PJT Partners Inc. (PJT) Q2 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the PJT Partners Second Quarter 2017 Earnings Conference Call. My name is Julie, and I will be your operator for today. [Operator Instructions] I would like to advise all parties, this conference is being recorded for replay purposes. And now I would like to hand the conference over to Sharon Pearson, Head of Investor Relations. Please proceed.

Thanks very much, Julie. Good morning, and welcome to the PJT Partners Second Quarter 2017 Earnings Conference Call. 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 of our 2016 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 statement 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 the 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.

Thanks, Sharon. Good morning, and thank you all for joining us today. We're pleased to report on our continued progress in building out a world-class advisory firm. Our core priorities have always been consistent, to create a world-class Strategic Advisory business by delivering a superior team, deep domain expertise and an unrelenting focus on clients, to leverage the power of our 3 highly complementary businesses, thereby generating superior growth and to serve as diligent stewards for our shareholders. In the second quarter of 2017, firm revenues increased 22% year-over-year. Strategic Advisory and Park Hill were the largest contributors to revenue growth in the quarter. For the first half of the year, firm revenues increased 13% versus a year ago. Turning to each of our businesses in a bit more detail. Park Hill. Park Hill had meaningfully higher revenues in the quarter compared to both a year-ago and the first quarter. As we mentioned on our last call, this business is quite consistent as measured in years, but inherently variable quarter-to-quarter. Park Hill revenues grew across private equity, hedge funds and secondary with particularly strong results in private equity. The real estate fundraising environment continues to be challenging, given lofty valuations and high levels of undrawn capital. However, our recent additions to the Park Hill team, as well as increased collaboration with Strategic Advisory, position us well for the future. Turning to Restructuring. Despite a muted market environment for Restructuring, our performance year-to-date has kept pace with last year's strong results. Our global Restructuring revenues were flat for the quarter and up year-to-date versus last year. We continue to be cautious about the macro environment for Restructuring, given the benign credit backdrop and the fall off in energy-related activity. However, the power of our integrated platform is enhancing an already formidable franchise. By leveraging the front-end relationships and industry expertise of our advisory team, with both corporate and financial sponsors, we are finding ourselves engaged in more restructuring dialogues and winning more business as a result. As our Strategic Advisory business continues to scale, the benefits of these collaborative efforts will become increasingly apparent. Turning to Strategic Advisory. We generated strong year-over-year growth in Strategic Advisory for both the quarter and year-to-date. While we are pleased with our financial performance thus far, the reality is, we're just getting started. We have been methodical in building out our Strategic Advisory business. We recently added 2 partners, bringing our Strategic Advisory partner count to 25 and our partner additions year-to-date to 5. We are also in advanced dialogues with a significant number of extremely high-quality candidates. We've attracted very high impact bankers, who are clearly differentiated in the marketplace with long-standing client relationships. We are creating a culture that fosters a collaborative work environment with bankers who are committed to building and enduring a sustainable franchise. Importantly, we are beginning to see the ramp in our recent investments. By way of example, we began 2016 with just 5 partners who had been in our firms for at least the 2 years prior. Going into 2018, that number grows to 18. Another example is the transformation of our European Advisory franchise. We started with a single partner in Madrid and have since added 7 London-based partners. In a very short period of time, our European team has gained considerable traction, secured an impressive list of important mandates and been associated with a number of industry-defining transactions. The progress in Europe is mirrored by our momentum overall. Our number of active Strategic Advisory mandates around the globe is up 40% versus a year ago. Every day that passes, our brand grows in strength, our bankers gain more traction with clients and we improve our competitive position. I will now turn it over to Helen to review our financials.

