PJT Partners Inc

NYSE:PJT

Earnings Call Analysis

PJT Partners Reports Record 2023 Results

PJT Partners achieved record revenues in 2023, reaching $1.15 billion, marking a 12% increase from the previous year, driven by stellar performance in restructuring and strong strategic advisory. Adjusted EPS was $3.27 per share, with a 25% effective tax rate expected going into 2024. Despite a challenging year for alternative investments and decreased M&A activity, the firm saw a net income of $183 million, and maintained over $435 million in cash, ending with no funded debt. Significant investment in hiring and office space is anticipated to yield future returns, although it has impacted current operating margins. The board authorized a new $500 million share repurchase program, with a Q1 increase in the weighted average share count expected due to performance shares reaching their price hurdle. A dividend of $0.25 per share will be paid in March 2024.

Record Revenues and Steady Growth

PJT Partners has reported a milestone achievement with the highest revenues in the firm's history, reaching $1.15 billion, marking a 12% increase year-over-year. This success was primarily driven by robust performance in restructuring services and solid results in Strategic Advisory. Reinforcing their commitment to growth and industry leadership, the firm expanded its Strategic Advisory team by integrating 19 new partners and managing directors, enhancing their expertise and capabilities.

Share Repurchases and Strong Financial Position

The company demonstrated its shareholder value focus by repurchasing almost 2.2 million share equivalents, affirming its strong cash position with more than $435 million on hand at year's end. Going forward, the Board has initiated a new $500 million share repurchase program, highlighting a strategic approach to capital management.

Compensation and Noncompensation Expenses

The firm's adjusted compensation expenses rose to $805 million, a 23% increase compared to the previous year, with the compensation ratio standing at 69.8%. The fourth quarter specifically saw a 70.7% ratio due to a consistent accrual strategy throughout the initial nine months of the year. On the noncompensation side, there was a total expense of $165 million for the year, growing by 12% from the prior year, mainly due to increased professional fees and occupancy costs. Further, the company anticipates these expenses to continue growing at a similar rate in the next year because of a renewed long-term office lease and expansions in New York.

Pre-Tax Income, Tax Rate, and Earnings Per Share

Adjusted pre-tax income was reported at $183 million for the year, with margins slightly increasing from 15.8% to 16.1% in the fourth quarter. The effective tax rate settled lower than expected at 25.3%, with projections to remain around 25% in the forthcoming year. Earnings per share amounted to $3.27 for the year, although there was a decrease in the fourth quarter earnings, dropping from $1.08 in 2022 to $0.96 in 2023.

Capital Structure and Dividend Payout

The capital structure of PJT Partners remained robust, ending the year devoid of funded debt and possessing $437 million in cash and equivalents. The firm also showed its commitment to shareholder returns by declaring a dividend of $0.25 per share.

Restructuring Success Amidst Economic Headwinds

The firm took advantage of the economic challenges presented by rising interest rates and market dislocations to significantly grow its restructuring business. This sector achieved stellar fourth-quarter results and the best annual performance on record, with PJT Partners securing the top spot in announced restructurings globally and in the U.S..

PJT Park Hill and M&A Environment Challenges

However, not all areas saw growth; the challenging fundraising environment for alternative investments in 2023 contrasted starkly with the previous record years of 2021 and 2022. This situation led to a notable yearly revenue decline in the PJT Park Hill division. Further, a volatile global M&A market experiencing its lowest activity levels in a decade significantly hindered the pace of strategic activity across the industry .

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and welcome to the PJT Partners Fourth Quarter 2023 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma'am.

[Sharon Pearson, executive]

Thank you very much, Todd, and good morning, and welcome to the PJT Partners Full Year and Fourth Quarter 2023 Earnings Conference Call. I'm Sharon Pearson, Head of Investor Relations at PJT Partners. And joining me today is Paul Taubman, our Chairman and Chief Executive Officer; and Helen Meates, our Chief Financial Officer.

Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2022 Form 10-K is available on our website at pjtpartners.com. I want to remind you that the company assumes no duty to update any forward-looking and that the presentation we make today contains non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For detailed disclosures on non-GAAP metrics, and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website. And with that, I'll turn the call over to Paul.

[Paul Taubman, executive]

Thank you, Sharon, and thank you all for joining us this morning. Today, we reported financial results for quarter end and full year 2023. Revenues were the highest in our firm's history at $1.15 billion, up 12% year-over-year. For the full year, adjusted pretax income was $183 million, and adjusted EPS was $3.27 per share.

