Sign in

You're signed outSign in or to get full access.

M&

Moelis & Co (MC)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue accelerated to $264.6M, up 45% YoY, with diluted EPS of $0.17 GAAP and $0.18 adjusted; the strength was broad-based across M&A, restructuring and capital markets, with capital markets posting its best quarter since Q1 2022 .
  • Compensation was accrued at 75% and non-comp expenses were $46.6M, consistent with the firm’s plan pending better full-year visibility next quarter; underlying corporate tax rate remained 34% .
  • Backlog and pipeline conversion improved notably versus Q1; management expects continued momentum as sponsor activity reengages and valuation rotations favor mid-market comps, citing faster conversion and rising activity levels .
  • Dividend maintained at $0.60 per share; cash and liquid investments increased to $191.3M with no debt—supporting flexibility while revenue tailwinds build .
  • Wall Street consensus (S&P Global) for Q2 2024 was unavailable due to data access limits; estimate comparison could not be performed (see Estimates Context).

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based momentum: “improved performance across each of our major product areas,” with public company strategic transactions a significant contributor; capital markets had best quarter since Q1 2022 .
    • Backlog and conversion: pipeline activity “highest ever” outside SVB onboarding; conversion ratio and speed improved meaningfully by quarter-end versus Q1 .
    • Private credit opportunity: hybrid/private capital in high demand—Moelis’ independent advisory positioning benefits from shoppers seeking bespoke financing across multiple private lenders .

  • What Went Wrong

    • Elevated comp ratio persists: 75% accrual maintained pending better visibility; normalization requires sustained revenue recovery (management aims to reassess next quarter) .
    • Share count creep: ~900k quarterly “unaffected amortization,” with buybacks paused—dilution pressure remains a consideration until repurchases resume .
    • Pull-forward revenues: $6–$7M recognized in Q2; while supportive, it introduces some timing noise for trend analysis .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Revenues ($USD Millions)$179.9 $217.5 $264.6
Diluted EPS - GAAP ($)-$0.17 $0.22 $0.17
Diluted EPS - Adjusted ($)-$0.04 $0.22 $0.18
Compensation Ratio (% of revenues, GAAP)81.1% 75% 74.8%
Non-Comp Expenses ($USD Millions, GAAP)$43.7 —$46.6
Total Operating Expense Ratio (% of revenues, GAAP)105.3% —92.4%
Operating Income ($USD Millions, GAAP)-$9.6 —$20.1
Operating Margin (%)-5.3% (calc from -$9.6/$179.9) —7.6% (calc from $20.1/$264.6)
Net Income ($USD Millions, GAAP)-$13.2 $17.5 $14.9
Net Income Margin (%)-7.4% (calc) 8.0% (calc) 5.6% (calc)

KPIs

  • Cash & Liquid Investments ($USD Millions): Q1 2024 $124.9; Q2 2024 $191.3 .
  • Dividend per Share: $0.60 declared in Q2; payable Sept 26, 2024 to holders of record Aug 5, 2024 .
  • Other Income (GAAP): Q2 2023 -$5.6M vs Q2 2024 $1.7M (YoY improvement); Adjusted: $2.2M vs $2.7M .
  • Pull-forward revenue recognized in Q2: ~$6–$7M .
  • MD talent: YTD seven promotions and seven hires; three MDs added since last release in Tech, Industrials, Capital Structure Advisory .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Compensation RatioFY 2024 trajectoryAlgorithm outlined in Feb; visibility to adjust later in year 75% accrual in Q2; expect better visibility to adjust next quarter Maintained (reassess next quarter)
Non-Comp ExpensesQuarterly run-rate~$46M excluding transaction-related $46.6M in Q2 Maintained/in-line
Corporate Tax RateUnderlying34% underlying rate (Q1) 34% underlying rate (Q2) Maintained
DividendQuarterly$0.60 per share $0.60 per share declared; payable Sept 26, 2024 Maintained
Share Count AmortizationQuarterly—~900k per quarter unaffected amortization; buybacks paused New disclosure/operational parameter

Note: The company does not provide formal revenue/EPS guidance; management commentary above reflects operational parameters and capital return stance .

