U.S. Markets closed

Edited Transcript of MC earnings conference call or presentation 30-Oct-19 9:00pm GMT

Q3 2019 Moelis & Co Earnings Call

New York Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Moelis & Co earnings conference call or presentation Wednesday, October 30, 2019 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Joseph Walter Simon

Moelis & Company - CFO

* Kenneth David Moelis

Moelis & Company - Chairman & CEO

* Michele S. Miyakawa

Moelis & Company - MD

================================================================================

Conference Call Participants

================================================================================

* Devin Patrick Ryan

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* James Francis Mitchell

The Buckingham Research Group Incorporated - Research Analyst

* Kenneth Brooks Worthington

JP Morgan Chase & Co, Research Division - MD

* Manan Gosalia

Morgan Stanley, Research Division - Equity Analyst

* Michael C. Brown

Keefe, Bruyette, & Woods, Inc., Research Division - Associate

* Salvatore Domenico Saroni

Goldman Sachs Group Inc., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Moelis & Company Third Quarter 2019 Earnings Conference Call and Webcast. (Operator Instructions) Please note that this event is being recorded.

I would now like to turn the conference over to Ms. Michele Miyakawa, Head of Investor Relations. Please go ahead, ma'am.

--------------------------------------------------------------------------------

Michele S. Miyakawa, Moelis & Company - MD [2]

--------------------------------------------------------------------------------

Good afternoon, and thank you, everyone, for joining us for Moelis & Company's Third Quarter 2019 Financial Results Conference Call. On the phone today are Ken Moelis, Chairman and CEO; and Joe Simon, Chief

Financial Officer.

Before we begin, I'd like to note that the remarks made on this call may contain certain forward-looking statements, including regarding future performance, which are subject to various risks and

uncertainties, including those identified from time to time in the Risk Factors section of Moelis & Company's filings with the SEC. Actual results could differ materially from those currently anticipated.

The firm undertakes no obligation to update any forward-looking statements.

Our comments today include references to certain adjusted or non-GAAP financial measures. We believe these measures, when presented together with comparable GAAP measures, are useful to investors to compare

our results across several periods and to better understand our operating results. The reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information

required by Reg G is provided in the firm's earnings release, which can be found on our Investor Relations website at investors.moelis.com.

I'll now turn the call over to Joe.

--------------------------------------------------------------------------------

Joseph Walter Simon, Moelis & Company - CFO [3]

--------------------------------------------------------------------------------

Thanks, Michele, and good afternoon, everyone. On today's call, I'll go through our financial results, and then Ken will discuss our business further.

We achieved a record third quarter in which we earned $232 million of revenues, which was our second-highest revenue quarter ever, and represented a 12% increase over the prior year period. Our performance

compares favorably to the overall M&A market in which the number of global M&A completions greater than $100 million was down 11% from the prior year quarter.

We witnessed positive momentum across all products with our total average fees, specifically our M&A average fee increasing on completed transactions as compared to the prior year. Restructuring had its

largest quarter of activity since inception, and Moelis was ranked #1 in both global and U.S. restructuring completions by value and number of transactions in the third quarter.

Moving to expenses. Adjusted compensation expense was accrued at 58% in both the third quarter and year-to-date. Our non-comp ratio was 15% in the third quarter, down from 16% in the prior year period. For

the third quarter, we reported $35.7 million of non-comp expenses as a result of continued expense discipline.

As mentioned on last quarter's call, we anticipate our non-compensation expenses to increase in the fourth quarter due to the build-out and expansion of our New York City headquarters. The increased space is

vital to support our future growth. We expect quarter 4 non-comp to be $38 million to $39 million.

Our underlying corporate tax rate remained at approximately 25%. As a reminder, our adjusted net income presentation reflects all of the firm's income tax at our calculated effective corporate tax rate. We

recognized an adjusted net gain of $5.4 million related to our sale of 12.5 million shares or 25% of our ownership in Moelis Australia.

As previously announced, there was an additional 8 million shares sale expected to occur in the fourth quarter. Assuming that this transaction is consummated, the adjusted net gain is expected to be a little

more than $3 million pretax. Ultimately, there is expected to be no change to the strategic partnership and the collaboration between Moelis & Company and Moelis Australia as a result of this transaction.

