MC - Earnings call transcript Q2 2019

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Operator

Good day and welcome to the Moelis & Company Second Quarter Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Ms. Investor of Head Miyakawa, Relations. Michele Please go ahead.

Michele Miyakawa

you joining us thank financial conference and second good for you results Thank everyone. call. for XXXX afternoon quarter Great, Moelis Company's &

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

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

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

Our believe measures compare to results useful certain to these results. to across are measures. our and to several measures operating comments will together our include We GAAP better financial be references comparable understand adjusted investors or today periods presented non-GAAP with

G information firm's GAAP information on The required with the be investors.moelis.com. can Relations reconciliation relevant our Reg provided adjusted measures found Investor of website and other financial release, which are at financial in these by earnings the

call the turn Joe. to now I'll over

Joe Simon

Thanks, discuss financial through business Ken results then today's good will everyone. I our will and further. afternoon Michele call, and go our On

number from XX% declined of global the million revenues the reported year. up We million M&A $XXX prior $XXX second from quarter, completions prior than XX% year sequentially. compares of in market with which M&A in down This the greater XX% but period, the the overall

ranked in and down by to be a the While completions Moelis second In for value. quarter, continued number global related business strong our the one M&A restructuring activity was our U.S. was contributor. restructuring quarter,

was XX.X%. accrued compensation adjusted XXXX first was Moving half to at And XX.X%. our expenses, expense ratio

or current were levels, near non-compensation two $XX expenses Our run the million to next expect prior the quarter quarter. rate of million year $XX to $XX we our period. be At underlying non-compensation of down X% quarterly headcount million versus expenses

fourth is The and taking the space out expenses $XX to result it underlying our starting quarter, quarter. non-compensation we to expect likely headquarters to to in York and increase in of increase the growth. City building per forward Going million million New our our support more $XX

$X.X is corporate our award underlying tax tax benefit, quarter. before rate rate Including benefit for reported the tax to the XX.X%, the discrete deliveries. equity related tax million we of compensation an effective X.X% Our excess

As corporate income reminder, effective presentation firm's all tax tax net our adjusted reflects the income our at rate. a calculated

bought XXX,XXX share diluted decline through over allocation, to ended for quarter. the last shares, today's average to and this to We million a million regarding shareholders than position over no year. dividends. which the a little quarter, We’ve XXX,XXX dividend, weighted repurchased back little a $XXX the more months debt with to a six buybacks in sequential and including have will activity aggregates and investments. added contribute declared during liquid quarter Lastly, when the of cash and distributed with helped capital This we financial than $XXX quarter count the shares first more strong

call the to turn Ken. now I over will

Ken Moelis

Thanks, afternoon. good Joe, and

Looking ahead, our across our business about we products. levels given feel our activity confident all of

we to performance than of call, half stronger our the on last much year. first the expect As stated we be second half our

continues of which and activity. markets restructuring our middle robust both coverage, Our strategic an founding sponsor cap been financial since dialogue to has our with market M&A, business drive large companies pillar is and and important capital

quarter. a be growth to the continues in year-over-year achieving Restructuring contributor major second

of involved the was For global in restructuring X six months top Moelis transactions. completed XX first the

we will cuts, believe the cycle. extend outlook policy and current -- both starting maybe extend positive recent Our both on M&A in is macroeconomic the reversal will and amplify potential Fed��s tomorrow environment with

our clients. a diverse deliver We platform, model. franchise to world unique to powerful to ability and a combined our differentiator resources the restructuring around given This creates with are and leading is collaborate positioned the well our from

talented healthy U.S., enhance our external fill last a Director announced our oil to And internal talent platform. have the pipeline expertise. managing currently large we core gas earnings a have with of also focus, Since a bankers the call We excelling veteran a on space in Houston amount our to and we large of future pipeline sectors. also Managing already development our directors of across hire of many wide

have In conclusion, months. we’re of the several experienced in encouraged past we pace client the by increased activity,

remaining our our execute is organic clients strategy. number to we in continue long-term growth which on focused servicing one on will Our building goal, relationships,

