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, 2023
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 May 1, 2023, the registrant had 41,859,792 shares of Class A common stock, par value $0.0001 per share, and 43,778,015 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”). As contemplated by the Business Combination Agreement, (i) Perella Weinberg Partners acquired certain partnership interests in PWP Holdings LP (“PWP OpCo”), (ii) PWP OpCo became jointly-owned by Perella Weinberg Partners, PWP Professional Partners LP (“Professional Partners”) and certain existing partners of PWP OpCo, and (iii) PWP OpCo serves as Perella Weinberg Partners’ operating partnership as part of an umbrella limited partnership C-corporation (Up-C) structure (collectively with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). 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): global economic, business, and market conditions; the Company’s dependence on and ability to retain key employees; the Company’s ability to successfully identify, recruit and develop talent; conditions impacting the corporate advisory industry; 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; the Company’s successful formulation and execution of its business and growth strategies; substantial litigation risks in the financial services industry; cybersecurity and other operational risks; assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity; 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 (including the treatment of carried interest); other risks and uncertainties described under the section entitled “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, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Investments in short-term marketable debt securities | |||||||||||
| Accounts receivable, net of allowance | |||||||||||
| Due from related parties | |||||||||||
| 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 | |||||||||||
| Deferred revenue | |||||||||||
| Lease liabilities | |||||||||||
| Amount due pursuant to tax receivable agreement | |||||||||||
| Total liabilities | |||||||||||
Commitments and Contingencies (Note 17) | |||||||||||
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, | |||||||||||
| 2023 | 2022 | ||||||||||
| 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) | |||||||||||
| Change in fair value of warrant liabilities | |||||||||||
| Total non-operating income (expenses) | |||||||||||
| Income (loss) before income taxes | ( | ||||||||||
| Income tax benefit (expense) | ( | ( | |||||||||
| 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, | |||||||||||
| 2023 | 2022 | ||||||||||
| 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, 2021 | ( | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 and exchange of PWP OpCo Units with corresponding Class B common stock for cash using Offering proceeds (Note 9—Stockholders’ Equity) | ( | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 2022 | ( | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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, | |||||||||||
| 2023 | 2022 | ||||||||||
| 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 | |||||||||||
| Change in fair value of warrant liabilities | ( | ||||||||||
| 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 | ( | ||||||||||
| Deferred revenue | ( | ( | |||||||||
| Lease liabilities | ( | ||||||||||
| Amount due pursuant to tax receivable agreement | ( | ||||||||||
| 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 the Offering, net of underwriting discount | |||||||||||
| Exchange of PWP OpCo Units and corresponding Class B common stock for cash using Offering proceeds | ( | ||||||||||
| Payment of 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 | ( | ( | |||||||||
| 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 | $ | $ | |||||||||
| Non-cash paydown of Partner promissory notes | $ | $ | |||||||||
| Deferred tax effect resulting from exchanges of PWP OpCo Units, net of amounts payable under tax receivable agreement | $ | $ | |||||||||
| Accrued treasury stock purchases | $ | $ | |||||||||
| Pending broker-to-broker trades | $ | $ | |||||||||
| 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 mission-critical 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.
Perella Weinberg Partners (formerly known as FinTech Acquisition Corp. IV (“FTIV”)) was incorporated in Delaware on November 20, 2018 as a special purpose acquisition company for the purpose of acquiring businesses or assets through a business combination. On June 24, 2021, the Company consummated a business combination pursuant to a Business Combination Agreement among various parties, resulting in FTIV acquiring partnership interests in PWP OpCo, and PWP OpCo becoming jointly-owned by Perella Weinberg Partners, PWP Professional Partners LP (“Professional Partners”) and existing partners, as part of an umbrella limited partnership C-corporation (Up-C) structure (the “Business Combination”).
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements reflect the financial condition, results of operations and cash flows of the Company and have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). All intercompany balances and transactions between the consolidated subsidiaries comprising the Company have been eliminated in the accompanying condensed consolidated financial statements.
These condensed consolidated financial statements and notes thereto are unaudited, and as permitted by the interim reporting rules and regulations set forth by the Securities and Exchange Commission (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, 2022 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.
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.
