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 Regulation 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 non-comp expenses were $40 million, resulting in a non-comp ratio of 17%.
The increase in our non-compensation 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 pre-tax 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.
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 plain vanilla financings 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 two new managing directors in New York, one to expand our coverage of 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 two have continued into the beginning of quarter three.
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, you want to address the questions?
We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from Devin Ryan with JMP. Your line is open.
Thanks. Good afternoon, Ken and Joe. I guess I want to start with maybe a bigger picture question just on financial sponsors and the outlook. Kind of where I'm starting here is, you know, sponsors raised record funds, you know, record PE funds the last couple of years. They were deploying capital at kind of a record pace, and it felt like, you know, they're trying to get on to that next kind of incremental record fund from there. Now where we sit here, you know, fundraising for that next fund, you know, probably 2022, even into 2023, is looking pretty uncertain.
You know, we're hearing that, you know, LPs are starting to push back a little bit on, you know, essentially giving more capital, and at the same time, you know, the sponsors are slowing deployment. 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 the call it equity prices and bid-ask spread and the markets coming back to, you know, more of an equilibrium.
There's really two separate questions there. One, I do understand that LPs have. You know, there was so much fundraising that they allocated a lot of money early. They just people you know their GPs contacted them very early. They made their big allocations. Possibly even, you know, some of them have a rule on how much of alternatives can be relative to the total portfolio. The denominator might have shrunk at the same time, right? There is an allocation issue in the current year. By the way, that doesn't mean they didn't allocate a significant amount of capital. It's just that they did it early. That capital is in the market.
I think the idea that if you're in the fundraising business, the next six months are gonna 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. That's number one. Number two, the idea that sponsors are on the sidelines is just not, 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 sponsor world. The debt markets are just not functioning right now. 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 three, four, five months ago isn't appropriate for the market today. It's gonna be discounted and cleared. That'll happen quickly. I think we'll be back, 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.
Yep. Okay. That's great color, Ken. Appreciate it. Then, maybe a follow-up for Joe. You know, good to see you guys hold the line on the comp ratio, you know, despite the tougher conditions in the second quarter. Not sure if you can give any guidance or thought around kind of the back half of the year. 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 too on the comp ratio. Look, it's the best estimate that we have. We think that's a good ratio given everything we know. Again, I anticipate the back half of the year, at least the third quarter. I'm not gonna even predict the fourth quarter at this point. You know, we don't expect a massive change. As I said, we're four weeks into the third, and it feels a lot like the second in terms of the world. You know, I think we're going into that ratio with a knowledge of where we are and where we think the third will be. We're not, you know, and the fourth will be determined. We'll see.
Yep. Got it. Okay. Terrific. I'll leave it there, but thanks for taking the questions.
Thank you. Our next question comes from Ken Worthington with JP Morgan. Please proceed.
Hi. Good afternoon. Thanks for taking the question. Clearly, M&A has slowed. As you look at your business, what part of advisory has been the most resilient? I guess, do you expect that resiliency to continue? If you take the other side of it, what part of advisory has slowed maybe the most, and how quickly do you think that or those areas will bounce back? Maybe what areas do you think really are going to be slow for the foreseeable future? Thank you.
Thanks. First, the slowest has been restructuring. I mean, you know, the conversations are beginning, and it's getting a lot more active. Ken, you should probably put it on mute if you can. Ken, can you put yours on mute? I think you hear the background noise. Thank you. Restructuring's definitely had the, you know, the as I called it almost dormant in the first half of the year. Conversations are beginning, but it hasn't. 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. It's 'cause sponsor transactions from the time they're entered into to the time they close are usually 30-45 days. There's not a lot of, you know, there's no shareholder vote, there's no proxy, there's often a lot less regulatory. It also causes at the end of a cycle, at the beginning of a down cycle, they clear out faster because they don't have long tails. Strategic transactions could take three months to, you know, anywhere up to, you know, for highly regulated deals, 18 months to close.
Those transactions often, you know, 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. That's why, you know, you know, I believe the business has a different cycle than I've been, you know, reading from a lot of you know, I'm not picking on you, Ken. I'm talking about the research in general.
Understood. Thank you very much.
Thank you. The next question comes from Brennan Hawken with UBS. Your line is open.
Good afternoon. Thanks for taking my questions. Ken, I'd like to explore what I think 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 financing would get going again. Was that your conclusion, or did I not read that correctly?
