Good morning, and welcome to the Perella Weinberg Partners' full year and fourth quarter 2021 earnings conference call. During today's discussion, all callers will be placed in listen-only mode. Following management's prepared remarks, the conference call will be open for questions from the research community. This conference call is being recorded. At this time, I'd like to turn the conference over to Taylor Reinhardt, Head of Investor Relations. Please go ahead.
Thank you, operator, and welcome to our full year and fourth quarter 2021 earnings call. Joining me today are Peter Weinberg, Chief Executive Officer, and Gary Barancik, Chief Financial Officer. A replay of this call will be available through the Investors page of the company's website approximately two hours following the conclusion of this live broadcast through March 3, 2022. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, February 17, 2022, and have not been updated subsequent to the initial earnings call. Before we begin, I'd like to note that this call may contain forward-looking statements, including PWP's expectations of future financial and business performance and conditions and industry outlook.
Forward-looking statements are inherently subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guarantees of future events or performance. Please refer to PWP's most recent SEC filings for a discussion of certain of these risks and uncertainties. The forward-looking statements are based on our current beliefs and expectations, and the firm undertakes no obligation to update any forward-looking statement. During the call, there will also be a discussion of some metrics, which are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. PWP has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8-K, which can be found on the company's website. I will now turn the call over to Peter Weinberg to discuss our results.
Thanks very much, Taylor, and good morning to everybody. Thank you for joining us for our full year and fourth quarter 2021 earnings call. Gary and I are gonna provide prepared remarks for around 15 minutes, and then we're gonna open it up for Q&A. This morning, we reported record full year results with revenues of $802 million and adjusted net income of $161 million, a 54% increase and more than a fourfold increase, respectively, over the prior year period. 2021 was a transformational year for PWP, with our public listing in June representing an important milestone in the ongoing growth and development of our global platform.
Our commitment to both providing trusted and high-quality advice to clients and delivering long-term value to shareholders is driving our continued execution and the focused investment in our future. The results achieved in 2021 underscore the strength of our platform and showcase the benefits of past investment, which enabled this level of performance. In 2021, we experienced a broad-based rise in M&A activity levels across our industries and geographies. This is evidenced by an increase in the number of completed transactions as well as an increase in fee discipline across those transactions. We experienced robust activity in the healthcare, industrials, consumer, and financial sectors. The activity was balanced across large cap, mid-market, and emerging growth corporates with a strong showing amongst financial sponsors across all sectors of our business.
While the DNA of PWP was historically skewed toward corporate clients, the financial sponsor community has become an increasingly important market participant and today represents a significant client base for the firm. There remains an enormous amount of dry powder waiting to be deployed, and the line between strategic and sponsor is blurring, creating opportunities we've not seen before. We continue to see strong activity from this client base in 2021 and believe that will continue even in more volatile markets. Turning to our capital priorities, this morning, concurrent with our earnings release, we announced $100 million Class A common stock repurchase authorization. This program will allow us to repurchase stock in the open market from time to time.
While Gary will provide more details on the program, I wanna remind you of our strong employee shareholder alignment with our public investors and affirm our commitment to returning all excess capital over time. On the investment front, we continue to add talent at all levels to support our strategic growth and the build-out of our franchises. 2021 represented a year of record recruiting for the firm with total partner adds near all-time highs. We were able to attract exceptional professionals who fit both our strategic needs and our culture. Our recruiting pipeline remains strong heading into 2022, and we're encouraged by conversations we're having with external candidates. As of December 31, we had 60 advisory partners. This figure reflects 10 partners who were added to the platform in 2021, including lateral hires and internal promotes. 2022 has already proved dynamic for our partner base.
As of today, our advisory partner count stands at 62, which reflects the elevation of three advisory managing directors to partners, a recent addition from outside the firm, as well as two retirements. We are encouraged by our strong pipeline of internal talent with approximately 40% of our current partner base representing internal promotes. We remain committed to growing and promoting our talent throughout the firm. We're focused on further strengthening our partner base with individuals who will help expand our coverage and expertise from an industry, advisory, product, and geographic standpoint, both external to the firm and internally. Our new partners expand our coverage efforts consistent with these objectives in tech and fintech broadly, energy, financials, healthcare, and industrials, both in the U.S. and Europe.
As a component of our previously articulated growth strategy, we continue to lean into opportunities where we can add expertise in businesses that complement traditional M&A. Through external hiring in 2021, we invested behind our private capital markets advisory capability and expect to further build out this strategy over time. The expansion of this offering will not only further align us with our current clients and their financing needs, but will also strengthen our relationships with the venture and growth ecosystem and invite new growth companies to our platform. As we look toward 2022, I'd like to share some observations on the environment and PWP's positioning. At a high level, we see many of the positive dynamics from 2021 carrying over into 2022. There exists a vast amount of liquidity in the market and a widespread availability of credit.
Leadership of our corporate clients continue to express confidence with CEOs having found stability following the initial 2020 pandemic-related shock and leveraging strong balance sheets to drive growth and transformation. The level of advisory dialogue remains high as leaders react to the changing landscape and try to improve their positioning. The European market is positioned to experience a continuation of M&A activity spurred by economic growth. However, there are macro risks spurring market volatility in the near term, which we feel are likely to impact M&A momentum later this year, including rising interest rates, a concerning inflationary environment, shifting U.S. antitrust policy, tax law changes, supply chain disruptions, and potential geopolitical instability. Additionally, some previous tailwinds, notably government stimulus and pent-up activity from the 2020 lows, are beginning to abate.
Based on these factors, we do not believe that 2022's global M&A levels will meet the levels we saw in 2021. Turning to restructuring and liability management, market activity continues, but it is considerably down from the elevated levels experienced in 2020. We expect that the rising rate environment will lead to more mandates longer term, but the timing and magnitude of such activity is hard to predict. In the near term, the rate environment is likely to remain more conducive to M&A activity than restructuring. As we have noted in the past, our model is client-centric, not product-centric, and we can adjust our resources according to client needs. Now to place PWP within that market backdrop, our 2021 results reflected exceptionally strong PWP-specific performance in a record M&A market.
We generated over $14 million in revenues per average advisory partner, essentially matching our previous peak productivity in 2018 on an adjusted basis. We're starting 2022 with a larger partner base than 2021, a firm that is stronger in nearly every respect than a year ago, and a market environment that remains very active. That said, 2021 was exceptional in both the level of M&A activity as well as PWP's partner productivity. While our backlog heading into 2022 is strong by historical levels, it's slightly below where it was heading into 2021. Additionally, we have continued to invest heavily in partner growth. 19 of today's partners, representing over 30% of our current base, were promoted or hired since January 2020 and are still ramping up their productivity on our platform.
With all these factors considered, we are expecting productivity per partner to move toward historical averages in 2022. We have conviction in our intermediate growth prospects but are aware that our business model does not always translate to lockstep annual growth. Beginning in 2016, we worked to double our revenues in five years. While we achieved this goal, it was not completed on a straight-line basis, and we expect that dynamic to continue as we look toward the billion-dollar revenue milestone and beyond. Gary, on that note, I will turn it over to you.
Thank you, Peter. As Peter mentioned, total revenues for 2021 were $802 million, up 54% over the prior year period. This included revenue in the fourth quarter of $199 million, up 5% year-over-year. The period-over-period growth for both the full year and the fourth quarter reflects high levels of M&A advisory activity across several service lines, sectors, and geographies. The increase in revenues for the full year period can be attributed to both an increase in the number of advisory transaction completions and the average fee size per client, particularly in mergers and acquisitions advice as compared to the same period in 2020. The increase in revenues for the fourth quarter of 2021 was primarily driven by an increase in average fee size per client as compared to the prior year period.
The M&A advisory-driven increase in revenues for both the full year and fourth quarter was partially offset by a reduction in restructuring and liability management fees as compared to the prior year periods. The year-over-year decrease was most noticeable for the fourth quarter period, as the fourth quarter of 2020 represented peak levels of restructuring and liability management activity for the firm. Our fourth quarter results did not include any transaction fee revenue from closings in the first quarter of 2022, in line with the prior year period. This compares to a recognized revenue amount of $29 million in the third quarter of 2021 from transactions that closed early in the fourth quarter, in line with relevant accounting principles. Now my following comments will focus on non-GAAP metrics, which we believe are relevant in assessing the financial performance of the business.
Our GAAP measures and a reconciliation of GAAP to adjusted results can be found in our earnings press release, which is on our website. On the expense side, our adjusted compensation margin of 63% for 2021 is within the range of our previously communicated medium-term guidance of mid-60s expense margin and is below the 64% expense accrual during the first nine months of the year. As a result of setting our full year compensation margin at 63% together with our third quarter year-to-date accruals at 64%, our implied fourth quarter ratio was 60%. Our adjusted non-comp expense was $123 million for the full year 2021, up 9% year-over-year, and $35 million for the fourth quarter, up 25% from the same period last year.
