UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED |
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification No.) |
(Address of principal executive offices)(Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated Filer |
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Non-Accelerated Filer |
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Smaller Reporting Company |
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Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 29, 2024, there were
TABLE OF CONTENTS
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PART I. |
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Unaudited Condensed Consolidated Financial Statements — June 30, 2024 and 2023: |
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Condensed Consolidated Statements of Financial Condition as of June 30, 2024 and December 31, 2023 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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PART II. |
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PJT Partners Inc. was formed in connection with certain merger and spin-off transactions whereby the financial and strategic advisory services, restructuring and reorganization advisory services and Park Hill Group businesses of Blackstone Inc. (“Blackstone” or our “former Parent”) were combined with PJT Capital LP, a financial advisory firm founded by Paul J. Taubman in 2013 (together with its then affiliates, “PJT Capital”), and the combined business was distributed to Blackstone’s unitholders to create PJT Partners Inc., a stand-alone, independent publicly traded company. Throughout this Quarterly Report on Form 10-Q, we refer to this transaction as the “spin-off.” PJT Partners Inc. is a holding company and its only material asset is its controlling equity interest in PJT Partners Holdings LP, a holding partnership that holds the Company’s operating subsidiaries, and certain cash and cash equivalents it may hold from time to time. As the sole general partner of PJT Partners Holdings LP, PJT Partners Inc. operates and controls all of the business and affairs and consolidates the financial results of PJT Partners Holdings LP and its operating subsidiaries.
In this Quarterly Report on Form 10-Q, unless the context requires otherwise, the words “PJT Partners Inc.” refers to PJT Partners Inc., and “PJT Partners,” the “Company,” “we,” “us” and “our” refer to PJT Partners Inc., together with its consolidated subsidiaries, including PJT Partners Holdings LP and its operating subsidiaries.
Forward-Looking Statements
Certain material presented herein contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include certain information concerning future results of operations, business strategies, acquisitions, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “opportunity,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, many of which are outside our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance upon any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (a) changes in governmental regulations and policies; (b) cyber attacks, security vulnerabilities and internet disruptions, including breaches of data security and privacy leaks, data loss and business interruptions; (c) failures of our computer systems or communication systems, including as a result of a catastrophic event and the use of remote work environments and virtual platforms; (d) the impact of catastrophic events, including business disruptions, pandemics, reductions in employment and an increase in business failures on (1) the U.S. and the global economy and (2) our employees and our ability to provide services to our clients and respond to their needs; (e) the failure of third-party service providers to perform their functions; and (f) volatility in the political and economic environment, including as a result of inflation, elevated interest rates and geopolitical and military conflicts.
2
Any of these factors, as well as such other factors discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the United States Securities and Exchange Commission (“SEC”), as such factors may be updated from time to time in our periodic filings with the SEC, accessible on the SEC’s website at www.sec.gov, could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict at this time or that are not currently expected to have a material adverse effect on our business. Any such risks could cause our results to differ materially from those expressed in forward-looking statements.
Website Disclosure
We use our website (www.pjtpartners.com) as a channel of distribution of Company information. The information we post may be deemed material. Accordingly, investors should monitor the website, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about PJT Partners when you enroll your e-mail address by visiting the “Investor Relations” page of our website at ir.pjtpartners.com. Although we refer to our website in this report, the contents of our website are not included or incorporated by reference into this report. All references to our website in this report are intended to be inactive textual references only.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PJT Partners Inc.
Condensed Consolidated Statements of Financial Condition (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
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June 30, |
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December 31, |
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Assets |
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Cash and Cash Equivalents |
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$ |
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$ |
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Investments (at fair value) |
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Accounts Receivable (net of allowance for credit losses of $ |
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Intangible Assets, Net |
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Goodwill |
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Furniture, Equipment and Leasehold Improvements, Net |
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Operating Lease Right-of-Use Assets |
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Other Assets |
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Deferred Tax Asset, Net |
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Total Assets |
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$ |
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$ |
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Liabilities and Equity |
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Accrued Compensation and Benefits |
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$ |
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$ |
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Accounts Payable, Accrued Expenses and Other Liabilities |
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Operating Lease Liabilities |
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Amount Due Pursuant to Tax Receivable Agreement |
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Taxes Payable |
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Deferred Revenue |
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Total Liabilities |
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Equity |
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Class A Common Stock, par value $ |
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Class B Common Stock, par value $ |
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— |
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Additional Paid-In Capital |
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Retained Earnings |
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Accumulated Other Comprehensive Loss |
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Treasury Stock at Cost ( |
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Total PJT Partners Inc. Equity |
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Non-Controlling Interests |
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Total Equity |
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Total Liabilities and Equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
4
PJT Partners Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenues |
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Advisory Fees |
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$ |
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$ |
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$ |
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$ |
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Placement Fees |
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Interest Income and Other |
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Total Revenues |
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Expenses |
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Compensation and Benefits |
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Occupancy and Related |
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Travel and Related |
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Professional Fees |
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Communications and Information Services |
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Depreciation and Amortization |
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Other Expenses |
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Total Expenses |
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Income Before Provision for Taxes |
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Provision for Taxes |
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Net Income |
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Net Income Attributable to |
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Net Income Attributable to PJT Partners Inc. |
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$ |
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$ |
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$ |
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$ |
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Net Income Per Share of Class A Common Stock |
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Basic |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-Average Shares of Class A Common |
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Basic |
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Diluted |
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See notes to condensed consolidated financial statements.
5
PJT Partners Inc.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in Thousands)
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Net Income |
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$ |
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$ |
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$ |
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$ |
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Other Comprehensive Income (Loss), Net of Tax — |
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Comprehensive Income |
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Less: |
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Comprehensive Income Attributable to Non- |
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Comprehensive Income Attributable to PJT Partners Inc. |
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$ |
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$ |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
6
PJT Partners Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(Dollars in Thousands, Except Share Data)
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Three Months Ended June 30, 2024 |
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Shares |
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Accumulated |
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Class A |
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Class B |
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Class A |
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Class B |
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Additional |
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Other |
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Non- |
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Common |
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Common |
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Treasury |
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Common |
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Common |
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Paid-In |
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Retained |
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Comprehensive |
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Treasury |
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Controlling |
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Stock |
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Stock |
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Stock |
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Stock |
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Stock |
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Capital |
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Earnings |
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(Loss) |
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Stock |
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Interests |
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Total |
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Balance at March 31, 2024 |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net Income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Other Comprehensive Loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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( |
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Dividends Declared ($ |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
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Tax Distributions |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Equity-Based Compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net Share Settlement |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
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Deliveries of Vested Shares of |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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— |
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— |
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Change in Ownership Interest |
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— |
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( |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Treasury Stock Purchases |
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— |
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— |
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( |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at June 30, 2024 |
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( |
) |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Six Months Ended June 30, 2024 |
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Shares |
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Accumulated |
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Class A |
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Class B |
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Class A |
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Class B |
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Additional |
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Other |
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Non- |
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Common |
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Common |
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Treasury |
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Common |
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Common |
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Paid-In |
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Retained |
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Comprehensive |
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Treasury |
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Controlling |
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Stock |
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Stock |
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Stock |
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Stock |
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Stock |
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Capital |
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Earnings |
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(Loss) |
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Stock |
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Interests |
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Total |
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Balance at December 31, 2023 |
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( |
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$ |
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$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Other Comprehensive Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Dividends Declared ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Tax Distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Equity-Based Compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Net Share Settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Deliveries of Vested Shares of |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Change in Ownership Interest |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
Treasury Stock Purchases |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 30, 2024 |
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
(continued)
See notes to condensed consolidated financial statements.