Thank you, Paul, good morning. Beginning with revenues. Total revenues for the quarter were $109 million, up 22% compared with the second quarter 2016. And the breakdown of revenues: Advisory revenues, which includes Strategic Advisory, Restructuring and the secondary Advisory business in Park Hill was $73 million, up 24% versus the same period last year. And as Paul mentioned, the growth was driven by an increase in Strategic Advisory revenues, primarily as a result of increased average fees earned per transaction. Placement revenues were $34 million, up 17% from the same period last year. The gross in placement revenues was also driven by an increase in average fees per transaction with a number of fee paying clients essentially unchanged year-over-year. For the 6 months ended June 30, total revenues were $230 million, up 13% compared with revenues of $205 million for the first 6 months of 2016. The breakdown of 6 months revenues: Advisory revenues were $173 million compared with $141 million for the same period last year, up 23% year-over-year; Placement revenues were $53 million compared with $61 million for the same period last year, down 13% year-over-year. Now 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 on adjusted compensation expense. Second quarter 2017 compensation expense was $70 million or 64% of revenues compared with 63% in the second quarter 2016. The 64% ratio is consistent with our first quarter 2017 ratio and represents our current estimate for the compensation ratio for the full year. Turning to adjusted non-compensation expense. Total adjusted non-compensation expense was $23.1 million for the second quarter 2017 compared with $24.8 million in the same period last year. Year-to-date, total non-comp expense was $44 million compared with $46.4 million in the first 6 months of 2016. And as a percentage of revenues, 19.1% for the first 6 months of 2017 compared with 22.7% for the same period last year. Turning to adjusted pretax income. We reported adjusted pretax income of $16.2 million for the second quarter, up from $8.5 million last year and $38.9 million for the first 6 months 2017, up from $29.4 million for the same period last year. Our adjusted pretax margin was 14.9% in the second quarter, up from 9.5% last year and 16.9% for the first 6 months, up from 14.4% versus the same period last year. And the provision for taxes as of prior quarters, we've presented our results as if all partnership units had been converted to shares, so that assumes all of our income was taxed at a corporate tax rate. And as of the first quarter, the tax rate also takes into account the tax benefits related to the delivery of vested shares at a value higher than our amortized cost. Taking into account this benefit, our fixed - effective tax rate was 36.1% for the second quarter and 36.3% for the first 6 months. Earnings per share. Our adjusted if-converted earnings were $0.27 per share for the second quarter compared with $0.14 in the second quarter last year. And for the first 6 months, $0.65 per share compared with $0.49 in the same period last year. The impact from the reduction in tax expense relating to the delivery of vested shares at a value higher than their amortized cost was $0.02 for the quarter and $0.03 for the first 6 months. Our share count for the quarter. Our weighted average share count was 37.9 million shares. And as we've discussed on prior calls, partnership units, which are owned primarily by current and former Blackstone employees can be exchanged on a quarterly basis. We have the option to settle those exchanges in either cash or Class A shares. Year-to-date, we settled the exchange of 888,000 units in cash at an average price of $36.21. And during the second quarter, we received notices to exchange an additional 180,000 units. We've also elected to exchange the cash and expect to settle on August 9th. With this latest exchange, we will have repurchased approximately 1.7 million partnership units since then and our fully diluted share count will be below that of a year-ago. We continue to view these exchanges as an opportunity for us to minimize dilution without impacting our public float. On the balance sheet, we ended the quarter with approximately $96 million in cash, cash equivalents and short-term investments, $172 million in net working capital and no funded debt. And finally, the board has approved a dividend of $0.05 per share, the dividend will be paid on September 21, 2017 to Class A common shareholders of record on September 7. And I'll now turn back to Paul.

Thank you, Helen. As we have said from the beginning, we measure our progress in years, not quarters. However, given we are only 7 quarters into this journey as a public company with a limited history to point to, we wanted to provide more detail around our near-term financial outlook. We have great conviction about the progress we will see in 2018 as the pieces continue to fall into place. As was the pattern last year, we expect to generate substantially higher revenues in the second half of this year, relative to the first half, with second half revenues heavily weighted to the fourth quarter. We remain very confident in the power of our franchise. We are building PJT Partners with a focus on serving clients through all cycles. As a result, we are well positioned to grow in almost any market environment. And with that, I will now turn to your questions.

[Operator Instructions] Our first question comes from the line of Mike Needham, Bank of America Merrill Lynch.

So thanks for the disclosures and some of the color on your outlook for the balance of the year. So maybe first if you dive down on the pipeline. Can you give us a sense for how active your bankers are maybe versus their potential? I know there are a lot of changes that are still happening at the firm. And then I think you may have said plus 40% year-over-year, can you confirm that? And is that the number of deals or is it something else? And then any color on where you're seeing the most activity?

