PJT Partners Inc. Reports Full Year and Fourth Quarter 2018 Results

Overview

> Total Revenues of $580.2 million for full year 2018, up 16%
year-over-year

  • Advisory Revenues of $451.6 million, up 17% from a year ago
  • Placement Revenues of $111.0 million, up 8% from a year ago

> Full year diluted EPS of $1.16, up from $(1.73) a year ago; Adjusted
EPS of $1.91, up from $1.54 a year ago

> Strong balance sheet at year end with $108.3 million of cash, cash
equivalents and short-term investments

> Repurchased approximately 3.2 million share equivalents during the
full year through Partnership Unit exchanges, share repurchases and
employee net share settlements

  • Additionally, intend to repurchase approximately 216,000 Partnership
    Units for cash in February 2019

> Completed acquisition of CamberView on October 1, 2018

NEW YORK–(BUSINESS WIRE)–PJT Partners Inc. (the “Company” or “PJT Partners”) (NYSE:PJT) today
reported Total Revenues of $580.2 million for the year ended
December 31, 2018 compared with $499.3 million for 2017. GAAP Pretax
Income and Adjusted Pretax Income were $41.5 million and $99.2 million,
respectively, for 2018 compared with GAAP Pretax Income of $10.1 million
and Adjusted Pretax Income of $86.8 million, respectively, for 2017.

Total Revenues for fourth quarter 2018 were $175.4 million compared with
$190.6 million for 2017. GAAP Pretax Income and Adjusted Pretax Income
were $16.7 million and $32.9 million, respectively, for the current
quarter compared with GAAP Pretax Income of $25.7 million and Adjusted
Pretax Income of $43.8 million, respectively, for the prior year quarter.

Paul J. Taubman, Chairman and Chief Executive Officer, said, “We are
pleased to report strong 2018 financial performance, reflecting steady
and consistent progress across all of our businesses and record results
in Park Hill and Strategic Advisory. Our businesses are increasingly
working together to deliver unique financial solutions, differentiated
expertise and superior client service to an increasing number of
companies around the globe. We continue to attract top talent to our
platform and we are highly confident in our growth prospects for 2019
and beyond.”

Revenues

The following table sets forth revenues for the three months and full
year ended December 31, 2018 and 2017:

           
Three Months Ended

December 31,

Year Ended

December 31,

        2018   2017   % Change   2018   2017   % Change
(Dollars in Millions)
Revenues
Advisory $ 132.6   $ 153.1 (13 %) $ 451.6   $ 386.3 17 %
Placement 38.6 33.9 14 % 111.0 102.8 8 %
Interest Income & Other         4.2     3.6   18 %     17.7     10.2   73 %
Total Revenues $ 175.4 $ 190.6 (8 %) $ 580.2 $ 499.3 16 %
 

Year Ended

Total Revenues were $580.2 million for 2018 compared with $499.3 million
for 2017, an increase of 16%.

Advisory Revenues were $451.6 million for 2018 compared with
$386.3 million for 2017, an increase of 17%. The increase in Advisory
Revenues primarily resulted from increases in our strategic advisory and
secondary advisory businesses.

Placement Revenues were $111.0 million for 2018 compared with
$102.8 million for 2017, an increase of 8%. The increase was primarily
driven by increased revenues from our real estate vertical.

Interest Income & Other was $17.7 million for 2018 compared with
$10.2 million for 2017 and includes $8.2 million of reimbursable
expenses that are now presented on a gross basis due to adoption of ASU
No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“new
revenue guidance”).

Three Months Ended

Total Revenues were $175.4 million for fourth quarter 2018, down from
$190.6 million for the prior year quarter.

Advisory Revenues were $132.6 million for the current quarter compared
with $153.1 million for the prior year quarter, a decrease of 13%. The
decrease was primarily due to a decline in restructuring activity,
partially offset by an increase in strategic advisory.

