Moelis & Company (“we” or the “Firm”) (NYSE:MC) today reported financial
results for the first quarter ended March 31, 2015. The Firm’s total
revenues of $99.4 million for the quarter represented a decrease of 13%
from the prior year period. Adjusted Pro Forma net income was $15.4
million or $0.28 per share (diluted), as compared with $19.7 million or
$0.36 per share (diluted) in the first quarter of 2014. On a GAAP basis,
the Firm reported net income of $20.0 million, or $0.25 per share
(diluted) for the first quarter of 2015.
“Since going public a year ago, we have made significant progress in
growing our franchise. We have enhanced the depth and quality of our
client relationships, advising on a number of highly complex
transactions around the world. We have added 12 Managing Directors in
strategically important areas of expertise and maintained our focus on
internal talent development. During the first quarter, this progress
continued with the hiring of four Managing Directors who will join us
this summer to cover sectors that we expect to be active. This is in
addition to 99 Managing Directors at the end of the quarter, which
positions us well as the M&A market continues to steadily build,” said
Ken Moelis, Chairman and Chief Executive Officer.
“Compared to a record first quarter in 2014, our first quarter results
included fewer notably large fee events. As a result, we had a slower
start to the year, more consistent with the pattern of seasonality that
we have experienced in previous years. We also felt the effects of
extended M&A processes for credit-sensitive transactions and of a softer
restructuring market.”
“We continue to be encouraged by the steadily improving M&A environment
which is developing largely in-line with what we have articulated since
our IPO last April. With default rates hovering at record lows however,
the restructuring environment remains subdued. As we look to the rest of
2015, we remain confident in our ability to generate revenue and
earnings growth for our shareholders. We believe M&A will continue to be
the engine of our growth and expect to see this growth manifest in the
second half of the year.”
The Firm’s revenues and net income can fluctuate materially depending
on the number, size and timing of completed transactions on which it
advised as well as other factors. Accordingly, financial results
in any particular quarter may not be representative of future results
over a longer period of time.
Moelis & Company completed its IPO on April 22, 2014 and introduced a
new corporate structure. Currently 36% of the operating
partnership (Moelis & Company Group LP) is owned by the corporation
(Moelis & Company) and is taxed as a corporation. The
remaining 64% is owned by partners and is primarily subject to tax at
the partner level (except for certain state and local and foreign income
taxes). The Adjusted Pro Forma results included herein remove the
impact of charges related to the Firm’s IPO and assume all outstanding
Class A partnership units of Moelis & Company Group LP have been
exchanged into Class A common stock of Moelis & Company. Accordingly,
the Adjusted Pro Forma presentation reflects 100% of the Firm’s income
being taxed as a corporation from January 1, 2014. We believe the
Adjusted Pro Forma results, when presented together with comparable GAAP
results, are useful to investors to compare our performance across
periods and to better understand our operating results. A
reconciliation of our GAAP results to our Adjusted Pro Forma results is
presented in the Appendix to this press release.
