Earnings Call Transcript - MC Q2 2022

Operator, Operator

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. Mat Tsukroff.

Mat Tsukroff, Presenter

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 Reg G is provided in the firm's earnings release, which can be found on our Investor Relations website at investors.moelis.com. I will now turn the call over to Joe to discuss our results.

Joe Simon, CFO

Thanks Mat 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 pretax 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 three 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. And 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.

Ken Moelis, CEO

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 planned vanilla financing has 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 in 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, do you want to address the question?

Operator, Operator

We will now begin the question-and-answer session. The first question comes from Devin Ryan with JMP. Your line is open.

Devin Ryan, Analyst

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. And kind of where I'm starting here is sponsors raised record funds, record PE funds the last couple of years. They were deploying capital at kind of a record pace and it felt like they were trying to get on to that next kind of incremental record funds from there. But now where we sit here fundraising for that next fund probably 2022 even into 2023 is looking pretty uncertain. So we're hearing that LPs are starting to push back a little bit on essentially giving more capital and at the same time, the sponsors are slowing deployment. And so 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, you call it equity prices and bid-ask spread in the markets coming back to more of an equilibrium.

Ken Moelis, CEO

There are two distinct questions to address. First, I understand that limited partners have allocated a significant amount of money early in the fundraising process due to their general partners reaching out to them quite early. Some may also have restrictions on how much of their portfolio can be allocated to alternatives, which could have impacted their allocations this year. However, this doesn't mean they haven't invested a considerable amount of capital; it was simply done early. Consequently, that capital is already in the market. For those in the fundraising business, the next six months may prove challenging because funds have already been allocated, but this isn't necessarily negative as it indicates that capital is actively in play at levels that are more aggressive than anticipated. Secondly, the notion that sponsors are inactive is not accurate. In fact, sponsors are quite engaged in the market. The current environment is interesting as equity is likely the most accessible aspect for transactions in the sponsored landscape, while the debt markets are currently facing challenges. This situation arises from numerous loans being marked down, similar to what retailers are experiencing. Products that were offered several months ago are no longer suitable for today’s market and will need to be discounted and cleared promptly. Once that occurs, we should see a new financing market emerge. However, at this moment, while the sponsor community is eager to execute transactions, they are struggling to do so at their preferred capital structures.

Devin Ryan, Analyst

Yes. Okay. That's great color Ken. Appreciate it. And then maybe a follow-up for Joe. Good to see you guys hold the line on the comp ratio despite the tougher conditions in the second quarter. I'm not sure if you can give any guidance or thoughts around kind of the back half of the year. And 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?

Ken Moelis, CEO

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. And we think that's a good ratio given everything we know. And again, I anticipate the back half of the year at least the third quarter, I'm not going to even predict the fourth quarter at this point. We don't expect massive. As I said we're four weeks into the third and it feels a lot like the second in terms of the world. So, I think we're going into that ratio with the knowledge of where we are and where we think the third will be and the fourth will be determined. We'll see.

Devin Ryan, Analyst

Yes, got it. I'll leave it there, but thanks for taking the questions.

Operator, Operator

Thank you. Our next question comes from Ken Worthington with JPMorgan. Please proceed.

Ken Worthington, Analyst

Hi, good afternoon. Thanks for taking the question. So, clearly M&A has slowed. As you look at your business, what part of advisory has been the most resilient? And I guess do you expect that resiliency to continue? And if you take the other side of it, what part of advisory has slowed maybe the most and or slowed? And how quickly do you think that for those areas will bounce back? And maybe what areas do you think really are going to be slow for the foreseeable future? Thank you.

Ken Moelis, CEO

Thanks. So, first the slowest has been restructuring. I mean the conversations are beginning and it's getting a lot more active.

Joe Simon, CFO

Ken you should probably put it on mute if you can.

Ken Moelis, CEO

Ken, could you please mute your mic? I think we’re picking up some background noise. Thank you. Restructurings have been quite inactive in the first half of the year. However, discussions are starting to pick up. The market has not yet been deeply affected, and we are having early conversations with people to preempt potential issues. We are quite engaged in this. Currently, people are trying to address their challenges proactively. I believe there is some confusion regarding the sponsor business. We are still in the early stages of this cycle, and it tends to clear quickly. What I mean is that we recognized potential for M&A activity fairly early after COVID. This is due to the nature of sponsored transactions, which typically close within 30 to 45 days. These deals usually don't require shareholder votes, proxies, or lengthy regulatory processes. Therefore, at the beginning of an economic downturn, they tend to close faster because they lack longer timelines. On the other hand, strategic transactions can take anywhere from three months to as long as 18 months for highly regulated deals to close, resulting in them remaining in the pipeline longer. That's why I believe that sponsor activity will be the first to bounce back among closable transactions. They tend to proceed and finalize quickly. Therefore, I believe there's a different cycle for this business than what I’ve seen in general research. I’m not specifically addressing you, Ken, but rather the research as a whole.

