UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________________________________________________________________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________________________________________________________________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024
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: 001-39558
_____________________________________________________________________________________________________________________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
_____________________________________________________________________________________________________________________________________________________________________
( State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (212 ) 287-3200
_____________________________________________________________________________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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. Yes x No o
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). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
| Large accelerated filer | o | x | |||||||||
| Non-accelerated filer | o | Smaller reporting company | |||||||||
| 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 any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 30, 2024, the registrant had 53,410,156 shares of Class A common stock, par value $0.0001 per share, and 40,795,985 shares of Class B common stock, par value $0.0001 per share, outstanding.
Perella Weinberg Partners
Table of Contents
| Page | ||||||||
1
On June 24, 2021 (the “Closing Date” or the “Closing”), Perella Weinberg Partners consummated a business combination pursuant to that certain Business Combination Agreement, dated as of December 29, 2020 (the “Business Combination Agreement”). Unless the context otherwise requires, all references to “PWP,” the “Company,” “we,” “us” or “our” refer to Perella Weinberg Partners and its consolidated subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements regarding the expectations regarding the combined business are “forward-looking statements.” In addition, words such as “estimates,” “projected,” “expects,” “estimated,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “would,” “future,” “propose,” “target,” “goal,” “objective,” “outlook” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of the parties, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements.
Important factors, among others, that may affect actual results or outcomes include (but are not limited to): changing market conditions; the Company’s ability to execute on its growth initiatives, business strategies or operating plans; the Company’s ability to successfully identify, recruit, develop and retain talent; the Company's dependence on its fee-paying clients and fluctuating revenues from its non-exclusive, engagement-by-engagement business model; the high volatility of the Company’s revenue as a result of its reliance on advisory fees that are largely contingent on the completion of events which may be out of its control; the Company’s ability to appropriately manage conflicts of interest and tax and other regulatory factors relevant to the Company’s business, including actual, potential or perceived conflicts of interest and other factors that may damage its business and reputation; substantial litigation risks in the financial services industry; cybersecurity and other operational risks; extensive regulation of the corporate advisory industry and U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy and laws; and other risks and uncertainties described under the section entitled “Part I—Item 1A. Risk Factors” included in our Annual Report on Form 10-K.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Website Disclosure
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). The SEC maintains an internet site where reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC are available. Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov and on our website at https://investors.pwpartners.com/ free of charge as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Our website is https://pwpartners.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.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Perella Weinberg Partners
Condensed Consolidated Statements of Financial Condition
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Investments in short-term marketable debt securities | |||||||||||
| Accounts receivable, net of allowance | |||||||||||
| Fixed assets, net of accumulated depreciation and amortization | |||||||||||
| Intangible assets, net of accumulated amortization | |||||||||||
| Goodwill | |||||||||||
| Prepaid expenses and other assets | |||||||||||
| Right-of-use lease assets | |||||||||||
| Deferred tax assets, net | |||||||||||
Total assets | $ | $ | |||||||||
| Liabilities and Equity | |||||||||||
| Accrued compensation and benefits | $ | $ | |||||||||
| Accounts payable, accrued expenses and other liabilities | |||||||||||
| Lease liabilities | |||||||||||
| Amount due pursuant to tax receivable agreement | |||||||||||
| Total liabilities | |||||||||||
Commitments and Contingencies (Note 16) | |||||||||||
Class A common stock, par value $ | |||||||||||
Class B common stock, par value $ | |||||||||||
Preferred stock, par value $ | |||||||||||
| Additional paid-in-capital | |||||||||||
| Retained earnings (accumulated deficit) | ( | ( | |||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
Treasury stock, at cost ( | ( | ( | |||||||||
| Total Perella Weinberg Partners equity | |||||||||||
| Non-controlling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited)
3
Perella Weinberg Partners
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | $ | $ | |||||||||
| Expenses | |||||||||||
| Compensation and benefits | |||||||||||
| Equity-based compensation | |||||||||||
| Total compensation and benefits | |||||||||||
| Professional fees | |||||||||||
| Technology and infrastructure | |||||||||||
| Rent and occupancy | |||||||||||
| Travel and related expenses | |||||||||||
| General, administrative and other expenses | |||||||||||
| Depreciation and amortization | |||||||||||
| Total expenses | |||||||||||
| Operating income (loss) | ( | ( | |||||||||
| Non-operating income (expenses) | |||||||||||
| Related party income | |||||||||||
| Other income (expense) | |||||||||||
| Total non-operating income (expenses) | |||||||||||
| Income (loss) before income taxes | ( | ( | |||||||||
| Income tax expense (benefit) | |||||||||||
| Net income (loss) | ( | ( | |||||||||
| Less: Net income (loss) attributable to non-controlling interests | ( | ( | |||||||||
| Net income (loss) attributable to Perella Weinberg Partners | $ | ( | $ | ( | |||||||
| Net income (loss) per share attributable to Class A common shareholders | |||||||||||
| Basic | $ | ( | $ | ( | |||||||
| Diluted | $ | ( | $ | ( | |||||||
| Weighted-average shares of Class A common stock outstanding | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited)
4
Perella Weinberg Partners
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(Dollars in Thousands)
Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net income (loss) | $ | ( | $ | ( | |||||||
| Foreign currency translation gain (loss), net of tax | ( | ||||||||||
| Comprehensive income (loss) | ( | ( | |||||||||
| Less: Comprehensive income (loss) attributable to non-controlling interests | ( | ( | |||||||||
| Comprehensive income (loss) attributable to Perella Weinberg Partners | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited)
5
Perella Weinberg Partners
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
| Shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Treasury Stock | Class A Common Stock | Class B Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Non- Controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | ( | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based awards | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to partners | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common stock for vested PWP Incentive Plan Awards | — | — | — | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Withholding payments on vested PWP Incentive Plan Awards | — | — | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation gain (loss) | — | — | — | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A common stock in public offering (Note 9—Stockholders’ Equity) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange of PWP OpCo Units and corresponding Class B common stock for Class A common stock (Note 9—Stockholders’ Equity) | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in ownership interests | — | — | — | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | ( | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited)
6
Perella Weinberg Partners
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
| Shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Treasury Stock | Class A Common Stock | Class B Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Non- Controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | ( | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity-based awards | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to partners | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common stock for vested PWP Incentive Plan Awards | — | — | — | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Withholding payments on vested PWP Incentive Plan Awards | — | — | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation gain (loss) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange of PWP OpCo Units and corresponding Class B common stock for Class A common stock (Note 9—Stockholders’ Equity) | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchase | — | — | ( | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in ownership interests | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | ( | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited)
7
Perella Weinberg Partners
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in Thousands)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income (loss) | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Equity-based awards vesting expense | |||||||||||
| Depreciation and amortization | |||||||||||
| Foreign currency revaluation | ( | ||||||||||
| Non-cash operating lease expense | |||||||||||
| Deferred taxes | |||||||||||
| Other | ( | ||||||||||
| Decrease (increase) in operating assets: | |||||||||||
| Accounts receivable, net of allowance | ( | ||||||||||
| Due from related parties | ( | ||||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Increase (decrease) in operating liabilities: | |||||||||||
| Accrued compensation and benefits | ( | ( | |||||||||
| Accounts payable, accrued expenses and other liabilities | ( | ||||||||||
| Lease liabilities | |||||||||||
| Net cash provided by (used in) operating activities | ( | ( | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of fixed assets | ( | ( | |||||||||
| Purchases of investments in short-term marketable debt securities | ( | ||||||||||
| Maturities of investments in short-term marketable debt securities | |||||||||||
| Other | |||||||||||
| Net cash provided by (used in) investing activities | |||||||||||
| Cash flows from financing activities | |||||||||||
Proceeds from issuance of Class A common stock in public offering, net of underwriting discount and offering costs | |||||||||||
| Distributions to partners | ( | ( | |||||||||
| Dividends paid on Class A and Class B common stock | ( | ( | |||||||||
| Withholding payments for vested PWP Incentive Plan Awards | ( | ( | |||||||||
| Treasury stock purchases | ( | ||||||||||
Payments pursuant to tax receivable agreement | ( | ||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| Supplemental disclosure of non-cash activities | |||||||||||
| Lease liabilities arising from obtaining right-of-use lease assets | $ | $ | |||||||||
| Accrued capital expenditures | $ | $ | |||||||||
| Accrued dividends and dividend equivalent units on unvested PWP Incentive Plan Awards | $ | $ | |||||||||
| Deferred tax effect resulting from exchanges of PWP OpCo Units, net of amounts payable under tax receivable agreement | $ | $ | |||||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Cash paid for income taxes | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited)
8
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Note 1—Organization and Nature of Business
Perella Weinberg Partners and its consolidated subsidiaries, including PWP Holdings LP (“PWP OpCo”) (collectively, “PWP” and the “Company”), is a global independent advisory firm that provides strategic and financial advice to a wide range of clients. The Company’s activities as an investment banking advisory firm constitute a single business segment that provides a range of advisory services, including advice related to strategic and financial decisions, mergers and acquisitions (“M&A”) execution, shareholder and defense advisory, financing and capital solutions advice with resources focused on restructuring and liability management, capital markets advisory, private capital placement, as well as specialized underwriting and research services primarily for the energy and related industries.
