Moelis & Company (MC) 2026 Q3 法說會逐字稿

Good afternoon, and welcome to the Moelis & Company earnings conference call for the third quarter of 2026. (Operator Instructions) To begin, I'll turn the call over to Mr. Matthew Tsukroff. Please go ahead.

Good afternoon, and thank you for joining us for Moelis & Company's third quarter 2026 financial results conference call. On the phone today are Navid Mahmoodzadegan, CEO and Co-Founder; and Chris Callesano, 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 Navid.

Thank you, Matt. Great to be with everyone. Certainly an interesting afternoon to be doing an earnings call, but it is great to be with you. So we had another active quarter advising clients and continue to build on the momentum in our business. We reported third quarter revenues of $426 million, up 13% from the prior-year period.

Our revenue increase for the quarter was driven by substantial growth in our M&A business and strong performance in capital structure advisory. For the first nine months of 2026, our revenues of $1.15 billion increased 10% year-over-year and represented a record first nine months. Our average fee earned per completed transaction was also a record for both the quarter and first nine months as we continue to advise clients on larger and more complex assignments.

These include a number of notable transactions announced since our last earnings call. Our leading Special Committee advisory practice has been very active, having recently advised on several assignments, including Meta's establishment of a new class of common stock, Penske Automotive's $16 billion take-private and Surgery Partners' $5.7 billion sale to HealthSpan Partners.

We also advised QIAGEN on its EUR 10.8 billion sale to EQT, and Marathon Petroleum on its $4.2 billion divestment of certain assets to CVR Energy. In Capital Markets, we advised Sequence Holdings and DFO Management in connection with $3.7 billion of financing for the acquisition of The Baldwin Group.

And in Capital Structure Advisory, we advised Medical Properties Trust on its $2.4 billion liability management transactions. And finally, in PCA, we advised BlackRock on the capitalization of a private credit continuation vehicle. Moving to the market. We continue to have a constructive outlook for transaction activity as the underlying fundamentals for M&A remain very much intact.

Companies recognize that standing still is not an option. The need to build scale, strengthen market positioning and enhance growth continues to create demand for M&A. While we are mindful of risks such as higher market volatility, geopolitical tensions, higher rates and uncertainty surrounding AI infrastructure financing, our client activity remains strong. As of today, both new business origination and our announced pipeline are up approximately 20% year-over-year, and our total pipeline is at a record high.

Now turning to our product areas. Our M&A business continues to perform very well. Third quarter M&A revenue grew 40% year-over-year, driven by strong growth in strategic M&A. Our investments in talent and expanded capabilities as well as the continued maturation of our platform are translating into a growing number of assignments advising large corporate clients on significant transactions.

Additionally, our sponsor M&A business has also performed well this year despite broader sponsor market activity trailing expectations. Notably, the number of sponsor M&A transactions on which we advise increased approximately 30% during the first nine months of the year, underscoring the strength of our long-standing relationships and continued engagement across this important client base.

Our capital structure advisory business delivered one of its strongest quarters on record with year-to-date revenue growth in line with the broader firm. The current market themes are consistent with what we discussed last quarter. Liability management solutions continue to account for much of the activity, while increased lender selectivity is making refinancing more challenging for lower quality credits.

Looking ahead, as lenders become less willing to extend upcoming maturities, we expect traditional restructuring to increase over time. Additionally, the recent rise in interest rates as well as continued dislocation across a number of industries could further expand the opportunity set for our CSA business. In capital markets, our third quarter revenues were softer following a record first half, primarily reflecting the impact of increased market volatility and transaction timing.

Despite this, our capital markets pipeline continues to grow with both the number of transactions and associated fees at record levels. Underlying client demand remains strong across both public and private markets as unprecedented capital expenditures related to AI and digital infrastructure and other high-growth sectors continue to drive issuance activity. We remain confident in the outlook for the business, although the timing of completions remains dependent on market conditions.

Finally, private capital advisory. The secondaries market continues to experience strong growth, supported by significant pressure to increase DPI across private market portfolios and growing investor demand for established high-quality assets. Our PCA team is very active in this market, winning new mandates and building a significant pipeline.

We continue to make substantial progress in expanding our PCA capabilities. All seven of our managing directors focused on GP-led secondaries are now on our platform and our recently hired LP-led secondaries and promoted co-investment teams are off to a good start.

