PJT Partners Inc. (PJT) Q3 2022 Earnings Report, Transcript and Summary

Good day and welcome to the PJT Partners Third Quarter 2022 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma’am.

Thank you very much. Good morning and welcome to the PJT Partners third quarter 2022 earnings conference call. I am 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’ 2021 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. The detailed disclosures on these 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, Sharon and thank you all for joining us. This morning, we reported third quarter revenues of $266 million, adjusted pre-tax income of $54 million and adjusted EPS of $0.96 per share. For the 9-month period, we had record revenues of $746 million, adjusted pre-tax income of $159 million and adjusted EPS of $2.84 per share. Before we review our results in more detail, I wanted to make a few comments on the broader operating environment. We have previously spoken about an increasingly challenging macro environment. As the year has progressed, hopes of a soft landing have grown increasingly less likely as successive rate hikes have failed to stem the inflationary tide. Clearly, the Fed will need to go further and push rates higher than previously thought. This in turn has increased the probability of an economic contraction next year. At the same time, further disruptions caused by the war in Ukraine, rising energy prices and political instability are pressuring markets and economies in Europe and elsewhere around the globe. Notwithstanding these significant headwinds, each of our businesses continues to perform well with higher revenues in both the 3- and 9-month periods compared to a year ago. 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 third quarter were $266 million, up 15% year-over-year, driven by meaningful growth in both Strategic Advisory and restructuring revenues and a slight increase in PJT Park Hill revenues. Interest income and other revenue decreased $2.5 million in the third quarter. For the 9 months ended September 30, total revenues were $746 million, up 10% year-over-year, with significant revenue increases in Restructuring in PJT Park Hill and a modest increase in Strategic Advisory revenues compared to the prior year. Interest income and other revenue decreased $7.6 million in the 9-month period. Excluding interest income and other, total revenues for the 9 months were up 11% year-over-year. Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments. These adjustments are more fully described in our 8-K. First, adjusted compensation expense. Our compensation accrual for the first 9 months of the year was 64% of revenues. We increased the year-to-date compensation ratio from 63% to 64% due to increased uncertainty resulting from a current operating environment. Given we had accrued compensation at 63% through the first 6 months of the year, the resulting comp was accrued at 65.8% in the third quarter to bring our 9-month ratio up to 64%, which is our current best estimate for the year. Turning to adjusted non-compensation expense, total adjusted non-compensation expense was $37 million for the third quarter, up $4 million year-over-year and $109 million for the 9 months, up $16 million year-over-year. As a percentage of revenues, this represents 13.9% in the third quarter and 14.6% for the first 9 months. Of the $16 million year-over-year increase in non-comp expense for the first 9 months of the year, approximately $12 million was due to increased travel and related expense. For the full year, we continue to expect our non-comp expense, excluding travel and related to grow in the high single-digit percentages, driven principally by increased client and internal events, increases in senior adviser expense, as well as a modest expansion of office space. Turning to adjusted pre-tax income. We reported adjusted pre-tax income of $54 million for the third quarter and $159 million for the first 9 months. Our adjusted pre-tax margin was 20.3% for the third quarter and 21.4% for the first 9 months. The provision for taxes, as with prior years, we have presented our results as the 4 partnership units had been converted to shares, and that all of our income was taxed at a corporate tax rate. Our effective tax rate for the first 9 months of 2022 was 25.8%, and we expect this to be our effective tax rate for the full year. Our adjusted if-converted earnings were $0.96 per share for the third quarter and $2.84 per share for the first 9 months. On the share count for the quarter, our weighted average share count was 41.5 million shares. During the third quarter, we repurchased the equivalent of approximately 279,000 shares, primarily through open market repurchases, bringing our repurchases in the first 9 months to approximately 2 million shares, including the exchange of partnership units for cash. On the balance sheet, we ended the quarter with $290 million in cash, cash equivalents and short-term investments and $293 million in net working capital, and we have no funded debt outstanding. Finally, the Board has approved a dividend of $0.25 per share. The dividend will be paid on December 21, 2022, to Class A common shareholders of record as of December 7. And with that, I will turn it back to Paul.