On June 24, 2021, the Company consummated a business combination pursuant to a Business Combination Agreement that resulted in PWP OpCo becoming jointly-owned by Perella Weinberg Partners, PWP Professional Partners LP (together with its successors (including pursuant to the Division and Merger (each as defined below)) and assigns, as applicable, “Professional Partners”) and certain existing partners of PWP OpCo as part of an umbrella limited partnership C-corporation (Up-C) structure (the “Business Combination”).
On December 31, 2023, as part of an internal reorganization, Professional Partners was divided into three partnerships pursuant to a plan of division (the “Division”), which, among other things, provided that (i) all of its limited partnership interests in PWP OpCo were allocated to one of the divided partnerships, PWP AdCo Professionals LP (“AdCo Professionals”), (ii) all of its shares of Class B-1 common stock of the Company were allocated to another divided partnership, PWP VoteCo Professionals LP (“VoteCo Professionals”) and (iii) PWP Professional Partners LP changed its name to PWP AmCo Professionals LP. On April 1, 2024, as part of this internal reorganization, AdCo Professionals merged with and into PWP OpCo (the “Merger”). Refer to Note 18—Subsequent Events for additional information on the Merger. The principal purpose of the internal reorganization was to simplify the structure for the partners in Professional Partners with respect to their indirect interests in PWP OpCo. There was no consideration exchanged in connection with the Division or the Merger, and neither the Division nor the Merger are expected to affect the respective rights or economic interests of the Company, PWP GP LLC (“PWP GP”), or any limited partner with respect to PWP OpCo.
The operations of PWP OpCo are conducted through a wholly-owned subsidiary, Perella Weinberg Partners Group LP, and its subsidiaries which are consolidated in these financial statements. PWP GP is the general partner that controls PWP OpCo. The limited partner interests of PWP OpCo are held by the Company, an Investor Limited Partner (the “ILP”), and Professional Partners. The Company shareholders are entitled to receive a portion of PWP OpCo’s economics through their direct ownership interests in shares of Class A common stock of PWP. The non-controlling interest owners of PWP OpCo receive economics through ownership of PWP OpCo Class A partnership units (“PWP OpCo Units”). See Note 9—Stockholders’ Equity for additional information.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and all intercompany balances and transactions have been eliminated.
These condensed consolidated financial statements and notes thereto are unaudited, and as permitted by the interim reporting rules and regulations set forth by the SEC, exclude certain financial information and note disclosures normally included in annual audited financial statements prepared in accordance with U.S. GAAP. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K. The condensed consolidated financial statements reflect all material adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods.
Consolidation
9
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Use of Estimates
The preparation of the condensed consolidated financial statements and related disclosures in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and the assumptions underlying these estimates are reviewed periodically, and the effects of revisions are reflected in the period in which they are determined to be necessary.
In preparing the condensed consolidated financial statements, management makes certain estimates regarding the measurement of amounts due pursuant to the tax receivable agreement, measurement and timing of revenue recognition, assumptions used in the provision for income taxes, measurement of equity-based compensation, expected insurance reimbursements related to litigation costs, evaluation of goodwill and intangible assets, fair value measurement of financial instruments, and other matters that affect the reported amounts and disclosures of contingencies in the condensed consolidated financial statements.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash held at banks, including interest-bearing money market accounts, and any highly liquid investments with original maturities of three months or less from the date of purchase. Cash account balances often exceed federally insured limits. Restricted cash represents cash that is not readily available for general purpose cash needs. As of March 31, 2024 and December 31, 2023, the Company had no 2.9
Foreign Currencies
In the normal course of business, the Company and its subsidiaries may enter into transactions denominated in a non-functional currency. The Company recognized net foreign exchange gains (losses) arising from such transactions of $0.5 million and $(1.1 ) million during the three months ended March 31, 2024 and 2023, respectively, which are included in Other income (expense) on the Condensed Consolidated Statements of Operations. In addition, the Company consolidates its foreign subsidiaries that have non-U.S. dollar functional currencies. Non-U.S. dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and profit and loss activity is generally translated using the average exchange rate throughout the period. Cumulative translation adjustments arising from the translation of non-U.S. dollar denominated operations are included as a component of Accumulated other comprehensive income (loss) on the Condensed Consolidated Statements of Changes in Equity.
Recently Adopted Accounting Pronouncements
There were no recently adopted accounting pronouncements that had a material effect on the Company’s condensed consolidated financial statements.
Future Adoption of Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which amends the guidance in Accounting Standards Codification (“ASC” or the “Codification”) Topic 280, Segment Reporting, to require enhanced disclosures about reportable segments on an annual and interim basis. The amendments will require disclosure of significant segment expenses, identification of the chief operating decision maker (“CODM”), and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 clarifies that an entity that has a single reportable segment is subject to all the disclosures required by the amendments and all existing segment disclosures in Topic 280. The amendments in ASU 2023-07 are effective for the Company beginning with the annual period ended December 31, 2024 and interim periods within the year ended December 31, 2025. The amendments are required to be applied retrospectively to all period presented and early adoption is permitted. The Company does not expect the adoption of ASU 2023-07 to have a material impact on the consolidated financial statements.
10
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which amends the guidance in ASC Topic 740, Income Taxes (“ASC 740”), to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments in ASU 2023-09 are effective for the Company beginning with the annual period ended December 31, 2025. The amendments are to be applied prospectively with both retrospective application and early adoption permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on the consolidated financial statements.
Note 3—Revenue and Receivables from Contracts with Customers
The following table disaggregates the Company’s revenue between over time and point in time recognition:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Over time | $ | $ | |||||||||
| Point in time | |||||||||||
| Total revenues | $ | $ | |||||||||
Reimbursable expenses billed to clients were $1.9 million and $1.2 million for the three months ended March 31, 2024 and 2023, respectively.
Performance Obligations and Contract Balances
As of March 31, 2024, the aggregate amount of the transaction price, as defined in the Codification, allocated to performance obligations yet to be satisfied was $1.4 million, and the Company generally expects to recognize this revenue within the next twelve months . Such amounts primarily relate to the Company’s performance obligations of providing transaction-related advisory services. The Company recognized revenue of $58.2 million and $94.2 million during the three months ended March 31, 2024 and 2023, respectively, related to performance obligations that were satisfied or partially satisfied in prior periods. These amounts were recognized upon the resolution of revenue constraints and uncertainties in the respective periods and were generally related to transaction-related advisory services.
As of March 31, 2024 and December 31, 2023, the Company recorded $2.0 million and $0.9 million, respectively, for contract liabilities which are presented within Accounts payable, accrued expenses and other liabilities on the Condensed Consolidated Statements of Financial Condition. The Company recognized previously deferred revenue of $0.5 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively, which was primarily related to transaction-related advisory services that are recognized over time.
