Perella Weinberg Partners

Good morning and welcome to the Perella-Weinberg full year and fourth quarter 2025 earnings conference call. Currently, all callers have been placed in a listen-only mode. And following management's prepared remarks, the call will be open for your questions. If you would like to ask a question at that time,

Chief Financial Officer. Before we begin, I'd like to note that this call may contain forward-looking statements, including Parola Weinberg's expectations of future financial and business performance and conditions and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guaranteed of future events or performance. Please refer to Perrella Weinberg's most recent SEC filings for discussion of certain of these risks and uncertainties. The forward-looking statements are based on our current beliefs and expectations, and the firm undertakes no obligation to update any forward-looking statements. During the call, there will also be a discussion of some metrics, which are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. Perrella Weinberg has reconciled these items to the most comparable gap measures in the press release filed with today's Form 8K, which can be found on the company's website. I will now turn the call over to Andrew Bednar to discuss our results.

Thank you, Taylor, and good morning. Today we reported full year 2025 revenues of $751 million and fourth quarter revenues of $219 million. While 2025 revenues were down 14% from 2024's record results, 2025 was the third highest revenue year in our firm's 20-year history, a testament to the strength and resilience of our business and the result of our deliberate investment in building a focused and differentiated platform that can perform across market conditions. In M&A, it was a productive year for expanding and deepening our coverage and expertise. that we fell short of our revenue ambitions as several large transactions we advised on did not complete as we had hoped. That said, we are pleased with our progress and have confidence that our investments and laser focus on clients will deliver in 2026 and beyond. In Europe, we delivered record revenues, further cementing our position as a leading advisor in the most active regions on the continent. Our restructuring practice also hit record revenues, gaining market share in a market that continues to grow. Consistently delivering superior results for our clients is attracting more high-profile and high-value assignments, especially in debtor-side mandates. This positions us extremely well going forward across our financing and capital solutions business. On talent, 2025 was a record year for both recruiting and promoting senior bankers, and new higher momentum continues. We see a flywheel effect. Top talent is attracting more top talent, and our pipeline of future senior hires remains very strong. During the year, we added 23 new senior bankers to our platform. And already in 2026, we added two more partners, one reflecting our continued build-out of our healthcare services business and the other strengthening our U.S. software coverage following a recent partner addition in Europe. Looking ahead, The opportunity to grow our business is exceptional. Our gross pipeline stands at record highs, and our announced and pending backlog is strong and building. Sentiment is positive across our client base, from corporates to sponsors, and we see momentum building. As we enter our 20th year as a firm, we feel great about our position. We're incredibly proud of the firm we've built over two decades, and we're excited to write the next chapter, one that builds on our strengths to deliver both superior outcomes for our clients and attractive returns for our shareholders. In a sense, we're really just getting started. With that, I'll now turn the call over to Alex to review our financial results and capital management in more detail.

Thank you, Andrew. Our fourth quarter revenues of $219 million included $18.5 million related to closings that occurred within the first few days of 2026, which in accordance with relevant accounting principles were recorded in the fourth quarter. Our adjusted compensation margin was 68% for the full year 2025 compared to 67% in 2024. We maintained strong discipline in managing our compensation ratio despite, as Andrew mentioned, a year of record talent investment, including the Devon Park acquisition. We remain highly aligned with our shareholders, with partners in our broader team owning over 30% of the firm, and we are committed to thoughtfully managing our compensation ratio as we drive profitability while strategically investing in top talent. Our adjusted non-compensation expense was $159 million for the full year 2025, down 2% from a year ago and well below the single-digit growth range we originally projected earlier in the year. Looking ahead to 2026, with certain non-recurring items now behind us, we expect a further single-digit percent decrease. Turning to capital management, we returned over $163 million to equity holders in 2025 through dividends, RSU settlements, share repurchases, and unit exchanges. As a part of these efforts, we retired 6.5 million shares during the year, reflecting our continued focus on managing our share count. At year end, we had 67 million shares of Class A common stock and 22 million partnership units outstanding. Finally, we closed the year with $256 million in cash and no debt. And this morning, we declared a quarterly dividend of 7 cents per share. With that, operator, please open the line for questions.

Thank you. At this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. Once again, that is star one to ask a question. We will pause for just a moment to allow questions to queue. Our first question will come from Devon Ryan with Citizens Bank. Your line is open.

Great. Good morning, Andrew and Alex. How are you?

Yeah. Hi, Devon.

