Moelis & Company Reports Second Quarter 2018 Financial Results; Special Dividend of $1.50 Per Share in Addition to Regular Quarterly Dividend of $0.47 Per Share

Moelis & Company (NYSE: MC) today reported financial results for the second quarter ended June 30, 2018. The Firm’s revenues of $220.4 million increased 28% over the prior year period and represented our largest quarter of revenues since inception. The Firm reported second quarter 2018 GAAP net income of $53.1 million, or $0.72 per share (diluted), compared with $49.5 million, or $0.57 per share (diluted), in the prior year period. On an Adjusted basis, the Firm reported net income of $52.2 million, or $0.78 per share (diluted), for the second quarter of 2018, which compares with $41.5 million of net income, or $0.66 per share (diluted), in the prior year period. GAAP and Adjusted net income in the second quarter of 2018 include tax benefits of $0.10 per share and $0.11 per share, respectively, related to the settlement of share based awards.

First half 2018 revenues were a record $439.8 million and represented an increase of 27% over the prior year period. GAAP net income for the period was $107.1 million, or $1.47 per share (diluted), as compared with $88.9 million, or $1.04 per share (diluted), in the prior year period. On an Adjusted basis, the Firm reported net income of $108.0 million, or $1.62 per share (diluted), in the first half of 2018, as compared with $75.1 million, or $1.20 per share (diluted), in the prior year period. GAAP and Adjusted net income in the first half of 2018 include tax benefits of $0.28 per share and $0.30 per share, respectively, related to the settlement of share based awards.

“Our record second quarter revenues reflect the strength of our franchise as we continued to capitalize on a robust environment for M&A and experienced growth across our additional strategic advisory offerings. We expect to maintain our momentum as we continue to develop the world’s leading bankers and integrate them into a cohesive global network that delivers exceptional client service around the world,” said Ken Moelis, Chairman and Chief Executive Officer.

“Our capital-light business model and focus on organic growth creates substantial shareholder value, as evidenced by today’s announcement of a $1.50 per share special dividend in addition to our regular quarterly dividend of $0.47 per share. Including today’s announcement, we will have returned over $10 per share in dividends over the last three years.”

The Firm’s revenues and net income can fluctuate materially depending on the number, size and timing of completed transactions on which it advised as well as other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.

Currently 70% of the operating partnership (Moelis & Company Group LP) is owned by the corporate partner (Moelis & Company) and is subject to corporate U.S. federal and state income tax. The remaining 30% is owned by other partners of Moelis & Company Group LP and is primarily subject to tax at the partner level (except for certain state and local and foreign income taxes). The Adjusted results included herein remove the impact of compensation expenses specifically related to the Firm’s IPO awards, and apply the corporate tax rate to all earnings under the assumption that 100% of the Firm’s second quarter 2018 income was taxed at our corporate effective tax rate. We believe the Adjusted results, when presented together with comparable GAAP results, are useful to investors to compare our performance across periods and to better understand our operating results. A reconciliation between our GAAP results and our Adjusted results is presented in the Appendix to this press release.

GAAP and Adjusted (non-GAAP) Selected Financial Data (Unaudited)

Revenues

We earned revenues of $220.4 million in the second quarter of 2018, as compared with $172.1 million in the prior year period, representing an increase of 28% and our largest quarter of revenues on record. This compares favorably with a 12% decrease in the number of global completed M&A transactions in the same period¹. The increase in revenues was driven by strong performance across our diverse platform, with particular strength in our M&A-related activity. For the first half of 2018, revenues were $439.8 million as compared with $345.4 million in the same period of 2017, or an increase of 27%.

As a result of the adoption of ASC Topic 606, the Firm recognized revenues of $36.9 million in the second quarter of 2018 related to certain transactions which met all material conditions for completion in the second quarter but closed during the third quarter of 2018. Prior to January 1, 2018, revenue was generally recognized on the closing date of the transaction. Our current period and first half 2018 revenues also include billable expense revenues, in accordance with this new accounting guidance. Prior to adoption, billable expenses were netted against the corresponding non-compensation line item.

We continued to execute on our strategy of organic growth. In the first half of 2018 we promoted five of our advisory professionals to Managing Director and hired four external Managing Directors to enhance our expertise in important sectors, products and regions. This includes a veteran Managing Director that we announced since our last earnings release who will provide financial and strategic advice to global internet and digital media clients.

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¹ Source: Thomson Financial as of July 3, 2018; includes all transactions greater than $100 million in value

Expenses

The following tables set forth information relating to the Firm’s operating expenses, which are reported net of client expense reimbursements for the 2017 periods presented.

Total operating expenses on a GAAP basis were $164.8 million in the second quarter and $329.1 million in the first half of 2018. On an Adjusted basis, operating expenses were $163.4 million in the second quarter of 2018 as compared with $128.4 million in the second quarter of 2017, and $326.7 million in the first half of 2018 as compared with $257.5 million in the prior year period. The increase in operating expenses in both periods was associated with increased revenues, which drove increased compensation and benefits expenses, as well as higher non-compensation expenses.

