Moelis & Company - Earnings Call - Q1 2025

Transcript

Operator (participant)

Good afternoon and welcome to the Moelis & Company Earnings Conference Call for the first quarter 2025. To begin, I'll turn the call over to Mr. Matt Tsukroff.

Matt Tsukroff (VP for Investor Relations)

Good afternoon and thank you for joining us for Moelis & Company's first quarter 2025 financial results conference call. On the phone today are Ken Moelis, Chairman and CEO, and Chris Callesano, Chief Financial Officer. Before we begin, I would 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 Moelis & 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. Our comments today include references to certain adjusted financial measures. We believe these measures, when presented together with comparable GAAP measures, are useful to investors to compare our results across several periods and to better understand our operating results.

The reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information required by Reg G is provided in the firm's earnings release, which can be found on our investor relations website at investors.moelis.com. I will now turn the call over to Chris to discuss our results.

Chris Callesano (CFO)

Thanks, Matt, and good afternoon, everyone. On today's call, I will go through our financial results, and then Ken will comment further on the business. We achieved revenues of $307 million in the first quarter, representing an increase of 41% over the prior year period. The revenue increase is attributable to growth in M&A and capital markets versus the prior year period. Moving to expenses, our first quarter compensation expense ratio was 69%. As the year progresses, our compensation ratio will depend on the trajectory of revenues and the pace and magnitude of hiring throughout the year. Our first quarter non-comp ratio was 19%. The quarterly year-over-year growth in non-compensation dollars is primarily attributable to increased costs associated with our investment in client conferences, many of which occurred during the first quarter. As indicated previously, we currently anticipate the full-year growth of non-compensation expense to be approximately 15%.

Moving to taxes, our underlying corporate tax rate was 29.5% for the quarter before the discrete tax benefit related to the vesting of equity awards. Adding in this discrete benefit resulted in an overall net tax benefit for the quarter. Regarding capital allocation, the board declared a regular quarterly dividend of $0.65 per share. Lastly, we continue to maintain a strong balance sheet with no funded debt. I will now turn the call over to Ken.

Ken Moelis (Chairman and CEO)

Thanks, Chris, and welcome to your first earnings call as CFO, sorry, not CEO. As we finished the first quarter, we had record new business origination and a record pipeline. Our go-to-market, including the maturation of our investments in tech and energy, are extremely strong, and we finished the quarter with a very bullish point of view for 2025. However, the new wave of volatility introduced into the capital markets post-April 2nd has definitely slowed M&A transaction activity. Although the scale and timeframe is hard to predict, we believe this is a temporary phenomenon, and we are planning our business accordingly. The silver lining is that no matter the outcome, our clients will need strategic advice and will turn to our team to help them better understand their capital needs and how they can adapt or transform their business models.

We continue to invest in the growth of our Private Funds Advisory business. Following the announcement earlier this year of a senior banker to lead the team, we have a robust pipeline of additional senior talent and expect to have more news on that in the coming weeks. Private Capital Solutions and continuation vehicles will continue to be an important liquidity tool for sponsors, and our goal is to be the market leader in the space. We also remain focused on adding talent to fill other areas of strategic importance to the firm. A technology-focused managing director based in Europe recently joined the firm, and one focused on business services in Europe will also join shortly. We're optimistic about the road ahead and are well-positioned. Remember, there are no tariffs on relationships and the world-class advice we deliver to our clients every day.

We have no debt and a strong cash position, and our talent, breadth of experience, and culture of collaboration are stronger than ever before. With that, I'll open it up for questions.

Operator (participant)

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Devin Ryan from Citizens. Your line is open.

Devin Ryan (Head of Financial Technology Research)

Hey, great. Hi, Ken. Hi, Chris. Welcome. First question, Ken, great to hear about, obviously, the backlogs, where they are right now, and appreciate we're in a pretty uncertain moment here. I guess there's still a little bit of TBD on the year. I'm curious, just with the backlogs, at what point do they get canceled versus just pushed out? I guess I'm just trying to think through. There's a lot of competing forces here. Sponsors have a lot of pressure on them to do something with kind of the long duration of their portfolios today. It feels like there's a lot of pressure there. At the same time, volatile asset prices make it challenging. I'd just love to get a sense of how the backlogs kind of move from here and what potentially would cancel them, if at all.