Thank you, Helen. In Strategic Advisory, despite the volatile operating environment, many of the leading indicators we track remain positive. Our mandate count is at near record levels as our clients remain highly engaged on matters of strategic importance, and our addressable market continues to grow as our coverage footprint expands. Following the COVID sequestration, our bankers are back traveling, crisscrossing the globe to be with clients. This greater degree of in-person engagement fundamentally plays to our strengths. It showcases our differentiated capabilities and collaborative culture and better positions us to cultivate new relationships as well as strengthening existing ones. On an industry-wide basis, while clients’ willingness to engage in strategic dialogues remains high, converting mandates into announcements has become increasingly difficult. In the U.S. and globally, industry-wide M&A announcement volumes have fallen sharply from year ago levels. Many announced transactions are taking longer to close with an increasing number of terminated deals. Amidst this turbulence, we continue to perform well on a relative basis as clients increasingly recognize our integrated, holistic approach to advice. Although we delivered record Strategic Advisory revenues for the 9-month period, given deals pushed out and deals withdrawn, we no longer expect our full year Strategic Advisory revenues to exceed last year’s record levels. Our Strategic Advisory partner count has grown 18% from year end 2021. We see this environment as a particularly opportune one to invest in and have stepped up our senior recruiting efforts as a result. Turning to Restructuring. Rising interest rates, inflationary trends, supply chain pressures and less accommodating capital markets are pressuring company’s balance sheets and their access to funding. As the year has progressed, our Restructuring business has become increasingly active with an uptick in mandates compared to year ago levels. Our Restructuring revenues are up for both the 3-month and 9-month periods relative to a year ago. As we have spoken about previously, the close partnership between our restructuring bankers and our expanding roster of strategic advisory bankers has increasingly enabled us to present our integrated and differentiated liability management capabilities to companies at the first signs of distress. Not surprisingly, our firm has maintained its leadership position in restructuring and liability management. For the first half of 2022, the most recent period for which we have published rankings, we ranked first in number of announced restructurings in the U.S. and second globally. And in PJT Park Hill, after a red hot fundraising environment in 2021, market conditions have softened as asset allocators feel the sting of price declines across their investment portfolios. With fewer M&A monetizations, dividend recapitalizations and IPOs, the pace of capital return to LP investors has slowed considerably. As a result, both LPs and GPs are looking for alternative ways to create liquidity in their portfolios. Against this backdrop, PJT Park Hill delivered record 9-month revenues and remains on track to deliver record full year results. As we look ahead, the current operating environment is impacting each of our businesses in different ways. While these market conditions have been positive for our restructuring business, they have negatively impacted our Strategic Advisory business. In PJT Park Hill, the effects have been more nuanced with unsettled markets dampening our primary businesses while benefiting our secondary businesses. In difficult environments such as these, our differentiated business model more clearly shines through. We remain confident that our diverse mix of integrated businesses positions us well on both an absolute and relative basis. We have the right people, the right capabilities, and the right culture to not only weather this challenging environment, but to emerge stronger on the other side. And with that, we will now take your questions.

[Operator Instructions] The first question today comes from the line of Devin Ryan of JMP Securities.

Thanks. Good morning, everyone.

Good morning, Devin.

Thanks for all the details. I guess I just want to start on the financing markets and interplay with what you are seeing in Strategic Advisory and maybe some of the outlook commentary. Obviously, financing markets hit a little bit of a rough patch in the third quarter and Fed Funds rates are just more broadly still expected to move higher as you mentioned. So, the borrowing costs are higher. Can you talk a little bit about how that’s impacting both the friction of the market and higher borrowing cost activity in Strategic Advisory and your outlook for both sponsors and corporates?

