Good morning and welcome to the Perella Weinberg Partners' Full Year and Fourth Quarter 2022 Earnings Conference Call. During today's discussion, all callers will be placed in listen-only mode and following managements' prepared remarks, the conference will be open for questions from the research community. This conference is being recorded. At this time, I'd like to turn the conference over to Taylor Reinhardt, Head of Investor Relations. Please go ahead.

Thank you, operator and welcome to our full year and fourth quarter 2022 earnings call. Joining me today are Peter Weinberg, Founding partner and Chairman; Andrew Bednar, Chief Executive Officer; and Gary Barancik, Chief Financial Officer. Areeplay of this call will be available through the Investors page of the company's website approximately two hours following the conclusion of this live broadcast through February 16th, 2023. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, February 9, 2023 and have not been updated subsequent to the initial earnings call. Before we begin, I'd like to note that this call may contain forward-looking statements including PWP's expectations of future financial and business performance and conditions and industry outlook. Forward-looking statements are inherently subject to risk, uncertainties, and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guarantees of future events or performance. Please refer to PWP's most recent SEC filing for a discussion of certain of these risks and uncertainties. The forward-looking statements are based on our current beliefs and expectations and the firm undertakes no obligation to update any forward-looking statements. During the call, there will also be discussion of some metrics, which are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. PWP has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8-K, which can be found on the company's website. I will now turn the call over to Peter Weinberg to discuss our results.

Thank you, Taylor. Good morning everybody and thank you all for joining us on our earnings call. I will take a few moments to review our 2022 results and accomplishments and then turn the call over to Andrew and Gary to discuss outlook and financials respectively. Before I start though, I just wanted to acknowledge that we lost one of our colleagues who prematurely passed away very recently. He was a friend and a member of the PWP family and I wanted to take a moment to acknowledge his passing and reiterate our deepest condolences to his family. So, this morning, we reported full year revenues of $632 million, adjusted pre-tax income of $98 million, and adjusted EPS of $0.78 a share. Our topline results, while down 21% versus the prior year's record performance, are strong in the context of the tumultuous environment of 2022, an achievement which speaks to the tenacity of our team and the commitment of our clients within a challenged market backdrop. Within our traditional M&A business and in line with market trends, we experienced a broad base contraction in activity levels across industries. That said, industrials, financial technology, and healthcare represent positive performance. While European M&A faced many headwinds this year, the completion of a few large deals on our platform supportive stable absolute revenue contribution from this geography year-over-year. These attributed to our financing and capital solutions business, which includes global restructuring, capital markets advisory and private capital placement were up in 2022. A trend we hope to see continue as we further invest in this business and diversify the scope of our clients solutions. Andrew will speak more to the importance of this growth opportunity shortly. To me as both the founder and shareholder, the value of our franchise is measured by more…

Hi and thank you, Peter for your dedication and leadership and for your continued partnership. Today I'm honored and excited to be speaking with all of you on my first call as CEO. The firm's accomplishments Peter just outlined are quite remarkable, given the structural headwinds we and our industry faced in 2022. Throughout the year, the narrative from us and our peers was largely aligned. We are in a more challenging operating environment. Client dialogue remains active and gross backlogs are full, but there is significant elongation and increased risk within transaction completion timelines. Over the past few months, we have started to see a subtle yet important shift in client behavior and in confidence levels. As we have alluded to before, when markets gain some clarity as is happening real time on rates and inflation, parties explore transactions in pursuit of their strategic priorities. To be sure the market is still turbulent, financing is more difficult, and comes at a higher cost than we have all become accustomed to. And transactions still need to get from announcement to close. But it does feel like the range of uncertainty has narrowed. And that is a step in the right direction. Looking beyond this quarter, let me speak to our strategy. Our singular focus is and will continue to be providing financial and strategic solutions to our clients across our platform, especially in connection with their most complex financial and strategic challenges. Our focus is on scaling the franchise's we've already built, so we can broadly serve the needs of our current clients, while also expanding our client footprint. Senior external hires, who can broaden our industry and product expertise will be the key to above market growth, as well top performers who rise through our ranks internally. Our advisory…