Ken Worthington, Analyst

Understood. Thank you very much.

Operator, Operator

Thank you. The next question comes from Brennan Hawken with UBS. Your line is open.

Brennan Hawken, Analyst

Good afternoon and thanks for taking my questions. Ken I'd like to explore what I think I thought 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 the financing would get going again. Was that your conclusion? Or did I not read that correctly?

Ken Moelis, CEO

Yes, I think this is not 2008-2009, in 2008-2009 you had fundamentally damaged financial company balance sheets and they had to rebuild equity and Tier 1 equity and they were really out of the market for a while. 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, 10% 20% off. And I just think that's just a natural – yes, I think that those are going to get cleared out because they're onetime and then we will reset and the banks will be in business. By the way, they'll be in the new federal funds rate I get it, there will be higher interest rates. There might be lower leverage, but they'll be back in business. Right now, there's a fundamental almost not working transactional market as the clearance sale happens.

Brennan Hawken, Analyst

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? And what the market is acquiring now is far more onerous because you have such a significant amount of uncertainty out there. And therefore, it's not like once you clear these existing this clearance rack, so to speak then everything is all good. You've still got these kind of onerous financing terms, new kind of requirements that lenders are going to need regardless of whether the balance sheet of the bank or whatnot you've just got such significant economic and macro uncertainty. So just to me, I guess I don't quite follow the confidence that financing is just going to come rearing back. And 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, are you guys going to continue to remain active? Or should we be just assuming a kind of a lower run rate of activity?

Ken Moelis, CEO

I disagree with that perspective. The markets will find a clearing price, and two factors will contribute to this adjustment. One of those factors is already evident, which is the multiples and the sale prices of assets. For example, if multiples decrease by three or four turns, that means the overall capitalization requirement is reduced by the same amount. Additionally, banks may choose to provide slightly less leverage than before, which could be a turn less. What’s essential is having functioning markets. As of now, interest rates like SOFR or Fed funds are in the low 2s, and adding a few points for financing deals is feasible. It all comes down to pricing and leverage ratios, and the market will move forward. We haven’t always operated in a zero-interest environment; the market will stabilize and reflect appropriate pricing, allowing transactions to occur. Banks have solid balance sheets and are eager to lend. A significant amount of capital is being directed towards alternative asset managers for transaction loans. I understand their focus on short-term opportunities, but once the market stabilizes, there may be a shift from five turns of leverage to four, ultimately leading to reduced overall transaction sizes. Despite these fluctuations, businesses will continue to operate; they are not going to shut down. I don’t see the issue you mentioned. Our capital markets are experiencing similar challenges. Right now, it’s tough to sell when there are competing goods available at lower prices elsewhere. However, that situation will resolve, and activity will resume. We are also experiencing a moment of volatility in capital markets, but we believe that our structured capital markets will provide the necessary solutions moving forward.

Brennan Hawken, Analyst

Okay. I appreciate the disagreement and that's what makes the market. So, 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 comp.

Ken Moelis, CEO

I didn't think I said capital markets are slow. It's actually done pretty well. Capital markets have been fine. I don't think I said it was slow.

Brennan Hawken, Analyst

Yes. And last year was tough they were active for you all in capital markets as I recall, right?

Ken Moelis, CEO

Yes.

Brennan Hawken, Analyst

So, when we think about the outlook from here, is restructuring still expected to be much more of a 2023 story? And then how should we be thinking about the composition of the business? Do you think it would be very similar to what we've seen year-to-date? And then it's not going to be until '23 when restructuring picks up. When we're trying to think about refining the model and coming up with the forecast, how should we think about the different pieces and the outlook from here?

Ken Moelis, CEO

I think it's going to feel similar to where it is. M&A is going to lead the way. Capital markets, I think we'll continue to do what I've said. I think they'll stay, 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 going to be a beneficiary of that. And I think we've been a beneficiary and we will continue to be. I think 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 until closings because of the speed with which it enters the market and closes. And restructuring will start to creep up and start taking in monthly retainers and I would guess, you're right, it's a 2023 success-based fee will be put off to 2023.

Brennan Hawken, Analyst

Okay. Thanks for that color. Appreciate it.

Ken Moelis, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from Richard Ramsden with Goldman Sachs. Your line is open.