11
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Accounts Receivable and Allowance for Credit Losses
As of March 31, 2024 and December 31, 2023, $5.3 million and $7.1 million, respectively, of accrued revenue was included in Accounts receivable, net of allowance on the Condensed Consolidated Statements of Financial Condition. These amounts have been recognized as revenue in accordance with the Company’s revenue recognition policies but remain unbilled at the end of the period. As of March 31, 2024, certain accounts receivable in the aggregate amount of $22.8 million were individually greater than 10% of the Company’s gross accounts receivable and were concentrated with two clients. Of that amount, all was subsequently received after March 31, 2024. As of December 31, 2023, certain accounts receivable in the aggregate amount of $17.3 million, were individually greater than 10% of the Company’s gross accounts receivable and were concentrated with two clients. Of that amount, all was subsequently received after year end.
The allowance for credit losses activity for the three months ended March 31, 2024 and 2023 was as follows:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Beginning balance | $ | $ | |||||||||
| Bad debt expense | |||||||||||
| Write-offs | ( | ( | |||||||||
| Foreign currency translation and other adjustments | ( | ||||||||||
| Ending balance | $ | $ | |||||||||
Note 4—Leases
The Company leases office space and equipment under operating lease agreements. The following is information related to such operating leases:
| March 31, 2024 | December 31, 2023 | ||||||||||
Weighted-average discount rate – operating leases | |||||||||||
Weighted-average remaining lease term – operating leases | | ||||||||||
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating lease cost | $ | $ | |||||||||
| Variable lease cost | |||||||||||
Sublease income – operating leases | ( | ||||||||||
| Total net lease cost | $ | $ | |||||||||
Net cash outflows on operating leases(1) | $ | $ | |||||||||
__________________
(1)Presented net of lease incentives received, including landlord contributions to tenant improvements.
12
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
As of March 31, 2024, the maturities of undiscounted operating lease liabilities of the Company are as follows:
| Years Ending: | Operating Leases | ||||
Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
Total lease payments(1) | |||||
| Less: Imputed Interest | ( | ||||
| Total lease liabilities | $ | ||||
(1)Total future lease payments are presented net of expected lease incentives, including landlord contributions to tenant improvements.
Note 5—Intangible Assets
The following table provides the detail of the Company’s intangible assets:
| March 31, 2024 | |||||||||||||||||
| Gross Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Customer relationships | $ | $ | ( | $ | |||||||||||||
| Trade names and trademarks | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||
| December 31, 2023 | |||||||||||||||||
| Gross Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Customer relationships | $ | $ | ( | $ | |||||||||||||
| Trade names and trademarks | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||
Note 6—Regulatory Requirements
The Company has a number of consolidated subsidiaries registered as broker-dealers with regulatory agencies in their respective countries. None of the SEC-regulated subsidiaries hold funds or securities for, or owe money or securities to, clients or carry accounts of or for clients, and as such are all exempt from the SEC Customer Protection Rule (Rule 15c3-3). As of March 31, 2024 and December 31, 2023, all regulated subsidiaries had capital in excess of their applicable minimum capital requirements. As a result of the minimum capital requirements and various regulations on these broker dealers, a portion of the capital of each subsidiary of the Company is restricted and may be unavailable to pay its creditors.
13
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Note 7—Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation and amortization and consist of the following as of March 31, 2024 and December 31, 2023:
| March 31, 2024 | December 31, 2023 | ||||||||||
| Leasehold improvements | $ | $ | |||||||||
| Furniture and fixtures | |||||||||||
| Equipment | |||||||||||
| Software | |||||||||||
| Total | |||||||||||
| Less: Accumulated depreciation and amortization | ( | ( | |||||||||
| Fixed assets, net | $ | $ | |||||||||
Depreciation expense related to fixed assets was $3.4 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively. Amortization expense related to software costs was immaterial for the three months ended March 31, 2024 and 2023.
Note 8—Income Taxes
The following table summarizes the Company’s tax position for the periods presented:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Income (loss) before income taxes | $ | ( | $ | ( | |||||||
| Income tax expense (benefit) | $ | $ | |||||||||
| Effective income tax rate | ( | % | ( | % | |||||||
The Company’s overall effective tax rate in each of the periods presented above varies from the U.S. federal statutory rate primarily because (i) a portion of the Company’s income is allocated to non-controlling interests held in PWP OpCo in which the majority of any tax liability on such income is borne by the holders of such non-controlling interests and reported outside of the condensed consolidated financial statements and (ii) permanent differences related to compensation expenses.
As of March 31, 2024 and December 31, 2023, the Company recorded a liability for unrecognized tax benefits of $3.6 million and $3.7 million, respectively, primarily related to potential double taxation at certain of its foreign subsidiaries. The Company does not expect there to be any material changes to uncertain tax positions within 12 months of the reporting date.
Note 9—Stockholders’ Equity
Class A Common Stock Offering
On March 1, 2024, the Company issued and sold 5,750,000 shares of Class A common stock at a price of $12.00 per share for net proceeds of $66.0 million after deducting underwriting discounts and offering costs.
Share Repurchase Program
On February 16, 2022, the Company’s Board of Directors initially approved a stock repurchase program and the authorized amount under such program was increased on February 8, 2023 such that the Company is authorized to repurchase up to $200.0 million of the Company’s Class A common stock. Since inception of the share repurchase program, 11,920,699 shares have been purchased at an average price per share of $7.65 through March 31, 2024. No purchases were made during the three months ended March 31, 2024.
14
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Non-Controlling Interests
Non-controlling interests represents the ownership interests in PWP OpCo held by holders other than Perella Weinberg Partners. As of March 31, 2024, Professional Partners and the ILP collectively own 40,795,985 PWP OpCo Units which represent a 43.3 % non-controlling ownership interest in PWP OpCo. These PWP OpCo Units are exchangeable into PWP Class A common stock on a one -for-one basis.
Exchange Rights
Holders of PWP OpCo Units (other than the Company) may exchange their units for (i) shares of Class A common stock on a one -for-one basis or (ii) cash from an offering of shares of Class A common stock (at the Company’s option). Concurrently with an exchange, such PWP OpCo Unitholder is required to surrender shares of Class B common stock for additional shares of Class A common stock or cash (at the Company’s option) at a conversion rate of 0.001 . Working partners are restricted in their ability to exchange PWP OpCo Units for a period between to five years after the Closing. PWP GP may waive, and in certain cases has waived, the foregoing restrictions for any holder with respect to all or a portion of such holder’s units, with no obligation to do so for any other holder. During the three months ended March 31, 2024 and 2023, the Company settled exchanges of certain PWP OpCo Units and certain shares of Class B common stock for 794,146 and 786,644 shares of Class A common stock, respectively. The exchanges created a step-up in tax basis for which the Company recorded an increase in Deferred tax assets, net, Amounts due pursuant to tax receivable agreement, and Additional paid-in-capital.
Refer to Note 18—Subsequent Events for information on the impact of the Merger on the settlement of exchanges and the accounting for non-controlling interests.
Note 10—Debt
As of March 31, 2024, and December 31, 2023, the Company had no 50.0 million with up to $20.0 million of available incremental revolving commitments, and a maturity date of July 1, 2025. The Company incurred $1.8 million in issuance costs related to the Credit Agreement, which are being amortized as interest expense using the effective interest method over the life of the Revolving Credit Facility. The Company is also charged a quarterly commitment fee of 0.25 % on any unused portion of the line of credit, which is recorded as interest expense. Interest expense related to the Revolving Credit Facility was immaterial during the three months ended March 31, 2024 and 2023 and is included within Other income (expense) on the Condensed Consolidated Statements of Operations. Unamortized debt issuance costs of $0.2
Note 11—Equity-Based Compensation
Further information regarding the Company’s equity-based compensation awards is described in Note 12—Equity-Based 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.