Thank you, Andrew. As it pertains to our fourth quarter revenue, the surprise to the upside versus our previous expectation can be attributed to some seasonality experienced across the firm, as well as the timing of a few large key events, and once again demonstrates how difficult it can be to predict the quarter's performance in our business. We do not expect our first quarter results to benefit from seasonality as our fourth quarter did. As a reminder, my following comments will focus on non-GAAP metrics, which we believe are relevant in assessing the financial performance of the business. Our GAAP measures and the reconciliation of GAAP to adjusted results can be found in our earnings press release which is on our website. On the expense side, our adjusted compensation margin of 66.7% for 2022 is above where we accrued during the first nine months of the year. As I discussed on our third quarter earnings call, and setting our compensation margin for the fourth quarter and the year, we carefully considered the business performance, market environment and the compensation levels needed to attract and retain key talent and decided a modest increase. But still within our medium term guidance of mid 60s was proven for the full year 2022. We view this investment in our team and our platform as the most important type of CapEx decision we can make in account driven business, and one which should further our long term value creation. As a result of setting our full year compensation margin at 66.7%, together with our third quarter year-to-date accruals at 64%.Our effective fourth quarter ratio was 73.2%. Our adjusted non compensation expense was $123 million for the full year 2022 flat year-over-year and $32 million for the fourth quarter down 9% from the same period…

Thank you, sir. [Operator Instructions] We'll take our first question from Devin Ryan with JMP Securities. Your line is open.

Hey, good morning, Peter, Andrew and Gary. Thanks for taking the questions.

Good morning.

Hi, Devin.

Hi. I guess maybe just want to start on the current operating environment. You guys were I think early last year to point out some of the turn in sentiment. And appreciate that the environment remains uncertain. But good to hear about maybe some of the recent improvement that you're seeing in sentiment. So be great to maybe just add a little bit more context on how that's evolving. Whether geographically Europe versus US activity, corporates versus sponsors, I'm just trying to get sense that that's kind of a blanket comment of what you're seeing, maybe in some of the -- maybe the recent green shoots or are there some different themes that are emerging amongst either geographies or product types or client types? Thanks.

Yes, sure, Devin. So, I think, last year, as I mentioned in the comments up front, there was very consistent alignment with our peers, and that is a relatively unconstructive macro backdrop for 2022. I think that in the first few weeks at 2023, I'd say the macro backdrop has improved. It's less unconstructive, but I wouldn't say that it's incredibly positive, sort of going into 23. We still have a lot of headwinds that that we and the peer group will grapple with. I think financing markets are opening, but they're not open. And so, you do have windows of open credit. You've had a bit of rallying here in the first couple of weeks. But it's very, very different from the 2021 backdrop, where you had wide open credit markets, not only in availability and size, but also very attractive rates. And so, that does tend to sideline financial sponsors and sort of credit-oriented acquisition activity. And so, we're seeing, a bit of a retrenchment for sure. And sponsor activity, I think that's very natural. When you have had such a rapid change in the rate environment, you have, typically buyers resetting on valuation faster than sellers. And so that is very natural disruption. I think that will change. PE will have to deploy capital. That's their job. And I do think it will come back with respect to corporates. It is an interesting environment that we see, because they're seeing less sponsors competing for assets that have been on their wish list for many years, and find themselves flush with cash and decent valuations. And so from a corporate buyer perspective, it's actually a quite attractive environment. And that's why I think you hear from us that overall client activity, especially with our within our core base of clients in the corporate world, it's very, very active dialogue. So we're encouraged by that level of dialogue that's been ongoing. And you're starting to see some of the plumbing that's been backed up in that market, unclog. And then lastly, you had a question, I think about just the European and the rest of the world versus U.S. not really seeing a big difference in activity there. It's pretty balanced in terms of our historic contributions from both Europe and the U.S. I do think, as I said, in my upfront comments, the range of uncertainty of outcomes has narrowed with respect to rates. We're in a round the back half of these rate increases, it seems. And with respect to Europe, I think the worst case scenarios that were outlined, post the invasion of Ukraine have really turned out to be significantly better than again, those worst case scenarios, which takes away a lot of uncertainty.

Okay, great color. Thank you, just as a follow-up Andrew on the billion dollar revenue goal, just to give you more contexts there. What are some of the profitability metrics potentially look like? If that more revenue, I appreciate, you'll have more to pay, et cetera. But like, how should we think about, maybe what the comp ratio trend could look like? And then also, what you need to meaningfully larger infrastructure to get there, which would imply and usually hired non-GAAP costs, just trying to think about kind of what that billion dollars means for actually profitability? Thanks.

Yeah. Sure. So I don't think our long term comp margin target of mid-60s which we've outlined historically, both in our original IPO process, and then with you all on our quarterly calls changes as we move through that initial revenue target. I think what does drive bottom-line earnings is that we have enormous operating leverage in non-comp. And so I don't see a material increase in non-comp required for us to achieve a consistent billion-dollar plus revenue target.