7
PJT Partners Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(Dollars in Thousands, Except Share Data)
|
|
Three Months Ended June 30, 2023 |
|
|||||||||||||||||||||||||||||||||||||||||
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Class A |
|
|
Class B |
|
|
|
|
|
Class A |
|
|
Class B |
|
|
Additional |
|
|
|
|
|
Other |
|
|
|
|
|
Non- |
|
|
|
|
|||||||||||
|
|
Common |
|
|
Common |
|
|
Treasury |
|
|
Common |
|
|
Common |
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury |
|
|
Controlling |
|
|
|
|
|||||||||||
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
(Loss) |
|
|
Stock |
|
|
Interests |
|
|
Total |
|
|||||||||||
Balance at March 31, 2023 |
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Other Comprehensive Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Dividends Declared ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Tax Distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Equity-Based Compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Net Share Settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Deliveries of Vested Shares of |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Change in Ownership Interest |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
Treasury Stock Purchases |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 30, 2023 |
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
|
|
Six Months Ended June 30, 2023 |
|
|||||||||||||||||||||||||||||||||||||||||
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
Class A |
|
|
Class B |
|
|
|
|
|
Class A |
|
|
Class B |
|
|
Additional |
|
|
|
|
|
Other |
|
|
|
|
|
Non- |
|
|
|
|
|||||||||||
|
|
Common |
|
|
Common |
|
|
Treasury |
|
|
Common |
|
|
Common |
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury |
|
|
Controlling |
|
|
|
|
|||||||||||
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
(Loss) |
|
|
Stock |
|
|
Interests |
|
|
Total |
|
|||||||||||
Balance at December 31, 2022 |
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Other Comprehensive Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Dividends Declared ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Tax Distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Equity-Based Compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Net Share Settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Deliveries of Vested Shares of |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Change in Ownership Interest |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
Treasury Stock Purchases |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 30, 2023 |
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
See notes to condensed consolidated financial statements.
8
PJT Partners Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Operating Activities |
|
|
|
|
|
|
||
Net Income |
|
$ |
|
|
$ |
|
||
Adjustments to Reconcile Net Income to Net Cash Provided by |
|
|
|
|
|
|
||
Equity-Based Compensation Expense |
|
|
|
|
|
|
||
Depreciation and Amortization Expense |
|
|
|
|
|
|
||
Amortization of Operating Lease Right-of-Use Assets |
|
|
|
|
|
|
||
Provision for Credit Losses |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Cash Flows Due to Changes in Operating Assets and Liabilities |
|
|
|
|
|
|
||
Accounts Receivable |
|
|
( |
) |
|
|
( |
) |
Other Assets |
|
|
|
|
|
( |
) |
|
Accrued Compensation and Benefits |
|
|
( |
) |
|
|
|
|
Accounts Payable, Accrued Expenses and Other Liabilities |
|
|
( |
) |
|
|
( |
) |
Taxes Payable |
|
|
( |
) |
|
|
|
|
Deferred Revenue |
|
|
|
|
|
( |
) |
|
Net Cash Provided by Operating Activities |
|
|
|
|
|
|
||
Investing Activities |
|
|
|
|
|
|
||
Purchases of Investments |
|
|
( |
) |
|
|
( |
) |
Proceeds from Sales and Maturities of Investments |
|
|
|
|
|
|
||
Purchases of Furniture, Equipment and Leasehold Improvements |
|
|
( |
) |
|
|
( |
) |
Net Cash Used in Investing Activities |
|
|
( |
) |
|
|
( |
) |
Financing Activities |
|
|
|
|
|
|
||
Dividends |
|
|
( |
) |
|
|
( |
) |
Tax Distributions |
|
|
( |
) |
|
|
( |
) |
Proceeds from Revolving Credit Facility |
|
|
|
|
|
|
||
Payments on Revolving Credit Facility |
|
|
|
|
|
( |
) |
|
Employee Taxes Paid for Shares Withheld |
|
|
( |
) |
|
|
( |
) |
Cash-Settled Exchanges of Partnership Units |
|
|
( |
) |
|
|
( |
) |
Treasury Stock Purchases |
|
|
( |
) |
|
|
( |
) |
Payments Pursuant to Tax Receivable Agreement |
|
|
( |
) |
|
|
( |
) |
Net Cash Used in Financing Activities |
|
|
( |
) |
|
|
( |
) |
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
|
|
( |
) |
|
|
|
|
Net Decrease in Cash and Cash Equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and Cash Equivalents, Beginning of Period |
|
|
|
|
|
|
||
Cash and Cash Equivalents, End of Period |
|
$ |
|
|
$ |
|
||
Supplemental Disclosure of Cash Flows Information |
|
|
|
|
|
|
||
Payments for Income Taxes, Net of Refunds Received |
|
$ |
|
|
$ |
|
||
Payments for Interest |
|
$ |
— |
|
|
$ |
|
|
See notes to condensed consolidated financial statements.
9
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
PJT Partners Inc. and its consolidated subsidiaries (the “Company” or “PJT Partners”) offer a unique portfolio of advisory and placement services designed to help clients achieve their strategic objectives.
On October 1, 2015, Blackstone Inc. (“Blackstone” or the “former Parent”) distributed on a pro rata basis to its common unitholders all of the issued and outstanding shares of Class A common stock of PJT Partners Inc. held by it. This pro rata distribution is referred to as the “Distribution.” The separation of the PJT Partners business from Blackstone and related transactions, including the Distribution, the internal reorganization that preceded the Distribution and the acquisition by PJT Partners of PJT Capital LP (together with its general partner and their respective subsidiaries, “PJT Capital”) that occurred substantially concurrently with the Distribution, is referred to as the “spin-off.”
PJT Partners Inc. is the sole general partner of PJT Partners Holdings LP. PJT Partners Inc. owns less than
Basis of Presentation
The Company prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and the instructions to Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments (consisting of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Intercompany transactions have been eliminated for all periods presented.
For a comprehensive disclosure of the Company’s significant accounting policies, see Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “Part II. Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Cash, Cash Equivalents and Investments
Cash and Cash Equivalents include short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. Cash and Cash Equivalents are maintained in U.S. and non-U.S. bank accounts and are held at six financial institutions. Also included in Cash and Cash Equivalents are amounts held in bank accounts that are subject to advance notification to withdraw, which totaled $
Treasury securities with original maturities greater than three months when purchased are classified as Investments in the Condensed Consolidated Statements of Financial Condition.
10
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Income Taxes
The Organization for Economic Co-operation and Development ("OECD") Pillar Two Model Rules ("Pillar Two") set forth for a global
Recent Accounting Developments
In November 2023, the Financial Accounting Standards Board ("FASB") issued guidance on improvements to reportable segment disclosures. The guidance primarily requires enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact that adoption will have on its condensed consolidated financial statements.
In December 2023, the FASB issued guidance to improve its income tax disclosure requirements. The guidance enhances existing income tax disclosures related to the effective tax rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact that adoption will have on its condensed consolidated financial statements.
In March 2024, the FASB issued guidance that clarifies appropriate accounting for profits interest and similar awards. The guidance is effective for annual and interim periods beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact that adoption will have on its condensed consolidated financial statements.
The following table provides a disaggregation of revenues recognized from contracts with customers for the three and six months ended June 30, 2024 and 2023:
|
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Three Months Ended |
|
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Six Months Ended |
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|
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2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Advisory Fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Placement Fees |
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|
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||||
Interest Income from Placement Fees and Other |
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|
|
|
|
|
|
|
|
|
|
||||
Revenues from Contracts with Customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Remaining Performance Obligations and Revenue Recognized from Past Performance
As of June 30, 2024, the aggregate amount of the transaction price allocated to performance obligations yet to be satisfied was $
The Company recognized revenue of $
11
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Contract Balances
There were no significant impairments related to contract balances during the three and six months ended June 30, 2024 and 2023.
