Moelis & Co (MC) 2015 Q1 法說會逐字稿

Good day, and welcome to the Moelis & Company First Quarter Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Kate Pilcher, Head of Investor Relations. Please go ahead.

Thank you and good afternoon. With me today are Ken Moelis, Chairman and Chief Executive Officer and Joe Simon, Chief Financial Officer. Earlier today, we issued a press release announcing our firm's first quarter 2015 results, which can be found on our Investor Relations website at investors.moelis.com. This conference call is being webcast live on the Investor Relations section of our website. An archive recording will be available approximately one hour after conclusion of this call.

Before we begin, I would like to note 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 factor section of Moelis & Company's filings with the Securities and Exchange Commission. Actual results could differ materially from those currently anticipated.

Our comments today include references to certain adjusted pro forma 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 better understand our operating results.

The reconciliation of these adjusted pro forma financial measures with the relevant GAAP financial information and other information required by Regulation G is provided in the firm's earnings release, which as I mentioned is posted on our Investor Relations website at investors.moelis.com.

Following today's prepared remarks, we will open up the call for questions. I will now turn the call over to Ken.

Thanks, Kate. And welcome everyone to our first quarter 2015 earnings call. Since going public a year ago, I am pleased with the progress we've made in building our franchise. We've continued to enhance our global platform by adding seasoned team members in areas of strategic importance and expertise. We have maintained our intense focus on retaining and developing our talent and have continued to establish deep long-term relationships with clients around the globe. Today, I'm going to begin with comments on the quarter, then address our outlook for the firm and finally touch on what we're seeing in the market.

Looking at the first quarter when compared to last year's first quarter, we had a slower start to the year. Revenues were down 13% from what was a record first quarter in 2014. As a result, we reported a decrease in earnings per share as well. While we continue to see significant growth in activity levels with clients and we're confident in our long-term trajectory, our first quarter results were impacted by really three factors.

First, the last quarter of last year was a tough comp for us. It included several notably large fee events that contributed to 91% increase in revenues over the prior year. These large fee events also contributed to a somewhat unusual pattern of seasonality last year. Our first quarter 2014 revenues comprised 22% of our full year revenues as compared with prior years where our first quarter has historically been in the mid-to-high teens of our full year revenue. In the first quarter of 2015, we had a more balanced mix of fees, consistent with how our business typically performs.

Second, we began to see an extended timeline for certain M&A processes during the quarter, particularly with regards to credit sensitive deals such as financial sponsor M&A where we have a very strong franchise. We believe higher multiples and active pressure on regulated banks to tighten the availability of credit were one of the major causes leading to these extended processes. I'm going to touch a little more on this trend later in my remarks. But the good news is that it feels like these issues have worked their way through the system, and buyers and sellers have adjusted to what are some of the new capital requirements and issues and transactions.

Despite longer completion times, the number of our completed M&A transactions actually increased from quarter one 2014, and M&A comprised a larger percentage of our total revenues, which leads me to a third factor and that is a more subdued restructuring environment. Default rates continue to I think surprise on the downside, it went from 3% to 2% last year. And restructuring activities comprises a smaller percentage of our revenues. We estimate approximately 20% of our 2014 revenues were restructuring related and expect this percentage to decrease through 2015 as our M&A activity continues to grow. We're encouraged by the steadily improving M&A market and our strong and growing venture senior talent, which are driving increased overall activity with clients. We typically look at fees greater than a million dollars as a proxy for transaction closings, and had 28 clients paying fees equal to or greater than $1 million in this year's first quarter as compared to 24 clients in the prior period.

And we're also pleased with the power of our differentiated globally integrated model. The best signal to me is this, that our model is working is how it resonates with clients around the globe. Just to give you a feel, we are currently advising Hutchison Whampoa, our Hong Kong client on its GBP10 billion acquisition of O2 in the UK, the largest transaction announced in Europe in the first quarter. In Australia, we are advising a consortium of investments on the AUD8.2 billion Aussie acquisition of GE Capital in Australia and New Zealand consumer finance, and that was the second largest transaction announced in Australia in the first quarter. We recently advised Dubai Ports on $3.5 billion acquisition in Dubai, one of the largest ever public company transaction in the Middle East, which we wrapped up in the first quarter.

