UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-36869

 

 

 

PJT Partners Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware	36-4797143
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

 

280 Park Avenue

New York, New York 10017

(Address of principal executive offices)(Zip Code)

(212) 364-7810

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, par value $0.01 per share		PJT		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer	☒		Accelerated Filer	☐
Non-Accelerated Filer	☐		Smaller Reporting Company	☐
			Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 24, 2023, there were 24,193,651 shares of Class A common stock, par value $0.01 per share, and 140 shares of Class B common stock, par value $0.01 per share, outstanding.

 

 

 

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TABLE OF CONTENTS

				Page
PART I.		FINANCIAL INFORMATION
ITEM 1.		FINANCIAL STATEMENTS		4
		Unaudited Condensed Consolidated Financial Statements — June 30, 2023 and 2022:
		Condensed Consolidated Statements of Financial Condition as of June 30, 2023 and December 31, 2022		4
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022		5
		Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022		6
		Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2023 and 2022		7
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022		9
		Notes to Condensed Consolidated Financial Statements		10
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		22
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		31
ITEM 4.		CONTROLS AND PROCEDURES		31
PART II.		OTHER INFORMATION
ITEM 1.		LEGAL PROCEEDINGS		32
ITEM 1A.		RISK FACTORS		32
ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		33
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES		33
ITEM 4.		MINE SAFETY DISCLOSURES		33
ITEM 5.		OTHER INFORMATION		33
ITEM 6.		EXHIBITS		34
SIGNATURES				35

 

 

 

 

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PJT Partners Inc. was formed in connection with certain merger and spin-off transactions whereby the financial and strategic advisory services, restructuring and reorganization advisory services and Park Hill Group businesses of Blackstone Inc. (“Blackstone” or our “former Parent”) were combined with PJT Capital LP, a financial advisory firm founded by Paul J. Taubman in 2013 (together with its then affiliates, “PJT Capital”), and the combined business was distributed to Blackstone’s unitholders to create PJT Partners Inc., a stand-alone, independent publicly traded company. Throughout this Quarterly Report on Form 10-Q, we refer to this transaction as the “spin-off.” PJT Partners Inc. is a holding company and its only material asset is its controlling equity interest in PJT Partners Holdings LP, a holding partnership that holds the Company’s operating subsidiaries, and certain cash and cash equivalents it may hold from time to time. As the sole general partner of PJT Partners Holdings LP, PJT Partners Inc. operates and controls all of the business and affairs of PJT Partners Holdings LP and its operating subsidiaries.

In this Quarterly Report on Form 10-Q, unless the context requires otherwise, the words “PJT Partners Inc.” refers to PJT Partners Inc., and “PJT Partners,” the “Company,” “we,” “us” and “our” refer to PJT Partners Inc., together with its consolidated subsidiaries, including PJT Partners Holdings LP and its operating subsidiaries.

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 (the “Exchange Act”). 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,” “opportunity,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, many of which are outside our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance upon any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (a) changes in governmental regulations and policies; (b) cyberattacks, security vulnerabilities, and internet disruptions, including breaches of data security and privacy leaks, data loss, and business interruptions; (c) failures of our computer systems or communication systems, including as a result of a catastrophic event and the use of remote work environments and virtual platforms; (d) the impact of catastrophic events, including business disruptions, pandemics, reductions in employment and an increase in business failures on (1) the U.S. and the global economy, and (2) our employees and our ability to provide services to our clients and respond to their needs; (e) the failure of third-party service providers to perform their functions; and (f) volatility in the political and economic environment, including as a result of inflation, rising interest rates, international conflict, and recent events affecting the financial services industry.

2

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Any of these factors, as well as such other factors discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022, 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.

Website Disclosure

We use our website (www.pjtpartners.com) as a channel of distribution of Company information. The information we post may be deemed material. Accordingly, investors should monitor the website, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about PJT Partners when you enroll your e-mail address by visiting the “Investor Relations” page of our website at ir.pjtpartners.com. Although we refer to our website in this report, the contents of our website are not included or incorporated by reference into this report. All references to our website in this report are intended to be inactive textual references only.

 

3

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PJT Partners Inc.

Condensed Consolidated Statements of Financial Condition (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

 

		June 30, 2023				December 31, 2022
Assets
Cash and Cash Equivalents		$	151,496			$	173,235
Investments (at fair value)			74,144				50,242
Accounts Receivable (net of allowance for credit losses of $2,977 and    $1,945 at June 30, 2023 and December 31, 2022, respectively)			333,059				317,751
Intangible Assets, Net			15,420				17,880
Goodwill			172,725				172,725
Furniture, Equipment and Leasehold Improvements, Net			29,358				30,693
Operating Lease Right-of-Use Assets			110,654				119,025
Other Assets			129,327				99,929
Deferred Tax Asset, Net			70,919				69,172
Total Assets		$	1,087,102			$	1,050,652
Liabilities and Equity
Accrued Compensation and Benefits		$	123,190			$	83,920
Accounts Payable, Accrued Expenses and Other Liabilities			25,178				24,782
Operating Lease Liabilities			126,210				135,627
Amount Due Pursuant to Tax Receivable Agreement			32,244				30,315
Taxes Payable			3,844				3,451
Deferred Revenue			11,245				12,999
Total Liabilities			321,911				291,094
Commitments and Contingencies
Equity
Class A Common Stock, par value $0.01 per share (3,000,000,000    shares authorized; 32,251,216 and 31,062,575 issued at    June 30, 2023 and December 31, 2022, respectively; 24,220,466 and    24,479,286 outstanding at June 30, 2023 and December 31, 2022,    respectively)			322				310
Class B Common Stock, par value $0.01 per share (1,000,000    shares authorized; 140 issued and outstanding at June 30, 2023;    158 issued and outstanding at December 31, 2022)			—				—
Additional Paid-In Capital			541,750				502,585
Retained Earnings			88,149				60,969
Accumulated Other Comprehensive Loss			(562	)			(2,274	)
Treasury Stock at Cost (8,030,750 and 6,583,289 shares at June 30,    2023 and December 31, 2022, respectively)			(480,552	)			(376,484	)
Total PJT Partners Inc. Equity			149,107				185,106
Non-Controlling Interests			616,084				574,452
Total Equity			765,191				759,558
Total Liabilities and Equity		$	1,087,102			$	1,050,652

 

 

See notes to condensed consolidated financial statements.

