Record Second Quarter and First Half
Revenues
- Second quarter revenues of $131.7
million, up 5% from the second quarter of 2015; first half revenues
of $258.1 million, up 15% from the same period of 2015
- GAAP net income of $0.29 per share
(diluted) for the second quarter and $0.60 per share (diluted) for
the first half of 2016; Adjusted net income of $0.35 per share
(diluted) and $0.69 per share (diluted) for the second quarter and
first half of 2016, respectively
- Board of Directors approved 7% increase
in quarterly dividend to $0.32 per share
- Strong balance sheet with $176.1
million of cash and short-term investments and no debt at
quarter-end
- Continued to execute on organic growth
strategy
- Recruited two Managing Directors in the
U.S. to enhance industry expertise in oil & gas and diversified
industrials
- Announced one Managing Director hire in
Frankfurt to advise clients in Europe’s German speaking
countries
Moelis & Company (“we” or the “Firm”) (NYSE:MC) today
reported financial results for the second quarter ended June 30,
2016. The Firm’s total revenues for the second quarter were a
record $131.7 million, representing an increase of 5% from the
prior year period. The Firm reported second quarter 2016 GAAP net
income of $26.2 million, or $0.29 per share (diluted). On an
Adjusted basis, the Firm reported net income of $19.8 million or
$0.35 per share (diluted) for the second quarter of 2016, as
compared with $20.6 million or $0.37 per share (diluted) in the
prior year period.
First half 2016 total revenues were $258.1 million as compared
with $225.3 million in the first half of 2015, representing our
largest first half of revenues on record and an increase of 15%
from the prior year period. GAAP net income for the period was
$51.8 million, or $0.60 per share (diluted). On an Adjusted basis,
the Firm reported net income of $39.5 million or $0.69 per share
(diluted) for the first half of 2016, as compared with $36.0
million or $0.65 per share (diluted) in the prior year period.
“Our record second quarter revenues represent the fourth
consecutive quarter of year over year revenue growth and
demonstrate the strength of our model against the backdrop of a
slower global M&A environment. Our M&A-related activity was
strong during the quarter, and our restructuring activity continues
to grow, contributing to a solid pipeline of clients who are
evaluating strategic alternatives,” said Ken Moelis, Chairman and
Chief Executive Officer.
“Today we announced a 7% increase in our quarterly dividend to
$0.32 per share, representing the third increase in our regular
dividend from the time of our IPO. We also invested in the firm
with the recent announcements of three new MD hires. Our model is
durable, our advisory practice is diverse, and our balance sheet is
strong. As a result, we remain confident in our ability to grow the
franchise while continuing to distribute earnings to our
shareholders.”
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 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.
The Firm has modified the description of its unaudited
non-generally accepted accounting principles (“non-GAAP”) measure
presented in its quarterly earnings release and other supplementary
information from “Adjusted Pro Forma” to “Adjusted.” This
modification impacted the descriptions only. The amounts and
principles used to derive the Adjusted data have been consistently
applied. We believe the Adjusted 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 results is presented in the Appendix to this press
release.
GAAP and Adjusted
(non-GAAP) Selected Financial Data (Unaudited)
U.S. GAAP Adjusted (non-GAAP)* Three
Months Ended June 30, ($ in thousands except per share
data) 2016 2015
2016 vs. 2015
Variance
2016 2015
2016 vs. 2015
Variance
Revenues $ 131,725 $ 125,873 5 % $ 131,725 $ 125,873 5 %
Income (loss) before income taxes 30,926 32,934 -6 % 32,788
34,321 -4 % Provision for income taxes 4,721 6,079
-22 % 12,951 13,729 -6 %
Net income (loss)
26,205 26,855 -2 % 19,837 20,592 -4 % Net income (loss)
attributable to noncontrolling interests 19,312
19,724 -2 % - - N/M Net income (loss)
attributable to Moelis & Company $ 6,893 $ 7,131 -3 % $ 19,837
$ 20,592 -4 % Diluted earnings per share $ 0.29 $ 0.34 -15 %
$ 0.35 $ 0.37 -5 % N/M = not meaningful * See Appendix for a
reconciliation of GAAP to Adjusted (non-GAAP)
U.S.