Sure. I think on the [Technical Difficulty] side, it’s pretty clear you have got a micro and a macro pressure. I think on a micro level, there is less quantum of debt available from a financing perspective for most assets and the cost of that debt has gone up. So when you pencil out rates of return, clearly, you are getting to lower valuations, because there is less leverage and the leverage that is part of the financing structure is more expensive and that clearly has an effect on valuations, which until the market fully adjusts and there is a reset that creates a headwind. Then I think you have a second issue, which is an awful lot of capital has been put out by financial sponsors in a relatively short period of time. And probably the vast majority of those investments are worth in the current spot market, the same or less than when they agreed to those transactions. So I think there is a second order, which is until there is greater clarity as to where markets are going to settle out at and whether or not there is potentially another leg down, there is probably going to be a less aggressive push to put capital out. So we see sponsors being less active in the near-term. I think that presents itself in the data, but it’s also very clear anecdotally. But that’s not a permanent phenomenon, and that’s sort of a transitory phenomenon. And if sponsors were overly active in 2021, they are probably correcting to the downside, and you’re seeing that significant deceleration in activity. But I think over time, as we get to a new normal, as we get to some equilibrium in terms of financing and cost of capital and prices, you’ll start to see that activity pick up. And then I think you also have another phenomenon, which is you have the balance sheets clogged to some extent with the number of banks holding significant inventories of committed, but not syndicated financings. And until that works its way through, I think all else equal, while there’ll still be transactions. Probably that pressures the market for larger-sized commitments a bit. But inevitably, all of this works its way through the system.

Yes. Okay. Thanks for all the detail there. I want to follow-up just on the strong growth in employee headcount. It was up 9% in the third quarter from the end of the second quarter. So it seems like you’re still very much leaning in on growth. And you talked about kind of accelerating senior banker recruiting as well. And so I’m curious, was this big step-up just kind of a timing dynamic and just catching up to support the existing firm? Or is this getting a little bit ahead of some of the senior recruiting that you’re going to be doing? And then just taken all together, I’m assuming this isn’t battening down the hatches and obviously, people are starting to talk about letting people go. It feels like you guys are going in the opposite direction. So just want to maybe dig in a little bit more on that and then thought process on the big step-up.

Yes. I think you need to be careful when you go from the second quarter to the third quarter, you get all the campus recruiting and all of the analysts and associates that show up. So if you look at it quarter-to-quarter, you really need to look at that year-over-year and over the full year because that’s when a disproportionate amount of our junior recruiting shows up in the head count because they all arrive in the third quarter. So that’s not representative of full year growth. You can’t take that and annualize it. But we have slowed our overall head count a smidge. It’s literally a smidge, and I think that’s a technical financial term, a smidge, relative to the last year. What we said previously was in this environment, we were going to be most focused on hiring at the most senior levels. And if transaction activity and velocity slowed a little bit, we needed less incremental headcount to support that. And that’s probably what you’ll see as we continue to move into 2023. But we feel that this is very attractive environment for us. I have spoken repeatedly about the double whammy that we faced in recruiting in 2021. One was when you’re on lockdown and people are working remotely and they are not in the office, it’s difficult to really vet candidates for candidates to understand just how special place PJT is. As the world has returned to a greater sense of normalcy, not surprisingly, our recruiting has picked up. I’ve also spoken about how when you’re at breakneck pace transaction activity, as we were in 2021, it’s very difficult to recruit because everyone is so busy, and it’s hard to get mind share, but also the friction with a senior hire leaving all of their client mandates behind and leaving their clients in the lurch is compounded. And in a lower transaction velocity environment, as we’re in, we’re having more of those conversations. There is greater take-up, and there is more comfort in making a senior move because the friction cost is meaningfully less. So we talked about all of the headwinds that we had in 2021. Most of those have dissipated and now we’ve got some tailwinds blowing. So I would expect us to capitalize on that at the senior level where the major focus will be and less so in terms of the infrastructure to support that. But you’re focused on the campus effects in Q3.

Yes. Okay, got it. Thanks for all the color. I hop back in the queue.

Okay, thanks, Devin. Good to speak.

And the next question comes from Richard Ramsden of Goldman Sachs.

Hi, good morning, everyone. So Paul, can you just help us think through the increase in the comp-to-revenue ratio? It sounds like, on one hand, you said this is partly because of the uncertainty in the operating environment, but it also does sound like you are accelerating investments, too. So it would be helpful if you could just unpack the two. And then on the investment side, how long do you think this would persist for? Is this something that you think is really just going to impact this year? Or do you think it could continue into next year as well?

