PJT Partners Inc. (PJT) Q3 2017 Earnings Report, Transcript and Summary

Good day, and welcome to the PJT Partners Q3, 2017 Earnings Call. My name is Joyce and I will be the operator for today. [Operator Instructions]. And now I’d like to hand the call over to Sharon Pearson, Head of Investor Relations. Please proceed.

Thanks very much, Joyce and good morning and welcome to the PJT Partners, Third 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 the 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 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.

Good morning and thank you for joining us today. Last quarter I stated that our second half revenues would be heavily weighted to the fourth quarter. At the time I didn’t fully appreciate how true that would be. In the third quarter we generated revenues of $78 million with revenues for the nine months totaling $309 million. Rarely will any single reporting period be representative of the earnings power of our franchise, which is why we have consistently said we measure our progress in years, not quarters. As we look at all of our leading indicators in building out this world class advisory firm, we are on or ahead of schedule across virtually all of them. We continue to solidify our position as the destination for top talent and are committed to attracting the most talented individuals at all levels. Since then we have grown our headcount by approximately 140 employees. This year alone we added 11 new partners to the firm, including seven in strategic advisory. On campus we received 55% more applications for junior banker positions than a year ago. Our culture of collaboration, integrity and excellence is resonating everywhere. From the perspective of our clients and potential clients, our repetition continues to grow. PJT is increasingly associated with the highest caliber advice and truly differentiated capabilities. An increasing number of clients are seeking us out as they become more familiar with our high touch approach and impactful teams. Our pipelines are strong. We are competing for and winning more businesses. The number of mandates continues to grow and the size and quality of our pipeline is improving. Increasingly our three businesses are operating in a more integrated manner. This seamless approach undoubtedly enhances the breath and depths of our client dialogs. We continue to have great conviction about our 2018 progress as the pieces fall into place. Turning to each of our businesses: In Park Hill, Park Hill taken as a whole was down slightly for the three months and nine months periods versus year ago levels, reflecting the softness in the real estate fund raising environment previously identified. Nevertheless our full year outlook for Park Hill remains constructive, which is derived in no small part from the historical weighting of Park Hill revenues to the fourth quarter. Restructuring revenues while down year-to-date are tracking not far off last year’s near record performance, even though restructuring activity and commodity driven sectors has clearly trailed off. In a world where industry wide restructuring activity has slowed, our business has benefited from closer alignment, with an increasingly more powerful strategic advisory franchise and an expanded addressable market; a direct result of the separation from Blackstone. In the third quarter our new restructuring mandates ticked up appreciably, driven by new assignments in industries that have experienced significant disruption, including retail, energy power and industrials. In our strategic advisory business it continues to be early days. October 1 marked the two year anniversary of our new firm. In that period of time we have increased the number of advisory partners by 50%, the numbers of partners on our platform for at least one year by more than 100% and the number of partners on our platform for at least two years by almost four fold. Since our last earnings call, our advisory partner account increased from 25 to 27. We see great opportunity to add additional top talent as we seek to build out this premier advisory franchise. We expect that our advisory partner account will continue to increase at a meaningful pace. When we look at leading indicators, we pay most attention to the number and caliber of senior professionals that we attract to our platform, as well as the roster of clients who seek out PJT for strategic advice. Our numbers of mandates continues to increase as does the size, complexity, and revenue potential of these assignments. While we are not in control of the pace of announced or completed transaction, the ever increasing number and quality of mandates will inevitably lead to significantly enhanced financial results. I will now turn it over to Helen to revenue our financial results.

