Moelis & Co Q4 2024 Earnings Call Transcript

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

Question: Devin Ryan - JMP Securities LLC - Analyst : Really nice end of the year here for you guys. And I just wanted to dig in a little bit on what you're seeing in the environment. Obviously, you saying backlogs have been at records? And then, we see this really strong quarter here. I know turnover has been a bit slow. But I'm just curious if we should think about this quarter as maybe there being a catalyst where there's been a change in that conversion ratio or timing or is it just more seasonality from this quarter? And then just more broadly how we should think about that conversion ratio or timing of deals moving through the backlog as we look into 2025? Thanks.

Question: Devin Ryan - JMP Securities LLC - Analyst : Got it. Okay. That's great color Ken. Thank you. And then a follow up for Joe, I heard you mention I think some inflationary noncomp expense items as we look ahead. So I'm just curious if we can maybe flesh those out a little bit. You know, is there any degree of of how significant those will be or how to think about non comp growth into 2025? Because obviously you have that on one end. But then my senses, there's also probably less SVB contract -- contracted expenses if I'm correct. So I just wanted to think about some of the puts and takes as we are modeling out non comp expenses for '25. Thanks.

Question: James Yaro - Goldman Sachs & Co. LLC - Analyst : Just want to turn to restructuring quickly, obviously very strong for you and for the industry in 2024. As you think about the outlook for 2025 what's the ability to hold this level of activity? Is there any potential that we could see a further acceleration from here and then any ability for you to just give a rough split of how much revenue in the quarter was from M&A versus restructuring versus capital markets? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 10:00PM, MC.N - Q4 2024 Moelis & Co Earnings Call

Question: James Yaro - Goldman Sachs & Co. LLC - Analyst : Maybe just quickly on the comp ratio. I think you were well within the range of the sensitivity that you gave for the comp ratio for 2024 maybe if you could just provide any context on the comp ratio progression to 2025 and whether that sensitivity is still something we should be thinking about.

Question: Brennan Hawken - UBS Securities LLC - Analyst : Curious on capital, Ken. So saw the dividend increase clear sign of confidence from you and I know that you have a and expressed fondness for dividends and being in the dividend growing club and whatnot, but with fully diluted shares on an average basis from 4Q '23 to 4Q '24. It increasing by 12%. What -- what are your thoughts on allocating some of your excess capital or capital generation to buy back to neutralize the employee comp?

Question: Brennan Hawken - UBS Securities LLC - Analyst : And I get the irony, can there's no doubt. And Joe, thanks for pointing that out. If we just convert to 1Q, then it's 8%. And that's over, a year and a half, nearly two years. So it's a, it's a more modest amount of pollution for sure. So appreciate all that when you're thinking about the productivity levels, right? So you guys did really, there's no other way to describe it. I mean, you really did quite a great job here in 2024 very strong finish to the year. You got to like, nearly $8 million of advisory revenue per trailing MD. So, really turned what we were all thinking was going to be a pretty bad year into quite a solid one. How given the quantum of banking talent and the caliber that you've added, you flagged the tech team's contribution here this year? And how should we be thinking about that metric and given the new team and the new capabilities, is 2021 really such a stretch from a productivity perspective. I know you guys did 12.5 in that year.

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : I guess to start just on the sponsor business, you said that you're starting to see signs of a pickup. There would be great to get a sense as to, how meaningful of an acceleration we could start to see. And on top of that, a lot of the restructuring activity has been focused among sponsor clients REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 05, 2025 / 10:00PM, MC.N - Q4 2024 Moelis & Co Earnings Call through LME activity. I was just wondering whether there's any connection between the elevated restructuring activity among sponsor backed companies and the subdued sponsor M&A backdrop.

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : That's, that's helpful context, I guess for my follow up, I just wanted to touch on the comp ratio. It was great to see the comp leverage come through this year. And, I think you alluded to this in your prior answer to a prior question, but when you provided the incremental guidance, you indicated that you thought you could get back to a low 60s comp ratio with about $1.3 billion to $1.4 billion of revenues. I just want to get a sense as to whether you think that's still the case today or as the continued investment in the business maybe push that number a bit higher.

Question: Ryan Kenny - Morgan Stanley & Co. LLC - Analyst : So you've been really strong at hiring and protecting your workforce in downturns and then taking share in market upturns. So as the market starts to recover is the recruiting environment getting more competitive. And does that slow the pace of leaning into hiring or do you expect to continue hiring at pace?

Question: Ryan Kenny - Morgan Stanley & Co. LLC - Analyst : And then just to follow up on the quarter revenues were clearly really strong. Should we think about the build through 2025 as building off of 4Q annualized revenue numbers or should we look more at full year '24? Is there anything idiosyncratic in the quarter? Any big fee events or pull forwards that we should be thinking about as we model into 2025?

Question: Ken Worthington - JPMorgan Chase & Co. - Analyst : Big questions largely answered and asked and answered, Joe a little one for you. The comp ratio usually early in the year. The comp ratio is, is like a placeholder and then you chew up later in the year. How should we think about, the, placeholder as we start thinking about compensation for 2025?

Question: James Yaro - Goldman Sachs & Co. LLC - Analyst : I just want to clarify on your comment around the 25% comp ratio here. Just, just to confirm, are you saying that for you know, let's say $100 million increase in revenue that 75% of that would drop to the bottom line. So that'd be like a 25% margins. Is that the right? Is that what you --