Yes. Well, let’s kind of put this in perspective. We made our first comp accrual for the year, which was our best estimate of the full year at the end of the first quarter. We’re now looking at the world 6 months later. Just to give you some perspective. If you break up this year into roughly two 5-month periods, transaction activity was down about 20% in the first 5 months and down by 50% in the second 5 months. So clearly, a significant step down. What we’re saying is, in light of all of the news flow, all of the dislocations, all of the pressure on announced transactions and in light of our commitment to invest and strengthen and capitalize on the business, in light of all of that, our judgment is that as sitting here today, the appropriate full year comp-to-revenue ratio has moved 100 basis points. That’s how we think about it. But it needs to flow through at some point. So what you’re really seeing in the third quarter is the catch-up for the first and the second quarter, which is why it’s more than 100 basis points in Q3. But we’re never smart enough to know with precision one-fourth of the way through the year, what the right ratio is. And I think just given a slowdown in transaction activity, while recruiting remains robust, that the appropriate thing to do is to bump the full year accrual by 100 basis points.

Okay, got it. And then secondly, I mean, it’s probably too early to think about the outlook to ‘23, but there is a lot of companies that have got significant financial obligations from a debt refinancing perspective heading into ‘23, and there is a significant refinancing need and obviously, as you talked about debt markets have deteriorated if anything. Look, should we think about that predominantly as a restructuring opportunity or do you think the fact that debt markets are so dysfunctional could actually spur pickup in M&A as we head into ‘23?

I think you could have both next year. If you said to me, where do I have the greatest clarity? It’s that the restructuring trend will continue to vector up and to the right. I don’t see any signs that that’s going to change. And it’s hard to imagine that with all that has transpired this year, and all that has been set in motion that, that momentum now that it’s kind of running on the track is not going to lead to more and not less activity next year. It’s not clear to me, though, that it pressures Strategic Advisory levels for a couple of reasons. One is when we close the books on 2022 in Strategic Advisory, this is going to be a very weak year. And therefore, we’re starting with a phase level of activity where there may well be a lot of reasons to think that next year will be stronger. I also think that what we’re dealing with here is just the massive move in financing rates, equity prices, uncertainty and it’s less the absolute conditions and more the rate of change. And when you get everything into a new equilibrium, I think you have a clear base to build back up. So I’m not ready to prognosticate for 2023, but I’m not at all ruling out that we couldn’t have a step-up in activity in 2023. And I don’t think you’ll need that much of a catalyst to do that. But if we just kind of step way back, our view, which I think was out of consensus at the beginning of the year, was we saw the M&A market as being down. But I don’t know if I ever publicly quantified it. I think in our minds, we were thinking down 10% to 15%. And for the first 5 months of the year, it was down 20%. But there is no doubt that we’re in an air pocket where as rates keep moving, as inflation continues to spiral, with all of the second and third order consequences of the war in Ukraine and energy prices and supply chain and political uncertainty and market dislocations, activity has slowed appreciably. And as I said before, it’s running about 50% in the second 5 months of the year behind. I don’t see that persisting, but we need to kind of get to a new equilibrium. And that could happen very soon or it may a little bit of time, but I don’t think that the current level of activity is representative of the new normal. It may be a temporary normal, but it’s not the new normal.

Okay, alright. Thank you. That’s very helpful.

And our next question comes from Steven Chubak of Wolfe Research.

Hi, good morning.

Good morning.

So sorry to beat a dead horse here, Paul, but I’m going to press you a little bit more on the comp ratio.

Okay. Go for it.

So looking out to next year, it sounds like Rx fees or restructuring fees are likely to be a much higher contributor in ‘23, just given the timing of when those mandates will – those success fees will ultimately hit. And from what it sounds like, given you’re coming into this quarter with a strong backlog, and you gave pretty subdued or conservative Advisory revenue guidance. With the strong mandates, it does suggest that you’re likely to enter 2023 with a very strong backlog as well with some of the delayed closings. Do you see a credible path to growing revenues next year? And how should we think about the comp accrual, assuming a better revenue backdrop?

