Good day, and welcome to the Moelis & Company First Quarter 2018 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Ms. Michele Miyakawa, Head of Investor Relations. Please go ahead.

Great. Thank you, and good afternoon, everyone, today. Thank you for joining us for our company's first quarter 2018 financial results. Today, on the phone is Ken Moelis, Chairman and CEO; 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 go through our results, and then Ken will provide additional commentary on the business. Our strong business momentum continued. We achieved $219 million of revenues in the first quarter, up 27% over the prior year. This represented our highest quarter of revenues on record. Our performance compares favorably to the overall M&A market in which the number of global M&A completions greater than $100 million declined 14% during the same period. Our growth was primarily attributable to very strong M&A activity in the quarter. We are participating across industries and deal sizes, and we are also earning higher average fees per transaction. In addition, restructuring activity continued to be a solid contributor. Beginning this quarter, the new revenue accounting guidance went into effect, whereby changes in the treatment in client reimbursements had an impact on the income statement presentation. Under the old method, we recorded client reimbursements as a contra expense at the time of invoicing. This used to reduce noncompensation expenses and have no effect on revenue. Under the new method, we record client reimbursements as revenues. In order to continue to minimize adjustments made to GAAP for management reporting, we did not adjust out this accounting change. Historically, client reimbursements have not been significant relative to total revenues. For the current quarter, revenues reflect an expense reimbursement amount of approximately $3 million. One should expect reimbursements to add approximately 1% to 2% of revenues for 2018. Moving to expenses. Adjusted compensation expense was accrued at 57.5%. Our quarter 1 noncomp expenses increased primarily due to the absence of client reimbursements, which used to be an offset to noncomp expense. Incremental business development activities also explain the increase. The noncomp ratio was a solid 17%. Moving to taxes. Our corporate effective tax rate declined to 3% from 29.2% in the prior year quarter. In quarter 1, the reduced rate is a function of the new corporate tax rate plus the impact of deductions related to the first quarter equity vest. The discrete equity element, which we talked about last quarter, contributed approximately $0.19 of EPS. Absent the impact of this discrete benefit, our effective tax rate would have been 25.2%. As a reminder, our adjusted net income presentation reflects all of the firm's income tax that are calculated effective corporate tax rate. Finally, our board declared a quarterly dividend of $0.47 per share, consistent with last quarter, to be paid on May 17 to stockholders of record at May 3. We ended the quarter with a strong financial position with no debt and $159 million of cash and liquid investments. And I'll now turn the call over to Ken.

Thanks, Joe. Good afternoon, everyone. Quarter 1 was our strongest quarter of revenues on record, given an exceptional quarter for M&A, coupled with a continued level of meaningful restructuring activity. I'd like to touch on a few of the finer points related to each of these areas. First, on M&A, we experienced increased volume and higher fees, which came together to provide our highest quarter of M&A activity in our history. The level of client conversations is high. Clients want to transact, and that should lead to steady and continued M&A cycles. While M&A is by far our largest business, restructuring continues to be an important contributor even in a very low fault -- low default environment. This is a result of our market-leading position and our collaborative approach with 12 dedicated restructuring Managing Directors working with our other 100-plus Managing Directors around the world in advising companies not just in Chapter 11 but in all types of distressed situations. Our strong M&A franchise, together with our market-leading restructuring business, provide two powerful forces for continued growth. To support growth, we continue to enhance the team, and we announced 3 new Managing Directors since our last earnings call. Robert Glauerdt joined our U.K. office in March to cover financial institutions with a focus on traditional and alternative asset management -- managers, where we're seeing a significant amount of activity. We also announced two Managing Directors that will join during the second quarter. Joel Thompson will enhance our coverage of med tech companies in the U.S., and Chris Roberts will expand our IPO advisory and equity coverage in Europe. Furthering our significant commitment to energy, we recently appointed Martin Houston as Chairman of our Global Energy Group to support our teams in Houston, London and the Middle East. We also added Rick Haythornthwaite as an advisory partner in London with significant experience and expertise across the energy, industrials and technology sectors. We remain focused on profitable organic growth, and we have a solid pipeline of senior-level talent. As I think about the rest of the year, I'm excited about the opportunity that lies ahead. We are experiencing significant momentum. Our teams are exceptionally busy, and I'm optimistic about the power of our global network coming together to meet the increasing demand. And with that, I'll now welcome any questions.

