# Perella Weinberg Partners: Form 10-Q for the period ended Sep 30, 2022

- Company: [Perella Weinberg Partners](/companies/pwp.md) (CIK 1777835)
- Form: 10-Q
- Filed: 2022-11-07
- Accepted by EDGAR: Nov 7, 2022, 09:01 ET
- Period: 2022-09-30
- Accession: 0001777835-22-000094
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1777835/000177783522000094/pwp-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1777835/000177783522000094/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $145.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $448.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$8.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$28.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $69.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $206.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $4.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $10.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | $1.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | $19.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.19 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.19 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.03 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | $0.44 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 87,745,776 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 90,535,232 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$98.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $8.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2022-01-01 to 2022-09-30 | $9.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2022-09-30 | $142.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2022-09-30 | $631.6m | us-gaap:Assets |
| Total liabilities | at 2022-09-30 | $357.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-09-30 | $140.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 52,835 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” and elsewhere in this Form 10-Q.*

### Executive Overview

We are a leading global independent advisory firm that provides strategic and financial advice to clients across a range of the most active industry sectors and international markets. Our wide range of global clients include large public multinational corporations, mid-sized public and private companies, individual entrepreneurs, private and institutional investors, creditor committees and government institutions.

On June 24, 2021, Perella Weinberg Partners consummated the Business Combination whereby (i) FTIV acquired certain partnership interests in PWP OpCo, (ii) PWP OpCo became jointly-owned by Perella Weinberg Partners, Professional Partners and certain existing partners of PWP OpCo, and (iii) PWP OpCo serves as the Company’s operating partnership as part of an umbrella limited partnership C-corporation (Up-C) structure. The Business Combination was structured as a reverse recapitalization. The historical operations of PWP OpCo are deemed to be those of the Company. Thus, the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q reflect (i) the historical operating results of PWP OpCo prior to the Business Combination and (ii) the combined results of the Company following the Business Combination. The Company shareholders are entitled to receive a portion of PWP OpCo’s economics through their ownership interests in shares of Class A common stock of Perella Weinberg Partners, which holds PWP OpCo Class A partnership units (“PWP OpCo Units”). The non-controlling interest owners of PWP OpCo receive a portion of its economics through their ownership of PWP OpCo Units. See Note 3—Business Combination and Note 11—Stockholders' Equity in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for additional discussion related to the transaction.

For further information regarding our business, refer to “Part I. Item 1 Business” in Part I “Item1A. Risk Factors” in Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2021 as filed with the SEC on July 7, 2022.

### Business Environment and Outlook

Global macroeconomic headwinds coupled with elevated geopolitical risks have caused a break in M&A momentum off of record 2021 levels. Announced global M&A volumes during the first nine months of 2022 were down more than a third as compared to the same period of 2021. Closing volumes across the market also dropped during this period as timeframes from announcement to close experienced extensions.

While the level of M&A advisory dialogue remains active across industries and geographies of focus, the tough macroeconomic environment may persist in the near-term and continue to affect M&A and financing volumes. Headwinds which are impacting 2022 industry volumes include rising interest rates and inflation, a more aggressive anti-trust policy stance, supply chain disruptions and elevated geopolitical risks associated with Russia’s invasion of Ukraine, amongst others.

Near-term headwinds aside, our core advisory services benefit from changes which impact our client base and lead them to consider business combinations, acquisitions and divestitures, capital raises and restructurings. These changes can include a broad range of economic factors in global or local markets, technological advancements which alter the competitive landscape, regulatory and political policies, globalization, changing consumer preferences, commodity and financial market movements, among many other factors.

As our team of advisory professionals expands and continues to gain traction, and as we continue to expand our advisory services, we expect our sector-focused global team collaboration will deepen and continue to resonate with clients. We expect to continue to experience growing global demand for independent advice over the long-term.

Economic and global financial conditions can materially affect our operational and financial performance. See “*Risk Factors”* included elsewhere in this Form 10-Q for a discussion of some of the factors that can affect our performance.

### Results of Operations

The following is a discussion of our results of operations for the respective periods indicated:

*(Dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | 2022 vs. 2021 | Nine Months Ended September 30, 2022 | 2021 | 2022 vs. 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Revenues** | $145,379 | $177,427 | (18)% | $448,359 | $602,749 | (26)% |
| **Expenses** |  |  |  |  |  |  |
| Compensation and benefits | 86,260 | 113,322 | (24)% | 264,092 | 387,196 | (32)% |
| Equity-based compensation | 36,999 | 38,050 | (3)% | 114,316 | 51,272 | 123% |
| Total compensation and benefits | 123,259 | 151,372 | (19)% | 378,408 | 438,468 | (14)% |
| Non-compensation expenses | 30,938 | 36,382 | (15)% | 98,141 | 97,078 | 1% |
| Total operating expenses | 154,197 | 187,754 | (18)% | 476,549 | 535,546 | (11)% |
| **Operating income (loss)** | (8,818) | (10,327) | (15)% | (28,190) | 67,203 | NM |
| **Non-operating income (expenses)** |  |  |  |  |  |  |
| Related party income | 740 | 1,529 | (52)% | 2,248 | 5,303 | (58)% |
| Other income (expense) | 6,152 | 2,564 | 140% | 11,908 | 1,236 | 863% |
| Change in fair value of warrant liabilities | (6,294) | (3,006) | 109% | 15,806 | (2,058) | NM |
| Loss on debt extinguishment | — | — | NM | — | (39,408) | NM |
| Interest expense | (69) | (72) | (4)% | (206) | (7,536) | (97)% |
| **Total non-operating income (expenses)** | 529 | 1,015 | (48)% | 29,756 | (42,463) | NM |
| **Income (loss) before income taxes** | (8,289) | (9,312) | (11)% | 1,566 | 24,740 | (94)% |
| Income tax benefit (expense) | (4,570) | (150) | NM | (10,707) | (2,695) | 297% |
| **Net income (loss)** | (12,859) | (9,462) | 36% | (9,141) | 22,045 | NM |
| Less: Net income (loss) attributable to non-controlling interests | (13,999) | (12,938) | 8% | (28,440) | 31,068 | NM |
| **Net income (loss) attributable to Perella Weinberg Partners** | $1,140 | $3,476 | (67)% | $19,299 | $(9,023) | NM |
| NM = Not meaningful |  |  |  |  |  |  |

