PJT Partners Inc.

Welcome to the PJT Partners First Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead.

Thanks very much, Jennifer. Good morning and welcome to the PJT Partners First Quarter 2021 Earnings Conference Call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners, and joining me today is Paul Taubman, our Chairman and Chief Executive Officer, and Helen Mates, our Chief Financial Officer. Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners 2020 Form 10-K, which is available on our website at pjtpartners.com. I want to remind you that the company assumes no duty to update any forward-looking statements and that the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in the company's performance. For detailed disclosures on the non-GAAP metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website. And with that, I'll turn the call over to Paul.

Thank you, Sharon. Good morning and thank all of you for joining us today. We're pleased to report strong first quarter results with revenues of $207 million, adjusted pre-tax income of $50 million, and adjusted earnings per share of $0.89. Our strategic advisory and PJT Park Hill businesses both delivered their strongest first quarters ever. more than offsetting declines in restructuring. Compared to year-ago levels, adjusted pre-tax income and adjusted earnings per share grew 26 percent and 25 percent, respectively, far outpacing our growth in revenues as we benefited from the operating leverage inherent in our business. Now, turning to each of our businesses in more detail. beginning with restructuring. While 2020 was certainly a near-term high watermark for restructuring, the damage caused by COVID-19 is long-lasting, with many companies now irreparably broken, notwithstanding the fiscal and monetary stimulus that continues to be pumped into the economy. Against this macro backdrop, We currently expect our market-leading restructuring franchise to generate 2021 revenues, which are meaningfully above 2019 levels, but meaningfully below 2020 levels. Drilling down further, a number of restructuring assignments that might have been resolved this past quarter were either accelerated into 2020 or pushed out later into 2021. As a result, the first quarter of 2021 should be our weakest restructuring revenue quarter of the year. We expect our restructuring revenues to be greater in the second quarter than the first quarter, and to be greater in the second half of the year than in the first half of the year. Turning to PJT Park Hill. At PJT Park Hill, our roster of best-in-class managers, combined with our differentiated global distribution capabilities, is the backbone of our leading franchise. In the first quarter, stronger investor demand for alternatives drove significant revenue growth compared to year-ago levels. We had favorable comparisons in all verticals with private equity and secondaries showing the highest year over year gains. After a record first quarter, PJT Park Hill is on track to achieve record full year performance in 2021. Turning to strategic advisory. Strategic advisory revenues were also up year over year. As the breadth and depth of our practice has increased, so too has the number of discrete revenue events reflecting our expanded advisory capabilities and global footprint. While the dollar value of our completed transactions declined substantially from year-ago levels, our strong revenue performance was driven by a significant increase in the number of completed M&A transactions, record contributions from capital markets advisory, and continued strength in PJT Camberview. Three months ago, we talked about our record pipeline of pre-announced mandates. However, we also cautioned that we were unable to predict the timing of and success in turning many of these mandates into announced and ultimately completed transactions. Since then, Our number of active mandates has continued to grow, as has our confidence in our full year strategic advisory outlook. We now expect strategic advisory to be up meaningfully in 2021, with most of the growth weighted towards the back half of the year. While each of our businesses are demonstrably stronger today than they were five years ago, strategic advisory has been and will continue to be our biggest and most powerful growth engine. We see increasing opportunities to grow our market share given how well our model of integrated advice across mergers and acquisitions, capital markets, capital structure, fundraising, and shareholder engagement has resonated with clients. Reviewing our capital priorities. Our approach to capital investment and capital return remains unchanged. Investing in talent is still far and away our highest priority. The greatest return on investment continues to be the people we attract to our platform. In the last 12 months, against a backdrop of the pandemic, we grew our partner headcount by 13% and our total headcount by 10%. We remain keenly focused on offsetting the share issuances resulting from this investment, and we continue to view share repurchases as a compelling investment opportunity. Over the past four quarters, we have spent almost $230 million on repurchases, buying back nearly 3.5 million shares and share equivalents. These repurchases have entirely offset the two and a half million earn out units that vested during the second half of 2020. Our repurchases have continued in the second quarter and with our decision to cash settle the 221,000 partnership units presented for exchange, we will have entirely offset our 2020 year-end employee equity awards as well. Our first quarter cash balances stand at the highest levels ever at this point in the year, even with the accelerated pace of repurchases. Now over to Helen to review our financial results in more detail.

