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Good afternoon, and welcome to the Moelis & Company Earnings Conference Call for the Second Quarter of 2025. To begin, I'll turn the call over to Mr. Matt Tsukroff. Please go ahead, sir.

Good afternoon, and thank you for joining us for Moelis & Company's Second Quarter 2025 Financial Results Conference Call. On the phone today are Ken Moelis, Chairman and CEO; Navid Mahmoodzadegan, Co-Founder and Co-President; and Chris Callesano, Chief Financial Officer. Before we begin, I would like to note that the remarks made on this call may contain certain forward-looking statements, 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 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 Chris to discuss our results.

Thanks, Matt, and good afternoon, everyone. On today's call, I will go through our financial results. Ken will comment further on the business, and Navid will provide a few remarks before we open the call for Q&A. We reported $365 million of revenues in the second quarter, an increase of 38% versus the prior year period and our highest second quarter revenues on record. Our first-half revenues of $672 million were up 39% from the prior year period. The year-over-year increase in revenues in both the second quarter and first half of the year is primarily attributable to growth in M&A and capital markets. Moving to expenses. Our second-quarter compensation expense ratio was accrued at 69%, consistent with last quarter. Our second quarter non-compensation expense ratio was 14.4%. We continue to anticipate the full-year growth of non-compensation expense to be approximately 15% compared with the prior year. Moving to taxes. Our corporate tax rate was accrued at 29.5%, consistent with the underlying tax rate in Q1 prior to the discrete tax benefit related to the vesting of equity awards. Regarding capital allocation, the Board declared a regular quarterly dividend of $0.65 per share, consistent with the prior period. And lastly, we continue to maintain a strong balance sheet with cash and liquid investments of $475 million and no debt. I will now turn the call over to Ken.

Thanks, Chris, and good afternoon, everyone. Our revenues in the second quarter and first half of the year reflect the investments we've made over the last few years, our globally integrated platform and our team's relentless focus on executing for our clients. We entered the second half of the year in a significantly improved transaction environment since we last spoke in April, which was right in the heart of the post-Liberation Day market chaos. In retrospect, Liberation Day did cause a temporary disruption to activity. However, our new business origination remained healthy and our pipeline currently sits near record levels. Both our strategic and sponsor clients are moving forward with transactions driven by technology disruption and the need for sponsors to recycle capital. The investments we've made in capital markets have continued to pay off as well as our team achieved record revenues in the first half of the year. The team enters the second half of the year with strong momentum as investor risk appetite grows and capital is generally available. During the second quarter, 3 of our -- of the leading private capital advisory bankers joined our firm, underscoring our ambition to build the premier platform in secondary and primary capital solutions for sponsors. We continue to believe there is a significant opportunity for us to grow this franchise, and we plan to aggressively scale into a market leader. Finally, our capital structure advisory team continues to work on a steady amount of liability management engagements across a range of industries, and our investments in our creditor-side franchise are beginning to show results. In addition to our hiring in PCA, we welcomed a technology-focused and business services MD, both based in Europe during the second quarter. In summary, we entered the back half of the year with momentum across the business, and I'm confident in our team's ability to execute for our clients. Before I pass it to Navid, I'd like to make a few remarks about our upcoming CEO transition. With the firm in such a strong position financially, strategically and culturally, the Board and I determined this was the right time to elevate our next generation of leadership. Navid founded the firm with me 18 years ago and has been a key driver of our most impactful growth initiative and was one of the best strategic advisers I've ever worked with, making him well-positioned to lead us through the next phase of growth as CEO. In my role as Executive Chairman, I'll spend even more time with clients and in boardrooms around the world advising on critical strategic decisions while also remaining involved in the firm's long-term strategy. And although I am excited to spend more time with our clients, I'll certainly miss my time with you on these quarterly earnings calls. I know you've been hearing my voice for a long time. I know you'll be in good hands with Navid when he gets the mic at our quarter 3 earnings call. So with that, I'll pass it to Navid for a few more remarks.

