Q3 2021 Moelis & Co Earnings Call
Good afternoon, and welcome to the Moelis and company earnings Conference call for the third quarter of 2021, all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded to begin I'll turn the call over to Mr. Chat Mendell head of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us for Molson companies' third quarter 2021 financial results conference call on the phone today are Ken Moelis, Chairman and CEO and Joe Simon Chief Financial Officer before we 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.
Putting those identified from time to time in the risk factors section of Moelis <unk> company's filings with the SEC actual results could differ materially from those currently anticipated.
<unk> 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 and to better understand our operating results. The 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 website at investors Moelis Dot Com I will now turn the call over to Joe to discuss our results Jeff. Thanks, Chad and good afternoon, everyone on today's call I'll go through our financial results and then Ken.
We will comment further on the business, we achieved $516 million of adjusted revenues in the third quarter, an increase of nearly 150% over the prior year. This represents our largest quarter of revenues ever our robust growth. During the third quarter was primarily attributable to high levels of transaction completions with particular.
Strength coming from both our sell side and buy side M&A activity. In addition, our restructuring and capital markets were strong contributors as our model truly has three powerful revenue ratchet. Our nine month total revenues of $1 1 billion are up 119% from the prior year period. Our adjusted revenues include gains from the sale of Moelis.
Australia shares as well as gains on the firm's investment and our affiliated spak entity Atlas Crosswalk.
These revenues were reclassified from GAAP other income because our employees and I'm almost platform were instrumental in creating the related value move.
Moving to expenses, our compensation expense was accrued at 59, 3% consistent with prior periods, our third quarter non comp expenses were $31 million, resulting in a non comp ratio of 6% through focused expense discipline and an outstanding revenue quarter, we achieved a 35% pretax margin, which is our highest.
Quarterly pre tax margin in history.
Moving to taxes, our underlying corporate tax rate was 26% for the third quarter.
Regarding capital allocation as always we remain committed to returning 100% of our excess capital consistent with that philosophy, our board declared a $2.50 per share spec.
Special dividend in addition to the regular dividend of <unk> 60 per share. This is our third special dividend declared within the last 12 months' period and highlights the businesses powerful earnings and cash generation capabilities and lastly, we continue to maintain a fortress balance sheet with no funded debt I'll now turn the call over to Ken.
Thanks, Joe and thanks, all of you for joining the call. Since this time last year, we've achieved our strongest four quarters of revenue ever. We added 11, new managing directors bought back one 8 million shares of our stock and declared $9 18 per share in dividends, while producing a trailing.
12 months pre tax margin of about 33%.
We are generating a tremendous amount of leverage from our platform by building a fully integrated network with a focus on internal talent development and order the organizing around one incentive pool, we have created a collaborative FERC collaborative franchise with a differentiated advisory offering.
The speed with which companies are adapting their business models is accelerating these companies required advisor that puts a premium on teamwork and holistic coverage across products regions and sectors. As a result, our ability to rapidly deliver innovative ideas and solutions to the highest level decision makers around the world just.
<unk> and without conflicts.
Mostly company uniquely valuable platform and with that I'll now welcome any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you were using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble.
Our roster.
Our first question comes from Devin Ryan with JMP Securities. Please go ahead.
Okay, great good afternoon, Ken and Joe.
First of all congratulations on first $500 million plus quarter, I'm, obviously, a big Complishments big number.
It would be great, maybe just unpack that a little bit and kind of I know you've spoken a lot about.
Kind of the evolution of financial sponsors and how mobile losses kind of creating a menu of services for them.
Is sponsors and just getting closer to to that group and so can you maybe just give us a sense of like how relevant that was this quarter and the backlog of just just a little more flavor for the momentum with sponsors and then also just outside of the U S. How are you building.
Out your sponsor teams kind of where do you feel like you are obviously, we're seeing a lot of capital being deployed in Europe and increasingly so in Asia.
So how much more are you guys looking to do with sponsors outside of the U S.
Well.
Look the sponsoring a portion of the M&A continues to accelerate I think Oh. This year. It is largest it's ever been I would say when you look at our numbers.