Placement Revenues were $38.6 million for the current quarter compared
with $33.9 million for the prior year quarter, an increase of 14%. The
increase was primarily driven by increases in revenues from our real
estate and private equity verticals during the quarter.

Interest Income & Other was $4.2 million for the current quarter
compared with $3.6 million for the prior year quarter and includes
$1.6 million of reimbursable expenses that are now presented on a gross
basis due to adoption of the new revenue guidance.

Expenses

The following tables set forth information relating to the Company’s
expenses for the three months and year ended December 31, 2018 and 2017:

     
Year Ended December 31,
2018   2017
        GAAP   As Adjusted   GAAP   As Adjusted
(Dollars in Millions)
Expenses    
Compensation and Benefits $ 424.5 $ 371.9 $ 391.5 $ 320.2
% of Revenues 73.2 % 64.1 % 78.4 % 64.1 %
Non-Compensation $ 114.3 $ 109.1 $ 97.7 $ 92.3
% of Revenues 19.7 % 18.8 % 19.6 % 18.5 %
Total Expenses $ 538.7 $ 481.0 $ 489.2 $ 412.5
% of Revenues 92.8 % 82.9 % 98.0 % 82.6 %
Pretax Income $ 41.5 $ 99.2 $ 10.1 $ 86.8
% of Revenues 7.2 % 17.1 % 2.0 % 17.4 %
 
 
Three Months Ended December 31,
2018 2017
        GAAP   As Adjusted   GAAP   As Adjusted
(Dollars in Millions)
Expenses
Compensation and Benefits $ 126.7 $ 112.8 $ 140.3 $ 122.6
% of Revenues 72.2 % 64.3 % 73.6 % 64.3 %
Non-Compensation $ 32.0 $ 29.7 $ 24.6 $ 24.1
% of Revenues 18.3 % 16.9 % 12.9 % 12.7 %
Total Expenses $ 158.7 $ 142.5 $ 164.9 $ 146.7
% of Revenues 90.5 % 81.2 % 86.5 % 77.0 %
Pretax Income $ 16.7 $ 32.9 $ 25.7 $ 43.8
% of Revenues 9.5 % 18.8 % 13.5 % 23.0 %
 

Compensation and Benefits Expense

Year Ended

GAAP Compensation and Benefits Expense was $424.5 million for 2018
compared with $391.5 million for 2017. Adjusted Compensation and
Benefits Expense was $371.9 million for 2018 compared with
$320.2 million for 2017. The increase in Compensation and Benefits
Expense was primarily due to higher revenues and increased headcount.

Three Months Ended

GAAP Compensation and Benefits Expense was $126.7 million for fourth
quarter 2018 compared with $140.3 million for the prior year quarter.
Adjusted Compensation and Benefits Expense was $112.8 million for the
current quarter compared with $122.6 million for the prior year quarter.
The decrease in Compensation and Benefits Expense was primarily due to
lower revenues during the current quarter.

Non-Compensation Expense

Year Ended

GAAP Non-Compensation Expense was $114.3 million for 2018 compared with
$97.7 million for 2017. Adjusted Non-Compensation Expense was
$109.1 million for 2018 compared with $92.3 million for 2017.

GAAP Non-Compensation Expense increased during 2018 compared with 2017,
and includes $10.4 million of expenses reimbursable by clients that
prior to adoption of the new revenue guidance were reported on a net
basis.

The increase in Travel and Related was primarily related to adoption of
the new revenue guidance, as well as increased business activity. The
increase in Communications and Information Services was primarily driven
by investments in our technology and data management infrastructure
during the first half of the year. Depreciation and Amortization
increased primarily due to additional amortization expense related to
intangible assets recorded in the acquisition of CamberView during the
fourth quarter. Other Expenses increased primarily as a result of
increased headcount and business activity, as well as expense recorded
during the fourth quarter related to the impairment of certain former
CamberView leased space. Professional Fees included $1.5 million of
expense related to the acquisition of CamberView.