|
GAAP and Adjusted Pro Forma Selected
Financial Data (Unaudited)
|
|
|
|
|
|
|
|
U.S. GAAP
|
|
Three Months Ended March 31,
|
($ in thousands except per share data)
|
2015
|
|
2014
|
|
2015 vs. 2014 Variance
|
|
|
|
|
|
|
Revenues
|
$99,412
|
|
$114,517
|
|
-13%
|
Expenses:
|
|
|
|
|
|
Compensation and benefits
|
55,393
|
|
70,441
|
|
-21%
|
Non-compensation expenses
|
22,638
|
|
20,141
|
|
12%
|
Total operating expenses
|
78,031
|
|
90,582
|
|
-14%
|
Operating income (loss)
|
21,381
|
|
23,935
|
|
-11%
|
Other income and expenses
|
15
|
|
19
|
|
-21%
|
Income (loss) from equity method investments
|
2,865
|
|
(1,220)
|
|
N/M
|
Income (loss) before income taxes
|
24,261
|
|
22,734
|
|
7%
|
Provision for income taxes
|
4,300
|
|
642
|
|
N/M
|
Net income (loss)
|
19,961
|
|
22,092
|
|
-10%
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests
|
14,625
|
|
-
|
|
N/A
|
Net income (loss) attributable to Moelis & Company
|
$5,336
|
|
$22,092
|
|
N/A
|
|
|
|
|
|
|
Diluted earnings per share
|
$0.25
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
N/M = not meaningful
N/A = not applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Pro Forma*
|
|
Three Months Ended March 31,
|
($ in thousands except per share data)
|
2015
|
|
2014
|
|
2015 vs. 2014 Variance
|
|
|
|
|
|
|
Revenues
|
$99,412
|
|
$114,517
|
|
-13%
|
Expenses:
|
|
|
|
|
|
Compensation and benefits
|
53,933
|
|
60,092
|
|
-10%
|
Non-compensation expenses
|
22,638
|
|
20,141
|
|
12%
|
Total operating expenses
|
76,571
|
|
80,233
|
|
-5%
|
Operating income (loss)
|
22,841
|
|
34,284
|
|
-33%
|
Other income and expenses
|
15
|
|
19
|
|
-21%
|
Income (loss) from equity method investments
|
2,865
|
|
(1,220)
|
|
N/M
|
Income (loss) before income taxes
|
25,721
|
|
33,083
|
|
-22%
|
Provision for income taxes
|
10,288
|
|
13,399
|
|
-23%
|
Net income (loss)
|
15,433
|
|
19,684
|
|
-22%
|
Net income (loss) attributable to noncontrolling interests
|
-
|
|
-
|
|
N/M
|
Net income (loss) attributable to Moelis & Company
|
$15,433
|
|
$19,684
|
|
-22%
|
|
|
|
|
|
|
Diluted earnings per share
|
$0.28
|
|
$0.36
|
|
-22%
|
|
|
|
|
|
|
N/M = not meaningful
|
|
|
|
|
|
* See Appendix for a reconciliation of GAAP to Adjusted Pro Forma
|
|
Revenues
For the first quarter of 2015, revenues were $99.4 million as compared
with $114.5 million in the first quarter of 2014, representing a
decrease of 13%. This decrease was primarily driven by fewer notably
large fee events as compared with a record first quarter of 2014 which
included the completion of a number of sizeable advisory assignments. We
earned revenues from 113 clients (28 of whom paid fees equal to or
greater than $1 million) in the first quarter of 2015 as compared with
110 clients (24 of whom paid fees equal to or greater than $1 million)
during the same period in 2014.
We continued to execute on our strategy of profitable expansion. In the
first quarter, we hired two Managing Directors who will strengthen our
European sector expertise in chemicals and oil & gas as well as two
Managing Directors in the U.S. to enhance our capabilities in the
technology, media and telecommunications sector. These individuals will
join the Firm this summer.
Expenses
The following tables set forth information relating to the Firm’s
operating expenses, which are reported net of client expense
reimbursements.
