Moelis & Co (MC) 2016 Q4 法說會逐字稿

Good day, everyone, and welcome to the Moelis & Company fourth-quarter 2016 earnings conference call and webcast.

(Operator Instructions)

Please note that this event is being recorded. I would now like to turn the conference over to Mrs. Michele Miyakawa, Head of Investor Relations. Please go ahead.

Great, thank you and good afternoon, everyone. Thank you for joining us for Moelis & Company's fourth quarter and full-year 2016 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, 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 Investor Relations website at investors.Moelis.com. I will now turn the call over to Joe.

Thanks, Michele. Good afternoon, everyone. On today's call, I will go through our results and then Ken will update you on some recent Firm developments and our outlook.

I am pleased to report that we achieved record revenues for both the fourth quarter and full-year 2016. For the fourth quarter, we reported $205 million of revenues, up 17% from the prior-year period, and we reported $613 million of revenues for the full year, up 11% over 2015. Our full-year performance compares favorably to the overall M&A market, in which the number of global M&A completions greater than $100 million actually declined 7% year over year.

Our revenues were primarily driven by continued strong M&A activity. We also experienced improved restructuring activity year over year. This all resulted in our advising on a greater number of transaction completions than in 2015, and serving the largest number of clients in the Firm's history.

Moving to expenses and starting with compensation. Our adjusted comp expense ratio of 58% for the quarter and the year compares with 55% in the prior-year periods. The increased compensation ratio is attributable to the additional tranche of equity awarded in early 2016, as well as the modified vesting terms associated with that equity.

Our non-comp ratio decreased from 19% to 15% for the full year. The decrease in the ratio was primarily attributable to higher revenues and lower non-comp costs, including both professional fees and T&E. Some of the cost savings were one time in nature, while others are expected to be more enduring. We will maintain a focused emphasis on cost control.

As a reminder, our adjusted presentation assumes that all partnership units have been converted to shares. So that all of the Firm's income is taxed as if it were subject to our corporate effective tax rate of 39.2%, which compares with the prior-year's tax rate of 40%.

In January, we completed a secondary offering of 5.75 million shares of Class A common stock. The purpose of the offering was to facilitate organized liquidity, given that the first tranche of MD pre-IPO shares will be released from lock-up in early 2018. This transaction increased out public float which has grown to about 24 million shares. The offering had no impact on dilution.

As we continue to grow our float, we will gain more flexibility in our capital allocation strategies, including share buybacks. We remain committed to returning 100% of our excess capital to our shareholders. And in January, our Board declared a dividend of $0.37 per share, which represented a 16% increase and was our fourth increase since going public.

The dividend will be paid on March 17 to stockholders of record as of March 3. This is in addition to the $1.25 special dividend we paid in early January. We ended the year with a strong liquid balance sheet and no debt. And I will now turn the call over to Ken.

Thanks, Joe. 2016 was a very strong year for us. We achieved record revenues, completed the build of our premiere energy franchise, entered into Mexico and then added expertise in Germany, industrials and M&A.

We internally promoted our largest class of eight managing directors and continued to organically grow our JV in Australia, positioning it for a possible IPO early this year. Our ability to grow the franchise while returning significant cash flow to investors is what we believe sets us apart. Since going public in just under three years, we have grown revenues by 50%, increased managing director headcount by 28%, entered new markets and expanded our product offering.

We have done all this while returning 24% of our IPO price back to shareholders in dividends, including the $2.56 per share we paid with respect to 2016 on top of substantial price and share price appreciation. We achieved all of this while incurring no debt, and finishing 2016 with a healthy level of excess cash on our balance sheet.

Looking forward, we have significant room to grow. Our M&A dialogue continues to be extremely active, and certainly in the US, CEOs are looking to transact. And there could be further tailwinds if the new administration implements regulatory and tax reform, as has been suggested.

Our recapitalization and restructuring dialogue remains healthy, and we continue to advise clients on how to navigate a slower growth and rising interest rate environment. We are experiencing significant momentum, not just in the US but around the world, including India, Asia, Brazil, and the Middle East.

Most importantly, I have never felt better about our global platform and our ability to work together as a team to offer the best advice, and build an increasing number of trusted client relationships around the world. All while generating an industry-leading return on invested capital. With that, I'll now welcome any questions.

