NEW YORK--(BUSINESS WIRE)--Moelis & Company (“we” or the “Firm”) (NYSE: MC) today reported financial results for the first quarter ended March 31, 2016. The Firm’s total revenues of $126.4 million for the quarter represented our largest first quarter of revenues on record and an increase of 27% from the prior year period. Adjusted Pro Forma net income was $19.6 million or $0.35 per share (diluted), as compared with $15.4 million or $0.28 per share (diluted) in the first quarter of 2015. On a GAAP basis, the Firm reported net income of $25.6 million, or $0.31 per share (diluted) for the first quarter of 2016. This compares with GAAP net income of $20.0 million, or $0.25 per share (diluted) for the first quarter of 2015.
“We achieved record first quarter revenues as a result of increased M&A activity and higher average fees earned per transaction. Revenues increased 27% for the first quarter in 2016 over the same period last year which compares favorably to the 23% decrease in global completed M&A transactions over the same time period1. We executed on our pipeline of M&A mandates and restructuring activity continued to improve,” said Ken Moelis, Chairman and Chief Executive Officer.
“We are experiencing healthy M&A activity as companies continue to evaluate their strategic growth options despite the market volatility earlier this year. In an environment of rapidly changing and interconnected financial markets and world economies, Moelis & Company is well positioned to advise clients given our breadth of expertise including a strong M&A and Recapitalization & Restructuring practice and global reach.”
1 Source: Thomson Financial as of April 6, 2016; includes all transactions greater than $100 million in value
The Firm’s revenues and net income can fluctuate materially depending on the number, size and timing of completed transactions on which it advised as well as other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.
Currently 38% of the operating partnership (Moelis & Company Group LP) is owned by the corporate partner (Moelis & Company) and is subject to corporate U.S. federal and state income tax. The remaining 62% is owned by other partners of Moelis & Company Group LP and is primarily subject to tax at the partner level (except for certain state and local and foreign income taxes). The Adjusted Pro Forma results included herein remove the impact of compensation expenses specifically related to the Firm’s IPO awards, and apply the corporate tax rate to all earnings under the assumption that all outstanding Class A partnership units of Moelis & Company Group LP have been exchanged into Class A common stock of Moelis & Company. We believe the Adjusted Pro Forma results, when presented together with comparable GAAP results, are useful to investors to compare our performance across periods and to better understand our operating results. A reconciliation between our GAAP results and our Adjusted Pro Forma results is presented in the Appendix to this press release.
GAAP and Adjusted Pro Forma Selected Financial Data (Unaudited)
| U.S. GAAP | Adjusted Pro Forma* | |||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||
| ($ in thousands except per share data) | 2016 | 2015 |
2016 vs. |
2016 | 2015 |
2016 vs. |
||||||||||||
| Revenues | $ | 126,364 | $ | 99,412 | 27 | % | $ | 126,364 | $ | 99,412 | 27 | % | ||||||
| Expenses: | ||||||||||||||||||
| Compensation and benefits | 74,668 | 55,393 | 35 | % | 73,294 | 53,933 | 36 | % | ||||||||||
| Non-compensation expenses | 22,805 | 22,638 | 1 | % | 22,805 | 22,638 | 1 | % | ||||||||||
| Total operating expenses | 97,473 | 78,031 | 25 | % | 96,099 | 76,571 | 26 | % | ||||||||||
| Operating income (loss) | 28,891 | 21,381 | 35 | % | 30,265 | 22,841 | 33 | % | ||||||||||
| Other income (expenses) | 103 | 15 | 587 | % | 103 | 15 | 587 | % | ||||||||||
| Income (loss) from equity method investments | 2,069 | 2,865 | -28 | % | 2,069 | 2,865 | -28 | % | ||||||||||
| Income (loss) before income taxes | 31,063 | 24,261 | 28 | % | 32,437 | 25,721 | 26 | % | ||||||||||
| Provision for income taxes | 5,444 | 4,300 | 27 | % | 12,813 | 10,288 | 25 | % | ||||||||||
| Net income (loss) | 25,619 | 19,961 | 28 | % | 19,624 | 15,433 | 27 | % | ||||||||||
| Net income (loss) attributable to noncontrolling interests | 18,649 | 14,625 | 28 | % | - | - | N/M | |||||||||||
| Net income (loss) attributable to Moelis & Company | $ | 6,970 | $ | 5,336 | 31 | % | $ | 19,624 | $ | 15,433 | 27 | % | ||||||
| Diluted earnings per share | $ | 0.31 | $ | 0.25 | 24 | % | $ | 0.35 | $ | 0.28 | 25 | % | ||||||
| N/M = not meaningful | ||||||||||||||||||
| * See Appendix for a reconciliation of GAAP to Adjusted Pro Forma | ||||||||||||||||||
Revenues
For the first quarter of 2016, revenues were $126.4 million as compared with $99.4 million in the first quarter of 2015, representing an increase of 27% and our highest first quarter of revenues on record. This compares favorably with a 23% decrease in the number of global completed M&A transactions in the same period1. The increase in revenues during the quarter resulted from a combination of higher average fees, particularly with respect to our M&A and General Advisory activity, as well as continued improvement in the restructuring environment. We earned revenues from 126 clients in the first quarter of 2016 as compared with 113 clients during the same period in 2015.