Ken Moelis (Chairman and CEO)

It's a tough question to answer. It's a very specific policy dynamic that's going on right now. The reason I believe it's temporary is because it's in the control. I'm not saying it might not work out to be exactly what the markets want, but it is in the control of the administration. Whereas I look back to prior problems like COVID and even the GFC back in 2008, they seemed to be outside the control of an individual. COVID definitely was. We didn't know what was going to happen, and it was very hard to know when the end would come. We've lost some from the quarter-end backlog that I talked about. We have lost some. Strategics might be quicker to put down their pencils on supply chain-affected transactions. Sponsors will put things on hold. I think the go-to-market on sponsors that need liquidity are probably timing.

You can't hold them forever. The sponsor liquidity backlog has been there for a while, and people are going to have to push to market. I'd say the majority of those, I think, are on delay and pushback just because they have to be. There are some transactions that have gotten shelved, and we no longer have them in backlog. Our backlog is down from $331 as a result of it. It's really hard to say what the effect of the day-to-day volatility is. You have two things: the policy volatility and then the market volatility and pricing, interest rate volatility. That's all taking a toll on it. For now, we've lost some, but I would say the vast majority are in pushback, I think, or in timeframe pushback.

Devin Ryan (Head of Financial Technology Research)

Yeah, got it. Okay. Thanks, Ken. Really helpful. Just to follow up on the restructuring business, just great to get a little bit of a maybe flavor for what you guys are seeing there, kind of whether there's been any tone shift just with some of the uncertainty in the markets, anything around tariffs. I'm not sure if anything has changed there and just the trajectory of kind of new mandates coming in that business as well.

Ken Moelis (Chairman and CEO)

I think, again, the first quarter, it's a tell. Remember, the tariff thing was April 2nd. You sort of have a first quarter in which you were going along in a different world than the next two or three weeks before this call. I'd say the first quarter restructuring was kind of flat. It was what we were expecting, which was there's a good economy, there's strong consumer, interest rates seem to be coming down. We weren't expecting a big year out of restructuring. Now, you're talking about a two to three-week period since then in which, yes, there are lots of conversations starting to develop about things that might happen but haven't happened but could happen. That conversation is picking up. Have there been a substantial increase in mandates due to events around April 2nd? I'd say no.

I'd call it an increase of significant conversation. More so, I think it's in the capital markets side where companies are trying to figure out if they've got to fund inventory purchases, supply chain transactions that have tariffs associated with them. Working capital financing has gone up. They have to actually finance the acquisition of supply chain goods that might have gone up a significant amount due to tariffs, etc. I think there's almost been more conversation around financing options than this idea of going straight to restructuring. That is why we kind of combine the two when we talk about it because they kind of subsume each other. That is where we are. I think where financing is probably the primary thing being talked about, not quite yet to restructuring.

Devin Ryan (Head of Financial Technology Research)

Yeah. Very interesting. I'll leave it there, but thanks, Ken. I appreciate it.

Ken Moelis (Chairman and CEO)

Thanks, Devin.

Operator (participant)

Your next question comes from a line of Kenneth Worthington from J.P. Morgan. Your line is open.

Kenneth Worthington (Asset Managers and Exchanges Equity Analyst)

Hey, great. Good afternoon. Thanks for taking the questions. Ken, I would love to hear your thoughts when thinking about the volatility and the impact looking at things three ways. One is sort of geographic: U.S. versus Europe and Asia. Any sort of differences that the volatility has sort of brought out? I know it's really recent, but thus far, sponsor versus non-sponsor, and then big versus small. What your guess is? What's sort of more resilient? What's more vulnerable? What are your thoughts? To the extent you've heard, what have you heard?

Ken Moelis (Chairman and CEO)

Ken, I think what you're asking me is post-April 2nd, right? Because there's two different environments.

Post-April 2nd.

Kenneth Worthington (Asset Managers and Exchanges Equity Analyst)

Yeah.

Post-April 2nd.

Yeah. Sorry. Yeah.

Ken Moelis (Chairman and CEO)

Yeah.

Look, I actually think, again, I always say the U.S. is the most dynamic market, but I think Europe is an interesting market post-April 2. They've been less effective. They're trading better. They don't have some of the supply chain issues. I think transactions in Europe haven't hiccupped as much. There are obviously less transactions to begin with, but they're not directly in the line of fire right now. There have been some indications that the economies in Europe are going to spend some capital and take some actions that I think could be actually positive for Europe. I'll say that. That's a three-week read. Remember, I'm reading the tea leaves while they're still falling off the tree, I would say. Asia, I haven't seen. Obviously, China, Asia is going to be very different.

