Good afternoon and welcome to the Moelis & Company Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Michele Miyakawa, Head of Investor Relations. Please go ahead.

Great. Thank you and good afternoon. Thank you for joining us for Moelis & Company's Third Quarter 2017 Financial Results Conference Call. On the phone today are Navid Mahmoodzadegan, Co-Founder and Co-President; and Joe Simon, Chief Financial Officer. Before we begin, I'd like to note that the remarks made on this call may contain certain forward-looking statements, including regarding future performance which are subject to various risks and uncertainties, including those identified from time to time in the Risk Factors section of Moelis & Company's filings with the SEC. Actual results could differ materially from those currently anticipated. The firm undertakes no obligation to update any forward-looking statements. Our comments today include references to certain adjusted or non-GAAP financial measures. We believe these measures, when presented together with comparable GAAP measures, are useful to investors to compare our results across several periods and to better understand our operating results. The reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information required by Reg G is provided in the firm's earnings release, which can be found on our Investor Relations website at investors.moelis.com. I'll now turn the call over to Joe.

Thanks, Michele. Good afternoon everyone. On today's call, I’ll discuss our results and then Navid will provide an update on our business. We reported third quarter revenues of $170 million, up 13% from the prior year quarter. Our performance compares favorably to the overall M&A market in which the number of global M&A completions greater than 100 million was down 5% from the prior year quarter. We saw a strong growth in M&A in the first half of the year and this trend continued into the third quarter, driving much of our quarterly revenue growth. In particular, we saw a large number of sell side completions and also earned higher average fees on these transactions. While restructuring activity grew through the first half of the year as expected, we saw a decrease in the number of completed transactions in the third quarter and we anticipate this trend will continue. We expect to end the year with the restructuring business that is both strong and consistent, but given growth in other areas will likely represent the lower end of the 20% to 25% range of total revenues. Our year-to-date revenues were $515 million, up 26% from the prior year period. We advised a greater number of clients in the first nine months of 2017, including a greater number of clients who paid fees over $1 million, and we completed a larger number of transactions over the prior year period earning higher average transaction fees. Moving to expenses, our adjusted comp expense ratio of 58% for the quarter and first nine months is in line with our target, as well as with prior periods. Regarding non-comp expenses, we reserved for client collection issues of nearly $3 million in the third quarter. We view this activity to be an anomalous and isolated. For…

Thanks Joe, good afternoon. As Joe discussed, our revenue growth this quarter was largely attributable to growth and M&A. We continue to see an increase in the size and complexity of the transactions on which we advise, as well as in fees earned per transaction. We benefited significantly to date as a result of our collaborative model. Of note, cross-border transactions are a meaningful top line contributor responsible for more than a third of our year-to-date M&A completions as we continue to benefit from banker collaboration on our global platform. In addition, for the year-to-date period Europe, the Middle East, and Asia were positive contributors to our growth. As the markets improve in these regions and as our network continues to strengthen, we should see further international and cross-border opportunity. We continue to add to our global network with key senior hires in September. Trevor Montano joined our DC office, broadened our financial institutions effort with coverage of regional banks and non-bank lenders. In addition, earlier this month Pablo de la Infiesta joined our London office to expand our private fund advisory offering throughout EMEA; and Jay Hernandez joined our Boston office to focus on the highly active industrial technology sector. We also expect to announce an additional MD hire next week. Excluding the senior hires that joined in October, we ended the quarter with 113 managing directors. That is up from 102 managing directors at the end of 2016. The benefits of our model, the network effect of our global collaboration, our focused strategy of organic growth, and our expense discipline are clear. We have a strong track record of returning all of our excess capital, and have generated significant cash year-to-date. Similar to prior years, we intend to evaluate this cash at year-end, and will determine the best method of returning it to our shareholders as we continue to build shareholder value. With that, we welcome any questions you may have.

We will now begin the question and answer session. [Operator Instructions] Our first question comes from Ken Worthington with JPMorgan. Please go ahead.

