Moelis & Co

Previous wording

As of March 31, 2024, we served our clients globally with 843 advisory bankers. We generate revenues primarily from providing advisory services on transactions that are subject to individually negotiated engagement letters which set forth our fees. We generally generate fees at key transaction milestones, such as closing, the timing of which is outside of our control. As a result, revenues and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter. The performance of our business depends on the ability of our professionals to build relationships with clients over many years by providing trusted advice and exceptional transaction execution.

Current wording

As of June 30, 2024, we served our clients globally with 831 advisory bankers. We generate revenues primarily from providing advisory services on transactions that are subject to individually negotiated engagement letters which set forth our fees. We generally generate fees at key transaction milestones, such as closing, the timing of which is outside of our control. As a result, revenues and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter. The performance of our business depends on the ability of our professionals to build relationships with clients over many years by providing trusted advice and exceptional transaction execution.

Previous wording

Economic and global financial conditions can materially affect our operational and financial performance. See “Risk Factors” in Part II. Other Information of this Form 10-Q and in our Form 10-K for a discussion of some of the factors that can affect our performance. The M&A market data for announced and completed transactions during the three months ended March 31, 2024 and 2023, referenced throughout this Form 10-Q was obtained from LSEG - Financial Technology & Data (formerly known as Refinitiv) as of April 10, 2024 and April 10, 2023, respectively.

Current wording

Economic and global financial conditions can materially affect our operational and financial performance. See “Risk Factors” in Part II. Other Information of this Form 10-Q and in our Form 10-K for a discussion of some of the factors that can affect our performance. The M&A market data for announced and completed transactions during the three and six months ended June 30, 2024 and 2023, referenced throughout this Form 10-Q was obtained from LSEG - Financial Technology & Data (formerly known as Refinitiv) as of July 3, 2024 and July 6, 2023, respectively.

Previous wording

For the first three months of 2024, we earned GAAP revenues of $217.5 million compared with $187.8 million earned during the same period in 2023. This represents an increase of 16% compared to a 20% decline in the number of global completed M&A transactions greater than $100 million in the same period.

Current wording

For the first half of 2024, we earned GAAP revenues of $482.1 million compared with $367.7 million earned during the same period in 2023. This represents an increase of 31% compared to a 6% decline in the number of global completed M&A transactions greater than $100 million in the same period.

Previous wording

Despite low M&A activity levels, we continue to see strong client dialogue and engagement as corporate boards continue to seek to use M&A and the capital markets as a tool to realize long-term strategic priorities. Additionally, the record levels of capital accumulated by financial sponsors combined with unsold portfolio companies and a dearth of exits over the last two years should provide for increased financial sponsor-related M&A over time. Our out-of-court liability management and in-court restructuring mandates have increased as a result of higher borrowing costs and more limited access to refinancing opportunities which have led to modestly rising default rates. We expect companies to turn to Moelis for capital structure advice as they continue to address significant debt maturity walls over the next several years. While the amount of new debt and equity issuance has been subdued over the last two years, our capital markets business continues to provide advice to companies across all sectors on their capital raising and liquidity needs. Improving macroeconomic conditions and investor sentiment could lead to better capital raising and financing conditions moving forward.

Current wording

As the M&A market continues to recover from historic lows, we are seeing improved client dialogue and engagement as corporate boards continue to seek to use M&A and the capital markets as a tool to realize long-term strategic priorities. Additionally, the record levels of capital accumulated by financial sponsors combined with unsold portfolio companies and a dearth of exits in recent years should provide for increased financial sponsor-related M&A over time. Our out-of-court liability management and in-court restructuring mandates continue at a steady pace as a result of higher borrowing costs which have led to modestly rising default rates. We expect companies to turn to us for capital structure advice as they are impacted by higher rates and continue to address significant upcoming debt maturity walls or structural business disruption. Improving macroeconomic and investor sentiment has led to better capital raising and financing conditions and our capital markets business continues to provide the full suite of capital raising solutions to our clients across all sectors.