GAAP Adjusted (non-GAAP)* Six Months Ended June
30, ($ in thousands except per share data) 2016
2015
2016 vs. 2015
Variance
2016 2015
2016 vs. 2015
Variance
Revenues $ 258,089 $ 225,285 15 % $ 258,089 $ 225,285 15 %
Income (loss) before income taxes 61,989 57,195 8 % 65,225
60,042 9 % Provision for income taxes 10,165 10,379
-2 % 25,764 24,017 7 %
Net income (loss)
51,824 46,816 11 % 39,461 36,025 10 % Net income (loss)
attributable to noncontrolling interests 37,961
34,349 11 % - - N/M Net income (loss)
attributable to Moelis & Company $ 13,863 $ 12,467 11 % $
39,461 $ 36,025 10 % Diluted earnings per share $ 0.60 $
0.59 2 % $ 0.69 $ 0.65 6 % N/M = not meaningful * See
Appendix for a reconciliation of GAAP to Adjusted (non-GAAP)
Revenues
For the second quarter of 2016, revenues were $131.7 million as
compared with $125.9 million in the second quarter of 2015,
representing an increase of 5%. This compares favorably with a 23%
decrease in the number of global completed M&A transactions in
the same period1. The increase in revenues was primarily driven by
strong M&A activity, including higher average fees earned per
completed M&A transaction.
For the first half of 2016, revenues were $258.1 million as
compared with $225.3 million in the same period in 2015,
representing an increase of 15%. We advised 184 total clients in
the first half of 2016 as compared with 168 clients during the same
period in the prior year.
We continued to execute on our strategy of profitable expansion.
Since our last earnings release, we hired two Managing Directors in
the U.S. who will strengthen our industry expertise in oil &
gas and diversified industrials. We also strengthened our regional
coverage with a senior hire in Frankfurt who will provide financial
and strategic advice to clients across the German-speaking region
and the rest of Europe. These individuals will join the Firm in the
third quarter of 2016.
1 Source: Thomson Financial as of July 6, 2016; includes all
transactions greater than $100 million in value
Expenses
The following tables set forth information relating to the
Firm’s operating expenses, which are reported net of client expense
reimbursements.
U.S. GAAP Adjusted (non-GAAP)* Three
Months Ended June 30, ($ in thousands) 2016
2015
2016 vs. 2015Variance
2016 2015
2016 vs. 2015Variance
Expenses Compensation and benefits $ 78,198 $ 69,663
12% $ 76,336 $ 68,276 12% % of revenues 59% 55% 58% 54%
Non-compensation expenses $ 22,968 $ 23,438 -2% $ 22,968 $ 23,438
-2% % of revenues 17% 19% 17% 19% Total operating expenses $
101,166 $ 93,101 9% $ 99,304 $ 91,714 8% % of revenues 77% 74% 75%
73% * See Appendix for a reconciliation of GAAP to Adjusted
(non-GAAP)
U.S. GAAP Adjusted
(non-GAAP)* Six Months Ended June 30, ($ in
thousands) 2016 2015
2016 vs. 2015Variance
2016 2015
2016 vs. 2015Variance
Expenses Compensation and benefits $ 152,866 $
125,056 22% $ 149,630 $ 122,209 22% % of revenues 59% 56% 58% 54%
Non-compensation expenses $ 45,773 $ 46,076 -1% $ 45,773 $ 46,076
-1% % of revenues 18% 20% 18% 20% Total operating expenses $
198,639 $ 171,132 16% $ 195,403 $ 168,285 16% % of revenues 77% 76%
76% 75% * See Appendix for a reconciliation of GAAP to
Adjusted (non-GAAP)
Total operating expenses on a GAAP basis were $101.2 million for
the second quarter and $198.6 million for the first half of 2016.
On an Adjusted basis, operating expenses were $99.3 million for the
second quarter of 2016 as compared with $91.7 million for the
second quarter of 2015, and $195.4 million for the first half as
compared with $168.3 million in the prior year period. The increase
in operating expenses in 2016 resulted from increased compensation
and benefits expenses.
