10-Q 1 mc-20240331.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 March 31, 2024

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

 

img188345080_0.jpg 

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 April 10, 2024, there were 70,354,653 shares of Class A common stock, par value $0.01 per share, and 4,432,288 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

 

36

Item 4.

Mine Safety Disclosures

 

36

Item 5.

Other Information

 

36

Item 6.

Exhibits

 

37

Signatures

 

 

38

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Financial Statements (Unaudited)

 

 

Page

 

 

Condensed Consolidated Statements of Financial Condition as of March 31, 2024 and December 31, 2023

4

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

5

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

7

Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2024 and 2023

8

Notes to Condensed Consolidated Financial Statements

9

 

3


 

 

Moelis & Company

Condensed Consolidated Statements of Financial Condition

(Unaudited)

(dollars in thousands, except per share amounts)

 

 

 

March 31,

 

December 31,

 

 

2024

 

2023

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

102,643

 

$

186,417

Restricted cash

 

 

610

 

 

798

Receivables:

 

 

 

 

 

 

Accounts receivable, net of allowance for credit losses of $1,955 and $1,263 as of March 31, 2024 and December 31, 2023, respectively

 

 

49,970

 

 

51,219

Accrued and other receivables

 

 

35,241

 

 

12,416

Total receivables

 

 

85,211

 

 

63,635

Deferred compensation

 

 

42,271

 

 

17,133

Investments

 

 

67,676

 

 

210,357

Right-of-use assets

 

 

167,993

 

 

171,998

Equipment and leasehold improvements, net

 

 

66,793

 

 

63,803

Deferred tax assets

 

 

451,001

 

 

437,238

Prepaid expenses and other assets

 

 

28,274

 

 

28,380

Total assets

 

$

1,012,472

 

$

1,179,759

Liabilities and Equity

 

 

 

 

 

 

Compensation payable

 

$

48,621

 

$

259,771

Accounts payable, accrued expenses and other liabilities

 

 

43,398

 

 

32,626

Amount due pursuant to tax receivable agreement

 

 

310,119

 

 

304,567

Deferred revenue

 

 

5,729

 

 

4,649

Lease liabilities

 

 

211,844

 

 

215,684

Total liabilities

 

 

619,711

 

 

817,297

Commitments and Contingencies (See Note 11)

 

 

 

 

 

 

Class A common stock, par value $0.01 per share (1,000,000,000 shares authorized, 80,697,991 issued and 70,354,653 outstanding at March 31, 2024; 1,000,000,000 authorized, 76,859,499 issued and 66,675,039 outstanding at December 31, 2023)

 

 

807

 

 

768

Class B common stock, par value $0.01 per share (1,000,000,000 shares authorized, 4,432,288 issued and outstanding at March 31, 2024; 1,000,000,000 authorized, 4,489,778 issued and outstanding at December 31, 2023)

 

 

44

 

 

45

Treasury stock, at cost; 10,343,338 and 10,184,460 shares at March 31, 2024 and December 31, 2023, respectively

 

 

(459,253)

 

 

(450,859)

Additional paid-in-capital

 

 

1,626,614

 

 

1,573,702

Retained earnings (accumulated deficit)

 

 

(799,087)

 

 

(767,587)

Accumulated other comprehensive income (loss)

 

 

(4,647)

 

 

(3,928)

Total Moelis & Company equity

 

 

364,478

 

 

352,141

Noncontrolling interests

 

 

28,283

 

 

10,321

Total equity

 

 

392,761

 

 

362,462

Total liabilities and equity

 

$

1,012,472

 

$

1,179,759

 

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 March 31,

 

2024

 

2023

Revenues

$

217,485

 

$

187,820

Expenses

 

 

 

 

Compensation and benefits

 

164,475

 

 

148,239

Occupancy

 

7,089

 

 

5,834

Professional fees

 

6,165

 

 

4,946

Communication, technology and information services

 

12,244

 

 

10,834

Travel and related expenses

 

11,963

 

 

10,968

Depreciation and amortization

 

2,375

 

 

2,073

Other expenses

 

7,372

 

 

6,317

Total expenses

 

211,683

 

 

189,211

Operating income (loss)

 

5,802

 

 

(1,391)

Other income and (expenses)

 

4,229

 

 

1,746

Income (loss) before income taxes

 

10,031

 

 

355

Provision (benefit) for income taxes

 

(7,454)

 

 

(3,208)

Net income (loss)

 

17,485

 

 

3,563

Net income (loss) attributable to noncontrolling interests

 

919

 

 

(103)

Net income (loss) attributable to Moelis & Company

$

16,566

 

$

3,666

Weighted-average shares of Class A common stock outstanding

 

 

 

 

 

Basic

 

70,228,589

 

 

67,008,526

Diluted

 

75,102,099

 

 

71,462,547

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

 

 

 

 

 

Basic

$

0.24

 

$

0.05

Diluted

$

0.22

 

$

0.05

 

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 March 31,

 

 

2024

 

2023

Net income (loss)

 

$

17,485

 

$

3,563

Foreign currency translation adjustment, net of tax

 

 

(779)

 

 

284

Other comprehensive income (loss)

 

 

(779)

 

 

284

Comprehensive income (loss)

 

 

16,706

 

 

3,847

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

 

859

 

 

(75)

Comprehensive income (loss) attributable to Moelis & Company

 

$

15,847

 

$

3,922

 

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

6


 

Moelis & Company

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

2024

 

2023

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

17,485

 

$

3,563

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

 

 

 

 

 

 

Bad debt expense (benefit)

 

 

965

 

 

(30)