All right, great. I'll leave it there. I hop back in queue. Thanks very much.

Thanks, Devin.

Thank you. Our next question will come from James Yaro with Goldman Sachs. Your line is open.

Good morning. I just wanted to touch on the restructuring backdrop that you're seeing at this point, you talked about financing markets, opening but not being fully open. Has this impacted restructuring? And do you think it's a risk to that restructuring backdrop, if markets fully reopen?

Yeah, thanks for the question, James. We have seen a very significant increase in our overall capital solutions and financing business. So within our financing and capital solutions business, that includes restructuring, liability management, debt advisory and private capital markets business that generally has picked up quite significantly through the course of fourth quarter and continues in Q1. I think credit markets are going to remain volatile. As I mentioned, upfront, there are windows that are opening and closing, we don't have a consistently open market. We also have realized within our corporate client base, we have a number of finance executives and CFOs that have really not seen this type of market. And in fact, many of many of us haven't with such a rapid rise in rates, and so much of the market hanging on to every Fed word. And so that's a challenge of where executives that needs to think about their financing, are seeing a market where they need some help and guidance and our teams are providing that guidance and we're able to be involved in transactions where it's not just you know call 911, I have a potential bankruptcy, but extends much further beyond that, it’s a perfectly healthy companies that need assistance in accessing markets and managing maturities.

That's very clear. I just want to touch on the capital return priorities from here. You did increase the share repurchase authorization score by I think 100 million. So when you just think about the cadence of capital return, should we expect buybacks to operate to be a sort of this 4Q 2022 level, or could they increase or decrease from here? And then is there any ability to contextualize a minimum cash balance that you think about -- that you feel comfortable operating at?

Hi, James, it's Gary. I'll take those questions. We don't comment on the cadence forward-looking repurchases. What we've kind of said in the past, and it's really true, as we do look at a number of factors. You saw -- if you look at last year, for example, if you saw the cadence from the time the announcement, it was heaviest in the second quarter, which is when our stock price was kind of at a much lower place. So obviously, that is one factor. We look at our overall cash needs, cash balances, other needs for investment. And we're mindful of liquidity in our stock as well. We want to make sure that we have sufficient liquidity that we can attract new investors into the name. So those are all things that we think about when we consider the cadence of it. In terms of cash balances, again, we haven't provided an explicit target on what that minimum is. You can kind of look at -- if you look at historically quarter-by-quarter where we've been, and you look at cash net of accrued comp liability, which is the biggest seasonal factor that we have, you can kind of get some sense of where that number has hovered around it. At year end, for example, we have $312 million of cash, cash equivalents and marketable securities, and net of those accrued comp liability, that number was about 100 million at that time. And so obviously, we have working capital needs, we have -- want to keep some dry powder for just both changes in the market condition opportunities and so forth. But that's kind of where we end of the year.

Okay. Thank you both for taking my question.

Thank you.

Thank you. Our next question will come from Steven Chubak with Wolfe Research. Your line is open.

Hi, good morning. So, Andrew, I was hoping that you might provide as a follow-up to Devin's earlier question, just some additional color on some of the assumptions underpinning that $1 billion revenue target. It didn't sound like you provided any explicit timetable for when you could get there. I was hoping you could just speak to your expectation around industry see full growth that would support that target, and your partner growth and productivity per partner, just trying to get sense as to like the same store versus new store dynamics that are underpinning that target?

Yes, sure. So as I mentioned, it's not a time based target. It is something that we are working on. And usually when we set an objective, it's post based around here. So, our expectation and hope is that we drive to those targets as quickly as possible. But we have not set a specific time requirement against it. I think it's just important as we evolved from private partnerships, now, public enterprise, and we have a broad group of stakeholders, even though the partnership and employees own 51% of the firm, it's important to have these cuts and metrics for our public stakeholders. So that was a key reason why we wanted to set that objective. I think in terms of how we get there? We will continue to drive partner productivity, but also our MD productivity, which has been significantly improving over the years as we've made -- select hires. And we've also I think, done a better job at developing our non-partner talent. We also have six major industry groups, and if you think about contribution from each of those groups that 150 million plus we can see getting to our $1 billion target. And with respect to adding additional client coverage, as I said, upfront, our plan on hiring is about increasing our client footprint. We view ourselves as a small firm with a big brand, and we have a tremendous opportunity to acquire talent and add talent to our platform that does consistent with our values and can help us drive our business and achieve those revenue metrics that I on.