Earnings Call Themes & Trends

TopicQ4 2023 (Prev-2)Q1 2024 (Prev-1)Q2 2024 (Current)Trend
M&A recoveryBottom likely behind; near-record pipeline; rate-cut expectations supportive Pipeline building; strategics more active; PE timing sensitive Clear acceleration in public strategic activity; improved conversion ratios Improving and broadening
Sponsor activityAnticipated ramp with rates pivot PE timing tied to rate path and stability “Feels in motion” with real pitches/workloads; 6–12 month normalization view Reengaging
Restructuring~25% of 2023 rev; resilient given rates/maturities Strong mandates; liability management outweighs Ch.11; ~50% non-M&A in Q1 Combined with capital markets ~30% of Q2 rev; likely sustained even as M&A accelerates Stable-to-high
Capital markets/private creditBuilding; SVB team and private credit focus Bullish; bespoke/one-off structures vs bank distribution Best since Q1’22; hybrid capital demand strong; advisory positioning advantaged Strong acceleration
Regulatory/FTCFTC stance suppressing deal attempts; potential change could unlock pipeline —Election/FTC changes could “significant effect” on U.S. M&A Watch for catalysts
Costs/comp leverageNon-MD inflation lifts comp baseline; target ≥25% pretax margin 75% comp; reassess Q3; non-comp ~21.7% 75% comp; non-comp $46.6M; visibility to adjust next quarter Holding pending visibility

Management Commentary

  • “Our results this quarter reflect improved performance across each of our major product areas… our capital markets business had its best quarter since the first quarter of 2022.” – Ken Moelis, CEO .
  • “Our compensation expense was accrued at 75% consistent with last quarter… underlying corporate tax rate was 34%… noncompensation expenses were $46.6 million.” – Joe Simon, CFO .
  • “By the end of this quarter… conversion ratio… is speeding up.” – Ken Moelis, on pipeline conversion .
  • “Sponsors are moving back to the front… workload is high… momentum is there, and it’s real.” – Ken Moelis on PE activity .

Q&A Highlights

  • Backlog and conversion velocity: Activity and conversion improved markedly from Q1; highest new business review activity levels ever (ex-SVB onboarding) .
  • Regulatory outlook: A friendlier FTC following elections could unlock multiple stalled/abandoned deals; corporate tax policy clarity also matters for risk-taking .
  • Mix and contribution: Restructuring plus capital markets ~30% of Q2 revenue; backlog in capital markets building given private credit demand .
  • Cost/structure: Q2 comp ratio held at 75% pending visibility; share count amortization ~900k per quarter; pull-forward revenue ~$6–$7M .
  • Macro catalysts: Rate cuts and valuation rotation into the Russell 2000/mid-market could accelerate sponsor exits and new investments .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 (EPS and revenue) were unavailable due to access limits; therefore, an estimates comparison could not be provided at this time. Values would typically be anchored to S&P Global consensus; in absence of access, we refrain from using non-S&P sources to avoid inconsistency.

Key Takeaways for Investors

  • Revenue momentum is broadening beyond M&A as capital markets/private credit drive advisory demand; this reduces cyclicality and supports near-term upside as sponsor activity returns .
  • Conversion velocity and backlog health improved versus Q1, suggesting a stronger 2H setup; watch for further acceleration and potential comp ratio normalization next quarter .
  • Cost discipline remains key: 75% comp accrual and ~$46.6M non-comp in Q2 align with plan; sustained revenue recovery is the lever to expand margins toward long-term targets .
  • Regulatory outcomes and rates are near-term catalysts; any FTC stance softening or stable rate backdrop should unlock larger deal flow, particularly for corporates and sponsors .
  • Dividend continuity ($0.60) and rising cash ($191.3M) with no debt provide capital flexibility; buyback resumption could mitigate share creep once visibility improves .
  • Product mix tailwinds: As restructuring transitions to funding solutions, Moelis can capture economics via capital markets—supporting revenue durability through cycles .
  • Trading setup: With improving top-line, cleaner YoY comps (no SEC settlement drag), and visible private credit tailwinds, further beats hinge on conversion pace and sponsor follow-through; monitor Q3 comp ratio update and backlog commentary .

Citations: Q2 press release/8-K and tables ; Q2 earnings call transcript ; Q1 2024 press release ; Q1 and Q4 2023 calls .