For the six months ended June 30, 2024 and 2023, $
Changes in the allowance for credit losses consist of the following:
|
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Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Beginning Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for Credit Losses |
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|
|
|
|
|
|
|
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|
||||
Write-offs |
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|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Ending Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Included in , Net is accrued interest of $
Included in Accounts Receivable, Net are long-term receivables of $
The Company does not have any long-term receivables on non-accrual status. Of receivables that originated as long-term, there were $
Intangible Assets, Net consists of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Finite-Lived Intangible Assets |
|
|
|
|
|
|
||
Customer Relationships |
|
$ |
|
|
$ |
|
||
Trade Name |
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|
|
|
|
|
||
Total Intangible Assets |
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|
|
|
|
||
Accumulated Amortization |
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|
|
|
|
|
||
Customer Relationships |
|
|
( |
) |
|
|
( |
) |
Trade Name |
|
|
( |
) |
|
|
( |
) |
Total Accumulated Amortization |
|
|
( |
) |
|
|
( |
) |
Intangible Assets, Net |
|
$ |
|
|
$ |
|
||
Amortization expense was $
12
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Amortization of Intangible Assets held at June 30, 2024 is expected to be $
Furniture, Equipment and Leasehold Improvements, Net consists of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Leasehold Improvements |
|
$ |
|
|
$ |
|
||
Furniture and Fixtures |
|
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|
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|
||
Office Equipment |
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||
Total Furniture, Equipment and Leasehold Improvements |
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|
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|
||
Accumulated Depreciation |
|
|
( |
) |
|
|
( |
) |
Furniture, Equipment and Leasehold Improvements, Net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
The following tables summarize the valuation of the Company’s investments by the fair value hierarchy:
|
|
June 30, 2024 |
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Level I |
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|
Level II |
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|
Level III |
|
|
Total |
|
||||
Treasury Securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Level I |
|
|
Level II |
|
|
Level III |
|
|
Total |
|
||||
Treasury Securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Investments in Treasury securities were included in both Cash and Cash Equivalents and Investments at June 30, 2024 and December 31, 2023 in the Condensed Consolidated Statements of Financial Condition.
The following table summarizes the Company’s tax position:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Income Before Provision for Taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for Taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Effective Income Tax Rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
The Company’s effective tax rate differed from the U.S. federal statutory tax rate for the three and six months ended June 30, 2024 primarily due to partnership income not being subject to U.S. corporate income taxes and permanent differences related to compensation.
The Company had
13
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Basic and diluted net income per share of Class A common stock for the three and six months ended June 30, 2024 and 2023 is presented below:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
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|
|
|
|
|
|
|
|
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|
||||
Net Income Attributable to Shares of Class A |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Incremental Net Income from Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income Attributable to Shares of Class A |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
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|
|
|
|
|
|
|
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|
||||
Weighted-Average Shares of Class A Common |
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|
||||
Weighted-Average Number of Incremental Shares from |
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|
|
|
|
|
|
|
|
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|
||||
Weighted-Average Number of Incremental Shares from |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Weighted-Average Shares of Class A Common |
|
|
|
|
|
|
|
|
|
|
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|
||||
Net Income Per Share of Class A Common Stock |
|
|
|
|
|
|
|
|
|
|
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|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The ownership interests of holders (other than PJT Partners Inc.) of the common units of partnership interest in PJT Partners Holdings LP (“Partnership Units”) may be exchanged for PJT Partners Inc. Class A common stock on a one-for-one basis, subject to applicable vesting and transfer restrictions. If all Partnership Units were exchanged for Class A common stock, weighted-average Class A common stock outstanding would be
Share Repurchase Program
On February 6, 2024, the Company announced that the Board authorized a $
During the six months ended June 30, 2024, the Company repurchased
14
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Overview
Further information regarding the Company’s equity-based compensation awards is described in Note 10. “Equity-Based and Other Deferred Compensation” in the “Notes to Consolidated Financial Statements” in “Part II. Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The following table represents equity-based compensation expense and the related income tax benefit for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Equity-Based Compensation Expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Income Tax Benefit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted Stock Units
The following table summarizes activity related to unvested RSUs for the six months ended June 30, 2024:
|
|
Restricted Stock Units |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Average |
|
||
|
|
|
|
|
Grant Date |
|
||
|
|
Number of |
|
|
Fair Value |
|
||
|
|
Units |
|
|
(in dollars) |
|
||
Balance, December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Dividends Reinvested on RSUs |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Balance, June 30, 2024 |
|
|
|
|
$ |
|
||
As of June 30, 2024, there was $
RSU Awards with Both Service and Market Conditions
The Company has granted RSU awards containing both service and market conditions. The service condition requirement for these awards is generally to
Effective February 10, 2022, the Company granted RSU awards containing both service and market conditions. The effect of the service and market conditions is reflected in the grant date fair value of the award. Compensation cost is recognized over the requisite service period, provided that the service period is completed, irrespective of whether the market condition is satisfied. The service condition requirement with respect to such RSU awards is
15
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
February 26, 2027.
The following table summarizes activity related to unvested RSU awards with both a service and market condition for the six months ended June 30, 2024:
|
|
RSU Awards with |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Average |
|
||
|
|
|
|
|
Grant Date |
|
||
|
|
Number of |
|
|
Fair Value |
|
||
|
|
Units |
|
|
(in dollars) |
|
||
Balance, December 31, 2023 |
|
|
|
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Balance, June 30, 2024 |
|
|
|
|
$ |
|
||
As of June 30, 2024, there was $
Partnership Units
The following table summarizes activity related to unvested Partnership Units for the six months ended June 30, 2024:
|
|
Partnership Units |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number of |
|
|
Grant Date |
|
||
|
|
Partnership |
|
|
Fair Value |
|
||
|
|
Units |
|
|
(in dollars) |
|
||
Balance, December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Balance, June 30, 2024 |
|
|
|
|
$ |
|
||
As of June 30, 2024, there was $
Partnership Unit Awards with Both Service and Market Conditions
Effective February 10, 2022, the Company granted Partnership Unit awards containing both service and market conditions. The effect of the service and market conditions is reflected in the grant date fair value of the award. Compensation cost is recognized over the requisite service period, provided that the service period is completed, irrespective of whether the market condition is satisfied. The service condition requirement with respect to such Partnership Unit awards is
16
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Class A common stock achieving a 20-day VWAP above $
The following table summarizes activity related to unvested Partnership Unit awards with both a service and market condition for the six months ended June 30, 2024:
|
|
Partnership Unit Awards with |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number of |
|
|
Grant Date |
|
||
|
|
Partnership |
|
|
Fair Value |
|
||
|
|
Units |
|
|
(in dollars) |
|
||
Balance, December 31, 2023 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Balance, June 30, 2024 |
|
|
|
|
$ |
|
||
As of June 30, 2024, there was $
Units Expected to Vest
The following unvested units, after expected forfeitures, as of June 30, 2024, are expected to vest:
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Service Period |
|
||
|
|
Units |
|
|
in Years |
|
||
Restricted Stock Units |
|
|
|
|
|
|
||
Partnership Units |
|
|
|
|
|
|
||
Total Equity-Based Awards |
|
|
|
|
|
|
||
Deferred Cash Compensation
The Company has periodically issued deferred cash compensation in connection with annual incentive compensation as well as other hiring or retention related awards. These awards typically vest over a period of to
17
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
The components of lease expense were as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Operating Lease Cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable Lease Cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sublease Income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Lease Cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Supplemental information related to the Company’s operating leases was as follows:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash Paid for Amounts Included in Measurement of Lease Liabilities |
|
|
|
|
|
|
||
Operating Cash Flows from Operating Leases |
|
$ |
|
|
$ |
|
||
Right-of-Use Assets Obtained in Exchange for Operating Lease Liabilities |
|
$ |
|
|
$ |
|
||
|
|
June 30, |
|
|
December 31, |
|
||
Weighted-Average Remaining Lease Term (in years) |
|
|
|
|
|
|
||
Weighted-Average Discount Rate |
|
|
% |
|
|
% |
||
The following is a maturity analysis of the annual undiscounted cash flows of the Company’s operating lease liabilities as of June 30, 2024:
Year Ending December 31, |
|
|
|
|
2024 (July 1 through December 31) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total Lease Payments |
|
|
|
|
Less: Tenant Improvement Allowances |
|
|
|
|
Less: Imputed Interest |
|
|
|
|
Total |
|
$ |
|
|
In December 2023, the Company entered into a lease amendment to its New York office lease which provides for the leasing of additional floor space. The lease associated with this additional floor space has not been included in Operating Lease Right-of-Use Assets and Operating Lease Liabilities as of June 30, 2024 on the Condensed Consolidated Statement of Financial Condition as the Company does not yet have the right to use the premises. Commencement is currently anticipated to occur in the first quarter of 2025 with a term that expires in 2041.
