MC - Earnings call transcript Q2 2018

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Operator

Good afternoon, and welcome to the Moelis & Company Second Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I’d now like to turn the conference over to Michele Miyakawa, Head of Investor Relations. ahead. go Please

Michele Miyakawa

you second thank us Moelis for Great XXXX for financial Company’s quarter results & and joining conference call.

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

this which I'd those like identified uncertainties, statements, that made certain Before we to call future various to contain performance, begin, may regarding of including subject materially the note remarks Moelis Actual on from those are & including and forward-looking filings Factors time-to-time in firm SEC. differ the with to forward-looking The results anticipated. section could obligation update from Risk currently the no statements. Company's undertakes any risks

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

Joseph Simon

million report of afternoon, to call, record. our highest revenues. another then our This financial record quarter Ken the and Thanks, in everyone. results, of On prior Michele, pleased increase I'll over quarter and we revenues and further. represents business will good today's go quarter $XXX achieved I'm year through a discuss XX% which on our

$XXX prior quarter. global number in market XX% M&A from M&A the overall the year the to favorably down compares completions than greater was performance of million Our which

half, million, last from first revenues first up the half XX% $XXX our For year. the were

both our more the growth and a been, of restructuring We quarter. for completed this and it prior was affirmed consistently Our market-leading be advised transactions, than stable on continued as globally accounted revenue The M&A particularly in of our Restructuring of in environment activity and default was the greater to activity. quarter the and than it strong M&A our transactions on continues has highest level both primarily low number activity for strong to half the clients completed attributable growth is contributor, activity noteworthy which the more by public light in a and announced private of period. position ever half. and year first also volumes

continued quarter. meaningful of funds clients number financial diversification transactions our in larger In the revenues Overall, second in the greater prior million, private and year markets, quarter, compared we a addition, capital and with of paid number advised of over $X who as the growth advisory during a we completed including seeing experienced period. businesses advisory we a are clients greater as our institutions fees number

of the quarter our was went second revenue to revenues evaluate results, the closing year-to-date from deal transaction. that want effect benefited Prior out rules on you new second date to quarter the January and recognized recognition As accounting I point revenue January. generally X, and that in into our timing

meets However, fees subsequent conditions based the when guidance, completion on for to the if the quarter. close transaction all new earned in be they are even material

days two of one on not quarter, of in deals which on evaluate all results business approximately the business you resulted met note was the million to change, completion that June, July. for important but encourage our in revenues closed this first $XX material we conditions While thought based any of to in we recognition in it the

Moving compensation to to accrued be continues expenses. at expense Adjusted XX.X%.

non-comp are increase expenses. new no under was $XX.X to client year-over-year to to reported which dollar the expense. XX.X% quarter accounting Our The the non-comp million ratio offset and headcount second non-comp was attributable reimbursements in we largely increases longer and an of

rate, This Our rate tax rate reduced vests. quarter. the $X.XX impact second to recent EPS benefit is corporate XX.X% contributed was function benefits a the equity tax to second in excess related corporate and of the tax for the new first X% effective The half. plus quarter for of the tax

we the Given of not similar the did of second in timing the anticipate benefits year. our vesting events, half tax

this Excluding the and impact was our XX.X% rate half. of second discrete corporate benefit, the first quarter effective for

to quarterly $X.XX turn regular record million XX will sixth dividend We our a addition to with no effective as the of reflects of that September of debt special corporate position adjusted quarter $XXX on the dividend calculated X. As liquid paid tax all special our a now excess reminder, This to the rate. to are be of August to date. declared financial with of a shareholders, $X.XX capital dividend the of per and income in per I'll is the share, net commitment tax our presentation ended return The and firm's strong Ken. over our Consistent with Board income $X.XX investments. share. to And cash stockholders call