PWP Omnibus Incentive Plan Awards
Concurrent with the Business Combination, the Company adopted the Perella Weinberg Partners 2021 Omnibus Incentive Plan (the “PWP Incentive Plan”), which establishes a plan for the granting of various forms of incentive compensation awards, including restricted stock units (“RSUs”) and performance restricted stock units (“PSUs”), measured by reference to PWP Class A common stock (“PWP Incentive Plan Awards”). The PWP Incentive Plan established a reserve for a one-time grant of awards in connection with the Business Combination as well as a reserve for general purpose grants (the “General Share Reserve”). Grantees have rights to dividends declared during the vesting period and receive such dividends only upon vesting in the form of cash or dividend equivalent units. The Company uses newly issued shares of Class A common stock to satisfy vested awards, with the exception of shares issued out of treasury stock for vested awards (and related dividend equivalent units) held by French employees. Pursuant to the PWP Incentive Plan, the number of shares of Class A common stock reserved for issuance from the General Share Reserve increases each year.
15
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
During the third quarter of 2021, in connection with the Business Combination, the Company granted awards (the “Business Combination Awards”) in the form of (a) RSUs that vest upon the achievement of service conditions (“Transaction RSUs”) and (b) PSUs that only vest upon the achievement of both service and market conditions, including certain long-term incentive awards granted to management (“Transaction PSUs”).
The Company grants units from the General Share Reserve from time to time in the ordinary course of business in the form of (a) RSUs that vest upon the achievement of service conditions (“General RSUs”) and (b) PSUs that only vest upon the achievement of both service and market conditions (“General PSUs”). During the three months ended March 31, 2024 and 2023, the Company granted 6,125,742 and 6,793,265 General RSUs, respectively, from the General Share Reserve at a weighted average grant date fair value of $13.30 and $10.15 per award, respectively. Additionally, during the three months ended March 31, 2023, the Company granted 1,000,000 General PSUs from the General Share Reserve at a weighted average grant date fair value of $6.02 per award. No General PSUs were granted during the three months ended March 31, 2024.
Legacy Awards and Professional Partners Awards
Prior to the Business Combination, Professional Partners granted certain equity-based awards to partners providing services to PWP OpCo (the “Legacy Awards”). In connection with the Business Combination and a related internal reorganization of Professional Partners, existing Legacy Awards were canceled and replaced by converting each limited partner’s capital interests in Professional Partners attributable to PWP OpCo into original capital units (“OCUs”), value capital units (“VCUs”), and/or alignment capital units (“ACUs,” and collectively, the “Professional Partners Units”). The OCUs were fully vested upon recapitalization. The VCUs and ACUs (collectively, “Professional Partners Awards”) are held by current working partners and require services to be performed on behalf of PWP OpCo. The Professional Partners Awards are generally subject to a service-based graded vesting schedule over a to five-year requisite service period. Vested Professional Partners Units are exchangeable for PWP OpCo Units that allow for their exchange into Class A common stock of PWP on a one -for-one basis. Holders of Professional Partners Units are entitled to participate in distributions made on the PWP OpCo Units underlying their Professional Partners Units during the vesting period.
The Company accounted for the cancellation of the Legacy Awards and concurrent grant of Professional Partners Awards as a modification of the Legacy Awards. The $301.5 million incremental fair value of the Professional Partners Awards is being amortized over the requisite service period and was based on the closing price of PWP Class A common stock on the date of grant. The unrecognized cost associated with the Legacy Awards was amortized over its original vesting schedule and such awards were fully amortized as of September 30, 2023.
The vesting of Professional Partners Awards does not dilute Perella Weinberg Partners shareholders relative to Professional Partners as Professional Partners’ interest in PWP OpCo does not change as a result of granting those equity awards to its working partners. All of the compensation expense and corresponding capital contribution associated with the Professional Partners Awards and Legacy Awards (prior to being fully amortized on September 30, 2023) is allocated to Non-controlling interests on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Financial Condition. If any Professional Partners Award is forfeited, the value attributable to the forfeited Professional Partners Award will accrete to all limited partners in Professional Partners based on relative ownership at the time of forfeiture. The accretion of value upon forfeiture reflects a reallocation of value attributable to the forfeited Professional Partners Award and does not result in an incremental grant.
16
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
The following table presents the expense related to equity-based awards that were recorded in Professional fees and components of Equity-based compensation included on the Condensed Consolidated Statements of Operations:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Professional fees | |||||||||||
| PWP Incentive Plan Awards | $ | $ | |||||||||
| Equity-based compensation | |||||||||||
| PWP Incentive Plan Awards | $ | $ | |||||||||
Legacy Awards(1) | |||||||||||
Professional Partners Awards(1) | |||||||||||
| Total Equity-based compensation | $ | $ | |||||||||
| Income tax benefit of equity-based awards | $ | $ | |||||||||
As of March 31, 2024, total unrecognized compensation expense related to all unvested equity-based awards was $305.2 million, which is expected to be recognized over a weighted average period of 2.1 years. Refer to Note 18—Subsequent Events for information on the impact of the Merger and the Vesting Acceleration, as defined therein, on the accounting for the Professional Partners Awards.
Note 12—Other Compensation and Benefits
Compensation and benefits expense consists of salaries, bonuses (discretionary awards and guaranteed amounts), severance, as well as payroll and related taxes and benefits for the Company’s employees. In all instances, compensation expense is accrued over the requisite service period.
Benefit Plans
Certain employees participate in employee benefit plans, which consists of defined contribution plans including (i) profit-sharing plans qualified under Section 401(k) of the Internal Revenue Code, (ii) a U.K. pension scheme for U.K. employees and (iii) a German pension plan for employees in Germany. For the three months ended March 31, 2024 and 2023, expenses related to the Company’s employee benefit plans were $1.8 million and $1.7 million, respectively, and are included in Compensation and benefits on the Condensed Consolidated Statements of Operations.
17
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Business Realignment
During the second quarter of 2023, the Company began a review of the business, which resulted in headcount reductions in order to improve compensation alignment and to provide greater flexibility to advance strategic opportunities (the “Business Realignment”). In conjunction with the Business Realignment and for the three months ended March 31, 2024, the Company incurred expenses related to separation and transition benefits of $1.8 million, and the acceleration of equity-based compensation amortization (net of forfeitures) of $1.5 million. Such amounts are presented in Compensation and benefits and Equity-based compensation on the Condensed Consolidated Statements of Operations, respectively. All of the expected Business Realignment costs have been incurred as of March 31, 2024.
Activity within Accrued compensation and benefits on the Condensed Consolidated Statements of Financial Condition related to the Business Realignment was as follows:
Balance at January 1, 2024 | $ | ||||
Incurred expenses | |||||
Non-cash expenses | ( | ||||
Payments | ( | ||||
Balance at March 31, 2024 | $ | ||||
Note 13—Net Income (Loss) Per Share Attributable to Class A Common Shareholders
The calculations of basic and diluted net income (loss) per share attributable to Class A common shareholders are presented below:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Numerator: | |||||||||||
| Net income (loss) attributable to Perella Weinberg Partners – basic | $ | ( | $ | ( | |||||||
| Dilutive effect from assumed exchange of PWP OpCo Units, net of tax | ( | ( | |||||||||
| Net income (loss) attributable to Perella Weinberg Partners – diluted | $ | ( | $ | ( | |||||||
| Denominator: | |||||||||||
| Weighted average shares of Class A common stock outstanding – basic | |||||||||||
| Weighted average number of incremental shares from assumed exchange of PWP OpCo Units | |||||||||||
| Weighted average shares of Class A common stock outstanding – diluted | |||||||||||
| Net income (loss) per share attributable to Class A common shareholders | |||||||||||
| Basic | $ | ( | $ | ( | |||||||
| Diluted | $ | ( | $ | ( | |||||||
Basic and diluted net income (loss) per share attributable to Class B common shareholders has not been presented as these shares are entitled to an insignificant amount of economic participation.