18
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Exchange Agreement
The Company has entered into an exchange agreement, as amended, with the limited partners of PJT Partners Holdings LP pursuant to which they (or certain permitted transferees) have the right, subject to the terms and conditions set forth in the Third Amended and Restated Limited Partnership Agreement of PJT Partners Holdings LP (the “Partnership Agreement”), on a quarterly basis, to exchange all or part of their Partnership Units for cash or, at the Company’s election, for shares of PJT Partners Inc. Class A common stock on a
Further information regarding the exchange agreement is described in Note 13. “Transactions with Related Parties—Exchange Agreement” in the “Notes to Consolidated Financial Statements” in “Part II. Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Certain holders of Partnership Units exchanged
The Company intends to exchange
Registration Rights Agreement
The Company has entered into a registration rights agreement with the limited partners of PJT Partners Holdings LP pursuant to which the Company granted them, their affiliates and certain of their transferees the right, under certain circumstances and subject to certain restrictions, to require the Company to register under the Securities Act of 1933 shares of Class A common stock delivered in exchange for Partnership Units. The registration rights agreement does not contain any penalties associated with failure to file or to maintain the effectiveness of a registration statement covering the shares owned by individuals covered by such agreement.
Tax Receivable Agreement
The Company has entered into a tax receivable agreement with the holders of Partnership Units (other than PJT Partners Inc.) that provides for the payment by PJT Partners Inc. to exchanging holders of Partnership Units of
19
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Sublease
The Company has entered into a Sublease Agreement (the “Sublease”) with Dynasty Equity Partners Management, LLC (“Dynasty”) to sublease a portion of its office space to Dynasty. K. Don Cornwell, a member of the Board, is the CEO and co-founder of Dynasty. The sublease commenced on
Aircraft Lease
The Company makes available to its CEO and on occasion by exception, to other partners, including Company’s Named Executive Officers, personal use of a company leased aircraft when it is not being used for business purposes, for which the Company is reimbursed the full incremental costs associated with such use. Such amount is not material to the condensed consolidated financial statements.
Commitments
Line of Credit
On February 1, 2021, PJT Partners Holdings LP, as borrower (the “Borrower”), entered into a Renewal and Modification Agreement (the “Renewal Agreement”) and related documents with First Republic Bank (now part of JPMorgan Chase), as lender (the “Lender”), amending the terms of the Borrower’s revolving credit facility with the Lender under the Amended and Restated Loan Agreement dated October 1, 2018 (the “Amended and Restated Loan Agreement”). The Renewal Agreement provides for a revolving credit facility with aggregate commitments in an amount equal to $
As of June 30, 2024 and December 31, 2023, there were
As of June 30, 2024 and December 31, 2023, the Company was in compliance with the debt covenants under the Renewal Agreement and the Amended and Restated Loan Agreement.
On July 29, 2024, PJT Partners Holdings LP, as borrower, entered into a new syndicated revolving credit agreement (the “Credit Agreement”) and related documents with Bank of America, N.A., as the administrative agent (the “Administrative Agent”), and certain other financial institutions party thereto as lenders. The Credit Agreement, which replaces the Borrower's existing Amended and Restated Loan Agreement in its entirety, provides for a revolving credit facility with aggregate principal amount of up to $
20
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Contingencies
Litigation
From time to time, the Company may be named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Some of these matters may involve claims of substantial amounts. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, after consultation with external counsel, the Company believes it is not probable and/or reasonably possible that any current legal proceedings or claims would individually or in the aggregate have a material adverse effect on the condensed consolidated financial statements of the Company. The Company is not currently able to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support such an assessment, including quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by courts on motions or appeals, analysis by experts or the status of any settlement negotiations.
In connection with these matters, the Company has incurred and may continue to incur legal expenses, which are expensed as incurred and presented net of any insurance reimbursements. These expenses are recorded in Professional Fees and Other Expenses in the Condensed Consolidated Statements of Operations.
There were no material developments to the legal proceedings previously disclosed in Note 14. “Commitments and Contingencies—Contingencies, Litigation” in the “Notes to Consolidated Financial Statements” in “Part II. Item 8. Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Guarantee
The Company provides a guarantee to a lending institution for certain loans held by employees for investment in funds of its former Parent, which are secured by the underlying investments in those funds. The amount guaranteed was $
Indemnifications
The Company has entered and may continue to enter into contracts that contain a variety of indemnification obligations. The Company’s maximum exposure under these arrangements is not known; however, the Company currently expects any associated risk of loss to be insignificant. In connection with these matters, the Company has incurred and may continue to incur legal expenses, which are expensed as incurred.
Transactions and Agreements with Blackstone
Employee Matters Agreement
The Company is required to reimburse Blackstone for the value of forfeited unvested equity awards granted to former Blackstone employees that transitioned to PJT Partners in connection with the spin-off. Such reimbursement is recorded in Accounts Payable, Accrued Expenses and Other Liabilities with an offset to Equity in the Condensed Consolidated Statements of Financial Condition. The accrual for these forfeitures was $
Pursuant to the Employee Matters Agreement, the Company has agreed to pay Blackstone the net realized cash benefit resulting from certain compensation-related tax deductions. Amounts are payable annually (for periods in which a cash benefit is realized) within nine months of the end of the relevant tax period. As of June 30, 2024 and December 31, 2023, the Company had accrued $
21
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
Certain subsidiaries of the Company are subject to various regulatory requirements in the U.S., United Kingdom, Hong Kong, Spain and Japan which specify, among other requirements, minimum net capital requirements for registered broker-dealers.
PJT Partners LP is a registered broker-dealer through which advisory and placement services are conducted in the U.S. and is subject to the net capital requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). PJT Partners LP had net capital of $
On April 1, 2024, PJT Partners Japan K.K. became a Type II financial instruments firm registered with Kanto Local Finance Bureau and regulated by the Japan Financial Service Agency and is required to maintain minimum capital of ¥
As of June 30, 2024 and December 31, 2023, PJT Partners (UK) Limited, PJT Partners (HK) Limited and PJT Partners Park Hill (Spain) A.V., S.A.U. were in compliance with local capital adequacy requirements.
The Company’s activities providing advisory and placement services constitute a single reportable segment. An operating segment is a component of an entity that conducts business and incurs revenues and expenses for which discrete financial information is available that is reviewed by the chief operating decision maker in assessing performance and making resource allocation decisions. The Company has a operating segment and therefore a reportable segment.
The Company is organized as one operating segment in order to maximize the value of advice to clients by drawing upon the diversified expertise and broad relationships of senior professionals across the Company. The chief operating decision maker assesses performance and allocates resources based on broad considerations, including the market opportunity, available expertise across the Company and the strength and efficacy of professionals’ collaboration, and not based upon profit or loss measures for the Company’s separate product lines.
Since the financial markets are global in nature, the Company generally manages its business based on the operating results of the Company taken as a whole, not by geographic region.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Domestic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
June 30, |
|
|
December 31, |
|
||
Assets |
|
|
|
|
|
|
||
Domestic |
|
$ |
|
|
$ |
|
||
International |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
22
PJT Partners Inc.
