MC - Earnings call transcript Q4 2018

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Operator

Good day, and welcome to the Moelis & Company Fourth Quarter 2018 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ms. Michele Miyakawa. ahead. go Please

Michele Miyakawa

and us you full-year everyone. you Thank financial Great, Moelis good & joining for conference and Company’s for results thank call. afternoon fourth XXXX quarter

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

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

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

Ken Moelis

the the achieved full-year revenues XXXX of everyone. a Michele, good period. year record and up prior prior and from period $XXX Thanks, afternoon, XX% $XXX record revenues million, up tremendous firm. year of was quarter for We fourth from XX% the million,

advisory. all completions M&A, and in full-year higher Our record driven was across funds a and of revenue growth products private restructuring with number by average fees greater transaction revenues

additional full capital of the opportunities discrete and for firm. to advice defense markets world. allows our clients expert quality capabilities, the M&A elite Having complex on and creating debt with Our transactions dialogue provided advisory increase us fee shareholder including high throughout suite a franchise

across values Additionally, fees in billion billion. than deals over earned a with on we M&A greater $X greater average meaningful $XX earned deals fees with increase

default low level rate in a of despite we experienced revenues, height record achieved the that the environment crisis. franchise restructuring Our surpassing financial the

market completed one and you the in we according of dividend, gain on the our announced on special the cash to shareholders, We number transaction ended year’s continued repurchase U.S. like as Joe? to the Reuters. to Joe through to restricting India. the regular will we year market of environment. Thompson in take worked focused I’ll We had and continue and amount turn in results program. our on in the XXXX to of authorized ten to assignments share million hires as well, stay call $XXX Asia seven current over will generation for shortly we bought flow and market top and completed the for with volumes and In shares deals increased discuss another financial advisor our touch further would who then key record global benefit open as which director Joe managing the our come return on to we’ve announced dividend, capital I share

Joe Simon

revenue strong results, take some including on as as Starting Since Ken. taxes, I’ll allocation. well taken our details expenses. through Ken’s through capital already with you Thanks you expenses, more

and of compensation is quarter line ratio Our for a the with the year expense in adjusted target. XX.X%

XXXX masked for ratio improvement. XXXX the impact XX.X% of to have not XX.X% the the If does, of true the but decreased XX.X%. approximately in of from as reimbursements contra ratio expense non-compensation the the year, like applied Our would had been expense accounting prior the full-year XXXX impact a XXXX new

XXXX. financial rate The of a corporate concentrated plus normalized the compares federal related year. The includes of of we decrease, the business of effective corporate XX.X% taxes, approximated were a We to in full-year which positive impact with largely rate half tax discipline in of impact So, underlying the XX.X% vesting of the year-over-year margin first the the about benefits tax events, pre-tax excess the corporate for our strong had XX.X%. improvement operate On in basis points. year rate XX%. XXX XXXX XXXX with rate resulting

reminder, a the our corporate are net that As rate. calculated income firm’s income tax all adjusted effective reflects presentation tax of

excludes Going revenue forward remain impact XX% mix the effective underlying basis, to share similar price changes of adjusted normalized on rate related the to geographical vested our XX%, equity. same we XXXX. to a of tax to approximately corporate assuming The expect at rate tax

Our primary annual vest this month. towards occurs of the end

breakeven excess quantifying share the benefit price tax quarter $XX vest purposes a one, this approximately For for the is in of share.

share For each $X.XX the vesting, of expect EPS. to at $X approximately price we in impact change be

$XXX November of XXXX, returned open for an and market, return We XX,XXX We million of in basis, record over purchased $XX.XX. bought to to our of our During XXXX, excess in through repurchases. XXX,XXX of confirmation board of year-end purchased capital level in million the capital average a at form $XXX shares all January. A late approved shareholders. On shares including share over shares back price starting we dividends in buybacks. the and another XXX,XXX go-forward in the commitment

In The regular at addition, as dividend declared increase one in We’ve now of and dividend, year. second quarterly the special a in I’ll public least call our related dividend our increased have regular as February XXXX. will board from record well Ken. XX back holders $X.XX since stock to our on $X.XX annually $X.XX of company. $X.XX, hand the dividend to becoming And an be declared March special to quarterly the to as dividends paid

