10-Q 1 mc-20210930.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, 2021

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, 5th 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 14, 2021, there were 60,964,311 shares of Class A common stock, par value $0.01 per share, and 4,845,457 shares of Class B common stock, par value $0.01 per share, outstanding.

 

 


 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

Part I. Financial Information

 

 

Item 1.

Financial Statements

 

3

Item 2.

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

 

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

36

Item 4.

Controls and Procedures

 

36

Part II. Other Information

 

37

Item 1.

Legal Proceedings

 

37

Item 1A.

Risk Factors

 

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

37

Item 3.

Defaults Upon Senior Securities

 

37

Item 4.

Mine Safety Disclosures

 

37

Item 5.

Other Information

 

37

Item 6.

Exhibits

 

38

Signatures

 

 

39

 

 

 

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, 2021 and December 31, 2020

 

4

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

 

5

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020

 

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

 

7

Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2021 and 2020

 

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,

 

 

2021

 

2020

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

278,701

 

$

202,477

Restricted cash

 

 

1,032

 

 

807

Receivables:

 

 

 

 

 

 

Accounts receivable, net of allowance for credit losses of $2,768 and $3,775 as of September 30, 2021 and December 31, 2020, respectively

 

 

100,783

 

 

89,297

Accrued and other receivables

 

 

32,268

 

 

11,916

Total receivables

 

 

133,051

 

 

101,213

Deferred compensation

 

 

13,840

 

 

12,004

Investments

 

 

338,628

 

 

211,826

Right-of-use assets

 

 

163,902

 

 

177,069

Equipment and leasehold improvements, net

 

 

56,836

 

 

49,977

Deferred tax assets

 

 

417,132

 

 

424,345

Prepaid expenses and other assets

 

 

16,408

 

 

16,726

Total assets

 

$

1,419,530

 

$

1,196,444

Liabilities and Equity

 

 

 

 

 

 

Compensation payable

 

$

389,895

 

$

220,058

Accounts payable, accrued expenses and other liabilities

 

 

21,019

 

 

25,026

Amount due pursuant to tax receivable agreement

 

 

307,603

 

 

307,581

Deferred revenue

 

 

3,914

 

 

2,692

Lease liabilities

 

 

191,207

 

 

196,614

Total liabilities

 

 

913,638

 

 

751,971

Commitments and Contingencies (See Note 11)

 

 

 

 

 

 

Class A common stock, par value $0.01 per share (1,000,000,000 shares authorized, 66,771,423 issued and 60,964,311 outstanding at September 30, 2021; 1,000,000,000 authorized, 61,986,927 issued and 58,027,844 outstanding at December 31, 2020)

 

 

667

 

 

620

Class B common stock, par value $0.01 per share (1,000,000,000 shares authorized, 4,845,457 issued and outstanding at September 30, 2021; 1,000,000,000 authorized, 5,948,750 issued and outstanding at December 31, 2020)

 

 

48

 

 

59

Treasury stock, at cost; 5,807,112 and 3,959,083 shares as of September 30, 2021 and December 31, 2020, respectively

 

 

(252,192)

 

 

(152,170)

Additional paid-in-capital

 

 

1,184,795

 

 

1,052,322

Retained earnings (accumulated deficit)

 

 

(414,851)

 

 

(420,682)

Accumulated other comprehensive income (loss)

 

 

(1,691)

 

 

(201)

Total Moelis & Company equity

 

 

516,776

 

 

479,948

Noncontrolling interests

 

 

(10,884)

 

 

(35,475)

Total equity

 

 

505,892

 

 

444,473

Total liabilities and equity

 

$

1,419,530

 

$

1,196,444

 

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,

 

 

2021

 

2020

 

2021

 

2020

Revenues

 

$

490,821

 

$

207,604

 

$

1,115,594

 

$

521,248

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

307,590

 

 

127,148

 

 

678,106

 

 

371,884

Occupancy

 