Really helpful color, Andrew. And for my follow-up, maybe for Gary, just trying to understand some of the comps dynamics a bit better and how we should think about the outlook for comp from here? And I wanted to frame in the context of the original SPAC presentation that you provided. It had three year management forecasts. And interestingly, the 2022 revenue bogey that you outlined at that time, maybe it wasn't a guide or objective, but at least an indication as to what that revenue trajectory might look like was actually similar to what materialize this year, at around 630 some odd million or so. And you indicated in that environment, you could sustain a 64% comp ratio, and moderate the pace of non-comp growth. So recognizing that it is a tougher inflationary backdrop, it's just not clear to us what factors have limited your ability to manage both the comps. And based on the outlook you just provided, some of the non-comps a bit better versus what was contemplated in some of those original targets. So I was hoping for some additional context there.

Yeah, see, I guess one -- just one point to clarify it at the time. This is like 2021 when we were prior to this SPAC transaction we were providing some estimates for sections. We were very clear that our comp ratio targets for the mid-term was mid-60s. We had to pick point estimates just to illustrate something in the projections. And that was kind of the best view that we had at the time. So we're today in a market environment that we can actually see what environment we're in today. We know kind of where we are in partners, how many new partners around the platform, and kind of where they are. We know, it’s competitive environment, it’s like to attract and retain people. And so, that we made that judgment for this past year. On a prospective basis, as I think Andrew made a comment earlier, we're not deviating from that mid-60s guidance, but where we land exactly is going to -- it's going to reflect the environment and kind of where we see things. And obviously, when we report our first quarter results, we'll need to put a stake in the ground on our best view at the time on where will we be going for the full year. We don't have that today. But obviously will on our next earnings call.

Helpful color guys. Thanks so much for taking my questions.

Thank you.

Thanks, Steve.

Thank you. Our next question will come from Matt Moon [ph] with KBW. Your line is open.

Good morning, guys.

Good morning.

Good morning.

So just one for me. Thinking about the backdrop and the environment, obviously, there's a lower number of new activity making across the finish line. And you've also spent a lot of this past year or so cleaning up the capital structure and having that behind you. So just kind of curious from here, how we should be thinking about your willingness to grow potentially inorganically? And maybe how we should think about it areas of potential focus with respect to that kind of potential inorganic growth?

Sure, Matt. Thanks for the question. So a couple of things about just organic growth, and then I'll speak inorganic growth. So we have almost one-third of our partnership is on the platform less than three years. And so we think that represents significant embedded growth within the firm today. And this is an area where we invest, and it's part of the reason we took up our comp ratio, because we need to invest behind our teams and that's our CapEx. And we think that represents significant future revenue that's already on the platform. Our workforce management will be continuous, as we again drive the productivity of our teams, but also look to the outside to expand our client footprint. So in industries where it's adjacent to our core six industry groups, we will continue to add talent that increases our clients' footprint. We'll also selectively hire in areas that enhance our product capabilities. And that's both here in the US as well as in Europe.

Okay. Great. And then one for Gary. I appreciate the non-comp growth guidance, especially '23. I know a lot of that is baked in just given the duplicative rent expense and the higher D&A of the build-outs. But just kind of curious what kind of operating environment and revenue backdrop we should be considering that's kind of underlying that that 15 to 20% year-on-year growth guidance, just wondering on what environment in particular we're looking at for that assumption?

I think we're what we're really assuming in that is that, we're not assuming a dramatic change in the operating environment, but we are assuming, this is a very attractive business to be in over the long-term and we're continuing to invest in the business with that in mind. So while we -- we've certainly tried to moderate some of our non-comp expenses for things that will not impact growth in the business, we actually are still continuing to invest in things that support our people in some areas of technology and some of that is driven there. Some of that is inflation. And some of it is just headcount growth, which has been reasonably significant as we've invested in our business here over the last few years.

Okay. Great. Thanks, guys.

Thank you

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the call back over to Andrew Bednar for any additional or closing remarks.

Great. Thank you, operator. And thank you all for joining. I also just wanted to recognize the tremendous performance of our team, all of our partners, all the rest of our teammates that have worked extremely hard during a very challenging operating environment and continue to deliver for our clients and for all of our stakeholders. So thank you, and we'll talk to you on our next call.

Ladies and gentlemen, this concludes the Perella Weinberg Partners full year and fourth quarter 2022 earnings call and webcast. You may disconnect your line at this time and have a wonderful day.