Adjusted Non-Compensation Expense increased during 2018 compared with
2017, primarily due to increases in Travel and Related, Communications
and Information Services and Professional Fees for the same reasons
noted above, and an increase in Other Expenses primarily as a result of
increased headcount and business activity.

Three Months Ended

GAAP Non-Compensation Expense was $32.0 million for fourth quarter 2018
compared with $24.6 million for the prior year quarter. Adjusted
Non-Compensation Expense was $29.7 million for the current quarter
compared with $24.1 million for the prior year quarter.

GAAP Non-Compensation Expense increased during the current quarter
compared with the prior year quarter, and includes $3.2 million of
expenses reimbursable by clients that prior to adoption of the new
revenue guidance were reported on a net basis.

The increase in Travel and Related was primarily related to adoption of
the new revenue guidance. Other Expenses increased primarily as a result
of increased headcount and business activity as well as expense recorded
during the current quarter related to the impairment of certain former
CamberView leased space. Depreciation and Amortization increased
primarily as a result of additional amortization expense related to
intangible assets recorded in the acquisition of CamberView during the
fourth quarter.

Adjusted Non-Compensation Expense increased during the current quarter
compared with the prior year quarter, primarily due to an increase in
Travel and Related and Professional Fees for the same reasons noted
above, and an increase in Other Expenses primarily as a result of
increased headcount and business activity.

Provision for Taxes

As of December 31, 2018, PJT Partners Inc. owned 58.5% of PJT Partners
Holdings LP. PJT Partners Inc. is subject to corporate U.S. federal and
state income tax while PJT Partners Holdings LP is subject to New York
City unincorporated business tax and other entity-level taxes imposed by
certain state and foreign jurisdictions. Please refer to Note 11.
“Stockholders’ Equity (Deficit)” in the “Notes to Consolidated and
Combined Financial Statements” in “Part II. Item 8. Financial Statements
and Supplementary Data” of the Company’s Annual Report on Form 10-K for
the year ended December 31, 2017 for further information about the
corporate ownership structure.

In calculating Adjusted Net Income, If-Converted, the Company has
assumed that all outstanding Class A partnership units in PJT Partners
Holdings LP (“Partnership Units”) (excluding the unvested partnership
units that have yet to satisfy certain market conditions) have been
exchanged into shares of the Company’s Class A common stock, subjecting
all of the Company’s income to corporate-level tax.

The effective tax rate for Adjusted Net Income, If-Converted for the
year ended December 31, 2018 was 22.9% compared with 32.3% for the same
period a year ago. This tax rate excludes the tax benefits of the
adjustments for transaction-related compensation expense, amortization
expense and spin-off-related payable due to The Blackstone Group L.P.
(“Blackstone”). The decrease in tax rate from the year ended
December 31, 2017 is primarily due to the decrease in U.S. corporate
income tax rate related to the passage of the Tax Cuts and Jobs Act1
as well as an increased tax benefit related to the deliveries of vested
shares during 2018 at values in excess of their amortized cost.

The increase in the effective tax rate for Adjusted Net Income,
If-Converted for the year ended December 31, 2018 from the year-to-date
amount as of September 30, 2018 primarily relates to an increase in the
business apportionment of client engagements performed in jurisdictions
with higher statutory tax rates.

Capital Management and Balance Sheet

As of December 31, 2018, the Company held cash, cash equivalents and
short-term investments of $108.3 million. Additionally, the Company held
a debt balance of $30 million, which was entered into in connection with
the acquisition of CamberView.

Partnership Units may be presented to the Company for exchange on a
quarterly basis and repurchased for cash or, at the Company’s election,
for shares of the Company’s Class A common stock on a one-for-one basis.
During fourth quarter 2018, the Company repurchased 492,986 Partnership
Units for cash. An additional 216,330 Partnership Units have been
presented to be exchanged, which the Company intends to repurchase for
cash on February 14, 2019 at a price to be determined by the per share
volume-weighted average price of the Company’s Class A common stock on
February 11, 2019.

