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Moelis & Company Reports Fourth Quarter and Full Year 2019 Financial Results; Declares Special Dividend of $0.75 Per Share and Increases Regular Quarterly Dividend to $0.51 Per Share

  • Fourth quarter revenues of $223.5 million, down 6% from a record fourth quarter of 2018; annual revenues of $746.5 million, down 16% from the prior year
  • GAAP net income of $0.38 per share (diluted) for the fourth quarter and $1.89 per share (diluted) for the full year of 2019; Adjusted net income of $0.38 per share (diluted) for the fourth quarter and $1.96 per share (diluted) for the full year of 2019
  • Continued to execute on organic growth strategy

       Added 11 Managing Directors in 2019 through internal promotion and key hires; added sector capabilities in data science, fintech, specialty finance, oil & gas, and technology, media and telecommunications; strengthened expertise in M&A and Capital Markets Advisory and enhanced coverage of the Benelux and Nordic regions and the Middle East
       Promoted five additional advisory professionals to Managing Director in early 2020
       Strong pipeline of 2020 Managing Director hires

  • Strong cash flow generation and record amount of share repurchases

       Ended 2019 with cash and short term investments of $341.8 million and no debt or goodwill
       Returned approximately $225 million through share repurchases and dividends with respect to the 2019 performance year
       Declared special dividend of $0.75 per share; increased regular quarterly dividend by 2% to $0.51 per share; seventh regular quarterly dividend increase and eighth special dividend declared in Firm history
       Record levels of share repurchases in 2019

Moelis & Company (NYSE: MC) today reported financial results for the fourth quarter and fiscal year ended December 31, 2019. The Firms fourth quarter revenues of $223.5 million decreased 6% over the prior year period. The Firm reported fourth quarter 2019 GAAP net income of $27.2 million, or $0.38 per share (diluted). On an Adjusted basis, the Firm reported net income of $26.4 million or $0.38 per share (diluted) for the fourth quarter of 2019, which compares with $52.0 million of net income or $0.77 per share (diluted) in the prior year period.

The Firms fiscal year 2019 revenues of $746.5 million represented a decrease of 16% over the prior year. GAAP net income for the period was $135.7 million, or $1.89 per share (diluted), compared with $208.0 million or $2.78 per share in the prior year period. On an Adjusted basis, the Firm reported net income of $134.2 million for fiscal year 2019 as compared with $202.3 million in the prior year. On a per share basis, the Firm reported Adjusted net income of $1.96 per share (diluted) for fiscal year 2019, which compares to $3.00 per share (diluted) reported in the prior year period.

"We continued our momentum from the third quarter into the fourth quarter, resulting in a strong second half of revenues. During 2019 we provided discreet and exceptional advice on some of the worlds most complex and largest transactions, and our restructuring franchise achieved record revenues, surpassing last years peak level of activity. We achieved an increase in our average fees earned per completed transaction for the fourth consecutive year, as our global platform continues to mature," said Ken Moelis, Chairman and Chief Executive Officer.

"During 2019, Moelis & Company added 11 managing directors through internal promotion and key external hires, enhancing our capabilities in important products, regions and sectors. Our ability to attract, develop and retain best-in-class talent, has led to increased client dialogue versus the same time last year. By continuing to invest in our talent, we are well positioned to execute on increased levels of activity."

"As part of our ongoing commitment in creating shareholder value, we increased our regular dividend for the seventh time, and announced our eighth special dividend. Coupled with record levels of share repurchases totaling 1.3 million shares, we will have returned approximately $225 million with respect to the 2019 performance year. We remain committed to returning our excess capital to shareholders, while continuing to invest in our business."