We continued to execute on our strategy of profitable expansion. In the first quarter, we hired a Managing Director who will join the Firm in July to further strengthen our global energy coverage team by providing financial and strategic advice to midstream oil and gas companies and Master Limited Partnerships.
Expenses
The following tables set forth information relating to the Firm’s operating expenses, which are reported net of client expense reimbursements.
| U.S. GAAP | Adjusted Pro Forma* | |||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||
| ($ in thousands) | 2016 | 2015 |
2016 vs. |
2016 | 2015 |
2016 vs. |
||||||||||||
| Expenses: | ||||||||||||||||||
| Compensation and benefits | $ | 74,668 | $ | 55,393 | 35% | $ | 73,294 | $ | 53,933 | 36% | ||||||||
| % of revenues | 59% | 56% | 58% | 54% | ||||||||||||||
| Non-compensation expenses | $ | 22,805 | $ | 22,638 | 1% | $ | 22,805 | $ | 22,638 | 1% | ||||||||
| % of revenues | 18% | 23% | 18% | 23% | ||||||||||||||
| Total operating expenses | $ | 97,473 | $ | 78,031 | 25% | $ | 96,099 | $ | 76,571 | 26% | ||||||||
| % of revenues | 77% | 78% | 76% | 77% | ||||||||||||||
| N/M = not meaningful | ||||||||||||||||||
| * See Appendix for a reconciliation of GAAP to Adjusted Pro Forma | ||||||||||||||||||
Total operating expenses on an Adjusted Pro Forma basis were $96.1 million for the first quarter of 2016 as compared with $76.6 million for the first quarter of 2015. The increase in operating expenses in the first quarter of 2016 was primarily linked to increased revenues, which drove our increase in compensation and benefits expense. Compensation and benefits expenses were $73.3 million, or 58% of revenues on an Adjusted Pro Forma basis in the first quarter of 2016, as compared with $53.9 million, or 54% of revenues in the first quarter of 2015. The increased compensation ratio reflects an additional tranche of equity amortization expense arising from the 2015 equity incentive grants made in early 2016 as well as modified vesting terms associated with that equity which have a five year pro-rata vest for Managing Directors as compared with awards issued in the previous two years which have a five year vest, pro-rata in years three, four and five. We remain committed to our targeted long-term compensation ratio level of 58% of revenues.
Adjusted Pro Forma non-compensation expenses were $22.8 million for the first quarter of 2016 as compared with $22.6 million for the same period of the prior year. Our Adjusted Pro Forma non-compensation expense ratio decreased to 18% from 23% in the same period of the prior year driven by increased revenues.
Provision for Income Taxes
The corporate partner (Moelis & Company) currently owns 38% of the operating partnership (Moelis & Company Group LP) and is subject to corporate U.S. federal and state income tax. Income on the remaining 62% continues to be subject to New York City unincorporated business tax and certain foreign income taxes and is accounted for at the partner level through the non-controlling interests line item. For Adjusted Pro Forma purposes, we have assumed all outstanding Class A partnership units of Moelis & Company Group LP have been exchanged into Class A common stock of Moelis & Company such that 100% of the Firm’s first quarter 2016 income was taxed at our corporate effective tax rate of 39.5%, versus 40.0% in the prior year period.
Capital Management and Balance Sheet
Moelis & Company continues to maintain a strong financial position and as of March 31, 2016, we held cash and short term investments of $138.5 million and had no debt or goodwill on our balance sheet.
On April 21, 2016, the Board of Directors of Moelis & Company declared a quarterly dividend of $0.30 per share. The $0.30 per share will be paid on June 3, 2016 to common stockholders of record on May 20, 2016.