On October 26, 2017, the Company’s Board of Directors authorized the
repurchase of shares of the Company’s Class A common stock in an amount
up to $100 million. Under this repurchase program, shares of the
Company’s Class A common stock may be repurchased from time to time in
open market transactions, in privately negotiated transactions or
otherwise. The timing and the actual number of shares repurchased depend
on a variety of factors, including legal requirements, price and
economic and market conditions. The repurchase program may be suspended
or discontinued at any time and does not have a specified expiration
date. During fourth quarter 2018, the Company repurchased 627,764 shares
of Class A common stock pursuant to this share repurchase program.

Additionally, during fourth quarter 2018, the Company net share settled
16,923 shares to satisfy employee tax obligations.

In aggregate during fourth quarter 2018, the Company repurchased an
equivalent of 1.1 million shares at an average price of $46.62 per
share. For the year ended December 31, 2018, the total share equivalent
repurchases were 3.2 million shares at an average price of $49.40 per
share.

Dividend

The Board of Directors of PJT Partners Inc. has declared a quarterly
dividend of $0.05 per share of Class A common stock. The dividend will
be paid on March 26, 2019 to Class A common stockholders of record on
March 6, 2019.

Quarterly Investor Call Details

PJT Partners will host a conference call on February 7, 2019 at
8:30 a.m. ET to discuss its full year and fourth quarter 2018 results.
The conference call can be accessed via the internet on www.pjtpartners.com
or by dialing +1 (888) 339-2688 (U.S. domestic) or +1 (617) 847-3007
(international), passcode 873 623 65#. For those unable to listen to the
live broadcast, a replay will be available following the call at www.pjtpartners.com
or by dialing +1 (888) 286-8010 (U.S. domestic) or +1 (617) 801-6888
(international), passcode 213 823 13#.

About PJT Partners

PJT Partners is a global advisory-focused investment bank. Our team of
senior professionals delivers a wide array of strategic advisory,
shareholder engagement, restructuring and special situations and private
fund advisory and placement services to corporations, financial
sponsors, institutional investors and governments around the world. We
offer a unique portfolio of advisory services designed to help our
clients achieve their strategic objectives. We also provide, through
Park Hill, private fund advisory and placement services for alternative
investment managers, including private equity funds, real estate funds
and hedge funds. To learn more about PJT Partners, please visit the
Company’s website at www.pjtpartners.com.

Forward-Looking Statements

Certain material presented herein contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements include certain information
concerning future results of operations, business strategies,
acquisitions, financing plans, competitive position, potential growth
opportunities, potential operating performance improvements, the effects
of competition and the effects of future legislation or regulations.
Forward-looking statements include all statements that are not
historical facts and can be identified by the use of forward-looking
terminology such as the words “believe,” “expect,” “plan,” “intend,”
“anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,”
“might,” “should,” “could” or the negative of these terms or similar
expressions.

Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in such
forward-looking statements. You should not put undue reliance on any
forward-looking statements contained herein. We undertake no obligation
to publicly update or review any forward-looking statement, whether as a
result of new information, future developments or otherwise.

The risk factors discussed in the “Risk Factors” section of our Annual
Report on Form 10-K for the year ended December 31, 2017, filed with the
United States Securities and Exchange Commission (“SEC”), as such
factors may be updated from time to time in our periodic filings with
the SEC, accessible on the SEC’s website at www.sec.gov,
could cause our results to differ materially from those expressed in
forward-looking statements. There may be other risks and uncertainties
that we are unable to predict at this time or that are not currently
expected to have a material adverse effect on our business. Any such
risks could cause our results to differ materially from those expressed
in forward-looking statements.