9
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Cash, Cash Equivalents and Restricted Cash
Cash includes both cash and interest-bearing money market accounts and cash equivalents are defined as highly liquid investments with original maturities of three months or less from the date of purchase. As of March 31, 2023 and December 31, 2022, the Company had no
Restricted cash represents cash that is not readily available for general purpose cash needs. As of March 31, 2023 and December 31, 2022, the Company had restricted cash of $2.6
A reconciliation of the Company’s cash, cash equivalents and restricted cash as of March 31, 2023 and March 31, 2022 is presented below:
| March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash | $ | $ | |||||||||
| Cash equivalents | |||||||||||
| Restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash as shown on statements of cash flows | $ | $ | |||||||||
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 $(1.1 ) million and $1.4 million during the three months ended March 31, 2023 and 2022, respectively, which are included in Other income (expense) in 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 income, expenses, gains and losses are 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 loss in 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
No changes to U.S. GAAP that are not yet effective are expected to have a material effect on the Company’s condensed 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)
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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Over time | $ | $ | |||||||||
| Point in time | |||||||||||
| Total revenues | $ | $ | |||||||||
Reimbursable expenses billed to clients was $1.2 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively.
Remaining Performance Obligations and Revenue Recognized from Past Performance
As of March 31, 2023, the aggregate amount of the transaction price, as defined in the Accounting Standards Codification (“ASC”), allocated to performance obligations yet to be satisfied was $2.4 million, and the Company generally expects to recognize this revenue within the next 12 months. Such amounts primarily relate to the Company’s performance obligations of providing transaction-related advisory services.
The Company recognized revenue of $94.2 million and $119.9 million during the three months ended March 31, 2023 and 2022, 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.
Contract Balances
As of March 31, 2023 and December 31, 2022, the Company recorded $3.0 million and $5.0 million, respectively, for contract liabilities which are presented as Deferred revenue on the Condensed Consolidated Statements of Financial Condition. The Company recognized revenue of $2.9 million and $3.8 million for the three months ended March 31, 2023 and 2022, respectively, of the respective beginning deferred revenue balance, which was primarily related to transaction-related advisory services that are recognized over time.
Accounts Receivable and Allowance for Credit Losses
As of March 31, 2023 and December 31, 2022, $14.5 million and $5.1 million, respectively, of accrued revenue was included in Accounts receivable, net of allowance on the Condensed Consolidated Statements of Financial Condition. These amounts represent amounts due from clients and are recognized as revenue in accordance with the Company’s revenue recognition policies but unbilled at the end of the period.
As of March 31, 2023, certain accounts receivable in the aggregate amount of $15.5 million were individually greater than 10% of the Company’s gross accounts receivable and were concentrated with two clients. Of that amount, $10.0 million was subsequently received after March 31, 2023. As of December 31, 2022, certain accounts receivable in the aggregate amount of $28.4 million, were 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.
11
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
The allowance for credit losses activity for the three months ended March 31, 2023 and 2022 was as follows:
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Beginning balance | $ | $ | |||||||||
| Bad debt expense | |||||||||||
| Write-offs | ( | ( | |||||||||
| Recoveries | |||||||||||
| Foreign currency translation and other adjustments | ( | ||||||||||
| Ending balance | $ | $ | |||||||||
Note 4—Leases
The Company leases office space and certain office equipment under operating lease agreements. See summary below of significant new leases and lease modifications.
During the first half of 2022, the Company entered into amendments to its New York and Los Angeles office leases, as well as a new 12-year lease agreement related to the relocation of the Company’s United Kingdom (“U.K.”) office in London. The New York lease amendment extended the term of the lease by approximately 16 years with an expiration of December 31, 2039. The amended term of the Los Angeles lease is scheduled to expire on December 31, 2032. In the second quarter of 2022, the Company’s amended Los Angeles lease commenced and the amended New York lease partially commenced resulting in an increase to Lease liabilities and a corresponding increase to Right-of-use lease assets of $66.3 million. In the third quarter of 2022, the New York lease became fully commenced and the London lease also commenced, which resulted in an additional $62.3 million increase to Lease liabilities and a corresponding increase to Right-of-use lease assets.