Thank you. We will now begin the question-and-answer session.

(Operator Instructions)

The first questioner is Mike Needham with Bank of America Merrill Lynch. Please go ahead.

Good afternoon, everyone. So first, I think that just because most of your revenues have come from the US in the past some people might consider Moelis more of a US-focused firm. Can you talk about the areas outside the US where you think you have a meaningful presence? And then without getting into specific details around the deal in the news today, can you give us an idea of the history and the team you have in the Middle East?

Look, we have been investing globally for a long time, and it was expensive but we did it right away. We have 17 offices around the globe, and we transact revenue all over. I think last year, we did 12 transactions from China, 8 out of India.

We're active in Brazil. We've been active in the Middle East for a very long period of time. We really look at it as a global relationship with our clients.

So last year, I'd say the one geographic area that was weak was Europe UK, and that's a large region, by the way. So we did tend to have more revenue come out of the US. But we're very excited about our team there, and we're ready for any rebound in Europe UK, we will be part of.

Okay, thanks. And then second on restructuring, I think in the past you have indicated you still see growth in restructuring mandates. I guess, is that still the case?

I think in the prepared remarks you said it's active or healthy. But are you seeing new mandates happening? And is it mostly in energy, or is it active in other sectors as well?

I would call it, if it's growing, it's slight. It's not fiercely growing. Let's put it that way.

For right now, you have a lot of optimism in markets. There is a lot of refinancing capability. The markets are open.

But it's fine, it's healthy and it's spreading. There is a lot. The locus of restructuring is around energy and commodities, but there is a lot of leveraged companies out there in retail, media, TMT, and they'll be specific one-off occurrences based on over leverage, et cetera, where you have to do restructuring and we are seeing it start to evolve in that.

There is a tremendous amount of leveraged paper in the world. There is a business cycle, and we feel very good about the restructuring group and what the next three years will look like. But that's not to say that I'd characterize it as growth in the very short term.

Okay, great. Thank you.

Our next questioner is Ken Worthington with JPMorgan. Please go ahead.

Hello, good afternoon. I wanted to follow up on actually the Saudi Aramco deal. If when you went public we had to talk about the sector you were best known for, I would say energy probably would not have been on top of the list. So can you talk about maybe the resources you were able to pull together to win that mandate, and the capabilities that you think you'll use to advise in the deal?

And I know this is a little far fetched, but you have been building up the restructuring effort in energy. Did that have a factor in you think you -- winning that deal?

Let me say I'm not going to comment on any client matters, okay? If you've noticed on our press releases and in our filings, we have always not listed, talked about, or discussed our clients' business. I really feel like in some ways the earnings are for you on the phone and discretion and confidentiality is for our clients on our other phone calls, and we're going to maintain that.

I will say this though. The Firm -- our number-one product we sell is client service and confidentiality, client service, dependability, and great people. All combined together as a team. We have had that since we were -- when we went IPO, that was the story.

And the reason I've said now on the phone several times over the last few months, I have never felt better about the Firm, is the global network and collaboration is incredibly -- is working incredibly well right now. And we are able to deliver expertise to all our clients, from multiple office sectors, specialties, and we're invested in those people and we are delivering them seamlessly and together as a team.

And that's what people want, and that's the product they want more than anything, and it's in short supply. So I think we're doing a good job of supplying it.

Great. Congrats on the deal and congrats on the quarter. Thank you.

Our next questioner is Devin Ryan with JMP Securities. Please go ahead.

Hey, great. Good evening, guys.

Hello.

So maybe starting, the Firm has now been public for three years. A little bit hard to believe. And, Ken, you have really been saying for the past few years that the healthy M&A market that we have been in has been driven by that lack of economic growth, almost a deflationary environment. So that's been a catalyst for bringing companies together, but over time strong growth seems to be an even better correlator with an improving M&A backdrop.

So I am curious, you are seeing good momentum in business right now. Is that a reflection of just confidence in growth improving so that's supporting that? So I'm really getting to, if we actually pivot to a stronger economic growth backdrop, does that actually make you more optimistic about what the business could look like?

Let me say this. We were very strong going into the election, and I'd say we're -- I'm not sure I have seen a change of speed coming out of the election. I think M&A was strong, people wanted to evaluate their options, to create value.