Ken Moelis

drove quality platform The tremendous and our global results. of Joe. these unique Thanks connectivity

the talent productive promoted proud internal have managing XX% success. in become our made grown our hired we directors as at promoted Currently, talent our critical focus is we internally have XX analyst Additionally, years director. ago MDs to and have have our firm. of a and of on our we respective this they to managing development franchises their some first been most the Earlier year, are of investment our

grew around promoted five hired top that we for of college advisor senior look we partners. by the to the believe the inclusion managing in XX% future. increased exciting, campuses diversity also on directors is rapidly XX% growth we our and a talent hiring world achieved advisory and our year, leader’s XXXX, program holding become best diversity XXXX. on our X March. and talent Number and this diversity forward annual five We Most the our base added we a that destination the on young and for two coming And we focus of During have on with third we focused

into our all products remain XXXX, As we activity across look strong. further our

see sponsors need to around economy. governments world financial continued company’s to the a stay the in for expect global We competitive fast-changing and transact to

growth economic climates of with model. and in that, We have strong a And and I’ll open it differentiated questions. track varying unique up record for

Operator

Please Instructions] comes Ryan at [Operator Securities. JMP go first ahead. Devin from question Our

Devin Ryan

Joe. afternoon good Ken, hi Hi,

Ken Moelis

Devin. Hi,

Joe Simon

Hi, Devin.

Devin Ryan

is recovered the are just bit quite trying came quarter, to about there I guess, range? plan? forward question just guys first are obviously for based guys kind repurchases, – kind of just in is you a we’ve looking where you moving and optimistically, the through and it fourth share just a stock do the are on XXbX-X shares parameters intention a about Or trading to But price What back at the buyback? of a bit? off think the think on the

Ken Moelis

the quarter, we did it in we period. was buying, answer were to because the So, we a fourth limited In start are is. blackout but that –

– we are midstream didn't as formula were So, in XXb-X. would we set a or a it on just limited place. our we as by we have had that some Joe see couldn't said, more it imagination, aggressive. gone we got low stock we have lower, plan been as have And And up would would as change it the

flow, then do two, return we're stock to to So, shareholders. was repurchase allocate to is, back at our the always share capital through dividends first, want had limited we shareholders. all But a growing. going as flow going said, we way destroy I not said either we repurchases. we think one, it Number we've that this, Number to to would we're a capital or did about

We will plan not have an though. autopilot

I obvious, zone, when the analogy we'll to maybe the line, aggressively. XX-yard off the I'll into that use it's on get stock red but just we're think, the Super I'm when buy where Bowl, we

XX think things to we're And decision red like other field you But part of use might to that'll also we quarter. dependent going about the ask lots at say the – to and yards we on conditions and zone that know think make in you're time. And to to of and that. going pay is the probably kind were the that And you field when way we're going to playing it enough should we're we'll stock I'm The we is? thought repurchases. like market And not of last smart be that that of dividends. of that

Devin Ryan

Great. Appreciate Okay. Ken. color, the

a Just follow-up.

and kind whipsaw good So, the just kind their the extreme at curious and appetite, the client that still list this maybe your fourth markets. volatility here been private market change just went feel and pretty volatility, obviously public of you any business between through a as pretty of that quarter, companies And about of obviously if public look extreme there's if I'm in see companies kind in business usual. didn't

in few quarters, differentiation any look between and the are be So, as going next on world companies off expect themes of were Or that between curious private? markets? the was public versus public company the how maybe acquiring that do companies that into for you what's you out at over market there sold and outlook the kind just to business dynamic overdone? your looking kind played in certain I'm that of it even maybe two

Ken Moelis

that have the We with or one the are and Christmas of environment, volatility. around the the your [quick which in say around no And believe the it your world imperatives. of to and of was I way, And to conversation little no to believe five dangerous the any time, think the to people height position of the continue conversation of volatility private that lot are industries volatility, strategic bit. discussion talking the to decision, years to many And down because did three I so speed thinking the don't it's not we one diverted obviously, public companies changing the will change technology I I But saw difference it become also mean again, in buy almost cut a And quiet. about see compete. that difference. both I – I versus saw competitive their by don't industries I markets question]. they’re that's volatility. M&A. But has triggering build because and revolves in build the a see almost kind road

discussion, of we're strategy. level And so, any the I trying was implement people to see didn't still their front – on and it foot in change were their

Devin Ryan

Okay, great. queue. I'll hop it. back Appreciate in the

Ken Moelis

Thanks.

Operator

Our comes Please next America. from go Michael Bank question with Needham ahead. of

Michael Needham

guys. afternoon, Good Hi.

that So, the cleanup. million that include settlement $XXX shares? just Does authorization, first does tax

Ken Moelis

Joe?

