Moelis & Co (MC) 2022 Q2 法說會逐字稿

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

Good afternoon, and thank you for joining us for Moelis & Company's Second Quarter 2022 Financial Results Conference Call. On the phone today are Ken Moelis, Chairman and CEO; and Joe Simon, Chief Financial Officer.

Before we begin, I would like to note that the remarks made on this call may contain certain forward-looking statements, which are subject to various risks and uncertainties, including those identified from time to time in the Risk Factors section of Moelis & Company's filings with the SEC. Actual results could differ materially from those currently anticipated. The firm undertakes no obligation to update any forward-looking statements. Our comments today include references to certain adjusted financial measures. We believe these measures, when presented together with comparable GAAP measures, are useful to investors to compare our results across several periods and to better understand our operating results. The reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information required by Reg G is provided in the firm's earnings release, which can be found on our Investor Relations website at investors.moelis.com. I will now turn the call over to Joe to discuss our results.

Thanks, Matt, and good afternoon, everyone. On today's call, I'll go through our financial results, and then Ken will comment further on the business. We achieved adjusted revenues of $237 million in the second quarter, a decrease of 34% versus the record prior year period. The decrease in revenue during the second quarter was primarily attributed to fewer transaction completions during the quarter, which is a function of the elongated time to close we have remarked on previously. Our first half adjusted revenues of $536 million were down 14% from the record first half of last year.

Moving to expenses. Our compensation expense was accrued at 59%, consistent with the prior quarter. Our second quarter noncomp expenses were $40 million, resulting in a noncomp ratio of 17%. The increase in our noncompensation expense for the quarter is primarily attributed to client travel as well as transaction-related expenses. We expect our non-compensation expenses to be in the $39 million range for the third quarter, excluding transaction-related expenses.

We achieved a quarterly pretax margin of 25%. Moving to taxes, our underlying corporate tax rate continued to be 27.1%. Regarding capital allocation. During the second quarter, we repurchased approximately 822,000 shares totaling $35 million. For the full year up to yesterday, we purchased approximately 3 million shares totaling $140 million. Furthermore, the Board declared a regular quarterly dividend of $0.60 per share. As always, we remain committed to returning 100% of our excess cash. And lastly, we continue to maintain a fortress balance sheet with $277 million of cash and liquid investments and no debt. I'll now turn the call over to Ken.

Thanks, Joe. Although transaction completions slowed in the quarter, our M&A platform continued to be the largest driver of activity. Restructuring conversations have picked up from a dormant state earlier in the year and are primarily now focused on liability management advice. However, the revenue contribution in the second quarter continued to be modest.

Our capital markets business continues to be active as planned vanilla financing has become more difficult to complete. -- issuers are forced to turn to more structured financings, which play directly to our strength. Turning to talent. We remain committed to attracting external talent that will excel on our platform. We're excited to welcome 2 new managing directors in New York, one to expand our coverage at the consumer and retail sector and the other to enhance our M&A capabilities. Our hiring pipeline continues to be strong, and we expect to make additional announcements in the future. As always, we continue to be focused on internal talent development.

The financial markets remain volatile. The Fed and the media have been beating the drum loudly preparing the market for higher interest rates and the possibility of a coming recession. We believe this has caused sellers to more quickly adjust to lower valuations than they have in prior cycles. Both strategic and financial buyers remain interested and engaged. However, the debt market is not fully operational due to significant transactional loans that are mispriced for the current market and need to move through the system. As a result, the market conditions that existed in quarter 2 have continued into the beginning of quarter 3. However, we remain very optimistic about the advisory business and even more confident that our model of organic growth, maintenance of a pristine balance sheet and total focus on unconflicted collaborative expert advice is the best path to future success.

All the bad news that you can possibly think of is in the market. Balance sheets for banks remain fundamentally strong, and I believe the debt market problem will be resolved as debt is repriced. We are well positioned to take advantage of the coming opportunities, and we plan to be aggressive about future growth. With that, we'll welcome questions.

(Operator Instructions) The first question comes from Devin Ryan with JMP.