I do not know that I have enough data to tell you what happens to Hong Kong, Asia. Japan, Asia, by the way, seems pretty—there is a lot of optimism around Japan as a market. Again, we are early on, and I assume China is going to be—there is going to be, without resolution, there will be a lot of difficulties out of China. I know you said big versus small. What was the second?

Kenneth Worthington (Asset Managers and Exchanges Equity Analyst)

Sponsor versus non-sponsor.

Ken Moelis (Chairman and CEO)

I think if you're—it depends on the sector, right? If you're American-based, if you're not a supply chain-oriented transaction, a lot of that's going forward. There is a lot of financing available. The private credit is out there looking to put capital to work. The bank market, a little more difficult. The private credit is out there. If you have a healthcare business in the United States that's not affected by supply chain, you're probably going to get your transactions done. That's both strategic and sponsor. I would actually think that it's more of what sector you're talking about than strategic versus sponsor. Are you affected? When I say affected, I think there are people now trying to figure out kind of third derivatives of if there's no containers shipped for another month because of the tariffs. You're starting to think of second and third derivatives.

I think the effects might get more widespread than people think. Right now, I do not see a big difference in those so long as you are talking about the effect of the supply chain. I would say that kind of goes to your big versus small, which, it is very hard to have—you do not have a lot of big companies that do not have a supply chain that is complicated. Just by the characterization of being large companies, they have a very good chance of encountering a supply chain issue that would cause a transaction to go on hold. I think it is because it is such a digital outcome on the policy that it is very hard to underwrite. People, companies, and sponsors can underwrite uncertainty, but not when it is digital and in the total outcome of the administration, I think.

Yeah, a lot of those are going to go on hold. It really starts with, is your supply chain affected? Are you affected by the supply chain? I think that's where it breaks.

Kenneth Worthington (Asset Managers and Exchanges Equity Analyst)

Okay. Great. I feel like that was three questions, so I won't be as big of a queue. I appreciate it.

Ken Moelis (Chairman and CEO)

All right. Thanks, Ken.

Operator (participant)

Your next question comes from the line of James Yaro from Goldman Sachs. Your line is open.

James Yaro (VP for Equity Research)

Good afternoon. Thanks for taking the questions. I just wanted to touch again quickly on CEO confidence. Ken, you've been through plenty of cycles, and you have seen various exogenous shocks. Maybe you could just help us think about how long it has taken, on average, perhaps, in historic episodes that you think are most similar to this with this sort of exogenous shock before CEOs come back to the table and engaging in M&A transactions.

Ken Moelis (Chairman and CEO)

I am now trying to think of a good analogy. You are supposed to have a 40-year history and come up with a great analogy. I do not have a great one because the last two or three I remember are COVID, regional banking, even the Fed hiking interest rates of the GFC before that. You could even go back to some of the—let us say I remember when the Iraq War shut down. People were out on road shows, and you kind of blew a whistle and said, "Everybody come back home." This was the—by the way, this was the first Iraq War. You just sent a signal out, "Everybody come home. There is nothing to do until we figure out what is going to happen here." That was a more complicated decision.

I really believe this—my gut on this is it will be short, sharp, because there will be a policy outcome. That policy outcome could be very negative, or it could move on very quickly. I think it is in control, right? We are not waiting to see, is COVID a disease that will rampage throughout the planet and have no solution? We sort of have—people could call it off tomorrow if they wanted to, right? You would go back almost with some shocks to the system. It is a directed policy decision. My belief is that if you tell me somebody snapped their fingers and all of the policy was settled, I believe M&A would return very rapidly, very rapidly. People have growth plans. They have strategic things they want to affect. Even what I just talked about, about our own firm.

I mean, we have a deal slowdown, and yet we are very actively hiring in Private Capital Advisory. We are hiring into our—we are hiring into a world that is going to be very active in M&A. I think that tells you what I think about the world. Don't look what I say, look what I do. I am going to continue to put together a team that is ready to advise as soon as this policy situation is over because I think it will snap back pretty quickly to an active deal market where people will want to execute on their plans that they've been waiting to execute on and got disrupted. I think it'll be pretty quick is the answer.