47

### Revenues

We operate in a highly competitive environment. Each revenue-generating engagement is separately solicited, awarded and negotiated, and there are limited long-term sources of revenue in the form of recurring retainers. Therefore, our fee-paying client engagements are not predictable, and high levels of revenues in one quarter are not necessarily predictive of continued high levels of revenues in future periods. To develop new business, our professionals maintain an active business dialogue with a large number of existing and potential clients. We expect to add new clients each year as our advisory professionals continue to expand their relationships, as we hire senior advisory professionals who bring their client relationships and as we receive introductions from our relationship network of senior executives, board members, attorneys and other third parties. We also lose clients each year as a result of the sale or merger of clients, changes in clients’ senior management, competition from other financial services firms and other reasons.

In many cases, revenue is not recognized until the successful completion of an underlying transaction. Complications that may terminate or delay a transaction include failure to agree upon final terms with the counterparty, failure to obtain regulatory consents, failure to obtain board or stockholder approvals, failure to secure financing, adverse market conditions or unexpected operating or financial problems related to either party to the transaction (or their customer base). While transactions typically close within a 12-month period post-announcement of such transaction, they can occasionally extend longer. Such delays often occur with larger transactions and can contribute to unpredictability in the timing of such revenues. In other circumstances, we often do not receive the same level of advisory fees that would have been received if the transaction had been completed, and in some cases we may receive no advisory fee despite the fact that we may have devoted considerable time and resources to the transaction. Other barriers to the completion of a restructuring transaction may specifically include a lack of anticipated bidders for the assets or securities of our client, the inability of our client to restructure its operations, the absence of court approval in a bankruptcy proceeding, or a failure to reach agreement with a client’s creditors. In these circumstances, our advisory fees are generally limited to monthly retainer fees (if any). In the case of bankruptcy engagements, fees are subject to approval by the applicable court. In most cases, even if a transaction is not successfully completed, we are reimbursed for certain out-of-pocket expenses incurred in connection with the engagement.

We do not present our revenue by the type of advice we provide because of the complexity of the transactions on which we may earn revenue and our holistic approach to client service. For example, a traditional M&A engagement may also require capital markets or liability management advice, or an engagement to raise private capital could also be followed by a business combination. These engagements may call for cross-functional expertise from a number of our professionals across M&A advisory and/or capital solutions advisory. We dedicate the resources and expertise needed on any given assignment regardless of product lines and focus on achieving the desired outcome for our clients. Such an approach does not lend itself to tracking the type of advisory service offered in each instance.

#### Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Revenues were $145.4 million for the three months ended September 30, 2022 as compared with $177.4 million for the same period in 2021, representing a decrease of 18%. The quarter-on-quarter decrease in revenue was driven by a reduction in mergers and acquisitions activity across most industry groups. This decrease was partially offset by increased activity in our capital solutions advisory business, which includes restructuring and liability management services and capital markets advisory, as compared to the prior year period. The decrease in revenues can be attributed to both fewer advisory transaction completions and a decrease in average fee size per client.

For the three months ended September 30, 2022 and 2021, we earned revenues from 78 and 90 advisory clients, respectively. The number of advisory clients who paid fees equal to or greater than $1.0 million decreased to 24 for the three months ended September 30, 2022 compared to 38 advisory clients for the three months ended September 30, 2021. The average fee size decreased to $1.8 million for the three months ended September 30, 2022 from $1.9 million for the three months ended September 30, 2021.

Revenues for the nine months ended September 30, 2022 were $448.4 million, a decrease of 26% from the nine months ended September 30, 2021 of $602.7 million. The period-over-period decline was driven by a reduction in mergers and acquisitions activity across most industry groups as compared to the prior period. The decrease in revenues can be attributed to both fewer advisory transaction completions and a decrease in average fee size per client.

For the nine months ended September 30, 2022 and 2021, we earned revenues from 151 and 188 advisory clients, respectively. The number of advisory clients who paid fees equal to or greater than $1.0 million decreased to 86 advisory clients for the nine months ended September 30, 2022 compared to 106 advisory clients for the nine months ended September 30, 2021. The average fee size decreased to $2.9 million for the nine months ended September 30, 2022 from $3.2 million for the nine months ended September 30, 2021.

