Moelis & Co (MC)·Q1 2024 Earnings Summary

Executive Summary

• Q1 revenue increased 16–17% YoY to $217.5M, with diluted EPS of $0.22; EPS included a $0.14/share tax benefit from share-based awards settlement, and non-M&A businesses drove growth .
• Expense discipline improved sequentially: GAAP comp ratio fell to 75.6% and non-comp remained 21.7%, bringing total opex to 97.3% of revenue vs. >100% in recent quarters .
• Management signaled an improving M&A setup with a strong pipeline and active sponsor/strategic dialogues; restructuring and capital solutions stayed robust as higher-for-longer rates pressure weaker credits .
• Guidance signals: 2Q comp ratio similar to 1Q (~75%), non-comp run-rate ~ $46M per quarter (ex transaction costs), full-year underlying corporate tax rate ~34%, dividend maintained at $0.60/share; no funded debt .

What Went Well and What Went Wrong

• What Went Well

  • Revenue inflected YoY: Q1 revenue rose to $217.5M, up 16–17% YoY, with non-M&A (restructuring, capital solutions, PFA) the key driver .
  • Operating leverage improving: comp ratio (GAAP) declined to 75.6% and total opex fell below revenue (97.3% of rev), improving vs. recent quarters .
  • Positive pipeline tone: “M&A pipeline continues to build” and financing markets are open; management expects activity to accelerate as stakeholders accept the current rate regime .

• What Went Wrong

  • EPS quality: diluted EPS of $0.22 benefited by ~$0.14/share from tax effects tied to share-based awards, inflating bottom-line optics .
  • M&A still lagging: management noted M&A was a weaker part of the business in Q1 as conversion remained challenging despite an improving backdrop .
  • Expense base still elevated: non-comp at 21.7% of revenues and comp in the mid-70s keep operating margins thin; prior quarters were above 100% opex/rev .

Financial Results

Revenue and EPS trend (GAAP)

Expense ratios (GAAP)

Other operating details (GAAP/Adjusted as labeled)

YoY reference points (for Q1 seasonality)

Non-GAAP adjustments (Q1 2024): reclassified $1.1M to comp for non-compete forfeiture credits and reclassified $0.2M TRA-related amounts to taxes; adjusted tax presentation assumes 100% of income taxed at corporate rate, with net tax benefit ~$8.0M including share-based award settlement .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We achieved revenues of $217 million in the first quarter… primarily attributable to growth in restructuring. The M&A pipeline continues to build, but conversion to revenue remains challenging.” — CFO
• “We are getting closer to an M&A recovery… financing markets are open… restructuring team is seeing a consistent flow of mandates.” — CEO
• “If PE firms… had certainty there will not be a rate cut for 2 years, they will begin to transact fairly aggressively.” — CEO
• “Our non-M&A… was about 50%.” — CEO
• “Very bullish” on capital markets solutions; bespoke, negotiated capital is available and looking for opportunities, improving match rates — CEO .

Q&A Highlights

• Sponsor backdrop and timing: PE timing around rates has delayed exits; with fewer expected cuts and greater rate stability, activity should accelerate even without cuts .
• Restructuring & non-M&A mix: Liability management and rescue financing remain active; restructuring should persist for lower-performing names; non-M&A ~50% of Q1 revenue .
• Capital markets outlook: Bespoke private capital solutions (governance, exits) are an expanding opportunity as capital availability improves; differentiated from “plain-vanilla” IPO/distribution .
• Hiring/productivity: Recent hires meeting expectations; 2023 was a tough conversion year, but backlog/client engagement are strong; guarantees to new hires affect share-based comp mix .
• Cost framework: 2Q comp ratio similar to ~75%; non-comp run-rate ~$46M per quarter ex transaction costs; underlying corporate tax rate ~34% for 2024 .

Estimates Context

• S&P Global consensus for Q1 2024 EPS and revenue was unavailable at time of retrieval due to data access limits; therefore, a beat/miss assessment versus consensus cannot be provided (Values unavailable from S&P Global).
• Implications: Absent consensus, post-quarter estimate revisions may focus on higher non-M&A contribution, capital markets momentum, and expense cadence (comp ratio near-term ~75%; non-comp ~$46M/quarter) .

Key Takeaways for Investors

• Non-M&A engines (restructuring, capital solutions, PFA) are offsetting slower M&A conversion and comprised ~50% of Q1 revenue, providing near-term resilience .
• The M&A recovery narrative is intact: pipeline is strong, financing is open, and rate stability (not cuts) is the key unlock for sponsor activity per management .
• Expense leverage is improving as comp ratio declined to mid-70s and total opex fell below revenue; sustained revenue inflection could drive margin expansion from depressed levels .
• Q2 comp ratio guidance similar to Q1, non-comp run-rate ~$46M/quarter, and full-year tax ~34% anchor near-term modeling; dividend maintained at $0.60/share with no funded debt .
• Watch regulatory constraints on larger public deals (FTC scrutiny) which may cap mega-deal flow; expect middle-market/strategic and sponsor activity to lead as rate stability sets in .
• Hiring cycle appears largely complete; platform capacity and sector breadth (including Energy and Clean Tech) should support operating leverage as activity normalizes .
• EPS quality note: Q1 EPS benefited by ~$0.14/share tax benefit; investors should normalize for this when assessing run-rate profitability .

Notes and Cross-References

• Q1 2024 results and adjustments: revenues/EPS, expense ratios, tax benefit, dividend, balance sheet .
• Prior two quarters (trend): Q4 2023 and Q3 2023 press releases for revenue/EPS and expense ratios .
• Strategic and pipeline commentary: management remarks (pipeline, rates, restructuring, capital markets, regulatory) .