Notes to Condensed Consolidated Financial Statements – Continued (Unaudited)
(All Dollars Are in Thousands, Except Share and Per Share Data, Except Where Noted)
The Company has evaluated the impact of subsequent events through the date these financial statements were issued and determined there were no subsequent events requiring adjustment or further disclosure to the financial statements besides those described in Note 12. “Transactions with Related Parties—Exchange Agreement” and Note 13. “Commitments and Contingencies—Commitments, Line of Credit”.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with PJT Partners Inc.’s Condensed Consolidated Financial Statements and the related notes included in this Quarterly Report on Form 10-Q.
Our Business
PJT Partners is a premier, global, advisory-focused investment bank that was built from the ground up to be different. Our highly experienced, collaborative teams provide independent advice coupled with old-world, high-touch client service. This ethos has allowed us to attract some of the very best talent in the markets in which we operate. We deliver leading advice to many of the world's most consequential companies, effect some of the most transformative transactions and restructurings and raise billions of dollars of capital around the globe to support startups and more established companies.
For further information regarding our business, refer to “Part I. Item 1. Business” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Business Environment
Economic and global financial conditions can materially affect our operational and financial performance. See “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of some of the factors that can affect our performance.
Mergers and acquisitions (“M&A”) is a cyclical business that is impacted by macroeconomic conditions. There are several factors influencing global M&A activity in the intermediate term, including monetary policy, greater economic and geopolitical uncertainty and global growth. Worldwide M&A announced volumes during first half of 2024 were up 18% compared with first half of 2023. On an annualized basis, volume was up 6% compared with 2023.1 How these macroeconomic factors will impact the strength of strategic activity in the intermediate term is still uncertain. While we expect the markets to recover to historical relationships between M&A activity and broader market benchmarks, the pace of such recovery remains unclear.
Global restructuring activity remained strong throughout the second quarter of 2024 due to continued elevated levels of liability management and more traditional balance sheet restructurings. A number of factors continue to drive restructuring activity, including elevated interest rates, companies proactively managing debt maturities and structural issues facing many industries. Activity in the second quarter of 2024 continued to remain dispersed across companies, creditors and financial sponsors as well as a broad cross section of industries and geographies, demonstrating a continued multi-year trend of elevated restructuring activity.
Fund placement activity, although increased from a year ago levels, remained challenged given the global macroeconomic environment and supply of alternative investment opportunities in the market seeking capital. Additionally, limited partners have become more discerning in their deployment of capital for both existing and new fund manager relationships. Investors continue to focus on existing relationships and, as a result, the bar for fund managers to attract new investors remains high as a flight to quality persists. As it relates to private capital solutions, investors need for liquidity continues to be a driver for increased market volumes, and, absent any unexpected macroeconomic headwinds, these favorable conditions should persist.
___________________________________________________________________________________________________________________________________________
1Source: LSEG Global Mergers & Acquisitions Review for First Half of 2024 as of June 30, 2024.
Key Financial Measures
Revenues
Substantially all of our revenues are derived from contracts with clients to provide advisory and placement services. This revenue is primarily a function of the number of active engagements we have, the size of each of those engagements and the fees we charge for our services.
24
We provide a range of strategic advisory, shareholder advisory, capital markets advisory and restructuring and special situations services to corporations, financial sponsors, institutional investors and governments around the world. In conjunction with providing restructuring advice, we may also assist with raising various forms of financing, including debt and equity. Our private capital solutions services include providing General Partner solutions and investing solutions to clients seeking portfolio liquidity, unfunded commitment relief and investments in secondary markets. Our fund placement services primarily serve a diverse range of investment strategies, including private equity, alternative credit/hedge funds and real estate. We advise on all aspects of the fundraising process including competitive positioning and market assessment, marketing materials and related documentation including partnership terms and conditions most prevalent in the current environment. We also provide public and private placement fundraising services to our corporate clients and recognize placement and underwriting fees based on the successful completion of the transaction.
The amount and timing of the fees paid vary by the type of engagement and are typically based on retainers, completion of a transaction or a capital raise. Fees earned for services provided to alternative asset managers are typically recognized upon acceptance by a fund of capital or capital commitments (referred to as a “closing”), in accordance with terms set forth in individual agreements. For commitment based fees, revenue is recognized over time as commitments are accepted. Fees for such closed-end fund arrangements are generally paid in installments over three or four years and interest is charged to the outstanding balance at an agreed upon rate, such as the Secured Overnight Financing Rate or an alternate reference rate, plus a market-based margin. For funds with multiple closings, the constraint on variable consideration is lifted upon each closing. For open-end fund structures, placement fees are typically calculated as a percentage of a placed investor’s month-end net asset value. Typically, we earn fees for such open-end fund structures over a four year period. For these arrangements, revenue is recognized over time as the constraint over variable consideration is lifted. We may receive non-refundable up-front fees in our contracts with customers, which are recorded as revenues in the period over which services are estimated to be provided.
A transaction can fail to be completed for many reasons, including global and/or regional economic conditions, failure of parties to agree upon final terms, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals. In the case of bankruptcy engagements, fees are subject to approval of the court.
Interest Income and Other – Interest Income and Other represents interest typically earned on Cash and Cash Equivalents, investments in Treasury securities and outstanding placement fees receivable; foreign exchange gains and losses arising from transactions denominated in currencies other than U.S. dollars; sublease income; and the amount of expense reimbursement invoiced to clients related to out-of-pocket expenses. Interest on placement fees receivable is earned from the time revenue is recognized and is calculated as mutually agreed upon with the receivable counterparty. Interest receivable is included in Accounts Receivable, Net in the Condensed Consolidated Statements of Financial Condition.
Expenses
Compensation and Benefits – Compensation and Benefits expense includes salaries, restricted and unrestricted cash awards, benefits, employer taxes and equity-based compensation associated with the grants of equity-based awards to partners and employees. Changes in this expense are driven by fluctuations in the number of employees, the composition of our workforce, business performance, compensation adjustments in relation to market movements, changes in rates for employer taxes and other cost increases affecting benefit plans. The expense associated with our restricted and unrestricted cash award and equity plans can also have a significant impact on this expense category and may vary from year to year. Certain awards are expensed over the requisite service period for partners and employees who are or will become retirement eligible prior to the stated vesting date. Over time, a greater number of partners and employees may become retirement eligible and the related requisite service period over which the expense is recognized will be shorter than the stated vesting period.
We maintain compensation programs, including salaries, annual incentive compensation (that may include components of unrestricted cash, restricted cash and/or equity-based awards) and benefits programs. We manage compensation to estimates of competitive levels based on market conditions and performance. Our level of compensation reflects our plan to maintain competitive compensation levels to retain key personnel and it reflects
25
the impact of newly-hired senior professionals, including related grants of equity awards that are generally valued at their grant date fair value.
Increasing the number of high-caliber, experienced senior level employees is critical to our growth efforts and our continued investment in senior talent may also increase compensation and benefits expense. These hires generally do not generate significant revenue in the year they are hired.
Non-Compensation Expense – Non-Compensation expenses are the other costs typical to operating our business, which generally consist of Occupancy and Related, Travel and Related, Professional Fees, Communications and Information Services, Depreciation and Amortization and Other Expenses. Further information regarding these expenses can be found in “Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Income Taxes – PJT Partners Inc. is a corporation subject to U.S. federal, state and local income taxes in jurisdictions where it does business. Our businesses generally operate as partnerships for U.S. federal and state purposes and as corporate entities in non-U.S. jurisdictions. In the U.S. federal and state jurisdictions, taxes related to income earned by these entities generally represent obligations of the individual members and partners.
The operating entities have generally been subject to New York City Unincorporated Business Tax and to entity-level income taxes imposed by state and local as well as non-U.S. jurisdictions, as applicable. These taxes have been reflected in our condensed consolidated financial statements.
PJT Partners Inc. is subject to U.S. corporate federal, state and local income tax on its allocable share of results of operations from the holding partnership (PJT Partners Holdings LP).
