PJT Partners Inc (PJT) 2025 Q4 法說會逐字稿

Good day and welcome to the PJT Partners fourth-quarter 2025 earnings call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma'am.

Thank you very much. Good morning and welcome to the PJT Partners full-year and fourth-quarter 2025 earnings conference call.

I'm Sharon Pearson, Head of Investor Relations at PJT Partners, and joining me today are 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 2024 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 evaluating the company's performance. For detailed disclosures on these non-GAAP metrics and their GAAP reconciliation, 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 everyone, and thank you for joining us to review our fourth-quarter and full-year results.

Across the Board, our 2025 results were record setting, as we reported record revenues, record adjusted pre-tax income, and record adjusted EPS. The strong performance reflects our sustained investment in building the best advisory focused firm possible. A firm distinguished by its best-in-class talent and its unwavering commitment to a culture of collaboration and teamwork. This firmwide investment continued in 2025 as we added senior talent across industries, capabilities, and geographies.

For the year, firmwide partner headcount increased 12%, while total head count increased 7%. We ended the year with record cash balances of $586 million after directing a record $384 million to share repurchases. Our capital priority remains first and foremost to invest in our firm and our people. And second, to return capital to shareholders and to do so principally through repurchases.

After Helen takes you through our financial results, I will review our business performance and outlook in greater detail.

Helen?

Thank you, Paul. Good morning.

Beginning with revenues. For the full-year 2025, total revenues are $1714 million, up 15% year over year. As Paul mentioned, this is a record result for our firm. All of our businesses had record revenues, with strategic advisory, the primary driver of revenue growth for the year.

So the fourth quarter, total revenues of $535 million, up 12% year over year, also reflecting a record revenue quarter for our firm. The growth in the fourth quarter was primarily driven by growth and restructuring and PJT Park Hill. Turning to expenses consistent with prior quarters, we've presented the expenses with certain non-GAAP adjustments which are more fully described in our 8-K first adjusted compensation expense.

Full-year adjusted compensation expense was $1.15 billion, representing a compensation ratio of 67.1%, which compares to 69% for the full-year 2024. Given the higher compensation accrual for the first nine months of the year, the resulting rate for the fourth quarter was 66.2%. We will provide guidance on our 2026 compensation estimate when we report our first-quarter results.

Turning to adjusted non-compensation expense. Total adjusted non-compensation expense was $207 million for the full year 2025, up 12% year over year. The main drivers of the year-over-year increase were higher occupancy costs, driven by additional space in New York and London and higher travel and business-related expenses. In the fourth quarter, total adjusted non-compensation expense was $54 million, up 16% year over year, with the same drivers of year-over-year growth, higher occupancy costs, and higher travel and business-related expenses.

As a percentage of revenues, our adjusted non-compensation expenses was 12.1% for the full-year 2025 and 10.1% for the fourth quarter. We expect our total non-compensation expense in 2026 to grow at a similar rate to 2025, and we will provide more guidance on our outlook for the year when we report our first-quarter results.

We reported an adjusted pre-tax income of $357 million for the full-year 2025 and $127 million for the fourth quarter. Our adjusted pre-tax margin was 20.8% for the full year and 23.7% for the fourth quarter. The provision for taxes, as with prior quarters, we 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. Our effective tax rate for the full year was 14.1% as we realized a significant tax benefit from the delivery of vested shares.

The 14.1% rate was below our previous estimate of 15.5%, primarily due to the final income allocations across the state, local, and foreign entities. For 2026, our current estimate for the tax rate is in the high-teens percentage, which is between the 2024 rate and the 2025 rate. We'll provide an updated estimate when we report first-quarter results.

Our adjusted if converted earnings for $6.98 per share for the full year, compared with $5.02 in 2024 and $2.55 for the fourth quarter, compared with $1.90 for the fourth quarter 2024. On the share count for the year ended 2025, our weighted average share count was 43.9 million shares, slightly down year over year. During the year, we repurchased approximately 2.4 million shares and share equivalents. And as Paul mentioned, we spent a record $384 million on share repurchases.

We are in receipt of exchange notices for an additional 850,000 partnership units and subject to Board approval, we intend to exchange these units for cash. We view the partnership exchanges as an effective way to repurchase shares without impacting the float. And consistent with our capital priorities, we will continue to invest in the business while using excess cash to, over time, reduce our share count.

