of the historic barriers to transactions and the excuses for not doing transactions have largely been removed from the boardroom. We're seeing now a very open-mind investment and in some cases, a very aggressive stance toward thinking about how to drive business forward, create value for stakeholders. So lot of the prior excuses, whether it was tariffs or inflation or the rand war or whatever it might have been, we're just not feeling that in the boardrooms anymore. People are in transaction mode, and we like that, particularly for our larger strategic clients.

Great color. And then just a follow-up on just the kind of the partner composition. I appreciate a fair amount of changes just even this year with the 3-year review and then kind of recent acquisitions and a big promote class, which is good to see. Can you just talk a little bit about the team on the field today and how you think that compares to kind of the kind of the team heading into the year? And I appreciate kind of the comment on there's a lot of partners kind of still scaling their productivity. So, how do you feel about kind of their ability to ramp? I don't know if it's to $15 million of revenue or how you guys think about kind of a more mature partner productivity level? And just intertwined with the question is, if productivity is increasing, what does that mean for margin potential of the company? And the last part of the question, sorry for multiparts here, but just how to think about the -- just the growth now from here. You've kind of reset the base. You brought some people in, some people have been moved to adviser or moved out. How do we think about growing from now this level?

Okay. I'll try to get all of that, Devin, if I missed something, just let [indiscernible] I mean fundamentally, as your question about our business. And at its core, we're investors and business builders, and we invest in people. So in effect, the product is our people. And when you invest in people, you have to make the investment upfront. As you know, I've had debates with the accountants on this but our investments in people are not capitalized. They're expensed. And so it's a unique feature of the business where we're investing in people, we have to take that investment upfront. But then as people mature in this business, as they build their network, as they build transactions and build relevance and get more experience, actually, unlike products, which depreciate and then you have to figure out how to reinvent the product and innovate the product. Our products actually get more valuable over time. So it's a great feature of our business. Now we have to make the right decisions about the people we bring into the firm, the people we promote and develop, but it's just a great feature of the business. Now reality of the business also is at some point, you have people that will retire, will age out, we will get less productive. So I think the changes we made without me being too derogatory, I think they've been misinterpreted by the marketplace, which is okay. I'm not trying to correct everyone's viewpoint, but these are very natural and necessary changes if you're going to have a high-performing partnership and you're being positioned for future growth, and you're always investing in the next generation. We have a really great class of partners we've announced earlier this week. As you mentioned, these are all highly qualified and highly productive people that we believe in to be highly productive partners in the future. And we're still targeting that $15 million. But when we have promotions, in particular, it takes time to ramp up. And so our -- there is a differential when we hire talent from the outside versus promote from within the promotion from within does take longer to ramp. But the primary reason we have chosen this class of partners is that we believe in them and believe that they can ramp. So, our profile right now is if you look at 1/3, even a little more than 1/3 of the partnership is here less than 3 years, we have experienced, particularly in post-COVID though. I don't know that it's a post-COVID thing. It just means that's when we looked at this inflection where historically, we start to ramp up people 1 to 2 years, and that ramp is really 3-plus years. And so we're managing the business as though our promotions are going to be 3-plus year ramps and from external hires, maybe a little faster, but generally, that ramp-up is taking a bit longer. So we feel good about the growth from within here. Again, we're really disciplined on how we're thinking about coverage. And we feel like some of the investments we've made, particularly from outside within and from the outside are actually paying some real dividends now as we build up scale in those businesses. I hope I got all the questions, Dev and I did forget what you asked because I was talking sorry.

You did. And the fundamental piece we hit, and I appreciate the multipart of it, but I think we covered everything. So, thank you.

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

Just wanted to start on the compensation outlook for the year here. So the first half, the adjusted compensation ratio was 71%. But just -- wondering how you're thinking about the full year, just given the visibility into the back half. Obviously, a lot can change between now and the end of the year. But as we sit here, just would be great to kind of get your updated take on full year expectations. And I think you've previously cited like that 67% ratio. Just wondering if that is still a reasonable target here for the full year.