Q4 2021 Moelis & Co Earnings Call

Good afternoon, and welcome to the Moelis and company earnings Conference call for the fourth quarter of 2021.

Speaker 1: Good afternoon and welcome to the Mo Listen Company earnings conference call for the fourth quarter of 2021. All participants will be in listen only mode.

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Please note. This event is being recorded to begin I'll turn the call over to Mr. Chip Mendell head of Investor Relations. Please go ahead.

Speaker 1: To begin, I'll turn the call over to Mr. Chet Mandel, Head of Investor Relations. Please go ahead.

Thank you for joining us for Moelis <unk> company's full year and fourth quarter of 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.

Speaker 2: Thank you for joining us for Molus and Company's full year and fourth quarter 2021 Financial Results Conference call. On the phone today are Ken Molus, Chairman and CEO and Joe Simon, Chief Financial Officer.

Speaker 2: 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, including those identified from time to time in the Risk Factors section of Mollis and Company's filings with the SEC. Actual results could differ materially from those currently anticipated. The firm undertakes no obligation to update any forward-looking statements.

Including 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.

Speaker 2: 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.

Speaker 2: 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.mollus.com. I will now turn the call over to Ken to discuss our results. Ken? Thank you so much.

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 Ken to discuss our results Ken.

Thanks, Chad and good afternoon.

'twenty one was an outstanding year for Moelis <unk> company and I'm proud of how we executed this past year and the relentless efforts of our people. Our adjusted full year 2021 revenues exceeded $1 5 billion and were up 65% from the prior year's record performance.

Speaker 3: 2021 was an outstanding year for Molis and company, and I'm proud of how we executed this past year and the relentless efforts of our people. Our adjusted full year 2021 revenues exceeded 1.5 billion, and we're up 65% from the prior year's record performance.

We grew year over year across all of our products in all regions.

Speaker 3: We grew year over year across all of our products and all regions.

Our M&A activity on its own exceeded last year's full total revenues and we also produced record levels of capital markets and restructuring activity.

Speaker 3: Our M&A activity on its own exceeded last year's full total revenues, and we also produced record levels of capital markets and restructuring activities.

We achieved a full year pre tax margin of 34%, which is our highest in history, allowing us to return a significant amount of capital to shareholders.

Speaker 3: We achieved a full year pre-tax margin of 34%, which is our highest in history, allowing us to return a significant amount of capital to shareholders.

And we announced 16 managing director banker promotes the largest class in the firm's history in.

Speaker 3: and we announced 16 managing director, Banker Promotes, the largest class in the firm's history.

In fact, nearly 50% of our current managing directors have been internally promoted and we expect this to continue to be a fundamental part of our gross debt strategy.

Speaker 3: In fact, nearly 50% of our current managing directors have been internally promoted, and we expected this to continue to be a fundamental part of our growth strategy.

But being laser focused on internal talent development and differentiating our advisory offering through an integrated one firm approach, we've been able to organically grow our revenues by 20% and earnings per share by 25% on a five year compounded annual growth rate.

Speaker 3: By being laser focused on internal talent development and differentiating our advisory offering through an integrated one firm approach, we've been able to organically grow our revenues by 20% and earnings per share by 25% on a five-year compound and annual growth rate.

While also paying out a total of $21 79 per share in dividends over that same period.

Speaker 3: while also paying out a total of $21.79 per share in dividends over that same period.

I'll now turn the call over to Joe who will take you through our financial highlights and I'll come back and discuss our growth strategy some more Joe.

Speaker 3: I'll now turn the call over to Joe who will take you through our financial highlights and I'll come back and discuss our growth strategy some more. Joe.

Thanks, Ken first on revenues during the quarter, our adjusted fourth quarter revenues of 417 million represented our third largest quarter of revenues since inception. The performance during the fourth quarter was driven by continued strength in M&A and capital markets. There were non-GAAP adjustments that reduced revenue.

Speaker 3: Thanks, Ken. First on revenues during the quarter, our adjusted fourth quarter revenues of $417 million represented our third largest quarter of revenue since inception. The performance during the fourth quarter was driven by continued strength in M&A and capital market.

Speaker 3: There were non-GAAP adjustments that reduced revenues during the fourth quarter and full year related to mark-to-market of the firm's equity positions that were taken in lieu of cash to facilitate certain client transactions.

During the fourth quarter and full year related to mark to market of the firm's equity positions that were taken in lieu of cash to facilitate certain client transactions regarding.

Expenses, our adjusted comp expense ratio was 58, 5% for the full year down from 59, 3% in the first nine months in the prior year.

Speaker 3: Regarding expenses, our adjusted comp expense ratio was 58.5% for the full year, down from 59.3% in the first nine months and the prior year. For the full year, we reported a non-comp ratio of 8%, largely due to continued expense discipline, low levels of travel, partially offset by transaction-related fees associated with increased activity levels.

For the full year, we reported a non comp ratio of 8% largely due to continued expense discipline.

Low levels of travel, partially offset by transaction related fees associated with increased activity levels.

Regarding taxes, our normalized corporate tax rate for the year was approximately 27% and our effective tax rate was approximately 23% driven primarily by the benefit recognized related to the delivery of equity based compensation at a price above the grant price. Similarly, we should recognize the tax benefit in the first quarter of <unk>.

Speaker 3: Regarding taxes, our normalized corporate tax rate for the year was approximately 27%, and our effective tax rate was approximately 23%, driven primarily by the benefit recognized related to the delivery of equity-based compensation at a price above the grant.

Speaker 3: Similarly, we should recognize a tax benefit in the first quarter of 2022 related to the annual vesting of RSUs later this month. For purposes of quantifying the excess tax benefit in quarter one, for each dollar difference between the vesting and breakeven price of $35 a share, we expect the impact to EPS to be approximately two thirds of a cent.

2022 related to the annual vesting of ours use later this month for purposes of quantifying the excess tax benefit in quarter. One for each dollar difference between the best thing in breakeven price of $35 a share we expect the impact to EPS to be approximately two thirds of assent.

Regarding capital allocation, we remain committed to returning 100% of our excess capital with respect to the 2020 one performance here, including the dividend declared today, we will have returned approximately $576 million through dividends and share repurchases and lastly, we continue to maintain a fortress balance sheet with no funded.

Speaker 3: we remain committed to returning 100% of our excess capital. With respect to the 2021 performance year, including the dividend declared today, we will have returned approximately $576 million through dividends and share repurchases.

Speaker 3: And lastly, we continue to maintain a fortress balance sheet with no funded debt. And I'll now turn it back to Ken.

And I'll now turn it back with cat.

Thanks, Joe.

But to summarize I think theres been a secular shift in M&A. Historically M&A has been used by companies as a tactic to accelerate growth of the <unk> cost synergies and that.

Speaker 4: But to summarize, I think there's been a secular shift in M&A. Historically M&A has been used by companies as a tactic to accelerate growth at a sea-cost center.

Can use to be the case for many of our most important clients, but now in addition to that significant client base global investment institutions have becoming the fastest growing part of the market as their primary business is eminent.

Speaker 4: And that continues to be the case for many of our most important clients. But now in addition to that significant client...

Speaker 4: Global investment institutions have becoming the fastest growing part of the market as their primary business is

These businesses must transact and as a result of rapidly expanding and dominating the pace and velocity of M&A activity for them spans the globe and across all sectors.

Speaker 4: These businesses must transact and as a result are rapidly expanding and dominating the pace and velocity of it.

Speaker 4: Activity for them spans the globe and is across all sectors.

It takes place at all stages of our portfolio companies lifecycle and at all levels of their capital structure.

Speaker 4: investment takes place at all stages of a portfolio company's lifecycle and at all levels of their capital structure.

The breadth of activity and growing size of funds, but requires these investment institutions to have an advisor who's plugged into their platform.

Speaker 4: the breadth of activity and growing size of funds requires these investment institutions to have an advisor who's plugged into their platform.

We've been a completely aligned with what they require since the founding of the firm 15 years ago.

Speaker 4: We've been completely aligned with what they require since the founding of the firm 15 years ago. Our advisory offering has become an essential and recurring service to these institutions.

Our advisory offering has become an essential and recurring service to these institutions.

As a result of our ability to execute has never been stronger and the market dynamics that contributed to our success in 2021 remain in place we have a large pipeline today with a larger pipeline today than we've ever had at any time last year and a significant level of ongoing new business activity. So with that let's open it up for questions.