### Operating Expenses

The following table sets forth information relating to our operating expenses:

*(Dollars in thousands)*

| Expenses | Three Months Ended September 30, 2022 | 2021 | 2022 vs. 2021 | Nine Months Ended September 30, 2022 | 2021 | 2022 vs. 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Compensation and benefits | $86,260 | $113,322 | (24)% | $264,092 | $387,196 | (32)% |
| % of Revenues | 59% | 64% |  | 59% | 64% |  |
| Equity-based compensation | $36,999 | $38,050 | (3)% | $114,316 | $51,272 | 123% |
| % of Revenues | 25% | 21% |  | 25% | 9% |  |
| Total compensation and benefits | $123,259 | $151,372 | (19)% | $378,408 | $438,468 | (14)% |
| % of Revenues | 85% | 85% |  | 84% | 73% |  |
| Non-compensation expenses | $30,938 | $36,382 | (15)% | $98,141 | $97,078 | 1% |
| % of Revenues | 21% | 21% |  | 22% | 16% |  |
| Total operating expenses | $154,197 | $187,754 | (18)% | $476,549 | $535,546 | (11)% |
| % of Revenues | 106% | 106% |  | 106% | 89% |  |

Our operating expenses are classified as (i) total compensation and benefits expenses including equity-based compensation and (ii) non-compensation expenses. Headcount is a primary driver of the level of our operating expenses. Compensation and benefits expenses account for the majority of our operating expenses. Compensation expenses also include expense associated with hiring which has been a significant focus of the Company in all of the historical periods described herein. Non-compensation expenses, which include the costs of professional fees, technology and infrastructure, rent and occupancy, travel and related expenses, general, administrative and other expenses and depreciation and amortization generally have been less significant in comparison with compensation and benefits expenses.

#### Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Operating expenses were $154.2 million for the three months ended September 30, 2022 and represented 106% of revenues, compared with $187.8 million for the three months ended September 30, 2021, which also represented 106% of revenues. The decrease in operating expenses was primarily driven by a decrease in total compensation and benefits which was $123.3 million for the three months ended September 30, 2022 compared to $151.4 million for the three months ended September 30, 2021 as well as lower non-compensation expenses which were $30.9 million for the three months ended September 30, 2022 compared to $36.4 million for the three months ended September 30, 2021.

Operating expenses were $476.5 million for the nine months ended September 30, 2022 and represented 106% of revenues, compared with $535.5 million for the nine months ended September 30, 2021, which represented 89% of revenues. The decrease in operating expenses was primarily driven by a decrease in total compensation and benefits which was $378.4 million for the nine months ended September 30, 2022 compared to $438.5 million for the nine months ended September 30, 2021, partially offset by an increase non-compensation expenses which were $98.1 million for the nine months ended September 30, 2022 compared to $97.1 million for the nine months ended September 30, 2021.

### Compensation and Benefits Expenses

Our compensation and benefits expenses are determined by management based on revenues earned, the competitiveness of the prevailing labor market and anticipated compensation requirements for our employees, the level of recruitment of new partners, the amount of compensation expense amortized for equity awards and other relevant factors. Such factors can fluctuate, including headcount and revenues earned, and as a result, our compensation expenses may fluctuate materially in any particular period. Accordingly, the amount of compensation expenses recognized in any particular period may not be consistent with prior periods or indicative of future periods.

Our compensation expenses consist of base salary, benefits, payroll taxes, annual incentive compensation payable as cash bonus awards, deferred compensation awards, profit sharing arrangements and amortization of equity-based compensation awards. Compensation expenses also include signing bonuses and compensation paid pursuant to guarantees for new hires. These amounts have historically been significant. Base salary and benefits are paid ratably throughout the year. Depending on the plan, deferred compensation and profit-sharing awards vest immediately, at future dates, or upon the occurrence of certain events. Cash bonuses, which are accrued each quarter, are discretionary and dependent upon many factors, including the performance of the Company, and are generally paid during the first quarter of each calendar year with respect to prior year performance.

Equity awards are measured at fair value on the grant date and recognized on a straight-line basis over the vesting period. The awards are subject to a service vesting condition, and in some cases a market-based performance vesting condition, and vest ratably on a graded vesting schedule of up to five years. The awards are recorded within equity as they are expensed. The vesting of Legacy Awards granted prior to the Business Combination and the various Professional Partners awards issued in connection with the Business Combination have no economic impact on, and do not dilute, PWP shareholders relative to Professional Partners. The awards do not change the economic allocations between Professional Partners and PWP shareholders, nor do they change the Professional Partners’ interest in PWP OpCo. As a result, all of the compensation expense and corresponding capital contribution associated with the Professional Partners Awards is allocated to non-controlling interests on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Financial Condition.

Beginning in the third quarter of 2021, the Company granted incentive compensation awards in accordance with the PWP Incentive Plan. The Company uses shares of PWP Class A common stock to satisfy vested awards under the plan. The vesting of these awards for employees are recorded as equity-based compensation expense and awards for non-employees are recorded as professional fees at PWP OpCo for U.S. GAAP accounting purposes. The accounting for this equity-based compensation expense, and potentially other factors as well, may cause the Company to experience operating losses in future periods.