I guess I want to start with maybe a bigger picture question just on financial sponsors and the outlook. And kind of where I'm starting here is sponsors raised record funds, record PE funds the last couple of years. They were deploying capital at kind of a record pace and it felt like they're trying to get on to that next kind of incremental record funds from there. But now where we sit here, fundraising for that next fund, probably 2022, even into 2023, is looking pretty uncertain. So we're hearing that LPs are starting to push back a little bit on essentially giving more capital and at the same time, the sponsors are slowing deployment. And so I'm just curious kind of what that might mean or if you actually are even seeing that or thinking that could play out over the next year and whether that's maybe more of a structural dynamic that the market has to absorb relative to just, you call it, equity prices and bid-ask spread in the markets coming back to more of an equilibrium.

So there's really 2 separate questions there. One, I do understand that LPs have, there was so much fundraising that they allocated a lot of money early. Their GPs contacted them very early. They made their big allocations and possibly even some of them have a rule on how much of alternatives can be relative to the total portfolio. So the denominator might have shrunk at the same time, right? So there is an allocation issue in the current year. But by the way, that doesn't mean they didn't allocate a significant amount of capital. It's just that they did it early. So that capital is in the market.

I think the idea that if you're in the fundraising business, the next 6 months are going to be difficult because people have allocated already. That's not a bad thing. That means the capital is already in play more aggressively than it even expected to be as ratio. So that's number one. Number 2, the idea that sponsors around the sidelines, I don't believe that's right at all. The sponsors are very active. It's an interesting market actually where the equity is probably the easiest part of the capitalization to get interested in transactions in sponsored world.

The debt markets are just not functioning right now. And I think that's a function of, there's a bunch of loans that are being marked down. It's a little bit like the retailers are doing. I think the product that was put on the shelves 3, 4, 5 months ago isn't appropriate for the market today. It's going to be discounted and cleared that will happen quickly. And then I think I believe we'll be back to a new financing market. But right now, I think the sponsor community wants to transact. They just can't transact in the capitalizations that they want to.

Yes. Okay. That's great color, Ken. Appreciate it. And then maybe a follow-up for Joe. Good to see you guys hold the line on the comp ratio despite the tougher conditions in the second quarter. I'm not sure if you can give any guidance or thoughts around kind of the back half of the year. And if you can't, just even help us with what scenarios would potentially drive kind of a change to the comp ratio in the back half relative to the first half?

Well, I know you addressed that to Joe, but I hold the line 2 on the comp ratio. Look, it's the best estimate that we have. And we think that's a good ratio given everything we know. And Again, I anticipate the back half of the year, at least the third quarter, I'm not going to even predict the fourth quarter at this point. We don't expect massive. As I said, we're 4 weeks into the third, and it feels a lot like the second in terms of the world. So I think we're going into that ratio with the knowledge of where we are and where we think the third will be, and the fourth will be determined. We'll see.

Our next question comes from Ken Worthington with JPMorgan.

So clearly, M&A has slowed. As you look at your business, what part of advisory has been the most resilient? And I guess, do you expect that resiliency to continue? And if you take the other side of it, what part of advisory has slowed maybe the most and or slowed? And how quickly do you think that for those areas will bounce back? And maybe what areas do you think really are going to be slow for the foreseeable future?

So first, the slowest has been restructuring. I mean, the conversations are beginning and it's getting a lot more active.

Ken, you should probably put it on me, if you can.

Ken, can you put yours on me, I think you're the background noise. Restructurings definitely had the, as I called it almost dormant in the first half of the year. And conversations are beginning, distress has not permeated the market now. We're just in conversations very early with people trying to get ahead of problems that could occur. We're pretty active in that. But we're at the point where people are trying to get ahead of their problems. I believe that the longest term, look, I think there's a misunderstanding of the sponsor business. It is very early into the cycle, and it clears early.

What I mean by that is I think we were early post COVID in saying we saw M&A green shoots. And it's because sponsored transactions from the time they're entered into the time they close are usually 30 to 45 days. There's no shareholder vote, there's no proxy. There's often a lot less regulatory. And it also causes at the end of the cycle, at the beginning of the down cycle, they clear out faster because they don't have long tails. Strategic transactions could take 3 months to anywhere up to highly regulated deals, 18 months to close. So those transactions often take a lot longer and stay in the pipeline longer.

Right now, that's why I think M&A, I think the sponsor activity will be the first to reappear in the closable transactions. They will move quickly and they will close quickly. And that's why I believe the business has a different cycle than I've been reading from a lot of I'm not picking on you, Ken. I'm talking about the research in general.

The next question comes from Brennan Hawken with UBS.