The Organization for Economic Co-operation and Development ("OECD") Pillar Two Model Rules ("Pillar Two") set forth for a global 15% minimum tax on the income arising in each jurisdiction in which we operate. Many such jurisdictions have implemented or are in the process of implementing Pillar Two and it is expected to be applicable for annual periods beginning on or after December 31, 2023. We are continuing to assess the impact of Pillar Two and do not expect it to have a material impact on the Company’s 2024 condensed consolidated financial statements.
Non-Controlling Interests
PJT Partners Inc. is a holding company and its only material asset is its controlling equity interest in PJT Partners Holdings LP, a holding partnership that holds the Company's operating subsidiaries, and certain cash and cash equivalents it may hold from time to time. As the sole general partner of PJT Partners Holdings LP, PJT Partners Inc. operates and controls all of the business and affairs and consolidates the financial results of PJT Partners Holdings LP and its operating subsidiaries. The portion of net income attributable to the non-controlling interests is presented separately in the Condensed Consolidated Statements of Operations.
26
Condensed Consolidated Results of Operations
The following table sets forth our condensed consolidated results of operations for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Advisory Fees |
|
$ |
307,082 |
|
|
$ |
323,794 |
|
|
|
(5 |
)% |
|
$ |
595,763 |
|
|
$ |
491,884 |
|
|
|
21 |
% |
Placement Fees |
|
|
46,873 |
|
|
|
20,028 |
|
|
|
134 |
% |
|
|
81,362 |
|
|
|
47,613 |
|
|
|
71 |
% |
Interest Income and Other |
|
|
6,226 |
|
|
|
2,455 |
|
|
|
154 |
% |
|
|
12,449 |
|
|
|
6,768 |
|
|
|
84 |
% |
Total Revenues |
|
|
360,181 |
|
|
|
346,277 |
|
|
|
4 |
% |
|
|
689,574 |
|
|
|
546,265 |
|
|
|
26 |
% |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation and Benefits |
|
|
250,326 |
|
|
|
246,614 |
|
|
|
2 |
% |
|
|
479,254 |
|
|
|
379,657 |
|
|
|
26 |
% |
Occupancy and Related |
|
|
12,107 |
|
|
|
9,920 |
|
|
|
22 |
% |
|
|
24,268 |
|
|
|
19,931 |
|
|
|
22 |
% |
Travel and Related |
|
|
9,055 |
|
|
|
8,314 |
|
|
|
9 |
% |
|
|
18,156 |
|
|
|
15,286 |
|
|
|
19 |
% |
Professional Fees |
|
|
8,780 |
|
|
|
11,454 |
|
|
|
(23 |
)% |
|
|
17,129 |
|
|
|
18,381 |
|
|
|
(7 |
)% |
Communications and |
|
|
5,296 |
|
|
|
3,761 |
|
|
|
41 |
% |
|
|
10,074 |
|
|
|
7,838 |
|
|
|
29 |
% |
Depreciation and |
|
|
3,112 |
|
|
|
3,597 |
|
|
|
(13 |
)% |
|
|
6,610 |
|
|
|
7,040 |
|
|
|
(6 |
)% |
Other Expenses |
|
|
7,106 |
|
|
|
8,448 |
|
|
|
(16 |
)% |
|
|
15,781 |
|
|
|
14,770 |
|
|
|
7 |
% |
Total Expenses |
|
|
295,782 |
|
|
|
292,108 |
|
|
|
1 |
% |
|
|
571,272 |
|
|
|
462,903 |
|
|
|
23 |
% |
Income Before Provision |
|
|
64,399 |
|
|
|
54,169 |
|
|
|
19 |
% |
|
|
118,302 |
|
|
|
83,362 |
|
|
|
42 |
% |
Provision for Taxes |
|
|
11,368 |
|
|
|
13,117 |
|
|
|
(13 |
)% |
|
|
11,899 |
|
|
|
14,324 |
|
|
|
(17 |
)% |
Net Income |
|
|
53,031 |
|
|
|
41,052 |
|
|
|
29 |
% |
|
|
106,403 |
|
|
|
69,038 |
|
|
|
54 |
% |
Net Income Attributable |
|
|
24,715 |
|
|
|
18,911 |
|
|
|
31 |
% |
|
|
45,464 |
|
|
|
29,561 |
|
|
|
54 |
% |
Net Income Attributable to |
|
$ |
28,316 |
|
|
$ |
22,141 |
|
|
|
28 |
% |
|
$ |
60,939 |
|
|
$ |
39,477 |
|
|
|
54 |
% |
Revenues
The following table provides revenue statistics for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Total Number of Clients |
|
|
236 |
|
|
|
226 |
|
|
|
293 |
|
|
|
282 |
|
Total Number of Fees of at least $1 Million from |
|
|
70 |
|
|
|
52 |
|
|
|
128 |
|
|
|
104 |
|
Total Revenues were $360.2 million for the three months ended June 30, 2024, an increase of $13.9 million compared with $346.3 million for the three months ended June 30, 2023. Advisory Fees were $307.1 million for the three months ended June 30, 2024, a decrease of $16.7 million compared with $323.8 million for the three months ended June 30, 2023. The decrease in Advisory Fees was due to a decrease in restructuring revenues partially offset by an increase in strategic advisory revenues. Placement Fees were $46.9 million for the three months ended June 30, 2024, an increase of $26.8 million compared with $20.0 million for the three months ended June 30, 2023. The increase in Placement Fees was due to a significant increase in fund placement revenues. Interest Income and Other was $6.2 million for the three months ended June 30, 2024, an increase of $3.8 million compared with $2.5 million for the three months ended June 30, 2023. The increase in Interest Income and Other was principally due to higher interest income.
Total Revenues were $689.6 million for the six months ended June 30, 2024, an increase of $143.3 million compared with $546.3 million for the six months ended June 30, 2023. Advisory Fees were $595.8 million for the six months ended June 30, 2024, an increase of $103.9 million compared with $491.9 million for the six months
27
ended June 30, 2023. The increase in Advisory Fees was due to increases in restructuring, strategic advisory and private capital solutions revenues. Placement Fees were $81.4 million for the six months ended June 30, 2024, an increase of $33.7 million compared with $47.6 million for the six months ended June 30, 2023. The increase in Placement Fees was due to a significant increase in fund placement revenues. Interest Income and Other was $12.4 million for the six months ended June 30, 2024, an increase of $5.7 million compared with $6.8 million for the six months ended June 30, 2023. The increase in Interest Income and Other was principally due to higher interest income.
Expenses
Expenses were $295.8 million for the three months ended June 30, 2024, an increase of $3.7 million compared with $292.1 million for the three months ended June 30, 2023. The increase in expenses was due to increases in Compensation and Benefits, Occupancy and Related, and Communication and Information Services of $3.7 million, $2.2 million and $1.5 million, respectively, which were offset by decreases in Professional Fees and Other Expenses of $2.7 million and $1.3 million, respectively. Compensation and Benefits increased reflecting higher revenues and a lower compensation accrual rate. Occupancy and Related increased principally due to the expansion and lease term extension of our New York headquarters in the fourth quarter of 2023. Communications and Information Services increased principally due to investments in technology infrastructure. Professional Fees decreased due to lower consulting expenses relating to the firm's business activities. Other Expenses decreased principally due to insurance reimbursements, which were partially offset by increases in market data and higher bad debt expense.
Expenses were $571.3 million for the six months ended June 30, 2024, an increase of $108.4 million compared with $462.9 million for the six months ended June 30, 2023. The increase in expenses was principally due to increases in Compensation and Benefits, Occupancy and Related, Travel and Related, and Communications and Information Services of $99.6 million, $4.3 million, $2.9 million and $2.2 million, respectively, partially offset by a decrease in Professional Fees of $1.3 million. Compensation and Benefits increased reflecting higher revenues compared with the prior year. Occupancy and Related increased principally due to the expansion and lease term extension of our New York headquarters in the fourth quarter of 2023. Travel and Related increased due to increased levels of business travel. Communications and Information Services increased principally due to investments in technology infrastructure. Professional Fees decreased due to lower consulting expenses relating to the firm's business activities.