The Company uses the treasury stock method to determine the potential dilutive effect of unvested PWP Incentive Plan Awards and the if-converted method to determine the potential dilutive effect of exchanges of PWP OpCo Units into Class A common stock. The Company adjusts net income (loss) attributable to Class A common shareholders under both the treasury stock method and if-converted method for the reallocation of net income (loss) between Class A common shareholders and non-controlling interests that result upon the assumed issuance of dilutive shares of Class A common stock as if the issuance occurred as of the beginning of the applicable period.
18
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
The following table presents the weighted average potentially dilutive shares that were excluded from the calculation of diluted net income (loss) per share under the treasury stock method or if-converted method, as applicable, because the effect of including such potentially dilutive shares was antidilutive for the period presented:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| PWP Incentive Plan Awards | |||||||||||
Note 14—Fair Value Measurements and Investments
Fair value is generally based on quoted prices, however if quoted market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations, price activity for equivalent instruments and valuation pricing models. The Company established a fair value hierarchy which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of instrument, the characteristics specific to the instrument and the state of the marketplace (including the existence and transparency of transactions between market participants). Financial instruments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories (from highest to lowest) based on inputs:
Level 1—Unadjusted quoted prices are available in active markets for identical financial instruments as of the reporting date.
Level 2—Pricing inputs are observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3—Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which level within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the instrument.
As of March 31, 2024 and December 31, 2023, the fair values of cash, restricted cash, accounts receivable, due from related parties, accounts payable and certain accrued liabilities approximate their carrying amounts due to the short-term nature of these items.
Fair Value of Financial Instruments
The following table summarizes the categorization and fair value estimate of the Company’s financial instruments that were measured on a recurring basis pursuant to the above fair value hierarchy levels as of December 31, 2023:
| December 31, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Financial asset | |||||||||||||||||||||||
U.S. Treasury securities | $ | $ | $ | $ | |||||||||||||||||||
The Company held no financial instruments subject to fair value measurement as of March 31, 2024. The Company had no transfers between fair value levels during the three months ended March 31, 2024 and 2023.
19
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
As of December 31, 2023, the Company’s investment in U.S. Treasury securities is presented within Investments in short-term marketable debt securities on the Condensed Consolidated Statements of Financial Condition, and the aggregate cost basis of the investment was $89.3 million. These U.S. Treasury securities matured in January 2024. The Company had net realized and unrealized gains (losses) on these investments of $0.3 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.
Note 15—Related Party Transactions
PWP Capital Holdings LP
On February 28, 2019, a reorganization of the existing investment banking advisory and asset management businesses of PWP Holdings LP was effected which resulted in the spin-off of its asset management business (the “Separation”). PWP Holdings LP was divided into (i) PWP OpCo, which holds the advisory business and (ii) PWP Capital Holdings LP (“Capital Holdings”), which holds the asset management business. In connection with the Separation, the Company entered into a transition services agreement (the “TSA”) with Capital Holdings under which the Company agreed to provide certain administrative services to Capital Holdings. The TSA was terminated as of January 1, 2024. The Company also subleased certain portions of its office space to Capital Holdings through October 2023. Income earned from Capital Holdings related to the TSA and the sublease is presented within Related party income on the Condensed Consolidated Statements of Operations. Amounts due from Capital Holdings are reflected as Due from related parties on the Condensed Consolidated Statements of Financial Condition as of December 31, 2023, with no amounts due as of March 31, 2024.
Separately, Capital Holdings entered into an arrangement with certain employees of the Company, including members of management, related to services provided directly to Capital Holdings. With respect to services provided to Capital Holdings, the amounts paid and payable to such employees now and in the future are recognized by Capital Holdings. All compensation related to services these employees provide to the Company are included in Compensation and benefits on the Condensed Consolidated Statements of Operations.
Tax Receivable Agreement
In connection with the Business Combination, the Company entered into a tax receivable agreement with PWP OpCo, Professional Partners and ILPs that provides for payment of 85 % of the amount of cash savings, if any, in U.S. federal, state and local and foreign income taxes that the Company is deemed to realize as a result of (a) each exchange of interests in PWP OpCo for cash or stock of the Company and certain other transactions and (b) payments made under the tax receivable agreement. As of March 31, 2024, the Company had an amount due of $34.2 million pursuant to the tax receivable agreement, which represents management’s best estimate of the amounts currently expected to be owed in connection with the tax receivable agreement for the Business Combination and subsequent exchanges made to date and is reported within Amount due pursuant to tax receivable agreement on the Condensed Consolidated Statements of Financial Condition. The Company expects to make the following payments with respect to the tax receivable agreement, which are exclusive of potential payments in respect of future exchanges and may differ significantly from actual payments made:
| Years Ending: | Estimated Payments Under Tax Receivable Agreement | ||||
Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total payments | $ | ||||
20
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Partner Promissory Notes and Other Partner Loans
The Company loaned money pursuant to promissory note agreements (the “Partner Promissory Notes”) to certain partners. The Partner Promissory Notes bear interest at a semi-annual rate equal to the Federal Mid-Term Rate. The Partner Promissory Notes are due on various dates or in the event a partner is terminated or leaves at will and are primarily secured by the partner’s equity interests in PWP OpCo or one of its affiliates. As the Partner Promissory Notes and associated interest receivable relate to equity transactions, they have been recognized as a reduction of equity on the Condensed Consolidated Statements of Financial Condition in the amounts of $2.1 million as of March 31, 2024 and December 31, 2023.
In November 2021, PWP OpCo agreed to provide loans to certain partners. As of March 31, 2024 and December 31, 2023, $3.6 million and $3.5 million, respectively, of outstanding loans to certain partners and related interest receivable are recognized in Due from related parties on the Condensed Consolidated Statements of Financial Condition.
Other Related Party Transactions
The Company’s U.K. subsidiary, Perella Weinberg UK Limited, as well as Professional Partners and certain partners (including one partner who serves as a Company director and president) are party to a reimbursement agreement, pursuant to which such partners directed Professional Partners to pay distributions related to certain of their Professional Partners Awards first to a subsidiary of the Company, so that the subsidiary can make employment income tax payments on such distributions to the appropriate non-U.S. authorities.
Note 16—Commitments and Contingencies
Indemnifications
The Company enters into certain contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown. As of March 31, 2024 and December 31, 2023, the Company expects no claims or losses pursuant to these contracts; therefore, no
Legal Contingencies
From time to time, the Company is 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 and, after consultation with external counsel, the Company believes it is neither probable nor reasonably possible that any current legal proceedings or claims would individually or in the aggregate have a material adverse effect on the consolidated financial statements of the Company as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023.
In 2015, the Company filed a complaint against three former partners and one former employee which alleges they entered into a scheme while at PWP to lift out the Company’s restructuring group to form a new competing firm that they were secretly forming in breach of their contractual and fiduciary duties. The complaint contains 14 causes of action and seeks declaratory relief as well as damages. Trial was set to commence on April 29, 2024. However, after an April 17, 2024 pre-trial conference, the trial was adjourned and the court has yet to provide new trial dates.
During the three months ended March 31, 2024, the Company incurred $2.3 million in legal and professional fees, net of expected insurance reimbursement, related to this litigation, with an immaterial amount incurred during the three months ended March 31, 2023. These litigation costs are included in Professional fees on the Condensed Consolidated Statements of Operations.
Note 17—Business Information
The Company’s activities of providing advisory services for M&A, private placements and financial advisory, as well as services for underwriting of securities offered for sale in public markets, and equity research constitute a single business segment. The Company is organized as one
21
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
For the three months ended March 31, 2024, revenues of $15.0 million related to one individual client accounted for more than 10 % of aggregate revenue, while no individual client accounted for more than 10% of aggregate revenue for the three months ended March 31, 2023. 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. The following tables set forth the geographical distribution of revenues and assets based on the location of the office that generates the revenues or holds the assets and therefore may not be indicative of the geography in which the Company’s clients are located:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | |||||||||||
| United States | $ | $ | |||||||||
| International | |||||||||||
| Total | $ | $ | |||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| United States | $ | $ | |||||||||
| International | |||||||||||
| Total | $ | $ | |||||||||
Note 18—Subsequent Events
The Company has evaluated subsequent events through the issuance date of these condensed consolidated financial statements.