How are you? Doing great. Question just first on kind of the advisory environment and kind of outlook. Obviously, don't want to dwell too much on what happened in 2025, but you did mention there were some kind of large deals that didn't come together. Any sense of like order of magnitude of how much that impacted results on the year? And then as we think about 2026 and assuming your kind of batting average is more normal versus maybe it's a little below normal on those large deals how much of an impact does that have as you look at your your kind of record backlog as you noted and how much is kind of large deals versus kind of a broadening out in the m&a market yeah thanks dad look we we live for large-scale m&a transactions but but we don't

We don't die when they don't play out. I mean, last year there were 70 transactions over $10 billion. The year before that, there were 35. And in the year where we had record results, we were in four transactions over $10 billion. Last year, we were not in any. This year, out of the gate, we're in one already. So I think generally the trending is better. Because of our scale, we're just going to have lower transactions. incident rate and really all segments in the market. But in particular, we all feel it a little bit more when we're not in the larger scale, larger fee transactions. There are several that where the ball just didn't bounce our way for us and for our client. That's unfortunate. That usually leads to some other type of strategic activities. So that doesn't usually lead to just a dead environment for a deal flow. Generally, once you have that client relationship, you're thinking about the next thing. So that's encouraging. And generally, you know, a few of them, the ball just didn't bounce our way. And we're more optimistic heading into 26, again, given the starting point that we have here in January, where we announced a $15 billion transaction a couple weeks ago.

Okay, that's great. Thanks, Andrew. And follow up here on the private capital, the Devon Park kind of addition. Now that that's been part of the business, obviously not too long, but any anecdotes on how that's going, how it's making you more relevant in client conversations, and just how we can think about maybe the order of magnitude of what that business could mean for Paul Weinberg over the intermediate term, just like how's it going and the anecdotes you're seeing there. Thanks.

Yeah, so far we feel great about the combination. As you know, we look for situations where they're culturally and financially and strategically highly attractive to us and to our new partners. I think the Devon Park transaction has gone very well in all those regards. The take-up rate and the conversations with our private equity clients and our credit clients and real estate clients has gone very well. and we have already jointly won new mandates, so we're very encouraged by that. And the pipeline looks very good. We're only month four, obviously, so it's early days, but we couldn't be happier with the early days.

Okay, great. I'm going to try to squeeze one more in here, if I can, just on compensation. Obviously, in a year where revenues go down, not surprising to see the comp ratio pick up a little bit indirectly because it makes sense. As we look ahead and the environment's improving, hopefully a better hit rate in 2026 on some of these larger deals, how do we think about the algorithm from this jumping off point to get back into that mid-20s or even mid-60s or below on the comp ratio? or not 25.

Yeah, thanks for that. Look, we didn't hit our revenue targets for 25, and combined with our heavy investment, I always look at the balance of trade between our productive partners and our shareholders, and I've always committed to finding the right balance point between having partners invest in future growth and having shareholders invest in future growth. I think we've historically struck the right balance. We're all large shareholders, as you know, so we We care about the equity of this company and always looking at ways to drive us forward. We do have comp leverage. We have flexed that in the past, as you know. We flexed it in 21. We flexed it in 24, where we took it down 300 basis points from 2023. We need more scale, so we need the revenue progression to continue and get back on what we think we can earn here. I think last year we under-earned based on our capabilities and and our capacity, so we're more optimistic going into 26. But I don't have a specific algorithm because it really depends on this multivariable equation where we have to look at not only the revenue outcome, but also what our investing is like. And you know, Deb, and I have a different view than the accountants, but the accountants control the outcome on how it's reported. But some of our comp margin is capex. And I think that when we're wisely investing, we're going to see the results of that in the go-forward periods. There's a bit of a mismatch where we have to invest before we get the revenue. But we feel really good about the 23 senior hires we had, the 23 senior additions we had in 2025, 14 of whom are new to the platform, which is great. And we see the pipeline looking pretty good for 2026 as well. But that's a constant balancing that we have to do to make sure that we're sharing appropriately how we think about CapEx here and this impact on comp margin. But as you get scale, we have that comp leverage flex, and we've done that in the past. We just weren't able to do it in 2025. And I think a one-point increase from where we were accruing reflects the level of investments that we're doing.

Yeah, very helpful. Thank you very much. I'll hop back into the queue. Thanks, Evan.

Thank you. Our next question will come from Alex Bond with KBW. Your line is open.