We intend to compensate our personnel competitively in order to continue building our business and growing our Company. Certain awards were granted in conjunction with the Business Combination and directly related to this transaction milestone event. These awards were outside the Company's normal and recurring compensation processes. Total future amortization, which will be recognized over the next five years before accounting for forfeitures, is $60.3 million for the Transaction Pool RSUs and Transaction Pool PSUs and $56.7 million for the Long-Term Incentive Awards granted in conjunction with the Business Combination.

#### Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

For the three months ended September 30, 2022, total compensation and benefits expenses of $123.3 million represented 85% of revenues, compared with $151.4 million, which also represented 85% of revenues for the three months ended September 30, 2021. Included in total compensation-related expense was $37.0 million and $38.1 million of amortization of equity awards for the three months ended September 30, 2022 and 2021, respectively. The decrease in total compensation and benefit expenses was due to a smaller bonus accrual associated with lower revenues, partially offset by increased base salaries and benefits due to increased headcount.

For the nine months ended September 30, 2022, total compensation and benefits expenses of $378.4 million represented 84% of revenues, compared with $438.5 million, which represented 73% of revenues for the nine months ended September 30, 2021. Included in total compensation-related expense was $114.3 million and $51.3 million of amortization of equity awards for the nine months ended September 30, 2022 and 2021, respectively. The decrease in total compensation and benefit expenses was due to a smaller bonus accrual associated with lower revenues partially offset by both an increase in equity-based compensation related to awards granted in connection with or subsequent to the Business Combination and increased base salaries and benefits due to increased headcount.

### Non-Compensation Expenses

Our non-compensation expenses include the costs of professional fees, technology and infrastructure, rent and occupancy, travel and related expenses, depreciation and amortization and general, administrative and other expenses including certain co-advisory fees and expenses reimbursed by our clients. Revenues related to co-advisory fees and expenses reimbursed by clients are presented within revenues on our Condensed Consolidated Statements of Operations.

Historically, our non-compensation expenses associated with business development have increased as we have increased our headcount. These costs include costs such as travel and related expenses which have increased due to increasing headcount, increasing prices charged by travel vendors and an increased volume of travel as COVID-19 pandemic-related travel restrictions have eased.

While there are some temporary factors causing rent and occupancy as well as professional fees to be lower period over period, and while we expect to continue to reduce certain costs associated with being a newly public company, over the long term we expect our non-compensation expenses will trend upward with growth in headcount and inflation. However, we also expect to realize economies of scale such that over the long term, we expect that the pace of growth in non-compensation expense will be slower than the pace of revenue growth..

#### Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

For the three months ended September 30, 2022, non-compensation expenses of $30.9 million represented 21% of revenues, compared with $36.4 million, which also represented 21% of revenues, for the three months ended September 30, 2021. The decrease in non-compensation expense was primarily driven by a $2.8 million decrease in professional fees related to reduced consulting and legal spending which was higher in the prior year in connection with the Business Combination. General administrative and other expenses were $2.5 million lower, largely due to bad debt reserves recognized in the third quarter of the prior year as well as lower D&O insurance costs this year as compared to the costs which were incurred last year as a newly-public company. Additionally, depreciation and amortization were temporarily lower by $1.0 million as certain leasehold improvements became fully depreciated due to our New York and London headquarters each reaching the end of their initial lease term. New leasehold improvement activities have not yet been completed and therefore have not begun depreciating. These decreases were partially offset by a $1.3 million increase in travel and related expenses due to the return to more normalized travel levels as well as increased headcount and the higher cost of travel.

For the nine months ended September 30, 2022, non-compensation expenses of $98.1 million represented 22% of revenues, compared with $97.1 million, which represented 16% of revenues, for the nine months ended September 30, 2021. The increase in non-compensation expenses included a $5.3 million increase in travel related expenses due to the return to more normalized travel levels, increased headcount and the higher cost of travel, as well as a $3.4 million increase in general administrative and other expenses resulting from three full quarters of public company costs such as D&O insurance incurred in the current year and the recognition of a bad debt reserve in the second quarter of the current year. These increases were partially offset by decreases in professional fees of $3.1 million, depreciation and amortization of $3.0 million and rent and occupancy of $2.6 million. The decrease in professional fees included a $5.8 million decrease in legal and consulting fees from the previous year’s elevated levels which included costs associated with the Business Combination, while recruiting fees increased year over year by $2.4 million with increased hiring activities. The reduction in rent and occupancy as well as depreciation and amortization expense, are temporary decreases as certain leasehold improvements became fully depreciated in the current year with our New York and London headquarters each reaching the end of their initial lease term. New leasehold improvement activities have not yet been completed and therefore have not begun depreciating. Additionally, some lease amendment and extension negotiations resulted in favorable leasehold incentives.

