PJT Partners Inc. ($PJT)

Good day, everyone. Welcome to the PJT Partners First Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Sharon Pearson, Head of Investor Relations. Ms. Pearson, please go ahead, ma'am.

Thanks very much, Bo, and good morning, and welcome to the PJT Partners First Quarter 2026 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 actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2025 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 that 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 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.

Thank you. Thank you, Sharon. Good morning, everybody, and thank you all for joining our earnings call. Earlier today, we reported revenues, adjusted pretax income and adjusted EPS that were all Q1 records. Our revenues increased 29%. Our adjusted pretax income increased 49%, and our adjusted EPS increased 47% from year ago levels. The substantial progress we have made is even more apparent when viewed through a longer lens. In just 3 years, our quarterly revenues have doubled, while our adjusted pretax income and adjusted EPS have nearly tripled. In this dislocated market environment, we delivered strong performance in all of our businesses with Strategic Advisory leading the way. Our consistent efforts to attract talent drove our increased partner count as we added 8 new partners in the first quarter. Our hiring pipeline continues to be robust, and we expect to remain very active in recruiting senior professionals to our firm. While geopolitical uncertainties and other risks pressured many companies' prospects and valuations during the quarter, our outlook for our business remained unchanged. During the first quarter, we repurchased 1.6 million share equivalents, more than offsetting our year-end 2025 equity issuances. Even after this record $244 million of repurchases, we still ended the first quarter with record first quarter cash balances of nearly $400 million. All told, we have allocated almost $1 billion to repurchase shares and partnership units in just over 2 years. Our Board of Directors has authorized a new $800 million open market share repurchase program, reflecting our continuing confidence in our prospects as well as the strength of our balance sheet. After Helen takes you through our financial results, I will review our business performance and outlook in greater detail. Helen?

Thank you, Paul. Good morning. Beginning with revenues. Total revenues for the first quarter were $418 million, up 29% year-over-year, and as Paul mentioned, a record first quarter for our firm. Our businesses all delivered strong results in the quarter with record first quarter performance in both Strategic Advisory and Restructuring. Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments, which are more fully described in our 8-K. First, adjusted compensation expense. We accrued compensation expense at 66.5% of revenues for the first quarter compared to 67.5% for the first quarter in 2025 and 67.1% for the full year 2025. The 66.5% ratio represents our current best estimate for the full year 2026. Turning to adjusted non-compensation expense. Total adjusted non-compensation expense was $56 million in the first quarter, up 14% year-over-year. The main drivers of the increase were higher travel and business-related expenses, higher occupancy costs driven by the expansion of our global office footprint and higher professional fees. As a percentage of revenues, our adjusted non-compensation expense was 13.4% for the first quarter, which compares to 15.2% for the same period last year. We continue to expect our total non-compensation expense in 2026 to grow at approximately 12%, a similar rate to 2025. So growth rates in travel expenses as well as AI-related investments are more uncertain this year, and we will provide an updated view on our non-comp expense outlook when we release our first half results. Turning to adjusted pretax income. We reported record first quarter adjusted pretax income of $84 million compared with $56 million for the same period last year, and our adjusted pretax margin was 20.1% for the first quarter compared with 17.3% for the same period last year. The provision for taxes, as with prior quarters, we presented our results as if all partnership units had been converted to shares and all of our income was taxed at a corporate tax rate. Our effective tax rate for the first quarter was 20.5% compared with 14.1% for the full year 2025. The increase in the effective tax rate compared to both last year and our prior guidance was principally a result of a lower tax benefit from the delivery of vested shares in the first quarter. As a reminder, we take a full year view of that benefit, and we currently expect our full year effective tax rate to be around 20.5%. Our adjusted competed earnings was a record for the first quarter at $1.54 per share compared with $1.05 per share for the same period last year. On the share count for the quarter, our weighted average share count was 43.3 million shares, down 3% versus a year ago. During the first quarter, we repurchased approximately 1.6 million shares and share equivalents, and we committed a record $244 million to share repurchases in the first quarter. We are in receipt of exchange notices for 149,000 partnership units and subject to Board approval, we intend to exchange these units for cash. Additionally, our Board has authorized a new $800 million open market share repurchase program. On the balance sheet, we ended the quarter with $388 million in cash, cash equivalents and short-term investments and $535 million in net working capital, and we have no funded debt outstanding. And finally, the Board has approved a quarterly dividend of $0.25 per share. Back -- Paul?