Thank you, Paul. Good morning. I’ll begin with reviewing revenues. Total revenues for the quarter were $78 million, down $43 million or 35% compared with third quarter 2016 revenues of $121 million. The breakdown of revenues: Advisory revenues were $60 million compared with the $101 million for the third quarter 2016, down 40% year-over-year. The year-over-year decline was driven by lower average fees earned, primary as a result of the absence of any large transaction closings during the quarter and either strategic advisory or restructuring. Placement revenues were $16 million, down 13% compared with third quarter 2016 revenues of $18 million. Despite an increase in the number of closed transactions during the quarter, the decrease in year-over-year placement revenues was a result of a decline in average fees earned. This decline was primarily driven by the nature of the fund raising assignment that closed during the quarter. For the nine months ended September 30, total revenues were $309 million, down $17 million or 5% compared with revenues of $326 million for the first nine months of 2016. The breakdown of the nine months revenues, advisory revenues were $233 million compared with $241 million for the same period last year, down 3% year-over-year. Placement revenues were $69 million compared with $79 million for the same period last year, down 13% year-over-year. The primary driver of the year-over-year decrease was a decline in real estate fund raising. Turning to expenses, consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments and these adjustments are more fully described in our 8-K. First, adjusted compensation expense. Third quarter 2017 compensation expense was $50 million or 64% of revenues, down 36% compared with compensation expense in the third quarter 2016 of $79 million and the decline in compensation expense was driven primarily by lower revenues. The 64% ratio for the third quarter is consistent with our nine month 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 $24 million in the third quarter, an increase of $2.6 million over the same period last year. Due to the relatively high fixed component of our non-comp expense, it is reasonably consistent quarter-to-quarter with the increase this year driven by higher professional fees. Third quarter non-compensation expense as a percentage of revenues was 31%. This higher ratio is a function of the lower revenues in the quarter. Over the first nine months, total non-compensation expense was $68 million, roughly flat year-over-year and year-to-date non-comp expense as a percentage of revenues was 22%. Turning to adjusted pretax income, we reported pretax income of $4 million in the third quarter and $43 million year-to-date with an adjusted pretax margin of 5.2% in the third quarter and 13.9% year-to-date. The provision for taxes as of prior quarters we presented our results as if all partnership units had been converted to shares, but that assumes all of income was taxed at a corporate tax rate, and the tax rate also takes into account the tax benefit relating to the delivery of vested shares at a value higher than your amortized cost. We did deliver vested shares in the third quarter resulting in a modest reduction in our year-to-date effective tax rate to 33.7%, down from 36.3% for the first six months, and our current estimate for the full year effective tax rate is 33.7%. Our adjusted if-converted earnings were $0.10 per share for the third quarter compared with $0.34 in the third quarter last year and for the first nine months $0.75 per share compared with $0.84 in the same period last year. The impact from the lower tax rate relating to the delivery of vested shares was $0.03 per share in the third quarter and $0.06 per share for the first nine months. Now turning to exchanges during the third quarter, we received notices to exchange approximate 155,000 Partnership Units, and as in prior quarters was elected to exchange these unites for cash. With this latest exchange year-to-date, we will have settled the exchange of approximately 1.2 million partnership units in cash and our fully diluted share count will be below that of a year ago. To-date the exchanges have provided an opportunity for us to minimize dilution without impacting our public float, but there are only four exchange opportunities in any given year. As we noted in our 8-K filing, the Board has approved the repurchase of up to $100 million in Class A common stock and while our primary capital allocation priority is to continue to invest in the business, we believe this repurchase plan will provide us an additional opportunity to be proactive and managing dilution from future share assurance. We expect to fund any repurchases from operating cash flow without incurring any debt and we continue to be mindful of our float. Even with this repurchase plan, we anticipate an increase in the float in 2018, given that based on its employee and partnership shares in 2018. A couple of notes on the balance sheet; we ended the quarter with approximately $157 million in cash in short term investments, $181 million in net working capital and no funded debt, and we recently renewed our two year revolving credit facility with First Republic Bank. Finally the Board has approved the divided of $0.05 per share. The dividend will be paid on December 20, to Class A common share holders of record on December 6. I’ll now turn it back to Paul.

