Perella Weinberg Returns to Growth as Cost Controls Lift Profit
Adjusted operating income rose 77% to $26.3 million as compensation and other expenses declined.
Perella Weinberg Partners (PWP), an advisory firm, returned to year-over-year revenue growth in the second quarter after three consecutive quarters of declines. Revenue increased 1%, reversing declines of 30% in the first quarter, 3% in the fourth quarter and 41% in the third quarter.
The improvement was also visible sequentially. Revenue rose about 5% from the first quarter, following a roughly 32% drop from the fourth quarter. First-half revenue remained down 17% as fewer large-fee closings reduced the average fee per client.
Second-quarter revenue totaled $156.5 million, compared with $155.3 million a year earlier and $148.9 million in the first quarter. Adjusted earnings increased to $0.20 a share from $0.09 a year earlier and $0.05 in the prior quarter. GAAP diluted earnings rose to $0.06 a share from $0.04 a year earlier and $0.02 sequentially.
The revenue mix shifted toward mergers and acquisitions, supported by more fee-paying clients, as financing and capital-solutions activity declined. In the first quarter, fewer clients and fewer closings across M&A and financing weighed on revenue, partly offset by a higher average fee per client.
Profitability recovered more sharply than revenue. Adjusted operating margin widened to 16.8% from 9.6% a year earlier, helped by an adjusted compensation margin of 63%, down from 79% in the first quarter and 67% a year earlier. GAAP pretax results swung to income of $6 million from an $11 million first-quarter loss, and adjusted pretax income improved to $27 million from a $3 million loss.
Adjusted non-compensation expense fell to $31.4 million, or 20% of revenue, from $37.4 million, or 25%, in the first quarter, helped by lower professional fees and litigation-insurance recoveries. Perella Weinberg also began a business review and headcount reductions focused on lower-performing areas, recording $13.8 million of realignment costs and estimating about $22 million of total costs through year-end.
The firm accelerated hiring despite the reductions, adding 10 partners and 11 managing directors during the first half and expecting another six partners and three managing directors to join. Cash recovered to $115.8 million at June 30 from $78 million at the end of March, and the company continued to carry no debt.