The Firms 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 79% 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 21% is owned by other partners of Moelis & Company Group LP and is primarily subject to U.S. federal tax at the partner level (certain state and local and foreign income taxes are incurred at the company level). The Adjusted results included herein apply certain adjustments from our GAAP results, including the assumption that 100% of the Firms fourth quarter and full year 2019 income was taxed at our corporate effective tax rate. 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)

 

 

US. GAAP

 

 

Adjusted (non-GAAP)*

 

 

 

Three Months Ended December 31,

 

($ in thousands except per share data)

 

2019

 

 

2018

 

 

2019 vs. 2018 Variance

 

 

2019

 

 

2018

 

 

2019 vs. 2018 Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

223,528

 

 

$

238,294

 

 

 

-6

%

 

$

223,528

 

 

$

238,294

 

 

 

-6

%

Income (loss) before income taxes

 

 

28,301

 

 

 

68,222

 

 

 

-59

%

 

 

28,301

 

 

 

68,903

 

 

 

-59

%

Provision for income taxes

 

 

1,151

 

 

 

12,217

 

 

 

-91

%

 

 

1,896

 

 

 

16,911

 

 

 

-89

%

Net income (loss)

 

 

27,150

 

 

 

56,005

 

 

 

-52

%

 

 

26,405

 

 

 

51,992

 

 

 

-49

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests

 

 

5,699

 

 

 

16,789

 

 

 

-66

%

 

 

-

 

 

 

-

 

 

N/M

 

Net income (loss) attributable to Moelis & Company

 

$

21,451

 

 

$

39,216

 

 

 

-45

%

 

$

26,405

 

 

$

51,992

 

 

 

-49

%

Diluted earnings per share

 

$

0.38

 

 

$

0.72

 

 

 

-47

%

 

$

0.38

 

 

$

0.77

 

 

 

-51

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

N/M = not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* See Appendix for a reconciliation of GAAP to Adjusted (non-GAAP)

 

 

 

 

US. GAAP

 

 

Adjusted (non-GAAP)*

 

 

 

Twelve Months Ended December 31,

 

($ in thousands except per share data)

 

2019

 

 

2018

 

 

2019 vs. 2018 Variance

 

 

2019

 

 

2018

 

 

2019 vs. 2018 Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

746,534

 

 

$

885,840

 

 

 

-16

%

 

$

746,534

 

 

$

885,840

 

 

 

-16

%

Income (loss) before income taxes

 

 

147,505

 

 

 

238,452

 

 

 

-38

%

 

 

148,605

 

 

 

242,052

 

 

 

-39

%

Provision (benefit) for income taxes

 

 

11,813

 

 

 

30,448

 

 

 

-61

%

 

 

14,423

 

 

 

39,764

 

 

 

-64

%

Net income (loss)

 

 

135,692

 

 

 

208,004

 

 

 

-35

%

 

 

134,182

 

 

 

202,288

 

 

 

-34

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests

 

 

30,597

 

 

 

67,324

 

 

 

-55

%

 

 

-

 

 

 

-

 

 

N/M

 

Net income (loss) attributable to Moelis & Company

 

$

105,095

 

 

$

140,680

 

 

 

-25

%

 

$

134,182

 

 

$

202,288

 

 

 

-34

%

Diluted earnings per share

 

$

1.89

 

 

$

2.78

 

 

 

-32

%

 

$

1.96

 

 

$

3.00

 

 

 

-35

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

N/M = not meaningful

 

* See Appendix for a reconciliation of GAAP to Adjusted (non-GAAP)

 

Revenues

We earned revenues of $223.5 million in the fourth quarter of 2019, as compared with $238.3 million in the prior year period, which is the largest quarter of revenues on record. This compares favorably with a 17% decrease in the number of global completed M&A transactions in the same period 1 . The decrease in quarterly revenues was driven by a decrease in transaction completions, partially offset by a meaningful increase in average fees earned per completed transaction as compared with the prior year period.

For the year ended December 31, 2019, revenues were $746.5 million as compared with $885.8 million in 2018, or a decrease of 16%. The decrease in full year revenues reflects fewer M&A transaction completions, partially offset by strength in our Restructuring activity over the prior year period. We earned higher average fees per completed transaction across all transactions, including both M&A and Restructuring, as compared with the prior year period.

Our second half of the year ended December 31, 2019 revenues were $455.2 as compared with $446.0 in the second half of 2018, an increase of 2% and our strongest six month period of revenue in the Firms history.