AdCo Professionals Merger with PWP OpCo
On April 1, 2024, as part of an internal reorganization, AdCo Professionals merged with and into PWP OpCo. As a result of the Merger, (i) the OCUs, VCUs and ACUs of AdCo Professionals were converted into an equivalent number of OCUs, VCUs and ACUs of PWP OpCo, (ii) the minimal net assets of AdCo Professionals became the net assets of PWP OpCo and (iii) PWP OpCo adopted an amended and restated limited partnership agreement that permits the Company to settle quarterly exchanges in cash or shares at the Company’s discretion.
At the time of the Merger, the Company entered into vesting acceleration agreements with certain holders of partnership units of AdCo Professionals and VoteCo Professionals to accelerate vesting for VCUs and ACUs (the “Accelerated Units”) on a day determined by PWP GP between April 2, 2024 and May 16, 2024 (the “Vesting Acceleration”). Accelerated Units generally will be subject to a lock-up period that is identical to the lockup period applicable to such units prior to the Vesting Acceleration. The Company also provided each holder of ACUs the ability to convert a portion of such holder’s ACUs into cash on vesting in an aggregate amount up to such holder’s estimated tax liability, to the extent cash is available for such purpose. The principal purpose of the Vesting Acceleration is to facilitate the payment of taxes associated with ACU vesting to align with the treatment of restricted stock units of the Company. As of the issuance date of these condensed consolidated financial statements, the Vesting Acceleration has not occurred.
As a result of the Merger, Non-controlling interests on our Condensed Consolidated Statements of Financial Condition will be prospectively reclassified to Redeemable non-controlling interests and recorded at the current redemption value, with changes in the current redemption value in future periods recorded to Additional paid-in capital.
At the time of the Merger, certain ACUs and VCUs will be modified from equity-classified to liability-classified awards with changes in fair value generally recorded as incremental equity-based compensation expense through the date of the Vesting Acceleration. At a minimum, during the second quarter of 2024, the Company will record $116.5 million of equity-based compensation expense related to the unvested ACUs and VCUs, before taking into account potential forfeitures and changes in fair value of liability-classified awards.
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Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Dividends Declared
On May 1, 2024, the Company’s Board of Directors declared a cash dividend of $0.07 per outstanding share of Class A common stock. This dividend will be paid on June 10, 2024 to Class A common stockholders of record on May 28, 2024. Holders of Class B common stock will also receive dividends equal to the amount of dividends declared on 0.001 shares of Class A common stock.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” and elsewhere in this Form 10-Q.
Executive Overview
We are a leading global independent advisory firm that provides strategic and financial advice to clients across the most active industry sectors and international markets. Our wide range of global clients include large public multinational corporations, mid-sized public and private companies, individual entrepreneurs, private and institutional investors, creditor committees and government institutions.
For further information regarding our business, refer to “Part I. Item 1. Business” and “Part I. Item1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 23, 2024.
Business Environment
Economic and global financial market conditions impact our financial performance. The market environment for advisory services is improving, driving increased dialogue and activity levels across the traditional M&A markets.
Our core advisory services benefit from macroeconomic changes that impact our client base and lead them to consider business combinations, acquisitions and divestitures, capital raises and restructurings. We continue to invest in our platform to achieve scale, accelerate growth, and deliver value in anticipation of a rebound in activity levels.
See “Risk Factors” included in our Annual Report on Form 10-K for a discussion of some of the factors that can affect our performance.
Key Financial Measures
Revenues
We operate in a highly competitive environment, and each revenue-generating engagement is separately solicited and negotiated. Our fee-paying client engagements are not predictable, and we may experience fluctuations in revenues from quarter to quarter. To develop new business, we maintain an active business dialogue with existing and potential clients, and we expect to add new clients each year through expanding our relationships, hiring senior advisory professionals, and receiving introductions from our relationship network. However, we also lose clients each year due to various factors, such as sales or mergers, changes in clients’ senior management, and competition from other financial services firms.
Our revenue recognition is often tied to the completion of a transaction, which can be delayed or terminated due to various reasons, including failure to obtain regulatory or board approval, failure to secure financing, or adverse market conditions. Larger transactions may take longer to close, adding unpredictability to the timing of revenues. Despite our efforts, we may receive lower advisory fees or no fee at all if a transaction is not completed. Other barriers to the completion of restructuring transactions include a lack of anticipated bidders, failure to obtain court approval, or a failure to reach an agreement with creditors. In such cases, our advisory fees may be limited to monthly retainer fees plus the reimbursement of expenses.
We do not present our revenue by the type of advice we provide because of the complexity of the transactions on which we may earn revenue and our holistic approach to client service. For instance, a traditional M&A engagement may require additional advisory services, such as capital markets or capital solutions advice or a private capital raise, which may call for cross-functional expertise from our professionals. We focus on dedicating the necessary resources and expertise to each engagement, regardless of product lines, to achieve the desired outcome for our clients. Consequently, tracking the type of advisory service offered in each instance is not practical.
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Operating Expenses
Our operating expenses are classified as (i) total compensation and benefits expenses, including equity-based compensation, and (ii) non-compensation expenses.
Compensation and Benefits Expenses
Our compensation and benefits expenses consist of salaries, bonuses (discretionary awards and guaranteed amounts), severance, payroll and related taxes, benefits, and the amortization of equity-based compensation awards that are subject to a service vesting condition, and in some cases, a market-based performance vesting condition. These expenses also include signing bonuses and compensation paid pursuant to guarantees for new hires.
Compensation is determined by management based on revenues earned, headcount, labor market conditions, and anticipated compensation requirements for our employees. Such factors can fluctuate, including headcount and revenues earned, and as a result, our compensation expenses may fluctuate materially in any particular period.
The amortization expense for certain equity-based awards granted by Professional Partners is allocated fully to non-controlling interests as these awards have no economic impact on, and do not dilute, PWP shareholders relative to Professional Partners.
Non-Compensation Expenses
Our non-compensation expenses include the costs of professional fees, technology and infrastructure, rent and occupancy, travel and related expenses, depreciation and amortization and general, administrative and other expenses. Our non-compensation expenses also include certain expenses reimbursed by our clients. Overall, our non-compensation expenses are subject to variability due to multiple factors, including headcount, business needs, and inflation.
Non-Operating Income (Expenses)
Non-operating income (expenses) includes the impact of income and expense items that we consider to be non-operational in nature, which typically includes related party income, interest income and expense, and other non-operating gains (losses), including the impact of foreign exchange rate fluctuations.
Non-Controlling Interests
Non-controlling interests represent the ownership interests in PWP OpCo held by holders other than Perella Weinberg Partners, which are Professional Partners and the ILP. In the notes to the condensed consolidated financial statements, refer to Note 9—Stockholders’ Equity, Note 11—Equity-Based Compensation, and Note 18—Subsequent Events for further information regarding the current and prospective accounting for non-controlling interests.