Speaker 4: As a result, our ability to execute has never been stronger, and the market dynamics that contributed to our success in 2021 remain in place. We have a large pipeline today, we have a larger pipeline today than we have ever had at any time last year, and a significant level of ongoing new business activity. So with that, let's open it up for questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

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Speaker 1: draw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

At this time, we will pause momentarily to assemble our roster.

The first question is from Ken Worthington of J P. Morgan. Please go ahead.

Speaker 1: The first question is from Ken Worthington of JP Morgan. Please go ahead.

Hi, good afternoon.

Ken I think to my question last quarter I asked about the number of bankers being sort of constant over multiple years and of course. This quarter you show. Some some big growth. A 236, you mentioned and I think the prepared remarks. It was the biggest class of internal promotes are that you've supported thus far.

Speaker 5: Hi, good afternoon. Ken, I think to my question last quarter, I asked about the number of bankers being sort of constant over multiple years. And of course this quarter, you show some big growth to 136.

Speaker 5: uh... you mentioned and i think the prepared remarks it with the biggest class of internal promotes uh... that you've supported thus far maybe first what's happening in terms of banker attrition uh... is that sort of expected to increase

Sure.

Maybe first what's happening in terms of banker attrition is that sort of expected to increase to higher than typical levels as well.

Speaker 5: to higher than typical levels as well. And if not, is this more consistent level of senior bankers that we've seen for the past couple of years, is it time for that to sort of break out to new higher levels, given the internal promotes and based on what you're seeing on the attrition side?

And if not is this more consistent level of senior bankers that we've seen for the past couple of years is it time for that to sort of break out to new higher levels.

Given the internal promotes and you know based on what you're seeing on the attrition side.

Okay.

Yes to that I actually believe and I won't get into that I feel very strongly that we have a great.

Speaker 4: Okay, the answer is yes to that I actually believe and I'll get into that I feel very strongly that we have a great

Our Bes group of talent now and we're also in a wonderful position to continue to expand from there now your point Ken on attrition due I think attrition is coming there's a lot of things we get to see in life attrition as always I get to hear about that at about $4 59 on an afternoon. When somebody tells me that they are thinking about that theres very little insight.

Speaker 4: base group of talent now and we're also in a wonderful position to continue to expand from there. Now your point Ken on attrition, do I think attrition is coming. There's a lot of things we get to see in life. Attrition is always, I get to hear about that at about 4.59 on an afternoon when somebody tells me that they're thinking about that. There's very little insight. But let me say this, you can look at our numbers. The last year was spectacular.

But let me say this you can look at our numbers.

Last year.

Year was spectacular.

For us for our bankers, we run the company extremely efficiently 8% non comp.

Speaker 4: for our bankers. We run the company extremely efficiently, 8% non-comp. And you know, look, the numbers are fairly transparent. I think we have an energized, motivated, energetic group of people here. The addition to that, by the way.

And you know what the numbers are fairly transparent.

I think we have an energized motivated energetic.

A group of people here.

But the addition to that by the way.

Is that other people can see our platform.

And if I, if I were a banker I would want to work for a place that lost eight cents to non comp between the dollar of revenue I took in in the decision of whether to or whether they pay comp or put it into pretax. After you. After your non comp you have two choices one the shareholders got 34% in the bag.

Speaker 4: And if I were a banker, I would want to work for a place that lost 8 cents to non-comp between the dollar of revenue I took in and the decision of whether to pay comp or put it into pre-tax. After your non-comp, you have two choices. One, the shareholders got 34% and the bankers got comp.

<unk> Dot com.

So I believe that where we are we're fairly young firm and the history of investment banking, but where we are now is our go to market has matched this incredible surge in M&A.

Speaker 4: So I believe that where we are, we're a fairly young firm in the history of investment banking, but where we are now...

Speaker 4: is our go-to-market has matched this incredible surge in M&A.

As a recurring growing dynamic primary business by the way as well as our strategic.

Speaker 4: as a recurring, growing, dynamic primary business, by the way, as well as our

And I think Theres a lot of people around the street, who would look at it and say, that's where I want to have my career and I think you'll see both our internal promotes continue to be.

Speaker 4: And I think there's a lot of people around the street who would look at it and say, that's where I want to have my career. And I think you'll see both our internal promotes continue to be, look last year was I think unique, but we have great people. I hope it's not unique.

Well last year was I.

<unk> unique, but we have great people I hope it's not unique.

I think we can we're in a really good position to attract bankers, who want to work as a team and get that and get revenue delivered to the bottom line or do you think.

Speaker 4: And then I think we can, we're in a really good position to attract bankers who want to work as a team and get that and get revenue delivered to the bottom line, or to, you know, to both the comp line and the bottom.

Both the topline and the bottom line.

Got it okay. Thank you and then maybe just to follow up on the outlook for 'twenty. Two maybe things that are different you know as we look forward this year versus the last call. It two years.

Speaker 5: Thank you. And then maybe just to follow up on the outlook for 22, maybe things that are different, you know, as we look forward this year versus the last two years, maybe one, we're in a rising interest rate environment. And two, there seems to be a transition in leadership from growth towards value.

Maybe one where in a rising interest rate environment and two there seems to be a transition in leadership from growth towards value.

Your diversified clearly to either of these really change the.

Speaker 5: You're diversified clearly. Do either of these really change the outlook in the second half of the year, maybe even in 23, versus the record pipeline, strong environment that you're kind of seeing today and the sponsor-driven business that's really driving some of this great activity levels that we're seeing today.

Outlook in the second half of the year, maybe even in 'twenty three versus the record pipeline strong environment, you know that you're kind of seeing today and the sponsor driven.

No business, that's really driving some of this you know.

Great great activity levels that we're seeing today.

Yeah look I think there's there's several crosscurrents going on that are interesting. So we do we have our largest.

Speaker 4: Yeah, look, I think there's several cross currents going on that are interesting. So we do we have our largest backlog, I believe pipeline ever. And it's interesting because we probably have one of the lowest backlogs in restructuring.

Backlog I believe pipeline.

Yeah.

And it's interesting because we probably have one of the lowest backlogs in restructuring.

And I think we signaled that at the end of the third quarter to us restructuring is a very visible.

Speaker 4: And I think we signal that at the end of the third quarter. To us, restructuring is a very visible, predictable, it's the most predictable of your businesses because you usually get hired and in cases unfold pretty steady over six, nine months, something like that, and a year could be. So, but you know what you have. And so we saw that coming down. So very interesting that our M&A backlog has replaced.

Predictable it it's the most predictable of your businesses, because you usually get hired and Encases unfold pretty steady over six nine months, something like that and a year. It could be so but you know what you have and so we saw that coming down so very interesting that our M&A backlog has replay.

Just essentially all of the I call it missing restructuring and believe me restructuring is very light right now and the ability there aren't many targets.

Speaker 4: essentially all of the, I call it missing, restructuring. And believe me, restructuring is very light right now. And the ability, there aren't many targets. To your point, rising interest rates might change that, but it has not yet.

Your point rising interest rates might change that but it has not yet.

The other thing that we're seeing and I think it's very fair to say this is Eric.

Speaker 4: The other thing that we're seeing, and I think it's very fair to say this, is there.

All of what you just said, Ken but changed from value to growth interest rates, even even some geopolitics probably has caused an enormous amount of volatility.

Speaker 4: All of what you just said Ken, the change from value to growth, interest rates, even some geopolitics probably, has caused an enormous amount of volatility.

We started to see that really in the maybe second or third week in December you guys, probably can track it better than I, but it immediately started to elongate our closures you even in the backyard December the fourth quarter.

Speaker 4: We started to see that really in maybe second or third week in December . You guys probably can track it better than I, but it immediately started to elongate closures, even in the back half of December , the fourth quarter. And we definitely are seeing

And we definitely are seeing that in the first quarter.

The pipeline and the activity level is extremely high but the pace of closures is according hang out a little bit. It's just taking longer so everything that you're working on is just a little harder a little longer and little tougher by the way if we don't see any I shouldn't say anything we don't.

Speaker 4: the pipeline and the activity level is extremely high.

Speaker 4: but the pace of closures is accordioning out a little bit. You know, it's just taking longer. So everything that you're working on is just a little harder, a little longer, a little tougher. By the way, we don't see any, I shouldn't say anything. We don't see a lot dropping out of pipeline. We just see it, you know, the thing you thought would close.

See a lot dropping out of pipeline, we just see it you know the thing that you thought would close.

Next week is going to close in three weeks or four weeks and we're seeing that.

Speaker 4: next week is going to close in three weeks or four weeks. And, um, and we're, we're seeing that.

We're seeing that in the first quarter, so although our pipeline range.