In a very challenging operating environment, we deliver differentiated results as strong absolute performance in restructuring, coupled with strong relative performance in Strategic Advisory were the drivers of our record revenues. This was also a record year for senior recruiting as we added 19 partners and managing directors principally in Strategic Advisory. Many of these hires bring key industry expertise and relationships, which will significantly augment the depth and breadth of our industry footprint. Total Strategic Advisory partner and MD head count increased 20% this year, while firm-wide headcount grew 12%. This considerable hiring has weighed on our operating margins, but we are confident that in time, our shareholders will be rewarded for this investment.

During the year, we repurchased almost 2.2 million share equivalents. Even with these significant share repurchases, we ended the year with more than $435 million of cash on hand and the strongest balance sheet in our firm's history. Given the strength of our balance sheet, and our continued emphasis on mitigating dilution resulting from our continuing investment in the franchise. Our Board has authorized a new $500 million share repurchase program which supersedes the current repurchase authorization. After Helen takes you through our financial results, I will review our business performance, recruiting initiatives and outlook in greater detail. Helen?

[Helen Meates, executive]

Thank you, Paul. Good morning. Beginning with revenues. For the full year 2023, total revenues were $1.153 billion, up 12% year-over-year, with a significant increase in restructuring more than offsetting a significant decline in PJT Park Hill and a modest decline in Strategic Advisory revenues compared to year ago levels. For the fourth quarter, total revenues were $329 million, up 17% year-over-year, with a significant increase in restructuring and a modest increase in strategic advisory revenues more than offsetting declines in PJT Parkhill.

Turning to expenses. Consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments. These adjustments are more fully described in our 8-K. First, [ as just ] the compensation expense. Full year adjusted compensation expense was $805 million, up 23% year-over-year with a compensation ratio of 69.8%. Given we accrued compensation at 69.5% service through the first 9 months of the year, the resulting fourth quarter ratio was 70.7%. We will provide guidance on our accrual for compensation expense for 2024 when we report our first quarter results.

Turning to adjusted noncompensation expense. Total adjusted noncompensation expense was $165 million for the full year 2023 and $43 million for the fourth quarter. As a percentage of revenues, our adjusted noncomp expense was 14.3% for the full year 2023 and 13.2% for the fourth quarter. Adjusted noncompensation expense grew 12% in 2023 year-over-year driven primarily by higher professional fees and higher occupancy costs. Looking ahead, we expect our total noncomp expense in 2024 to grow at a similar rate compared to 2023. This will primarily be driven by a step function increase in our occupancy costs as we recently renegotiated a 15-year lease in our office space in New York. We are taking on some additional space in other regions that we will grow into over the next several years.

Turning to adjusted pretax income. We reported adjusted pretax income of $183 million for the full year 2023 and $53 million for the fourth quarter. Our adjusted pretax margin was 15.8% for the full year and 16.1% in the fourth quarter. The provision for taxes. As with prior years, we presented our results as if all partnership units had been converted to shares, and that all of our income was taxed at a corporate tax rate. Our effective tax rate for the full year was 25.3% below the 26.7% estimated rate that we applied for the first 9 months of the year, reflecting a final allocation of state level income taxes.

In 2024, we would expect our effective tax rate to be around 25%, and we will refine our view at the end of the first quarter. Earnings per share or adjusted as converted earnings was $3.27 per share for the full year compared to $3.92 in 2022 and $0.96 in the fourth quarter compared to $1.08 in 2022. The share count for the year ended 2023, our weighted average share count was 41.7 million shares, essentially unchanged from the prior year. During the year, we repurchased the equivalent of approximately 2.2 million shares primarily through open market repurchases.

For the fourth quarter, our weighted average share count was 42.9 million shares, up 2.7% year-over-year. A portion of this increase is attributable to the fact that during the fourth quarter, we reached the price hurdle on 1.3 million performance shares, which are partially reflected in our Q4 weighted average share count and will be fully reflected in our Q1 2024 weighted average share count. Of these 1.3 million performance units, 20% have met the service requirements. As Paul mentioned, our Board has authorized a new $500 million share repurchase program. And consistent with our capital priorities, we will continue to invest in the franchise while using excess cash to reduce the dilutive impact of share issuance.

On the balance sheet, we ended the year with $437 million in cash, cash equivalents and short-term investments and $456 million in net working capital, and we have no funded debt outstanding. Finally, the Board has approved a dividend of $0.25 per share. The dividend will be paid on March 20, 2024, to Class A common shareholders of record as of March 6. And with that, I'll turn it back to Paul.

[Paul Taubman, executive]

Thank you, Helen. Beginning with restructuring. We saw significant growth in restructuring activity in 2023, driven by sharply higher interest rates, dislocated capital markets and slowing economic growth around the globe. Our restructuring business capitalized on this favorable backdrop, delivering stellar results for the fourth quarter and record results for the full year. We were increasingly active across both liability management and in-court restructuring assignments as we continue to be the go-to adviser for complex liability management engagements.