Two thirds two thirds of all of our revenues are M&A and two thirds of the M&A, maybe 60% touches a sponsor and we always say touches a sponsor.
Remember the decision maker and this is why it's interesting coverage model the decision maker of the other company it could be the CEO of that company.
So it's very hard to define what touches a split of what you know what.
What is a sponsored deal.
By the way I also want to say our strategic corporate M&A was was strong too because even one third of $500 million is a lot of there's a lot of non sponsored business.
Yeah.
If you go to Europe, Europe, we're doing very well in Europe. I think we are we started a couple of years ago. We started to make sure that strategy was on track there.
And we've done some phenomenal deals in Europe are we even did a sponsor transaction out of Asia. This year.
And.
You know I would say look the U S is the center of deal volume, but you know Europe is a it's pretty active and we're going to continue to focus on that client base.
In Europe as well capital is accumulating there the same way just off a lower base.
Okay terrific and then maybe just one for Joe on expenses.
If you can just maybe help.
Help us think about the trajectory.
Hum.
Both on non comps here as you know travel starting to pick back up do you have any sense of kind of.
At least at this point kind of where that starts to normalize here.
Travel Reaccelerate Tibet.
And then also.
Delivery kind of terrific margins here heading into the fourth quarter. It would seem like there may be some room.
On the compensation ratio to make an adjustment there, but any kind of early thoughts or frameworks to think about the puts and takes here I get it to competitive environment.
And also our revenues are coming in.
Incredibly strong so any kind of early thoughts around the moving parts in the comp ratio as well.
Joe why don't you take expenses and I'll take comp after that.
Yeah sure.
So yes.
We pursued a number of one time benefits, which we realized this quarter.
So the true quarterly run rate.
Assuming current travel level, which is probably 45% to 50% of pre pandemic is about 33 to 34 I'm assuming that you know I assume that that kind of a 50% area is probably a good measure for the next quarter end.
I just don't have enough of a feel for any anything further out than that.
Ever remember the highest margin I think I've tracked comparables for as long as as long as were public at least and so we're getting tremendous leverage out of our personnel.
In the system and.
And my goal is to keep that that pre tax margin.
I know everybody you focus on comp, but I my goal as we've had now 33% for nine months. That's an that's a lot of leverage out of our system in which everybody is doing a great job. So that's the number I'd like you to continue to focus on.
Got it fair enough well congrats on a very strong quarter before catching.
Catching up again soon.
Thanks.
The next question is from an uncle salient with Morgan Stanley. Please go ahead.
Hi, good afternoon, Ken and Joe.
Clearly you know a very strong quarter here can you talk a little bit about how the pipeline is being replenished.
And you know, particularly for deals that would happen in 2020. Two so basically if you can talk about any thoughts from your conversations with companies and sponsors.
Do you have any deals that are in front of your new business Review Committee right now.
That sort of gives you an inside into activity levels for early 2022 specifically.
Yeah.
Well, our our pipe is very near its all time highs.
And that's you have to remember your 500 million does empty out some of it. So it would be very it's very close to all time highs, it's up significantly from where we started this year from last year.
So you know those deals we'll print a lot of the deals in the pipe I mean, we're now at October what do we at October 27, and so a lot of those.
Ill have to print next year I think it's it feels like the run rate is very similar and I will tell you. There is a moment in a company that when you're generating a quarter like like we just generated I think with with the same level of personnel you, sometimes worry that you're you're in such execution mode.
Good that you know or are you generating oh, you're generating new business fast enough. So to have our pipe very near its all time highest levels I think it's a great achievement and that that is where it is I don't know exactly.
What quarter, they they roll out it too, but you know the years Theres almost hope.
Got it.
And are you seeing any level of urgency from clients in terms of getting deals done ahead. If any are you know changes in tax policy next year.
I think we saw that early in the year. If you. If you were worried about a change in capital gains I think you moved in the first half of the year and started the transaction in motion.
You know, it's almost it's getting late for that I think there are some transactions people would prefer to close this year then next year if they could.
But I don't think you're seeing anybody start.
Things are very lets say very little would start at this point and hope to get done in an M&A transaction by year end.