Previous wording

We believe that high interest rates, inflation, military conflicts abroad and increasing regulatory burdens may continue to add uncertainty to the business environment, despite U.S. stock markets closing at record highs in the first quarter of 2024. However, our Firm remains well positioned due to our focused client coverage and balanced business model. Our team of investment banking professionals continues to be very active, providing advice to a large number of clients around the globe.

Current wording

We believe that high interest rates, inflation, military conflicts abroad, global elections and increasing regulatory burdens may continue to add uncertainty to the business environment, despite U.S. stock markets closing near record highs in the second quarter of 2024. However, our Firm remains well positioned due to our focused client coverage and balanced business model.

Previous wording

The following is a discussion of our results of operations for the three months ended March 31, 2024 and 2023.

Current wording

The following is a discussion of our results of operations for the three and six months ended June 30, 2024 and 2023.

Previous wording

Revenues were $217.5 million for the three months ended March 31, 2024 as compared with $187.8 million for the same period in 2023, representing an increase of 16%. The increase in revenues was primarily driven by greater transaction completions as compared to the prior year period.

Current wording

Revenues were $264.6 million for the three months ended June 30, 2024 as compared with $179.9 million for the same period in 2023, representing an increase of 47%. The increase in revenues was primarily driven by an increase in the number of completed transactions as compared to the prior year period.

Previous wording

For the three months ended March 31, 2024 and 2023, we earned revenues from 154 clients and 127 clients, respectively, and more importantly, the number of clients that paid fees equal to or greater than $1 million was 57 clients and 40 clients, respectively.

Current wording

For the three months ended June 30, 2024 and 2023, we earned revenues from 163 clients and 128 clients, respectively, and more importantly, the number of clients that paid fees equal to or greater than $1 million was 64 clients and 34 clients, respectively.

Previous wording

Operating expenses were $211.7 million for the three months ended March 31, 2024 and represented 97% of revenues, compared with $189.2 million for the same period in 2023 which represented 101% of revenues. The increase in operating expenses was primarily driven by increased compensation and benefits expense and non-compensation expenses associated with significant new hires.

Current wording

Operating expenses were $244.5 million for the three months ended June 30, 2024 and represented 92% of revenues, compared with $189.5 million for the same period in 2023 which represented 105% of revenues. The increase in operating expenses was primarily driven by increased compensation and benefits expense associated with higher revenues compared to the prior year period.

Previous wording

For the three months ended March 31, 2024, compensation related expenses of $164.5 million represented 76% of revenues, compared with $148.2 million which represented 79% of revenues in the prior year period. The increase in compensation expenses was primarily due to greater headcount as compared to the prior year period. As a percentage of revenues, compensation related expenses decreased as compared to the prior year period due to greater revenues, partially offset by greater headcount.

Current wording

For the three months ended June 30, 2024, compensation related expenses of $197.9 million represented 75% of revenues, compared with $145.8 million which represented 81% of revenues in the prior year period. The increase in compensation expenses was primarily attributable to increased headcount and higher revenues earned as compared to the prior year period.

Previous wording

For the three months ended March 31, 2024, non‑compensation expenses of $47.2 million represented 22% of revenues, compared with $41.0 million which represented 22% of revenues in the prior year period. The increase in non-compensation expenses is broad based and is primarily due to increased headcount.

Current wording

For the three months ended June 30, 2024, non‑compensation expenses of $46.6 million represented 18% of revenues, compared with $43.7 million which represented 24% of revenues in the prior year period. The increase in non-compensation expenses is primarily due to greater headcount as compared to the prior year period.

Previous wording

For the three months ended March 31, 2024, other income and expenses was income of $4.2 million, primarily related to income of $3.3 million on cash equivalent investments and sovereign debt securities and $1.1 million from the enforcement of non-compete provisions. For the prior year period, other income and expenses was income of $1.7 million, primarily related to $1.6 million in income earned on cash equivalents and investments and income of $1.5 million from the Company's share of earnings in MA Financial, partially offset by unrealized losses of $2.1 million from the mark-to-market impact on equity instruments measured at fair value.

