Ryan Kenny

Ryan Kenny inquired about the percentage of Moelis's Managing Directors (MDs) who are currently ramped, particularly those hired since 2021, and whether the ramp-up time for MDs in Private Capital Advisory (PCA) is faster than in traditional M&A.

Answer

CEO Navid Mahmoodzadegan stated that about a third of MDs have been on the platform for less than three years, with their most productive years ahead. He confirmed that PCA MDs ramp faster by leveraging existing sponsor and industry relationships, effectively plugging a new product set into established client connections.

Ryan Kenny followed up on the compensation ratio, asking if there is a specific formula that investors should use for modeling the rest of the year, referencing a formula provided in the prior year.

Answer

CEO Kenneth Moelis confirmed there is no formula for the current year. He explained that last year's formula was specific to that environment and that for this year, the compensation ratio will be a derivative of top-line revenue performance, driven by the firm's recent investments.

Ryan Kenny sought clarification on the first quarter's 69% compensation ratio, asking whether the accrual was based on the full-year outlook as of March 31 or if it reflected the more recent market turmoil.

Answer

CFO Christopher Callesano and CEO Kenneth Moelis confirmed that the 69% comp ratio is their current best estimate for the full year. This figure incorporates the recent market volatility post-April 2nd and includes planned investments in strategic hiring, such as for the private funds advisory business.

Ryan Kenny asked if the recruiting environment is becoming more competitive as the market recovers and how that might affect hiring pace. He also questioned if the strong Q4 revenue represents a new run-rate or if it contained any idiosyncratic items.

Answer

CEO Ken Moelis stated that while the hiring environment is competitive, regulatory pressures on large banks continue to make top talent available to independent firms. On Q4 revenue, Moelis and CFO Joe Simon confirmed there were no unusual large fees or significant pull-forwards, but cautioned against annualizing a single quarter's results due to typical business seasonality.

Ryan Kenny asked for an update on the factors driving longer transaction completion times and whether this lag is expected to normalize. He also asked a technical question about the nature of the $7 million gain on Moelis Australia shares.

Answer

CEO Ken Moelis attributed the deal lag to a combination of factors, including regulatory reviews but more significantly, internal dynamics at private equity firms related to capital allocation and fundraising uncertainty. On the Moelis Australia shares, he explained the sale was prompted by a reverse inquiry from a buyer. He clarified it was an opportunistic move for liquidity and that the strategic alliance with MA Financial remains strong and important.

Ryan Kenney asked about the increasing competition in the Private Capital Advisory (PCA) secondary market, where Evercore is a leader, and how the firm plans to protect its market share against new entrants.

Answer

CEO John Weinberg acknowledged the heated and growing competition in the PCA business. He expressed confidence in Evercore's ability to compete effectively, citing its well-established base, satisfied client relationships, strong data capture, extensive experience, and proven track record of success as key advantages.

Ryan Kenny inquired about the increasing competition in the private capital advisory (PCA) secondaries market, where Evercore is a market leader, and how the firm plans to protect its market share.

Answer

CEO John Weinberg acknowledged the heated and growing competition in PCA but expressed confidence in Evercore's ability to compete effectively. He cited the firm's well-established base, strong client relationships, extensive data, experience, and track record of success as key advantages.

Ryan Kenny from Morgan Stanley asked if the Roby Warshaw acquisition signals a strategic shift towards more M&A for growth, questioning how Evercore now views the mix between acquisitions and its traditional organic hiring model.

Answer

Chairman and CEO John Weinberg affirmed that Evercore's primary growth strategy remains hiring high-quality talent on an individual basis. He characterized the Roby Warshaw deal as a unique opportunity driven by the firm's exceptional quality, cultural fit, and business synergies, rather than a fundamental change in strategy. He reiterated the commitment to aggressively growing through recruiting.

Ryan Kenny from Morgan Stanley asked about Evercore's hiring plans and strategy in a potentially slower M&A environment, including which areas the firm is focused on for talent acquisition.

Answer

CEO John Weinberg affirmed the firm's consistent hiring philosophy, stating they hire for 'A plus talent' as it becomes available, not based on numerical targets. He mentioned a strong pipeline and continued focus on areas like TMT, Healthcare, and European expansion, emphasizing that 'talent drives opportunity'.