Kenneth Moelis

Thanks, Joe, everyone. and hello,

exceptional Joe bankers our As delivering to whom Company, world. is them collaborate this and strong of and These we in businesses. across quarter the results. cohesive client global a evident into many around we were ability and diverse have bankers, Moelis& communicate homegrown, the results the with integrated service of revenues globally, advisory our the unique record developed network, strength another achieved discussed, At of world's leading

of Our earnings quarter year-to-date, our growth. activity strong, high, prospects announced this levels and our future new includes our good remain which five for are XXX positioning last Managing the and about was call. business, ended and we Directors, client promotes We with hires since our feel one conversations four

look remains as our enhance sectors pipeline network. talent to robust across to global at we continue regions hiring Our and

has his Leaman you stepped Board recently many at the As from know, repositioned of and Directors. of Rick firm role our down

financial Operating the service Board in She be a Partner this industry is has Crain. years will as of our Principal, Elizabeth Executive. Going of by Senior filled Founding Chief seat Elizabeth XX a Banker, forward, our Officer, experience firm. over and

Directors, and to together the closely in in look questions. now, it Board me to and I up for with believe years this she her We open working she'll XX that, asset instrumental for been an of has With let forward have of be success role. firm. I our our over worked

Operator

We today first Needham begin comes from session. the now America our will ahead. And Bank question Lynch. Michael Instructions] go question-and-answer of with [Operator Merrill Please

Michael Needham

everyone. afternoon good Hey,

transactions So the the I of those business? XQ did that in the is Wondering, closed in have were accounting first come I question recognized XQ, parts from $XX revenue for other M&A million it get transactions or of change.

Kenneth Moelis

don't of I think predominantly, M&A I transactions, know it's XXX%, but transactions. it's a predominantly handful M&A. if advisory, Or it's

Joseph Simon

right. That’s

Michael Needham

the for for hires, I if wondering drill could past, heard, has new just at in return the of market getting return just the key what And all? a And not? or more Wondering, investment you is little down that, you platform a guys. that white attractive that a space? have calc on from evolved thinking your Is the Thanks. that pipeline been change is you bit decision lot I've Okay. competitive. of the Has that hiring does part it think on still on and

Kenneth Moelis

still above, the high think Kind bar. we I same look of all the have

on don't working leading seeing set go changing very at quality looking in. our fill going and over But that. training is on are to our being we're stuck lot more on return measure I And those a may have difficult, become return maybe we've I promotion and think that against we but spectacular is a within. we if young, outside, time our risk. a longer, a have more we space. and creating our can parameters. own create of of seen we'd And out We system that It lot take to we we're of bankers, white – areas do we've a internal do little become might parameters but it. So we've careful cross-hire. the and what all and great like we're the get of pretty risk very more we're we're that, a amount own is, that not confident pretty margin, little investment maybe feel we the These we on confident people. I And stringent – like reason on think it And don't still are I even think for

Michael Needham

Thanks Great. Okay. guys.

Operator

question comes Securities. Please JMP Ryan from go with ahead. Devin Next today

Devin Ryan

Hey, were trending there evening, Europe. I on Joe. quarter, here first the Good double more Ken. that Good Last great. question than announcements guess mentioned up year-over-year. evening, I Thanks. think you

the tone, globe, are love concern the what so and And And across guys kind just just if if to get continuing. update in any then Europe you an trade momentum broadly there's more there? is tensions about hearing that around of specifically,

Kenneth Moelis

by Europe slightly, I the it's continues think be to way, year-over-year down but not just us. –

the I them be just to firm, the transactions have the in year-over-year the that is the there. talent through us we we're very announced feel I Europe U.S. bit just come significantly terms of system, created up numbers of years there, we continue three the very we people but workforce and of later. we’re given And I closed four in optimistic about like behind down always little but in optimistic just And and hiring it Again, think behind got started it. to is reputationally, think want development. base Europe, the train or the it's pretty about that transactions a development way

seen trade it a “wars,” trade we've trade, on I've going the on. On the The – not battles not seen big yet. effect

somewhat become things a of people. there. has few in minefield regulatory out a that think regulatory I surprising are There's

seen anything I deal continue see not environment. could I But really affected start on trade deals. we've you impinge in things the think it, to think to it yet has if see escalate, could I