4

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PJT Partners Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Revenues
Advisory Fees		$	323,794			$	186,649			$	491,884			$	368,307
Placement Fees			20,028				49,482				47,613				109,833
Interest Income and Other			2,455				(2,990	)			6,768				1,320
Total Revenues			346,277				233,141				546,265				479,460
Expenses
Compensation and Benefits			246,614				150,587				379,657				309,819
Occupancy and Related			9,920				8,658				19,931				17,600
Travel and Related			8,314				7,977				15,286				13,030
Professional Fees			11,454				7,226				18,381				14,277
Communications and Information Services			3,761				4,241				7,838				8,664
Depreciation and Amortization			3,597				4,094				7,040				8,401
Other Expenses			8,448				6,670				14,770				13,833
Total Expenses			292,108				189,453				462,903				385,624
Income Before Provision for Taxes			54,169				43,688				83,362				93,836
Provision for Taxes			13,117				8,495				14,324				14,175
Net Income			41,052				35,193				69,038				79,661
Net Income Attributable to    Non-Controlling Interests			18,911				16,025				29,561				34,789
Net Income Attributable to PJT Partners Inc.		$	22,141			$	19,168			$	39,477			$	44,872
Net Income Per Share of Class A Common Stock
Basic		$	0.88			$	0.76			$	1.56			$	1.79
Diluted		$	0.86			$	0.74			$	1.53			$	1.74
Weighted-Average Shares of Class A Common    Stock Outstanding
Basic			25,238,144				25,141,339				25,234,983				25,065,684
Diluted			26,333,261				26,421,087				26,625,890				26,486,899

See notes to condensed consolidated financial statements.

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PJT Partners Inc.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Net Income		$	41,052			$	35,193			$	69,038			$	79,661
Other Comprehensive Income (Loss), Net of Tax —    Currency Translation Adjustment			1,677				(3,659	)			3,065				(5,095	)
Comprehensive Income			42,729				31,534				72,103				74,566
Less:
Comprehensive Income Attributable to Non-    Controlling Interests			19,652				14,377				30,914				32,492
Comprehensive Income Attributable to PJT Partners Inc.		$	23,077			$	17,157			$	41,189			$	42,074

 

See notes to condensed consolidated financial statements.

6

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PJT Partners Inc.

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(Dollars in Thousands, Except Share Data)

 

		Three Months Ended June 30, 2023
		Shares																												Accumulated
		Class A				Class B								Class A				Class B				Additional								Other								Non-
		Common				Common				Treasury				Common				Common				Paid-In				Retained				Comprehensive				Treasury				Controlling
		Stock				Stock				Stock				Stock				Stock				Capital				Earnings				Loss				Stock				Interests				Total
Balance at March 31, 2023			32,238,601				159				(7,438,407	)		$	322			$	—			$	531,034			$	72,076			$	(1,498	)		$	(442,664	)		$	578,879			$	738,149
Net Income			—				—				—				—				—				—				22,141				—				—				18,911				41,052
Other Comprehensive Income			—				—				—				—				—				—				—				936				—				741				1,677
Dividends Declared ($0.25 Per Share    of Class A Common Stock)			—				—				—				—				—				—				(6,068	)			—				—				—				(6,068	)
Tax Distributions			—				—				—				—				—				—				—				—				—				(12,149	)			(12,149	)
Equity-Based Compensation			—				—				—				—				—				44,596				—				—				—				4,604				49,200
Net Share Settlement			—				—				—				—				—				(175	)			—				—				—				—				(175	)
Deliveries of Vested Shares of    Class A Common Stock			12,615				—				—				—				—				—				—				—				—				—				—
Change in Ownership Interest			—				(19	)			—				—				—				(33,705	)			—				—				—				25,098				(8,607	)
Treasury Stock Purchases			—				—				(592,343	)			—				—				—				—				—				(37,888	)			—				(37,888	)
Balance at June 30, 2023			32,251,216				140				(8,030,750	)		$	322			$	—			$	541,750			$	88,149			$	(562	)		$	(480,552	)		$	616,084			$	765,191

 

		Six Months Ended June 30, 2023
		Shares																												Accumulated
		Class A				Class B								Class A				Class B				Additional								Other								Non-
		Common				Common				Treasury				Common				Common				Paid-In				Retained				Comprehensive				Treasury				Controlling
		Stock				Stock				Stock				Stock				Stock				Capital				Earnings				Loss				Stock				Interests				Total
Balance at December 31, 2022			31,062,575				158				(6,583,289	)		$	310			$	—			$	502,585			$	60,969			$	(2,274	)		$	(376,484	)		$	574,452			$	759,558
Net Income			—				—				—				—				—				—				39,477				—				—				29,561				69,038
Other Comprehensive Income			—				—				—				—				—				—				—				1,712				—				1,353				3,065
Dividends Declared ($0.50 Per Share of    Class A Common Stock)			—				—				—				—				—				—				(12,297	)			—				—				—				(12,297	)
Tax Distributions			—				—				—				—				—				—				—				—				—				(12,149	)			(12,149	)
Equity-Based Compensation			—				—				—				—				—				88,672				—				—				—				9,324				97,996
Net Share Settlement			—				—				—				—				—				(16,514	)			—				—				—				—				(16,514	)
Deliveries of Vested Shares of    Class A Common Stock			1,188,641				—				—				12				—				(12	)			—				—				—				—				—
Change in Ownership Interest			—				(18	)			—				—				—				(32,981	)			—				—				—				13,543				(19,438	)
Treasury Stock Purchases			—				—				(1,447,461	)			—				—				—				—				—				(104,068	)			—				(104,068	)
Balance at June 30, 2023			32,251,216				140				(8,030,750	)		$	322			$	—			$	541,750			$	88,149			$	(562	)		$	(480,552	)		$	616,084			$	765,191

(continued)

See notes to condensed consolidated financial statements.

 

 

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PJT Partners Inc.

