Moelis & Company (MC) 7 Feb 242023 Q4 Earnings call transcript

Good afternoon, and welcome to the Moelis & Company Earnings Conference Call for the Fourth Quarter and 2023. To begin, I'd like to turn the call over to Matt Tsukroff.

Good afternoon, and thank you for joining us for Moelis & Company's Fourth Quarter and Full Year 2023 Financial Results Conference Call.

On the phone today are Ken Moelis, Chairman and CEO; and Joe Simon, Chief Financial Officer. .

and would call note statements in may subject various I made the which the begin, identified with to this those the of on contain risks Company's Risk we Factors like to Moelis that to remarks are from section Before time including & time filings uncertainties, certain forward-looking SEC.

from any firm undertakes to update forward-looking Actual The results no anticipated. could those currently differ statements. materially obligation

these adjusted comments investors The presented measures, results. include across believe to to measures. Our can at investors.moelis.com. operating measures, to financial to understand in our and is reconciliation the better website results when certain with provided useful with other financial GAAP today our be Investor comparable adjusted several together firm's periods our Relations Reg We relevant references measures earnings are compare release, G found information the of on which GAAP information these financial and required by

to over I will now Joe call turn to discuss results. the our

Matt. the X% Good then period. further an the of everyone. comment quarter go prior I'll the $XXX will Ken results, call, on our fourth today's financial We of through revenues and reported increase million in Thanks, year versus business. On afternoon,

an of in For a declines by down were M&A restructuring full decrease from fees. $XXX driven and markets in our the increase adjusted XX%. year, offset revenues partially by were capital million The revenue fees earned

is year ratio XX%. compensation a full our expense less expenses, little Regarding than

of grant. are result at time As ratio likely awards, of a will a elevated retirement be our eligible expensed reminder, as which compensation first the quarter

excluding a will MD count expenses. ratio the million For million be a to beginning first expansion, of underlying the result full and non-compensation reported quarter, expenses the as head in we in range $XX transaction-related $XX noncomp approximately our of year, XX%

of month. annual will you this know, vesting later many the RSUs occur of As

between $X $X.XX quantifying benefit, EPS of the For we the approximately each impact $XX be the price a adjusted and purposes for grant vesting to difference of to tax price excess expect share.

regular a to dividend over period. share a Ken. I'll And with Regarding cash consistent capital we million continue call strong the balance $X.XX turn $XXX per now quarterly no debt. of the maintain and declared to the allocation, prior sheet with of Board lastly,

Joe. Thanks, Good everyone. afternoon,

was played aggressively year, XXXX challenging our While offense we and a expanded strong business.

hired new our During on and MDs these promoted the year, pools, the significant fee Directors. of we . Group. global XX Many Technology are Managing focused and technology, most including X industrials Clean

promoted the energy. X firm's employee under new our we X. to While In upstream population by total Directors X% credit weeks will funds XX% count join hired are X grew we coming our we focused approximately enhances our just and hire actively as the on expanded early head MD MD One managed XXXX, year, during count. and Managing of the have coverage in bankers head

rebound. While on talent we predict see to environment expect will will areas the difficult to to our key primarily where clients. It's delivering fully our we when in this expertise expanded meaningful opportunities, focused be selectively year, we M&A add pool

view activity. eliminated which an in will give believe probability has future I coming in the messaging tail Fed's to of hikes in and year. brought the the a However, to risk increase rise rate cuts M&A rate of high

I'm of firm for this have up We're seen of bottom well have unforeseen questions. seeing record near early in at coming With events, which that, signs the our open levels Barring of the uplift. cycle confident and is the expressed for pipeline, we positioned I'll year. an that sentiment beginning that it as improvement in M&A the we the

line first question [Operator of and from with is gentlemen, Ladies Ryan Thank JMP you, Mr. Devin Our the Moelis. Instructions] Securities.

market just I I in Clearly, the challenging sponsor very start Joe. on backdrop. want to and guess XXXX. Ken

