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Moelis & Co
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Good afternoon, and welcome to the Moelis & Company Earnings Conference Call for the First Quarter of 2021.
To begin, I'll turn the call over to Mr. Chett Mandel, Head of Investor Relations.
Good afternoon. And thank you for joining us for Moelis & Company's first quarter 2022 financial results conference call. On the phone today are Ken Moelis, Chairman and CEO; and Joe Simon, Chief Financial Officer.
Before we begin, I would like to note that the remarks made on this call may contain certain forward-looking statements, which are subject to various risks and uncertainties, including those identified from time-to-time in the Risk Factors section of Moelis & Company's filings with the SEC. Actual results could differ materially from those currently anticipated. The firm undertakes no obligation to update any forward-looking statements.
Our comments today include references to certain adjusted financial measures. We believe these measures, when presented together with comparable GAAP measures, are useful to investors to compare our results across several periods and to better understand our operating results. The reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information required by Reg G is provided in the firm's earnings release, which can be found on our Investor Relations website at investors.moelis.com.
As many of you know, this is my last earnings call with Moelis. Mat Tsukroff will be my replacement and you should contact him if you have any questions.
And with that, I'll turn the call over to Joe.
Thanks, Chett. 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 $298 million in the first quarter, representing an increase of 13% over the prior year period and our largest first quarter of revenues ever. The increase in revenues was primarily attributed to growth in our M&A activity and higher average fees earned on our completed transactions.
Moving to expenses. Our first quarter comp ratio was 59% largely consistent with our comp ratio for the past two years. Our first quarter non-comp ratio was 12%. This all combined to produce a quarterly pretax margin of 29%.
Moving to taxes, our underlying corporate tax rate was 27.1% for the first quarter.
Regarding capital allocation, year-to-date we've repurchased, approximately 2.4 million shares, totaling $115 million. Approximately 50% of the buyback was in connection with RSU tax withholding. And the other 50% of the buyback was pursuant to open market purchases.
In addition, the board declared a regular quarterly dividend of $0.60 per share. As always, we remain committed to returning 100% of our excess cash.
And lastly, we continue to maintain a fortress balance sheet with no funded debt.
And I'll now turn the call over to Ken.
Thanks, Joe. And good afternoon, everyone. Our new business activity remained strong, and we continue to see positive momentum in the franchise. The macro environment has been quite volatile over the past quarter. As I mentioned on our last call, the time to completion of deals has generally elongated.
Our M&A platform continues to be the largest driver of activity. There has been no slowdown in clients seeking advice as innovation and disruption continue to fuel transaction dialogues across the world. Our non-M&A revenues in aggregate remain in line with historical averages. Our restructuring team has begun to have more conversations as there have been some signs of distress in the market and our capital markets franchise is expanding its capabilities. As volatility adversely affects plain vanilla capital markets, market participants start to require more structure and that plays directly to our strength. We have built a fully integrated coverage model across all of our products, which allows us to provide innovative solutions to our clients.
And finally, we continue to grow our platform through internal talent development and key external hires. The volatility that we're seeing across the globe will require business leaders everywhere to make difficult decisions. We are in the business of advising clients through difficult decisions. Volatility and rapid change, increases the number of decisions that need to be made. And that's why I remain very optimistic about the future of Moelis & Company.
Before we go to questions, I'd just like to thank Chett for all of his contributions. Chett you've done a great job and everyone at Moelis, we wish you a really good next adventure and hope to be your banker as well. So, with that will open it up.
Thank you. [Operator Instructions] The first question is from the line of Brennan Hawken with UBS. Your line is open.
Good afternoon. Thanks for taking my questions. Ken, good to hear that you are feeling really, really good about the business. We're starting to – we heard from another M&A-focused firm this morning that they are seeing some timelines extending. This is similar to the comments that you made on the last quarter call. There is increased uncertainty in the environment. And there is just a little bit of lack of clarity on exactly how some of the geopolitical risks could end up impacting the velocity in so far as MA& and advisor is concerned. What's your view on that? And how do you think that could end up playing out here as we move through the year?