 

5,842

 

 

7,660

 

 

20,226

 

 

22,564

Professional fees

 

 

4,771

 

 

4,952

 

 

16,572

 

 

14,383

Communication, technology and information services

 

 

9,139

 

 

8,162

 

 

26,014

 

 

24,117

Travel and related expenses

 

 

4,469

 

 

1,662

 

 

8,949

 

 

11,154

Depreciation and amortization

 

 

1,947

 

 

941

 

 

5,033

 

 

3,216

Other expenses

 

 

4,915

 

 

5,121

 

 

17,885

 

 

14,682

Total expenses

 

 

338,673

 

 

155,646

 

 

772,785

 

 

462,000

Operating income (loss)

 

 

152,148

 

 

51,958

 

 

342,809

 

 

59,248

Other income and (expenses)

 

 

30,435

 

 

(1,631)

 

 

36,376

 

 

(6,568)

Income (loss) before income taxes

 

 

182,583

 

 

50,327

 

 

379,185

 

 

52,680

Provision (benefit) for income taxes

 

 

42,119

 

 

8,534

 

 

69,721

 

 

(10,195)

Net income (loss)

 

 

140,464

 

 

41,793

 

 

309,464

 

 

62,875

Net income (loss) attributable to noncontrolling interests

 

 

20,169

 

 

8,842

 

 

43,299

 

 

10,526

Net income (loss) attributable to Moelis & Company

 

$

120,295

 

$

32,951

 

$

266,165

 

$

52,349

Weighted-average shares of Class A common stock outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

63,024,943

 

 

56,803,430

 

 

62,493,293

 

 

55,263,689

Diluted

 

 

68,274,912

 

 

60,668,084

 

 

67,631,068

 

 

59,241,139

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.91

 

$

0.58

 

$

4.26

 

$

0.95

Diluted

 

$

1.76

 

$

0.54

 

$

3.94

 

$

0.88

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss)

 

$

 

140,464

 

 

$

 

41,793

 

 

$

 

309,464

 

 

$

 

62,875

 

Foreign currency translation adjustment, net of tax

 

 

 

(2,983

)

 

 

 

(499

)

 

 

 

(1,685

)

 

 

 

(2,224

)

Other comprehensive income (loss)

 

 

 

(2,983

)

 

 

 

(499

)

 

 

 

(1,685

)

 

 

 

(2,224

)

Comprehensive income (loss)

 

 

 

137,481

 

 

 

 

41,294

 

 

 

 

307,779

 

 

 

 

60,651

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

 

19,831

 

 

 

 

8,752

 

 

 

 

43,104

 

 

 

 

10,093

 

Comprehensive income (loss) attributable to Moelis & Company

 

$

 

117,650

 

 

$

 

32,542

 

 

$

 

264,675

 

 

$

 

50,558

 

 

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,

 

 

2021

 

2020

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

309,464

 

$

62,875

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

 

 

 

 

 

 

Bad debt expense

 

 

1,733

 

 

2,808

Depreciation and amortization

 

 

5,033

 

 

3,216

Equity-based compensation

 

 

108,824

 

 

97,724

Deferred tax provision

 

 

28,363

 

 

(7,111)

Gain on equity method investment

 

 

(22,508)

 

 

            —

Other

 

 

(11,442)

 

 

8,509

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(28,339)

 

 

(23,532)

Accrued and other receivables

 

 

(19,393)

 

 

(2,589)

Prepaid expenses and other assets

 

 

(922)

 

 

1,190

Deferred compensation

 

 

(1,836)

 

 

(1,585)

Compensation payable

 

 

170,149

 

 

(45,715)

Accounts payable, accrued expenses and other liabilities

 

 

3,446

 

 

1,245

Deferred revenue

 

 

1,209

 

 

4,464

Dividends received

 

 

3,356

 

 

1,942

Net cash provided by (used in) operating activities

 

 