XXXX. since I think sponsors have year announcements their of slowest

years you're technology X in next now get Do to love just you XXXX? on to the it sectors be in recovery thoughts way it so I some how you like think slow your do a going it's just for like? see build? really back? look So see snap some appreciate back. relate in And to thoughts Do a think a well, get as maybe what sponsors you to I'd wanted bigger you could just a developing potentially bigger snapping get there. And

cuts actual beginning when be you're asking tailwind. a event in I -- will will between in Devin, trigger again, I'll the I to think cut somewhere will rate a think depending you me that of handicap. I ramp-up back. of and think whatever they it a the But again, speed and happen rate take And provide

so these world fast think the days. changes I

a largest had October, think possibility. October, and there paper rates much the and think and for it. hedge telling the community so be that to I that were short early the of theory to the vocal of print of months, It's they had within the was X XX-year one funds we in head the X a had saying for funds that country, ready way banks last federal or in This most the We one have major we of sometimes literally and I treasury. was opposite forget is going was in rate, the direction. CEO no treasury the X% ready nobody

low that cuts that X% the happen. believe is of community believes fact have when less entered the March the last difference of we talking of is think will actually May none risk about all destroy And they will very that rate year. into the happen And how the about is could I promote other a back think won't than June that deal half we rate -- will I almost that majority how Fed the conversation. I go there how nobody rates. high between deal It or don't tail and face is the activity quickly direction, vast you impact funds in do or today, fast what rapidly. And of or a

private -- as market. to equity again, who exactly much is entrants into more it are now. trying It and mostly long strategics hit timing see their we their are their right sensitive it start this I to when So I will most to think building investing best exit people to use think term. the is are for M&A, And that community the judgment

said, answer, forgot So gradually I think we think look, the it famous from I gradually we'll then think was one will but go here then long I to and rapidly. I start -- build the has and

rapidly. bankruptcy, said out will start first, was to I forgot think who so But gradually, that I I use we'll then in it move analogy. relation that shouldn't and

understand. a other restructuring and the in business some in release Obviously, follow-up increase optimism the press the calls, a or around, I Yes. on through restructuring. you And that think, business. in noted year-over-year that just earnings guys I resilience and

so were And mandates building. XXXX like obviously, had the of pockets but it strength, felt

should XXXX. some revenues in in And be so acceleration therefore, there

the conditions you biggest So of that absolute think. actually I restructuring. think sense people than the -- how that walls falloff your just then cutting do rates is just starts comment could kind maturity and or to thinking on think better loosen surprise M&A trying perhaps that a a the of more Fed level restructuring you I the the want I on driver. in trajectory as as to of M&A just guess the kind of accelerate get people a Do you're And maybe just environment of Fed it's about high how could cutting

there So want in bit. I just drill to a little

scope part and on aggressively, And Going the that, of off market is interest or do wouldn't period being exercise of to be have will of of would and built management -- the there market if of how the but Fed higher why Look, long impact rates cut It's on year, strongly. think I a nobody in terms, a in are cut up. that to who matter into close the the time. because interest a we liability restructuring. it so look, who we than in cuts markets a -- a market. the do to the Most begin financing. size financing outlook capital But and restructuring restructuring very rather long market think were this liquidity the financials, restructurings and we rates, up that's

the like speed definitely with -- right a aggressiveness a for pressure. market actually amount now, rate of But fundamental would things still damage the that have a I the whole change pressure if think restructuring which to lot interest I the and would do the it Fed we companies -- under there's wall the think addresses of series the are a tightening. outlook yes, quantitative So be began will it Fed maturity

out do bunch of available of can that wall. that credit a push make they would So just a lot and things

Worthington Ken with Our the comes next of from line question JPMorgan.

Joe, to into ratio compensation how react environments. different Maybe and compensation Moelis' for wanted to dig I could the

$XXX how clean revenue $XXX So hiring a Moelis million $XXX is million about of did of year. last So throughout that million lot you generated a ? the of year, compensation

another $XXX of revenue and and revenue environment from of look much the of you that environment goes for to goes you paid 'XX the $X incremental much maybe in goes If how employees? like actually million how compensation revenue, million what investor? does to here? again, I much gets revenue, How So generated guess if first, in make out improves comp if higher,

Joe, work I around think that. you've been doing some

deal you let I'll So with that.