Yes. Well, I agree with that, Brennan. And we're definitely seeing an elongation of process and I said it on the last call, what I probably, didn't understand as well as it probably started elongating even in the fourth quarter. So, some of that elongation started as volatility started in the middle of December. And so, what happens is people either delay coming to market, or it possibly takes an extra week or two or a few weeks to come to conclusion on transactions.
And so, we do see in elongation when there is a bull market, when values are increasing daily. Transactions tend to get done at a greater speed. The alternative to that, and we are seeing that. I don't want to underplay that in the short run. But what's also happening is the volatility and it's happening in supply chains, in industry energy, it's happening in interest rates, it's happening in technology. It does create decisions. And if you think about the business, we're in, we're in the business is of advising major institutions on making decisions that are outside their normal course of business.
And so, the top of the funnel, I think, is as large as it's ever been. And so again, it's one of the reasons we never guide short term because these transactions have a life of their own. But I'm very positively inclined as to the number of decisions that will have to be made and our ability to help people make those and the company going forward.
Okay. Thanks for that. Just focusing in a little bit on the sponsor market. This is a part of the market that's really important to your franchise and you've had a lot of success there. So, could you maybe comment on what you are seeing among that cohort and whether or not I would assume that the trends that you are commenting on would apply to sponsors as well? But are there any parts of the market where you are seeing sponsors more active or you are seeing some change in behavior where you're seeing like bigger equity checks as opposed to financing, is financing getting tighter? What general conditions are sponsors dealing with right now? And how do you see that maybe impacting activity?
I'd say sponsors are pretty aggressive. I don't see a withdrawal of anything. I think the sponsors are as aggressive as ever. Look the interesting part is the amount of capital going into sponsors is increasing at a very rapid rate in different pockets, too. Some of them, they are going into new lines of business, new strategies. I think I started talking about literally the fact that we're going to see sponsors and private equity dis intermediate the banks in transactional credit in the next few years. And I think we saw it in the last few months. As several of the largest buyouts were financed through alternative asset manager is almost a hundred percent.
So, the one negative, that we might be seeing Brennan is if you are sitting on a quality asset and you might think today, April 27, whatever today is, maybe it was a volatile week and we're going to put off launching the sale of that asset set to realize price by a week or two. That's what I mean by elongation.
But look at the end of it they are going to want to monetize that asset, so that asset will come to market. It probably won't sit like a strategic could sit with the asset for a year or two. That's not what happens here. And secondly, they see lower prices and volatility as an opportunity to put capital to work.
So again, I continue to see sponsors being very active on their front foot and very little diminution in the pipeline from sponsors. By the way, not – sorry, I shouldn't put it in the negative. Our pipeline is above where it was a year ago and we had pretty good 12 months following that. So, we're seeing a lot of activity.
Sorry, Ken, that last comment about your pipeline, it's above where it was a year ago and that's for sponsors specifically, or is that firm wide?
No, sorry in total. I do not have the answer on my…
In total?
In total.
Got it. So not trying to slice it up or anything. Okay. Thank you very much.
Thank you.
Thank you. The next question is from the line of Ken Worthington with J.P. Morgan. Your line is open.
Hi good afternoon. Thank you for taking the questions. If we look at the pipeline in the public data, and we think about the deals that are supposed to close, it seems to look like the pipeline of deals to close is slowing. But that doesn't really seem to exactly jive with how you're describing the pipeline, although maybe it's, the pipeline is extended. So maybe that's sort of how the two data points converge. So, is that a reasonable explanation here? The pipeline is as strong as ever, but because it's being extended, it's the same number of deals closing over a longer period of time.
And then maybe to kind of flesh out the pipeline is the nature of the pipeline changing at all, either by geography, or sector, or participant type, or is it largely as it was a year ago at this time?