I’ll you that, have. with questions, welcome And any

Operator

JP [Operator Instructions] at question from ahead. go comes Thank Morgan. Your you. with first Please Ken Worthington

Ken Worthington

accruals difference cetera, of afternoon. good comp, weaker the because experienced given activity first, and does bonus really in it in that has deferred all at the et talent say easier it for are hire seen in questions any half, year? make first early Hi, way industry weak Two down to of does the the make me. that I'd the maybe year no was so part first or

Ken Moelis

I that or your them. I Is think both two. is for have that you of wait -- Should second

Ken Worthington

That's one one for and I got But… number a two. completely different

Ken Moelis

Okay, with that. start me let

was to see world a probably point, felt back The fourth sharply they going we than hire. to was opportunistic down we’re stock market a raise actually good rates you think the expected it’s an months Fed would time slightly the Ken, were and So go saying I quarter facing and like we nine if ago, in different today. we

as I sure seen years think they XXX the Fed a in the ever XX business I’ve as change direction, I’ve I’m been have. not degree fast

think beginning, week forward. a of going was there's a there think but lot optimism I I So

start available. And it’s lot with has to might pretty hiring a a why I to are it looking market. look of chance time, optimistic on -- bit people and a changed balance We out kind making of we that, --were there And but it's thought slow probably industry companies got the so a we is of forward opportunistic hire external. I raising the at seeing having I think M&A believe general an off that seeing and issues kind some are think a Fed balanced we have

Ken Worthington

-- and fair I'm of side-ish enough. question. And sell Okay, this is a sort sorry then

you it. So adapt hopefully to can

The the extent year To levels just weaker there are pent-up first etcetera. half other first In half can the the year for second half year, of of second the up become I'm demand those normally activity think do sure deals you the in So the the in be anyway had stronger the and way, which years if was recoverable you deal are of that by the year what in the is half does but terms the year? for seasonally it you, that are in sense, transactions some of make words, of don't of happen M&A to industry, those to relative is half you've would first second in because than of not half it the in year. actually of half the modelers come think make activity? do. you weaker year of I seeing about the prior Does business stronger think we even sort first market didn't what that

Ken Moelis

Okay.

some never either the you a markets think, downside better On that in first a faster looking quarter goes the I road different always the specific is deal went raising. is deal. things bump say people than thing fourth a There's a a it’s you I and goes are off the do stock specifically and in of I direction. or the environment, that accelerate XX% up, there's of XX% completely a the smoothly in found. deal deal. deals Fed in when a middle there is -- by there couple, people So can't see there you’re would deal, make middle they think at

doesn't think we to Fed could kind become go don’t have are when around back am are more I have accelerate. can are reach things market if now negative finding aggregate and where could that When part and -- pebble see with but through transactions them it it. and mean a that -- you But individual ways, an comes that get I that the find of just come you'll do is, boulder the happen hit stock I right acceleration, just your think to becomes it see are pebbles. optimism line I I starting find and now finish you boulders And the their of deals optimistic think you by They didn't an right people the indications answers and feel want they the in people to it’s that of I that questions. again that see market. know deal acceleration when an bump people

Ken Worthington

Okay, perfect.

it. the You you got intent of than asked question, better answered I the

much. very you thank So

Ken Moelis

Thanks.

Operator

you. Thank

Your Brown go next question comes from KBW. Please with Michael ahead.

Michael Brown

afternoon. good Hi,

to a for of kind little just your of dive to wanted deeper So back in expectations kind half. bit the

are but we’ve stronger a quarter. heard the idiosyncratic, we’ve start understand from are to expecting some fourth from So teams they and I heard been peers has strong some that July also management a that off results commentary

is So would rough sympathetic the obviously to think could I shift, you kind and you. any date how helpful? the third between color am as And but there difference quarter? deal there you give fourth a to us guide about can Thank that be closing the quarter

Ken Moelis

like more transactions marginally really the fourth to world getting hard to do do the say have third every it is week. I'd visibility seems weekly, the people and is but the animal and improving spirits and world desire if the that’s better I always Look quarter quarter, within for or

see impossible it a quarters it game a into could just a almost dividing stronger being half, is to to because tough play want I up strong it's don't the a see it's we -- get So it's second right. -- I fourth but quarter very such