Earnings Call
We will host a conference call beginning at 5:00pm ET on Wednesday, April 27, 2016, accessible via telephone and the internet. Ken Moelis, Chairman and Chief Executive Officer, and Joe Simon, Chief Financial Officer, will review our first quarter 2016 financial results. Following the review, there will be a question and answer session.
Investors and analysts may participate in the live conference call by dialing 1-877-510-3938 (domestic) or 1-412-902-4137 (international) and referencing the Moelis & Company First Quarter 2016 Earnings Call. Please dial in 15 minutes before the conference call begins. The conference call will also be accessible as a listen-only audio webcast through the Investor Relations section of the Moelis & Company website at www.moelis.com.
For those unable to listen to the live broadcast, a replay of the call will be available for one month via telephone starting approximately one hour after the live call ends. The replay can be accessed at 1-877-344-7529 (domestic) or 1-412-317-0088 (international); the conference number is 10083956.
About Moelis & Company
Moelis & Company is a leading global independent investment bank that provides innovative strategic advice and solutions to a diverse client base, including corporations, governments and financial sponsors. The Firm assists its clients in achieving their strategic goals by offering comprehensive integrated financial advisory services across all major industry sectors. Moelis & Company’s experienced professionals advise clients on their most critical decisions, including mergers and acquisitions, recapitalizations and restructurings and other corporate finance matters. The Firm serves its clients with about 650 employees based in 17 offices in North and South America, Europe, the Middle East, Asia and Australia. For further information about Moelis & Company, please visit www.moelis.com.
Forward-Looking Statements
This press release contains forward-looking statements, which reflect the Firm’s current views with respect to, among other things, its operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “target,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. For a further discussion of such factors, you should read the Firm’s filings with the Securities and Exchange Commission. The Firm undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
Non-GAAP Financial Measures
Adjusted Pro Forma results are a non-GAAP measure which better reflect management’s view of operating results. We believe that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable GAAP measures, are useful to investors to understand the Firm’s operating results by removing the significant accounting impact of one-time charges associated with the Firm’s IPO and assuming all Class A partnership units have been exchanged into Class A common stock. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of GAAP results to Adjusted Pro Forma results is presented in the Appendix.
Appendix
GAAP Consolidated Statement of Operations Unaudited
GAAP Reconciliation to Adjusted Pro Forma Financial Information Unaudited
| Moelis & Company | ||||||
| GAAP Consolidated Statement of Operations | ||||||
| Unaudited | ||||||
| (dollars in thousands, except for share and per share data) | ||||||
| Three Months Ended March 31, | ||||||
| 2016 | 2015 | |||||
| Revenues | $ | 126,364 | $ | 99,412 | ||
| Expenses | ||||||
| Compensation and benefits | 74,668 | 55,393 | ||||
| Occupancy | 4,558 | 3,677 | ||||
| Professional fees | 2,236 | 3,554 | ||||
| Communication, technology and information services | 5,296 | 4,101 | ||||
| Travel and related expenses | 6,131 | 5,613 | ||||
| Depreciation and amortization | 736 | 620 | ||||
| Other expenses | 3,848 | 5,073 | ||||
| Total expenses | 97,473 | 78,031 | ||||
| Operating income (loss) | 28,891 | 21,381 | ||||
| Other income and expenses | 103 | 15 | ||||
| Income (loss) from equity method investments | 2,069 | 2,865 | ||||
| Income (loss) before income taxes | 31,063 | 24,261 | ||||
| Provision for income taxes | 5,444 | 4,300 | ||||
| Net income (loss) | 25,619 | 19,961 | ||||
| Net income (loss) attributable to noncontrolling interests | 18,649 | 14,625 | ||||
| Net income (loss) attributable to Moelis & Company | $ | 6,970 | $ | 5,336 | ||
| Weighted-average shares of Class A common stock outstanding | ||||||