Yes. I think you know, this is not 2008-2009. 2008-2009, you had fundamentally damaged financial company balance sheets. They had to rebuild equity and Tier 1 equity, and they were forced out of the market for a while. They were really out of the market for a while. This is, the banks are strong. The non-bank market is strong, but right now, the non-bank market is focused on transactional loans that the banks have, and they're being offered at the clearance aisle, you know, 10%, 20% off. I just think that's just a natural. Yeah, I think that those are gonna get cleared out. It 'cause they're one-time, and then we will reset, and the banks will be in business.
By the way, they'll be in it, you know, 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, you know, not working transactional market as the clearance sale happens.
Yeah. 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? What the market's requiring now is far more onerous because you have such a significant amount of uncertainty out there, and therefore, you know, it's not like once you clear these existing, this clearance rack, you know, so to speak, then everything's all good. You've still got these kind of onerous financing terms, new kind of requirements that lenders are gonna need regardless of whether of the balance sheet of the bank or whatnot. You've just got such a significant economic and macro uncertainty. I just to me, I guess I don't quite follow the confidence that financing is just gonna come rearing back.
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, you know, are you guys going to continue to be 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 two things that help clear it. I think one of them has already helped clear it, and that is multiples and the price that assets sell for. Just to pick a number, for instance, if multiples go down by three turns or four turns, you know, you've already, like you said, that's already then the bank has to. The whole capitalization has thre e or four turns less of need, so already you're down. The banks will step in, and they might do a turn less of leverage. Sure, they might do that. I'm not saying that. All you need is functioning markets. I don't know what you. Onerous is in the eye of the beholder.
It's again, as of today, what's SOFR, whatever, you know, Fed funds rates in the low 2s, you add 3 points. Now, 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. You know, we didn't always run a business on 0% interest. It will find a level, pricing will reflect it, and people will transact assets. 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-$0.90. So they're distracted on one-time opportunities. I think that's what they're doing. I don't blame them.
When we come back to the market, they'll be, instead of five turns of leverage, maybe it'll be four turns of leverage. The whole transaction will be three turns less, and everybody will move on and do their IRR off of that. The world will go back into the mode that it's in, because everybody's strong enough that they will return to business. They can't. They're not gonna shut down. I disagree with you on. You know, I don't see that. Our capital markets activity is undergoing the same thing. Right now, you're competing again with the clearance aisle. Very difficult. Hard to sell, you know, when the outlet down the street has the same goods on the shelf that the primary retailer, the primary seller has.
That'll clear out, and then everybody will be back in business and, you know, so we're having the same sort of a 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. Appreciate the disagreement and, you know, that's what makes a market. 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 come.
I don't think I said capital markets.
Sorry, go ahead.
I didn't think I said capital markets are slow. It's actually done pretty well. It's actually, you know, capital markets has been fine. I don't think I said it was slow.
Oh, maybe I just misinterpreted.
Yeah. Okay.
Let's clarify that. Capital markets has been good. Has it been running, you know, 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 six months.
Yeah, it's over 10%.
Yeah. I think, you know, 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's. You know, it just hasn't slowed. It's done very well.
Yeah, last year was tough 'cause they were active for you all in capital markets, as I recall. Right? Yeah. So when we think about the outlook from here, restructuring is still expected to be much more of a 2023 story? How should we be thinking about the, you know, the composition of the business? Do you think it would be very similar to what we've seen year to date? Or, it's not gonna be until 2023 when restructuring picks up. When we're trying to think about refining a model and coming up with a forecast, how should we think about the different pieces and the outlook from here?
I think it's gonna feel similar to where it is. M&A is gonna lead the way. Capital markets, I think will continue to do what I've said. I think they'll stay. You know, 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 gonna be a beneficiary of that. I think we've been a beneficiary, and we will continue to be. 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 till closings because of the speed with which it enters the market and closes.
You know, restructuring will start to creep up and you know start taking in monthly retainers. I would guess you're right, it's a 2023, you know, six, you know, success-based fees will be put off to 2023.
Okay. Thanks for that color. Appreciate it.
Thank you.
Thank you. Our next question comes from Richard Ramsden with Goldman Sachs. Your line is open.
Hi, Ken. 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 gonna unfold. I mean, has it in any way got you to rethink or reprioritize the investments that you wanna make in the business, either in absolute terms or in terms of prioritization, i.e., from a product or 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. Look, you know, this is just my feeling, so take it for what it's worth. I'm not, you know, 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. Ev ery.
