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OFFON

PERELLA WEINBERG PARTNERS

(PWP)
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PERELLA WEINBERG PARTNERS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/12/2021 | 04:11pm EST
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. We provide advisory services to a wide range of
clients globally, including large public multinational corporations, mid-sized
public and private companies, individual entrepreneurs, private and
institutional investors, creditor committees and government institutions.

We were founded in June 2006 with the opening of offices in New York and London,
led by a team of ten seasoned advisory partners who previously held senior
management positions at large global investment banks. Our mission is helping
clients address complex strategic and financial challenges. The foundation of
our Company was rooted in a belief, among other considerations, that clients
would increasingly seek out deeply experienced advisors who offer independent
strategic thinking and who are not burdened by the complicated conflicts that
large investment banking institutions may face due to their various businesses.
The 2008 global financial crisis reinforced this hypothesis and contributed to
the early growth of our firm. Today, we believe that our independence is even
more important. For clients and for us independence means freedom from the
distractions that dilute strategic thinking and a willingness and candor to
share an honest opinion. We believe that our clients choose to engage us because
they value our unbiased perspective and expert advice regarding complex
financial and strategic matters.

Our business provides services to multiple industry sectors and geographic
markets. We believe that our collaborative partnership and integrated approach
combining deep industry insights, significant technical, product and
transactional expertise, and rigorous work ethic create a significant
opportunity for our Company to realize sustainable growth. We seek to advise
clients throughout their evolution, with the full range of our advisory
capabilities including, among other things, advice related to mission-critical
strategic and financial decisions, mergers and acquisitions ("M&A") execution,
capital markets advisory, shareholder and defense advisory, capital raising,
capital structure and restructuring, specialized underwriting and research
services for the energy industry.

Since our inception, we have experienced significant growth in our business,
driven by hiring professionals who are highly regarded in their fields of
expertise, expanding the scope and geographic reach of our advisory services,
deepening and expanding our client relationships and maintaining a firm culture
that attracts, develops and retains talented people. In addition to our hiring
and internal development of individual professionals, in November 2016, we
completed a business combination with Tudor, Pickering, Holt & Co., LLC ("TPH"),
an independent advisory firm, focused on the energy industry. As of June 30,
2021, we serve our clients with 57 advisory partners based in 10 offices,
located in five countries around the world.

We generate and recognize revenues when earned, primarily from providing advisory services on transactions that are subject to individually negotiated engagement letters, which set forth our fees.


Upfront fees are recognized over the estimated period that the related services
are performed. Transaction-related fees are recognized when or as services for a
transaction are provided and specified conditions or certain milestones have
been achieved, which are often outside of our control. Underwriting revenues are
recognized when the offering is deemed complete. As a result, revenues and net
income in any period may not be indicative of full year results or the results
of any other period and may vary significantly from year to year and quarter to
quarter. The performance of our business depends on the ability of our
professionals to build relationships with clients over many years by providing
trusted advice and exceptional transaction execution.



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On June 24, 2021, Perella Weinberg Partners consummated the Business Combination
Agreement 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 direct ownership interests in shares of Class A common stock of Perella
Weinberg Partners. The non-controlling interest owners of PWP OpCo receive
economics through ownership of PWP OpCo Class A partnership units ("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.

Business Environment and Outlook


Worldwide announced M&A volumes during the first quarter of 2021 increased
significantly as compared to the same period in 2020. While the overall level of
mergers and acquisitions globally declined in 2020, heavily influenced by the
impact of the COVID-19 pandemic, M&A activity began to recover in the third
quarter of 2020, accelerated in the fourth quarter of 2020, and continued to
reflect a strong performance for the six months ended June 30, 2021.

The level of M&A advisory dialogue remains strong across all our industries and
geographies of focus and among our large cap, middle market and sponsor clients.
As companies continue to focus on strategic growth and capital deployment, we
expect these considerations and the overall business environment will keep
activity robust in the medium term.

Although restructuring activity in the first half of 2021 was higher than in the
first half of 2020, this level of activity moderated in the first half of 2021
compared to the elevated levels seen throughout most of 2020. Restructuring
activity continues to be less active as compared to 2020 and while we expect
that this more moderate pace of activity will continue through the year, we
believe that the restructuring and liability management opportunity remains
significant.

More broadly, 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.

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.