Thank you, Helen. Beginning with Restructuring. We continue to operate in a period of sustained demand for liability management and restructuring advice, with Restructuring revenues for the first quarter comfortably above year ago levels. We expect this level of activity to continue as companies around the globe across a wide array of industries contend with overleveraged balance sheets, challenged business models, pressures resulting from technological disruption and an increasingly complex geopolitical environment. As our coverage footprint grows, so too does our ability to connect our leading liability management team to additional opportunities. Turning to PJT Park Hill. PJT Park Hill revenues were comfortably above year ago levels as significant growth in private capital solutions more than offset a decline in primary fundraising revenues. While this is shaping up to be another challenging year for the overall primary fundraising market, we expect our primary fundraising revenues to broadly match our high water levels as we benefit from a high-quality fundraising pipeline that is receiving strong investor interest. In contrast to pressures in the primary market, the secondaries market is positioned for another year of robust growth as rising demand from GPs and LPs for liquidity solutions is being matched by growing secondary investor appetite. Clients are increasingly recognizing the power of our integrated platform given the close collaboration with Strategic Advisory and the ability to access an extensive network of global LPs through PJT Park Hill's strong distribution relationships. Turning to Strategic Advisory. For the quarter, our Strategic Advisory business delivered record performance with revenues increasing significantly compared to year ago levels. On our last earnings call, we noted the many positive dynamics supporting a highly constructive deal environment, including strength in the debt and equity capital markets, greater confidence regarding regulatory outcomes and increased CEO confidence. We also sounded a cautionary note that market sentiment could turn on a dime and that geopolitical risks as well as debate surrounding AI would continue to loom large in shaping the year ahead. The first quarter did, in fact, see large swings in market sentiment as investors grappled with significant geopolitical events and profound AI debates. These dislocations were a reminder of the many risks and uncertainties facing CEOs and Boards of Directors as they evaluate strategic alternatives. Adding to the list of potential worries are the implications of higher oil prices and potential supply disruptions emanating from the conflict with Iran. This heightened volatility is fueling a greater sense of urgency to play both offense and defense as companies continuously reimagine and reposition their business models to fortify their competitive standing. In this uncertain environment, our mandate count continues to increase and is now at record levels, up about 15% from a year ago. Our preannounced revenue pipeline has increased even more and also stands at record levels. And while our announced pending close backlog is below year ago levels, we have seen the pace of our announcements begin to pick up appreciably. As we look ahead, our firm remains well positioned to thrive across a broad range of market environments, given the growth opportunities before us in each of our businesses. As before, we remain confident in our near, intermediate and long-term growth prospects. And with that, we will now take your questions.

[Operator Instructions] We'll go first this morning to Brennan Hawken with BMO Capital Markets.

Paul, I was hoping -- thanks for your comments on the Restructuring outlook and all the uncertainty. Would appreciate maybe getting a bit more color there. It seems like we're likely to get at least a slowing of capital in the private credit markets, even though the retail vehicles are roughly 1/5 of the AUM. Certainly, there've been a lot of the capital flowing in, and that looks to be slowing at best and maybe even more dramatic than that. So what impact do you expect that could have on the outlook for Restructuring? And what are your updated expectations there?

I appreciate the call. Look, we've maintained for a long time that we're in a long cycle of elevated Restructuring liability management activity. And it's driven by a whole host of things. One is there's no doubt that lending standards, if you go back to the 2019, 2022 period were not as rigorous as they are today. Rates were very low. People were chasing yield and perhaps the loans and the credit that was extended or the standards were laxer than they are today. So some of that is just dealing with that. Some of it is clearly the fact that we have a very dynamic world and the outlook for some of these businesses is fundamentally different than it was before. I think private credit has a larger exposure to some of these issues because of how much growth they saw during those benign credit years and also because they have a greater-than-average allocation to the broader software marketplace. We don't see systemic issues. We do think that this will undoubtedly slow the pace and potentially cause a retreat in retail flows. I think there's a period of time when all of this was characterized as gates and limited liquidity was the best of both worlds. I think in this environment, it may be the worst of both worlds. And I do think that expectations for liquidity are being magnified by some of the new stories and the like. But inevitably, this probably has more of an implication for what's the long-term appetite for retail interest in this product than it is for anything more systemic. But we see the overall trends as being quite consistent with an increase in overall liability management exercises. And if you just look at all of the industries that rely on energy, cost of energy, how sensitive that is, and if you see a pinching of supply, you could see another leg up. But we're in a period of significant volatility and uncertainty, and that typically is not constructive for credit that was underwritten in a different environment.