Other information as it relates to the Company’s operating leases was as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Weighted-average discount rate - operating leases | |||||||||||
| Weighted-average remaining lease term - operating leases | | ||||||||||
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Operating lease cost | $ | $ | |||||||||
| Variable lease cost | |||||||||||
| Sublease income - operating leases | ( | ( | |||||||||
| Total net lease cost | $ | $ | |||||||||
| Cash paid for lease obligation | $ | $ | |||||||||
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, 2023, the maturities of undiscounted operating lease liabilities of the Company are as follows:
| Years Ending: | Operating Leases | Sublease Income | Net Payments | ||||||||||||||
Remainder of 2023 | $ | ( | $ | $ | ( | ||||||||||||
| 2024 | |||||||||||||||||
| 2025 | |||||||||||||||||
| 2026 | |||||||||||||||||
| 2027 | |||||||||||||||||
| 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.
Refer to Note 16—Related Party Transactions for information regarding the Company’s subleasing arrangements.
Note 5—Intangible Assets
Below is the detail of the intangible assets:
| March 31, 2023 | |||||||||||||||||
| Gross Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Customer relationships | $ | $ | ( | $ | |||||||||||||
| Trade names and trademarks | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||
| December 31, 2022 | |||||||||||||||||
| Gross Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Customer relationships | $ | $ | ( | $ | |||||||||||||
| Trade names and trademarks | ( | ||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||
13
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Note 6—Regulatory Requirements
The Company has a number of consolidated subsidiaries registered as broker-dealers with regulatory agencies in their respective countries, including the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), the New Self-Regulatory Organization of Canada (“New SRO”, formerly the Investment Industry Regulatory Organization of Canada or “IIROC”), the Financial Conduct Authority (“FCA”) of the U.K. and the Autorité de contrôle prudentiel et de resolution (“ACPR”) of France. 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, 2023 and December 31, 2022, all regulated subsidiaries were 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.
Note 7—Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation and amortization and consist of the following as of March 31, 2023 and December 31, 2022:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Leasehold improvements | $ | $ | |||||||||
| Furniture and fixtures | |||||||||||
| Equipment | |||||||||||
| Software | |||||||||||
| Total | |||||||||||
| Less: Accumulated depreciation and amortization | ( | ( | |||||||||
| Fixed assets, net | $ | $ | |||||||||
Depreciation expense related to fixed assets was $1.1 million and $1.1 million for the three months ended March 31, 2023 and 2022, respectively. Amortization expense related to software development costs was $0.1 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively.
During the three months ended March 31, 2023, the Company disposed of certain assets, substantially all of which were fully depreciated and related to the expansion and relocation of the New York and London office space. Leasehold improvement assets capitalized during the three months ended March 31, 2023 were largely related to build-out projects associated with new or amended office leases in New York and London. Refer to Note 4—Leases for further information.
Note 8—Income Taxes
The following table summarizes the Company’s tax position for the periods presented:
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Income (loss) before income taxes | $ | ( | $ | ||||||||
| Income tax benefit (expense) | $ | ( | $ | ( | |||||||
| 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) a portion of the Company’s compensation expense is non-deductible for tax purposes.
14
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Note 9—Stockholders’ Equity
Share Repurchase Program
The Company’s Board of Directors approved a stock repurchase program on February 16, 2022 under which the Company is authorized to repurchase up to $100.0 million of the Company’s Class A common stock, and on February 8, 2023, the Board approved an incremental $100.0 million, in each case with no requirement to purchase any minimum number of shares. The manner, timing, pricing and amount of any transactions will be subject to the Company’s discretion. During the three months ended March 31, 2023 and 2022, the Company purchased 1,457,304 and 172,303 shares, respectively, resulting in an increase of $14.8 million and $1.6 million, respectively, at cost, to Treasury stock on the Company’s Condensed Consolidated Statement of Financial Condition. The 11,001,320 shares purchased since inception of the share repurchase program through March 31, 2023 were purchased at an average price per share of $7.58 .
Non-Controlling Interests
Non-controlling interests represents the ownership interests in PWP OpCo held by holders other than Perella Weinberg Partners. Professional Partners and the ILPs own 43,778,015 PWP OpCo Units as of March 31, 2023, which represent a 50.8 % 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. Class B-1 and Class B-2 common stock have de minimis economic rights.
