Perella Weinberg Partners — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Amounts below are U.S. dollars. The Business Combination closed June 24, 2021; statements reflect PWP OpCo’s historical results before closing and the combined company afterward. Per-share results are presented only for June 24–30, so reported net income attributable to the company and EPS are not directly comparable with prior periods.
Business context and financial performance
PWP is a global independent advisory firm providing M&A, restructuring, capital markets and related advice. It reported one operating segment. Results are driven by transaction activity and often-contingent advisory fees, making revenue and earnings volatile.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $255.5m | $114.6m | $425.3m | $207.0m |
| Operating income (loss) | $49.5m | ($20.7m) | $77.5m | ($24.3m) |
| Operating margin | 19.4% | (18.1%) | 18.2% | (11.7%) |
| Net income (loss), consolidated | $9.0m | ($22.1m) | $31.5m | ($26.2m) |
| Operating cash flow | Not separately presented for the quarter | $27.8m | ($108.4m) |
- Q2 revenue increased 123% year over year; first-half revenue rose 105%. Management attributed growth principally to stronger activity across industry groups and geographies, particularly M&A, versus COVID-19-affected 2020 comparables.
- Compensation and benefits, including equity-based compensation, were $171.5m in Q2 and $287.1m in the first half. They equaled 67% and 68% of revenue, respectively, versus 81% and 76% in the comparable periods.
- Non-compensation expenses fell 19% in Q2 and 18% for the first half, to $34.6m and $60.7m. Comparisons reflect the $14.8m write-off of previously deferred offering costs in 2020; excluding that write-off, professional fees increased in 2021.
- Consolidated net income includes income allocated to non-controlling interests: $21.5m in Q2 and $44.0m for the first half. Income attributable to PWP was a loss of $12.5m for the post-combination period shown; basic and diluted EPS were ($0.29) and ($0.32), respectively.
Financial position, liquidity and debt
- At June 30, cash and cash equivalents were $349.7m, restricted cash was $1.8m, and accounts receivable was $85.1m, net of a $1.1m credit-loss allowance. Two clients represented $30.1m of receivables; $17.0m was collected after quarter-end.
- Total assets were $610.5m and total liabilities $349.7m. The balance sheet included $54.4m of lease liabilities and a $13.7m tax receivable agreement liability.
- No borrowings were outstanding at June 30. PWP repaid its $150.0m convertible notes and $27.7m revolving-facility balance at the Business Combination. The amended revolver provides $50.0m of commitments, with up to $20.0m of incremental commitments available; maturity is July 2025.
- First-half operating cash flow was $27.8m. Cash, cash equivalents and restricted cash increased $20.6m to $351.5m. Financing cash flows included $355.0m of Business Combination proceeds, alongside debt repayment, partner-interest redemptions, transaction costs and partner distributions.
- Management said cash, operating cash generation and available revolver capacity should meet operating needs and commitments for the next 12 months under current market conditions. Broker-dealer regulatory capital is restricted; U.S. subsidiaries had combined net capital of $71.1m, $70.7m above minimum requirements.
Material changes, outlook and notable items
- The June 24 Business Combination established the public-company Up-C structure. It generated $355.0m of cash proceeds, repaid debt and resulted in 53.87% non-controlling ownership of PWP OpCo at June 30. Class B-1 shares carry 10 votes per share while the applicable ownership condition is met; Professional Partners holds voting control.
- The $39.4m loss on debt extinguishment—comprising a $10.9m premium and $28.5m of unamortized discounts and issuance costs—was the main reason first-half non-operating expense was elevated.
- Management described M&A dialogue as strong and expected activity to remain robust in the medium term. Restructuring activity had moderated from 2020 levels, and management expected a more moderate pace through the year while viewing the opportunity as significant. The filing provides no quantified earnings or revenue guidance.
- The company recorded $21.96m of warrant liabilities, remeasured at fair value; changes may create non-cash earnings volatility. The filing also reports $313.7m of unrecognized compensation cost for unvested Professional Partners Awards, generally expected to be recognized over 4.88 years; this expense is allocated to non-controlling interests. Management cautioned that future public-company incentive awards may contribute to operating losses.
- Subsequent events: the board declared a $0.07-per-Class-A-share dividend payable September 21, 2021; the company repurchased 1.0m founder shares for $12.0m on August 9; and the compensation committee approved 19.7m RSUs for grant (10.2m transaction-pool shares and 9.5m general-reserve shares).
- A long-running dispute with former partners and Ducera Partners remained pending after summary-judgment argument in May 2021. Defendants seek at least $60.0m; management disputes the claims and recorded no liability, while acknowledging an adverse outcome could be material.
- Other risks include volatile, transaction-dependent fees; client payment and receivables concentration; retention and recruiting of partners; conflicts of interest, competition, litigation, cybersecurity, regulation and foreign-exchange exposure. The company reported $48.0m in non-U.S.-dollar cash and did not hedge currency exposure.
- Management concluded disclosure controls were effective at June 30. A previously reported FTIV warrant-accounting material weakness related to FTIV’s controls; the filing says those controls ceased with the combination and PWP OpCo’s controls replaced them.
Investor verification priorities
- Reconcile consolidated net income with the loss attributable to PWP, including the effect of non-controlling interests and the post-combination-only EPS period.
- Track collection of the concentrated receivables, especially the $13.1m of the identified $30.1m concentration not reported as collected after quarter-end.
- Assess the recurring economics and potential cash burden of the tax receivable agreement, under which PWP generally owes 85% of realized qualifying tax savings.
- Review dilution and compensation implications of the approved RSUs, exchangeable PWP OpCo units, warrants and the 1.0m-share repurchase.
- Monitor the former-partners litigation, revolver covenants and capacity, and whether strong M&A activity and moderated restructuring demand persist.