[Operator Instructions]. Our first question today comes from Ken Worthington of JPMorgan.

So just two questions here. I guess, first, some topical events. Just, Ken, want your impressions on how they might impact corporate M&A. So first, trade wars and the threat of more executive branch interference in trade. Any impact do you think that either having right now or outlook there? And then China seems to be migrating from a buyer to a seller of assets. Any impact, positive or negative, on the global outlook for corporate M&A?

So on the first two, Ken, the trade wars and the executive branch, which I'm not sure it's easy to distinguish between the effects of both of those. Look, I think they are having an effect. There are a couple of transactions out there, and we've been involved in some that have had unusual intrusions by both regulatory, executive branch and might even be related to a step-up in trade wars. And I think there are steps being taken by both sides in the deal environment to either gain leverage or gain outcome. We'll see where it leads. So I'm concerned about that getting worse going forward, and I think that would have an effect. I think China moving from the buyer to a seller is probably neutral. I mean, there was a big Chinese bid on some assets going back, but I think many of those assets would have traded anyway. The M&A around those types of assets probably would have happened. They might have happened to a different end buyer. So I see that being less significant than just the inability to predict the outcomes and government -- governments getting involved in the process.

Okay, fair enough. And then just to further your comments on restructuring. We've seen some spread widening. We haven't seen much movement in terms of the number of bankruptcies or a break in distressed. Your comments were surprisingly positive. Can this persist for you if the environment -- I guess maybe these are my words, not yours, seems pretty mediocre, and you guys are able to sell the firm and have the bankers, the corporate bankers and the distressed bankers, work well together? Can that -- is this sort of steady state for you in a lousy environment? Can things only get better from here?

Well, never expect things to only get better. But it's been -- look, it's been a low default environment for a long time, and I think some of the peers and competitors have kind of -- who were edging in to restructuring might have edged out a bit. We're not. We think we have the leading restructuring group on the Street. They've been together for years and years and years. And now the way we integrate them, the amount of spread we can get using the 120 MDs, to really make sure that they're talking to companies that are having issues, and those issues could be opportunities too. It almost crosses over with liability management. It might stay to be a 1% or 2% default rate for a while, Ken. You can never tell. But there's a large amount of paper out there. So even at 1% or 2%, you can stay busy if you have a market-leading restructuring group, which we do. Look, it could get worse. I guess nobody could default. But I think between 1% and 0 defaults and 1% and 5% defaults, I would bet we hit 5% before we hit 0. So I'm happy we held the team together. We've added to it. We've integrated it. It continues to be a solid part of our business, and I think it has a lot more upside than downside.

The next question comes from Devin Ryan with JMP Securities.

Maybe start with a bigger picture question here. So Moelis has gotten to 120 Managing Directors, I think, faster than most of us would have thought when you went public. And so I understand you're going to be opportunistic on the recruiting front going forward. But when we think about the areas that you're not in that maybe you could be over time and kind of getting to those areas without hitting diminishing returns on recruiting, how can we think about how much more room there might be to go? Or how do you think about it? Is it 50 Managing Directors? Is it another 100? So trying to think about orders of magnitude now that we're at, I think, a pretty high level relative to maybe where we thought you might have been a few years back.