Co-Founder, Founding Partner, Co-President & MD Thanks so much, Ken. I'm honored to step into the role of CEO at a firm that I've had the privilege of building and helping to build from the very beginning. As CEO, I will continue to focus on the principles that have been key to our success over the past 18 years, an intense focus on clients, investing in our firm's talent, fostering innovation through the adoption of new ideas and technologies and, of course, driving returns for our shareholders. We head into the next phase of growth with the highest quality talent and most extensive capabilities for clients in our history. I'm extremely excited about the opportunities ahead and look forward to working with more with all of you in my new role. Operator, I think you can now open it up for questions.

[Operator Instructions] We'll take our first question today from Devin Ryan, Citizens JMP.

First off, welcome, and congratulations on the new role and to you as well, Ken. I always enjoy the calls, but looking forward to Navid being on as well. I guess maybe just first place I want to start is on sponsors reengaging and I heard some of the prepared remarks, but just love to get a little more flavor around like the progression of reengagement and just maybe even from a sector perspective, are you seeing it across kind of all sectors? Obviously, areas like technology are still dealing with higher fire around. So are there certain sectors that maybe aren't coming back as fast? Just love to get a little bit of a flavor for kind of the level of reengagement and then what that looks like in different industries as well.

Okay. So first, let's start with the macro, which was -- I think last time we did our phone call, we were in the middle of a pretty significant market downturn. And it wasn't just the market. You had real concerns about tariffs and how they would affect the industry. Sometimes it's just valuation markets and interest rates, but that also had operational issues involved with what was going to happen. We probably reached our highest point of backlog on March 31, and then April 2 happened. And what I'd say happened is deals that were in pipeline and in progress kept going. But I think from about April 2 to 5 or 6 weeks later, middle of May, there were a lot of people sitting on their hands. Transactions were getting done, but not a lot of things got started. Then it started back gradually, but I'd say it's really accelerated in the past 5 or 6 weeks. I think we've seen a better market every week starting 4, 5 weeks ago. And I would say we're kind of back as of now very close to the level of enthusiasm that was prior to April 2, March 31. Now it's building back. You did have a few weeks there, so the pipeline is not at all-time highs, but it feels like the energy is there. On the sectors, I think it's pretty much across the board. I mean there may be 1 or 2. Again, I don't see every transaction in every industry across the board. So I'm talking about our subset. But I'd say we're pretty strong across sectors.

Co-Founder, Founding Partner, Co-President & MD Yes, Devin, I think there's still some sectors that are right in the sweet spot of some of the trade uncertainty, maybe some of the parts of consumer, parts of industrials, manufacturing. But as Ken said, I think the strength we're seeing is more broad than narrow.

Yes. Okay. That's good to hear. And then just for my follow-up, I want to hit on the private capital advisory business and opportunity. I know you guys have made some senior additions there, and you highlighted that in the script. Just love to get a sense of how big of an addressable market you think that specific business is? I know it's important for just the firm level, but just how you think about the addressable market? How big of a business could this be for Moelis? It's pretty big at some of your peers, but is this a couple of hundred million dollar revenue opportunity? And then just how many more resources do you need to put there to get this business to where you think the potential is? Do you have now what you need? Or should we expect to see a lot more additions kind of follow after some of these senior hires?

Well, I agree with you. We see it as a -- in a leadership position, it's a couple of hundred million dollars or more, more than a couple of hundred million, we think, in the leadership positions. We think we've hired the leadership that we feel very comfortable will get us to that position. We have more to hire throughout the system, and we're going to be aggressive on it. We have gone aggressively -- we didn't hire just one of the top players in the industry. We hired 3. We think this is -- could be very strong. By the way, it's a couple of hundred million dollars to the top of the market right now or more than -- as I said, it might be more than that. I think it is more than that. And I think we're in the early stages of it being a growth market. So we're pretty bullish on it. We think of it as a -- you can think of it as a third or fourth leg on the firm in terms of where we think the size of that market could be.

Co-Founder, Founding Partner, Co-President & MD And it's also -- I should just add, it's also in addition to just the direct revenue opportunity that Ken outlined. It's having that capability in secondaries, continuation vehicles it's just very strategic for our dialogues with private equity firms and the ability to provide holistic solutions for those firms. It not only creates a revenue opportunity, but it also helps our M&A business. And so it's just a capability that's just critical for us to scale and be very, very strong at, which we're well on the way to doing, we think.