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(Dollars in Thousands, Except Share Data)

 

		Three Months Ended June 30, 2022
		Shares																												Accumulated
		Class A				Class B								Class A				Class B				Additional								Other								Non-
		Common				Common				Treasury				Common				Common				Paid-In				Retained				Comprehensive				Treasury				Controlling
		Stock				Stock				Stock				Stock				Stock				Capital				Earnings				Loss				Stock				Interests				Total
Balance at March 31, 2022			30,593,822				164				(5,815,973	)		$	305			$	—			$	438,634			$	14,503			$	(156	)		$	(323,569	)		$	525,319			$	655,036
Net Income			—				—				—				—				—				—				19,168				—				—				16,025				35,193
Other Comprehensive Loss			—				—				—				—				—				—				—				(2,011	)			—				(1,648	)			(3,659	)
Dividends Declared ($0.25 Per Share of    Class A Common Stock)			—				—				—				—				—				—				(6,098	)			—				—				—				(6,098	)
Tax Distributions			—				—				—				—				—				—				—				—				—				(7,310	)			(7,310	)
Equity-Based Compensation			—				—				—				—				—				30,811				—				—				—				5,490				36,301
Net Share Settlement			—				—				—				—				—				(20	)			—				—				—				—				(20	)
Deliveries of Vested Shares of    Class A Common Stock			3,758				—				—				—				—				—				—				—				—				—				—
Change in Ownership Interest			—				(3	)			—				—				—				(23,464	)			—				—				—				19,029				(4,435	)
Treasury Stock Purchases			—				—				(404,076	)			—				—				—				—				—				(27,357	)			—				(27,357	)
Balance at June 30, 2022			30,597,580				161				(6,220,049	)		$	305			$	—			$	445,961			$	27,573			$	(2,167	)		$	(350,926	)		$	556,905			$	677,651

 

		Six Months Ended June 30, 2022
		Shares																												Accumulated
		Class A				Class B								Class A				Class B				Additional				Retained				Other								Non-
		Common				Common				Treasury				Common				Common				Paid-In				Earnings				Comprehensive				Treasury				Controlling
		Stock				Stock				Stock				Stock				Stock				Capital				(Deficit)				Income (Loss)				Stock				Interests				Total
Balance at December 31, 2021			29,248,457				159				(4,929,044	)		$	292			$	—			$	391,242			$	(4,933	)		$	631			$	(267,000	)		$	517,340			$	637,572
Net Income			—				—				—				—				—				—				44,872				—				—				34,789				79,661
Other Comprehensive Loss			—				—				—				—				—				—				—				(2,798	)			—				(2,297	)			(5,095	)
Dividends Declared ($0.50 Per Share of    Class A Common Stock)			—				—				—				—				—				—				(12,366	)			—				—				—				(12,366	)
Tax Distributions			—				—				—				—				—				—				—				—				—				(7,310	)			(7,310	)
Equity-Based Compensation			—				—				—				—				—				84,528				—				—				—				10,842				95,370
Net Share Settlement			—				—				—				—				—				(15,387	)			—				—				—				—				(15,387	)
Deliveries of Vested Shares of   Class A Common Stock			1,349,123				—				—				13				—				(13	)			—				—				—				—				—
Change in Ownership Interest			—				2				—				—				—				(14,409	)			—				—				—				3,541				(10,868	)
Treasury Stock Purchases			—				—				(1,291,005	)			—				—				—				—				—				(83,926	)			—				(83,926	)
Balance at June 30, 2022			30,597,580				161				(6,220,049	)		$	305			$	—			$	445,961			$	27,573			$	(2,167	)		$	(350,926	)		$	556,905			$	677,651

 

See notes to condensed consolidated financial statements.

 

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PJT Partners Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)

		Six Months Ended June 30,
		2023				2022
Operating Activities
Net Income		$	69,038			$	79,661
Adjustments to Reconcile Net Income to Net Cash Provided by    Operating Activities
Equity-Based Compensation Expense			97,996				95,370
Depreciation and Amortization Expense			7,040				8,401
Amortization of Operating Lease Right-of-Use Assets			11,871				10,327
Provision for Credit Losses			2,574				1,687
Other			791				4,512
Cash Flows Due to Changes in Operating Assets and Liabilities
Accounts Receivable			(16,560	)			(19,871	)
Other Assets			(28,976	)			(19,606	)
Accrued Compensation and Benefits			38,294				(28,998	)
Accounts Payable, Accrued Expenses and Other Liabilities			(72	)			(2,529	)
Operating Lease Liabilities			(12,949	)			(11,268	)
Taxes Payable			335				(870	)
Deferred Revenue			(1,767	)			660
Net Cash Provided by Operating Activities			167,615				117,476
Investing Activities
Purchases of Investments			(78,845	)			(54,164	)
Proceeds from Sales and Maturities of Investments			54,797				19,979
Purchases of Furniture, Equipment and Leasehold Improvements			(2,874	)			(1,752	)
Net Cash Used in Investing Activities			(26,922	)			(35,937	)
Financing Activities
Dividends			(12,297	)			(12,366	)
Tax Distributions			(12,149	)			(7,310	)
Proceeds from Revolving Credit Facility			15,000				42,000
Payments on Revolving Credit Facility			(15,000	)			(42,000	)
Employee Taxes Paid for Shares Withheld			(16,514	)			(15,387	)
Cash-Settled Exchanges of Partnership Units			(19,443	)			(10,995	)
Treasury Stock Purchases			(104,068	)			(83,926	)
Payments Pursuant to Tax Receivable Agreement			(29	)			(559	)
Net Cash Used in Financing Activities			(164,500	)			(130,543	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents			2,068				(4,158	)
Net Decrease in Cash and Cash Equivalents			(21,739	)			(53,162	)
Cash and Cash Equivalents, Beginning of Period			173,235				200,481
Cash and Cash Equivalents, End of Period		$	151,496			$	147,319
Supplemental Disclosure of Cash Flows Information
Payments for Income Taxes, Net of Refunds Received		$	4,569			$	4,770
Payments for Interest		$	20			$	133

See notes to condensed consolidated financial statements.

