Moelis & Co Q3 2025 Earnings Call Transcript

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

Question: Ken Worthington - JPMorgan - Analyst : Hi, good afternoon. Thanks for taking the questions. A little esoteric here. Maybe first on restructuring. One of the narratives in the market is the disruptive nature of AI, particularly in parts of the tech sector. Are you seeing this risk start to pop up in your dialogue with your clients on the restructuring side? And is AI a theme that you think might be meaningful to restructuring as we look out over the next one to two years? Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Yeah. Thanks for the question, Ken. Look, I think AI is going to have a profound impact on our economy and sectors of our economy and companies in particular. It's obviously early days there in terms of the direct disruptive impact AI is going to have. But I do think, to your point, while it's still early days, I do think that disruption is going to create opportunities for us on the restructuring side as the rollout of AI and the impact on AI becomes apparent to corporate P&Ls. And so early days, I don't know that we've seen sort of a direct set of mandates that have come from that, but I think that's on the horizon.

Question: Ken Worthington - JPMorgan - Analyst : Okay, great. Thank you for the insights. Very much appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2025 / 9:00PM, MC.N - Q3 2025 Moelis & Co Earnings Call Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Thank you, Ken.

Question: Devin Ryan - Citizens JMP Securities LLC - Analyst : Hey thanks good afternoon everyone. Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Hey Devin.

Question: Devin Ryan - Citizens JMP Securities LLC - Analyst : Yeah. Great color. And then a follow-up here just on compensation. So revenues up really strong year-to-date, 37% comp, expense up 24%. So nice to see some leverage there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2025 / 9:00PM, MC.N - Q3 2025 Moelis & Co Earnings Call Obviously, we don't know the full year revenues, but it would be good just to get a sense of how you would frame the 68% comp ratio year-to-date. Like is that a good number on the year? Or is there potentially -- is that one step toward potentially additional leverage as we get better visibility on the full year? And that's one part of the question. The second part is just based on where we are in this kind of M&A recovery that you talked about, Navid, still seems like a fair amount of revenue upside for Moelis as conditions normalize. And so just trying to think about how much more comp leverage there may be in that scenario to the

Question: James Yaro - Goldman Sachs Group Inc - Analyst : Good afternoon and thanks for taking the questions. So we're nine, ten months into the second Trump administration. Companies do appear more comfortable with the regulatory backdrop. Maybe you could just talk about the antitrust dialogues that you're having with -- in the boardroom. And then maybe you could also just talk about the broader deregulatory impacts and whether that's driving deal activity as well. Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Sure. Well, look, as I noted in our remarks, clearly, the more accommodative regulatory outlook, the perception that the government is going to be more accommodating on improving transactions. Clearly, in the last administration, there was a view that bigger is worse. And I think as we look at the landscape, I don't think that's the view of the current administration. And so that is allowing for companies to think big and pursue larger transactions, which may have been more difficult in the prior administration. So that's driving the ambition and a lot of the transactional activity we're seeing today. And unless and until the administration acts in ways that are unforeseen, I think that trend will continue. And it's not just the types of deals that are going to be allowed. It's the types of flexibility around remedies and being more accommodative towards solutions to potential problems. And again, this is in the US. So we'll see what happens outside the United States, a different regulatory scheme. But clearly, in the US, it feels like everyone in the ecosystem is assuming that many things are now possible that weren't possible before. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2025 / 9:00PM, MC.N - Q3 2025 Moelis & Co Earnings Call In terms of deregulation generally, I think that has added to the risk on environment and the feeling that our economy is going to continue to grow and there is a premium for growth and people need to invest in growth and future opportunities. And I think that's sort of adding a little bit of fuel to the fire, both in terms of where the stock market is, which obviously helps dealmaking activity, where the financing markets are. All of those corroborate enhanced deal making.

Question: James Yaro - Goldman Sachs Group Inc - Analyst : Excellent, thank you so much.

Question: Ryan Kenny - Morgan Stanley - Analyst : Hi, thanks for taking my question. I wanted to follow up on the regulation comment. So clearly, it's a more supportive environment. And my question is, when you talk to your corporate clients, are they hearing and feeling that message similarly? And is there any nuance in regulation that we should think about in certain industries like technology? Do you need to see a few deals in each industry get approved first before others get comfortable moving? Any thoughts there, maybe industry by industry would be helpful. Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Yeah. Look, I think you rightly point out that against this backdrop of a more accommodative antitrust or regulatory backdrop, there are definitely nuances as it relates to certain types of cross-border deals, economic companies that are have security sensitivities, CFIUS and other issues like that. You're seeing some noise around certain types of media companies, right, and what's approvable and what may not be approvable. So I think there are idiosyncrasies in some of these sectors. But I think generally, putting aside some of those idiosyncrasies in some of the sectors, the overall thrust is a much more accommodative thrust. But you're right to point out that it's not -- there are elements in some of these sectors given the political landscape that create some nuance.