Thank you, Paul. Good morning. Beginning with revenues, Total revenues for the quarter were 207 million, up 3% year-over-year. The breakdown of revenues, advisory revenues were 153 million, down 3% year-over-year, with the decline in restructuring revenues largely offset by an increase in strategic advisory, particularly in capital markets advisory. Placement revenues were 50 million, up 29% year-over-year, reflecting a strong increase in fund placement revenues. Turning to expenses. Consistent with prior quarters, we've presented the expenses with certain non-GAAP adjustments. These adjustments are more fully described in our 8 . First, adjusted compensation expense. We accrued adjusted compensation expense at 62.5% of revenues for the first quarter, which is our current expectation for the year and is based on our current outlook for the business. As a percentage of revenues, this ratio is 100 basis points lower than the 2020 full-year adjusted comp ratio of 63.5%. Turning to adjusted non-compensation expense. Total adjusted non-comp expense was $28 million in the first quarter, down from $30.6 million in the first quarter 2020. As a percentage of revenues, our non-compensation expense was 13.5% for the first quarter, down from 15.3% in the same period last year. The year-over-year decline reflects a significant reduction in travel and related expense compared with normal travel activity for much of the first quarter last year. One area of higher expense to highlight was professional fees. where we had higher consulting expenses relating to the firm's business activities, as well as increased recruiting costs. Excluding travel and related expense, our first quarter non-comp expense increased 8.5% compared with the same period last year. And for the full year, we expect that expense to be up a bit more than 10% versus last year, driven by continued investment in communications and IT, an increase in the number of senior advisors, and higher recruiting costs. In terms of our travel and related expense, it is still too soon to forecast when and by how much travel activity will pick up, but as a reference point, our travel and related expense was approximately $2 million per month in 2019. Turning to adjusted pre-tax income, we reported adjusted pre-tax income of 49.5 million for the first quarter, up 26% year over year. and our adjusted pre-tax margin was 24% for the first quarter compared with 19.7% for the same period last year. The provision for taxes, as with prior quarters, we have presented our results as if all partnership units had been converted to shares and that all of our income was taxed at a corporate tax rate. The tax rate also takes into account the tax benefit relating to the delivery of vested shares during the first quarter at a value higher than their amortized cost. This benefit resulted in a 3.6% reduction in the annualized effective tax rate to 22.2%, which is the rate we applied in the first quarter. Earnings per share are adjusted if converted earnings were 89 cents per share for the first quarter, up 25% compared with 71 cents per share in the first quarter last year. Share count. For the quarter, our weighted average share count was 43.1 million shares. During the first quarter, we repurchased the equivalent of approximately 1.6 million shares, including approximately 658,000 shares in the open market. The balance of repurchases came from the exchange of partnership units for cash and net share settlement of employee tax obligations. We're currently in receipt of exchange notices for approximately 221,000 partnership units, and as we have done in the past, we will exchange these units for cash. On the balance sheet, we ended the quarter with $172 million in cash, cash equivalents and short-term investments, which was a record for first quarter cash balance, and $292 million in net working capital. We have no debt outstanding, and our full line of credit is available to us. Finally, the board has approved a dividend of $0.05 per share. The dividend will be paid on June 16, 2021, to Class A common shareholders of record as of June 2, 2021. With that, I'll turn it back to Paul.

Thank you, Helen. In terms of our outlook, our distinctive and differentiated mix of businesses is highly complementary, positioned for growth, and provides us with the diversification and ballast needed to enable our firm to succeed in most any environment. As we continue to integrate and leverage our relationships and capabilities across our firm, all of our businesses become more powerful and more formidable. Enormous opportunities to grow each of our businesses abound. And as before, we remain extremely confident in our future prospects, and with that, We will now take your questions.

Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. And we'll go first to Devin Ryan with JMP Securities.

Caller, your line is open. You may be on mute.

Oh, hey, this is Devin. Can you guys hear me?

Yes, Devin, we can now. Good morning.

Sorry about that. A little technical difficulties here. I guess, Paul, first, appreciate all the outlook on there. I think it's very clear. When you think about the restructuring business, I appreciate the revenue trajectory all in the year, but how are you thinking about the tone for that business more broadly and what type of catalysts will we need to see for something to change here? Is it just the credit backdrop changing, or are there dynamics in the market that could create kind of a resurgence in activity, just companies potentially capitulating or something on the regulatory front? Just curious what potentially could change in a new mandate activity there.

Sure. Well, let's first start with some of the basics, which we've talked about for a while. What COVID has done is it has disrupted an enormous number of business models and it has shaken up the playing field in a way that we now have clear winners and clear losers in the business marketplace. And that is really irrespective of the macro backdrop. So what we've said consistently is that the baseline level of restructuring post-COVID is going to be higher than it was pre-COVID. And that's why when we talk about our 21 prospects, we talk about it being meaningfully greater than 2019. We see that trend continuing for some considerable period of time, just because of the damage and dislocation caused to many businesses that have been severely hurt by change in customer preferences, business buying habits, the way in which people move about the world. Then on top of that, restructuring is always keenly tethered to the macro backdrop. And right now there's no doubt that we're in a risk-on environment. And if that changes, and if the capital markets become less hospitable, and if there are fewer refinancing opportunities, and less capital available, clearly that will be an accelerant to take the current level of restructuring activity up a notch or two or maybe more. I think another is interest rates. If interest rates move higher, that then creates its own series of dislocations. So we are absolutely of the belief that in this macro environment, we're gonna see more restructuring as a baseline. We also believe that the overall conditions are about as favorable as one can imagine for debtors. And that inevitably is going to change because, you know, the world ebbs and flows. And when that does, you're going to find record amounts, record quantum of debt outstanding. And that should take restructuring levels up meaningfully. But we're We see that as a potential opportunity, but we're certainly not banking on it in the near or intermediate term.

Okay, great. Thanks, Paul. And then just one on, I guess, headcount expansion and just thinking about the push and pull in the current environment. Clearly, the most invested banks had a pretty solid 2020 activity starting at a very good level. in 2021. And so just, you know, kind of thinking about that backdrop, you know, the ability to recruit people out of banks where, you know, they have a pretty active current backlog of deals that they're working on. Maybe just talk a little bit about that expectations for recruiting on the year, given that, you know, you guys are benefiting quite a bit. It sounds like we'll continue doing 2021 from the senior people that you recruited over the past couple of years.

We continue to be an employer of choice. We continue to have very significant growth aspirations. We continue to expect to be very active on the recruiting front. But like anything else, there's always puts and takes in any given market environment. What I would say is, if you think about this as sort of a three-legged stool, right now one headwind that may stop blowing in our face is just the virtual world. It is clearly more difficult to recruit in a virtual world than it is when people can be in physical proximity and have direct conversations and engagement. Our hope is that as the health crisis recedes somewhat, that we'll be able to do more and more of this face-to-face, which should be helpful and additive to our recruiting efforts. The second is every day that goes by, there is increasing recognition about the power of the firm, the special culture that we've built, and that this is a winning platform and the best way for many senior practitioners to practice their trade, and it's the right place for junior students professionals with career aspirations to learn the trade and to be nurtured and to learn. Both of those are certainly going to be favorable to us in 2021. But as you point out, you never get everything all at once. In a world where there's a lot of M&A activity, oftentimes it's difficult for people to make a switching decision because they're fearful that by doing that they may be leaving existing clients in the lurch. So we always have some things in our favor, some things that are not perfectly aligned, but year in and year out we're confident in our ability to continue to meaningfully grow the platform and to meaningfully grow the franchise.

Okay, great. Thanks, Paul. I'm getting some questions here this morning. Just on the comp ratio.

