Earnings Call: Q2 2021

Jul 21, 2021

Good afternoon, and welcome to the Moelis and Company Earnings Conference Call for the Q2 of 2021. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. To begin, I'll turn the call over to Mr. Chet Mandel, Head of Investor Relations. Good afternoon, and thank you for joining us for Moelis and Company's Q2 2021 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 and 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. Mollus.com. I will now turn the call over to Joe to discuss our results. Joe? Thanks, Chad, 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 $361,000,000 of revenues in the 2nd quarter, an increase of 126% over the prior year. This represents our 2nd largest quarter of revenues ever. Our first half revenues of $625,000,000 were up nearly 100% from the prior year period. The robust growth during the Q2 was primarily attributable to increased levels of transaction completions with particular strength in M and A. In addition, our restructuring and capital markets teams remain very active as our model truly has 3 powerful revenue engines. Moving to expenses. Our compensation expense was accrued at 59.3%, consistent with both the prior quarter and the prior year. Our 2nd quarter non comp expenses were $29,000,000 resulting in a solid non comp ratio of 8%. We expect our non compensation expenses to be in the range of $33,000,000 to $34,000,000 for the 3rd quarter, primarily driven by anticipated increases in travel. We achieved a quarterly pre tax margin of 33.5 percent, well exceeding our 25% target. Moving to taxes, our underlying corporate tax rate was 26% for the 2nd quarter. Regarding capital allocation, the Board declared a regular quarterly dividend of $0.60 per share, an increase of 9% from the Q1 of 2021 and our second increase since the end of 2020. In addition, we repurchased approximately 400,000 shares in the open market During the Q2, in order to continue to execute on our capital management strategy, the Board of Directors has authorized an increase of $100,000,000 to the repurchase authorization. Including today's announcement, our current repurchase capacity stands at approximately 150,000,000 As always, we remain committed to returning 100 percent of our excess cash. And lastly, we continue to maintain a fortress balance sheet with $281,000,000 of cash and no debt. I'll now turn the call over to Ken. Thanks, Joe, and good afternoon, everyone. I've never been more optimistic about our business given the changing dynamics of the M and A market. Alternative asset managers have seen tremendous inflows capital over the past year. This trend is accelerating and these institutions will become a dominant force in increasing the scale, velocity and most importantly, the consistency of M and A going forward. Our holistic approach to client coverage brings comprehensive and innovative solutions to these clients across their entire portfolio and their investment cycle. Our approach is completely aligned with what is required by these companies. We believe that the combination of market factors And our model has resulted in Moelis and Company having entered a period of secular growth. Our strong financial performance over the last few quarters is the direct result of the deliberate choices we made over the last 10 years. By committing early internal talent development and promotion from within, we have created a growing and sustainable organic talent base. Combined with the dedication to having one P and L and no commission structure, we have a differentiated advisory offering, An exceptional pipeline of internal talent and a franchise that would be extremely difficult to replicate. By setting up our platform the way we Have since day 1 and remaining unwavering to that vision, we're able to be more nimble, integrated and enter areas of high growth faster. For that reason, the pace of our new business activity remains high and our pipeline is stronger than it has ever been. And I remain confident about our ability to continue to generating value for our shareholders for years to come. And with that, we'll now welcome any questions. We will now begin the question and answer session. Our first question will come from Devin Ryan with JMP Securities. Please go ahead. Terrific. Hi, Ken. Hi, Joe. Clearly, a great quarter here. Love to maybe just dig in a little bit more, if you can, On the mix, I heard clearly that M and A was a big contributor, but that restructuring capital markets are very strong. So if you can give any more color on just the contribution, was it kind of the normal breakdown, but it a higher absolute level or anything else you could share there? And then in terms of the M and A market, Ken, if you can just talk maybe a little bit more between what you're seeing in the middle markets, Where we're hearing, there's a tremendous activity versus maybe kind of larger end of the spectrum? I think on the breakdown, it was very similar. We always say Restructuring is 20% to 25% of our total revenues and it was again, it was at the lower end and that wasn't as a result of a low level of restructuring activity. It was more a level of activity, it was more a level of result of very high level of M and A creating a bigger denominator. So Restructuring had a good quarter just on a bigger denominator because M and A was so large. And Capital Markets It's probably high single digits, but growing rapidly and because the SEC put back And delayed a lot of the SPAC financings due to the accounting they put in. I'm not sure that the quarter was Look, I think they can do even a larger percentage. On your point as to which is what I said in my remarks, I believe that the Fundamentals of the M and A market are changing right in front of your eyes and people aren't recognizing it as much. The flows of capital into alternative asset managers who then do not choose when to execute a transaction. 