MC - Earnings call transcript Q3 2019

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Operator

Good day and welcome to the Moelis & Company Third Quarter 2019 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note that this event is being recorded.

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

Michele Miyakawa

thank third for conference quarter and Moelis call. us & Company’s XXXX you afternoon, joining everyone for Good financial results

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

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

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

the to turn call I’ll now Joe. over

Joe Simon

third XX% was revenues, everyone. and ever, increase in Thanks, Ken of financial record highest results We which a go will further. million Michele, and we second prior-year $XXX which discuss and I’ll quarter, over afternoon period. call, revenue On a represented achieved then good earned today’s through our our our the quarter business

$XXX prior restructuring quarter. our momentum Moelis all number value to global number market, M&A XX% We witnessed in M&A in in fee; from U.S. M&A compared of as global both the third with the transactions since compares the completions and and inception year performance by Our overall its and down the of products Restructuring average uncompleted completions had prior the our than greater was to specifically, ranked increasing fee of number quarter. positive was largest quarter total across million favorably year. activity average one which transactions

to in both Moving year-to-date. at Adjusted the accrued third and was expense expenses. quarter XX% compensation

XX% non-comp the period. Our prior-year down from in XX% the third in quarter, ratio was

$XX.X result quarter, continued reported expense non-comp expenses as the For million third of we of a discipline.

As space on the future expenses to build anticipate call, last increase growth. the City quarter’s of York is mentioned fourth expansion support to our we and to vital our due The our increased New out headquarters. in quarter non-compensation

million. four We expect $XX $XX to quarter non-comp million to be

XX%. tax remained approximately Our underlying corporate at rate

the net of sale million Australia. presentation Moelis our As net income of are We recognized or XX.X firms’ rate. in of a shares million reminder, all our gain that an ownership reflects XX% calculated related to adjusted $X.X adjusted corporate of income effective tax tax our

As million previously X was to expected sale fourth occur share announced, an there the in additional quarter.

and transaction little strategic adjusted collaboration change the there consummated, be a this Company is Assuming Moelis $X expected no net gain that partnership this is to Ultimately, pretax. Australia between Moelis more of to than is be as result the the million and & transaction. to expected a

board The allocation. consistent authorized capital dividend of regarding last with Lastly, $X.XX quarter. per share a

financial $XXX the be debt repurchased regular position million buyback to and opportunistic million have year-to-date and our cash addition we continue with and utilizing of quarter over a ended We X distributions, liquid program. no investments. shares In dividend with share to our in strong

the now call And I’ll Ken. to turn over

Ken Moelis

afternoon, Joe. Thanks, everyone. Good

over be half year. first than call, last much performance As a report we expected the year and stronger to QX pleased we half on to second the stated growth our of our I’m last record double-digit

our and strong are activity Our confident outlook forward. levels business about I’m going

completed transaction greater was middle demonstrating platform. M&A quarter size deal on We breadth transaction. in values greater average transactions meaningful earned fees $X a market the M&A achieves average earned the both we our per higher diversity experienced activity increase of than and and billion revenue fee and solid third and Our average and

significant provides platform, a but business. provide Restructuring mind a financial of It growing into continues last allows increase not our our share only coverage component part with and countercyclical more to Since our us and sponsors. corporates to and be our client importantly the important earnings in finance Managing clients based the Directors strategic respectively. Directors and four and are financial Two and announced Managing we expand call, to of advice fintech in U.S. coverage regions. hiring to sectors enhance will in specialty and our

during expand coverage sectors. talent are All of in profitable We fourth these and managing-director additions on other will quarter. the the expertise of One join remain and made firm based augment enhance XX senior level media four Benelux to solid individuals Europe and have growth both Continental organic a year-to-date. the external will regions, focused The the pipeline Europe. and technology, telecom internal Nordic the our our in two Directors of and Managing the will other and

and creating for their in all shareholders be markets. board the helping most of Overall, excites our maximizing value the through I in despite are the rooms what in helping though we’re are continue the and opportunities strategic of that globe. delivering business that’s doing; market what was amazed on to sorts around the volatility, we companies seeing clients exceptional me transactions. focused And C-suite advice and succeed

up for I’ll it questions. that, With open

Operator

[Operator Ken Instructions] first And question Please Worthington will of go our ahead. from JPMorgan. come