Sorry, we lost you.

You just said on the comp ratio.

Yeah, the comp ratio, the 62.5% accrual in the first quarter is 100 basis points, obviously lower than the full year 2020 level. So I'm getting a couple questions. I view it as just a kind of an indicator of just the outlook on the year for revenues and some of the flexibility in the model. But the question is just around whether there's any shift in kind of stock-based comp accruals or anything else that's giving additional flexibility in that accrual this quarter.

Look,

I'd say a few things. Number one, we always look at our compensation expense over a multi-year period. And if you look at where we were pre-pandemic, we were at 64.1%, I believe, the last year pre-pandemic. What we're talking about is 160 basis points of comp leverage over two years, which are the two pandemic years. And if you look at the total revenue growth that we will deliver over those two years, in absolute terms or revenue terms, it's entirely consistent with that model. So we start there. I think the second is we also start with a very strong position in that our absolute compensation expense last year grew the most of any of our peers. It grew the most in percentage terms. It grew the most on a per capita basis. And therefore, we start from a position of strength And this year, I think we're going to be very comfortable with this as the accrual unless there's some exogenous event later in the year which causes us to move it either up or down. It is our best estimate of full-year accrual.

Great. Thanks very much. Appreciate it. Thank you, Devin.

We'll go next to Richard Ramson with Goldman Sachs.

Hey, good morning, everyone. So perhaps I can ask a follow-up on the restructuring business. And I guess my question is, are you seeing a substitution between restructuring mandates and M&A? Are you seeing some of these restructuring mandates shifting into M&A mandates as a result of the better economic environment and the better financing environment? Or is it much more of a delay, which is, I guess, kind of what you alluded to in your comments up front?

It's a little bit of everything, right, Richard? We have a broad-based business, so we are in a risk-on environment. So in a risk-on environment, that clearly is going to be a headwind for restructuring, but it also is going to be a tailwind for the SPAC market, as an example. So there's constantly – it's not like we're just losing here where we may see this business more challenging, but it's creating an environment which is inviting – more activity elsewhere. And what I have seen, and I think others have noted this as well, is the SPAC market has, in a number of instances, created opportunities for companies that might not have otherwise had refinancing opportunities available to them to be taken public through a SPAC merger, and all of a sudden all that debt gets refinanced rather than than trying to figure out how to meet interest payments. So there is some of that. I don't think it's anywhere near one-to-one, but at 50,000 feet, we're in a risk-on environment, which is inviting activity over here while it's curtailing activity over here. But the basic fact remains, which is we have a lot of businesses that are dislocated, and restructuring has always been an idiosyncratic issue. So If you want to have elevated levels of restructuring, you don't want to see 10 units of pain in every company. You want to see 90 units of pain in a subset of those companies. So the more concentrated the pain is or the dislocation or the disruption, the more likely that those companies will not be able to withstand ordinary shocks and will need to restructure. And I think that's... That fundamental element remains unchanged. Okay.

All right, that's helpful. As we think about year-on-year comparisons for the restructuring business, can you give us a sense as to which quarter in 2020 restructuring revenues peaked in? I'm just thinking about how we model this out over the course of the year.

It was back half of the year. I mean, clearly, as the pandemic began to rear its teeth, the back half of the year was meaningfully more active than the first half of the year.

Okay, got it. And then perhaps we can talk a little bit about the strategic advisory business. And it looks like an extraordinary start to the year, at least in terms of just announced deals. And it also looks like it's very broad-based by geography and client type. So when you think about the start of the year and you think about the pace of activity, do you think this is indicative of what you could see over the course of 2021, or do you think there is some sort of catch-up effect or pull-forward effect, just given how quickly things have changed from an economic standpoint in the first quarter?