As a percentage of revenues, our adjusted non-comp expense was 15% for the full year and 18% for the quarter. The overall dollar increase in full year adjusted non-comp expense was primarily driven by an increase in professional fees related to consulting and recruiting and increased public company costs, including D&O insurance. The fourth quarter expense also reflected a modest increase in travel and related expenses as pandemic-related travel restrictions eased. For 2022, we'd expect our adjusted non-compensation expense, excluding travel, meals, and entertainment, to be modestly above the run rate in the second half of 2021, mostly due to anticipated double rent relating to both our New York and London headquarters.
As I noted on our last earnings call, the leases for our London and New York headquarters expire in December 2022 and September 2023 respectively, and given our significant projected growth, we anticipate expanding our square footage meaningfully in both locations. In addition, our adjusted non-compensation expense for 2022 is expected to include some impact from headcount growth and inflation as well as investment in our people and IT systems, offset by some moderation of certain professional services expenses we incurred last year as a newly public company and do not expect to continue at the same pace this year. We saw T&E pick up a bit in the fourth quarter to just under $1 million per month, still below our 2019 average run rate of about $1.6 million per month.
Adjusted net income totaled $161 million for 2021 and $38 million for the fourth quarter. Our adjusted if converted net income for the fourth quarter was $31 million and presents our results as if all partnership units had converted to shares of common stock. Adjusted, diluted, if converted, net income per Class A share was $0.33 for the three months ended December 31, 2021. Now turning to the balance sheet, as of December 31, 2021, we had $503 million of cash and cash equivalents, no debt, and an undrawn revolving credit facility. A significant portion of our year-end cash balance is earmarked for bonus compensation that is typically paid out in the first quarter of the following fiscal year.
As of December 31, 2021, our accrued compensation liability stood at $312 million. Our business is quite cash generative, and over time, we are committed to returning all excess capital to shareholders. We intend to retain sufficient cash to fund specific growth initiatives, such as our New York and London headquarter build-out, to support investment and growth through periods of volatility and for working capital purposes, including accrued compensation obligations. As a result of the dynamic business environment, our minimum cash amount will likely be somewhat dynamic, and we expect to review our excess cash position at least quarterly. Consistent with this commitment, our board has authorized a $100 million Class A common stock repurchase program effective immediately. The authorization has no expiration date.
Under the repurchase program, shares of the company's Class A common stock may be repurchased from time to time in open market transactions. The timing and the actual number of shares repurchased depend on a variety of factors, including legal requirements and regulatory restrictions as well as market conditions. Over the long term, we anticipate favoring share repurchases to moderate dilution over other capital return strategies. This includes our current intention to reduce dilution by net settlement of vesting RSUs to remit required employee withholding taxes. However, we may also consider special dividends or the repurchase of our outstanding warrants based on market conditions. Since the consummation of our business combination on June 24, 2021, we've allocated $35 million in capital towards dividends and reducing our share count.
PWP Holdings LP made $13 million in pro rata distributions to its limited partners, including PWP, in order to allow PWP to pay the quarterly dividends on its Class A common stock. In addition, we repurchased $12 million in shares from the sponsor of FinTech IV, and we redeemed $10 million of common share equivalents through net settlement to satisfy the tax withholding obligations related to vested RSUs. The board has declared a Class A common stock dividend of $0.07 per share payable on March 17, 2022, to holders of record as of March 3, 2022. Before we open the line for questions, let me turn the call back over to Peter.
Thanks very much, Gary. To wrap up, we had an exceptional 2021, and as I mentioned last quarter, we are a growth company confident in our prospects going forward. As we continue to invest in our client-centric model, our platform will become stronger and even more balanced, allowing us to execute more efficiently and profitably. Irrespective of the market environment, we remain committed to serve and support our clients with trusted strategic and financial advice across our platform with our integrated model, allowing us to pivot and allocate our resources as needed. With that, we'll now turn it back to the operator to open the line for questions. Thank you.
Ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touch-tone telephone. If your question has been answered or you wish to move yourself from the queue, please press the pound key. Our first question comes from Devin Ryan with JMP Securities.
Great. Good morning, Peter and Gary. How are you?
Good morning, Devin.
I wanna start on the capitalization and the buyback. You know, I think, you know, clearly good to see the $100 million buyback authorization. And if we can, just to think about, you know, how you came up with that level. It's a, you know, large number relative to the outstanding Class A shares today. Just more broadly, I heard your comments, Gary, around kind of thinking about excess capital. But as you just think about the capitalization of the firm and clearly the capital that will be generated over the next year, it seems like we'll still be in a position where there's more excess capital created than even, you know, that $100 million would satisfy and the current dividend.
