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M&

Moelis & Co (MC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue surged to $438.7M, up 104% year over year, with diluted EPS of $1.15 GAAP and $1.18 adjusted; Q4 adjusted pre-tax margin reached 31.4% as average fees per completed transaction increased with particular strength in M&A .
  • Management raised the regular quarterly dividend 8% to $0.65, citing strong cash and no debt, and emphasized record pipeline and improved deal conversion into 2025 .
  • Non-comp expenses held at 11.4% of revenue in Q4 (adjusted), while CFO guided 2025 underlying non-comp run-rate up roughly 15% on tech, occupancy and T&E as headcount grows .
  • S&P Global Wall Street consensus estimates for Q4 2024 revenue/EPS were unavailable during retrieval; comparison vs estimates is therefore not included (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Q4 revenue and EPS inflected sharply: revenues $438.7M (+104% YoY) and adjusted diluted EPS $1.18; management attributed strength to higher average fees per completed transaction and strong M&A activity .
  • Operating leverage improved: Q4 adjusted compensation ratio at 58.4%, non-comp at 11.4%, delivering 31.4% adjusted pre-tax margin; CFO expects continued leverage while investing in growth .
  • Strategic investments paid off: Technology was the largest 2024 sector contributor; Industrials and Energy were active; Capital Markets had a strong year and serves as a “strategic weapon” as dealmaking accelerates .
  • Pipeline and conversion improved: CEO cited record pipeline levels and faster conversion post-election, with minimal “pull-forward” effects in Q4 .

What Went Wrong

  • Expenses rose with growth: Q4 adjusted compensation expenses increased vs prior year due to higher bonus accruals; full-year adjusted non-comp expenses increased broad-based with business expansion .
  • 2025 cost outlook: CFO guided a ~15% increase in underlying non-comp run-rate driven by tech, occupancy, and client events, creating a near-term headwind to operating leverage .
  • Regulatory delays: Some Q4 deals were pushed from Q4 to Q2 2025 due to regulatory timing, tempering near-term quarterly annualization assumptions despite strong momentum .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$264.6 $273.8 $438.7
Diluted EPS (GAAP) ($)$0.17 $0.22 $1.15
Diluted EPS (Adjusted) ($)$0.18 $0.22 $1.18
Compensation Ratio (Adjusted, %)75.1% 75.0% 58.4%
Non-Comp Ratio (Adjusted, %)17.6% 16.9% 11.4%

Notes:

  • Q4 YoY comparison: Revenue $438.7M vs $214.9M (+104%); GAAP diluted EPS $1.15 vs $(0.08); adjusted diluted EPS $1.18 vs $(0.06) .
  • Q4 adjusted pre-tax margin: 31.4%; FY 2024 adjusted pre-tax margin: 16.4% .

Segment/Revenue Mix (Context)

MetricFY 2024
Revenue Mix: M&A (%)≈60% (full year)
Revenue Mix: Capital Markets + Restructuring (%)≈40% (full year)

Key KPIs and Balance Sheet

KPIQ4 2024
Cash and Short-Term Investments ($USD Millions)$560.4
DebtNone
GoodwillNone
Regular Quarterly Dividend ($/share)$0.65 (paid 3/27/25; record 2/18/25)
Managing Directors (platform)169
Adjusted Pre-Tax Margin (%)31.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular Quarterly DividendOngoing$0.60/share (Q3 declared) $0.65/share (Q4 declared) Raised
Non-Compensation Expenses (Underlying Run-Rate, ex transaction)FY 2025Not previously quantified~15% increase vs 2024 underlying run-rate (drivers: tech, occupancy, T&E, client events) Raised
Compensation Ratio LeverageFY 20252024 algorithm delivered leverage Leverage persists but asymptotically slows approaching low-60s; incremental savings possible but tempered by investments (e.g., PFA build-out) Maintained framework; tempered
Tax/EPS Sensitivity (Q1)Q1 2025Not previously quantifiedEPS approx +$0.01 for each $1.25 above adjusted grant price $41 at RSU vesting; example: $76 price → ~$0.28 EPS New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q2 2024)Previous Mentions (Q-1: Q3 2024)Current Period (Q4 2024)Trend
M&A environment & pipeline conversion“Improved performance across major product areas” “Increase in M&A revenues; momentum across products” Record pipeline, improved conversion post-election; minimal pull-forward; regulatory delays pushed some deals to Q2 Strengthening and accelerating conversion
Sector investments (Tech/Industrials/Energy)Added MDs in Tech, Industrials, Capital Structure Advisory Added Biotech MD; franchise breadth emphasized Tech largest sector contributor in 2024; Industrials/Energy active; investments exceeding expectations Investments paying off; Tech leadership emerging
Capital Markets capabilityNot highlightedNot highlightedStrong year; “strategic weapon” as private capital providers play increasing role Increasing strategic importance
Sponsor activityNot highlightedNot highlightedEarly pickup; bias to be more aggressive vs last year’s inertia Improving from low base
Restructuring backdropNot highlightedNot highlightedExpect 2025 activity similar to 2024; interest rates and creditor coverage constructive; expanding private credit-side coverage Stable-to-constructive
Expenses/comp ratioQ2 adjusted comp 75.1%; non-comp 17.6% Q3 adjusted comp 75.0%; non-comp 16.9% Q4 adjusted comp 58.4%; non-comp 11.4%; 2025 underlying non-comp +~15% Operating leverage achieved; 2025 non-comp rising
Dividend/capital return$0.60 declared $0.60 declared $0.65 declared; confidence in excess capital generation; buybacks possible depending on board/market Capital return stepping up
Regulatory environmentNot highlightedNot highlightedSome Q4 deals delayed to Q2 by regulatory timing Near-term timing noise

