Q3 2020 Moelis & Co Earnings Call
Participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero. After todays presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.
Please note this event is being recorded.
Now ill turn the conference over to Mr. chat Mendell head of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us for Moelis <unk> company's third quarter 2020 financial results Conference call.
Someone today are Ken Moelis, Chairman, and CEO, and Joe Simon Chief Financial Officer.
To begin I'd like to note that the remarks made on this call may contain certain forward looking statements, which are subject to various risks and uncertainties, including those identified from time to time and the risk factor section of Moelis <unk> company's filings with the EPS, you see and now and in our earnings release actual results could differ materially from those currently anticipated.
[music] undertakes no obligation to update any forward looking statements.
Our comments today include references to certain adjusted financial measures. We believe these measures when presented together with comparable GAAP measures are useful to investors to compare our results across several periods.
I understand our operating results.
Reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information required by Reg G is provided in the firm's earnings release, which can be found on our Investor Relations Web site investors that bought stock comp I will now turn the call over to Joe to discuss our results Joe.
Thanks, John Good afternoon, everyone on today's call I'll go through our financial results and then Ken will discuss our business further we.
We achieved a strong third quarter, earning 208 million up revenue.
Resulted in sequential growth for the second consecutive quarter since the onset of cold at night cheap.
General M&A landscape dramatically improved in the third quarter, leading to a solid contribution from both strategics and sponsors.
Restructuring related activity was the highest its ever been exceeding last year's record third quarter contribution.
We experienced particular strength an out of court restructuring.
Specialty or bars, we continue to excel in offering innovative solutions, which in certain cases can accelerate the timeline to resolution and avoid a Wednesday chapter 11 process.
In addition, our restructuring retainers remain significantly elevated over the prior year and our capital markets business continues to make steady contribution to revenue.
Moving to expenses adjusted compensation expenses accrued at 61% in the third quarter.
Our non comp ratio was 14% in the third quarter, and we reported 28 million up Noncomp expenses due to continued low travel and continued expense discipline.
Normalized corporate tax rate remained at approximately 25%.
Quarter's effective tax rate was higher than the normalized rate due to the reversal of some carrots benefits previously accrued due to current quarter profitability.
Regarding capital allocation the board declared a dividend of 38 in the quarter cents per share an increase of 50% from the second quarter, which is halfway back to our former regular dividends.
We've always operated from a position of financial discipline and remain committed to returning 100% of our excess capital.
And lastly, we continue to maintain a fortress balance sheet with substantial liquidity and no debt. We ended the quarter with 266 million of cash and liquid investments and an undrawn revolver and I'll now turn the call over to Ken.
Good afternoon, and thank you all for joining the call I know from looking at a lot of our people listen to our calls.
Internal people. So I just wanted to say how grateful I am the dedication and focus you showed terribly unusual time.
You have all worked together to come up with innovative solutions for our clients, which has created a powerful groups.
I'm, sorry, powerful and positive energy within the company, even though everyone who's been working remote.
I bought by the breadth and depth of the leadership throughout the firm during this crisis are.
Our unique culture sets us apart and allows our people to come together create could create only to solve client problems, which is why our business is being able to rebound. So quickly. The fact that we have no debt and a fortress balance sheet enable everyone in the organization to put their heads down and concentrate on clients nobody was concerned about the financial help.
Property and everybody was busy helping clients focus on opportunities.
Also without the friction of an internal commission structure, we were able to rapidly for new teams to deal with clients many of which we have never seen before even thought of sports right.
And lastly.
I do believe cope and my team will continue to reshape Goldman Tommy for years to come.
The ramifications of the pandemic of course companies like large scale decisions about their marketing position growth strategy and capitalization and they would need an advisor who can quickly pivot their resources in stride with the changing environment.
This is exactly what we do I believe we are the best at it and that is why I feel so great about the future of the firm and with that I'll open it up for questions.
We will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and he would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our.
Sorry.
Our first question comes from Ken Worthington with JP Morgan. Please go ahead.
Hi, Good morning, I'm, sorry, good afternoon, and thank for taking the question on you you mentioned, an accelerated path to restructuring resolutions, how big a driver was that accelerated path to the restructuring success that you had this quarter.
In terms of the restructuring outlook did you continue to see a ramp.
In activity levels throughout the quarter or has restructuring started to kind of level off given the environment.
No arc or.
Sales and it was on a current basis that our retainers remained elevated so restructuring continues its really a bifurcated economy, 75% of it as well.
