PJT Partners Inc (PJT) 2017 Q3 法說會逐字稿

Good day, and welcome to the PJT Partners Q3 2017 Earnings Call. My name is Joyce, and I will be the operator for today. (Operator Instructions)

And now I'd like to hand the call over to Sharon Pearson, Head of Investor Relations. Please proceed.

Thanks very much, Joyce, and good morning, and welcome to the PJT Partners Third Quarter 2017 Earnings Conference Call.

Joining me today is Paul Taubman, our Chairman and Chief Executive Officer; and Helen Meates, 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' 2016 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 statement and also the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these non-GAAP metrics and the 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.

Good morning, and thank you for joining us today.

Last quarter, I stated that our second half revenues would be heavily weighted to the fourth quarter. At the time, I didn't fully appreciate how true that would be.

In the third quarter, we generated revenues of $78 million, with revenues for the 9 months totaling $309 million. Rarely will any single reporting period be representative of the earnings power of our franchise, which is why we have consistently said, we measure our progress in years, not quarters.

As we look at all of our leading indicators in building out this world-class Advisory firm, we are on or ahead of schedule across virtually all of them. We continue to solidify our position as the destination for top talent, and are committed to attracting the most talented individuals at all levels.

Since spin, we have grown our headcount by approximately 140 employees. This year alone, we added 11 new partners to the firm, including 7 in Strategic Advisory. On-campus, we received 55% more applications for junior banker positions than a year ago. Our culture of collaboration, integrity and excellence is resonating everywhere.

From the perspective of our clients and potential clients, our reputation continues to grow. PJT is increasingly associated with the highest caliber advice and truly differentiated capabilities. And increasing number of clients are seeking us out as they become more familiar with our high-touch approach and impactful teams.

Our pipelines are strong. We are competing for and winning more business. The number of mandates continues to grow and the size and quality of our pipeline is improving. Increasingly, our 3 businesses are operating in a more integrated manner. This seamless approach undoubtedly enhances the breadth and depth of our client dialogues. We continue to have great conviction about our 2018 progress as the pieces fall into place.

Turning to each of our businesses. In Park Hill, Park Hill taken as a whole was down slightly for the 3-month and 9-month periods versus year-ago levels, reflecting the softness in the real estate fundraising environment previously identified.

Nevertheless, our full year outlook for Park Hill remains constructive, which has derived in no small part from the historical weighting of Park Hill revenues to the fourth quarter.

Restructuring revenues, while down year-to-date, are tracking not far off last year's near record performance even though restructuring activity and commodity-driven sectors has clearly trailed off.

In a world where industry-wide restructuring activity has slowed, our business has benefited from closer alignment with an increasingly more powerful Strategic Advisory franchise and an expanded addressable market, a direct result of the separation from Blackstone.

In the third quarter, our new restructuring mandates ticked up appreciably, driven by new assignments in industries that have experienced significant disruption, including retail, energy, power and industrials.

In our Strategic Advisory business, it continues to be early days. October 1 marked the 2-year anniversary of our new firm. In that period of time, we have increased the number of Advisory partners by 50%. The number of partners on our platform for at least 1 year by more than 100%. And the number of partners on our platform for at least 2 years by almost fourfold. Since our last earnings call, our Advisory partner count increased from 25 to 27. We see great opportunity to add additional top talent as we seek to build out this premier Advisory franchise. We expect that our Advisory partner count will continue to increase at a meaningful pace.

When we look at leading indicators, we pay most attention to the number and caliber of senior professionals that we attract to our platform as well as the roster of clients who seek out PJT for strategic advice. Our number of mandates continues to increase as does the size, complexity and revenue potential of these assignments. While we are not in control of the pace of announced or completed transactions, the ever-increasing number and quality of mandates will inevitably lead to significantly enhanced financial results.

I will now turn it over to Helen to review our financial results.