10, 20, 30 years ago M and A was a coverage of strategics who would choose when and where they felt the market Was good for them to act. The amount of capital flowing into a new industry called private equity or alternatives or sovereign wealth And these entities, these institutions are getting extremely large. And by the way, I think as a result of 2020, will accelerate because they did not at least report the volatility that the public capital markets did. You didn't have to suffer through a mark of March 30, 2020. And these entities have to transact. They are in the business of transacting. And that's why I said, I think we're going into We have become a secular growth. I think M and A is in a secular growth mode. And lastly, I'd say there's a whole new asset class. I read somewhere, I think yesterday We're up to 900 unicorns. If you would have asked me 6, 7 years ago, 5, 6, 5 years ago, 4 years ago maybe, What was our coverage for venture capital? I would have said really not our client base. But when you have 900 unicorns that I think have a market Capitalization now $3,000,000,000,000 that's another asset class that will do something. Some might go public, but some will M and A. And I believe that's almost a market capitalization equivalent to private equity at this point. So we're seeing Just a whole new M and A market, I believe. Yes. Appreciate the color. It's fascinating. And maybe a follow-up for Joe just on expenses. I heard the comment about the Q3 expectation with travel coming back in. Is that kind of the right Level to be thinking about maybe is kind of a new base if travel is normalizing or are there other puts and takes in there? And then On the compensation outlook, clearly it looks like there should be some solid revenue growth on the year. I understand how you're accruing for comp over the 1st few quarters, but is it reasonable to think there's some flexibility as we get towards the end of the year here just given The revenue backdrop or how are you guys thinking about that here at the moment? Joe, let me talk about comp and then I'll turn it over to you on the expenses side. On the comp, We thought it does just to stay where we were. There's a lot of time left in the year to figure that out. And 2 things I want to be Clear. First of all, 30 we came close to a 34% margin. I mean, we're getting people ask, can you get leverage on the model? I'd say 30 getting close to a 34% margin in the 2nd quarter is leverage on the model. We're pretty happy with that leverage. And I would also point out there is a real war for talent out there now and that's why we didn't change That's one of the reasons we didn't change. It's unclear. We'll see what happens over the rest of the year and where the year takes us to. But right now, We want to keep the talent that's producing these kind of 34% type margins in place. Joe, I'll turn it over to you on the other expenses. Yes. So I think it's all a guess in terms of travel. We're seeing increased activity. Our underlying Quarterly non comp run rate is probably 30 to 31 at the current travel level. And so we think that it's prudent So it suggests that a couple more 1,000,000 per quarter isn't out of the band of reasonableness. But I don't have any magic insight on that. Understood. Yes, I just wanted to get a little bit of framework. So appreciate it and I'll hop back in the queue. Thank you. Our next question will come from Ken Worthington with JPMorgan. Please go ahead. Hi, good afternoon. So wanted to talk about MD and headcount there. That 125 is about the same number that Moelis has had over the next Couple of years with you guys continuing to be active on the hiring and promotion front, but it seems to be offsetting the attrition that you're generating, Clearly not having a negative impact on the revenue growth, but as we think about the outlook for MD headcount over the next few years. What does that look like? Is now the right time to grow it? Is now the wrong time to grow it? And you So to harvest the decisions that you've made in the past. And can you talk about the white space that You would like to fill in here. You mentioned sort of VC. Is that sort of the place that you think you'll look to grow in coming years or there's other areas that you'd like to allocate your MD resources? So on MD, I think we're not harvesting. In fact, we have worked extremely hard to match our MDs to the Rapidly changing world of what's going on in the world. And I