Oh, you had long looking at M&A, 25% of it is having troubles and.
Yeah, something like that yeah.
So we are continue to elevate and find a restructuring.
It turned out we were just wondering how we always do out of course, it's it's sort of a specialty of ours. It's a continuation there was really nothing unusual about it other than people prefer.
And we've done that we've done a lot of Oh, we've always done that I forgot the exact percentage, but a significant percentage of our restructuring is done you know that.
Do you know how to court and we think its innovative and its.
As far as we're concerned most companies prefer to stay out of chapter 11, I found very few that like going yet.
Yeah, Chris, especially after the fact after they go after they've been through.
Okay. Okay fair enough and then on maybe your thoughts about a special dividend. This year, maybe it's a little bit of a the cart before the horse, but given potential changes to the dividend tax rate under.
Under certain election scenarios would you consider pulling forward a special dividend into 2020.
Or is the policy really to wait until you know March of the following year, if you should choose to move in that direction.
Let's put it this way I think our balance sheet and we only bought the dividend back, but we still have a substantial amount of liquidity no leverage on our balance sheet is fortress.
You know again, we are pretty conservative the virus floating around in case people have a different read on it. We just don't know those were done or.
It feels like we're done.
This is wise I mean things are picking up pretty dramatically if there were to be substantial so I.
I think your ticket substantial change in the election, and an indication that there were some relevance, bringing the dividend forward that would be a benefit.
I would definitely think about it I don't want to say any more because that involves our board, but we have the capabilities.
Oh, I'm thinking quickly being nimble and if there were something of the tax.
Future, but we can foresee that this was a real benefit yeah, we would respond to it.
Okay, great. Thank you very much.
Our next question comes from Devin Ryan from JMP Securities. Please go ahead.
Great Good afternoon guys.
Hi, David.
So maybe to talk a bit about the M&A environment and what you guys are seeing there could you maybe put just a little bit more flavor around that the tone for business today, and maybe how that compares relative to the pre pandemic levels, yeah, what Glenn business was obviously.
Got a quite healthy and really what I'm getting at here is it feels like M&A is getting back to kind of similar levels. We were at restructuring is.
Is it higher level, which which would seem to come together for a pretty strong outlook for 2021, but but really you know the M&A piece.
You're trying to get a flavor for how you would frame that rocket two yes called the pre pandemic pace.
I think our M&A pace feels as high as its ever been our backlog is a strong totally as it's ever been we I think of the government has been was our second on the fourth quarter was in late July We said, we started but we really felt it.
It may be you know that it's we deal with a little bit of a growth here middle a lot of what we do at the sponsor community and.
Possibly they were spotted quicker.
I think the larger transactions or a little more.
Affected by maybe by the election and tax policy of what happens globally and in.
If you're growing 20% to 40% a year I think those types of clients tend to you know.
They actually doesn't make a big difference if your growth rate is high and you're in that kind of the market. So we felt it starting in June July I think we talked about in our second quarter call and right now we feel like it.
It's exceptionally busy and two things are happening.
One is we're getting extraordinary efficiency.
The way the bankers use their time I mean literally are back you know I've talked to bankers and their onto the scene from you know like seven am to seven at night I used to ask your bank or you know you busy this week and they should go yes, I had to travel to Germany and then it came back and then I had to get to the West coast and they came back and it literally talking about you know two thirds above 90% of the way.
First time was getting to or from an airport.
I think we're getting more production per hour.
Because oh, that's dramatically because it where people are.
And actually we're getting less expenses. So it's it's pretty interesting what's going on right. Now. So the short answer is I feel like M&A might be the strongest as strong as we've ever thought let's put it that way.
Yeah.
Okay terrific and then this ties into the point you just made Canada I guess for Joe just around expenses. So your non comp costs were down 20% year over year or at least in the in the third quarter.
And clearly some tailwinds there just with the limited travel.
But as business starts to ER continues to recover hopefully and you travel hopefully at some point here starts to pick back up where do you see that balancing out and how should we think about non.
Non compensation cost trending into next year, just contemplating kind of maybe some recovery, but the same time, maybe you pulled back in some spending areas travel may not quite get back to where it was.
And also contemplating some of the headcount expansion, but you're also talking about.
Yeah. So I think you know thinking about non comp you know if I think about just the next quarter I'm thinking that it's still probably in the 30 million level or thereabouts again, that's assuming that travel stays at current levels I have no idea how to predict travel, but I'm I'm fairly sure that.
It's not going to resort.