Yes. Well, again, forgive me for pumping a little bit. I’m more than happy to give you a full year perspective at the beginning of the year, when we actually – all kind of baseline is because 2022 is done and dusted. What’s kind of hard to do is without knowing what actually hits in the fourth quarter of 2022 and what gets pushed as backlog into next year and without knowing sort of what the pace of announcements and mandates is for the next 2.5 months. It’s – I think we run the risk of confusing each other by talking too much about sort of next year. If you said to me, though, on the bullish bearish meter, how am I thinking about the businesses? I would say the following: I think restructuring is clearly based on everything we see today, that locomotive heading down the train tracks to use that visual, that’s in all likelihood, only going to pick up speed. So I see that as an incremental tailwind in 2023. I think Park Hill is going to have its puts and takes next year. I think clearly, the fundraising environment is more challenging. There is less liquidity and monetizations for LPs. They have these oversized commitments. I think they are going to be more discriminating. I think fundraising is going to be more difficult. I think fewer companies, as we’ve sort of foreshadowed in prior commentaries, are finding it harder and harder to reach their full fundraise. But at the same time, if you’re not getting liquidity from the underlying assets, you’re going to see more activity amongst LPs in looking to create liquidity by selling their stakes in GPs. You’re going to see more GPs trying to do monetizations through the GP solutions capabilities. So that one is going to be pushes and pulls, and we will see where that all nets out next year. But I think the fundraising environment is going to be more challenging. There is no doubt about that. And then in Strategic Advisory, we’ve always talked about ourselves as being idiosyncratic. It’s just very hard if the market is down 50% to outrun 50% through market share gains. At some point, if the market is in extremis, I just don’t believe that, that’s where we’re headed to next year because I suspect that we will get to a point of exhaustion on rates. We will get to a point where there is greater clarity where banks will return to more forward leaning-lending commitments, where private equity having paused for some considerable period of time, will return to put significant amounts of capital out where strategic will have seen some of their strategic ambitions put on hold as long as we get a little bit more clarity and less volatility in the market. That’s sort of where my gut is. But I just think it’s a little hard to roll it all up until we go and we’re done and dusted on ‘22. But I think there is – the most clarity of all is in the Restructuring. And I do think that there is a reasonable prospect of Restructuring and Strategic Advisory, both moving forward next year.

That’s really helpful, Paul. And just for my follow-up, a clarifying question. Just on the full year advisory revenue guidance. Admittedly, would that imply – your indication that’s going to be down full year ‘22 versus ‘21, certainly implies a rather challenging outcome for the fourth quarter. Want to better understand what’s driving it? Is it simply a function of delays, which should like – and like do you expect any of those deals to fall out or any perspective that you can give in terms of what’s driving some of the pressures and what’s typically a very seasonally strong quarter, not just for you, but for the group more broadly?

Yes. And again, your – there is a lot in that, where you mixed in seasonal with annual with advisory with our firm-wide numbers. So, let me try and unpack that a little bit. The fourth quarter is traditionally seasonally strong. I don’t think I have said anything that the fourth quarter won’t be seasonally strong. So, let’s just take that one and move it to the side. Then there is the second one, which is, I think I have said in my comments that because we have seen a number of announced deals withdrawn, and that’s all part of the public record, and there are probably other announced deals that may take longer to close, i.e., fall into 2023. And that tied to those factors, we no longer see ourselves setting another record in that one business, of which we have three businesses. And then I think – go ahead.

You did – sorry, but you did indicate that advisory revenues will be down full year ‘22 versus ‘21.

Strategic advisory, okay. I just want to be clear of our three businesses. That’s strategic advisory, that’s not talking about restructuring, that’s not talking about Park Hill. I am talking about – not the way – yes. That’s why I said it’s only one of three businesses, and I did talk about the fact that Park Hill would have a record year, this year. And I did talk about the fact that restructuring would be up. So, two of our three businesses will be up, and the third one will fall, a smidge or more short because of the very specific factors.

Certainly a good outcome for this environment. Thanks so much for taking my questions Paul.

Thank you. Absolutely.