For full year 2023, we ranked #1 in announced restructurings in both the U.S. and globally, and we renamed Global Restructuring Adviser of the Year by IFR for the fourth year in a row. Turning to PJT Park Hill. After record fundraising in 2021 and 2022, the 2023 environment for alternative investments proved to be extraordinarily difficult. The dearth of M&A and IPO activity led to a significant reduction in capital return, leaving many alternatives investors over allocated to the asset class and highly restrained in making new commitments. Last year's environment was best characterized as one of elongated fundraising time lines and downward revisions to fund size targets with an uptick in the number of postponed fundraises. Against this difficult backdrop, our fourth quarter and full year revenues and PJT Park Hill declined significantly year-on-year.

On the positive side, the gap between public and private valuations has narrowed, and we now see some early signs of a more constructive fundraising environment. Turning to Strategic Advisory. 2023 marked the second year in a row of meaningfully below trend global M&A activity with announced global M&A volumes declining to levels not seen in a decade. The uncertainty caused by volatile markets, sharply higher interest rates, and greater economic and geopolitical uncertainty, all weighed on the pace of strategic activity. Our fourth quarter strategic advisory revenues were up slightly and our full year strategic advisory revenues were down slightly year-over-year. These results compare favorably when measured against the declines in industry-wide volumes.

Turning to talent. Our most important strategic priority continues to be the build-out of our strategic advisory franchise. 2023 was a favorable recruiting environment when dislocated M&A markets enabled us to significantly accelerate the pace of senior hiring. While we expect our hiring remain elevated in 2024, it may not equal 2023's record levels. As we look ahead, in PJT Park Hill, we expect the environment to slowly but steadily improve after a difficult couple of years for fundraising. Narrowing spreads between public and private valuations, more receptive capital markets and greater capital returns to LPs as M&A and IPO activity picks up should result in an improved backdrop for fundraising.

Our private capital solutions business should also benefit from increased demand from GPs to employ continuation funds to create additional monetization opportunities for their LPs. In M&A, while we expect the markets to take time to get back to historical relationships between M&A activity and broader market benchmarks. The direction of travel should be positive, although the pace of such recovery remains unclear. Higher equity valuations, lower volatility and anticipated rate cuts should cause the macro environment to be more conducive to deal making. Executives remain focused on M&A as a strategic tool as they seek to remake their companies in response to the significant disruptions caused by technological innovation.

Today, we have a decidedly more formidable team on the field to capitalize on these opportunities. We are better positioned in certain key growth areas, including technology, health care and consumer. Our brand and our capabilities are stronger than ever. We are engaged in an increasing number of strategic conversations and our mandate count is at near record levels, up 25% from a year ago. However, given the slowdown in 2023 deal activity, we begin 2024 with a lower than typical backlog of announced pending close transactions. In restructuring, we are in the early days of what we believe will be a multiyear cycle of elevated activity in liability management and in-court restructurings while the rebound in capital markets activity and lower interest rates may provide relief for some companies, the sheer quantum of debt that must be refinanced together with an increasing number of companies facing structural pressures will likely expand this restructuring cycle for some time to come.

We are confident about our businesses, we are confident about our strategy, and we are confident about our long-term growth prospects. And with that, we will now take your questions.

[Operator]

[Operator Instructions]

Our first question will come from Devin Ryan with JMP Securities.

[Devin Ryan, analyst]

Thanks. Good morning, everyone. So just want to, Paul, start maybe on some of the outlook commentary and just talk a little bit about the interplay between restructuring and the strategic advisory M&A advisory business. And I'm curious, does this feel like a 2020 to 2021 environment where you had a record 2020 with your restructuring strength. And then into 2021, you kind of saw a normalizing restructuring and that was then offset by kind of the M&A growth and recovery. So do you kind of see that scenario? Or based on what you're seeing today, do you see a scenario where maybe both businesses are working -- and then the M&A part of the business is recovering to the extent that kind of macro environment you laid out plays out?

[Paul Taubman, executive]

Yes, I think it's a far different bridge from 2021 vs '23, '24. So let's look at restructuring first. Restructuring was an incredibly accelerated but abbreviated cycle in 2020 and the time frame for these executions all compressed just given the urgency of the situation and then it stopped raining, the sun came out and all of the wet grounds dried up seemingly overnight, and we went from incredibly active to inactive on a dime.

Here, what we have seen, and we've been talking about this for some period of time is a multiyear restructuring wave, and we have caught that wave early. We have caught it earlier than most. And we have done a very good job in leveraging the increased footprint in strategic advisory to go hand-in-hand with our restructuring capabilities to continue to build out and expand our footprint. I expect that this cycle is a multiyear cycle. Clearly, if the economy strengthens to such an extent and rates come all the way back down, it will have some effect on this restructuring cycle.