Current wording

For the three months ended June 30, 2024, other income and expenses was income of $1.7 million, primarily related to interest and gains of $1.7 million on financial assets measured at fair value and $0.9 million from the Company's share of earnings in MA financial. For the prior year period, other income and expenses was expense of $5.6 million, primarily related to the $10.0 million SEC fine, partially offset by net gains of $3.4 million on financial assets measured at fair value.

Previous wording

The Company’s provision for income taxes was a benefit of $7.5 million against a pre-tax income of $10.0 million and a benefit of $3.2 million against pre-tax income of $0.4 million for the three months ended March 31, 2024 and 2023, respectively. The income tax provision for the aforementioned periods primarily reflect the Company’s allocable share of operating results from Group LP at the prevailing U.S. federal, state, and local corporate income tax rate, and the effect of certain non-tax-deductible items, offset by the impact of the excess tax benefit recognized in connection with equity-based compensation delivered at a price above the grant date price.

Current wording

The Company’s provisions for income taxes were a benefit of $0.6 million against a pre-tax loss of $31.8 million and a benefit of $5.2 million against a pre-tax loss of $14.9 million for the six months ended June 30, 2024 and 2023, respectively. The income tax provisions for the aforementioned periods primarily reflect the Company’s allocable share of operating results from Group LP at the prevailing U.S. federal, state, and local corporate income tax rate, and the effect of certain non-tax-deductible items, offset by the impact of the excess tax benefit recognized in connection with equity-based compensation delivered at a price above the grant date price.

Previous wording

We evaluate our cash needs on a regular basis in light of current market conditions. Cash and cash equivalents include all short‑term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. As of March 31, 2024 and December 31, 2023, the Company had cash equivalents of $68.7 million and $137.4 million, respectively, invested primarily in U.S. and U.K. sovereign debt securities and money market funds. Additionally, as of March 31, 2024 and December 31, 2023, the Company had cash of $34.0 million and $49.1 million, respectively, maintained in U.S. and non‑U.S. bank accounts, of which most bank account balances exceeded the U.S. Federal Deposit Insurance Corporation (“FDIC”) and U.K. Financial Services Compensation Scheme (“FSCS”) coverage limits.

Current wording

We evaluate our cash needs on a regular basis in light of current market conditions. Cash and cash equivalents include all short‑term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. As of June 30, 2024 and December 31, 2023, the Company had cash equivalents of $102.6 million and $137.4 million, respectively, invested primarily in U.S. and U.K. sovereign debt securities, money market funds, and certificates of deposit. Additionally, as of June 30, 2024 and December 31, 2023, the Company had cash of $47.8 million and $49.1 million, respectively, maintained in U.S. and non‑U.S. bank accounts, of which most bank account balances exceeded the U.S. Federal Deposit Insurance Corporation (“FDIC”) and U.K. Financial Services Compensation Scheme (“FSCS”) coverage limits.

Previous wording

In addition to cash and cash equivalents, we hold sovereign debt securities that are classified as investments on our condensed consolidated statements of financial condition as they have original maturities of three months or more from the date of purchase. As of March 31, 2024 and December 31, 2023, the Company held $22.3 million and $162.9 million of sovereign debt securities classified as investments, respectively.

Current wording

In addition to cash and cash equivalents, we hold sovereign debt securities that are classified as investments on our condensed consolidated statements of financial condition as they have original maturities of three months or more from the date of purchase. As of June 30, 2024 and December 31, 2023, the Company held $40.9 million and $162.9 million of sovereign debt securities classified as investments, respectively.

Previous wording

Our liquidity is highly dependent upon cash receipts from clients which generally requires the successful completion of transactions. The timing of receivable collections typically occurs within 60 days of billing. As of March 31, 2024 and December 31, 2023 accounts receivable were $50.0 million and $51.2 million, respectively, net of allowances of $2.0 million and $1.3 million, respectively.

Current wording

Our liquidity is highly dependent upon cash receipts from clients which generally requires the successful completion of transactions. The timing of receivable collections typically occurs within 60 days of billing. As of June 30, 2024 and December 31, 2023 accounts receivable were $51.6 million and $51.2 million, respectively, net of allowances of $2.3 million and $1.3 million, respectively.