And by the way, rates are not moving as fast as people thought. I have not changed my view on where the economy is right now on growth.

Now, there is an expectation, I think, of a deregulated environment that is making people very excited about what they might be able to implement. And I actually think that's what's going to drive M&A. There is a feeling that you can achieve the goals you set out, that the government will not get in your way if you have a strategy to implement something.

I think that's rifling through all industries. People call it animal spirits, but I think it's the optimism that they can envision a creative way to create value and that the government might not get in their way, and that's going to motivate people to attempt and try things that will be exciting for everyone. That's what I think is going to drive the M&A market.

Interesting, got it. And are you already starting to have -- are the conversations around that already occurring behind the scenes? I am sure not too many deals have occurred yet because of the view of regulation. But I'm assuming maybe conversations are starting?

I think so, yes. I believe that people are much more optimistic.

There is a lot that goes into a merger. There is a lot of assumptions that you're going to be able to do things that you want to do. Those include things like divestitures, reductions in work force, et cetera, move assets around.

There is a lot that goes into it. And I think that any sense that the regulator will get out of the way of implementing that will be positive, and I do sense it. I think that's what's driving it right now.

Yes, got it. Very helpful. And maybe pivoting here a little bit. Recruiting, you just continue to have success here.

Over the years, you have been able to expand the footprint, but at the same time you are also increasing profit margins. And I know that can be tough to do in an accelerated growth phase for a firm.

So given that you're still maybe active I'm sure moving forward, just given the optimism and the ability to grow the Firm. Can you touch on again, I know you have spoken about it, but the recruiting philosophy, how you think about balancing, you're bringing in good talent versus the economics of doing that at a high level? And then maybe also what you're seeing in the competitive landscape for talent right now?

It's complicated. Obviously, different phases of your growth, you think of it different ways.

But we are reaching the point right now where our first thought is can we fill the need through internal growth? Do we have a young person coming up through the ranks who can fill that sector need that we have? That's number one.

If you can't do that, we'll look in the market. The market is pretty active. I think there is still a lot of people who are unhappy with the big bank model mostly, and we will go in the market.

But we then look at it very, I think, different than a lot. We look at it very much on duration. The first thing we ask is, can we put the person -- is this somebody who will be with us for a long period of time? Not 2, 3, 4 years, but 8, 10, 15.

I am a believer, as you can see, in I think what's happening with our Firm right now. If you put the same people and collaborate and put them in a team environment, the acceleration in the benefits is dramatic, but it takes time. And we really look at duration as a very substantial decision in going after somebody that's not internal.

Great. And just how is the competitive landscape just at this moment for talent?

I think there is a lot of good talent, external talent, is out there. Interestingly, I actually think there is an interesting dynamic.

There has been a real reallocation of money in the alternative space from hedge funds, which are not really a competitor for talent in the investment banking space. But the alternative money now has gone to private equity. There is a lot of allocation going to private equity and out of hedge funds.

Private equity is a competitor for talent, not just in Moelis & Company, but throughout the investment banking industry. Bankers tend to go there. And I could see that expansion of private equity again, and the amount of capital that's flowing in to create a good competitor for the boutiques.

For a while there, I think the boutiques were, by far, the best alternative for those who wanted to leave the big banks. But I think we're going to have a competitor now in private equity a little bit.

Interesting. Okay. Last quick one here maybe for Joe. Just around the operating margin of the Firm, some improvement over 2015 during 2016, which was pretty impressive just given the natural expansion of the comp ratio with the stock-based amortization.

Just trying to think about from here, and I know the non-comps were lighter in 2016 as well, maybe you will see this step back up with some one-time events that will come back in. But moving forward, if the assumption is we are still in a pretty healthy revenue backdrop, is there room to really expand that operating margin or are we at the upper bound just mathematically, the mechanics of it?

So longer term, I think there absolutely is capacity to move the boundaries. I think for the next two years, 2017 and 2018, I think you should plan on comp ratio being 58%, and the primary reason for that is that we basically have two amortization schedules out there now. We have one that was more back-end weighted combined with one that's front-end weighted.

So you're going to have this bubble that we are dealing with in 2017 and 2018. So 58% is definitely where we're targeting. And then on non-comp, as you said, we think that with reasonable revenue growth we'll still be at the lower end of our express target of $15 [million] to $18 [million].