On the balance sheet, we ended the year with a record $586 million in cash equivalent and short-term investments and $632 million in networking capital and we have no funded debt outstanding. Additionally, the board has approved a quarterly dividend of [$0.25] (technical difficulty) per share.

Finally, a note on our revenue reporting. Going forward, we will report our revenue as a single line item and will no longer break out the advisory placement and other designations. In our earlier years as a public company, the placement fee line was a reasonable proxy for PJT Park Hill. Today, more than 10 years on with the expansion of our Private Capital Solutions business and the growth in our corporate placement capabilities, that is no longer the case.

Given our strategic priority of expanding and further integrating our Broad advisory capabilities, these revenue designations do not reflect either how we manage our performance or how we measure our progress. As we've done in the past, we will continue to provide context around the key drivers of our performance.

Back to Paul.

Thank you, Helen.

Beginning with restructuring, notwithstanding broadly favorable macroeconomic and capital market conditions, an increasing number of companies continue to grapple with overleveraged balance sheets, challenged business models, technological disruption, and changing consumer preferences and governmental policies. In this environment, demand for our liability management and restructuring advice remained elevated and we delivered record Q4 and full-year results.

Turning to PJT Park Hill. Relatively modest capital returns have further strained an already challenged primary fundraising environment, prompting GPs and LPs alike to pursue alternative liquidity options while investor interest in secondary products continues to grow, driven by an increasingly appreciated return profile.

Against this backdrop, global primary fundraising volumes declined for the fourth straight year while client interest in Private Capital Solutions and other structured products continue to build. In this push-pull environment, our PJT Park Hill business delivered its strongest quarter ever, enabling full-year results to exceed 2024's record results.

Turning to strategic advisory. M&A activity increased sharply in 2025 with global announced volumes up significantly as strength in debt and equity markets, greater confidence regarding regulatory outcomes as well as improved CEO confidence, all serve to make this the second best year ever for announced M&A activity.

Our 2025 strategic advisory results benefited from this favorable deal environment as well as the continued investment in and maturation of our advisory platform. 2025 strategic advisory revenues significantly outpaced 2024's record levels, with revenues in our strategic advisory business reaching record highs for both the fourth quarter and the year.

As we look ahead, the broader capital markets and M&A environment continue to be highly constructive for deal making. The momentum and global M&A activity observed in the second half of 2025 is likely to carry over through 2026 with strength in debt and equity capital markets, greater confidence regarding regulatory outcomes, and increased CEO confidence, all providing ballast.

But as events of the last couple of weeks have shown, market sentiment can turn on a dime. Geopolitical risks as well as debate surrounding the pace of AI development and capital deployment, and the economic returns associated with this investment continue to loom large. How these factors evolve will play a central role in shaping the year ahead.

As it relates to our firm, in PJT Park Hill, the strength in our Private Capital Solutions business should more than offset any declines in primary fundraising. In restructuring and liability management, we continue to operate in a sustained period of elevated activity and our best-in-class team remains well positioned to capture additional market share.

In strategic advisory, while we began 2026 with a pipeline of announced transactions comparable to year ago levels, our pipeline of pre-announced transactions, measured both by number of mandates and revenue opportunity is up meaningfully from a year ago and now stands near record levels. We are better positioned than ever before to capitalize on a favorable deal environment due to our expanded footprint, enhanced capabilities, and growing brand awareness.

Given our differentiated mix of businesses and the growth opportunities before us in each of these businesses, our firm remains well positioned to prosper in nearly any market environment. As before, we remain confident in our near-, intermediate-, and long-term growth prospects.

And with that, we will now take your questions.

(Operator Instructions)

Devin Ryan, Citizens.

I want to start with restructuring. Obviously, I think a lot of interest in that business -- in the industry just as new firms are saying, kind of slightly different things on kind of the outlook there and so I'm curious if you can just give a little bit more color around the type of activity that you're seeing. Is it kind of amend and extend or kind of comprehensive liability management? Is there more in court and then just expectations there as we go out?

I know we don't have a crystal ball here, but in a world where your M&A activity is kind of normalizing and accelerating nicely, does restructuring maintain? Can it still grow or does the normal pattern of it kind of falling off a little bit kind of play out? I'm just curious how you're thinking about not necessarily the next couple of months but by the next 12 to 18 months. Thanks.

