Moelis & Co

Previous 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.

Current wording

As of September 30, 2024, we served our clients globally with 926 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 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.

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 nine months ended September 30, 2024 and 2023, referenced throughout this Form 10-Q was obtained from LSEG - Financial Technology & Data (formerly known as Refinitiv) as of October 4, 2024 and October 4, 2023, respectively.

Previous 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.

Current wording

For the first nine months of 2024, we earned GAAP revenues of $755.8 million compared with $639.9 million earned during the same period in 2023. This represents an increase of 18% compared to a 5% decline in the number of global completed M&A transactions greater than $100 million in the same period.

Previous 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.

Current wording

The M&A market has been gradually improving throughout 2024 and with the Federal Reserve starting to cut interest rates, we expect to see continued improvement. 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 near 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 remain elevated as a result of higher borrowing costs. We anticipate a prolonged restructuring cycle centered around liability management exercises due to a large amount of non-investment grade debt maturing over the next few years. 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

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

Current wording

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

Previous 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.

Current wording

Revenues were $273.8 million for the three months ended September 30, 2024 as compared with $272.2 million for the same period in 2023, representing an increase of 1%.

Previous 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.

Current wording

For the three months ended September 30, 2024 and 2023, we earned revenues from 163 clients and 139 clients, respectively, and more importantly, the number of clients that paid fees equal to or greater than $1 million was 67 clients and 48 clients, respectively.

Previous wording

Revenues were $482.1 million for the six months ended June 30, 2024 as compared with $367.7 million for the same period in 2023, representing an increase of 31%. The increase in revenues was driven by an increase in the number of completed transactions as compared to the prior year period.

Current wording

Revenues were $755.8 million for the nine months ended September 30, 2024 as compared with $639.9 million for the same period in 2023, representing an increase of 18%. The increase in revenues was driven by an increase in the number of completed transactions as compared to the prior year period.

Previous wording

For the six months ended June 30, 2024 and 2023, we earned revenues from 239 clients and 177 clients, respectively, and more importantly, the number of clients that paid fees equal to or greater than $1 million was 117 clients and 79 clients, respectively.

Current wording

For the nine months ended September 30, 2024 and 2023, we earned revenues from 314 clients and 248 clients, respectively, and more importantly, the number of clients that paid fees equal to or greater than $1 million was 177 clients and 129 clients, respectively.

Previous wording

Operating expenses were $456.2 million for the six months ended June 30, 2024 and represented 95% of revenues, compared with $378.7 million for the same period in 2023 which represented 103% of revenues. The increase in operating expenses was primarily driven by increased compensation and benefits expensed associated with higher revenues compared to the prior year period.

Current wording

Operating expenses were $258.2 million for the three months ended September 30, 2024 and represented 94% of revenues, compared with $292.2 million for the same period in 2023 which represented 107% of revenues. The decrease in operating expenses was primarily driven by a decrease in compensation and benefits expense associated with a lower target compensation as a percentage of revenues compared to the prior year period.

Previous 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.

Current wording

Operating expenses were $714.4 million for the nine months ended September 30, 2024 and represented 95% of revenues, compared with $670.9 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 six months ended June 30, 2024, compensation related expenses of $362.3 million represented 75% of revenues, compared with $294.0 million which represented 80% 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.

Current wording

For the three months ended September 30, 2024, compensation related expenses of $210.7 million represented 77% of revenues, compared with $242.2 million which represented 89% of revenues in the prior year period. The decrease in compensation expenses was primarily attributable to a lower target compensation as a percentage of revenues compared to the prior year period.

Previous 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.

Current wording

For the nine months ended September 30, 2024, compensation related expenses of $573.0 million represented 76% of revenues, compared with $536.3 million which represented 84% of revenues in the prior year period. The increase in compensation expenses was primarily attributable to increased headcount as compared to the prior year period.

Previous 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.

Current wording

For the three months ended September 30, 2024, non‑compensation expenses of $47.5 million represented 17% of revenues, compared with $50.0 million which represented 18% of revenues in the prior year period. The decrease in non-compensation expenses is primarily due to a decrease in professional fees directly connected to specific transactions, partially offset by increased expenses related to greater headcount as compared to the prior year period.

Previous wording

For the six months ended June 30, 2024, non‑compensation expenses of $93.9 million represented 19% of revenues, compared with $84.6 million which represented 23% 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.

Current wording

For the nine months ended September 30, 2024, non‑compensation expenses of $141.4 million represented 19% of revenues, compared with $134.6 million which represented 21% 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 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.