Hey, good morning, everyone. Just a question on the restructuring outlook. You know, this has obviously been an increasingly important part of your business recently, but wondering if you can just speak to your outlook for 2026 here, maybe relative to 2025. Are you expecting revenues to be up here maybe year over year or maybe closer to flat or even down slightly? And then any color you could add just on the broader backdrop for restructuring from here would be helpful as well. Thank you.

Yeah, thanks, Alex. We feel very, very good about the environment for our restructuring business and we feel very good about across sectors in that in that market as well we saw a record year for our business last year we're not seeing any slowdown particularly in liability management engagement so not necessarily 9-1-1 going bankrupt tomorrow but just generally really prudent and very proactive finance managers with our clients that are looking ahead at maturities, they're looking ahead at covenants, they're looking ahead at, you know, ways to enhance their balance sheet. And we guide them through that and receive a fee in those circumstances. So I think the environment is very strong. I think with some of the disruption we've seen in software and recent sessions has created some level of concern with the credits in those particular sectors that I think will again lead to some more activity for us so that that business is quite strong and we're feeling very good about heading into the rest of 2026.

Okay, got it. That's helpful. And then maybe just another one on the recruiting backdrop. I think you've noted previously that this past year was an above-average year for you all in terms of hiring. But maybe if you could just help us think about how you're thinking about the recruiting backdrop for the coming year, maybe what we should expect to see in terms of maybe not necessarily a number, but just in terms of your activity there on the hiring side, and also just Any high-level thoughts around the recruiting backdrop as a whole would be helpful as well. Thank you.

Sure. That's a continuous exercise for us. It's a core part of our strategy to add talent. We have a lot of open space in our platform still with only now 77 partners, and we have covering about 1,500 to 2,000 clients, so we have a lot of open space for high-quality bankers to join our platform. And the pipeline looks very good. We have always every year more candidates that are interested in joining us than we will accept. And that's just reality of how we think about additions to our platform. I think it'll be likely a more normal year. I think it'll go back to trend in the coming 12 months. I think, again, the pipeline looks good, but I don't see it as active as we were last year. in terms of the sort of brick-by-brick strategy that we've been on. But we can get some surprises, and that'll be great if we can add some more talent. But I think we're back on trend, and the pipeline looks very good, so I'm happy about it.

Okay, great. That all makes sense. Thank you, Andrew.

Thank you. Our next question will come from Brendan O'Brien with Wolf Research. Your line is open.

Good morning, and thank you for taking my questions. To start, I was just a bit surprised that you guys have the record year in Europe, given from what we can see in the geologic data, trends have continued to lag those in the U.S. So I was just hoping you could unpack some of the drivers, what seems like pretty meaningful share gains in the region, and just what the tenor of discussions are like in Europe today and how you feel that fee pool will track relative to the U.S. over the near to intermediate term.

Yeah, I think for the better part of the decade, European volumes have been trending below normal and certainly trending disproportionate to the growth in the U.S. market. So I think it's a matter of just a matter of time before those activity levels get back to where they should be. Again, I think we're seeing the benefits of some of our investments and not only in new talent, but also our investments in clients that you have to make that are going to take time to to actually convert to revenue. And we were fortunate to have some large-scale transactions not only announced in the period, but also get done in the period because we're in a business where typically large-scale transactions don't announce and close in the same quarter or sometimes even in the same year. So I think we had some very good dynamics in our European business. We've got a terrific team there. We've got, you know, leading share in markets like in Germany and in France. And those were very active markets as we look back at 2025's results. I think Europe is very, very focused on what their future is looking like. There's active investments around industries, around defense and energy security, things around infrastructure. So the dialogue has picked up quite dramatically in the wake of all the geopolitical changes that we're all witnessing every day week. we wake up and read the news. And I think that's leading to more and more discussions on the continent about what the industries will look like in a go-forward Europe, which is good for our business. When people have complex situations, they tend to have experts around them. And so we're fortunate to get those calls and be around the table with industry leaders as they think about and contemplate the future of of what Europe's going to look like, but we're right in the middle of those dialogues and feel good about our team and happy, very happy with the results coming out in 2025.

It's helpful color. And I guess building on your comments on the geopolitical tensions ramping, you know, that's obviously seen a pretty noble uptick. And you've also seen an increase in policy uncertainty in the U.S., which is only likely to intensify into the midterm elections. Just wanted to get a sense as to whether you've seen any impact on dialogues at this point with your U.S.-focused clients. And do you anticipate the midterms to have any negative impact?