Thank you, Paul, good morning. I'll begin with reviewing revenues. Total revenues for the quarter were $78 million, down $43 million or 35% compared with third quarter 2016 revenues of $121 million.

The breakdown of revenues: Advisory revenues were $60 million compared with $101 million for the third quarter 2016, down 40% year-over-year. The year-over-year decline was driven by lower average fees earned primarily as a result of the absence of any large transaction closings during the quarter in either Strategic Advisory or Restructuring.

Placement revenues were $16 million, down 13% compared with third quarter 2016 revenues of $18 million. Despite an increase in the number of closed transactions during the quarter, the decrease in year-over-year Placement revenues was a result of a decline in average fees earned. This decline was primarily driven by the nature of the fundraising assignments that closed during the quarter.

For the 9 months ended September 30, total revenues were $309 million, down $17 million or 5% compared with revenues of $326 million for the first 9 months of 2016.

The breakdown of the 9 months revenues: Advisory revenues were $233 million compared with $241 million for the same period last year, down 3% year-over-year. Placement revenues were $69 million compared with $79 million for the same period last year, down 13% year-over-year. The primary driver of the year-over-year decrease was a decline in real estate fundraising.

Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments. And these adjustments are more fully described in our 8-K.

Turning to adjusted compensation expense. Third quarter 2017 compensation expense were $50 million or 64% of revenues, down 36% compared with compensation expense in the third quarter 2016 of $79 million. And the decline in compensation expense was driven primarily by lower revenues. The 64% ratio for the third quarter is consistent with our 9-month ratio and represents our current estimate for the compensation ratio for the full year.

Turning to adjusted non-compensation expense. Total adjusted non-compensation expense was $24 million in the third quarter, an increase of $2.6 million over the same period last year. Due to the relatively high fixed component of our non-comp expense, it is reasonably consistent quarter-to-quarter with the increase this quarter driven by higher professional fees. Third quarter non-compensation expense as a percentage of revenues was 31%. This higher ratio is a function of the lower revenues in the quarter. Over the first 9 months, total non-compensation expense was $68 million, roughly flat year-over-year. And year-to-date non-comp expense as a percentage of revenues was 22%.

Turning to adjusted pretax income. We reported pretax income of $4 million in the third quarter and $43 million year-to-date with an adjusted pretax margin of 5.2% in the third quarter and 13.9% year-to-date.

The provision for taxes as of prior quarters, we presented our results as if all partnership units had been converted to shares, but that assumes all of our income was taxed at a corporate tax rate. And the tax rate also takes into account the tax benefit relating to the delivery of vested shares at a value higher than our amortized cost. We did deliver vested shares in the third quarter, resulting in a modest reduction in our year-to-date effective tax rate to 33.7%, down from 36.3% for the first 6 months. And our current estimate for the full year effective tax rate is 33.7%.

Our adjusted if converted earnings were $0.10 per share for the third quarter compared with $0.34 in the third quarter last year. And for the first 9 months, $0.75 per share compared with $0.84 in the same period last year. The impact from the lower tax rate relating to the delivery of vested shares was $0.03 per share in the third quarter and $0.06 per share for the first 9 months.

Now turning to exchanges. During the third quarter, we received notices to exchange approximately 155,000 partnership units and as in prior quarters, we've elected to exchange these units for cash. With this latest exchange, year-to-date, we will have settled the exchange of approximately 1.2 million partnership units in cash and our fully diluted share count will be below that of a year ago. To date, the exchanges have provided an opportunity for us to minimize dilution without impacting our public float, but there are only 4 exchange opportunities in any given year.

As we noted in our 8-K filing, the board has approved the repurchase of up to $100 million in Class A common stock, and while our primary capital allocation priority is to continue to invest in the business, we believe this repurchase plan will provide us an additional opportunity to be proactive in managing dilution from future share issuance. We expect to find any repurchases from operating cash flow without incurring any debt, and we continue to be mindful of our float. Even with this repurchase plan, we anticipate an increase in the float in 2018 given the vesting of employee and partnership shares in 2018.