James Yaro (VP for Equity Research)

Okay. That's super clear. Maybe just another one on restructuring here. I think within restructuring, you've seen a lot of the activity over the recent years be driven by liability management. I think a significant portion of that has been refinancing of sponsor portfolio company debt stacks.

Let's just say we do end up with a harder landing. How would you think about the trajectory for restructuring revenue? Obviously, liability management exercises are shorter in duration, and Chapter 11 and traditional bankruptcy are longer, and the fees are back-end weighted. How would you think about the path for restructuring in a weaker economic scenario? If that is what we end up with.

Ken Moelis (Chairman and CEO)

Yeah. I think a lot of it would be liability management. I believe as opposed to the restructuring environment, let's say you go back 10 years ago and the GFC, and there's so much more equity inside of—most sponsor deals now have more than 50% of the purchase price in equity. It just leaves you a lot of value to go to private capital or alternative sources and structure some pretty interesting securities to extend out the runway and try to figure out, is this a temporary shock to the system? As I said, everybody would prefer high-cost debt to Chapter 11. There's no choice between those two.

I just think that you don't have an over-levered—when I say you don't have an over-levered balance sheet, you might have leverage vis-à-vis the cash flow, but some of these companies were valued at 15, 18 times EBITDA, so they may have cash flow difficulties, but the valuation, the amount of equity put in under the value, I think will make liability management a very interesting part. That will be where all the activity is, I think. Unless you have a tremendously unexpected continuation of tariffs that are so difficult that it actually does disrupt the whole global order for a long period of time. That would be the alternative that we really do have a long-term, very punitive tariff system that really does disrupt American business. I don't expect that.

James Yaro (VP for Equity Research)

Okay. Super clear. Just one ticky-tacky one. Could you give us the split of revenue this quarter, perhaps across M&A, cap markets, and restructuring?

Ken Moelis (Chairman and CEO)

It's about two-thirds M&A and one-third cap markets and restructuring. Again, I'm going to combine those two because they really are a blendable item.

James Yaro (VP for Equity Research)

Okay. Thanks so much.

Operator (participant)

Your next question comes from the line of Brendan O'Brien from Wolfe Research. Your line is open.

Brendan O'Brien (SVP)

Good afternoon. Thanks for taking my questions. I just want to talk about the recruiting backdrop. I know that recruiting this year was expected to be focused on a build-out of your Private Capital Advisory team, which it sounds like you're off to a good start on. Given activity to start the year has been a bit slower, I just wanted to get a sense as to whether you're seeing any improvement in the recruiting environment and whether you might look to lean in more aggressively than you expected at the start of the year.

Ken Moelis (Chairman and CEO)

Again, you're talking about a three-week period. Because the first quarter, I think everybody's pretty bullish. It was going to be a great year for everybody. I haven't seen a dramatic change in the last three weeks. I think it would be too soon almost for me to see it. We're seeing good talent. I think, again, one of the things I always talk about is we are an unlevered company with a lot of excess capital. Most of the big banks are very heavily levered, whether they are deposit institutions with nine-to-one leverage.

I do think if the world stays this volatile, I continue to believe that talent will leave nine-to-one levered institutions that have mismatched deposits versus assets and liabilities and are very shaky in a volatile world. I think people have learned that no matter what you're told, those balance sheets are not as clean as they're portrayed in a shaky, volatile world. As I said, if you were ten-to-one levered right now, I do not know any asset that I own that's not down 10% since April 2nd. You'd have to wonder about how you can be ten-to-one levered and be confident in your balance sheet. I think we'll be the beneficiary of that. It's one of the reasons we keep a very strong balance sheet.

We know it's attractive to that banker that is looking where to place their lifetime, their family, and their lifetime future career. I think more and more people look at it and go, "Yeah, that's where I want to be." That is one of the reasons we do keep our balance sheet so strong. I don't see a big change right now. We're going to go after the Private Capital Advisory situation very hard. We'll fill in, but we were always planning on filling in some of our other places, but you'll see us be strong in private capital. I think we have a good line of sight into some very strategic hires right now that I can't talk about.

Brendan O'Brien (SVP)

That's great. For my follow-up, I just wanted to touch on the comp ratio. I understand there's a lot of unknowns at the moment, and the accrual is sort of a reflection of the bifurcated potentially outcomes of this year. I was hoping you could help us or help frame how to think about the level of revenue growth needed to keep your comp ratio flat year on year or maybe what the break-even point is.