Compensation and benefits expenses on a GAAP basis were $128.1 million in the second quarter and $255.3 million in the first half of 2018. Adjusted compensation and benefits expenses (which exclude the amortization of IPO awards for the reported periods) were $126.7 million and $252.9 million in the second quarter and first half of 2018, respectively. This compares with $99.8 million and $200.4 million in the second quarter and first half of 2017, respectively. The Adjusted compensation and benefits ratio in both the current period and first half of 2018 was consistent at 57.5%.

Non-compensation expenses on a GAAP and Adjusted basis were $36.7 million in the second quarter of 2018 as compared with $28.6 million in the prior year period. Our non-compensation expense ratio was 16.6% in both the current and prior year quarters. In the first half of 2018, GAAP and Adjusted non-compensation expenses were $73.8 million as compared with $57.1 million in the same period of the prior year, and the non-compensation expense ratio increased to 16.8% from 16.5%. The increase in non-compensation expenses primarily resulted from the absence of contra expenses related to client reimbursements, as well as increased recruiting and transaction related charges associated with increased revenues.

Other Income

Other income on a GAAP basis was $1.3 million in the second quarter and $1.9 million in the first half of 2018. On an Adjusted basis, other income was $0.6 million in the second quarter and $1.2 million in the first half of 2018. This compares to other income of $17.7 million and $17.9 million in the second quarter and first half of 2017, respectively. In the second quarter of 2017, we recorded a gain of $17.5 million related to our investment in Moelis Australia resulting from its issuance of new shares in connection with its IPO and acquisition of an asset manager. No such gains were recorded in the current periods.

Provision for Income Taxes

The corporate partner (Moelis & Company) currently owns 70% of the operating partnership (Moelis & Company Group LP) and is subject to corporate U.S. federal and state income tax. Income on the remaining 30% continues to be subject to New York City unincorporated business tax and certain foreign income taxes and is accounted for at the partner level through the non-controlling interests line item. For Adjusted purposes, we have assumed that 100% of the Firm’s second quarter 2018 income was taxed at our corporate effective tax rate of 12.8%, versus 30.9% in the prior year period. The decrease in the tax rate is primarily attributable to a tax benefit related to the appreciation of the Company’s stock price from employee equity grant date to delivery date, as well as the enactment of the Tax Cuts and Jobs Act in 2017, which reduced the U.S. federal corporate income tax rate from 35% to 21% beginning January 1, 2018.

Capital Management and Balance Sheet

On July 20, 2018, the Board of Directors of Moelis & Company declared a special dividend of $1.50 per share in addition to a regular quarterly dividend of $0.47 per share. The $1.97 per share will be paid on September 12, 2018 to common stockholders of record on August 2, 2018.

Moelis & Company continues to maintain a strong financial position, and as of June 30, 2018, we held cash and liquid investments of $191.2 million and had no debt or goodwill on our balance sheet.

Corporate Governance

On July 20, 2018, the Board of Directors elected Elizabeth Crain, Chief Operating Officer and Founding Partner, as a director of the Company. She replaces J. Richard Leaman III, who will continue in his role as Vice Chairman of the Firm.

Earnings Call

We will host a conference call beginning at 5:00pm ET on Monday, July 23, 2018, accessible via telephone and the internet. Ken Moelis, Chairman and Chief Executive Officer, and Joe Simon, Chief Financial Officer, will review our second quarter 2018 financial results. Following the review, there will be a question and answer session.

Investors and analysts may participate in the live conference call by dialing 1-877-510-3938 (domestic) or 1-412-902-4137 (international) and referencing the Moelis & Company Second Quarter 2018 Earnings Call. Please dial in 15 minutes before the conference call begins. The conference call will also be accessible as a listen-only audio webcast through the Investor Relations section of the Moelis & Company website at www.moelis.com.

For those unable to listen to the live broadcast, a replay of the call will be available for one month via telephone starting approximately one hour after the live call ends. The replay can be accessed at 1-877-344-7529 (domestic) or 1-412-317-0088 (international); the conference number is 10121797.

About Moelis & Company

Moelis & Company is a leading global independent investment bank that provides innovative strategic advice and solutions to a diverse client base, including corporations, governments and financial sponsors. The Firm assists its clients in achieving their strategic goals by offering comprehensive integrated financial advisory services across all major industry sectors. Moelis & Company’s experienced professionals advise clients on their most critical decisions, including mergers and acquisitions, recapitalizations and restructurings, capital markets transactions, and other corporate finance matters. The Firm serves its clients from 19 geographic locations in North and South America, Europe, the Middle East, Asia and Australia. For further information, please visit: www.moelis.com or follow us on Twitter @Moelis.

Forward-Looking Statements

This press release contains forward-looking statements, which reflect the Firm’s current views with respect to, among other things, its operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “target,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. For a further discussion of such factors, you should read the Firm’s filings with the Securities and Exchange Commission. The Firm undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

Adjusted results are a non-GAAP measure which better reflect management’s view of operating results. We believe that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable GAAP measures, are useful to investors to understand the Firm’s operating results by removing the significant accounting impact of one-time charges associated with the Firm’s IPO and assuming all Class A partnership units have been exchanged into Class A common stock. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of GAAP results to Adjusted results is presented in the Appendix.

Appendix

GAAP Consolidated Statement of Operations (Unaudited)

Reconciliation of GAAP to Adjusted (non-GAAP) Financial Information (Unaudited)

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