Got it. Okay, terrific. Thank you, guys.

Our next questioner today is Conor Fitzgerald with Goldman Sachs. Please go ahead.

Just when you're talking to CEOs, how are they thinking about the potential for corporate tax reform to impact their appetite for M&A? And are you hearing more optimism about what lower taxes could mean for their businesses, or are you hearing any hesitancy about the willingness to embark on M&A until there is more certainty on this topic?

I think everybody is very excited about lower taxes, and most executives have in the back of their mind exactly how much their earnings go up on a lower tax rate. But I have not heard one person say we do that deal in a lower tax environment. I think the transactions are strategic, and they're not based solely on the financials around a lower tax.

Lower tax would effect everybody across the board. So I think there is a feeling it might affect your cost to capital, raise your equity stock price, lower your cost of equity, but I haven't heard it become a precursor to a deal.

That's helpful. Thanks. And then, Joe, I think in your comments I think I heard you say that if the float continues to improve, you would view yourself as having flexibility to pursue buybacks. Should we interpret that to mean you don't want to do buybacks post the follow on, or you are still waiting for the float to improve?

No, what I was suggesting is that with a 30% increase in the float, that we would have more appetite than we have had in the past, which has been none, to potentially do share buybacks. But I think we are still in a -- we still believe that float is an important asset, and we want to nurture it. And so we're going to be very careful about it, but our minds are more open to it.

That's helpful. Thanks. Thank you for clarifying.

Then just one to maybe more broadly understand your philosophy on buybacks. I understand primarily it would be used to offset dilution. But with the float (inaudible) improved, if there ever was a period where your share price was under pressure or you thought it was trading below intrinsic value, would you be willing to divert away capital returns out of dividends and into buybacks?

I will take that, Joe. The answer is yes. I think if we could figure out the answer to that question in the market, if we thought the stock were undervalued, we would divert capital from dividends to share buybacks.

That's helpful. Thank you.

Our next questioner today is Brennan Hawken with UBS. Please go ahead.

Thanks for taking the questions. Good afternoon. So first, Joe, a question. Non-comp results were pretty impressive.

I know that you mentioned some of the decline year over year was one timers. Was that reference -- and I'm sorry if you quantified it, was that the nearly $4 million of legal and episodic that you had disclosed last year? Is that the decline you were talking about?

Not solely. I think that what I've indicated in past calls is that I believe at the current headcount, that the run rate is -- that the underlying run rate is probably $24 million to $25 million, and we in the -- during 2016 incurred something closer to $23 million.

Okay. And do you think part of that lower rate is tied to one timers and part of it is discipline?

Yes. Right, exactly.

Okay.

But I think that the underlying run rate is probably $24 million to $25 million at the current headcount.

Cool. Got it. Thanks for clarifying.

Sure.

And then while we got a little back and forth going here, Joe, I'll keep it. So the following up on Conor's question, can you -- is there a way in which, since before buybacks weren't really something you guys considered because of your limitations with the float, have you thought about an approach or a methodology for thinking about weighing regular dividends versus buybacks versus specials as you consider returning cash to shareholders? High-class problem.

Yes, exactly, and we consider it each time. It's certainly part of the ongoing conversation that we have with the Board, and we'll continue to have that conversation. The only reason for bringing it up was that, obviously, with the secondary, we were able to increase the float and that will ultimately be part of the conversation going forward.

Okay. Related, I know, Ken, on the IPO you had made reference to offsetting employee-based comp with the buyback. Would the near-term goal of any buyback program be first targeted at that before moving on to potentially reducing the share count?

I think -- I'm not going to use that as a straight jacket. I think firms that have gotten into exactly how they're going to use their capital to accomplish a goal that's not in the ultimate interest of the shareholders is a straight jacket. So look, I am going to manage the capital for the benefit of all the stockholders of the Company and do what's right at the time.

And I literally believe the idea of maintaining a straight jacket on share count has caused -- so you maintain a straight jacket and then somebody does an acquisition where they issue a boatload of shares in one acquisition. I don't get that.

I think we are not going to use our capital to do probably any acquisitions that would cause concern. But as we grow organically, I also don't want to be -- we've gone from -- again, we have raised the revenue of the Firm by 50% in two years without doing an acquisition, and returned a tremendous amount of capital. And so I just don't want to put myself in any formulaic absolutes that require you to do something that don't make sense at the time.

Sure. My questions wasn't implying rigidity. I was more about priority -- it was more about priorities. Sorry if that wasn't clear.

I want to be clear. The priority will be to look where our float is, where the stock is, where our cash is, and what we should do with it. I think over time, that will keep the share count under control.

But I also don't know that, that has to be mantra that leads you to do things you ultimately don't think are best interests of your shareholders. That's what we're going to do. Every time we're going to create a quarterly dividend that will abide by and hopefully grow over a period of time pretty consistently, which we have.

We will then hopefully create excess cash and we'll decide what to do with it given what's going on in the market, the outlook, the share price, et cetera. And I think, again, I think that decision will be fairly well determined at the moment by the inputs we have to make that determination.

Brennan, one of the reasons I say that, I just wanted to -- we did a secondary and that created a lot of liquidity. But the cost of creating the liquidity is very expensive. I just want you to know, when you issue stock, you start with a $35 price and you end up issuing it at $30.50 because of all the -- I know I am an investment banker, but now I know why everybody hates investment bankers.

The fee take is enormous. So I do think there is a burden on repurchasing it at market when it costs you like 15% to issue it, and I just want to -- we're going to -- we want to be aware of that as we manage our capital.

Fair enough. And then last one from my perspective, Ken. Interesting to hear your comments on private equity as a competitor for talent.

I seem to recall on the IPO, you indicating that for, especially for some of the younger bankers and for attracting some of the more junior-level folks, that you tried to create a culture where if they ultimately wanted to go the direction of private equity that there was no stigma. There was no need to hide that. Is that -- were your comments before tied into that same approach, or is this something new?

No, we're continuing that. By the way, that's on the junior side. So the analyst's program, we very much help them look for private equity.

The two year -- the young analyst's programs that come out of school, I was really talking about managing director when I was saying the new talent. Sorry. On junior talent, it's always been a part of the program, and I think is maintained.

I just -- I think there is a lot of capital all of a sudden targeting specific private equity funds. Middle market, all of a sudden the middle market is very interesting again. To pensions, endowments, family offices, and they are creating, I think, a bunch of new sector funds, and you're seeing that in the market.

I think those funds go after actual managing directors on the street. That's a difference that we haven't seen in -- well, I don't think we have seen that in the last six or seven years.

Terrific. Well, thanks for all the color, and congrats on the end of a solid year.

Thank you.

Our next questioner today is Jim Mitchell with Buckingham Research. Please go ahead.

Good afternoon. Maybe just the follow up on -- you guys have been very good obviously in returning capital to shareholders. You have committed to 100% capital return.

Can you help us think about what that minimum, when you talk about excess, what is the minimum you look at? Is that a growing minimum as you grow the Firm, or is there a hard number that we can think about in terms of the minimum amount of cash you want to hold on the balance sheet? Any help there would be great.

Joe, why don't you take that?

Yes. So we, from the time that we went public, have maintained a minimum cash capital of $50 million. We are not growing that as the firm grows. We haven't, anyway.

We don't believe that. We believe that is highly conservative as is, and we think it's important for a number of reasons. Most important is just the security that it provides all our employees, that we don't have debt and we have a very comfortable level of cash that will permit us to have financial flexibility in the event of any kind of environment.

Right. So when we think about first quarter after the special dividend and other things, you will be closer to that number, or some level higher than that? It seems like in the first quarter of last year, you were comfortable -- well, comfortably above that.

Yes. There is a number of floats. So when you're looking at a balance sheet and you look at just the cash balance, you're not necessarily taking into account, for instance, the fact that we have bonus payments, we have tax payments, as well as the dividend payments.

We look at the whole thing, and on a liquidated basis we look at $50 million as being the minimum. We don't carry a whole lot more, if any. We look at $50 million as the number.

Okay.

And, Jim, this is Ken. It's a very conservative number because that's the -- we do it at the peak of the bottom of the cash flow from the day after bonuses clear for the rest of the year you should have accelerating cash. But we have taken employee confidence and security in the financial security of the Firm to be an asset. We actually -- we think that's a real asset, and we pay for it by having a secure balance sheet.

Yes, no. Absolutely. Okay, that's helpful.