So, I think your first point is the right one, the pipelines are gross fees that you have in backlog. Those are in different stages of completion. And again, I don't know the numbers you're looking at. So, Ken, I don't see the public numbers. In fact, that now the Chett is leaving us; you can call him and ask him to interpret that from outside. But that would be consistent with what I call an elongation of a process if that were to happen. And we might have been awarded the assignment to go sell company X, and that company could have planned to push off to market last week and they could have decided, hey, we’re going to wait another week or two to see how the markets come out and to see the markets settle down, that’s just a two or three-week elongation. That’s what happens in volatility.
We’re pretty confident, all of that is coming to market. So we feel very good about the pipeline in terms of the makeup of it, it’s as opposed to this time last year, it’s definitely down in backlog on restructuring. And in M&A, we would consider it a better pipeline because it’s up in sell sites, which in M&A sell side is a better probability of closure meaning you have the asset, there could be five bidders, but you’re going to sell it when you have a buy side, there could be five bidders. So you’re not sure you’re going to transact whereas if you’re the seller, you usually – you’re pretty sure you’re going to transact.
Now that’s usually where you want to be. So I feel like the backlog pipeline, I commented on it being as good if – and that’s if everybody decides to go to market and the volatility doesn’t get to the point where people keep pushing it off. So those are the – that’s the combination of events that’s going on.
Okay. If in your conversations with clients, there seems to be a number of factors that may be contributing to the extension we’ve got rising rates, we’ve got inflation, we’ve got supply chain, we’ve got Russia. And I assume this each factor may be contributing differently depending on the sector and the geography of the clients. Is there one or is any one of those a bigger factor in dialogue with CEOs and decision making than the others, or they just sort of all factors that are being combined together? So I think about like as we get resolutions to these different factors over time, what should we be paying more attention to in terms of maybe shrinking the time for these deals to kind of come to market?
I think when you put it all together, the fundamental driver is the – all those activities resulting in price volatility. Now you could see interest rates, but we don’t see that yet. Interest rates do not seem to be driving any transactions to non-closure. Capital’s available and rates are still historically low enough to fund transactions. So but I think when you aggregate the issues that you talked about what’s happening is and all you have to do is look back a couple of days is you’re having some very significant price volatility. Price volatility changes people’s desire to go into a market and find the discovery of price for the asset that they have. If it’s a quality asset, they want to discover the price in an environment where somebody is willing to pay for that quality asset.
And you could also get into a situation where you’ve launched a transaction five months ago, you have indications of value from five months ago, you’re coming down to the finality of it. And the comparable companies or comparable prices have changed enough that your buyer and seller no longer agree on where the outcome of the transaction closes at. So look, it’s a long way of saying. It’s – those activities you’re talking about they’ve happened pretty significantly, interest rates have changed pretty rapidly. Russia invaded Ukraine pretty quickly. And so these things had sharp implications to prices and I would really attribute most of what we’re talking about to the volatility of price and value.
Okay, perfect. Just maybe last question, you operated at 59% comp ratio this quarter, at planning for the best or hoping for the best planning for the worst, at what level – at what revenue level this year would that comp ratio start to move higher. How should we think about the downtime protection to that comp ratio?
At this point, I’m – we’re pretty confident that that comp ratio’s get on under a pretty wide range of outcomes in and around what we’re expecting, seeing, planning for. So I just say I’m confident that 59% barring some catastrophe, I think it covers a lot of outcomes in the range of expectations, 59% it's going to be fine.
Okay, great. Thank you so much.
Thank you. The next question is from the line of Devin Ryan. Your line is now open.