But as we look out at '24 as we look at even further than '24, we think that we're in we're in the early to middle innings of what should be an extended restructuring cycle. And then I'd also make the point that -- the default rates that we've experienced for the better part of the decade were so far below trend that simply getting default rates to trend can have a major impact on the quantum of restructuring. That's point #1. Point #2 is that if you look at what's going on in terms of innovation, creative destruction, industries being created overnight and having profound effects on others. There can't be winners without there also being losers. Technology helps but it also pressures other business models. And we're seeing that. So you can have severe disruption and dislocation coexist with a relatively benign macro environment.

And then the third point is if you just look at the sheer quantum of debt outstanding and I've been talking about this for a long time, the maturity walls and the debt that needs to be refinanced in the coming years. And it needs to be refinanced at meaningfully higher rates than that debt was put on the books at. And when you think about all of the ways with these relatively lose covenants to be creative in restructuring balance sheets and assisting companies and creating runway. This should be a long cycle. And on the M&A side, this is different in a very different way, which is '21 in the world melted up seemingly on a dime. I don't think we're going to see that here. We are -- we've touched bottom. We're building a stronger foundation. I expect this to be an up year in M&A from a global perspective.

But if you look historically, the good news is that after 2 down [indiscernible] we've never had 3. But when you look at that first year of recovery, it typically is a modest recovery. And if you look at sort of how things are playing out, sitting here in February, I think this is going to be a slow, steady build, and it's going to continue to gain strength. But I think the pivot from '20 to '21, we saw in M&A globally, you're not going to see from '23 to '24. So very, very different marketplaces.

[Devin Ryan, analyst]

Yes. Got it. Okay. And then just a follow-up question here just on the comp ratio. In 2023, you obviously meaningfully grew the headcount we're also operating in an environment where 2 out of the 3 businesses that you're in were incredibly subdued and then there was competitive dynamics as well. So just trying to think about relative to that 69.8% 2023 comp ratio how you guys would frame kind of the comp ratio in a more normalized environment for all 3 businesses. And maybe there's another way to kind of explain it from just like incremental margins from here.

[Paul Taubman, executive]

Sure. Look, to me, it's a pretty simple issue, which is we have made very significant investments in our Strategic Advisory business. And while it was record levels in 2023, it didn't start in 2023. And if you just look at the quantum of headcount that we have added over the last 3 years, we are a demonstrably stronger, more formidable, more complete firm as we build out these verticals where the opportunities are extraordinary. And if you're doing that in an environment where M&A is down for 2 years in a row, you have this conflict between significant investment where you know you're going to get a meaningful return.

But in the short term, you don't have a return for it and it pressures margins. And as that investment begins to earn a return and the principal gating item is you need more constructive M&A markets. And it's not just announcements, you need to get to closings before you see it in the comp ratio, it's going to take a little bit of time. But that's -- that's pretty much what we've been doing. We're looking at all of these investments, and we're quite confident with the return, but you don't oftentimes make investment and get a day 1 payback. We are going to get a long-term payback and we're going to apply reward our shareholders. And in the short term, we're going to see our comp ratios go up. And I would just -- it would be remiss of me not to add. It's not as if we're the only ones who are seeing our comp ratios move higher, but we're doing it with complete confidence that it's the right thing. This is not where we expect the business to be when it hits its normal stride but it's part of the journey. And on the other side of this, there's a lot of attractive return.

[Devin Ryan, analyst]

Got it. I mean is there any way to just drill down a little bit more into like where the comp ratio could revert to or like any way to quantify the numbers around like where you see it going as the businesses are either more mature or just the backdrop is, [indiscernible] and normal.

[Paul Taubman, executive]

Well, look, again, part of the challenge is what's normal. And I think one of the things we've always said is anyone who talks about 1 comp ratio for all conditions, it's just not -- it's not realistic, which is you need to overlay. Are you in a bull market? Are you in a bear market? Are you in a normalized market as your hiring leveled out. There's no reason why our comp ratios should not be in line with peer ratios in time.

But you need to sort of assume a set of circumstances. The reality is that most firms who came well before us were operating in the circa 60% comp ratio, some a little higher, some a little bit lower. So unless until we have other evidence to suggest that that's not the right ratio. That's pretty much where this should trend over time.

[Operator]

Our next question comes from James Yaro with Goldman Sachs.

[James Yaro, analyst]

Paul, maybe -- just to start with sort of a bigger picture macro one. I think we're seeing generally mix, but generally, somewhat better industry announced M&A trends. I'd love to get your mark-to-market on how you are thinking about the macro and how that's factoring into conversations in corporate boardrooms. And then separately, how are M&A dialogues evolving with sponsors.

[Paul Taubman, executive]

Right. Well, look, it's -- I'm not sure that there's a one-size-fits-all answer to that. It depends on geography. It depends on industry, it's size of transaction. It's whether you're talking about strategics or sponsors. Let's just talk about sponsors first. Let's double-click on sponsors.