Ken Moelis (Chairman and CEO)

I'm going to try to stay away from the algorithm. Last year, we were at a point where we had invested a lot in the tech group, and we had made so much investment, we had to give you a roadmap. I was very nervous that we were giving you the right roadmap because there are so many movable—there are so many movable things. I do not want to—I am not going to try to get back into that because it will—how fast we hire people, how long this stays, how rapidly—if this is a six-week downturn, and then it rapidly springs back, like I am saying, I am going to continue to build pretty significantly for what I think are a strong next 12 months is really what I want to do anyway.

I think it's just too volatile, and there are too many moving parts for me to give you an algorithm. Our intention is to get the comp ratio down while building a great business. I just don't want to get caught into some algorithm that doesn't match the opportunity or the volatility inherent in the market.

Brendan O'Brien (SVP)

Totally fair. Thanks for taking the questions.

Ken Moelis (Chairman and CEO)

Thanks.

Operator (participant)

Your next question comes from the line of Mike Brown from Wells Fargo Securities. Your line is open.

Mike Brown (Investment Adviser)

All right. Great. Thanks. Good afternoon. Ken, I just wanted to dive into 2Q here. We're just a few weeks into the quarter, certainly a much more volatile environment. Can you maybe just give us a little bit of views into the quarter relative to 1Q? It's not easy from really anyone's perspective. Maybe you can shine a light onto how to think about the revenue potential just based on either what you can see in terms of the deals that are set to close and which ones you maybe have some greater confidence in, the contribution of non-M&A. Just some color relative to 2Q would be helpful as we think about the near term. Thank you.

Ken Moelis (Chairman and CEO)

We're getting pushed out. Some things are getting delayed that we thought would be in Q2, and we don't think—and then there are some that are dying. Like I said, our pipeline is down. Not dramatically, but it's down from March 31st. Interestingly, there are some things that were announced and are in the process of closing. It's not like there's a shutdown on the quarter. The quarter, we're having trouble getting our handle on exactly when things we thought were going to get pushed into market are going to go to market. It's difficult for us to know that as well. I would just say things are being pushed out. I don't look at it as a horror. It's not horrible.

It's not as bad as the volatility of the market, which would imply in terms of just how difficult it is for people to understand what's going on. Because, again, things that were announced during the first quarter will close in the second. There are many things getting pushed out. I'm going to leave it at that, which is I don't think it's disastrous, but it's not as good as I was hoping it was going to be.

Mike Brown (Investment Adviser)

Okay. Yeah, that's fair. I wanted to maybe follow up on the talent question. With this M&A upswing being pushed out, perhaps this tariff-related turmoil is quick, but if it's not and the eventual recovery is kind of slower with more fits and starts and maybe just a bit weaker overall or more spread out, what I'm interested to hear about is how do you think about protecting the margins, investing in the talent, building out the Private Capital business? What do you do in terms of retaining talent? Do you take a closer look at the mix of talent that you currently have and what the opportunities are, and do you kind of reassess or maybe do some right-sizing? Just maybe talk through that a little bit for us. Thank you.

Ken Moelis (Chairman and CEO)

We would look at all the above, which we do look at every year. We do believe that the private capital—by the way, I think we're transitioning the name. So it's Private Funds Advisory. We're thinking of transitioning the names. These names get confusing, but it is the group that does the secondaries. I think that's an important part of the world, by the way. We're not going to slow down. We think that is key. Maybe even as the M&A environment and the IPO market gets more difficult, like you said, if you think they're going to be in a difficult mode, you want to have that asset, that expertise, and go to market. That's very important. We're going to fight to keep all our good talent.

We think in the last couple of years, what we did in technology and energy and then our existing people in—and by the way, in industrials, we hired some great people, our media, our healthcare franchises. We're extremely happy with where the fourth quarter came in, where the first quarter was trending to, up 40—what were we? Up 41%, I think was the number. Those are not bad numbers if a policy event did not happen on April 2. You cannot put it on the sidelines and come back and just say, "Everybody, come back. We sent you out for on vacation." We put together an extraordinary go-to-market team, and we're going to protect it unless we see something that is so awful that we think it extends out over a period of time. I cannot imagine that a policy decision over tariffs is that item.

This is not a world war, maybe a world tariff war, but it's not a—I believe it is a policy issue that's going on and not a fundamental degradation of business, and especially the transaction business.

Mike Brown (Investment Adviser)

Okay. Great. Thanks for taking my questions, Ken.