And our next question is from Jim Mitchell of Seaport Global.

Hey. Good morning.

Good morning.

Paul, maybe we could just talk a little bit about the deals being withdrawn. I think that’s been more of a last few months type phenomenon. So, can you just sort of give us a sense of, is that more of the financial sponsors based on price or financing? What’s – just trying to get us – or is it strategic? How do we think about what’s driving withdrawals? And how do you see that playing out for the next few months?

Look, it’s like anything else. When you have transactions taking long periods of time to close, and we have seen that phenomenon for a while. Some of that is longer regulatory reviews. When markets are completely dislocated in all likelihood, a deal that was struck in a different time and era, that was perfectly pitched between buyer and seller, is no longer perfectly pitched between buyer and seller. And either the buyer has buyers’ remorse or the seller has sellers’ remorse, but there is a binding commitment. Now, if things go long enough, in some instances, not all, but in some instances, not even many, but in just, there is an opportunity because some condition has not been met and you no longer have two motivated sides to a transaction. So, to me, it’s really it’s the interplay of extended period of time between signing and receipt of all approvals and all conditions being satisfied. And one side or maybe both saying, you know what, this deal made sense in that market environment, it doesn’t make sense in this. And some of these are mutual consent because some of the reasons for a transaction no longer makes sense. In others, it may be that one side is seen that when you get to a termination period rather than just automatically extending it, they are saying, gee, we just assume and walk away. It’s not dramatic, but it tends to spike some period of time after there has been a meaningful pivot in asset values up or down. And if it’s up, it tends to be the sellers. And if it’s down, it tends to be the buyers, who are asking themselves. And if it’s just dislocated equity markets, sometimes it’s by mutual agreement. So, that’s – and it’s a little bit of very thing. There is no one culprit to it, but it’s the final toll to pay when you have a meaningful revaluation up or down and dislocation in markets, deals that were struck in a different time, may not, in the fullness of time, be as compelling. And that affects everyone. It’s different. And but again, that’s why I think this is all about kind of – this is like the turbulence until you kind of get up to a higher cruising altitude and you can kind of get above it. I think we are almost all through that. And I would suspect that that’s really not going to be a forward-looking issue. That’s more of a backward-looking issue.

Okay. Great. And then just maybe on liability management within restructuring, how big would you say that that business has become? And I would imagine that has a shorter time or turnaround time in terms of completion. So, are both of those statements correct? Any way you could help us think through the impact of liability management.

Yes. Absolutely. Look, I mean clearly, you have a lot of companies, who are sitting there and saying, okay, like my choke point may be out 3 years. So, what can I do today to give myself more room or how can I position myself. Gee, my debt is trading at a significant – at significantly dislocated prices, can I take advantage of it, is there a debt tender, is there an exchange, is there a tender with an amendment. There is all of that dialogue. And this has really focused senior financial executives, who have the responsibility of keeping their companies fully funded. As you look at walls and maturities, as you look at access to bank revolvers and the like, you need to make sure that you can always pass the stress test, and this is clearly a stress test. So, that has been a meaningful uptick in activity, but you are also finding companies that have gotten to the end of the line where they are going to need to go through the court processes to deal with their over-leverage situation. So, it’s – at some point, it’s going to be both. But right now, you are seeing a lot of increased activity on liability management. And that’s where having an ever-growing presence in strategic advisory and the coverage force, that’s where it’s a real benefit because those dialogues tend to be with trusted advisers and having those relationships. And as we build that out, that’s fueling some of our restructuring success.

Great. Thanks.

Absolutely.

And our next question comes from Mike Brown of KBW.

Great. Hi, good morning.

Good morning Mike.

And I am still just getting some questions here about some of your commentary for the full year, so was hoping to maybe just clarify your comment as it pretends to the fourth quarter. So, I appreciate the color on the strategic advisory for the full year and your comments on restructuring in the placement business. But if I take all of that together and the challenges of deals in terms of withdrawals and elongations of closing times, do – is it still fair to expect that the advisory fee line can be sequentially higher in the fourth quarter versus the third quarter? Again, just a lot of commentary there, I want to make sure that I understand all the pieces correctly.