Depreciation and amortization

 

 

2,375

 

 

2,073

Equity-based compensation

 

 

59,978

 

 

59,638

Deferred tax provision (benefit)

 

 

(7,454)

 

 

(3,170)

Other

 

 

(171)

 

 

86

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

195

 

 

16,328

Accrued and other receivables

 

 

(16,525)

 

 

(8,807)

Prepaid expenses and other assets

 

 

71

 

 

(3,870)

Deferred compensation

 

 

(25,152)

 

 

(19,001)

Compensation payable

 

 

(211,139)

 

 

(214,005)

Accounts payable, accrued expenses and other liabilities

 

 

11,137

 

 

16,507

Deferred revenue

 

 

1,082

 

 

(3,644)

Dividends received

 

 

2,155

 

 

2,189

Net cash provided by (used in) operating activities

 

 

(164,998)

 

 

(152,143)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of investments

 

 

(22,599)

 

 

Proceeds from sales of investments

 

 

163,684

 

 

171,321

Notes issued to employees

 

 

(6,330)

 

 

Purchases of equipment and leasehold improvements

 

 

(5,366)

 

 

(1,104)

Net cash provided by (used in) investing activities

 

 

129,389

 

 

170,217

Cash flows from financing activities

 

 

 

 

 

 

Payments for dividends and tax distributions

 

 

(39,263)

 

 

(46,031)

Payments for treasury stock purchases

 

 

(8,394)

 

 

(44,526)

Net cash provided by (used in) financing activities

 

 

(47,657)

 

 

(90,557)

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

 

 

(696)

 

 

329

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

 

 

(83,962)

 

 

(72,154)

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

 

 

187,215

 

 

207,539

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

 

$

103,253

 

$

135,385

Supplemental cash flow disclosure:

 

 

 

 

 

 

Cash paid (received) during the period for:

 

 

 

 

 

 

Income taxes, net

 

$

595

 

$

2,352

Other non-cash activity:

 

 

 

 

 

 

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

 

$

1,047

 

$

226

Dividends in kind

 

$

6,007

 

$

5,711

Non-cash settlement of accounts receivable

 

$

261

 

$

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

 

$

82

 

$

 

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, 2024

76,859,499

 

4,489,778

 

(10,184,460)

 

$

768

 

$

45

 

$

(450,859)

 

$

1,573,702

 

$

(767,587)

 

$

(3,928)

 

$

10,321

 

$

362,462

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

16,566

 

 

 

 

919

 

 

17,485

Equity-based compensation

3,436,930

 

 

 

 

34

 

 

 

 

 

 

45,618

 

 

 

 

 

 

14,326

 

 

59,978

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(719)

 

 

(60)

 

 

(779)

Dividends declared ($0.60 per share of Class A Common Stock) and tax distributions

 

 

 

 

 

 

 

 

 

 

6,007

 

 

(48,066)

 

 

 

 

2,796

 

 

(39,263)

Treasury Stock Purchases

 

 

(158,878)

 

 

 

 

 

 

(8,394)

 

 

 

 

 

 

 

 

 

 

(8,394)

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

401,562

 

(57,490)

 

 

 

5

 

 

(1)

 

 

 

 

980

 

 

 

 

 

 

63

 

 

1,047

Equity-based payments to non-employees

 

 

 

 

 

 

 

 

 

 

307

 

 

 

 

 

 

 

 

307

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(82)

 

 

(82)

Balance as of March 31, 2024

80,697,991

 

4,432,288

 

(10,343,338)

 

$

807

 

$

44

 

$

(459,253)

 

$

1,626,614

 

$

(799,087)

 

$

(4,647)

 

$

28,283

 

$

392,761

 

 

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, 2023

73,063,181

 

4,635,898

 

(9,076,777)

 

$

730

 

$

46

 

$

(403,857)

 

$

1,412,795

 

$

(560,690)

 

$

(4,529)

 

$

14,443

 

$

458,938

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

3,666

 

 

 

 

(103)

 

 

3,563

Equity-based compensation

3,396,802

 

 

 

 

34

 

 

 

 

 

 

48,656

 

 

 

 

 

 

10,948

 

 

59,638

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

256

 

 

28

 

 

284

Dividends declared ($0.60 per share of Class A Common Stock) and tax distributions

 

 

 

 

 

 

 

 

 

 

5,711

 

 

(46,097)

 

 

 

 

(5,645)

 

 

(46,031)

Treasury Stock Purchases

 

 

(1,057,278)

 

 

 

 

 

 

(44,526)

 

 

 

 

 

 

 

 

 

 

(44,526)

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

240,027

 

(146,120)

 

 

 

3

 

 

(1)

 

 

 

 

(1,101)

 

 

 

 

 

 

1,325

 

 

226

Equity-based payments to non-employees

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

18

Balance as of March 31, 2023

76,700,010

 

4,489,778

 

(10,134,055)

 

$

767

 

$

45

 

$

(448,383)

 

$

1,466,079

 

$

(603,121)

 

$

(4,273)

 

$

20,996

 

$

432,110

 

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

8


 

Moelis & Company

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(dollars in thousands, except share amounts and where explicitly stated)

1.
ORGANIZATION AND BASIS OF PRESENTATION

Moelis & Company and its consolidated subsidiaries (the “Company,” “we,” “our,” or “us”) is a leading global investment bank, incorporated in Delaware. Prior to the Company’s Initial Public Offering (“IPO”), the business operated as a Delaware limited partnership that commenced operations during 2007. Following the IPO, the operations are owned by Moelis & Company Group LP (“Group LP”), a U.S. Delaware limited partnership, and Group LP is controlled by Moelis & Company. Moelis & Company’s shareholders are entitled to receive a portion of Group LP’s economics through their direct ownership interests in shares of Class A common stock of Moelis & Company. The noncontrolling interest owners of Group LP (not Moelis & Company) receive economics of the operations primarily through their ownership interests in Group LP partnership units.