Yes.

$XXX to think increase leverage. about think of is, So to revenue million $XXX say, starting from the the every in X million looking of I point, way it -- points the for X best kind at we're comp I'd

don't go that. to just XX, I until that to XX it in doesn't into to we go it turn other words, -- that route imagine So much I goes million, which we progression $XXX -- from would at and XX kind point area of million XX happen if beyond along that $XXX got would think would

Okay. one another Joe. just Great. Perfect. then for And again, you, simple

payable what end compensation And sheet, balance the of payable was the much that of satisfied is then cash? year? On the how the in at

in next satisfied in will couple of is weeks. payable don't have cash. the compensation at the the in my Well, balance but K that that be . fingertips, I

with next of Our question Brennan from line is Hawken the UBS.

represented? on hear touched much . for bit fourth a prepared advisory you breakdown is a that But about to this giving the restructuring how get of the quarter markets the and Would far restructuring. revenue little capital XXXX texture -- it as remarks as love and in little and in to possible

full We if thinking capital a the of as in restructuring tend it's I let mid-third. a as me say been to -- think Well, I think, Brennan, markets year, that into -- and we I together that markets, think, restructuring I'm if the for said, think can you you because a your really capital you've and client, move a haven't succeeded failed, goal. I is put them I as this.

mid-XXs. the move and out in debt number, might mid-XXs, and I And annual think restructuring believe the think refinance that in I an they've to combined, though. been Just it be has I been

Yes, directionally but higher than mid-XXs, a little the that's right.

Mid-XXs in XXXX?

Yes. It X combined. on

side So restructuring, to XX% XX% of kind XX% XX%, for area capital maybe combined the markets XX%. -- on

it. Got

your on which Okay. texture. Great. the comment And comp in Joe, is leverage, helpful

number? elevated to -- it little take few and be to XX was Or is it's high given that Ken, idea You went the that down indicated longer more that just for you've general the a bring years then Is long-term that to was adjusting target like $XX stay new more you recruiting down of next standard public, might going XXs. XX% the in that and or to to when XX%. you it done, it general quantum now comp get now level there. is the and a for normalized

Now Brennan. go-to-market I Presidents But the the what it company we'll there's inflation Vice said associates. our see think was in base fairly and happens, non-managing base large been -- run what feeling Joe director that

or is those really that But environment And the significant it we might I what ratio. inflation or will point get That's So what what's but see inflation there, pretax tell we'll margin your and a I have we're doesn't to we're think eaten as come still is hard we is ranks. that for. -- quickly. in think aiming manage is back -- overall competitive was you again, out to XX% on our that X -- ability we view up comp of a better. . But there

Our with from Sachs. Goldman is Instructions] [Operator James next the line question of Yaro

and just base Joe, Ken turning the quickly. maybe to senior banker

existing by down talk actually maybe were noted step And but capabilities could then commented also hires you sequential what down? more you I the drove about just X year-to-date. MDs net clients. that your your -- And -- think it's you sequentially X think to about bringing I

understand hiring could XXXX? than maybe So is for will backdrop XXXX? be assume you just I help the substantially it us in slower

have it of net me I don't -- I thought MDs because... right surprised I'm are in that front down. our

about took all half is this half. second in -- the leaving the Ken, there -- leave they actually, were of place folks actions It's of were in first a some who the number

net the down. the -- And slightly the between quarter, so the and change was third quarter fourth in

Okay.

