Q1 2020 Earnings Call

Know until we know more. However, we remain committed to returning all of our excess Capital to shareholders. And when the future is more certain and business activity stabilizes, we will not need to restore our dividend and declare a special dividend if appropriate and not pass it to Joe will walk you through our financial results and then I'll conclude with a few final thoughts on the environment Joe X can we aren't first quarter revenues of $154 million up 12% from the prior-year period or the end of the quarter. We saw transactions being put on hold with both of those deals delayed due to the uncertainty and Market volatility caused by covid-19 at the same time our restructuring business coupled with our Capital markets capabilities as experienced a tremendous increase in mandates recently and we feel very confident about its long longer-term contribution. However, there is a transition period in the short-term as we learn retainers and interim Capital raising fees dead.

But expect a lag before we earn completion fees on most restructuring transactions moving to expenses. Our first quarter adjusted compensation expense ratio was 62% It takes compensation costs are always slightly elevated in the first quarter due to retirement accounting for our annual Equity grants and payroll tax charges. Our non-compensation ratio is 22% for the first quarter of 2028 versus 28% in the prior year. Absolute non-compensation expenses declined 10% versus the prior-year largely driven by decreased travel and other business development expenses back to social distancing restrictions implemented for most of March moving to taxes are underlying corporate tax rate was 25.2% for the quarter before the discrete tax benefits primarily related issue or Equity Awards settlements this resulted in an overall net tax benefits for the quarter and that will now hand the call back to Ken.

Thanks, Joe.

So let me conclude with this. I've experienced many different Cycles environments to my 40-year career, but I've never seen an economic cessation caused by a global Health crisis took a lot of what will happen in the coming weeks and months would be dictated by governments medical experts and circumstances that are completely unpredictable and unpredictable and out of our control because the timing of the recovery is uncertain a fortress balance sheet and having a diversified flexible and collaborative business model is of Paramount importance. We have come prepare with us in a position to do what we do best, which is Empower our employees exceed our client's expectations and execute for our shareholders. And with that. I'll open it up to questions.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the key off to withdraw your question, please press * then two.

Our first question will come from Ken Worthington with JPMorgan.

Hi, good afternoon. And thank you for taking my questions. I'll stick to to costs for my question. So first on compensation $95 Million last year as a compensation for the year average to Touch under a hundred twenty million for the quarter and in hindsight, it seemed like most may have under accrued in the first part of the year in compensation and move to a high level higher level of compensation in the second half of the year. So as we think about sort of the the 95 million dollars, is that a comfortable is that a wage level or figure that you would feel comfortable with if Revenue generation is low for 2020 to kind of persist for the rest of the year. And if so that would suggest about a hundred million dollars Less in compensation in 2020 vs. 19 is at a level that that feels right to you or or or or Not Dead.

The answer is I don't know. I am going to try to be very careful. I think the next couple of quarters and and maybe even the recorders if they come as soon as the end of the year are so unknowable can that I'm not going to that was the first quarter was the first quarter and we did we did break. I was pursuing to the first quarter. I believe we've got a really this is a year that again I have no control over there's no there's no tools. I can use as the CEO to turn the economy back on secure the virus and to affect the medical expertise. So in that regard, I am just going to leave it as we we're going to all have to wait and see what this what how long you're on folds and we'll make decisions around that when we know more and and that's really all I'm going to say.

okay, I think it's fair and then

On the non-compensation side. So social distancing, uh, and sort of the slow down and travel happened towards the end of the month or not for for the full quarter as we think about sort of, you know, at least the next quarter and and maybe all throughout the assumption that the social distancing continues. What should we expect from you guys in terms of the non-comp, you know, if travel remains as slow as it was and the latter part of of one Q. Yep, and I guess my assumption is that that travel and meeting with client has really slowed maybe that's an error and you guys are able to get out on the road. But if if my assumption is, correct, you know, what should we think about four nine called? You're correct on that joke that we're not having a lot of in-person meetings and not a lot of flights. So Jo, do you have you want to take that?