Lastly, regarding capital allocation, the Board authorized a dividend of $0.50 per share, consistent with last quarter. In addition to our regular dividend distributions, we have repurchased over 1 million

shares year-to-date and continue to be opportunistic in utilizing our share buyback program. We ended the quarter with a strong financial position with no debt and $162 million of cash and liquid

investments.

And I'll now turn the call over to Ken.

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [4]

--------------------------------------------------------------------------------

Thanks, Joe. Good afternoon, everyone. As we stated on our last call, we expected our second half performance to be much stronger than the first half of the year and are pleased to report double-digit growth

over a record Q3 last year. Our activity levels are strong, and I'm confident about our business outlook going forward.

Our third quarter M&A activity was solid, and we experienced a meaningful increase in the average transaction size and average fee earned per completed transaction. We earned greater revenue and achieved

higher M&A average fees on both middle market transactions at deal values greater than $5 billion, demonstrating the breadth and diversity of our platform.

Restructuring continues to be a growing and significant part of our business. It not only provides a countercyclical component to our platform, but more importantly, allows us to increase our mindshare and

coverage with corporates and financial sponsors.

Since our last earnings call, we announced the hiring of 4 Managing Directors to expand and enhance our client coverage in important sectors and regions. Two Managing Directors are based in the U.S. and will

provide financial and strategic advice to fintech and specialty finance clients, respectively.

The 2 other Managing Directors are based in Europe. One will expand our coverage of Continental Europe in the Benelux and Nordic regions, and the other will enhance our expertise in the technology, media and

telecom sectors. All 4 of these individuals will join the firm during the fourth quarter.

We remain focused on profitable organic growth and have a solid pipeline of both internal and external senior-level talent to augment the 11 Managing Director additions made year-to-date.

Overall, what excites me the most, though, is the opportunities we are seeing in helping companies around the globe. I continue to be amazed that despite market volatility, the C-suite and boardrooms are

focused on creating and maximizing value for their shareholders through strategic transactions. And that's what we're in the business of doing: delivering exceptional advice and helping our clients succeed

in all sorts of markets.

With that, I'll open it up for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question will come from Ken Worthington of JPMorgan.

--------------------------------------------------------------------------------

Kenneth Brooks Worthington, JP Morgan Chase & Co, Research Division - MD [2]

--------------------------------------------------------------------------------

Maybe first, MD hiring. You've hired a bunch of MDs in 3Q and 4Q so far, which feels a bit unusual given the timing of annual bonuses. So maybe, is Moelis benefiting from some of the dislocations seen at the

other banks? And is the nature of available talent maybe increasing a little bit?

And then the MD level has only grown, I'd say, modestly over the last 18 months. And I know quality is far, far more important than quantity. But do you feel that there's the talent and you have the capacity

to boost MD growth at maybe a faster pace looking forward than we've seen more recently?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [3]

--------------------------------------------------------------------------------

So the answer to the last question was, yes, I think this year, we've hired, but we -- look, we manage our headcount actively. We have somewhere starting the year than -- 130 MDs to start the year. And we do

actively manage it. I mean we -- that's our job is to keep track of where we think we can -- we are doing well and where we could do better. So that probably happened more this year. We continue to hire. I

think going forward, we think we can continue to bring in a net 8 to 10 new Managing Directors. The pipeline is good both from outside the firm and most important to me, inside the firm.

So that -- I'll start with the second one. The first question, I think you're right. We are -- it is a little later in the year. It's interesting. I think some of the availability of talent is coming more

out of the European mid-market banking system. And one of the benefits of that is they went a few years ago to a very high cash salary level. They pay a lot during the course of the year in salary. It

actually gives you the ability to not feel so bad about hiring later in the year because they've already received a lot of their compensation. It's not all back end. You're not picking up 100% of the bonus.

So again, we try to hire earlier in the year than this. But when you're hiring in the European banking sector, you can often hire later in the year and not be penalized as much.

--------------------------------------------------------------------------------

Kenneth Brooks Worthington, JP Morgan Chase & Co, Research Division - MD [4]

--------------------------------------------------------------------------------

Awesome. And then just maybe secondly. As we think about 2020, what kind of feedback are you starting to get from your clients about the macro influences impacting M&A decision-making? So clearly, some

things haven't changed. You've got the technological disruption. But are you getting the sense that given some of the more extreme political views by some of the leading candidates, that there might be

either more elevated activity in the U.S. to get things done before elections close, or maybe at the other end of the spectrum, there's more uncertainty and more of a preference to wait and see?