Back to where we were in 2021 or I don't I don't believe it will be I think that's probably something on the order of you know at this point 8 million per quarter that you know, we see in terms of the Jack or men and travel.
So and then on top of that you should also know that the new New York lease expenses fully taken into account in that 30 million run rate. So you own the real swing factor is going to be travel.
Okay got it I just want to make sure I heard the 8 million is where we get back to where that's the <unk> no no I'm going to ask about it if you want to think about a boundary. It's you know we are currently spending modest amounts on travel.
$1 a quarter used to be probably 10 million a quarter. So there was an $8 million delta on a quarterly basis I don't know how to outer judge you know how much of that is going to return I'm, assuming that it's going to be quite quite a bit less than the full 8 million gap right now.
Yep, Okay terrific I'll leave it there. Thank you guys.
Hi.
[music].
Our next question comes from Manav Gosselin from Morgan Stanley. Please go ahead.
Hi, good afternoon.
Maybe just a follow up on the pipeline of question.
You think the were on the start of another like two to three year cycle and M&A.
I mean to your comments earlier in the call it a pretty bullish overall, but basically what I'm trying to get out as you know we typically saw two to two to three year down cycles. Once we had a recession. This time. It was two to three months. So how robust do you think this inflection there is that we're seeing right now and it touches rebound have it up on them because they are.
Oh look there's a lot of balls, there's a lot of things up in the air right. There's an election next week and yeah. There is a virus out there, but what I'm seeing wouldn't.
Would lead me to believe we're in a long term M&A cycle two to three years easy and one of the reasons is I think you have you.
You have all this part of the economy.
25% or whatever it is 15% to 20% that's going through restructuring you know just affected negatively by fire as well.
Oh, we structure and maybe and I don't know where what happens there they might consolidate I think size showed that size matters in this downturn number two.
And lastly, and I think most importantly.
The.
Scope of the economy really change the pandemic has really you know I look at our own business and I said, yeah, maybe where a you know kind of a zoom economy, but maybe you didn't say they know you didn't travel or maybe maybe it'll before and maybe our productivity went up and I think I think every business is looking at their business and is going to make that.
It's what I said at the EPS is going to make large decisions if you're a winner in this environment and your stock and your booming you might make a decision to change or to continue to grow and if.
If you were a company that was marginally.
Not in restructuring, but you're kind of marginally off center and you Werent ready for the digital economy, maybe you have to do something quick can change your or your strategy and go to market.
I think what I said at the end is very important the koby will change everything.
Whether you know whether its to the extent, we believe today, but it will change a lot of businesses and those businesses will have to make decisions around Oh capitalization got market and that's what we do for a living we help corporations make really big decisions implemented I think it will go on for a while.
That's helpful. And then last quarter I think you spoke about you were down 14 deals on.
The capital raising side I don't if I, if I caught it but did you mention how much you're dead on the capital raising side this quarter and you know how.
How much of it how much of a tailwind do you have in that business.
We love, we like that business, we hired two really seasoned veterans that joined us over the summer.
Ah, but I'd say the third quarter, the second quarter. If you remember I pointed out because it was so immediate people needed liquidity and we were there to raise it the third quarter continued that the business is good it wasn't quite you know the second quarter was an outlier the third quarter was strong and adult Joe might have the number we pointed it out in the <unk>.
Second because it was one of the reasons you know it was big enough to point out how would we think that business, though will continue to grow we see lots of new Bart markets opening up and opportunities in places for us to play and.
And we've really stepped up our game so.
Joe I don't know if you have mobile yeah and in APAC like if I look at last year. It was probably a couple of points of revenue you know chewed up 4% of revenue this quarter I think it's probably around 8% to 10%.
Got it that's helpful. Thank you.
And you know that's capital markets advisory whenever we don't have any.
Great Thats all advisory.
Revenue.
Our next question comes from Steven Chubak from Wolfe Research. Please go ahead.
Hi, good afternoon.
So I wanted to start off with just a question on M.D. productivity. Just you know looking at the historical performance and the productivity for you guys peaked in 2018 or just above 7 million per the five year average is just above 6 million Prime day, there just given the optimistic outlook in the release.
How should we be thinking about the productivity looking out to next year and just given what you're seeing in the current pipeline. How quickly do you believe that you can get to that 7 million plus productivity level.
You know I'm not going to give guidance, but I think that's good analysis.
Remember when we were growing fast we always had a new fresh whenever you're growing too fast you always take it on somebody new people that could be you know the new people don't add so one of the things 2018 did it was it was the end of a very significant growth period. So our revenue trend Beach statistic, you know catched up caught up I don't really think.