And since our last earnings call, we've hired three managing directors focused on primary fundraising who will join us over the coming months. With the team we are assembling and our deep sponsor relationships, we believe we are well on our way to establishing a best-in-class PCA business that supports clients across the private capital ecosystem. This brings me to our investment in talent. Attracting and promoting top talent remains a key strategic priority. Year-to-date, we've hired 24 managing directors, making this our most active recruiting year on record.

13 MDs have already joined the firm, including seven since our last earnings call. The remaining 11 are expected to join over the remainder of 2026 and into 2027, strengthening our capabilities in TMT, financial institutions and industrials, all large fee pools where we see attractive long-term growth opportunities as well as in primary fundraising within PCA, as previously mentioned.

We remain active in the recruiting market and continue to engage with exceptional bankers who can be difference bankers on our platform. Before I conclude, I want to highlight the significant progress we're making incorporating AI across our business. I'm particularly excited about the collaboration of our teams as they develop new use cases and incorporate these tools into workflows that can be deployed firm-wide.

While we are still in the early stages, we believe AI will significantly enhance productivity, allowing us to generate more ideas, deliver better advice and ultimately create more transaction opportunities for our clients. In closing, our franchise is performing at a very high level despite a complex market backdrop.

We have a strong and diversified pipeline with the best talent serving more clients than at any point in our history. Having a broad set of capabilities enables us to best advise our clients through periods of market volatility. We remain focused on delivering exceptional advice investing in the long-term growth of our business and creating lasting value for our shareholders.

With that, I'll pass the call to Chris to review our financial results in more detail.

Thanks, Navid, and good afternoon, everyone. As Navid noted, third quarter revenues were $426 million, up 13% from the prior year period, with growth driven primarily by M&A and capital structure advisory, partially offset by lower capital markets. Revenues in the first nine months of the year were a record $1.15 billion, up 10% year-over-year. The year-to-date increase in revenues was primarily attributable to M&A, capital structure advisory and a growing contribution from TCA. For the first nine months of the year, our business mix was approximately 70% M&A and 30% non-M&A.

Turning to expenses. Our adjusted compensation ratio for both the third quarter and first 9 months of 2026 was 65.8% compared with 66.2% and 68% in the prior year period. As we have stated previously, we expect to reduce our compensation ratio over time with the magnitude of improvement depending on revenues and a competitive market for talent.

Adjusted noncompensation expenses were $61.3 million in the third quarter, resulting in a 14.4% noncompensation expense ratio. For the first nine months of the year, our adjusted noncompensation expenses were $195 million, an increase of 19% year-over-year, representing a noncompensation expense ratio of 16.9%.

The primary drivers of the expense growth in both current year periods are higher occupancy costs associated with our New York and London offices, increased technology and data expenses, including investments in AI and increased business and client activity, including higher deal-related travel and client conferences.

For the full year, we expect growth in noncomp expenses to be approximately 19% over last year. Our adjusted pretax margin was 21.4% for the third quarter and 18.6% for the first nine months of 2026 compared with 22.2% and 18.2%, respectively, in the prior year period. Our effective tax rate for the quarter was 29%, roughly in line with the third quarter of 2025. Turning to capital allocation.

The Board declared a regular quarterly dividend of $0.65 per share, consistent with the prior period. In the third quarter, we repurchased 278,000 shares on the open market net settlement for a total cost of approximately $19 million. During the first nine months of the year, we have repurchased 2.6 million shares for a total cost of approximately $160 million. Including the dividend declared today, we will have returned approximately $318 million of capital to shareholders with respect to the first nine months of 2026. And finally, we ended the quarter with a strong cash position of $659 million and no debt.

With that, we can open the line for questions.

(Operator Instructions)

Devin Ryan, Citizens JMP.

I want to ask a question about the pipeline and kind of the connection to revenue conversion. I appreciate some of the color just on the new business origination and announced pipeline being up 20% year-over-year. I think the total pipeline, you said is a record. But you're also doing some larger deals and the market conditions are, as we saw today, pretty complicated. Can you talk about the pace of kind of conversion, how that's been evolving just over the past few months?

And then assuming we are on the other side of the midterm here, having to kind of rethink certain verticals and there's obviously ripples around that, like do these types of events substantially lengthen transaction timing? Or do you think it will really be just sector-specific and deal specific? I'm just curious, you've been through these kind of volatile moments before. So curious kind of what you think will happen.

Sure. Thanks, Devin. I appreciate the question. And I know every firm kind of looks at pipelines differently. I just want to make sure you understand how we think about pipeline. So when new business comes into our firm, and we are actively working on an assignment on a deal, obviously, if we're spending time on it, we think it has a reasonable chance of happening. That's what gets added to our pipeline.