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Results of Operations

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


                                           Three Months Ended June 30,                  Six Months Ended June 30,
(Dollars in thousands)                2021          2020        2021 vs. 2020     2021          2020        2021 vs. 2020
Revenues                            $ 255,520     $ 114,601         123%        $ 425,322     $ 206,997         105%
Expenses
Compensation and benefits             164,404        86,254          91%          273,874       144,765          89%
Equity-based compensation               7,065         6,179          14%           13,222        12,364          7%
Total compensation and benefits       171,469        92,433          86%          287,096       157,129          83%
Non-compensation expenses              34,565        42,869         (19%)          60,696        74,164         (18%)
Total operating expenses              206,034       135,302          52%          347,792       231,293          50%
Operating income (loss)                49,486       (20,701 )        NM            77,530       (24,296 )        NM
Non-operating income (expenses)
Related party income                    1,565         2,402         (35%)           3,774         4,771         (21%)
Other income (expense)                    526         1,002         (48%)          (1,328 )       2,850          NM
Change in fair value of warrant
liabilities                               948             -         100%              948             -         100%
Loss on debt extinguishment           (39,408 )           -        (100%)         (39,408 )           -        (100%)
Interest expense                       (3,596 )      (3,996 )        10%           (7,464 )      (7,970 )        6%
Total non-operating income
(expenses)                            (39,965 )        (592 )        NM           (43,478 )        (349 )        NM
Income (loss) before income taxes       9,521       (21,293 )        NM            34,052       (24,645 )        NM
Income tax benefit (expense)             (521 )        (834 )        38%           (2,545 )      (1,544 )       (65%)
Net income (loss)                       9,000     $ (22,127 )        NM            31,507     $ (26,189 )        NM
Net income (loss) attributable to
non-controlling interests              21,499                               

44,006

Net income (loss) attributable to
Perella Weinberg Partners           $ (12,499 )                                 $ (12,499 )
NM = Not meaningful


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.

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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 specifically may 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, (i) a restructuring engagement may
evolve to require a sale of all or a portion of the client, (ii) M&A assignments
can develop from relationships established on prior restructuring engagements,
(iii) capital markets expertise can be instrumental on both M&A and
restructuring assignments, and (iv) capital markets revenue can be generated
through the provision of capital markets advisory work, capital raising
assignments or the issuance of focused equity research services. 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 June 30, 2021 Compared to Three Months Ended June 30, 2020

Revenues were $255.5 million for the three months ended June 30, 2021 as compared with $114.6 million for the same period in 2020, representing an increase of 123%. The quarter-on-quarter increase in revenue reflects a significant acceleration of activity across substantially all industry groups, geographies, and product areas, particularly in M&A advice.


For the three months ended June 30, 2021 and 2020, we earned revenues from 106
and 76 advisory clients, respectively. The number of advisory clients who paid
fees equal to or greater than $1.0 million increased to 46 for the three months
ended June 30, 2021 compared to 23 advisory clients for the three months ended
June 30, 2020. The average fee size increased to $2.4 million for the three
months ended June 30, 2021 from $1.4 million for the three months ended June 30,
2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020


Revenues were $425.3 million for the six months ended June 30, 2021 as compared
with $207.0 million for the same period in 2020, representing an increase of
105%. The period-over-period growth reflects a significant acceleration of
activity across substantially all industry groups, geographies, and product
areas, particularly in M&A activity when compared to the decreased M&A activity
in the prior year period primarily due to the COVID-19 pandemic. Restructuring
activity has begun to moderate from levels experienced in the back half of 2020.

For the six months ended June 30, 2021 and 2020, we earned revenues from 149 and
102 advisory clients, respectively. The number of advisory clients who paid fees
equal to or greater than $1.0 million increased to 70 advisory clients for the
six months ended June 30, 2021 compared to 44 advisory clients for the six
months ended June 30, 2020. The average fee size increased to $2.8 million for
the six months ended June 30, 2021 from $1.9 million for the six months ended
June 30, 2020.

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Operating Expenses


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

                                Three Months Ended June 30,            Six Months Ended June 30,

                                                         2021                                  2021
                                                          vs.                                   vs.

(Dollars in thousands) 2021 2020 2020 2021

       2020         2020
Expenses
 Compensation and           $ 164,404     $  86,254       91%     $ 273,874     $ 144,765       89%
benefits
% of revenues                     64%           75%                     64%           70%
 Equity-based               $   7,065     $   6,179       14%     $  13,222     $  12,364       7%
compensation
% of revenues                      3%            5%                      3%            6%

Total compensation and $ 171,469 $ 92,433 86% $ 287,096

     $ 157,129       83%
benefits
% of revenues                     67%           81%                     68% 

76%

 Non-compensation           $  34,565     $  42,869      (19%)    $  60,696     $  74,164      (18%)
expenses
% of revenues                     14%           37%                     14% 