 

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PJT Partners Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

 

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PJT Partners Inc.

Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

 

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PJT Partners Inc.

Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

 

13

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PJT Partners Inc.

Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

 

 

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PJT Partners Inc.

Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

 

20

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PJT Partners Inc.

Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)

(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with PJT Partners Inc.’s Condensed Consolidated Financial Statements and the related notes included in this Quarterly Report on Form 10-Q.

Our Business

PJT Partners is a premier, global, advisory-focused investment bank that was built from the ground up to be different. Our highly experienced, collaborative teams provide independent advice coupled with old-world, high-touch client service. This ethos has allowed us to attract some of the very best talent in the markets in which we operate. We deliver leading advice to many of the world's most consequential companies, effect some of the most transformative transactions and restructurings and raise billions of dollars of capital around the globe to support startups and more established companies.

We have world-class franchises in each of the areas in which we compete:

Strategic Advisory

Our team of leading professionals delivers strategic advice and innovative solutions to various opportunities and often highly complex challenges. We advise clients on transactions including mergers and acquisitions (“M&A”), spin-offs, activism defense, contested M&A, joint ventures, minority investments and divestitures. Additionally, we advise private and public company boards and management teams on strategies for building productive investor relationships with a focus on shareholder engagement; complex investor matters; environmental, social and governance transition solutions; and other critical strategic, governance and shareholder matters. Our capital markets advisory team advises and executes public and private capital raises in the debt and equity capital markets, including debt financings, acquisition financings, structured product offerings, public equity raises including IPO and SPAC offerings, private capital raises for early and later stage companies as well as other capital structure related matters. Our geopolitical and policy advisory practice assists boards and managements team navigate changing geopolitical relationships against the backdrop of evolving political landscapes.

Restructuring and Special Situations

Our Restructuring and Special Situations business is one of the world’s leading advisors in financial debt restructurings, liability management, distressed M&A and Chapter 11 matters, around the globe. We have been named IFR Restructuring Advisor of the Year for three years running beginning in 2020 and are consistently ranked among the top three financial advisors in announced global restructuring volume. With expertise in highly complex capital structure challenges, we advise management teams, corporate boards, sponsors and creditors in situations where a company is experiencing financial distress.

PJT Park Hill

PJT Park Hill, our leading global alternative asset advisory and fundraising business, provides private fund advisory and fundraising services for a diverse range of investment strategies. Moreover, PJT Park Hill is the only group among its peers with top-tier dedicated private equity, hedge fund, private credit, real estate, directs and private capital solutions groups. PJT Park Hill’s Private Capital Solutions business is a leading advisor to GPs and LPs on liquidity and other structured solutions.

Business Environment

Economic and global financial conditions can materially affect our operational and financial performance. See “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of some of the factors that can affect our performance.

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M&A is a cyclical business that is impacted by macroeconomic conditions. There are several factors weighing on global M&A activity in the intermediate-term, including monetary policy, greater economic and geopolitical uncertainty and slowing global growth. Worldwide M&A announced volumes during the first half of 2023 were down 37% compared with the first half of 20221 as these factors adversely impacted the strength of strategic activity. While the pace of activity has changed, we expect corporate boards and management teams to continue to use M&A as a strategic tool.

Global restructuring activity remained elevated during the second quarter of 2023 as adverse macroeconomic conditions and higher interest rates continued to challenge companies with levered balance sheets. In the first half of 2023, out-of-court liability management transactions, primarily driven by financial sponsor activity, continued to drive an increase in restructuring mandates. Restructuring activity remains dispersed across a broad range of sectors, including healthcare, consumer-driven businesses and industrials, geographies, and across a mix of financial debt restructuring, liability management and in-court Chapter 11 matters.

Given the global macroeconomic environment and supply of alternative investment opportunities in the market seeking capital, the fundraising environment remains challenging as limited partners have become more discerning in their deployment of capital for both existing and new fund manager relationships. Investors continue to focus on existing relationships and, as a result, the bar for fund managers to attract new investors remains high as a flight to quality persists. As it relates to secondary and other private capital solutions activity, market volatility has increased resulting from rising inflation, supply chain disruption and geopolitical events. As a result, market sentiment has shifted away from highly concentrated portfolio structures in favor of diversification.

___________________________________________________________________________________________________________________________________________

1Source: Refinitiv Global Mergers & Acquisitions Review First Half of 2023 as of June 30, 2023.

Key Financial Measures

Revenues

Substantially all of our revenues are derived from contracts with clients to provide advisory and placement services. This revenue is primarily a function of the number of active engagements we have, the size of each of those engagements and the fees we charge for our services.

We provide a range of strategic advisory, capital markets advisory, restructuring and special situations and shareholder advisory services to corporations, financial sponsors, institutional investors and governments around the world. In conjunction with providing restructuring advice, we may also assist with raising various forms of financing, including debt and equity. Our private capital solutions services include providing GP solutions and investing solutions to clients seeking portfolio liquidity, unfunded commitment relief and investments in secondary markets. Our fund placement services primarily serve alternative investment strategies, including private equity, real estate, hedge funds and private credit. We advise on all aspects of the fundraising process including competitive positioning and market assessment, marketing materials and related documentation including partnership terms and conditions most prevalent in the current environment. We also provide public and private placement fundraising services to our corporate clients and recognize placement and underwriting fees based on the successful completion of the transaction.

The amount and timing of the fees paid vary by the type of engagement and are typically based on retainers, completion of a transaction or a capital raise. Fees earned for services provided to alternative asset managers are typically recognized upon acceptance by a fund of capital or capital commitments (referred to as a “closing”), in accordance with terms set forth in individual agreements. For commitment based fees, revenue is recognized over time as commitments are accepted. Fees for such closed-end fund arrangements are generally paid in installments over three or four years and interest is charged to the outstanding balance at an agreed upon rate, such as the Secured Overnight Financing Rate or an alternate reference rate, plus a market-based margin. For funds with multiple closings, the constraint on variable consideration is lifted upon each closing. For open-end fund structures, placement fees are typically calculated as a percentage of a placed investor’s month-end net asset value. Typically, we earn fees for such open-end fund structures over a four year period. For these arrangements, revenue is recognized over time as the constraint over variable consideration is lifted. We may receive non-refundable up-front fees in our contracts with customers, which are recorded as revenues in the period over which services are estimated to be provided.