Non-GAAP Financial Measures

The following represent key performance measures that management uses in
making resource allocation and/or compensation decisions. These measures
should not be considered substitutes for, or superior to, financial
measures prepared in accordance with GAAP.

Management believes the following non-GAAP measures, when presented
together with comparable GAAP measures, are useful to investors in
understanding the Company’s operating results: Adjusted Pretax Income;
Adjusted Net Income; Adjusted Net Income, If-Converted, in total and on
a per-share basis; Adjusted Earnings Per Share; Adjusted Compensation
and Benefits Expense and Adjusted Non-Compensation Expense. These
non-GAAP measures, presented and discussed in this earnings release,
remove the significant accounting impact of: (a) transaction-related
compensation expense, including expense related to Partnership Units
with both time-based vesting and market conditions as well as
equity-based and cash awards granted in connection with the spin-off
from Blackstone and acquisition of CamberView; (b) intangible asset
amortization associated with Blackstone’s initial public offering
(“IPO”), acquisition of PJT Capital LP, and acquisition of CamberView;
(c) impairment of former CamberView leased space; and (d) the amount the
Company has agreed to pay Blackstone related to the net realized cash
benefit from certain compensation-related tax deductions.
Reconciliations of the non-GAAP measures to their most directly
comparable GAAP measures and further detail regarding the adjustments
are provided in the Appendix.

To help investors understand the effect of the Company’s ownership
structure on its Adjusted Net Income, the Company has presented Adjusted
Net Income, If-Converted. This measure illustrates the impact of taxes
on Adjusted Pretax Income, assuming all Partnership Units (excluding the
unvested partnership units that have yet to satisfy certain market
conditions) were exchanged for shares of the Company’s Class A common
stock, resulting in all of the Company’s income becoming subject to
corporate-level tax, considering both current and deferred income tax
effects.

Appendix

GAAP Condensed Consolidated Statements of Operations (unaudited)

Reconciliations of GAAP to Non-GAAP Financial Data (unaudited)

Summary of Shares Outstanding (unaudited)

Footnotes

 
PJT Partners Inc.
GAAP Condensed Consolidated Statements of Operations (unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
 
Three Months Ended

December 31,

 

Year Ended

December 31,

    2018   2017   2018   2017
Revenues  
Advisory $ 132,635 $ 153,118 $ 451,553 $ 386,263
Placement 38,554 33,873 111,035 102,785
Interest Income and Other     4,204     3,562     17,660     10,234  
Total Revenues 175,393 190,553 580,248 499,282
Expenses
Compensation and Benefits 126,679 140,256 424,459 391,514
Occupancy and Related 7,108 7,278 27,125 26,889
Travel and Related 6,468 4,292 23,374 13,617
Professional Fees 5,341 3,910 20,631 19,276
Communications and Information Services 3,018 2,947 12,539 10,770
Depreciation and Amortization 3,611 1,991 9,973 8,143
Other Expenses     6,494     4,216     20,634     19,019  
Total Expenses 158,719 164,890 538,735 489,228
Income Before Provision (Benefit) for Taxes 16,674 25,663 41,513 10,054
Provision (Benefit) for Taxes     4,144     54,027     (1,045 )   38,380  
Net Income (Loss) 12,530 (28,364 ) 42,558 (28,326 )
Net Income Attributable to

Non-Controlling Interests

    5,091     9,081     15,388     4,228  
Net Income (Loss) Attributable to PJT Partners Inc. $ 7,439 $ (37,445 ) $ 27,170 $ (32,554 )
Net Income (Loss) Per Share of Class A Common Stock
Basic $ 0.32 $ (1.98 ) $ 1.23 $ (1.73 )
Diluted $ 0.22 $ (1.98 ) $ 1.16 $ (1.73 )
Weighted-Average Shares of Class A Common Stock

Outstanding

Basic 23,226,095 18,899,800 21,879,574 18,858,010
Diluted 39,883,039 18,899,800 24,254,061 18,858,010
 
