The following discussion and analysis should be read in conjunction with PJT Partners Inc.'s Condensed Consolidated Financial Statements and the related notes included in this Quarterly Report on Form 10-Q.

Our Business

PJT Partners is a premier global advisory-focused investment bank. We offer a unique portfolio of advisory services designed to help our clients achieve their strategic objectives. Our team of senior professionals delivers a range of strategic advisory, capital markets advisory, restructuring and special situations and shareholder advisory services to corporations, financial sponsors, institutional investors and governments around the world. We also provide, through PJT Park Hill, private fund advisory and fundraising services for alternative investment managers, including private equity funds, real estate funds and hedge funds.

We have world-class franchises in each of the areas in which we compete.



     •    Our Strategic Advisory business offers a broad range of financial
          advisory and transaction execution capabilities, including advising
          clients on mergers and acquisitions ("M&A"), joint ventures, minority
          investments, asset swaps, divestitures and activism defense. Our capital
          markets advisory team specializes in advice and execution on public and
          private capital raises in the debt and equity capital markets. We
          provide in-depth advice on capital structure, acquisition finance, debt
          execution, SPACs, Pre-IPO and IPO, private capital raising and
          structured products. Through PJT Camberview, our industry leading
          shareholder advisory business, we provide investor-led advice to public
          company boards and management teams around the globe on shareholder
          engagement, strategic investor relations, activism and contested
          situations, ESG and sustainability and other complex corporate
          governance matters.


     •    Our Restructuring and Special Situations business is one of the world's
          leading advisors in restructurings and recapitalizations, both in and
          out of court, around the globe. With expertise in highly complex capital
          structure challenges, we advise companies, creditors and financial
          sponsors on liability management and related capital raise transactions
          including exchanges, recapitalizations, reorganizations, debt
          repurchases and distressed mergers and acquisitions.


     •    PJT Park Hill, our leading global alternative asset advisory and
          fundraising business, provides private fund advisory and fundraising
          services for a diverse range of investment strategies. Moreover, PJT
          Park Hill is the only group among its peers with top-tier dedicated
          private equity, hedge fund, private credit, real estate and secondary
          advisory groups. PJT Park Hill's Secondary Advisory business provides
          clients with a breadth of expertise in the secondary markets, including
          GP led continuation vehicles, GP liquidity solutions, LP portfolio
          solutions and other structured solutions.

Business Environment

Economic and global financial conditions can materially affect our operational and financial performance. See "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of some of the factors that can affect our performance.

M&A is a cyclical business that is impacted by macroeconomic conditions. Worldwide M&A announced volumes during the first nine months of 2021 were up significantly compared with the first nine months of 2020. While the pace of activity may not remain at these levels, we expect corporate boards and management teams to continue to use M&A as a strategic tool.

Global restructuring activity continued to slow from elevated 2020 levels through the first nine months of 2021, mainly driven by a global economic recovery and fiscal and monetary stimulus that continues to drive strong capital markets activities. While some companies have addressed near-term issues, many companies remain significantly levered and will need to address their balance sheets in the future. We continue to believe that the medium- to long-term demand for such advisory services will improve.



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While many limited partners are actively allocating capital, investors remain focused on existing relationships with fund managers. As a result, the bar for fund managers to attract new investors remains high as investors continue to demand highly successful and tenured firms and a flight to quality persists. Managers are continuing to deploy capital at a very rapid pace resulting in many returning to the market for their next fundraise in extremely short periods of time with much larger fund sizes. As it relates to secondary activity, the number of high quality sponsors accessing the secondary market through continuation vehicles continues to increase. While many investors have begun to demonstrate optimism as we progress towards a more normalized business environment, it remains difficult to predict the future impact that COVID-19 may have on the economic environment.

Key Financial Measures

Revenues

Substantially all of our revenues are derived from Advisory Fees and Placement Fees. This revenue is primarily a function of the number of active engagements we have, the size of each of those engagements and the fees we charge for our services.

Advisory Fees - The Company provides a range of strategic advisory, capital markets advisory, restructuring and special situations and shareholder advisory services to corporations, financial sponsors, institutional investors and governments around the world. In conjunction with providing restructuring advice, we may also assist with raising various forms of financing, including debt and equity. Our secondary advisory services provided by PJT Park Hill include providing solutions to investing clients seeking portfolio liquidity, unfunded commitment relief and investments in secondary markets. Advisory Fees typically consist of retainer and transaction-based fee arrangements. The amount and timing of the fees paid vary by the type of engagement. The majority of our recognized Advisory Fees are dependent on the successful completion of a transaction.

A transaction can fail to be completed for many reasons, including global and/or regional economic conditions, failure of parties to agree upon final terms, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals. In the case of bankruptcy engagements, fees are subject to approval of the court.

Placement Fees - Our fund placement services primarily serve private equity, real estate and hedge funds. Our team advises on all aspects of the fundraising process including competitive positioning and market assessment, marketing materials and related documentation and partnership terms and conditions most prevalent in the current environment. We also provide public and private placement fundraising services to our corporate clients and earn placement and underwriting fees based on the successful completion of the transaction.