Joe Simon

No. That's That's purchases. authorization. excluded just open from market the

Michael Needham

got you. pipeline. Okay, And of the Alright. terms just deal in then

You year. strong a strong really put quarter, fourth up really

sort far, like how it's terms up. from of to going the half shape So the advisory how pipelines year, trending, first we've heard mixed the in looks other of of the are firms things it

Just wondering seeing at firm. what you're your

Ken Moelis

ability thing had too to We've in that attempting hurt – of speed one to tell shutdown was time, we’re busy. for weren’t very And the hurt activity. – government approving of to wasn't corporates hasn't quick. desire watching we're the same But are the deals it, – they approve early during at just recent that is there element during because were any not the the conversations, of they catch slowdown SEC are seen half slowing saw that things pretty And I They slowdown volatility up, the that the was government only that closings. was time. get thought – possibility There trying the M&A hasn't affecting have to it's And back and level time. down. everything that we the

Michael Needham

low potential like past doing? band? and Obviously, where here. be from things last Can the seems trend talk for be it how still And of said Thanks. is changed Has revenues, that the on your meaningful the business could one in it. or the It XX%, kind business. at in should XX% of there all? Got think they in is up about business. restructuring you've near that picking I me Okay. you

Ken Moelis

restructuring. in a all, of this did First we record year revenue

rate there. So, there we’ve had a great It there’s default year of still is debt out companies environment, restructuring. just and low a in lot a lot there’s of out a

year, right. had had is they a It’s So, the same big about just probably that band we a percentage big year.

show there X.X% difference are It seeing a rates we of elements Europe is big X%. seeing between and we is elements of are and big Now, this, difference interest up.

we're slower. I I – think European is economy think the

pop we the I how And lot is restructuring good in United X.X% so, different or better restructuring I X%. starting general some a is world unfolds. as leverage system is we're the a can't But on there. to around up think see than don't strong. and of now, recession, could States see There But year economy the a depending have

Michael Needham

Makes sense. Thank you.

Operator

Our next from comes go from question Richard Sachs. Please Goldman Ramsden ahead.

Richard Ramsden

talk Hi, good you acceleration on business about follow-up an of talked as industries, talk course think there but big could stand bit opportunity really Can a you evolved how quarter? a though. Did little would restructuring over any little And, see in be I bit cadence you about the you Can a I are specific the fourth the Europe, there that everyone. opportunity? of the you geographies afternoon, just ask know a perhaps about where a or business? the that industries year? out

Ken Moelis

through can't cadence, I has go because another started when think gone energy it I through cycle. the

of started some those. to a problems at and cracked the but isn't giant, in energy top that bring head, of industry can't when and exactly, of prices back has but they think – I my U.S. up which in when showed I that the retail, off participated we pocket least remember

general you hit slowing. of in Europe commodity the industry is leveraged deals in get that just that I of get don't is were economy a you Europe where think, we're see sign it's slightly slowing a not single a me it in industry, weakness kind see or economy, but I and seeing usually and a particular over any to the hit, by Continent think different.

sector, it's U.S., the Europe, that, economy. the commodity sector it's still I more things round, think in general and the like So, energy a in

Richard Ramsden

in second in a public lot deterioration obviously And question of financing December for conditions then my and both private on markets. concerns is was There M&A. about funding

we certain If of have be where got do to to deals kind a get headwind a you take to types were of done? think pulse of that now, round-tripped? Or could a you we in

Ken Moelis

answer that. to me two Let you give

trip We have – round on say I'd rates. we do not

came that's is So, have rates The leverage they back iterated thing okay. mean then I finance back, availability. they way. half come plummeted, about halfway that but about round-trip

of the rates probably capital. stop the rates can a and there to and the liquidity the and market be of back. capital So, the middle leverage In think finance, But worry People XXX% they a real a was smidge the is of okay. liquidity leverage that available. off was are ETFs round-tripped transaction, I available, if price price funds, going might call capital that market. that's get think can That won't concern December, there going on wasn't I I'd was it what in of a structural take between And closed-end but halfway it. some

Richard Ramsden

helpful. you. really That's Thank Okay.

Operator

Michael Instructions] from ahead. go with Please KBW. [Operator Our comes next Brown question

Michael Brown

good afternoon. Hi,

Ken Moelis

Hi, Michael.