Speaker 4: pretty we're seeing that in the first quarter. So although our pipeline remains extremely high and every every bank.

Greenlee high and every every banker I talk to seems to be almost busier than they were last year, we're definitely seeing pace.

Speaker 4: seems to be almost busier than they were last year, we're definitely seeing pace.

Pace of closings slow in the first quarter.

Speaker 4: pace of closings slow in the first quarter.

As a result of the volatility I think.

Great. Okay. Thank you so much.

The next question is from Steven Chu back with Wolfe Research. Please go ahead.

Speaker 1: The next question is from Steven Chewback with Wolf Research. Please go ahead.

Hey, guys. This is a trend in o'brien filling in for Steven.

Speaker 3: Hey guys, this is Brandon O'Brien filling in for Steven. So, margin expansion has been quite substantial since the onset of the pandemic. But with inflation and return to travel putting upward pressure on your cost base as well as peers, how should we be thinking about the sustainability of 30% plus?

So margin expansion has been quite substantial since the onset of the pandemic, but with inflation and we're trying to travel putting upward pressure on your cost base as well as peers, how should we be thinking about the sustainability of 30% plus operating margins and.

Speaker 3: operating margins and an environment where revenue growth is likely not going to be as strong as what we've seen in recent years.

Our our revenues revenue growth.

Likely not going to be as strong as what we used to see in recent years.

Yeah.

I think we should be able to sustain I think travel Joe and I talk about travel as probably you know if you want if you went back to.

Speaker 4: I think we should be able to sustain I think travel Joe and I talked about it travels probably, you know, if you what if you went back to Pre- COVID-19 it's probably

Pre COVID-19 , it's probably two or three points, Joe what do you think.

Sure Yeah, I mean, we're we're probably as F 'twenty, one where 40% of pre pandemic levels and we've got 10% more head count.

Speaker 3: Yeah, I mean, we're probably as of 21, we're 40% of pre-pandemic levels, and we've got 10% more head.

So and I don't know that by the way.

Speaker 4: I saw and I don't know that it's going back. So you know, that won't that won't kill the leverage in the model is substantial.

No that it's going back so that won't that won't kills the leverage in the model is substantial.

I think there's more leverage to be had out of the model I actually believe our customer base.

Speaker 4: I think there's more leverage to be had at the model. I actually believe our customer base.

That I described in my remarks is a large group of people, it's a large customer base.

Speaker 4: that I described in my remarks is a large group of people, it's a large customer base, and almost everyone has a plan.

And almost every one has a plan to double their size.

I don't listen to all the alternative asset manager calls you do but I would suspect every single one of them has a plan to double their size what are the fundamental input that they need to which is the information the deal flow the ability.

Speaker 4: I don't listen to all the alternative asset manager calls you do, but I would suspect every single one of them has a plan to double their size. What are the fundamental input that they need to which is the information, the deal flow, the ability to make the business better.

To to show transaction closed so I feel very good about that.

Speaker 4: to show transaction flow. So I feel very good about that and getting margin out of that. Or when you talk about inflation, I...

And and getting margin out of that.

Or when you talk about inflation.

Our comp was.

On a absolute level was fantastic.

Speaker 4: Our comp was, was on an absolute level was fantastic. You know, that's me talking, by the way, you might have to ask some of the people, but I believe it was it was excellent and we hit a 34% pre-tax margin now.

Lets me talking by the way you might have to add some people, but I believe it was it was excellent and we hit a 34% pre tax margin now.

My positive we can stay at 34.

Speaker 4: Am I positive we can stay at 34? No, but you gave me 30 as a number. I would very much hope to stay in excess of 30. Thanks for that, Cameron.

No, but you gave me 30 is a number I you know I would I would very much hope to stay in excess of 30.

Oh, that's great color, thanks for that and.

On a capital raising you guys have obviously had a lot of great success building out that business.

Speaker 6: great success building out that business.

With industry issuance slowing meaningfully due in parts of the recent volatility in equity markets. I was wondering how your outlook for the business has changed and was hoping whether you could give us some color around how meaningful of a contributor capital Advisory was your results this past year.

Speaker 6: flowing meaningfully due in parts of the recent volatility in equity markets. I was wondering how your outlook for the business has changed and was hoping whether you could give us some color around how meaningful of a contributor capital advisory was to your results in the past.

Capital markets.

Two look we've we set out to make it a big.

Speaker 4: capital markets started to look we set out to make it a big.

Contributor and I think it was if I didn't think it was mid double mid double digits like 15 ish percent, probably if I had to plus or minus.

Speaker 4: contributor and I think it was if I didn't think it was mid double mid double digits like 15 ish percent probably if I had the plus or minus

Remember, we're not we're not doing the IPO markets were not doing regular way in some ways when things get volatile.

Speaker 4: Remember, we're not we're not doing the IPO markets, we're not doing regular way. I in some ways, when things get volatile, people go to the private markets, they structure, they go to structured finance, because you're unsure that, you know, the public markets are based on tremendous confidence, you have to, you know, file a document and go out there and distribute shares into the public. If you're uncertain, like at the beginning of COVID, when people were uncertain, it was all structured private.

People go to the private markets they structure they.

They go to structured finance, because you're unsure that.

The public markets are based on tremendous companies you have to.

File a document and go out there and distribute shares into the public.

If you're uncertain like at the beginning of Covid when people were uncertain. It was all structured private.

I'm still very bullish about that the markets are large.

Speaker 4: So I'm still very bullish about that. The markets are large.

And again I will tell you the alternative asset managers are all getting very creative and aggressive in taking down.

Speaker 4: The, um, and again, I will tell you the alternative asset managers are all getting very creative and aggressive in taking down, uh, credit money. See, really, if you looked at most of these alternative asset players and you say, what, what, what's substantially different about them from five years ago to today, it would probably be that almost everyone has a.

Credit money.

Really if you look at most of these alternative asset players and you say well whats substantially different.

About them from five years ago to today, it would probably be that almost everyone has a.

As a credit.

Fund or our credit asset class, that's growing significantly and they want to do interesting things now that's not something where they want to go out and buy.

Speaker 4: fund or credit asset class that's growing significantly and they want to do interesting things. And that's something where they want to go out and buy.

But you know a single a rated bonds they want structure.

Speaker 4: you know, a single A rated bond, they want structure. So I'm really very, I think that'll be great. For a long period of time, that'll be a good business. And lastly, again, to this volatility, you know, when I look back, you know, I think

So I'm I'm really very well.

That'll be great for a long period of time that'll be a good business and then lastly, again to this volatility you know when I look back the.

The volatility always affects things pretty significantly in the short run, but what volatility then makes every corporation do is make decisions. So COVID-19 . The first three months of Covid was extremely negatively volatile, but then the world woke up everybody had to make a decision and we had two years of helping people make decisions about the future there.

Speaker 4: The volatility always affects things pretty significantly in the short run. But what volatility then makes every corporation do is make decisions. So, you know, COVID the first

Speaker 4: three months of COVID was extremely negatively volatile, but then the world woke up, everybody had to make a decision and we had two years of.

Speaker 4: of helping people make decisions about the future, their business and strategy. And it was great. You know, we had a great two years. Even I go back to maybe even the crisis, it was it was horrible for a and by the way, we're nowhere near that. I don't want to I'm not comparing this volatility we've had over the last

Business and strategy and it was great you know we had a great two years.

Even though you know I go back maybe even the crisis. It was it was horrible for a and by the way we're nowhere near that I don't want to I'm not comparing that with the volatility we've had over the last eight weeks, but you know what happens then as people come back in and to the point that Ken Might've said.

Speaker 4: You know, what happens then is people come back and to the point that Ken might have said it.

If people are revalued gross in and versus different forms of cash flow you can bet there'll be a lot of decision, making and a lot of our focus on strategic go to market and that usually leads to a real upturn in our business. So it's a small price to pay I think and and capital markets will be.

Speaker 4: if people are revaluing growth and versus different forms of cash flow, you can bet there'll be a lot of decision making and a lot of focus on strategic go to market. And that usually leads to a real upturn in our business. So it's a small price to pay, I think and and capital markets will be part of that. I mean, it's short answer that capital markets will will be key to that as well.

I mean, the short answer that capital markets will who will be key to that as well.

Yeah.

Thanks for taking my questions.

The next question is from Brennan Hawken with UBS. Please go ahead.

Speaker 1: The next question is from Brennan Hawken with UBS. Please go ahead.

Good afternoon. Thanks for taking my question, Ken wanted to dig into your comments on the backlog.

