All right, let's get started. So we are pleased to have with us Navid Mabuzad again, CEO and co-founder of Molus. Navid, thanks so much for joining us. Great to be here. Always great to have you back. So let's start on strategy. So you're roughly eight months into the CEO role. Feels like longer. Been a busy year. So how have these last few months been and what are the few things that you're most focused on as CEO? Thanks for the question and wonderful to be here today.
So it's gone great. I've really enjoyed being CEO of the firm and leading our great franchise. I think it's been what I thought it would be, which is exhilarating every day to wake up and do everything I can to support our bankers and the work of supporting our clients, growing our firm which is a really important initiative to continue to expand our capabilities and to make sure our culture is the best it possibly can be so all of those things are
our challenge and taking up a lot of my time so on culture as a co-founder you've seen mull us through various cycles and what parts of the culture are really non-negotiable to you especially as the firm expands and navigates different environments? So culture is, as you say,
absolutely critical to everything we do. It's a foundational thing for our firm and the elements of the culture that I think are most important. First, collaboration. We were founded on the principles of bankers working together in seamless teams to bring the best of our firm to our clients. I think that's been one of the hallmarks of our success and one of the reasons why even though we're now much larger than we were at the founding, the firm still feels like a family because we are all working together to do everything we can to help our clients. Second, to be nimble and innovative. I think we do a really good job and our bankers do a really good job of trying to go where the puck is going in terms of new business opportunities, new sectors, new spaces. And there's countless examples of that within the firm of our bankers coming together to attack new spaces. And I think third, you know, a culture of people who are good people, high integrity, people who really care about the work they're doing, they care about the clients and want to work together to maintain and perpetuate
that culture. So let's shift to the environment. On the M&A side, really want to start with what are you hearing from clients and have the conversations with clients changed over the
last few months? So I think it's generally, it's an active market. We feel good about the trajectory of the business, the deal volume and deal flows. I think if you look at our business, we've had a great start to the year both in terms of announcements that we've made as well as the pipeline as it sits today and the overall level of activity I think is strong and I think what's underlying that back to your question about clients is you know real desire to on the corporate side for companies to get scale in an environment where you know the regulatory environment is accommodative of a scale and welcoming scale. I think that's further important in a world where there's a lot of tech disruption and companies are trying to figure out how to win in an AI world and oftentimes getting additional scale to put themselves in the best position to succeed in that world is super important. And on the private equity side, much has been made about the lack of deal flow in the middle market and the volumes there. And there's some reasons why the market hasn't opened up the way we all hoped it would. It's not a terrible market, but it's certainly not as frothy as I think many of us had hoped. I think the important thing to note there is there's still very, very strong desire from the private equity community to both deploy and, more importantly, to monetize their portfolio investments. And I think that monetization will take many different forms, and it will take some time to work through the system. I don't think we're anticipating you wake up one day and the middle market opens up, you know, dramatically. I think it will, I think we've seen some signs of improvement, and I think it will further gradually improve over time, you know, which I think will happen over a period of months.
So activity remaining strong, and when you think about the areas of strength, you mentioned AI, Is AI the big driver of strategic decisions on the M&A side, or is it broader than that?
AI is on everybody's minds. It's in every conversation, every meeting we're having with clients. It's the number one topic that people want to talk about. How is AI going to disrupt the specific industry? How should we as a company best position ourselves to take advantage of that? How does M&A play into that? What should we be doing in terms of acquisitions or divestitures to put ourselves in the best position to win? You know, those are the flavor of questions that literally every meeting we go to is on the front and center of every strategic conversation we're happening. You know, one of the things I think you've seen that has put a little bit of a damper on, you know, part of the market is, you know, we've seen some disruption in some sectors, software being kind of that first sector. that got a lot of attention in terms of people questioning, you know, the ultimate value of some of these companies, the terminal value of these companies. And I think, as I said on an earnings call, I think the market has painted a broad brush on a lot of those businesses today. And I think over time, we're going to learn that many of those software companies are in fact going to thrive in a post-AI world. Some won't, and some, it will take some time to figure out where they sit in that in that spectrum and um and i think until some of that plays out it's hard to know what to
do with some of those companies and software is a manageable percentage of deal flow for you meaning majority of your deal flow would would not be impacted by ai disruption well i think i think
if you just ask the question how big a software is software is an important space for us but it's definitely not the majority of our deal flow it's an important part of an important sector of ours which is technology, and, you know, we have a great tech team and a great tech team covering lots of different software companies, and they're in active dialogue with their clients over the
kinds of topics we're talking about. What about large cap versus middle market? We've seen large cap strategic decisions really drive activity in the U.S. over the last 12 months, supported by a regulatory backdrop that's more transparent. So what do you think it takes to get that core middle market piece moving in scale? I think there would be a few things that would be very
helpful to get more momentum in that middle market. I think first, getting the war to a good conclusion, I think would be super helpful. Getting past some of the inflationary pressures in the marketplace. Hopefully, we won't be getting a series of rate cuts that will dramatically impact the cost of capital i think if we can get kind of kind of stability on the geopolitical front stability on the rate front um and time i think you know for a certain segment of these companies it just takes time for them to grow into valuations that make it compelling for the private equity sponsors to actually come to market and so i just believe that you know with some stability and some of those macro factors and some time things will gradually improve
And on geopolitics and the themes of deglobalization, supply chain resiliency, how do you compare the level of activity in the boardroom of those themes versus AI? Has AI overtaken everything or is it equally meaningful?