Well, I hope that's a compliment. We've got great bankers and the ability to hire great bankers from a rapidly changing environment. Remember, the last 10 years in finance has just changed dramatically the culture, the career tracks between large institutions and the boutique. And the interest in the boutique model, again, I don't have the numbers in front of me, Devin, but I think it's kind of tripled its market share since the time we started. So there's been a lot of room to grow. I think there's still a tremendous amount of room. I appreciate your statement about our success, but I turn on the TV every once in a while on Monday morning, and there's a deal -- there are several deals that we are not involved with. Stunning to me. Stunning to me that somebody would make that decision, but they still do. So I think we still have a very small percentage of the M&A market because it's a pretty diversified group of people. And look, my gut feel, and I've said this to people, as to how big we can get is I go back to the beginnings of my career, the early '80s. The investment banks were very similar in size to some of the leading high-quality service providers like the great law firms around the world. The great law firms made one major decision that was better than most of us 30 years ago, and they didn't sell themselves to large conglomerates. They stayed independent, and partnership, and kept to their knitting. But those firms have now gotten to be significantly larger. And so what I'm saying is, I don't -- some of these large, extremely high-quality law firms have gotten to the size of 2,000 lawyers. And I just wonder if that's not -- have we not interrupted our own ability to -- by selling all those firms out to the large banks in the mid -- late '90s, whether that's not the natural place that we could get to in a global business. I'm not positive, but it is the parameter I often look to.

Yes. Got it. Okay. Very helpful. Yes, that was a compliment, but I appreciate the perspective. And in terms of just the backdrop. So clearly, the Trump administration blocked a pretty high-profile transaction in the quarter that you guys know about. And I'm curious if that had a chilling effect on any types of deals, or is it just more a reminder that even though this is maybe a bit more business friendly administration, you still have to factor in kind of externalities or what their reactions might be in a high-profile situation?

Yes. Look, I think that you have to take into account that was a very specific, I suppose, reason. I mean, it is still very hard for me to understand the decision and the decisions like that and what the actual legal rights of the government to -- what the action -- what it was based upon. But it just shows that there's always that lurking out there. And I think that you're seeing some responses to that in transactions as a result of that transaction, you may see sort of a response to that from other global governments and independent operators. So yes, the answer is that was a very confusing and hard to evaluate intervention by a government agency in a -- I was going to say in a transaction, but it was actually in a proposed transaction. It hadn't even -- which is in early stage of doing it as well. So the short answer is yes. That, I think, has made a lot of professionals in the industry scratch their heads, and I'm sure people wonder what it means for other transactions that are possible.

Okay, great. A quick one for Joe just on -- appreciate the detail on the revenue recognition. I just want to be clear here. Should we be thinking about kind of a core 58% comp ratio and then making kind of an adjustment for the revenue recognition change kind of our estimate going forward? Or how should we be thinking about the comp ratio thought process?

I think the way we think about it is we're holding constant on the philosophy related to comp. I think the current quarter ratio is our best estimate of the comp ratio for the year. So we're looking at it similar to a tax rate, and we reduced the ratio slightly to recalibrate for the impact of client reimbursements, and we expect to monitor it throughout the year.

Our next question comes from Michael Needham with Bank of America Merrill Lynch.

So the first question I have is on recruiting. It sounds like you are going to continue to focus on adding people possibly for the rest of this year. Looking back to 2014 and '15, that was another period where on a net basis, you added quite a few people. Then in 2016, there was a significant amount of revenue growth. So I guess if you are successful and you're able to hire quality people, what are your expectations for the people you're bringing in? And what kind of organic growth do you think you can achieve in a flat -- flattish M&A market?

Look, again, so we're getting very close to ask me to guide you through the year, which we don't do, but it was a very good -- appreciate it, Michael. Look, we believe we're hiring extremely high quality bankers and that they're dealing with a better brand in the globe today than the bankers -- we hired great bankers back then, but I believe it's a brand now that's more recognized and more easy to -- easily accepted into a boardroom or a management conversation. So we would hope to be similarly profitable off of the hires, similarly growth-oriented. But again, you have to also look at the economic environment, and there's 1,000 other variables that could affect it. But we're hiring those people with the same expectation. Maybe higher expectations as we think the company resonates. And we really believe every time we add a node to the network, if we integrate the network right, it becomes more powerful in and of itself, and that's where we're seeing some of it as well.