Richard Ramsden, Analyst

Hi Ken. So, 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 going to unfold. I mean, has it in any way got you to rethink or reprioritize the investments that you want to make in the business either in absolute terms or in terms of prioritization i.e. from a product or a geographic standpoint?

Ken Moelis, CEO

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. And look, this is just my feeling so take it for what it's worth. I'm not 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 very a bit if you go on all their earnings calls none of them think they're going to be smaller in three years. And the person that's going to get 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 and 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 valuations. And now the debt markets have thought about it and have reacted in advance. And between the Fed and the media I think you've done a pretty bad recession. So people kind of 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 because there's no way to avoid it is the consumer. And 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. So 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 going to be very aggressive, not today, maybe not tomorrow but sooner than you think.

Richard Ramsden, Analyst

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, is there a significant difference? And should we think about liability management mandates effectively becoming restructuring mandates over time? Or should we think about them separately?

Ken Moelis, CEO

Well one of the things we pitch, Richard, and we're proud of is we think if you hire us on liability mandates in advance, Bill Darrow our Head of REIT 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. So 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 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 and liability management does take more activity and more thinking and it's often just not as large a transaction. But you usually have a good client for life if you succeed in that and that's what we try to do. So yes, it's not as profitable but it's probably more quite a better client opportunity than bankruptcy.

Richard Ramsden, Analyst

Okay. That’s very helpful. Thanks.

Operator, Operator

Thank you. The next question comes from Manan Gosalia with Morgan Stanley. Please proceed.

Manan Gosalia, Analyst

Hi, good afternoon. I just wanted to dig in a little bit more on the rate of change through the quarter and into July. I mean it sounds like last quarter seller valuations were the issue. Debt markets were also an issue but not as much. And it feels like today's seller valuation to reset maybe not fully but there is some progress there and that markets are the bigger issues. So 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?

Ken Moelis, CEO

You're correct. The shift in seller valuations has occurred faster than I've ever seen. I believe this rapid change is largely due to the coordinated messages from the Fed and the media regarding dire forecasts for the economy. In a short period from February to May, sellers were hoping for a return to previous values. By late June or July, however, sellers were starting to think the situation might deteriorate further. They began to evaluate the market and strategize on moving assets, which indicates a quick adjustment in pricing, roughly within three months. Then the credit markets tightened significantly, making it very challenging for anything below investment-grade credit. This shift is part of a broader market reset. Banks need to offload certain assets from their balance sheets promptly, and that process will occur. Once we establish a balance between buying and selling, I anticipate a functioning debt market will emerge, albeit under different terms. However, transactions can take place if the terms are clear.

Manan Gosalia, Analyst

So I guess, that's the biggest catalyst we should be looking for is the debt markets at this stage?

Ken Moelis, CEO

Yes, I think that's the primary prob as of right now. And if that cleared up, and especially, if markets felt pretty good, you can say that a lot of good assets people might hold them for a while. 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 needs somebody wants to sell a strategic asset, and also financials have a cycle. So I think things come back if the bank market and the financing markets come back online.

Manan Gosalia, Analyst

Got it. And then, just as a follow-up. Are there any differences that you're seeing between markets? It would seem like public market valuations, particularly in some sectors, have come down pretty significantly. Are you seeing more dialogues maybe on the public side versus the private side or on the tech side or maybe from cash-rich corporates on the strategic side? Where would you say the incremental dialogues are coming from?

Ken Moelis, CEO

Look, I do think that the public markets, because they're liquid, react faster and often much more volatile. And I do think that if there was a function in the debt market, you could have some cash buyers trying to take advantage of dislocations in the public market. But right now, the math of available debt and to undertake those transactions just makes it difficult. And so, 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.

Operator, Operator

The next question comes from Steven Chubak with Wolfe Research. Your line is open.

Steven Chubak, Analyst

Hi. Good afternoon.

Ken Moelis, CEO

Good afternoon.

Steven Chubak, Analyst

So, maybe I'll 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 want to 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?

Ken Moelis, CEO

We are committed to returning all our cash and, for the first time in a long time, we have been actively repurchasing shares. Buying back three million shares in a six-month period is the most we've done. We felt that the stock was favorably valued, as the cost of not repurchasing was significant—almost 6% due to our dividend alone. As a result, we have chosen not to pay a special dividend and have been focused on stock buybacks for our capital return strategy in the near term. While I can't make any promises about future decisions, this is our current approach.

Steven Chubak, Analyst

Understood. I have a two-part question to capture both the comp and non-comp aspects regarding the outlook. Similar to Devin's earlier inquiry but with a different angle. Considering the potentially challenging revenue environment for the second half, I am aware that some sponsors have indicated they anticipate reduced deal volume and activity during this period. Ken, it seems you have a differing perspective on this. If the revenue situation proves to be more difficult, could you help us understand the minimum revenue levels or baseline needed to maintain the 59% comp ratio? Additionally, with the increase we observed in non-comps, what non-comp run rate should we be considering for the second half?