Speaker 7: Good afternoon. Thanks for taking my question. Ken wanted to dig into your comments on the backlog. I believe you said it's the biggest backlog in history.

So you I believe you said that it's the.

The biggest backlog in history, but you have more history, our yep Yep got it so.

Speaker 7: But our history. Our history. Yep. Yep. Got it. So, curious if, and I know the closing pace you indicated has been slowing, but like when we're tracking the public data, the public announcements have slowed too and it very much looks like the...

Yes, if if and I know that closing pace you indicated has been slowing but like when we're tracking the public data the public announcements have slowed two in it and it very much looks like the.

Public pipeline is it has diminished recently so are these included in your backlog are there deals that you're working on that are unannounced in and therefore, theres sort of a double swelling on that front in order to help us reconcile between the two I know the public is never a perfect proxy, but it's.

Speaker 7: public pipeline has diminished recently. So included in your backlog, are there deals that you're working on that are unannounced and therefore there's sort of a double swelling on that front in order to help us reconcile between the two? I know the public is never a perfect proxy, but it's usually like kind of directionally close. So how do you square those two different metrics?

Usually like kind of Directionally close so how do you square those those two different metrics.

I would encourage you look at my problem with that question Brandon as everybody else. You asked me about those whatever whatever public numbers you look at and I've spent almost no time looking at them because you know I have our numbers. So I don't I don't spend a lot of time looking at somebody external taking a guess and I'm not I'm not being why just don't spend any time bridging that.

Speaker 4: I would encourage you, look, my problem with that question Brandon is everybody has asked me about those whatever public numbers you look at. And I spend almost no time looking at them because I have our numbers so I don't spend a lot of time looking at somebody external taking a guess. And I'm not being wise, I just don't spend any time bridging that.

Chet and Joe might be able to help you do that but.

Speaker 4: Chet and Joe might be able to help you do that. But look, there's a lot of things we work on that are not announced until they're announced. I mean, that is the very essence of public market.

Look there's a lot of things we work on that are not announced until they were announced I mean that is the very essence of public market.

M&A, we announced the deal yesterday that wasn't announced until seven this morning.

Speaker 4: M&A, we announced the deal yesterday that wasn't announced until 7th this morning. And there would be no sign of that. And so I don't, again, I don't know how to reconcile it other than I know what we have.

And.

There would be no sign of that and so I don't.

Again, I don't know how to reconcile it other than I know what we have.

And and I know the activity I know the bankers. We're also very much engaged I think what youre seeing is Ah.

Speaker 4: And I know the activity, I know the bankers are also very much engaged. I think what you're seeing is the volatility is causing things to churn a little bit. All those conversations, if you and I were trying to buy each other's company.

The volatility is causing things to churn a little bit all those conversations if you and I were trying to you know buy each other's company.

You know your stock might have gone down I mean, if you're in the wrong industry right now your stock would have gone up 20% right.

Speaker 4: you know, your stock might have gone down. I mean, if you're in the wrong industry right now, your stock could have gone down 20%. Right. And I might feel I should be the beneficiary of that you might feel you shouldn't and we're still actively engaged and trying to make it happen. But you know, we need we need time for price discovery. So again, I would encourage you I don't know the answer to how to break

And I might feel I should be the beneficiary of that and you might feel you shouldn't and we're still actively engaged in trying to make it happen, but we need we need time for price discovery. So again I would encourage you I don't know the answer to how to bridge it.

But I'm.

I'll just tell you what we see on our you know what we're looking at is healthy.

Speaker 4: But I'll just tell you what we see on our, you know, on what we're looking at is healthy, you know, as I said, record backlogs. And the amazing part is that's with, I think, I'm not going to say it's near record lows because I don't know what the lows are, but restructuring is, you know, near record lows.

You know as I said record backlogs.

In an amazing parties, that's with I think I'm not going to say, it's near record lows because I don't know what the lows are but restructuring as you know near record lows.

Yeah Okay.

For that color and maybe I can try and approach it from a different direction. When we've been analyzing some of the and this is broad industry data. This isn't about most specifically, but when we're looking at the industry data and some of the trends some of the announcements the pace of announcements have certainly slowed but also interestingly looking at sponsor activity as a percentage of industry volume.

Speaker 7: Yeah. Okay. Thanks for that, Color. Maybe I can try and approach it from a different direction. When we've been analyzing some of the, and this is broad industry data, this isn't about most specifically, but when we're looking at the industry data and some of the trends, some of the announcements, the pace of announcements have certainly slowed, but also interestingly, looking at sponsor activity as a percentage of industry volume, you know, that really got quite elevated in 2021 up to about 40%. And...

You know that that really got quite elevated in 2021 up to about 40% and here. This year, we've actually seen it start to decline and E. R. From your perspective are you seeing you know maybe the idea that the sponsors are working out seeing the forward.

Speaker 7: here this year, we've actually seen it start to decline.

Speaker 7: And from your perspective, are you seeing, you know, maybe the idea that the sponsors are looking at line-outs seeing the forward curve?

Curve show higher financing cost and maybe we're seeing some bid ask spreads widened and there needs to be some time for that market to settle out or.

Speaker 7: show higher financing costs and maybe we're seeing some bid ask spreads widen and there needs to be some time for that market to settle out or are you seeing something else or are you not seeing that trend at all the same trend that I'm seeing?

Or are you seeing something else or are you not seeing that trend at all at the same time that I'm seeing in the data.

Giant market too, but that's probably happening.

Speaker 4: giant market to sit, but that's probably happening. First of all, but that'll get over very quick. I mean, again, I go back to the first six or seven weeks of COVID.

First of all.

But that'll get over very quick I mean, you know again I go back to the first six or seven weeks of Covid.

Yeah, I went home and I thought Oh, who's ever going to do a deal well private equity went home and thought about what.

Speaker 4: I went home and I thought, who's ever going to do a deal? Well, private equity went home and thought about what.

What about their businesses, let six weeks past. It then came roaring out of the gate now we're nowhere near that kind of volatility I think there may be some.

Speaker 4: thought about their businesses, let six weeks pass and then came roaring out of the gate. Now we're nowhere near that kind of volatility. I think there may be some, some gumbo, you know, we have lots of conversations going on. Their aum I'm sure is growing. So I

But you know we have lots of conversations going on there.

They're a U M I'm sure is growing.

So I E.

Again to explain away what happens in any four or five week period, especially when theres volatility I think it's almost too much to think somebody can explain it it's volatile it will cause things to differ by the way there are things going on and I, even think the pace.

Speaker 4: again, to explain away what happens in any four or five week period, especially when there's volatility, you know, I think it's almost too much to think somebody can explain it's volatile. It will cause things to defer. By the way, there are things going on. I even think the pace

When you talk about the pace of closing so I think sometime in the third or fourth quarter. The SCC.

Speaker 4: when you talk about the pace of closing. So I think sometime in the third or fourth quarter, the SEC started to really kind of slow down.

Started to really kind of slowed down this backwards I think that was.

Almost purposeful on the accounting approvals and things like that so all of those things are in there.

Speaker 4: Almost purposeful on the accounting approvals and things like that. So all those things are in there

And it and.

Speaker 4: And it started at the middle of December , maybe second or third week.

And it started at the Middle of December maybe second or third week.

And maybe we're coming out of it now we'll see.

Speaker 4: and maybe we're coming out of it now, we'll see. But it definitely happened. It was definitely happening over the last.

But it definitely was definitely happening over the last eight weeks.

Hey.

This one might be a question for Joe Theres, a theres a $7.7 million just meant goes like a re class from other expense into revenue for unrealized losses is that tied to some of the Atlas cross back activity.

Speaker 7: Okay, this one might be a question for Joe. There's a there's a $7.7 million adjustment. It looks like a reclass from other expense into revenue for unrealized losses. Is that tied to some of the Atlas Crest SPAC activity, Joe?

That's I mean that is part of it but basically what we said in the third quarter was that we had these kinds of we have these facts and ultimately we took them in lieu of transaction fees.

Speaker 3: That's in I mean that is part of it basically what we said in the third quarter was that we had these kinds of we had these SPACs and ultimately We took them in lieu of transaction fees cast Chairs, right, I'm sorry chairs and that we would ultimately reflect those

Parents, who sits back some share chairs right I'm, sorry chairs and that we would ultimately reflect those through revenues until we monetize them. So this quarter, we reflected a mark to market loss and that went through revenues, which obviously would have an impact on on comp as well.

Speaker 3: through revenues until we monetize them. So this quarter, we reflected a mark to market loss, and that went through revenues, which obviously would have an impact on comp as well.

