PERELLA WEINBERG THIRD QUARTER 2026 EARNINGS - PERELLA WEINBERG PARTNERS

Financial Performance:

• Third Quarter 2026 revenue reached $251 million, representing a 53% year-over-year increase and a 61% sequential increase; Year-to-Date (YTD) revenue totaled $557 million, up 5% YoY.
• M&A business nearly doubled YoY and is up over 40% YTD; strong performance noted in consumer, industrials, energy, and financial institutions sectors.
• Restructuring revenues declined against record 2025 levels but pipeline remains robust for large, complex situations.
• Fee-paying client count increased 50% YoY; fee events exceeding $5 million rose nearly 80% YoY.
• Adjusted compensation margin for the first nine months was 67%, meeting full-year targets; Q3 margin was 62.5%.
• Adjusted non-compensation expenses were $37 million for the quarter (flat YoY) and $106 million YTD (down 14% YoY).
• Q3 adjusted tax rate was 29.5% on an if-converted basis; underlying rate expected in the low-to-mid 30s for the remainder of 2026.
• Cash position stood at $150 million with no debt at quarter-end.
• Returned $88 million to equity holders YTD via RSU settlements, dividends, and open market repurchases; $0.07 quarterly dividend declared.

Guidance and Future Outlook:

• Revenue expected to remain back half-weighted; momentum is shifting from pipeline to announcements and revenue recognition.
• Strong conviction heading into year-end and 2027 driven by a total booked plus announced pending backlog up 30% YoY and announcement pending backlog nearly tripled YoY.
• Gross backlog under engagement letters is up 40% versus the prior year.
• Full-year adjusted non-compensation expense guidance remains on track for a single-digit percentage decrease versus 2025.
• Management expects fee levels in the $1–$5 billion transaction segment to remain sustainable and attractive in 2027.
• Long-term strategy focuses on scaling the firm through 2027, emphasizing organic growth, talent acquisition, and selective acquisitions to expand client coverage and product capabilities.

Business Segments and Product Lines:

• M&A division is the primary growth engine, leading the revenue surge in Q3.
• Closed acquisition of Gleacher Shacklock on September 1; the combined U.K. business has announced six transactions since closing.
• Product expansion includes added capabilities and broader client coverage, with a focus on $1–$5 billion strategic and financial sponsor deals rather than just mega-cap (> $10 billion).
• Energy sector expected to perform well in 2027 despite a choppy 2026.
• Talent acquisition added 14 partners and 13 managing directors YTD, including the Gleacher Shacklock team.

Market and Competitive Landscape:

• Market activity is described as broad-based with no significant reliance on the macro backdrop, except for energy sector volatility.
• Competition remains fierce in the $1–$5 billion segment, which offers high volume (approx. 1,000 transactions annually) and significant fee realization.
• The firm positions itself as a "natural hedge to asset inflation," benefiting from market value appreciation.
• Strategic clients (corporates) are less sensitive to rate fluctuations than financial sponsors, providing a stabilizing factor.
• No observed impact from upcoming midterm elections on client deal timing or strategy.

Risks and Challenges:

• Restructuring and liability management revenues face headwinds from a record 2025 baseline, though pipeline is building.
• Valuation gaps between buyers and sellers remain a primary constraint on deal volume, more so than capital availability.
• Interest rate volatility poses a risk if rates increase violently (gapping up), which could negatively impact highly levered private equity transactions.
• Reliance on talent ramp-up; over 30% of the partnership has less than three years of tenure, requiring time to reach full productivity.

Management Commentary and Tone:

• Tone is highly confident and focused on long-term value creation; management explicitly stated they have not initiated any sale process and are building the firm for the long term.
• Leadership emphasized a "brick by brick" scaling strategy combining internal development with selective M&A.
• Management expressed certainty regarding the 67% compensation ratio for the full year, even if some deal closures slip to early 2027.
• Andrew Bednar (CEO) and Alex Gottschalk (CFO) displayed strong alignment on growth metrics and capital allocation priorities.

Analyst Questions and Answers:

• Devin Ryan (Citizens Bank): Asked about backlog conversion timelines and drivers.
  • Answer: Some backlog will convert in 2027; typical conversion is 1–2 quarters with minimal closing risk. Growth is driven by client opportunity utilization and partner ramp-up rather than macro improvements.
• Devin Ryan (Citizens Bank): Inquired about the firm's scale strategy and future M&A focus.
  • Answer: Focus remains on expanding client coverage and product capabilities; geographical expansion is viewed cautiously unless compelling, as clients prefer travel-based service.
• Alex Bond (KBW): Questioned sensitivity of the 67% comp ratio to deal slippage and outlook for large-cap strategic activity.
  • Answer: Firm remains committed to the 67% target. The $1–$5 billion market is prioritized for 2027 over mega-cap, citing higher fees and volume.
• James Yarrow (Goldman Sachs): Asked about interest rate impacts and geopolitical factors (midterms).
  • Answer: Markets can absorb 50–75 bps rate increases; valuation gaps are the main barrier, not capital scarcity. Midterm elections are not currently influencing client deal timing.

Other Key Points:

• The $55 million revenue recognized in Q3 included closings that occurred in early Q4, recorded per accounting principles.
• The firm has 79.5 million Class A shares and 18 million partnership units outstanding.
• Capital deployment is currently prioritized toward strategic investments (e.g., Gleacher Shacklock) over share buybacks.
• The firm noted a strong return to record-high Q3 revenue levels, matching performance from Q3 2024.