Michael Brown

then just to Appreciate color this that. more reference Could that bit bit a a am trying that benefit quarter. transaction? just press better? share release, that something a a understand there I And was that one-off? clawback And in little about is just was little to a you the

Ken Moelis

Joe. turn Joe, that to going to I'm over

Joe Simon

Sure.

to who policy for managing this just to goes So our clawback go compete. directors back

is some one of the to from the other those reclass the some or line adjusted So policy for come director managing of the comp, in of comp, basically left amounts back hire whole recapture of to the But our we form gap to replacement. the income have case form in economics the income, because who clawback, in point forfeiture. clawback a

Michael Brown

Okay, thank you.

Operator

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

Brennan Hawken

a think your prepared afternoon. you the indicated Thanks Ken, taking for question. good in think amplify cycle. Hey, had that the I would you Fed cut remarks, M&A

So a that color of comment? most rates, curious It on already just such have little as more seems short-term bit dropped. LIBOR like to kind get

on in some think Bank that better? clear is be maybe market, would that by right? rebuilding, cut help little run the already a the the understand weighing Central that of And of simplistically, a risk So, me you lower wouldn't impact can rates confidence leaving of see you a comment

Ken Moelis

markets think -- The any they're I of we're reversal going about we cuts, the saw seeing Fed I prediction four into has of of Well, of everybody moving than year, and kind worried quarter the respond everything. of, right, a there. they're dramatically. that to first, in hikes. worried to last worry And fourth confidence, about to more you going Valuations, just about worried people lot valuations, might economy, changed be raise not you're a were think

stating undercut cut. built that you obvious cut, might confidence the they that So be to I up don't if going the they're all might

takeout generating the you But digitizing might means tell when investments, S&P XX% low. on trying it cut and get their it are and that might with are might that has is And I be done Brennan, that in see be that But is the the lower, way, is in might available. you the the slowing and the costs, I companies you capital get that making economy rate will that rise said, to it larger true. the rate S&P hurt X,XXX the still year. you the that. of processes slowing As at a doesn't Rates the But be been think executing underlying since highly economy indicate agree about market. beginning I to by

get might last the a priced over priced mean in But out. that doesn't yes, So if and the might been half. doesn't have it it Fed do month it,

I what have the is probably at for pointing good they're what discount been, M&A. going that to that's cut, trying which confirm is So, I'm markets and will think to

Brennan Hawken

that of from that of things? contributed really of -- Yes, Central anticipation to drive market, rates that it rates other? short-term that's week-to-week? markets has the think Do -- and as and have the that some saying of you a dovish the than Ken. the Do positivity think you is improvement that some you've spirits one LIBOR referenced a have financing might the fair, rates importance that no, Bank? of Thanks. just of combination and seen? given just Or plus some animal you moved kind is in more financing you're mix these And the a it Or more of factor the such

Ken Moelis

It's -- and I rates a fourth things go sometime the to one time on think I -- said needed it's we first quarter. rates is down really you said XX It while work. mean, of months that the to the started nine or see calls back, of this it's I for in not the to about ago the like key. isn't make the level not

valuation pretty Let's say in recession putting into years changes financial which significantly. models, sponsors, their

recession. of you pick one put a differentials. And bid you If cannot all ask be that sudden would a one, year,

people that will of we the not one, to I Fed a aggressively instead lot think have confidence one. cause of the lower raise get rates and are may maybe starting

I wouldn't in the will difference, market say I maybe of raise that Availability you and And the don't when coupon all the effect, emerging a XXXX think people only rates into might I of been it's global plays is bullying capital Fed in the get and a lowering not the has for one the mean, that the recession. really of markets. dollar -- problem companies of it's makes that dollar -- not a strength the front happen, the no, think I will