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A transaction can fail to be completed for many reasons, including global and/or regional economic conditions, failure of parties to agree upon final terms, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals. In the case of bankruptcy engagements, fees are subject to approval of the court.

Interest Income and Other – Interest Income and Other represents interest typically earned on Cash and Cash Equivalents, investments in Treasury securities and outstanding placement fees receivable; foreign exchange gains and losses arising from transactions denominated in currencies other than U.S. dollars; sublease income; and the amount of expense reimbursement invoiced to clients related to out-of-pocket expenses. Interest on placement fees receivable is earned from the time revenue is recognized and is calculated as mutually agreed upon with the receivable counterparty. Interest receivable is included in Accounts Receivable, Net in the Condensed Consolidated Statements of Financial Condition.

Expenses

Compensation and Benefits – Compensation and Benefits expense includes salaries, restricted and unrestricted cash awards, benefits, employer taxes and equity-based compensation associated with the grants of equity-based awards to partners and employees. Changes in this expense are driven by fluctuations in the number of employees, composition of our workforce, business performance, compensation adjustments in relation to market movements, changes in rates for employer taxes and other cost increases affecting benefit plans. The expense associated with our bonus and equity plans can also have a significant impact on this expense category and may vary from year to year.

We maintain compensation programs, including salaries, annual incentive compensation (that may include components of cash, restricted cash and/or equity-based awards) and benefits programs. We manage compensation to estimates of competitive levels based on market conditions and performance. Our level of compensation reflects our plan to maintain competitive compensation levels to retain key personnel and it reflects the impact of newly-hired senior professionals, including related grants of equity awards that are generally valued at their grant date fair value.

Increasing the number of high-caliber, experienced senior level employees is critical to our growth efforts. These hires generally do not begin to generate significant revenue in the year they are hired.

Non-Compensation Expense – Non-Compensation expenses are the other costs typical to operating our business, which generally consist of Occupancy and Related, Travel and Related, Professional Fees, Communications and Information Services, Depreciation and Amortization and Other Expenses. Further information regarding these expenses can be found in “Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Income Taxes – PJT Partners Inc. is a corporation subject to U.S. federal, state and local income taxes in jurisdictions where it does business. Our businesses generally operate as partnerships for U.S. federal and state purposes and as corporate entities in non-U.S. jurisdictions. In the U.S. federal and state jurisdictions, taxes related to income earned by these entities generally represent obligations of the individual members and partners.

The operating entities have generally been subject to New York City Unincorporated Business Tax and to entity-level income taxes imposed by state and local as well as non-U.S. jurisdictions, as applicable. These taxes have been reflected in our condensed consolidated financial statements.

PJT Partners Inc. is subject to U.S. corporate federal, state and local income tax on its allocable share of results of operations from the operating partnership (PJT Partners Holdings LP).

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Non-Controlling Interests

PJT Partners Inc. is a holding company and its only material asset is its controlling equity interest in PJT Partners Holdings LP, and certain cash and cash equivalents it may hold from time to time. As the sole general partner of PJT Partners Holdings LP, PJT Partners Inc. operates and controls all of the business and affairs and consolidates the financial results of PJT Partners Holdings LP and its operating subsidiaries. The portion of net income attributable to the non-controlling interests is presented separately in the Condensed Consolidated Statements of Operations.

Condensed Consolidated Results of Operations

The following table sets forth our condensed consolidated results of operations for the three and six months ended June 30, 2023 and 2022:

 

		Three Months Ended June 30,												Six Months Ended June 30,
		2023				2022				Change				2023				2022				Change
		(Dollars in Thousands)
Revenues
Advisory Fees		$	323,794			$	186,649				73	%		$	491,884			$	368,307				34	%
Placement Fees			20,028				49,482				(60	)%			47,613				109,833				(57	)%
Interest Income and Other			2,455				(2,990	)		N/M					6,768				1,320				413	%
Total Revenues			346,277				233,141				49	%			546,265				479,460				14	%
Expenses
Compensation and Benefits			246,614				150,587				64	%			379,657				309,819				23	%
Occupancy and Related			9,920				8,658				15	%			19,931				17,600				13	%
Travel and Related(1)			8,314				7,977				4	%			15,286				13,030				17	%
Professional Fees			11,454				7,226				59	%			18,381				14,277				29	%
Communications and    Information Services			3,761				4,241				(11	)%			7,838				8,664				(10	)%
Depreciation and    Amortization			3,597				4,094				(12	)%			7,040				8,401				(16	)%
Other Expenses(1)			8,448				6,670				27	%			14,770				13,833				7	%
Total Expenses			292,108				189,453				54	%			462,903				385,624				20	%
Income Before Provision    for Taxes			54,169				43,688				24	%			83,362				93,836				(11	)%
Provision for Taxes			13,117				8,495				54	%			14,324				14,175				1	%
Net Income			41,052				35,193				17	%			69,038				79,661				(13	)%
Net Income Attributable    to Non-Controlling Interests			18,911				16,025				18	%			29,561				34,789				(15	)%
Net Income Attributable to    PJT Partners Inc.		$	22,141			$	19,168				16	%		$	39,477			$	44,872				(12	)%

__________________
N/M Not meaningful.

 

(1) Certain balances on the Condensed Consolidated Statements of Operations in the prior period have been reclassified to conform to their current presentation. For the three and six months ended June 30, 2022, this resulted in a reclassification of $1.3 million and $1.9 million, respectively, from Other Expenses to Travel and Related. This reclassification had no impact on net income or stockholders’ equity.