Question: Brennan Hawken - Bank of Montreal - Analyst : Good afternoon. Thanks for taking my question. I'd like to follow up on that Moelis Australia question. So you said that you had reclassified the revenue from other income to adjusted revenue and that, that movement was EPS neutral. That EPS neutral clause, does that just applies to the reclassification of revenue, not the impact of the gain, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2025 / 9:00PM, MC.N - Q3 2025 Moelis & Co Earnings Call

Question: Brennan Hawken - Bank of Montreal - Analyst : Got it. Got it. Okay. Were there any expenses tied to that gain? Like did that impact the comp ratio? Should we back that out of the adjusted revenue to think about what a sort of core comp ratio is? Can you maybe help us understand how that gain might impact the expenses?

Question: Brennan Hawken - Bank of Montreal - Analyst : Got it. Okay. And then on the MD count, it looks like that's down by three quarter-over-quarter. And you did have a -- it looks like you had a $6.5 million benefit from comp forfeiture. I know that there was a sort of senior person who left in restructuring, but was there sort of more elevated churn here this quarter, which led to that? Or was that just sort of a single isolated incident? Or have you been more actively managing or refocusing the talent pool? Any color on that would be great. Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Yeah. If you kind of look year-over-year, I think our MD count has gone from 157 at this point last year to 170 today. And when you look at that, that's the increase, the gross number of MDs is roughly split kind of half and half between internal promotes and external hiring. There have been some levers in that, which is what gets you to your kind of net adds of, call it, 13 over the last 12 months. But it's -- again, as I said, a combination of internal promotes and external hiring that makes the difference.

Question: Brennan Hawken - Bank of Montreal - Analyst : Okay. So it's not necessarily an indication that there was -- anything was elevated here this quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2025 / 9:00PM, MC.N - Q3 2025 Moelis & Co Earnings Call

Question: Brennan Hawken - Bank of Montreal - Analyst : Got it. Thanks for taking my questions. Of course, thank you.

Question: Brendan O'Brien - Wolfe Research LLC - Analyst : Hey, good afternoon, and thanks for taking my questions. To start, I just wanted to follow up on Ken's first question on the restructuring outlook earlier and maybe drill down more specifically to your business. You did a good job outlining some of the bigger concerns on the credit side, but at the same time, the Fed lowering rates should help to alleviate some of the stresses put on corporate balance sheets. And so just given these puts and takes, I just wanted to get a sense as to how you're thinking about the outlook for this business, both in 4Q and into 2026. Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Sure. Look, we -- as I think you all know, we have an outstanding practice in CSA and restructuring, a great team that's been successful for a long time and continues to be successful. We are seeing more muted level, to your point, around ample Capital Markets, good economy. We are seeing less new origination of business than we saw a year ago. I remind everybody that last year was a record year for our CSA business, up 30% over the year prior. And so I think we've sort of outlined that business was unlikely to be flat this year, likely to be down a little bit. And part of that is the market environment and part of it is a tough comp over last year.

Question: Brendan O'Brien - Wolfe Research LLC - Analyst : Great, thank you for taking my questions. Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Thank you.

Question: Alex Bond - KBW - Analyst : Hey, good afternoon, guys. Thanks for taking the questions. Now that we're a decent way through the fourth quarter, just wondering if you could share how you're starting to think about the pace of your hiring activity in 2026 relative to this year. Maybe assuming we continue to see a gradual improvement in M&A volume, should we expect hiring to be at a similar level next year relative to this year? And then also just maybe how you're thinking about the hiring trajectory specifically for the PCA business? Navid Mahmoodzadegan - Moelis & Co - Co-President, Co-Founder, Managing Director Sure. Thank you for the question. Yeah, look, we're -- we still have -- as I mentioned, we hired 5 people this quarter, 5 MDs this quarter, 10 for the year. We have a number of active dialogues that we're trying to get over the finish line today. And as you know, recruiting is a 365 year-round affair. And our focus is on building out PCA, as you mentioned, that's a really important strategic priority for us to make sure we get that team built out fully because we think there's a significant opportunity to go take advantage of. And we're focused on other big TAMs where we're still light on coverage or where there's still white area that we can fill in and go after big opportunities. So hiring continues to be a very important priority. We have lots of great conversations happening and a lot of focus on trying to convert those and have people join us. The hiring activity that we've had over the last three or four years has been really spectacular. The success we've seen in Capital Markets and oil and gas and tech and the early signs in PCA have just given us a lot of confidence to continue to attack the hiring opportunity and continue to grow the franchise. Obviously, we want to do that in a prudent way. We want to do that in a way that's consistent with our culture that's critical. And we want to bring in people on the platform that can really thrive as partners of the firm.