Ryan Kenny of Morgan Stanley asked for more detail on the pace of the activity build in M&A and equity capital markets for 2025, questioning if recent market volatility around tariffs or AI had impacted the firm's 'gradual build' outlook.

Answer

CEO John Weinberg reiterated the expectation for a gradual build throughout the year in both M&A and ECM. He stated that, at this point, issues like tariffs are not seen as impacting the high level of client dialogue and deal preparation, and the firm's positive outlook remains unchanged.

Ryan Kenny from Morgan Stanley inquired about the size of deals in Evercore's pipeline, specifically asking about corporate appetite for large-cap M&A and whether deal values are expected to be higher in the current cycle.

Answer

CEO John Weinberg confirmed the pipeline is robust with deals of all sizes and that he expects sizable transactions, although the uncertain regulatory environment could be a factor. He does not see a bias for small or large deals to recover first. CFO Timothy LaLonde added that year-to-date, the number of M&A transactions valued over $1 billion is up 26%.

Ryan Kenny asked Chris Hogbin about Lazard's approach to inorganic opportunities for Asset Management growth and the framework for their evaluation. He also sought Peter Orszag's view on the current restructuring cycle, specifically whether it has peaked or if further growth is anticipated.

Answer

CEO of Asset Management Chris Hogbin stated Lazard would be highly selective with inorganic opportunities, prioritizing additive value, attractive returns, robust processes, cultural fit, and favorable economics. CEO and Chairman Peter Orszag explained that the restructuring cycle is in a different environment due to increasing performance disparity among companies, leading to continued activity and a coexistence of M&A and restructuring.

Ryan Kenny asked about inorganic opportunities in Asset Management and the framework for evaluating them. He also inquired about the current state of the restructuring cycle, specifically whether it has peaked or if further growth is anticipated.

Answer

CEO of Asset Management Chris Hogbin stated that Lazard will always consider inorganic opportunities but will be 'super selective,' evaluating factors like additive value, attractive returns, robust processes, cultural fit, and economic viability. CEO and Chairman Peter Orszag explained that the restructuring cycle is in a different environment than past cycles due to increased disparity in corporate performance, allowing M&A and restructuring to coexist. He noted continued activity in Lazard's restructuring business.

Ryan Kenny inquired about the trajectory of non-compensation expenses, specifically whether there's a significant upfront investment needed for Lazard's AI ambitions.

Answer

Peter Orszag, Lazard's CEO and Chairman, stated that upfront AI investments are modest relative to other expenditures and not a material driver of non-comp. Mary Ann Betsch, Lazard's CFO, reiterated guidance for a high single-digit percentage increase in non-comp dollars year over year, driven by technology investments, business development, FX headwinds, and higher asset servicing fees due to AUM growth.

Ryan Kenny inquired about the trajectory of Lazard's non-compensation expenses, specifically whether there's a significant upfront investment needed for the firm's AI ambitions.

Answer

Peter Orszag, Lazard's CEO and Chairman, stated that upfront AI investments are modest relative to other expenditures and offer high returns, thus not materially impacting the non-comp component. Mary Ann Betsch, Lazard's CFO, reiterated guidance for a high single-digit percentage increase in non-comp dollars year over year, driven by technology investments, business development, FX headwinds, and higher asset servicing fees due to AUM growth.

Ryan Kenny of Morgan Stanley questioned the timing for achieving the firm's 60% compensation ratio target, given the improving advisory outlook. He also asked if the current non-MD headcount is appropriately sized to handle an anticipated increase in deal volume.

Answer

Peter Orszag, CEO & Chairman, stated that while the 60% comp ratio remains the goal, the timeline is dependent on market conditions and the pace of hiring. He emphasized that the firm is being conservative by holding the ratio flat for the quarter. Regarding staffing, he confirmed that Lazard is in a 'good place' with its non-MD ranks and has the capacity to meet a more constructive business environment.

Ryan Kenny from Morgan Stanley questioned if there is a floor for compensation dollars if revenue weakens and asked about the timing for the growing restructuring backlog to impact the P&L.

Answer

CFO Mary Ann Betsch explained that fixed compensation components like salaries and amortization, which are expected to be up mid-single-digits, effectively form a floor for comp dollars. CEO Peter Orszag added that liability management and other non-M&A mandates can convert to revenue faster than traditional M&A deals.

Ryan Kenny asked about Managing Director productivity, questioning if the 2028 target of $10 million per MD could be achieved early. He also inquired about the sensitivity of the M&A pipeline to different interest rate scenarios.