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Revenues

The following table provides revenue statistics for the three and six months ended June 30, 2023 and 2022:

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Total Number of Clients			226				234				282				293
Total Number of Fees of at least $1 Million from    Client Transactions			52				41				104				89

Total Revenues were $346.3 million for the three months ended June 30, 2023, an increase of $113.1 million compared with $233.1 million for the three months ended June 30, 2022. Advisory Fees were $323.8 million for the three months ended June 30, 2023, an increase of $137.1 million compared with $186.6 million for the three months ended June 30, 2022. The increase in Advisory Fees was principally due to an increase in restructuring revenues. Placement Fees were $20.0 million for the three months ended June 30, 2023, a decrease of $29.5 million compared with $49.5 million for the three months ended June 30, 2022. The decrease in Placement Fees was principally due to a decrease in fund placement revenues. Interest Income and Other revenues were $2.5 million, an increase from a loss of $3.0 million in the prior year. Last year's results reflected the reduction in fair market value of certain equity securities received as part of transaction compensation.

Total Revenues were $546.3 million for the six months ended June 30, 2023, an increase of $66.8 million compared with $479.5 million for the six months ended June 30, 2022. Advisory Fees were $491.9 million for the six months ended June 30, 2023, an increase of $123.6 million compared with $368.3 million for the six months ended June 30, 2022. The increase in Advisory Fees was principally due to an increase in restructuring revenues. Placement Fees were $47.6 million for the six months ended June 30, 2023, a decrease of $62.2 million compared with $109.8 million for the six months ended June 30, 2022. The decrease in Placement Fees was principally due to a decrease in fund placement revenues. Interest Income and Other revenues were $6.8 million, an increase from $1.3 million in the prior year. Last year's results reflected the reduction in fair market value of certain equity securities received as part of transaction compensation.

Expenses

Expenses were $292.1 million for the three months ended June 30, 2023, an increase of $102.7 million compared with $189.5 million for the three months ended June 30, 2022. The increase in expenses was principally attributable to increases in Compensation and Benefits, Professional Fees, Other Expenses, and Occupancy and Related expenses. The increase in Compensation and Benefits was principally due to a higher six month accrual rate. Professional Fees increased principally due to higher consulting expense relating to the firm's business activities. Other Expenses increased principally due to higher bad debt expense. Occupancy and Related increased principally due to the further expansion of our New York office.

Expenses were $462.9 million for the six months ended June 30, 2023, an increase of $77.3 million compared with $385.6 million for the six months ended June 30, 2022. The increase in expenses was principally attributable to increases in Compensation and Benefits, Professional Fees, Occupancy and Related, and Travel and Related expenses. The increase in Compensation and Benefits was principally due to a higher compensation accrual rate and higher revenues. Professional Fees increased principally due to higher consulting expense relating to the firm's business activities. Occupancy and Related increased principally due to the further expansion of our New York office. Travel and Related increased due to increased levels of business travel.

Provision for Taxes

The Company’s Provision for Taxes for the three months ended June 30, 2023 was $13.1 million, which represents an effective tax rate of 24.2% on pretax income of $54.2 million. The Company’s Provision for Taxes for the three months ended June 30, 2022 was $8.5 million, which represents an effective tax rate of 19.4% on pretax income of $43.7 million.

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The Company’s Provision for Taxes for the six months ended June 30, 2023 was $14.3 million, which represents an effective tax rate of 17.2% on pretax income of $83.4 million. The Company’s Provision for Taxes for the six months ended June 30, 2022 was $14.2 million, which represents an effective tax rate of 15.1% on pretax income of $93.8 million.

Non-Controlling Interests

Net Income Attributable to Non-Controlling Interests is derived from the Income Before Provision for Taxes and the percentage allocation of the income between the holders of common units of partnership interest in PJT Partners Holdings LP (“Partnership Units”) and holders of Class A common stock of PJT Partners Inc. after considering any contractual arrangements that govern the allocation of income.

Liquidity and Capital Resources

General

We regularly monitor our liquidity position, including cash and cash equivalents, investments, working capital assets and liabilities, any commitments and other liquidity requirements.

Our assets have been historically comprised of cash and cash equivalents, investments, receivables arising from advisory and placement engagements and operating lease right-of-use assets. Our liabilities generally include accrued compensation and benefits, accounts payable and accrued expenses, taxes payable and operating lease liabilities. We expect to pay a significant amount of incentive compensation toward the end of each year and during the beginning of the next calendar year with respect to the prior year’s results. A portion of annual compensation may be awarded with equity-based compensation and thus requires less cash. We expect levels of cash to decline at the end of the year and during the first quarter of each year after incentive compensation is paid to our employees. We then expect cash to build throughout the remainder of the year.

On February 1, 2021, PJT Partners Holdings LP, as borrower (the “Borrower”), entered into a Renewal and Modification Agreement (the “Renewal Agreement”) and related documents with First Republic Bank, as lender (the “Lender”), amending the terms of the Borrower’s revolving credit facility with the Lender under the Amended and Restated Loan Agreement dated October 1, 2018 (the “Amended and Restated Loan Agreement”). On February 7, 2023, the Renewal Agreement was further amended to extend the maturity date to October 1, 2024. Further information regarding the Renewal Agreement and Amended and Restated Loan Agreement can be found in Note 13. “Commitments and Contingencies—Commitments, Line of Credit” in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing. As of June 30, 2023 and December 31, 2022, we were in compliance with the debt covenants under the Renewal Agreement and Amended and Restated Loan Agreement, respectively. Additionally, as of June 30, 2023 and December 31, 2022, there were no borrowings outstanding under the revolving credit facility.

We evaluate our cash needs on a regular basis. As of June 30, 2023 and December 31, 2022, we had cash, cash equivalents and short-term investments of $225.6 million and $223.5 million, respectively. The vast majority of these balances are either held in institutions labeled by the Financial Stability Board as global systemically important banks, fully insured cash sweep accounts or Treasury securities. Although we maintain multiple banking relationships with both global and regional banks and actively monitor the financial stability of such institutions, a failure at any institution where we maintain a banking relationship could impact our liquidity.

Our liquidity is highly dependent upon cash receipts from clients, which are generally dependent upon the successful completion of transactions as well as the timing of receivable collections. As of June 30, 2023 and December 31, 2022, total accounts receivable, net of allowance for credit losses, were $333.1 million and $317.8 million, respectively. As of June 30, 2023 and December 31, 2022, the allowance for credit losses was $3.0 million and $1.9 million, respectively. Included in Accounts Receivable, Net are long-term receivables of $125.8 million and $133.3 million as of June 30, 2023 and December 31, 2022, respectively, related to placement fees that are generally paid in installments over a period of three to four years.