Sponsors, people tend to focus on sponsors as creating demand for M&A as buyers of assets. But the reality is, given their meds portfolios, they're also potential sources of supply and sellers of assets. And when you look at sponsor activity, it gets created when sponsors monetize portfolio investments as well as when they reload and they make new investments. And the reality is with many of their portfolio companies on the books because they were acquired in a near 0 interest rate environment. The math may not work in the very near term to sell those assets in order for them to get maximum value. And one of the things about the alts world and private equity sponsors is they are incredibly [indiscernible] at timing exits and without an incredible impetus, I think you're seeing more restrained exits, which is dampening M&A.

And because you are having more restrained exits and because there is less DPI for investors and because the flywheel is slightly out of balance, I think at the margin, their willingness to commit capital has also been subdued. And I have said that when rates actually start to be cut, as opposed to when they have crested is when you're likely to see that market heat up in a meaningful way. And that most likely will be sometime in the middle of 2024. And on the strategic side, what I've always pointed to is, even with these very challenging conditions, company's desires to pursue M&A to use M&A as a tool has never wavered. And that's not something you typically see in a [ bear ] market. In many [ bear ] markets for M&A, oftentimes executives have no interest in seriously considering M&A. And what we have here is -- 2 going on 3 years of subdued activity. Lots of companies have strategic plans and initiatives that they need to execute. And at the first sign that they can finance a transaction that they can agree on value that they're going to be in the game.

And that's why we've seen the leader, if you will, in resuming and reopening the market has been more corporate-driven and less sponsor driven. But that too takes a little bit of time because there are still impediments to this. And some of the targets in order to take over a company the entire cap stack has to be refinanced, and that may be difficult in the current environment. There may be concerns about and I trust risk, not so much about whether the deal will ultimately be bounced but more about how long it will take, how long the review process and what could happen to the underlying business signing and closing in an extended regulatory review.

So you've got lots of different elements, but I think what's clear to say is the direction of travel is positive. But these markets tend to take a little bit of time to reopen and to pick up steam. And then the last point I would make is that a lot of M&A is pro-cyclical, which I equally refer to as fomo that transactions we get transactions and transactions we get competitive responses. And if your competitors are taking advantage in using M&A as a tool that's probably going to accelerate your time line. If your competitor isn't doing anything, it probably gives you a sense of security that you can buy your time. So we've clearly touched bottom. We're clearly building a base back up. But just exactly what that recovery curve looks like it's hard to tell, although if history is a guide, the first year tends to be subdued, and then it picks up steam in the...

[James Yaro, analyst]

That's very clear. As my follow-up, somewhat related question to what you just spoke to on the sponsor side. Fundraising remains bet, and I do appreciate your constructive commentary on Park Hill improving. But maybe you could just update us on what you're hearing from sponsors on their ability to accelerate fundraising at this point relative to 2023, over the course of 2024. And then what this means for the time line for Park Hill revenue to fully normalize. Is that a 2024 event or something that's more of a medium-term expectation?

[Paul Taubman, executive]

I think the direction of travel begins in a positive direction in '24. But I don't think it gets fully back to normal levels in '24. I would defer that for the moment to say '25, we'll revisit that. But I think it's probably a 2-year process to get to where we got to. We saw some weakening in the marketplace in the latter half of it in '22 carried over to 23. I think in a similar vein to the M&A commentary. I think we've touched bottom and it's now more constructive, but that will take some time.

And one of the challenges is a little bit of an affordability issue, which is you're pulling all this capital and you're not returning a lot of capital. And with the IPO market is still not really fully open and vibrant as a monetization tool and with subdued M&A that has put a damper on it, but the lack of capital that's been called is one of the ways in which the system gets back into equilibrium. Also, the credit markets, they're ripping tighter. You're starting to see the early signs of some dividend recap deals and alike. So I think liquidity is beginning to flow back in the marketplace. And I think that's all very positive for the Park Hill business in the intermediate term. But clearly, '24 will be an up year.

[Operator]

Our next question will come from Steven Chubak with Wolfe Research.

[Steven Chubak, analyst]

Paul, you find election risk in a recent interview as a potential overhang on deal activity. Admittedly, I've asked that of other management and they've been fairly dismissive of the impact. And so I was hoping you could maybe walk through some of the election game theory how this overhang is going to impact deal activity across different sectors. And just what you're hearing from corporates generally ahead of the upcoming election?

[Paul Taubman, executive]

Yes. I think just -- let me be really clear. What I said was that no one was focusing on the election right now. But that come summer, that's all people are going to be talking about. And therefore, what is not a risk today they will be a risk tomorrow. And therefore, I'm not at all surprised to hear you say that in some of your conversations, people are not assigning that as a principal risk today because it's not.