I think what I did say is our mandates at halfway mark in 2017 were up 40% versus a year ago. So what I look at is, I'm looking at all of the leading indicators in our business. And I'm looking at how much traction we're gaining with clients, I'm looking at client dialogues, mandates that we have won, which is what are referencing in the up 40% and that gives me great confidence that we are very much on track to create the firm that we always envisaged. And I'm also looking at the maturation of our bankers and recognizing that a year ago, we had all of 5 partners, who had been on the platform for 2 years or more and next year that number will be 18. And obviously, it takes a while for our partners to come on and have a revenue generating impact. They have impact on Day 1, that's not the issue. Our bankers come on and they are immediately awash in client dialogues and shortly thereafter, competing for and winning a fair share of mandates. But if that works its way through the system and we can report revenues, there's clearly a lag and that's a little bit of the process in getting started. And what we've always said is we're going slowly to go fast. And in our hiring, we have been inundated with folks who would like to join and we have been incredibly discerning, incredibly careful to make sure that everyone who joins is the right individual both in terms of commercial capability, but also cultural fit and willingness to invest and build and serve clients for the long term. And our belief is that the more we build out the firm, the more success becomes apparent to those on the outside. The more demand there is to join and the greater the pace of hiring and we're already seeing that as well, Mike.

Okay, got it. One on the operating margin. Obviously, there'd be a lot of variability based on when deals close and things like that. I'm just thinking about the amount of operating leverage in the business and how much the heavier recent hiring, might weigh on the operating margin for the next year or something?

Well I think, one thing, I'll stick to the first part about the hiring and I'll let Helen talk about the operating leverage we're seeing in the business. Those individuals who are coming to our firm are coming because they believed in what we're creating for the long term and we're not chasing people. We're not dangling financial incentives in the short term, we're not putting anyone on a guarantee. I think that's destructive to the culture of a firm and it's not the way to build a world-class firm. We've already talked about our compensation allocation. We had 64% in the first quarter that was our best estimate of what it would be for the entirety of the year. We also made a provision at 64% in the second quarter. So I think that speaks for itself as it relates to hiring. So this is a less of a cost issue, but there is no doubt, that over time, as our business scales, you'll see meaningful revenue growth and as that works its way through the system, that's probably the single best way to get margin improvement.

And then on the non-comp side, I think we've talked about it before, that we have about 2/3 of our costs are fixed, obviously, as the variable will increase as we increase headcount - as business activity increases. But overall, we believe, there is definitely operating leverage on the non-comp side.

And just one more on I guess, the progress you've made, really expanding the Advisory business, it's been almost 2 years since the spinoff. If I may just get your sense of how things have progressed building - expanding the Advisory business. I think, all, or mostly all of your partners are former group heads or had senior management positions. Clearly, you've been focused on very high producing senior talent. Is that still the focus or is it more that, early hires are very senior people and going forward, you may focus on building out teams more?

Well, I think you need to have anchor tenants, if you will, right? So you need to have individuals who really are the acts in the space in which they compete. And therefore, early on, you are looking for very senior bankers with a wonderful rolodex, a long history of client service and stellar reputations. But of course, you need to build out the team from top to bottom and that's what we've done. We're only talking on this call about partner additions, but we've added an awful lot of individuals at the Managing Director level and below. And in almost any other firm, those managing directors by way of example, would be partners just because of their capabilities and their tenure in the business. So we're certainly being very thoughtful, as to how we build out the business. We also are making sure that everyone who joins, there is some adjacency or some complementarity to something else we're doing. So we're not just simply making a commitment to an individual with no ability to support that individual in building out a team and integrating it into the rest of our firm. And we are benefiting from the fact that many of our partners have both majors and minors. If you're in this business for 2 or 3 decades, chances are you've worked quite skilled in navigating business in countries around the globe. You've tended to be involved in more than one industry and you have a reputation that in many instances, transcends association with one particular sector. So being able to activate those individuals as you bring others in, who can take the laboring oar, creates a great deal of synergy and scale and that's what we're seeing. So as an example, we've recently added a senior energy banker. That energy banker can leverage off of a lot of the energy dialogues and relationships that are emanating from our restructuring practice. We added a senior industrials banker. We already have a fast growing nucleus of senior industrial bankers that creates more critical mass. We added a senior real estate banker to go with another senior real estate hire as well as all the dialogues that emanate from our Park Hill real estate group. So we - very much believe it takes a village and we're building out the village, but it has to start with very senior individuals who can help us lead those efforts.