think one of the reasons our revenues are where they are is, I think I used the analogy in the last call, but I'll say it again. You guys might see the same MD count above the water, but below the water, It's like the duck, we're paddling like crazy, changing and focusing on sectors that are moving. We have Added 11 MDs. And the most important thing I can tell you is what I said. We believe our internal talent pool is phenomenal. It takes 7, 8, 9 years for us to take a person from hiring as an associate at a business school to a Managing Director. Moelis and Company is only 14 years old. So the base of the pyramid didn't get large enough Until 7, 8, 9 years ago, where we were hiring enough people out of school that when they came to the class, came up, we had enough to repeat. Now We think we're looking at double digit MDs internally. By the way, we would hire we are looking to hire and we are hiring externally. But that is the fundamental power of the platform is that they're coming up and you can't go back 10 years and redo that. We did it. We've hired the people. We've trained them. And they're by the way, a lot of the revenues right now being generated by some of those As pre Managing Directors, Executive Directors, we're already becoming productive. So I'm very excited about our ability to grow Managing Director head Plus maybe some levers, but I'm very excited about what we have going on inside the firm. And the second part of the question was sort of the white space to fill in. So lots of internal talent. Where are they getting assigned? Where do you want to direct them to help build their careers and build Moelis' revenue? Ken, it's so strong across the board. And what's happening is a lot of it is coming from sizable transactions Out of these alternative asset managers. And the way you have to cover them, they want you to cover them in a holistic way. So When we say white space, first of all, just executing on $360,000,000 of revenue, and there's more to be done. I mean, we have raised our average fee. We have Tried to limit the work. There's a lot more work I think we could be doing. We're trying to in order to maintain To get a margin like this, we're trying to select the best possible things we can work on. But I would say that we want to continue Cover these entities that I think are growing way faster than the market. And they cover all Most of these alternative asset managers now have credit funds, real estate funds, all the sectors. That's one of the reasons why we went into secondaries. I know you saw it in the middle of the year, we hired a Very prominent Managing Director in secondary transactions and funds. We just added more distribution this morning to our Capital Markets. And I'd say, I'm trying to give you the feeling, I think the white space is uncovering an asset class that might go from $3,000,000,000,000 to $5,000,000,000,000 over the next 5 years. I think it will, which is alternative asset managers. And as you said, oh, lastly, you mentioned the venture capital groups. And I agree with you And I don't think anybody is quite yet set perfectly to cover that $3,000,000,000,000 of assets because of how rapidly It has shown up. And yes, I do want to figure out how to cover that better. Awesome. Thank you very much. Our next question will come from Richard Ramsden with Goldman Sachs. Please go ahead. Hi, good afternoon guys. So Ken, could you talk a little bit about the dynamic in the strategic M and A market? And I guess specifically, I'm interested in whether or not you've seen any shifts in terms of the geographic skew in terms of activity. And then linked to that, I know President Biden recently signed an executive order, which I think has heightened the focus on antitrust enforcement. Do you think that will have much of an impact in terms of near term pipelines for M and A transactions? Thanks a lot. So again, I've always said this, when something shocks the system, the U. S. Rebounds quicker than anybody, Almost scary how well the U. S. Overcomes volatility and reemerges. And I think, again, we're seeing the U. S. Lead the charge out of the COVID year. But I will tell you, we've had a lot of strength down in Brazil. We've had strength in Europe. We've even had transactions in China and actually Australia is doing very well, which is people forget about our Australian business. So but the U. S, if you're looking for that, it's the U. S. Is at a peak and just Leading the way out of the COVID year. To the Biden executive order, look, we're watching that carefully. I do think there'll be transactions that are affected by that. I would look at our revenues and say 99% of them would not have been affected nor Every one of them would let's just say 99% of the first half probably would have gone forward anyway, even if those Executive orders turned into some type of more active legislation or policy. But I do think there'll be some large transactions that Might have happened, it won't. And again, it will be a little like the dog that didn't bark. I'm not sure we'll know which ones didn't happen, but I think there will be a few. Okay. And then secondly, can you just talk a little bit about the capital