But I do believe that as we get into the election and as the rhetoric heats up, and as we have competing policy initiatives, and as we -- I expect to have a very close election, where it is unclear where we're going to be in terms of policies, tax immigration, China relations and the like that, that may have a freezing effect. I've also said, I think there is some possibility for some foreign intervention to create mischief near the election. So when people talk about geopolitical risk, that's geopolitical risk, but it comes in the form of an election. And then I've made the point that since we've had 2 razor thin elections that have been decided by literally tens of thousands of votes that goes down to a county or 2 or 3 I don't expect this third time around to be any different.

And therefore, the possibility of a disputed election and what that brings, which is another form of geopolitical risk. So I don't want to be a mate. I'm just simply pointing out that I think something that is not on people's radar screens today, we'll get on people's radar screens at some point, and we've seen that with things like the debt ceiling, where no one talks about it and then all of a sudden, they can't stop talking about it. So that would be my perspective.

[Steven Chubak, analyst]

Very helpful color, Paul. And just for my follow-up on capital management. Certainly a meaningful uptick in the repurchase authorization. Certainly nice to see that. Just want to better understand how we should think about the cadence of buyback and the share count trajectory in the year ahead, given some of the impact of prior year awards, which Helen had alluded to in her prepared remarks.

[Paul Taubman, executive]

Look, we are a big believers in our company and in our prospects. And we also feel an obligation to our shareholders to be good stewards of capital, and those 2 things go hand in hand. So you should expect us to continue certainly relative to others, to be very aggressive in using our capital to buy back our stock because we can capture value and we can avoid dilution for our shareholders. And if you look back over the last 8 years, how well we've accomplished that goal, that's the playbook we intend to use for the next 8 years and 8 years after that and beyond.

What we've also said is we happen to come into this year with our best balance sheet in the firm's history and you measure it on any basis, whether it's cash, cash less comp payable net working capital, any dimension. And therefore, we have more firepower now than we've ever had. So you should expect our open market purchases to be as robust, if not more robust than they've ever been.

The other thing that we're also mindful of is, if we're going to repurchase, we've typically tried to do it in the front half of the year, more so just because we can match repurchases better with awards that get issued. But there's no there's no black box algorithm. It's just a basic philosophy, which is always be prudent with the balance sheet. Always put shareholders first and all else equal, probably bigger buyers in the first half of the year than in the second half of the year just because it's easier for us to do matching.

[Helen Meates, executive]

I would just add, if you look over the last 2 years, our repurchases have pretty closely matched what we issued as part of year-end comp. And as you mentioned, there's additional shares that are coming into the share count, it will be about 1.3 million shares and it will be our intention to go get those back, but we may not perfectly match when they come into the account.

[Operator]

Our next question will come from Brennan Hawken with UBS.

[Brennan Hawken, analyst]

So Helen, you touched on this in your prepared remarks, but hoping to drill down a little bit. You touched on hitting the performance metrics. I believe it was a VWAP target. I think you guys hit that in December. So if you could confirm that. And then I think what you said was that impacted the fully diluted average shares but there's more to come. Could you give us a sense of how much more we should expect in the first quarter from that averaging in? And did it also impact the compensation expense in 2023 as well?

[Helen Meates, executive]

It is not -- I'll answer that question is it does not impact the compensation expense in 2023, the crystallization of those units. And in terms of sizing of the 1.3,600,000 came in [indiscernible] -- and so another 700,000 will come in, in Q1.

[Paul Taubman, executive]

I'm sorry. And just to clarify, the triggering of the award in no way affected the comp ratio. But clearly, the granting of the award back in '22 was expensed beginning in '22 and it continues for a number of years. But it's not the triggering of the investing on that.

[Brennan Hawken, analyst]

Understood.. Staying on expenses. So under totally appreciate that trying to predict the comp ratio is really challenging, right, because you've got revenue and you've got expenses and it's very hard to predict revenue in February or beginning of February. So if we were to just maybe lay out a scenario, right? If you were to see total revenue in 2024 grow by 10%, and you were to hire no more bankers, right? So all you had was the existing base of employees what sort of magnitude could we expect comp expense to grow in a scenario like that for 2024.

[Helen Meates, executive]

So look, we're just trying to clarify your assumptions. Revenues are up 10% as what you said.

[Brennan Hawken, analyst]

Revenue is up 10% headcount lunch. What kind of operating leverage? I'm just trying to get a sense of the operating leverage that is embedded, given how much recruiting you guys have done and how much the comp ratio was impacted?