And when I say that -- and obviously, a deal either happens or it dies or it's still in process, and that's what impacts the overall pipeline. And then within the overall pipeline, if we announce a deal, if we announce the world of deals happening, then usually those convert at a very, very high level. So typically, the only thing that will impact that is regulatory, if there's a regulatory problem.

So announced pipeline has very high conversion. And then within our overall pipeline, obviously, there's different conversion metrics that we look at and things like market volatility impact some of those businesses differently than others. So a CSA mandate, for instance, typically has a very, very high conversion because a lot of that business is retainer-based, something will happen.

You don't always know the timing of that. That's kind of maybe on one end of the spectrum, a CSA mandate or even a PCA mandate typically has very, very high conversion on deals in the pipeline. Capital markets may be more at the other end of that because it is market dependent and market volatility could impact that. And then M&A, depending upon if it's strategic M&A or sponsor M&A somewhere in between, right?

But as I said, all of the key metrics, all of the key KPIs that we look at, overall activity, stuff coming into our pipeline. And certainly, announcements are at very, very strong levels. We're obviously processing the events of the last 48 hours. It's been an interesting last 48 hours, and we're still getting our head around that.

But look, I do think the one theme here is having a broad-based set of capabilities to be able to pivot depending upon market conditions, to be able to advise our clients and make sure we have the right advice and the right set of capabilities to help them navigate through periods of market volatility is really key, and we're really happy that we're in a position to be able to do that.

Got it. Appreciate it. And a quick follow-up on the private capital advisory platform and kind of the scaling you're seeing there. It sounds like that's just continuing to contribute at an increasing level. Just to put a finer point on it, can you just talk a little bit about how that's, I guess, on its own becoming more impactful to the firm, if there's anything else you can share around the contribution.

But then also whether that's driving more opportunities in the M&A side with sponsors? And is that playing a role in doing some of these larger fee deals? Just curious kind of like with the momentum as you've added numerous bankers since 2023, kind of the contribution there and then the network effect across the firm.

Sure. Well, look, the PTA build is still relatively early. Matt Wesley, who runs that business for us, got here earlier last year. So he's been on the platform a little bit over the year. He's been actively building the team.

As I said on the prepared remarks, the GP-led secondaries team is the most developed at this point, seven MDs working on active mandates. Revenues are already seeing the recognition of deal closings and some revenue. It's not meaningful this year or this quarter. But as we look into next year, there's certainly a meaningful pipeline that's building, and we feel awesome about that business.

The two other businesses where we have people who've hit the ground are the promoted co-investment business and the LP secondary business, and they're very nascent. So those people are just getting going, but off to a good start so far. And then as I mentioned, the primary fundraising team, which is a little bit of a longer lead time business generally, those teams won't really get here.

The senior people of those teams won't get here until next year. And then it will take some time for primary fundraising to get mandates and get capital raised and to see real revenue. So I feel great about the team. I think we've made absolutely the right set of hires. The opportunity is as good as I ever thought it was going to be. So very much on track there. And I think you're absolutely right. Like we've already seen mandates where we went in both with our M&A team and our PCA team.

We weren't really sure -- the sponsor really wasn't really sure whether they're doing M&A or they were going to do a continuation vehicle. If we didn't have that PCA capability, I think there's a chance we may not have had those mandates. And some of those mandates are staying PCA, others are pivoting to M&A. And again, having both of those capabilities, sometimes it doesn't even show up in PCA. It will show up in M&A, but it will have been an opportunity loss if you didn't have the PCA capability.

So we're definitely seeing that real time.

James Yaro, Goldman Sachs.

Good afternoon, and thanks for taking the question. I was hoping you might be able to comment a little bit further on the restructuring cadence from here. As you think about the outlook from here, is there a handoff between liability management traditional -- to traditional restructuring? Or is that more of a seamless growth trajectory potentially? And then maybe just over what potential that handoff or shift from one type of mandate to another could occur?

So great question, James. So all of that, both liability management, traditional restructuring happen is processed through our CSA capability. It's not a handoff from one part of the firm to another. And one of the things, again, that's really unique about our go-to-market strategy is, there are also sector bankers and sometimes sponsor coverage bankers if it's a sponsor deal, who are all part of those teams. So we have a very collaborative, very integrated approach, which is very differentiated in the world of CSA.

