10-Q 1 mc-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number: 001-36418

 

 

Moelis & Company

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

46-4500216

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

399 Park Avenue, 4th Floor, New York NY

 

10022

(Address of principal executive offices)

 

(Zip Code)

 

(212) 883-3800

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title

Trading Symbol

Name of Exchange on which registered

Class A Common Stock

MC

New York Stock Exchange (NYSE)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). ☐ Yes No

As of October 20, 2022, there were 63,965,801 shares of Class A common stock, par value $0.01 per share, and 4,635,898 shares of Class B common stock, par value $0.01 per share, outstanding.

 

 


 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

Part I. Financial Information

 

3

Item 1.

Financial Statements

 

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4.

Controls and Procedures

 

34

Part II. Other Information

 

35

Item 1.

Legal Proceedings

 

35

Item 1A.

Risk Factors

 

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

Item 3.

Defaults Upon Senior Securities

 

35

Item 4.

Mine Safety Disclosures

 

35

Item 5.

Other Information

 

35

Item 6.

Exhibits

 

36

Signatures

 

 

37

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Financial Statements (Unaudited)

 

 

 

Page

 

 

 

Condensed Consolidated Statements of Financial Condition as of September 30, 2022 and December 31, 2021

 

4

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021

 

5

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021

 

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

 

7

Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2022 and 2021

 

8

Notes to Condensed Consolidated Financial Statements

 

10

 

3


 

 

Moelis & Company

Condensed Consolidated Statements of Financial Condition

(Unaudited)

(dollars in thousands, except per share amounts)

 

 

 

September 30,

 

December 31,

 

 

 

2022

 

2021

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

148,246

 

$

520,213

 

Restricted cash

 

 

700

 

 

801

 

Receivables:

 

 

 

 

 

 

 

Accounts receivable, net of allowance for credit losses of $4,106 and $2,823 as of September 30, 2022 and December 31, 2021, respectively

 

 

58,992

 

 

41,870

 

Accrued and other receivables

 

 

4,683

 

 

27,698

 

Total receivables

 

 

63,675

 

 

69,568

 

Deferred compensation

 

 

18,136

 

 

11,499

 

Investments

 

 

247,407

 

 

263,341

 

Right-of-use assets

 

 

153,558

 

 

164,083

 

Equipment and leasehold improvements, net

 

 

57,296

 

 

59,163

 

Deferred tax assets

 

 

427,689

 

 

448,123

 

Prepaid expenses and other assets

 

 

41,721

 

 

18,890

 

Total assets

 

$

1,158,428

 

$

1,555,681

 

Liabilities and Equity

 

 

 

 

 

 

 

Compensation payable

 

$

200,806

 

$

503,707

 

Accounts payable, accrued expenses and other liabilities

 

 

7,008

 

 

69,883

 

Amount due pursuant to tax receivable agreement

 

 

307,841

 

 

307,363

 

Deferred revenue

 

 

3,506

 

 

4,539

 

Lease liabilities

 

 

194,365

 

 

191,890

 

Total liabilities

 

 

713,526

 

 

1,077,382

 

Commitments and Contingencies (See Note 11)

 

 

 

 

 

 

 

Class A common stock, par value $0.01 per share (1,000,000,000 shares authorized, 73,010,881 issued and 63,963,608 outstanding at September 30, 2022; 1,000,000,000 authorized, 68,518,779 issued and 62,645,599 outstanding at December 31, 2021)

 

 

730

 

 

685

 

Class B common stock, par value $0.01 per share (1,000,000,000 shares authorized, 4,635,898 issued and outstanding at September 30, 2022; 1,000,000,000 authorized, 4,686,344 issued and outstanding at December 31, 2021)

 

 

46

 

 

47

 

Treasury stock, at cost; 9,047,273 and 5,873,180 shares at September 30, 2022 and December 31, 2021, respectively

 

 

              (402,610)

 

 

              (256,320)

 

Additional paid-in-capital

 

 

1,378,700

 

 

1,280,498

 

Retained earnings (accumulated deficit)

 

 

              (536,852)

 

 

              (535,282)

 

Accumulated other comprehensive income (loss)

 

 

                  (9,670)

 

 

                     (560)

 

Total Moelis & Company equity

 

 

430,344

 

 

489,068

 

Noncontrolling interests

 

 

14,558

 

 

                (10,769)

 

Total equity

 

 

444,902

 

 

478,299

 

Total liabilities and equity

 

$

1,158,428

 

$

1,555,681

 

 

See notes to the condensed consolidated financial statements (unaudited).

