Perella Weinberg Partners - Earnings Call - Q3 2025

Executive Summary

• Q3 revenue was $164.6M, down 41% YoY from a record Q3’24, with GAAP diluted EPS of $0.08 and adjusted EPS of $0.13; adjusted operating margin was 10.6% and compensation ratio remained 67%.
• CFO flagged a timing effect: ~$8.5M tied to a closing in early Q4 was recognized in Q3 under accounting rules; management also lowered FY25 non-comp expense growth guidance to “low single-digit” from “mid single-digit” in Q2, signaling tighter opex control.
• Strategic build-out continued: PWP closed the Devon Park Advisors acquisition on Oct 1 (creating a private funds advisory capability) and added 25 senior bankers YTD; Europe revenue is up >50% YoY, with record active engagements and pipeline.
• Capital and returns: $185.5M cash, no debt; YTD capital returned totals $157.5M via RSU net settlement, unit exchanges/repurchases, and dividends; quarterly dividend maintained at $0.07 per share.
• Estimates context: S&P Global consensus for Q3 and next quarter was unavailable via the tool; we cannot quantify beats/misses this quarter. As-reported results plus lowered opex growth guidance and record pipeline are likely the key stock narrative catalysts near term [functions.GetEstimates].

What Went Well and What Went Wrong

• What Went Well

  • Record activity indicators: “number of active engagements is at a record” and “overall pipeline is at a record”; Europe up >50% YoY, with higher average and median fees—supporting durable revenue potential as conversion improves.
  • Platform expansion: Closed Devon Park to launch private funds advisory, broadening sponsor relationships and addressable market; management expects meaningful contribution as the group scales across 75 partners.
  • Expense discipline and capital strength: Adjusted compensation ratio held at 67%; adjusted non-comp expense ~$36.8M, roughly flat vs Q2; guidance cut to low single-digit FY25 growth; cash $185.5M and no debt.

• What Went Wrong

  • Tough comps and M&A closings: Revenues down 41% YoY vs a record Q3’24, driven by fewer M&A closings; management highlighted timing variability and conversion challenges.
  • GAAP margins compressed vs prior year: GAAP operating margin fell to 5.4% vs 12.9% in Q3’24; GAAP comp ratio ticked up to 71% vs 73% in Q3’24 amid lower revenue base (still operating discipline, but mix and volume pressured GAAP margins).
  • Litigation/tech/travel elevated YTD: Nine-month non-comp expense rose YoY on litigation in Q1, higher travel, and increased technology spend (though the run-rate improved in Q2–Q3).

Transcript

Operator (participant)

Good morning and welcome to the Perella Weinberg Third Quarter 2025 earnings conference call. Currently, all callers have been placed in a listen-only mode, and following management's prepared remarks, the call will be open for your questions. If you would like to ask a question at that time, please press Star 1 on your telephone keypad. If you need to remove yourself from the queue, press star two. At any time, if you should need operator assistance, press star zero. Please be advised that today's call is being recorded. I will now turn the call over to Taylor Reinhardt, Head of Communications and Marketing. You may begin.

Taylor Reinhardt (Head of Communications and Marketing)

Thank you, Operator, and welcome all. Joining me today are Andrew Bednar, Chief Executive Officer, and Alex Gottschalk, Chief Financial Officer. Before we begin, I'd like to note that this call may contain forward-looking statements, including Perella Weinberg's expectations of future financial and business performance and conditions and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guarantees of future events or performance. Please refer to Perella Weinberg's most recent SEC filings for a discussion of certain of these risks and uncertainties. The forward-looking statements are based on our current beliefs and expectations, and the firm undertakes no obligation to update any forward-looking statements.

During the call, there will also be a discussion of some metrics, which are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. Perella Weinberg has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8-K, which can be found on the company's website. I will now turn the call over to Andrew Bednar to discuss our results.

Andrew Bednar (CEO)

Thank you, Taylor, and good morning. Today, we reported third quarter revenues of $165 million and year-to-date revenues of $532 million. While not records as we reported last year at this time, the underlying fundamentals of our business remain strong and continue to strengthen. The number of active engagements is at a record, our overall pipeline is at a record, and our European business is up over 50% from last year. In addition, the number of fees above our target has increased meaningfully, and both our average fee and median fee across engagements are up as well. We've been deliberate in pursuing clients and assignments where we can add the most value, focusing our teams on complex, consequential transactions where our advice to clients matters the most. Year-to-date, we have made the most significant annual investment in our firm's history, adding 25 senior bankers across sectors and regions.