It's pretty unique and one of the things that I think has enabled us to create a top CSA franchise. And whether it's a liability management flavor of transaction or it ends up being a restructuring flavor of transaction, the professionals from the CSA team that are working on that are the same professionals. They're very, very well versed in all the different gradations of CSA transactions.

And so the deal teams don't change. And again, because we typically also have sector teams there, if the pivot is to M&A either as part of that transaction because that sometimes you see that, you see M&A out of restructuring or you see M&A on the back heels of restructuring because we have a collaborative approach to that, those handoffs are super seamless in our firm.

Okay. That makes sense. Maybe just one more on the restructuring side of things. How would you think about the impacts of potential stress on parts of the AI financing complex? And how could this potentially impact your restructuring business or your CSA business, I should say?

So look, if there's stress anywhere in the system, if there's disruption happening in any sector, especially where there's been lots of capital formation, clearly, our CSA team is well positioned to take advantage of that. And yes, AI infrastructure has been an area of massive capital formation. It's really been the dominant theme of the capital markets here for the last few years.

And if some of these situations should tip in or if a broad-based set of these situations should tip in to more liability management restructuring workout, et cetera, certainly, again, the combination of the fact that we have a very strong data center emerging telecom team that has been working and is working on many of these financings and M&A transactions and a strong CSA team, certainly, we'd be well positioned to take advantage of that.

Alex Bond, KBW.

Hey, good afternoon, everyone. Thanks for taking the questions. I wanted to drill down a little bit more on the sponsor side and the outlook there. So you mentioned the number of sponsor transactions you've advised on year-to-date is up 30%.

So if you could maybe speak to where the strength has been coming from there, whether that's contributions from specific sector teams or anything else really? And also how the movement in interest rates has impacted activity levels here more recently and also on your outlook for sponsor volumes to grow from here on out?

So I think the data I cited wasn't just M&A. It was sponsor transactions generally. And so I do think that, again, more of the broad-based nature of our capabilities has really helped us capture more sponsor wallet share.

That's been an important part, again, of having capital markets and having PCA to pair with CSA and restructuring and M&A to make sure that we're really front and center in sponsors with sponsors as a solution provider. In this particular year, obviously, sell-side is always a big part of our franchise, but we do from time to time in this year, we have had a fair number of buy-side work with sponsors.

So one of the things I'm really proud of is the more and better sector teams we have focused in more areas, the more capabilities we have to advise sponsors, the more wallet share we're going to take. And we're definitely seeing that in a year like this where generally sponsor activity is a little sluggish, a little muted. It's improving, but it's not where everybody wants it to be. And yet our share of sponsor wallet, we think, is improving.

Got it. That makes sense. And then maybe as a follow-up, I just wanted to ask around comp expectations for 4Q. So just given where the year-to-date revenue numbers stand, can you just maybe speak to how confident you are in being able to drive additional leverage here in the fourth quarter and how we're just thinking about -- how should we be thinking about comp kind of more generally as we think -- start to think about '27 as well? Just any additional color there would be great.

Look, I think we entered the year with the expectation that we would get some comp leverage. We haven't adjusted the comp ratio, as you can see for the first nine months of the year, but our expectation continues to be that by the time the year finishes up, we will be able to exhibit some comp leverage and a reduction in the comp ratio. So that still continues to be our expectation.

Great. Thanks, David.

Steven Chubak, Wolfe Research.

Hi, good afternoon, and thanks for taking my questions. So to start, I wanted to ask on the noncomp outlook beyond this year. You spoke of some of the factors that are driving the growth in noncomps. Just trying to gauge how we should be thinking about the duration of the AI investment cycle given the heavy investments you and some of your peers are making on the technology side and whether you'd be able to bend the cost curve beyond '26 or if that heavy pace of investment is going to need to be sustained just given the duration of this AI cycle?

Yes. Thanks for the question. It's going to be difficult to start by forecasting 2027 at this time. We are currently going through our bottoms-up budgeting process, right? So we closely review what's needed, what opportunities we have for savings.

We continue to focus on improving cost savings and pretax margins. I would say, if you're looking in particular on technology, that's a line item that I can imagine continue to grow in 2027, whereas, for instance, other line items that won't grow as much would be real estate. But at this time, I mean, I think we are not going to provide any real direction for 2027, except that we'll be in a position to probably provide more information at our next earnings call.

Let me add something to that. Look, you're right, Steven, there's increased technology spend because of AI and other things. Like everybody else, we're adopting, as I mentioned, adopting AI, experimenting with AI. We're excited about what we think it could do for our business. Those costs will continue to increase.