We do have another question and it comes from the line of Devin Ryan, JMP securities.

There are a couple here. So I guess first, maybe just a bigger picture on the M&A markets and what you're seeing, Paul. I think last time we spoke, it seemed like we were - especially the larger end of the market, it seemed like we're in a little bit of wait and see backdrop. Companies are either waiting for valuation to pull back and be rewarded with that or that they have to ultimately make a decision and jump on board with where things are. And I'm just curious here, now that it seems like the base case is grid lock in D.C. and maybe - not instant gratification on taxes, et cetera. Does that create an environment where companies' boards say okay, let's now move forward because we kind of think we have a framework of what the backdrop is? Or is it still just, that there's a lot of uncertainty and so therefore, with valuations where they are, nothing really changes.

Look, as you can imagine, it's a nuanced question that deserves a nuanced answer because there's not a single factor that drives M&A activity. But what I see, are 2 fundamental issues that buyers and sellers need to get their arms around. One is the regulatory/tax environment and the other is valuation. And it affects different parties differently and for many parties, they are going to transact regardless. But on the first, as it relates to the regulatory overlay and a tax policy, I think, for many folks, they're going about their business. Where it does affect is in the following ways. I think there is a lack of a positive and there is a negative. The lack of a positive is, if you were to get tax relief and lower corporate tax rates, I think there is no doubt that a number - a very large number of would-be sellers, who are landlocked because of the enormous tax friction in divesting a business, a division or individuals selling their companies, that you would see an acceleration. So right now, it's a lack of a positive because no one historically was held back by that relative to trend. But if you were to see a rate cut, there's no doubt, that you would see more portfolio pruning, more portfolio rationalization and you would see families and the like probably look to take advantage. I think within an uncertainty as to whether or not you're going to get tax relief, for most of those parties, the prudent thing is to remain on the sidelines. And either if there is no tax relief, then those who were holding off some of them will transact, others will decide that the friction is just too great and it will be much more like the last 30 years have been, in terms of portfolio rationalization. So that's one issue. I think the other issue related to tax reform is for companies that are thinking about significant and strategic transactions and have significant amounts of offshore cash. Having clarity as to whether or not they can take that cash back onshore, will be helpful. And I suspect that one way or the other, you'll see transactions, but no one wants to bring cash forward only to find out that they should have waited a year. So that affects some number of transactions. By no means does it affect the majority of transactions. But it does have an effect and it's one of the reasons I believe that volumes are down. There's a bit of freezing in the marketplace, but it affects a small subset of would-be transactors. And I think once we either know that we're going to have tax reform or that it has been shelled for the foreseeable future, you will see an increase in activity all else equal. The second is valuation and you and I have talked about this. I think as the market continues to grind higher, there is increasingly valuation issues between buyers and sellers and it's further complicated when buyers are seeking to use their own stock as currency. You're now dealing with not only the valuation of the seller, but also the valuation of the buyer. And again, you tend to get equilibrium over time. One of 2 things happen, which is corporate profits continue to be strong. The overall economic backdrop continues to be strong and you "grow into this valuation" in the eyes of M&A participants or there is a market correction and people absorb it and then once they adjust, you move forward. But I think at the moment, because the market continues to grind higher and higher, I think, at the margin and all of my comments are at the margin, it's just that if you have a lot of things that are holding up transactions at the margin, it aggregates to a not insignificant overall effect on the market. But leaving those 2 things aside, the thing that I have talked about for a long time is technological disruption and dislocation and the fact that every day as this world speeds up, the status quo is riskier and riskier. And the more risky the do-nothing case is, the more activity you should see all else equal as companies conclude they either have to get bigger or they have to exit particular businesses. And that, in my opinion, is not going to change.

Maybe a follow up here. You added a Capital Markets partner earlier in the year. There's obviously a number of kind of other called ancillary Advisory businesses that - there are a number of firms in the industry are increasingly focusing on activism - defense has been a bigger area. Obviously, a lot more going on in kind of capital structure advisory. There's a lot of white space in PJT across the platform just given where you guys are in your growth trajectory and then probably a lot of white space in kind of maybe the traditional corporate coverage. And so I guess my question is I guess first, are there any obvious ancillary areas in Advisory that you don't have right now that represent kind of an immediate focus if the right person is available? And then as you grow from here, how do you think about the appropriate balance of call it corporate coverage and clients and increasing the rolodex, relative to kind of layering on product specialists that are going to help you further leverage those relationships and do even more?