Yeah, sure. I mean so just as background we're constantly reviewing my account and you might recall in 2019. We did Kris the absolute dollar amount of old versus 2008 while still adding headcount this year. We are seeing a natural reduction in TNA. We're also taking action on a variety of other areas and I think I'd expect the second quarter to be probably less than 30 million going into the second quarter.

Okay, great. Thank you very much.

Our next question comes from Devin Ryan with JMP securities.

Great day. Good afternoon, Ken and Joe question. I get pretty frequently from our client is trying to frame the upside case for restructuring structuring revenues. And I appreciate you know, the long time line on restructuring closings. And so there tends to be a little of a mismatch, you know as m&a slows, but how do you guys think about I guess maybe the potential upside case, you know, is there conditions for doubling or more or you know any other kind of Frameworks that you think about kind of how much better business could get to the extent the address continues and and you know appreciate you know, you guys have a pretty good opinion just given the firm was set up real late the beginning of you know, the the prior restrictions cycle.

I don't have an exact number and and it's hard to know but doubling seems like it's you know easy I think you know over and over as we get going and back up. Again, Joe said there is a transition when you go from you know, it's like the car was going forward and put it in stop and now we're going backward how fast we we go fast, and and I've probably been dead.

Pleasantly surprised at how fast the level of conversations and calls are picking up. I think one of the reasons is one of the benefits is, you know, emanating from a business you had to be out on the road a meeting your clients for weeks and weeks before they'll you know, sorry years and years before they will hire you I've always said that we struck his kind of a a a fire department type of business. You don't spend a lot of time with the person who's going to restructure your balance sheet cuz you're not thinking that most most places. I'm planning on that and so the calls are fairly immediate and and actually not being there in person is much less of a barrier, you know, not having that personal interaction and then on top of that

we're able to get calls and

Work done extremely quickly cuz as I said, nobody's at their kids ball game or out for dinner or on an airplane or at a board meeting when we when we've gotten calls to them to come up with ideas and and and help people. You know, we we had everybody on the phone five or ten minutes later. It's it's a stunning efficiency. So the short answer to you is I think I met, you know, became a fairly large business over the last three four years. I don't know that restructuring could ever replace it but I think restructuring can be a lot larger than it was in the eight or nine month cycle given how much papers out there and our firm we've retained almost our whole team. We probably promoted five people from within over that time to bmv's or boss. And and and as I said last last cycle, we went back and looked every one of our embassies accepted one actually worked transition from working on Eminem.

Device to restructuring and this cycle were what committed to finding that one guy and making sure he gets to work too.

Got it. Fulton and just a follow-up on maybe a little bit more of an m&a spin. But you know pretty clear that pretty much every company in the world moved from kind of normal business operations to a hyper focus on health of their employees and um clients as well. And you know is you're talking about maybe some of the dialogue starting to pick back up a bit here, but we're early days. There's still a lot of uncertainty what are some of the signposts that you would maybe think about is indicators, um from the outside that that would suggest there's more willingness to move forward on a transaction page then if if if anything is kind of different here any Nuance between sponsors and how they're thinking behaving versus, you know, corporate clients at the moment.

So your car there is a lot of I called transactions. They're just they're not for control. There's a lot of hype and transactional volume around 5 you financing and and I'd say the risk-adjusted return because a lot of those you're coming in at levels above common stock or almost, you know, sometimes in a secured position for rates of return I'm close to equity returns. So right now there is a lot of transactions and that's where they're going. I think the signpost and and you know, you'll be able almost see it when we'll see it is you'll have to be able to underwrite the next twelve months. You cannot buy a company if you cannot underwrite to some level of certainty the next 12 months of of operations or even the the 12 months after that right now you couldn't do either and again because we're not in control of this. I just want to say that's one of the reasons m&a has to slow down in in the 09 crisis.