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Results of Operations
The following is a discussion of our results of operations for the respective periods indicated:
| Three Months Ended March 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2024 | 2023 | 2024 vs. 2023 | |||||||||||||||||
| Revenues | $ | 102,127 | $ | 131,426 | (22)% | |||||||||||||||
| Expenses | ||||||||||||||||||||
| Compensation and benefits | 68,590 | 69,963 | (2)% | |||||||||||||||||
| Equity-based compensation | 46,807 | 47,671 | (2)% | |||||||||||||||||
| Total compensation and benefits | 115,397 | 117,634 | (2)% | |||||||||||||||||
| Non-compensation expenses | 40,293 | 36,482 | 10% | |||||||||||||||||
| Total operating expenses | 155,690 | 154,116 | 1% | |||||||||||||||||
| Operating income (loss) | (53,563) | (22,690) | (136)% | |||||||||||||||||
| Non-operating income (expenses) | ||||||||||||||||||||
| Related party income | — | 273 | NM | |||||||||||||||||
| Other income (expense) | 2,657 | 283 | 839% | |||||||||||||||||
| Total non-operating income (expenses) | 2,657 | 556 | 378% | |||||||||||||||||
| Income (loss) before income taxes | (50,906) | (22,134) | (130)% | |||||||||||||||||
| Income tax expense (benefit) | 19,094 | 5,286 | 261% | |||||||||||||||||
| Net income (loss) | (70,000) | (27,420) | (155)% | |||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | (34,156) | (22,297) | (53)% | |||||||||||||||||
| Net income (loss) attributable to Perella Weinberg Partners | $ | (35,844) | $ | (5,123) | (600)% | |||||||||||||||
| NM = Not meaningful | ||||||||||||||||||||
Revenues
The following table provides revenue statistics for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, | ||||||||||||||||||||
| 2024 | 2023 | 2024 vs. 2023 | ||||||||||||||||||
| Total Advisory Clients | 76 | 83 | (7) | |||||||||||||||||
| Total Clients with Fees Greater than $1.0 million | 22 | 30 | (8) | |||||||||||||||||
Revenues were $102.1 million for the three months ended March 31, 2024 as compared with $131.4 million for the three months ended March 31, 2023, representing a decrease of 22%. The decrease in revenues was driven by a reduction in the number of clients and a moderately lower average fee per client. Revenues attributed to financing and capital solutions activity were relatively flat year-over-year, while mergers and acquisition revenues were down, primarily due to elongated transaction closing timelines in the current year period.
Compensation and Benefits Expenses
For the three months ended March 31, 2024, total compensation and benefits expenses were $115.4 million, a decrease of 2% compared with $117.6 million for the three months ended March 31, 2023. The slight decrease in total compensation and benefits expenses was the result of a lower bonus accrual in the current year period, partially offset by a year-over-year increase in equity-based compensation amortization. Furthermore, headcount reductions associated with the Business Realignment, which began during the second quarter of 2023 and was completed as of March 31, 2024, resulted in $3.2 million of costs, including separation and transition benefits and the acceleration of equity-based compensation amortization (net of forfeitures) for separated employees.
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Non-Compensation Expenses
For the three months ended March 31, 2024, total non-compensation expenses were $40.3 million, an increase of 10% compared with $36.5 million for the three months ended March 31, 2023. The increase in non-compensation expenses was primarily the result of increased legal spend as well as higher depreciation expense due to new assets being placed in service subsequent to the first quarter of 2023 related to the renovation of the New York office space. These increases were partially offset by lower rent costs and reduced D&O insurance costs.
Non-Operating Income (Expenses)
For the three months ended March 31, 2024, non-operating income was $2.7 million compared with non-operating income of $0.6 million for the three months ended March 31, 2023. In the current period, non-operating income included a net gain from foreign exchange rate fluctuations and interest income, which increased from the prior year due to higher interest rates and additional investments in U.S. Treasury securities that matured in the first quarter of 2024. In the prior year period, non-operating income included lower interest income, which was also offset by a net loss from foreign exchange rate fluctuations. For both periods, the impact of foreign exchange rate fluctuations was largely related to U.S. dollar-denominated cash and intercompany receivables held by our foreign subsidiaries.
Income Tax Expense (Benefit)
The Company’s income tax expense and effective tax rate were $19.1 million and (37.5)%, respectively, for the three months ended March 31, 2024 compared to income tax expense and an effective tax rate of $5.3 million and (23.9)%, respectively, for the three months ended March 31, 2023. The change in the effective tax rate was primarily due to the relative size of our permanent differences in relation to the pre-tax loss in the respective periods, which was partially offset by the recognition of tax benefits associated with the appreciation in our share price upon vesting of RSUs above the original grant price during the three months ended March 31, 2024.
Liquidity and Capital Resources
General
We regularly monitor our liquidity position, including cash and cash equivalents, working capital assets and liabilities, commitments and other liquidity requirements. Our primary sources of liquidity are generally our cash balances, investments in short-term marketable debt securities, the net cash generated from operations, and the available borrowing capacity under our Revolving Credit Facility. Our primary cash needs are for working capital, operating expenses (including cash compensation for our employees), repurchasing shares of the Company’s Class A common stock, withholding tax payments for vested PWP Incentive Plan Awards, income taxes, dividends and distributions, capital expenditures, making payments pursuant to the tax receivable agreement, commitments, and strategic investments. We generally pay a significant portion of our annual cash incentive compensation during the first quarter of each calendar year with respect to the prior year’s results. Therefore, levels of cash and/or investments in short-term marketable debt securities generally decline during the first quarter and build over the remainder of the year.
Our current assets are primarily composed of cash, receivables related to fees earned from providing advisory services, certain prepaid expenses and certain amounts due from related parties. Our current liabilities are primarily composed of accrued employee compensation, accounts payable and other accrued expenses. Cash includes cash held at banks, including interest-bearing money market accounts. As of March 31, 2024 and December 31, 2023, the Company had cash balances of $156.7 million and $247.2 million, respectively, and as of December 31, 2023, investments in short-term marketable debt securities, consisting entirely of U.S. Treasury securities, of $91.2 million.
Our liquidity is highly dependent upon cash receipts from clients, which generally require the successful completion of transactions. Accounts receivable typically have net terms of 30 days. Accounts receivable were $57.9 million, net of a $2.7 million allowance for credit losses balance as of March 31, 2024. Accounts receivable were $47.8 million, net of a $2.2 million allowance for credit losses balance as of December 31, 2023.
On March 1, 2024, the Company issued and sold 5,750,000 shares of Class A common stock at a price of $12.00 per share for net proceeds of $66.0 million after deducting underwriting discounts and offering costs. In connection with the Vesting Acceleration, we expect to use some or all of such proceeds to settle the conversion of certain ACUs of PWP OpCo into cash in an aggregate amount up to the converting unitholders’ estimated tax liability. Refer to Note 18—Subsequent Events in the notes to the condensed consolidated financial statements for further information regarding the Vesting Acceleration.
The Company has a Revolving Credit Facility with Cadence Bank with an available line of credit of $50.0 million. Additionally, up to $20.0 million of incremental revolving commitments above the $50.0 million commitment amount may be incurred under the Credit Agreement. As of March 31, 2024, the Company had no outstanding balance related to the Revolving Credit Facility and no incremental revolving commitments were incurred. For further information on the Revolving Credit Facility, refer to Note 10—Debt in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q.
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Based on current market conditions, we believe that our cash on hand, net cash generated from operations and the available borrowing capacity under our Revolving Credit Facility will be sufficient to meet our operating needs and commitments for the next twelve months; however, if these sources of liquidity are not sufficient, we may seek additional debt or equity financing.
Cash Flows
A summary of our operating, investing and financing cash flows is as follows:
| Three Months Ended March 31, | |||||||||||
| (Dollars in thousands) | 2024 | 2023 | |||||||||
| Cash Provided By (Used In) Operating Activities | |||||||||||
| Net income (loss) | $ | (70,000) | $ | (27,420) | |||||||
| Non-cash charges and other operating activity adjustments | 57,495 | 55,547 | |||||||||
| Other operating activities | (193,840) | (160,069) | |||||||||
| Total operating activities | (206,345) | (131,942) | |||||||||
| Investing Activities | 82,727 | 97,724 | |||||||||
| Financing Activities | 33,793 | (33,230) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (658) | 863 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (90,483) | (66,585) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 250,102 | 174,166 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 159,619 | $ | 107,581 | |||||||
Three Months Ended March 31, 2024
Operating activities resulted in a net cash outflow of $206.3 million primarily attributable to an increase in client receivables and cash operating expense outflows, including discretionary bonuses paid during the first quarter of 2024 with respect to prior year compensation expense.
Investing activities resulted in a net cash inflow of $82.7 million attributable to the maturation of investments in U.S. Treasury securities partially offset by capital expenditures related to our office space renovations.