Provision for Taxes
The Company’s Provision for Taxes for the three months ended June 30, 2024 was $11.4 million, which represents an effective tax rate of 17.7% on pretax income of $64.4 million. The Company’s Provision for Taxes for the three months ended June 30, 2023 was $13.1 million, which represents an effective tax rate of 24.2% on pretax income of $54.2 million.
The Company’s Provision for Taxes for the six months ended June 30, 2024 was $11.9 million, which represents an effective tax rate of 10.1% on pretax income of $118.3 million. The Company’s Provision for Taxes for the six months ended June 30, 2023 was $14.3 million, which represents an effective tax rate of 17.2% on pretax income of $83.4 million.
Non-Controlling Interests
Net Income Attributable to Non-Controlling Interests is calculated by multiplying the Income Before Provision for Taxes by the percentage allocation of the income between the holders of common units of partnership interest in PJT Partners Holdings LP (“Partnership Units”) and holders of Class A common stock of PJT Partners Inc. after considering any contractual arrangements that govern the allocation of income.
Liquidity and Capital Resources
General
We regularly monitor our liquidity position, including cash and cash equivalents, investments, working capital assets and liabilities, any commitments and other liquidity requirements.
28
Our assets have been historically comprised of cash and cash equivalents, investments, receivables arising from advisory and placement engagements and operating lease right-of-use assets. Our liabilities generally include accrued compensation and benefits, accounts payable and accrued expenses, taxes payable and operating lease liabilities. We expect to pay a significant amount of incentive compensation toward the end of each year and during the beginning of the next calendar year with respect to the prior year’s results. A portion of annual compensation may be awarded with equity-based compensation and thus requires less cash. We expect levels of cash to decline at the end of the year and during the first quarter of each year after incentive compensation is paid to our employees. We then expect cash to build throughout the remainder of the year.
On February 1, 2021, PJT Partners Holdings LP, as borrower (the “Borrower”), entered into a Renewal and Modification Agreement (the “Renewal Agreement”) and related documents with First Republic Bank (now part of JPMorgan Chase), as lender (the “Lender”), amending the terms of the Borrower’s revolving credit facility with the Lender under the Amended and Restated Loan Agreement dated October 1, 2018 (the “Amended and Restated Loan Agreement”). On February 7, 2023, the Renewal Agreement was further amended to extend the maturity date to October 1, 2024. Further information regarding the Renewal Agreement and Amended and Restated Loan Agreement can be found in Note 13. “Commitments and Contingencies—Commitments, Line of Credit” in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing. As of June 30, 2024 and December 31, 2023, we were in compliance with the debt covenants under the Renewal Agreement and Amended and Restated Loan Agreement, respectively. Additionally, as of June 30, 2024 and December 31, 2023, there were no borrowings outstanding under the revolving credit facility.
On July 29, 2024, PJT Partners Holdings LP, as borrower, entered into a new syndicated revolving credit agreement (the “Credit Agreement”) and related documents with Bank of America, N.A., as the administrative agent (the “Administrative Agent”), and certain other financial institutions party thereto as lenders. The Credit Agreement, which replaces the Borrower's existing Amended and Restated Loan Agreement in its entirety, provides for a revolving credit facility with aggregate principal amount of up to $100 million. Outstanding borrowings under the revolving credit facility bear interest of Secured Overnight Financing Rate plus 1.85% per annum. In connection with the closing of the Credit Agreement, the Borrower paid certain closing costs and fees. In addition, the Borrower will also pay a commitment fee on the unused portion of the revolving credit facility of 0.25% per annum, payable quarterly in arrears. The revolving credit facility will mature and the commitments thereunder will terminate on July 29, 2026, subject to extension by agreement of the Borrower and Administrative Agent.
We evaluate our cash needs on a regular basis. As of June 30, 2024 and December 31, 2023, we had cash, cash equivalents and short-term investments of $350.8 million and $436.9 million, respectively. The vast majority of these balances are either held in institutions labeled by the Financial Stability Board as global systemically important banks or Treasury securities. Although we maintain multiple banking relationships with both global and regional banks and actively monitor the financial stability of such institutions, a failure at any institution where we maintain a banking relationship could impact our liquidity.
Our liquidity is highly dependent upon cash receipts from clients, which are generally dependent upon the successful completion of transactions as well as the timing of receivable collections. As of June 30, 2024 and December 31, 2023, total accounts receivable, net of allowance for credit losses, were $343.7 million and $263.5 million, respectively. As of June 30, 2024 and December 31, 2023, the allowance for credit losses was $3.6 million and $2.4 million, respectively. Included in Accounts Receivable, Net are long-term receivables of $89.6 million and $84.4 million as of June 30, 2024 and December 31, 2023, respectively, related to placement fees that are generally paid in installments over a period of three to four years.
Sources and Uses of Liquidity
Our primary cash needs are for working capital, paying operating expenses including cash compensation to our employees, exchanging of Partnership Units for cash, repurchasing shares of the Company’s Class A common stock, paying income taxes, dividend payments, partnership tax distributions, capital expenditures, making payments pursuant to the tax receivable agreement, commitments and strategic investments. We expect to fund these liquidity requirements through cash flows from operations and borrowings under our revolving credit facility. Our ability to fund these needs will depend, in part, on our ability to generate or raise cash in the future which depends on our
29
future financial results, which are subject to general economic, financial, competitive, legislative and regulatory factors.
Additionally, our ability to generate positive cash flow from operations will be impacted by global economic conditions. If our cash flows from operations are significantly reduced, we may need to borrow from our revolving credit facility, incur debt, or issue additional equity. Although we believe that our revolving credit facility, and our ability to renew it, will permit us to finance our operations on acceptable terms and conditions for the foreseeable future, our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including: business performance; our credit ratings or absence of a credit rating; the liquidity of the overall capital markets; the current state of the economy; and stability of our lending institution. We cannot provide any assurance that such financing will be available to us on acceptable terms or that such financing will be available at all. We believe that our future cash from operations and availability under our revolving credit facility, together with our access to funds on hand, will provide adequate resources to fund our liquidity and capital needs.
Regulatory Capital
We actively monitor our regulatory capital base. We are subject to regulatory requirements in the U.S. and certain international jurisdictions to ensure general financial soundness and liquidity. This requires, among other things, that we comply with certain minimum capital requirements, recordkeeping, reporting procedures, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to and from affiliates. See Note 14. “Regulated Entities” in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing for further information. The licenses under which we operate are meant to be appropriate to conduct our business. We believe that we provide each of these entities with sufficient capital and liquidity, consistent with their business and regulatory requirements.
Our activities may also be subject to regulation, including regulatory capital requirements, by various other foreign jurisdictions and self-regulatory organizations.
We do not anticipate that compliance with any and all such requirements will materially adversely impact the availability of funds for domestic and parent-level purposes.
Exchange Agreement
Subject to the terms and conditions of the exchange agreement, as amended, between us and certain of the holders of Partnership Units (other than PJT Partners Inc.), Partnership Units are exchangeable at the option of the holder for cash or, at our election, for shares of our Class A common stock on a one-for-one basis. Depending on our liquidity and capital resources, market conditions, the timing and concentration of exchange requests and other considerations, we may choose to fund exchanges of Partnership Units with available cash, borrowings or new issuances of Class A common stock or to settle exchanges by issuing Class A common stock to the exchanging holder of Partnership Units.
Certain holders of Partnership Units exchanged 0.3 million Partnership Units for cash in the amount of $30.3 million for the six months ended June 30, 2024 and 0.3 million Partnership Units for cash in the amount of $19.4 million for the six months ended June 30, 2023.