36%

Total operating expenses $ 206,034 $ 135,302 52% $ 347,792

     $ 231,293       50%
% of revenues                     81%          118%                     82% 

112%

Income (loss) before $ 9,521 $ (21,293 ) NM $ 34,052

    $ (24,645 )     NM
income taxes
% of revenues                      4%         (19%)                      8%         (12%)


Our operating expenses are classified as (i) compensation and benefits expenses
and equity-based compensation and (ii) non-compensation expenses. Headcount is
the 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,
travel and related expenses, technology and infrastructure, rent and occupancy,
depreciation and amortization, and general, administrative and other expenses
generally have been less significant in comparison with compensation and
benefits expenses.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020


Operating expenses were $206.0 million for the three months ended June 30, 2021
and represented 81% of revenues, compared with $135.3 million for the three
months ended June 30, 2020, which represented 118% of revenues. The increase in
operating expenses was primarily driven by an increase in compensation and
benefits expenses, which were $164.4 million, for the three months ended
June 30, 2021 compared to $86.3 million, for the three months ended June 30,
2020, partially offset by lower non-compensation expenses which were $34.6
million for the three months ended June 30, 2021 compared to $42.9 million for
the three months ended June 30, 2020. The increase in compensation and benefits
expenses was primarily due to a larger bonus accrual associated with the
increase in revenue despite a lower compensation margin. The decrease in
non-compensation expense was primarily driven by a decrease in professional fees
compared to the prior year period which included the write-off of certain
previously deferred offering costs due to the termination of a public company
transaction process in May 2020, partially offset by an increase in technology
and infrastructure expenses and travel and related expenses.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020


Operating expenses were $347.8 million for the six months ended June 30, 2021
and represented 82% of revenues, compared with $231.3 million for the six months
ended June 30, 2020, which represented 112% of revenues. The increase in
operating expenses was primarily driven by an increase in compensation and
benefits expenses, which were $273.9 million for the six months ended June 30,
2021 compared to $144.8 million for the six months ended June 30, 2020,
partially offset by lower non-compensation expenses which were $60.7 million for
the six months ended June 30, 2021 compared to $74.2 million for the six months
ended June 30, 2020. The increase in compensation and benefits expense was
primarily due to a larger bonus accrual associated with the increase in revenue
despite a lower compensation margin. The decrease in non-compensation expense
was primarily driven by decreased professional fees compared to the prior year
period which included the write-off of certain previously deferred offering
costs due to the termination of a public company transaction process in May 2020
and decreased travel and entertainment as well as conference and seminars from
the COVID-19 pandemic.

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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 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 plans to grant incentive
compensation awards in accordance with the Perella Weinberg Partners 2021
Omnibus Incentive Plan (the "PWP Incentive Plan"). The Company intends to use
newly issued shares of PWP Class A common stock to satisfy vested awards under
the plan. The vesting of these awards will be recorded as equity-based
compensation expense at PWP OpCo for U.S. GAAP accounting purposes. Due to the
accounting for this equity-based compensation expense, we may experience
operating losses in future periods.

We intend to compensate our personnel competitively in order to continue building our business and growing our firm.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020


For the three months ended June 30, 2021, compensation-related expenses of
$171.5 million represented 67% of revenues, compared with $92.4 million of
compensation-related expenses, which represented 81% of revenues for the three
months ended June 30, 2020. Included in total compensation-related expense was
$7.1 million amortization of equity awards, for the three months ended June 30,
2021. The increase in total compensation and benefit expenses was due to a
larger bonus accrual associated with the increase in revenue despite a lower
compensation margin when compared to the same period in 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020


For the six months ended June 30, 2021, compensation-related expenses of $287.1
million represented 68% of revenues, compared with $157.1 million of
compensation-related expenses, which represented 76% of revenues for the six
months ended June 30, 2020. Included in total compensation-related expense was
$13.2 million and $12.4 million amortization of equity awards for the six months
ended June 30, 2021 and 2020, respectively. The increase in total compensation
and benefit expenses was due to a larger bonus accrual associated with the
increase in revenue despite a lower compensation margin when compared to the
same period in 2020.