Great. Thank you.
The next question is from Richard Ramsden with Goldman Sachs. Please go ahead.
Hey, good evening, everyone. So so Ken.
As we think about the financial sponsor business going forward.
How do you think the evolution of churn in private markets is going to evolve from here and I guess, specifically, we're seeing this growth in coal products were also seeing this rapid growth in secondary businesses do you think that's going to impact the velocity of private equity holdings in a material way as you think out over the next one to three years.
Yeah.
Okay.
It's hard to judge you know there are these secondary a single single.
Neil extensions, but you know we have.
One of the leading bankers in the world on that and we did that purposely because we think that could it could become a product.
<unk>.
Look the World has continued to accelerate Richard I can't tell you how fast transactions that would be held for five years or now helps with three that could be a function of how fast the stock market is appreciated.
But I do it it's not just the amount of capital that's going into private equity. It's how aggressive they are doing is extending their product lines almost everybody who's in a singular product line wants to be in multiple product lines wants to be a larger alternative asset manager.
We have those relationships, we are trusted relationships and that just means they're going to transact with capital somewhere across the capital spectrum.
And again I think it's a very limited amount of companies that really get the right attention. If you think about it.
The amount of companies to actually service the number of private equity firms is getting larger every day and the number of investment banks that generate quality quality ideas for them is not.
So we continue to to Oh.
Servicing larger and larger client base with sort of the same amount of.
Same amount of banks.
Okay. That's helpful and then on the corporate side, there's obviously been a lot of focus on supply chain disruption a lot of focus on inflation higher rates. When you talk to boards. How concerned are they about piece. When you think about the impact on the M&A cycle. In 2022 do you think these factors are going to be positive or negative in terms of driving act.
<unk> levels.
If people are concerned about their own particular supply chain problems and there was concern at the board meeting.
Their operations.
I think the only thing that you have to worry about in the supply chain is if you're in a deal and it seems like there's an ability for a company now to come up with a quarter.
That is an unpredictable event.
That could disrupt the deal when you have volatility in the midst of a transaction you could have that happen, but that would be very.
Socratic.
You would hope that you'd be talking about that during the during the deal conversations it would be taken into account.
That's usually what happens is these conversations are are discussed during the the private due diligence part of it and somebody probably adjust price or tries to see through the supply chain.
Situation, but I will say that there are issues that companies I don't know I don't think it'll be a big effect on M&A, but companies are having issues I'm sure you've seen that.
Okay. That's very helpful. Thanks, a lot.
The next question is from Ken Worthington with J P. Morgan. Please go ahead.
Hi, good afternoon.
As we think about growing the ranks of senior bankers at Moelis does the composition between experienced hires and promotions from from outside the firm change from the current mix as you look forward over the next couple of years, either due to environment or the greater ability of moelis to.
What this chart talent internally and it seems like the rapid rise of bank share prices could in fact alter the math for.
For you as you make those decisions so I wasn't sure what what what to think about that is as we look forward and then as we think about the the senior banking talent at Morris you know the numbers are even though you continue to add new bankers there some attrition on the other side that MD count.
It's been reasonably stable over the last few years in growth has really come from our increased banker productivity and now it's been massive increases in impact for productivity, but that's been the driver and I guess my question as you think about you know your business and growing it.
Do we need to see the M. D ranks actually start to grow at some point or is growth through productivity really you know are.
An appropriate long term growth strategy.
[laughter].
Okay.
Have you been there.
Yeah, I'm going to give you a fulsome answer on this because I think it's something that's happening in the industry that has changed the economics, it's probably why our margins are so high.
Again I hate to go back you know I'm, an old Guy So I hate to go back, but you know.
When you did strategic M&A, which drove a lot of the market 20 years ago. The CEO was usually a person closer to my age then you know the.
35, right. It was a person who climbed up the range and then the board was older and so you would tend to have these very senior superstar M&A bankers.
And the reason was it was it was that that was what was required to go into a boardroom of of 12 people and hold their attention and make a tactical strategic M&A.
Largest.
Private equity firms in the world there may be five to 10.
People that are 40 years old or younger than have a larger check book there.
And.