|
|
U.S. GAAP
|
|
|
Three Months Ended March 31,
|
($ in thousands)
|
|
2015
|
|
2014
|
|
2015 vs. 2014 Variance
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Compensation and benefits
|
|
$55,393
|
|
$70,441
|
|
-21%
|
% of revenues
|
|
56%
|
|
62%
|
|
|
Non-compensation expenses
|
|
$22,638
|
|
$20,141
|
|
12%
|
% of revenues
|
|
23%
|
|
18%
|
|
|
Total operating expenses
|
|
$78,031
|
|
$90,582
|
|
-14%
|
% of revenues
|
|
78%
|
|
79%
|
|
|
Income (loss) before income taxes
|
|
$24,261
|
|
$22,734
|
|
7%
|
% of revenues
|
|
24%
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Pro Forma*
|
|
|
Three Months Ended March 31,
|
($ in thousands)
|
|
2015
|
|
2014
|
|
2015 vs. 2014 Variance
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Compensation and benefits
|
|
$53,933
|
|
$60,092
|
|
-10%
|
% of revenues
|
|
54%
|
|
52%
|
|
|
Non-compensation expenses
|
|
$22,638
|
|
$20,141
|
|
12%
|
% of revenues
|
|
23%
|
|
18%
|
|
|
Total operating expenses
|
|
$76,571
|
|
$80,233
|
|
-5%
|
% of revenues
|
|
77%
|
|
70%
|
|
|
Income (loss) before income taxes
|
|
$25,721
|
|
$33,083
|
|
-22%
|
% of revenues
|
|
26%
|
|
29%
|
|
|
|
|
|
|
* See Appendix for a reconciliation of GAAP to Adjusted Pro Forma
|
|
Total operating expenses on an Adjusted Pro Forma basis were $76.6
million for the first quarter of 2015 as compared with Adjusted Pro
Forma operating expenses of $80.2 million for the first quarter of 2014.
The decrease in operating expenses in 2015 primarily resulted from
reduced compensation and benefits expenses due to lower revenues earned
during the period, partially offset by an increase in non-compensation
expenses reflecting increased headcount and greater recruiting and
business development expenses. The pre-tax income margin was 26% on an
Adjusted Pro Forma basis in the first quarter of 2015 as compared with
29% on an Adjusted Pro Forma basis in the same period of 2014.
In the first quarter of 2015, compensation and benefits expenses on an
Adjusted Pro Forma basis were $53.9 million, or 54% of revenues, which
compares with $60.1 million of compensation and benefits expenses, or
52% of revenues in 2014. Adjusted Pro Forma compensation and benefits
expenses for the quarter exclude $1.5 million of compensation charges
associated with the amortization of equity granted in connection with
our IPO. Compensation expense in 2015 reflects an additional tranche of
equity amortization expense arising from 2014 equity incentive grants
made in early 2015. As annual equity compensation granted in the future
accumulates and amortizes, we expect that our compensation expense ratio
will increase toward our targeted long-term compensation ratio of
approximately 57% to 58% of revenues.
Adjusted Pro Forma non-compensation expenses were $22.6 million for the
first quarter of 2015 as compared with $20.1 million for the same period
of the prior year. Our Adjusted Pro Forma non-compensation expense ratio
increased to 23% from 18% in the same period of the prior year due to
the increase in operating expenses and decline in revenues.
Provision for Income Taxes
Prior to our IPO, the Firm was not subject to federal income taxes, but
was primarily subject to New York City unincorporated business tax and
certain foreign income taxes. As a result of completing our IPO in April
2014, we have a new corporate structure and currently 36% of the
operating partnership (Moelis & Company Group LP) is owned by the
corporation (Moelis & Company) and is subject to U.S. federal income tax
as a corporation. Income tax on the remaining 64% continues to be
subject to New York City unincorporated business tax and certain foreign
income taxes and is accounted for at the partner level through our
non-controlling interest adjustment. For Adjusted Pro Forma purposes, we
have assumed all outstanding Class A partnership units of Moelis &
Company Group LP have been exchanged into Class A common stock of Moelis
& Company such that 100% of the Firm’s first quarter 2015 income was
taxed at our current corporate effective tax rate of 40.0%, versus a
corporate effective tax rate of 40.5% for the first quarter of 2014. On
a GAAP and Adjusted Pro Forma basis, our first quarter 2015 provision
for income taxes was $4.3 million and $10.3 million, respectively, as
compared with $0.6 million and $13.4 million, respectively in the prior
year period.
Capital Management and Balance Sheet
Moelis & Company continues to maintain a strong financial position and
as of March 31, 2015, we held cash and short term investments of $107.9
million and had no debt on our balance sheet.