On the last point on midterms, we're not seeing anything yet. I think it's a little too early for that to start bleeding into some of the decisions our clients have to make. So I think it's a little early on that. Geopolitical generally, as I mentioned a few seconds ago, it's just part of our environment now, very much part of the everyday. We wake up and assess what's going on in the world. I think it creates a level of anxiety, but not panic. And I think once you know, we and our clients get through some of the fog. Most of our clients, I would say the overwhelming majority of clients see opportunities more than they see obstacles coming out of the geopolitical landscape. And that's true for the energy complex, for global manufacturing, and even for services companies that operate globally. So I think once you get through the initial shock of some of the headlines and news flow, I think the cooler heads prevail, long-term thinking sets in, and people are seeing more opportunities than they are seeing problems.

Great. Thank you for taking my questions.

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

Good morning. Would you be able to help us think through, at a high level, the mix of your advisory revenue across companies? M&A versus the non-M&A businesses, perhaps for 2025 in aggregate, or however you'd be willing to break this down.

Yeah. Good morning, James. As you know, I've said on prior calls and at various conferences that we don't segment our business that way because we don't operate our business based on our products. We don't sell products. We sell problems to our clients. We are organized by sector and therefore organized by the coverage we have of our clients, not the products that we're trying to sell. So I know I get this question often. I'm respectfully declining to give that detail because it isn't how we operate the business. I do want to give some color on the different markets we operate in, which hopefully I've given in terms of M&A context as well as our financing and capital solutions business, which I mentioned was at a record. And we feel very good about, you know, in particular, our liability management engagements going forward and the activity we see there.

Understood. Could you just perhaps update us a little bit on your capital return priorities beyond the organic investment, which is clearly top of the list of priorities, and that makes sense. But just beyond that, anything that we should be thinking about for capital deployment?

Our priority stack remains exactly the same. If we can invest our capital in future revenue and future clients and building out businesses, that's by far the best use of our capital. We saw really good uses in 25, so we were weighted a bit more to that deployment in the prior period. 26, we don't, you know, it's early days, so we don't know. We may have some good investment opportunities, and we'll take advantage of those as they present themselves. but we're still laser focused on our share count. We have our dividend, which we announced this morning. And, you know, we will take advantage of buyback opportunities, either through exchanges and our typical RSU vesting, where we buy in the shares to pay taxes. And from time to time, we're in the open market. But I don't see any departure from our uh priority stack there um and from you know time to time we may emphasize one over the other but priorities remain in place james so no change there thank you and maybe if i

if I may, just one more. What is the right starting point for the comp ratio as we head into 2026? I'm just trying to make sure that we understand, I think different firms do it differently. Should we be looking at the full year 25 ratios, the jumping off point, the 4Q number, and then does the mid-60s comp ratio target still hold?

Yeah, the Q4 number, to me at least, is irrelevant. That's just what, you know, the math shows to get to our annual comp ratio, which is 68, which is 100 basis points above where we were accruing in the first three quarters, which I explained I thought was a fair balance of trade for who will pay for future growth. And I think we're going to get that, and it's a good investment. Our jumping off point, we're going to have the same as last year. So we'll start at 67 for Q1. And I've just always asked all of our stakeholders, people on this phone and my partners, employees that own shares, that we just need some flexibility in Q4 to assess, you know, what the final comp ratio needs to be in order to prudently manage our business and reflect our investments. So that's our typical cadence. We'll stick with that. But the jumping off point, as you call it, for Q1 will be a 67% accrual. That's very clear. Thanks a lot. Thank you.

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

Okay. Thank you, Katie, and thank you, everyone, for joining us today. As we mark our 20th anniversary as a firm, I want to express our gratitude to, first, all of our clients who have trusted us with their most consequential transactions over the last two decades. Relationships are the foundation of everything we do, and we thank you for placing your trust and confidence in us over the years. To our investors, many of you have been with us since we went public five years ago, and others have joined along the way or more recently. Thank you for your confidence and for all your support. We're committed to delivering for you, as you know. As I've mentioned many times, we're also large shareholders. my teammates around the world, you make this firm what it is. Your exceptional talent and tireless dedication to our clients drives their success every day and, in turn, our success. Thank you. We look forward to updating all of you on our next quarter, and thanks again for joining us today.

This concludes the Pirello Weinberg full year and fourth quarter 2025 earnings call and webcast. You may disconnect your lines at this time and have a wonderful day.