The Company’s activities as an investment banking advisory firm constitute a single business segment offering clients, including corporations, financial sponsors and governments, a range of advisory services with expertise across all major industries in mergers and acquisitions, recapitalizations and restructurings and other corporate finance matters.

Basis of Presentation — The condensed consolidated financial statements of Moelis & Company include its partnership interests in Group LP, its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC (“Group GP”), and its interests in its subsidiaries. Moelis & Company will operate and control all of the business and affairs of Group LP and its operating entity subsidiaries indirectly through its equity interest in Group GP. The Company operates through the following subsidiaries:

Moelis & Company LLC (“U.S. Broker Dealer”), a Delaware limited liability company, a registered broker-dealer with the U.S. Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
Moelis & Company Israel Ltd., a limited company incorporated in Israel.

 

Moelis & Company International Holdings LLC (“Moelis International”), a Delaware limited liability company, owns the following entities and investments, directly or indirectly:

 

Moelis & Company UK LLP (“Moelis UK”), a limited liability partnership registered under the laws of England and Wales. In addition to the United Kingdom, Moelis UK maintains operations through the following branches:

 

Moelis & Company Europe Limited, Frankfurt am Main Branch (German branch)

 

Moelis & Company UK LLP, DIFC Branch (Dubai branch)

 

Moelis & Company Asia Limited (“Moelis Asia”), a limited company incorporated in Hong Kong licensed under the Hong Kong Securities and Futures Ordinance to provide financial advisory services. In addition to Hong Kong, Moelis Asia maintains operations in Beijing, China through a wholly-owned Chinese subsidiary, Moelis & Company Consulting (Beijing) Company Limited.

 

Moelis & Company Netherlands B.V., a private limited company incorporated in Amsterdam, Netherlands. In addition to Amsterdam, Moelis Netherlands maintains operations in Paris, France through a branch, Moelis & Company Netherlands B.V. French Branch

 

Moelis & Company Europe B.V., a private limited company incorporated in Amsterdam, Netherlands.

 

Moelis & Company India Private Limited, a private limited company incorporated in Mumbai, India.

 

Moelis & Company Assessoria Financeira Ltda. (“Moelis Brazil”), a limited liability company incorporated

9


 

in São Paulo, Brazil.

 

Moelis & Company Saudi Limited, a limited liability company incorporated in Riyadh, Saudi Arabia.

 

An equity method investment in MA Financial Group Limited ("MA Financial", previously known as Moelis Australia Limited), a public company listed on the Australian Securities Exchange.

 

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting — The Company prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The condensed consolidated financial statements include the combined operations, assets and liabilities of the Company. The Notes are an integral part of the Company's condensed consolidated financial statements. As permitted by the interim reporting rules and regulations set forth by the SEC, the condensed consolidated financial statements presented exclude certain financial information and footnote disclosures normally included in audited financial statements prepared in accordance with U.S. GAAP. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to fairly present the accompanying unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Consolidation — The Company’s policy is to consolidate (i) entities in which it has a controlling financial interest, (ii) variable interest entities where the Company has a variable interest and is deemed to be the primary beneficiary and (iii) limited partnerships where the Company has ownership of the majority of voting interests. When the Company does not have a controlling interest in an entity, but exerts significant influence over the entity’s operating and financial decisions, the Company applies the equity method of accounting in which it records in earnings its share of income or losses of the entity. All intercompany balances and transactions with the Company’s subsidiaries have been eliminated in consolidation.

Use of Estimates — The preparation of condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could have a material impact on the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period in which they are determined to be necessary.

In preparing the condensed consolidated financial statements, management makes estimates and assumptions regarding:

the adequacy of the allowance for credit losses;
the assessment of whether revenues from variable consideration should be constrained due to the probability of a significant revenue reversal;
the assessment of probable lease terms and the measurement of the present value of such obligations;
the assessment of long-lived assets for impairment and measurement of impairment, if applicable;

 

the measurement and realization of deferred taxes;

 

the measurement of amount due pursuant to tax receivable agreement; and

 

other matters that affect the reported amounts and disclosures of contingencies in the condensed consolidated financial statements.

 

Cash, Cash Equivalents and Restricted Cash — Cash and cash equivalents include all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase.

The Company’s cash is maintained in U.S. and non-U.S. bank accounts, of which most bank account balances had little or no insurance coverage (most balances are held in U.S. and U.K. accounts which exceeded the U.S. Federal Deposit Insurance

10


 

Corporation and U.K. Financial Services Compensation Scheme coverage limits). The Company’s cash equivalents are invested primarily in U.S. and U.K. sovereign debt securities and money market funds.

The Company’s restricted cash is comprised of collateral deposits primarily held by certain non-U.S. subsidiaries. These deposits are required for certain direct debit accounts and are also used to satisfy future U.S. medical claims. A reconciliation of the Company’s cash, cash equivalents and restricted cash as of March 31, 2024 and 2023, is presented below.

 

 

March 31,

 

 

2024

 

2023

Cash

 

$

33,989

 

$

49,199

Cash equivalents

 

 

68,654

 

 

85,423

Restricted cash

 

 

610

 

 

763

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

 

$

103,253

 

$

135,385

 

Additionally, as of December 31, 2023, the Company held cash of $49,054 and cash equivalents of $137,363.