On April 23, 2015, the Board of Directors of Moelis & Company declared a
quarterly dividend of $0.20 per share. The dividend will be paid on June
9, 2015 to common stockholders of record on May 26, 2015.
During the first quarter, the Firm repurchased 129,863 shares of its
Class A common stock and 6,043 restricted stock units from employees at
the time of vesting to settle tax liabilities at an average price of
$31.84 per share/unit. The goal of the limited buyback was to neutralize
the increase in basic share count associated with the vesting of
restricted stock units. Due to the Firm’s limited public float, we
anticipate modest share repurchases for the remainder of 2015.
Earnings Call
We will host a conference call beginning at 4:30pm ET on Wednesday,
April 29, 2015, accessible via telephone and the internet. Ken Moelis,
Chairman and Chief Executive Officer, and Joe Simon, Chief Financial
Officer, will review our first quarter 2015 financial results. Following
the review, there will be a question and answer session.
Investors and analysts may participate in the live conference call by
dialing 1-877-510-3938 (domestic) or 1-412-902-4137 (international) and
referencing the Moelis & Company First Quarter 2015 Earnings Call.
Please dial in 15 minutes before the conference call begins. The
conference call will also be accessible as a listen-only audio webcast
through the Investor Relations section of the Moelis & Company website
at www.moelis.com.
For those unable to listen to the live broadcast, a replay of the call
will be available for one month via telephone starting approximately one
hour after the live call ends. The replay can be accessed at
1-877-344-7529 (domestic) or 1-412-317-0088 (international); the
conference number is 10063245.
About Moelis & Company
Moelis & Company is a leading global independent investment bank that
provides innovative strategic advice and solutions to a diverse client
base, including corporations, governments and financial sponsors. The
Firm assists its clients in achieving their strategic goals by offering
comprehensive integrated financial advisory services across all major
industry sectors. Moelis & Company’s experienced professionals advise
clients on their most critical decisions, including mergers and
acquisitions, recapitalizations and restructurings and other corporate
finance matters. The Firm serves its clients with over 550 employees
based in 17 offices in North and South America, Europe, the Middle East,
Asia and Australia. For further information about Moelis & Company,
please visit www.moelis.com.
Forward-Looking Statements
This press release contains forward-looking statements, which reflect
the Firm’s current views with respect to, among other things, its
operations and financial performance. You can identify these
forward-looking statements by the use of words such as “outlook,”
“believes,” “expects,” “potential,” “continues,” “may,” “will,”
“should,” “seeks,” “target,” “approximately,” “predicts,” “intends,”
“plans,” “estimates,” “anticipates” or the negative version of these
words or other comparable words. Such forward-looking statements are
subject to various risks and uncertainties. Accordingly, there are or
will be important factors that could cause actual outcomes or results to
differ materially from those indicated in these statements. For a
further discussion of such factors, you should read the Firm’s filings
with the Securities and Exchange Commission. The Firm undertakes no
obligation to publicly update or review any forward-looking statement,
whether as a result of new information, future developments or otherwise.
Non-GAAP Financial Measures
Adjusted Pro Forma results are a non-GAAP measure which better reflect
management’s view of operating results. We believe that the disclosed
Adjusted Pro Forma measures and any adjustments thereto, when presented
in conjunction with comparable GAAP measures, are useful to investors to
understand the Firm’s operating results by removing the significant
accounting impact of one-time charges associated with the Firm’s IPO and
assuming all Class A partnership units have been exchanged into Class A
common stock. These measures should not be considered a substitute for,
or superior to, measures of financial performance prepared in accordance
with GAAP. A reconciliation of GAAP results to Adjusted Pro Forma
results is presented in the Appendix.