Devin Ryan

Got it.

activity? some that just a what's more the be of competitors? Okay. continuing on outpunching it Can pretty us little are Thanks some of of Is recent driving there underlying then activity? just you restructuring for Or for healthier. level flavor that. themes has bit driving been kind And commentary that to Moelis the give

Kenneth Moelis

try competitors. We our punch to not

call it's default not have to, but which are the is, low. it's we groups. I But of flat our a steady. try we mean, It's number, difficult, I kind pretty think a I It’s I to. rates think, team. market difficult – for for restructuring restructuring good Sometimes

the think good we're hard there a upsurge an is not do drive energy. continues what of they're that and A motivate restructuring, but be energy, power to very to the I as default will year. less the job parts the know to good continue We and of a think of I said. rate. doing team just So I doing some which month, predict cycle, again, to want don't still a team, careful. job. team the in much in more And But that's what them growing. keep commodity-oriented lot market and when, be It's I

Devin Ryan

it. Got

just for And last Great. one me. Okay.

capabilities, capital financing of seeing it the space just whether or increased are financing we up So the maybe plethora up various out some advising kind in peers the these options facilities commitments now setting but partnerships more of given provide of more even be just kind directly. choices set there, of so on

So some further push and into guys just I just business. love you to a something that with are quite all of involved on thoughts, whether as that’s thoughts sponsor community kind or any the know

Kenneth Moelis

healthy other advice, and world We the we have some on of the advise. a IPO largest business raising, capital do advising things, and in transactions in

back get putting you don't plans, by have We our healthy give or We else's don't no business it that have little to up direct – competitive low if you sheet. fear with a and want into have done incrementally. than those businesses. we to you have to we're facilities sooner happens gets end – all capital risk no the to you to love provide out special and somebody as plans very going later, would so We a use be real see distribution, It our go be I ever capital balance and dividends. can thought drawn even into in we the would. we more

the is to no, so answer that. And have short do no plans we

Devin Ryan

Thank leave I’ll Great. there. Okay. Ken. you, it

Operator

Next JPMorgan. question Please comes from Ken with go ahead. Worthington

Kenneth Worthington

my Thanks questions. for taking Hi, good afternoon.

out the remember the Japanese and you. I months you or of and First, that or you think as there and maybe Moelis pull increase the areas like you through can it? where mentioned pace I of you so. the growing certain investment, out sort and think alliance, has you XX think next it the investment to the months, can Ken, best alliance in about market you of in you call you And have called time lot about is are year you the can if economic Mexico don't in pace specific gone the of about out, energy where but returns? we back past, get as the the the of XX growth initiatives. the business, Thank are periods maintain when two, call know to areas growth cycle, And now think when

Kenneth Moelis

pretty out really which talent because Ken, to it's I Board. time all question. think advisory the M&A and want and happening too I'm good the like asked to sectors. I'm figure of feel strong across I I a wouldn't is can't services it's almost are have sector think more I the sector a dumb all in. across

So talent I person the every think or very along. now, I of a could can't we add right growth, I it sector, wouldn't think, if horizontal right I one broad a almost think two I call in came meaning

I at Company, Moelis And would there think So Company that's number anything and of spending its I improve spending talent think internal where almost to a two, growth. if the investment development & more. was just sort broad

really our to now internal now we all of down programs working have education lot take We a days. where promotes for for executive four spent training, or we

investing training good a into base it integrated the and clients. about I how our do young flew happening of think with that big I a of network what people to how makes And more time month we young close Managing ago – acculturating seeing well I with spending together. function, culture think people spend to Directors think kind actually our one globe XX and and that is around in do which that in I'm just the money, and or network. from all money effective them XX