Having said that, we're laser-focused on making sure that we're being most efficient in how we utilize these tools. I think as we move more towards token-based consumption, which is likely around the corner for us and our peers, making sure we're being very, very focused on efficiency and using the right tools for the right task is going to be very, very important.

Secondly, at some point, we're going to have to get efficiencies in our organization and drive efficiencies in our organizational structure and most importantly, in terms of productivity. And so we do believe that there will be a positive return over time on the AI spend. And we're very, very focused on making sure that we can track that and can demonstrate that once we get through this uptake period.

No, that's really helpful color. And for my follow-up, I did want to ask on the 162M tax provision that's expected to go into effect beginning next year. It looks like for you and some of your peers, it could have a pretty material impact on the go-forward tax rate. I was hoping you could speak to at least some of your preliminary findings based on the work that you've done thus far.

Yes. Thanks for that. Yes, we are currently evaluating the impact. There are, as you can imagine, many variables that will affect the rates as we head into year-end. However, for a start, we can imagine adding a few points to our tax rate.

We'll be able to again provide more information at our next earnings call and then, of course, the first earnings call when it finalized.

Any guardrails around that?

I think at this point, there's too many variables that are open. So I think we're going to stick with a few points is probably give or take a point or two on either side.

Gabriel Angelini, Bank of America.

Obviously, activity was quite strong this quarter, and I think revenue growth actually accelerated modestly year-over-year compared to the second quarter, which was nice to see. And I appreciate the pipeline is up 20% year-over-year, but I think it's a little lower than the 80% mark you discussed last quarter. So given that, can you talk to us around where you think we are in the current M&A cycle? And is it fair to say that we're no longer in the early innings there?

Yes. Look, I'm not sure those 2 data points have any relevance to the concept of where we are in the M&A cycle. So look, M&A cycles are very, very hard to predict. Everything we see into the foreseeable future is really strong demand for M&A, both from strategics and from financial sponsors. Now in the prepared remarks, we did talk about some of the headwinds that we have to navigate in order to make M&A pipeline turn into M&A completions.

And certainly, we don't take any of those things for granted. Whether it's geopolitical risk or some of the volatility you're seeing in the marketplace, there are factors that could impact the pacing of M&A completions. But the underlying fundamentals, the need for scale, the need for growth the need to deal with technology disruption, the sponsor need to get DPI, all of those things suggest a healthy level of M&A demand for a long period of time. Typically, these cycles, you can only predict in hindsight when an event happens, and that's the end of the cycle. It's very hard to predict those on a go-forward basis.

Got it. That's helpful. And then maybe as a quick follow-up, it sounds like the business mix may have shifted slightly more toward M&A this quarter versus the typical sort of 2/3, 1/3. So just wondering if that was driven by more strength in M&A this quarter. And I understand you don't break out the non-M&A businesses, but maybe any color you could provide there on the relative strength between them would be helpful.

I just think in a business like ours, especially now that we have expanded capabilities, it's hard to extrapolate too much on any one quarter or two. As I said before, I think we have a healthy and vibrant M&A business, demonstrated by the continued growth in that business. CSA has had a good year and a very good past quarter. We had a softer quarter in capital markets despite the fact that they had a record year last year and a record first six months of the year.

So I think when you're looking at any specific quarter or two, there are vagaries of client activity and impact the timing and very client-specific things and sometimes market-specific things that impact some of the composition of the revenue in any one period. And I'm not sure I extrapolate too much on any quarter or two.

Nathan Stein, Deutsche Bank.

So markets sold off today on pretty broad-based AI concerns. And while that's obviously just one day and a singular data point, but I wanted to ask what would a major slowdown or delay in AI-related CapEx or data center build-out mean to your business and pipelines?

Yes. Look, it's a good question. I think, look, we're still processing the events of the last 48 hours. I think coming out of the blue wave of Tuesday, I think the market's interpretation of that yesterday was very different than the market's interpretation of that today despite the fact that there wasn't a lot of news between yesterday and today, right?

And so I think in a sense, you could look at some of the political changes and draw an optimistic picture about the likelihood of continued war in the Middle East and what impact there could be a rollback of tariffs and potentially getting inflation under control and some of the checks and balances that might be super helpful in terms of helping M&A activity and financing activity.

And at the same time, there's certainly increased political risk to the system on the development of data centers and things of that nature and the market was captivated by that today. And look, again, I keep coming back to this theme of having a broad-based business. It's absolutely critical to be able to pivot depending upon market conditions.