We continued to execute on our strategy of organic growth through internal talent development. In early 2020 we promoted five of our advisory professionals to Managing Director: Rohan Choudhary (EMEA/Restructuring and Recapitalization), Wouter Leemhuis (EMEA/Oilfield Services), Adam Steinberg (U.S./Restructuring and Recapitalization), Suraj Tolani (U.S./M&A) and Taryn Widén (U.S./FinTech). We have a robust pipeline of Managing Director hires for 2020.

1 Source: Thomson Financial as of January 3, 2020; includes all transactions greater than $100 million in value

 

Expenses

The following tables set forth information relating to the Firms operating expenses

 

 

US. GAAP

 

 

Adjusted (non-GAAP)*

 

 

 

Three Months Ended December 31,

 

($ in thousands)

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

172,096

 

 

$

137,876

 

 

 

25

%

 

$

166,916

 

 

$

136,963

 

 

 

22

%

% of revenues

 

 

77.0

%

 

 

57.9

%

 

 

 

 

 

 

74.7

%

 

 

57.5

%

 

 

 

 

Non-compensation expenses

 

$

34,680

 

 

$

37,263

 

 

 

-7

%

 

$

34,680

 

 

$

37,263

 

 

 

-7

%

% of revenues

 

 

15.5

%

 

 

15.6

%

 

 

 

 

 

 

15.5

%

 

 

15.6

%

 

 

 

 

Total operating expenses

 

$

206,776

 

 

$

175,139

 

 

 

18

%

 

$

201,596

 

 

$

174,226

 

 

 

16

%

% of revenues

 

 

92.5

%

 

 

73.5

%

 

 

 

 

 

 

90.2

%

 

 

73.1

%

 

 

 

 

* See Appendix for a reconciliation of GAAP to Adjusted (non-GAAP)

 

 

 

US. GAAP

 

 

Adjusted (non-GAAP)*

 

 

 

Twelve Months Ended December 31,

 

($ in thousands)

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

488,439

 

 

$

513,863

 

 

 

-5

%

 

$

470,254

 

 

$

509,302

 

 

 

-8

%

% of revenues

 

 

65.4

%

 

 

58.0

%

 

 

 

 

 

 

63.0

%

 

 

57.5

%

 

 

 

 

Non-compensation expenses

 

$

143,552

 

 

$

145,196

 

 

 

-1

%

 

$

143,552

 

 

$

145,196

 

 

 

-1

%

% of revenues

 

 

19.2

%

 

 

16.4

%

 

 

 

 

 

 

19.2

%

 

 

16.4

%

 

 

 

 

Total operating expenses

 

$

631,991

 

 

$

659,059

 

 

 

-4

%

 

$

613,806

 

 

$

654,498

 

 

 

-6

%

% of revenues

 

 

84.7

%

 

 

74.4

%

 

 

 

 

 

 

82.2

%

 

 

73.9

%

 

 

 

 

* See Appendix for a reconciliation of GAAP to Adjusted (non-GAAP)

 

Total operating expenses on a GAAP basis were $206.8 million for the fourth quarter and $632.0 million for the full year ended December 31, 2019. On an Adjusted basis, operating expenses were $201.6 million for the fourth quarter of 2019 as compared with $174.2 million in the prior year period and $613.8 million for fiscal year 2019 as compared with $654.5 million in 2018. The decrease in operating expenses for the full year is associated with decreased revenues, which drove a decline in compensation and benefits expenses. Through continued expense discipline, we achieved lower non-compensation expenses for fiscal year 2019.

Compensation and benefits expenses on a GAAP basis were $172.1 million in the fourth quarter and $488.4 million in the fiscal year ended December 31, 2019, respectively. Adjusted compensation and benefits expenses were $166.9 million and $470.3 million for the fourth quarter and fiscal year ended December 31, 2019, respectively. This compares with $137.0 million and $509.3 million for the fourth quarter and fiscal year ended December 31, 2018, respectively. The Adjusted compensation and benefits ratio for the current quarter was 74.7%, and for the fiscal year 2019 was 63.0%.