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Sources and Uses of Liquidity

Our primary cash needs are for working capital, paying operating expenses including cash compensation to our employees, exchanging of Partnership Units for cash, repurchasing shares of the Company’s Class A common stock, paying income taxes, making distributions to our shareholders in accordance with our dividend policy, partnership tax distributions, capital expenditures, making payments pursuant to the tax receivable agreement, commitments and strategic investments. We expect to fund these liquidity requirements through cash flows from operations and borrowings under our revolving credit facility. Our ability to fund these needs will depend, in part, on our ability to generate or raise cash in the future which depends on our future financial results, which are subject to general economic, financial, competitive, legislative and regulatory factors.

Additionally, our ability to generate positive cash flow from operations will be impacted by global economic conditions. If our cash flows from operations are significantly reduced, we may need to borrow from our revolving credit facility, incur debt, or issue additional equity. Although we believe that the arrangement we have in place, and our ability to renew that arrangement, will permit us to finance our operations on acceptable terms and conditions for the foreseeable future, our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including: (a) business performance, (b) our credit ratings or absence of a credit rating, (c) the liquidity of the overall capital markets, (d) the current state of the economy, and (e) stability of our lending institution. We cannot provide any assurance that such financing will be available to us on acceptable terms or that such financing will be available at all. We believe that our future cash from operations and availability under our revolving credit facility, together with our access to funds on hand, will provide adequate resources to fund our liquidity and capital needs.

Regulatory Capital

We actively monitor our regulatory capital base. We are subject to regulatory requirements in the U.S. and certain international jurisdictions to ensure general financial soundness and liquidity. This requires, among other things, that we comply with certain minimum capital requirements, recordkeeping, reporting procedures, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to and from affiliates. See Note 14. “Regulated Entities” in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing for further information. The licenses under which we operate are meant to be appropriate to conduct our business. We believe that we provide each of these entities with sufficient capital and liquidity, consistent with their business and regulatory requirements.

Our activities may also be subject to regulation, including regulatory capital requirements, by various other foreign jurisdictions and self-regulatory organizations.

We do not anticipate that compliance with any and all such requirements will materially adversely impact the availability of funds for domestic and parent-level purposes.

Exchange Agreement

Subject to the terms and conditions of the exchange agreement between us and certain of the holders of Partnership Units (other than PJT Partners Inc.), Partnership Units are exchangeable at the option of the holder for cash or, at our election, for shares of our Class A common stock on a one-for-one basis. Depending on our liquidity and capital resources, market conditions, the timing and concentration of exchange requests and other considerations, we may choose to fund exchanges of Partnership Units with available cash, borrowings or new issuances of Class A common stock or to settle exchanges by issuing Class A common stock to the exchanging holder of Partnership Units.

Certain holders of Partnership Units exchanged 0.3 million and 0.2 million Partnership Units, respectively, for cash in the amounts of $19.4 million and $11.0 million, respectively, for the six months ended June 30, 2023 and 2022, respectively.

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Share Repurchase Program

During the six months ended June 30, 2023, the Company repurchased 1.4 million shares of the Company's Class A common stock at an average price per share of $71.87, or $104.0 million in aggregate, pursuant to the share repurchase program. As of June 30, 2023, the Company’s remaining repurchase authorization was $69.7 million.

Contractual Obligations

For a discussion of our contractual obligations, refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2022. There have not been any material changes to our contractual obligations since December 31, 2022.

Commitments and Contingencies

Litigation

With respect to our litigation matters, including any litigation discussed under the caption “Legal Proceedings” elsewhere in this report, we are not currently able to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support such an assessment, including quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by courts on motions or appeals, analysis by experts or the status of any settlement negotiations. While the ultimate outcome and the costs associated with litigation are inherently uncertain and difficult to predict, we believe, based on current knowledge and after consultation with counsel, that we are not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company.

Guarantee

The Company provides a guarantee to a lending institution for certain loans held by employees for investment in funds of its former Parent, which are secured by the underlying investments in those funds. The amount guaranteed was $2.6 million and $3.3 million as of June 30, 2023 and December 31, 2022, respectively. In connection with this guarantee, we currently expect any associated risk of loss to be insignificant.

Indemnifications

We have entered and may continue to enter into contracts that contain a variety of indemnification obligations. Our maximum exposure under these arrangements is not known; however, we currently expect any associated risk of loss to be insignificant. In connection with these matters, we have incurred and may continue to incur legal expenses, which are expensed as incurred.

Tax Receivable Agreement

We have entered into a tax receivable agreement with the holders of Partnership Units (other than PJT Partners Inc.) that provides for the payment by PJT Partners Inc. to exchanging holders of Partnership Units of 85% of the benefits, if any, that PJT Partners Inc. is deemed to realize as a result of the increases in tax basis related to such exchanges of Partnership Units and of certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. As of June 30, 2023 and December 31, 2022, the Company had amounts due of $32.2 million and $30.3 million, respectively, pursuant to the tax receivable agreement, which represent management’s best estimate of the amounts currently expected to be owed in connection with the tax receivable agreement. Actual payments may differ significantly from estimated amounts due.

Further information regarding the tax receivable agreement can be found in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

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Other

See Notes 8, 10, 11 and 13 in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing for further information in connection with income taxes, equity-based and other deferred compensation plans, leasing arrangements and commitments, respectively.

Critical Accounting Estimates

A discussion of critical accounting estimates is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk and Credit Risk

Our business is not capital-intensive and we do not invest in derivative instruments or, generally, borrow. As a result, we are not subject to significant market risk (including interest rate risk, foreign currency exchange rate risk and commodity price risk) or credit risk. Notwithstanding the foregoing, current economic and geopolitical uncertainty and slowing global growth could have a material adverse effect on the Company's condensed consolidated financial statements.