I think supply chain and making sure that, you know, there are certain industries that are based and certain capabilities that are based in the U.S. is still an important theme. But, yeah, I agree with the general proposition that AI is the central defining question of our time and how companies take advantage of AI and put themselves in the best position to win is the topic that is most relevant right now in the boardroom.
let's turn to sponsors so how has activity changed year to date and how has it changed
versus your expectations you know as i said earlier i think we all hoped that there would be you know a major uptake in sponsor level activity i think we've definitely seen continued improvement it may not be going at the pace that we all hoped but there's definitely improvement and i think again back to the desire there is strong desire in the private equity community to transact. The whole essence of a private equity firm is to deploy capital and return capital. And I think there's just tremendous desire to get that flywheel going again in the private equity universe. And I think that's why it's really important if you kind of take a step back and look at our firm over the last few years, we've really done a lot to bolster and enhance and create world-class capabilities on our product set. We've always had a great M&A franchise. We've always had a great franchise in capital structure advisory. We now, after a few years of investment and talent and leadership, have a world-class equity capital markets, debt capital markets business. A lot of that business not only works with growth companies, but also works with sponsors to work on custom-tailored capital solutions. And our newest business, Private Capital Advisory, is one we're super excited about. That is a business that really is facing the private equity GPs and helping them create CVs and other solutions to help with portfolio optimization and portfolio management. and having that full suite of capabilities puts us in a beautiful position to have really strategic dialogues with our private equity clients beyond just, hey, can we help you sell an individual
company here or there? When we think about getting that flywheel spinning for sponsors, one of the changes we've noticed in the last few months is the IPO market is active, the window is open. Does that change the momentum in the flywheel? I think it's very healthy. I think an
open and active IPO market is good for our business. We participate in some of that. As I mentioned before, we have an active equity capital markets business that is doing IPO advisory and working in IPO underrating groups, you know, with a lot of growth companies. So that's a business we're in. But I think even broader, if you kind of take a step back, I think the ability to create more public companies if the IPO market is open is a healthy thing for the whole ecosystem. And it's something I welcome. And what about interest rates? So we entered the
year expecting some cuts, and now there's discussion of maybe pause, maybe hike. How are
clients thinking about those various scenarios? Look, cost of capital is always an important factor in decision-making around transactions. I think the hope would be, again, that we see some of the inflationary pressures subside if we can get, you know, passed and have a decent settlement to the conflict in the Middle East. And, you know, again, my hope is that, you know, rates kind of stay within a zone that's conducive to activity. That's something we're monitoring really carefully. It's something our clients are monitoring really carefully. And if there was a hike, would that put the sponsor return narrative on pause? I think if there was a meaningful move in, you know, longer-term rates, which are really kind of tied to, you know, a lot of the financings that drive private equity activity. I think if there was a sustained increase in that cost of debt capital, that could have an impact on the margin, sure. Got it. So a sustained significant
move is bad, but maybe one hike is... Yeah, again, you know, the Fed doesn't set the longer-term
rates. The Fed, you know, sets shorter term rates and the market will determine longer term rates. So I think at this point, people are assuming there's going to be a Fed hike, you know, towards the end of the year. We'll see what that does to longer term rates. And as I said,
we're monitoring that pretty carefully. Great. So let's turn to restructuring. So on the restructuring side, how are companies adapting to a world where refinancing capital is structurally more expensive?
Well, I think when you look at what's happening, we do have a series of debt maturity walls really picking up in 2028, 2029, 30. There's something like $2 trillion of maturities that will have to be either refinanced or extended out, or something has to happen with the balance sheets of those companies. Some of those maturity walls were really kicked out from a few years ago. And so I do think as we get closer to some of these dates, our teams are active in terms of advising clients and kind of what to do with those maturity walls. And I think, you know, the flavor of the day for the last few years has been what we call liability management, which is working with creditors in different ways to extend out maturities and buy companies more time before they have to do something. But I do think in segments of the market, especially in some of these more disrupted segments, we're likely to see potentially more normal way restructurings, as we like to call them, as opposed to liability management exercises. So I think you'll see both liability management and more formal restructuring processes with some of those companies.