Hi, good morning. I'm sorry, good afternoon. In terms of the middle market, can you talk about your thoughts on further growing the advisory business in the middle market? I think Ken talked last year about the opportunity and then a couple of quarters ago about the increase in middle market activity, so I’m curious to see what the firm outlook is right now for that and to what extent you are thinking about sort of further pursuing the middle market as sort of an M&A opportunity for Moelis?

Great, thanks Ken, this is Navid, appreciate the question. Look, the middle market has and will continue to be an area that we focus on in addition to our large cap coverage. It’s a segment of the market that year-to-date has proven to be stronger growth in terms of completed transaction volume year-to-date than the larger cap deals for reasons we’ve talked about on previous calls, but mid-cap coverage has been a good business for us, will continue to be a good business for us and we continue to put resources against that effort.

Just maybe a follow up on that, how does pushing down market impact your ability to kind of serve your bigger banking clients, and then maybe separately, how does the pushdown market kind of impact your brand as bigger banking clients sort of think about choosing Moelis as the adviser on their transactions?

Ken, I guess I would maybe quibble a little bit with the characterization of pushing down market. I think we look at coverage of clients in a holistic way. Our sector bankers, our product bankers, cover companies both medium size all the way up to the largest companies in the world. We think it’s not an either/or coverage model, and in fact we think working with growth companies, middle market companies, actually adds to the dialogue we have with our bigger cap clients. We do think understanding spaces and companies of note as ideas and opportunities adds to the dialogue with bigger cap companies as opposed to detracts from the dialogue from bigger cap companies. And so, I don't think it’s - we started big and we are pushing smaller, we started small and we are pushing big, I think we’ve always kind of focused on the entire market, our bankers continue as we - as our talent develops as our brand matures, as our global network continues to be built out, continues to devise on larger and more complex assignments. We’ve seen that trend throughout our history and we expect it to continue, and we think covering middle market companies is both positive from a P&L perspective and adds to the coverage of our larger cap clients.

Great. Thank you very much.

Next question comes from Betsy Graseck with Morgan Stanley. Please go ahead.

Hi, good afternoon. It’s Betsy Graseck.

Hi Betsy.

Couple of questions, one is on the restructuring piece I know we talked a lot on the prepared remarks regarding M&A, could you just give us a sense as to where the business is in the life cycle of restructuring in the various industries that have really been driving the bus on restructuring revenues recently?

Betsy, look I think we’ve talked on previous calls that we thought the restructuring business despite kind of a blip up towards the end of last year and the beginning part of this year was going to largely be sort of a flattish kind of business this year. I think that’s proven to be true, and so I think the trajectory of that business is very much in line with what we expected to happen at this point in the cycle, and where we are on the cycle obviously is we are at an all-time high in the equity markets. We have capital markets that are providing companies with tremendous opportunities for liquidity, obviously there are some spaces and some sectors that are undergoing some duress because of technology changes. We saw it in the energy industry because of oil prices et cetera, but I think at this point in the economic cycle and given where the equity markets are and the credit markets, I think the level of restructuring activity is pretty much in line with what you would expect.

Okay and then just a separate question on M&A, get a couple of thoughts from you on how you are thinking about the tax, potential for tax changes impacting M&A market, and then secondly on how you are advising your clients with regard to technology oriented M&A. It feels like a lot of M&A is to drive operating leverage from expense improvements, but just wondering to what extent you are seeing companies engaging M&A to drive revenue lift from better optimizing their customer set and the technology that they can get from their customer set?

So, let me ask answer both questions Betsy. On tax, I’m not going to predict whether tax reform is going to happen and when and what the rates are going to look like, obviously the political situation is fluid and unpredictable, but look, I do think if there is meaningful corporate tax reform and by that I think the two elements that I think could potentially drive incremental M&A business are repatriation of overseas cash and significant reductions in corporate tax rates. If either or both of those things happen then I do think net, net those will become positive elements that will spur incremental M&A. So on the repatriation side, if companies are allowed to bring overseas cash back in the United States, certainly some of that money will be returned to shareholders in the forms of dividends and share repurchases, but we also think some of that money will free-up M&A activity, and will spur M&A activity, and on corporate tax rates, I do think that when companies, especially larger companies are kind of thinking about the businesses they are in, oftentimes a barrier to corporate divestitures or kind of restructuring of their operations or carveouts is, you know the taxes they are going to have to pay, should they choose to get out of this business or that business. And so, if the corporate tax rates lowered that just reduces the friction cost on the margin of undertaking a corporate carveout or a divestiture. And we do think if that should happen, if meaningful corporate tax - lowering of corporate tax rate should happen we do think that will change the calculus on the margins for some companies in certain situations, and we do think that’s a positive from an M&A volume perspective, but again hard to…

Okay. Thank you.