So that would where might be. say I'd growth the be

Kenneth Worthington

different Great. angle. lines, Thank same Along you. the

U.S. to good that yield overshadow And As with seeing? the CEOs, generally play like MiFID or data come you what factor against flattening curve economic the maybe the managers still optimistic there or Or very you're is are or policy speak to talking senior CEOs? another hearing extent the politics into of and be starting we're you're outlook that the seem in who to in the marketplace? guess, growing of are is I looking it to that to concerns minds transact just from this the

Kenneth Moelis

was it changing and They’re think there's politics Brexit May. year-ago night What's got to that – ever Trump on interesting explain you've come things I about Good acceptance – when and me more the Italy? don't some big of interesting part historically, of both. of And to a in trip want it's have think than people's the different I a it. a real where there's just in captive was was I'd said, world. you think he wrong I Germany, question. everywhere there's People And what I I was explain. to of what So of of even of U.S. correct seen growing, just assets. and Theresa spent with I trying Russia, Merkel I from They had kind economy CEO. to you're to Germany Trump Europe ask in is an healthy in the in you Germany there's overlaid a bothered I optimism? back and so Nobody almost a it's interested But see Germany, is a there, time to to thought going lot happening insulted, being but of optimism. a out said from going issues I lastly anymore. fear dose having And dinner about mix with that behavior. to much were the said, what is to

or of all turned win, take I winner it's these three top you all two industries. more to much or industries want take make to you're think it's that set have sure both many into

good to and in industries. in the to assets top, to a globally, there's they afford be – we in and say, a be optimism maybe have GDP GDP, there's have it, in desire right be many right to are backdrop but even And can we the there's that and positioned going call managements the not three real boards assets an by examine yes, so the

what's much think So driving I that focus and on there's it, than more politics. that's

Kenneth Worthington

Awesome.

so to my you much. questions. thank Okay, you. Thank Great answers

Operator

ahead. KBW. go with comes from Please question Yian Next Dai

Yian Dai

Thanks. good Hi, afternoon.

just were couple saw the It we on during So curious of years. I the have couple just the past like Ken, was maybe present strong probably and equity years. impact ratchet of had over they helpful the somewhat revenues that fees feels about markets last

trying seeing get choppier So contribution just how where year for really to a we're what sense that we're do that was and we this year compare last what markets? seeing to

Kenneth Moelis

that's me, business, trying I'm that. structure the don't certain and have this, not client will will we that I in fees, versus would you how is ask complicated know front affect are But up then than There bankers for because and But and what – don't in sure aggregated year are you a fees them. say we lot I it. I that underappreciated. are even and spent to this you the its yourself them of of I you – I'm are approach reward think you it structuring your the ask last the to excellent. a would answer all with sure this they’re create I with that look, tremendous execution don't how and client. most and of that question. more set of of how and an not fees time them part for ever have valuable, probably aligning and tell I think fees year one just I behavior fees Good the alignment they're could

should similar. that? How's they're you think assume I So

Yian Dai

And management. for it. on capital just Appreciate me Okay. one

by year, last it now second where distribution was I the you've driven year the second done in Australia. think part in from is the quarter, So special

just decent how the it's should trends from cadence we strong an year? or about thinking on operating know, just be here? hand by two that looking But we of special level absolute cash of dividends and cash. a about don't forward, I it being be to So levels as wanting having to think specials committed triggered Should this year, maybe just of

Kenneth Moelis

invested on the at it we taxes. that you look every triggers what to and in and capital, coming it be walk the XX-day the at what had want to we it feel a we let like translates we mean And and let sitting cash Joe have it. your But treasuries and led I’ll we us that's we enough this year-to-date flows. it four to do way of through to weeks. have of into material, time. not Joe, we optimal Look, specials you obviously, I also think XX-day that's some cash, treasuries, do when or want revenues additional we're number give and is the I I'll walk this – through to don't lot back.