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Non-Compensation Expenses


Our non-compensation expenses include the costs of professional fees, travel and
related expenses, technology and infrastructure, rent and occupancy,
depreciation and amortization and general, administrative and other expenses
including certain co-advisory fees and expenses reimbursed by our clients. Any
expenses reimbursed by clients and the co-advisory fees are also 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
non-compensation support costs such as travel and related expenses. Growth in
our headcount has increased rent and occupancy expenses while geographic
expansion has increased regulatory expenses. This trend may continue as we
expand into new sectors, geographies and products to serve our clients' growing
needs, domestically and internationally.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020


For the three months ended June 30, 2021, non-compensation expenses of $34.6
million represented 14% of revenues, compared with $42.9 million, which
represented 37% of revenues, for the three months ended June 30, 2020. The
decrease in non-compensation expense was primarily driven by a $10.1 million
decrease in professional fees, partially offset by an increase in technology and
infrastructure costs and travel and related expenses. This reduction is largely
due to elevated professional fees during the three months ended June 30, 2020
related to previously deferred offering costs of $14.8 million that were
expensed due to the termination of a public company transaction process in May
2020. Excluding this write-off, professional fees during the three months ended
June 30, 2021, increased $4.7 million, including $2.9 million of
transaction-related expenses as well as increased consulting expenses and
recruiting placement fees for strategic hires.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020


For the six months ended June 30, 2021, non-compensation expenses of $60.7
million represented 14% of revenues, compared with $74.2 million, which
represented 36% of revenues, for the six months ended June 30, 2020. The
decrease in non-compensation expense was primarily driven by a $10.4 million
decrease in professional fees. This reduction is largely due to elevated
professional fees during the six months ended June 30, 2021 as previously
deferred offering costs of $14.8 million were expensed due to the termination of
a public company transaction process in May 2020. Excluding this write-off,
professional fees during the six months ended June 30, 2021, increased $4.4
million, including $2.9 million of transaction-related expenses as well as
increased consulting expenses and recruiting expenses. The decrease in
non-compensation expense was also due to a $2.7 million decrease in travel and
related expenses as a result of the COVID-19 pandemic.

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, interest expense, change in the fair value of warrant liabilities, loss
on debt extinguishment and other income (expense). For the three and six months
ended June 30, 2021, the most significant component and change from the prior
year periods was the $39.4 million loss on debt extinguishment which was related
to the redemption of the $150.0 million aggregate principal of the Convertible
Notes concurrent with the Business Combination. The loss is composed of the
$10.9 million premium and $28.5 million of unamortized debt discount and
issuance costs.

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 annual effective tax
rate are based on projected U.S. GAAP income and the currently enacted statutory
tax rates in the various jurisdictions in which the Company operates. For
interim reporting, the Company estimates the annual effective tax rate based on
projected income for the full year and records a quarterly tax provision in
accordance with the annual effective tax rate.

                                       49

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The Company's effective tax rate is dependent on many factors, including the
estimated 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.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

The Company's income tax expense and effective tax rate were $0.5 million and 5.47%, respectively, for the three months ended June 30, 2021, compared to income tax expense and effective tax rate of $0.8 million and (3.92%), respectively, for the three months ended June 30, 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020


The Company's income tax expense and effective tax rate were $2.5 million and
7.47%, respectively, for the six months ended June 30, 2021, compared to income
tax expense and effective tax rate of $1.5 million and (6.26%), respectively,
for the six months ended June 30, 2020.

Liquidity and Capital Resources

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 and net cash generated from operations.


Our current assets are primarily composed of cash, short-term liquid
investments, receivables related to fees earned from providing advisory services
and due from related parties. Our current liabilities are primarily composed of
accounts payable, accrued expenses, accrued and deferred employee compensation
and due to related parties. Due from related parties primarily includes amounts
due from PWP Capital Holdings LP. We 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 made partner tax
distributions of $47.4 million and $9.4 million during the six months ended
June 30, 2021 and 2020, respectively. Additionally, as a public company, we
intend to pay dividends throughout the year and may consider share repurchases
as well.

We evaluate our cash needs on a regular basis in light of current market
conditions. 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 June 30, 2021 and December 31, 2020. As of
June 30, 2021 and December 31, 2020, the Company had cash balances of $349.7
million and $329.1 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.

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 was $85.1 million, with
$1.1 million of allowance for credit losses balance as of June 30, 2021.
Accounts receivable was $40.8 million, with $1.0 million of allowance for credit
losses balance as of December 31, 2020.

In December 2018, the Company amended the Credit Agreement to modify a term loan
to a revolving credit facility with a line of credit of $50.0 million (the
"Revolving Credit Facility"). During the six months ended June 30, 2020, the
Company made principal payments on the Revolving Credit Facility of $10.0
million as well as drawdowns of $22.0 million.



                                       50

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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. As of June 30,
2021, 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 the cash we retain
post-transaction, 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.

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. Depending on our
liquidity and capital resources, market conditions, the timing and concentration
of exchanges and other considerations, we may choose to fund exchanges of PWP
OpCo Units with available cash, borrowings or issuances of Class A common stock.