Next question comes from Michael Needham with Bank of America Merrill Lynch. Please go ahead.

Hi good afternoon. So, just first on, I guess level of industry activity, we’re kind of seeing different things from different firms just in terms of the level of their M&A pipelines, clearly results continue to be good for you guys, just wondering if you could talk a little bit about how active your pipeline is, how active dialogues are for M&A?

Thanks Michael, thanks for the question. Look, we don't talk about or quote pipeline numbers or things of that nature, but let me just sort of tell you kind of qualitatively, look we feel as good as about our business as we have ever felt. I do think our dialogues are active, our client penetration and activity levels are very, very good. We feel great about the hires we’ve made this year, we feel great about our talent development. And again, while we don't talk about specific numbers we feel really good about our business. So…

Okay, fair enough. And then just on something you mentioned, I think in your prepared remarks that you are seeing bigger deals recently and bigger fees per deal, I am wondering is this a trend, can you maybe take a crack at isolating the drivers or is it just kind of some things close that were bigger recently? Thanks.

And again, I think, look I think just to separate the issues. We have seen a reduction market-wide in terms of large cap deal activity this year. So, primarily we believe the increase in fees we're seeing is primarily a result of continued match duration of our company and of our bankers and of our global platform. So, as I said before, I do think that as we mature and as we develop that our client dialogues get better. We are in more places and in more rooms and I think that naturally means bigger and more complicated transactions, and I think that’s part of what you are seeing in our numbers this year, and that’s within an overall context where large deal activity for lots of reasons we’ve talked about in previous calls has been relatively muted this year.

Okay, thank you.

Next question comes from Yian Dai with KBW. Please go ahead.

Hi, good afternoon. Thank you. I don't know if you have the specific numbers, but I was hoping you could give us an idea of how many of your MDs are within a year to either being promoted or hired? You know you’re hiring very quickly, you’re promoting a lot as well, I guess I’m just trying to put a framework around, how much of the firm is still fairly new to their seats and maybe in the earlier stages of ramping up their revenue generation personally?

Yes, great question thanks for asking that. It’s a very big part of our story, our internal talent development bringing people up through our system, part of our culture and helping to kind of create the next generation of managing directors has really being kind of one of the foundational principles of the firm. So, sitting here today roughly a little under a third of our MDs have been at the firm for three years or less and approximately a quarter of our MDs are internally promoted MDs. And we think, especially that second number, the 25%, I think again is a testament to the emphasis we put on talent development, kind of the culture that we’ve tried to create at the firm and our success so far in helping new Managing Directors be successful on the platform.

Okay great, thank you. And as a follow-up, I guess, I’m wondering if you could give us some color on some of the conversations you’re having with potential clients and whether the market evaluations today are, I guess promoting or hindering deal activity and what that push take is just given maybe having a greater currency to do deals versus not wanting to buy expensively?