Brennan Hawken

macro Okay, the there. thanks oriented humoring Quick the sheet. balance questions one on for

by for $XXX have balance guys strong the normally You quarter. you in cash and last got three it's sheet, referenced you on million point built from at this investments, you have, cash guys you end a as I been years versus XQ. is that’s short-term the But low have running which last how think

you Is the hit the okay market we build think a that guys And really should an patch, the cycle at. it's -- set, but about still we've do how about versus level think into it's here. high dividend year-end, soft dividend at cash you've decently and how regular earnings a

about and term to come things maybe forward? going we more So longer year-end as as little how should we the slowly think is should both grow going into a think we too, little dividend those maybe bit a

Ken Moelis

first slightly probably been good hasn't first our very as to half. of Well, half, have cash, half expect we I we’re second a said, all, low first our best

and So and does are we've month cash. up anything of to changed in response build the in not timing three managing affect that a not period we it but way, or short the company -- your periods,

a expecting second we half. strong So

On ago. in think we've specials, the or did the -- I dividend, obviously, first and comfortable, special we months very feel five doing been $X.XX of four we

sheet, we to financial want -- we our and bad So we've be six of able capital, on on cash We balance are million that clear -- given be themselves last unique and in to the be $XXX not this, grow But opportunities back situation. we we months. the run will those a want leverage do want me let we not believe in think with in very pounce present unpredictably opportunities markets. and them excess not we to to

slower in time. will of to cash build the sheet in and pristine we the the the flow quicker building balance half maintain So I a opposite completely back think first

Brennan Hawken

the makes color, Yes, Ken. sense. lot thanks. That Thanks a of for

Ken Moelis

you. Thank

Operator

Thank you.

with Your next Please question go comes Morgan ahead. from Manan Gosalia Stanley.

Manan Gosalia

afternoon. Good

XX% full Sorry, do missed to still be expect between ratio XX% if your to for year? but the comp I you this,

Ken Moelis

we’ll we We back Yes, a able we'll half, that. given think to think be able target. strong maintain be -- that's our to

Manan Gosalia

would from a here just of or bit that So be that back in revenues on depend improvement an little the year? improving of the half materially does

Ken Moelis

it's to -- enough a keep to think but continue back we a I it, strong and And the Well, keep think but target and so the think it can we year hypotheticals our we every that. to half we're half view have do strong I it, not of have on back we we about we target. intend on outcome, worried think possible intend we that's can't we to

Manan Gosalia

Got the this give know and year-on-year? up of revenues revenues guess, it. can was you you good of came were XXXX year for up on talk secondly, And year from and quarter range it don't about what of year dollar but restructuring number, a restructuring know mentioned half and I for there track I percentage you maybe record a be, revenues first was in whether I you're a that another record were to given year-on-year,

Ken Moelis

on we've cetera. XX% XX% depending revenue. I et They XX% quarters, of XX%, to think our continue figure -- to to But -- given specific be the be to percentages it's it

I don't well and And would very I year. exceptional say, a know it's it's in this an to but think so, a good if it'll could be shape year. record, trending I be have good

Manan Gosalia

you. thank it, Got

Operator

you. Thank

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

Jim Mitchell

Hey, or from dividend afternoon, good the up the is the question philosophy, as little pace on that cash it just with here? How it we after -- first levels versus is do at buyback good Maybe see quarter? a we about on think the buyback Do a buyback where sorry. is builds focus here these pick more bit? stock the morning

Ken Moelis

really than started stock buybacks now, of obviously, the and right you our were to specials. what if buyback at look have to we doing we done, more done capital hadn't mean, of I As ever done. them, structure use we we've we've aggressively do we

those leverage goal make value return make us -- where anybody is a to we but capital, what Jim what and how give get as cash, at balance sheet excess not with in think of efficient, and opportunity. it decisions. our sure manner But that and advantage quickly do we most think our we it'll to XXX% be a an the I they not is could price stock, of take -- blend build markets we're able to we'll and look, value where the the XXX% when do

that's And anything. as as important

I gut might again, markets XX And pristine. warning. with we we advantage no had for to really pretty care like going said, a the they to take to of me don't ago. I pretty tells be and come because show that. crisis one took And And enable in and haven't think, thought, opportunities stay in years, been XX this my quickly pays up I business we're grow you an opportunity of give having to it as that years come so while. liquid