And then going across the pond to Brexit, it seems like we may be coming to a resolution at some point in the foreseeable future. To what extent do you think there's been pent-up demand in either the U.K. or

Continental Europe and that might come to market if we get some sort of resolution finally?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [5]

--------------------------------------------------------------------------------

So in general, in the U.S., I think there's -- I don't think anybody is holding back for election, and really not for macro either. I said that at the end of my speech because I think it is interesting how,

on the front foot, everybody is. And that's not always M&A, but it is creating value. There's a lot of talk about spinoffs, division sales, M&A. But the boardroom, the C-suite, everybody's really focused and

engaged in creation of value. I think -- so there's -- nobody's holding back for election, and I don't believe anybody is holding back on macro either. That might -- that could change. I mean we're going to

have a pretty interesting election over the next, what is it, year, I guess. We're close to it -- inside of a year. And look, I think as polling changes, that could change. But for right now, no, it's not

happening -- I mean, meaning that it's not affecting anything.

In Europe, I almost got the feeling -- well, I've been over in Europe a lot in the last 2, 3 months. It's almost like, especially in the U.K., people are so bored of talking about Brexit. It's like -- I

think there's almost -- it's -- I know you think the resolution is coming. I think in people's mind, it's like we've got to move forward. We cannot stay paralyzed by this forever. So I think that if it

ended, it would probably be helpful. And maybe there is pent-up demand. But at this point, I really believe people are sick and tired of talking about it. And they're sick and tired of putting off plans to

create value even in Europe, and people are trying to look past it.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

Our next question will come from Richard Ramsden of Goldman Sachs.

--------------------------------------------------------------------------------

Salvatore Domenico Saroni, Goldman Sachs Group Inc., Research Division - Research Analyst [7]

--------------------------------------------------------------------------------

This is Sal Saroni on for Richard Ramsden today. You reached a record quarter in restructuring in a largely benign economic environment. Where are you seeing the largest pockets of opportunity in

restructuring today? And then also, can you comment on how your backlog is looking heading both into the end of the year and then also into 2020?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [8]

--------------------------------------------------------------------------------

Are you talking backlog just specifically to restructuring? Or...

--------------------------------------------------------------------------------

Salvatore Domenico Saroni, Goldman Sachs Group Inc., Research Division - Research Analyst [9]

--------------------------------------------------------------------------------

Yes, that's right.

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [10]

--------------------------------------------------------------------------------

So restructuring is fairly still idiosyncratic outside of some of the commodity sectors like oil and gas. I think that's the one where we see -- that's probably the sector that's having still difficulties in

a lot of restructuring -- we have a very good position in oilfield services, and they're very affected by the downturn in the commodity.

And then around, it's really idiosyncratic after that. If you have a lot of companies with significant leverage, 1% or 2% of them get in trouble. We have the market-leading restructuring group. We have kept

our investment in them during very -- what has been a pretty good economic environment with low defaults. We've invested in the group. We believe in the group, so we're taking market share, I believe.

In terms of their pipeline, I think we have a pretty good restructuring pipeline. Going forward, I think it continues to be at about the level that it has on a trailing basis, meaning elevated and doing

well. So those are very hard to predict when they hit, though. You have -- restructurings are almost harder to predict when they might hit success fees than -- they're easier to know that they will get to a

success fee, but the actual timing of those is sometimes even more difficult than M&A.

--------------------------------------------------------------------------------

Salvatore Domenico Saroni, Goldman Sachs Group Inc., Research Division - Research Analyst [11]

--------------------------------------------------------------------------------

Okay. Great. And then additionally, on your non-compensation expenses, they came in well below expectations, and the 15% non-comp ratio is one of the lowest levels that you've achieved so far. To what degree

does this quarter indicate your ability to control cost inflation? Or was this more a factor of some positive quarterly volatility? And then looking forward, how are you thinking about improving your non-

comp ratio from the current levels that we see today?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [12]

--------------------------------------------------------------------------------

Joe?