| Basic | 20,376,718 | 19,730,182 | ||||
| Diluted | 22,402,820 | 20,948,966 | ||||
|
Net income (loss) attributable to holders of shares of Class A |
||||||
| Basic | $ | 0.34 | $ | 0.27 | ||
| Diluted | $ | 0.31 | $ | 0.25 | ||
| Moelis & Company | ||||||||||||
| Reconciliation of GAAP to Adjusted Pro Forma Financial Information | ||||||||||||
| Unaudited | ||||||||||||
| (dollars in thousands, except share and per share data) | ||||||||||||
| Three Months Ended March 31, 2016 | ||||||||||||
| GAAP |
Pro-Forma |
Adjusted Pro |
||||||||||
| Revenues | $ | 126,364 | $ | - | $ | 126,364 | ||||||
| Expenses | ||||||||||||
| Compensation and benefits | 74,668 | (1,374 | ) | (a) | 73,294 | |||||||
| Non-compensation expenses | 22,805 | - | 22,805 | |||||||||
| Total operating expenses | 97,473 | (1,374 | ) | 96,099 | ||||||||
| Operating income (loss) | 28,891 | 1,374 | 30,265 | |||||||||
| Other income (expenses) | 103 | - | 103 | |||||||||
| Income (loss) from equity method investments | 2,069 | - | 2,069 | |||||||||
| Income (loss) before income taxes | 31,063 | 1,374 | 32,437 | |||||||||
| Provision for income taxes | 5,444 | 7,369 | (b) | 12,813 | ||||||||
| Net income (loss) | 25,619 | (5,995 | ) | 19,624 | ||||||||
| Net income (loss) attributable to noncontrolling interests | 18,649 | (18,649 | ) | - | ||||||||
| Net income (loss) attributable to Moelis & Company | $ | 6,970 | $ | 12,654 | $ | 19,624 | ||||||
|
Weighted-average shares of Class A common |
||||||||||||
| Basic | 20,376,718 | 33,870,710 | (b) | 54,247,428 | ||||||||
| Diluted | 22,402,820 | 33,870,710 | (b) | 56,273,530 | ||||||||
|
Net income (loss) attributable to holders of shares of Class A |
||||||||||||
| Basic | $ | 0.34 | $ | 0.36 | ||||||||
| Diluted | $ | 0.31 | $ | 0.35 | ||||||||
| (a) | Expense associated with the amortization of restricted stock units (“RSUs”) and stock options granted in connection with the IPO. In accordance with GAAP, amortization expense of RSUs and stock options granted in connection with the IPO will be recognized over the five year vesting period; we will continue to adjust for this expense due to the one-time nature of the grant. | |
| (b) | Assumes all outstanding Class A partnership units have been exchanged into Class A common stock. Accordingly, an adjustment has been made such that 100% of the Firm’s income is taxed at the corporate effective tax rate of 39.5% for the period presented. |
| Three Months Ended March 31, 2015 | ||||||||||||
| GAAP |
Pro-Forma |
Adjusted Pro |
||||||||||
| Revenues | $ | 99,412 | $ | - | $ | 99,412 | ||||||
| Expenses | ||||||||||||
| Compensation and benefits | 55,393 | (1,460 | ) | (a) | 53,933 | |||||||
| Non-compensation expenses | 22,638 | - | 22,638 | |||||||||
| Total operating expenses | 78,031 | (1,460 | ) | 76,571 | ||||||||
| Operating income (loss) | 21,381 | 1,460 | 22,841 | |||||||||
| Other income (expenses) | 15 | - | 15 | |||||||||
| Income (loss) from equity method investments | 2,865 | - | 2,865 | |||||||||
| Income (loss) before income taxes | 24,261 | 1,460 | 25,721 | |||||||||
| Provision for income taxes | 4,300 | 5,988 | (b) | 10,288 | ||||||||
| Net income (loss) | 19,961 | (4,528 | ) | 15,433 | ||||||||
| Net income (loss) attributable to noncontrolling interests | 14,625 | (14,625 | ) | - | ||||||||
| Net income (loss) attributable to Moelis & Company | $ | 5,336 | $ | 10,097 | $ | 15,433 | ||||||
|
Weighted-average shares of Class A common |
||||||||||||
| Basic | 19,730,182 | 34,407,005 | (b) | 54,137,187 | ||||||||
| Diluted | 20,948,966 | 34,407,005 | (b) | 55,355,971 | ||||||||
|
Net income (loss) attributable to holders of shares of Class A |
||||||||||||
| Basic | $ | 0.27 | $ | 0.29 | ||||||||
| Diluted | $ | 0.25 | $ | 0.28 | ||||||||
| (a) | Expense associated with the amortization of RSUs and stock options granted in connection with the IPO. In accordance with GAAP, amortization expense of RSUs and stock options granted in connection with the IPO will be recognized over the five year vesting period; we will continue to adjust for this expense due to the one-time nature of the grant. | |
| (b) | Assumes all outstanding Class A partnership units have been exchanged into Class A common stock. Accordingly, an adjustment has been made such that 100% of the Firm’s income is taxed at the corporate effective tax rate of 40.0% for the period presented. |