[Paul Taubman, executive]

Yes. I mean I guess my first reaction to that is it's really hard to answer hypotheticals because you've got to start to then say, okay, if revenues were up 10%, how is that distributed amongst our 3 businesses? Are they all at 10% -- you start to get there. Then you get into what's the broader macro environment for talent and compensation, one of the fixed costs at the more junior levels, [indiscernible] associate and BP on [ WestoPyramid ] cost going to be we're having inflation or deflation, then you've got the next issue, which is it up 10% because the next year looks like it's going to be where the business takes off or is it up 10%, but then you think the lot could come right back down. You start to get into so many hypotheticals.

If you want to talk about the comp leverage, the way I think about it is, over the last 3 years, we have added 35% head count, and we've not grown our revenues near 35%. And that's what the drag is. And we're making an investment where we're confident that over time, that head count is going to be reflected in the bottom line, and it's less about at 10% in 1 year, it's really sort of trying to get step function change in our revenue as those individuals who we know are going to be quite productive on the platform or not only productive on the platform in a relative sense, but they actually have a constructive M&A backdrop in which to translate client progress into revenues. And then this all kind of gets back to normal. But exactly kind of how it sort of drifts back in to reduce the ratio. It's very hard to answer a hypothetical like that.

You got to really sit down with all the facts at the end of year, which is why I'm confident that where we are is certainly elevated relative to trend. -- and I'm confident that it will return to a more normal level. But fundamentally, that's just getting the investment to begin to show a financial return. We see a return by what these individuals are doing and how they're expanding our practice well before you all see it in the P&L, and that's the lag effect.

[Brennan Hawken, analyst]

Yes. No, I totally appreciate all that, Paul. I just -- it'd be great maybe -- I know it's sort of challenging to come up with on the slide, but it'd be great if you could trying to -- because this is a one question that [indiscernible] struggle with is how do you think about the leverage that's embedded into the platform and how much is from this expansion? And so maybe you guys could consider adding some more granular color around compensation leverage in the future? I would really appreciate that.

[Paul Taubman, executive]

More than happy to revisit it. But as I've said, that here's the paradox of the business. When M&A is going gangbusters and it's easiest financially to absorb new investment, it's hardest to attract the new investment. When M&A markets are dislocated and it's the worst possible time to absorb that investment into your P&L is when you get the best opportunities to build the franchise. And we're just simply trying to make the most out of it.

I learned in driver many decades ago was AMI in the steering wheel, look far down the road. That's what we're doing. And we're constantly measuring it to make sure we're doing the right things. But that's really where we're at. And that's the paradox, which is we invested at the depth of the market because that's when you could get the best talent. That's when people were most willing to move. I think that continues into -- but consistent with my commentary, as the M&A market is slowly heal. I expect that, that environment will still be quite attractive by historic levels, but not as attractive as '23 was and then as this market begins to rebound as we know it will, for dealmaking, then these ratios start to quickly return to more normal levels.

[Brennan Hawken, analyst]

Am I last in the queue because I had one more question, but I can requeue if this way.

[Helen Meates, executive]

That's fine. Go ahead.

[Brennan Hawken, analyst]

Okay. Great. I would love to ask about Park Hill. So Park Hill has been struggling. You spoke a good deal about the headwinds to that business broadly in the environment. So I totally appreciate that. But we just had a competitor of your speed to strength in their prior private asset advisory business. and that they actually were seeing revenue growth.

So are you losing share in that business? Is there -- so maybe some into certain asset classes like real estate that happens that's causing Park Hill to show a bit of weakness when others are showing some more resilience. Could you speak to maybe consolidation in the industry, creating some problems? What do you think might be causing those divergent data points?

[Paul Taubman, executive]

It's always hard to mix and match everything, but I'll make a few observations. Number one, Park Hill had another record year in 2022. So just to put this in perspective, after setting record after record after record, you've got to look at that. So sometimes, it's easy for someone to have quite growth, it's all a question of what your base is.

So we're dealing with record results in 2022, number one. Number two, you've got to look at the composition within that business as to how much of it is primary versus secondary and how the firms are weighted one versus the other. And the third is, it's not unlike the M&A business, particularly with fundraisers that are long tailed at all, timing plays a very important role and there's an idiosyncratic nature to this as to what actually gets closed in the year, what gets pushed into the next year. And I think if you've listened to my earlier commentary, you've no doubt heard that we are quite constructive on a rebound in our results in 2024, which I think just again emphasize the fact that with a slightly longer lens a lot of things that appear to be important moves one way or the other, tend to be more noise than anything else.

[Brennan Hawken, analyst]

Okay. Does Park Hill have a pretty large real estate business, though, could you give some texture around some of the different asset classes?

[Paul Taubman, executive]

Well, as a real estate business, but as principal is the largest primary fundraising business, is on the PE side and probably second largest would be hedge funds, credit phones.

[Operator]

Our next question comes from Michael Brown with KBW.

