Perella Weinberg Partners (PWP) Q3 2025 Earnings Report, Transcript and Summary

Good morning, and welcome to the Perella Weinberg Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I will now turn the call over to Taylor Reinhardt, Head of Communications and Marketing. You may begin.

Thank you, operator, and welcome, all. Joining me today are Andrew Bednar, Chief Executive Officer; and Alex Gottschalk, Chief Financial Officer. Before we begin, I'd like to note that this call may contain forward-looking statements, including Perella Weinberg's expectations of future financial and business performance and conditions and industry outlook. Forward-looking statements are inherently subject to risks, 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 Perella Weinberg's most recent SEC filings 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 a discussion of some metrics which are non-GAAP financial measures which management believes are relevant in assessing the financial performance of the business. Perella Weinberg 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 Andrew Bednar to discuss our results.

Thank you, Taylor, and good morning. Today, we reported third quarter revenues of $165 million and year-to-date revenues of $532 million. While not records as we reported last year at this time, the underlying fundamentals of our business remain strong and continue to strengthen. The number of active engagements is at a record, our overall pipeline is at a record and our European business is up over 50% from last year. In addition, the number of fees above our target has increased meaningfully, and both our average fee and median fee across engagements are up as well. We've been deliberate in pursuing clients and assignments where we can add the most value, focusing our teams on complex, consequential transactions where our advice to clients matters the most. Year-to-date, we have made the most significant annual investment in our firm's history, adding 25 senior bankers across sectors and regions. The partners who joined us in 2025 alone represent 18% of our total partner base, a clear signal of our commitment to scale and a large source of potential future revenue. On October 1, we closed our acquisition of Devon Park, and the impact has been both immediate and notable. This transaction brought us a new capability, new capital relationships and new sponsor clients overnight, meaningfully expanding our addressable market and revenue potential. The timing of our acquisition could not have been better, with the secondaries market expected to exceed $200 billion this year as sponsors increasingly turn to continuation vehicles and other creative solutions to manage liquidity needs. Additionally, we are seeing private equity moving off the sidelines with a substantial exit backlog building for 2026. The business building we've done this year is significant, expanding our client coverage and capabilities in strategically active industries for both corporates and private equity. We remain confident in our scaling strategy and believe these investments will drive significant revenue growth for our firm and create value for our shareholders. With that, I'll now turn the call over to Alex to review our financial results and capital management in more detail.

Thank you, Andrew. Our third quarter revenues of $165 million included $8.5 million related to a closing that occurred within the first few days of the fourth quarter, in which in accordance with relevant accounting principles, was recorded in the third quarter. Consistent with the first 2 quarters, our adjusted compensation margin remained at 67% of revenues. Our adjusted noncompensation expense of $37 million for the quarter was down from last year and roughly flat with Q2. For the 9-month period, noncompensation expenses totaled $122 million, up 5% from last year. Given our continued expense discipline, we are lowering our guidance further to a low single-digit increase for the full year 2025. Our adjusted tax rate for the first 9 months was 4%. Excluding the benefit from stock-based compensation vesting at a higher price than the grant date, the adjusted tax rate would have been 32%. Turning to capital management. In the third quarter, we returned an additional $12 million to equity holders, primarily through the net settlement of RSUs and through dividends. Share repurchase activity during this quarter was limited as we prioritize deploying capital towards strategic investments, including the Devon Park acquisition. Year-to-date, we have returned more than $157 million to equity holders through dividends, the net settlement of RSUs, open market repurchases and unit exchanges. In 2025, we have retired more than 6 million shares, and our commitment to proactively managing our share count remains unchanged. At the end of the third quarter, we had 65 million shares of Class A common stock and 23.5 million partnership units outstanding. Finally, we closed the quarter with $186 million in cash and no debt. And this morning, we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions.

[Operator Instructions] We'll take our first question from Devin Ryan of Citizens Bank.

First question, kind of a two-parter here. Just on -- Andrew, some of the pipeline commentary, so obviously heard kind of the record point. We're seeing a lot of non-M&A activity that doesn't seem to be getting picked up in the public data sources like debt advisory, et cetera. Can you talk about the mix of the pipeline? Is it more geared toward non-M&A right now? Or maybe it's just the M&A is less visible? And that's kind of the point -- part 1 of the question. And part 2 is on the timing of the pipeline, should we expect normal fourth quarter seasonality, positive? Or is it more geared toward 2026?