The partners who joined us in 2025 alone represent 18% of our total partner base, a clear signal of our commitment to scale and a large source of potential future revenue. On October 1, we closed our acquisition of Devon Park, and the impact has been both immediate and notable. This transaction brought us a new capability, new capital relationships, and new sponsor clients overnight, meaningfully expanding our addressable market and revenue potential. The timing of our acquisition could not have been better, with the secondary market expected to exceed $200 billion this year as sponsors increasingly turn to continuation vehicles and other creative solutions to manage liquidity needs. Additionally, we are seeing private equity moving off the sidelines with a substantial exit backlog building for 2026.

The business building we've done this year is significant, expanding our client coverage and capabilities in strategically active industries for both corporates and private equity. We remain confident in our scaling strategy and believe these investments will drive significant revenue growth for our firm and create value for our shareholders. With that, I'll now turn the call over to Alex to review our financial results and capital management in more detail.

Alex Gottschalk (CFO)

Thank you, Andrew. Our third quarter revenues of $165 million included $8.5 million related to a closing that occurred within the first few days of the fourth quarter, and which, in accordance with relevant accounting principles, was recorded in the third quarter. Consistent with the first two quarters, our adjusted compensation margin remained at 67% of revenues. Our adjusted non-compensation expense of $37 million for the quarter was down from last year and roughly flat with Q2. For the nine-month period, non-compensation expenses totaled $122 million, up 5% from last year. Given our continued expense discipline, we are lowering our guidance further to a low single-digit increase for the full year of 2025. Our adjusted tax rate for the first nine months was 4%. Excluding the benefit from stock-based compensation vesting at a higher price than the grant date, the adjusted tax rate would have been 32%.

Turning to capital management, in the third quarter, we returned an additional $12 million to equity holders, primarily through the net settlement of RSUs and through dividends. Share repurchase activity during this quarter was limited as we prioritized deploying capital towards strategic investments, including the Devon Park acquisition. Year-to-date, we have returned more than $157 million to equity holders through dividends, the net settlement of RSUs, open market repurchases, and unit exchanges. In 2025, we have retired more than 6 million shares, and our commitment to proactively managing our share count remains unchanged. At the end of the third quarter, we had 65 million shares of Class A Common Stock and 23.5 million partnership units outstanding. Finally, we closed the quarter with $186 million in cash and no debt, and this morning we declared a quarterly dividend of $0.07 per share.

With that, Operator, please open the line for questions.

Operator (participant)

At this time, if you wish to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two. We'll take our first question from Devin Ryan of Citizens Bank. Please go ahead.

Devin Ryan (Analyst)

Thanks. Good morning, Andrew and Alex. How are you?

Andrew Bednar (CEO)

We're doing well. Hi, Devin.

Devin Ryan (Analyst)

Good. First question, kind of a two-parter here, just on, Andrew, some of the pipeline commentary. Obviously, heard kind of the record point. We're seeing a lot of non-M&A activity that doesn't seem to be getting picked up in the public data sources like debt advisory, etc. Can you talk about the mix of the pipeline? Is it more geared toward non-M&A right now, or maybe it's just the M&A is less visible? That's kind of the point, part one of the question. Part two is on the timing of the pipeline. Should we expect normal fourth quarter seasonality, positive, or is it more geared toward 2026? Thanks.

Andrew Bednar (CEO)

Yeah, thanks, Devin. I think on the look back, the mix is a bit more in the non-traditional M&A. If you look back in the last three quarters, our liability management business, our capital-raising business, our X business are all showing very good growth through the course of the year. The pipeline, however, continues to show a significant increase in traditional M&A business. As you know, it's really challenging to predict when transactions will get announced and closed. As you also know, we are very much still early innings in scaling our business.

When I look at those indicators that you guys do not see in terms of new business reviews, engagement letters, the mandates, the announcements that we expect in the course of the next several weeks and months, those all look very positive, and they are all much more weighted to traditional M&A versus our other products and services that we provide.

Devin Ryan (Analyst)

Okay, great. Thanks, Andrew. Just a follow-up on the recruiting environment, but then also the success that you've had today, both external recruiting in 2025, but then also the acquisition as well. Twenty-five bankers, obviously, is a lot to digest in a year, but great for kind of forward momentum. Can you just talk about how these bankers are ramping on the platform? Are they going to be additive to 2026, or is it further out than that? Just more broadly, kind of the momentum in recruiting, can you do another kind of big year in 2026? Is that the expectation? Thanks.