Okay. Got it. That makes sense. For the restructuring business, it looked like this quarter was kind of on par with the first quarter last year, that was, I think, a really good quarter for that business. I think the previous guidance was maybe at the low end of 20%, 25%. Is that kind of still what you're thinking? And is it just, I don't know, like lumpier fees in the quarter that you don't think recur?

So yes, I think we still think that you should think of the restructuring revenue at 20%, 25% on a long-term basis. And given the low default rate, 20% over a 12-month rolling period at any one time should be the right thinking. Yes, for some reason, this quarter was -- the timing was good. I think last first quarter was when we were wrapping up a lot of the first round of the energy restructurings. Interestingly, energy continued to be a good driver of restructuring revenue in this first quarter. It wasn't really lumpy. I think it was diverse, and there were significant transactions, so I wouldn't call it lumpy as much as it just was we had a good team. And again, some of the stuff is probably timing as well. By happenstance, you get a few more closed. But I wouldn't call it lumpy. I would just call it diverse and effective, and the team did a great job.

Okay. And just one more for Joe. Joe, did you give an update to the noncomp expense guidance? Or is it still the, like, 30 to 31 plus billable expenses?

Well, obviously, with the new accounting, so the client reimbursement accounting again explains a large amount of the increase for the current quarter. And so our adjusted noncomp would be in the order of 35 to 36, taking into account the new accounting.

Okay. And that's the right -- I guess I'm trying to figure out a run rate ex the, like, travel and things that just happen when the quarter is really strong.

I'm looking at an underlying run rate of about 35 to 36.

Next question comes from Conor Fitzgerald with Goldman Sachs.

Just appreciate your comments on how some of the political environment is impacting the appetite for M&A, but I wondered if you can share some comments on how the market environment is impacting corporates outlook to do deals. Has the volatility of 1Q put any of the deals potentially either delayed or made corporates less willing to engage in conversations?

Again, I can't speak for every deal. Is there one deal? Yes, possibly. I don't see 90% of the transactions. And I assume that it had some effect. But I can say I don't see it as a broad-based effect. The corporate environment is exceptionally strong. People are still reacting to the strategic imperative of putting their business in the correct competitive shape. I've said this a few times, but M&A in the last 5 -- 3 to 5 years has really struck me as very different. It is repositioning -- the world is changing so fast in terms of where you need to be and how quickly you need to reposition to be competitive that you don't have time to build everything from scratch. You must react and add to your position through M&A. And going back 20 years ago, I think M&A was significantly driven in many instances by price, and I can buy something cheap, or I can sell something expensive. And today, it's much more of an existential philosophy that in order to compete for the next 5 years, we need to have this. Or should we -- or let's discuss what we need to have, where we should be, what our asset base should look like, and I just think that's driving a level of conversations that are very high. And both the regulatory and the volatility of the market affect it, but they don't change the need to have that conversation. They might affect your concerns about doing something, but it does not change the fact that you're having that conversation and trying to figure out what you can and should do given all the -- given everything that's going on.

That's helpful color. And maybe just to follow up on that. The need for corporates to do M&A, are you seeing that mainly from a technology and a scale acquisition? Or is it more product silos and verticals that they're in and remixing their revenue stream? Just a bit curious on what you think is making this M&A cycle different than ones past.

So again, not speaking -- because you have a spread of all of that, but the majority goes somewhere to technology and product sets, and that's driven by technology. Am I vulnerable? Do I want to get ahead of something? And it's not technology -- what we would normally call a technology company. But I would say almost every company is thinking about themselves as a technology company or is positioning themselves to be or to compete as a technology company in the future. And so I think I've said this before. One of the reasons we have expanded our software expertise so much is we think almost every client that -- we used to have a software banker who called on software companies, and now we want to have our software and tech bankers calling on every company alongside the sector banker just thinking about how that company will position itself going forward because almost every board in every company is thinking about it.