Joseph Simon

in really was does amount substantial created about and between rates, we What dividend. first It the tax to Yes. million cash was of in regular revenues. our half of back come excess $XXX that the talked new that

waiting idea year good it And was end period, distribute to some was than a the until the this that rather arbitrary it or other point so of it at

Yian Dai

it. Okay. Thank both. you Appreciate

Operator

Buckingham ahead. Next go question comes with from Please Jim Research. Mitchell

James Mitchell

dry Is across it work private relationships? fund about set has afternoon. talk set little it biggest opportunity seems Is kind finally opportunity to and do your putting think to clearly there mean footprint just powder good diversification about see we your forward? I the it How firms fund advisory? the franchise? Hey, your do work that we to story. about going some develop advisory your to a bit efforts. expand think Maybe just increasingly where you contributing been How like placement of equity

Kenneth Moelis

probably revenue and growth is doing involved it's way. business and to to number money, paid the it's come get judgment us. total they out you On group, M&A by moments most basically ever the raising have most are about continue similar believe funding that always each and do just think it's that's a great business life-threatening very there I think like, the that. private significant advisory going come guess, – hit But they is of incremental equity is can business. incremental amount, get But our and is of a a by like into of size. don't that that. on then is right And But are our growth going way the is one, that is surge. way, think the thing is amount, Those M&A. be a you on Restructuring important it our moment, and business actually when critical in now could grow M&A I group to effect important critical. of businesses absolute time their we private transactions M&A. with raising private PFA driver right was the the are to than And the see we and funds. And If like some we recession, Time think because to an if want thing I we'll PFA, dollar companies really, restructuring a M&A dollar I is a now, be in restructuring of do. the dollar bigger we trend, a expertise relationships in those risk M&A. I funds no group matter to

James Mitchell

be maybe kind that? just it quarter, two for to should that of I we day And or give frame it kind to what timing after that only just you on great? look post think have us change follow-up sense evaluating the deals at couple the the what us question of and fall of further the may data of would quarter? a the for a there than is goes helpful. kind of time Could sort could deals a That’s accounting. are the Okay. of days examples a Joe, limited where in be

Joseph Simon

the that or is two no to deals think in are the appropriate accounting practical previous I in that is diminishes quarter I diminishes the And time require as that setting – first day that stone. quarter. of application just conditions be as those mean, time the with succeeding our Yes. passes. I that of would likely conditions probability goes, recognition the the prior time But dramatically there experience, passage of that as the close recognition the in quarter again, of in think those

James Mitchell

helpful. said, first the you right, Okay. as was two That’s business And it days, only?

Joseph Simon

That’s right.

James Mitchell

Okay.

Kenneth Moelis

into ask that's sometimes are July final XX – why the look every on days. to think That on later. June week, I going that literally, and final June X, XX those deals We're sure happens at because go us not quarter, July those XX a us X. the quarterly to basis or not we on they’re are just or things close to going you we going don't to know if – one-day or down close

for project us And hard so it's very well. quarterly as to

Joseph Simon

I days production. XX the point approximately of think other worth that is And still we're important measuring

isn't this just if So there's It's in anything. extra time pulling shift. like been or a days

James Mitchell

able absolutely. as be accurate We we No, just that's like to can, to as be all. try to

Thanks. appreciated. So

Joseph Simon

enough. Yes. Fair

Operator

Harte Jeff ahead. Sandler Please from Next O'Neill. comes question go with

Jeffery Harte

couple A me. guys. afternoon, Good Hey. for

pulled - revenue the On simple XQ got as is as would XQ expected revenues million we saying XXXX? probably it simple accounting-driven that have recognition I'm of over into benefit, $XX

Joseph Simon

the this When old into you happened But transition the on year-end. about process of think that January as old was X. effect came again, There accounting accounting.

And XXXX. the calendar is starting so all reset we've done with

similar we're of at time same think – I looking a period measuring the at production. purposes we're for again, looking

Kenneth Moelis

Yes.