Andrew Bednar (CEO)

Yeah, of the 25 senior banker ads, nine are already on the platform, so they will just continue to grow and expand their client base and hopefully contribute to revenue more near term. The external hires are the remainder, so we've got 16, including Devon Park, and we're very excited about those ads. They're in terrific industries and in areas where we have a right to win, and we think that they will be contributing to our business during the course of 2026. I think with seven weeks left of 2025, it'll be a bit of a higher bar to have them announce and close transactions by the end of the year. Again, looking at the forward indicators, these new partners where we have about now 25% of our partners are here less than two years, that cohort seems to be hitting the ground running.

With the addition of Devon Park, as I said, that's different because that provides us with a new product category and a new group of clients that we didn't have prior to the acquisition. That, for us, is a game changer because you get non-linear growth and synergy out of that type of transaction where that product capability now is across 75 partners. We're really excited about Devon Park and that capability. Our clients have been very excited that we have that capability, and that's, as I said in my upfront comments, Devin, the timing of that feels quite good.

Devin Ryan (Analyst)

Okay, excellent. I will leave it there, but thanks for taking the questions.

Andrew Bednar (CEO)

Thanks, Devin.

Operator (participant)

Our next question is from Alex Bond of KBW. Please go ahead. Your line is open.

Alex Bond (VP)

Hey, good morning, everyone. Just wanted to ask on the restructuring.

Andrew Bednar (CEO)

Good morning.

Alex Bond (VP)

Good morning. Yeah, just wanted to ask on the restructuring backdrop. Can you just maybe update us on what you're seeing in terms of the broader backdrop here and overall client engagement levels? Some of your peers have sounded a little bit more upbeat around restructuring volumes, while there's a note that they've seen somewhat of a slowdown in new activity recently. Maybe, have you seen any slowdown in recent weeks, and also, has there been any shift in terms of the mix between in-quarter more traditional restructurings versus LME activity? Thanks.

Andrew Bednar (CEO)

Yeah, thanks, Alex. We're seeing just a very steady pace of activity in our broad liability management business. I know there's been a lot of press reported about some cracks in credit markets and a couple of high-profile bankruptcies. We don't see that as something that's systemic. Those feel more isolated, but there are still a large number of clients that need assistance with managing balance sheet, in some cases managing liquidity, and in some cases going through a traditional workout or bankruptcy. For us, that business continues to grow. That will be a higher contributing business this year than last year, and that team continues to generate increasing revenue, and we feel very, very good about our setup for 2026.

Alex Bond (VP)

Okay, great. That's helpful. Maybe just on the private capital side, now that the Devon Park deal has closed and those folks are on the platform, just trying to think about how soon or maybe how quickly we should expect that area of the business to meaningfully contribute to the revenue base, and maybe if there's any way to size up the potential contribution from that team relative to the M&A and restructuring sides once that team is fully up and running.

Andrew Bednar (CEO)

Yeah, so we're doing our planning in terms of looking at targets and what our expectations will be for our groups heading into 2026, and we are going to treat the Devon Park business now fully part of Perella Weinberg as a group in terms of the expectations we have, and we think this will be a significant contributor, much like our other groups. We have six groups that are across our platform plus our restructuring business, so we're expecting that we just do the simple math on our revenue, and we expect Devon Park business to be that kind of contributor to our overall franchise. As I said earlier, we have 75 partners, all of whom have private equity relationships and relationships with private credit, infrastructure, and real estate, which is where we really cover in the Devon Park business.

We're very excited about the product capability, which, again, a couple of months ago we didn't have, and last year we had zero revenue in this area. We're very excited about the setup there.

Alex Bond (VP)

Got it. Thank you, Andrew.

Andrew Bednar (CEO)

Thanks, Alex.

Operator (participant)

This concludes the Q&A portion of today's call, but now I'd like to turn the call back over to Andrew Bednar for any additional closing remarks.

Andrew Bednar (CEO)

Okay, thank you, Leo, and thanks to everyone for joining us today. I also want to specifically thank our exceptional team. They have been working tirelessly both in recruiting top talent for our firm this year, but also, of course, in covering our clients, and their unwavering and very enthusiastic dedication and commitment to our mission is these are the things that make our firm great. We look forward to updating you on our progress next quarter, and thank you for your continued support.

Operator (participant)

This concludes the Perella Weinberg Third Quarter 2025 Earnings Call and Webcast. You may now disconnect your line at this time and have a wonderful day.