### Non-Operating Income (Expenses)

Non-operating income (expenses) includes the impact of income and expense items that we consider to be non-operational in nature, including related party income, loss on debt extinguishment, interest expense, and other income (expense), which includes gains (losses) on foreign exchange rate fluctuations. Also included in non-operating income (expenses) was the change in fair value of warrant liabilities prior to the Warrant Exchange Offer, which concluded on August 23, 2022. The Warrant Exchange Offer resulted in the exchange of all outstanding warrants for shares of the Company’s Class A common stock with a minimal cash settlement in lieu of partial shares. As a result, the warrant liabilities were removed from the Condensed Consolidated Statements of Financial Condition and the issuance of shares of Class A common stock was reflected within equity. There will be no future change in the fair value of warrant liabilities. Refer to Note 12—Warrants in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for additional information.

#### Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

For the three months ended September 30, 2022, non-operating income (expenses) was $0.5 million of income compared to $1.0 million of income for the three months ended September 30, 2021. The change in non-operating income (expenses) included a $3.3 million increase in the loss on change in fair value of warrant liabilities prior to the Warrant Exchange Offer. Additionally, foreign exchange rate fluctuations recorded in Other income (expense) resulted in a $3.4 million increased gain, primarily related to U.S. dollar-denominated cash and intercompany receivables held by our foreign subsidiaries as the U.S. dollar strengthened.

For the nine months ended September 30, 2022, non-operating income (expenses) was $29.8 million of income compared to $42.5 million of expense for the nine months ended September 30, 2021. For the nine months ended September 30, 2021, non-operating income (expenses) included a $39.4 million loss on debt extinguishment related to the redemption of the $150.0 million aggregate principal of the Convertible Notes concurrent with the Business Combination. The loss was composed of the $10.9 million premium and $28.5 million of unamortized debt discount and issuance costs. The change in non-operating income (expenses) also included a $17.9 million increased gain from the change in fair value of warrant liabilities as the warrant price fell year over year prior to the Warrant Exchange Offer, as well as a decrease of $7.3 million of interest expense related to the repayment of all indebtedness in connection with the Business Combination. Additionally, foreign exchange rate fluctuations recorded in Other income (expense) resulted in a $10.4 million increased gain, primarily related to U.S. dollar-denominated cash and intercompany receivables held by our foreign subsidiaries as the U.S. dollar strengthened.

### Income Tax Benefit (Expense)

Prior to the Business Combination, the Company operated as a partnership, and therefore, was generally not subject to U.S. federal and state corporate income taxes. Subsequent to the Business Combination, PWP is a corporation and is subject to U.S. federal and state corporate income taxes on its proportionate share of taxable income generated by the operating partnership, PWP OpCo, as well as any standalone income (or loss) generated at the PWP entity level.

The Company’s income tax provision and the corresponding effective tax rate are based on U.S. GAAP income adjusted for permanent book-tax differences at the currently enacted statutory tax rates in the various jurisdictions in which the Company operates. For the three and nine months ending September 30, 2022, the Company determined that the year-to-date actual effective tax rate represents the Company’s best estimate of the annual effective tax rate. This is due to the Company’s significant permanent differences as compared to estimated pre-tax income.

The Company’s effective tax rate is dependent on many factors, including the amount of income subject to tax. Consequently, the effective tax rate can vary from period to period. The Company’s overall effective tax rate in each of the periods described above varies from the U.S. federal statutory rate primarily because (i) the Company was not subject to U.S. federal corporate income taxes prior to the Business Combination, (ii) a portion of equity-based compensation expense is non-deductible, both prior to the Business Combination and for the subsequent period and (iii) 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.

### Cash Flows

Our operating cash flows are primarily influenced by the amount and timing of receipt of advisory fees, which generally have net terms of 30 days, and the payment of operating expenses, including payments of incentive compensation to our employees. We pay a significant portion of incentive compensation during the first quarter of each calendar year with respect to the prior year’s results. Our investing and financing cash flows were primarily influenced by the payment of dividends, distributions to partners, purchase of treasury shares and withholding payments for vesting of PWP Incentive Plan Awards in the nine months ended September 30, 2022.

A summary of our operating, investing and financing cash flows is as follows:

*(Dollars in thousands)*

| Cash Provided By (Used In) Operating Activities | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net income (loss) | $(9,141) | $22,045 |
| Non-cash charges and other operating activity adjustments | 110,496 | 117,992 |
| Other operating activities | (200,047) | (13,996) |
| Total operating activities | (98,692) | 126,041 |
| **Investing Activities** | (147,406) | (1,662) |
| **Financing Activities** | (102,641) | (34,670) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (10,523) | (2,943) |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (359,262) | 86,766 |
| Cash, cash equivalents and restricted cash, beginning of period | 504,775 | 330,908 |
| Cash, cash equivalents and restricted cash, end of period | $145,513 | $417,674 |

53

#### Nine Months Ended September 30, 2022

Cash and restricted cash were $145.5 million as of September 30, 2022, a decrease of $359.3 million from $504.8 million as of December 31, 2021. The Company reported a net loss of $9.1 million for the nine months ended September 30, 2022 which includes $110.5 million of non-cash charges and other adjustments, largely comprised of equity-based awards vesting expense, depreciation and amortization, the change in fair value of warrant liabilities, foreign currency revaluation and non-cash operating lease expense. This operating cash inflow was offset by working capital needs predominantly due to the payment of annual bonus compensation in the first quarter of the year as well as payments for lease liabilities, resulting in a net operating outflow of cash of $98.7 million during the nine months ended September 30, 2022. Investing activities resulted in a net outflow of $147.4 million largely attributable to investments of cash in treasury securities as well as the purchase of fixed assets. Financing activities resulted in a net outflow of $102.6 million primarily related to the repurchase of shares pursuant to the stock repurchase program, distributions to partners, withholding payments for vesting of PWP Incentive Plan Awards and the payment of dividends.