Ken, I'd like to explore what I think I thought I heard you say about the financing market that you thought it was just a matter of clearing some of the deals out that were mispriced or priced for the prior market and then the financing would get going again. Was that your conclusion? Or did I not read that correctly?

Yes. I think this is not '08, '09, '08, '09, you had fundamentally damaged financial company balance sheets, and they had to rebuild equity and Tier 1 equity, and they were really out of the market for a while. The banks are strong. The nonbank market is strong. But right now, the nonbank market is focused on transactional loans that the banks have and they're being offered at the clearance aisle, 10%, 20% off. And I just think that's just a natural, yes, I think that those are going to get cleared out because they're onetime, and then we will reset and the banks will be in business. By the way, they'll be in the new federal funds rate, I get it, there'll be higher interest rates. There might be lower leverage, but they'll be back in business. Right now, there's a fundamental almost not working transactional market as the clearance sale happens.

Sure. But I mean, isn't the reason for the clearance sale that those loans were underwritten with meaningfully different terms than what the market is requiring now. And what the market is acquiring now is far more onerous because you have such a significant amount of uncertainty out there. And therefore, it's not like once you clear these existing this clearance rack, so to speak, then everything is all good. You've still got these kind of onerous financing terms, new kind of requirements that lenders are going to need regardless of whether the balance sheet of the bank or whatnot, you've just got such significant economic and macro uncertainty. So just to me, I guess I don't quite follow the confidence that financing is just going to come rearing back. And more importantly, I think, from the perspective of Moelis, like how reliant is the activity in which you all advise for the financing markets. Like is that key? Or if the financing markets don't come back, are you guys going to continue to remain active? Or should we be just assuming a kind of a lower run rate of activity?

Well, first of all, I disagree. The markets will find a clearing price, and there will be 2 things that help clear. I think one of them is already held clear it, and that is multiples and the price that assets sell for. So just to pick a number, for instance, if multiples go down by 3 turns or 4 turns, like you said, that's already then the bank has to, the whole capitalization has 3 or 4 turns less of need. So already, you're down. And then the banks will step in and they may do a turn less of leverage, sure. They might do that. I'm not saying that. But all you need is functioning markets. I don't know what -- (inaudible) is in the eye of the beholder.

It's -- again, as of today, what's SOFR or whatever Fed funds rates in the low 2s, you add 3 points that, you could finance deals on that. It's just a matter of the price and the leverage ratio. And everybody moves forward in the market. We didn't always run a business on 0% interest. It will find a level, pricing will reflect it and people will transact assets and banks are in the business of making loans. They have strong balance sheets. They need to put money to work. There's an enormous amount of money going into the alternative asset managers to make transaction loans. Right now. I don't blame them. They're looking at buying things at $0.80 to $0.90. So they're distracted on onetime opportunities. So I think that's what they're doing. I don't blame them.

But when we come back to the market, there will be instead of 5 turns of leverage, maybe it will be 4 turns of leverage. The whole transaction will be 3 turns less. And everybody will move on and do their IRRs off of that. But the world will go back into the moment that it's in because everybody is strong enough that they will return to business. They're not going to shut down. So I disagree with you. I don't see that. And our capital markets activity is undergoing the same thing.

Right now, you're competing, again, with the clearance aisle, very difficult. Hard to sell when the outlet down the street has the same goods on the shelf that the primary seller has. But that will clear out and then everybody will be back in business. And so we're having the same sort of moment in capital markets, but it's strong. And we think that our structured capital markets is exactly where the solutions lie as things remain volatile.

Okay. I appreciate the disagreement, and that's what makes the market. So plenty of respect for your view there. When we think about the current environment and you think about what parts of the business are active, you said capital markets has been slow. You said restructuring. The outlook is improving, right, but it's still on the comp.

I didn't think I said capital markets are slow. It's actually done pretty well. Capital markets have been fine. I don't think I said it was slow.

And then maybe I just misinterpreted.

Yes. Okay.

Then let's clarify that. Capital markets has been good. Has it been running above the normal proportion of revenue for you all that we've seen historically? Has it been more active?

It's been about flat from last year, I believe, for the first 6 months.

Yes, it's over 10%.

Yes. So I think as the top line decreased it probably as a percentage has gone up, but it's running about flat. I didn't mean to say that it just hasn't slowed. It's done very well.

Yes. And last year was tough, they were active for you all in capital markets, as I recall, right?

Yes.