Give it that way, but I do think no I've said this before but we know there's a lot of people talking about do we have a comp problem. We had a revenue shortfall in the first half a 19, that's followed us for a while and then and then called it hit in March. So we didn't get to show what we thought was a pretty significant backlog.
The 20 Twond. He would just you know it it came to a halt I.
I think some of what you're seeing now is that backlog is coming to market because we weren't involved with it began the year.
And it's a long way of saying I don't I don't want to give guidance, but I don't know I think.
The fact that that was revenue trendy and if we get more productivity by zoom, calling and you know I I would hope.
I would hope that that's that's the path, we're on but I don't want to give a time frame or no we're not giving guidance no.
No I could certainly appreciate that Kevin Thanks for all that color just to follow up on day. Since you brought up the topic of compensation that through the first nine months revenues are tracking flat year to date I understand that the fixed comp base is going to grow as a firm grows but wanted to just get some insight in terms of why that variable comp piece is higher since.
<unk> revenue production is tracking flat with last year in any specific factors and maybe you could speak to.
Well, because it's really a nine month.
You know this quarter was 61% for the revenue we produced and I think that's if you look at the firm we're not back to full normal which still the first.
Month of the third quarter was just beginning now we're getting back to full stride I think you can see us get right back to where we want to be on comp I will point out one thing too I've always said, we really aim for 25% pre tax margin. We beat that you know right now and that's I don't think we're full stride yet.
And so you see you know if you're seeing that we're looking at the nine months, you're looking at is a quarter in there where March April may.
You know nothing happens.
There's no M&A you.
Restructure was just getting started.
So again I keep telling people do not look at this year stats. There was a three month you know complete black hole.
But you can start to look at what we're doing on a run rate and I think you can see what we're doing.
Right and just one quick cleanup for me can you speak to the contribution from ratchet fees, whether that was a meaningful contributor in the quarter and also just provide the MD headcount.
Yeah. These are 127.
Correct, Joe might know exactly and.
Oh yeah.
Yeah, 127, and I don't have a specific number and one of the reasons that I don't think Ratchets played a major role in the third quarter I mean, I'm sure. There was a deal or two but I'm usually knowledgeable of when we've had something really hit the top end of a wretched or or change. It. It's probably I think those kind of minor.
But Joe you have you ever flavor.
I I agree I don't know that number off the top of my head, but it's not something that you know with something that that struck us as being something that you know topped off the page right. Because I mean, you don't look we're doing a lot of deals. So it was meaningful we would know but that's that's why it's not meaningful meaningfully with Morgan.
Great. Thanks for taking my questions.
Thanks.
Our next question comes from Brennan Hawken with you'd be yes. Please go ahead.
Hi, good afternoon, thanks for taking the question.
And then tighten again.
Good how are you.
Good good thanks <unk>.
Started out on the dividend appreciate your comments before in considering maybe a special but this has been quite a rollercoaster for the for even the regular for.
For you all so I'm really curious about how your experience in this year, maybe might inform how you think about a a regular dividend you know your how you manage the regular dividend how your approach is going to be to the regular dividend going forward.
Clearly you're feeling a lot better about your business, which is you know and raising the dividend by 50% is a very powerful way to state that.
But just can you maybe help us think about what.
What you might be instilling as far as guardrails go or overall.
Philosophy around the regular dividend going forward.
I think I take it we would go back to where we were you know our goal over time is due to go back to the regular dividend and the same philosophy, we liked it.
We ended up with excess capital even at the end it out and specials.
I I can't if.
If you tell me when the next time the entire world will shut down of Watson sales known anybody who didnt take emergency actions in March you know, what we said in the past I run the company as if I own a home run as if it's Mike I own every share.
I did but I would do to protect what is one of the great franchises that we're building and by the way I said it during the call.
We are rebounding much more I think we're on a rapid rebound because there was not one person in this company who is concerned about the future of the company or its own.
<unk>.
Stability and if you remember on April 1st by the way, it's hard to really remember that moment.
People work it scared.
And at least I can look everybody on our internal let's say you're far you're fine I'll pick up the phone and the clients call you're fine don't worry about us.
That's worth a fortune and.
And we will we will bake that over the next few years as we picked up great people are we banked our clients and we'll see that in it for five years now.
The focus we were able to have so yeah. It was a roller coaster, but you tell me. The next time, we shut the entire global economy get down and that's the time I might go through that again.