Michael Brown

characterized strong. environment is like sounds M&A it So,

little we’re was a to you're the of thoughts given particularly seeing I China? what what interested just seeing the then with activity, there. more geopolitical bit So, still Europe, on cross-border your And uncertainty are about of some in some that hear

Ken Moelis

it's the then the you weakest market. two Well, picked of strong elements and

a had general. to in think Europe XXXX not in a big So, was sorry a year us not Europe expecting big either. I don't Europe, I'm And in year year great for XXXX, M&A be

you going multiple slowing year the the political havoc to have more the two you that coming cause a elections I things, think Brexit, economy on things, I have throughout system. are Continent think that than and have two you through

ago, assuming maybe hope kind And was since as then two XXXX, we're macro-wise China environment. it we're Europe. – deals ago from of much pretty China, out of look did three the have XXXX much, largest share, and go to we're to better cross-border we we of but in that's it years back where for U.S. that firm, the do years on depending be China, We and in XX to microcosm market a not if into kind we're looking an assuming, we So, our as better. not

we I as we're are China out. of thinking depending think year none. not a not did pulling And of kind we big cross-border last we're market, –

and want and it's a in go think can't be you I out. and big we to economy there

spot So, Look, think larger we're I thing going one in are you I been six for to there to those. the the political, the on a but now. deals say twice at for world. stay think M&A, cross-border. transactions there, cross-border China don't from bunch whole of reasons where months to And a but be look is cross-border I'd lot market And, same have of for concerned have you'd look do regulatory, that's the about

Michael Brown

tease strong. And environment kind your of I how M&A appreciate the commentary on color the just to then there. currently out is

how And environment? this you looks stronger compared now saw you it's prior like the this than and Would characterize be time for So, say what to would you kind periods? what kind pipeline year? may of of last you

Ken Moelis

bigger. I a level same the feels and think It bigger we're like firm. at we're we're

having So, might firm. done a I restructuring things business like established of say say answer proportional guess, tough pretty Asia, the a and have restructuring might in our is good Asia, having in going is business we And And market, but when I China transactions to in continue. it's the a M&A up. some that were is, pick tough, best Europe our probably activity the let's look,

some take of that offset as And so, around is a there well. to lot of world the up

the to business. it same which of size – and say busy is to proportion me, in feels and the feels I'd probably it So, strong about our

with yes, absolute size our of firm. XX size of as would is our concert the ago, against that So, I months bigger business in I'd the measured say guess

Michael Brown

questions. taking for my you Thank Great.

Operator

next a is go Please Our Ryan ahead. Securities. Devin with follow-up question JMP from

Devin Ryan

the and of on about for great. model I the kind Hi, is just Thanks guess operating humoring thinking here. here. from me Joe follow-up just the for margin

So, and the there level? we adding do understanding have to more still Is revenue that's XX.X% growth any any room Is on part this I another guess And of talent. extent comp good obviously you're the below kind there flexibility of year there ratio? one.

of reminder think a quarter part is, is I other good it downturns. the planning potential for fourth The

the about, maybe model trying just the extent, flex margins how to environment could where revenue you're deteriorate about operating of does here thinking go? think So, of the in the lower end accurately to and just broader kind the

Joe Simon

Sure.

So, comp adequate. to XX.X% I think on the think be I ratio, continues

the think probably I way that's to investments business. new still and think important remain for we will We about XX.X% and to therefore, we mode and continue is that the is, remain in growth about think thinking think appropriate. I – increased make headcount

relates and say obviously – the variable. on And probably a it amount will is fixed in flexibility two-thirds there it's there obviously, downturn, year large obviously discretionary is is side, come. As non-comp distribution, in and there the opportunities of revenue as flex terms that's each that one-third to a comp, I'd

is well. So, some there there as flexibility

Ken Moelis

to and transaction. the the long to our to lines, fair best to we a Managing just we exceed, We front the about and by They hold was – this me add employees will. for let and results year let if below way, conversation part And XXX our it's as the that. downside that XXX well that's we the firm XX.X%. economic of Directors deal And the enough decision had That on – their was and good go no. to our on get them thought a they expect

the that everybody phone the also the in through maxed last pretty do call look participants terms sprint. was for for out. consistent I we they best in they in interest we've That shouldn't of it I you in that way. pool. they've a And was level. through bonus let because the run the felt this our know five year hope thing on line to them full a exceed, by of great years, been if If succeeded – everybody retire was to November think fair in comp It holding great and should the at our year finish the in the for shareholders returns But I

also we downturn hold that what's going line forward. fair in And a and it we that's in it we in and line, as to environments well to hold will a all will comp hold think I firm to tough line well. operate going know as will the that the make make environment how great

Devin Ryan

Perfect. That the looking for. Thanks was color guys. was I

Operator

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

Brent Dilts

Hi, good This Brent Brennan. Dilts for is afternoon. on

the about expect MDs characterized should as hiring And we the should you from XXXX? and pipeline productivity, the we in given pipeline how given above Just hiring think robust, XXXX? average