Answer

CEO Peter Orszag confirmed they believe the $10 million per MD target can be surpassed and that they are ahead of schedule. He attributed this to an improving operating environment, better mandate selection, and a culture of collegiality. Regarding interest rates, Orszag stated they are a "secondary factor" for most M&A discussions, with offsetting effects in businesses like restructuring, and that the overall impact on the advisory business is marginal at this point.

Ryan Kenny asked about MD productivity, noting the firm surpassed its 2025 target a year early and questioning if the 2028 target of $10 million per MD could also be achieved sooner. He also asked about the M&A pipeline's sensitivity to a scenario with fewer interest rate cuts.

Answer

CEO Peter Orszag affirmed that Lazard aims to surpass the $10 million productivity target and remain ahead of schedule, citing improved mandate selection, a cultural shift towards collaboration, and a more productive mix of bankers as key drivers. On interest rates, he characterized them as a 'secondary factor' for M&A, noting that other businesses like restructuring provide an offset and that the long-end of the curve, which is more critical for deal analytics, has not moved in tandem with short-term rate expectations.

Ryan Kenny of Morgan Stanley asked about the key drivers behind the growing investor interest in emerging market equities and whether management views this trend as sustainable.

Answer

CEO Peter Orszag attributed the trend to the prospect of future rate cuts and Lazard's strong performance in the asset class. Evan Russo, CEO of Asset Management, added that clients have been significantly under-allocated to emerging markets and are now in the early stages of rebalancing portfolios to capture potential upside. He described it as a developing trend that will likely unfold over the next one to two years as the rate environment and geopolitical landscape stabilize.

Ryan Kenny asked for more color on non-compensation expenses, specifically regarding elevated IT, communication spend, and professional fees, and expectations for Q4 fiscal 2026 and fiscal 2027. He also inquired about the strategy behind the new data bank product, whether it's charged for, and the evolution of the firm's data strategy.

Answer

Managing Director Lindsey Alley noted no specific puts and takes for Q3 non-comp expenses, suggesting year-to-date growth as a proxy for Q4, with some elevation due to rent in Europe and acquisitions. She projected high single-digit growth for fiscal 2027 non-comp. CEO Scott Adelson described the data bank as an important indicator of future potential, leveraging valuable proprietary data, currently available to some existing clients, with monetization being a top priority for future development.

Ryan Kenny asked for additional color on Houlihan Lokey's non-compensation expenses, specifically addressing elevated IT and communication spend and professional fees, and any expected puts and takes for the current quarter and fiscal year 2027. He also inquired about the strategy behind the recently announced data bank product, its monetization model, and the future evolution of the firm's data strategy.

Answer

Lindsey Alley, Managing Director, indicated no specific puts and takes for non-comp expenses in the quarter, suggesting year-to-date growth as a proxy for Q4, with fiscal 2027 growth expected in the high single digits. Scott Adelson, CEO, described the data bank as an important indicator of future potential, highlighting the value of proprietary data and the firm's intent to monetize it, though it's still in early stages.

Ryan Kenny asked about client sentiment in the middle market in the U.S. and Europe, comparing 'animal spirits' to large corporate deals, and identifying top risks. He also inquired about sponsor sensitivity to interest rates and the potential impact of a Fed pause on the pipeline.

Answer

Scott Adelson, CEO, explained that client sentiment is hard to generalize due to global and industry diversification, noting a greater degree of uncertainty from geopolitical issues, but clients are willing to proceed despite the 'noise.' Lindsey Alley, CFO, added that larger cap M&A might be a step ahead of mid-cap due to pent-up demand. On interest rates, Lindsey Alley stated that while lower rates are better, capital availability is the biggest driver, and clients can adjust to rates within reason, with large cap deals being more sensitive than middle market.

Ryan Kenny from Morgan Stanley questioned the company's 'cautiously optimistic' stance, asking why the outlook isn't more bullish given strong markets and deal activity. He sought to understand what client feedback might be tempering their optimism.

Answer

CEO Scott Adelson explained that the 'cautiously optimistic' tone reflects the company's measured nature and acknowledges the ongoing uncertainty and volatility in the macro environment. He stated that while they feel very good about the current trajectory, they remain mindful of potential volatility.