Maybe you could figure out what you wanted to do because it was a financial crisis and you could you could wager on your own expertise and figuring out how deep and how long a financial crisis is off of Crisis is outside of the purview of of most of the boards and and management teams to underwrite and and again and remember that that also goes to the government reaction to the Health crisis. So I think you have to see two things the ability to control your own destiny come back into the Board Room or the c-suite somewhere inside your company. You need to be able to control your own outcomes. And I also think you need to be able to underwrite some level of of a of a of an economy or you know, the business that you should do. And by the way, that's my that's why m&a is not dead. There are some companies that are involved in technology and and even in health care that are uniquely not negatively affect.

Goodbye this but there's a significant amount that are you know.

significant majority are

Right, and I guess is there any Nuance between sponsors that you need outside financing and and maybe have more leverage but but there's also some differences there versus Corporate Office could use equity here and all that what you use or values have moved lower. So maybe there's a a still kind of a fair swap. I mean is there is there any difference in kind of those conversations or would you say it's all quite similar in terms of how long your firm's reacting and kind of thoughts on m&a?

It's fairly simple cuz you sort of have to be able to do due diligence and underwrite a business model. Even if you're going to swap your own stock and you think your stock is low you do have to do due diligence become comfortable with the other person's business prospects, which is very hard to do in this environment. So that's difficult and I think sponsors are willing and looking at doing things off but I think the rescue financing opportunities risk-adjusted for where they can put their capital in for the time being.

Are attracting their attention more than trying to do whole company transactions. And and I do think it'll come. The only thing lastly I'll say to you is I think that the Dead

the most difficult part of this to get back on track is going to be the Middle Market financing is already available.

A large caps, you see that the fed's move to open the liquidity and start to buy investment-grade and even Fallen Angel and you know junk credits has really helped wage. Some of the you've seen them the companies have rushed to Market. I think the part of this Market that people don't don't they might have a longer Time coming back is that basic financing leveraged financing for the Middle Market company that has to rebuild after you know, and and rebuilding is going to take some time as well.

Yeah, got it. Appreciate kind of leave it there.

Our next question comes from monongah zawya with Morgan Stanley.

Hi, good afternoon. You mentioned that you know doubling of restructuring is is you know is very possible. Is there a limit on how much capacity you have to take on more business, you know given that multiple Industries right now facing pressure on you could see a pretty significant spike in restructuring activity. You know, how easy is it for? You know your your entire team towards restructuring?

You know, I think we can do it I is there a limit? Yeah, there's going to be a limit. So I do think if we stayed in this type of environment for a while I think doubling would be the Baseline for most for the total amount of restructuring. If I remember it depends how you define restructuring. A lot of this rescue financing is starting as restructuring and ending up with one that might be a capital markets trade by the way, which is very good. It's not a terrible thing. It's a good thing. It's good for the companies and it's in a more immediate opportunity. But you know, you might read that as a capital markets and we might really see that as having started as restructuring. So it's it's one of those businesses if you're if you're willing to get into it as a as a managing director the trouble is sometimes you have some very senior managing directors to kind of you know, they don't want to learn a new business. I mean part of the reason we I think our Workforce is much more flexible that I think yep.

we hired a managing director, you know in

A few years ago who didn't know what a restructuring was when I told him we had a grid restructuring group. He told me he he shook my hand. He said that's really good to know that he went home and Googled what a restructuring group done that now he's probably he's not in our restructuring group, but he's probably our most experienced restructuring guy that we have and that's happening in retail that's happened in media before birth. And so I think we could really expand the workforce will expand very rapidly. We have sort of fifty or sixty dedicated restructuring people. We will pair them up with our leadership. They will do one or two deals in their space. And then the leadership will be a next, you know will be pretty expert in how to do it.

Got it. That's helpful. And then separately, can you give us a little more and higher thinking about your liquidity? I know you said you have a hundred forty five billion in cash and short-term Securities and you know that's higher than what you had in some quotas. So I was wondering you know, what Buffalo would you be comfortable building before you take the dividend back up?