Look, there's no doubt that this is a very constructive environment for merger activity, and we – expected to continue for a considerable period of time. I can't predict whether it will persist at the current levels of activity that we're seeing, but it is quite broad-based. And if you look at the increase in M&A activity, the most encouraging sign is not the dollar values, it's just the broad basis, the number of transactions, it's the number of billion-dollar-plus transactions, the number of $5 billion-plus transactions. the fact that it's across many different geographies, many industries, which does speak to broad-based health. When we started the year, we had a very strong and increasing backlog of mandated assignments that had not matured enough to reached the announcement phase. And in many respects, this year is the polar opposite for us of last year. Last year, we came into the year with a bevy of announced pending closed transactions. And then when the pandemic hit, it did not move that much. This year, we came into the year with a paucity of announced pending closed transactions. But the pace at which we're acquiring new mandates The accelerated pace at which many of these mandates are maturing and leading either already or likely in the near term to announce transactions, the ability to complete transactions inside the year is a very different tone, and that's why we were appropriately cautious three months ago. I think we're more forward-leaning three months later.

Okay, thanks a lot. That's very helpful. Thank you, Richard.

We'll go next to Stephen Chubak with Wolf Research.

Hey, good morning. Good morning, Stephen. How are you?

Yeah, I'm doing okay. Thanks for asking, Paul. I had a question just on potential changes to the tax regime. I was hoping you could just speak to how changes to either the corporate tax rate or capital gains has impacted dialogues with corporates, if at all, and maybe just specific to PJT. Any guidance that you could share on how Biden's tax proposal could actually impact your own tax rate?

Well, let's start with the first one. It's kind of hard to talk about how it's going to affect our tax rate since we haven't seen the proposal, and there's an awfully long way to go between the administration putting forth a proposal and trying to get something done in Congress. So I would prefer to not speculate on any of that because these these tax uh reforms or increases or whatever you want to refer to them as can take you know all sorts of different shapes going forward what i will say on the macro point is if you go back into 2020 i think the conventional wisdom early in the year was a Republican victory and the Trump administration remaining in power. And therefore, there wasn't much focus early in the year on changing capital gains rates or changes in tax policy. I think as the market began to absorb that there might in fact be a change, and that with that might be an increase in taxes. You did not see what we typically see, which is a lot of positioning, particularly from individuals, family-owned businesses and the like, to... to optimize their portfolio because you were dealing with the depths of COVID. And even if it was the right time to manage your taxes, it was certainly not the right time to optimize the value of an asset by running a process in the middle of COVID. I think now we're in a different environment where you clearly have a very attractive macro backdrop of valuations are robust. and with a strong potential for an increase in rates and capital gains, I would expect that there's likely to be some pop in activity as you coax out a number of sellers, most likely families or estate planning or others who want to take advantage of current capital gains rates. But as all these things are, they tend to be a pull forward. and they tend to be relatively short duration because once there's a new regime and a new rate, people adjust and you get to a new equilibrium.

Thanks for that perspective, Paul. And just a follow-up on some of the earlier discussion on the SPAC market. Your company has had really solid momentum in winning a couple of very large SPAC engagements. We are hearing more concerns around the sustainability of SPAC fundraising activity. Admittedly, there are still some significant fee events tied to those funds already raised, but just want to get your thoughts on the outlook for fundraising activity from here and maybe how that informs your expectations for M&A beyond 2021 as some of those fee events are set to expire.

I'm quite constructive on the long-term M&A market, and we've talked about this for a long time, where I've said that with increasing dislocation, the cost of standing still becomes greater and greater. Companies all else equal will be more active, and while I cannot repeal the laws of the Of business cycles and, you know, the cyclicality of the business for any given macroeconomic backdrop, we expect to see higher levels of M&A. I think the SPAC market is a market we've always said that was benefiting in part, not exclusively, but in part on regulatory arbitrage. And we've always said that we expect over time those benefits, many of them, to be taken away as the playing field becomes leveled. So that phenomenon we've always expected, which would cause the number of SPAC transactions to be reduced. But we've also talked about the fact that in many respects the price discovery and the pipe process and a truncated period from start to finish is a real long-term advantage that is likely to persist. And the third is we have talked about the fact that we're in an extraordinary risk-on market, which is enabling a lot of companies that otherwise would not be able to find their way to the public markets to get listed. We don't expect all of those conditions. to exist at this pace indefinitely. We don't expect it to continue for that much longer, but in many respects, because the companies that we're working with are the best of the best, A flight to quality is not likely to impact us nearly as much as it may others. So in many respects, we see the numerator of transactions that we're doing to not move very much. We do think the denominator of the total number of transactions that get done to shrink. And I think we're well positioned relative to others because of the discerning lens with which we've taken to which companies we do business with.