Just wanted to maybe dig in a little bit more around how you came up with that number and then, you know, other outlooks for capital.
Sure, Devin. Look, I think the $100 million number was really kind of derived from a number of different, you know, looking at a number of different things. We obviously looked at our, you know, our current trading volume in the market and what we thought sort of reasonable amounts that could be repurchased without, you know, impacting the share price as well as where kind of precedent transactions have been done. The size of our program at a $100 million is large relative to many based on our float, our public float, but obviously on a market cap basis, much less so.
You know, we're obviously thinking about the business environment, where we think that's going, what we think our cash generation abilities would be under kind of a range of different economic scenarios. You know, there are a lot of different variables there. It's really a number of subjective factors there, and we thought that was an appropriate amount that would, you know, allow us to have the right amount of flexibility, you know, without having, you know, such a small amount that we'd have to go back to the board very quickly, for example. It's really all of those factors.
You know, I think, look, you know, in terms of sort of the duration and excess cash and so forth, we're gonna really just kinda continue to monitor this over, you know, over the next, you know, many quarters. You know, obviously, if we determine that we have such cash generation or excess cash generation that we can do more quickly, we'll do that. That's just something we're gonna sort of see as the rest of the year plays out.
Okay, great. Very helpful. I guess a follow-up here for Peter. You heard the commentary around kinda outlook for the broader advisory market. I think, you know, the $6 trillion of, you know, announced M&A last year was by far a high watermark, so most people expect some moderation there. On the other hand, Perella Weinberg has a lot of partners kind of ramping on the platform, as you mentioned. You know, it's not a linear path of kind of productivity, you know, kind of progression here. Just how should we think about some of the puts and takes in maybe the intermediate-term outlook for the company as maybe the overall backdrop moderates a bit, but on the other hand, you're growing the franchise faster than most of your peers out there?
Yeah. Well, look, I mean, as we think, Devin, about 2022, you know, we are in week seven of 52, so it's as you know, and everyone on this call knows, it's not easy to predict how the year's gonna turn out. My comments really earlier about the environment were exactly as you suggest, that I think another $6 trillion year is gonna be very difficult just purely based on the storm clouds, macro storm clouds, which are, you know, I feel just darker than they have been. You know, that would. I won't go through every one in detail, but you know, with respect to inflation being less and less transitory and the consensus on the frequency and level of interest rate increases is quite high. Antitrust policy taking shape. You know, geopolitical temperatures seem to get higher every day.
The first comment I really had was about the macro environment. I think with respect to the firm, you know, we reached a revenue amount in 2021 that was one where last year, early last year, we said we would reach in 2024. It was a very significant increase for us. Productivity was, of course, at a peak. We do have, you know, a third of our partners are new. You know, this is just how we plan the business. You know, we really are very excited and positive about our growth, mostly because the conversations that we're having with clients and with recruits are just very positive and continue to be. That's really how we looked at the year going forward in the context of your question.
Okay, great. I'll leave it there, but thanks a lot. Appreciate it.
Thanks, Devin.
Our next question comes from Michael Brown with KBW.
Great. Thanks. Hi, good morning, guys.
Hey, Mike.
I wanted to start with the, I guess, follow on to the productivity question, maybe build on Devin's question there. You obviously had a very strong 2021, and I think you mentioned productivity hit about $14 million per partner. I believe you mentioned that you expect to return to historical periods. When I look back, you know, the historical range looks like it's something closer to $10 million per partner range. I guess, one, is that what you're expecting from the business, going forward or is it that you expect to kinda tick down towards that range over time? Just wanted to flesh that out a little bit more.
Yeah, I can take that one, Mike. Look, I think that we, you know, first of all, we plan for our business, you know, we're not gonna plan for extremes. You heard the commentary about, you know, how kind of what we see in the environment. You know, even with our own productivity level, you know, while Peter mentioned, we definitely see long-term productivity trends being very positive as our partners get more mature on the platform. For 2022, what we said was we, you know, we do think, and we're planning for productivity reverting towards more of the historical average levels, not at.
We're obviously in an environment that's, you know, much stronger than we were in when we had $10 million of partner productivity. But we are sort of planning internally that, you know, we're gonna have something that trends more towards an average. That's, by the way, probably how we are always going to look at it, particularly a handful of weeks into the year, where just visibility at this point is not very good.
Okay, thanks, Gary. That's really helpful. So it's not reverting to the historical level, it's ticking down from the peak and okay, that certainly makes sense. I guess just one follow-up. I wanted to hear a little bit more about the energy space. I think that's, you know, an important sector for your company, and it seems to be ripe for more M&A activity. Any comment there on how activity's been lately and your expectations for that piece of the business in 2022?