Sure. I think we've been remarkably consistent on this point which is we're in a multi-year period of elevated restructuring activity and there are lots of reasons for that. Some of which is the benchmarks and the mindsets relate back to historically low interest rates that were aberrational and we're dealing in a more normalized rate environment today than before.

The second is we're dealing in a world that is speeding up, not slowing down, and the technological innovation is fueling our global economy, but at the same time, it's creating winners and those winners are redefining, who the losers are left behind companies are in what industries and which companies and as a result, you can have a world where you have robust GDP growth, you have broad consensus that the macroeconomic environment is constructive, but at the same time, have very concentrated stress in certain industries and with certain companies.

And I think that suggests to us that that this has legs and is going to continue to play out for a period of time, and the reality is we haven't really hit a recessionary environment for an extended period of time. If we were to, then all this commentary sort of gets taken off the board and you're looking at a meaningful leg up. But if you just assume the current economic environment, we think you're going to continue to see robust liability management and restructuring.

We have not seen any diminution in that activity, and if anything, we think we're starting to see the very early signs of that growing. In addition, we have every day the goal of broadening our footprint, broadening our footprint with sponsors, broadening our footprint in industry groups, broadening our footprint geographically, and every day that we broaden that footprint gives us a greater addressable market in which to market those leading liability management and restructuring capabilities and as we're able to reach a broader group and become relevant to a broader group that gives us you know the prospect of continuing to grow our business at rates that may be greater than what the overall liability management restructuring data suggests.

That's great color, Paul. Thank you.

And then just for my follow-up. I want to talk about the kind of platform maturation. You kind of mentioned that a couple times, obviously just tremendous growth in strategic advisory over the last -- really the last decade but the last handful years really the business has been maturing, so and again I appreciate you don't break out a segment P&L.

It's not how you run the firm, but can you help us get comfort around the ability to drive operating leverage off of those investments? Is there any proof points that you're seeing that. And then just kind of order of magnitude of operating leverage as the business backdrop transitions to a stronger M&A environment to the extent it does and I don't know if there's a way to think about an algorithm of revenue versus expense growth or just how you would frame just given the growth you've had and then the maturation of some of that growth as well?

Well, I don't think we've had a year to date where our strategic advisory partners writ large have been more productive than in 2025. So clearly, as you just looked at the maturation and the progression of our firm, that continues to be up and to the right. At the same time, that may direct to up and to the right, but that doesn't mean that every quarter and every year is precisely up and to the right.

And as an example, one factor is just the pace of investment, and we've made it very clear that when we find individuals who match our expectations for talent, relationships, and personal integrity, and ability to operate in a culture of teamwork and collaboration; we're not going to be shy about onboarding those individuals. So some of these productivity measures get masked from time to time on what's the rate and pace of investment, so that's why it's never a straight line. And also the strategic advisory business is a long sales cycle business, so many times you could be having real impact and effect.

And from the KPIs one would look at you're seeing increased productivity even if the revenue lags, but I think we look back on 2025 and we're just at a fundamentally different firm and maybe the easiest way to see that is if you just look at our firm wide revenue and compare it to 2021, which was the peak year for M&A activity of all time.

On that basis, we're up nearly 75% in firm revenues from 2021 to 2025. So just to give you some perspective as to how this continued investment is starting to gel, I think there's been real returns, but we're not satisfied with where we are because we have really high expectations and aspirations, but we're going to just continue to methodically get after all of the white space that we see across the board.

James Yaro, Goldman Sachs.

Hi, this is [Songqing Jiang] stepping for James.

Paul, 2025 was a mega cap M&A driven backdrop. So do you think can this part of market continue at this pace or improve further in '26?

I certainly think we haven't tasted the full extent of how robust the M&A market can be but when you have a year like 2025 where depending upon how one counts volumes are up 35%, 40%, even higher than 40% and you're looking at the second highest revenue year, it becomes a difficult comparison, but I focus less on whether we're going to ring the bell and top tick last year.

I asked myself, are we in a multi-year period of elevated deal activity? And I think given the current macroeconomic backdrop, the regulatory posture of this administration, the desire in Europe to address certain issues in terms of industry consolidation and the like which is perhaps been a negative for the continent when I think about the attractive capital markets backdrop, and a world that is speeding up and not slowing down, which means you either need to press your competitive advantage.

And one of the ways to do that is with more scale and to use your capabilities to continue to build boats or you find yourself left behind and you need to think about the corporate structure that you have or you're vulnerable to shareholder activism or you need to pair the mission and focus on areas where you have clear core competencies and advantages.