Jim Mitchell

Right. of Fair just try enough. bigger have well picture again, tried. a And big sort I'll -- others a what maybe breadbox some question than around,

to hard As to little potential revenues think pretty a it it, a year-over-year. most trying kind tell possibility quarter, how half. we tough as expected about be of be if you there you we back down? is Is have still thinking think -- that year-over-year could the to just I there you're on the are a of get should which up think about you half shot, how people comp closer about thinking basis, fourth it's but the back Obviously, think through any to there's a

Ken Moelis

make It’s assessment. early that to

quite say good -- want we hill look to an things here. on would would big But up get look, we don't I the And given to But of be it are. would year-on-year, have everybody focus be -- I want given that that's also an So don't be discount start don't lot that a a decline that have want to going get to I I'd it. achievement. -- where

Jim Mitchell

about second was not Well, just half. talking year, full I right. But for

Ken Moelis

Yes, full No. saying the for I you're thought year. right.

way. thought from could second That's strong put I year-on-year, just we want feel have were Look, -- it half. a Okay. that. climb? this -- I like I that’s We we you at let's And stay said steep looking a away to

Jim Mitchell

Yes.

Ken Moelis

project on going want all stride a And we too good And about to year business three don’t kinds to -- our year And -- a basis. lot half far where feel But we run markets feel be of have have here. very it's very the into think on good to of we're month I where don't get things. second it's confident. we a for good and strong. we the out We're back me look, of I But activity. to

Jim Mitchell

Okay, thanks. Fair enough.

Operator

JMP The Securities. next Devin Thank with from Please question you. go comes Ryan ahead.

Devin Ryan

hopped Thanks. Good a guys. moment on afternoon, I here. late

covered. being was there the as be strong out a there. rates the to suggesting to If on restructuring the that you're change relieve seeing I restructuring that X contributor. times which structural really continues Or probably too So is the cut were little business But apologize X as if lower issues? in So maybe the just more stress as the not rate this a Fed by driven to right notable curve would much? business, much situations now outlook bit forward wouldn’t

Ken Moelis

economist, Look, I stay I'm in a not at a night. last holiday macro but did

So I'll answer to try question. your

points, theory over forward It next to the economy four the a own to times. much do cuts think like now. right to weaker did two handicapped I actually curve four. I have basis being is be my cut response would is XX not interestingly, that But then if three probably three a Fed year,

market, And that of weaker in Russell to yield be economy middle the bonds are. the tends high where much kind

you're of X opportunities see don't from on lot right middle have a the now as strength strength see X S&P respond sure that go in low XXX valuation might times poorly respond world. large interest not out just stress times what I'm every X it's pretty that. -- these I a tech you see to market you to I caps day, the And I'm levered. Fed have so companies jump there, rate to not to world sure And the land. interesting and same don't the companies large X% on just but could cut But an if big the very positively

saying to that times. forward X economy to is That's for you. cut the that an going rates and Looking Fed might not X great do

reaction and a a bigger valuation bad cap happen, in -- S&P world. both market, high but restructuring see could in yield you think land I cycle XXX So, not middle

a guess, economist. I again, that what I'm think macro and my not that's worth, for it's take So,

Devin Ryan

Well, it good was macro a answer.

experience business as obviously appreciate So of the well. it. And lot a in

or guess I a the been has be little So, some big bit just to of on a you firm. flavor whole are for Any out be of love either areas How and of newer kind a years activism driving restructuring. beyond kind some slew because the the recent there differentiate business would or able directly newer analytics. whether follow-up feel obviously in when advisory thoughts added capabilities. and like the data pitch there a you've build more you like capabilities get of M&A it you're ancillary go of those for just Obviously, shareholder anecdotes or just there's in to here

about those how So just platform today? think to trying the are to additive

Ken Moelis

become about look, think call as a time the is -- has and now, of boards. as it activism of year been of is, which important hey, become happens And in what -- tip introduction before and is M&A and corporate worried that a an often it an lot but Well of a lot or transaction something the happens people which cornerstone a spending that's a a leading places it's I on right we're the very edge firm. half I spear and into a