Receivables — The accompanying condensed consolidated statements of financial condition present accounts receivable balances net of allowance for credit losses based on the Company’s assessment of the collectability of customer accounts.

Included in the accounts receivable balances at March 31, 2024 and December 31, 2023 were $3,529 and $4,422, respectively, of long-term receivables related to private funds advisory capital raising engagements, which are generally paid in installments over a period of three to four years. Long-term receivables generated interest income of $32 and $70 for the three months ended March 31, 2024 and 2023, respectively.

The Company maintains an allowance for credit losses that, in management’s opinion, provides for an adequate reserve to cover losses that may be incurred. For purposes of determining appropriate allowances, the Company stratifies its population of accounts receivable into two categories, one for short-term receivables and a second for private funds advisory receivables. Each population is separately evaluated using an aging method that results in a percentage reserve based on the age of the receivable, in addition to considerations of historical charge-offs and current economic conditions.

After concluding that a reserved accounts receivable is no longer collectible, the Company will charge-off the receivable. This has the effect of reducing both the gross receivable and the allowance for credit losses. If a reserved accounts receivable is subsequently collected, such recoveries reduce the gross receivable and the allowance for credit losses and is a reduction of bad debt expense, which is recorded within other expenses on the condensed consolidated statement of operations. The combination of recoveries and the provision for credit losses of a reported period comprise the Company’s bad debt expense.

The following tables summarize credit loss allowance activity for the three months ended March 31, 2024 and 2023:

 

 

Three Months Ended March 31, 2024

 

Three Months Ended March 31, 2023

 

Accounts Receivable

 

Accounts Receivable

 

Short-term Receivables

 

Private Funds Advisory Receivables

 

Total

 

Short-term Receivables

 

Private Funds Advisory Receivables

 

Total

Allowance for Credit Losses, beginning balance

$

1,221

 

$

42

 

$

1,263

 

$

1,136

 

$

593

 

$

1,729

Charge-offs, foreign currency translation and other adjustments

 

(273)

 

 

 

 

(273)

 

 

(74)

 

 

 

 

(74)

Recoveries

 

(564)

 

 

(8)

 

 

(572)

 

 

(729)

 

 

(11)

 

 

(740)

Provision for credit losses

 

1,536

 

 

1

 

 

1,537

 

 

710

 

 

 

 

710

Allowance for credit losses, ending balance

$

1,920

 

$

35

 

$

1,955

 

$

1,043

 

$

582

 

$

1,625

Deferred Compensation — Deferred compensation costs represent arrangements with certain employees whereby cash payments are subject to a required period of service subsequent to payment by the Company. These amounts are charged to expenses over the period that the employee is required to provide services in order to vest in the payment.

Financial Instruments at Fair Value — Fair value is generally based on quoted prices, however if quoted market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations, price activity for equivalent instruments and valuation pricing models. The Company established a fair value hierarchy which prioritizes and ranks

11


 

the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of instrument, the characteristics specific to the instrument and the state of the marketplace (including the existence and transparency of transactions between market participants). Financial instruments with readily-available actively quoted prices or for which fair value can be measured from actively-quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories (from highest to lowest level of observability) based on inputs:

Level 1 — Quoted prices (unadjusted) are available in active markets for identical instruments that the Company has the ability to access as of the reporting date. The Company, to the extent that it holds such instruments, does not adjust the quoted price for these instruments, even in situations in which the Company holds a large position and a sale could reasonably affect the quoted price.

Level 2 — Pricing inputs that are significant to the overall fair value measurement are observable for the instruments, either directly or indirectly, as of the reporting date, but are not the same as those used in Level 1. Fair value is determined through the use of models or other valuation methodologies.

Level 3 — Pricing inputs that are significant to the overall fair value measurement are unobservable for the instruments and include situations where there is little, if any, market activity for the investments. The determination of fair value is based on the best information available, may incorporate management's own assumptions, and involves a significant degree of judgment.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the instrument. The Company's methodology for reclassifications impacting the fair value hierarchy is that transfers in/out of the respective category are reported at fair value as of the beginning of the period in which the reclassification occurred.

Equity Method Investments — The Company accounts for its equity method investments under the equity method of accounting as the Company does not control these entities but has the ability to exercise significant influence. The amounts recorded in investments on the condensed consolidated statements of financial condition reflect the Company’s share of contributions made to, distributions received from, and the equity earnings and losses of, the investment. The Company reflects its share of gains and losses of the investment in other income and expenses in the condensed consolidated statements of operations using the most recently available earnings data at the end of the period.

Leases — The Company maintains operating leases for corporate offices and an aircraft. The Company determines if a contract contains a lease at inception. Operating leases are recorded as right-of-use (“ROU”) assets and lease liabilities on the condensed consolidated statements of financial condition. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease liabilities are recognized at the lease commencement date and are measured at the present value of anticipated lease payments over the lease term. The operating lease ROU assets are equal to the lease liabilities, adjusted for certain lease incentives, accrued rents, and prepaid rents. Typically, our borrowing rate is used to determine the present value of lease payments because the implicit rate is not readily determinable. Our lease terms may include options to extend or terminate the lease. These options are factored into our present value calculations when it is reasonably certain that such options will be exercised. Operating lease expense is recognized on a straight-line basis over the lease term. ROU assets are evaluated for impairment when an event or change in circumstances indicates the carrying value of the assets may not be recoverable. If this occurs, the Company recognizes an impairment charge for the difference between the carrying amount and the estimated fair value of the assets.