Share Repurchase Program
On February 6, 2024, the Company announced that the Board authorized a $500 million Class A common stock repurchase program, which replaced the then-existing $200 million repurchase program authorized on April 25, 2022. Under the new repurchase program, which has no expiration date, shares of the Company’s Class A common stock may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number of shares repurchased depend on a variety of factors,
30
including legal requirements, price and economic and market conditions. The repurchase program may be suspended or discontinued at any time and does not have a specified expiration date.
During the six months ended June 30, 2024, the Company repurchased 1.7 million shares of the Company’s Class A common stock at an average price per share of $97.60, or $162.5 million in aggregate, pursuant to the share repurchase program. As of June 30, 2024, the Company’s remaining repurchase authorization was $350.2 million.
Contractual Obligations
For a discussion of our contractual obligations, refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2023. There have not been any material changes to our contractual obligations since December 31, 2023.
Commitments and Contingencies
Litigation
With respect to our litigation matters, including any litigation discussed under the caption “Legal Proceedings” elsewhere in this report, we are not currently able to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support such an assessment, including quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by courts on motions or appeals, analysis by experts or the status of any settlement negotiations. While the ultimate outcome and the costs associated with litigation are inherently uncertain and difficult to predict, we believe, based on current knowledge and after consultation with counsel, that we are not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company.
Guarantee
The Company provides a guarantee to a lending institution for certain loans held by employees for investment in funds of its former Parent, which are secured by the underlying investments in those funds. The amount guaranteed was $2.2 million and $2.3 million as of June 30, 2024 and December 31, 2023, respectively. In connection with this guarantee, we currently expect any associated risk of loss to be insignificant.
Indemnifications
We have entered and may continue to enter into contracts that contain a variety of indemnification obligations. Our maximum exposure under these arrangements is not known; however, we currently expect any associated risk of loss to be insignificant. In connection with these matters, we have incurred and may continue to incur legal expenses, which are expensed as incurred.
Tax Receivable Agreement
We have entered into a tax receivable agreement with the holders of Partnership Units (other than PJT Partners Inc.) that provides for the payment by PJT Partners Inc. to exchanging holders of Partnership Units of 85% of the benefits, if any, that PJT Partners Inc. is deemed to realize as a result of the increases in tax basis related to such exchanges of Partnership Units and of certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. As of June 30, 2024 and December 31, 2023, the Company had amounts due of $30.9 million and $29.7 million, respectively, pursuant to the tax receivable agreement, which represent management’s best estimate of the amounts currently expected to be owed in connection with the tax receivable agreement. Actual payments may differ significantly from estimated amounts due.
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Further information regarding the tax receivable agreement can be found in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Other
See Notes 8, 10, 11 and 13 in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing for further information in connection with income taxes, equity-based and other deferred compensation plans, leasing arrangements and commitments, respectively.
Critical Accounting Estimates
A discussion of critical accounting estimates is included in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recent Accounting Developments
Information regarding recent accounting developments and their impact on our financial statements can be found in Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk and Credit Risk
Our business is not capital-intensive and we do not invest in derivative instruments or, generally, borrow. As a result, we are not subject to significant market risk (including interest rate risk, foreign currency exchange rate risk and commodity price risk) or credit risk. Notwithstanding the foregoing, current economic and geopolitical uncertainty and slowing global growth could have a material adverse effect on the Company's condensed consolidated financial statements.
Risks Related to Cash, Cash Equivalents and Investments
Our cash and cash equivalents include short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. Cash and cash equivalents are maintained in U.S. and non-U.S. bank accounts and are held at six financial institutions. In addition to cash and cash equivalents, we hold investments in Treasury securities, certain of which are classified as Investments in our Condensed Consolidated Statements of Financial Condition. We believe our cash, cash equivalents and short-term investments are not subject to any material interest rate risk, equity price risk, credit risk or other market risk based on our diversified use of global and regional financial institutions and the short-term nature of the securities.
Credit Risk
We estimate our allowance for credit losses using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. We maintain an allowance for credit losses that, in our opinion, reflects current expected credit losses. As of June 30, 2024 and December 31, 2023, the allowance for credit losses was $3.6 million and $2.4 million, respectively.
Exchange Rate Risk
We are exposed to the risk that the exchange rate of the U.S. dollar relative to other currencies may have an adverse effect on the reported value of our non-U.S. dollar denominated or based assets and liabilities. In addition, the reported amounts of our revenues may be affected by movements in the rate of exchange between the transaction currency and the U.S. dollar, the currency in which our financial statements are denominated. The principal
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non-U.S. dollar currencies include the pound sterling, the euro, the Hong Kong dollar and the Japanese yen. For the six months ended June 30, 2024 and 2023, the impact of the fluctuation of foreign currencies in Other Comprehensive Income (Loss), Net of Tax – Currency Translation Adjustment in the Condensed Consolidated Statements of Comprehensive Income was a loss of $1.0 million and a gain of $3.1 million, respectively, and in Interest Income and Other in the Condensed Consolidated Statements of Operations, a loss of $1.6 million and $2.7 million, respectively. We have not entered into any transactions to hedge our exposure to these foreign currency fluctuations through the use of derivative instruments or other methods. Given the geopolitical uncertainty and the ongoing economic impact, elevated interest rates and heightened inflation, exchange rate fluctuations between the U.S. dollar and other currencies could unfavorably affect our condensed consolidated financial statements.
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during our most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and its affiliates may be subject to legal proceedings and claims in the ordinary course of business. In addition, government agencies and self-regulatory organizations in countries in which we conduct business undertake periodic examinations and may initiate administrative proceedings regarding the Company’s and its affiliates’ business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, or its directors, officers or employees. It is our policy to cooperate fully with such governmental requests, examinations and administrative proceedings. In view of the inherent difficulty of determining whether any loss in connection with any such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, we cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, we believe, based on current knowledge and after consultation with counsel, that we are not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company.
Further disclosure regarding legal proceedings is provided in Note 13. “Commitments and Contingencies—Contingencies, Litigation” in the “Notes to Condensed Consolidated Financial Statements” in “—Item 1. Financial Statements” of this filing.
ITEM 1A. RISK FACTORS
There were no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
The risks described in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our subsequently filed Quarterly Reports on Form 10-Q are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities in the Second Quarter of 2024
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Total Number |
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Approximate Dollar |
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of Shares |
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Value of Shares |
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Purchased as |
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that May Yet Be |
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Total Number |
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Part of Publicly |
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Purchased Under |
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of Shares |
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Average Price |
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Announced Plans |
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the Plans or |
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Repurchased |
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Paid Per Share |
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or Programs (a) |
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Programs (a) |
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April 1 to April 30 |
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421,128 |
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|
$ |
93.88 |
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421,128 |
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|
$ |
366.8 million |
May 1 to May 31 |
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|
107,119 |
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|
98.55 |
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|
107,119 |
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356.2 million |
June 1 to June 30 |
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57,000 |
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|
105.24 |
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57,000 |
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350.2 million |
Total |
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585,247 |
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$ |
95.84 |
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585,247 |
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$ |
350.2 million |
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Unregistered Sales/Issuances of Equity Securities and Use of Proceeds
There were no unregistered sales/issuances of equity securities during the second quarter of 2024.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended June 30, 2024,
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ITEM 6. EXHIBITS
Exhibit Number |
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Exhibit Description |
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2.1 |
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3.1 |
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3.2 |
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10.1 |
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10.2 |
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31.1 |
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Certification of the Chief Executive Officer pursuant to Rule 13a-14(a). |
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31.2 |
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Certification of the Chief Financial Officer pursuant to Rule 13a-14(a). |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 2, 2024 |
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PJT Partners Inc. |
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By: |
/s/ Paul J. Taubman |
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Name: |
Paul J. Taubman |
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Title: |
Chief Executive Officer |
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By: |
/s/ Helen T. Meates |
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Name: |
Helen T. Meates |
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Title: |
Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
37