--------------------------------------------------------------------------------

Joseph Walter Simon, Moelis & Company - CFO [13]

--------------------------------------------------------------------------------

Yes. So I'd say we're focused on expense management in the ordinary course, regardless of economic environment. I think that -- we think that we've ultimately gotten some leverage on costs. We look at our

average quarterly cost per head. This year, on average, is about $43,000 per quarter per head, and that compares to last year's $47,000. So I think even with the expansion of space, that's going to move to

maybe $44,000. We think we're -- we pay attention to it. We continue to make the right investments. And I think what I've described this fourth quarter and what you should expect is probably a pretty

reasonable estimate.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

Our next question will come from Manan Gosalia of Morgan Stanley.

--------------------------------------------------------------------------------

Manan Gosalia, Morgan Stanley, Research Division - Equity Analyst [15]

--------------------------------------------------------------------------------

So you had mentioned earlier this year that some buyers were building a recession into their models, whereas sellers were not. Is there still a large bid-ask gap? Or are those coming closer now?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [16]

--------------------------------------------------------------------------------

I didn't ask, so I haven't -- I don't have good information if the -- and I was talking mostly about sponsors, so I have to defer to that. I don't know if we're still seeing every model have a recession. I

would guess, yes. But I think what we're seeing now recently is -- and again, I'll go back to the fourth quarter last year, we had a really volatile downturn in the market. We felt in the first and second

quarters that sponsors weren't putting their best assets up for sale. It was concerning what happened in the fourth quarter, processes take a long time, the market -- if the Fed did the wrong things or China

trade war went the wrong way, my guess is people were unsure that the market was sustainable and didn't want to start what could be a 6-month process into a market in which valuations wouldn't be good for

their best assets.

Interestingly, we've come through all that, the Fed, the trade war, S&P is at all-time highs. It feels very resilient. The market feels to people resilient now, and I think we're starting to see sponsors put

their best assets or thinking about putting their best assets in the market again. I think they feel comfortable. So although there may still be recession cases in there, I think there's a feeling that the

valuation parameters are sustainable and solid here, and we're starting to see quality assets -- quality private assets be put into the market.

--------------------------------------------------------------------------------

Manan Gosalia, Morgan Stanley, Research Division - Equity Analyst [17]

--------------------------------------------------------------------------------

Got it. That's helpful. And then secondly, can you talk a little bit about, I guess, how the overall IPO environment impacts M&A? So basically, if the IPO exit strategy is becoming tougher, what do you think

happens with sponsor-driven M&A? Do you think that helps because then M&A is the only other exit strategy left?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [18]

--------------------------------------------------------------------------------

No, I think people are using sponsors as an exit strategy more and more. I think it's -- you look at a lot of the IPOs, and they are significantly companies that are in money-losing positions, not -- so

maybe for good reason, they're building market share, but they need capital. And you see more and more private companies that are at a solid EBITDA thinking of monetizing and using the private market for

liquidity.

And I think that's a trend that might go on for years as it's so much more efficient. You get to trade your company for a control premium rather than for an IPO discount. As a former banker, I went public

for paying a 7% commission to all of you on the phone was offensive. And so I understand now why they -- why people no longer want to incur those kind of fees and friction costs. And I think you're going to

see a continuing use of the sponsor and private markets as a way to create liquidity for companies that can do it.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

Our next question will come from Michael Brown with KBW.

--------------------------------------------------------------------------------

Michael C. Brown, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [20]

--------------------------------------------------------------------------------

So I guess, first, on the comp ratio. So clearly, the revenues have been a little bit more episodic this year. And I guess, as a result, the comp ratio has kind of bounced around more than usual quarter-to-

quarter. So kind of based on where we're at for the year, how should we think about, really, where the full year comp ratio could end up?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [21]

--------------------------------------------------------------------------------

Look, we've been as disciplined as anybody on a full year comp ratio, and that's our goal. But as you look at things, we also think that we have the best talent. We have an unbelievable opportunity to grow

the business and that we will protect that. I mean #1 is we want to protect our talent. But we have been disciplined, and we intend to continue to be disciplined in the context of making sure we can take

advantage of what I think is going to be a unique opportunity to grow our talent base. And I really -- I'm excited about the talent we have under roof here, and protecting that is the #1 priority.