Ken Worthington

hiring, far, MDs first, so bunch in annual Maybe, and bit Hi, the XQ good hired unusual afternoon. XQ a of feels of a giving timing which you’ve MD bonuses.

that boost recently. have quality that and but the to faster modestly other than of seen talent bit. forward And nature a is increasing has little capacity know some talent looking from the say maybe, it’s available level and than we’ve then of the MD more seen be only over feel a growth months important you grown, banks. I’d maybe, dislocations there’s I So most far quantity, the do the the last XX MD you may at more is And the pace benefiting

Ken Moelis

the answer but yes, to our last question the look, was this we headcount manage year, I we we’ve think So, hired, actively.

we MDs I our where are XXX mean, think where is the doing well start of do we we starting could and do somewhere we job that’s and it. track year to the – – can to – we we keep manage have year actively better. We

So that probably happened this year. more

hire. We continue to

and I is think The bring the eight important can net we from new Managing think outside good going me we forward; a Directors. firm. inside continue in to the firm to to pipeline XX most both

the So, that with second – one. I’ve started

The first question, I think right. you’re

later interesting. It’s in We year. are; little is the it a

mid-market of the the benefits of And talent that high one availability I course year few the banking system. salary the all is year, because they’ve actually think the received more of salary. some European not in during to of out you went about ability ago level. back-end. of a compensation. of lot gives pay lot is It’s very to a they It They the cash a feel coming the not so already a later in of their hiring years bad

picking up XXX% of the not You’re bonus.

can but So as we the you’re be again, the and in in try the you’re sector, this, in penalized banking earlier European hiring year year not hire you later often when to much. when – hire than

Ken Worthington

the what of think All some about So right, macro are get impacting things awesome. as XXXX haven’t you then clearly, feedback decision-making? secondly, we just influences kind And clients changed. to from starting maybe M&A about your

we and Continental a resolution either the be coming seems been get of demand foreseeable getting if are at in that by resolution going and technological elevated be done of then And disruption, the leading extent, the U.S. we You’ve activity but got more before there has To you things uncertainty upon come preference more candidates either to to might think some given point wait the the extreme more to some close the sense pent-up or end maybe that to sort finally? you some at political get UK Brexit in of other and future. the might see. Europe of what there’s market to elections or across of a the some the there that do may spectrum like more views in

Ken Moelis

everybody and about So, U.S., talk that’s of my foot not it that division is at interesting M&A, because not lot really speech, spin-offs, in of but think a either, there’s front value, always is the the for is I macro And on creating – board in M&A, anybody’s engaged for focused but holding creation there’s don’t back it think I how general, the end a said C-suite, value. think in sales, everybody I is the election. I of and the really, room,

the over I nobody’s have a year. – we’re could close there’s for so – believe year, macro a feel change. either. think, don’t holding it on inside guess mean, I I anybody’s now; election to and is what going a back of interesting to I That pretty might, election that back I it, holding next

– polling as it’s did I change, like, especially think there’s stay not last feeling, by over it’s, the two, in is Europe the could think forward. forever. resolutions paralyzed I people’s the coming, almost almost look, it’s to changes of affecting now, I move Europe, got right mean, in anything. lot months, not that talking I happening. mind you well, so We meaning like, – Brexit. And In It’s it’s a I got know I no, in we’ve three but almost I I for think about the bored in think UK, like people are cannot this

and be and there this putting in are really people I look sick demand, sick So, ended, past even and it think to talking value would they’re about to it. Europe tired believe and trying but create and it if are is maybe, point, tired plans helpful of of I pent-up that off it at people probably

Ken Worthington

Awesome. Thank much. so you

Operator

come will of from Our Goldman next Ramsden ahead. Please question go Richard Sachs.