Yes. I mean I wish I could wave a magic wand and make that advisory placement distinction go away, because it’s not really how we think about the business and how we manage the business. And as we have talked about in advisory that we report, you have restructuring revenues, you have core strategic advisory revenues and you have some Park Hill revenues. So, it’s a little bit of everything. Let me come at this a little differently, and we are not giving fourth quarter guidance. I have simply made one comment, which is that our strategic advisory business, which is one of our three businesses that is up for the nine months, will most likely not end the year up. But we have two other businesses that are not included in that commentary. So and I think I have been pretty clear about their prospects.

Sure. Okay. Thank you. And then on the Restructuring side, I was hoping to just hear a little bit more about the complexion of the mandates there in terms of what you are seeing by sector and by region. And what’s some of the themes that are at play that’s driving the increase in restructuring right now? And when you look out to 2023, and if I understand there is quite a lag in success fees, and it really depends on the type of transaction. But do you see those as more of a second half type of contribution for the year, or is it fair that it could start to be more consistent throughout the year?

I think it – look, these are steady builds, right, because as you take on more assignments, you get more retainers and then as things where we started to see an inflection point. I think we started to get more constructive on restructuring late last year would be my sense, right. Sort of late ‘21, we just started to see that inflection. So, as you start to get some tick up in mandates, those take some orders to resolve themselves. So, you start to see some of those early wins starting to work their way through and as you have more retainers. But clearly, like anything, it takes a while for that momentum to build. So, all else equal, it’s probably not a straight line, equally a portion quarter-to-quarter. It probably gets better as time march is on. And I think that would be just a general direction about how restructuring will continue to feed into our results for the rest of this year and into next year, probably more time, better results. I think we are seeing all sorts of situations in a broad array of industries, and there is a lot of different catalysts. I think some of this is you have – as I have spoken about repeatedly, you had companies that were severely damaged by COVID. And it all was covered up by extraordinarily accommodative fiscal and monetary policy and near zero interest rates. And when you take that punch ball away, some of the lasting damage and some of the fine behaviors that existed in [indiscernible] that it would treat to – back to normal. All of a sudden, a lot of those companies find that they don’t have the balance sheet to enable them to operate their businesses. So, that’s a theme. Then you have another theme of companies, who have a lot of floating rate debt. And all of a sudden, the rates move up. You have others, who are dealing where there is a mismatch in currency in the wild swings in currencies that created a stress there. Then you are dealing with companies, who are operating on relatively thin margins. And now you are dealing with supply chain delays in dislocations and you can’t get product to the end user and you can’t get revenues booked, but you have got all of those expenses. And then you have got just idiosyncratic situations in various companies that create issues, management decisions that have not worked out well or litigation overhang or the like. So, it’s just about everywhere. I would also say that activity levels in Europe tend to lag. And now as we get a little bit more into this credit cycle, we are starting to see more and more activity and as we have continued to build out our coverage footprint in Europe, where we are able to capitalize on more of that. And then it should come as no surprise that the Asian opportunity has ticked up, just given all of that has gone on in that part of the world. So, it’s not one thing. It’s almost everything starting to just turn a little bit. And I don’t really expect that to change in the foreseeable future. I think that this is kind of the next wave we are in. Now, some of that’s a function that we were in just unnaturally benign markets before, and you can argue that we are just going from the abnormal as far as near zero rates risk on plentiful capital, record equity prices, etcetera, to more of a normal, normal. But I think it’s beyond that. And I suspect that there is real structural challenges for lots of companies and lots of industries around the globe, and we will present ourselves to try and help companies be proactive where we can, hence, more and more focus on liability management. But there will be other situations we are working through the restructuring, processes will be more appropriate.

Very interesting. Thank you for taking my questions Paul.

Absolutely.

That was our final question. We will now turn it back to Paul Taubman for his closing remarks. End of Q&A:

Wonderful. Well, again, we very much appreciate everyone’s interest in our company. Thank you for your questions. Thank you for your time this morning, and we look forward to speaking with you again when we report full year results in early 2023. Thank you.