All of that suggests that we should be in a multi-year period of elevated deal activity. It's easy to talk about inflection points when things are going to get better or things are going to get worse, but when you're dealing with quite attractive macro backdrop, the issue is just simply how long is it going to continue, and we think it has legs, but whether we're continuously hitting new highs, that's much harder to call.

Thanks, very helpful.

Just to follow-up here. You delivered a meaningful step down in the competition in the quarter. Can you please help us think through the outlook for the comp ratio from here? Thanks.

Well, I think we've said a couple of years ago that when we're delivering our financial results that we thought that based on everything we had seen, our compensation as a percentage of revenue had peaked and it had peaked because we had maximal investment in a period of relatively low velocity M&A activity and that confluence had caused that ratio to gap out in the short-term, but we expected that to continue to work its way down.

And I don't think we're done working it down. The question is just simply the pace and rate of that and that's in part going to be a function of how the markets develop over the next couple of years and how strong they are and how much operating leverage we get by revenue growth, but some of it's also going to be the pace of investment, which is still very much TBD. And we'll report at the end of the first quarter when we deliver our Q1 results, our best estimate for what that ratio should be for 2026.

Brennan Hawken, BMO Capital Markets.

I'm hoping you can help me with something because I'm struggling a little bit here. So I hear you loud and clear that restructuring the outlook is pretty good. But you know when we look at the revenues here in the fourth quarter, I know you guys flagged in the press release that restriction was up, but like the multiple on the [theologic] revenue was one of the lowest that we've seen in years.

So to me that suggests that the actual quarter was a little bit lighter on the restructuring side than what we've been seeing. So number one, I'd love to hear you maybe speak to those. I know restructuring is chunky, right? So like that can happen quarter to quarter, but maybe help reconcile that a little bit.

And then, when you're thinking about restructuring, could you speak to maybe certain sectors and where you're seeing a lot of activity? There's a lot of [agida] out there around software, so curious about what you're seeing in your business there.

Okay, I don't spend a lot of time looking at theologic data. I just focus on the business that we do. And we are pretty clear in how we communicate to our investors. We had our record quarter in restructuring. Q4 was the best restructuring quarter we've ever had. The year was the best restructuring year we've ever had. And we continue to be constructive and optimistic about the future prospects for our franchise. I can't be any clearer than that. Those are the facts.

Okay, and sectors. Were you're busy in restructure (multiple speakers)--

Sectors, look, we're really busy across the board, but I think there are areas. I think you look at challenged industries, parts of the healthcare complex, there's a lot of pain. Software is an area where there will be elevated focus just given events and pressures coming from AI. We've talked consistently about the fact that AI is going to be a disruptor. The whole digitization and the consumption of media has created significant opportunities in media. There are issues in retail which also come from online versus offline shopping and changing in the consumer behaviors.

I think it's broad-based. It's not narrow because in many industries, there are companies that are being left behind and their business models took on or suggested they could support a quantum of debt that as the world moves forward, it's clear that that was not the right capital structure and companies are increasingly trying to get ahead of these issues and they're looking at where their choke points might be in the future as far as covenants or significant maturities and they're using the creativity and deep capital markets and the ability to access public or private markets to come up with a better capital solution. So it's really quite broad based and our focus is not narrow and that's another reason why I have greater confidence that this trend continues. If it was just a couple of very narrow verticals, there's always the risk that that well runs dry, but that's not what we see.

Got it. Yeah, and look. Thanks for that color. The strength of the restructuring franchise that you've built is clearly quite good.

Maybe I'm going to try my question in a different direction. I know you don't pay attention to theologic, but we're stuck here using the data that we've got. So could you speak to Park Hill? I know you spoke to the challenges in the fundraising environment, but there's also the GP-led secondaries business, which has been better. What did trends in Park Hill -- revenue trends in Park Hill look like and was that maybe a little bit weaker just because the fundraising remains so challenging?

I think most of my commentary throughout the year was that we expected the year to come close to or be proximate to the prior year's record performance. 2024 was a record for the Park Hill business. We ended up with a record fourth quarter and as a result of a record fourth quarter, we created a new full-year record, our 2025 results eclipsed 2024.

I mean if we just step back for a moment. We generate over $500 million in revenues in the quarter. We've never done that before as a firm. We had a record quarter. We pierced $500 million by a significant amount. We had the best quarter ever in restructuring. We had the best quarter ever in strategic advisory. We had the best quarter ever in PJT Park Hill.