It's not really the buffer. We have a we're in a great look we have no debt. We have a load burn Ray. We have the best lease structure of anybody and we have no deferred cash. I view it as an offensive move this there two things that could happen.

Lo and behold somebody cures this thing and we're all back to work fine. I'll pay a special and you know, I'll be embarrassed a little bit that I was overly girly careful or could go further. I just believe it's a very offensive move. I think this is the time to get prepared to take. Great to grow moelis & Company was created in the last crisis people used to ask me that five years ago when we went public. What's the one thing I regretted and I said, I that we only hired, you know, sixty people a year. It was the greatest moment. We could ever have to to acquire a plus talent that never becomes available.

I think in this environment people are going to look at their balance sheets of the companies. They work for the net could be in whether it's boutiques or big Banks and they're going to want safety and not going to want to know that they have a great career in front of them. So to me, it's not the buffer this this is an offensive move so that we can be aggressive if we have the opportunity.

Got it. Thanks for taking my questions.

Our next question comes from Brennan Hawken with UBS.

Hey, good evening. Thanks for taking the question. I wanted to follow up. Hey wanted to follow up on the dividend question. And I guess if you flagged the strength of your balance sheet and I certainly would agree with you on that point. I mean, it's it seems very very clear. This is something that's been a priority for you since you know the IPO and so I think maybe what might be leading to some confusion is that if if you have such a strong balance sheet, if you would think that this is such an asset then or are you worried about sending the mixed message of cutting the dividend which might lead some to wonder whether or not you're facing it. It's usually seen as as not a move of strength to remove a weakness. And so how do you balance the the risk of sending them?

message

Especially in light of what a priority is to have the Fortress balance sheet that you've built up over over at least many years. So that's a good question. We we thought a lot about that and we thought you know, obviously the range of the spectrum there a lot of people out there that are skipping a dividend. We said, you know, let's go to Hell by the way, it was there was there extreme science around, I'd like to tell you yes, but it's all fair. It's not like a good place to be now, two things one. Our Capital return method has been to Thursday 100% of many come out and dividend and until recently. We weren't buying a lot of stock. A lot of our competitors are comps. Let's say our comps have a much lower dividend payout fund have managed the spigot of that excess Capital through, you know share repurchase they can stop to share repurchase, you know easier so we decided wage

Do this and look the last part of that is the biggest non receiver of the cash is probably is the largest shareholder is is myself and the employee base and I I really want to own is the best franchise people have asked me and I said we will be the best and largest Investment Bank in the world, but it won't happen. You know, they won't happen it'll happen because and I've said this in the past it'll be happened because we're prepared for a downturn in a way that nobody else is and we we're not going to grow an extra 5% a year in the job Market's by stretching but we might grow twenty-five or thirty percent during a bad market and it's here Brandon and I'm not going to say, you know, I'm not going to give up if I it was dead last is a long answer to but I think it's important for everybody to know. I'm not driving the car on the decisions here Tony falchi and Donald Trump and the governors and the you know, there's a lot of people driving home.

The car of when I can get back in gear.

And I don't know when that is, you know, it's a different decision. If I was trying to predict to you what I could do with things under my control. I can't and I'm not going to give up my I'm not going to give up my advantage that I you know that I've kept a clean balance sheet for I'm going to I'm going to keep that Advantage no matter how tough it gets. I hope it doesn't get much tougher than this, but I want to keep it because I know the franchise will be extremely more valuable three to five years from now if we keep it.

And and that's what happened during the financial crisis. That's what'll happen post this crisis if we play our cards, right?

Okay, thank you for that that and then my follow-up is on the same topic actually is is it too much? Is it overstating it to say that maybe you know the most approach to a dividend is a more is just a more flexible philosophy around the dividend in other words, like what you described some of the others in the comp set as using the share repurchase as the valve you all have used specialist, but you also have ratcheted up the regular pretty quickly and now, you know, you're you're adjusting it off. So more quickly than others might is it just a difference in philosophy that you know, let me page some last dividend raise. We raised it slightly. And really the reason I was Raising it is I have in my mind that took twenty years from now, we'd be a dividend aristocat aristocrat.