Management Commentary

  • CEO: “Technology was the largest sector contributor to our 2024 revenues… Industrials and Energy sectors have also been quite active. And the Capital Markets Group had a strong year and continues to be a strategic weapon as dealmaking accelerates” .
  • CEO: “Our pipeline is at the highest levels ever… We’re building backlog faster than it is converting… conversion did pick up [post-election]” .
  • CFO: “Adjusted compensation expense ratio was 58.4% for the fourth quarter and 69% for the full year… noncomp expense ratio was 11.4% for the fourth quarter and 15.9% for the full year… pretax margin of 31.4% for the fourth quarter and 16.4% for the full year” .
  • CFO: “In 2025, we anticipate noncompensation expenses to trend higher… driven by adds to headcount, UK space build-out, client events, and tech/information services” (underlying run-rate ~15% increase) .
  • Capital return stance: “We increased the dividend… We will return the capital… may be stock repurchases… determined by us, the Board, the market” .

Q&A Highlights

  • Backdrop and conversion: Seasonality helped, but Q4 felt different; conversion accelerated post-election, pipeline at highs, minimal pull-forward .
  • 2025 non-comp outlook: Underlying non-comp run-rate up ~15% excluding transaction costs due to headcount, space, client events, and tech .
  • Revenue mix: About 60% full-year revenue was M&A; remainder capital markets and restructuring .
  • Compensation leverage: As comp ratio nears low-60s, incremental leverage becomes asymptotic; 2025 leverage exists but tempered by investment (e.g., PFA build-out) .
  • Capital return and share count: Dividend up; buybacks possible; clarified year-over-year share count comparison due to GAAP basics vs diluted accounting in loss periods .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q4 2024 revenue and EPS were unavailable at time of retrieval, so estimate comparisons could not be provided (S&P Global data unavailable).
  • Implications: Following the strong Q4 revenue/EPS and improved operating leverage, analysts may adjust models for higher revenue run-rate, improved comp leverage trajectory, and higher non-comp underlying costs into 2025, as well as updated capital return assumptions (dividend/base case) .

Key Takeaways for Investors

  • Revenue inflection: Q4 revenue of $438.7M and adjusted EPS $1.18 reflect stronger deal conversion and higher average fees; M&A led mix (~60% FY), supported by active Industrials/Energy and robust Capital Markets .
  • Operating leverage: Adjusted comp ratio improved to 58.4% in Q4 with non-comp at 11.4%, driving 31.4% adjusted pre-tax margin; path to low-60s comp ratio exists but will slow as it nears market levels .
  • 2025 cost trajectory: Plan for ~15% increase in underlying non-comp run-rate (tech, occupancy, T&E) as the firm scales, partially offsetting leverage near term; model fuller-year expenses accordingly .
  • Capital return signals: Dividend increased to $0.65 amid strong cash and no debt; buybacks remain a potential lever depending on market and board decisions .
  • Pipeline strength and timing: Record backlog and improved conversion support momentum into 2025; some Q4 deals delayed to Q2 by regulatory timing—avoid over-annualizing Q4 .
  • Strategic expansion: Tech now a leading sector, with continued build-out in Industrials/Energy and a new Global Head of Private Funds Advisory to scale PFA capabilities—expect expanding sponsor-related opportunities .
  • Tax/EPS sensitivity: Near-term Q1 EPS can benefit from RSU vesting price vs $41 adjusted grant price (about $0.01 per $1.25 delta); incorporate this sensitivity into Q1 models .