 

 

4


 

Moelis & Company

Condensed Consolidated Statements of Operations

(Unaudited)

(dollars in thousands, except per share amounts)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

$

 

233,506

 

 

$

 

490,821

 

 

$

 

778,114

 

 

$

 

1,115,594

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

160,437

 

 

 

 

307,590

 

 

 

 

477,166

 

 

 

 

678,106

 

Occupancy

 

 

6,022

 

 

 

 

5,842

 

 

 

 

18,099

 

 

 

 

20,226

 

Professional fees

 

 

6,048

 

 

 

 

4,771

 

 

 

 

15,933

 

 

 

 

16,572

 

Communication, technology and information services

 

 

9,971

 

 

 

 

9,139

 

 

 

 

28,858

 

 

 

 

26,014

 

Travel and related expenses

 

 

7,389

 

 

 

 

4,469

 

 

 

 

24,398

 

 

 

 

8,949

 

Depreciation and amortization

 

 

1,918

 

 

 

 

1,947

 

 

 

 

5,798

 

 

 

 

5,033

 

Other expenses

 

 

6,672

 

 

 

 

4,915

 

 

 

 

21,187

 

 

 

 

17,885

 

Total expenses

 

 

198,457

 

 

 

 

338,673

 

 

 

 

591,439

 

 

 

 

772,785

 

Operating income (loss)

 

 

35,049

 

 

 

 

152,148

 

 

 

 

186,675

 

 

 

 

342,809

 

Other income and (expenses)

 

 

2,625

 

 

 

 

30,435

 

 

 

 

(2,656

)

 

 

 

36,376

 

Income (loss) before income taxes

 

 

37,674

 

 

 

 

182,583

 

 

 

 

184,019

 

 

 

 

379,185

 

Provision (benefit) for income taxes

 

 

9,115

 

 

 

 

42,119

 

 

 

 

38,009

 

 

 

 

69,721

 

Net income (loss)

 

 

28,559

 

 

 

 

140,464

 

 

 

 

146,010

 

 

 

 

309,464

 

Net income (loss) attributable to noncontrolling interests

 

 

2,947

 

 

 

 

20,169

 

 

 

 

15,720

 

 

 

 

43,299

 

Net income (loss) attributable to Moelis & Company

$

 

25,612

 

 

$

 

120,295

 

 

$

 

130,290

 

 

$

 

266,165

 

Weighted-average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

65,873,976

 

 

 

 

63,024,943

 

 

 

 

65,684,485

 

 

 

 

62,493,293

 

Diluted

 

 

69,829,338

 

 

 

 

68,274,912

 

 

 

 

70,183,414

 

 

 

 

67,631,068

 

Net income (loss) per share attributable to holders of shares of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

 

0.39

 

 

$

 

1.91

 

 

$

 

1.98

 

 

$

 

4.26

 

Diluted

$

 

0.37

 

 

$

 

1.76

 

 

$

 

1.86

 

 

$

 

3.94

 

 

See notes to the condensed consolidated financial statements (unaudited).

5


 

Moelis & Company

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(dollars in thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Net income (loss)

 

$

 

28,559

 

 

$

 

140,464

 

 

$

 

146,010

 

 

$

 

309,464

 

 

Foreign currency translation adjustment, net of tax

 

 

 

(4,580

)

 

 

 

(2,983

)

 

 

 

(9,949

)

 

 

 

(1,685

)

 

Other comprehensive income (loss)

 

 

 

(4,580

)

 

 

 

(2,983

)

 

 

 

(9,949

)

 

 

 

(1,685

)

 

Comprehensive income (loss)

 

 

 

23,979

 

 

 

 

137,481

 

 

 

 

136,061

 

 

 

 

307,779

 

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

 

2,567

 

 

 

 

19,831

 

 

 

 

14,881

 

 

 

 

43,104

 

 

Comprehensive income (loss) attributable to Moelis & Company

 

$

 

21,412

 

 

$

 

117,650

 

 

$

 

121,180

 

 

$

 

264,675

 

 

 

See notes to the condensed consolidated financial statements (unaudited).