Well look, I think everywhere you go you definitely hear a recurring theme that clients were looking at buying companies believe the market is expensive and that high-quality companies are expensive. So, it is rare that you have a dialogue with the client where they don't say, I would like to do this, but that’s expensive, right. So, certainly with the - at a market peak in terms of the equity markets lots of financing available and so certainly kind of prices are high. Having said that, there continues to be reasons why companies will pursue M&A despite the perception of high prices or the reality of high prices. First, as we talked about you do have these tectonic shifts that are kind of hitting a lot of these industries that require companies to position themselves for the future, you do have this sort of general low growth economic environment, which causes companies to want to combine to get scale and to get expense savings to create EPS growth. And then you do have large pools of money, record-setting pools of money that have been raised by private equity firms that have to get put to work. They are in the business of buying companies even in markets where there is a perception the prices are expensive, and obviously there is ample credit available to buy companies and buy companies of scale. So, all of those forces continue to drive the kind of M&A environment we're seeing, which again is sort of a flattish M&A environment. I don't want to give of the view or belief that it’s a really hard or strong M&A market, it’s sort of a flat M&A market, but I think it’s sort of a push pull between those forces. Yes, the market is expensive, but we still need to do some things and that’s the tension that exists in the market today.

That’s good color. Thank you.

Next question comes from Brennan Hawken with UBS. Please go ahead.

Hi, thanks for taking the questions, good afternoon. Navid just following up on that last comment, I think you indicated about sponsors racing a lot of cash, have you seen any change in sponsors appetite in the market or activity levels on the back of some of this remarkable fund raiser?

Thanks Brennan. I think it’s really consistent with my comments on the prior question. Again, record amounts of money have been raised, new pools of capital, new different types of capital it’s not just controlled buyouts anymore, we have the large private equity firms raising innovative and creative new pools of capital to invest in different instruments and different parts of the capital structure et cetera. So, there is lots of different avenues to put money to work in the private equity community and certainly when a lot of that money is raised there is obviously a desire to put it to work, and so again I do think that’s become part of the - some of the forces that we’re kind of seeing in the M&A market today is desire to put money to work, obviously, the sponsors want to be cautious and they want to do good deals, and they want to do smart deals, and they are all very smart people. So, they take care in putting money to work, but certainly when you raise large pools of money that money generally gets spent.

Sure. Great. Thanks for that color. Appreciate that. One additional on recent hiring, I think you guys picked up a FIG banker that you mentioned was going to focus on the regional bank sector. This means we’re finally going to get that pick up in regional bank consolidation and seems like we’ve been waiting for throughout the cycle, and does the timing of this have anything to do with expectation for easing regulatory environment in DC or was it that just happens stands that you happen to find a great banker that fit in well with Moelis?

Yes, it’s a great question Brennan. I wouldn't necessarily read too much into it as a bullish statement about our views long-term on or short-term on activity in the space. It’s a space we haven't been in, it’s a space that has been active historically, and I think the most important point is the one you just made, which is we found a banker that we thought was terrific that would fit well on our platform that would fit culturally on our platform and that we thought could be successful on our platform, and so I think you’ve seen us historically, we tend to be patient and so we find the right person that we’re thinking of long-term success and will hire that person whether that space is hot or not hot or neutral, and I think it was really more about finding the right person to join at the right time in their career.

Sure. That makes a lot of sense. Last one from me, probably one for Joe, I know you indicated that another $0.09 or $0.10 or so of gain likely to come in 4Q from the Australian IPO, it’s been a little bit more volatile in the last few quarters, does that volatility and after this last gain that you highlighted, Joe, or is this just on mine that’s going to be a bit more volatile going forward and thanks to this JV that it’s now listed? Thanks.

Yes, so this is purely accounting and it’s really the impact of when Moelis Australia sells shares or uses it shares in connection with an acquisition ultimately there is a calculation that we have to go through in order to book up our basis and so we started from a very low point and we’re slowly building it as a result of what is happening as basically we’re recognizing gains as a result of some of the dilution that we’re experiencing. So, it doesn't have anything, it has something to do obviously with the Moelis Australia share price, but only in connection with actual transactions they do. So obviously in this latest transaction they were raising growth capital, they are very active in Australia, and as a result they raised it at a price that was greater than what we’re carrying it at.

Got it. Thanks so much for the color.

Sure.

Next question comes from Devin Ryan with JMP Securities. Please go ahead.

Great thanks. Hi Navid, hi Joe, how are you guys?

Hi Devin.

Hi.