Hey great, good afternoon, Ken and Joe. Want to come back to the conversation you’re just having on the confluence of factors impacting M&A, but maybe hit it from the restructuring angle because you did mention some pockets of stress or at least you’re starting to see those. Can you maybe talk a little about where that is? And then as we think about rates kind of normalizing here a couple hundred basis points isn’t much for a healthy company, but for a company that’s less healthy and all the other dynamics that may go along with that, what is your expectation in the market for how maybe the restructuring opportunity could evolve just based on kind of the implications of what higher rates mean for kind of the broader economy.
So we’re not seeing a restructuring boom yet, but as you are right. There’s a lot of paper out there. There’s a lot of issuers. And look even without rate movements, just operational issues that are individually expected 1% or 2% of companies have their own particular issues, layer on 200, 300 basis points of rates. And yes, we’re going to see it. I would say right now the restructuring team is working.
I think more on liability management, kind of shifting around those obligations in a market that doesn’t need to go through or get near more of them. I’m just speaking in the aggregate. More of them are how to address liability management as, but not in the context of the next chapter 11 could be around the corner.
I do think look, there’s a lot of paper. You only need 1% or 2% to get effective. I mean if we had a 2% default rate, all the restructuring teams throughout Wall Street would be at a 100% capacity because of the number of the large amount of paper out there. So as I said, I think the restructuring business is warming up in the bullpen and I expect we’ll get a full – they’re going to be called in. And it’s just a matter of what confluence of things triggers it. But it’s going to – I think it’s going to happen.
I think you have too much, there’s too much change and people lay out their Excel spreadsheets and they do transactions based on pretty predictable or an attempt to predict five years of cash flows, well, when you had supply chains, interest rates, energy costs, technological influences moving this rapidly, it would be unusual if 1% or 2% of those models didn’t turn out to be wrong.
Got it. So I mean just to put a fine point on it like in that scenario, you still can have a relatively healthy M&A backdrop, but you’re starting to see just stress around the edges for the companies that that maybe weren’t in a great spot to start with and this is just the final blow. Is that a way to think about it?
Yes. Look in a normal stress market, I think we will see that in – look the last hyper distress was the 2008, 2009 market and M&A did kind of dry up for a while. The opposite happened in the COVID distressed market. I – my guess is this market will not – will result in both markets operating and I’ll tell you, I come back to the fact that there’s a new market for M&A that is – it’s not a new market, but it’s so substantially impacted by the flows into private equity and the activity of those firms that they will continue to transact.
There may be some strategics that don’t want to transact for a while, but I do think the firms that are in the business of transacting for private capital will transact. And that you will have both – you can have both markets healthy, hard to call the restructuring market healthy, but you could have both markets busy at the same time.
Yes. Okay, great. And just quick follow-up here on the capital markets business, so appreciate, this has been a focus of expanding the footprint there, and we’re also coming off of phenomenal year for that business in 2021. So just trying to think about what this is a hard maybe question to answer, but like what normalized looks like is it right to think about that business growing off of 2021, just because you’re expanding the footprint or were conditions just it was kind of like four great quarters in a row for that business. So it’s just a little bit of a high bar for the near-term and then you kind of resume growth off of that.
I’m just trying to think about how and the last piece of it is, I also understand that, that you guys are not just connected to kind of broader capital raising or capital markets that you can be active in maybe more dislocated markets in that value. So I’m just trying to get a little more color there because it’s a question we get from investors.
Yes. I’m very bullish on capital markets. The growth – I think the growth could be is substantial. It is – I’m expecting it to grow this year. And by the way, that is with a headwind of having a much smaller SPAC capital market activity. Yes, I just think the ability; there are large pools of capital. They like structured finance, those require real hand holding much more so than trading floors and the way the world was structured or is structured. I think we could – we – I’m very bullish on that business. I’ll just leave, but I expected to grow this year and I would hope it would become, continue to grow. Let’s just leave it that way. We have large growth plans for capital markets.
Got it. Is there any way to kind of size out that business, whether it’s revenues or percentage or anything else just to help us?