Thank you, Helen. Before I turn to our fourth outlook, I wanted to reiterate our view of capital deployment and how it relates to our decision to initiate an open market repurchase program. As Helen noted, the Board has authorized a $100 million open market repurchase plan. We have consistently highlighted that investing in talent is our number one capital priority, with our highest return coming from our people and the talent we attract to PJT. A close second is managing share account and ownership dilution. We believe that now is an appropriate time to add another arrow in our quiver to manage our capital position, particularly as our cash generation and float increase. To-date we have avoided open market repurchases, in part due to our reluctance to reduce the float in our stock. However given employee vesting events in 2018, we can now effect open market repurchases and increase our float in 2018. As Helen discussed, this program will be funded with cash-on-hand and internally generated funds and not through debt. Turning to our firm outlook, as we sit here today, the fourth quarter is shaping up well and we remain confident in our growth prospects for 2018 and beyond. We see growth opportunities in Park Hill as our investments in the real-estate and secondary’s business bear fruit. Our leading restructuring business has held up well coming off a near record 2016 and we are seeing our business benefit from the additional footprint in strategic advisory and the independence from Blackstone. In strategic advisory, the increased client dialogs and mandates will boost advisory performance through the inevitable increase in announced and completed transactions. And with that, we’ll now take your questions.

[Operator Instructions]. The first question comes from the line of Mike Needham with Bank of America. Please proceed.

Hey, good morning everyone.

Good morning.

Good morning, Mike.

Hey, I guess first on the restructuring business, from your comments it sounds like things are still doing pretty okay for the business. Is it right to say that you don’t think that business is over earning now versus the new things that you are seeing coming in .

I think that’s fair. We had a terrific 2016 and clearly we benefited in 2016 from you know a hyperactive restructuring market for commodity driven businesses and that has slowed. Yet while that has slowed appreciably, our business has come very close to keeping pace with 2016 levels, which we view as a significant accomplishment and I see that in part because our restructuring business is meaningfully more powerful today than it was previously, because its prosecuting more opportunities jointly with the strategic advisory business. As we build out the advisory footprint, there are increasing numbers of introductions coming from the advisory side of the business. So as we develop out really a shadow sales force and a team that has their own set of relationships, their own domain expertise, we make that business more powerful. In addition, when this business was under Blackstone, it really was precluded from doing a lot of business through our financial sponsors and now with the separation we’re much more easily able to navigate and to represent other financial sponsored clients, and as that business continues to take hold we see more opportunity there. And even though the overall market is somewhat muted, we are heartened by the fact that in the third quarter we saw an appreciable uptick in new mandates and they are coming from industries away from commodity driven. So as you see more and more technological disruption, more and more industries are being challenged. The sort of the shifting sands are moving to other industries where there is industrials power generation retail, real estate and the like. So we are quite optimistic about the intermediate and long term, but the realities are we are benchmarking 2017 against a stellar stand out 2016.

Okay, got it. And following up on the financial sponsor stuff, do you think that clients, you know corporate clients for the M&A advisory business, do they still – or financial sponsors through M&A, do they still associate the firm with Blackstone? I guess they were some of the things you have been trying to do to capture that client type. I think you know financial sponsors are part of like one out of every five M&A deals now. So I guess what’s the upside there and you know are you seeing traction with those clients?

So you got to look at this as a negative and a positive. I think prior to the spin, the sponsor engagement was close to zero because people viewed it as competitive for this business under Blackstone. That issue disappeared on the 2nd October, 2015. But what wasn’t in place on the 1st or 2nd of October 2015, was a long historical record of covering, the broader sponsor community and we have begun to put it in place, more initiatives in that regard. But even without being anywhere near our fighting weight there, the number of sponsor engagements both on the advisory and restructuring side has increased dramatically from where it was just a short while ago and just as we consider our self to be significantly underpenetrated in the industrial world and the corporate world, I think the same is true in sponsors, and while we’ve gotten a lot of traction we’re just scratching the surface relative to the opportunity.