Fund placement fees earned for services provided to alternative asset managers are typically recognized upon acceptance by a fund of capital or capital commitments (referred to as a "closing"), in accordance with terms set forth in individual agreements. For commitment based fees, revenue is recognized over time as commitments are accepted. Fees for such closed-end fund arrangements are generally paid in installments over three or four years and interest is charged to the outstanding balance at an agreed upon rate, such as the London Interbank Offered Rate or an alternate reference rate, plus a market-based margin. For funds with multiple closings, the constraint on variable consideration is lifted upon each closing. For open-end fund structures, placement fees are typically calculated as a percentage of a placed investor's month-end net asset value. Typically, we earn fees for such open-end fund structures over a 48 month period. For these arrangements, revenue is recognized over time as the constraint over variable consideration is lifted.

We may receive non-refundable up-front fees in our contracts with customers, which are recorded as revenues in the period over which services are estimated to be provided.

Interest Income and Other - Interest Income and Other represents interest typically earned on Cash and Cash Equivalents, investments in Treasury securities and outstanding placement fees receivable; miscellaneous income; foreign exchange gains and losses arising from transactions denominated in currencies other than U.S. dollars; sublease income; and the amount of expense reimbursement invoiced to clients related to out-of-pocket expenses. Interest on placement fees receivable is earned from the time revenue is recognized and is calculated as mutually



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agreed upon with the receivable counterparty. Interest receivable is included in Accounts Receivable, Net in the Condensed Consolidated Statements of Financial Condition.

Expenses

Compensation and Benefits - Compensation and Benefits expense includes salaries, cash bonuses, benefits, employer taxes and equity-based compensation associated with the grants of equity-based awards to partners and employees. Changes in this expense are driven by fluctuations in the number of employees, business performance, compensation adjustments in relation to market movements, changes in rates for employer taxes and other cost increases affecting benefit plans. In addition, this expense is affected by the composition of our work force. The expense associated with our bonus and equity plans can also have a significant impact on this expense category and may vary from year to year.

We maintain compensation programs, including salaries, annual incentive compensation (that may include components of cash, restricted cash and/or equity-based awards) and benefits programs. We manage compensation to estimates of competitive levels based on market conditions and performance. Our level of compensation reflects our plan to maintain competitive compensation levels to retain key personnel and it reflects the impact of newly-hired senior professionals, including related grants of equity awards that are generally valued at their grant date fair value.

Increasing the number of high-caliber, experienced senior level employees is critical to our growth efforts. In our advisory businesses, these hires generally do not begin to generate significant revenue in the year they are hired.

Our remaining expenses are the other costs typical to operating our business, which generally consist of:



     •    Occupancy and Related - consisting primarily of costs related to leased
          property, including rent, maintenance, real estate taxes, utilities and
          other related costs. Our company headquarters are located in New York,
          New York, and we maintain additional offices in the U.S. and throughout
          the world;


     •    Travel and Related - consisting of costs for our partners and employees
          to render services where our clients are located;


     •    Professional Fees - consisting primarily of consulting, audit and tax,
          recruiting and legal and other professional services;


     •    Communications and Information Services - consisting primarily of costs
          for our technology infrastructure and telecommunications costs;


     •    Depreciation and Amortization - consisting of depreciation and
          amortization on our furniture, equipment, leasehold improvements and
          intangible assets; and


     •    Other Expenses - consisting primarily of provision for credit losses,
          regulatory fees, insurance, fees paid for access to external market
          data, advertising, other general operating expenses and
          transaction-related payable to Blackstone Inc.

Income Taxes - PJT Partners Inc. is a corporation subject to U.S. federal, state and local income taxes in jurisdictions where it does business. The Company's businesses generally operate as partnerships for U.S. federal and state purposes and as corporate entities in non-U.S. jurisdictions. In the U.S. federal and state jurisdictions, taxes related to income earned by these entities generally represent obligations of the individual members and partners.

The operating entities have generally been subject to New York City Unincorporated Business Tax and to entity-level income taxes imposed by non-U.S. jurisdictions, as applicable. These taxes have been reflected in the Company's condensed consolidated financial statements.

PJT Partners Inc. is subject to U.S. corporate federal, state and local income tax on its allocable share of results of operations from the operating partnership (PJT Partners Holdings LP).



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Non-Controlling Interests

PJT Partners Inc. is a holding company and its only material asset is its controlling equity interest in PJT Partners Holdings LP, and certain cash and cash equivalents it may hold from time to time. As the sole general partner of PJT Partners Holdings LP, PJT Partners Inc. operates and controls all of the business and affairs and consolidates the financial results of PJT Partners Holdings LP and its operating subsidiaries. The portion of net income attributable to the non-controlling interests is presented separately in the Condensed Consolidated Statements of Operations.

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