Ken Moelis, CEO

I'm not forecasting the year specifically. The third quarter has started similarly to the second, and I'm not anticipating an immediate turnaround. I expect it will take time for deals to close. Our current pipeline is almost identical to what it was a year ago, indicating that there are opportunities available, but it's the elongation and the ability to complete them that is challenging. This relates to the state of the debt markets, and I can't predict when this situation will improve. As of now, I don't want to provide a year-end projection. I do believe there will be a change. Regarding the compensation ratio, we're making our best guess currently, but numerous factors could influence any adjustments. I'm not expecting changes at this time, although unexpected events can occur. We have a strong organic growth model, and having many of our managing directors rise through the ranks helps us manage our compensation ratio and maintain what we consider a fair split. However, any changes would be influenced by many factors; if competitors adjust their compensation schemes, we won't remain passive. For now, this is our optimal estimate.

Steven Chubak, Analyst

And in terms of the non-comp jumping off point, just given it was a little bit higher in the quarter, some of that's certainly T&E related, but how we should be thinking about that for the back half?

Joe Simon, CFO

Yes. I think that's also included in the non-comp this period were some transaction-related costs, probably a couple of million. So the best guess I have is probably 39 area for the third quarter, absent any transaction-related costs which are hard to project.

Steven Chubak, Analyst

Very helpful. Thanks so much for taking my questions.

Operator, Operator

Thank you. The next question comes from Michael Brown with KBW. Please proceed.

Michael Brown, Analyst

Hi, Ken. Hi, Joe.

Ken Moelis, CEO

Hi, Michael.

Michael Brown, Analyst

So, I guess, if I maybe build on that comp question somewhat, during periods of market dislocation and ask 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?

Ken Moelis, CEO

The pipeline is strong. I have a feeling that after Labor Day, organizations will start reviewing their headcount, especially in challenging years. This is part of the usual cycle. During this time, many people are away, and focus shifts to bonus considerations in September. I believe that activity could pick up during this period as some organizations will make top-down decisions regarding human capital, and the rest will follow suit. I am hopeful about this. We plan to be aggressive, and our pipeline looks pretty good at the moment. We are moving forward, and I anticipate that we will become more active from September through the next nine months.

Michael Brown, Analyst

Okay. Yes. Very interesting. Maybe just one more for me. If I heard you correctly, you mentioned that your internal pipeline of deal activity is relatively unchanged. Could you clarify if that was in comparison to the prior year or the prior quarter? Also, could you remind us how you define that? We rely on public data, which may not align with your comments, and we have previously discussed the discrepancies between public information and your internal insights. It would be helpful to have a reminder of how you define that pipeline.

Ken Moelis, CEO

Well, the number I was looking at was a year ago today from our earnings call. And when I say it was the same, I mean it was exactly the same. I think they're down to the pennies. However, as we look toward how we see it roll in, it has stretched out. I just want to make that clear. We don't think the pipeline will be visible because most of it is confidential. These are things we're working on.

Joe Simon, CFO

They're mandates.

Ken Moelis, CEO

They're mandates, not announced deals. There are things we're working on trying to go to market advising behind the scenes. I mean, I would say I'm just making up a number, but 80% or 90% of what we think is a pipeline probably 90% is the things we're working on that are not announced yet.

Joe Simon, CFO

But they have an engagement letter.

Ken Moelis, CEO

They have an engagement letter, and I want to emphasize that it's interesting because it is identical to last year in terms of financials. However, when we consider the timeline for completion, it is definitely longer and likely riskier. It's important to note that extending the duration of a deal inherently increases its risk. As a deal takes longer to finalize, it becomes more risky by definition.

Michael Brown, Analyst

Okay. Yeah, that's really helpful. I guess when you look back historically during these periods of market dislocation, how has that pipeline works towards completion? Is it clearly there's more risk to the deal that you just mentioned. So when you look back is that kind of the 20% to your pipeline over time? How does that typically work in terms of deals that actually moved to completion?

Ken Moelis, CEO

I don't have an easy answer to that. If I had that really, we ask ourselves the same question and we try, but I can't give a public answer to that because there's no scientific answer.

Michael Brown, Analyst

Okay. Understood. Thanks, Ken. Thanks, Joe.

Operator, Operator

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.

Ken Moelis, CEO

Well, thank you for the call. If there's any we do to follow-up afterwards give Joe or Matt your call and we appreciate it. Thank you.