Okay, got it. And then just on guidance, I apologize if I missed it, but do you still think you know the second half of this year looks like it’s going to be stronger than the first half?

Absolutely.

Got you. Okay, great, thank you.

The next question comes from the line of Devin Ryan with JMP Securities. Please proceed.

Great. Good morning Paul, Helen, Sharon; how are you guys?

We’re great. Good morning.

Good morning.

Good. Happy Halloween. So maybe first question here. So Paul you mentioned the leading indicators in the business and then feeling you know really constructive around those and so one, to just maybe touch on in a more granular level, what some of those are and what’s giving you the positive feeling and also just bigger picture. I mean it does feel like you’ve in the past several days, you know PJT has been on some high profile announcements and so I am curious if that’s a function of kind of the leading indicator of just people becoming productive that are now on the platform or is that a shift in the market as well where you feel like maybe things are opening up as well. So I am just trying to put it all into context here.

Yeah look, I think one of the challenges is we’re managing this business based on leading indicators. We’re always looking at the progress we’re making on a prospective basis and yet we’re reporting results that in many instances relate to mandates that were secured 12 or 18 months ago. And what’s odd about this particularly is we’re at this inflection point in our growth, is we’re reporting results and describing a firm that no longer exists, because we’re dramatically different and more powerful today than we were just a short time ago. And if we just take – you know one indication is just the traction we’re getting in attracting best-in-class senior talent. So we’re having dialogues every single day and we know who is interested and the level and the intensity of those dialogues and our confidence that overtime a significant number of these individuals will land in our firm and yet we don’t report a new partner addition every day, they tend to come in clumps. So the idea is that in September four new advisory partners showed up for work. It all happened within a 30 or 35 day period and it wasn’t as if all of a sudden we became attractive to those candidates. It’s just that the way it all happened, it all was observable to the outside world at a short burst of time, even though that reflected a lot of hard work. In a similar vein when we look at our traction with clients, we’re looking at so many indicators. We’re looking at how many companies we are actively having dialogues with. We are measuring whether or not we are gaining traction; whether or not we are invited to present our qualifications; whether or not we are winning some competitive contest to be selected as an advisor; whether or not we are being retained in an advisory context. If we are, whether we are the lead advisor, the core or junior advisor; what the revenue opportunities are. We are looking at all of that data on a daily basis, but because of the nature of the business until those mandates translate into announced transactions, it’s hard for the outside world to get into appreciate some of the progress we are making and then until those announced transactions end up closing, we don’t report the revenue. So it’s something where we’re looking at a lot of internal data and getting very comfortable and at a similar vein when we announced three transactions in a 24 hour period, that’s not the run rate of the firm, but on the other hand to the fact that we may have done some period of time without some visible announced transactions, it doesn’t take away from the fact that we’re securing an ever increasing number and an ever increasing quality of advisory mandate.

Got it, okay. Yeah, that’s very helpful color. And I guess just to also maybe add some context around the broader backdrop for business, I understand that the PJT story is a little bit idiosyncratic to what you guys are doing, but what are you seeing in the broader landscape for kind of appetite to do business on the M&A side, is that improving or they are the same. Just curious what your thought is there?