So when we think about the outlook from here, is restructuring still expected to be much more of a 2023 story? And then how should we be thinking about the composition of the business? Do you think it would be very similar to what we've seen year-to-date? And then it's not going to be until '23 when restructuring picks up. When we're trying to think about refining the model and coming up with the forecast, how should we think about the different pieces and the outlook from here?

I think it's going to feel similar to where it is. M&A is going to lead the way. Capital markets, I think we'll continue to do what I've said. I think they'll stay, it's very hard to get a plain vanilla financing done in the market and people do need to finance. So you turn to us to do structured finance. And I think we are going to be a beneficiary of that. And I think we've been a beneficiary and we will continue to be. I think M&A will continue as is for a while. I think the sponsor community will turn quicker than most. And especially if you count it until closings because of the speed with which it enters the market and closes. And restructuring will start to creep up and start taking in monthly retainers, and I would guess you're right, it's a 2023 success-based fees will be put off to 2023.

Our next question comes from Richard Ramsden with Goldman Sachs.

So maybe I can just start off with a bigger picture question, which is, obviously, as you talked about, there's just a lot of uncertainty about the macro environment and how things are going to unfold. I mean has it in any way got you to rethink or reprioritize the investments that you want to make in the business, either in absolute terms or in terms of prioritization, i.e., from a product or a geographic standpoint?

Yes. I would like to be as aggressive as I could be. I do not see any fundamental weaknesses in corporations. I see the financial sponsor community has raised a lot of capital. In fact, to, I think it was Devin's first question. too much capital. They were too successful. They took all the money out of the system. They're in the business of transacting, so they will transact. And look, this is just my feeling so take it for what it's worth. I'm not a global macro economist. I think that you have corporations and financial institutions in excellent shape, and you have financial sponsors with a lot of capacity and everybody has a desire to grow very a bit, if you go on all their earnings calls, none of them think they're going to be smaller in 3 years.

And the person that's going to get -- as I said, if there's a hurricane coming, I think the corporate community heard it loud and clear. The Fed couldn't have been louder and the market couldn't have reacted more aggressively to marking down values to anybody who thinks has the Fed raised rates? Well, they raised the cost of equity capital by about 1,000 basis points in the markets by the discounting valuations. And now the debt markets have thought about it and have reacted in advance. And between the Fed and the media, I think you've presaged a pretty bad recession. So people kind of -- as I said, if it's a hurricane, they boarded up, they put the plywood up and they've gotten ready for the hurricane.

Now the part of the economy that probably isn't as ready and because there's no way to avoid it is the consumer. And I think you're seeing that the consumer has no way to really get out of the way of increased high gas prices and food inflation and things of that nature. So there will be parts of the economy that I do think have a very difficult time, but the part of the world that is thinking 5 to 10 years out on their business model and how to allocate capital to effectively deliver returns to their shareholders or their LPs. I think they're going to be very aggressive, not today, maybe not tomorrow, but sooner than you think.

Okay. That's very clear. The second question I had is, can you just spend a couple of minutes talking about the difference between a restructuring mandate and a liability management mandate when it comes from a fee perspective, is there a significant difference? And should we think about liability management mandates is effectively becoming restructuring mandates over time? Or should we think about them separately?

Well, one of the things we pitch Richard, and we're proud of is we think if you hire us on liability mandates in advance, Bill Darrow, our Head of REIT and team have some stats on this, but we're very effective of keeping people out. It's one of the things that we actually pitch very hard. We're very different than a lot of what I would call the bankruptcy firms. We think of ourselves as a bankruptcy avoidance firm. So I would say that we don't go into liability management. We're very proud of the fact that like 75% of those don't end up in bankruptcy, and that's a success for us.

Now some of them do. I would say to you that the fees involved in a full-on bankruptcy are more. They're more certain too. You go into court, and I always say, you get paid a success fee at the end, not really that big a success. You just go through the process and you come out of bankruptcy, and liability management does take more activity and more thinking and it's often just not as large a transaction. But you usually have a good client for life if you succeed in that, and that's what we try to do. So yes, it's not as profitable, but it's probably more quite a better client opportunity than bankruptcy.

The next question comes from Manan Gosalia with Morgan Stanley.