Okay. So there was a there was also the part of the $1.3 million adjustment was.

Speaker 7: Okay, so there was a there was also the part of the $1.3 million adjustment was it was a that's related to enforcement and non-compete. But was there some reversal because I know you guys took the comp on the on the marks initially, did you did you then reverse it tied to the 7-7? Exactly what that 7 or so million is about 7 million it was reclassed the revenues and it was adverse.

Looks like that's really the enforcement of noncompete, but was there some reversal because I know you guys took the comp on the on the marks initially did you did you then reverse it tied to the seven seven or so million is about 7 million. It was reclassify revenues.

And it was adverse.

Got it okay that makes sense. Thanks a lot.

Speaker 7: Got it. Okay, that makes sense. Thanks a lot.

The next question is from Monotocous Elliott with Morgan Stanley . Please go ahead.

Speaker 1: The next question is from Manan Ghisaliya with Morgan Stanley . Please go ahead. Hi. Good afternoon. Hi.

Hi, good afternoon.

I understand it's again.

So again, how do you on the on the backlog being low on the restructuring side, but any.

Speaker 8: So again, I heard you on the backlog being low on the restructuring side. But— connection An midterm

All of these scientists at yards, we could get several rate hikes are in quick succession here and that's a pretty different from the slow ramp that we saw the last time rates wind up from zero.

Speaker 8: Any early signs or thoughts here? We could get several rate hikes in quick succession here and that's it.

Speaker 8: pretty different from the slow ramp that we saw the last time rates went up from zero. And then you're sort of starting to see spreads rise a little bit as well, albeit from really tight levels. So I was just wondering if you're seeing any early signs of activity ramping on the restructuring side, is it too early to tell? And do you have any opinion on where it would go as we get towards the end of this year?

And then you know you are sort of starting to see spreads rise a little bit as well you know be it from royalty type levels. So I was just wondering you know if you're seeing any early signs of activity ramping on the restructuring side.

Is it too early to tell and you know do you have any opinion on like you know where I would go as we get towards the end of this year.

I'd say too early to tell it.

Speaker 4: I'd say too early to tell. Um, it's, we're not seeing it. Um, and you, and you do, you have a long, you get a pretty good, uh, well, sometimes you don't, I mean, if it's, you know, when things go into, into, uh, you know, commodity cycles, when the energy cycle hit, you know, it happened quick right now. There's there's anything I can do.

We're not seeing it and you do you have a law you get a pretty good well, sometimes you don't I mean, if it's you know when things go into into.

Commodity cycles, when the energy cycle here, you know could happen quick.

Right now, there's there's not much out there.

You're right at any point, you know I know, there's a lot of paper in the market.

Speaker 4: You're right at any point. You know I know there's a lot of paper in the market and and anything can happen.

And anything can happen so.

Look I'm not worried about it I think it's I just I just pointed out because it's it's a whole engine on the airplane that is is not you know, it's not helping right now but.

Speaker 4: Look, I'm not worried about it. I think it's I just I just pointed out because it's it's a whole engine on the airplane that is is not you know it's not helping right now but.

Let me tell you if I could hire.

Speaker 4: Let me tell you if I could hire into our restructuring business, I know how good it is, I know how good our team is.

Into our restructuring business I know how good it is I know how good our team is.

Hope, they're getting good sleep, if they're listening to the call I hope, they're getting to bed early getting some rest because someday it'll hit.

Speaker 4: I hope they're getting good sleep. If they're listening to the call, I hope they're getting to bed early, getting some rest, because someday it'll hit.

And in the previous cycles, it's it's very very busy and what happens in those cycles is what our business is so good you just can't you can't create the people again, it's it people.

Speaker 4: And in the previous cycles, it's very, very busy. And what happens in those cycles is why the business is so good. You just can't, you know, you can't create the people again. It's, people all of a sudden say, oh, there's a restructuring cycle. Let's create a group. You know, it's not createable in the instant it happens.

People all of sudden say Oh, there's a restructuring cycle, let's create a let's create a group, but you know it's not create a bull in the incident that happens and so I almost think this is good there may be some.

Speaker 4: And so I almost think this is good. There may be some, you know, some retired, some people who aren't as committed to staying in the business. And I think that that would be great for us. So we are committed. We love the team. And I hope they're resting up for what will inevitably be a cycle.

Some retired some people who aren't as committed to staying in the business and I think that that would be great for us. So we are committed we love the team.

And I hope, they're resting up for what will inevitably be a cycle.

Yeah Fair enough and we are we do we did see that sharp ramp up in 2020.

Speaker 8: Fair enough. We did see that sharp ramp up in 2020. And then maybe a separate question on just the SPAC market here. There's over 500 SPACs out there looking to find targets. And I think we will start seeing several of them bump up against their expiration dates as we get into the back half of this year. So just with the prospect of rising rates, the market volatility that we're already seeing here, what do you think it means for the SPAC market overall? And how do you see?

And then maybe a separate question on just the spot market here.

There's over 500 stocks out there looking to find target and you know I think when you will start seeing several of them bump up against their expiration dates as we get into the back half of this year. So you know just with the prospect of rising rates the market volatility that we're already seeing here do you know what.

What do you think it means for the stock market overall, and how do you see these.

These back activity trending from here as we go towards the end of this year and into 'twenty three.

Speaker 8: the stock activity trending from here as we go towards the end of this year and into 2021.

I always thought the stock market would be extremely volatile because it is an IPO market.

Speaker 4: I always thought the SPAC market would be extremely volatile because it is an IPO market.

And IPO markets go sharply into high gear and then they go sharply out of favor I mean there'd been you know.

Speaker 4: and IPL markets go sharply into high gear, then they go sharply out of favor. I mean, there have been, you know.

Years, where there's no IPO market and people forget how volatile the IPO market is.

Speaker 4: years where there's no IPL market and people forget how volatile IPL market is. And then here, you know, you had a new technology and you had a lot of non institutional players try their hand at it. And I think the market for pipes and money is now focused on

And then here you know you got a new technology and you had a lot of.

Non institutional players try their hand at it.

And I think the market for pipes and money is is now focused on.

Institutional is doing their transactions with institutional players.

Speaker 4: institutional, you know, is doing their transaction with institutional players.

Who who they feel comfortable with I think we're in obviously, it's a very difficult part of this back market now, but things are getting done there. If you have a really good quality product and you price. It right I think you can get something done, but like but like ipos during the downturn.

Speaker 4: who they feel comfortable with. I think we're in obviously, it's a very difficult part of the SPAC market now, but things are getting done. If you have a really good quality product and you price it right, I think you can get something done. But like IPOs during the downturn, I think it's, I wouldn't call it an attractive, it's not a hot market right now.

I think it's a I wouldn't call. It you know.

It's it's it's not it's not a hot market right now and I, but I think it's it's permanent it will be back it will professionalized.

Speaker 4: And I but I think it's permanent. It will be back. It will professionalize.

It will be done better.

Speaker 4: will be done better and it will be very

And it will be very cyclical.

And isn't there may be a lot of liquidations, you know again I don't track all the.

Speaker 4: And by the way, maybe, and there may be a lot of liquidations. I, you know, again, I don't track all the, you know, I spend more time with what we're doing and what everybody's doing, but it's, you know, it is possible that there'll be a lot of liquidations.

Spend more time with what we're doing and what everybody is doing but it's you know it is possible that there'll be a lot of liquidations.

Got it thank you.

The next question is from Devin Ryan with JMP Securities. Please go ahead.

Speaker 1: The next question is from Devin Ryan with JMP Securities. Please go ahead. Great. Good evening, Ken and Joe. How are you?

Great. Good evening, Joe how are you.

Great how you doing them.

Doing well.

Want to ask a question about average fees and what you guys are seeing you can obviously, you're talking about the sponsor is getting a lot more sophisticated and so they have even in an M&A transaction, you know more needs and just kind of the M&A advisory role. So how are you guys playing a part in that what are the implications on fees and then as.

Speaker 9: I just want to ask a question about average fees and what you guys are seeing. You're talking about...

Speaker 9: What are the implications on fees? As we think about maybe longer term, and I'm talking more on the sponsor side, if we think about portfolio companies roughly doubling over a five-year hold, that implies the deal values 2X what it was previously. Do you see the fee grid, if you will, holding up? These are sophisticated sellers in the sponsor market, so I'm just kind of curious if as we see the deal values hopefully continue to increase every time in sponsors become even a bigger part of the market. Is there any compression on fees?