Then the biggest company in America had.
The CEO had for all the years you always wanted to be their banker.
There's there's just there are sector heads of divisions of private equity that are writing five checks a year for you know $5 billion 345 billion dollar deal now what's so what's happening is that that person is.
It's less so it's much more about the numbers much more about the analysis much more about your sector expertise and so very rapidly we're finding our vice presidents our executive directors are first year managing directors.
All of whom we've trained to be bad as you directed we didnt put them and just say here do some spreadsheets and then then you'll leave and we will hire some other.
Superstar senior bankers, we've been training them to be productive bankers and they are coming on very strong. When you say that's why I never liked this revenue per M D number.
You see it as all productivity of the M. DS I don't have a number but I would tell you there was significant revenue generation and and deal origination from non M D.
Who are experts in their sector.
Sectors are younger these days as you know there are sectors that are being created faster than we can we can even understand them and I believe we're getting more leverage on the whole system not just the M D.
Now that being said, yes, we want to grow R&D. We think we have the best class we've ever had of internals promotions and will add to that from outside.
I think I've said this before without putting everybody done I think we've done a good job.
Of working on the workforce and optimizing the talent we have with the platform we have and I think that's what you see in the margin.
Youre right the MD count Hasnt grown as fast.
As a as it probably will in the coming years I think we did some.
Repositioning, let's just say.
Okay, great that that was a fulsome answer I really appreciate it. Thank you.
Thanks.
The next question is from Brennan Hawken with UBS. Please go ahead.
Yeah afternoon, and thanks for thanks for taking my questions.
Ken I'm curious you know <unk> seen a very interesting development here on the restructuring side in China, you've won a large creditor side mandate in that market and.
It seems as though there's a shift.
The market seems to be embracing sort of more of a chapter 11 style approach, what what kind of opportunity do you think this can present.
And how should we be thinking about this as far as you know potential for your restructuring bankers here as we move forward.
Well, we don't want to talk we don't talk about any specific client, but I would say that.
It's interesting in the business when you're in there when you're in a in a region or sector early and you are in the first two or three deals and we have done several very prominent restructuring over the last five years in China and Asia is amazing.
Some momentum around the project now these markets are all.
Much more difficult to do restructurings in the chapter 11 environment of the U S.
So it is difficult there, they're much more difficult environments to restructure companies.
But.
As the world becomes.
More global and and.
Everybody around the World now is taking on a little more debt and becoming a little more aggressive you're right I think the restructuring franchise.
He is a global one that you know as I said I think we've got the best restructuring team in the world.
They've globalized it and when it's a short answer.
I don't know how.
How much in these.
More controlled economies, you Wanna say that unless chapter 11 oriented economies the business could get.
But you never know I mean are you.
There's been a lot of companies created and.
In the last five years and some of them are going to need help.
Fair enough Yeah, I just wouldn't it was hard for me to guess this would've even happened and you would've gotten a restructuring mandate out of that market. So I'm trying to figure out how to think about it but.
But it's fair.
And then another one this one is maybe a bit more you know nitty gritty or technical but I totally understand the sort of industrial logic of the fact that the gains that you guys took where that was timed bankers had to work on you know these these efforts and therefore.
Or moving them up the revenue line I that that all is logical but the piece that I'm curious about and I am curious about the logic around it is wouldnt, though those revenues would be subject to a lower comp ratio than the 60, because the 60% is like fully loaded it's got salaries, it's got deferred and on.
The gains that it's a different sort of dynamic I just had assumed that might be a lower ratio, but maybe you could help me with the thought process around that.
So let me just take a look at let's talk about the Atlas crust spec.
There was you know we're not a we're not an investor we didn't put the money up you know when I'm looking around the world for the best investment we can make.
We we created this franchise to use our people to take great companies public.
And the amount and the.
By the way, there's a fairly large debate by the way as the weather M. C should either we're capital light, we don't want capital how much capital do we even want in a transaction that is you know very well.
The risk reward seems pretty pretty appropriate but.
So the the creation of the capital gain which really wasn't a capital gain it really was.
A transaction creation by a team that had to go hunt down the deal.