Ken Moelis

lot you, Europe The we institutions, the pipeline great look, terms, facing it'll we I of is especially be aggressive, good. think of into conditions. are opportunity. can't we on several midsize conditions market have extremely depend in in think we to There’s And tell going that want difficult but retreat. large a financial are a And them

an and So, an for you do more people there economically. with be normal, it agreement than think hiring but to opportunity come got got to I you might look, to

second can't question? commit it try get this going to – What’s to part be we're but that, there, think more we do try that we're disciplined. aggressive the to probably I to of but it's So, and to will the going year I say fair to

Brent Dilts

potential if add and decent through more of where amount for the just just just productivity…? expansion hired was productivity kind It a people you've pipeline, think you given, of you recently

Ken Moelis

is that we is at is these turnover important crossover. word, not young Managing from the a or wish most the I'll and level. talking Directors, think part, Our lastly, real productivity Director if let the consistency? been have level. this, say with have been story this why don't Managing turnover, of to is the good years, our the I Our dramatically. And that behind who think up me zero company Director almost promoted doing I Managing provoke, And careful within saying couple especially for I'm paid and that's be for our at last

– productivity faces and are teams I up of so that view from will the and think consistent going and dramatically seeing is are we point it continue. and clients Our

power promoted, we XX% to you what don't We have and pretty the clients, break math franchises are could out, but and probably and up see internal and are know their think about the that's deliver the I of you significantly. they as consistent young are become more it consistently that – firm could happens productivity do growing, and they I it's the

Brent Dilts

Okay. Thanks for that, Ken.

Operator

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

Jeff Harte

afternoon, Good guys. quarter. Nice

Ken Moelis

Thank you.

Jeff Harte

of it's a couple, guess. the starts third more way quarter right count importantly, of still XXX,XXX XXX,XXX forward increasing perspective. count the dollar How kind reduce then again, share I look appreciating as share kind quarter the count From did the assuming A about the much kind forward? suppose to is per going the is share clean-up, the a And of price I in think decline account? we share and

Joe Simon

your you quarter shares starting I price in I'll historical, of average So, the price. little or a at shares point. be share can changes but quarter, than the to of back And per average sensitivity and of was quarter the I that $XX the would future that. reference And dilution fourth look any with the the is price kind have XXX,XXX or average Impact price before $XX, between overall, dilution to dollar about a XXX,XXX point, for less The so buybacks change. think or four the come we of think is about

Jeff Harte

count was what year-end? MD the And at Okay.

Ken Moelis

year-end. was it's at XXX, now, XXX XXX that's maybe XXX, a it

Joe Simon

That's right.

Jeff Harte

How garden MD How quick for obviously, I growing mean guys can promote MDs thinking when you a can between you revenues. Okay. the the hiring. if for process promotes? count, for to comes hired a takes hire, much, relationship, client does and than hire promote revenue that as it not, generate generation? more you it impact And when I'm timelines I reestablishing guess, there leaves to is while you

Ken Moelis

get the immediate. been you on. veteran, of probably XX-year if backlog fairly they've what cross a hire be a working It's should It just you –

just to like year. you full worked of The go know the a is, part because best with back about we to are, consistency, slower, us eight a to base you number. client has go they’ll you like an you you and that duration a analysts year and year, So, are get and different including you Most been garden their ramp stream, up the get right? XX% rough garden first leave part just within long of There up, who veteran they seven, up I crossover ramp the the XX number, two-thirds you use will the one younger, revenue, with we a leave talked of can has promotes thing the then to with higher next eats life they've know is as slower. their they years, of ramp XX-year and lot existing have on banker. A they're then us, of the a But but up them no pickups. model been

are measurement. higher. of lifetime what that per what fought revenue always MD the I that's dramatically against I know that's associate And would banker junior a I don't people. tremendously on the it over your it's any I of higher on us. so culture, to be, that, be. motivates ultimately the it. life but higher don't is why returns it's return that higher, expectancy risk key the capital. much return that's kind just It's investment think would on consistency, the as invested you why I up the capital could do want, would on promote, we anytime I And cost of say The know jack a the

feel return on you to invested XX years and just highest have look we this we of So, capital. XX is out training promoting by like, hiring, – far as program from is within the

Jeff Harte

you. Thank Okay.

Operator

now back for over now This to session. any concludes turn remarks. to our question-and-answer conference Ken closing would like the Mr. I Moelis

Ken Moelis

you. thank again, Well,

any you Joe If questions and myself Michele, Thanks. call have appreciate or it. other

Operator

concluded. now for disconnect. may presentation, Thank now attending has you and you conference The today's

Moelis & Company (MC) 6 Feb 192018 Q4 Earnings call transcript