PJT Partners Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. PJT Partners is a global advisory-focused investment bank providing strategic, restructuring, shareholder and capital-markets advice, as well as fundraising and private-fund advisory services. Amounts below are in U.S. dollars; financial statement figures are unaudited.
Financial performance
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Total revenue | $233.1 million | $240.7 million | $479.5 million | $447.4 million |
| Income before taxes | $43.7 million | $52.4 million | $93.8 million | $96.3 million |
| Net income | $35.2 million | $42.9 million | $79.7 million | $86.7 million |
| Net income attributable to PJT Partners Inc. | $19.2 million | $23.1 million | $44.9 million | $49.8 million |
| Diluted EPS | $0.74 | $0.89 | $1.74 | $1.91 |
| Effective tax rate | 19.4% | 18.3% | 15.1% | 10.1% |
Q2 pretax margin was approximately 18.7%, versus 21.8% a year earlier; first-half pretax margin was approximately 19.6%, versus 21.5%. First-half net cash from operating activities was $117.5 million, compared with cash used of $47.6 million in the prior-year period. Cash and cash equivalents were $147.3 million at June 30; cash, cash equivalents and short-term investments totaled approximately $181.5 million. No borrowings were outstanding under the revolving credit facility. The $60 million facility was extended to October 1, 2023.
Changes versus prior comparable periods
- Q2 revenue declined 3% year over year: advisory fees fell 6% to $186.6 million, principally on lower strategic advisory revenue; placement fees rose 23% to $49.5 million.
- First-half revenue increased 7%: advisory fees rose 5%, principally from restructuring work, and placement fees rose 21%, driven by fund placement.
- Net income attributable to PJT Partners Inc. declined 17% in Q2 and 10% in the first half. Total expenses rose 1% in Q2 and 10% for the first half.
- Travel expense increased substantially as business travel resumed: up $5.0 million in Q2 and $8.9 million for the first half. First-half compensation expense rose $23.1 million, while equity-based compensation expense increased to $95.4 million from $57.2 million.
- Interest income and other was negative $3.0 million in Q2 and decreased $5.1 million for the first half year over year, primarily reflecting lower fair value of equity securities received as transaction compensation.
- Operating cash flow improved year over year, while cash declined $53.2 million from year-end, reflecting investing and financing outflows, including $83.9 million of share repurchases and $12.4 million of dividends during the first half.
Liquidity, capital and other key items
- Accounts receivable, net, was $303.1 million, including $125.5 million of long-term placement-fee receivables generally collected over three to four years. The credit-loss allowance was $2.2 million.
- Total liabilities were $303.0 million, including $143.8 million of operating lease liabilities and $31.3 million due under the tax receivable agreement. The filing reports no outstanding revolving-credit borrowings and compliance with debt covenants.
- On April 25, 2022, the board authorized an additional $200 million share-repurchase program. PJT repurchased 1.3 million shares in the first half at an average $64.98 per share; $199.2 million of the authorization remained at June 30. The company declared a quarterly dividend of $0.25 per share, payable September 21, 2022.
- Non-controlling interests represented 38.2% of the partnership at June 30. This ownership structure affects the relationship between consolidated net income and income attributable to PJT Partners Inc.
Outlook, commentary and risks
- The filing provides no numerical earnings or revenue guidance. Management noted that global announced M&A volume fell 21% in the first half versus the prior-year period, though it remained historically high, and said boards and management teams were expected to continue using M&A strategically.
- Management cited geopolitical uncertainty, inflation and monetary tightening as potential headwinds to M&A. Rising rates and economic uncertainty increased restructuring activity in Q2, particularly liability-management work; management did not expect a material increase in defaults before 2023, while identifying healthcare, consumer-facing businesses and some industrial sectors as more exposed to distress.
- Management said fundraising conditions remained selective, with investors favoring established relationships and quality managers. Market volatility also shifted secondary-market sentiment toward more diversified portfolios.
- Key exposures include transaction-dependent client receipts, timing and collection of receivables, compensation and share-based award costs, macroeconomic and deal-market cyclicality, and foreign-exchange movements. The company does not hedge currency exposure with derivatives; first-half currency translation was a $5.1 million loss in other comprehensive income.
- Ordinary-course legal matters were described as not expected to have a material effect, although potential losses could not be estimated for certain matters. A previously disclosed New Mexico qui tam case was fully dismissed after the state’s high court denied rehearing in April 2022.
- Disclosure controls and procedures were assessed as effective; the filing reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether weaker Q2 strategic advisory revenue persists, and how restructuring and placement-fee activity develops amid market volatility.
- Collection timing and credit quality of the $303.1 million receivables balance, particularly the $125.5 million in long-term placement-fee receivables.
- The scale and future impact of compensation and equity-based compensation costs on margins and cash generation.
- Cash allocation among repurchases, dividends, partnership-unit exchanges and liquidity needs; the repurchase authorization is discretionary and may be suspended.
- Potential effects of macroeconomic conditions, currency movements, and the tax receivable agreement; management notes actual tax-agreement payments may differ significantly from estimates.