A couple of notes on the balance sheet. We ended the quarter with approximately $157 million in cash and short-term investments; $181 million in net working capital and no funded debt. And we recently renewed our 2-year revolving credit facility with First Republic Bank.

Finally, the board has approved a dividend of $0.05 per share. The dividend will be paid on December 20, to Class A common shareholders of record on December 6.

I'll now turn back to Paul.

Thank you, Helen. Before I turn to our firm outlook, I wanted to reiterate our view of capital deployment and how it relates to our decision to initiate an open market repurchase program.

As Helen noted, the board has authorized a $100 million open market repurchase plan. We have consistently highlighted that investing in talent is our #1 capital priority with our highest return coming from our people and the talent we attract to PJT.

A close second is managing share count and ownership dilution. We believe that now is an appropriate time to add another arrow in our quiver to manage our capital position, particularly as our cash generation and float increase.

To date, we have avoided open market repurchases in part due to our reluctance to reduce the float in our stock. However, given employee vesting events in 2018, we can now effect open market repurchases and increase our float in 2018. As Helen discussed, this program will be funded with cash on hand and internally generated funds and not through debt.

Turning to our firm outlook. As we sit here today, the fourth quarter is shaping up well and we remain confident in our growth prospects for 2018 and beyond. We see growth opportunities in Park Hill as our investments in the real estate and Secondary's business bear fruit. Our leading Restructuring business has held up well coming off a near record 2016, and we are seeing our business benefit from the additional footprint in Strategic Advisory and the independence from Blackstone. In Strategic Advisory, the increased client dialogues and mandates will boost Advisory performance through the inevitable increase in announced and completed transactions.

And with that, we'll now take your questions.

(Operator Instructions) The first question comes from the line of Mike Needham with Bank of America.

I guess, first on the Restructuring business. From your comments it sounds like things are still doing pretty okay for the business. Is it right to say that you don't think that business is over earning now versus the new things that you're seeing coming in?

I think that's fair. We had a terrific 2016. And clearly, we benefited in 2016 from a hyperactive restructuring market for commodity-driven businesses. And that has slowed -- yet, while that has slowed appreciably, our business has come very close to keeping pace with 2015 levels, which we view as a significant accomplishment. And I see that in part because our Restructuring business is meaningfully more powerful today than it was previously, because it's prosecuting more opportunities jointly with the Strategic Advisory business. As we build out the Advisory footprint, there are increasing number of introductions coming from the Advisory side of the business. So as we develop that really a shadow sales force and a team that has their own set of relationships, their own domain expertise, we make that business more powerful. In addition, when this business was under Blackstone, it really was precluded from doing a lot of business for financial sponsors. And now with the separation, we're much more easily able to navigate and to represent other financial sponsor clients. And as that business continues to take hold, we see more opportunity there. And even though the overall market is somewhat muted, we are heartened by the fact that in the third quarter, we saw an appreciable uptick in new mandates and they're coming from industries away from commodity-driven. So as you see more and more technological disruption, more and more industries are being challenged, the sort of a shifting sands are moving to other industries whether it's industrials, power, generation, retail, real estate and the like. So we're quite optimistic about the intermediate and long-term. But the realities are, we're benchmarking 2017 against a stellar standout 2016.

Okay. Got it. And following up on the financial sponsor stuff. Is that -- do you think that clients -- corporate clients for the M&A Advisory business, are they still -- or financial sponsors for M&A, do they still associate the firm with Blackstone? I guess, what are some of the things you've been trying to do capture that, that client type, I think, financial sponsors are part of like 1 out of every 5 M&A deals now. So I guess what's the upside there? And are you seeing traction with that -- those clients?