We would have raised our dividend every year and I wanted to be one of those guys. I did I

And that's what we were doing. That was my plan.

But nobody told me they shut the economy for an unknowable amount of global economy. The whole world would shut down. You know, I didn't I didn't have that in my life planning and or maybe I did cuz we end up with a good balance sheet, but I I just decided in the balance of did I want to be a dividend Aristocrats twenty years from now or should I want to have the most powerful franchise position that I could take advantage of? I I think he chose the other one. We chose the wage the powerful franchise and I hope one day they'll have a footnote around dividend Aristocrats and said only skip during the pandemic

Sure. No, I could be like be like the Rodger Maris homerun.

Our next question comes from Jeff heart with Piper Sandler.

Hey good evening guys a couple from me one you talked about restructuring and kind of things being very active with the timeline to revenue recognition being longer. Can you give us an idea of kind of what you think that timeline to revenue recognition would normally be and to what extent kind of the pandemic environment may impact and kind of string that out or make that choice like it appears to be doing for strategic. M&a.

Usually a restructuring usually goes about six months to eighteen months depending on whether it's out of court has to go to court but you know between six to eighteen months we've had some that have gone longer and we've had some bath water but that's kind of a restructuring you get a monthly and you do it now. I actually I just want to know I think the pandemic restructuring feasting could be slightly shorter and I'll tell you why. This is less. It's less of a leveraged. I mean it may become an over-leveraged situation in the short term in the very short-term. It's a liquidity crisis. It's it's there's a substantial amount of companies out there that either have zero ebitda and some have zero revenue and and so how much cash becomes a problem and therefore the solution is capital or something immediate, you know, you don't have enough time to fix a balance sheet. All you're trying to do is fix a cash position wage.

Think a substantial amount of the early assignments here could actually fundamentally be quicker to conclusion and and might be reported as capital markets. But but six eighteen months is a usual restructuring.

Okay, and and along those lines Capital markets advisory kind of I would think that there is the potential for that to pick up some with with the environment out there. I mean is that would you expect to see that pick up some as well and she can you get a even a general idea of what kind of fee sizes Capital markets advisory tends to bring in relative to say advisory normal advisory North advisory.

Yeah.

I'm trying to get an idea of what kind of the general fee size on Capital markets advisory vs. I mean, it can be versus normal advisory or versus underwriting. Just kind of how it falls in on transactions. He pulled his kind of much smaller has been much smaller right now. It's all over the place. But you know anywhere from two to three points or you know equities probably still Five Points of private Capital being brought in dead. Well, you know, of course, it depends on because some of the the rescue Capital liquidity the capital is coming in and secured credit. So I'm coming in unsecured some is going to be a pipe preferred package type and Sons going to be equity and I bet I would guess it's, you know broad broad brush don't you know, there's a lot of specifics but you could go anywhere from like as you get into a rescue financing I'd say it's going from like one point on the secured financing to as large as Five Points on the equity.

Okay, and finally for me as far as kind of ongoing client dialogue, can you talk a little bit about on the Strategic side? How conversations are still taking place? I guess I'm I'm trying to get a feel for how long how underlying cease week. I'm desire to and and focus in in acting strategically today compares to maybe how it has in Prior recessions if they're you know, not so much in survival mode and I could I could turn back on more quickly.