Equipment and Leasehold Improvements — Office equipment and furniture and fixtures are stated at cost less accumulated depreciation, which is determined using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years, respectively. Leasehold improvements are stated at cost less accumulated amortization, which is determined using the straight-line method over the lesser of the term of the lease or the estimated useful life of the asset.

Major renewals and improvements are capitalized and minor replacements, maintenance and repairs are charged to expenses as incurred. Assets that are in development and have not yet been placed in service are generally classified as “Construction in Progress” and are reclassified to the appropriate category when the associated assets are placed in service. Equipment and leasehold improvements are evaluated for impairment when an event or change in circumstances indicates the carrying value of the assets may not be recoverable. If this occurs, the Company recognizes an impairment charge for the difference between the carrying amount and the estimated fair value of the assets. Upon retirement or disposal of assets, the cost

12


 

and related accumulated depreciation or amortization are removed from the condensed consolidated statements of financial condition and any gain or loss is reflected in the condensed consolidated statements of operations.

Software Costs related to implementation of cloud computing arrangements that qualify for capitalization are stated at cost less accumulated amortization within prepaid and other assets on the Company’s condensed consolidated statement of financial condition. Such capitalized costs are amortized using the straight-line method over the term of the cloud computing service contract or another rational basis, beginning when the cloud computing arrangement is substantially complete and ready for its intended use. All costs not directly related to the implementation of cloud computing arrangements, including overhead costs and costs of service agreements, are expensed in the period they are incurred. The amortization expense of such capitalized costs are presented under communication, technology and information services on the condensed consolidated statement of operations.

Deferred Tax Asset and Amount Due Pursuant to Tax Receivable Agreement — In conjunction with the IPO, the Company was treated for U.S. federal income tax purposes as having directly purchased Class A partnership units in Group LP from the existing unitholders. Additional Group LP Class A partnership units may be issued and exchanged for shares of Class A common stock in the Company. The initial purchase and future exchanges are expected to result in an increase in the tax basis of Group LP’s assets attributable to the Company’s interest in Group LP. These increases in the tax basis of Group LP’s assets attributable to the Company’s interest in Group LP would not have been available but for the initial purchase and future exchanges. Such increases in tax basis are likely to increase (for tax purposes) depreciation and amortization deductions and therefore reduce the amount of income tax the Company would otherwise be required to pay in the future. As a result, the Company records a deferred tax asset for such increase in tax basis.

The Company has entered into a tax receivable agreement with its eligible Managing Directors that will provide for the payment by the Company to its eligible Managing Directors of 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax or franchise tax that the Company actually realizes as a result of (a) the increases in tax basis attributable to exchanges by its eligible Managing Directors and (b) tax benefits related to imputed interest deemed to be paid by the Company as a result of this tax receivable agreement. The Company expects to benefit from the remaining 15% of cash savings, if any, in income tax that it realizes and record any such estimated tax benefits as an increase to additional paid-in-capital. For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing the Company’s actual income tax liability to the amount of such taxes that it would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of Group LP as a result of the exchanges and had it not entered into the tax receivable agreement. The term of the tax receivable agreement commenced upon consummation of the IPO and will continue until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the tax receivable agreement for an amount based on an agreed value of payments remaining to be made under the agreement. The Company has recorded the estimated tax benefits related to the increase in tax basis and imputed interest as a result of the initial purchase and subsequent exchanges described above as a deferred tax asset in the condensed consolidated statements of financial condition. The amount due to its eligible Managing Directors related to the tax receivable agreement as a result of the initial purchase and subsequent exchanges described above is recorded as amount due pursuant to tax receivable agreement in the condensed consolidated statements of financial condition. The amounts recorded for the deferred tax asset and the liability for our obligations under the tax receivable agreement are estimates. Any adjustments to our estimates subsequent to their initial establishment will be included in net income (loss). Future exchanges of Class A partnership units in Group LP for Class A common shares in the Company will be accounted for in a similar manner.

Revenue and Expense Recognition — We earn substantially all of our revenues by providing advisory services on mergers and acquisitions, recapitalizations and restructurings, capital markets transactions, private fund raisings and secondary transactions, and other corporate finance matters. The Company also acts as an underwriter of certain securities offerings. We provide our advisory services on an ongoing basis which, for example, may include evaluating and selecting one of multiple strategies. In many cases, we are not paid until the completion of an underlying transaction.

The Company recognizes the vast majority of its advisory services revenues over time, including reimbursements for certain out-of-pocket expenses, when or as our performance obligations are fulfilled and collection is reasonably assured. The determination of whether revenues are recognized over time or at a point in time depends upon the type of service being provided and the related performance obligations. We identify the performance obligations in our engagement letters and determine which services are distinct (i.e. separately identifiable and the client could benefit from such service on its own). We allocate the transaction price to the respective performance obligations by estimating the amount of consideration we expect in exchange for providing each service. Both the identification of performance obligations and the allocation of transaction price to the respective performance obligations requires significant judgment.

13


 

During such advisory engagements, our clients are continuously benefitting from our advice and the over time recognition matches the transfer of such benefits. However, the recognition of transaction fees, which are variable in nature, is constrained until substantially all services have been provided, specified conditions have been met (e.g. transaction closing) and it is probable that a significant reversal of revenue will not occur in a future period. Upfront fees and retainers specified in our engagement letters that meet the over time criteria will be recognized on a systematic basis over the estimated period where the related services are performed.