return philosophy? As you've said, you've increased the dividend twice. I think you bought back $100,000,000 of stock in the first half of the year alone. Historically, you also used special dividends as a capital return mechanism. Yes. How attractive do you think that is? And is that something that we should think about when we model capital returns for you in the second half of the year? Yes. By the way, and we did 2 specials of $2 I believe in the last 7 months. So we've been returning a lot of capital. I said we'd look to all look, I think we always said we would look to all methods. We were active as we saw and what we talked about today on the call. I think we got active when we saw the whole dynamic of the M and A market Tom, I think it's both our effectiveness and our model and how it's working and also The realization that the M and A market has fundamentally changed and I think will go through secular growth. I know a lot of people keep asking, they always ask, Where are we in a cycle? Well, if alternative asset managers continue to grow their assets under management by double digits, Then we're not going to cycle. Those managers are not going to sit on their hands. It's just not what they do for Livings, not their business. So I think we got active in buying back the stock early in the year. We've continued through this quarter. And we'll continue to focus on all different methods. As Joe said, we have no debt $281,000,000 of cash on the balance sheet. And so I wouldn't rule out any method that we can get our capital back to our shareholders. Okay, thanks. That's very helpful. Our next question will come from Steven Chubak with Wolfe Research. Please go ahead. Good afternoon. This is Brendan O'Brien filling in for Steven. So Ken, I know you mentioned that Restructuring activity was strong in the quarter, but at a recent industry conference you said that industry restructuring activity has slowed down dramatically. I guess How much of the restructuring activity and revenues in the quarter was related to COVID mandates? And how would you compare the pace of new mandates today relative to say 2019? Look, I don't know what you define as a COVID mandate, because COVID has been with us now for 16 months or 17 months. So almost everything you're working on started Our M and A might be COVID mandates. I would say everybody always has idiosyncratic Backlog in everything. I mean, I watch M and A, some people have idiosyncratic Backlog, we happen to go into 2021 with a very good backlog of restructurings. And I think they will We will continue to be in the range, I believe, of 20% to 25% of our revenue restructuring through the end of this year. Now I do know and our team has told me that the pitches, the pitching for new Restructurings throughout the world is dropping off rather dramatically as capital becomes relatively free And equity markets are at all time peaks, and you would expect that. So I like our backlog remains Strong for the rest of the year because of the deals that we happen to have. But I do know and I said I think I said it that The number of opportunities to pitch new restructurings has gone down significantly. Now I will say this, by the way. Somebody once had a famous quote, bull markets, it stares up and elevator down. Every time we've ever gone into a restructuring market from 2,009 to 1998 to 2020 1994, nobody ever has in their 5 year projections a catastrophe, but they happen. And the elevator and it goes down quick. So again, everybody asked me, what do I think about 2022? We're maintaining our whole team. We would even improve it. There's a lot of leverage in the system. There's a lot of companies out there. And I don't know what will happen, but I know something always does happen. And when it happens, it happens quickly. So again, there are not a lot of pitches right now, but when they are, they usually come very quickly as COVID did last year. That's great color. Thank you. So I guess switching over to productivity, I know back when You went public. You initially outlined a target range of about $6,000,000 to $9,000,000 But given the optimization of the MD base, Some of the few dynamics you mentioned earlier, as well as the reduced travel and the benefit to productivity there, How are you sort of thinking about maybe like a new range for where you think productivity could get to considering the last couple of quarters you've run Above that $8,000,000 to $9,000,000 range or $6,000,000 to $9,000,000 Well, look, let me go back and say I have never from the time I went we went on our IPO, I have never used productivity per MD. I think it's a terrible statistic. I get laughed at because I said I could tell you our revenues and I could tell you our MDs. So I guess I could tell you what a revenue per MD is, but it's a meaningless number. I don't know why that it's we're a system, we're a company. And I'll tell you what our What we're really trying to do is produce a 30 plus margin right now. That's not even what we were hoping. We were hoping for 25% margin. But we produce revenue throughout the system. And I don't have a target on that. I would ask you to just Take our managing directors and divide