[Unknown Analyst]

Good morning, everyone. Paul, I wanted to ask about the ramping potential here from the talent base. So maybe you could dive into where you see the productivity expansion as greatest. And I assume the expansion potential for the strategic advisory would be higher than restructuring. And so if you focus on the strategic advisory side, -- where is the opportunity the highest as a recent higher season on the PJT platform? And what would be -- would it be possible to get back to kind of the 2020 peak which I think was the peak for you guys in terms of advisory revenue per partner.

[Paul Taubman, executive]

I'm doing this set new benchmarks for the firm, not to go back to old benchmark. So my goal would be to be more productive than we were in 2020. So there's absolutely no reason why we can't be and that we won't be at some point. So that's -- but in order to do that, it's a function of what's the macro environment and it's a function of how much harvesting you're doing with established partners versus how much investing you're doing with new partners. So you need all of those things.

But absolutely, I don't view that as the ceiling at all on what we're all about. I would observe, though, that in that period of time over the last 3 years, we haven't exactly seen growth in the M&A marketplace. So it's great that you pick 2020 I think the overall M&A market is pretty much flattish, plus or minus. It went up in '21, and they came down in '22, and they came back down to 23. And it was more or less a round trip. But over that period of time, we've added significant head count. That would be the first thing. I think the second is, ultimately, where you want to be is you want to be where the biggest wallets are. And those wallets have historically been technology, health care, consumer or industrials, among others. But you can't start a firm and then just focus on where the biggest wallets are because if you do that, you may end up fishing in the best waters in terms of wallet opportunity, but you get the best bankers. If you want to get the best bankers, you've got to be opportunistic about when those opportunities present themselves.

And that's why it takes time, and that's why we continue to build out in areas where we heretofore hadn't been. It's not because we necessarily didn't have an interest in the space. It was we perhaps couldn't find the right people to occupy that space. And then when you get to the productivity, so in a way, it's the last partner and that's the most productive as opposed to the first partner because the first partner in a new space, that's a very large order for one individual to come into a new space and have the critical mass and the expertise and the totality of the relationships. So you tend to make investment, investment, investment. And all the while being stronger and more competitive and you're starting to light up the network, but it's really that last individual. Now as we've made this journey of investment and we have what I would call mostly built but not fully built networks, industry group by industry group, we're starting to now close off and complete some of those networks.

And when you do that, that's when you get big spikes in productivity. And then as we play a longer game as we start to now compete in some areas where there's very rich wallets like the technology space like, we end up with another bump. So those are all the ways in which we continue to strengthen the firm. And then finally, a lot of this investment also has utility beyond just strategic advisory, and we see that in opening up new corporate and sponsor relationships for our restructuring colleagues. So everywhere we go, that investment finds other ways to be amortized and to be monetized, but it does take constructive markets. Where we've had constructive markets and restructuring -- we've had more than enough proof of concept as far as our penetration is sponsors and corporates. And as the M&A market heats up, I expect we'll see the same productivity gains there as well.

[Unknown Analyst]

Maybe just a quick one for Helen on the noncomp guide. I understand that the occupancy sounds like that's going up as your business grows, that makes sense. Is this increase that you talked about for 2024? Is that a kind of 1 year or a transitory impact or that essentially a permanent increase? Essentially, is there kind of a double rent impact that's impacting the guidance?

[Helen Meates, executive]

So in 2024, there will be a step function increase in occupancy costs, and it will stay elevated. So it's not a onetime increase. It's not a double occupancy issue. So we're just pointing out that, that increase is more significant in 2024, and then it will level out a bit beyond that. And the majority of that increase has come from the fact that we've renegotiated these leases, as I mentioned. It's a 15-year lease. So rents are higher. We also had some sublease income that was below market.

So that's being mark-to-market. We are taking on some additional space. And then there is an accounting straight lining of that 15-year lease, which means in the early years we're expensing more than our cash outlay that that's just an accounting issue. So we're just trying to highlight that. As I mentioned, as we sit here today and look at the noncomps overall, we expect that growth will be around the growth that we had in 2023, and we'll refine that as we get further into the year.

[Paul Taubman, executive]

I mean, at the way I think about it simply is the bad news is we get a step function jump in our real estate expense. The good news is we have a lot of space to grow without having to make additional commitments and that rent from an accounting perspective just stays fixed at that number and doesn't grow. So over time, we have the same nominal debt expense -- and as we add more and more people to that space, we use it more efficiently and effectively. So we kind of take our lumps on the front end and then we get the benefit over time.

[Operator]

That concludes our question-and-answer period. I would now like to turn the call back over to Mr. Taubman for any closing remarks.

[Paul Taubman, executive]

I just again want to thank everyone for their interest and their support, and I look forward to visiting with all of you when we report first quarter earnings in the spring. Thank you very much, and have a great day.