Our next question comes from Jeff Harte with Sandler O'Neill + Partners.

Environmentally, just kind of touching again. I mean, we're seeing, as far as, like, the data we can look at, a pretty strong ramp up in activity levels in Europe. I guess I'm wondering 2 things. One, are you guys seeing this kind of on the ground? And secondarily, from a franchise positioning standpoint, do you have the franchise in place to really capitalize on an improvement in Europe relative to how strong the U.S. has been?

The answer is yes on both. We're seeing it. Last year, we had a very good year in Europe, by the way. If you look at the underlying numbers in 2017, Europe did very well. And we are participating with it, and we feel, and I think I said this on our last calls, never felt better about our European, well, franchise. And when I say that, I mean, I think we're set to play. We are expanding in Europe. We have close, right around, call it, 100 people total in Europe, probably more now that I'm thinking about it. We've added Germany to the mix. And I think it's going to be -- I'm very bullish on Europe because I think it'll be very slow, steady, expansionary, and they're going through some of the same reckoning about how technology is affecting their industries and what they have to do. And yes, we're very bullish about our franchise there, our leadership there, our presence there. And I think it'll be steady. I don't think you'll see a spike, but I think you're going to see a long, steady build from where Europe comes because I think it may be 18 months behind the U.S., so I think we have a wave coming.

Okay. Just to touch on the hiring again. I'm just looking, I think we've had 7 MD announcements year-to-date as far as hires. That's like -- it seems like an accelerated pace from the last couple of years. I recall on the last call, you were kind of talking about high-single-digit growth expectations. Should we -- I mean, if there's still a strong pipeline, should we be thinking about the potential for a 2017 type MD expansion kind of continuing in 2018? Because it was quite a bit higher last year.

Yes, it's very possible. Look, it's hard for us to know that amount going into the year because you really do not have a great look at your ability to hire until bonuses clear. So this is the first call where you have, where people have received their bonuses from their prior firm and are -- so we know who's really looking and what's available and if it fits. And part of that, by the way, I think, is also you're seeing us press Europe a little bit. You saw us go equity capital markets, IPO advisory. We've done some -- I think last year, we did 2 or 3 in Europe. I'm doing it off the top of my head. And this year, we are willing to hire into Europe, and maybe that is -- that little bit of excess you see, we're willing to bank on Europe being strong for a while. And I think that might be the 2 or 3 or 4 extra hires we could be seeing. But the answer is yes. We might -- again, I don't know that we'll complete with everybody. We're very disciplined on who we want and how we want to hire people and into what format, but we could definitely do a few more this year if things fall the right way for us.

Okay. Just a quick, I guess, accounting basis. As we look at 2Q '18, should we still expect a share-based comp accounting benefit? I mean, the benefit in the first quarter is a little more at least I was expecting. Should we still see something in the second half before the tax rate normalizes?

Yes. I mean, so we reported an incremental EPS of approximately $0.19 due to the vesting events this quarter. We have a smaller vest in April, which goes back to year-end '13 comp. And I think that we would expect an EPS benefit of something on the order of $0.07 to $0.08 in the second quarter.

The next question today comes from Yian Dai with KBW.

A quick question on rates. And I'm just curious, as we start to see the longer rates begin to creep back up, does that incrementally become more of a conversation with clients? And are they starting to look ahead and say, well, if it gets here, then we got to do this? I'm just curious if that's changing the tone of any conversations you're having.

I'd say very little. Obviously, as rates move slightly, you talk about it a little bit, you have a discussion whether you think rates continue, and that discussion's had. But again, I think M&A is about positioning just the companies -- your company, to succeed. It really is about very different feeling as to why you're entering into the transaction. So a marginal 20 basis points on rates is not going to -- or 50 is not going to change the desire to buy or sell an asset if you think it fundamentally changes your go-to-market competitiveness. And I guess 200 basis points, 300 basis points could start to do that. But we have not seen it. And if you think about it, rates, everybody's talking about rates moving a lot. It's really only been about 50 basis points.