In China, we worked on the second largest IPO in Asia-Pacific last year, the $3.7 billion IPO of Dalian Wanda Commercial Properties. And recently, our newly opened office in Brazil, advised Petrobras on $127 billion assignment to provide capital markets and debt market strategies related to liability management. And that wrapped up in the first quarter. And as well, we've had significant transactions for clients in India, Japan and Africa. In only eight years, I think we've build one the most successful broad and diverse global platforms. So we feel good about current activity levels and expect to generate continued revenue growth in 2015. Given the longer lead time we have experienced in recent M&A processes, we expect to see this growth manifest itself in the second half of the year and that will be driven by two key areas.

First, M&A activity. M&A activity continues to steadily improve and we are participating. All of the fundamentals for long-term steadily improving cycle remain in place. And second, we are growing and developing our team. We continue to invest in our talent and to enhance our global franchise. Today, we have 99 managing directors, which is up from 87 managing directors at the time of our IPO. And we have recently hired another four who will join this summer and strengthen our capabilities in sectors that we expect to be active. For the full year, we believe we could add a similar number of managing directors as we did last year. Just to remind you, we think of hiring in two ways. One just opportunistically, when we see a creative talent become available, we're prepared to move quickly and two, strategically. Over the past few years, we invested in our team in Europe, where we now have almost 70 bankers, including 19 managing directors. We also recently hired two managing directors in Europe who will join us this summer and will cover chemicals and oil and gas.

We believe we're well positioned to capture market share as European activity improves and it is improving. The dollar volume in number of announced transactions over $100 million was up 9% and 8% respectively over the first quarter in 2014. And our team to generated continued revenue growth this quarter. We also continue to be focused on enhancing our coverage of the energy sector, where we expect restructuring M&A and other strategic activity to pick up towards the end of the year. Additionally, we're exploring incremental distribution talent for our private funds advisory business and we'll probably look add senior M&A expertise in the US.

So in summary, we're confident about our growth prospects for the year, we expect to achieve revenue growth in 2015, and we believe this growth will manifest itself in the second half of the year. While some of the trends that contributed to a slower first quarter have continued into the second quarter, it does feel like the market is beginning to adjust, and buyers and sellers are getting back in sync.

With that let me turn the call over to Joe to discuss the financial results in more detail.

Thanks, Ken. I'll take a few minutes to highlight some key points and metrics contained in the press release. Compensation and benefits expenses on an adjusted pro forma basis were $53.9 million for the first quarter of 2015, down from $60.1 million in the prior year period consistent with the decrease in revenues. This resulted in a compensation expense ratio of 54% for the quarter, which was higher than the 52% reported in the prior-year period, primarily due to an additional tranche of equity amortization expense beginning to accrue in 2015.

As a reminder, we report a lower-than-targeted total comp run rate expense due to the incentive equity reset that occurred last year when we accelerated the vest of MD Equity, which we've discussed in previous quarters. First quarter adjusted pro forma non-comp expense were $22.6 million, which is up 12% from the $20.1 million reported in the first quarter of 2014. The increase over the prior year period reflects increased headcount and greater recruiting and business development expenses. Our first quarter non-comp ratio increased to 23% in the first quarter of 2015, up from 18% in the prior year period as a result of 12% increase in operating expenses and 13% decline in revenues. Non-comp expenses largely a function of head count. Last year, our average cost per head was approximately $175,000 per year. We expect the 2015 average cost per head to be broadly consistent with 2014. And we continue to target our non-comp ratio to be 15% to 18% each year. Our equity investment line reflects two investments, which were both positive contributors to net income, our Australia JV contributed approximately $300,000 in earnings, while an equity interest obtained as part of an innovative advisory assignments fee structure resulted in $2.5 million contribution for the current period.

On an adjusted pro forma basis, we assume that all partnership units have been converted to shares, so that 100% of the firm's income is presented as if tax as a corporation at a current effective tax rate of 40%. This compares with last year's tax rate of 40.5%. The resulting adjusted net income for the first quarter of 2015 was $0.28 per share as compared with $0.36 in the prior year period.

On April, 23rd, our Board declared a quarterly dividend of $0.20 per share consistent with previous quarters to be paid on June 9 to stockholders of record as of May 26. During the first quarter, we bought back approximately 135,000 share equivalents at an average share price of $31.84. Our goal with this limited buyback was to neutralize the basic share count creep associated with actual and projected employee RSU vesting this year.