Risks Related to Cash, Cash Equivalents and Investments

Our cash and cash equivalents include short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. Cash and cash equivalents are maintained in U.S. and non-U.S. bank accounts and are held at seven financial institutions. In addition to cash and cash equivalents, we hold investments in Treasury securities, certain of which are classified as Investments in our Condensed Consolidated Statements of Financial Condition. We believe our cash, cash equivalents and short-term investments are not subject to any material interest rate risk, equity price risk, credit risk or other market risk based on our diversified use of global and regional financial institutions and the short-term nature of the securities.

Credit Risk

We estimate our allowance for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. We maintain an allowance for credit losses that, in our opinion, reflects current expected credit losses. As of June 30, 2023 and December 31, 2022, the allowance for credit losses was $3.0 million and $1.9 million, respectively.

Exchange Rate Risk

We are exposed to the risk that the exchange rate of the U.S. dollar relative to other currencies may have an adverse effect on the reported value of our non-U.S. dollar denominated or based assets and liabilities. In addition, the reported amounts of our revenues may be affected by movements in the rate of exchange between the transaction currency and the U.S. dollar, the currency in which our financial statements are denominated. The principal non-U.S. dollar currencies include the pound sterling, the euro, the Hong Kong dollar and the Japanese yen. For the six months ended June 30, 2023 and 2022, the impact of the fluctuation of foreign currencies in Other Comprehensive Income (Loss), Net of Tax – Currency Translation Adjustment in the Condensed Consolidated Statements of Comprehensive Income was a gain of $3.1 million and a loss of $5.1 million, respectively, and in Interest Income and Other in the Condensed Consolidated Statements of Operations, a loss of $2.7 million and $0.1 million, respectively. We have not entered into any transaction to hedge our exposure to these foreign currency fluctuations through the use of derivative instruments or other methods at this time. Given the geopolitical uncertainty and the ongoing economic impact, rising interest rates and heightened inflation, exchange rate fluctuations between the U.S. dollar and other currencies could unfavorably affect our condensed consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during our most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company and its affiliates may be subject to legal proceedings and claims in the ordinary course of business. In addition, government agencies and self-regulatory organizations in countries in which we conduct business undertake periodic examinations and may initiate administrative proceedings regarding the Company’s and its affiliates’ business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, or its directors, officers or employees. It is our policy to cooperate fully with such governmental requests, examinations and administrative proceedings. In view of the inherent difficulty of determining whether any loss in connection with any such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, we cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, we believe, based on current knowledge and after consultation with counsel, that we are not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company.

In June 2017, an action was filed in New York state court by affiliates of Moore Capital against defendants PJT Partners Inc., Park Hill Group LLC and Andrew W.W. Caspersen, arising out of the fraudulent conduct of Caspersen. A principal of Plaintiffs had a personal relationship with Caspersen and Plaintiffs had no relationship with either Park Hill Group LLC or PJT Partners Inc. PJT Partners Inc. and Park Hill Group LLC moved to dismiss the complaint. On August 13, 2018, the court dismissed all of the claims asserted against PJT Partners Inc. and Park Hill Group LLC, except for the fraud-based apparent authority claim. Plaintiffs and PJT Partners Inc. and Park Hill Group LLC appealed the court’s decision. On December 3, 2019, the appellate court dismissed the complaint in its entirety against PJT Partners Inc. and Park Hill Group LLC. On January 2, 2020, Plaintiffs filed a motion with the appellate court seeking reargument or, alternatively, leave to appeal, which motion was denied by the appellate court. On September 15, 2020, the New York Court of Appeals granted Plaintiffs permission to file an appeal, which appeal was filed on December 30, 2020. On June 13, 2023, the New York Court of Appeals reversed the dismissals of the two lower courts and reinstated Plaintiff’s claim for negligent supervision and retention for further proceedings at the state court. We believe this matter is without merit and will continue to vigorously oppose Plaintiffs’ sole remaining claim.

ITEM 1A. RISK FACTORS

There were no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

The risks described in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our subsequently filed Quarterly Reports on Form 10-Q are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities in the Second Quarter of 2023

 

Total Number

Approximate Dollar

of Shares

Value of Shares

Purchased as

that May Yet Be

Total Number

Part of Publicly

Purchased Under

of Shares

Average Price

Announced Plans

the Plans or

Repurchased

Paid Per Share

or Programs (a)

Programs (a)

April 1 to April 30

—

$

—

—

$

107.5 million

May 1 to May 31

507,598

63.29

507,598

75.4 million

June 1 to June 30

84,745

67.76

84,745

69.7 million

Total

592,343

$

63.93

592,343

$

69.7 million

 

Unregistered Sales/Issuances of Equity Securities and Use of Proceeds

There were no unregistered sales/issuances of equity securities during the second quarter of 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended June 30, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

In addition, on July 27, 2023, and effective as of that date, the Company filed a Restated Certificate of Incorporation (the “Restated Certificate”) with the Secretary of State of the State of Delaware, integrating prior amendments to the Company’s existing Amended and Restated Certificate of Incorporation (the “Existing Charter”). The Restated Certificate was approved by the Company's Board of Directors in accordance with the DGCL and only restated and integrated, but did not further amend, the Company’s Existing Charter. The foregoing description of the Company's Restated Certificate is qualified in all respects by reference to the text of the Restated Certificate, which is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

 

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ITEM 6. EXHIBITS

 

Exhibit Number		Exhibit Description
2.1		Separation and Distribution Agreement by and among The Blackstone Group L.P., Blackstone Holdings I L.P., New Advisory GP L.L.C., PJT Partners Inc. and PJT Partners Holdings LP, dated as of October 1, 2015 (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2015).
3.1		Restated Certificate of Incorporation of PJT Partners Inc.
3.2		Amended and Restated By-Laws of PJT Partners Inc. (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2015).
*10.1		Second Amended and Restated PJT Partners Inc. 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 25, 2023).
31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).
31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

______________________

* Indicates management or compensation plan or arrangement.

 

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: July 28, 2023
		PJT Partners Inc.
		By:	/s/ Paul J. Taubman
		Name:	Paul J. Taubman
		Title:	Chief Executive Officer
		By:	/s/ Helen T. Meates
		Name:	Helen T. Meates
		Title:	Chief Financial Officer
			(Principal Financial and Accounting Officer)

 

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