I think what I’ve said before is there is a macro trend and a micro. The macro trend, we see that we are in a secular increase or secular upswing in M&A activity and as the world becomes more global, more connected, more disrupted, companies need to aggressively manage their portfolios and either more aggressively prune their portfolios and refocus or they need to more aggressively commit to some of their businesses to four to five of them and prevent them from being disrupted, and that can only mean more M&A activity as the holding periods of assets shrink. And if we were to get corporate tax reform, I think one of the many benefits would be a significant reduction in the friction cost, because paying taxes on sales of businesses is a friction cost which prevents companies from appropriately optimizing their portfolio and if the rate were to come down appreciably, I think you would see another meaningful spike up in activity. On the micro, some of this is being held back by a lack of clarity out of Washington as to tax reform and as to anti-trust point of view, and I think as you get more data points one way or the other, and everyone knows the rules of the game with greater clarity, that will also create an uptick in activity. But I think what we’ve consistently said is that regulatory and policy uncertainty, whether it’s in the U.S. or elsewhere around the globe, doesn’t affect all actors equally. It tends to affect on the margin you know some percentage of potential corporate clients and corporate transactions, but for a large part of the universe they are moving forward with their business day in and day out and for a world where it looks as if you know global growth is on the uptick, consumer confidence appears to be on the uptick, you know rates continue to be quite low by historic levels, equity value, access to capital, so many of the addition of a healthy M&A market are present today. I think what your seeing is a lot of companies are just getting on with transactions that make sense to them individually, not withstanding a lack of macro clarity on some important policy matters, and I suspect that when we get that clarity, that’s an opportunity for another leg up in activity levels, because at some point just knowing what the answer is, is better than this uncertainty.

Got it. Thanks Paul, it’s really helpful. Maybe a follow-up here on the restructuring, projected from a different angle here and appreciate the comments on momentum in the business and it does feel like maybe the baseline for that business is higher for PJT for the reasons you mentioned. I’m trying to think about maybe the upside case for restructuring with you know some of the dynamics that you mentioned and really the question is, is there a bigger upside case for the business. I know that there has been some evolution in just terms of how restructuring has progressed here and there’s more roles per assignment and there is obviously more debt outstanding, but is there a capacity constraint with people where if you look at where maybe the prior peak and the stress coming out of the financial crisis where you would say people were kind of hitting on all cylinders and everybody was as busy as they could be, so that kind of gets to the upside or do you feel like for many reasons this could be much bigger if we go back to that stress scenario, because people can do even quite a bit more than they were doing under the new framework at PJT.

I think of that as really three vectors here. The first is all else equal. Whatever the restructuring environment is, our restructuring market share should be greater in this framework than it was with the prior ownership for all the reasons we’ve talked about; absence of conflicts, engagement with sponsors, benefit from an ever increasing and more powerful strategic advisory business, more collaboration, more cooperation. So our baseline market shares should over time be meaningfully greater than they were under the old structure. The second is in the past, I think it was my sense that restructuring activity was so heavily weighted to the macro economic backdrop and when you had recession, then you saw an uptick and what we’re increasingly seeing is isolated pockets of restricting, even in a very healthy and benign global economic environment, and a lot of that is coming from technology and technological dislocation. So even in a world where you have very low interest rates and abundance access to capital and GDP growth rates that you know at least for the moment are you know 3% and north, you still have industries that are being radically transformed and dislocated, and as a result your seeing big spikes in targeted industries and I think that suggests that all else equal the baseline of restructuring activity for a given GDP scenario should be greater than it was perhaps in the old models. And then the third which is sometime out is the sheet quantum of high yield paper that is out there and all of the issuers and the quantum of debt and the lack of covenants and the like, that inevitably if there is a sever macro dislocation and downturn, one would think that the upside would be you know meaningfully greater than in prior cycles. So it’s kind of three different vectors depending upon your timeframe, whether its short, intermediate or long term.

Okay, that’s great Paul. Maybe just the last one here on the recruiting environment and you know it’s good to hear that the conversations are still at a high level and obviously you’ve had a number of people join recently. Here we are kind of late in the year, so I guess I personally would anticipate much more, but it sounds like your having the dialogues or setting the stage for 2018. It would seem that you know the preference is to have people onboard longer period of the year than not. So when you think about the conversations you’re having today, I understand you can’t predict this perfectly, but you know do we have this kind of big pent-up backlog where people are saying we’re going to join kind of right after you know bonuses, after we are able to resign from our prior employer. You know is that kind of what we’re setting the stage for here into early 2018 or how should we think about just the recruiting dynamic given that you are having so many conversations.