As we think about maybe the longer term and I'm talking more on the sponsor side. If we think about portfolio companies roughly doubling over a five year hold is that implies either deal values to ask what it was previously.

Do you see the grid.

Grid, if you will holding up.

Sophisticated sellers in the sponsor market. So I'm just kind of curious.

So as we see the deal values, hopefully continue to increase overtime and sponsors become even a bigger part of the market is there any compression on fees or are they kind of hold the line. So kind of short term and long term view on that.

Speaker 9: If, you know, as we see the deal values hopefully continue to increase over time and sponsors become even a bigger part of the market, is there any compression on fees or do they kind of hold the line? So kind of short term and long term view.

First just looking back our average fees were up pretty nicely and secondly, I think that's the exact opposite is going to happen.

Speaker 4: Chris, just looking back, our average fees were up pretty nicely. And secondly, I think that's the exact opposite is going to happen. Um, we just spend a second, you know, walk through your your your, you know, private equity firm XYZ.

Just spend a second you know walk through your your your you know private.

Private equity firm X y Z.

The reason you want to buy a $2 billion asset that we might have.

Speaker 4: the reason you want to buy a $2 billion asset that we might have.

Is you think in five years, and it's gonna be worth 4 billion.

Speaker 4: is you think in five years it's going to be worth 4 billion.

And that.

That $2 billion profit goes into a carried interest 20 per cent of this $400 million.

Speaker 4: And that $2 billion profit goes into a carried interest 20% of this $400 million.

The key to the success of your firm isn't getting our feet down from X to Y I mean.

Speaker 4: The key to the success of your firm isn't getting our fee down from X to Y. I mean, like, like, because that doesn't even come out of the 400 million. It's the key is to get access to that $2 billion company to get out.

Because that doesn't even come out of the 400 million. If the key is to get access to that $2 billion company.

To to get access be showing it.

P. In the flow so that when that company comes in you've trained your whole team and whatever you know specialty they're in and they say they go to committee and say look this is an unbelievable asset and you know and.

Speaker 4: be in the flow so that when that company comes and you've trained your whole team in whatever specialty they're in and they say, they go to committee and say, look, this is an unbelievable asset and you know, and we want to buy it. So remember our fee is the difference between, I'm just making this up, you know, 10 million or $15 million fee. It doesn't go to the 400. It's a difference between 2 billion going to 4 billion or 2 billion going to 3 billion, 990 million.

We want to buy it so remember our fee is the difference between I'm just making this up.

$10 million or $15 million for you. It doesn't go down to 400, it's a different scene 2 billion going to $4 billion.

Or 2 billion going to $3.990 billion.

And then the carry as you know three carry comes out of that so.

Speaker 4: And then the carry is, you know, 300, the carry comes out of that. So I'd say, um, I believe the access to our intellectual property, the size and scale, the global integrated nature with which we can deliver unique, uh, difficult to access.

I would say Hum I believe the access to our intellectual property the size and scale the global integrated nature with which we can deliver.

Unique difficult to access.

Places to put your capital is.

He is extremely worth it for them you know that that's the best part of being a.

Speaker 4: It's extremely worth it for them. I you know, that's that's the best part of being a supplier of very rare.

Supplier are very rare.

Super highly charged.

Valuable.

Information and and.

Speaker 4: valuable information and, and, and assets. And so I think if anything, as, as these firms double in size, and for, you know, and the amount of firms double

And assets and so I I think if anything as.

As these firms double in size and for you now and the amount of firms double.

The desire to get access to that flow of information assets quality deal flow only goes up.

Speaker 4: the desire to get access to that flow of information, assets, quality deal flow only goes up. And our ability, again, this goes, I know it's hard for anybody to see it, but the fact that we can deliver the one firm and do it across all.

And our ability again this goes I know, it's hard for anybody to see it but the fact that we can deliver the one firm and do it across all.

Without commission structure across the globe and across products I think we can deliver to that to that.

Speaker 4: you know, with that commission structure across the globe and across products, I think we can deliver to that.

That financial institution, very well so I.

Speaker 4: that financial institution very well. So I do not see any pressure.

I do not see any pressure.

And if anything I would like to try to extract more.

Speaker 4: And if anything, I would like to try to extract more value for the quality of the information that we're working our butts off to get.

Value for the quality of the information that we're working our butts off to get to them.

Got it okay. That's great color. Thanks, so much and then just a follow up on kind of the conversation on margins.

Speaker 9: Got it. Okay, that's great, Keller Kemp. Thanks so much. And then just to follow up on kind of the conversation on margins.

You know what kind of stood out that you know the expectation that margins can kind of remain at very elevated levels. I appreciate you're not giving guidance and it's going to be 33% every year, but you know I like the way you guys think about the business is kind of the balance is not just about comp ratio not complex, but the overall margin and so they're going to always put.

Speaker 9: stood out that the expectation that margins can kind of remain at these very elevated levels. I appreciate you're not getting guidance that's going to be 33% every year. But you know I like the way you guys think about the business.

Speaker 9: the balance is not just about comp ratio and non-comp, but the overall margin, and so there's always puts and takes there. But if I think about this kind of concept that non-comp expense is probably going up in the absolute travels coming back.

It takes there, but if I think about just the kind of concept that non comp expenses is probably going up in the absolute and travel is coming back.

If you think about Mark even if you were to think about margins remaining flattish.

Speaker 9: you think about margin, even if you were to think about margins remaining flat-ish or remaining particularly elevated, is the leverage going to come from as revenues grow from non-comps or do you see kind of leverage from here on the comp ratio? You had a great year and you still were able to deliver 33% margin, so you people were paid well, but I'm curious if there's any leverage, I guess, still in the system on the comp.

Our remaining particularly elevated is is the leverage is going to come from as revenues grow from non comps or do you see.

I'm kind of leverage from here on.

On the comp ratio you had a great year and Easter, we're able to deliver 333% margin. So your people are paid well, but I'm curious if there's any.

The leverage I guess still in the system on the comp side as well.

I wouldn't look to it and what I would look to is the leverages and the revenue side.

Speaker 4: I wouldn't look to it. What I would look to is the leverages and the revvages.

The money the 34% margin wasn't for me.

Speaker 4: The money, the 34% margin wasn't for me, you know.

No.

Going after comp ratio, we just felt it was optimal the way we did it.

Speaker 4: going after comp ratio, we just felt it was optimal the way we did it. The leverage came from all of our bankers taking that last phone call on December 15, and still executing transactions. Because they because I wasn't gonna take it out, you know, I wasn't gonna say enough and stop work, you know, by the way, you'd be amazed people understand that if you're not getting, if they cap out in the last deal is is not for them, though, you know that people people

The leverage came from all of our bankers taken that last phone call on December 15th and still executing transactions.

They because I wasn't going to take it out you know I wasn't going to say Enough's and stop work you know by the way you'd be amazed people understand that if youre not doing if they cap out in the last deal. It is not for them you know that.

People people works.

They they get motivated so.

The.

Speaker 4: they get motivated. So the all the leverage and I think there might be more is in revenue is in the revenue line. And you saw getting our non comp down to 8%. I mean, I never thought I'd see a number like that. I didn't know that was possible. That wasn't because I am a master of cost cutting.

All the leverage and I think there might be more is in revenue is in the revenue line and you saw it getting our non comped down 8% I mean, I never thought I'd see a number like that I had I didn't know that it was possible that wasn't because I am a master of cost cutting.

And that was because the revenue was high and and if we're good at technology, you know somebody who we were talking about travel.

Speaker 4: That was because the revenue was high. And, um, and if we're good at technology, you know, somebody, we were talking about travel.

Well, maybe travels a revenue generator, maybe now you know the base business is done via zoom, the drafting and the commodity stuff and maybe we're going to get another kick up because once once we start traveling and meeting twice. The travel is actually an incremental revenue generator or not not just cost generator. If you follow I think.

Speaker 4: maybe travels or revenue generator, maybe now, you know, the base business is done via zoom, the drafting and the commodity stuff. And maybe we're going to get another kick up because once once we start traveling and meeting clients, the travel is actually an incremental revenue generator, not not just a cost generator, if you follow, I think

There may be a new way to do.

Speaker 4: there may be a new way to do business, which is commodity stuff, execution is done on, on the computer. And, and most of travel is for generation and relationship. Um, but, but then that's all I'll say is all of this is a result of the revenue.

New business, which is commodity stuff execution is done on.

On the computer and and most of travelers for generation in relationship.

But that's all I'll say is all of this is a result of the revenue.

And when you start getting production throughout the system and integrate yeah, we were even talking about the.