You know, I'll bet if you go on all their earnings calls, none of them think they're gonna be smaller in three years. 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. 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 of valuations. Now, you know, the debt markets have thought about it and have reacted in advance. Between the Fed and the media, I think you've presaged a pretty bad recession, so people kinda, as I said, if it's a hurricane, they board it 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, 'cause there's no way to avoid it, is the consumer. 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. You know, 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 five 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 gonna be very aggressive. Not today, maybe not tomorrow, but, you know, 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? I mean, is there a significant difference, and should we think about liability management mandates as effectively becoming restructuring mandates over time, or should we think about them separately?
One of the things we pitch, Richard, very, and we're proud of is we think if you hire us on liability mandates in advance, Bill Derrough, our Head of Re, 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. 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 know, 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. Liability management does take more activity and more thinking, and it's often just not as large a transaction. You know, you usually have a good client for life if you succeed in that, and that's what we try to do. Yeah, it's not as profitable, but it's probably more, probably a better client opportunity than bankruptcy.
Okay. That's very helpful. Thanks. Thanks for your time.
Thank you. The next question comes from Manan Gosalia, excuse me, with Morgan Stanley. Please proceed.
Hi. Good afternoon. I just wanted to dig in a little bit more on the rate of change through the quarter and into July. It sounds like last quarter, seller valuations were the issue. Debt markets were also an issue but not as much. It feels like today's seller valuations have reset, you know, maybe not fully, but there is some progress there. Debt markets are the bigger issue. 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?
You're right. You know, what happened with seller valuations, and this is the fastest I've ever seen it go in a cycle. 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 gonna do and, etc., etc. What happened very quickly is, you know, February, March, April, maybe even May, you had sellers looking back to hope, you know, for a while hoping, well, what happened to that value? I think by July, maybe late June, you would have sellers of assets thinking, you know, "I think it might get worse. So tell me what the market is.
Let's see what the market is, and let's move." That was a pretty quick cycle. I mean, I think three-month cycle to reset pricing. What happened is the credit markets disappeared. There are, you know, for less than investment-grade credit, it's very difficult. That is what happened. I just think that market of resetting the bank market is a function of clearance. It'll 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 gonna happen, and I feel like then now we have an equilibrium in buy-sell, and I think we'll have a functioning debt market at a different, as I think Brennan said, at a different terms. People can transact if they know the terms.
I guess that's the biggest catalyst we should be looking for is the debt markets at this stage?
Yes. I believe that is the primary, you know, I think that's the primary as of right now. If that cleared up, and especially if markets, you know, have felt pretty good and, you know, you could say that a lot of good assets, people might hold them for a while, you know. But 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 need, somebody wants to sell a strategic asset. Also financials have a cycle, so I think things come back if the bank market and the financing markets come back online.
Got it. Just as a follow-up, are there any differences that you're seeing between markets? You know, it would seem like public market valuations, particularly in some sectors, have come down pretty significantly. Are you seeing more dialogue maybe on the public side versus the private side or on the tech side or, you know, maybe from cash-rich corporates or the strategic side? You know, where would you say the incremental dialogues are coming from?
Look, I do think that the public markets, because they're liquid, react faster and often much more volatilely. I do think that if there was a functioning debt market, you could have some cash buyers try to take advantage of dislocations in the public market. Right now, the mass of available debt and to undertake those transactions just makes it difficult. You know, 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.
Got it. Thanks so much.
Thank you. The next question comes from Steven Chubak with Wolfe Research. Your line is open.
Hey, good afternoon.
Good afternoon.
Maybe to 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 wanna 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. We were for the first time in, I think, a very long time, very active repurchasing shares. I think 3 million shares for us in a six-month period is by far the most we've done. We've said when we felt the stock was in a position that, you know, it wasn't in our minds a close call on valuation. Look, you know, just buying back our stock when we were doing it in the last month or two was almost a 6% cost of capital not to do it on our dividend alone. We have decided, you know, we're not gonna pay a special because we've 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 to for the near term allocate our capital to return is to stock buybacks. Again, I'm not saying anything from here on forward, but that's what we have been doing.
Understood. Maybe just a two-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 with a slightly different take. As we think about the more challenging revenue backdrop, potentially for the back half, I know that there have 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. Just if the revenue backdrop's 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? Then, similar to the.