Non-compensation expenses on a GAAP and Adjusted basis were $34.7 million for the fourth quarter of 2019 as compared with $37.3 million in the same period of the prior year, and the non-compensation expense ratio decreased to 15.5% from 15.6%. For the fiscal year of 2019, GAAP and Adjusted non-compensation expenses were $143.6 million as compared with $145.2 million in the prior year period, representing a decrease of 1%.

 

Other Income (Expenses)

 

 

US. GAAP

 

Adjusted (non-GAAP)*

 

 

Three Months Ended December 31,

($ in thousands)

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

$

11,549

 

 

$

5,067

 

 

N/M

 

$

6,369

 

 

$

4,835

 

 

N/M

N/M = not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* See Appendix for a reconciliation of GAAP to Adjusted (non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US. GAAP

 

Adjusted (non-GAAP)*

 

 

Twelve Months Ended December 31,

($ in thousands)

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

2019

 

 

2018

 

 

2019 vs. 2018
Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

$

32,962

 

 

$

11,671

 

 

N/M

 

$

15,877

 

 

$

10,710

 

 

N/M

N/M = not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* See Appendix for a reconciliation of GAAP to Adjusted (non-GAAP)

 

 

 

 

 

 

 

 

 

 

Other income (expenses) on a GAAP basis was $11.5 million in the fourth quarter and $33.0 million for fiscal year 2019. On an Adjusted basis, other income (expenses) was $6.4 million in the fourth quarter of 2019 as compared with $4.8 million in the prior year period. In the fourth quarter of 2019, we recorded a GAAP gain of $8.1 million related to the November 2019 share sale of our investment in Moelis Australia. Compensation expense associated with this gain was reclassified from compensation and benefits to other income (expenses) on an Adjusted basis. As a result, the net gain associated with the share sale of our investment in Australia included in Adjusted other income (expenses) was $3.1 million.

For the year ended December 31, 2019, other income (expenses) on an Adjusted basis was $15.9 million as compared with $10.7 million for the prior year period. Other income (expenses) on an Adjusted basis for the fiscal year 2019 includes the fourth quarter gain mentioned above, in addition to the $5.4 net gain related to the September 2019 share sale of our investment in Moelis Australia.

Provision for Income Taxes

The corporate partner (Moelis & Company) currently owns 79% of the operating partnership (Moelis & Company Group LP) and is subject to corporate U.S. federal and state income tax. Income on the remaining 21% 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 that 100% of the Firms fourth quarter and full year 2019 income was taxed at our corporate effective tax rate of 6.7% and 9.7% respectively, versus 24.5% and 16.4% in both prior year periods.

Capital Management and Balance Sheet

Moelis & Company continues to maintain a strong financial position, and as of December 31, 2019, we held cash and liquid investments of $341.8 million and had no debt or goodwill on our balance sheet.

On February 4, 2020, the Board of Directors of Moelis & Company declared a special dividend of $0.75 per share and increased the regular quarterly dividend to $0.51 per share. The $1.26 per share will be paid on March 27, 2020 to common stockholders of record on February 18, 2020.

During the fiscal year ended December 31, 2019, we repurchased 1.3 million shares of our common stock for a total cost of $51.2 million.

Earnings Call

We will host a conference call beginning at 5:00pm ET on Wednesday, February 5, 2020, accessible via telephone and the internet. Ken Moelis, Chairman and Chief Executive Officer, and Joe Simon, Chief Financial Officer, will review our fourth quarter and full year 2019 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 Fourth Quarter 2019 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 10138064.

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 & Companys 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 from 20 geographic locations in North and South America, Europe, the Middle East, Asia and Australia. For further information, please visit: www.moelis.com or follow us on Twitter @Moelis .

Forward-Looking Statements

This press release contains forward-looking statements, which reflect the Firms 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 Firms 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 managements 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 Firms operating results by adjusting the accounting impact of certain items 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)

Reconciliation of GAAP 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

December 31,

 

 

Twelve Months Ended

December 31,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

223,528

 

 

$

238,294

 

 

$

746,534

 

 

$

885,840