       
PJT Partners Inc.
Reconciliations of GAAP to Non-GAAP Financial Data (unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
 
Three Months Ended

December 31,

Year Ended

December 31,

        2018   2017   2018   2017
GAAP Net Income (Loss) $ 12,530   $ (28,364 ) $ 42,558   $ (28,326 )
Less: GAAP Provision (Benefit) for Taxes         4,144       54,027       (1,045 )     38,380  
GAAP Pretax Income 16,674 25,663 41,513 10,054
 
Adjustments to GAAP Pretax Income
Transaction-Related Compensation Expense(2) 13,893 17,681 52,566 71,343
Amortization of Intangible Assets(3) 1,984 584 3,735 2,418
Spin-Off-Related Payable Due to Blackstone(4) 70 (79 ) 1,145 2,995
Impairment(5)         266             266        
Adjusted Pretax Income 32,887 43,849 99,225 86,810
Adjusted Taxes(6)         7,762       38,446       16,513       45,476  
Adjusted Net Income 25,125 5,403 82,712 41,334
 
If-Converted Adjustments
Less: Adjusted Taxes(6) (7,762 ) (38,446 ) (16,513 ) (45,476 )
Add: If-Converted Taxes(7)         8,005       13,592       22,718       28,073  
Adjusted Net Income, If-Converted $ 24,882 $ 30,257 $ 76,507 $ 58,737
 
GAAP Net Income (Loss) Per Share of Class A

Common Stock

Basic $ 0.32 $ (1.98 ) $ 1.23 $ (1.73 )
Diluted $ 0.22 $ (1.98 ) $ 1.16 $ (1.73 )
GAAP Weighted-Average Shares of Class A

Common Stock Outstanding

Basic 23,226,095 18,899,800 21,879,574 18,858,010
Diluted 39,883,039 18,899,800 24,254,061 18,858,010
 
Adjusted Net Income, If-Converted Per Share $ 0.60 $ 0.79 $ 1.91 $ 1.54
Weighted-Average Shares Outstanding, If-Converted 41,278,100 38,227,666 40,067,556 38,048,652
 
       
PJT Partners Inc.
Reconciliations of GAAP to Non-GAAP Financial Data – continued
(unaudited)
(Dollars in Thousands)
 
Three Months Ended

December 31,

Year Ended

December 31,

        2018   2017   2018   2017
GAAP Compensation and Benefits Expense $ 126,679   $ 140,256 $ 424,459   $ 391,514
Transaction-Related Compensation Expense(2)         (13,893 )     (17,681 )     (52,566 )     (71,343 )
Adjusted Compensation and Benefits Expense $ 112,786 $ 122,575 $ 371,893 $ 320,171
 
Non-Compensation Expenses
Occupancy and Related $ 7,108 $ 7,278 $ 27,125 $ 26,889
Travel and Related 6,468 4,292 23,374 13,617
Professional Fees 5,341 3,910 20,631 19,276
Communications and Information Services 3,018 2,947 12,539 10,770
Depreciation and Amortization 3,611 1,991 9,973 8,143
Other Expenses         6,494       4,216       20,634       19,019  
GAAP Non-Compensation Expense 32,040 24,634 114,276 97,714
Amortization of Intangible Assets(3) (1,984 ) (584 ) (3,735 ) (2,418 )
Spin-Off-Related Payable Due to Blackstone(4) (70 ) 79 (1,145 ) (2,995 )
Impairment(5)         (266 )           (266 )      
Adjusted Non-Compensation Expense $ 29,720 $ 24,129 $ 109,130 $ 92,301
 

Contacts

Media Relations:
Julie Oakes
Joele Frank, Wilkinson
Brimmer Katcher
Tel: +1 212.355.4449
[email protected]

Investor Relations:
Sharon Pearson
PJT Partners Inc.
Tel:
+1 212.364.7120
[email protected]

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