Given the uptick that we saw actually in non-comps, what's the right non-comp run rate we should be thinking about in the back half?
Well, again, I'm not projecting that the year. You know, I've said the third quarter has started the same as the second, and I'd said, you know, 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'll take time for deals to close, by the way. You know, we have our pipeline as of today is almost exactly, by the way, I looked at it's almost like to the penny, where it was exactly one year ago. It's not for lack of opportunities and pipeline. It's elongation, it's the inability 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.
I don't wanna leave you with a projection on the year-end. I'm just saying that this thing. You know, I believe there will be a turn. On the comp ratio, as of right now, that's our best guess. There are a thousand things that would go into any change in that. I don't foresee it, but again, things happen in life. You know, right now, that's our best guess. We guess. You know, we have a tremendous organic growth model. I do think that having so many of our managing directors come up through the system gives us a little, I think, good control over our comp ratio and an ability to maintain, you know, the split that we think is fair.
Again, I don't want to. I don't know exactly. If we were to change it would be because of a thousand different inputs. Some of, you know, if competitors come after us and wanna break their comp ratios to some extent, you know, we're not gonna sit still. For right now, this is an estimate that we think is optimal.
In terms of the non-comp jumping off point, just given it was a little bit higher in the quarter.
Yeah.
Some of that's certainly T&E related, but how we should be thinking about that for the back half.
I think that also included in that non-comp this period were some transaction-related costs, probably $2 million. The best guess I have is probably 39 area for the third quarter, absent any, you know, transaction-related costs, which are hard to project.
Very helpful. Thanks so much for taking my questions.
Thank you. The next question comes from Michael Brown with KBW. Please proceed.
Hi, Ken. Hi, Joe.
Hi, Michael.
I guess if I maybe build on that comp question somewhat. You know, during periods of market dislocation and, you know, in the past for you, it's been a good opportunity to get active on the recruiting side. You've added two 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?
You know, 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. You know, people are away. They focus on the bonus pool somewhere in September. Look, 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, you know, if you have. Will from the top down just allocate human capital decisions and the organizations will respond. I'm kinda hopeful of that. We would be aggressive and intend to be aggressive, and our pipeline's pretty good right now.
We're continuing to move, but I think you could see, you know, I hope you'll see us be more aggressive sometime from September through the next, you know, nine months.
Okay. Yeah, very interesting. Maybe just one more from me. If I heard you correctly just now, you said your pipeline is your internal pipeline of deal activity is relatively unchanged. Can you just clarify, was that relative to the prior year or to the prior quarter? Can you just remind us how you define that? Obviously, you know, we look at public data, which doesn't necessarily line up with that, you know, that commentary. I know we've in the past had discussions about the differences between what's out there publicly and what you guys see internally. 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, you know, one year ago. By the way, when I say it was the same, it was the same. I think they're, you know, down to the pennies. As we look toward how we see it roll in, it has elongated. I just wanna make that clear. We don't think the pipeline will. Again, how do we define pipeline? You don't see it because most of it is confidential. These are things we're working on.
Yeah, they're mandates.
They're mandates, not announced deals. They're things we're working on trying to go to market, advising behind the scenes. I mean, I would say, you know, I'm just making up a number. 80% or 90% of what we think is a pipeline, probably 90% is the things we're working on that are not announced yet.
Yeah, they're an engagement letter.
They're an engagement letter. Again, I wanna be clear, you know, it's to the dollar, the same as a year ago. When we look at it and try to picture the timeframe to completion, it's definitely longer. Probably riskier, but definitely you know. By the way, any time you elongate a deal, it becomes riskier. A deal does not get less risky as it goes on. They're longer to completion, which makes them riskier by definition.
Okay. Yeah, that's really helpful. I guess if when you've looked back historically during these periods of market dislocation, how has that pipeline, you know, worked towards completion? Is it, you know, clearly there's more risk to the deal, as you just mentioned. So when you look back, is it, is that kind of the 20% hit to your pipeline over time? Like, how does that typically work in terms of deals that actually move to completion?
You know, I don't have an easy . Yeah, I don't have an easy answer to that. It's if I had that, I'd, you know, really, we ask ourselves the same question, and we try, but, you know, I can't give a public answer to that 'cause it's, there's no scientific answer.
Okay. Understood. Thanks, Ken. Thanks, Joe.
Thanks.
Thank you. 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 anything we can do to follow up afterwards, give Joe or Matthew a 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 line.