I'd love to hear your thoughts on Strategic Advisory. Strategics are clearly driving the market with M&A right now. That's an area where you've been leaning into as you've been building out the Strategic Advisory business. So you were pretty optimistic on growth in those revenues coming into the year. We started out the year yet again on a bit of a roller coaster. Has that impacted your view? And I believe you touched on the fact that mandate count is up 15%. Is that in the Strategic Advisory business? And can you help us maybe frame what that statistic would mean in the long-term outlook for the company?

Sure. So look, the basic message to me -- from me is strategic activity. I think corporate Boards of Directors are bigger and bolder than ever before. We've talked about this for a long period of time. I think there is a secular shift to constantly reimagining companies. The cost of standing still in a dynamic environment is far greater companies that don't move are putting themselves in increasing peril. And that's a secular shift, and that's why we believe that the level of M&A activity, which has been by most macro metrics sort of meaningfully below trend, is quickly getting back closer to trend and may well operate above trend line. Having said that, the reality is that strategic activity is highly linked to the market environment at that moment in time. And when we, 3 months ago, sounded a cautionary tale, we just made the point that these market windows are going to open and close and they're not going to stay open all the time, and there are going to be shocks to the system and that there's perhaps an underappreciation for some of the tail risks out there. So we see a world where the secular trends are pushing activity up and to the right, but we do see more oscillation and volatility around that where there will be moments in time where you've got launch conditions that are perfect or near perfect. You'll have other periods of time when people will be digesting and retrenching as they wait to assimilate the implications of additional news flow. That's kind of our view. And we also made the point that 2025 was a really strong year in Strategic Advisory for the overall market. And while we expected a steady increase from there, we didn't think that there were going to be step function increases from there and that we were probably going to have a stronger year this year, but not by crazy amounts. Now as far as our business, we're in the CEO engagement and mandate accumulation game. That's what we do. Our footprint and our dialogues are all designed to have a long-term view to identify companies where we can add significant value. We have a compelling value proposition to go from not being on their radar screen on their radar screen to being the adviser of choice and being the strategic adviser who's helping them prosecute all of their many strategic activities. The leading indicator for that is new client mandates, new companies that we've "broken into as a trusted adviser". The mandate count is up about 15%. Our preannounced pipeline, which is a better measure of revenue potential is up meaningfully more than that. But at the end of the day, quarter-to-quarter, it's just simply a function of the quickly -- how quickly the pace of preannouncements become announcements and then what's the time to close. And we'll have much more clarity as the year progresses on that specifically. But right now, I think when we look at kind of the most important KPIs, we're seeing a meaningful step function increase in the level of activity.

We go next now to Devin Ryan with Citizens Bank.

I want to dig in a little bit on the software sector specifically, just given some of the comments that you made. Obviously, an important part of the M&A market, a lot of uncertainty directly there and then kind of emanating off of that. And there's been a lot of valuation disruption as well. So would love to just get some thoughts around whether you're expecting this part of the market is just going to remain particularly challenged with those dynamics? Or do you see buyers maybe starting to get ready to step in more value or these companies need to consolidate? I love to get some thoughts around how that specific part of the market playing out over the next year or so here.

Sure. So look, I don't think you can sort of paint the entire industry with one broad brush. And the reality is that within the software ecosystem [indiscernible] large, there are clearly winners, but they're not all winners. That would be the first point. I think the second point is the debates are much less about near-term cash generation profitability and more about what's the long-term value, what's the terminal value of these businesses. The debates that are underway are not likely to be resolved across the board in the near term. And you can end up with operating performance that's quite positive while questions linger about long-term value. And in a world where many of these companies were financed in the credit markets with a loan-to-value mindset, if there's real questions about the value, the ability to refinance that entire capital stack without further equitizations or some other catalyst may, in some instances, be a challenge, which is why you're starting to see the earliest signs of this bleeding into the credit markets as it relates to liability management. And that's less about near-term fundamentals and just more about quantum of debt, loan to value and whether or not that entire cap stack is the right cap stack when there are questions about long-term value. I think there's that. I think it also makes monetizations by private equity firms more challenging. And I suspect that there were probably monetization goals overall for individual asset managers that may be a bit more challenging if some of those assets need to be held back waiting for greater clarity. I think that, that trend plays very nicely into our private capital solutions business as alternative asset managers are going to look increasingly to alternative liquidity options to maintain the pace of capital return and that you'll see more, and it may be on assets that are away from these where there are still question marks. But clearly, monetization -- if you're finding it challenging with parts of your portfolio, you may rethink monetization opportunities in other parts of your portfolio. And probably for some of these companies, there will be a sense that creating more scale is important. So I think at the right time, you'll see more strategic activity as it relates to some of these companies. But it's challenging when there's that much headline risk and people are still trying to calibrate what the new equilibrium is. So I sort of see this as sort of the waiting and watching and absorbing before there's full assimilation, repricing. And then inevitably, you're going to see an increase in activity.