That's great. Thanks for that color, Paul. If I could just squeeze in one more here. I'm not sure this is a better question for you or Helen. We've had some inquiries on the incentive awards for management. I know those are set to expire at the end of the year. Admittedly, you guys gave a constructive comp guide. Just now that we're five years into your journey as a public company, how is the approach to compensating leadership evolving at all? Any insights you can share in just how those changes might impact the trajectory beyond 2021 as we think about your next layer of growth?

We put in place six years ago this incentive program, which I think has worked extraordinarily well. When we're talking about incenting our most senior leadership, that's really for the board. to decide, and at the appropriate time, I'm sure, whatever the path forward is, we'll try and figure out how to best communicate that after it's designed. But the reality is we've always believed in shareholder alignment. We've always believed in putting shareholders first, and I can't imagine that we're going to do anything that won't continue that approach.

That's great call or follow. Thanks so much for taking my questions.

Absolutely. Thanks, Steve.

We'll go next to Jim Mitchell with Seaport Global Securities.

Hey, good morning.

Good to see you, Jim. Maybe just ask a little bit about the partner growth again. I think if I look at your presentation, you had about 11 new partners in one queue. Could you maybe – Is there a lot of promotes in there or is that all hires? How do we think about that growth? And I was kind of struck by the fact that we had or saw growth in partners in both Park Hill and restructuring kind of the first time in a few years. So is that kind of imply that you see a greater set of growth opportunities in those two businesses as post-COVID? Is that the way to think about that?

As you can imagine, there's a different story for each of the businesses depending upon how you drill down. If you look at the Park Hill business and the restructuring business, we have had extraordinary stability in those businesses, but we also have extraordinary deep benches in both of those businesses. And over time, as those individuals grow up on the platform, you know, a number of them, you know, have become partners. And we also have in some of these businesses individuals who have had 30-year careers where at some point they want to step back from the business. So I think you need to look at the part kill and restructuring businesses individually through the entirety of the arc. I believe if you look at the partner count, you'll see more growth in Park Hill in the near term than you will in restructuring, which is probably more reflective of the near-term opportunities. But it's really sort of broad-based in both of those. And if you look at strategic advisory, it's a hybrid, which is we're now into the sixth year. There are a considerable number of individuals who we've recruited to the platform who would be partners anyplace else but come in as managing directors. And after some period of time, they're promoted to partners. So whether you want to think about those as an internal promote or really an external hire is a bit of six of one, half a dozen of the other. And then also, you know, apropos of my earlier comment, When you have six years of operating history in strategic advisory, we have a very strong bench of individuals, so we're going to increasingly see a hybrid approach to growth in strategic advisory in a way that wasn't possible when we were one, two, three years into our journey. Now that we're six years in, many of our professionals and colleagues are growing up with us.

Right. That's helpful. And then just maybe thinking about the risk-on environment that you've been talking about, it's clearly helped, I think, some of the capital markets, businesses, clearly the Park Hill business in demand for alternatives. How do we think about what you see there? If we do get a pullback, you'd kind of get the offset potentially in restructuring growing. So how do we think about the impact of potentially a slowdown in capital markets activity and what that could mean for Park Hill and in capital markets advisory from a macro impact versus just the fact that you're trying to grow those businesses organically.