Maybe first one here just on the restructuring outlook, I understand that maybe we’re moderating here a bit, but it is still feels like we’re above the trough from several years ago, so I’m curious, do you think that we’re moderating back toward that kind of trough level of the credit backdrop remains benign or is there enough just idiosyncratic activity that's. driving business, I'm just trying to get a sense of the pace of deals closing that are kind of legacy versus kind of new mandates coming in.

Look Devin, I don't - there is still fair amount of activity out there, our restructuring bankers are busy, they, every time I see them they are running around working pretty hard and there is activity out there and as you know there is a bunch of spaces that have encountered some duress and companies that have accounted duress and I think that’s going to continue. So, I do think there is going to still continue to be a good level of activity and our market positioning in that business is terrific. Our team is doing a great job, you know one of the top teams on the street and continue to stay active in and around many situations. So, we feel good about the business and certainly feel great about our long-term opportunity there. Again, it’s just hard to predict what the next quarter and the next year is going to bring. It’s hard to know what’s going to happen in the overall marketplace, but I think all what we're really saying is, as we predicted that there was going to be sort of a flattish year and it could be up a little bit next year, it could be down a little bit next year, hard to know, but I don't think we can see anything right now that suggests it’s going to be significantly up or down next year.

Okay. That’s good color. Maybe a follow-up question here, obviously one of your peers increased their leverage quite a bit and what seem to be pretty good terms not suggesting that Moelis will look to do something to that magnitude, and I know every situation is idiosyncratic there as well, but any new thoughts around leverage in the model or maybe the opportunity to use that particularly if the math works, you know relative to kind of share repurchases?

Yes. So, obviously we are cognizant of the opportunities in the marketplace and we obviously are cognizant of what our competitors are doing. We’ve taken the view for a long time now that the right way to capitalize our company was to have a debt free company, free of contingent liabilities and other things of that nature. We consistently return all of our excess cash to our shareholders. We think that’s the right capital structure and philosophy to support growth. We think it’s the right capital structure and philosophy to support the work we do with our clients, and we think it’s the right capital structure and philosophy to continue to attract and retain really high-quality bankers. And despite opportunities to do different things in the marketplace, we continue to think that’s the right capital structure for us and provides us with the most flexibility to grow the business and the right return of capital to create shareholder value.

Okay. Got it. All right thank you. Maybe just one on the recruiting kind of bank drop right now in competitive dynamics. We’ve heard that some of the European banks have been more aggressive over the past few months here just with recruiting after raising capital and maybe that’s not sustainable, but I’m curious if you are seeing or feeling any upward pressure on comp trends as a result of that? I don't want to overplay it, so I am just curious if that is something that is - is it all a theme or looking at it competitively, some of these firms, kind of reemerging or feeling like they are remerging?

I think, look since we started the company there has always been competition for talent whether it was from the other boutiques or new boutiques or you know the larger firms and sure from time-to-time you do see some of the larger banks flex up or down in terms of their hiring depending upon what’s happening at their company’s so on and so forth. I think through all of that we’ve consistently and I think really successfully continue to higher really great people to join the firm. And while every year is a little different and the competition looks a little different, I think we continue to feel good about certainly about this hiring year. We feel good about conversations that we’re kind of teeing up for the future and we continue to think lateral recruiting is going to be part of our continued growth. And as we’ve always said, our internal talent development and internal promotion we think is continuing to be a really important part. This year, we’re actually going to have more MDs promoted internally despite a great lateral recruiting year, more MDs promoted internally than recruited from the outside. Next year could be same, it could be flipped, but we do think a balance of those two things has served us well and we think we will hopefully continue into the future.

Got it. Okay. That’s great Navid and maybe just last one here for Joe just on the Australia gain, I understand that it is kind of guy tied to events and appreciate the color going forward, but is there a public data out there that we can use to kind of get to the number of just trying to make sure that, as long as we can we do that, but I just want to check on that. Thanks.

Well certainly they are a public company. There are announcements to the extent that they do an acquisition, they have announced each of those to the extent that they have done these share sales those also are in the public domain and we would be happy off-line to take you through to the calculation if you want to get into that detail.

Okay, great. We knew that the event happened, but just wasn’t, didn’t know the orders magnitude so I appreciate it.

Understood, thanks.