And the reality is we're dealing with a fourth quarter a year ago where we also had records, so we had very tough hurdles there, and we cleared them across the board. So all of the businesses are very well positioned going forward. I think as you look at the Park Hill business going forward, you're going to see Private Capital Solutions, structured products, and the like increasingly represent the bulk of the revenue opportunity and that market, as I said in the outlook, is growing meaningfully faster for us than any potential diminution or flatness in the primary fundraising line which makes us optimistic about the Park Hill business in (inaudible). So, we're feeling pretty good about where we stand at the end of 2025 moving into 2026.

Jim Mitchell, Seaport Global Securities.

Paul, last, you mentioned that M&A volumes are the second best year ever. But when we look at sort of the number of deals, down for the fourth year in a row last year, so very much a mega cap kind of environment. So I guess number one, are you seeing activity starting to broaden out to more the middle market and down? And then secondly for you specifically for PJT, I know you've been looking to build out your touch points with financial sponsors, so just any kind of update on how you're positioned for that maybe middle market recovery among financial sponsors.

So, volumes are up meaningfully, deal count down, although if you really double click on that, a lot of the reduction in deal count is in the sub-billion dollar transactions and that's not a place that we play as much in so in some respects that's not -- it's not as broad based as people might think because a lot of that reduction in deal count is at the much, much smaller level than it is in chunky $3 billion, $5 billion, $10 billion transactions. That would be the first point.

I think the second point is, if you look at the buying binge in private equity in 2021 and then the painful comeuppance in 2023 when there were somewhere like nine rate hikes in 2023. You've got a very low velocity private equity environment and I think what we're doing is we're getting back to equilibrium between capital expended and DPI and we've talked about this. It's not always the easiest way to shift from a fundamental imbalance where all this capital has been called and relatively little of it is monetized.

If you do that for a period of time, you create stresses and strains in the system. I think the industry has worked through a lot of it. They haven't worked through all of it, but I would expect that we will continue to see some increasing activity amongst private equity firms as they become more comfortable in monetizing investments at these valuations. And the more that they can monetize, I think that will make it easier for them to be more forward leaning and commit more capital and we'll get the ecosystem better linked between sort of capital deployed and capital return.

I don't think that it's going to be perfectly in balance, which is why we're so constructive on the Private Capital Solutions business. I think that's an arrow in one's quiver that's going to continue for a considerable period of time. And as far as the private equity ecosystem and how we touch it and how we cover it. One way we touch it and cover it is through all the liability management exercises we do and as we continue to broaden our sponsored coverage, it shouldn't be a surprise that some of that benefits our restructuring special situations liability management effort.

I think the next is we have a leading Private Capital Solutions business. The more developed that business is, the more opportunities we have to use those distinctive capabilities and also our distribution and our ability to raise new capital to further penetrate the middle market or sub-mega fund complexes and that's an area where PJT Park Hill is particularly strong and has real deep relationships and as we continue to build out our industry groups and strategic advisory, we become more relevant to more sponsored firms because of our industry expertise and our industry verticals better matching where there might be investor focused. So you know we're continuing that journey to further grow that business, but I've always believed it needs to start with best-in-class advice, it needs to start with best-in-class corporate access, and then from there, you have things of real relevance that resonate with your sponsored funds.

Oh, that's really helpful.

Maybe a quick one for Helen. I appreciate not giving the full year tax rate yet, but can you give us any help on the first quarter given the likely quite positive benefit in the first quarter? Any way to think about what the tax rate could be in the first quarter?

Sure. When we estimate the taxes, Jim, we look at it over the full year and smooth it over the full year when we do the adjusted effective tax rate. So when we do that -- when I gave you the high-teens that anticipated that benefit from the (multiple speakers) delivery which will be early March, so.

That's right (multiple speakers)--

Mike Brown, UBS.

Paul, I wanted to just double click on the private client solutions opportunity here. You've touched on it a number of times on the call. Maybe just start on the secondary side of the market. What are you expecting from kind of a GP and LP side in terms of the mix in '26 compared to '25. And then your positive views there, it sounds like it's kind of a secular growth, but maybe can you unpack a little bit about PJT's opportunity for market share opportunity and then just on the primary side, if you could spend a minute there. We are seeing realizations picking up for the industry, so when could that return of capital start to translate to stronger fundraising on the primary side for Park Hill?