Previous wording

Unless the lender of the $65.0 million facility issues a notice of termination at least 60 days prior to the maturity date of June 28, 2024, this facility will automatically extend to June 30, 2025. Advances on the facility bear interest at the greater of a fixed rate of 3.50% per annum or at the Company’s option of (i) SOFR plus 1.1% or (ii) Prime minus 1.50%. As of March 31, 2024, the Company had no borrowings under the credit facility.

Current wording

To provide for additional working capital and other general corporate purposes, we maintain two revolving credit facilities with aggregate base credit commitments of $50.0 million. The facility for corporate purposes has a base credit commitment of $5.0 million, and we can request a temporary increase of the credit amount by up to $45.0 million additional credit, not to exceed the capacity available under the FINRA credit line discussed below. This option may be exercised up to two times per year during the twelve-month term of the credit line. Unless the lender issues a notice of termination prior to the maturity date of May 24, 2025, this facility will automatically extend to June 30, 2026. The Company incurs a 0.25% per annum fee on the amount of the unused commitment. Advances on the facility bear interest at the greater of a fixed rate of 3.50% per annum or at the Company’s option of (i) SOFR plus 1.3% or (ii) Prime minus 1.50%.

Previous wording

As of March 31, 2024, the Company’s available credit under this facility was $64.4 million as a result of the issuance of an aggregate amount of $0.6 million of various standby letters of credit, which were required in connection with certain office leases and other agreements. The Company incurs a 1% per annum fee on the outstanding balances of issued letters of credit.

Current wording

As of June 30,2024, the Company had no borrowings under the $5.0 million credit facility and the Company’s available credit was $4.4 million as a result of the issuance of an aggregate amount of $0.6 million of various standby letters of credit, which were required in connection with certain office leases and other agreements.

Previous wording

Under the $30.0 million facility, U.S. Broker Dealer may borrow capital until May 24, 2024, the end of the credit period, and must repay aggregate principal balances by the maturity date of May 24, 2025. Borrowings on the facility bear interest equal to the Prime rate, payable quarterly in arrears on the last day of March, June, September and December of each calendar year. U.S. Broker Dealer had no borrowing under the credit facility and the available credit under this facility was $30.0 million as of March 31, 2024.

Current wording

In addition, Moelis & Company LLC ("U.S. Broker Dealer") maintains a $45.0 million revolving credit facility agreement pre-approved by FINRA to provide additional regulatory capital as necessary. Under the facility, U.S. Broker Dealer may borrow capital until May 23, 2025, the end of the credit period, and must repay aggregate principal balances by the maturity date of May 24, 2026. The Company incurs a 0.25% per annum fee on the amount of the unused commitment. Borrowings on the facility bear interest equal to the Prime rate, payable quarterly in arrears on the last day of March, June, September, and December of each calendar year. U.S. Broker Dealer had no borrowing under the credit facility and the available credit under this facility was $45.0 million as of June 30, 2024.

Previous wording

The Board of Directors of Moelis & Company declared a regular quarterly dividend of $0.60 per share. The $0.60 per share will be paid on June 20, 2024 to Class A common stockholders of record on May 6, 2024. During the three months ended March 31, 2024 the Company paid aggregate dividends of $0.60 per share.

Current wording

The Board of Directors of Moelis & Company declared a regular quarterly dividend of $0.60 per share. The $0.60 per share will be paid on September 26, 2024 to Class A common stockholders of record on August 5, 2024. During the six months ended June 30, 2024 the Company paid aggregate dividends of $1.20 per share.

Previous wording

During the three months ended March 31, 2024 and 2023, the Company repurchased 158,878 and 1,057,278 shares, respectively. The Company's share repurchases primarily consist of shares repurchased from its employees for the purpose of settling tax liabilities incurred upon delivery of equity-based compensation awards and share buybacks pursuant to the Company’s share repurchase program. In July 2021, the Board of Directors authorized the repurchase of up to $100 million of shares of Class A common stock and/or Class A partnership units of Group LP with no expiration date. The dollar value of shares that may yet be purchased under the program was $62.5 million as of March 31, 2024.