PWP OpCo Limited Partnership Agreement
Exchange Rights
In accordance with the Amended and Restated Agreement of Limited Partnership of PWP OpCo, dated as of June 24, 2021 (as amended, restated, modified or supplemented from time to time, the “PWP OpCo LPA”), holders of PWP OpCo Units (“PWP OpCo Unitholders”) (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. Concurrently with an exchange of PWP OpCo Units for shares of Class A common stock or cash by a PWP OpCo Unitholder who also holds shares of Class B common stock, such PWP OpCo Unitholder will be required to surrender to the Company a number of shares of Class B common stock equal to the number of PWP OpCo Units exchanged, and such shares will be converted into shares of Class A common stock or cash (at the Company’s option) which will be delivered to such PWP OpCo Unitholder at a conversion rate of 0.001 .
On January 21, 2022, the Company closed a follow-on public offering of 3,502,033 shares of Class A common stock (the “Offering”) at a public offering price of $10.75 per share for total gross proceeds of $37.6 million, before deducting underwriting discounts and commissions. All proceeds from the Offering, net of the underwriting discounts and commissions of $0.32 per share or an aggregate of $1.1 million, were used by the Company to settle an exchange of certain PWP OpCo Units and certain shares of Class B common stock. Under the terms of the underwriting agreement, directors, officers and certain significant shareholders signed customary lockup agreements with respect to their ownership of Class A common stock. Total deferred offering costs of $1.3 million for the Offering were netted against the proceeds of the offering in Additional paid-in-capital on the Condensed Consolidated Statements of Financial Condition.
15
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Note 10—Debt
As of March 31, 2023, and December 31, 2022, the Company had no 50 million. The Company incurred $1.8 million in issuance costs related to the Credit Agreement, which were amortized as interest expense using the effective interest method over the life of the Revolving Credit Facility. Interest expense related to the Revolving Credit Facility was immaterial during the three months ended March 31, 2023 and 2022 and is included within Other income (expense) on the Condensed Consolidated Statements of Operations. Unamortized debt issuance costs of $0.3 million and $0.4 million, as of March 31, 2023 and December 31, 2022, respectively are reported within Prepaid expenses and other assets on the Condensed Consolidated Statements of Financial Position.
Note 11—Warrants
Warrant Exchange
As of March 31, 2023 and December 31, 2022, the Company had no 0.20 shares of the Company’s Class A common stock in exchange for each warrant tendered by such holders. This offer coincided with a solicitation of consents from holders of the public warrants to amend the warrant agreement (together, the “Warrant Exchange Offer”). Further information regarding the Company’s warrants is described in Note 12—Warrants 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, 2022.
Prior to Warrant Exchange
Prior to the Warrant Exchange Offer, each warrant entitled the registered holder to purchase one share of Class A common stock at an exercise price of $11.50 per share. The warrants met the definition of a derivative under ASC Topic 815, Derivatives and Hedging, and as such, the Company recorded these warrants as liabilities at fair value upon the closing of the Business Combination in accordance with ASC Topic 820, Fair Value Measurement, with subsequent changes in their respective fair values recorded in Change in fair value of warrant liabilities on the Condensed Consolidated Statements of Operations.
Note 12—Equity-Based Compensation
Further information regarding the Company’s equity-based compensation awards is described in Note 13—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, 2022.
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 incentive compensation awards measured by reference to PWP Class A common stock (“PWP Incentive Plan Awards”). Under the PWP Incentive Plan, the Company may grant options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance restricted stock units (“PSUs”), stock bonuses, other stock-based awards, cash awards or any combination of the foregoing. The PWP Incentive Plan established a reserve for a one-time grant of awards that occurred in connection with the Business Combination (the “Transaction Pool Reserve”) as well as a reserve for general purpose grants (the “General Share Reserve”). As of March 31, 2023, 6,274,486 total shares remained reserved and available for future issuance under the PWP Incentive Plan.