When we started this firm, the goal of this firm was not to be the firm that looks over the shoulder of some bulge bracket firm and just chips in from time to time. The goal of this firm was to create a firm so that we could serve clients from most senior to most junior team member and deliver a team, top to bottom, that was better than any team, anywhere else that any firm had. And to make sure that the incentives were such that the entire team was incented to work together to serve the client's needs. And early on, we went out and added "product specialists". And the historic view of smaller firms was, how do you pay for them? How do you justify that? Why would you do that? And we just jumped right in. Our view has always been if you're going to advise clients, you want it to be with a capital A, not a small A. And you need to be able to be in the boardroom and be able to talk about almost any issue that comes up. You need to have deep domain expertise, you need to have senior bankers who can negotiate transactions, you need to be able to get to people, decision makers around the globe, you need to be able to advise on liability management, you need to be able to help clients arrange financing, you need to be able to help clients think about whether or not to lock in rates or not, how to think about taking down a bridge facility and terming it out. You need to have bankers who have a view on how shares are going to trade, investor sentiment. Be able to deal with activist share owners and that's the firm that we have created and that's the firm that's going to continue to grow. And we are always looking for individuals who in some way shape or form could add to that tapestry and can make our firm bigger, better, stronger. And you're going to see us add individuals who broaden our geographic presence, broaden our domain expertise in terms of sector expertise and history, individuals who continue to add some element to the advisory equation. And that's why we see white space everywhere we go. But it all starts by making sure that you build the right foundation with the right anchor bankers and that you have the right culture that incents everyone to work together. And then on top of that we have this incredible gift of being able to knit together the Restructuring and Park Hill leading positions to create a firm that truly is differentiated in terms of capability. So this is all music to our ears. Others seem to be coming our way, that's fine. We've always had that conviction.

Maybe last one here, nuanced around just the compensation expense and I'm not sure if you guys have given this. But obviously, with the elevated recruiting, trying to think about how much of the cost $70 million of adjusted compensation this quarter is stock-based amortization. I get it, there's a lot of moving parts within the compensation, and over time, the comp ratio is going to come down. I'm just trying to think about some of the components within that and how much is, call it, noncash amortization expense, which gives us some perspective around kind of the flex there, I guess, over time?

Well, I'll start and I'll let Helen continue. We provisioned at 64%. Our view is that over time that number comes down. How quickly it comes down and to where it ultimately ends is unclear. But there's no doubt that there is meaningful - there's meaningful investment that is underway. And notwithstanding all of that, we're still able to demonstrate meaningful margin improvement. I think our margins first 6 months versus a year ago were 250 basis points or so of margin improvement. So there's no doubt that it's going to continue. But I really don't want to get caught up in how much of this quarter or next quarter and all these intermediate destinations. There's no doubt that there is tremendous opportunity to increase the margins, but that's not going to deter us from making investment. And I would say, as it relates to amortization and shares, I would focus on the fact that our fully diluted share count is actually down versus a year ago. As much as we want to compensate our employees and tie them to the firm, we also don't want to unnecessarily dilute our share owners and many of our employees are share owners. And the fact that we have been this aggressive in that regard, suggests that we've actually probably moved more towards some early direct expensing of compensation because we've been focused on not diluting our share count.

I think just from my perspective, as we mentioned 64% is our estimate for the full year. So we begin with looking at awarded comp and there will be variables that move that. But it will be - where revenues end up, what the competitive backdrop is, what the hiring levels are, ultimately. And then what the appropriate mix is between cash and equity. But we make that estimate and review it each quarter. So I think what you'll find is, there may be variability in any given quarter and what the amortization is or what the cash component is, but what we're trying to do is take a full year view and keep that consistent.

And our final question comes from the line of Steven Chubak from Nomura.

This is actually Julian Craitar. So just to kick things off, how should we be thinking about your ability to gain market share the back half of this year as commentary provided by your public peers implies a somewhat challenging backdrop for deal activity given ongoing policy uncertainty?