How to organize the raising the money the beach back the pipe.
You know I can't say I believe.
That's not an investment.
I plan to watch it for tax purposes or something.
That's that's much more of a personal service transaction that that resulted in that game because people worked out that's what I want to say, we're not in the business. We're not looking to make investments we're looking to work on deals and that one we just happened to.
Originate ourselves, we happen to find a way to originate a.
A transaction in which our people can work on it.
Okay Fair enough I guess I just to me that the logic of using a lower comp ratio it seems to make sense, but in any event.
Maybe sneak in one last one b.
Our capital return approach awesome amounts of dividends returned the cashes is tremendous.
Really a clearly a positive now that the liquidity profile, though like initially you chose to go to the special route because the liquidity profile of the stock was thinner.
Most trades $20 million a day, there's plenty of liquidity to to help offset some of the dilution from share based comp and I, just looked and that you know that.
Since 2017, the fully diluted share counts are up nearly 20%. So why not start to allocate some money greater amounts to the buyback. In addition to that special effects, there and what are and what our earnings per share up since that time.
Yeah.
[laughter].
But imagine how much it could be if you didn't have the share count was flat it would be even more tremendous [laughter] well.
Well as I said I've said since we went public I believe we've returned the entire IPO price in cash dividends. We've tripled the revenues of the company, we've never incurred a dollar of debt and we haven't done one M&A deal.
And I I don't think I think that's fairly unique I'm not sure of companies been able to generate cash and grow so Brendan the short answer to that is.
Look we're sitting with Joe what are we sitting with at quarter end and 500 million of cash.
Yes, that's right.
So I mean, we could then try to go in the market and chase the stock but to me. It's just a fishing we have a lot of shareholders.
You know they should all get the capital back we can give it to them I think we're declaring a dividend in Q.
10 days or something and pain in three weeks. It just seems so much more efficient to me to give it back to your shareholders. Some of them are some by the way some of them may be worried about taxes next year and getting a dividend in this year could be a positive but it just seems very efficient very democratic and very fair and then we don't have to.
It's been chasing the stock in the market are doing whatever it just going to give it back to you by the way I think we've given.
$9.18 this year.
And I don't think the earnings per share growth has been hurt that much.
Yeah.
But the dividends have been tremendous there's no question. Thanks for taking my questions I appreciate it Ken.
Thanks.
Question is from Jim Mitchell with Seaport Research. Please go ahead.
Hey, good afternoon guys.
Maybe just you guys had a lot of growth in capital markets and you added another empty there in the third quarter could you just discuss kind of what specific areas within that business.
Driving the most growth how do you see that momentum continuing into next year and I guess, maybe just overall, how do you think of what inning. We're in in terms of the evolution and growth and size of that business.
Oh I think we're pretty early because we we started you know we're really we we always had this and then really what triggered a lot of it was almost the beginning of Covid. We were involved in a lot of.
Very significant mezzanine type rescue financings that had to be done quickly.
And we did a great job on some of those.
And then right after that so that triggered us to see how rapidly we could raise.
$1 billion tranches without a trading floor.
It was interesting you after that came back phenomenon and pipes.
And in the whole raising of the pipes became a pretty significant and I'll tell you. What I think is game is happening now.
Have.
A thousand unicorns and remember that means you probably have you know 2000.
I don't even know how many of them taking a wild guess that awards you know between 500 and a $1 billion.
Many of these companies are going to look to structured financing of some sort.
Some financing that might look to you like a convertible or a mezz or a press.
And they're gonna be sizable remembering that in the VC days of 5678 years ago.
And 30 50 million dollar items today there.
Our multi hundred million dollar items, and I think that's going to keep going and you have again you have the financial sponsor community you know kind of asset managers organizing huge amounts of assets to put into exactly that asset class. So once again, I think youre going to have capital.
Drive, they're going to demand access to transactions like like that.
And we want to be the middleman between gross capital.
Backs.
There's still rescue financings, all those kinds of things that that need rapid turnaround of structured product.
And they and they really want the high touch of a senior banker in it I think it could be very significant.
Okay. That's that's really helpful. Maybe a follow up on something a little different maybe.