--------------------------------------------------------------------------------

Michael C. Brown, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [22]

--------------------------------------------------------------------------------

Great. And then also, as we get kind of closer to year-end, any updated thoughts on how you're thinking about the capital return and kind of mix between buybacks and the special dividend? And I guess, where

the special could be relative to where it was in the fourth quarter of last year?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [23]

--------------------------------------------------------------------------------

We focus on that with the Board at the next Board meeting. And look, we've been more active in -- at these prices, we're more active repurchasing shares. So we're going to look at it. I mean it's a different

market today. We have a different valuing -- our shares trade differently than they did a year ago when we were doing specials, and we're going to make that decision coming up, but we've been more active in

share repurchase.

And there are 2 -- and the other thing we're going to do, by the way, is we continue to want to leave the company 100% debt free. So even the build-out we're going to do in New York, we're going to fund that

with cash flow, which will be a use of our cash, too. So we're not -- we thought about borrowing for that. But we like being debt-free. We think it's a motivating force for talent to be here. And I think it

also sends a message to our clients that we don't need to do deals. It's very important to us that our advice be seen as a best possible advice, not in context with any financial pressure.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

Our next question will come from Devin Ryan with JMP Securities.

--------------------------------------------------------------------------------

Devin Patrick Ryan, JMP Securities LLC, Research Division - MD and Senior Research Analyst [25]

--------------------------------------------------------------------------------

Most have been asked, but I just want to come back a little bit to some of the commentary on the environment. And just trying to kind of parse through on your tone, Ken, I mean it feels like what you're

saying is that the backdrop has actually been improving. And so I just want to make sure kind of I'm hearing that right. Whether that's fair or if it's more just a function of a little bit of a slower start

to the year where some things didn't hit, and so we're just getting back to maybe where we were prior to the fourth quarter disruption? Or is there actually something maybe happening here that's more

meaningful in terms of the acceleration, in terms of what you're seeing or dialogues, whether it be with sponsors or strategics?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [26]

--------------------------------------------------------------------------------

Well, it was -- you're right about one thing, it was pretty easy to improve over our first half. So it was a low bar to improve, but it was a good quarter. I think things are improving. Look, the first

quarter had some lumpiness to it for everyone. I think that the end of last year was not a wonderful time. It was very volatile, and I think people changed plans. And there was some conservatism, I think, in

companies as to how the first half of the year would play out.

So my feeling is we're kind of back to where we were. I think the aberration of it, maybe it's a good way to say it, Devin, is our -- the first 6 months to me feel like the aberration. I feel like we're back

in the kind of place we were on run rate and feeling that we were sort of last year. And plus or minus, we'll see. Again, I don't -- we don't guide. I don't -- and again, to look at us quarterly, I think, is

just not the way to look at one of these companies. I cannot control these quarters. It's hard for me to even predict with full knowledge of what I'm looking at how these quarters come out.

But I know we have great talent. We have a great market share. We have great conversations. And in my -- my gut feeling is that the underlying tone is better, is it the best -- is as good as I've seen it

since maybe a year ago.

--------------------------------------------------------------------------------

Devin Patrick Ryan, JMP Securities LLC, Research Division - MD and Senior Research Analyst [27]

--------------------------------------------------------------------------------

Yes, that's very helpful. And then just a follow-up on kind of the Middle East footprint. You guys obviously have invested quite a bit there in both money and time. And it seems like maybe there's some

activity moving forward. You have some of the high-profile business. And so I'm just curious how you're thinking about that region for Moelis, whether it be your footprint relative to the opportunity or just

kind of more broadly?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [28]

--------------------------------------------------------------------------------

We've worked long and hard, it hasn't been recently. It's been really 10 years ago when we started, really, with the restructuring and helping Dubai 10 years ago. We've kept -- we have great talent there. We

maintain a very good presence there. It is a part of the world that I think respects commitment and continuous commitment. They respect discretion and confidentiality. And I think we've got the best

franchise in the Middle East, bar none, and we intend to keep investing in it. And I think we're actually looking at opening an office in Saudi Arabia.

So we're -- we think it's a growing part of the world and a place where having all those attributes of loyalty, discretion, confidentiality and good advice pays off. So we're pretty happy with it.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

And the next question will come from Jim Mitchell with Buckingham Research.