Appendix
GAAP Condensed Consolidated and Combined Statement of Operations
Unaudited
GAAP Reconciliation to Adjusted Pro Forma Financial Information Unaudited
|
Moelis & Company
GAAP Consolidated and Combined Statement of Operations
Unaudited
(dollars in thousands, except for share and per share data)
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
Revenues
|
|
$99,412
|
|
$114,517
|
|
|
|
|
|
Expenses
|
|
|
|
|
Compensation and benefits
|
|
55,393
|
|
70,441
|
Occupancy
|
|
3,677
|
|
3,304
|
Professional fees
|
|
3,554
|
|
3,335
|
Communication, technology and information services
|
|
4,101
|
|
3,774
|
Travel and related expenses
|
|
5,613
|
|
5,085
|
Depreciation and amortization
|
|
620
|
|
575
|
Other expenses
|
|
5,073
|
|
4,068
|
Total expenses
|
|
78,031
|
|
90,582
|
|
|
|
|
|
Operating income (loss)
|
|
21,381
|
|
23,935
|
Other income and expenses
|
|
15
|
|
19
|
Income (loss) from equity method investments
|
|
2,865
|
|
(1,220)
|
Income (loss) before income taxes
|
|
24,261
|
|
22,734
|
Provision for income taxes
|
|
4,300
|
|
642
|
Net income (loss)
|
|
19,961
|
|
$22,092
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests
|
|
14,625
|
|
|
Net income (loss) attributable to Moelis & Company
|
|
$5,336
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding
|
|
|
|
|
Basic
|
|
19,730,182
|
|
|
Diluted
|
|
20,948,966
|
|
|
Net income (loss) attributable to holders of shares of Class A
common stock per share
|
|
|
|
|
Basic
|
|
$0.27
|
|
|
Diluted
|
|
$0.25
|
|
|
|
|
|
|
|
|
Moelis & Company
Reconciliation of GAAP to Adjusted Pro Forma Financial
Information
Unaudited
(dollars in thousands, except share and per share data)
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
GAAP
|
|
IPO-Related Expense Adjustments
|
|
Adjusted
|
|
As if Partnership Units
Converted to Class A (b)
|
|
Adjusted Pro Forma
|
Revenues
|
$ 99,412
|
|
$ -
|
|
$ 99,412
|
|
$ -
|
|
$ 99,412
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
55,393
|
|
(1,460)
|
(a)
|
53,933
|
|
-
|
|
53,933
|
Non-compensation expenses
|
22,638
|
|
-
|
|
22,638
|
|
-
|
|
22,638
|
Total operating expenses
|
78,031
|
|
(1,460)
|
|
76,571
|
|
-
|
|
76,571
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
21,381
|
|
1,460
|
|
22,841
|
|
-
|
|
22,841
|
Other income and expenses
|
15
|
|
-
|
|
15
|
|
-
|
|
15
|
Income (loss) from equity method investments
|
2,865
|
|
-
|
|
2,865
|
|
-
|
|
2,865
|
Income (loss) before income taxes
|
24,261
|
|
1,460
|
|
25,721
|
|
-
|
|
25,721
|
Provision for income taxes
|
4,300
|
|
259
|
|
4,559
|
|
5,729
|
|
10,288
|
Net income (loss)
|
19,961
|
|
1,201
|
|
21,162
|
|
(5,729)
|
|
15,433
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests
|
14,625
|
|
882
|
|
15,507
|
|
(15,507)
|
|
-
|
Net income (loss) attributable to Moelis & Company
|
$5,336
|
|
$319
|
|
$5,655
|
|
$9,778
|
|
$15,433
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
19,730,182
|
|
|
|
19,730,182
|
|
34,407,005
|
|
54,137,187
|
Diluted
|
20,948,966
|
|
|
|
20,948,966
|
|
34,407,005
|
|
55,355,971
|
Net income (loss) attributable to holders of shares of Class A
common stock per share
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.27
|
|
|
|
$0.29
|
|
|
|
$0.29
|
Diluted
|
$0.25
|
|
|
|
$0.27
|
|
|
|
$0.28
|
|
|
|
(a)
|
|
Expense associated with the amortization of restricted stock units
and stock options granted in connection with the IPO. The adjustment
excludes RSUs granted in connection with 2013 incentive compensation
at the time of the IPO. In accordance with GAAP, amortization
expense of RSUs and stock options granted in connection with the IPO
will be recognized over the five year vesting period; we will
continue to adjust for this expense due to the one-time nature of
the grant.