It's important to note that we intend to keep basic share count flat. Until we begin a more aggressive repurchase program, you should expect to see an increase in diluted share count, given the new tranche of annual equity awards we just issued together with the prior year's awards, which continue to vest. Finally, we ended the quarter with a strong financial position with $107.9 million of cash and short-term investments and no debt.

I'll now turn it back to Ken.

Thanks, Joe. I want to spend just a few minutes on the market and our outlook and conclude with the investment teams that will drive the Company. As I have articulated since our IPO, we believe this is going to be a long and steadily improving cycle. I think this is evident based on our conversation with clients and when you look at the data. The dollar volume of global announced M&A transactions over $100 million is up 14% over the first quarter of 2014. But as we have discussed, we believe the number of transactions is more indicative of revenue potential and this number is up only 3% from the prior year period. But that's not the whole picture.

When you look more closely at the data, different trends emerge for large cap and mid-cap activity. While the number of transactions of over $5 billion almost doubled versus the first quarter of last year, the number of deals between $100 million and $5 billion was basically flat. So while the M&A market is improving, some of the headline deals are suggesting a more pronounced rebound than what we're seeing in broader markets. And to be candid, we were surprised by this trend as relative to last year, it does feel like deals are taking longer to get to the finish line, particularly with regards to credit sensitive M&A. Again, we attribute this to a few factors.

Last earnings call, I think I spoke about M&A activity being driven by the sellers. Stock prices increase and sellers become confident that they can receive value for their company, and M&A begins to pick up. This was the dynamic last year, which led to an acceleration of activity and high valuations achieved for sellers. Today, the sellers' expectations continue to be high, but we're seeing a bit of a mismatch in terms of what buyers especially credit-sensitive buyers are able and willing to pay. And by being able to pay, one of the key ingredients is financing package. The big banks are feeling regulatory pressure on leveraged transactions, which means financing packages and buyers' ability to pay on credit-sensitive deals are being impacted. And by willing to pay, we mean buyers are generally being more disciplined as they face either lower levels of leverage when they evaluate opportunities or higher interest costs as many of them are now tapping the shadow banking system in the unregulated sectors, which are charging more money.

I do think that most of these deals cross the finish line as buyers and sellers are becoming more willing to adjust. And we will continue to see the M&A environment improve in the second half of the year. With regards to restructuring, we are more muted on the near-term opportunity given micro trends. Absent activity in certain sectors like energy, the continuation of low interest rates and low default rates means activity will remain relatively soft. I believe we have the leading restructuring franchise globally. And it includes about 12% of our managing director population. We're going to keep the team in place for when the cycle comes back. I'm pretty convinced that it isn't a question of If, but When given the tremendous amount of debt issued in recent years. And if you look back on the last cycle, I don't think in 2006 or early 2007, it was apparent how hard the cycle would hit in 2008 and 2009. So I don't think they give you a lot of warning, but we want to be ready for it.

So what does this mean for Moelis. Looking out over the rest of 2015, we expect that M&A will continue to drive our revenue growth will offset the low level of restructuring activity. As we look longer-term, which we believe is the best way and really the only way to evaluate our business, four key investment themes will continue to drive our value. These are number one, we operate with a singular and intense focus on clients and relationships. Clients at the center of everything we do whether M&A or restructuring, our goal is to retain our clients through the cycles. Number two, the strong market trends I think is egging to create opportunity for us, both during M&A upticks, which we expect to continue for a while, and what I feel will be a restructuring uptick, which is just a matter of time.

We're well positioned to capture these opportunities. Our globally integrated one firm model is unique and I think the clients appreciate it. And finally, with over 60% of our firm owned by employees, we operate as owners with extraordinary financial discipline. In every decision we make, our interests are aligned with our shareholders.

With that I want to thank my colleagues for their continued hard work and dedication, and our clients for their continued confidence in our capabilities, and our shareholders for your strong support. And now I'll open it up for questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Brennan Hawken, UBS.

So, Ken, just a quick question on MDs. I think you had said that you expected to add the same number as last year, but just a math on where you are today with 99 plus the four coming in the summer, I think that would put you above next year. Would you not being overly precise in your numbers or were you telling us that there might be some turnover?