Compensation and benefits expenses were $78.2 million on a GAAP
basis in the second quarter and $152.9 million for the first half
of 2016. Adjusted compensation and benefits expenses (which exclude
the amortization of IPO awards for both 2015 and 2016) were $76.3
million and $149.6 million for the second quarter and first half of
2016, respectively, as compared with $68.3 million and $122.2
million for the second quarter and first half of 2015,
respectively. The Adjusted compensation and benefits ratio
increased from 54% in the second quarter and first half of 2015 to
58% of revenues in the current year periods. 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. We remain committed to our targeted long-term
compensation ratio level of 58% of revenues.
Non-compensation expenses on a GAAP and Adjusted basis were
$23.0 million for the second quarter of 2016 as compared with $23.4
million for the second quarter of 2015. Our non-compensation
expense ratio decreased to 17% from 19% in the same period of the
prior year. For the first half of 2016, GAAP and Adjusted
non-compensation expenses were $45.8 million as compared with $46.1
million for the same period of the prior year, and the
non-compensation expense ratio decreased to 18% from 20%, 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 purposes, we have assumed all
outstanding Class A partnership units of Moelis & Company Group
LP to have been exchanged into Class A common stock of Moelis &
Company such that 100% of the Firm’s second 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 June 30, 2016, we held cash and short term
investments of $176.1 million and had no debt or goodwill on our
balance sheet.
The Board of Directors of Moelis & Company has declared a
quarterly dividend of $0.32 per share to be paid on September 6,
2016 to common stockholders of record on August 22, 2016.
Earnings Call
We will host a conference call beginning at 5:00pm ET on
Wednesday, August 3, 2016, accessible via telephone and the
internet. Ken Moelis, Chairman and Chief Executive Officer, and Joe
Simon, Chief Financial Officer, will review our second 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 Second
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 10088331.
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, capital markets transactions
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 results are a non-GAAP measure which better reflect
management’s view of operating results. We believe that the
disclosed Adjusted 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 results is presented in
the Appendix.
Appendix
GAAP Consolidated Statement of Operations (Unaudited)
GAAP Reconciliation to Adjusted (non-GAAP) Financial Information
(Unaudited)
Moelis & Company
GAAP Consolidated Statement of
Operations
Unaudited
(dollars in thousands, except for share
and per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Revenues $ 131,725 $ 125,873 $ 258,089 $ 225,285
Expenses Compensation and benefits 78,198 69,663
152,866 125,056 Occupancy 6,287 3,715 10,845 7,392 Professional
fees 2,511 4,143 4,747 7,697 Communication, technology and
information services 5,309 4,440 10,605 8,541 Travel and related
expenses 5,831 5,131 11,962 10,744 Depreciation and amortization
806 688 1,542 1,308 Other expenses 2,224 5,321
6,072 10,394 Total expenses 101,166
93,101 198,639 171,132
Operating income (loss) 30,559 32,772 59,450 54,153 Other
income (expenses) 101 (33 ) 204 (18 ) Income (loss) from equity
method investments 266 195 2,335
3,060
Income (loss) before income taxes 30,926 32,934
61,989 57,195 Provision for income taxes 4,721 6,079
10,165 10,379
Net income (loss)
26,205 26,855 51,824 46,816 Net income (loss) attributable
to noncontrolling interests 19,312 19,724
37,961 34,349 Net income (loss) attributable
to Moelis & Company $ 6,893 $ 7,131 $ 13,863 $ 12,467