547,137

 

 

103,441

Cash flows from investing activities

 

 

 

 

 

 

Purchases of investments

 

 

(380,496)

 

 

(259,965)

Proceeds from sales of investments

 

 

270,083

 

 

252,484

Notes issued to employees

 

 

                  —

 

 

(200)

Note payments received from employees

 

 

70

 

 

            —

Purchases of equipment and leasehold improvements

 

 

(11,890)

 

 

(31,209)

Proceeds from partial sale of equity method investment

 

 

29,164

 

 

            —

Net cash provided by (used in) investing activities

 

 

(93,069)

 

 

(38,890)

Cash flows from financing activities

 

 

 

 

 

 

Dividends and tax distributions

 

 

(259,589)

 

 

(122,871)

Payments under tax receivable agreement

 

 

(16,336)

 

 

            —

Proceeds from exercise of stock options

 

 

                  —

 

 

11,923

Treasury stock purchases

 

 

(100,022)

 

 

(33,354)

Net cash provided by (used in) financing activities

 

 

(375,947)

 

 

(144,302)

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

 

 

(1,672)

 

 

(2,672)

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

 

 

76,449

 

 

(82,423)

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

 

 

203,284

 

 

168,572

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

 

$

279,733

 

$

86,149

Supplemental cash flow disclosure:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Income taxes

 

$

48,532

 

$

1,914

Other non-cash activity

 

 

 

 

 

 

Non-cash settlement of accounts receivable

 

$

15,125

 

$

            —

Cumulative effect adjustment upon adoption of ASU 2016-13

 

$

                  —

 

$

364

Dividend equivalents issued

 

$

33,293

 

$

17,021

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

 

$

4,193

 

$

5,968

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

 

$

25

 

$

96

 

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, 2021

 

61,986,927

 

 

5,948,750

 

 

(3,959,083

)

$

 

620

 

$

 

59

 

$

 

(152,170

)

$

 

1,052,322

 

$

 

(420,682

)

$

 

(201

)

$

 

(35,475

)

$

 

444,473

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66,529

 

 

 

 

 

 

9,269

 

 

 

75,798

 

Equity-based compensation

 

3,612,341

 

 

 

 

 

 

 

36

 

 

 

 

 

 

 

 

 

41,508

 

 

 

 

 

 

 

 

 

9,419

 

 

 

50,963

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(655

)

 

 

(89

)

 

 

(744

)

Dividends declared ($0.55 per share of Class A common stock) and tax distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,131

 

 

 

(39,013

)

 

 

 

 

 

(5,803

)

 

 

(39,685

)

Treasury Stock Purchases

 

 

 

 

 

(1,363,934

)

 

 

 

 

 

 

 

 

(74,211

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(74,211

)

Equity-based payments to non-employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108

 

 

 

 

 

 

 

 

 

 

 

 

108

 

Issuance of Class A common stock and cancellation of Class B common stock in connection with offerings and other exchanges

 

1,049,293

 

 

(1,049,293

)

 

 

 

 

10

 

 

 

(10

)

 

 

 

 

 

2,161

 

 

 

 

 

 

 

 

 

1,742

 

 

 

3,903

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25

)

 

 

 

 

 

 

 

 

 

 

 

(25

)

Balance as of March 31, 2021

 

66,648,561

 

 

4,899,457

 

 

(5,323,017

)

$

 

666

 

$

 

49

 

$

 

(226,381

)

$

 

1,101,205

 

$

 

(393,166

)

$

 

(856

)

$

 

(20,937

)

$

 

460,580

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79,341

 

 

 

 

 

 

13,861

 

 

 

93,202

 

Equity-based compensation

 

45,056

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,699

 

 

 

 

 

 

 

 

 

1,342

 

 

 

29,041

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,810

 

 

 

232

 

 

 

2,042

 

Dividends declared ($2.55 per share of Class A Common Stock) and tax distributions