Next up is Ken Worthington from JPMorgan.

Navid, thank you for your comments on your priorities. Ken mentioned that you're here to kind of usher in the next phase of growth for Moelis. What does this next phase of growth look like? What would you see your focus really being? Where are you paying attention most thoughtfully to? And what areas do you feel like you want to amplify as you think about this next phase of growth?

Co-Founder, Founding Partner, Co-President & MD Sure. Well, look, I think the first comment is the strategy that we've been deploying for the last couple of years very much is the strategy that we've all been developing together that I expect to continue to carry on. So what are the elements of that? First, let's make sure that our investments are made in the highest TAMs, the biggest TAMs where we have the most opportunity to really drive revenue growth. That's why we did things like invest heavily in technology group, oil and gas and now PCA and before that, capital markets. So we're going to continue to look for those big opportunities. Second, we want to make sure that we're attracting when we do lateral hiring, what I call difference makers, elite players who really move the needle with clients who bring franchises that we think are really accretive to our firm and to our global network. And making sure we're doing that and executing that at the really highest levels is going to be critical to our success. And then third, which is a really important pillar that helped build this firm is making sure that we continue to have the best culture, one, where everyone is collaborating and kind of bringing the best of themselves to our clients and then making sure that this internal talent development engine that we're really proud of, where 40% of our MDs are internally promoted MDs, including some of our highest producers that, that engine continues to operate at a very high level.

And I think you and Ken both talked about the economy being in possibly the next leg of a strong period of growth. Do you increase the pace of investment and increase the pace of new hiring from what you have seen more recently? Or is it really about kind of leveraging the elevated pace of investments that you've really been focused on over the last 2 years and sort of letting things kind of play out? Like which sort of scenario is more likely for you to pursue over the next 1 to 2 years?

Probably accelerate or slow down. I think overall, it might feel about the same space. We're going to accelerate into things like PCA. So you're going to see us be very aggressive in the private capital advisory group. But Navid -- I'll say this, Navid was the major force behind the tech group hire, and that's been nothing but extremely successful. I'll just leave it at that. The energy group we hired down in Houston has been a spectacular success. We've -- industrials. So I think you'll see it about the same level. It will be very aggressive in certain areas like as we go to finish out our private capital group. And you'll continue to see the same pace, I think, of managing directors in white spaces around the organization. But it will probably -- it might feel pretty aggressive just because of what we're going to do in PCA, I think.

Co-Founder, Founding Partner, Co-President & MD Yes. And I think the only thing I would add to that is, look, we're not growing for the sake of just growing and adding headcount. We want to make sure we're hiring the best people in the world to help us build these franchises. And sometimes that's not market- specific. It could happen in a down market where those people become available like with technology, and it could happen in an upmarket. And I think what we've done is make sure we have the financial resources, clean balance sheet to make sure we can do it under all environments, right? And so I think we want to lean into growth. As I said, big TAMs, great people. And sometimes that will happen in up markets and sometimes it will happen when the markets don't feel great, and that's why we keep the flexibility to do that.

The next question today comes from James Yaro, Goldman Sachs.

I guess this is a question for both of you. But there's a lot of focus, I'd say, on the market -- in the market around this, I don't know what you want to call it a big bang of M&A and IPO activity that could occur post Labor Day. What do you make of that -- of the post-Labor Day outlook? And do you really think things could come back that quickly in a big way?

Things are definitely coming back. I mean, it was interesting, the early part of June. Remember, a lot of deals -- there were no deals really started between April 2 and a certain day. There was a lot of people sitting on their hands. So when you look at your new business activity, and I apologize for the fire engine going right by the window. But -- so then you saw those were the deals that would have started in April that would have registered in our new business activity sometime in late May, early June. But what we're seeing is every week within June just gets stronger and stronger and stronger as you get further and further away from Liberation Day. So look, the S&P 500 is getting close to 6,400. I mean that's not just a rebound from Liberation Day. That is a significant uptick. We haven't seen rates come down yet. I don't -- we're not -- I'm not predicting a big bang -- but I am predicting that if there's not an external event from here on in, the market is improving almost daily. And the activity level and the amount of transactions people want to do is definitely improving, and you can see it almost daily. So again, I don't see a big bang, but I see a really steadily improving market.