Yes, okay. That's good color. And I just wanted to also piggyback on the discussion around Europe. So just given your existing, I guess, historical bias to promote from within, I'm wondering whether that's compatible with the goal of growing in Europe and elsewhere globally as you try to establish a bigger foothold and build a brand abroad. Do we -- does it have to look more like hiring from outside and maybe even being open to doing an acquisition?

The last part is no. I'll take the easy one first. We -- look, the only type of acquisition we would do is something small, that's kind of a number of, a few people, we wouldn't look to what you would think of as an acquisition. It could be a small -- something small that would sound like people-oriented for us. But look, Europe is a little behind on the internal promotion curve, but we want to do it the same exact way. We believe it works. Hire people, teach them how you want them to approach clients, teach them your culture, have them interact for years with all their -- with people around the globe. And then when you bring that all to the client, you might not have exactly the same impact that a 55-year-old transfer would have from another firm, but I think you have a better firm, you have a better company, and you have a better product for years to come, and that's the way we want to do it. Now we do mix it up. As you'll see, we're hiring in some places in Europe, where I call them almost the teachers, the leaders who actually begin to generate and teach the younger people. Somebody has to teach the group how to accomplish it. So yes, you're going to see a little of that as we grow in the short term, but we're pretty committed to internal promotion in Europe as well.

Next question comes from Betsy Graseck with Morgan Stanley.

So just two follow-ups here. One, on the higher rates, I get your point, it's not up that much in basis points, but as a percentage increase, it's high. And I'm just wondering, in particular on the lev fin guys, folks that get involved in that world structure, things, et cetera, there's no incremental desire to get something done quick before rates go up too much more?

Look, there may be some pressure on the private equity guys to put money to work, but I don't really see it that much. And it's good for our level. We have a couple of people around the world who do capital markets advisory on leverage finance. And as rates gone up, I think we've seen more activity because it makes a few deals that much tougher to do, and you're bringing our experts to help you and advise you to get it done, so we benefited from it. So well, I don't see people racing yet to beat a rate hike. I just don't see that as generating. Behind the scenes, somebody could be thinking that way, but we don't see it as a dominant factor.

Okay. And then as I'm thinking out the next couple of quarters here, I'm not asking you to tell me what your revenue is going to be. But I recall, I think it was last quarter where you mentioned that there might have been a couple of deals that didn't get done, could get pushed into the 1Q. So should I think about the run rate here as an average of 4Q, 1Q? Or is your commentary earlier that's suggesting lots of discussion, lots of interest, we see announced deal activity increasing that really this is a 1Q rev that's a number to build off of quarterly going forward.

Well, it's not a quarterly business. So I don't even know how to tell you -- if I were to try to analyze the business, I kind of look at it 12 months rolling, it's probably the best way. And then even more than that, I would just look at the overall generation-ability of a firm, are we replicating and creating revenues from scratch? I think I started to tell you -- you don't remember the calls as well as I do, but maybe even 5 quarters ago that you can sense -- you could just sense that the process was building up, and that the creation of new opportunities and the self-generation of that was good. So we are at that point. I cannot tell you where those transactions will fall. As somebody pointed out on the phone call, there are large transactions that sometimes get stopped right at the finish line, and it would be almost impossible to try to guide you to a quarterly basis. So I'm going to try not to do that. I don't know if two quarters is enough to really get a feel for it, so I kind of like, if I were you, I'd look at it as a 12-month.

Sure. And then just lastly, the conversation around brand and brand awareness and appreciation improving here. I would translate that as net new MD should be able to ramp revs faster than maybe three years ago. Is that a fair statement?