--------------------------------------------------------------------------------

James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [30]

--------------------------------------------------------------------------------

Just a couple of questions. Maybe one on the buyback, Ken, I know you sort of said you're leaning towards buybacks. But in the quarter, if I read it correctly, you only did about $2.5 million of buybacks

out of the $100 million-or-so you had. The price was obviously -- it was down quite a bit. If it wasn't attractive in the third quarter, why wasn't it? Is it a liquidity thing? Just trying to get a sense of

why you weren't a little more active in 3Q.

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [31]

--------------------------------------------------------------------------------

Well, first, the first 6 months weren't exactly liquidity providing. They weren't excessive revenues. So -- and then we had some liquidity come in after the reporting period from the Australia sale, so we

got more liquidity. And so we've been active -- we had a 10b5 program that's done some. But look, I think we are going to be more active on it. I want you to know, I continue to believe -- and I think I was

reading a Charlie Munger quote that said, "The key for us to succeed is to just not do anything too stupid."

So I'm not trying to do -- to be brilliant on this stuff. I think the key is to avoid being stupid. And to me, that means maintaining our liquidity, being careful and being in a position to take care of

times when other people might do something stupid. And so that's a real goal. I've seen it. This is a long -- the market feels really good to me. But things happen after 10-year expansions. And I want to be

ready for those possibilities that give us the ability to really step function grow the firm. We did that in '08, '09, '10, and that -- and I think there'll be a moment, and I don't want it to be the moment

I don't have liquidity. So that's a long answer to we're just being careful.

--------------------------------------------------------------------------------

James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [32]

--------------------------------------------------------------------------------

Yes. No, that's all fair. And maybe on the restructuring side, you guys have obviously done very well with M&A down, restructuring seemingly up. Can you kind of update -- you've kind of talked about

somewhere around 20% of revenues. Is it running materially higher than that this year? How do you see that sort of evening out over time?

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [33]

--------------------------------------------------------------------------------

It's definitely north of there. But look, there's chunky stuff that comes in. We had a couple of -- so I'd say it's running north of 20%, but don't overdo quarters. Things happen -- deals happen in chunks.

And I'd just say, it's running north of 20%. And yes, and it might still. Again, I'm not predicting that. But as of now, it's running slightly north of 20%.

--------------------------------------------------------------------------------

James Francis Mitchell, The Buckingham Research Group Incorporated - Research Analyst [34]

--------------------------------------------------------------------------------

All right. And maybe one for you, Joe. Just on the non-comps, kind of a step-up this -- in the fourth quarter. How do -- is that because of the investment in the New York office? Is it going to stay at that

level and move higher from there? Is that the jumping-off point for next year, which would push the growth rate higher in non-comps? Or is that not the way to think about it?

--------------------------------------------------------------------------------

Joseph Walter Simon, Moelis & Company - CFO [35]

--------------------------------------------------------------------------------

Well, it's certainly a starting point. I think it's always going to be founded on headcount. That's the principal basis. But ultimately, yes, the new space and some of the process that we have to go through

in the build-out, that's all taken into account in that new run rate.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

We have a follow-up question from Richard Ramsden of Goldman Sachs.

--------------------------------------------------------------------------------

Salvatore Domenico Saroni, Goldman Sachs Group Inc., Research Division - Research Analyst [37]

--------------------------------------------------------------------------------

Just a quick accounting question from us. Was there really any material pull-forward of the revenues booked this quarter? I just want to make sure that we're seeing the data correct relative to the backlogs.

--------------------------------------------------------------------------------

Joseph Walter Simon, Moelis & Company - CFO [38]

--------------------------------------------------------------------------------

Yes. I mean, again, the quarters are now comparable since the new accounting came into effect, so we're really comparing the same 90 days. But I think if you're asking what happened in the first couple of

days of October, I think it was a few deals and it may have added up to around $15 million.

--------------------------------------------------------------------------------

Operator [39]

--------------------------------------------------------------------------------

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Kenneth Moelis for any closing remarks. Please go ahead.

--------------------------------------------------------------------------------

Kenneth David Moelis, Moelis & Company - Chairman & CEO [40]

--------------------------------------------------------------------------------

Thank you for your time this afternoon. We appreciate it, and we look forward to speaking to you soon. Thank you.

--------------------------------------------------------------------------------

Operator [41]

--------------------------------------------------------------------------------

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.