But in the interim I'll assume we won't do that again, and then I'll go back to regular way dividends and.
Do I have to push if it's the same thing if it was March 15th again I do the exact same thing until I knew the coast was clear.
Yeah, I I'm I'm totally appreciate that April was a very different period and I'm not trying to well I wasn't trying to imply any kind of question about the decision whether or not it was a good one just was more you know.
The the business.
That you're in is a great business it kicks off a ton of cash as is evidenced by your capital return policy, but sometimes that can be trajectory the revenue can change pretty dramatically.
Whether its cyclicality driven or what have you and so I'm just yeah. My question was more based around that and whether or not you might approach that you know raising the dividend at him at a more measured pace as you grow that's all no I think we'll try to bring it back as soon if you told me the viruses care Tomorrow, I know where I'd be in it would look like pretty.
I I can't I'm speaking out of turn because I'd have to talk to the board.
But you know we would probably bring it back pretty quick.
And would want to go back to that you know.
We have a great balance business we.
We have a great restructuring team and they they usually it's counter cyclical.
And our cash flows balance for that reason, we also have a very nimble team and they all moved like in the second quarter. They all moved to help do the capital market side of the business side a lot of faith.
In any event in them to do things like get I'd, just had no idea of what would happen. When we all went home and sat on her catches up there that concerns me.
I've never done it before but I do know in regular way, if you've got a great restructuring team and we've got great bankers.
I know, what we can do care about it and we have no debt. So if there was a quarter if there's a quarter downturn I don't know I don't mind or yeah, because we have such a fortress balance sheet quarters don't matter, So I'm I'm pretty comfortable with it we generate that kind of free cash flow that's why.
So for all those years, we were we were shutting cats, we were having to do so.
Two two specials, one mid year, one it wasn't the beginning of year because the cash build up is so quick so I think I'd be if you told me a brand that you had cleared the virus I think I know what I'd recommend to the board and it would be very very similar to what it was prior.
That is very very clear.
Yeah, I can't put a board would approve it.
They have to speak for them, but I know what I would recommend.
Great. Thank you. Thank you for that and then just wanted to do a follow up on the MD headcount question. So it's at 127 I think that's up one year to date, you have either promoted or hired a total of 13. So can you help us square was that just.
The idea that maybe you had realized at the end of 2019 that you had previously gone through to faster growth.
Bert and you need to do and make some adjustments or was that just regular way.
Departures that happen all the time can you maybe was there anything unusual that was happening on the on the MD count side.
Well, but a lot of times what happens is we we bought a jar you know we manage our headcount actively every year.
And what usually happens is we start talking to people like sometime around now.
And we give them to the end of the year and a lot of those then heads drop off in January February you know their December 30, not.
There's still on the payroll formally and we give them time and then they they really they go. So we don't look the reason you don't know what we don't do extraordinary charges are.
Our.
Rob.
Ratio includes all our hiring which is investment spend.
And all of our.
People management, we view people management as the core competency of what we do so we don't we don't segment. It out it's just imagine there every year.
And and look at every year like this I don't off the look if some people that love the midyear I know I don't think it was a lot of this year, because we really tried not to do anything during the pendency or the beginning of the crisis, we really didn't want to do.
And he head count so if there was it was a it was people we talk to at the end of 2019, good time to find their way out.
Okay, great. Thanks for answering my question.
Thanks.
Our next question comes from Michael Brown with KBW. Please go ahead.
Great. Thank you operator.
[music].
So can I just wanted to follow up on me on compensation discussion earlier. So you know as I've mentioned before you know revenues are kind of flat year to date I'm now that we are on towards the end of October I'm, just kind of curious how you think about that full year comp ratio.
I know that there was.
A lot of uncertainty earlier in the year, but now that we're kind of closer to the end of the year.
Any sense as to where that could end up you know last year you ended at 63% comp ratio for the full year I understand as you know greater fixed and variable cost embedded in the cost structure. This year I'm just trying to get a sense, if we could kind of get down into that ballpark, perhaps something in the mid 60 per se.
That range, obviously, knowing there's an election around the corner, which could certainly be a wildcard here.
Well look I'm not going to give guidance for the fourth quarter. We think we have a very oh.
Great.
We've said our backlog is strong.
And I think if you look at the third quarter third quarter is pretty clean.
And it's not it's not back up to our run rate of 2018, but its clean. So I think you can see how we think about comp when we don't have a virus you know when we don't have a shutdown going on or a complete a stoppage of business look very hard to say that the second quarter or even the first quarter the second quarter, especially.