Sal Saroni

Sal on Richard Ramsden this Saroni is for today. Hi,

record of looking comment in You the then a end Where in And seeing in also, you largest the you can benign XXXX? how year then environment. your into heading pockets is today? quarter both backlog also reached of restructuring are on a economic largely the restructuring and into opportunity

Ken Moelis

backlog talking or? you specifically just Are restructuring

Sal Saroni

right. that’s Yes,

Ken Moelis

So, sectors still of and restructuring of the is oil gas. some fairly commodity idiosyncratic outside like

with significant in by sector one, restructuring you very services see, then lot commodity. lot really oil leverage the and around, position that’s probably X% about get a the that’s good X% of of a very in in they’re downturn the companies And having that field trouble. that’s idiosyncratic still and in think after or we if it’s of a them have where I difficulties the affected we have

We the group. leading market have restructuring

our low – We’ve been environment kept economic group. believe very defaults. investment them with during good in have the group. to invested a We We pretty – in what the in has

I share, market taking we’re believe. So,

good I forward. we their going pipeline pipeline, In terms of think restructuring a have pretty

to continues trailing well. a level at about it basis, on the think meaning has I be and elevated it that doing

though. hit they when predict to hard very are those So,

restructurings when M&A. of have sometimes predict almost will even success easier to a than difficult more is fee, than success fees You those are harder that might – actual they’re to to know but hit they they timing get the

Sal Saroni

your Okay, so forward, that you’ve then degree looking below you. of To to you indicate then Thank we non-comp inflation, or non-compensation ability this improving quarterly on great. expectations does lowest about ratios a they the one some levels this was And factor well more came of that And today? the XX% non-comp in the current in additionally, quarter expenses, your thinking what control achieved how far. ratio positive levels from are your cost see volatility?

Joe Simon

Yes.

course say I’d environment. the in management ordinary economic expense we’re on regardless So, focused of

costs. we’ve ultimately $XX,XXX. head We head cost per last year that is I some on about gotten to compares think on average look $XX,XXX at is year think quarterly per and our per leverage quarter that we this average that

to think think, $XX,XXX. We move the even to pay I that’s we to with attention we’ve of going it. expansion So, space – maybe,

continue think, estimate. right pretty investments should and a We what expect you described to fourth is as make and I’ve what quarter probably I the reasonable

Sal Saroni

you. Thank Okay.

Joe Simon

Sure.

Operator

question Gosalia will Stanley. of from Manan come Please Morgan go next Our ahead.

Manan Gosalia

afternoon. good Hi,

recession or a So, those building gap some are mentioned you into were still large that now? not. models, were there had closer coming this their sellers buyers earlier year bid-ask Is a whereas

Joe Simon

ask. didn’t I

was I mostly don’t So, good and talking I I about information haven’t, have sponsors. if

defer to seeing we’re don’t still to have model have every if recession. I that. So, know I a

Ken Moelis

sustainable concerning fourth guess. market. sponsors felt weren’t quarter seeing best were good now take is in would quarter assets the for be into long But sale. market the downturn start first and their people things the what that in was the and a if didn’t a had the quarters last in I unsure valuations what or market, Fed which best and recently again, guess really I for my I’ll year; six-month volatile the their is the Yes. up happened market, we time, processes putting trade wouldn’t China wrong second want go be way, war in to the could We think the wrong fourth if was of that went a process a did to we’re It assets. back what

Interestingly, It to in feels feels fed, all-time thinking all putting their starting put that; very the or again. people resilient the we’ve now trade sponsors come about highs. best their The think at through and I S&Ps market see assets assets war, to best resilient. the market we’re

I think feel they comfortable.

market. although a parameters solid quality starting are there assets the feeling private I may and assets still sustainable there, – be So, here quality cases there’s in and that be valuation recession to the into we’re think put see

Sal Saroni

how secondly IPO the helpful. it. then And a I M&A. That’s can bit little talk guess impacts environment overall you Got about

strategy happens because exit or an think that do the is M&A of then is tough, left? M&A, sponsor strategy the IPO you So, with becoming what helps, exit other think do you basically,

Ken Moelis

an people using more. sponsors I strategy think are and as more exit

solid discount. much reason, get and of company – market see that’s more an the building I that they capital. more the money-losing it’s for for that not a are thinking go think for it’s efficient. more look so private premium in for than significantly you trend liquidity. good trade IPO at for using And market EBITDA are private maybe they’re I control positions, at might companies think but to and are a a years its on share, and you And companies they need that monetizing lot your IPOs as of rather you

for I to offensive. a on As paying you commission phone went former public banker, X% of a was all the

and to now, no they people companies and of understand as I to going why why use continuing those to the friction see a it. think do want you’re they I so, a markets fees longer can create private And sponsor – costs. kinds incur for way And liquidity of

Sal Saroni

That’s Okay. Good. you. Thank Got helpful. it.

