Moelis & Company (NYSE:MC) Q4 2022 Earnings Conference Call February 8, 2023 5:00 PM ET

Company Participants

Matt Tsukroff - Investor Relations

Ken Moelis - Chairman and Chief Executive Officer

Joe Simon - Chief Financial Officer

Conference Call Participants

Brian McKenna - JMP Securities

James Yaro - Goldman Sachs

Michael Cho - JPMorgan

Brennan Hawken - UBS

Matt Moon - KBW

Brendan O’Brien - Wolfe Research

Operator

Good afternoon and welcome to the Moelis & Company Earnings Conference Call for the Fourth Quarter of 2022. To begin, I will turn the call over to Mr. Matt Tsukroff.

Matt Tsukroff

Good afternoon and thank you for joining us for Moelis & Company’s fourth quarter 2022 financial results conference call. On the phone today are Ken Moelis, Chairman and CEO and Joe Simon, Chief Financial Officer.

Before we begin, I would like to note that the remarks made on this call may contain certain forward-looking statements that 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 will now turn the call over to Joe to discuss our results.

Joe Simon

Thanks, Matt. Good afternoon, everyone. On today’s call, I will go through our financial results and then Ken will comment further on the business. First, we achieved $202 million of adjusted revenues in the fourth quarter. For the full year, our adjusted revenues of $970 million were down 38% from the record prior year. Regarding expenses, our full year compensation expense ratio is 63%. For the full year, we reported a non-compensation ratio of 15.6%. The increase in full year non-compensation expenses is largely due to a normalization of travel and related expenses.

Looking to the first quarter, we expect non-compensation expenses to be in the $40 million range, excluding episodic transaction-related costs. Our full year pre-tax margin is 22.5%. Regarding taxes, our normalized corporate tax rate for the year was approximately 27% and our effective tax rate was approximately 22%. The difference is driven primarily by excess tax benefits related to the delivery of equity-based compensation in the first quarter of 2022. We may recognize a tax benefit in the first quarter of 2023 related to the annual vesting of RSUs later this month. For purposes of quantifying the excess tax benefit, we expect the impact to EPS to be approximately $0.01 for each $1.25 difference between the vesting and breakeven price of $36 per share.