So you got a look at this as a negative and a positive. I think prior to the spin, the sponsor engagement was close to 0 because people viewed it as competitive, this business under Blackstone. That issue disappeared on the 2 of October, 2015. What wasn't in place on the 1 or 2 of October 2015 was a long historical record of covering the broader sponsor community. And we have begun to put in place more initiatives in that regard, but even without being anywhere near our fighting weight there, the number of sponsor engagements, both on the Advisory and Restructuring side has increased dramatically from where it was just a short while ago. And just as we consider ourself to be significantly underpenetrated in the industrial world and the corporate world, I think the same is true in sponsors, and while we've gotten a lot of traction, we're just scratching the surface relative to the opportunity.

Okay. Got it. And then just on guidance, I apologize if I missed a bit, do you still think the second half of this year looks like it's going to be stronger than the first half?

Absolutely.

The next question comes from the line of Devin Ryan from JMP Securities.

So maybe first question here, so Paul, you mentioned the leading indicators in the business and feeling really constructive around those. And so I'd like you to just maybe touch on in a more granular level what some of those are and what's giving you the positive feeling? And also just bigger picture, I mean, it does feel like even in the past several days, your PJT has been on doing some profile announcements. And so I'm curious if that's a function of kind of the leading indicator, of just people becoming productive that are now on the platform? Or is that a shift in the market as well where you feel like maybe things are opening up as well? So I'm just trying to put it all into context here.

Yes. Look, I think one of the challenges is, we're managing this business based on leading indicators. We're always looking at the progress we're making on a prospective basis. And yet we're reporting results that in many instances relate to mandates that were secured 12 or 18 months ago. And what's odd about this particularly is we're at this inflection point in our growth is we're reporting results and describing a firm that no longer exists because we're dramatically different and more powerful today than we were just a short time ago. And if we just take -- 1 indication is just the traction we're getting in attracting best-in-class senior talent. So we're having dialogues every single day. And we know who is interested, and the level and the intensity of those dialogues and our confidence that over time a significant number of these individuals will land at our firm. And yet we don't report a new partner addition every day. They tend to come in clumps. So the idea is that in September, 4 new Advisory partners showed up for work, it all happened within a 30 or 35-day period. And it wasn't as if all of a sudden, we became attractive to those candidates. It's just that the way it all happened, it all was observable to the outside world in a short burst of time even though that reflected a lot of hard work. In a similar vein, when we look at our traction with clients, we're looking at so many indicators. We're looking at how many companies we're actively having dialogues with. We're measuring whether or not we're gaining traction, whether or not we're invited to present our qualifications, whether or not we're winning some competitive contest to be selected as an adviser, whether or not we're being retained in Advisory context. If we are, whether we're the lead adviser of the co or a junior adviser. What the revenue opportunities are? We're looking at all of that data on a daily basis, but because of the nature of the business until those mandates translate into announced transactions, it's hard for the outside world to begin to appreciate some of the progress we're making. And then until those announced transactions end up closing, we don't report the revenues. So it's something we're looking at a lot of internal data and getting very comfortable, and in a similar vein, when we announced 3 transactions in a 24-hour period, that's not the run rate of the firm. But on the other hand, due to the fact that we have may done some period of time without some visible announced transactions doesn't take away from the fact that we're securing an ever increasing number and ever increasing quality of Advisory mandate.

Got it. That's a very helpful color. And I guess, just to also maybe add some context around the broader backdrop for business. I understand that the PJT story is a little bit idiosyncratic to what you guys are doing. But what are you seeing in the broader landscape for kind of appetite to do business on the M&A side? Is that improving or the same? Just curious what your thought is there.