I just wanted to dig in a little bit more on the rate of change through the quarter and into July. I mean it sounds like last quarter, seller valuations were the issue. Debt markets were also an issue, but not as much. And it feels like today's seller valuation to reset, maybe not fully, but there is some progress there, and that markets are the bigger issues. So would you say that net-net, things are a little bit better? Or would you just say that there's not enough visibility right now to say that?

So you're right. What happened with seller valuations, and this is the fastest I've ever seen it go in a cycle. And again, I attribute it to, have you ever really, I've been around a long time. I've never seen the Fed and the media in unison call for such disastrous future economic results and loudly make it known what the Fed was going to do and et cetera, et cetera. So what happened very quickly is February, March, April, maybe May, you had sellers looking back for a while, hoping what happened to that value. And I think by July, maybe late June, you would have sellers of assets thinking, I think it might get worse.

So tell me what the market is, let's see what the market is and let's move. And that's a pretty quick cycle. I mean, I think 3-month cycle to reset pricing. Then what happened is the credit markets disappeared. For less than investment-grade credit, it's very, very difficult. And that is what happened. I just think that market of resetting the bank market is a function of clearance. it will happen. Banks have to get this stuff off their balance sheet and they don't have all day to do it. And so it's going to happen. And I feel like now then we have an equilibrium in buy sell, and I think we'll have a functional debt market at a different, as I think Brennan said, at a different terms, but people can transact if they know the terms.

So I guess that's the biggest catalyst we should be looking for is the debt markets at this stage?

Yes. I think that's the primary as of right now. And if that cleared up, and especially if markets felt pretty good, you can say that a lot of good assets, people might hold them for a while, there's a cycle to these situations. Strategics need to sell certain assets to accomplish goals that they want for their own needs, whether it's simplicity or for whatever needs somebody wants to sell a strategic asset and also financials have a cycle. So I think things come back if the bank market and the financing markets come back online.

Got it. And then just as a follow-up, are there any differences that you're seeing between markets? It would seem like public market valuations, particularly in some sectors have come down pretty significantly. Are you seeing more dialog maybe on the public side versus the private side or on the tech side or maybe from cash rich corporates on the strategic side? Where would you say the incremental dialogs are coming from?

Look, I do think that the public markets because their liquid reacts faster and often much more volatile. And then I do think that if there was a function in debt market, you could have some cash buyers trying to take advantage of dislocations in the public market. But right now, the math of available debt and to undertake those transactions just makes it difficult. And so they're not starting yet, but I do think that could happen. I think the public markets were quicker to react. I mean you look at the violent reaction of the public markets in some sectors and yes, they reacted much quicker.

The next question comes from Steven Chubak with Wolfe Research.

So maybe I'll start off with a question on capital management. Your cash position is quite strong. It's currently around the level where you've historically paid a special, but we also have to recognize there are some greater risks to the outlook. You also talked, Ken, about the more attractive market for talent. Just want to get a sense as to how you're thinking about the balance between maintaining the flex to invest and potentially more challenging backdrop with returning some of that capital to your shareholders?

Well, again, we're committed to returning all our cash, and we were, for the first time in, I think, a very long time, we were very active repurchasing shares. I think 3 million shares for us in a 6-month period is by far the most we've done. We've said when we felt the stock was in a position that we were, in our minds, wasn't a close call on valuation. Look, just buying back our stock when we were doing it in the last month or 2 was almost a 6% cost of capital not to do it on our dividend alone. So we have decided we're not going to pay a special because we have been, I'm not saying what we'll do in the next few months. But we've been very active in the market buying back our stock, and that's the way we've decided for the near term, allocate our capital return is to stock buybacks. Again, I'm not saying anything from here on forward, but that's what we have been doing.

Understood. And maybe just a 2-parter just so we capture both the comp and non-comp side with regards to the outlook. Similar question to what Devin had asked earlier, maybe just taking with a slightly different take. As we think about the more challenging revenue backdrop potentially for the back half. I know that there has been some sponsors on the record saying that they expect deal volume and activity to be lighter in the back half. It sounds like you have a dissenting view from that, Ken. But just if the revenue backdrop is more challenging, I was hoping you could help us frame what's the minimum level of revenues or baseline revenues that would be required to hold the line at that 59% comp ratio? And then given the uptick that we saw actually in noncomps, what's the right noncomp run rate we should be thinking about in the back half?