I think that’s getting to be, I’d say in the first quarter, I think it’s getting to be close. It was close to 15% of the business. I think I’m right about that. Joe might stop me if I’m wrong.
Yes, that’s right. That’s right.
Okay. All right. Great. Well, thanks so much for taking the questions.
Thank you.
Thank you, Mr. Ryan. The next question is from James Yaro with Goldman Sachs. Your line is open.
Good afternoon, Ken, and thanks for taking my questions. So your revenue this quarter was significantly higher than the Dealogic and website data. I would expect this reflects continued growth outside of traditional M&A. You obviously just cited the 15% for capital markets. When you think about your non-M&A businesses, would you say these perhaps have more great – have greater durability versus M&A revenue or perhaps more countercyclical. Are they something we can view as a bit more sticky when we plug in your revenue run rate going forward?
Again, I never really try to bridge to the public markets, so I don’t have a great answer. Other than to say, we advise on a lot of – as I said, there’s a lot of decision making going on in boards that might not result in the transaction that can be measured the way you’re measuring and I like that. I think more and more under the complexities of the world were being brought in to advice on things that you might not consider traditional M&A, but to involve the future of a company and how they’re positioning themselves. That could be the answer.
But I will say, I think our M&A was extremely strong this quarter. I don’t know why, it didn’t show in the numbers you’re looking at. But, again, I would ask you to contact Joe afterwards and go through, what it is we’re missing. Other than I do think we’re doing things inside of corporate strategic activity that may be more broad than generally recognized. In terms – when I say broad, it just doesn’t result in a definitive transaction of purchasing an asset x or selling asset x, and maybe that’s not listed.
Okay. That makes sense. Maybe just turning to a world in which we did see sort of a deeper economic recession. To what extent, do you think your restructuring business could offset a decline in M&A revenue? And then if we just dig in a little bit on the capital advisory business, do you think that’s something that could perform well, if we did enter a more troubled economic backdrop.
So I think the restructuring business could do that, because I think the size of the market is gigantic. Now, I don’t have it on my fingertips, but there’s been a lot of issuance. There’s just a lot of paper out there. And the way we’ve set up the company, remember, we do not divide up the restructuring team from the general corporate finance team. That’s why we don’t break it out.
So again, when the market was much smaller back in 2009, we had 96% of the bankers had – were working on a restructuring – with the restructuring team, getting a lot of leverage out that expertise. So I do think we could – I think we did revenue of something like $300 million in restructuring back 2009, 2010. Could we double that? Yeah, I do believe it’s possible.
I’m not trying to make any prediction here, but – or more, because we could have – I think we could have 95% of the company, if it was a deep recession and everybody needed that advice. We would move our talent over there and operate as a team like we always do. And I think that’s one of the parts of our model that is exceptional. Nobody has a blockage or a fence around their business.
So yeah, I think it could get to be a very large number in an environment that – it was a very large number by the way at the beginning of COVID, it came and went quickly. But in the three month timeframe that it was active, it was very active. And to capital markets, I continue to believe as plain vanilla financing and most capital markets are setup to do plain vanilla better than they are highly structured. We are doing – we’re setting up to do highly structured. And I think in a deep – if there was a deep downturn, I know things would go structured. The one thing I know is in a downturn, plain vanilla, fully distributed, regularly financings are much harder to do and everybody wants to put some structure in and we’ve got a great large integrated team around that. So I think that would do well in that environment as well.
Okay. That’s really helpful. And then just one other quick one, you’ve seen a lot of different cycles and I know you said that interest rates have not affected the M&A dialogue so far or the M&A completion so far. But you’ve – when you look back historically, at what level of interest rates do you think that would start to affect the M&A backdrop? Or do you think the world is just different and that’s not really the right way to think about it?