With respect to fairness opinions, fees are fixed and delivering the opinion is a separate performance obligation from other advisory services that may be promised under the same engagement letter; as such these revenues are recognized at a point in time when the engagement is formally completed and the client can obtain substantially all of the benefits from the service. Similarly, underwriting engagements are typically a single performance obligation and fees are generally recognized as revenue when the offering has been deemed to be completed by the lead manager of the underwriting group. In these instances, point in time recognition appropriately matches the transfer and consumption of our services.

Incremental costs of obtaining a contract are expensed as incurred since such costs are generally not recoverable and the typical duration of our advisory contracts is less than one year. Costs to fulfill contracts consist of out-of-pocket expenses that are part of performing our advisory services and are typically expensed as incurred, except where the transfer and consumption of our services occurs at a point in time. For engagements recognized at a point in time, out-of-pocket expenses are capitalized and subsequently expensed in the condensed consolidated statement of operations upon completion of the engagement. The Company records deferred revenues when it receives fees from clients that have not yet been earned (e.g. an upfront fee) or when the Company has an unconditional right to consideration before all performance obligations are complete (e.g. upon satisfying conditions to earn an announcement fee, but before the transaction is consummated).

Complications that may terminate or delay a transaction include failure to agree upon final terms with the counterparty, failure to obtain required regulatory consents, failure to obtain board or stockholder approvals, failure to secure financing, adverse market conditions or unexpected operating or financial problems related to either party to the transaction. In these circumstances, we often do not receive advisory fees that would have been received if the transaction had been completed, despite the fact that we may have devoted considerable time and resources to the transaction. Barriers to the completion of a restructuring transaction may include a lack of anticipated bidders for the assets of our client, the inability of our client to restructure its operations, or indebtedness due to a failure to reach agreement with its creditors. In these circumstances, our fees are generally limited to monthly retainer fees and reimbursement of certain out-of-pocket expenses.

We do not allocate our revenue by the type of advice we provide because of the complexity of the transactions on which we may earn revenue and our holistic approach to client service. For example, a restructuring engagement may evolve to require a sale of all or a portion of the client, M&A assignments can develop from relationships established on prior restructuring engagements, and capital markets expertise can be instrumental on both M&A and restructuring assignments.

Equity-based Compensation The Company recognizes the cost of services received in exchange for equity instrument awards. The cost of such awards reflects the grant-date fair value, which is typically based on quoted market prices of the Company's stock at the time of grant, amortized over the service period required by the award’s vesting terms. The Company also grants equity-based awards with post-vesting restrictions or market conditions. For these types of awards the grant-date fair value reflects the post-vesting restrictions or the probability of achieving the market conditions. The Company also recognizes the cost of services received from a nonemployee in exchange for an equity instrument based on the award’s grant-date fair value. The Company records as treasury stock shares repurchased from its employees for the purpose of settling tax liabilities incurred upon the vesting of restricted stock units (“RSUs”). The Company records dividends in kind, net of forfeitures, on outstanding RSUs as a reduction of retained earnings with a corresponding increase in additional paid-in capital, resulting in no net change to equity. Dividends in kind on RSUs and other stock-based awards are subject to the same vesting conditions as the underlying awards on which they were accrued. Dividends in kind will be forfeited if the underlying award does not vest.

The Company has terms that qualify certain employees to terminate their services while not forfeiting certain qualifying incentive awards granted during employment. For qualifying awards, (i) the employee must be at least 56 years old, (ii) the employee must have provided at least 5 consecutive years of service to the Company and (iii) the total of (i) and (ii) must be equal to at least 65 years. Any such awards will continue to vest on their applicable vesting schedule, subject to noncompetition and other terms. Over time a greater number of employees may become retirement eligible and the related requisite service period over which we will expense these awards will be shorter than the stated vesting period. Unvested RSUs and certain stock-based awards are eligible to receive dividends in kind; however, the right to dividends in kind will be forfeited if the underlying award does not vest.

14


 

Income Taxes The Company accounts for income taxes in accordance with ASC 740, “Accounting for Income Taxes” (“ASC 740”), which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax bases of its assets and liabilities by applying the enacted tax rates in effect for the year in which the differences are expected to reverse. Such net tax effects on temporary differences are reflected on the Company’s condensed consolidated statements of financial condition as deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when the Company believes that it is more-likely-than-not that some or all of the deferred tax assets will not be realized.

ASC 740-10 prescribes a two-step approach for the recognition and measurement of tax benefits associated with the positions taken or expected to be taken in a tax return that affect amounts reported in the financial statements. The Company has reviewed and will continue to review the conclusions reached regarding uncertain tax positions, which may be subject to review and adjustment at a later date based on ongoing analyses of tax laws, regulations and interpretations thereof. For the three months ended March 31, 2024 and 2023, no unrecognized tax benefit was recorded. To the extent that the Company’s assessment of the conclusions reached regarding uncertain tax positions changes as a result of the evaluation of new information, such change in estimate will be recorded in the period in which such determination is made. The Company reports income tax-related interest and penalties relating to uncertain tax positions, if applicable, as a component of income tax expense. For the three months ended March 31, 2024 and 2023, no such amounts were recorded.

The Company recognizes excess tax benefits and deficiencies as income tax benefits or expenses in the condensed consolidated statement of operations. These are reflected in accounts payable, accrued expenses and other liabilities within the condensed consolidated statement of cash flows.

Foreign Currency Translation Assets and liabilities held in non-U.S. dollar denominated currencies are translated into U.S. dollars at exchange rates in effect at the end of the reporting period. Revenues and expenses are translated at average exchange rates during the reporting period. A charge or credit is recorded to other comprehensive income to reflect the translation of these amounts to the extent the non-U.S. currency is designated the functional currency of the subsidiary. Non-functional currency related transaction gains and losses are immediately recorded in the condensed consolidated statements of operations.