Okay, why don't we start there? I think that the primary industry across the board is challenged for a variety of reasons, right? One of which is increasingly asset allocators are allocating larger and larger percentages of their allocations to the largest fund complexes. And as a result, many of those have their capabilities in-house, so you're really dealing with the next level. That trend towards consolidating relationships and the like, I don't expect to change. I think that's the first thing.

I think the second is the performance across the industry has been a bit uneven and I think the 2021 vintage may choose -- may turn out to be a less than flattering vintage when history is written and as a result, there's also the risk that just the absolute allocations to the asset class sort of move away.

At the same time, there's immense interest and opportunity in credit and credit products and structured credit, and I think we're very well positioned there. There's also real opportunities in real estate and I think that the dynamics today are more favorable than they've been for a considerable period of time. So it's not like one monolithic industry, it's the fact that there were going to be pockets of opportunity always. And in a world where it's more difficult to raise capital, clients are going to be more discerning about whether or not to employ a placement agent if they use a placement agent, who to use, and I think all of those trends work to our benefit. And the more we solidify those relationships that puts us in the pole position for more of the opportunities and looks as it relates to private capital solutions.

So I think those businesses are highly synergistic as they as they work together. And I do think that as an asset class if you just look at how many new funds are being raised in secondaries, I think as I said in my prepared remarks there is an increasing realization of the attractiveness of the secondary opportunity from an investment perspective. The absence of a J-curve, the ability to invest alongside sponsors where there's continuity of management, specific identification of the assets, a real track record of performance, and increasingly those assets that are being presented to the marketplace are the highest quality assets.

So I think that that's going to have a reinforcing effect and that's going to invite more capital. The more capital there is, the ability to run a more competitive process with a better price discovery where you have a multitude of providers with capital to choose from. So all of that, I think, is a positive for the industry. And we're very comfortable with our market position in the sense that we have unique capabilities, particularly the secondaries joined with our unique primary distribution capabilities and we expect to gain share in that business as we look at going forward.

Great, thanks, Paul, for all of that color there.

Just wanted to follow-up on the restructuring side. So very positive outlook here for restructuring. That was clear. Just wanted to ask, are you seeing any competition for talent in the restructuring business? You've obviously got a premier franchise and leading share, but we did observe that a partner looks like they spun out and create -- creating their own restructuring business and just curious how you're thinking about the war for talent and that restructuring side of the business.

Thank you.

Look, we're a talent-focused firm, so we're always focused on making sure that we have the best talent and we believe we have the best talent. We believe we have the best culture. And we believe we have tremendous opportunities ahead of us as we start to get at the white space that we have, and I think our franchise enjoys more white space than most anyone else, so we're very comfortable that it is a highly attractive destination and we'd love nothing more than to continue to invest in our franchise and to add more talent if those opportunities arise.

Brendan O'Brien, Wolfe Research.

I guess to start this bigger picture question, Paul, there's obviously been a lot of optimism on the capital markets outlook this earnings season, but just based on what we can see in the data, it looks like announced volumes for January were down around 10% year on year. I know that one month does not make a trend, but as you flag in your prepare remarks that we have seen a notable uptick in geopolitical tension and political uncertainty in the US, which is only likely to intensify into the mid-terms. So I just wanted to see if you had any views around as to what is driving that delta between the optimism and the data thus far, and whether you've seen the rhetoric and resulting market volatility have any impact on dialogues at this point.

Well, I think bankers love to be optimistic in January. I think that's a tried and true tradition and that doesn't seem to vacillate regardless of the macro environment. I think maybe because I've been around so long, I have a more sober view of the world, which is I think we have a highly constructive macro backdrop.

But the [deal] environment, the capital markets environments are inherently fragile, and they react in a punishing way in the news flow, and the news flow can be positive or it can be negative, and we're dealing with some large geopolitical risks and we're dealing with some very large debates about the capital being deployed to AI and the pace of that capital deployment, what the returns are, the implications for industries and changing market winners and resultant market losers.

So I think we have a very constructive backdrop, but I'm not prepared to kind of just wave the flag and bring out the pom-poms and talk about how this is going to be the best year ever and the like. I think it's a highly constructive environment. I've taken note of the first month. I think it is just a month. But maybe when we have our conversation at the end of the first quarter, we'll have more clarity.