6


 

Moelis & Company

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(dollars in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income (loss)

 

$

146,010

 

$

309,464

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Bad debt expense (benefit)

 

 

2,717

 

 

1,733

 

Depreciation and amortization

 

 

5,798

 

 

5,033

 

Equity-based compensation

 

 

96,767

 

 

108,824

 

Deferred tax provision

 

 

29,009

 

 

28,363

 

Gain on equity method investment

 

 

            (2,768)

 

 

          (22,508)

 

Other

 

 

7,683

 

 

          (11,442)

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

          (20,891)

 

 

          (28,339)

 

Accrued and other receivables

 

 

22,836

 

 

          (19,393)

 

Prepaid expenses and other assets

 

 

          (23,369)

 

 

               (922)

 

Deferred compensation

 

 

            (7,031)

 

 

            (1,836)

 

Compensation payable

 

 

        (299,083)

 

 

170,149

 

Accounts payable, accrued expenses and other liabilities

 

 

          (49,062)

 

 

3,446

 

Deferred revenue

 

 

               (960)

 

 

1,209

 

Dividends received

 

 

2,936

 

 

3,356

 

Net cash provided by (used in) operating activities

 

 

          (89,408)

 

 

547,137

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of investments

 

 

        (286,870)

 

 

        (380,496)

 

Proceeds from sales of investments

 

 

295,045

 

 

270,083

 

Note payments received from (issued to) employees

 

 

                  —

 

 

70

 

Purchases of equipment and leasehold improvements

 

 

            (3,928)

 

 

          (11,890)

 

Proceeds from partial sale of equity method investment

 

 

                  —

 

 

29,164

 

Net cash provided by (used in) investing activities

 

 

4,247

 

 

          (93,069)

 

Cash flows from financing activities

 

 

 

 

 

 

 

Payments for dividends and tax distributions

 

 

        (129,779)

 

 

        (259,589)

 

Payments for treasury stock purchases

 

 

        (146,290)

 

 

        (100,022)

 

Payments under tax receivable agreement

 

 

               (248)

 

 

          (16,336)

 

Other proceeds

 

 

1,900

 

 

                  —

 

Net cash provided by (used in) financing activities

 

 

        (274,417)

 

 

        (375,947)

 

Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash

 

 

          (12,490)

 

 

            (1,672)

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

        (372,068)

 

 

76,449

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

521,014

 

 

203,284

 

Cash, cash equivalents, and restricted cash, end of period

 

$

148,946

 

$

279,733

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Income taxes, net

 

$

74,696

 

$

48,532

 

Other non-cash activity:

 

 

 

 

 

 

 

Class A Partnership Units or other equity converted into Class A Common Stock

 

$

7,795

 

$

4,193

 

Dividends in kind

 

$

15,304

 

$

33,293

 

Non-cash settlement of accounts receivable

 

$

                  —

 

$

15,125

 

Forfeiture of fully-vested Group LP units or other equity units

 

$

                  —

 

$

25

 

 

See notes to the condensed consolidated financial statements (unaudited).

7


 

Moelis & Company

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(dollars in thousands, except share amounts)

 

 

Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

Accumulated

 

 

 

 

 

 

 

 

Class A

 

Class B

 

 

 

Class A

 

Class B

 

 

 

 

Additional

 

Earnings

 

Other

 

 

 

 

 

 

 

 

Common

 

Common

 

Treasury

 

Common

 

Common

 

Treasury

 

Paid-In

 

(Accumulated

 

Comprehensive

 

Noncontrolling

 

Total

 

 

Stock

 

Stock

 

Stock

 

Stock

 

Stock

 

Stock

 

Capital

 

Deficit)

 

Income (Loss)

 

Interests

 

Equity

 

Balance as of January 1, 2022

 

68,518,779

 

 

4,686,344

 

 

(5,873,180

)

$

 

685

 

$

 

47

 

$

 

(256,320

)

$

 

1,280,498

 

$

 

(535,282

)

$

 

(560

)

$

 

(10,769

)

$

 

478,299

 

Net income (loss)