No. I think, it'll probably be not overly precise on the numbers. I think we will add a couple more this year and I don't see a lot of turnover, no.

Okay. I just wanted to verify because I remember there was somewhat episodic reasons that you would have in the past why MD turnover was happening after the IPO and I just wanted to verify we're through that noise.

Yes, I think last year, right. I think last year as you said, we had some people that -- we had some turnover that was planned for a long time. And this year, actually one of things I see within the firm, which is I'm very proud of is enormous stability in the workforce. And I think that's very good for the firm and our workforce has been extremely stable. I do not think -- I'm not going to say it, because it will jinx me. I'm not going to say what I was about to say. Let's just say it's been very stable.

Got it. And given some of the investments you guys made in talent, is there potential put upward pressure on the comp ratio this year?

I think we'll be able to hold our comp ratio. We feel -- Joe, you want to talk to him.

Yes, I think overall, we are relatively comfortable with the comp ratio. Obviously, it's a function of a number of things, but we think that that will hit the 54 plus.

Okay, great. And then last one for me, you had highlighted and talked a little about the credit sensitive deals in your comments, Ken, but given the regulatory pressure on levered lending there, do you think that there's the potential that there just might be less availability of this credit, particularly at this stage in the cycle and it actually might do more than just draw the timelines but might actually result in less volume in that part of market?

Yes, probably on the margin, it would, maybe that's why the number counts was flat, maybe on the margin, it would. But we are seeing that the shadow on regulated banking system step in pretty actively. A lot of these companies that are being created by the private equity firms and the credit hedge funds are stepping in to provide it. The interesting part is, it's more expensive. Those prices are different on interest rates and terms. And that ultimately does affect a buyer's willingness to step up to the level of price that was expecting to us. Look as I said, some of these processes, they get rolling in September, October, November. They don't happen immediately. And so when the market changes a little bit, it's like you have a bit of a mismatch on expectations.

And I think it just takes a little time and it comes together, and we're seeing that. Now, I think on the margin, maybe you're right, maybe some transaction doesn't get done that would have, but I think most of them will find a way to happen. And that is why one of the reasons you're seeing some of the big private equity firms put together shadow banking credit opportunities and the opportunities have such growth orientation because there is a real need for it right now.

Devin Ryan, JMP Securities.

So it sounds like just based on the comments that the year seems like it's shaping up to be a bit more back-end loaded. And I think that's consistent with what we've heard from some others. So just kind of digging into that comment a little bit and get a sense of how much visibility do you guys have into the back half of the year now, meaning, should we take those comments as kind of a view of the current backlog of announcements than the backlog suggesting that, or more as just a general comment based on the overall tone of the M&A market and some of the factors that you mentioned are kind of cleaning up that were holding up deals?

Well, look, I hold myself to high bar when I have these calls. And I wouldn't say it if I didn't think we had looked at our activity level and feel we can make that statement I said, which I hope answers your question. I hope we can make it. But I will say this, this business is tough even on this quarter as we got through it. It's interesting to me how difficult it is to know where you stand two months into a three-month quarter. It's not a quarterly business and I don't want -- I hate to talk about it on any three-month basis, but the short answer to what you asked me is, I wouldn't say we expect growth and have it back-ended unless I expected it and wasn't hoping for it.

And then just with respect to Europe, we have been hearing some better commentary, I think this earning season, just around Europe and QE seems to be helping valuation and confidence seems to be improving a bit. So I know there's still plenty of issues, but based on what you're seeing, it's sounds like also a better view there. And so if that's the case, what type of ramp do you think we could see in Europe just based on your conversations? And then also with respect to cross-border M&A activity in the Europe with the weaker euro, how do you see that playing out as well?

I think we might see that -- look, the 8% or 9% I talked about on number of deals, I think that's kind of what we're going to see, again, hard to predict. We're seeing a pickup in cross-border Europe and activity levels, and then what will be interesting is, with the drop in the euro, do you just have a higher level of business. Will European business, well they should, I mean it is 30%, 40% decline relative to US dollar. Will they start to just generate business, feel more optimistic and start to do more and more M&A? I think, yes. The idea of the US going into buy European businesses, I think the answer to that is probably. But again, these things are episodic, they're very specific to the company you're talking about and I really find it hard to give these global predictions when most transactions are done through very firm-specific reasons.