Ken, I will say that one of the reasons I know you're an excellent banker that even though there's that loud fire truck there, you were still able to fill in those comments. So we appreciate that. And obviously, we'll miss you on the call.

I'm just making sure it wasn't an ambulance coming for me. That was the only thing that would have disturbed the whole thing.

Exactly. Undisturbed, unperturbed. Okay. Great. Just one last follow-up here. So look, you're investing a lot in the private capital advisory, and that's growing fast right now. Maybe could you just help us think through the guardrails around the build-out as we head towards an environment that's potentially more characterized by regular way M&A and IPO, which I could imagine could at least slow the growth rate in secondaries.

I think the guardrails is we're very excited, and we've now gotten to spend on the ground time with the 3 most senior leadership team. And we like them. We think they're real business builders. And remember, we're not sitting with 200 people in the space yet. We have a desire to get there if the market is as good as we think there is, we have a desire to have a large team and be a dominant player. But I think we'll all be watching that. I think it's a product that will find a way to be relevant. And as Navid said, and I think you have to show up when talking about the assets that are in private equity and in sponsor ownership, you have to be able to offer a series of different alternatives. And that -- in many of the spots, that will be an alternative that will be relevant. It may not be the one picked, but it's important that you'd be able to execute it in order to outline to people what their options are and effectively position it. So I think we will follow their lead -- and right now, we're not overcapitalized or overpeopled in that space at all. So I'm not worried about it getting slower. I'm worried about us getting up to speed is my main worry right now that we hire the people and the team to execute. And again, I'm an optimist on this. I think that product will be large and will be bigger over the years, yes.

Your next question today is from Brendan O'Brien from Wolfe Research.

Just to start, you mentioned the strength in capital markets and advisory driving the growth year-to-date. However, I just wanted to drill down a bit on restructuring activity and just to get a sense as to how that has trended since April 2 and what your expectations are for that part of the business from here?

It's -- for this year, it's trended flattish to slightly down. My guess is it continues to trend slightly down. And I think part of it, by the way, is you're seeing the other side of that and the benefits in our capital markets and our M&A. So what happens in a really good market when the S&P 500 gets to 6,300, and private capital has just a tidal wave of liquidity coming into private credit is that the marginal company that would go through a liability management or restructuring gets purchased in an M&A deal or refinanced. So I think we've always tried to put our capital markets kind of together with our restructuring business in the numbers because I do think it's sort of a choice. And I always say this, almost every CEO, everybody -- every CFO I know would rather do a financing than a restructuring. And so given the opportunity and the availability of capital, I think some of it, that marginal amount that in a bad market would be reported as a restructuring or liability management revenues is now moving into capital markets or even M&A.

Helpful color. And then I guess for my follow-up, I just wanted to touch on the comp ratio. You've had a really strong first half, and it sounds like momentum should build from here. However, as you mentioned, you've been aggressively and will continue to aggressively lean into recruiting as you build out the PCA business and your deferred comp amortization was up over 40% year-on- year in 1Q. While I understand the investment will pay off over time, I just want to get a sense as to how we should think about your ability to flex your comp ratio as the revenue backdrop begins to improve.

I think we're going to have the flexibility, and it's all top-line driven. And as I said, the growth that I think we have embedded in the firm through all those investments we made is pretty substantial. The -- we didn't change it. I don't think that a quarter was enough evidence to go trying to change it on a moment-by-moment basis. I think you get caught sort of jumping around a little too much. So we decided to leave the comp ratio where it is. We are hoping that the year continues to build out the way it is. We've got a lot of time left. We just didn't think the evidence of a quarter was enough to really try to fine-tune it right now. We'll do that in the back half of the year.

Congrats, Navid, on the new role and Ken, congrats on the new role as well. You'll be missed.

Your next question today comes from Ryan Kenny from Morgan Stanley.