I doing make it sense. that -- quarter-over-quarter -- Sorry, does year-over-year, I thought was thought were sorry, you sorry

look, year and and hired -- aggressively So we did managed. we a we but quietly, spent we we it aggressively

people reason pounding We lot it. head chest to I of we think any were their were managing it. talking it. a doing see about I just didn't extremely count did be about

did we substantial So there -- change. was a

supplier which of the much. You were for deals, then possibly that restructuring of significant a credit to very of not have a fund is think generator are upstream will in Two and activity. as a talking we year the deals of and happy rise XXXX. And We're the to continue I again, about credit be this to new both which gas, played the hires in person, market, those goes this a oil team, private lots future. place about

thought of growth So environment credit. banking of a given coverage dedicated dedicated its private coverage I we that have this we'll the time a first actually is think

going be you XXXX, client we also respond there we the done. Look, -- to I and always did that on like what deliver levers, out have so higher. where But are expand We we'll right we think in might we and get expertise the are might this there this there's we've be opportunistic. to But if XXXX, would to For of is situation year have show the rest given that. do we and the places to should focus what and places happened.

I expertise of think we've expanding we job done a great the have.

the technology, to delivering had I that, a on we build right think time is these that we've finding difficult client. addressed our services year think the this I like to moment to some And going we're that expertise. and right the markets the method focus

Okay. That's very clear.

million quarter. So you and cash did build this of short-term investments $XX another roughly

So I'm earnings is of or or capital promise see that's one backdrop going in the to increasing what than what two need But in that different you just terms to return, quite buyback. what would level to ask quarters consider ago. of macro a especially perhaps question the you the

the that's been an time asked question months. That's be -- question That's exciting XX I've that to in first asked.

I our certain the market spent in. level think and soon will -- much time get that on a So history, -- as of be again, capital. the in to we But We've look, haven't XX% don't the post again, of suspect in is we I we as we're return that past. given a have run months cash when cut an given we're you've seen we above rate market think first at comfortable mind rate exact with, my I done I we'll the it X aggressively pretax. X a

of year a I markets. think tale is X have because Again, calendar this you difficult very

into saying that that You a be created that X% have Fed were that the of about, environment there's was to the trying possible. talking funds market deals I people

have now, when that we it's in. a think don't and kicks And then as it question. I But good of

up what can do We comfortable spend soon about a with of time haven't you, how is lot capital. we'll guarantee return excess. to worrying I and we're it But we'll the the it that as as shareholders high

Research. line of next Our the from Steven Wolfe Chubak is with question

path to franchise, billion. would about the range require was in can we Joe, might sensitivity, that disclosure fashion, suggest be the whether which helpful in I billion basis pieces leverage of a guess low to One generation revenue XXX should the to comp somewhere that is comments contemplating Brennan's we If improvement. hoping $X.X on that point really of the echoing I $X.X linear underwrite unpack XXs the is across

high, that yes, maybe think be sounds -- I a that might little but reasonable.

you with believe lower You a can level. get revenue there

know think that we get can I there, don't I yes, are...

probably reasonable. It's

Yes.

I our think not of some compensation as linearly. remember, fluctuate does

too. think ballpark, you're I So you I thought high the myself, little a in were but

enough. Fair Okay.

this year, on past, of significant just And in talked But normalized sustainable given about various other believe in backdrop? a more MD composition level The Ken, a you've normal different operating what the is just of done do is ranges. you productivity past productivity piece hiring productivity normalization. MDs, you've the

Look, I agree with you.

just with we of we mean changed have in were the oil let's now, in facing same largest market. pretty off technology I And they pools. better a I -- think against think right think a dramatically. the fee we've we're I and pools deal, which facing addressed gas every and was our some with we've pools industrials, MD -- Silicon we Valley the say, the in that I not Bank size that the we matched face. improved fee that that had other place --

So had a normal long be time again, productive more I what year M&A. haven't And you we'll in then think a we per call in would MD.

look again, well was of your again, and haven't we I think, put to the and what 'XX had off optimal that, of look call X I'd you I normal just that. years. X should was say, But a -- and in And and productivity do then those than an had years so you average at ought had, we XXXX incredible at year below I together be we I of in them above kind spike 'XX average And say, last if kind I'd less think optimal. the

would divide good about I those the by don't again, in productivity. years together, think know to might of -- helpful way X what X be So kind be a context. But exactly It's normal I put will it.

adventure, it's I my the choose own to Now time appreciate I color. guess but

next of with line Ryan is the from Kenny Stanley. question Our Morgan

First leverage. question Kenny filling on Connell actually in is Ryan the for This Schmitz comp

leverage would are you in assuming revenues? MD $XXX million and overall X% incremental comp count there hiring one another of level to that X% head per Just detail be

reverting kind it's to a more pace on back front. years than hiring of mean normal last we've seen what the in the I Yes. X

to this on particular, Got statement and as any and how go comments [indiscernible], it. And in that quarter forward then you relates it then as it the noncomp relates to income noncomp. -- like on affected revs

Bank? about Is Valley Are Silicon that you asking what?