Operator

Our Michael next will Brown ahead. with come question from Please KBW. go

Michael Brown

Hi, afternoon. good

Joe Simon

afternoon. Good

Michael Brown

guess the result, guess clearly, So, ratio of year comp more is been this revenues I episodic ratio, more as bounced so, I than first have a on the around kind little usual bit the comp and a quarter-to-quarter.

on where think how full-year So, end for at we kind the based of we’re comp the really about year, where should ratio could up?

Ken Moelis

have full-year our as things, been we’ve as as disciplined on think comp that’s we you ratio But also the – got and we’ve anybody at a we best look, Well, goal. talent. look that

excited roof I unique the what talent a can I’m priority. take protect as We mean, we that we we an talent be and disciplined context is to have of really – opportunity to think to and to advantage grow in unbelievable have intend is continue opportunity business grow disciplined the want number have one number that will talent, and but to protect be protecting I of to the making sure I been base and we going our we about that. one our under the we here

Michael Brown

updated year-end, the and and And we and special on buybacks special the to also as return was where dividend, get mix to year? the relative kind closer thinking how last then thoughts of capital it guess be of I about quarter in could between fourth any the you’re of kind where Great. the

Ken Moelis

prices these board shares. been We we’ve focus the next active more board in on were the with And that repurchasing active – meeting? look, at more

mean, a we’re So, to look I today. at it’s going it. market different

other that going did when up. But our year we’re We we’ve were to a specials continue repurchase want to to been we thing way, And share company there coming valuating trade ago to the do, going have we’re debt-free. than differently XXX% phases. different shares we the the doing they decision make more are and as leave in a by active and two

to So, we’re fund too. flow, to do use our cash build going which a going even New be will in out the a out York, we’re of cash

We motivating also debt-free. And we So, I a think to sends we’re to borrowing here. that, not force it’s for be about like but for we message It’s our a to any – to thought talent that pressure. being context be need important it We best clients possible in seen as don’t advice, financial our with to. deals. us that do not need very don’t we advice think

Michael Brown

Great. questions. taking you Thank for my

Operator

Our go Securities. with Ryan Devin next question JMP Please come will from ahead.

Devin Ryan

to Joe. that It I the that’s a been a Ken. your Most back a that through saying what some hit. on you’re year, feels economy. just want a little it’s hearing to just the Great. start of Hey, some like if to of kind or function Hey, make the I’m been just have come where to parse But whether to environment just on slower backdrop has so, little improving. is bit asked. and bit more the didn’t commentary I right sure of trying actually fair want of and things total

And maybe, the on the fourth there or strategics? terms happening maybe, with seeing actually in or to prior terms of meaningful of here so something dialogs we’re where acceleration what just be to in that’s quarter getting back more is sponsors it disruption we were whether you’re

Ken Moelis

Well, you’re about thing, right over was it – one our pretty was half. to first it easy improve

low it improve. quarter. good was So, a it a bar was to

first the I to are it some had improving. for think things everyone. quarter lumpiness Look,

people would to think in time. last the play change and year that was wonderful of was think a and half plans very year out. not the first conservatism end volatile companies It some I I how there of was as think I the

back my kind to So, where we’re of were. we feeling is

don’t it’s and how the – again, we of these that knowledge I hard what we year. I we don’t rate have in the I’m run these we’re on to Devin of look and I or companies. cannot out. and we at is, our me, the way us like look of great aberration sort even for plus at kind of place one to feeling at predict think last see, just quarters. we’ll full say aberration, quarters like don’t not minus were I guide. know looking with feel – I six to again, of think talent. good want I were it, it’s is months But these the a feel way back the to the me quarterly, to maybe, – first control come it’s I

my underlying it we seen maybe, I’ve We the gut have then year is best, is a ago. great And since good conversations. is the better, have as as feeling share, market great a is tone

Devin Ryan

helpful. Yes, profile then on both that’s just follow-up guys of business. the it forward, invested middle some you quite seems obviously kind moving very Thanks, And have footprint, money high and and a Ken. East of there a there’s bit like maybe time, the some activity in

And so, thinking how more be your you’re for relative about whether addressed curious Moelis opportunity I’m kind that region just to of footprint it the broadly.