Just a follow-up there on the comp ratio. Is there a formula we should think about for the rest of the year? I know last year, we had a formula and it was unclear whether that still applies for this year. Any update there?

No. Joe's left, and I'm no longer stuck with Joe's formula. The formula worked beautifully last year because we were coming off of a very different environment. And this year, there's no formula. I think it's going to be driven by the top line. We have these investments. We have a great set of people on the ground. And I think it's going to be a derivative of how much we're able to drive on the top line.

The next question is from Alex Bond from KBW.

Firstly, I know we've talked or you've talked today on the call extensively about the build-out in the PCA team. But just curious if there are any other -- or what other areas outside of there where you are particularly focused on hiring currently?

Co-Founder, Founding Partner, Co-President & MD Look, we -- there are other spaces and sectors where I think we could add great talent. I don't know that I want to be super specific on this call. But I would say we do have an active set of dialogues with candidates that we think could be great on the platform. And I do think one of the things we want to do is continue to build those pipelines, and that's a full year-round effort in making sure we're having the right dialogues with the right people around other spaces. There's still -- despite our growth and despite investments we've made, there's still lots of areas and lots of companies we're not covering and lots of spaces where we have franchises that can be built. And so as I said, we want to focus on the great people and want to focus on the biggest opportunities. And that's where we're constantly having dialogue with people who can potentially join the firm.

Got it. That makes sense. And then apologies if I missed this earlier, but what was the breakout between advisory revenues and -- or sorry, non-M&A revenues versus M&A revenues this quarter? Was it consistent with the, I think, 2/3 M&A and 1/3 M&A split last quarter?

Pretty dead on, very close to that, yes. It might be a percentage point or higher on M&A, but not much. It's right around there.

The next question is Jim Mitchell from Seaport Global Securities.

Ken, I find it hard to believe you're going to miss these conference calls, but I appreciate the sentiment. But I just want to -- I had a follow-up on PCA. When you think about that business, the nature of the business as well as Moelis' historically strong relationships with sponsors, would you expect the new hires in that business to ramp up more quickly than your typical M&A banker? Just trying to think through the payback time on the PCA investment.

The answer is yes. And first of all, I think we're now interacting with them for 6, 7 or 8 weeks together. And I think they've been surprised or positively surprised at how strong our dialogue is with their core customer. And so we're very -- both of us are finding it like the match has been what we hoped it would be. And the answer is yes, because what's happening is there may be a sector banker that was going in to talk about an asset that a client had next week, and we can walk right in and push the PCA expertise right into the pitch and talk about it as part of the dialogue much more rapidly than you would say, okay, let's say you hired a new sector banker, they sort of have to go reestablish communication with the client, land a transaction. So I think I do think they can be productive quicker because they are being asked to show up in dialogues we're having with sponsors that have been ongoing real-time time before they hit the ground. They're just being slotted right in and providing new expertise and new options. So yes, it can be.

Co-Founder, Founding Partner, Co-President & MD Just to elaborate a little further, the 3 senior bankers that we've hired really focus on continuation vehicles and secondaries. And as Ken said, that's a much quicker M&A-like kind of time to market. The primary business, which is another part of the PCA business that we'll hope to build over time is a much longer lead time kind of business. But the businesses we're focused on first, a, I think, are the biggest market opportunities for us; and b, to your question, I think our -- the ability to make an impact more quickly, I think, is much more realistic.

Right. Okay. Yes, that's very helpful. And then maybe a pivot to balance sheet and cash. I don't want to put the cart before the horse, but I think cash and liquid investments doubled from a year ago and the highest second quarter, I think, on record. So if the environment is getting better from here, are you getting close -- any closer to starting to return any of that excess cash to shareholders? And how do you think about deploying it if we are getting close?

Yes. I think we are. We recognize that we probably have more excess capital than we want or need, and we're in discussions with the Board on that. And it will be a variety of ways. But I do think stock repurchase will probably play more prominently in that than it has in the past, where we were concerned about shrinking our float, we're not that concerned about that anymore. So let's just put it, we're looking at a variety of ways, and we want to get capital back, and we realize we probably have more capital than we need.

And at this time, there are no further questions. That does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.