Some of your peers have talked a lot about debt advisory I don't think that's really part of how you think about the capital markets business, but you know that's been a business I think you've talked about in the past.
How do you see that developing it seems like it's also been pretty active and is that sort of married with your restructuring business and what do you think of the opportunity set there.
And what is it when you described that advisory.
And about the restructuring that you're talking about.
What's that.
Yeah.
On raising on raising debt.
You know some of your peers have talked a lot about that I mean is that sort of how you think of part of what you think of at the capital markets business and wrap that all up with that.
We do do that and yes, I'd say that's.
We do do that that's part of our offering oftentimes somebody's in the middle of a transaction that they they want our help negotiating a bridge or some terms on our security in an M&A deal.
I don't think that's as fast growing as the one I said before which is the true pairing of AR.
Capital.
That needs capital.
With the amount of capital that I think is amassing to provide that kind of a mezz structured.
High gross return I think that's where the real.
Positive now and when did you say that advisers, we do a lot of IPO advisory as well. So that's probably a SaaS, that's probably a faster growing business than even debt advisory.
Okay. That's all helpful. Thanks, a lot.
The next question is from Michael Brown with K B W. Please go ahead.
Hi, Ken Joe I guess.
Hi.
So I just wanted to follow up on some of the 2022 focused questions.
Clearly we're in a very strong M&A market here and I was hoping to maybe get a little bit of thoughts about about next year.
After a quarter like this you're already at a record record year with like one more quarter to go. So as you think about 2022 and you know I guess, assuming a similarly strong operating environment is it possible for moelis to actually.
Produce revenue growth next year.
Again, we don't guide, but I don't understand why it wouldn't be so we have our strongest class coming up I think we will have 8% to 10%.
More managing directors.
Let's just use that as a no.
I think that the private equity firms will have 5% to 10% more capital under management.
In the normal world I'm, not a stock market.
<unk> go up 5% to 10% and by the way are.
Our revenues are based on market values.
So I you know I don't have an.
And strategics are still out there and I believe our brand in the strategic boardroom is stronger than it's ever been I, you know I know I speak a lot about.
Private equity and the sponsors but you can do the derivative our strategic business is on fire I mean, it's even a third of that two thirds of it touches a sponsor but.
It leaves a lot of room for a pretty big strategic revenue quarter as well.
And I could tell that we're doing well there too. So I again, I don't want to guide, but you know I expect to have eight to 10 somewhere M. DS I expect our clients to have 8% to 10% more capital and I expect the general stock market and the economy to grow and I. Just think you put all those together and.
And I believe we're taking market share pretty consistently so I I don't know why we wouldn't but again I don't want to guide.
You know, it's two okay Yep I couldn't guard.
In October of 2020, Twenty's only one I can't guide I really don't have but you know I look at it and I say, well, where an amazing position firm with a great network in the right. We're in the right places servicing the right clients at the right time.
With the right models by the way with the right model that.
I think people underestimate that it's very hard to replicate the model we put together.
Understood. Thanks for the thanks for all the thoughts there Ken.
Maybe just one more it's a little bit convoluted, so bear with me here, but just looking at the quarter here and the strength of this this this third.
Third quarter $550 million or so of revenue.
Could you just kind of parse that out a little bit here for US you know how much was restructuring capital markets and our restructuring is typically 20, 25% I assume that you know I understand they probably a little lower this quarter.
And then was there any pull forward that we should be aware of anything outside of kind of a normal puts and takes here.
I think it was normal Joe what was the what was the pull forward.
It was about 32 million spread across probably four or five deals.
Yeah.
I think that's a ratio that's close to normal and.
You don't look restructuring was lower and it would be.
It really wasn't restructurings fault. They they had an okay quarter restructuring is definitely not as vibrant as it was but I think it was more of a denominator problem. They they they had a decent quarter, but they they were they were lower and below that range. You just said only because of M&A and capital raise and all.
The other businesses were so so.
So strong.
Okay, great great.
I'll leave it there thank you guys.
The next question is from Steven Chu back with Wolfe Research. Please go ahead.
Hi, good evening.