I think it’s a lot like talking about our revenue visibility. If you ask me for our confidence level in number of partner additions in 2018, I’ve got great clarity. If you ask me when and how and the shape of that curve, it’s really idiosyncratic, and we have made a point of not having artificial deadlines or windows. There is too much value in getting the right individual who is entirely committed to joining us with no reservations and when that moment is right, then that’s the moment we are going to make that addition and waiting three months or six months for some check to clear. If it means that all this enormous progress we can make is put off for three to six months and if that means that the additional hires that we might make to augment that partner addition is in turn held off, then we are being penny wise and pound foolish. So it’s all about the individual, and as a result there is no rhyme or reason or pattern to it, but I think what is clear as a pattern is the engagement and another thing is happening. The more transactions that we announce, so that our success is visible to the outside world, in more industries that folks may not have initially associated our firm with and in more geographies, more regions and the more individuals come from an ever increasing number of prior employers. That just increases the interest and the enthusiasm in what we’re doing and we’ve always said Devin is we have a mantra here, you know ‘go slow to go fast,’ and by being very disciplined about who is onboard it, making sure they are the right individuals, not just professionally, but with the right character and the right ethos and the right mindset and then making sure that everyone who comes onto this platform is wildly successful, even though that is such a high bar that it may cause recruiting to be a little slower early. What we’re starting to see is as you get that flywheel going, it has intermediate and long term benefits, because it makes it easier to attract the next wave.

Alright, okay. I really appreciate the perspective. I’ll leave it there. Thanks guys.

Okay, thank you.

The next question comes from the line of Steven Chubak of Nomura Instinet. Please proceed.

Hi, good morning everyone.

Good morning.

Good morning.

So, I wanted to just start with maybe a two-parter on the advisory outlook. Paul I certainly appreciate a lot of the detailed remarks you had given on some of the factors impacting deal activity. One of the items that you didn’t touch on this go around, but had mentioned it in the past is valuation. I am just wondering given the strength there, the continued strength I should say in public markets that we saw this quarter, to what extent is that still an impediment for potential buyers?

I think what I’ve consistently said is you know I think private buyers are less accepting of current valuations than public buyers. Now some of that maybe the fact that you know in the public marketplace you know with funds flows and all the money had to be put to work where corporate do have some degree of the discretion as to when they put money to work. At the same time, strategic imperatives for a lot of companies are such that they can’t sit around and wait indefinitely and while I do think that there is some altitude sickness on the part of a number of participants at current valuation levels, you know the more this market stays at these levels and grinds higher with no clear, corrective impetus on the horizon, I think at some point people start to get more excepting of valuation levels. Then the flipside is you do have particularly in stock transactions you know buyers ability to try and capitalize on their own more highly valued currencies. So it’s clearly an issue in this market place all else equal. I think if the markets settled in here for a longer period of time that probably makes it easier. But at the end of the day this world continues to move forward and a lot of what you are seeing are quite strategic transactions. You are seeing a lot more strategic on the buy side than you are financial sponsors. And sponsors have the ability to decide whether they want to be in harvest mode or invest mode. We are seeing more harvesting on the part of sponsors and we are seeing corporates continue to go work. So while it’s not perfect conditions, I think you know by any stretch of the imagination we are still in a very constructive beneficial M&A environment. It just isn’t at the peak levels of two or three years ago and what we’ve consistently pointed out is those factors that drove those peak activity levels, a lot of that was sort of a moment in time. A lot of that was driven by you know a rush for inversions and to try and domicile outside the U.S. and they were very large scale transactions, that’s not a sustainable pace of activity. So I think what we are seeing today is maybe lower levels of activity, but still very healthy by any historic standpoint and maybe a but healthier, because if not driven by one impetus or one fad; it’s a bit more broad based.