#### Nine Months Ended September 30, 2021

Cash and restricted cash were $417.7 million as of September 30, 2021, an increase of $86.8 million from $330.9 million as of December 31, 2020. Operating activities resulted in a net inflow of $126.0 million largely attributable to net income generated during the nine months ended September 30, 2021, partially offset by changes in working capital. Net income included $78.6 million of non-cash charges as well as a $39.4 million loss on debt extinguishment related to the redemption of the Convertible Notes concurrent with the Business Combination. Investing activities resulted in a net outflow of $1.7 million attributable to the Company’s deconsolidation in PFAC Holdings and the purchases of fixed assets. Financing activities resulted in a net outflow of $34.7 million primarily related to the transactions associated with the Business Combination, the payoff of all outstanding debt, tax distributions to limited partners of PWP OpCo, the repurchase of founder shares held as treasury shares, withholding payments for vesting of PWP Incentive Plan Awards and the payment of dividends.

### Liquidity and Capital Resources

#### General

We regularly monitor our liquidity position, including cash and cash equivalents, working capital assets and liabilities, commitments and other liquidity requirements. Our primary sources of liquidity are our cash balances, our investments in short-term marketable debt securities, the net cash generated from operations and the available borrowing capacity under our Revolving Credit Facility.

Our current assets are primarily composed of cash, investments in short-term marketable debt securities, receivables related to fees earned from providing advisory services, certain prepaid expenses and certain amounts due from related parties. Our current liabilities are primarily composed of accrued and deferred employee compensation, accounts payable and other accrued expenses. We generally pay a significant portion of our annual incentive compensation, in the form of cash bonuses, during the first quarter of each calendar year with respect to the prior year’s results. Therefore, levels of cash generally decline during the first quarter of each year after our annual incentive compensation has been paid to our employees. Cash then typically builds over the remainder of the year. The Company makes quarterly partner tax distributions as required under 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”). These distributions totaled $10.1 million and $28.7 million during the three and nine months ended September 30, 2022, respectively, and $7.0 million and $54.4 million during the three and nine months ended September 30, 2021, respectively. Additionally, we intend to pay dividends throughout each year and may continue our share repurchases from time to time. During the three and nine months ended September 30, 2022, the Company paid $3.3 million and $9.9 million, respectively, in cash dividends. The Company has the option to net settle shares upon the vesting of PWP Incentive Plan Awards in order to remit required employee withholding taxes using cash on hand. During the three and nine months ended September 30, 2022, the Company paid $2.7 million and $9.1 million, respectively, in withholding payments for the net settlement of 373,939 and 986,101 shares on vested PWP Incentive Plan Awards. Additionally, during the three and nine months ended September 30, 2022, the Company purchased 1,289,459 and 7,729,666 shares of Class A common stock at a cost of $8.5 million and $53.8 million, respectively, pursuant to the stock repurchase program described below.

We evaluate our cash needs on a regular basis in light of current market and business conditions and regulatory requirements. Cash and cash equivalents include short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. The Company had no cash equivalents as of September 30, 2022 and December 31, 2021. As of September 30, 2022 and December 31, 2021, the Company had cash balances of $142.9 million and $502.8 million, respectively, maintained in U.S. and non-U.S. bank accounts, of which most bank account balances exceeded the U.S. Federal Deposit Insurance Corporation (“FDIC”) and U.K. Financial Services Compensation Scheme (“FSCS”) coverage limits. Additionally, as of September 30, 2022, the Company held investments in short-term marketable debt securities, consisting entirely of U.S. Treasury securities, of $138.9 million.

Our liquidity is highly dependent upon cash receipts from clients, which generally require the successful completion of transactions. Accounts receivable generally have net terms of 30 days. Accounts receivable were $46.7 million, net of a $2.6 million allowance for credit losses balance as of September 30, 2022. Accounts receivable were $46.9 million, net of a $1.9 million allowance for credit losses balance as of December 31, 2021.

#### Line of credit

The Company has a Revolving Credit Facility with Cadence Bank with an available line of credit of $50.0 million. Prior to the Business Combination, the Revolving Credit Facility bore interest at a rate per annum equal to either the variable Eurodollar Rate (or London Interbank Offered Rate, LIBOR) or a variable Base Rate (defined as the higher of the (i) Federal Funds Rate plus ½ of 1.0%; (ii) Cadence Bank prime rate; or (iii) Eurodollar Rate plus 1.0%) plus a rate which varies by the Company’s leverage ratio, as noted in the table below.