be transactions on to I really people when we're we're And put And There see because do advisory, with on the working restructuring. stand deliver I where managing capital best on trying five transactions we with do we cross I where this border from one get IPO four divisions not companies at structure. that's then still introduce team, think bonus and we we're we're get pool think do think the advisory, somebody and the are complex divisions to parents runs directors thing or large that in activism. this doing whether whole markets out. to it is

work M&A we’re and teams within silos competition -- people and that. They or firm. don't and team, So they together, the like the like as one work doing

to data to where we that's are of think and me to think look, that's information. year. the we help as for forward. discover to early, more at started even we the early us forefront processes look just it's And that, at put our more that at beginning that them ways data calling will and giving analytics, But say I'd starting of be together -- the So clients we really go I be on

Devin Ryan

I'll great. Ken. Thank leave it there. Okay, you,

Operator

ahead. comes Thank you. question [Operator with go Instructions] Sandler from Jeffrey Harte Your Please next O'Neill.

Jeffrey Harte

Hey. guys. afternoon Good

or a me. is? MD you couple say said cleanups the you Just count what will Have for current

Ken Moelis

I it’s think XXX.

Jeffrey Harte

Okay. mentioned earlier tougher optimism only announcing And you year-to-date a with for environment about hires hiring two slow guys. maybe historically and is you forward

we mean, guess and in looking the time little MD you at appetite driver? just becoming about main bit a hiring As to I promotions forward, availability, are look talked we I growth talent some relative at point in the

Ken Moelis

the liquid fourth there that into I tougher first an been the opportunity don't unlettered might company that me an quarter clarify, real to it thought Well, all, MDs. thing become into better might there a opportunistic first the have say from of want let to I a looks it to opportunity, hire I fray. would have for said, been step just

-- That just not been level, higher, I strength opportunity an it our the Fed have balance the the it I happen. the of us didn't the if Fed did cycle. did world looks to -- same fourth to our might thought sheet and there weak back a and again the and liquidity put like raised quarter rates continues, in on into think get it like -- use in

wait that in of attracting blame accurate continue We probably have months statistics. first and about because as XX Fed the to Look, four I we myself been the weak should might if raise in people. or ago three were I we the we're same of think months rates, be terms more my view.

to Right going last So gotten now we've backlog have three, we over support pretty changed I Fed’s got the that here. I And message that. the four that good months. aggressively blame economy mean, we've a the myself on the now.

a talking answer first et European fourth So, have in them. start, who we're having in the financials the are conservative multi, take being especially the quarter firms for no, And is, people just bigger some hirable. to blame the a firms, and availability, is cetera. the there's for issues the are little -- issues, if lot the There of slow anything, There I'll quarter.

Jeffrey Harte

Okay.

expense Just $XX up outlook to expect that Is the happen? quickly million a going be toward we multiple quarter its that the ramping to way quarter. rate wise, you kind over should in non-comp fourth step quarters? mentioned of How a function maybe

Ken Moelis

Joe, take would Joe, give I’ll you that?

Joe Simon

Yes.

of expect it expect quarter, fourth to quarter. possession we we the because in it's, take the happen So to space fourth in the early

your function should step in be that words. a So

as about made, non-comp think space, year, progress important costs $XX,XXX are to head I by $XX,XXX. our look for quarterly know about $XX,XXX about first costs you if And whole back the into the is headcount. $XX,XXX. primarily per last half, you first think $XX,XXX. average at quarterly half And I thing we've that the cost taking year driven going this on to this it go The additional the to of was come should is,

to on Hope quite costs thought So important good we're larger getting with some and scale. also helps. that we it our I think our was we competitive non-comp -- as And peers. I pretty leverage are of

Jeffrey Harte

Okay, you. thank

Joe Simon

Yes.

Operator

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

Ken Moelis

talking joining next you forward you. to and Thank for Thank look us quarter.

Operator

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

You may disconnect. now

Moelis & Company (MC) 30 Jul 192019 Q2 Earnings call transcript