Yes. I think what I've said before is there is a macro trend and a micro trend. The macro trend, we see that we are in a secular increase or secular upswing in M&A activity. And as the world becomes more global, more connected, more disrupted, companies need to aggressively manage their portfolios and either more aggressively prune their portfolios and refocus or they need to more aggressively commit to some of their businesses to fortify them and prevent them from being disrupted. And that can only mean more M&A activity as the holding periods of assets shrink. And if we were to get corporate tax reform, I think one of the many benefits would be a significant reduction in the friction cost, because paying taxes on sales of businesses is a friction cost which prevents companies from appropriately optimizing their portfolio. And if the rate were to come down appreciably, I think you would see another meaningful spike up in activity. On the micro, some of this is being held back by a lack of clarity out of Washington as to tax reform and as to antitrust point of view. And I think as you get more data points, one way or the other, and everyone knows the rules of the game with greater clarity, that will also create an uptick in activity. But I think what we've consistently said is that regulatory policy uncertainty whether it's in the U.S. or elsewhere around the globe doesn't affect all actors equally. It tends to affect the margin, some percentage of potential corporate clients and corporate transactions, but for a large part of the universe, they are moving forward with their business day in and day out. And in a world where it looks as if global growth is on the uptick, consumer confidence appears to be on the uptick, rates continue to be quite low by historic levels, equity values, access to capital, so many of the [addition] of a healthy M&A market are present today. I think what you're seeing is a lot of companies are just getting on with transactions that make sense to them individually notwithstanding a lack of macro clarity on some important policy matters. And I suspect that when we get that clarity, that's an opportunity for another leg up in activity levels, because at some point, just knowing what the answer is, is better than this uncertainty.

Got it. And maybe a follow-up here on the Restructuring approach it from a different angle here. And I appreciate the comments on momentum in the business. I mean, It does feel like maybe the baseline for that business is higher for PJT for the reasons you mentioned. I'm trying to think about maybe the upside case for Restructuring with some of the dynamics that you mentioned. And really the question is, is there a bigger upside case for the business? I know that there has been some evolution in just terms of how Restructuring has progressed here, and there was more roles per assignment, and there was obviously more debt outstanding. But is there a capacity constraint with people where if you look at maybe the prior peak and the stress coming out of the financial crisis where you would say, people were kind of hitting on cylinders and everybody was as busy as they could be. So that kind of get to the upside? Or do you feel like, for many reasons, this could be much bigger if we go back to that stress scenario, because people can do even quite a more than they were doing under the new framework at PJT?

Yes. Devin, I think about it in really 3 vectors here. The first is, all else equal, whatever the restructuring environment is, our Restructuring market share should be greater in this framework than it was with the prior ownership for all the reasons we've talked about: Absence of conflicts, engagement with sponsors, benefit from an ever-increasing and more powerful Strategic Advisory business, more collaboration, more cooperation. So our baseline market shares should over time be meaningfully greater than they were under the old structure. The second is, in the past I think it was my sense that restructuring activity was so heavily weighted to the macro economic backdrop, and when you had the recession then you saw an uptick. And what we're increasingly seeing is isolated pockets of restructuring even in a very healthy and benign global economic environment. And a lot of that coming that is from technology and technological dislocation. So even in a world where you have very low interest rates, an abundance access to capital and GDP growth rates that, at least for the moment, are 3% and north, you still have industries that are being radically transformed and dislocated, and as a result, you're seeing big spikes in targeted industries. And I think that suggests that all else equal, the baseline of Restructuring activity for a given GDP scenario, should be greater than it was perhaps in the old models. And then the third, which is some time out is the sheer quantum of high-yield paper that is out there. And all of the issuers and the quantum of debt and the lack of covenants and the like that, inevitably, if there is a severe macro dislocation in downturn, one would think that the upside would be meaningfully greater than in prior cycles. So it's kind of 3 different vectors depending upon your timeframe whether it's short, intermediate or long term.