But the reality is 2025 was a pretty darn good year with volumes of, however, you count it, 35%, 40%, 40%-plus, the second best year, it does create a high bar. So to me it's less about is this year better than last year. The issue in my mind is, how long is this runway? And how do we as a firm focus our efforts on continuing to gain market share? And we've always talked about our firm as a market share and not a market size story and what that means is that as long as we have a relatively healthy deal backdrop and as long as deals can get done, our goal is to win over clients one at a time and to be more relevant and more active and more geographies, more industries with more capabilities and a and a longer and longer record of excellence.

So in my mind, if things get a little tougher, that's actually good because it just means that advice matters more and when advice matters more in the selection process, that's good for our firm so I'm still highly constructive on the M&A environment. I just -- I'm not sure anyone can tell you exactly how good it's going to be, but relative to what we dealt with in '22 and '23 and pockets of '24, there's no doubt that we're in a much more favorable constructive environment.

That's a helpful, color. Thank you, Paul.

And I guess for my follow-up, we've talked a lot about the maturation of the platform on this call and one thing that stood out to me in your deck is that you're entering 2026 with the lowest percentage of partners on the platform for less than two years since you went public by a pretty significant margin. I was hoping you could help us think through the implications of this for your ability to generate comp leverage and revenue growth in 2026 just given you'll have less under earning partners on the platform.

It was so ironic about all of this and I think we introduced this concept when we went public and we just sort of broke out two-year partners because we made the observation at the time that it was quite difficult for any new partner when you actually went through the calendar to generate any revenues of consequence in the first two years because by the time someone came onto the platform, they still had non-solicit issues. Then after those handcuffs came off and then they went to engage with all of their clients, they needed to get to know you process so that they could better introduce their new firm.

Then you needed to see whether or not a mandate was available, that if a mandate was available that might or might not lead to an announcement or even if it led to. So we started out by just sort of saying don't even expect any revenues for two years and somehow that's now the view that that's like a fully functioning mature partner on the platform. And the reality is that every year that those partners are on our platform every year, there should be greater and greater productivity, so it's not like the magic. In year three, there's the calendar invites the opportunity for there to be real revenue, but year four is better than year three, year five is better than year four. That's the first point I would make.

The second point I would make is that in many areas, we have added our first or second partner and if you're adding one or two partners to a green fields initiative, it might take four or five partners until you get to critical mass, so the productivity curve of going from 0 to 1, 1 to 2, 2 to 3 might be quite light. When you add that 4th to that 5th, all of a sudden, you know the step function change because you light up the network for all of those partners. So it's not as easy to model.

And the third point which I talk about all the time is the walk-in business where people reach out to you because they've heard of the firm. There have been very positive experiences. Their chairman has a direct experience. Their CEO, someone else in the C-suite or someone else in the ecosystem, and every day that goes by, that continues to expand and that also is a meaningful driver of productivity, which is what I call sort of the firm or the franchise value. So all of those elements are still very much in play and I think we're in the very early days of getting to that potential that we aspire to, which is to continue to build the world's best investment bank. I think as we do it bit by bit, brick by brick, we should have financial rewards that come along with it.

Alex Bond, KBW.

Most of my questions have been asked already, but maybe a quick one for Helen just on the non-comp side. So I know I heard the guide for the year of roughly similar to the year-over-year increase to last year, but maybe if you could just help us think through what are going to be the main drivers there of the higher nominal amount in 2026, that would be helpful.

Yeah, so as I said, we'll give a more refined view in the first quarter, but if you think of the tailwinds going into '26, we definitely should experience less occupancy growth. We've made some pretty significant investments in New York and London, so that growth should slow. And we're always going to get leverage out of some of our fixed costs around IT infrastructure or some of the professional fees that we have relating to being a public company. So that would be the tailwinds.

And I think the headwinds are more people, more people brings more travel, more market data, more IT, and comp support. So I think against that that's where we're going to see the growth and just trying to figure out how we manage that. Well, I think it would be fair to say we've been very disciplined in how we manage our expenses, but there are some just activity-related expenses that are going to drive those non-comp side.

Thank you. That concludes our question-and-answer period. I would now like to turn the call back over to Mr. Taubman for closing remarks.

Once again, we want to thank everyone for joining us this morning as we reported our full-year results. We're very excited to get on with 2026 and we look forward to reconvening to report our Q1 results in April.

Thank you very much and have a great day.