That's great color, Paul. And just a follow-up here on recruiting. You obviously had a record year of partner additions last year, and I know some of that was promotions as well. It sounds like the pipeline right now is still quite strong. So can you talk a little bit about the pipeline, kind of what your expectations are in the year? And then just interrelated, the ramp time of productivity, I'm assuming that as the firm scales and kind of get some of those network effects in certain industries that potentially the production would scale faster. So I would love to hear a little bit about that. Like are the partners from last year increasing production faster? Just any thoughts around the second component to that question as well?

Let's start with the second component first. It all depends on whether it's the tip of the spear into a new area or whether it's going from strength to strength. So if you think about it, if you built out an industry vertical and you have real traction, real coverage footprint, real impact in boardrooms and you're adding another partner, the expectation is the ramp should be quickest. If you're going into a new geography or this is really ground zero for a hire in a space that you haven't previously been in, it will be longer. And I've always talked about this. We're out there building lots of networks. And every time you come closer to completing a network, it lights up. But it's those early investments in a new geography or a new industry where we haven't previously had presence, where by definition, it's not the productivity of the first couple of hires, it's the productivity of the third, fourth, fifth individual that completes the circle and lights up that network. And the reality is, no matter how much we've grown, our investment at any point in time is a little bit of everything, where we're taking really greenfield initiatives and recruiting. At the same time, we're fortifying real strengths. And then we have other initiatives that are somewhere in between. And that's the challenge in sort of talking about that. Having said that, whatever the time would be in any of those scenarios, that time to ramp is less today than it was 5 years ago because the firm has a much stronger field position is much better known. There's greater likelihood that there are others in this firm that have connectivity at the Board level and the C-suite with their other trusted advisers, be they law firms or other trusted advisers where we have clear credibility or where the Board members have seen us in action in other boardrooms. So you've got lots of cross currents here. All else equal, it should be quicker than it was, but it really depends on where the investment is. And if you look at our footprint, we've entered new markets. We've made a commitment to Italy. We've made a commitment to the Nordic region. Those are, to some extent, greenfield operations. But I think they'll scale faster than other markets would have because we've built a strong reputation for ourselves. And as far as the recruiting environment overall, look, it's challenging. It's competitive, but we have a unique value proposition. And I do think that when things slowed a little bit after all the hype of December, early January, I think there were some people who were saying, I couldn't possibly think of leaving at the apex of the gold rush. When it turned out in the first quarter, this wasn't necessarily the apex of the gold rush. We probably at the margin had more engagement with high-quality individuals than we were expecting just because the market, while still quite robust, maybe wasn't as frenetic as initially advertised. So at the margin, that's been helpful. But we're in a lot of active discussions. We have a lot of white space, and we have a lot of enthusiasm to continue to grow the business. And how much we do, we'll be able to report back with greater clarity in the second and third quarter, what the full year report is going to look like.

We'll go next now to James Yaro with Goldman Sachs.

Paul, I just want to touch on financing conditions today. Is it fair to say that the mix of M&A financing shifts at least for some period to more bank-led financing and private credit financing costs have already increased? I'd love to get your perspective there. To what extent are these impacting the health of financing markets and in turn, M&A? And finally, to what degree could the mix of M&A financing change more permanently as a result of the issues in private credit?