3.
RECENT ACCOUNTING PRONOUNCEMENTS.

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting" ("ASU 2023-07"). ASU 2023-07 requires public companies to disclose significant expenses and other income for each of their segments. Furthermore, it requires public companies to disclose the title and position of the Chief Operating Decision Maker ("CODM") and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing performance and deciding how to allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024. Upon initial evaluation, the Company does not expect the adoption of ASU 2023-07 to have a material impact to the Company's consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes" ("ASU 2023-09"). ASU 2023-09 requires entities to disclose more qualitative and quantitative information in the reconciliation of federal statutory tax rates. Furthermore, it requires entities to disaggregate the total income taxes paid by federal, state, and foreign taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Upon initial evaluation, the Company does not expect the adoption of ASU 2023-09 to have a material impact to the Company's consolidated financial statements.

In March 2024, the FASB issued ASU No. 2024-01, "Scope Application of Profits Interest and Similar Awards" ("ASU 2024-01"). ASU 2024-01 clarifies appropriate accounting for awards issued with the intent to align compensation with operating performance by providing specific examples for issuers to follow. Beyond these clarifying examples, no changes to the codification were made. ASU 2024-01 is effective for fiscal years beginning after December 15, 2024, and interim periods within the fiscal years beginning after December 15, 2024. The Company has evaluated ASU 2024-01 and does not expect its adoption to have a material impact to the Company's consolidated financial statements.

15


 

4.
FIXED AND INTANGIBLE ASSETS

 

Equipment and leasehold improvements, net consists of the following:

 

 

 

March 31,

 

December 31,

 

 

2024

 

2023

Office equipment

 

$

17,535

 

$

18,931

Furniture and fixtures

 

 

16,371

 

 

16,143

Leasehold improvements

 

 

72,687

 

 

69,910

Construction in progress

 

 

3,722

 

 

1,714

Total

 

 

110,315

 

 

106,698

Less: Accumulated depreciation and amortization

 

 

(43,522)

 

 

(42,895)

Equipment and leasehold improvements, net

 

$

66,793

 

$

63,803

 

Depreciation and amortization expenses for fixed assets totaled $2,375 and $2,073 for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023, there were $1,093 and $1,151 of costs capitalized, net of $1,778 and $1,720 of accumulated amortization, respectively, within prepaid expenses and other assets on our condensed consolidated statements of financial condition related to the implementation of cloud computing arrangements. The amortization expense of the capitalized costs was $58 and $122 for each of the three months ended March 31, 2024 and 2023, respectively. The amortization expense was recorded within communication, technology and information services on the condensed consolidated statements of operations.

5.
INVESTMENTS

Investments Measured at Fair Value

Fair value investments are presented within investments on the Company’s condensed consolidated statements of financial condition. The Company established a fair value hierarchy which prioritizes and ranks the level of market price observability used in measuring investments at fair value. See Note 2 for further information on the Company's fair value hierarchy.

The estimated fair value of sovereign debt securities, money market funds and certificates of deposit are based on quoted prices for recent trading activity in identical or similar instruments. The Company primarily invests in U.S. and U.K. sovereign debt securities with maturities of less than twelve months and we consider these securities to be risk free. Therefore, we do not reserve for expected credit losses on these investments.

Fair Value of Financial Assets

The fair value of the Company's financial assets as of March 31, 2024, have been categorized based upon the fair value hierarchy as follows:

 

 

Total

 

Level 1

 

Level 2

 

Level 3

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Money market funds

$

58,026

 

$

 

$

58,026

 

$

Certificates of Deposit

 

10,628

 

 

 

 

10,628

 

 

Total financial assets included in cash and cash equivalents

 

68,654

 

 

 

 

68,654

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Sovereign debt securities

 

22,290

 

 

 

 

22,290

 

 

Total financial assets included in investments

 

22,290

 

 

 

 

22,290

 

 

Total financial assets

$

90,944

 

$

 

$

90,944

 

$

During the year ended December 31, 2023, the Company liquidated its equity investments measured at fair value, and the Company held no such investments as of March 31, 2024. Therefore, there were no unrealized gains or losses on equity securities held at the reporting date for the three months ended March 31, 2024. Unrealized losses of $2,015 were recognized on equity investments measured at fair value and held at the reporting date for the three months ended March 31, 2023. For sovereign debt securities measured at fair value and held at the reporting date, unrealized losses of $48 and unrealized gains of

16


 

$373 were recognized for the three months ended March 31, 2024 and 2023, respectively. All gains and losses were recognized in other income and expenses on the condensed consolidated statement of operations. The cost basis of the investments recorded at fair value shown in the preceding table and included in investments on the condensed consolidated statement of financial condition was $22,338 as of March 31, 2024.

The fair value of the Company's financial assets as of December 31, 2023 have been categorized based upon the fair value hierarchy as follows:

 

 

Total

 

Level 1

 

Level 2

 

Level 3

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Sovereign debt securities

$

84,343

 

$

 

$

84,343

 

$

Money market funds

 

46,818

 

 

 

 

46,818

 

 

Certificates of Deposit

 

6,202

 

 

 

 

 

6,202

 

 

 

Total financial assets included in cash and cash equivalents

 

137,363

 

 

 

 

137,363

 

 

Investments

 

 

 

 

 

 

 

 

 

 

 

Sovereign debt securities

 

162,899

 

 

 

 

162,899

 

 

Total financial assets included in investments

 

162,899

 

 

 

 

162,899

 

 

Total financial assets

$

300,262

 

$

 

$

300,262

 

$

The cost basis of the financial assets recorded at fair value included in investments on the condensed consolidated statement of financial condition was $160,125 as of December 31, 2023.