Just lastly speaking of episodic, we've had some deals canceled here recently for antitrust reasons and there always seems to be some were that that's impacted, but do you see that as an increasing impediment for large deals or does this story just feel kind of over played with respect to the impact on the overall M&A market?

On the overall M&A market, I don't see it being a -- by the way, that deal alone was a tremendous impact. So by definition, it impacted the statistics. That was a very specific deal. Again, there may be deals that are being contemplated that it does affect. I'm not in every boardroom. So there could be somebody who's contemplating doing something on that order of market share that you might not read about, but it is hard for me to report to you the dog that doesn't bark. So I don't know.

Ashley Serrao, Credit Suisse.

So it looks like some of your private peers are also investing to expand. So just want to hear your thoughts on the competitive landscape here just both for talents and deals.

So on talent, I think it's not gotten a lot harder, it's not gotten a lot easier. I actually think what's happened is a lot of the people you wanted to go after have settled in, I'm not sure the pool to go look after is what it was in 2009, 2010 and 2011 when we were going out there looking and a lot of people were looking to change career. You might have -- actually there may be a slightly more leave-behinds as people's compensation and stocks have gone up, but it's not enough to chill the order of doing a hire if it's a quality person. And I don't see it being affected really by the number of players, because I find that the world just kind of shifts around, some banker leaves one place and puts up a shingle, does something else.

So it's kind of the same amount of things going on under different roofs in a lot of these places, same with the clients. Look, I think the key on that is going to be and where I feel very good is the key is going to be, do you have a culture and an environment that can create talent and that can repeat and create new clients over long cycles. That's actually the question that I think if you're -- because I think you're referring to sort of the number of people who have said they're going to go out and create new investment banks or boutiques.

And I do think there's a lot of great bankers, but I think the ability to create a long-term cohesive culture around a system that can create clients and new clients around the globe, like we talked about earlier in the presentation is a very different thing than having a great banker, he can't be great banker.

Thanks for all the color there. And then as you think about your vision for the franchise, seriously hear your thoughts on, where are we in that investment for growth. You mentioned Europe and private fund placement, but how are you thinking about the overall size of the firm and investment opportunities beyond some of the things you mentioned on this call.

I feel like there's a lot of growth. I'll say this because I said it inside the firm. I wakeup a couple of times on some Monday mornings and we're not in every deal. It's amazing, but we're not. And so I think there's a lot of room for us to add talent. We are very busy working -- we're working hard, the places on fully loaded on its work effort. And I think with interest rates, I believe interest rates will stay low longer than people think. I do believe people have to -- I think about how they're going to consolidate expenses in a very low growth environment. I think the GDP report of today continues to show that you're not going to get your EPS through top line, which means that throughout the world, you're seeing people, if they're not doing a transaction, they are thinking about it. There is a lot of activity and a lot of conversation. So I believe that we have a long way to grow. And it goes to again to your, the answer I gave before. I believe there's a lot of great bankers in the world, but to create an institution that can replacing itself, train people. In all those offices when I went around the world and talked about our transactions, and follow your clients so that they can stay with you and grow with you, and not just transact with you once, twice, is more difficult than people think. And I think we want to continue to be that firm and build that firm.

Vincent Hung, Autonomous.

Could you talk a bit more about the equity interest you received as part of this advisory assignment? Is that unique or is it something that's going to become more prevalent?

I'm going to let Joe talk about it. But it was unique, it was a good idea, but of course, it causes a question.

Yes. The background is, we received a cash fee, and we also took an equity participation in the performance of a pool of assets, which we did alongside our client. So far it's worked out well, but it's not something that we would see as being something that you should expect quarter-after-quarter.

We had an anchor on the transaction. And that's the way he structured his comp. By the way, there was a substantial comp fee that -- do you remember when it showed up, Joe?

Well, it's basically was over two years. So some of it was last year, some of it is this year. And this element, obviously struck this year.

And what was the year-on-year in restructuring?

Again, we don't break it out, but I think, if you look at the default rate, it kind of gives you a flavor.

And you said last year was 20% of revenues approximately.