A little of both, by the way. I don’t have a great answer on when – because the feds only moved 25 basis points, and yet it feels like they’ve moved 250. I mean, the market is so anticipatory. So I don’t – maybe the markets already anticipated six rate hikes. So it’s the anticipation as much as the actual hike. But I do think, again, there’s a fundamental change in the business. And that is – that there is an enormous amount of firms out there that are in the business of transacting and they will transact. So again 15, 20 years ago, if rates went up 300 or 400 basis points and there was a downturn, a significant amount of the strategics would decide, they’ve got to take care of their own business.
This is no – their stocks at all time lows, their shareholders don’t want them to do M&A, maybe they would do stock repurchases, and that would put a chill on the largest part of the market, 90% of the market. I would just say that there is a part of the market that if valuations went down significantly, I think would turn the engines on and significantly ramp up M&A. And by the way, they have enough money now to actually make a difference in our business. So yes, I think it’s a different business. I think it’s a little of both of what you said. It’s a different business and I don’t have a great answer of when it will actually create that moment.
Okay. Thanks for answering my questions.
Thank you, Mr. Yaro. The next question is from the line of Jim Mitchell at Seaport Global. Your line is open.
Jim?
Jim, your line is currently open.
Hey, sorry. I was on mute. Thanks. Good afternoon. Ken, maybe just one more question on financial sponsors, understand the story there and the flows. But if we look back to 2019, there was worries about a recession. The financial sponsors were pricing a recession in their valuation models activity really pulled back. Why is it now different as we start to worry about a recession, if the fed goes too far? It just sounds to me that you feel that the flows are there and activity’s going to happen no matter what. But it does – it wasn’t that long ago that we did have a pretty significant pullback in financial sponsor activity.
Well, wish you given me the material to study for this test, Jim, ahead of time. So now I got to try to remember.
Sorry. I apologize.
I think – if I remember, the fed really made a move at the end of 2018, right. I think they really crushed the markets at the end of 2018 and made an indication that they were going to raise. There was some – there was a real downturn, again, you – I think it recovered pretty quick though, if I remember. I didn’t think – I thought it was coming back pretty quick at the end of 2019. But if I remember there was a pretty hard move by the fed indicating that they were going to shut the economy down and then they changed. I would – I also think by the way, the markets have changed a lot even from 2019. I mean, it’s three years later and I believe the amount of momentum and aggressiveness in the alternative asset category in private equity. By the way, they came through COVID, because they had no reported volatility.
I’ll give – a lot of the volatility might have happened, but it was in private. I think the allocation of capital to these markets accelerated just look – go back and look at some of the leading private equity firms and look at the fundraising they were doing in 2018 or 2019, early 2019. And look at it today, I’ll bet they don’t resemble each other. I would bet the size and scope of those markets are extremely different today. But I don’t have, again, you didn’t give – I’ll do the homework for the next call,
Right. It sounds like you think though, they’re a lot more resilient and that’s, I appreciate the color. Maybe pivoting to the buyback, I think you…
Yes. Can I say one other thing, Jim?
Yes, please.
They’re being growth companies. Go back to the valuation of those public companies, I’ll bet that’s significantly different. The private entity environment is – these entities as growth companies. Hence, they’re going to deliver growth. Hence, they’re going to transact. There’s a lot of changes besides just, how do they feel? I think that the whole thought process on what these companies are, how they valued and what can they be has changed. And they’re going to go try to fulfill that mission.
Right. Right. Appreciate that. And just maybe on the buyback, I think year-to-date, if you include April, your 2.4 million shares, I think that’s more than of last year. Does that affect at all? How you think about specials versus buybacks. Are you sort of signaling you’re going to be doing more buybacks, less specials or what’s the thought process?
Well, look, we’re committed, as I said. We’re committed to returning our excess capital as quickly as we can figure out what the best way to do it. This time we went into the market pretty aggressively between, I think we sometime in the – it’s called the beginning of the year. And the reason is look, we just felt like, again, we felt the valuation was there. We’re trading it a little over 8 times PE.