Actually a couple of 2020.
Looks like with any natural business environment.
So again, you're you're trying to blend the whole year into what was.
Three distinct you know Lego blocks coming together for here. The first the second was completely different the third is clean and and the fourth will be what it is but I think if you look at the third you can see the way, we think about the business on a natural basis.
Okay, Great you mentioned the backlog and [noise].
Because of this and dynamic the drivers of this turnaround in M&A had been quite different and we've seen certain areas that are going on stronger in areas that have been a lot. We care here and so cross board has been weak Largecap strategic said had pockets of strength, but we haven't seen a full bounce back there at least not yet so.
How would you characterize some of the key things supporting your backlog at this time what are what are some of the key strengths. There and then I also wanted to secure about what you're seeing in Europe, obviously like cases, there have been spiking and.
Curious if that has started to impact deal activity over over there in Europe. Thanks.
You know the interesting part is I can't almost everywhere is strong I go around the world I think Asia is fairly strong.
Or even even our joint venture, which nobody talks about you know, we do have significant exposure to Australia, they're doing well.
The middle East is booming I will tell you that that franchise you know we since we are.
We're involved with the Saudi Aramco IPO as lead we lead advisor on that I think.
Are all.
Well activity there has never been higher.
Europe is as good as it's been in a long time, and we get a lot of head count Yeah, We probably had some great people we've done some maneuvering around Europe.
I have the profitability of the U.S. no it.
It doesn't have the.
The velocity of deals that the U.S. does but I feel much better about what we're doing in Europe.
The U.S. is strong in the U.S. is unbelievable how it recovers from these things I think it's a real testament to our economy.
And.
I think as we said all the businesses are really are really doing well I can't say.
Think of M&A is doing fine do very well restructuring is elevated and even cap markets continues to tick.
To go fill well I think yes.
Yes, I had maybe mark I don't have that really that.
Everybody seems to be doing pretty good I can't really think of a of a bad market.
Okay I appreciate the color thank again.
Our next question comes from Jeff Hearty from Piper Sandler. Please go ahead.
Hey, good afternoon, guys most.
Most have been asked but just a couple of follow ups. When we look at the M&A business is it reasonable to think that the worst is kind of behind us now from the covert announcement drop off.
Yes.
Okay. Yes is that it's come from my viewpoint. The answer is not only yes, but I also think people are are admitted that people, leaving into things really are it.
It seems like a and I know it sounds strange right because we're in the middle were still home and there's still a lot of uncertainty, but actually I believe that the amount of people, who who <unk> companies and institutions and especially private equity you don't want to do things is is significant.
Okay, and as we look from the outside kind of the industry data. We can see shows mega deals in really big deals being awfully strong, but deal counts kind of lagging a bit are you starting to see some spill over from kind of the mega deals into two or more of the middle market.
I see it the other way around I thought the middle market you know when I was on the call in July and I said I saw the M&A market come back.
Feedback that all you guys said whats can I, but I was seeing something different than everybody else. So I saw the first mover being a the sponsor community.
Coming back quickly and then I saw it I I thought that then went to the big deal market, but that may just be a me up but that's what I saw.
Okay. That's interesting you say by the way.
I want to be clear no I do think.
It's the it's the market that is big enough.
To access institutional financing.
And that's important I think that they will both sub scale deals. That's the smaller deals. So I think does have trouble. The bank market is kind of like bags aren't fully back years, there's going to be a real price to pay here in the <unk>.
In the general economy.
But it's so I do think you have to be careful eye I do think they started and that was what we now call you know sponsor middle market, which could be anywhere from one to 10 billion but.
But that's it they can access the institutional money markets and credit markets, which which is a little different than having to go to banks banks are not fully back in the financing and I think that you might see that lagged a little bit because they might you know there's some I think there's some troubles coming from just you know credits in the banking system.
Okay. Then thank you and you mentioned earlier the relative contribution kind of from the capital markets business and I thought I heard you say something earlier about restructuring. It did did I hear you right to say that restructuring was kinda close to the top of the 25% of revenue range that it's been in historically in Threeq you 20.
That's right yes.
For the for Q3, that's right.
Okay. Thank you.
This concludes our question and answer session I'd like to turn the conference back over to Ken Moelis for any closing remarks.
Thank you all for getting on next time, we talk though election will be behind us it'll be 2021 hard to believe and I hope, we're talking from an office somewhere and not from home. So good luck stay safe and we'll see you in 2021. Thank.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].