Yes. So, overall, look, we heard from several investors that it would be helpful to kind of broadly to mention it. Again, this is broad, it's approximations, we don't have an internal process to capture this information in a systematic way. We think overall, there will be some issues with coming up with more specific definitions and putting that infrastructure in place. And so we thought it would be helpful for the investors to at least have an understanding in a broad way what that dimension looked like last year. And basically, the direction that we see it happening going into 2015.

And just lastly on your comment around -- the issues around leverage financing for transactions. Having spoken to the rating agencies about how you address leverage lending, their view is that, when you get a weakness in leverage lending, sometimes you get a hand off into high yield. So why don't we see that in this circumstance?

Look, you could be seeing that, but that is usually much higher. I mean, in a capitalization, if you're going to try to pay 11 times EBITDA for a company and you want to borrow seven, whatever the number is, A, you can't borrow seven in regulated environments. By the way, I was speaking very broadly, so there may be exceptions. But second, the interest rate will be vastly different between a LIBOR floating bank first lien, or second lien in a high yield fixed rate longer term instrument. And that will affect the models on returns, which will affect the price, which will cause a process to result in a bidder not being where you thought they would be before the bank market tightens up. So it can happen, but it also takes an adjustment because somebody is going to pay a higher interest rate.

Betsy Graseck, Morgan Stanley.

A couple of questions. One about the outlook for the back-end activity that moves higher. Just wondering, is that more a function of completion of currently announced deals or is it more a function of new expected announcements that are in the pipeline that you're working on?

I think what I said earlier, it's combination of -- because there's a lot of things that we're involved with that are not announced but are in process. And so, what I said earlier and I will stay with is, it's things that we can see and expect and not things that we hope show up in the future. We have a real -- the reason we're saying is because we at this point have reason to expect it.

And then the second question was just on the European rate environment. I know that you mentioned quite a few times that how Europe is improving, just wondering specifically on the rate environment and how that's impacting the state of play?

Well, I think -- there's a couple things by the way on international, when we talk about in restructuring. If we see any level of restructuring that's coming about, some of the energies could be if it depends where oil ultimately settles out, but it is interesting. There are places around the world that have debt in US dollar denominations, you talk about rate and currency, and that might be where that has happened. Remember, that sort of results in 30%, 40% or 50% increase in the obligation just on currency. And if you haven't hedged it correctly, there could be some restructuring around that. Look, again, I think we're seeing the rate environment prior to -- the rate environment is helping business. As I said, I would like to be in the room when certain companies decide how much debt to issue in a negative interest rate environment.

But I think the low level of interest rate, and really more currencies than interest rates, I think you're seeing, because the sovereigns really in Europe, the negative interest rates are really around the sovereigns. I think it has to do with ECB buying of debt and capital charges against sovereigns being -- banks being able to buy sovereigns and that type of thing. So I don't really view the interest rate as much as the currency as being a large driver of European activity versus the US.

Okay, got it. And then just last from me. You mentioned that oil was obvious one of the drivers of restructuring, but could you give us a sense as to how far through the restructuring that you anticipate it's going to happen on the back of this oil price decline you're through?

In the energy sector or in the world? Do you mean just the energy sector?

Energy sector, yes.

I think it hadn't even begun. I don't think it's even begun. Look, it happened rapidly. The decline was rapid. There are many, many firms who hedge at least six months to a year out, not unusual at all to not even be feeling yet the cash flow, the real cash flow decline of the oil price. And the first thing people do is, you do anything to avoid default. You'll sell your quality assets, you'll sell your nonessential -- first, you sell your nonessential, then you'll try to sell some asset even if it's quality to keep current on your interest rates. So look, I don't think it's even really gotten started. I mean yes, it started. I know there are a few firms out there, but if oil were to settle in at, call it $50 a barrel for a long period of time, I think you'd see substantially more restructuring than we've seen.

Okay. So the acceleration rate, again, were back-end loaded, given the --.

In energy? Yes. Look, I think energy, we're -- again, I've said this one. We are focused on building up. We think the volatility -- in oil market, the volatility makes decision making very important at the board and the management level. That's where we want to be. And those decisions could be assert sales, it could be M&A and it could be restructuring. It depends how it plays out, but I do think that you've not seen the meet. If oil were to stay, call it at $50, you have not seen the meet of the energy restructuring environment yet.

(Operator Instructions) Ken Worthington, JPMorgan.