I think there are steel companies that trade as a higher multiple. And so our feeling was, we don’t see this as the cyclical, we feel like we’re in a secular growth industry that is being valued as it was 15 year ago as if these cycles will take you out again. That’s – so we went in aggressively. We will make that decision with the board depending on a series of factors, but what we’re going to do is return the capital, our excess capital to you quickly and aggressively as soon as we can and a 100%.
Okay. Great, thanks.
Thank you, Mr. Mitchell. The next question is from the line of Manan Gosalia with Morgan Stanley. Your line is open.
Hi, good afternoon. I was wondering if you could give some color on what you're seeing in the different sub-segments of deals, i.e., small, medium and large. I know that smaller deals tend to decline faster given that buyers and sellers can be a little bit more nimble there. So we saw that during COVID, is that something that you're seeing right now or has it been pretty consistent across the board?
I'm not sure I agree with the, that assumption. I know that assumption is kind of out there. COVID was an availability of capital problem. Literally at the beginning of COVID smaller deals will suffer in an availability. The first availability becomes an issue for smaller companies as capital dries up, and it's totally available right now. So I don't see the same situation. I actually think if any transaction is having trouble, if large transactions are so under focused by the DOJ and the administration that I do think there are, that the transaction that's under pressure is probably the large transaction that would've been attempted two or three years ago. That's just not being attempted today. Not because of capital, not because of price, just because of fears of getting hung out there in the market.
So I can't say that I see, and I know I've read in some of your reports that the – that you think the mid-size are smaller or under pressure. I don't see that yet. I think they're going along in about the same manner.
Got it. That's helpful. And Joe, sorry if I missed this, but did you talk about non-comp expenses? Should we expect that ramps up from here as travel ramps up?
I think that we feel pretty comfortable that, I mean, I'm only looking kind of a quarter forward, but I would say that kind of 37 million areas is a reasonable landing pie, so not looking for a whole lot of growth from here.
Got it. Thanks so much.
Thank you. Mr. Gosalia. The next question is for my Michael Brown with KBW. Your line is open.
Great. Thank you, operator.
Hi, Ken, good evening.
Hi.
So restructuring was traditionally 20% to 25% of revenue in a normalized environment. I know it's hard to nail down what's really normal anymore, but my question is, is that still the right way to think about the contribution of that business? Just given the growth that you experienced in the non-traditional M&A businesses? And now you flag the growth and that you've seen in the capital markets business. So I just wanted to see if that's still the right way to think about the business?
I think it will be over the long-term. In the first quarter it's not it's below that. It's probably mid-teens. I think I said on the last call that the fourth quarter did not have a large amount of new business. I think over the long haul, it will be back into the 2025. The only thing that could cause it to become a lower percentage is the rise of capital markets as just a larger part of the business creating a larger denominator for restructuring to get up to 20% to 25%. But yes, I do think – I don't think there's anything fundamental that has changed in the business. We had a year last year where there was so much money put into the market that it was interest, zero interest rates. The government is just flushing money into the system, and I think it was a very abnormal year for restructurings. By the end of it, it was very abnormal and very unusual.
And what is the dedicated MD headcount and restructuring today. And just given the opportunity set that you see that that you flagged in terms of the potential for a lot of restructuring activity to come down, down the pike. Do you see a need to add or talent there perhaps at the MD level or to build out the pyramid more?
No, because as I said you'd be amazed at how we put teams together on restructuring. We move again, it's a little technical, but I know there were some models in which restructure and gets the restructuring revenue, and the M&A department gets an M&A a revenue. We have a single bonus pool and so we can move – we will move the entire media team. Now I'm just, I'm just making I'm just saying that team would move over in a heartbeat and work alongside the restructuring team and fill it out.
So we that team is expandable to five to six folds and it's pretty significant. I'm thinking we probably have 15 Managing Directors that you would call experts in it. Joe correct me if I'm wrong, but the – but it would expand to 100 very quickly and it did. Look we just went through this. But COVID hit on March whatever 12th or 13th that we shut down. By April 1st I would always say there were 100 managing directors on teams, organized with restructuring, doing the work and maximizing that event. So I think we would see a radical expansion of the manpower without us having to go outside.