Business Combination Awards
During the third quarter of 2021, in connection with the Business Combination, the Company granted awards (the “Business Combination Awards”) in the form of (i) restricted stock units out of the Transaction Pool Reserve consisting of (a) PSUs that only vest upon the achievement of both service and market conditions (“Transaction Pool PSUs”) and (b) RSUs that vest upon the achievement of service conditions (“Transaction Pool RSUs”) as well as (ii) PSUs out of the General Share Reserve to certain executives and a small number of other partners that vest upon the achievement of both service and market conditions (the “2021 Long-Term Incentive Awards”).
16
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
Transaction Pool PSUs – The following table summarizes the balance of unvested Transaction Pool PSUs and activity during the three months ended March 31, 2023:
| Transaction Pool PSUs | |||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Balance at January 1, 2023 | $ | ||||||||||
Granted (1) | |||||||||||
| Vested | |||||||||||
| Forfeited | |||||||||||
Balance at March 31, 2023 | $ | ||||||||||
__________________
(1)Includes dividend equivalent units that have been awarded in the form of additional Transaction Pool PSUs that were granted from the General Share Reserve.
As of March 31, 2023, the $12 and $13.50 market condition requirements of the Transaction Pool PSUs were satisfied. No 22.8 million, which is expected to be recognized over a weighted average period of 2.5 years.
Transaction Pool RSUs – The following table summarizes the balance of unvested Transaction Pool RSUs and activity during the three months ended March 31, 2023:
Transaction Pool RSUs | |||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Balance at January 1, 2023 | $ | ||||||||||
Granted (1) | |||||||||||
| Vested | |||||||||||
| Forfeited | ( | ||||||||||
Balance at March 31, 2023 | $ | ||||||||||
__________________
(1)Includes dividend equivalent units that have been awarded in the form of additional Transaction Pool RSUs that were granted from the General Share Reserve.
The total fair value of Transaction Pool RSUs that vested during the three months ended March 31, 2022 was $8.1 million and no awards vested during the three months ended March 31, 2023. As of March 31, 2023, total unrecognized compensation expense related to unvested Transaction Pool RSUs was $23.6 million, which is expected to be recognized over a weighted average period of 1.6 years.
17
Perella Weinberg Partners
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts and Where Otherwise Noted)
2021 Long-Term Incentive Awards – The following table summarizes the balance of unvested 2021 Long-Term Incentive Awards and activity during the three months ended March 31, 2023:
2021 Long-Term Incentive Awards | |||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Balance at January 1, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | |||||||||||
| Forfeited | |||||||||||
Balance at March 31, 2023 | $ | ||||||||||
As of March 31, 2023, none of the market condition requirements of the 2021 Long-Term Incentive Awards were met and no 49.7 million, which is expected to be recognized over a weighted average period of 2.6 years.
As of March 31, 2023, total unrecognized compensation expense related to the combined unvested Business Combination Awards was $96.2 million, which is expected to be recognized over a weighted average period of 2.3 years.
Other General Reserve Awards
The Company grants RSU awards out of the General Share Reserve from time to time in the ordinary course of business (the “General RSUs”), which vest upon the achievement of service conditions. During 2023, the Company granted additional PSUs out of the General Share Reserve that vest upon the achievement of both service and market conditions (the “2023 Long-Term Incentive Awards”).
The General RSUs vest over the requisite service period, which is generally to five years . For the 2023 Long-Term Incentive Awards, the service condition requirement is generally satisfied in two equal installments subject to continued employment on the third and fifth anniversaries of the grant date. The market condition is satisfied upon the achievement of closing stock prices equal to $15 , $20 , $25 and $30 for any 20 trading days out of any 30 consecutive trading days prior to the fifth anniversary of the grant date, as measured on the last calendar day of each month. The market condition is satisfied with respect to 50 % of each award at the $15 closing stock price, 80 % of each award at the $20 closing stock price, 95 % of each award at the $25 closing stock price, and 100 % of each award at the $30 closing stock price, subject to linear interpolation between the applicable price points.
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 summarizes the balance of unvested General RSUs and 2023 Long-Term Incentive Awards (together, the “Other General Reserve Awards”) and activity during the three months ended March 31, 2023:
| Other General Reserve Awards | |||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Balance at January 1, 2023 | $ | ||||||||||
Granted (1) | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
Balance at March 31, 2023 | $ | ||||||||||
__________________
(1)Includes dividend equivalent units that have been awarded in the form of additional General RSUs that were granted from the General Share Reserve.