Financing activities resulted in a net cash inflow of $33.8 million primarily due to the issuance of 5,750,000 shares of Class A common stock for net proceeds of $66.0 million, partially offset by distributions to partners, withholding tax payments for vested PWP Incentive Plan Awards, and dividend payments.
Three Months Ended March 31, 2023
Operating activities resulted in a net cash outflow of $131.9 million primarily attributable to cash operating expense outflows, including discretionary bonuses paid during the first quarter of 2023 with respect to prior year compensation expense, partially offset by cash collections from clients.
Investing activities resulted in a net cash inflow of $97.7 million largely attributable to the maturation of investments in U.S. Treasury securities, net of additional investments in U.S. Treasury securities as well as capital expenditures associated with the renovation of the New York office space and relocation of the London office space.
Financing activities resulted in a net cash outflow of $33.2 million primarily related to the repurchase of shares pursuant to the stock repurchase program, withholding tax payments for vested PWP Incentive Plan Awards, distributions to partners, and dividend payments.
Share Repurchase Program
The Company’s board of directors approved a stock repurchase program under which the Company is authorized to repurchase up to $200.0 million of the Company’s Class A common stock with no requirement to purchase any minimum number of shares. No shares were repurchased during the three months ended March 31, 2024. As of March 31, 2024, $108.8 million remains of the combined $200.0 million share repurchase authorization.
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Exchange Rights
In accordance with the limited partnership agreement of PWP OpCo, holders of PWP OpCo Units (other than the Company) may exchange these units for (i) shares of Class A common stock on a one-for-one basis or (ii) cash from an offering of shares of Class A common stock with the form of consideration determined by the Company. See Note 9—Stockholders’ Equity in the notes to the condensed consolidated financial statements included elsewhere in the Form 10-Q for further information.
Regulatory Capital
We actively monitor our regulatory capital base. Our principal subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure general financial soundness and liquidity. This requires, among other things, that we comply with certain minimum capital requirements, record-keeping, 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. Refer to Note 6—Regulatory Requirements in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information. These regulations differ in the United States, United Kingdom, Canada, France and other countries in which we operate a registered broker-dealer or regionally similar construct. The license or regulatory framework under which we operate in each such country is meant to comply with applicable laws and regulations to conduct an advisory business. We believe that we provide each of our subsidiaries with sufficient capital and liquidity, consistent with their business and regulatory requirements to effectively operate in each jurisdiction.
Other Commitments and Contractual Obligations
Sponsor Share Surrender and Share Restriction Agreement
As a result of the Business Combination and related agreements, the Company has the right to purchase up to 1,000,000 founder shares of PWP at a purchase price of $15.00 per share if the Company’s Class A common stock reaches a closing share price of greater than $15.00 per share for a specified number of trading days. See Note 11—Stockholders’ Equity in the notes to the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for further information.
Tax Receivable Agreement
As of March 31, 2024, we had an amount due of $34.2 million pursuant to the tax receivable agreement, which represents management’s best estimate of the amounts currently expected to be owed in connection with the tax receivable agreement for the Business Combination and subsequent exchanges made to date. See Note 15—Related Party Transactions in the notes to the condensed consolidated financial statements included elsewhere in the Form 10-Q for further information as well as the expected timing of payments.
Leases
We have various non-cancelable operating leases in connection with the leases of our office spaces and equipment. As of March 31, 2024, we had $176.3 million of operating lease liabilities. See Note 4—Leases in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information as well as the expected timing of payments.
Market Risk and Credit Risk
Our business is not capital-intensive and we do not invest in derivative instruments. We are not subject to significant market risk (including interest rate risk and commodity price risk) or significant credit risk.
Risks Related to Cash and Cash Equivalents
Our cash and cash equivalents include any 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 is maintained in U.S. and non-U.S. bank accounts. Most account balances exceed U.S. Federal Deposit Insurance Corporation (FDIC) coverage limits or the coverage limits of the relevant foreign deposit insurance system, as applicable. We believe our cash and cash equivalents are not subject to any material interest rate risk, equity price risk, credit risk or other market risk.
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Credit Risk
We regularly review our accounts receivable and allowance for credit losses by considering factors such as historical experience, credit quality, age of the accounts receivable, and the current economic conditions that may affect a client’s ability to pay such amounts owed to the Company. We maintain an allowance for credit losses that, in our opinion, provides for an adequate reserve to cover current expected credit losses. Refer to Note 2—Summary of Significant Accounting Policies in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information.
When we invest our excess cash, we manage our credit risk exposure by holding investments primarily with investment grade credit quality.
Exchange Rate Risk
The Company is exposed to exchange rate risk as a result of having foreign subsidiaries with non-U.S. dollar functional currencies as well as from entering into transactions and holding monetary assets and liabilities that are not denominated in the functional currency of its operating subsidiaries. Specifically, the reported amounts in our consolidated financial statements may be affected by movements in the rate of exchange between the pound sterling, euro, and Canadian dollar and our reporting currency, the U.S. dollar. For the three months ended March 31, 2024 and 2023, the net impact of non-functional currency related transaction gains (losses) recorded in Other income (expense) on our Condensed Consolidated Statements of Operations was $0.5 million and $(1.1) million, respectively, primarily related to U.S. dollar-denominated cash and intercompany receivables held by our foreign subsidiaries as the strength of the U.S. dollar fluctuated. For the three months ended March 31, 2024 and 2023, the net impact of the fluctuation of foreign currencies recorded in Foreign currency translation gain (loss) within our Condensed Consolidated Statements of Comprehensive Income (Loss) was $(1.2) million and $1.6 million, respectively. We have not entered into any transactions to hedge our exposure to these foreign currency fluctuations using derivative instruments or other methods but may do so if we deem appropriate in the future. As of March 31, 2024, we held cash balances of $22.0 million in non-U.S. dollar currencies, composed of pound sterling, euros, and Canadian dollars.
Critical Accounting Estimates
This Quarterly Report on Form 10-Q should be read together with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K filed on February 23, 2024 regarding these critical accounting estimates. For changes to our critical accounting estimates during the three months ended March 31, 2024, refer to Note 2—Summary of Significant Accounting Policies in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are set forth above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk and Credit Risk”.
Item 4. Controls and Procedures
This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) included in this Quarterly Report on Form 10-Q as Exhibits 31.1 and 31.2.
Management’s Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.
In connection with the preparation of this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2024. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principle financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the three months ended March 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are now, and from time to time may in the future be, named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. We may also become involved in other judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of our businesses. Some of these matters may involve claims of substantial amounts.
For details on the current legal proceedings, refer to Note 16—Commitments and Contingencies in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q.
Item 1A. Risk Factors
There have been no material changes or updates to our risk factors that were previously disclosed in “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 23, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of Equity Securities
The following table summarizes our repurchase of equity securities during the three months ended March 31, 2024:
| Period | Total Number of Shares Repurchased | Average Price Paid Per Unit | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares yet to be Purchased Under the Publicly Announced Plans or Programs | ||||||||||||||||||||||
| January 1, 2024 - January 31, 2024 | — | $ | — | — | $ | 108,823,525 | ||||||||||||||||||||
| February 1, 2024 - February 28, 2024 | — | $ | — | — | $ | 108,823,525 | ||||||||||||||||||||
| March 1, 2024 - March 31, 2024 | — | $ | — | — | $ | 108,823,525 | ||||||||||||||||||||
| Total | — | $ | — | — | ||||||||||||||||||||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended March 31, 2024, no director or officer of the Company adopted terminated
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Item 6. Exhibits.
Exhibit Number | Description | |||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
* Filed herewith.
** Furnished herewith.
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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.
| PERELLA WEINBERG PARTNERS | |||||||||||
Date: May 3, 2024 | By: | /s/ ANDREW BEDNAR | |||||||||
| Andrew Bednar | |||||||||||
| Chief Executive Officer | |||||||||||
| (Principal Executive Officer) | |||||||||||
Date: May 3, 2024 | By: | /s/ ALEXANDRA GOTTSCHALK | |||||||||
Alexandra Gottschalk | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||||||||
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