it by whatever our trailing 12 months run rate is and you can have your own number. But I think the system provides Leverage, as our clients want to stay in contact The system and look to stay in context. We're a huge feeder of that base of asset managers that we were Talking about and I think, I look at it systematically and I really have never talked about a revenue per MD productivity number. Great. Thanks for taking my questions. Our next question will come from Manan Gosalia with Morgan Stanley. Please go ahead. Hi, Ken. Hi, Joe. I know you said that M and A is in secular growth mode and you also said your pipelines are at record levels, which is pretty impressive just given the level of completions coming through. Is it too early here to get a read through into 2022 because I'm sort of assuming that Majority of these deals in the pipeline should get completed by year end? We don't have I mean, some of our pipeline is 2022, but it's really too early to get a read other than my gut feel, which is, there is Nothing that says assets won't continue to flow to the alternatives. They will continue to transactions buy, sell, whatever. So I expect 2022 to be a great year, but I don't have any unique crystal ball into that other than Our pipeline is at all time record highs and some of that will flow into 2022. But it's just my sense of where The secular growth of capital and what those people are going to do with their capital. Okay, great. And then maybe I just wanted to follow-up on the comment on pretax margins were at record levels here, well above 25 That you've been targeting in the past. Other than hiring, are there any areas you would want to invest Dan, or any investments that you might want to accelerate here just given how strong the environment is right now? I think it would be all around hiring and coverage. It would be all normal course of business, I think. A little We put some money into distribution, which was kind of a new, but I don't think that has more leverage on it than so we not going to have to hire too many more people in there, but I think it would just be general coverage, general banker hiring. Got it. Thank you. Our next question will come from Michael Brown with KBW. Please go ahead. Great. Thank you, operator. Hey, Ken and Joe. So in the presentation, I saw that A comment that the Capital Markets Advisory has seen a record first half. Obviously, 2020 had a really strong second half. So when we think about That comparable period, is it possible for that business to be above 2020? I understand it's No smaller piece of the revenues, but clearly an area that you are investing in. And I guess the STACK regulatory environment could certainly impact How things play out from here, but based on what you know today, just kind of interested in your thoughts on how that could play out for the rest of the year? Yes, I would hope so. I would hope it would be larger. We had hired that team and They really just started with us some of the new team September of last year. So they didn't have a long lead time coming into the Q4. That and the fact that a lot of the pipes and some of the capital markets around SPAC transactions were pushed out. There were a lot of transactions that were pushed out of this quarter and probably will happen in the back half of the year. So again, I suspect it will be very strong back half of the year for Capital Markets. Okay. And on your comment earlier, you mentioned war on talent, We're relative to the headlines across Wall Street and related to that. So it appears that you're really across the entire I don't know if that's me, but you're fading. Is that me or is everybody? I'm am going to answer the question what I think you said, because I think some of it faded. So I should say it's a war for talent, because I think Some of the periodicals actually do report that it's a war on talent, but it's really we're not fighting the war on our talent, we're fighting war for talent. And we are trying to do all sorts of we are hiring as many people as we can To in the junior ranks, especially to take the burden off, you can imagine, I think on this $360,000,000 of revenue, we had over 180 fee events. You can imagine that's a it's a lot of revenue on the talent. They're doing a great job. We are doing things, they're numerous though, and I don't want to go into them all, maybe check it, do it offline. But We are trying to make life better, easier, hire more people, Give protected time off, all the things that you would try and still satisfy clients and make sure we get great work product. Yes, we are doing that and that's one of the reasons why we did not change our comp ratio yet Or may not. I mean, it's a time to keep your talent. There's enough happening out there. And one of the key things you want to do is have a great motivated set of workers. Okay, great. Thanks, Ken. Hopefully, you can hear me okay. I guess the other piece of that question was just In terms of what you're seeing in the market, I just was curious to hear if some of the players have kind of reached a level of maybe becoming somewhat irrational with Guarantees or what you're seeing in terms of what's needed to lure