Current wording

During the six months ended June 30, 2024 and 2023, the Company repurchased 165,604 and 1,063,410 shares, respectively, from its employees for the purpose of settling tax liabilities incurred upon delivery of equity-based compensation awards. In July 2021, the Board of Directors authorized the repurchase of up to $100 million of shares of Class A common stock and/or Class A partnership units of Group LP with no expiration date. The dollar value of shares that may yet be purchased under the program was $62.5 million as of June 30, 2024.

Previous wording

We actively monitor our regulatory capital base. Our principal subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure general financial soundness and liquidity. This requires, among other things, that we comply with certain minimum capital requirements, record‑keeping, reporting procedures, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to and from affiliates. See Note 10 of the condensed consolidated financial statements for further information. These regulations differ in the United

Current wording

We actively monitor our regulatory capital base. Our principal subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure general financial soundness and liquidity. This requires, among other things, that we comply with certain minimum capital requirements, record‑keeping, reporting procedures, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to and from affiliates. See Note 10 of the condensed consolidated financial statements for further information. These regulations differ in the United States, United Kingdom, Hong Kong and other countries in which we operate a registered broker‑dealer. The license under which we operate in each such country is meant to be appropriate to conduct an advisory business. We believe that we provide each of our subsidiaries with sufficient capital and liquidity, consistent with their business and regulatory requirements.

Previous wording

Cash, cash equivalents and restricted cash were $103.3 million at March 31, 2024, a decrease of $83.9 million from $187.2 million at December 31, 2023. Operating activities resulted in a net outflow of $165.0 million primarily attributable to cash operating outflows, including discretionary bonuses paid during the period, net of cash collected from clients. Investing activities resulted in a net inflow of $129.4 million primarily attributable to net proceeds from the sale of investments. Financing activities resulted in a net outflow of $47.7 million primarily related to the payment of dividends and tax distributions and treasury stock purchases.

Current wording

Cash, cash equivalents and restricted cash were $151.2 million at June 30, 2024, a decrease of $36.0 million from $187.2 million at December 31, 2023. Operating activities resulted in a net outflow of $25.0 million primarily attributable to cash operating outflows, including bonuses paid during the period, net of cash collected from clients. Investing activities resulted in a net inflow of $108.8 million primarily attributable to net proceeds from the sale of investments. Financing activities resulted in a net outflow of $119.6 million primarily related to the payment of dividends and tax distributions and treasury stock purchases.

Previous wording

Cash, cash equivalents and restricted cash were $135.4 million at March 31, 2023, a decrease of $72.1 million from $207.5 million at December 31, 2022. Operating activities resulted in a net outflow of $152.1 million primarily attributable to cash operating outflows, including discretionary bonuses paid during the period, net of cash collected from clients. Investing activities resulted in a net inflow of $170.2 million primarily attributable to net proceeds from the sale of investments. Financing activities resulted in a net outflow of $90.6 million primarily related to the payment of dividends and tax distributions and treasury stock purchases.

Current wording

Cash, cash equivalents and restricted cash were $160.8 million at June 30, 2023, a decrease of $46.7 million from $207.5 million at December 31, 2022. Operating activities resulted in a net outflow of $81.0 million primarily attributable to cash operating outflows, including bonuses paid during the period, net of cash collected from clients. Investing activities resulted in a net inflow of $172.0 million primarily attributable to net proceeds from the sale of investments. Financing activities resulted in a net outflow of $137.7 million primarily related to the payment of dividends and tax distributions and treasury stock purchases.

Previous wording

As of March 31, 2024, the Company has a total payable of $310.1 million due pursuant to the tax receivable agreement in the condensed consolidated financial statements and of this amount an estimated $21.7 million will be due in less than one year. These amounts represent management’s best estimate of the amounts currently expected to be owed under the tax receivable agreement. Payments made under the tax receivable agreement are required to be made within 225 days of the filing of our tax returns. We generally expect to receive the tax savings prior to making the cash payments to the eligible selling holders of Group LP partnership units. There were no payments made pursuant to the tax receivable agreement during the first three months of 2024.