Thanks for that Paul. Very helpful color, and just as a follow-up on your remarks relating to tax reform, I was hoping you can give us some perspective as to how we should we thinking about tax reform gain theory and all the different scenarios. There is some debate as to whether we can in fact cut the rate to 20%. That’s certainly a question that’s still looming. There is some discussion around the potential phased in-rate cut. I didn’t know if you could speak to under a couple of the different scenarios that have been thrown out there; how that might inform how corporate are going to act or what we could see in terms of deal activity.

Look, I think anything, like anything else – when you have step-downs that causes folks to sit on the sidelines and look at the calendar. When it’s just, you know let’s get on with it and there is the new rate and it applies and there is confidence that’s it’s going to remain in force for an extended period of time and they are perceived as permanent and not transitory, you see greater increase in activity. So while I have absolutely no sense as to whether or not we will get reform, and if we do what it looks like clearly phase in would be probably be lees stimulate than if it was just taking the rates down and having it be either retroactive or effective at a date certain that wasn’t too far out.

Got it, and last one for me just on Park Hill and just the fund raising outlook. Your competitors have alluded to strengthen that business this quarter. It feels like there was some divergence in results, primarily due to real-estate fund raising and hoping you can maybe speak to some other idiosyncratic factors that may have impacted results this quarter. And I know in the past you have talked about that business being a source of stable predictable revenues, but just given some of the positive commentary from peers, do you see the potential to grow off current levels?

Yes, I think there is a lot in that there. First of all, if you look at the nine months numbers, because what I’ve always said is, the Park Hill business is a steady eddy measured year-to-year-to-year, but it’s all over the place quarter-to-quarter-to-quarter and I kind of feel your pain trying to model out what it looks like quarter-to-quarter and we have much more conviction about it on an annual basis. I think the only source of weakness year-to-date is in the real-estate space, but the rest of the business is continuing to be at or above where they were a year ago. I think in the quarter it is just a couple of things. One is, there is a seasonal component to closings and in the third quarter which does cover the summer months, you tend to see a lot fewer closing. At least that’s been the historic pattern at Park Hill and you see a lot of funds trying to get it closed by calendar year end. So you tend to see disproportionately more closings in the fourth quarter. And like anything else, now the strength of Park Hill is not measured by which funds close in which quarter. It’s how many mandates, who you are in the market with, who you are bringing to the market, which mandates are you winning and that tends to be very, very lumpy as to when the revenue actually gets recognized. So I think it’s fair to say that we just had an absence of meaningful closings in the quarter across the board, but year-to-date three of the four verticals have been flat to up.

That’s it for me. Thanks for talking my questions.

Great, thank you all and – Oh! Sorry sir.

The final question is queue is a follow-up from Mike Needham with Bank of America. Please proceed.

Hey guys, thanks for taking the follow-up. There are a couple of just model things, first on taxes. The adjusted if-converted taxes were lower than past quarters. What drove that?

We delivered some vested shares in the third quarter and with the new rule in terms of those years being at a value higher than we were amortizing them that caused a small benefit and that’s what caused the change in rates.

Okay.

Most of the deliveries are earlier in the year. It just so happened we had some in the third quarter.

Okay, got you. Okay and is there any just based on what you know, any change for like the next, you know the run rate adjusted if-converted tax rate for the next year.

So for the full year we are forecasting the 33.7% and next year there will be some deliveries, so we will revisit that at the beginning of next year, but we are assuming that there will be a benefit in terms of where we are amortizing those vested shares and where they are likely to be delivered.

Got it, okay. Okay, thank you and just the partner account from the presentation of the site, the 60 partners, is that as of today and is anybody not in that that’s you know publically announced or someone your expecting to join who is on gardening leave.

So the 60 is at the end of Q3, 2017. We had one new partner join strategic advisory in Europe, so that would take that number today to 61.

Okay, great. Thanks guys.

Thank you all and Happy Halloween.

Thank you.