Moelis & Co Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Devin Ryan - Citizens JMP - Analyst : First question, Ken, great to hear about obviously the backlogs where they are right now and appreciate we're in a pretty uncertain moment here. So I guess there's still a little bit of TBD on the year. But I'm curious, just with the backlog, at what point do they get canceled versus just pushed out? And I guess I'm just trying to think through, there's a lot of competing forces here. Sponsors have a lot of pressure on them to do something with kind of the long duration of their portfolio today. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 23, 2025 / 9:00PM, MC.N - Q1 2025 Moelis & Co Earnings Call So it feels like there's a lot of pressure there. At the same time, volatile asset prices make it challenging. So I just love to get a sense of how the backlogs kind of move from here and what potentially would cancel them, if at all?

Question: Devin Ryan - Citizens JMP - Analyst : Yes. Got it. Okay. Thanks Ken, really helpful. And then just a follow-up on the restructuring business. Just great to get a little bit of a maybe flavor for what you guys are seeing there, kind of whether there's been any tone shift just with some of the uncertainty in the markets. Anything around tariffs? I'm not sure if anything has changed there. And just the trajectory of kind of new mandates coming in, in that business as well. .

Question: Ken Worthington - JP Morgan - Analyst : Hey, great. Good afternoon. Thanks for taking the questions. Ken, I would love to hear your thoughts when thinking about the volatility and the impact, looking at things three ways. One is sort of geographic, US versus Europe and Asia. Any sort of differences that the volatility has sort of brought out? I know it's really recent, but thus far, sponsor versus non-sponsor and then big versus small, what your guess is. What's sort of more resilient, what's more vulnerable? What are your thoughts? And to the extent you've heard, what have you heard?

Question: Ken Worthington - JP Morgan - Analyst : Post April 2, yes.

Question: Ken Worthington - JP Morgan - Analyst : Sponsor versus non-sponsor.

Question: Ken Worthington - JP Morgan - Analyst : Okay, great. I feel like that was three questions. So I won't be take. I'll be queue. I appreciate it.

Question: James Yaro - Goldman Sachs & Co - Analyst : Hey, good afternoon. Thanks for taking the questions. So I just wanted to touch again quickly on CEO confidence. Ken, you've been through plenty of cycles and so you've seen various exogenous shocks. Maybe you could just help us think about how long it has taken on average perhaps in historic episodes that you think are most similar to this with the sort of [exogenous] shock before CEOs come back to the table and engaging M&A transactions.

Question: James Yaro - Goldman Sachs & Co - Analyst : Okay. That's super clear. Maybe just another one on restructuring here. So within restructuring, you've seen a lot of the activity over the recent years be driven by liability management. I think a significant portion of that has been refinancing of a sponsor portfolio company debt stacks. So let's just say we do end up with a harder landing. How would you think about the trajectory for restructuring revenue? Obviously, liability management exercises are shorter in duration, and chapter 11 and traditional bankruptcy are longer, and the fees are back-end weighted. So how would you think about the path for restructuring in a weaker economic scenario, if that's what we end up with?

Question: James Yaro - Goldman Sachs & Co - Analyst : Okay. Super clear. Just one ticky-tacky one. Do you -- could you give us the split of revenue this quarter, perhaps across M&A, cap markets and restructuring?

Question: James Yaro - Goldman Sachs & Co - Analyst : Thanks so much.

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : Good afternoon. Thanks for taking my questions. I just want to talk about the recruiting backdrop. I know that recruiting this year was expected to be focused on the build-out of your private capital advisory team, which it sounds like you're off to a good start on. But given activity at the start of the year has been a bit slower. I just want to get a sense as to whether you're seeing any improvement in the recruiting environment and whether you might look to lean in more aggressively than you expected at the start of the year.

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : That's great. And then for my follow-up, I just wanted to touch on the comp ratio. I understand there's a lot of unknowns at the moment and the accrual is at a reflection of like the bifurcated potentially outcomes of this year. But I was hoping you could help us or help frame how to think about the level of revenue growth needed to keep your comp ratio flat year-on-year or maybe like what the breakeven point is.

Question: Mike Brown - Wells Fargo - Analyst : Hai. Great. Thanks. Good afternoon. Ken, I just wanted to dive into 2Q here. We're just a few weeks into the quarter. Certainly a much more volatile environment. Can you maybe just give us a little bit of views into the quarter relative to 1Q? It's not easy from really anyone's perspective, but maybe you can shine a light on to how to think about the revenue potential just based on either what you can see in terms of the deals that are set to close and which ones you maybe have some greater confidence in, the contribution of non-M&A. Just some color relative to Q2 would be helpful as we think about the near-term. Thank you.

Question: Mike Brown - Wells Fargo - Analyst : Okay. Yes, that's fair. Wanted to maybe follow up on the talent question. So with this M&A upswing being pushed out, perhaps this tariff related turmoil is quick. But if it's not, and the eventual recovery is kind of slower with more fits and starts and maybe just a bit weaker overall or more spread out. What I'm interested to hear about is how do you think about protecting the margins, investing in the talent, building out the private capital business? What do you do in terms of retaining talent? Do you take a closer look at the mix of talent that you currently have and what the opportunities are? And do you kind of reassess or maybe do some rightsizing? Just maybe talk through that a little bit for us. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 23, 2025 / 9:00PM, MC.N - Q1 2025 Moelis & Co Earnings Call

Question: Ryan Kenny - Morgan Stanley - Analyst : Hey, good afternoon. Thanks for taking my questions. I want to follow up on the comp ratio discussion earlier. Understand that you're not giving us a formula this year, which makes a lot of sense given the uncertainty. But can you just clarify, was the 69% in the first quarter based on your revenue assumption for the full year as of March 31? Or is that your current expectation? If this environment persists, is it fair to assume that could go up for the rest of the year?

Question: Ryan Kenny - Morgan Stanley - Analyst : So it's your best estimate after the tariff announcement, not as of March 31.

Question: Ryan Kenny - Morgan Stanley - Analyst : All right, great. Thank you.

Question: Ben Rubin - UBS Securities LLC - Analyst : Hi. Thanks for taking my questions. Last week, you announced another senior hire for your tech franchise over in London. So I'm just curious, what are you seeing from the tech team that you lifted out in 2023? Have they been performing better or worse than your original expectations? And maybe how does their productivity compare to your broader M&A business at large? Thanks.

Question: Ben Rubin - UBS Securities LLC - Analyst : That's great to hear. I'm not going to ask explicitly about the comp ratio but is there any chance you could share the dollar impact to comp expense in the first quarter from the accelerated vesting of retirement-eligible bankers?

Question: Ben Rubin - UBS Securities LLC - Analyst : Great. Thanks, Chris.