Well, again, I'm not projecting that the year -- I've said the third quarter has started the same as the second, and I said I'm not sure I'm envisioning an immediate return, by the way. I'm sort of saying that it will happen, and then it will take time for deals to close, by the way. So our pipeline as of today is almost exactly -- by the way I looked at it, it's almost like to the penny, where it was exactly 1 year ago. So it's not for lack of opportunities in pipe, which it's elongation. It's an ability to complete them. It's all the things we're talking about with the debt markets where it is. And I don't know what exact moment that will fall. So I don't want to leave you with a projection on the year-end. I'm just saying that I believe there will be a turn.

On the comp ratio, as of right now, that's our best guess. There are thousand things that would go into any change in that. I don't foresee it. But again, things happen in life. But right now, that's our best guess. I guess we have a tremendous organic growth model. And I do think that having so many of our managing directors come up through the system gives us a, I think, good control over our comp ratio and an ability to maintain the split that we think is fair. But again, I don't know exactly. if we were to change it, it would be because of 1,000 different inputs. If competitors come after us and want to break their comp ratios to some extent, we're not going to sit still. But for right now, this is an estimate that we think is optimal.

And in terms of the noncomp jumping off point, just given it was a little bit higher in the quarter, some of that's certainly T&E related, but how we should be thinking about that for the back half?

Yes. I think that's also included in the noncomp this period where some transaction-related costs, probably a couple of million. So the best guess I have is probably 39 area for the third quarter, absent any transaction-related costs, which are hard to project.

The next question comes from Michael Brown with KBW.

So I guess if I maybe build on that comp question somewhat during periods of market dislocation and ask for you, it's been a good opportunity to get active on the recruiting side. You've added 2 MDs. Can you just update us how is that talent pipeline now? What's your outlook here as you think about the back half of the year?

The pipeline is strong. My gut feel is that post Labor Day, I've worked at large banks. The word goes out right around Labor Day to look at your head count in a bad year. It's just the way the cycle works. People don't -- people will wait. They focus on the bonus pool somewhere in September. And my gut feel is that it could get much more active in that time period as we see, look, I think some of these organizations, especially the one will, from the top down, just allocate human capital decisions and the organizations will respond. And I'm kind of hopeful of that. And we would be aggressive and intend to be aggressive and our pipeline is pretty good right now. So we're continuing to move, but I hope you'll see us be more aggressive sometime from September through the next 9 months.

Okay. Very interesting. Maybe just one more for me. If I heard you correctly, just now you said your internal pipeline of deal activity is relatively unchanged. Can you just clarify, was that relative to the prior year or the prior quarter? And can you just remind us how you define that. Obviously, we look at public data, which doesn't necessarily line up with that commentary. And I know we've in the past had discussions about the differences between what's out there publicly and what you guys see internally. But if you could just remind us how you define that pipeline.

Well, the number I was looking at was a year ago like today from our earnings call 1 year ago. And by the way, it was like, when I say it was the same, it was the same. I think they're down to the pennies. But as we look toward how we see it roll in, it has elongated. I just want to make that clear. We don't think the pipeline will, so again, how do we define pipeline? You don't see it because most of it is confidential. These are things we're working on.

They're mandates.

They're mandates, not announced deals. There are things we're working on trying to go to market, advising behind the scenes. I mean I would say I'm just making up a number, but 80% or 90% of what we think is a pipeline, probably 90% is the things we're working on that are not announced yet.

Yes. But they have an engagement letter.

But they have an engagement letter. And again, I want to be clear, it's kind of interesting. It's to the dollar, the same as a year ago. But when we look at it and try to picture the timeframe to completion, it's definitely longer. And probably riskier, but definitely, by the way, any time you elongate a deal, it becomes riskier. A deal does not get less risky as it goes on. So they're longer to completion, which makes them riskier by definition.

Okay. Yes, that's really helpful. I guess when you look back historically during these periods of market dislocation, how has that pipeline works towards completion? Is it -- clearly, there's more risk to the deal that you just mentioned. So when you look back, is that kind of a [20%] to your pipeline over time? How does that typically work in terms of deals that actually moved to completion?

I don't have an easy answer to that. If I had that -- really, we ask ourselves the same question, and we try, but I can't give a public answer to that because there's no scientific answer.

There are no further questions waiting in the queue. So I will now pass the call over to the management team for any closing remarks.

Well, thank you for the call. If there's any who do want to follow up afterwards, give Joe or Matt your call, and we appreciate it. Thank you.

This concludes the Moelis & Company Q2 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.