*Applicable Rate*

| Combined Leverage Ratio | Eurodollar Rate | Base Rate |
| --- | ---: | ---: |
| \< 0.50 : 1.00 | 2.50% | 1.50% |
| ≥ 0.50 : 1.00, but \< 1.50 : 1.00 | 2.75% | 1.75% |
| ≥ 1.50 : 1.00 | 3.00% | 2.00% |

Upon consummation of the Business Combination, the Company repaid all of the outstanding borrowings under the Credit Agreement, which included $27.7 million principal amount plus accrued and unpaid interest. As of the Closing Date, the Credit Agreement was amended such that (i) the maturity was extended from April 1, 2022 to July 1, 2025, (ii) interest accrues at LIBOR plus a fixed rate of 2.00% per annum (with a 0.25% LIBOR floor) with an alternate base rate option equal to Cadence Bank’s prime rate minus 1.00% (with a 3.25% floor), (iii) up to $15.0 million of the Revolving Credit Facility may be used for the issuance of letters of credit, (iv) up to $20.0 million of incremental revolving commitments above the $50.0 million commitment amount may be incurred under the Credit Agreement, and (v) certain financial covenants were amended. The Credit Agreement provides that the benchmark of LIBOR will be replaced with a SOFR-based rate on or prior to the date that the LIBOR benchmark is unavailable. As of September 30, 2022, the Company had no outstanding balance related to the Revolving Credit Facility and no incremental revolving commitments were incurred. For further information on the Revolving Credit Facility, refer to Note 10—Debt in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q.

Based on current market conditions, we believe that our cash on hand, the investments in short-term marketable debt securities, the net cash generated from operations and the available borrowing capacity under our Revolving Credit Facility will be sufficient to meet our operating needs and commitments for the next twelve months; however, if these sources of liquidity are not sufficient, we may seek additional debt or equity financing.

### Share Repurchase Program

On February 16, 2022, the Company’s board of directors approved a stock repurchase program under which the Company is authorized to repurchase up to $100.0 million of the Company’s Class A common stock with no requirement to purchase any minimum number of shares. Shares may be repurchased under the new repurchase program through open market purchases, privately negotiated transactions, block trades, accelerated or other structured share repurchase programs, or other means. The manner, timing, pricing and amount of any transactions will be subject to the Company’s discretion. During the three and nine months ended September 30, 2022, the Company purchased 1,289,459 and 7,729,666 shares, at a cost of $8.5 million and $53.8 million, respectively, pursuant to this stock repurchase program.

### Other Commitments

#### Regulatory Capital

We actively monitor our regulatory capital base. Our principal subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure general financial soundness and liquidity. This requires, among other things, that we comply with certain minimum capital requirements, record-keeping, reporting procedures, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to and from affiliates. Refer to Note 7—Regulatory Requirements in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information. These regulations differ in the United States, United Kingdom, Canada, France and other countries in which we operate a registered broker-dealer or regionally similar construct. The license or regulatory framework under which we operate in each such country is meant to comply with applicable laws and regulations to conduct an advisory business. We believe that we provide each of our subsidiaries with sufficient capital and liquidity, consistent with their business and regulatory requirements to effectively operate in each jurisdiction.

#### Exchange Rights

In accordance with the PWP OpCo LPA, 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.

The PWP OpCo LPA contains restrictions on the ability to exchange PWP OpCo Units for shares of Class A common stock or cash from an offering of shares of Class A common stock, for the following periods: (i) PWP OpCo Units held by Professional Partners are subject to a restriction for time periods that are fully back-to-back with the lock-up periods contemplated in the amended and restated limited partnership agreement of Professional Partners (generally speaking, such lock-up periods (a) for former working partners, was 180 days after Closing and expired on December 24, 2021; and (b) for working partners is between three to five years after the Closing), (ii) PWP OpCo Units held by ILPs existing at the time of the Business Combination were subject to such restrictions for 180 days after the Closing, which expired on December 24, 2021, and (iii) any other outstanding PWP OpCo Units not previously covered by clauses (i) and (ii) above are subject to such restriction for a period of twelve months following the date on which such PWP OpCo Units were acquired. PWP GP may waive, and in certain cases has waived, the foregoing restrictions for any holder with respect to all or a portion of such holder’s units, with no obligation to do so for any other holder.

#### Sponsor Share Surrender and Share Restriction Agreement

Concurrent with the Business Combination Agreement, FTIV, PWP OpCo and certain other parties entered into the Sponsor Share Surrender and Share Restriction Agreement with the Sponsor, which was amended on May 4, 2021. Pursuant to this agreement, if, prior to the fourth anniversary of the Closing, the closing share price is greater than $12.00 per share or $15.00 per share for any 20 trading days out of 30 consecutive trading days (each a “Trigger Date”), then, during the 15 day period following such Trigger Date, the Company shall have the right to purchase from the Sponsor or its permitted transferees, as applicable, up to an aggregate of 1,000,000 founder shares per Trigger Date for a purchase price of $12.00 per share or $15.00 per share, respectively, by providing written notice of such repurchase election to the Sponsor or its permitted transfers, as applicable.

On August 9, 2021, the Company repurchased 1,000,000 founder shares from the Sponsor at $12.00 per share for a total purchase price of $12.0 million.

#### Guarantees

PWP OpCo has also unconditionally guaranteed, through a wholly-owned subsidiary, certain loans to limited partners of Professional Partners (“Limited Partners”) with First Republic Bank (the “Program Lender”), whereby PWP OpCo will pay the Program Lender upon the occurrence of a default event. Refer to Note 17—Related Party Transactions and Note 18—Commitments and Contingencies in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information.