Operator (participant)

Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from the line of of Ryan Kenny from Morgan Stanley. Your line is open.

Ryan Kenny (Executive Director for Equity Research)

Hey, good afternoon. Thanks for taking my question. Want to follow up on the comp ratio discussion earlier. Understand that you're not giving us a formula this year, which makes a lot of sense given the uncertainty. Can you just clarify, was the 69% in the first quarter based on your revenue assumption for the full year as of March 31, or is that your current expectation? If this environment persists, is it fair to assume that that could go up for the rest of the year?

Ken Moelis (Chairman and CEO)

Yeah. I will let Chris answer. My understanding is the requirement is you take your best efforts guess, and that is what that is on revenue and estimate for the year. Chris.

Chris Callesano (CFO)

Yeah. I mean, 69% for the quarter, it's our best estimate for the second quarter and the full year at this time. As Ken said, it's dependent on the trajectory of revenues and the hiring as we make investments in strategic areas like Private Funds Advisory. Yes, it's our best estimate currently at this time.

Ryan Kenny (Executive Director for Equity Research)

It's your best estimate after the tariff announcement, not as of March 31st?

Ken Moelis (Chairman and CEO)

Yes. It's our best estimate given everything we know, and it includes even a pretty good hiring. We want to hire into Private Funds Advisory. We know that, so we included that in there. Things might change, but that's our best estimate given all the elements that we know and hope to succeed on and the Liberation Day event.

Ryan Kenny (Executive Director for Equity Research)

All right. Great. Thank you.

Operator (participant)

Your next question comes from Ben Rubin from UBS. Your line is open.

Ben Rubin (Director fo Equity Research)

Hi. Thanks for taking my questions. Last week, you announced another senior hire for your tech franchise over in London. I am just curious, what are you seeing from the tech team that you lifted out in 2023? Have they been performing better or worse than your original expectations? Maybe how does their productivity compare to your broader M&A business at large? Thanks.

Ken Moelis (Chairman and CEO)

Thank you for that question. The tech team has been a stunning success. Now, I do not want to tell Jason that it is better than I expected because then he will think I thought he was not a good guy. I thought we hired a great team, and it has been a great team. I wish we did not have the April 2nd event because I think it would have shown how successful an operation that was. By the way, the same with the energy. I think we quietly have hired a significant energy team that has an incredible backlog and is making real gains there as well. The technology team has been just a phenomenal addition. What it has done is, again, in the sponsor world, we want to be important to sponsors.

We want them to think, "Okay, is Moelis showing us their best, and are we giving them enough?" It's kind of a bilateral trade, right? I'll bring the trade agreement into this with sponsors and advisors. Are we showing you too much goods? I should get Trump in here to negotiate for me. Are we showing you too many good ideas, and you're not giving us back enough? That kind of goes on. It's trade. What the tech team does has added like six or seven thousand calls, idea calls where we're in the over and above everything we were doing. If we were important in the halls of sponsors prior to that, not only are they producing significant revenue, backlog, but they're also improving everybody else's impact at the sponsor level. It's been phenomenal. Energy is doing the same thing.

If I have to admit it, it's been even better than we thought when we did it.

Ben Rubin (Director fo Equity Research)

Oh, that's great to hear. I'm not going to ask explicitly about the comp ratio, but is there any chance you could share the dollar impact to comp expense in the first quarter from the accelerated vesting of retirement-eligible bankers? Thanks.

Ken Moelis (Chairman and CEO)

Maybe Chris.

Chris Callesano (CFO)

Yeah. I mean, I think you're going to see that in the Q2. The Q1 always has a higher fixed comp ratio due to the retirement-eligible equity hitting all in Q1. I would say it's about double the expense than a normal quarter. We also accrue an incentive comp, right? It just means that there's a higher proportion of fixed comp versus variable comp in the first quarter, and we balance it out over the year.

Ben Rubin (Director fo Equity Research)

Great. Thanks, Chris.

Chris Callesano (CFO)

Sure.

Operator (participant)

There are no further questions at this time. I will now turn the call back over to Ken for closing remarks.

Ken Moelis (Chairman and CEO)

Thank you. Pleasure to be with you. This is the first time I think we were first to go. I think with every day, you want to be later and later. Maybe there will be a resolution before some other people tell you what's going on in the world in the whole tariff war. I look forward to seeing you, and hopefully, we'll have this all behind us and be talking about some brighter futures. Thanks.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect.