Moelis & Co (MC) 2017 Q3 法說會逐字稿

Good afternoon, and welcome to the Moelis & Company Third Quarter 2017 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

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

Great. Thank you, and good afternoon. Thank you for joining us for Moelis & Company's Third Quarter 2017 Financial Results Conference Call.

On the phone today are Navid Mahmoodzadegan, Co-Founder and Co-President; and Joe Simon, Chief Financial Officer.

Before we begin, I'd like to note that the remarks made on this call may contain certain forward-looking statements, including regarding future performance which are subject to various risks and uncertainties, including those identified from time to time in the Risk Factors section of Moelis & Company's filings with the SEC. Actual results could differ materially from those currently anticipated. The firm undertakes no obligation to update any forward-looking statements.

Our comments today include references to certain adjusted or non-GAAP financial measures. We believe these measures, when presented together with comparable GAAP measures, are useful to investors to compare our results across several periods and to better understand our operating results.

The reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information required by Reg G is provided in the firm's earnings release, which can be found on our Investor Relations website at investors.moelis.com.

I'll now turn the call over to Joe.

Thanks, Michele. Good afternoon, everyone. On today's call, I'll discuss our results, and then Navid will provide an update on our business.

We reported third quarter revenues of $170 million, up 13% from the prior year quarter. Our performance compares favorably to the overall M&A market in which the number of global M&A completions greater than $100 million was down 5% from the prior year quarter.

We saw strong growth in M&A in the first half of the year, and this trend continued into the third quarter, driving much of our quarterly revenue growth. In particular, we saw a large number of sell-side completions and also earned higher average fees on these transactions.

While restructuring activity grew through the first half of the year as expected, we saw a decrease in the number of completed transactions in the third quarter, and we anticipate this trend will continue. We expect to end the year with a restructuring business that is both strong and consistent but, given growth in other areas, will likely represent the lower end of the 20% to 25% range of the total revenues.

Our year-to-date revenues were $515 million, up 26% from the prior year period. We advised a greater number of clients in the first 9 months of 2017, including a greater number of clients who paid fees over $1 million, and we completed a larger number of transactions over the prior year period, earning higher average transaction fees.

Moving to expenses. Our adjusted comp expense ratio of 58% for the quarter and first 9 months is in line with our target as well as with prior periods.

Regarding non-comp expenses, we reserved for client collection issues of nearly $3 million in the third quarter. We view this activity to be anomalous and isolated. For both the quarter and year-to-date, we continue to manage our non-comp expense ratio to be within the range of 15% to 18%.

As a reminder, we hosted our annual client event this month after taking last year off and will incur a non-comp charge for it in the fourth quarter.

In September, our Australia business announced an AUD 110 million capital raise related to the sale of 22 million new shares at a price of AUD 5 per share to be used to finance growth. The capital raise had 2 components: The first tranche was a placement of 12 million shares, which was completed in September and resulted in a noncash accounting gain to MC of about USD 14.4 million or $0.14 contribution to EPS.

The second tranche was a conditional placement of 10 million shares sold at the same AUD 5 per share but is subject to shareholder approval. Assuming approval is obtained, we expect this transaction to close by the end of October, resulting in another accounting gain, which will approximate $0.09 to $0.10 of EPS in the fourth quarter. The gains are noncash and recorded within other income.

As a reminder, we continue to hold our original position of 50 million shares, which, based on the most recent market close, is worth over USD 200 million or in excess of $3 per fully diluted share of MC.

Moving to taxes. Our corporate effective tax rate of 33% compares with 39.5% in the prior year period. The current year rate includes the positive impact of excess tax benefits related to vesting events, largely concentrated in the first half of the year. Excluding the impact of these discrete benefits, our effective tax rate would have been 38.9% for the first 9 months.

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 taxes if it were subject to our corporate effective rate.

On the topic of share count. We expect diluted shares to increase in the fourth quarter by approximately 500,000 shares, assuming no change in average share price or other extraordinary share activity, that being new grants, buybacks, accelerations or forfeitures. The sensitivity to a change in price is approximately 100,000 shares for each dollar of average share price movement. The starting reference point is the average price in the third quarter, which was approximately $40.

Finally, our board declared a quarterly dividend of $0.37 per share, consistent with last quarter, to be paid on November 20 to stockholders of record as of November 6.

We ended the quarter with a strong financial position with no debt and $244 million of cash and liquid investments.

And with that, I'll turn the call over to Navid.

Thanks, Joe. Good afternoon.

As Joe discussed, our revenue growth this quarter was largely attributable to growth and M&A. We continue to see an increase in the size and complexity of the transactions on which we advise as well as in fees earned per transaction.

We have benefited significantly to date as a result of our collaborative model. Of note, cross-border transactions are a meaningful top line contributor, responsible for more than 1/3 of our year-to-date M&A completions as we continue to benefit from banker collaboration on our global platform.

In addition, for the year-to-date period, Europe, the Middle East and Asia were positive contributors to our growth. As the markets improve in these regions and as our network continues to strengthen, we should see further international and cross-border opportunity.

We continue to add to our global network with key senior hires. In September, Trevor Montano joined our D.C. office to broaden our Financial Institutions effort with coverage of regional banks and nonbank lenders. In addition, earlier this month, Pablo de la Infiesta joined our London office to expand our Private Funds Advisory offering throughout EMEA; and Jay Hernandez joined our Boston office to focus on the highly active industrial technology sector. We also expect to announce an additional MD hire next week.

Excluding the senior hires that joined in October, we ended the quarter with 113 Managing Directors. That is up from 102 Managing Directors at the end of 2016.

The benefits of our model, the network effect of our global collaboration, our focused strategy of organic growth and our expense discipline are clear. We have a strong track record of returning all of our excess capital and have generated significant cash year-to-date.

Similar to prior years, we intend to evaluate this cash at year-end and will determine the best method of returning it to our shareholders as we continue to build shareholder value.

With that, we welcome any questions you may have.

(Operator Instructions) Our first question comes from Ken Worthington with JPMorgan.

In terms of the middle market, can you talk about your thoughts on further growing the advisory business in the middle market? I think Ken talked last year about the opportunity and then a couple of quarters ago about the increase in middle market activity. So I'm curious to see kind of what the firm outlook is right now for that and to what extent you're thinking about sort of further pursuing the middle market as sort of an M&A opportunity for Moelis.

Great. Thanks, Ken. This is Navid. I appreciate the question. Look, the middle market has and will continue to be an area that we focus on in addition to our large-cap coverage. It's a segment of the market that, year-to-date, has proven to be stronger growth in terms of completed transaction volume year-to-date than the larger-cap deals for reasons we've talked about on previous calls. But mid-cap coverage has been a good business for us, will continue to be a good business for us, and we continue to put resources against that effort.

Just maybe to follow up on that. How does pushing down market impact your ability to kind of serve your bigger banking clients? And then, maybe separately, how does the pushdown market kind of impact your brand as bigger banking clients sort of think about choosing Moelis as the adviser on their transactions?

Ken, I guess I would maybe quibble a little bit with the characterization of pushing down market. I think we look at coverage of clients in a holistic way. Our sector bankers, our product bankers, cover companies, both medium-size all the way up to the largest companies in the world. We think it's not an either/or coverage model. And in fact, we think working with growth companies, middle market companies, actually adds to the dialogue we have with our bigger-cap clients. We do think understanding spaces and companies of note as ideas and opportunities adds to the dialogue with bigger-cap companies as opposed to detracts from the dialogue from bigger-cap companies. And so I don't think it's a -- we started big and we're pushing smaller; we started small and we're pushing big. I think we've always kind of focused on the entire market. Our bankers continue as we -- as our talent develops, as our brand matures, as our global network continues to be built out, continues to devise on larger and more complex assignments. We've seen that trend throughout our history, and we expect it to continue. And we think covering middle market companies is both positive from a P&L perspective and adds to the coverage of our larger-cap clients.

Next question comes from Buddy Graseck (sic) with Morgan Stanley.

It's Betsy Graseck. A couple of questions. One is on the restructuring piece. I know we talked a lot on the prepared remarks regarding M&A. Could you just give us a sense as to where the business is in the life cycle of restructuring in the various industries that have really been driving the bus on restructuring revenues recently?

Yes, sure, Betsy. Look, I think we've talked on previous calls that we thought the restructuring business, despite kind of a blip up towards the end of last year and the beginning part of this year, was going to largely be sort of a flattish kind of business this year. I think that's proven to be true. And so I think the trajectory of that business is very much in line with what we expected to happen at this point in the cycle. And where we are on the cycle, obviously, is we're at an all-time high in the equity markets. We have capital markets that are providing companies with tremendous opportunities for liquidity. Obviously, there're some spaces in some sectors that have -- are undergoing some duress because of technology changes. We saw it in the energy industry because of oil prices, et cetera. But I think, at this point in the economic cycle and given where the equity markets are and the debt -- and the credit markets, I think the level of restructuring activity is pretty much in line with what you'd expect.

Okay. And then just a separate question on M&A. Get a couple of thoughts from you on how you're thinking about the tax -- potential for tax changes impacting M&A market. And then, secondly, on how you're advising your clients with regard to technology-oriented M&A. Feels like a lot of M&A is to drive operating leverage from expense improvements, but just wondering to what extent you're seeing companies engage in M&A to drive revenue lift from better optimizing their customer set and the technology that they can get from their customer set.

Yes. So let me answer both questions, Betsy. So look, on tax, I'm not going to predict whether tax reform is going to happen and when and what the rates are going to look like. Obviously, the political situation is fluid and unpredictable. But look, I do think, if there's meaningful corporate tax reform, and by that, I think the 2 elements that I think could potentially drive incremental M&A business are repatriation of overseas cash and significant reductions in corporate tax rates. If either or both of those things happen, then I do think, net-net, those will become positive elements that will spur incremental M&A. So on the repatriation side, if companies are allowed to bring overseas cash back in the United States, certainly some of that money will be returned to shareholders in the forms of dividends and share repurchases, but we also think some of that money will free up M&A activity and will spur M&A activity. And on corporate tax rates, I do think that when companies, especially larger companies, are kind of thinking about the businesses they're in, oftentimes, a barrier to corporate divestitures or kind of restructuring of their operations or carveouts is taxes they're going to have to pay should they choose to get out of this business or that business. And so if the corporate tax rates lower, that just reduces the friction cost on the margin of undertaking a corporate carveout or a divestiture. And we do think, if that should happen, if meaningful corporate tax -- lowering of corporate tax rate should happen, we do think that will change the calculus on the margin for some companies in certain situations, and we do think that's a positive from an M&A volume perspective. But again, hard to predict when and if that's going to happen. In terms of your second question, look, I think we've talked about it in previous calls as well, technology and the impact of technology change is rippling through just about every sector. As part of just about every dialogue our bankers are having everywhere, companies are trying to figure out, "How is that rapid technology change impacting my business today and how is it going to impact my business over time?" And one of the tools in the toolkit for companies is M&A to better position themselves for the change that is happening in these industries. And so most definitely, a lot of our dialogue and a lot of our strategy outlooks and things that we talk to clients about has to do with, "Are there businesses I can buy to both position myself offensively for a larger customer base and a revenue opportunity? And also, how do I position myself defensively against these changes that are coming?" So it's definitely an important part of our dialogues. It's also part of the reason why we've been continuing to invest in hiring on the technology side. So just this year, we've hired or promoted internally 4 Managing Directors that focus in some way on the technology space, whether it's software or industrial technology or FinTech. It's obviously -- these are very relevant spaces, these are very relevant dialogues to have with clients. And we recognize that, and it's part of the reason why we're investing a lot and making sure we have the best bankers in the world with the best ideas to talk to clients about.

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

So just first on, I guess, level of industry activity, we're kind of seeing different things from different firms just in terms of the level of their M&A pipelines. Clearly, results continue to be good for you guys. I was wondering if you could just talk a little bit about how active your pipeline is, how active dialogues are for M&A.

Thanks, Michael. Thanks for the question. Look, we don't talk about or quote pipeline numbers or things of that nature, but let me just sort of tell you kind of qualitatively. Look, we feel as good as -- about our business as we've ever felt. I do think our dialogues are active. Our client penetration and activity levels are very, very good. We feel great about the hires we've made this year. We feel great about our talent development. And again, while we don't talk about specific numbers, we feel really good about our business. So...

Okay, fair enough. And then just on something you mentioned, I think, in the prepared remarks that you're seeing bigger deals recently and bigger fees per deal. I'm wondering if -- is this a trend? Can you maybe take a crack at isolating the drivers? Or is it just kind of some things closed that were bigger recently?

Yes. And again, I think -- look, I think, just to separate the issues, we've seen a reduction market-wide in terms of large-cap deal activity this year. So primarily, we believe the increase in fees we are seeing is primarily a result of continued maturation of our company and of our bankers and of our global platform. So as I said before, I do think that as we mature and as we develop that our client dialogues get better, we're in more places and in more rooms, and I think that naturally means bigger and more complicated transactions. And I think that's part of what you're seeing in our numbers this year, and that's within an overall context where large deal activity for lots of reasons we've talked about in previous calls has been relatively muted this year.

Next question comes from Ann Dai with KBW.

I don't know if you have the specific numbers, but I was hoping you could give us an idea of how many of your MDs are within a year or 2 of either being promoted or hired. You're hiring very quickly. You're promoting a lot as well. I guess I'm trying to put a framework around how much of the firm is still fairly new to their seats and maybe in the earlier stages of ramping up their revenue generation personally.

Yes, great question. Thanks for asking that. Look, it's a very big part of our story. Our internal talent development, bringing people up through our system, part of our culture and helping to kind of create the next generation of Managing Directors has really been kind of one of the foundational principles of the firm. So sitting here today, roughly a little under 1/3 of our MDs have been at the firm for 3 years or less, and approximately 1/4 of our MDs are internally promoted MDs. And we think -- I think, especially that second number, the 25%, I think, again is a testament to the emphasis we put on talent development, kind of the culture that we've tried to create at the firm and our success so far in helping new Managing Directors be successful in the platform.

Okay, great. And as a follow-up, I guess, I'm wondering if you could give us some color on some of the conversations you're having with potential clients and whether the market valuations today are, I guess, promoting or hindering deal activity, and what that push take is just given just maybe having a greater currency to do deals versus not wanting to buy expensively.

Well, look, I think everywhere you go, you definitely hear a recurring theme that clients who are looking at buying companies believe the market's expensive and that high-quality companies are expensive. So it's rare that you have a dialogue with a client where they don't say, "I'd like to do this but that's expensive, right?" So certainly, we're at the -- at a market peak in terms of the equity markets. Lots of financing available. And so certainly, kind of prices are high. Having said that, there continues to be reasons why companies will pursue M&A despite the perception of high prices or the reality of high prices. First, as we talked about, you do have these tectonic shifts that are kind of hitting a lot of these industries that require companies to position themselves for the future. You do have this sort of general low-growth economic environment, which causes companies to want to combine to get scale and to get expense savings to create EPS growth. And then you do have large pools of money, record-setting pools of money that have been raised by private equity firms that have to get put to work. They're in the business of buying companies, even in markets where there's a perception that prices are expensive. And obviously, there's ample credit available to buy companies and buy companies of scale. So all of those forces continue to drive the kind of M&A environment we're seeing, which, again, is sort of a flattish M&A environment. I don't want to give off the view or our belief that it's a really hot or strong M&A market. It's sort of a flat M&A market, but I think it's sort of a push-pull between those forces, the, "yes, market's expensive, but we still need to do some things." And that's the tension that exists in the market today.

Next question comes from Brennan Hawken with UBS.

Navid, just following up on that last comment, I think you indicated about sponsors raising a lot of cash. Have you seen any change in sponsors' appetite in the market or activity levels on the back of some of this remarkable fundraiser?

Thanks, Brennan. Look, I think it's really consistent with my comments in the prior question. Again, record amounts of money have been raised, new pools of capital, and new different types of capital. It's not just control buyouts anymore. We have the large private equity firms raising innovative and creative new pools of capital to invest in different instruments and different parts of the capital structure, et cetera. So there's lots of different avenues to put money to work in the private equity community. And certainly, when a lot of that money is raised, there's obviously a desire to put it to work. And so again, I do think that's kind of part of the -- of some of the forces that we're kind of seeing in the M&A market today is desire to put money to work. Obviously, the sponsors want to be cautious and they want to do good deals and they want to do smart deals, and they're all very smart people and so they take care in putting the money to work. But certainly, when you raise large pools of money, that money generally gets spent.

Sure, sure. Great. One additional on recent hiring. I think you guys picked up a FIG banker that you mentioned was going to focus on the regional bank sector. Does this mean we're finally going to get a -- that pickup in regional bank consolidation that seems like we've been waiting for throughout the cycle? And does the timing of this have anything to do with expectation for easing regulatory environment in D.C.? Or was it just happenstance that you happened to find a great banker that fit in well with Moelis?

Yes, it's a good question, Brennan. Look, I wouldn't necessarily read too much into it as a bullish statement about our views long term on, short term on activity in the space. It's a space we haven't been in. It's a space that have -- has been active historically. And I think the most important point is the one you just made, which is we found a banker that we thought was terrific that would fit well on our platform, that would fit culturally on our platform, and that we thought could be successful on our platform. And so I think you've seen us historically. We tend to be patient until we find the right person that we think could have long-term success, and we'll hire that person whether that space is hot or not hot or neutral. And I think it was really more about finding the right person to join at the right time in their career. So...

Sure. That makes a lot of sense. Last one for me, probably one for Joe. I know you indicated that another $0.09 or $0.10 or so of gain likely to come in 4Q from the Australian IPO. It's been a little bit more volatile in the last few quarters. Does that volatility end after this last gain that you highlighted, Joe? Or is this just a mine that's going to be a bit more volatile going forward, thanks to this JV that's now listed?

Yes. So this is purely accounting, and it's really the impact of when Moelis Australia sells shares or uses its shares in connection with an acquisition that, ultimately, there's a calculation that we have to go through in order to book up our basis. And so we started from a very low point, and we're slowly building it as a result of what is happening, as basically, we're recognizing gains as a result of some of the dilution that we're experiencing. So it's not -- it doesn't have anything -- it has something to do obviously with the Moelis Australia share price, but only in connection with actual transactions they do. So obviously, in this latest transaction, they were raising growth capital. They're very active in Australia. And as a result, they raised it at a price that was greater than what we're carrying it at.

Next question comes from Devin Ryan with JMP Securities.

Great. Navid, Joe, maybe first one here, just on the restructuring outlook. I understand that maybe we're moderating here a bit, but it still feels like we're above the trough from several years ago. So I'm curious, do you think that we're moderating back toward that kind of trough level where the credit backdrop remains benign? Or is there enough just idiosyncratic activity that's driving business? I'm essentially just trying to get a sense of the pace of deals closing that are kind of legacy versus kind of new mandates coming in.

Look, Devin, I don't -- I -- look, there's still a fair amount of activity out there. Our restructuring bankers are busy. They -- every time I see them, they're running around, working pretty hard and there's activity out there. And as you know, there's a bunch of spaces that have encountered some duress and companies that have encountered duress, and I think that's going to continue. So I do think there's going to still continue to be a good level of activity, and our market positioning in that business is terrific. Our team is doing a great job, and one of the top teams on The Street and continue to stay active in and around many situations. So we feel good about the business and certainly feel great about our long-term opportunity there. Again, it's just hard to predict what the next quarter, the next year is going to bring, and it's hard to know what's going to happen in the overall marketplace. But I think all we were really saying is, as we predicted, that it was going to be sort of a flattish year and could be up a little bit next year, it could be down a little bit next year, hard to know. But I don't think we can see anything right now that suggests it's going to be significantly up or down next year. So.

Okay, that's good color. Maybe a follow-up question here. Obviously, one of your peers increased here their leverage quite a bit in what seemed to be pretty good terms. Not suggesting that Moelis will have to do something to the magnitude. I know every situation is idiosyncratic there as well. But any new thoughts around leverage in the model or maybe the opportunity to use that, particularly if the math works relative to kind of share repurchases?

Yes. So look, obviously, we're cognizant of the opportunities in the marketplace, and we obviously are cognizant of what our competitors are doing. Look, we've taken the view for a long time now that the right way to capitalize our company was to have a debt-free company, free of contingent liabilities and other things of that nature. We've consistently returned all of our excess cash to our shareholders. We think that's the right capital structure and philosophy to support growth. We think it's the right capital structure and philosophy to support the work we do with our clients, and we think it's the right capital structure and philosophy to continue to attract and retain really high-quality bankers. And despite opportunities to do different things in the marketplace, we continue to think that's the right capital structure for us, and it provides us with the most flexibility to grow the business and the right return of capital to create shareholder value.

Got it. Okay. All right. And maybe just one on the recruiting kind of backdrop right now and competitive dynamics. We've heard that some of the European banks have been more aggressive over the past few months here just with recruiting after raising capital, and maybe that's not sustainable. But I'm curious if you're seeing or feeling any upward pressure on comp trends as a result of that. I don't want to overplay it, so I'm just curious if that is something that is, is it all a theme or looking at it competitively, some of these firms kind of reemerging or feeling like they're reemerging?

Look, I think, well, since we've started the company, there's always been competition for talent, whether it was through from the other boutiques or new boutiques or the larger firms. And sure, from time to time, you do see some of the larger banks kind of flex up or down in terms of their hiring, depending upon what's happening at their companies, and so on and so forth. I think, through all of that, we've consistently, and I think really successfully, continued to hire really great people to join the firm. And while every year is a little different and the competition looks a little different, I think we continue to feel good about -- certainly about this hiring year. We feel good about conversations that we're kind of teeing up for the future, and we continue to think lateral recruiting is going to be part of our continued growth. And as we've always said, our internal talent development and internal promotion, we think, is -- continue to be a really important part. This year, we're actually going to have more MDs promoted internally -- despite a great lateral recruiting year, more MDs promoted internally than recruited from the outside. Next year could be the same, it could be flipped, but we do think a balance of those 2 things has served us well and we think will hopefully continue into the future.

Got it, okay. That's great, Navid. And maybe just last one here for Joe, just on the Australia gain. I understand that it's kind of tied to events and appreciate the color going forward, but is there public data out there that we can use to kind of get to the number? I'm just trying to make sure that, as long as we can, we'd do that, but I just wanted to check on that.

Well, it's -- certainly, they're a public company. Their announcements, to the extent that they do an acquisition, they've announced each of those. To the extent that they've done these share sales, those also are in the public domain. And we'd be happy, offline, to take you through the calculation if you want to get into that detail.

Yes. Okay, great. We knew that the event happened, but just wasn't -- didn't know the orders of magnitude, so appreciate it.

Yes, understood.

Next question comes from Conor Fitzgerald with Goldman Sachs.

I just want to ask kind of a bigger-picture question about kind of how your culture has been evolving and as we've noticed some changes that's given some of the growth. And if not kind of just how you've managed to successfully keep the same mentality and franchise that ideal among your employees.

Yes, great. Great question. Look, it's something we really focus on. Obviously, as you get bigger and you have more offices in more places, it gets -- it requires continued focus to make sure that you're maintaining the culture and enhancing the culture and the culture is sort of infused within the whole organization. So I do think, between the work we do and the training we do with bankers who kind of show up to work for us full time in August, both at the analyst and the associate level, all the way through our talent development programs for our mid-level folks through some of the training and off-site work we do with new Managing Directors, to partner off-site, to the leadership that we put in different positions in our company, both on the product side and the sector side and managing our offices to how we do compensation at the end of the year, all of those things are opportunities to continue to reiterate and promote the culture. And we spend a lot of time talking about it. We spend a lot of time thinking about it, and we spend a lot of time thinking about how our decisions impact the culture. And so I think it's a great question because I do think it's sort of one of the fundamental things to how we try to run the business, and I think it's been one of the things that has made us successful. But I think culture is defined by what you do every single day, and we're just trying to consistently do it every single day.

That's helpful color. And then just a last cleanup for me. I think it was $3 million of client collection that went through the non-comp. Just wanted to kind of double-check that. And then any additional color you can provide on what that issue was, it'd be great.

Yes. So that's the right answer on the number. I would just say that I don't -- we don't see a broader collection issue. I'm certainly not going to speak about a specific -- about specific clients other than to say the majority related to one event. It represented a unique circumstance, but we have a long history of being very good about pursuing timely collection, and I consider the most recent event to be isolated.

Next question comes from Jim Mitchell with Buckingham Research.

Just maybe talking about the non-M&A, non-restructuring side, what you've seen year-to-date in terms of capital markets advisory, activist defense. It seems like there's been a lot of incremental growth outside of the traditional advisory channel. So how are you seeing that progress and what's your thoughts, I guess, going forward in terms of that as a growth opportunity?

Yes. Look, let me talk a little bit about some of our non-restructuring, non-M&A businesses. So we have an active and building private fund advisory business, which we started building a few years ago. That's a business that -- where it takes time to build the team, to build your distribution network, to get clients signed up and go out and raise funds for them. And I think that's a bill that's progressing very nicely for us. We're starting to see dividends paid for a few years of historical investment in that business. And as I mentioned before, it's a great fundraising environment. So as they continue to grow and add to their client base and have success raising funds, we're really excited about the opportunity in that business. We obviously also do debt and equity capital raising. And as part of that, we have an IPO advisory business. And all of those businesses continue to perform. We don't break out those numbers in terms of growth rates or percentage, but we feel good about the trajectory of all of those businesses.

Is that -- can you put a, I guess, bigger-than-a-breadbox type description on what -- how the revenue contribution from that -- those businesses right now? You kind of mentioned the restructuring is 20% to 25%, is that -- is this a material one or is it still pretty small potatoes?

Look, I'll say capital markets is a smaller business than our restructuring M&A business. I think, just given the cyclical nature of the restructuring business, we've given a little bit more of a breakdown of what that business looks like in terms of overall, and M&A is obviously our largest business and most important business in terms of revenue contribution. So it's a smaller business than our restructuring business on the capital market side, but an important one for us and, as I said, one we're excited about. But we'd rather stay away from specific numbers.

This concludes our question-and-answer session. I would like to now turn the conference back over to Navid Mahmoodzadegan for any closing remarks.

Great. Thanks, everyone. I really appreciate your joining. I wanted to let you know, I probably should have done this at the beginning, that Ken wished he could be here on this call, but unfortunately, he's traveling in an extremely difficult time zone to join the call but appreciate your joining. Please call us if you have any questions and look forward to speaking to you again soon. Thanks so much.

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