Some common themes here. So first on credit. Have you seen the big banks yet better leverage credit in the balance sheets to either win business that they might not have won six months ago or have they started to take a bigger slice of advisory fees yet? And I assume the answer is no, but they haven't yet, how do you in Moelis make sure that such pressure on your firm is minimized?

Two different markets. So that's a good question. I do think we've seen them used size as a winning tool. So on some of these big transactions, where you need to write a check, even though it's not -- remember when I say leverage, it's usually on the high end of the leverage ratios and the bigger public deals don't have high leverage ratios. But they do need a size check at the close, something Moelis -- I mean, not one of our highest calls that we provide. So I think that they're using that as an advantage. And in those particular deals, I do think they're able to get probably a bigger slice of the M&A fee than they would get if it was a pure third-party financier and the M&A was up for grab. That's my gut at least, on those types of transactions. On the deals where credit is actually an integral part of the transaction, which happens more in those $100 million to $5 billion, or maybe even slightly smaller than that transactions. I don't think they're actually competing anymore on credit. I think they have been -- I think that was happening right through September, October, and November of last year. I think the regulator's got very strict on extending more credit or less covenants or a whole bunch of things inside of leveraged credits is not a way to finance your M&A business. And so it's a bifurcated market to your question.

So next common theme, cross-border M&A. What I'm trying to figure out is the stronger dollar better for Moelis in your advisory business or is it a headwind? I guess historically, have you participated more on the US to Europe side of the business or the Europe to US side of the business, or is there another way to think about whether or how currency either benefits or hinders your business?

I don't think I can make a statement on that. We try to pay people in their local currency. So we have a natural hedge. Joe's looking at me. We don't. We pay them in dollar. We'd size their compensation package to the market that they are in. So we do have a natural offset they're having. If we do revenues around the world, we have the people there. Not like some people have a manufacturing facility in the United States in their sales. And in China, we have our people usually where our sales are. I'm trying to think if I don't see it, I can't make an observation on it. I think it would be very specific to a transaction and where that deal came in and whether -- so I don't see a trend that I can point out to you.

Okay, fair enough. And you're hitting my next question anyway. So for Joe, the FX impact on the P&L. How big was it? A lot of companies that have business outside the US will say, this is the impact of revenue and expenses, we were hurt by X-amount. Were you hurt by the changes in the US dollar? Is there anything unique on how you're paid in business outside the US? I assume you're paid in local currencies, you pay your people in local currencies. So anything unusual there?

So broadly, you're absolutely right. It's really a very little impact with respect to the fees that were generating because of the costs that we ultimately have effectively matching that. There was one FX item that went through our non-comp, it was relatively manageable and had to do with the capital structure that we've set up -- where we've set up Brazil with element of debt, and because the Brazilian currency moved a little bit, it was slightly negative and went through non-comp, but otherwise no particular impact.

Joel Jeffrey, KBW.

Most of my questions were asked, but just curious and I apologize if I missed this earlier, in first quarter, were there any deals that slipped into the second quarter that you'd expected to close in the first quarter?

Look, the answer is yes, but that happens every quarter. So I don't want you to read too much into it. I think, I'd have to say yes, but I'd have to say there might have been one in the fourth that slipped in the first, in the third that slipped into the fourth. And there'll probably be one in the second that slips into the third.

I appreciate the color you guys gave on everything being sort of back-half weighted, but in terms of thinking about the second quarter, should we think about it on sort of a comparable decline to what we saw in the first quarter in terms of revenues or is it just the impact of 1Q more weighting the first half of the year towards the negative side?

I think I'd rather stay, again this is so -- it's too difficult to do on three-month basis. And I would like to stay away from it and stay with my full year, that's the way we run the business. Well, we really run it on a longer term than that. And I'm not sure, Joel, if I gave you an answer to that question. I feel very comfortable that I'd be right. So I don't want to stay away from it. As you said, one or two things move one way or the other. And it could be -- it's percentages. So I feel very comfortable with what I'm telling you about 2015 and I'd like to leave it at that.

This includes our question-and-answer session. I would like to turn the conference back over to Ken Moelis for any closing remarks.

Well, thanks for all your time this afternoon, and your effort in covering us and the analysts and shareholders support. We look forward speaking with you and please call us if you have any questions that we can help you out. Thanks.

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