Well, that's what we're hoping, that everybody can. Remember, we were one of the newest firms to the block. We're only -- we're going on our 11th year. And so for the beginnings, I think people, especially non-U.S. firms, people would ask, who is Moelis? Who is Moelis? Who is Moelis? We have -- by the way, we have several different names around the world, depending on where you are. And I could tell you which countries because I know them all. But at this point, I think we've been involved with 5 of the largest transactions in the world, in the last couple of years, people -- so 2 things happened. One is I think they're getting more chances. And second, a really leverageable thing is the outgoing call, is the call where the management and the board gets together and needs an adviser, and they think, who should we call. Well, 9 years ago, very few people in the world would call Moelis or Moelis. And today, I think that, that -- if it only happens 1 out of 10 times, that's a tremendous leverage to the whole system, if you get that. And I think we're moving into that space. So that's a long answer to your question, which is I hope it improves the productivity of everyone in the whole organization.

Next question comes from Jim Mitchell with Buckingham Research.

Ken, I still get plenty of investors that mispronounce the name of your firm, so I guess they're still working on it.

There is no mispronunciation. There's only a wrong phone number. If they get the phone number right...

Exactly. Maybe just a question on the tax cut. Now that it's been implemented, have you seen any surprises one way or the other? Do you think it's starting to get reflected in how people are thinking about cash flow and putting it to work? And do you think that's on the come? Just trying to think through what -- in talking with your corporate customers, what the impact of the tax cut has been and potentially could be on M&A.

I think it's starting to get figured out. I still believe the power of the after-tax cash flow of a normal U.S.-based company that did not -- was not able to use international tax systems to defer tax is surprisingly strong. And Jim, the reason I think I know what surprisingly strong is, we have had trouble figuring out how powerful it was for our own after-tax cash flow. I mean, it just -- it literally results in a significant amount of more cash flow onto your bottom line. And so I think people are still -- are going to still have to come to grips with it. And again, I don't know if that will drive M&A. It might drive dividends. It might drive stock repurchases. But I do think the U.S. -- people who are paying U.S. tax and are now at 21%, are still, I think, surprised at how effective that is at increasing their profitability without having to do much, just straight cash flow to bottom line. So I think it's still working its way through the system a little bit.

Right. Do you think it spurs anymore cross-border flow now that there's a major tax regime change that might make people think of where they want to be located?

Yes. Look, I do think -- I was in Asia, I think Japan last week. I think they continue to be very actively looking at U.S. assets. And I could -- I think you could see more cross-border activity in both directions. Somebody was mentioning Europe. And I think you could see U.S. companies looking to acquire in Europe, again, because I think they're kind of 18 months behind the rally in valuations and maybe even in the economy. And so there may be a long way to run there. I think you can see that, yes.

Okay, great. That's helpful. And then maybe just a question on the dividend policy. I think cash levels are pretty similar to where they were last year. Is that -- should we kind of think that given your commitment to returning it consistently to shareholders, should we -- is there any reason to think we wouldn't have a similar kind of pattern to special dividends as we saw last year?

Yes, Joe. Please go ahead, Joe.

Look, yes, our philosophy remains the same. We're returning all the excess capital to shareholders. Certainly, the new tax law gave rise to more excess capital, which was a significant reason why last quarter we raised the dividend from $0.37 to $0.47. And I'm not going to commit to when the special, if a special, is going to be done. But each quarter, we review with our Board of Directors the best way to return our excess capital.

Well, look, as we did last year, I just want to say last year, we didn't plan on 2. We just felt like there was no point not giving you back the capital when we had excess capital, and that's our general leaning. So again, we have to talk to our board about when that is, but our feeling is it's your capital, and we should give it back to you.

This will conclude the question-and-answer session for today. I'd like to turn the conference back over to Ken Moelis for any closing remarks.

Okay. Well, thank you, everybody. I know I used 55 years old as an age bracket. I just want everybody to know I'm about to be 60, so I'm not putting down 55-year-olds. I just thought they're a little young to be joining the industry is what I was really getting at. But I appreciate everybody coming on the call, and thank you for your support.

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