Ryan Kenny sought specifics on the increase in restructuring conversations or mandates since early April, asking if it was a modest increase or a significant wave. He also asked if the positive outlook on the non-U.S. business was driven solely by tariff-related dynamics or if other factors, like regulatory changes, were at play.

Answer

CFO J. Alley confirmed that conversations with concerned companies have started but stated it is too early to determine if they will materially impact the P&L in the coming quarters. CEO Scott Adelson added that restructuring work has a longer lead time. Regarding the non-U.S. business, Adelson attributed its strength to continued market share gains and the firm's mid-market focus, which insulates it more from U.S.-centric disruptions compared to large-cap focused competitors.

Ryan Kenny from Morgan Stanley asked for more detail on client conversations in Corporate Finance, specifically whether the pickup in financial sponsor activity was more pronounced than the broader M&A market recovery.

Answer

CEO Scott Adelson confirmed that financial sponsor activity, dialogue, and sentiment have indeed picked up materially. He added that the sponsor-related pickup feels even stronger than the general market improvement, and the firm is optimistic about the trajectory of that business.

Ryan Kenny asked about SEI's pace of share buybacks, specifically if the 1.6 million shares repurchased in Q3 was a sustainable pace or if a slowdown was expected due to the Stratos acquisition. He also inquired if SEI was observing any impact on its private credit servicing pipeline from recent modest credit fears and bankruptcies in the market.

Answer

Sean Denham (CFO and COO) stated that SEI expects to return 90-100% of forward-looking twelve-month free cash flow to shareholders, primarily through buybacks, with current cash build anticipating the Stratos deal. Phil McCabe (EVP and Head of Investment Managers Business) confirmed no impact on the private credit servicing pipeline, noting SEI's diversification, high-quality managers, and payment structure based on invested capital rather than NAV, mitigating credit risk.

Ryan Kenny from Morgan Stanley asked about the pace of share buybacks, specifically if the Q3 rate of 1.6 million shares is sustainable or if a slowdown is expected as the Stratos acquisition progresses. Ryan also inquired whether SEI's private credit servicing pipeline has been impacted by recent modest credit fears or bankruptcies in the market, given SEI's role as a significant servicer. In a follow-up, Ryan asked for a quantification of the margin suppression resulting from accelerated investments.

Answer

Ryan Hicke, CEO, stated that SEI expects to return 90%-100% of free cash flow through dividends or buybacks, primarily buybacks. He clarified that the current cash build is in anticipation of funding the Stratos deal, and future buybacks will align with free cash flow generation. Phil McCabe, EVP and Head of Investment Managers Business, SEI, stated that SEI's private credit managers are not concerned and are aggressively launching products. He noted that SEI primarily gets paid based on invested capital, not mark-to-market, and sees no real risk for the business. Sean Denham, CFO and COO, SEI, stated that he could not quantify the margin suppression from accelerated investments, as it's not how they typically think about the business.

Ryan Kenny asked about the differentiating factors of Stratos's strategy compared to other RIA aggregators and whether SEI anticipates revenue synergies from the partnership, particularly from its asset management and servicing capabilities.

Answer

CEO Ryan Hicke and EVP Michael Lane highlighted Stratos's experienced executive team, disciplined centralized investment platform, and strong cultural fit as key differentiators. They also noted its hybrid advisor model (1099 and W-2) is a strategic advantage. Regarding synergies, they clarified the focus is on long-term, non-disruptive growth to protect Stratos's 10% organic growth rate, with opportunities to scale Stratos's existing investment management services rather than immediate cost-cutting.

Ryan Kenny of Morgan Stanley questioned if the Q4 incentive compensation should be considered a one-off expense and asked for details on the size and competitive differentiation of the alternative servicing business within the Investment Managers segment.

Answer

CFO Sean Denham confirmed the increased incentive compensation is being treated as a one-off for 2024, though CEO Ryan Hicke added that the company would not hesitate to reward employees for future record performance. Executive Phil McCabe stated that the alternatives business, including its global component, constitutes about 70% of the Investment Managers segment's revenue and is growing due to industry tailwinds and investments in its global footprint, particularly in Luxembourg.

Ryan Kenny asked for an explanation of how Net Interest Income in the Services division could be a tailwind as interest rates decline.

Answer

CFO Mark Mason explained that the dynamic is driven by several factors, including disciplined pricing with institutional clients, beta catch-up in non-U.S. currencies, and a significant benefit from reinvesting securities at higher yields, which flows through to the business's NII.