Equity Method Investments

Equity-method investments are presented within investments on the Company’s condensed consolidated statements of financial condition. As of March 31, 2024 and December 31, 2023, the carrying value of the Company's equity method investment in MA Financial (formerly known as Moelis Australia Limited) was $45,386 and $47,458, respectively. The Company's share of earnings on this investment is recorded in other income and expenses on the condensed consolidated statements of operation.

During the three months ended March 31, 2024 and 2023, MA Financial declared dividends, of which the Company received $2,155 and $2,189, respectively. The Company accounted for the dividends as returns on investment and reduced the carrying value of the investment in MA Financial by the amount of dividends received.

From time to time, MA Financial may issue shares in connection with a transaction or employee compensation which reduces the Company's ownership interest in MA Financial and can result in dilution gains or losses. Such gains or losses are recorded in other income and expenses on the condensed consolidated statements of operation.

17


 

6.
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO CLASS A COMMON SHAREHOLDERS

The calculations of basic and diluted net income (loss) per share attributable to holders of shares of Class A common stock for the three months ended March 31, 2024 and 2023 are presented below.

 

 

 

Three Months Ended March 31,

(dollars in thousands, except per share amounts)

 

2024

 

 

2023

Numerator:

 

 

 

 

 

 

 

Net income (loss) attributable to holders of shares of Class A common stock—basic

 

$

16,566

 

 

$

3,666

Add (deduct) dilutive effect of:

 

 

 

 

 

 

 

Noncontrolling interests related to Class A partnership units

(a)

 

 

 

(a)

 

 

Net income (loss) attributable to holders of shares of Class A common stock—diluted

 

$

16,566

 

 

$

3,666

Denominator:

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding—basic

 

 

70,228,589

 

 

 

67,008,526

Add (deduct) dilutive effect of:

 

 

 

 

 

 

 

Noncontrolling interests related to Class A partnership units

(a)

 

 

 

(a)

 

 

Weighted average number of incremental shares issuable from unvested RSUs and stock options, as calculated using the treasury stock method

(b)

 

4,873,510

 

(b)

 

4,454,021

Weighted average shares of Class A common stock outstanding—diluted

 

 

75,102,099

 

 

 

71,462,547

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

 

 

 

 

 

 

 

Basic

 

$

0.24

 

 

$

0.05

Diluted

 

$

0.22

 

 

$

0.05

 

We have not included the impact of Class B common stock because these shares are entitled to an insignificant amount of economic participation.

(a) Class A partnership units may be exchanged for Moelis & Company Class A common stock on a one-for-one basis, subject to applicable exchange restrictions. If all Class A partnership units were to be exchanged for Class A common stock, fully diluted Class A common stock outstanding would be 81,429,194 shares and 77,557,598 shares for the three months ended March 31, 2024 and 2023, respectively. In computing the dilutive effect, if any, that the aforementioned exchange would have on net income (loss) per share, net income (loss) available to holders of Class A common stock would be adjusted due to the elimination of the noncontrolling interests in consolidated entities associated with the Group LP Class A partnership units (including any tax impact). For the three months ended March 31, 2024 and 2023, such exchange is not reflected in diluted net income (loss) per share as the assumed exchange is not dilutive.

 

(b) Certain RSUs assumed to be issued as Class A common stock pursuant to the treasury stock method were antidilutive and therefore excluded from the calculation of diluted net income (loss) per share attributable to Moelis & Company for certain periods. During the three months ended March 31, 2024 and 2023, there were 163,642 RSUs and 1,332,032 RSUs that would have been included in the treasury stock method calculation if the effect were dilutive, respectively.

 

 

7.
EQUITY‑BASED COMPENSATION

2014 Omnibus Incentive Plan

In connection with the IPO, the Company adopted the Moelis & Company 2014 Omnibus Incentive Plan (the “Plan”) to provide additional incentives to selected officers, employees, Managing Directors, non-employee directors, independent contractors, partners, senior advisors and consultants. The Plan provides for the issuance of incentive stock options (“ISOs”), nonqualified stock options, stock appreciation rights (“SARs”), restricted stock, RSUs, stock bonuses, other stock-based awards (including partnership interests that are exchangeable into stock upon satisfaction of certain conditions) and cash awards.

18


 

Restricted Stock Units (RSUs) and other stock-based awards

Pursuant to the Plan and in connection with the Company’s annual compensation process and ongoing hiring process, the Company issues RSUs and other stock-based awards which generally vest over a service life of four to five years. For the three months ended March 31, 2024 and 2023, the Company recognized expenses of $59,978 and $59,638, respectively.

The following table summarizes activity related to RSUs for the three months ended March 31, 2024 and 2023.

 

Restricted Stock Units

 

2024

 

2023

 

 

 

Weighted

 

 

 

Weighted

 

 

 

Average

 

 

 

Average

 

Number of

 

Grant Date

 

Number of

 

Grant Date

 

Shares

 

Fair Value

 

Shares

 

Fair Value

Unvested Balance at January 1,

7,850,574

 

$

46.82

 

8,099,629

 

$

47.49

Granted

3,503,469

 

 

54.84

 

3,363,896

 

 

44.41

Forfeited

(13,693)

 

 

49.86

 

(43,319)

 

 

47.69

Vested

(2,903,954)

 

 

46.51

 

(3,247,897)