|
(b)
|
|
Assumes all outstanding Class A partnership units have been
exchanged into Class A common stock. Accordingly, an adjustment has
been made such that 100% of the Firm’s income is taxed at the
current corporate effective tax rate of 40.0% from January 1, 2015.
|
|
|
|
|
|
Moelis & Company
Reconciliation of GAAP to Adjusted Pro Forma Financial
Information
Unaudited
(dollars in thousands, except share and per share data)
|
|
|
|
Three Months Ended March 31, 2014
|
|
GAAP
|
|
IPO & Reorganization Adjustments
|
|
Adjusted
|
|
As if Partnership Units
Converted to Class A (d)
|
|
Adjusted Pro Forma
|
Revenues
|
$114,517
|
|
$ -
|
|
$ 114,517
|
|
$ -
|
|
$ 114,517
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
70,441
|
|
(10,349)
|
(a)
|
60,092
|
|
-
|
|
60,092
|
Non-compensation expenses
|
20,141
|
|
-
|
|
20,141
|
|
-
|
|
20,141
|
Total operating expenses
|
90,582
|
|
(10,349)
|
|
80,233
|
|
-
|
|
80,233
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
23,935
|
|
10,349
|
|
34,284
|
|
-
|
|
34,284
|
Other income and expenses
|
19
|
|
-
|
|
19
|
|
-
|
|
19
|
Income (loss) from equity method investments
|
(1,220)
|
|
-
|
|
(1,220)
|
|
-
|
|
(1,220)
|
Income (loss) before income taxes
|
22,734
|
|
10,349
|
|
33,083
|
|
-
|
|
33,083
|
Provision for income taxes
|
642
|
|
3,540
|
(b)
|
4,182
|
|
9,217
|
|
13,399
|
Net income (loss)
|
22,092
|
|
6,809
|
|
28,901
|
|
(9,217)
|
|
19,684
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests
|
-
|
|
23,320
|
(c)
|
23,320
|
|
(23,320)
|
|
-
|
Net income (loss) attributable to Moelis & Company
|
$22,092
|
|
$(16,511)
|
|
$5,581
|
|
$14,103
|
|
$19,684
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
N/A
|
|
|
|
15,263,653
|
|
39,022,902
|
|
54,286,555
|
Diluted
|
N/A
|
|
|
|
15,263,653
|
|
39,022,902
|
|
54,286,555
|
Net income (loss) attributable to holders of shares of Class A
common stock per share
|
|
|
|
|
|
|
|
|
|
Basic
|
N/A
|
|
|
|
$0.37
|
|
|
|
$0.36
|
Diluted
|
N/A
|
|
|
|
$0.37
|
|
|
|
$0.36
|
|
|
|
(a)
|
|
Amortization of equity held by Managing Directors for the three
months ended March 31, 2014 which was accelerated upon completion of
the IPO.
|
(b)
|
|
Reflects tax effect of IPO-related expense adjustments and change in
corporate ownership as a result of the IPO and reorganization.
|
(c)
|
|
Reflects an adjustment to record the allocation of earnings, net of
tax, to noncontrolling interests (72%) and to Moelis & Company (28%)
as if the Firm had been operating in its new corporate structure
since January 1, 2014.
|
(d)
|
|
Assumes all outstanding Class A partnership units have been
exchanged into Class A common stock. Accordingly, an adjustment has
been made to reflect 100% of the Firm’s income being taxed at the
2014 corporate effective tax rate of 40.5% from January 1, 2014.
|
Copyright Business Wire 2015