A lot of the market for the last year or two, certainly the financing markets and the public equity markets have been driven by all the capital formation around AI and digital infrastructure, and we've certainly taken advantage of that. And so if there's a shift there, it could hurt parts of our business on financing and M&A in some of those markets, but help other parts of our business.

I do think one of the things that has happened over the last 12 to 18 months is there's so much focus and so much emphasis on the AI trade and capital formation around that, that it's really crowded out capital formation in other areas that where there is growth happening and there is vibrancy, there's been just so much attention going to and so much capital going to the hot sector that it's been a little bit more challenging to raise money for companies that aren't growing at the same magnitude, but still are very healthy companies and very vibrant.

And so one of the silver linings, if there is a blip or a major blip on the AI infrastructure side is there could be a recalibration back to more traditional businesses that are worthy of capital. So we'll see. We're monitoring all this carefully. All of this is real time and -- but it's a very good question.

Appreciate the color there. And then I just want to ask really quickly on the noncomp expense dollars. So back in July, you had talked about the noncomp being in the mid- to high $60 million range in both 3Q and 4Q of this year. So it came in lower than that this quarter, but based on the full year comment, it sounds like 4Q levels will be near the high end of the range.

So I wanted to ask, was there a lumpy cost that maybe was taken out or pushed into 4Q? And longer term, is that mid- to high $60 million range a good way to think about noncomp dollars?

Yes. I would say that this quarter, Q3 was a little lighter due to some seasonality, lower travel during the summer months. There also was less underwriting syndication costs associated with capital markets business. However, as you can imagine, cost do shift from one quarter to the next. So it's probably best to look at noncomp on a full year basis.

And as I said in the prepared remarks, we expect it to grow approximately 19%. So I think we were pretty consistent from the beginning of the year that we thought it was going to grow in the high teens, and it looks like that's probably where we'll land.

Mike Brown, UBS.

I just wanted to ask on the software M&A trends. And I just wanted to touch base on how that is trending this year. Obviously, that was really constrained earlier this year around a lot of the AI uncertainty in the market. Have you started to see more activity coming through in that sector?

It seems like we've seen a couple of kind of larger deals, but wondering if that's starting to broaden out and you're seeing any more of that activity start to come through your pipeline.

Sure. Yes. Great question, Mike. So look, I think when the apocalypse kind of happened earlier in the year, I think when we got on that next call, we talked a little bit about how the market had painted a very broad brush on anything that was software related, and we at least felt that, that was an exaggeration that over time, there would really be differentiation between different types of software companies, some of which would adapt and thrive in the AI world and really adopt AI to transform their businesses and be super vibrant and others would struggle and potentially there was impact to their business model and impact to their terminal value. So I think now that we're a few quarters removed from that, I think we're seeing that.

Certainly, in the public markets, some of the cohorts, the software companies in that cohort are notwithstanding the events of the last couple of days, the public market valuations have essentially fully recovered. In the M&A world, we're definitely seeing in certain parts of the software sector, cyber being a good example, both big private activity and private company M&A.

So there is some M&A happening in pockets of the software industry, certainly. It's not broad-based yet. I still think there's a healthy part of the ecosystem where people just aren't sure even though they're not seeing business model impact yet from AI, there's still concerns around terminal value and terminal multiples and things of that nature.

And for a subsegment of those companies that have a heavy amount of leverage, there's certainly dialogue and work that our teams are doing around thinking through opportunistic liability management for some of those companies. So it's keeping our CSA team busy on some of those names. So I think there's some differentiation happening, but it's still early days.

Okay. Great. Maybe just a quick clarification on your last point there. Is the team starting to see some of the software restructuring or liability management exercises coming through at this point? And then if not, what's your view -- best guess on timing? Is that something that's more of a '27 event or later in the second half of '27? Just any views there would be helpful.

We're seeing some, but it's still, I would say, pre liability management work advice and conversations. So I still think it's going to a little bit -- take a little bit more time for some of those conversations to rip in. It's hard to say whether the bulk of that will happen in '27 or '28, although I would note that starting in '28, '29, there's a fair amount of debt maturities that are coming due and software is a very healthy portion of some of those debt maturities. So I think it's -- I think you're likely to see some -- a fair amount of liability management happen over the next 12 to 18 months.

There are no further questions at this time. I will now turn the call back to Navid for closing remarks.

Thank you all for your time this afternoon. We look forward to speaking with you all again soon. Have a great evening.

This concludes today's call. Thank you for attending. You may now disconnect.