I think that they both are quite capable of growing in most any environment. There's just a lot of, you know, inherent demand for those services. Park Hill has always been very discriminating in the managers that it brings to markets. And therefore, it's sort of similar to my SPAC comment, which is the number that they take to market doesn't change very much every year. The number of funds that want to be taken to market moves up and down every year. And we've always said that our capital advisory business is an enormous growth business. And it's just another arrow in our quiver. And it's not so much tied to it being risk on. It's tied to the fact that our client base wants integrated advice. They want sophisticated advice. They want advice that encompasses all of the elements in making good decisions, which is they want deep domain expertise. They want the best negotiation skills. They want the best read of the debt and equity markets. They want to be able to engage with shareholders. They want broad geographic reach. They want all of those things, and they would prefer it to be in a smaller, more focused firm. So I see those trends as playing out favorably for us for an awfully long time.

All right. That's a great caller. Thanks.

Absolutely.

We'll go next to Michael Brown with KBW.

Great. Thank you. Good morning, Paul. Good morning, Michael.

I wanted to start with strategic advisory. I appreciate the comments that you gave earlier, but I guess one area that's been so much soft this year has been the mega cap deals, deals greater than $10 billion. We saw some recent green shoots there with Microsoft, Nuance Deal, and Grab SPAC, but Overall, the contribution to total amount of announcements has really lagged historical years where it might be 20% to 25% of the volume. It's kind of high single digits. So just wanted to get your thoughts there about that segment of the market. Is there a lot more dialogues that are kind of happening behind the scenes? Do you expect that to really pick up and see some strength there? as we get into the back half of the year? Because that's kind of what we saw last year. So just curious how you think about that segment of the market.

I mean, there's large deals and then there are mega deals. And I think there's still a very robust appetite for large deals. But when you talk about mega deals with, you know, mergers of $100 billion plus market cap companies with one another, et cetera. I think in the current political environment and the inevitable regulatory scrutiny and with desires for more national champions and protectionist policies and the like, it's more difficult. And we had you know, talked about our cautious outlook for some of this heading into presidential election year. I don't think that at this point in the cycle, there's probably as much receptivity for those types of transactions, but there's still an awful lot below the sort of mega plus transactions and very large transactions that are in the tens of billions of dollars. And I don't think there's a size limit per se. I just think the reality is as you get larger and larger, you're inevitably dealing with horizontal combinations which will create regulatory scrutiny or some issues arising. in terms of the geographic and political chessboard. So we're a bit more cautious on that, but we don't really see that as really what drives overall M&A activity. It doesn't drive overall M&A profitability, and those things tend to wax and wane, and probably it will return at some point, but I think it's a bit premature as we're still dealing with the real effects of of COVID-19 and its aftermath.

Okay, great. I appreciate all the color there. Just one more follow-up from me. I just wanted to try and tie together some of your comments on, I guess, the, you know, if you think about the share repurchase, your record first quarter cash levels, and just, you know, there was higher issuance, you know, volumes in the share count this quarter. So as we think about maybe modeling out the share count here, and obviously there was also, you know, the comment about some of the awards that could vest later this year, is it possible for your share count to stay flattish or, I guess, up modestly year over year once we get to the fourth quarter? Just How should we think about that from a modeling perspective? Thanks.

I think if you – I'll turn it to Helen, but I think if you look over time and leave aside the earnouts, we've done quite a good job in avoiding any share creep, even though we've grown our business massively. But, Helen, do you want to take that?

Yeah, if you remember, we added 2.5 million shares to the share count at the end of last year with the earnouts. And I think we've demonstrated with all of the exchanges for cash that that is a way for us to address dilution without impacting our float. And that is a preferred way of going and getting back shares. The issue is we don't control the volume that comes to us. And then to supplement that, we've also been in the open market buying back shares, but we're also mindful of the float. So I think you have to take all the pieces together. And what we've said is that over time, We do expect to be able to manage dilution, but you're not going to be able to achieve it in any particular quarter. So as we look out throughout the rest of the year, I think it's too hard to predict where we'll end up in terms of share count, but I think our history would demonstrate that we have been mindful of dilution.

Okay, great. Thank you for the commentary there.

Well, are there any other questions?

I think we're done.

I think we're good to see you on the next or listen to you on the next earnings call. So thank you all for joining us this morning. Thank you for your interest in our company. Stay safe and be well. Thank you.

This does conclude today's conference. We thank you for your participation.