Yes. Thanks, Devin. I think on the look back, the mix is a bit more in the nontraditional M&A. So if you look back in the last 3 quarters, our liability management business, our capital raising business, Rx business are all showing very good growth through the course of the year. The pipeline, however, continues to show a significant increase in traditional M&A business. And as you know, it's really challenging to predict when transactions will get announced and closed. And as you also know, we are very much still early innings in scaling our business. But when I look at those indicators that you guys don't see in terms of new business reviews, engagement letters, the mandates, the announcements that we expect in the course of the next several weeks and months, those all look very positive. And they're all much more weighted to traditional M&A versus our other products and services that we provide.

Okay. Great. And then just a follow-up on the recruiting environment, but then also the success you've had today, both external recruiting in 2025, but then also the acquisition as well. So 25 bankers, obviously, is a lot to digest in a year, but great for kind of forward momentum. Can you just talk about how these bankers are ramping on the platform? Are they going to be additive to 2026? Or is it further out than that? And then just more broadly, kind of the momentum in recruiting, can you do another kind of big year in 2026? Is that the expectation?

Yes. Of the 25 senior banker adds, 9 are already on the platform. So they will just continue to grow and expand their client base and hopefully contribute to revenue more near term. The external hires are the remainder, so we've got 16, including Devon Park. And we're very excited about those adds. They're in terrific industries and in areas where we have a right to win. And we think that they will be contributing to our business during the course of '26. I think with 7 weeks left of '25, it will be a bit of a high bar to have them announce and close transactions by the end of the year. But again, looking at the forward indicators, these new partners where we have about now, 25% of our partners are here less than 2 years, that cohort seems to be hitting the ground running. And with the addition of Devon Park, as I said, that's different because that provides us with a new product category and a new group of clients that we didn't have prior to the acquisition. So that, for us, is a game changer because you get nonlinear growth and synergy out of that type of transaction where that product capability now is across 75 partners. So we're really excited about Devon Park and that capability. Our clients have been very excited that we have that capability. And that's, as I said in my upfront comments, Devin, that the timing of that feels quite good.

Our next question is from Alex Bond of KBW.

I just wanted to ask on the restructuring backdrop. Can you just maybe update us on what you're seeing in terms of the broader backdrop here in overall client engagement levels? Some of your peers have sounded a little bit more upbeat around restructuring volumes, while others have noted they've seen somewhat of a slowdown in new activity recently. Maybe have you seen any slowdown in recent weeks? And also, has there been any shift in terms of the mix between in-quarter, more traditional restructurings versus LME activity?

Yes. Thanks, Alex. We're seeing just a very steady pace of activity in our broad liability management business. I know there's been a lot of press reported about some cracks in credit markets and a couple of high-profile bankruptcies. We don't see that as something that's systemic. Those feel more isolated. But there are still a large amount of clients, a large number of clients that need assistance with managing balance sheet, in some cases, managing liquidity, and in some cases, going through a traditional workout or bankruptcy. So for us, that business continues to grow. That will be a higher contributing business this year than last year, and that team continues to generate increasing revenue. We feel very, very good about our setup for '26.

Okay. Great. That's helpful. And then maybe just on the private capital side, now that the Devon Park deal has closed and those folks are on the platform, just trying to think about how soon or maybe how quickly we should expect that area of the business to meaningfully contribute to the revenue base? And maybe if there's any way to size up the potential contribution from that team relative to the M&A and restructuring sides once that team is fully up and running?

Yes. So we're doing our planning in terms of looking at targets and what our expectations will be for our groups heading into 2026, and we are going to treat the Devon Park business now, fully part of Perella Weinberg as a group in terms of the expectations we have. And we think this will be a significant contributor, much like our other groups. We have 6 groups that are across our platform, plus our restructuring business. So we're expecting that we just do the simple math on our revenue, and we expect Devon Park business to be that kind of contributor to our overall franchise. And as I said earlier, we have 75 partners, all of whom have private equity relationships and relationships with private credit, infrastructure and real estate, which is where we really cover in the Devon Park business. So we're very excited about the product capability, which, again, a couple of months ago, we didn't have. And last year, we had 0 revenue in this area. So we're very excited about the setup there.

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.

Okay. Thank you, Leo, and thanks, everyone, for joining us today. I also want to specifically thank our exceptional team. They have been working tirelessly, both in recruiting top talent for our firm this year, but also of course, in covering our clients and their unwavering and very enthusiastic dedication and commitment to our mission, as these are the things that make our firm great. So we look forward to updating you on our progress next quarter, and thank you for your continued support.

This concludes the Perella Weinberg Third Quarter 2025 Earnings Call and Webcast. You may now disconnect your line at this time, and have a wonderful day.