Okay. That's great, Paul. Maybe just last one here on the recruiting environment and it's good to hear that the conversations are still at a high-level and obviously, you've had a number of people join recently. Here we are kind of late in the year so I guess, I personally wouldn't anticipate much more, but it sounds like you're having a dialogue as you're setting the stage for 2018. It would seem that -- it's a -- the preference is to have people on board longer period of year than not. So when you think about the conversations you're having today, I understand you can't predict this perfectly. But do we have kind of this big pent up backlog where people are saying, we're going to join you kind of right after bonuses after we're able to resign from our prior employer. Is that kind of what we're setting the stage for here into early next -- into early 2018? Or how should we think about just the recruiting dynamic given that you're having so many conversations?

I say, it's a lot like talking about our revenue visibility. If you ask me for our confidence level in number of partner additions in 2018, I've got great clarity. If you ask me when and how and the shape of that curve, it's really idiosyncratic. And we have made a point of not having artificial deadlines or windows. There is too much value in getting the right individual who is entirely committed to joining us with no reservations and when that moment is right, then that's the moment we're going to make that addition. And waiting 3 months or 6 months for some check to clear, if it means that all those enormous progress we can make is put off for 3 to 6 months. And if it then means that the additional hires that we might make to augment that partner addition is in turn held off then we're being penny wise and pound foolish. So it's all about the individual, and as a result, there is no rhyme or reason or pattern to it. But I think what is clear as a pattern is the engagement -- and another thing is happening, the more transactions that we announce so that our success is visible to the outside world in more industries that folks may not have initially associated our firm with, and in more geographies, more regions, and the more individuals come from an ever-increasing number of prior employers, that just increases the interest and the enthusiasm in what we're doing. And we've always said that and as we're -- we have a mantra here, go slow to go fast. And by being very disciplined about who is onboarded, making sure they're the right individuals, not just professionally but with the right character and the right ethos and the right mindset, and then making sure that everyone who comes on to this platform is widely successful. Even though that is such a high bar that it may cause recruiting to be a little slower early; what we're starting to see is, as you get that flywheel going, it has intermediate and long-term benefits, because it makes it easier to attract the next wave.

The next question comes from the line of Steven Chubak with Nomura Instinet.

So I wanted to start with maybe a 2-parter on the Advisory outlook. Paul, certainly I appreciate a lot of detailed remarks you've given on some of the factors impacting deal activity. One of the items that you didn't touch on this go around, but had mentioned in the past is evaluation. I'm just wondering given the strength or the continued strength, I should say in public markets that we saw this quarter, to what extent is that still an impediment for potential buyers?

I think what I've consistently said is, I think private buyers are less accepting of current evaluations than public buyers. And some of that may be the fact that in the public marketplace, with funds flows and all the money has to be put to work where corporates do have some degree of the discretion as to when they put money to work. At the same time, strategic imperatives for a lot of companies are such that they can't sit around and wait indefinitely. And while I do think that there is some altitude sickness on the part of a number of participants at current valuation levels, the more this market stays at these levels and grinds higher with no clear corrective impetus on the horizon, I think at some point people start to get more accepting of valuation levels. Then the flip side is, you do have, particularly in stock transactions, buyer's ability to try and capitalize on their own more highly valued currency. So it's clearly an issue in this marketplace. All else equal, I think if the market settled in here by longer period of time, that probably makes it easier. But at the end of the day, this world continues to move forward. And a lot of what you're seeing are quite strategic transactions, you're seeing a lot more of strategic on the buy side than you are financial sponsors. And sponsors have the ability to decide whether they want to be in harvest mode or invest mode. We're seeing more harvesting on the part of sponsors and we're seeing corporates continue to go to work. So while it's not perfect conditions, I think by any stretch of the imagination, we're still at a very constructive beneficial M&A environment. It just isn't at the peak levels of 2 or 3 years ago, and what we've consistently pointed out is, those factors that drove those peak activity levels, a lot of that was sort of a moment in time. A lot of that was driven by a rush for inversions and the [client] domicile outside the U.S., and they were very large-scale transactions. That's not a sustainable base of activities. So I think what we're seeing today is maybe lower levels of activity, but still very healthy by any historic standpoint. And maybe a bit healthier, because it's not driven by one impetus or one fad. It's a bit more broad-based.