Yes.

We don't that. out break any of

I'm long downtime. say ground fact Yes, we out. gotten the very group, it's a was that the break just been it -- a fourth not the lot it They weren't wasn't think a want but has off felt you hold of successful. wasn't fourth been the that going and And and that time. there group great it's the quarter it quarter, group ability I'll the to fact -- the we to don't not beach to year, their for a on the was and about to produce. Again, very people good the

said expect should guess, the I another off? off we as noncomp drop way, agreement incremental sharing in rolls an transaction

quarter. Well, XX area, fee anything ends that pre-transaction again, described the like was I the and would what this that as SVB exclude on arrangement,

be shouldn't if beyond quarter this quarter even it material material So it's actually. this

with follow-up for from final We have a question of line call the today. UBS. Brennan Hawken

just bit numbers the little I try confusing. on a little to a because count a few MD to and it's around down there's wanted drill

degree press of You XX $XXX prior question. press it added as the for -- release, promotions. now. the says to before release million of also And touched But shows then on MDs, million year-end some $XXX X investor MDs so the presentation you've

some some there the does right that around that the in being folks early million there year in in to or to weeks? where also So the the there And folks departing else? are have was departing coming include year-end, committed $XXX something was X addition join

as like whole -- a today. arrived as $XXX year-end. offline. you let's refers the as million like yet. that of if And to do far reconciliation, million that and $XXX -- excludes it's X haven't So That need

is from Brown just do have actually coming X final of that This question the from came line KBW. in. Mike We

been to have. have pipeline, visibility color the I guys Great. more a kind wanted shadow you but guess Most maybe I asked, that bit get just your of little or backlog on the

what take form. like take M&A time little behind for to quick just -- sounds understanding on a seeing can a it will maybe So give kind recovery update are you the of you it's broad-based But us scenes. it the that and

good quite sounds X ago months so you or when you think that bullish pipeline. I characterize

to So hear has interested that just evolved how since.

begin. highs. between table you of said in hikes is really out right again, this what's late earlier -- near idea off year was year the when guessing -- last of end that rate that the when rate the I Yes. actual the I the just put pipeline November and all-time start the Fed take And call -- will kind our cuts

feel think you that anybody is felt you bullish. was a business I going season. actually been business on back pre the -- go whether to like to can I eliminate into has But why to work of in that's the deal I that active. gotten take where in our a January, when very new which risk extremely like statement I tail we that pipe we is business, valuable just Christmas was almost we're do review, raise. determine

So Quality business now. new deals pipe been and happening realer, front it's right so us review in of much like quality feels busy. I is high, think has

will I beginning. maximize it's see a think think strategic buildup bit a equity be. very to to and they private and exit they're that -- more enter try M&A little when much What you're when is the in than do I very here they to sensitive is going

line of think find way So a getting amount the it to to don't they of right. large it's like next I And are and people to lot to time and hike. I as to when positioned think rate stepping a getting move to the this not move. if they I move. starting a to There now. that ready the everybody, But a just of that going question move it right not feels bit transactions little That's is thing means since the of move. a attempt are think -- do you're everybody institutions feels exactly trying up

for over any that today. gentlemen, and close Moelis, to our it session back you Ladies here to I'd Q&A comments. turn closing will Mr. with like

Thank you. . next see we'll and time, everybody's appreciate you call. on I the Well,

will Have Company great a today's time. Thank you call. next mall this conclude Ladies see day. gentlemen, We'll conference you. listen and