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Moelis & pany(MC) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted revenues for the fourth quarter were $202 million, with full-year adjusted revenues of $970 million, down 38% from the previous year [21][22] - The full-year compensation expense ratio was 63%, while the non-compensation ratio was 15.6% [22][40] - The company maintained a strong balance sheet with $413 million in cash and liquid investments and no funded debt [23] Business Line Data and Key Metrics Changes - The restructuring activity is increasing, but the cycle is expected to develop more slowly and sustainably compared to previous cycles [63] - The company has seen a significant year-over-year increase in restructuring volume, although there is a belief that the anticipated wave of maturities in 2024 and 2025 may not drive as much urgency as previously thought [51][63] Market Data and Key Metrics Changes - The financing markets are showing signs of improvement, with increased dialogue among sponsors and strategics, indicating a potential uptick in transaction activity [32][44] - The company noted that the dialogue with sponsors has improved significantly at the start of the year compared to the last months of 2022 [85] Company Strategy and Development Direction - The company continues to focus on long-term growth by investing in its platform, hiring new managing directors, and promoting existing talent [25] - The management emphasized the importance of maintaining a strong culture and client relationships, even in a challenging environment [75] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, suggesting that if the Federal Reserve pauses interest rate hikes, it could lead to a rapid increase in market activity [13][63] - There is a belief that companies are beginning to see the impact of higher interest rates, but many are still performing well, which may reduce the need for restructuring [73] Other Important Information - The company declared a dividend of $0.60 per share, returning approximately $316 million to shareholders [84] - The management indicated that the compensation ratio is likely to be higher in the first quarter due to a one-time equity expense related to retirement-eligible partners [29][79] Q&A Session Summary Question: What is the base for the compensation ratio increase? - The base for the compensation ratio increase is the end of year figure of 63%, with an expected spike of 6% to 8% in the first quarter [2] Question: Should buybacks be expected to be cautious in the next quarters? - Management indicated that buybacks would be cautious in the current environment, but there is a planned buyback event in February [3][4] Question: How has the dialogue with sponsors trended in 2023? - The dialogue with sponsors has improved significantly, with indications of increased activity in the financing markets [85] Question: What is the expectation for restructuring contributions to revenues? - Restructuring contributions to revenues were previously expected to be between 20% to 25%, and there is potential for this trend to increase [83] Question: How does the company view the current economic environment? - Management views the current environment as volatile but believes there is pent-up demand for transactions, indicating a potential for growth when conditions stabilize [44][75]