Sure. Yeah, so I think as oil pushes, you know, $90 a barrel, I haven't looked this morning where it is, but the energy companies, the oil and gas companies are generating enormous amounts of cash flow right now. With that cash flow, they are deliberating over a number of different uses of that cash. One would be just returning capital to shareholders and other uses would be M&A. I would say, honestly now, return of capital is probably winning slightly, although not completely. But I will say that two things about activity, 'cause your point is correct. One is that private companies now in that space, if you're looking at a possible liquidity event, now is the time.
We have a lot of dialogue going on with private companies in the energy space. I would say midstream companies are worth more now with higher prices and just the dynamics of the industry. It's a very interesting space for us. It's a very significant commitment for us. That's really how I look at the opportunity.
Okay. Very interesting color. Thank you.
Our next question comes from Steven Chubak with Wolfe Research.
Good morning, guys. This is Brendan O'Brien filling in for Steven. I guess for Gary. The comp flex exhibited this quarter was certainly a nice surprise. However, given the strong partner growth and your comments suggesting the industry fee pool is likely to contract in 2022, just wanted to get a sense of how we should be thinking about the trajectory of the comp ratio moving forward.
Yeah. We're really not changing our sort of medium-term view on that in terms of the mid-60s. You know, we think in, you know, most, you know, most environments, we think that's reasonable. Obviously, at extremes, if the environment were to turn extremely negative, there, you know, that would have to be revisited. But I think, you know, given, you know, given where we kinda see things right now, I think that's. We're very comfortable with that guidance that we've given so far.
Great. Thanks for that. Then, on Europe, optimism has been building on activity in the region since the back half of last year. However, with tensions rising in Ukraine and a number of major elections occurring this year, it feels like the risks of the outlook in the region are increasing, particularly in continental Europe, which is an area of strength for you guys. In light of these risks, I was hoping you could provide some color around what you're seeing in terms of activity in the near term and how that has impacted your outlook there.
I think I mean, just looking backwards, at 2021 the M&A volume in Europe, I believe was about $1.5 trillion out of the $6. It's really an enormous market now, and it's been growing quickly. As you rightly allude to, the largest activity is really in the U.K., France and Germany, where we are present. Looking forward, listen, the geopolitical risk is a relevant one in global M&A, and you can argue it's particularly relevant there because of its proximity, at least as it relates to the Ukraine. I will say a couple things about Europe which make us very enthusiastic about the opportunity. One is the private equity dry powder is enormous, and growing very, very quickly.
Now PE volume is about a quarter of European M&A volume, and that's gonna be increasing. That kind of buttresses the case for growing activity there. The availability of capital is still very significant, albeit the cost might be higher, it's still there. Frankly, rate increases are lagging more due to structural reasons than anything else. You know, we're particularly also focused on technology and financial technology and digital infrastructure, which are areas in which we've hired in the last year over there. Net-net, I'm very acknowledging of and sensitive to the geopolitical issues, but we're still bullish on Europe.
That's great, Garry. Thanks for that.
Our next question comes from Ken Worthington with JPMorgan.
Hi, good morning. I guess maybe just one for me to Peter to follow up on your outlook for 2022. We've heard that the greater volatility is leading to longer deal close times. I was wondering to what extent that you're seeing this too, and maybe either what regions or sectors are longer close times either more or less pronounced.
Sure. Hi, Ken. I actually think that the major reason why deals are taking longer to close is less so because of the volatility and more so because of antitrust policy. You know, essentially right now, there is no fast track in terms of antitrust review. That by definition will extend deal times. I think the volatility, it isn't as much a timing issue, more of an issue as to whether or not people feel that it's an appropriate time to enter the market at all. I do feel, and I've mentioned this a number of times, that there's a general comfort level with a very high level of volatility. We haven't seen, at least in our experience, that be a specific reason for delays. I think.
In terms of the last part of your question, in terms of where those delays will come from, I mean, linked to my comment on antitrust regulation, I think it could be on very, very large deals, particularly in very sensitive spaces like technology. Otherwise, you know, I mean, there were 60,000 M&A deals in 2021. There is a big market. There is a lot of activity there. There are some. You know, the clouds are there on the horizon, as I've said, but we remain bullish on level of activity generally.
Great. Very helpful. Thank you so much.
I'm not showing any further questions at this time. With that, I would like to hand the call back to Peter Weinberg for closing remarks.
Okay, thanks, Kevin. Thank you all for joining. Call anytime, and I know we will reconvene as a group after the first quarter. Have a good day.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.