Weighted-average shares of Class A common
stock outstanding
Basic 20,745,043 19,978,108 20,654,657
19,961,286 Diluted 23,618,093
21,088,220 23,052,255 21,144,161 Net
income (loss) attributable to holders of shares of Class A common
stock per share Basic $ 0.33 $ 0.36 $ 0.67 $ 0.62
Diluted $ 0.29 $ 0.34 $ 0.60 $ 0.59
Moelis & Company
Reconciliation of GAAP to Adjusted
(non-GAAP) Financial Information
Unaudited
(dollars in thousands, except share and
per share data)
Three Months Ended June 30, 2016 Adjusted
Items GAAP Adjustments Adjusted
(non-GAAP)
Compensation and benefits $ 78,198 ($1,862 ) (a) $ 76,336
Income (loss) before income taxes 30,926 1,862 32,788
Provision for income taxes 4,721 8,230 (b)
12,951
Net income (loss) 26,205 (6,368 ) 19,837
Net income (loss) attributable to noncontrolling interests
19,312 (19,312 ) - Net income (loss)
attributable to Moelis & Company $ 6,893 $ 12,944 $
19,837
Weighted-average shares of Class A common
stock outstanding
Basic 20,745,043 33,768,672 (b)
54,513,715 Diluted 23,618,093 33,768,672 (b)
57,386,765 Net income (loss) attributable to holders of
shares of Class A
common stock per share
Basic $ 0.33 $ 0.36 Diluted $ 0.29 $ 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 June 30, 2015 Adjusted
Items GAAP Adjustments Adjusted
(non-GAAP)
Compensation and benefits $ 69,663 ($1,387 ) (a) $ 68,276
Income (loss) before income taxes 32,934 1,387 34,321
Provision for income taxes 6,079
7,650
(b) 13,729
Net income (loss)
26,855
(6,263)
20,592 Net income (loss) attributable to noncontrolling
interests 19,724
(19,724)
- Net income (loss) attributable to Moelis &
Company $ 7,131 $
13,461
$ 20,592
Weighted-average shares of Class A common
stock outstanding
Basic 19,978,108 34,160,239 (b)
54,138,347 Diluted 21,088,220 34,160,239 (b)
55,248,459 Net income (loss) attributable to holders of
shares of Class A
common stock per share
Basic $ 0.36 $ 0.38 Diluted $ 0.34 $ 0.37 (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.
Six Months Ended June 30,
2016 Adjusted Items GAAP
Adjustments Adjusted
(non-GAAP)
Compensation and benefits $ 152,866 ($3,236 ) (a) $ 149,630
Income (loss) before income taxes 61,989 3,236 65,225
Provision for income taxes 10,165 15,599 (b)
25,764
Net income (loss) 51,824 (12,363 ) 39,461
Net income (loss) attributable to noncontrolling interests
37,961 (37,961 ) - Net income (loss)
attributable to Moelis & Company $ 13,863 $ 25,598 $
39,461
Weighted-average shares of Class A common
stock outstanding
Basic 20,654,657 33,859,058 (b)
54,513,715 Diluted 23,052,255 33,859,058 (b)
56,911,313 Net income (loss) attributable to holders of
shares of Class A
common stock per share
Basic $ 0.67 $ 0.72 Diluted $ 0.60 $ 0.69 (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 39.5% for the period
presented.
Six Months Ended June 30,
2015 Adjusted Items GAAP
Adjustments Adjusted
(non-GAAP)
Compensation and benefits $ 125,056 ($2,847 ) (a) $ 122,209
Income (loss) before income taxes 57,195 2,847 60,042
Provision for income taxes 10,379 13,638 (b)
24,017
Net income (loss) 46,816 (10,791 ) 36,025
Net income (loss) attributable to noncontrolling interests
34,349 (34,349 ) - Net income (loss)
attributable to Moelis & Company $ 12,467 $ 23,558 $
36,025
Weighted-average shares of Class A common
stock outstanding
Basic 19,961,286 34,177,061 (b)
54,138,347 Diluted 21,144,161 34,177,061 (b)
55,321,222 Net income (loss) attributable to holders of
shares of Class A
common stock per share
Basic $ 0.62 $ 0.67 Diluted $ 0.59 $ 0.65 (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.
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Moelis & CompanyInvestor Relations:Michele Miyakawa, + 1 310
443 2344michele.miyakawa@moelis.comorMedia:Andrea Hurst, + 1 212
883 3666m: +1 347 583 9705andrea.hurst@moelis.com
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