It was a lot of good backlog coming into the end of the crisis just quality assets. They said when markets are are peaking and evaluations are high. I think I use the art world as an example. The best assets were getting ready to come to Market in January February cuz you were at all-time highs and valuations. So people will put their best assets up and we had a substantial we had a very good backlog. So we're continuing to talk about that with them. You know, we're we're we're not moving forward by the way that conversation really happened for a few weeks. Should we should we should we have a lot of them are now that I am so that's part of the dialogue and then and then people are talking about what they've like to accomplish if the market comes back so I think that's

You know, I think there's just I would say it's should we approach it's you know, that's that's an interesting asset at that price and maybe they'll need to do something and maybe we should be thinking about that kind of thing. So it's it's conversational but you know wouldn't say they're they're they have different finger on the trigger.

Okay. Thank you.

Our next question comes from Michael Brown with KBW.

Hey good evening guys. So, you know, most of my questions have been been asked a couple of structuring. I just wanted to get your thoughts on God, how how are you kind of think about this cycle given its you know, quite different than prior cycles and one element. I was trying to get at is how do you think about how some of these stimulus programs and wage? You know how quick we came to Market will impact this cycling. Is it possible? We see a second wave of restructuring when some of the support kind of wears off say next year and then just kind of one other follow on there, you know, we saw that the, you know, the treasury announcement, you know, if yourselves to help with the your name out on the government programs just as he gave some color on a debt visor so I could you give a little bit of a little bit of color on how those fees play out and how they compare to kind of wage.

Go manage. Thanks. Okay, so I'm going to start with the second one. No, I don't want to we don't talk about specific assignments. So I know that was announced.

Publicly, but I still can't talk about it. So I won't and and

at the first question you were asked about was how do I take the the FED policies will still look again? I don't know I said I'd like to stick with the nobody knows anything. So don't try to sneak genius here. But to your point, I think there could be a second wave. I just feel like again comparing this to the 2009 crisis. Most people went to work every month. It was a crisis. But it if you if you Fern didn't shut down because Lehman Brothers didn't go every day, but the the ninety-nine percent of the jobs and the restaurants and then the bars and met the mom had popped retail. They they went to work every day. I've never this is unbelievable what's going on and the Damage it will do to me is going to come in waves. It's going to come right now what's happening on liquidity and crises about and then it's going to come with you know, what's the depth of the consumer? What money do they have when they haven't had a job?

How to businesses who have to socially distance and you know a make make money in their in their structure all those and you know, and the consumers going to be scared to travel and fly and and and and spend there's there's second and third derivatives that that we don't know yet and you know, it goes to why I'm being so conservative. I I don't think you'll have a chance to replay the hand. And yes, I do think they'll be a second wave today. It's about liquidity I think down the road. It will be about Leverage.

Okay, and just one quick follow-up, you know, so appreciate all that car that you have on the dividend, you know kind of hunkering down for really dead environment clearly. It sounds like you're looking for an opportunity for you know, hiring kind of similar to what you saw financial crisis, but given the significant shift in the office. Is this also a time to kind of reassess, um, your existing workforces there some repositioning that that could happen relative to you know, the the change in the environment that you may need to, you know, consider, you know, given obviously, you know the outlook for industry to you know, radically change so any color as to thinking about wage existing Workforce, thank you. Yes, and we don't want to do anything during the crisis people have a have a hard time and second. We've been doing this continuously. Yep.

Take workforce management as a continuing operation last year. We moved some people out. We do it continuously.

It's not a it's not it's it's an every year every day event. I will say to your point if the shape of the hole if the shape of how you work change, you know the shape of Industry. Maybe we have the wrong Workforce in the wrong places for the postcode of we'll address that but for the time being with planning anything and we're pretty happy with the majority of what we have look every everybody needs help. So we want all our sector Bankers to be contacting Industries and and even if it's talking about restructuring, we have great restructuring expertise so we can move that in we don't want to give up the connectivity but look, there's going to be a lot. There's going to be a lot knew about the world was finally figure this all out and we will if that's your question. Yes, we'll reassess its why I pointed out, you know, we have not a lot of excess, uh least expense on real estate.

Cuz we had about 20% expansion and you know, the question really is could you do it?