And have closed same – because, this it's when just could be October Joe can that's XX same the of that have October X of be could will – will the and two days Xor October XX the XX same? to to look So us happen never just why the things the these the things sort the on aware again, because in we going X third X October to the a we're not. new effect said the is could quarter. first, We it said, days. or can't X we've extra happen thing don't new just to one at a July these X of quarter quarter, thing know or it's on predict as

Jeffery Harte

is well, those I'm on two. And you what year, million, quarter – non-comp forward mentioned million half affect fell mean, I going last $XX it a comp back non-comp the what the I $XX accrued side, looks Okay. the mean, guess run rate. in Does kind would as And quarter, that of into you the you expense that against expect? that of like I at getting quarter

Joseph Simon

those two think things another. I – don’t of are one independent I No

non-comp headcount I the and – estimate. deal $XX an This in is related a to isn't million affecting This $XX charges, a remains standard. increases is global million that think that just also absent extraordinary Moelis. think, reasonable I accounting

Jeffery Harte

But the payout the Jobs it Okay. real-time that unusual in decision unusual or dividends of back touched decision the timing, to anticipate is a of dividend some do likely of cash in Or kind or year year And position? to or before things and a was as the cash forward – levels of year, last more special going on you kind at Act to not Is special special future. is look dividend were kind a this coming kind it there build? on you later Cuts earlier. year-end have kind forward going consider known of it and This gains. Tax the

Kenneth Moelis

Joe. ahead Go

Joseph Simon

Yes.

So I – think measure compute earmark the so we we bonuses your is as investor's in the in that that To element in trapping is. we excess periodically, – Ken I treasury we – can dividends it's hand. answer obviously then number, is rather it number think better the the and what and cash significant than that a regular taxes our bills other the for decide can and for account, extent indicated,

year. could there's a true to It rhythm And a year. necessarily. going I be don't so be periodically be we'll decision. It twice that think make once could a

We and dependent. circumstances it's haven't fact it's really – dependent –

Jeffery Harte

you. Thank Okay.

Operator

Our next question UBS. ahead. from with Brennan Please go comes Hawken

Brennan Hawken

Thanks Good for taking question. afternoon, guys. the

and On via from returned really really asked Just of my successful. of capital answered. capital, more Most been questions one dividends. you great deal have been guys a have end. special my the It's

Or has of As for more have with make considered to a just shareholder you you're special the the shifting popularity balance specials? reviews foreseeable share conclude that has specials of future? capital led your the or the and shares the to specials amongst the of in base you between the to Moelis liquidity stick returns improved, buybacks going

Kenneth Moelis

figure we found time we've has markets common do that for going Look, to think rata. to with created out all pro so distribute And just to That and give now, we have everybody happy it's think it's very say, hasn't a we've it. efficient to what far, time having in the – up being, been back But debate the it's change. received it back forward. do the Brennan, could way to – that not stock. way But without – we the good been And been for a the that nice to it may capital. float way been capital it worked, we'll we very the it well a always with I be

Brennan Hawken

wanted that, Yes. kind wasn't there criticism you question. to And Appreciate any with of it? implied about just Ken. I were the thinking how understand guys

Kenneth Moelis

dominant it change. It right now seems and think worked could because it, to the could just change. We method about well. be it Things

going a way for to it right forward, and this the seems to and getting on sitting about we'll the think the it. We is really efficiently policy we way do may be we But made think But best that our capital it not this to good – corporate and go, do to back a shareholders now, have way. quickly change. not this is and

Brennan Hawken

Okay.

color, the End for Q&A Thanks good. Ken. of Sounds

Operator

now for over today's the Moelis Ken back any this closing session. At I'll to this conference remarks. turn will time, conclude question-and-answer

Kenneth Moelis

call we questions. appreciate I the support all I three We'll have appreciate and see so to continue Thank perform, the on analysis you given the the And in good and call. getting hope you and us you asking could I months. you.

Operator

for has now you Thank conference concluded. today's attending presentation. The

now may disconnect. You

Moelis & Company (MC) 23 Jul 182018 Q2 Earnings call transcript