bankers away? Competitors' irrationality is only when they hire somebody you stop bidding on, then all of a sudden they seem irrational. So I will say that it's in the eye of the beholder. But it's not it's funny, the MD talent has always had a value and I'd say there's still a war for talent at the MD level. The war that I think is most active right now is for below the MD level, which is obviously everybody wants to hire a great And that happens every year. And they're rare enough that even whenever they come up, there's a war for that kind of talent. This what's different about what's going on now, it's throughout the pyramid. It's up and down the whole structure of everybody's company. So I assume others are having it and that's really where it's happening. Okay, great. Thanks for the color, Ken. Our next question will come from Brennan Hawken with UBS. Please go ahead. Hey, there. Thanks for taking my questions. Ken, interested to circle back on some of the comments and the metaphor Of the ducks feet swimming under the water and the processes and success that you've had around talent development. Can you talk about how what specifically do you guys have a process in place? Is it more laissez faire and up to various team leads to drive that? And In the decade or 15 years that you guys have been at this, how have you refined that process? Like How much of the success that you've had recently, I guess, is a result of design versus Maybe refinement in talent selection and whatnot. Like how do you think What do you attribute the success to and how systematized is it? I don't know, hopefully that makes No, no. Look, I appreciate that question because I think that's an under talked about answer. So let me I'll bore some of you with a real answer that I think fundamentally changes our model from everybody else's. First of all, We do have an internal training program that's extensive. People are evaluated on them replacing themselves and training and their comp When I talk about not being on commission, I'm going to say 2 things that are maybe Investment Banking, Advanced Investment Banking, but I think it's important to know. 1st of all, if you're on commission structure, then if you don't get paid for training, you're not going to train. We evaluate people on that. We evaluate on how much they go to campus and help recruit. And it's fundamentally part of it. By the way, I'm not sure if anybody else had it, but from I think from when we were a very small him, I forgot when you get promoted, we send you back for executive training at I think we do it I know we do it with the Wharton MBA program. We used to send people back for 3 days. I think we're now going to 4 days. We have the Board of Directors meet with them down there. We have senior management We Full on presentation skills from very early on. So it's systematized. And let me say one fundamentally last thing, because everybody says when I say we have One P and L and it's not a commission. Nobody seems to care. But Brendan, if you had a commission and you were covering industrials, Let's say you were covering the auto business and I told you that I had a really intelligent, brilliant Executive Director and could you help them? Well, your first thought would be no, I need to get that guy out of my system. God forbid, I introduce him to my the executives at the companies Covering and they like him. That would disintermediate my commission. Why would I ever introduce a smart energetic person to my accounts. And so the fact that we have one P and L and we actually Evaluate you on that is very important and you can't get over that. I wouldn't if I I've never heard of a commission salesman wanting to Hand their accounts over to anybody. So our model is systematized for this. It took a long time to show up Because the base of the pyramid is never as big as the growth at the top. And now, I look back 6 or 7 years ago, we probably were hiring 80 to 100 people. Now they're starting to show up and that is a fundamental change and that's why I think you're seeing So much productivity, because some of it's coming from EDs who have been with us a long time. And I'm very excited about The pipeline that's coming up through the system is a result of that. I hope that wasn't too long an answer, but it's fundamental to our success. Right. No, thanks for that color, Ken. Appreciate it. And this might Invite another long answer, but I'm going to give a shot anyway. So from my perspective, right, Ken, this This is clearly your swan song, right? The firm bears your name and you put a lot of blood, sweat and tears into it. But I do run into investors that get concerned about Q1 risk. So what is it that you can tell us about the succession planning process within Moelis And what is involved in that process and how what we can do to help lay concerns Around key man risk at the firm. You're worried about Joe? You that worried about Joe? Of course. Hey, look, we talk about it a lot. And I want to say one thing to you. And COVID, I think unveiled My main job as the firm is meeting clients, putting our flag out there. That's really what I did. For 14 years, I traveled incessantly. And really, At this