Look, I think it's going to coexist, but maybe the view that everything is going to private credit, which was a narrative at one point in all of this, is not the way this all plays out. And we've seen a lot of deals that were originally done in the private credit market were then refinanced in the syndicated market. I suspect you're going to see a little bit of both. and probably a lot of both. And therefore, it still has significant advantages to it, but it is a competitive world. And the banks are not looking to give up their field position and what's still a very lucrative origination business. And I suspect that we're going to get to a new equilibrium. And one of the beauties of our firm is we're agnostic about where our clients finance. We don't have any reason to favor one versus the other. And we can give the best independent advice. And I think increasingly, clients value our perspectives as what is the best way to finance a specific transaction and to do it clear-eyed and only thinking about what's in the best interest of our clients. And increasingly, we're seeing that clients will come to us to ask for those clear-eyed judgments as to how best to tap the markets and whether this should be done through private credit or whether they should be done in the syndicated market. And we believe it's very situation specific, and we can add real value in that regard. So I suspect that, that business is going to continue to increase in importance for our firm as we increasingly find ourselves able to originate and to advise clients on the best place to raise capital. I don't believe that there's a systemic risk to all of this from what we've seen. Obviously, no one sees everything and you don't know everything. But from what we see today, this is probably more of a PR challenge and an asset gathering challenge for the private credit world at large than it is a systemic issue. And we're watching it very carefully, but that continues to be our view.

That's extremely helpful. I hope you might be able to shed some additional detail on the secondaries business, specifically around perhaps the mix of LP versus GP secondaries, which you alluded to previously. Do the issues in software impact the growth of continuation vehicles volume specifically in which they were a meaningful component of activity? And then discretely, I'd love to just get your perspective on the LP market -- LP secondary market specifically as well.

Look, we've always maintained that you need to open up a third way for liquidity. If you just look at -- this is a math problem as much as anything else. If you just look at all of the capital that's been invested, all of the capital that needs to be returned and every dollar that was invested, isn't worth $1 today. On average, it's worth significantly more than $1 this sheer volume. And there are real challenges in trying to use the IPO markets as your sole avenue or to rely on another sponsor to sponsor passing of the parcel, there needs to be that third way. And if you look at it on any dimension, we think it's an underinvested marketplace. The biggest governor to date has not been the desire on the part of asset managers to consider secondary transactions is can they be done at scale, big assets, big size, big liquidity desires. And can it be done where there is the appropriate competitive tension where you don't need all these big anchor orders to be able to get to the number. And the way that happens is more allocations to secondaries funds as an asset class. And we've always maintained that if you step back and look at this as an asset class, it's a compelling asset class for reasons we've talked about previously, the ability to better match commitment and investment, the lack of J curve, clear identification with an operating history track record of the asset you're investing in, continuing sponsorship from the manager, and it's proven out that the returns have been strong. And as there's a better appreciation for that, we think that this asset class continues to grow in assets under management, assets deployed and then the better execution you can get, the more secondary activity will be coped out. And that's why we've spent so much of our time in building out this practice as really focusing on the ability to attract new sources of capital so that we can deliver better executions. And all that we've seen is that in a volatile world where I'm sure the January 1 internal plans as to which assets were likely going to be harvested in 2026, my guess is that for most managers, names have come off that list and in an effort to be able to return their targeted amounts of capital to their LPs, they're going to have to create more alternative liquidity vehicles. And that's why we're seeing such strong interest and strong take-up, but it needs to be matched with continued allocation of capital to the space. And we're seeing that. And I think we're in this virtuous circle, and we're going to continue to see that as well. And in other instances, you're starting to see more needs on the part of LPs to be more forward thinking about how they themselves reallocate their own commitments, and we're seeing more interest also in LP sales. But our real growth driver in this environment is on the GP side.

We'll go next now to Jim Mitchell with Seaport Global Securities.

Paul, so it sounds like you're not -- the thought process around sponsor activity on the M&A side is still kind of depressed and really being driven by secondaries and not really going the M&A route. So just curious, maybe taking a step back, how do you kind of view the environment this year will be very similar to last year, driven by strategics and still depressed financial sponsor activity? Or are you starting to see any of that change where middle market versus large cap starts to pick up on the M&A side?