Ken Moelis

And keep world and we’ve recently. the continuous got when part the And none. been I been franchise a think in in middle that years opening ago. I Saudi best I confidentiality. XX East, think with long worked and there. respect bar respects in, It at think we we’re really great They is have intend commitment helping the we really XX good restructuring actually office It’s Arabia. we looking very to hard, and there. hasn’t started investing commitment. an a the discretion talent started. of We and kept, years a We’ve and presence We it Dubai maintain ago We’ve that

a of good pays we those think having part world attributes and advice – a place, and where off. discretion, growing confidentiality it’s the of we’re loyalty, So, all

happy pretty it. we’re So, with

Devin Ryan

you. Thank Yes. Great.

Operator

go Research. next with Jim will Buckingham the Mitchell question come And from Please ahead.

Jim Mitchell

afternoon. good Hey,

why had a a in only XQ. it? thing? quite attractive million it sort little price of towards more one so the of of if read the was it and weren’t Is know it to but wasn’t a Just you I Just get you’re you buybacks quarter, or questions, on sense trying it. a you The wasn’t liquidity down $XXX third buyback I was the If active about in out – million obviously in couple correctly, did bit. quarter, Ken, buybacks, maybe $X.X – leaning you of why it of a

Ken Moelis

exactly, the And period sales. The then after they weren’t first the liquidity had excessive six months in from revenues. Australia providing, reporting liquidity weren’t some we

we got So, more liquidity.

is had But we’ve so want be a I to to for reading you that’s to program Charlie on stupid. we’re I XXbX we was do some. not look, to to too active. And I been a and going us active key believe, continue that I Munger I done more are succeed the it. know, We – said, quote think think going anything just to

to be to brilliant trying not do on I’m this So, stuff.

a the something maintaining take other and is me, stupid. careful to position a to I key people being of to avoid might stupid. think times liquidity, means being being in And do that care when

the there’ll expansions ability this And XXXX. so really the goal, want that that – don’t really I good it for moment seen real things function think the me, to after ready to I be that’s a don’t I market I grow those We And step have but to to happen the possibilities a want feels and moment I’ve give is and liquidity. XXXX, long XX-year us it. a in XXXX, firm. be did and be

just answer we��re that’s long careful. a So, to being where

Jim Mitchell

do you talked have see Is sort kind M&A well you’ve it about with revenues. guys Can you maybe, materially than year? fair. How XX% this time? that out all somewhere of done Yes. up. over of kind on evening restructuring that you of down running very That’s around obviously side, of the And update, seemingly restructuring, higher

Ken Moelis

running of so, definitely stuff a running there? in. say XX. now that of I’d north I but it it’s that, slightly Deals not predicting yes, XX, and might say XX%. running quarters. north Things of overdo I’m north just – it’s north happen. And again, but there’s I comes chunky still, it’s happen of It’s don’t of But in couple We chunks had and of look, as

Jim Mitchell

the at stay the rate level next because this point to going is kind for in that push fourth the think do it of is – growth year, in about the that is maybe, you, off And just on move would thanks. step-up for non-comps All jumping investment in York quarter, of office, the the that not there? right, and way higher that a to higher non-comps the from one it? New Is or which well how Joe,

Joe Simon

a it’s point. starting Well, certainly

a it’s of all always But to going think into principle and the run through we account be to founded headcount. in rate. that’s go that ultimately, the new on I That’s basis. the build the process some out, taken space have yes, and in that new

Jim Mitchell

Thanks my Okay. taking for questions.

Operator

We have a Please of Ramsden ahead. follow-up Goldman Sachs. Richard question from go

Richard Ramsden

Hi.

a data really was material to this make Just from quick forward we’re us, just backlogs. relative sure pull question the revenues want accounting there the that any the I to of correct quarter? seeing book

Joe Simon

Yes. again, came now the quarters I new into the effect. since mean, accounting are comparable

we’re to XX may added So, if and it in few days think the same comparing $XX asking But of think it what the deals really first have a I happened up you’re days. around was I October, of million. couple

Richard Ramsden

Okay. Thank you, again.

Operator

like session. mr. question-and-answer I the conference for Please closing Kenneth any to ahead. this go turn our concludes remarks. to would Moelis over back

Ken Moelis

forward it you time to Thank speaking this soon. afternoon. We appreciate Thank we you. you your for and look to

Operator

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

now disconnect. may You

Moelis & Company (MC) 30 Oct 192019 Q3 Earnings call transcript