Maybe just one question. I know it's not a cash event, but the change in the tax, GAAP tax rules for stock compensation. Is there a material impact in the first quarter for you guys as you deliver the stock?

Joe?

Yes. There might be with respect to our rate, because a lot of the equity that was delivered in connection with that, which is vesting, was done at a much lower price than what it is today. Assuming that the price today persists for the next several weeks.

Right. But no way to help us quantify that yet? It will be in the adjusted part-- taken out of the adjusted?

Yes, we'll disclose what that effect is when we measure it.

Okay. That's it for me. Thanks.

Our next questioner is Jeff Harte with Sandler O'Neill. Please go ahead.

Evening, guys. On the outlook for approved activity levels, can you -- how are you thinking about the importance of the emotional response to reduced regulatory pressure, the so-called animal spirits, versus waiting to actually see some tangible progress on things like the regulatory rollback or tax relief?

I think people are willing to believe that it's going to be better than it was, and that will motivate some. It's hard to know on the margin what happens with every single deal.

Will there be a deal that waits for their regulator to get better? Probably, in individual fields. But I think in general, the conversation is starting that, hey, we may have an opening here to get done something we couldn't get done before.

Okay. And with the Saudi headlines last night, can you just give us a little more of an idea of the IPO consulting business for you guys? How big is it, as far as is there more building to do there? Are you ready to see more benefits if ECM heats up? Give us just a little more an idea of where you're at in that business?

Again, I am not going to comment on any specific deal. But I will say, but we have a very good IPO advisory business. We were hired to advise on the largest tech IPO in Europe last year.

We've been on -- it's really -- the reason probably on this phone call it's not as recognizable. It's really an Asia European tradition to have what's called an IFA, an independent financial advisor, to do that role.

It's happening in the US. We've done it. We have had a couple deals where we've advised in the US, but it's much more prevalent in Europe.

We have a good business, we have a great team. And I do think there is more to be had in the space. I think we do anticipate it growing.

Okay. And a modeling detail question. The equity method investment lines seems to keep coming in higher than at least I would expect it to, given the Aussie JV. How should we think of that going forward, or is that just going to be a volatile line?

Yes, I think -- I'm not -- it has been a volatile line, and it will be a volatile line. I think that you may have read that they are planning to -- IPO we'll basically continue to take our equity -- our interest in their earnings. And as they grow, that will ultimately come through.

But you have to remember that they are also in a very significant investment phase. And so that's what's probably -- that is what is giving rise to some of that volatility, and it's something that we support. It's a relatively small number in the overall scheme of things, but we think it's a really important asset.

Okay, thank you.

The next question today comes from Vincent Hung with Autonomous. Please go ahead.

Hello.

Hello, Vincent.

So when we're talking about the floodgates being opened because of [lights at such] regulation, how many more deals are we talking about? Because I would gather it probably only applies to like a few mega deals per sector.

Yes. First of all, I didn't mean to use the word floodgates, if I did. Our business is on the margin. If you look at it in any one year, if there were 10% more deals or 10% less, it makes a difference on the margin.

And I'm talking something like a 10% benefit. I don't -- I wouldn't call it floodgates. I'd call it a good boost to the marginal transaction.

Vincent, you're probably right. On the regulatory front, a lot of those might result in large transactions that have regulatory issues. So they would be the ones that might move forward more aggressively.

But I also, again, don't miss -- I talked about it in terms of being a competitor on hiring, but the resurgence of private equity as an asset class will lead to a resurgence of M&A in the middle market as well. And I do think you are seeing a change in allocations that will lead to a long period of growth in middle market M&A with financial sponsors.

Okay. And in this new environment, are there any types of deals that would be less likely to happen now?

Maybe some cross border. Europe will be a little dangerous, given the elections coming up. I think there's a lot of elections coming up in Europe and those might be on hold.

That's probably predominant. And then there is some discussion of the ability to move cash out of China, and so there could be some of those transactions could find themselves not getting to the starting gate as well.

There really are restrictions, capital restrictions, right now. So I'd say those are the two places where you might see deals that normally would have happened, not happen.

Great. Thanks.

It looks like we have no further questions. So this will conclude the question-and-answer session. I would now like to turn the conference back over to Ken Moelis for any closing remarks.

Thank you very much for spending the time to understand our business, and we look forward to seeing you soon. Thank you.

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