Next question comes from Conor Fitzgerald with Goldman Sachs. Please go ahead.

Hi, good afternoon. I just want to ask kind of a bigger-picture question about kind of how your culture has been evolving, have you noticed any changes has given some of the growth and if not kind of how you managed to successfully keep the same mentality and franchise that ideal among your employees.

Great question. Look it is something that we really focus on. Obviously, as you get bigger and you have more offices and more places, it gets - it requires continued focus to make sure that you’re maintaining the culture and enhancing the culture and the culture sort of infused within the whole organization. So, I do think between the work we do and the training we do with bankers who kind of show up to work for us whole time in August, both at the Analyst and the associate level, all the way through our talent development programs for mid-level folks through some of the training and off-site work we do with new managing director to partner off-site, to the leadership that we put in different positions, you know on our company both on the product side and the sector side and managing our offices to how we do compensation at the end of the year. All of those things are opportunities to continue to reiterate and promote the culture and we spend a lot of time talking about, we spend a lot of time thinking about it, and we spent a lot of time thinking about how our decisions impact the culture. And so, I think it’s a great question because I do think it’s sort of one of the fundamental things to how we will try to run the business, and I think it’s been one of the things that has made us successful, but I think the culture is defined by what you do every single day and we’re just trying to consistently do it every single day.

That’s helpful color. Thank you. And then just a last cleanup from me, I think it was $3 million of client collection that went through the non-comp, just wanted to kind of double check that and any additional color you can provide on what that issue was would be great? Thanks.

So that’s the right answer on the number. I would just say that we don't see a broader collection issue. I’m certainly not going to speak about specific clients other than to say the majority related to one event. It represented a unique circumstance, but we have a long history of being very good about pursuing timely collection. And I consider the most recent event to be isolated.

Thanks for taking my questions.

Sure.

Next question comes from Jim Mitchell with Buckingham Research. Please go ahead.

Yes thanks. Good afternoon. Just maybe talking about the non-M&A non-restructuring side, what are you seeing year-to-date in terms of capital markets advisory, activist defense. It seems like there's been a lot of incremental growth outside of the traditional advisory channel. So, how are you seeing that progress and what’s your thoughts I guess going forward in terms of those growth opportunity?

Look, let me talk a little bit about some of our non-restructuring non-M&A businesses. So, we have an active and building private funds advisory business, which we started building a few years ago. That’s a business where it takes time to build the team to build your distribution network to get client signed up and go out and raise funds for them. And I think that is a bill that is progressing very nicely for us. We're starting to see dividends paid for a few years of historical investment in that business, and as I mentioned before, it’s a great fundraising environment. So, as they continue to grow and add to their client base and have success raising funds we’re really excited about the opportunity in that business. We obviously also do debt and equity capital raising and as part of that we have an IPO advisory business and all of those businesses continue to perform, you know we don't break out those numbers in terms of growth rates or in a percentage, but we feel good about the trajectory of all those businesses.

Does that - can you put - I guess bigger-than-a-breadbox type description on what - how the revenue contribution from that, those businesses right now, you kind of mentioned the restructuring is 20% or 25% of that. So, it is a material one or is it still pretty small potatoes?

Look I’ll say capital markets is a smaller business than our restructuring M&A business. I think just given the cyclical nature of the restructuring business we’ve given a little bit more of a breakdown of what that business looks like in terms of our overall and M&A is obviously our largest business and most important business in terms of revenue contribution. So, it’s a smaller business than our restructuring business, the capital markets side, but an important one for us and as I said, one we’re excited about, but we would rather stay away from specific numbers.

Sure. Fair enough. That’s it from me. Thanks.

This concludes our question-and-answer session. I would like to now turn the conference back over to Navid Mahmoodzadegan for any closing remarks.

Great thanks. Thanks everyone. I really appreciate you joining. I want to let you know, I probably should have done this in the beginning that Ken wished he could be here on this call, but unfortunately, he is travelling in an extremely difficult time zone to join the call, but appreciate your joining. Please call us if you have any questions and look forward to speaking to you again soon. Thanks so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.