Current wording

For the three months ended September 30, 2024, other income and expenses was income of $11.1 million, primarily related to a $7.0 million gain on the sale of 5,000,000 shares of our investment in MA Financial Group Limited ("MA Financial") and $3.9 million in interest and gains on financial assets measured at fair value. For the prior year period, other income and expenses was income of $9.9 million, primarily related to net gains of $7.1 million on financial assets measured at fair market value and $1.4 million in earnings related to the Company's investment in MA Financial.

Previous wording

For the six months ended June 30, 2024, other income and expenses was income of $5.9 million, primarily related to interest and gains on financial assets measured at fair value of $5.0 million and $1.0 million from the Company's share of earnings in MA financial. This compares to expenses of $3.9 million in the prior year period primarily related to the $10.0 million SEC fine, which was partially offset by $2.6 million in interest and dividends on cash equivalents and investments, net gains of $2.0 million on financial assets measured at fair value held and sold during the first half of the year, and income of $1.5 million from the Company's share of earnings in MA Financial.

Current wording

For the nine months ended September 30, 2024, other income and expenses was income of $17.0 million, primarily related to $7.0 million gain on the sale of 5,000,000 shares of our investment in MA Financial and $6.2 million in interest and gains on financial assets measured at fair value and. This compares to income of $6.1 million in the prior year period primarily related to net gains of $9.0 million on financial assets measured at fair market value, $3.5 million in interest and dividends on cash equivalents and investments and income of $3.0 million from the Company's share of earnings in MA Financial, partially offset by the $10.0 million SEC fine.

Previous wording

The Company’s provision for income taxes was an expense of $6.9 million against a pre-tax income of $21.8 million and a benefit of $2.0 million against pre-tax loss of $15.2 million for the three 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.

Current wording

The Company’s provision for income taxes was an expense of $7.4 million against a pre-tax income of $26.7 million and a benefit of $1.3 million against pre-tax loss of $10.1 million for the three months ended September 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.

Previous 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.

Current wording

The Company’s provisions for income taxes were a benefit of $6.8 million against a pre-tax income of $58.5 million and a benefit of $3.9 million against a pre-tax loss of $24.9 million for the nine months ended September 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 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.

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 September 30, 2024 and December 31, 2023, the Company had cash equivalents of $100.2 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 September 30, 2024 and December 31, 2023, the Company had cash of $45.1 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 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.

Current wording

In addition to cash and cash equivalents, we hold sovereign debt securities and certificates of deposit 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 September 30, 2024 and December 31, 2023, the Company held $152.3 million and $162.9 million of sovereign debt securities and certificates of deposit 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 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.

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 September 30, 2024 and December 31, 2023 accounts receivable were $57.8 million and $51.2 million, respectively, net of allowances of $2.1 million and $1.3 million, respectively.

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 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.

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 December 2, 2024 to Class A common stockholders of record on November 4, 2024. During the nine months ended September 30, 2024 the Company paid aggregate dividends of $1.80 per share.

Previous 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.

Current wording

During the nine months ended September 30, 2024 and 2023, the Company repurchased 181,718 and 1,078,130 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 September 30, 2024.

Previous 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.

Current wording

Cash, cash equivalents and restricted cash were $146.1 million at September 30, 2024, a decrease of $41.1 million from $187.2 million at December 31, 2023. Operating activities resulted in a net inflow of $112.1 million primarily attributable to cash collected from clients, net of cash operating outflows, including bonuses paid during the period. Investing activities resulted in a net inflow of $13.4 million primarily attributable to net proceeds from the sale of investments. Financing activities resulted in a net outflow of $168.1 million primarily related to the payment of dividends and tax distributions.

Previous 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.

Current wording

Cash, cash equivalents and restricted cash were $148.2 million at September 30, 2023, a decrease of $59.3 million from $207.5 million at December 31, 2022. Operating activities resulted in a net inflow of $59.1 million primarily attributable to cash collected from clients, net of cash operating outflows, including bonuses paid during the period. Investing activities resulted in a net inflow of $64.0 million primarily attributable to net proceeds from the sale of investments. Financing activities resulted in a net outflow of $183.0 million primarily related to the payment of dividends and tax distributions and treasury stock purchases.

Previous 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.

Current wording

As of September 30, 2024, the Company has a total payable of $290.6 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 nine 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 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.

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 $2.3 million and losses of $0.8 million for the three months ended September 30, 2024 and 2023, respectively, and gains of $2.0 million and losses of $0.2 million for the nine months ended September 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 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.

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 nine months ended September 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 nine months ended September 30, 2024 and 2023, no such amounts were recorded.