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 will be 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, will be 180 days after Closing;
and (b) for working partners, will be between three to five years after the
Closing), (ii) PWP OpCo Units held by ILPs existing at the time of the Business
Combination will be subject to such restriction for 180 days after the Closing,
and (iii) any other outstanding PWP OpCo Units not previously covered by clauses
(i) and (ii) above will be 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 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.



                                       51

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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 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.

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.

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 are primarily influenced by debt payments
and distributions to partners, and in the six months ended June 30, 2021, the
proceeds and distributions related to the Business Combination.

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

                                                         Six Months Ended June 30,
(Dollars in thousands)                                    2021                2020
Cash Provided By (Used In)
Operating Activities
  Net income (loss)                                  $       31,507       $     (26,189 )
  Non-cash charges and other operating activity              69,765              30,300
adjustments
  Other operating activities                                (73,443 )          (112,510 )
Total operating activities                                   27,829            (108,399 )
Investing Activities                                         (1,429 )            (4,104 )
Financing Activities                                         (6,459 )             2,570
Effect of exchange rate changes on cash, cash                   668              (3,130 )
equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents            20,609            (113,063 )
and restricted cash
Cash, cash equivalents and restricted cash,                 330,908         

266,582

beginning of period
Cash, cash equivalents and restricted cash, end of   $      351,517       $ 

153,519

period

Six Months Ended June 30, 2021


Cash and restricted cash were $351.5 million as of June 30, 2021, an increase of
$20.6 million from $330.9 million as of December 31, 2020. Operating activities
resulted in a net inflow of $27.8 million largely attributable to net income
generated during the six months ended June 30, 2021, partially offset by changes
in working capital. Net income included $30.4 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 $1.4 million attributable to the
Company's deconsolidation in PFAC Holdings and the purchases of fixed assets.
Financing activities resulted in a net outflow of $6.5 million primarily related
to the transactions associated with the Business Combination, the payoff of all
outstanding debt and tax distributions to partners.

Six Months Ended June 30, 2020


Cash and restricted cash were $153.5 million as of June 30, 2020. Operating
activities resulted in a net outflow of $108.4 million attributable to changes
in working capital and net loss incurred during the six months ended June 30,
2020, both partially offset by non-cash operating charges. Investing activities
resulted in a net outflow of $4.1 million primarily attributable to purchases of
fixed assets. Financing activities resulted in a net inflow of $2.6 million
primarily related to draw downs and principal payments on the Revolving Credit
Facility and distributions to partners.

                                       52

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Commitments and Contingencies

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 and 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.

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.

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 certain other persons (the
"TRA") under which the Company agreed to payments of 85% of the amount of
savings, if any, that the Company realizes in U.S. federal, state, local and
foreign income taxes as a result of (i) exchanges of interests in PWP OpCo for
cash or stock of the Company and certain other transactions and (ii) payments
made under the tax receivable agreement.

Off-Balance Sheet Arrangements


We do not invest in any off-balance sheet vehicles that provide liquidity,
capital resources, market or credit risk support, or engage in any activities
that expose us to any liability that is not reflected in our condensed
consolidated financial statements except for those described under "Commitments
and Contingencies" above.

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, foreign currency exchange 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.

                                       53

--------------------------------------------------------------------------------

Exchange Rate Risk


The Company is exposed to exchange rate risk as a result of entering into
transactions that are not denominated in the functional currency of its
operating subsidiaries, as well as having foreign subsidiaries with non-U.S.
dollar functional currencies. For the six months ended June 30, 2021 and 2020,
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 $1.8 million loss and a $2.7 million gain, respectively. In
addition, the reported amounts in our condensed consolidated financial
statements may be affected by movements in the rate of exchange between the
pound sterling, Euro, Canadian dollar and our reporting currency, the U.S.
dollar, resulting in translation gains and losses.

For the six months ended June 30, 2021 and 2020, 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 $0.5 million gain and $2.5 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 June 30, 2021, we held balances of $48.0 million of non-U.S. dollar denominated currencies, composed of pound sterling, the Euro, and Canadian dollars.

Critical Accounting Policies


This Quarterly Report on Form 10-Q should be read together with the discussion
within "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained in the Current Report on Form 8-K filed on June 24,
2021 regarding these critical accounting policies. For changes to our critical
accounting policies during the six months ended June 30, 2021, refer to Note 2 -
Summary of Significant Accounting Policies in the notes to condensed
consolidated financial statements included elsewhere in this Form 10-Q.

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