Okay. Very helpful. Thanks for taking my questions.
Thank you.
Thank you, Mr. Brown. Thank you. The next question is from Brennan Hawken with UBS. Your line is open
Double-dip in this one, Ken. Thanks for taking my follow up. So you commented before on the attractive multiple in Moelis shares driving a bit more buyback activity for you. If we – should we assume that that will remain a capital allocation decision of choice? If the stock remains attractive – at these attractive levels and therefore maybe less capital allocated to a special, how should we think about that for the rest of this year?
Well, some of that is math brand. We have 115 million less dollars to do a special with because we bought a bunch of stock. So it's mathematically you can only use your capital once if you figure out a way for me to do both I'll happy to do it. We're going to make that decision based on where the market is? But look we're going to make that decision along with the board, but it is – if you're asking, is it a decision that we changed fundamentally? No. We made a decision based on market conditions, quality of where we think the market is, all those things led us to believe this was a very good use of capital, and we'll make that decision on a real-time basis.
Yes. Okay. So you continue to assess got it. I was tempted to make a joke about what you could add on that, by…
Not yet, by the way. In context, by the way, I just want to know. One of the problems is you enter these blackout periods. So people why didn't you do this on Tuesday or Thursday? You don't have a 100% flexibility, so I just want to put that in there. We have to make these decisions in and around the periods in which we're open to do it.
Sure. Thanks for the caveat. Also just – just kind of curious to put a finer point on this, so I know you don't watch the public data. You've made that clear both this call and last call, but the, I'll just let you know, the public data basically suggests that Moelis is likely to see a revenue air pocket either in the next quarter or two. It sounds like you do not – the data you're watching does not suggest that that is the case. Am I paraphrasing that in a fair way? Or would you adjust that?
We have a backlog that is larger than we had a pipeline, not a backlog. We have a pipeline that's larger than at this point last year. We then had 12 months of the – if I could replicate the 12 months we had post that pipeline, I would 100% do it. If there's any sense of all I worry about is trying to be accurate by quarter in a time when it's volatile. So I don't – I don't sense a revenue back – what would you call it a revenue...
Air pocket?
Air pocket. No, we sensed extremely busy organization with a very large pipeline and, but I'm not going to. I don't want to get down to predicting what happens to the markets in the next two weeks and whether or not people – people decide to put off executing these transactions for three months. And Brennan, that's one of the reasons why we aggressively bought the stock. That doesn't really matter to us. If we're sitting with a larger backlog than we had, and we think our franchise and brand is better than it's ever been, we think our go-to-market strategy is right on with capital markets. We think restructuring has been suboptimal in terms of its ability to generate for us. So I again, I – the reason I don't look at it is because I really look at, I almost look at the company and think, are we executing?
And if we have a backlog that's bigger than last year pipeline, sorry, I'm not allowed to use the word backlog but, a pipeline that's bigger than last year. And by the way we continue to be – our biggest problem is still hiring and bringing in the quality talent we want to execute on what we think is the available market. So that's what I look at, and again to look at the public data, I think Matt now and Joe, I'm not saying don't go over it with them. I just don't manage the company based on, it would be like trying to fly an plan with data that somebody else is telling you how high your airplane is. It doesn't matter to me.
Sure. Understood. Thanks, Ken.
Thank you, Mr. Hawken. [Operator Instructions] There are no additional questions waiting at this time. I'll now turn the conference over to management for any concluding remarks.
No, just want to thank everybody. Thank you again, Chett for all your hard work and we look forward to talking to you in the next call. Appreciate it.
That concludes the Moelis & Company Q1 2022 Earnings Conference Call. Thank you for your participation. You may not disconnect our lines.