#### Tax Receivable Agreement

In connection with the Business Combination, the Company entered into a tax receivable agreement with Professional Partners and ILPs that provides for payment of 85% of the amount of cash savings, if any, in U.S. federal, state and local and foreign income taxes that the Company is deemed to realize as a result of (a) each exchange of interests in PWP OpCo for cash or stock of the Company and certain other transactions and (b) payments made under the tax receivable agreement.

### Contractual Obligations

We have various non-cancelable operating leases in connection with the leases of our office spaces and equipment. The related lease agreements, which range from non-cancelable to month-to-month terms, generally provide for fixed monthly rentals and can also include renewal options. See Note 5—Leases in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information as well as the expected timing of payments. Our London and New York office leases expire in December 2022 and September 2023, respectively. The Company signed new lease agreements in February 2022 for the London office and in April 2022 for the New York office spaces, which expand our square footage meaningfully in both locations in order to accommodate our anticipated growth. This expansion increased our contractual obligations upon lease commencement and will require capital contributions towards the design and construction of these spaces in excess of $50 million, mitigated in part by free rent periods at both locations.

In addition, PWP OpCo sponsors certain deferred compensation arrangements whereby portions of compensation related to employees (including working partners) providing services to the Company are deferred and paid in later periods. The deferred compensation amounts are charged to expenses over the period that each employee (including working partners) is required to provide services in order to vest in the payment. Refer to Note 14—Other Compensation and Benefits in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information.

### Market Risk and Credit Risk

Our business is not capital-intensive and we do not invest in derivative instruments. We are not subject to significant market risk (including interest rate risk and commodity price risk) or significant credit risk.

### Risks Related to Cash and Cash Equivalents

Our cash and cash equivalents include any short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. Cash is maintained in U.S. and non-U.S. bank accounts. Most U.S. and U.K. account balances exceed the FDIC and FSCS coverage limits. We believe our cash and cash equivalents are not subject to any material interest rate risk, equity price risk, credit risk or other market risk.

### Credit Risk

We regularly review our accounts receivable and allowance for credit losses by considering factors such as historical experience, credit quality, age of the accounts receivable, and the current economic conditions that may affect a client’s ability to pay such amounts owed to the Company. We maintain an allowance for credit losses that, in our opinion, provides for an adequate reserve to cover current expected credit losses. Refer to Note 2—Summary of Significant Accounting Policies in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q for further information.

With respect to investments, we manage our credit risk exposure by maintaining investment grade credit quality. As of September 30, 2022, the Company held investments of $138.9 million in U.S. Treasury securities with maturities of less than 12 months.

### Exchange Rate Risk

The Company is exposed to exchange rate risk as a result of having foreign subsidiaries with non-U.S. dollar functional currencies as well as from entering into transactions and holding monetary assets and liabilities that are not denominated in the functional currency of its operating subsidiaries. Specifically, the reported amounts in our consolidated financial statements may be affected by movements in the rate of exchange between the pound sterling, Euro, and Canadian dollar and our reporting currency, the U.S. dollar. For the nine months ended September 30, 2022 and 2021, the net impact of non functional currency related transaction gains and losses recorded in Other income (expense) on our Condensed Consolidated Statements of Operations was a $10.8 million gain and $0.4 million gain, respectively, primarily related to U.S. dollar-denominated cash and intercompany receivables held by our foreign subsidiaries as the U.S. dollar strengthened. For the nine months ended September 30, 2022 and 2021, the net impact of the fluctuation of foreign currencies recorded in Foreign currency translation gain (loss) within our Condensed Consolidated Statements of Comprehensive Income (Loss) was a $13.4 million loss and $1.5 million loss, respectively. We have not entered into any transactions to hedge our exposure to these foreign currency fluctuations using derivative instruments or other methods but may do so if we deem appropriate in the future.

As of September 30, 2022, we held balances of $30.9 million of non-U.S. dollar denominated currencies, composed of pound sterling, the Euro, and Canadian dollars.

### Critical Accounting Estimates

This Quarterly Report on Form 10-Q should be read together with the section entitled “*Management’s Discussion and Analysis of Financial Condition and Results of Operations”* contained in Amendment No. 1 to the Company’s Annual Report on Form 10-K/A filed on July 7, 2022 regarding these critical accounting estimates. For changes to our critical accounting estimates during the nine months ended September 30, 2022, refer to Note 2—Summary of Significant Accounting Policies in the notes to condensed consolidated financial statements included elsewhere in this Form 10-Q.

## Market risk

As filed, 202 characters.

Quantitative and qualitative disclosures about market risk are set forth above in “*Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk and Credit Risk”.*

## Controls and procedures

As filed, 2,126 characters.

This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) included in this Quarterly Report on Form 10-Q as Exhibits 31.1 and 31.2.

### Management’s Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principle financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the nine months ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 272 characters.

There have been no material changes or updates to our risk factors that were previously disclosed in Part I “Item 1A. Risk Factors” in Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2021 as filed with the SEC on July 7, 2022.

Filed Nov 7, 2022.
Source: SEC EDGAR, the filing index for accession 0001777835-22-000094. Last ingested by Listed: Nov 12, 2026, 19:25 ET. No prices; not investment advice.