Speaker 4: And when you start getting production throughout the system and integrate, you know, we were even talking about the, you know, I was joking a little about the restructuring team. They are, we already have them doing other things because we're one firm and one integrated effort. And that's the key is to have revenue and relationships come out of every part of the organization. So again, it's the revenue line that'll generate more.

Talk a little about the restructuring team. They are what we already have them doing other things because we're one firm in one integrated effort and that's the key is to have revenue and in relationship to come out of every part of the organization. So again.

It's it's the revenue line that'll generate margin.

Okay great.

Real quick for the model for Joe is the I'm, sorry, if I missed this but the fourth quarter ending MD head count is that a 120, we just.

Speaker 9: Okay, great. Just real quick for the model for Joe, is the, sorry if I missed this, but the fourth quarter ending MD headcount, is that 120 if we just make the adjustment for the internal promotes? Or just if you have that number, that'd be helpful. I think the, with the internal.

The adjustment for the internal promotes or just if you have that number that'd be helpful.

I think with the internal promotes we're at $1 36.

As of year end, sorry, or as of as of right. Now I guess, we're just trying to establish the brand.

Speaker 9: But as of year end, sorry, or as of right now, I guess we're just trying to plug in for the year end. But if you need year end.

But if you need year end I'm sure check and help you.

Got it okay. That's fine thanks, so much I appreciate it.

Speaker 9: Got it. OK, that's fine. Thanks so much. I appreciate it. Yeah, Devin, as of right now.

Yeah, Devin as of right now.

Yeah.

The next question is from James <unk> with Goldman Sachs. Please go ahead.

Speaker 1: The next question is from James Yarrow with Goldman Sachs. Please go ahead.

Thanks for taking my questions. So maybe you could just speak geographically to the strength of the M&A environment, and specifically, whether you're seeing an activity remained robust in the U S. And then what the environment looks like in Europe .

Speaker 10: Thanks for taking my questions. So maybe you could just speak geographically to the strength of the M&A environment, and specifically whether you're seeing an activity remain robust in the US, and then what the environment looks like in Europe .

Yeah.

He said we were actually up every single geography, which is Uh huh.

Speaker 4: You know, we said we were actually up every single geography, which is stunning.

Running.

The U S is definitely and again I'm going to hold back again on this you know show that near term volatility I'm just going to give you what I see on the rolling on a on a 12 month view.

Speaker 4: The US is definitely, and again, I'm going to hold back again on this, you know, sort of near term volatility. I'm just going to give you what I see on the rolling on a 12 month view. Europe is defin...

Europe is definitely.

Up an exciting and by the way because Europe is also starting to go to the same model I think you're starting to see a real well.

Speaker 4: Up and exciting and by the way, because Europe is also starting to go to the same model I think you're starting to see a real

Recurring client base much much more significant than it ever was much more diverse in our in sponsors in middle market. So you have the big Strategics, which Europe always had and I think they are developing a much more.

Speaker 4: recurring client base, much, much more significant than it ever was much more diverse in in sponsors and middle market. So you have the big strategic which Europe always had. And I think they're developing a much more recurring sponsor in diverse sponsor model. Interesting Asia was pretty good. episodic, of course, but we had some some pretty good

Recurring sponsor in diverse sponsored model interesting Asia was pretty good.

Episodic of course, but we had some some pretty good shine.

China, Hong Kong Asia business, we we had a our office in Brazil had a very good year.

Speaker 4: China, Hong Kong, Asia business. We had our office in Brazil, had a very good year.

You know them.

Going through our offices or our Middle East Officer is on fire I think every day.

Speaker 4: I'm going through our offices. Our Middle East officer is on fire. I think every

Saying, we are in the middle East, we just seem to be.

Speaker 4: thing we, you know, in the Middle East, we just seem to be

No.

When we win a lot and do a lot in the middle East.

Speaker 4: you know, win a lot and do a lot in the Middle East. That's a fantastic franchise for us. And even India, which, you know, has the ups and downs, had a very good year. And that might be the only economy right now. You know, I don't know off the top of my head, know if next year looks as good. But, you know, everything feels like it's a continuity from that.

Fantastic franchise for us.

And even India, which you know it has ups and downs had a very good year and.

That might be the only our economy right now.

If the top of my head no if next year looks as good but.

Every everything feels like it's.

It's a continuity from that trend.

Yeah, and we're gonna be issuing our 10-K in a couple of weeks and I think youll see that non U S. Entities basically wrote the same wave is your west so they are the.

Speaker 3: Yeah, and we're going to be issuing our 10K in a couple of weeks. And I think you'll see that the non-US entities basically rode the same wave as US. So the, the, the, uh, the contribution to revenues has been around 15% for the last several years, and it was still 15% in 21.

The the contribution to revenues has been around 15% for the last several years and it was still 15% and 21.

Okay. That's that's extremely helpful.

Just had one other one wishes.

Speaker 10: And then I just had one other one which is, you know, you've seen tremendous growth in revenue over the past few years, but you still only disclose one revenue line. Do you think there's a scale your business will reach at some point at which you might disclose, you know, a little bit more granularity across the various business lines? And if so, you know, how would you sort of think about that?

Seen tremendous growth in revenue over the past few years, but you still only disclose one revenue line do you think there's a scale your business will reach at some point at which you might disclose you know a little bit more granularity across the various business lines and if so how would you sort of think about that.

I'm going to give that to Joe is a financial question in my mind, we run one business.

Speaker 4: I'm going to give that to Joe as a financial question. In my mind, we run one business.

We work as again I don't think that's exactly right. We've always we always think about it that way and the way. The teams work, it's that way that an M&A or restructuring our capital markets. It's it's like if there is a continuum and it would be very difficult to start parsing that and start Alex.

Speaker 3: we work as a team. Yeah, and I think that's exactly right. We've always, we always think about it that way and the way the teams work, it's that way that an M&A, a restructuring, a capital markets, it's like, there's a continuum and it would be very difficult to start parsing that and start allocating it. And I don't think it would be, I don't think it would be real and I don't think it would be particularly useful.

Getting it and I don't think it would be I don't think it would be real and I don't think it would be particularly useful internally to try and start mashing up in and crediting various product areas because it's not how we work and that's not how we're organized.

Speaker 3: internally to try and start like mashing up and crediting various product areas because it's not how we work and it's not how we're organized.

Okay. Thanks, a lot.

The next question is a follow up from Brennan Hawken with UBS. Please go ahead.

Speaker 1: The next question is a follow-up from Brendan Hawken with UBS. Please go ahead.

Yeah.

Hey, Thanks for taking my follow up I just wanted to I think you know Devin was kind of poking around in this direction.

Speaker 7: hey thanks for taking my follow-up i i i just wanted you know devin was kind of poking around in this direction that i'm kind of curious about it um... you know the the the range of compensation ratios initially you know was fifty seven fifty nine this is an epic year for revenue uh... you know uh... great leverage you know and whatnot and and a lot a lot of attention to the pre-tax margin but you know that this teeny uh... low teeny's gonna go away to some degree and and whatnot so why wouldn't in a year like this weeks we go to the lower end of the comp range particularly

I'm kind of curious about it.

The the range of compensation ratios. Initially was 57 to 59. This is an epic year for revenue.

No.

Leverage and whatnot and in a lot of attention to the pre tax margin, but you know that this tiny low teen he's going to go away to some degree and whatnot. So why wouldn't in a year like this week. We go to the lower end of the comp range, particularly given how can you spend a lot of time talking about how.

Speaker 11: given.

Speaker 7: how can you spend a lot of time talking about how it's not a commission model and it's not

It's not a commission model in it and it's you know, it's it's not right.

We're script prescriptive like that.

Speaker 7: prescriptive like that, wouldn't what draws people to the platform not be that extra point of comp ratio but rather the revenue opportunity to generate.

Wouldn't we didn't know what draws people to the platform not be that extra point of comp ratio, but rather the revenue opportunity to generate.

Yeah.

Well you know you came up with a range, but we I mean, we were at 59, three and went to 58 five look I will say this we manage the company. It's not we don't have like a Microsoft X L Street and put these numbers in and out Pops number.

Speaker 4: Well, you know, you came up with a range, but we were at 59.3 and went to 58.5. Look, I will say this. We've managed the company. It's not a, we don't have like a Microsoft Excel, and put these numbers in and out pops a number.

We think this was optimal.

And by the way I've never felt better about being optimal what am I trying to do it would be definitely be like if you hold the hotels you can go well why don't you just pay your.