Sure. Well, again, I want to be really clear. We're talking about trends. We're not talking about individual situations. So on any high-quality asset that we're in market with, there's very robust interest from a broad group of sponsors. It's not as if people aren't active, aren't deploying capital, and it's not as if they're not looking to bring some of their own assets to market. I want to be really clear. The market is open, it's operating, it's healthy. The question is, compared to last year, how much have we seen an improvement? And the fact is, I think where software matters is software as an industry has created some overhang or plans for liquidity in 2026. And if some of the comps that you were looking at for an IPO are down considerably, that's obviously going to have a dampening effect on your own IPO plans and it's going to make your confidence in being able to monetize these assets relative to where they're marked, it's just going to reduce that activity. So if your own monetization machine is behind plan, probably at the margin, your own deployment schedule is going to be dialed down a little bit relative to what might have been the case at the beginning of the year. And therefore, we're not seeing the rebound that everyone was hoping for. We've always thought that this was going to be far more strategic led for a variety of reasons. One is when you think about changes in regulatory posture, that tends to affect decision-making on strategic assets than assets that were originally sold to sponsors. So as a result, when you see more degrees of freedom in thinking about consolidation 4 into 3, 5 into 4 type transactions, that's going to coat out more strategic firepower. You also have incredibly robust corporate balance sheets. So when rates are higher, they may make it harder to pencil out for a sponsor in a way that you don't feel the same pressures strategically. And then also the ability to use equity as a currency. And when you have market indices, while it may not be across the board, you have many companies trading at all-time highs, their willingness more comfort in using their own currency. So all of that is going to continue to make this in the near to intermediate term, we believe, more sponsor led -- I'm sorry, more strategic led. And if you ask me what are the 3 takeaways, if you look at this environment right now, it's strategics versus sponsors, it's larger deals versus smaller deals and it's rest of world deals versus the United States as sort of trends.

Okay. That's really helpful. And maybe just on the buyback, a nice increase from the $500 million previously authorization. Does that imply a faster pace going forward? I know you tend to do more in the first quarter, but how do we think about, I guess, the cadence of buybacks in the context of record cash and the bigger authorization?

Well, I'll let Helen speak to it. But before she does, I'll just make the point that we always want to neutralize the dilution as quickly as possible, but we're also looking at the value in our share price. And to the extent we find that to be compelling or the balance sheet backs it up, then we're going to back it up by putting our own money to work.

So Jim, I would say no real change to our strategy. As Paul said, we tend to be more front-end weighted year in our buybacks. Goal #1 is to offset dilution, but we're also opportunistic. So I think the strategy would continue. And I think the $800 million reflects a higher share price. The last buyback program we used in just over 2 years. So maybe it's a little longer, but no significant change.

We'll go next now to Mike Brown with UBS.

So I wanted to ask about Restructuring. So LME has really been driving a lot of the Restructuring activity over the past few years. How should we think about how the mix could shift going forward? Do you think we'll see more Chapter 11s here? And then, Paul, you touched on the global opportunities. Maybe can you talk a little bit about your capabilities outside of the U.S.? How does it compare maybe which regions, countries do you have a larger presence? And then how does that mandate mix debt or credit or differ from your domestic business?

Well, first thing I would say is, we have an addressable market that we still haven't come close to fully tapping. So if you think about just all the industry verticals, that are partially unbuilt where having that coverage footprint would enhance our liability management practice. There's no doubt there's a high correlation there. So as we build out industry groups. The second is while we've done a terrific job in expanding our breadth of sponsors who work with us on liability management exercises, there's an extraordinary amount of white space. And as we continue to expand our coverage footprint with sponsors, we have real growth opportunities. And then the third is as we continue to build out our footprint rest of world in Europe, Asia and the Middle East, we have tremendous opportunities. And we've seen success in France, Germany, Sweden, elsewhere, U.K. as we continue to build out presence. So the way we think about it, the coverage footprint continues to grow, becomes more powerful, and that can only be a real positive for the rest of our businesses. I would say there's probably more of an effort to focus on creditor assignments outside the U.S., particularly in Asia. So we've done a lot in Asia, but a lot of that has been represented in creditor groups as opposed to onshore creditors -- sorry, onshore debtors. And I think that, that's probably a difference in mix between U.S. and rest of world.

Great. I wanted to ask you about the non-comps. So you mentioned that some of the uncertainty due to the AI-related investments you're making makes a little tough to give some guidance there. Can you maybe just talk about how much investment came through in 1Q? Talk a little bit about where you were investing? And then when we think about AI, can you talk a little bit about what that can mean for the margin, maybe near term, longer term? Is there an opportunity on the comp side? And then maybe just one final one on 2Q, is there kind of a guide there at least as we think about our models?