Look, there's 2 different issues here. One is, I'd see where our firm is going and the traction we're gaining. And I look at all of the leading indicators. And when we talk about reported revenues now or in the next 6 months, those really are report cards from a year ago. The reality is, many of the transactions that we're booking now and in the second half of the year, are mandates that were awarded a year ago or so. So in some ways, the financials are looking backwards and we're looking at all of the client engagement and the traction we're getting and those are the leading indicators. And one simple vignette there would be the number of mandates being up 40% versus a year ago. Because we started with such a small footprint and because we deliberately tore down some of the historical business in an effort to build it with the best capabilities, we always knew that there would be a dislocation, we always knew that we would be quite small in terms of footprint relative to our so-called peers. We always knew that the individuals who joined would have been on this platform for a very short period of time, relative to consistency at others. We always knew that we were building a franchise really from the ground up. And that every day that goes by, that we increase our footprint with hires. And you need to look at the rate at, which we're growing, our number of bankers. You need to look at the number of them who are in their seats long enough to demonstrate significant progress. You need to then look at the momentum we have in building out our brand and our firm and our brand recognition. And you look at all of those and we are confident, that we can grow our business in almost any market environment. And one of the things we've always talked about is, in many respects, we are an idiosyncratic growth story because our growth is really not tied to the overall market environment. So it's not predicated on whether the market grows x or y or z percent. As long as the markets don't shut down completely, we're confident in our ability to continue to take share and grow and we really are embarking upon a strategy which is different than others. So I'm not particularly attuned or focused on what others are guiding to.

Just a follow-up, but switching over to Restructuring. I believe in the past, you noted that restructurings in the retail space tended to be less intensive and therefore, in relation to say the energy sector, you do not anticipate the same level of revenue contribution. Has your thinking here evolved at all, now that we're halfway through the year and a lot of the energy mandates have started to sort of fade? Has your thinking here evolved at all, given that your peers] are also in the early stages of Amazon disruption?

I don't recall saying that specifically, but what I have said is that retail - first of all, if you just look at amount of quantum of debt that's outstanding in retail versus energy, there's a lot more dollars in energy. It's a much more capital intensive business, a lot larger debt that needs to potentially be restructured. So we look at it that way. Also, some of the retail, because they are not all hard assets. Like energy, you end up with more liquidations as opposed to restructuring. So it's just a different size. There's no doubt that retail will continue to be active in terms of restructuring, but it's not a one-to-one substitution for energy. Having said that, there are all sorts of other places where you're going to see technology cause disruption and dislocations. So that businesses that were healthy will find in short order in a world that is speeding up, that there are real challenges and not all of them will survive. You can't have a world, where in Silicon Valley and elsewhere, all of these businesses are being created in garages in Palo Alto and are growing into these enormous juggernauts and not have that displace or dislocate or harm or threaten other established businesses, be they retailers or not. So in a way, the more technology speeds up, the more the pace of winners and losers will change and the more winners get created out of nothing, the more they will have a competitive impact and I think that bodes well for the Restructuring business longer term. And that's how you could actually have a robust M&A and Restructuring environment coexisting in the future, because historically a lot of Restructuring activity was just recession driven, economic downturn, but here, if you have a lot of Restructuring driven by disruption caused by technology, you could actually have a reasonably benign macro environment, but still have a bunch of losers paired off against an emerging group of winners.

Lastly, just a nitpicky question on expenses. On the last call, Helen, I believe you mentioned, how non-comps would grow modestly throughout the year. And given the fairly large percentage uptick this quarter versus 1Q, how should we think about the quarterly run rate for the rest of the year?

Sure. So I think I did highlight the fact that we thought the first quarter would be seasonally low business, future quarters. And I think we don't really look at it as a percentage of revenues, but an aggregate amount and 2/3 are fixed. And on the variable side, I think if you look at the increase from the first quarter to the second quarter, I don't think there was any specific driver of the increase. I think there are a lot of puts and takes in the quarter. But as I said, a large portion is fixed and on the variable side, we had increased headcount, increased business activity, which is going to drive the expenses higher. I think we've got a relatively limited history as a public company, so I don't want to commit to what the revenue - what the noncomps going to be like going forward, but I think it'll go higher on the variable side as we continue to do more business and help more people.

There are no further questions.