point, nobody if you're doing a software deal, they don't they want a software banker. If you're doing a consumer deal, you want a But I realized I always thought my role was to put the flag out there and meet people and get them comfortable. I will tell you, Brandon, COVID, I didn't get a chance to do that. Nobody would take my meeting. You couldn't go anywhere. And Zoom calls aren't really the greatest for that. And our trailing 12 month revenues is up above anything we've ever done. Our quarters have I'll tell you what, it makes you almost feel like you're not needed. Forget Swan Song. So I want you to know we talk about and we have lots of Discussions over how we would succession plan if I was hit by a bus. But I just want you to know, my birthday was 2 days ago. I turned 63. I'm in great health. I've never had more fun than what we're doing because the most fun part of my job now is watching young people we hired out of school Really dominate industries, create their own franchises. I'm just telling you, the firm is so much wider. When you do $360,000,000 in a quarter, believe me, that's not me. And I'm having fun doing it and we do have a plan And I have no plans to go anywhere. I really don't. It's become more and more fun. As I've seen young people really Take charge. It's actually I've had more fun this year almost than ever before to see the talent And what they're capable of doing. So I mean, we do I want you to know internally, we do talk about it. It's just that I'm in good health and I'm enjoying it. And I think we're not really thinking about it right now, actively. Yes, no, that's fair. Happy belated birthday, Thank you. And then sorry, I just want to sneak one last one in. Joe, You referenced the $30,000,000 to $31,000,000 non comp at the current rate. 2Q was a little lower than that. Does that imply that you guys reversed Some of that provision oriented noise that we had in 1Q in this quarter, which is where the run rate thing goes. That's exactly right. Bad debt is basically trending exactly where it does every year about $2,000,000 $2,500,000 a year And we're at 1.3 for the first half. We went the path that we took was much more volatile. We had a little over 3 in the Q1 and we had a reversal in the Great. Thanks for that. Sure. Our next question will come from Jeff Hardy with Piper Sandler. Please go ahead. Good afternoon, guys. Very nice quarter. So this has been touched on a few times, but I want to go back to it. I mean, we're used to looking at MD comp, but the thing that really still got stuck to me is the banker count going To 670, that was a sizable increase. And we're seeing the trend of bankers per MD continuing to climb as well. So this has been touched on a bit. Can you talk a bit about the efficiency of non MD client coverage and kind of that productivity? And as we look forward, should we kind of keep thinking that the bankers per MD kind of continues to go up or is maybe some of the increase just a function of you've got a lot of promotions Kind of to make over the next couple of years. No, I think some of that goes to the changing nature of the environment. Again, 10, 20 years ago to get into a big strategic boardroom, they'd want to see somebody that looked and felt like me. When you have all this money in alternative capital, Some of it is actually decisions are being made by people who are 30 to 40 years old. In those asset managers, they actually run significant assets and do the M and A themselves. And I feel like this whole idea of maybe you just touched on it, Revenue per MD, I think we have vice presidents who are experts in their field, who are talking to people of their age or slightly They're not CEOs of General Motors anymore. They're but they're running an M and A portfolio that's every bit as big, if not bigger. And so those people are very, very effective and having those people It's becoming more and more a key to winning the business of these institutions. The market is changing. And I think the way we're doing it and holistically covering those people from at each Segment, you'd be surprised how young some of those decision makers are on significant M and A transactions now and are willing to deal with what they perceive as an expert that 20 years ago you wouldn't have thought would make it into a corporate boardroom, but Different type of transactions right now. Okay. And just looking at the revenue strength, I mean, it's always nice to see. Is there anything to highlight as far as kind of deals having closed in July that might have helped revenues being pulled into the quarter From 3Q to 2Q? On the pull forward, Joe, you want to go through the pull forward? Yes, it was maybe Four transactions, I think it aggregated to something around $20,000,000 It's nothing out of the ordinary. Okay. Thank you. Sure. This concludes our question and answer session. I would like to turn the conference back over to Ken Moelis for any closing remarks. Well, thanks for your time. We appreciate your support and we'll see you in 3 months. And feel free to call Chad if you want any more insight to some of these questions. Thanks a lot. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.