I'll start with the last question first. I don't think we have a clearer guideline for Q2 than what we've said, which is 12% for the full year. So I think that would be still where we are. In terms of the AI spend, we have been buying licenses. But the reality is that you need to invest, we intend to invest. And in the short term, that probably means that it's got an impact on margins as a cost as opposed to a benefit. And there are lots of investments, making sure that we have our data structure organized, investments in security, infrastructure to support whatever we're putting in place. There's probably going to be some technical consulting expense that we need to incur. So we're looking broadly with a mindset of investment and then figuring out how we can best use it. So I think it's too early to say what the impact will be. But certainly in the short term, we think there'll be a cost from that.

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

I guess to start, you guys gave a lot of color on the pipelines. And if I heard you correctly, preannounced pipeline at record levels, while your announced backlog is down but improving. Obviously, got off to a strong start to the year, which helps, but I was just hoping you could give some color on what you're assuming in terms of deal conversion in the 66.5% comp accrual. And just given the trends in the announced backlog, is it fair to assume that revenues this year could be a bit more back half weighted?

Well, I think our comp accrual reflects our best estimate of a variety of factors where trying to give our best assessment about what our overall year financial results will be. We have some views on what our recruiting gets will be throughout the year. We also are making some judgments about the competitive environment, and it's our best estimate at this time. But as we said, I think, in our prepared remarks, our view for the year is pretty much unchanged from where it was 3 months ago because we had predicted some of this volatility in the marketplace. So I think it's sort of been part of what we've expected. And as it's played out, it hasn't caused us to adjust in any material manner our views for the year.

Great. And for my follow-up, Paul, your comments on rest of world versus U.S. in response to one of the previous questions caught my attention. I just was hoping you could maybe drill down a bit more in terms of what you're seeing in terms of activity by geography, what's driving some of those divergences and how you see that playing out throughout the balance of this year?

Well, we always got to be careful whether you're looking at percentage change or absolute market size. So there's no confusion. The market that's the biggest, deepest, most vibrant is the U.S. market. If you're just asking me though, where is there probably an uptick in growth year-on-year, I think Europe would be that place. And you can see it in the numbers, you can see it in the data. I think some of that is there's an increasing appreciation. And we've talked about this previously that you need to create more scaled European competitors in defense, in financials, in communications, in all sorts of critical areas. And I think the regulatory posture in Europe is going to continue to relax to allow more of this to occur. At the same time, there's been a valuation disconnect for many companies that operate on the global stage, but happen to be listed in Europe. So you're seeing more opportunities to capitalize on these valuation equilibriums with more take privates and the like in Europe. And I think that's probably 2 of the most important factors as to why European activity is up relative to rest of world this past year.

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

I have a follow-up on the Restructuring commentary from earlier. Paul, you noted that revenues were comfortably above the year ago levels in the quarter. But wondering how that maybe compares to other quarters last year, just given the seemingly strong results in 1Q? And then also it would be great to get a little bit more color around the outlook for the rest of the year here. I know you said you expect activity levels to remain elevated, but do you think restructuring results over the remainder of the year can or will also come in comfortably above the year ago levels?

Well, look, there's a lot to play out. I think I would say we feel very comfortable about our competitive position. We think that this dislocated environment is going to continue for a considerable period of time. It's certainly quite possible that we'll be up a bit. We could be up comfortably. But I suspect that it's going to be a very positive year. But it's just too early in the year to really put too fine a point on any of our businesses as to the actual quantification because there are a lot of transactions that could slip into next year. They could accelerate into this year. And when you have a lot of chunky assignments, whether they're in Strategic Advisory, the PCS business or Restructuring, it's just too early in the year to know exactly where the revenue recognition falls. But if you're asking about levels of activity, I think all of our businesses are going to be quite active in 2026.

Got it. Okay. Fair enough. That's helpful. And then a question on the increase in the restructuring MD headcount. This is the first time we've seen a step-up there in a couple of years. So curious if this was a concerted effort to add talent in this area or if there's just any other color you could add in that step-up in the quarter?

And you're talking about partner headcount?

Correct, yes.

Yes. Yes. Look, I think it just demonstrates the investment that we make. We hire MDs that get promoted to partner. That's one of the increases. And then we've got homegrown talent that we promote. So it is an investment in the overall franchise, and you're starting to see it come through as the headcount in that group increases. So I think it went from 18 up to 21.

And ladies and gentlemen, that concludes our question-and-answer period. I would now like to turn the conference back over to Mr. Taubman for any closing remarks.

Just want to once again thank everybody for their interest, for spending the last hour with all of us, and we look forward to reporting on our second quarter earnings and doing this again in the summertime. Thank you all very much.