Current wording

As of June 30, 2024, the Company has a total payable of $288.4 million due pursuant to the tax receivable agreement in the condensed consolidated financial statements. There is no payment due in less than one year. These amounts represent management’s best estimate of the amounts currently expected to be owed under the tax receivable agreement. Payments made under the tax receivable agreement are required to be made within 225 days of the filing of our tax returns. We generally expect to receive the tax savings prior to making the cash payments to the eligible selling holders of Group LP partnership units. The Company made a payment of $20.3 million pursuant to the tax receivable agreement during the first six months of 2024.

Previous wording

The Company is exposed to the risk that the exchange rate of the U.S. dollar relative to other currencies may have an adverse effect on the reported value of the Company’s non‑U.S. dollar denominated assets and liabilities. Non‑functional currency‑related transaction gains and losses are recorded in the condensed consolidated statements of operations. In addition, the reported amounts of our revenues and other income from investments may be affected by movements in the rate of exchange between the pound sterling, euro, Brazilian real, Hong Kong dollar, Israeli shekel, rupee, Australian dollar, Saudi riyal and the U.S. dollar, in which our financial statements are denominated. The net impact of the fluctuation of foreign currencies in other comprehensive income (loss) in the condensed consolidated statements of comprehensive income were losses of $0.8 million and gains of $0.3 million for the three months ended March 31, 2024 and 2023, respectively. We have not entered into any transactions to hedge our exposure to these foreign currency fluctuations through the use of derivative instruments or other methods.

Current wording

The Company is exposed to the risk that the exchange rate of the U.S. dollar relative to other currencies may have an adverse effect on the reported value of the Company’s non‑U.S. dollar denominated assets and liabilities. Non‑functional currency‑related transaction gains and losses are recorded in the condensed consolidated statements of operations. In addition, the reported amounts of our revenues and other income from investments may be affected by movements in the rate of exchange between the pound sterling, euro, Brazilian real, Hong Kong dollar, Israeli shekel, rupee, Australian dollar, Saudi riyal and the U.S. dollar, in which our financial statements are denominated. The net impact of the fluctuation of foreign currencies in other comprehensive income (loss) in the condensed consolidated statements of comprehensive income were gains of $0.5 million and gains of $0.3 million for the three months ended June 30, 2024 and 2023, respectively, and losses of $0.3 million and gains of $0.6 million for the six months ended June 30, 2024 and 2023, respectively. We have not entered into any transactions to hedge our exposure to these foreign currency fluctuations through the use of derivative instruments or other methods.

Previous wording

ASC 740 prescribes a two-step approach for the recognition and measurement of tax benefits associated with the positions taken or expected to be taken in a tax return that affect amounts reported in the financial statements. The Company has reviewed and will continue to review the conclusions reached regarding uncertain tax positions, which may be subject to review and adjustment at a later date based on ongoing analyses of tax laws, regulations and interpretations thereof. For the three months ended March 31, 2024 and 2023, no unrecognized tax benefit was recorded. To the extent that the Company’s assessment of the conclusions reached regarding uncertain tax positions changes as a result of the evaluation of new information, such change in estimate will be recorded in the period in which such determination is made. The Company reports income tax related interest and penalties relating to uncertain tax positions, if applicable, as a component of income tax expense. For the three months ended March 31, 2024 and 2023, no such amounts were recorded.

Current wording

ASC 740 prescribes a two-step approach for the recognition and measurement of tax benefits associated with the positions taken or expected to be taken in a tax return that affect amounts reported in the financial statements. The Company has reviewed and will continue to review the conclusions reached regarding uncertain tax positions, which may be subject to review and adjustment at a later date based on ongoing analyses of tax laws, regulations and interpretations thereof. For the three and six months ended June 30, 2024 and 2023, no unrecognized tax benefit was recorded. To the extent that the Company’s assessment of the conclusions reached regarding uncertain tax positions changes as a result of the evaluation of new information, such change in estimate will be recorded in the period in which such determination is made. The Company reports income tax related interest and penalties relating to uncertain tax positions, if applicable, as a component of income tax expense. For the three and six months ended June 30, 2024 and 2023, no such amounts were recorded.