So with that thanks for fitting me in here. So I just wanted to ask a question can just given some of the earlier discussion about some of the more the higher production coming from more V. P E D level bankers.
You made a passing comment just noting that this dynamic has contributed to the stronger operating margins that you've been experiencing of late.
Maybe at the risk of leading the witness so to speak is it reasonable to infer from that comment that the 30% plus operating margin shouldn't be viewed as anomalous that this may be more representative of some sort of new normal given how the business is evolving.
Okay.
Well I'll leave it to say that that's a good question I I looked at you know we're I mean, we're at 33 for nine months now. So you know 35 might feel a little high but 33 for nine months and if we can get if the system, we put together can leverage.
Young younger people in our system, Vice president and make them productive and create if.
If we create content and then.
A stronger like everybody always measures, what's your revenue per MD, but if we're getting revenue generation from instead of 100 and twenty-five M. DS 225 M. D V. P E D.
By putting together exclusive content I continue to believe that.
Having this good content, which is you know acquisition ideas and deal flow for a very hungry audience, which is the private equity guys and being able to deliver it.
At a more junior level I think you should be right, but you know we're in the early innings of what I think is a very different change in the model of M&A.
I I think M&A is changing much more than people are.
Talking about it and I'll just spend one second to say that I think I have enough time, because again I go back really 10 20 years ago M&A was a tactic that a company could use but you could have the best relationship with the world with the largest company in the world CEO and they could choose not to use that tactic for five years.
So you spend all this you know that.
And by the way that has happened I've seen it.
Just because they feel like their own product line doesn't need it or the economy is in a different place.
The Ah <unk>.
These new entities that Carryout M&A alternative asset managers they they they don't use it as a tactic is a primary business. They are in the business of doing transactions and so we believe.
That we can build around that you know much.
Much more confidently that we're not going to go through a two three year period.
You tell me the company the private equity firm out there that considered out two or three years and still have a business, though I think they would have their own issues, so where we are.
I believe the shape of the business is changing and our model is really well positioned.
To take advantage of the shape of how M&A has changed and it might be.
There may be a new margin the only reason Steven I'm not.
Saying that as you know you have these cross currents of Covid. So I you know its hard to make a definitive statement right now, but I will say this I don't think you're wrong.
Okay, that's certainly encouraging to hear and just for my follow up you know, it's relating to antitrust risk and to buy in the executive order and if I think about it from just from a timing perspective last quarter. I think you had to opine on it when it had been published maybe just a few days prior to your reporting.
Now that it's been outstanding for a few more months I was just hoping you can provide some insights on whether the executive order is impacting behavior among our large cap strategics, what's their willingness to pursue deals and what's your outlook for large cap strategic M&A just in general.
Yeah, Yeah, I believe it is and again I always say, it's a dog that doesn't bark is very hard to say what deal didn't happen because somebody said I'm not going to even try it.
Just doesn't happen I think those are a smaller number of very large deals.
Probably you know they they they they probably might've been attempted or might've started and people are our oh gonna be shy about some of those.
You know I think it will affect the larger transactions and the consolidation transactions.
But there's there's almost less and less of those but you know again there'll be some effect.
Understood. Thanks for that perspective, Ken I appreciate you taking my questions.
The next question is from Jeff Harte with Piper Sandler. Please go ahead.
Hey, good afternoon guys.
A couple of Cleanups for me, Joe you mentioned, some items as having depressed non comp expenses in the quarter what were those.
It was a it was a series of very small things, but that aggregated to like $1 5 million something on that order and that's what gave rise to the lower reported number. So I'm guiding that are suggesting that the run rate is probably closer to 33.
Okay.
Should we be thinking any differently about share count creep, nor do we have a price you know pushing $70.
Well each time, obviously the average price goes up that obviously pulls more of the unvested into the into the share count. So I think that you know.
Barring any change in price from this point I think they are the average per quarter creep apps and share buybacks and dividends et cetera is probably about $1 million.
Okay. Thank you that's all I got.
This concludes our question and answer session I would like to turn the conference back over to Ken Moelis for any closing remarks.
Thank you I appreciate all the good questions and your time and we'll see you after the end of the fourth.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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