Very helpful color. And just as a follow-up on your remarks relating to tax reform. I was hoping you can give us some perspective as to how we should be thinking about tax reform gain theory and all the different scenarios? There's some debate as to whether we can, in fact, cut the rate to 20%, that's certainly a question that's still looming. There's been some discussion around the potential phased-in rate cut. I didn't know if you could speak to, under a couple of the different scenarios that have been thrown out there, how that might inform how corporates are going to act? Or what we could see in terms of deal activity?

Look. I think anything -- like anything else, when you have step downs that causes folks to sit on the sidelines and look at the calendar. When it's just -- let's get on with it and there's the new rate and it applies and there's confidence that it's going to remain in force for an extended period of time. And they're perceived as permanent and not transitory. You see greater increase in activity. So while, I have absolutely no sense as to whether or not we will get reform, and if we do, what it looks like, clearly, a phase-in would probably be less stimulative than if it was just taking the rates down and having it be either retroactive or effective at a date certain that wasn't too far out.

Got it. And last one for me just on Park Hill and just the fundraising outlook. Your competitors have alluded to strengthen that business this quarter. It feels like there was some divergence in results, primarily due to real estate fundraising. And we -- hoping you can maybe speak to some other idiosyncratic factors that may have impacted results this quarter. And I know in the past, you've talked about that business being a source of stable predictable revenues. But just given some of the positive commentary from peers, do you see the potential to grow off current levels?

Yes, I think there's a lot in that there. First of all, if you look at the 9 months numbers, because what I've always said is the Park Hill business a steady Eddie measured year-to-year-to-year. But it's all over the place quarter-to-quarter-to-quarter. And I kind of feel your pain trying to model out what it looks like quarter-to-quarter. And we have much more conviction about it on an annual basis. I think the only source of weakness year-to-date is in the real estate space. But the rest of the businesses continue to be at or above where they were a year ago. I think in the quarter, it's just a couple of things. One is, there is a seasonable component to closings, and in the third quarter, which does cover the summer months, you tend to see a lot fewer closings, at least that's been the historic pattern at Park Hill and you see a lot of funds trying to get it close by calendar year end, so you tend to see disproportionally more closings in the fourth quarter. And like anything else, the strength of Park Hill is not measured by which funds close in which quarter. It's how many mandates, who are you in the market with, who are you bringing to market, which mandates are you winning, and that tends to be very, very lumpy as to when the revenue actually gets recognized. So I think it's fair to say that we had an absence of meaningful closings in the quarter across the board. But year-to-date, 3 of the 4 verticals have been flat to up.

The final question in queue is a follow-up from Mike Needham with Bank of America.

There are a couple of just model things. First on taxes, the adjusted if converted taxes were lower than past quarters. What drove that?

We delivered some vested shares in the third quarter. And with the new rule in terms of those shares being at a value higher than we were amortizing them that caused a small benefit, and that's what caused the change in rate. The most -- the deliveries are earlier in the year just so happened we had some in the third quarter.

Okay. Got you. And is there any -- just based on what you know now, any change in like the next -- the run rate, adjusted if converted tax rate for the next year?

So for the full year, we're forecasting the 33.7%. And next year, there will be some deliveries so we'll revisit that at the beginning of next year. But we're assuming that there will be a benefit in terms of where we're amortizing those vested shares and where they're likely to be delivered.

Got it. Okay. Thank you. And just the partner count from the presentation on the site, the 60 partners. Is that as of today? And is anybody not in that, that's you know been publicly announced? Or someone you're expecting to join who's on [gardening] leave?

Yes. So the 60 is at the end of Q3 2017. We had one new partner join Strategic Advisory in Europe. So that would take the number today to 61.

Thank you, all, and Happy Halloween.

Thank you.