Speaker 4: And by the way, I've never felt better about being optimal. What am I trying to do? It'd be definitely be like if you all the hotel you go. Well, why don't you just pay your shareholders more? Why'd you refurb the rooms? Why do the rooms really need a new cat? Yeah, why do that? I mean, you know you can do that every eighth year. Does anybody get it's like asking it's asking You know, why don't we stick to some modular thing? I will tell you

Shareholders more why you refurb the rooms, why did the rooms really need or do you know why do that I mean, you know you could do that every eighth year does anybody yet it it's like asking it's asking why don't we stick to some modular thing I will tell you that.

The reason I'm. So excited about the future is our people are motivated they're in <unk>. They they feel great about working here our junior people R. R.

Speaker 4: that the reason I am so excited about the future is our people are motivated, they're enthused, they feel great about working here, our junior people are heroic in what they've accomplished and we treated them so.

Our heroic and what they've accomplished and we treated them as such.

This was an optimal way to make this franchise on February what they say February nine.

Speaker 4: This was an optimal way to make this franchise on February 9th.

The reason we did it is because it optimize the value of this franchise on February 9th for the next five to 10 years now.

Speaker 4: The reason we did it is because it optimized the value of this franchise on February 9th for the next 5 to 10 years.

We can debate that because there's no scientific formula that says that.

Speaker 4: We can debate that because there's no scientific formula that says that. But myself, the board of directors, and the executive team came to that conclusion. And I believe it now. And I'd much rather be at a firm to optimize the way I just did it than try to do it a different way. And I think hopefully all our shareholders will be the benefit of that decision.

But myself the board of directors and the executive team came to that conclusion, and I believe it now and and I'd much rather be in a firm to optimize the way I just did it and tried to two did it a different way than I am and I think you'll be hopefully all of our shareholders will be the benefit of that decision.

Okay. Thanks for taking my follow up.

The next question is from Michael Brown with K B W. Please go ahead.

Speaker 1: The next question is from Michael Brown with KBW. Please go ahead.

Great. Thanks for taking my questions.

Speaker 5: Great, thanks for taking my questions. Yeah, kind of just looking at the promotional class and great to see, you know, broad basis sectors and capabilities represented there. When we

It kind of just looking at the.

The promotional clash and great to see a broad base of sectors and in capabilities represented there.

When we think about the next leg of growth where is that white space for you, where you know obviously as you've gotten larger it becomes less obvious from us on the outside so love to hear a little bit more bad debt and then you also flagged a strong pipeline with internal and external.

Speaker 12: Where is that white space for you now?

Speaker 12: as you've gotten larger, it becomes less obvious from us on the outside. So, you'll have to hear a little bit more about that. And then you also flag a strong pipeline of internal and external.

Talent, how does that pipeline compare to last year. If you could just give us a frame of reference there.

Speaker 12: How does that pipeline compare to last year if you could just give us a frame

Okay, well, it's sort of embarrassing because you're in my seat I looked down and all I see is white space I I can name and you know.

Speaker 4: OK, well, it's sort of embarrassing because you're in my seat. I look down and all I see is white space. I can name two or three of the largest sectors.

Two or three of the largest sectors for fees.

And we should be much bigger better I mean, it's extraordinary to me what.

Speaker 4: and we should be much bigger, better. I mean, it's extraordinary to me what...

What we what we what we havent done by the way I you know I know, there's 1 billion fiber revenue when I go to the right. It's a lot around here and I'm looking at I seem to the.

Speaker 4: what we what we what we haven't done, by the way, you know, I know the billion fiber revenue and I go that's right, it's a lot of revenue that I've looked and I see the the substantial sectors that have huge market shares and look, they're out there. I mean, we could be just to pick one look, we can still do a lot more in tech, it's a gigantic

The substantial sectors that have huge market shares and look they're out there I mean, we could be just to pick one look we can still do a lot more in tech it's a gigantic.

It's a gigantic fee pool will.

Speaker 4: Uh, it's a gigantic feed pool. I have a great team. I like what we do, but we can do more. So, and then there are other. Tremendous ones like that. And I don't want to signal them out. Um, but from, from inside, I've seen more white space than I see.

Have a great team I like what we do but we can do more so and then there are other.

Tremendous ones like that and I don't want to signal him out but from from inside I've seen more white space than I see.

Block space by far so I don't worry about that well sorry, what was the second part of the question.

Speaker 4: block space by far. So I don't worry about that. What's the second part of the question?

Just the the talent pipeline you mentioned that it's.

Speaker 12: Just the pipeline, you mentioned that it's in the press release, it's a strong...

In the press release, it's a strong.

I had a very strong level just wanted to get a frame of reference how does that compare to say last year.

Speaker 4: strong level just wanted to get a spring of reference out as I compared to say last year. Higher I mean we definitely higher than last year and much more skewed down.

Higher I mean were definitely higher than last year.

And much more skewed to M&A as I said.

And again to your point about our young talent.

And the up and comers you you're right about one thing I I think we don't even see these things coming I mean, you know if you would've told me Ken Who's your banker in the meta versus two years ago I would just ask you to spell that.

Speaker 4: and the up and comers. You're right about one thing. I think we don't even see these things coming. I mean, you know, if you would have told me, Ken, who's your banker in the metaverse two years ago, I would have asked you to spell that.

So I I think youre seeing them you know.

Speaker 4: So I think you're seeing, you know.

What would and what we ended up doing places like online gaming and some of these things where a new industries are being created all the time, you're right and that's the brilliant brilliant part of having these young energetic people who are finding their own sectors and niches in places, where you and I might not even know there's an opportunity in there.

Speaker 4: what we ended up doing in places like online gaming, it's some of these things where new industries are being created all the time, you're right. And that's the brilliant part of having these young, energetic people who are finding their own sectors and niches and places where you and I might not even know there's an opportunity in the next three to five years and they know it and it's not top down. I'm not hiring.

Three to five years and they know it and.

And it's not top down I'm not I'm not hiring.

Our bankers that you see that's the difference I don't I'm, not going out and finding a 50 year old banker.

Speaker 4: banker. That's the difference. I'm not going out and finding a 50 year old banker.

In that space, what's happening is the young people that we're hiring out of school or coming to an end in the middle of it saying, Hey, I think there's a huge opportunity here can I attack that space.

Speaker 4: in that space what's happening is the young people that were hiring out of school are coming you know and in the middle of it saying hey I think there's a huge opportunity here can I attack that space?

And that's really refreshing.

Speaker 4: And that's really refreshing and it will lead to a lot more value creation and it's bottoms up. So that's the excitement of having the internal talent promotion grabbing new sectors and market shares that they see way before I would.

And it will lead to a lot more value creation and its bottoms up so that's the excitement of a having the internal talent promotion grabbing.

Grabbing new sectors of market shares that they see they see way before I would.

Okay, Great I appreciate that Ken and then just a quick one for Joe.

Speaker 12: Appreciate that Ken. And then just a quick one for Joe. I heard the commentary on the tax rate for the first quarter and I always appreciate that color.

The commentary on the tax rate for the first quarter and I always appreciate that that color in terms of the impact of the share based comp.

Speaker 12: impact of the share-based comp. You know the tax rate was high this this quarter. Apologies if I missed it. What was the key driver there and then after the first quarter where should we expect the tax rate to be just kind of fall back to where it has been in store.

You know the tax rate was high this quarter.

Apologies if I missed it what was the key driver there and then after the first quarter.

Where should we expect the tax rate to be just kind of fall back to where it has been historically.

So I I would you know.

Speaker 3: So I would, you know, answer the second part, I would, I would expect it to be at or around the 27 level now. I think there's two items that are primarily affecting it. One is an increase in the non deductible expenses. And the other one is really what we were talking about earlier is the increase in income coming from outside of the US.

To answer the second part I I would I would expect it to be at or around the 27 level. Now I think there is two items that are primarily affecting our one is an increase in the non deductible expenses and the other one is really what we were talking about earlier is the increase in income.

From outside of the U S. In some cases it relates to income earned in higher rate jurisdictions and in other cases. The income earned is subject to foreign tax credit limitations and so that combination basically has given rise to a little bit of rate creep.

Speaker 3: In some cases, it relates to income earned in higher rate jurisdictions.

Speaker 3: And in other cases, the income earned is subject to foreign tax credit limitations. And so that combination basically has given rise to a little bit of rate creep.

Okay got it thanks for that color.

Thank you Bob.

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

Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Ken Molas for any closing remarks.

Thank you all I appreciate your time and we'll see you after the first quarter.

Speaker 4: Thank you all. I appreciate your time and we'll see you after the first quarter.

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

Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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