20% less and we always thought 20% expansion was going to be tight. But if we could do it 20% less maybe we have 50% Room to Grow because of work from home. So I'm happy don't have those obligations and we will look at the whole shape of the coverage and our Workforce again when we're back to work and we know what happened.

Okay, great. Thank you for taking my questions.

Our next question comes from that code with autonomous research. Hey Kenny, Joe. I'm taking a question and I hope you guys are making making a strange time arranges fine. So like one open ended one and I know it's incredibly difficult to tell with where we stand right now, but given the choice of conversations you have with various Business Leaders across the country and Globe. Could you provide your take on any potential ramifications a cycle like this could have on a activity once the economy begins to recover? Okay. So there is a there is a very optimistic and you know, I think it's it's really very possible that you have a continuing restructuring environment smoker leverage. And you also have a consolidation m&a wave look,

It's it's not a good thing that this has happened to the middle-market companies, but they're they may not be able to get back on their feet and you could really see a real the people are going to survive this are obviously the biggest folks in their industry. You had a balance sheets and accessibility to Capital and I could see a large Eminem wave in Industries where you just have to consolidate out the the middle and we end up with a very large concentrated industry birth to a lot of consolidation. And so you could have you could have both things happen and I can see that being a very likely outcome and and that's why you know, we do a lot. We have a great with great middle market and we have a great large-cap we cover everything but the I could see that happen. I don't think that's what this year event.

If that starts to happen, I think it'll be next year, but it could happen.

Awesome. Thanks again. And then one kind of picky question on restructuring. Is there any like broad-brush kind of guy that you could give on the Phoenix just of a typical contract just between retention progress and success.

you know, it's never the monthlies are usually within a range of

Call it a hundred and fifty to the the the vast majority of them are like two hundred to three hundred thousand. Obviously, there's some big complex ones where you you you charge a lot more and and and everything's different by the way, and then and then success I can't give you a ratio because you know, if you're dealing with a like a company with eight hundred million dollars who's in trouble like a different success than if you're dealing with a company with eight billion dollars. So it's not a ratio. The monthly fees are usually in in a certain range. They can get larger than that. By the way, if you're working in a transaction that doesn't have uh-oh easy to define success fee. So then you want to get more month lease, but the standard range of fees is kind of in there and then I then there's no ratio cuz the back end is is by size, but maybe another way of thinking about it is we've looked at this in the past and typically a third of the fee wage.

The total fee comes in the form of retainers and 2/3 comes in the form of a

We should be typically hour on average.

Awesome. Thank you so much cash.

My next question is a follow-up from Brennan Hawken with UBS.

Hey, thanks for taking my follow-up just a quick one and it it might be it might be just something I'm not aware of but the cares act benefit to your taxes. I haven't heard another company flag that could you just walk through what a piece of the act and and how that benefit flows through to you guys. Yep. I'll let y'all do that.

Yeah, so that cares act permits net operating loss has to be carried back five years based on current uncertainties. We were calculating our tax rate this year on a discreet quarterly basis rather than trying to come up with a full year forecast that's virtually impossible. So accordingly due to the large stock says that we had in quarter one month we generate Gap income but we generate an NRL for tax and so applying the nol two years starting with 2015 and we had taxable income the corporate tax rate with 35% It's today 21% that rate differential applied to that calculated. Nol for the quarter is ultimately what comes through the benefit.

Okay. Thanks for that. You sure.

This concludes our question-and-answer session. I would like to turn the conference back over to Ken moelis for any closing remarks.

Okay. Thank you everybody before I go. I wanted to thank the show me a calendar for her important contributions as a founding member of the firm and she is transitioning back to the banking side of the business office taking over investor relations function is Chapman dealt with a lot of you have met and worked closely with over the past five years. Please try to throw Michelle me a callous and business. She's a great banker, and I'm I'm sure you've all gotten to know or so. Again. Thank you for your time this afternoon. My thoughts are with all you and your families and your extended families as we navigate this difficult time. Please stay safe and healthy and walk forward to speaking with you soon. Thanks.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.