And are there any specific industries where you're seeing any real signs of stress beneath the surface?
you know look i think there are a lot a lot has been made about automation and job losses and job cuts i i think you know look i i do think it's easy to say call centers or something like that is kind of the paradigm for a business that really should be automated that shouldn't exist in a people-based format um we've talked about you know software and what that means i think there's many innings to play to figure out what happens to sass and software companies um but that's the that's the question right now is what's the what's what's the next leg of disruption and where does
it hit and how does it impact those companies all right let's turn to capital markets so your capital markets business is an increasingly visible growth area and you're participating in more ipos you've added mds and securitization and debt capital markets and private credit where are you seeing the most demand in that business right now and how big can the capital
markets business become for MOLUS? So we had a record year in capital markets last year, which we're really proud of. And that team is off to another great start in 2026. I think you're right to point out that we've significantly expanded our capabilities, both on the debt side and on the equity side. Our business on the equity side is really more facing growth companies. And so you could imagine the sectors where they're focused on today, space, alternative energy, blockchain and crypto, where there's just a lot of activity both in the public and private markets, digital infrastructure being another good example. And on the debt side, we have an active business in, you know, customized debt solutions. A lot of that interfaces with, you know, the private credit markets and private lenders. And securitization is a new business that we believe we could be very active in. So we're building a team to pursue that strategy as well.
And then another growth area is private capital advisory. We talked about it a little bit when we talked about sponsors, but want to dig in there. So you're investing heavily over the last year, and what are some of the lessons learned in your build-out of PCA? Has demand really met expectations?
We're really excited about the early days of our PCA business. Our assumptions going in were a fewfold. One, that there would continue to be a long runway of these kind of customized GP-led solutions. That's really the first business we're starting with, and that's proven to be true. We think that market is growing and active and is now not just doing CVs in private equity, but also in private credit. And we think those businesses have long runways. Second, we knew that if we put a world-class team together, which we have, that we felt strongly that our private equity clients would want to work with us. And that's proven to be true. That team's off to the races, lots of good early wins, lots of good early executions, and a rapidly building pipeline of transactions. So the going in assumptions, both with respect to strength in the market and our ability to create a great team and our clients' desires to work with us is all proven to be true. And we're adding to the team and building to the team. Right now, the biggest bottleneck is continuing to add resources there so we can go after the opportunity set that we think is pretty enormous.
Let's turn to non-comp. So investment banking industry is rapidly adopting AI. And how does MOLUS approach AI adoption, big picture?
AI, we are spending a lot of time, and I'm personally spending a lot of time thinking about this topic. We have a number of internal working teams with some of our most tech-enabled, tech-savvy bankers who are spending a lot of time on this topic. I think the phase one, which we're right in the middle of, is testing and deploying and utilizing a lot of the tools that are available in our industry. so we've put out rogo and chat enterprise and a note-taking tool and soon we'll have in our bankers hands some very functional tools around modeling and pitch book creation and some of those things so that's that's kind of the basics of kind of phase one and then i think in the long run the key is going to be you know how do we harness you know 20 years of internal data and kind of plug that into our internal AI models and, you know, create maximum functionality for our bankers. I think AI has enormous potential at all levels of our organization to make us more productive, more efficient, more effective. And I'm very, very excited about the promise of that and what it could do for our business in a positive way. And I think all of that could be done and still have, you know, healthy staffing levels and still provide our bankers incredible opportunities to grow within our firm from right out of college all the way to managing directors one day.
And is cost of token having any impact or driving any conversations on the non-comp side?
Not yet. Not yet. We are making significant investments in a lot of the technologies I just mentioned earlier. Right now, token usage is not driving a lot of incremental costs yet. We'll monitor that, obviously, as we get these tools in people's hands and as they utilize them to serve clients. But there is, as you point out, there is additional costs in our non-comp expense for the work we're doing to harness AI in the most beneficial way.
And do you see AI longer term changing the fundamentals of the people-driven, relationship-driven model that MOLIS has, or is it more productivity tool layered on top of the same model?
I think it's more of the latter. I do think AI is an enormously exciting productivity tool, as you put it. At the core of what we do, though, is relationship, judgment, discretion, trust. um i think ai helps us um put those other skills to the forefront in a more efficient way and a more productive way but i think the essence of what we do advising clients corporate clients governments private equity clients entrepreneurs etc on their most important transactions is still a very human endeavor and i think is going to be a human endeavor for a long time great um so
thinking about total non-comp, not just AI, how are you thinking about growth for the rest of
2026? Any updates? Yeah, we're going to see, as I think Chris said on our earnings call, you know, we'll see some growth this year in non-comp. Part of that is AI, but part of it also is, you know, we just moved into a beautiful new office space in London. I think that's really been transformative for our business there and morale and, you know, our ability to attract great talent there. So there'll be some incremental costs for office moves like that. There's some incremental moves for client events and, you know, things that, you know, we do as part of our franchise building. And there's some incremental costs for hiring and, you know,
some of the infrastructure around hiring. So on the hiring side, MOLIS has consistently emphasized hiring difference makers rather than simply adding scale. So is there any change in hiring philosophy what does that mean difference makers and how do you view hiring plans for the
rest of 2026 so we're actively engaged in lots of exciting conversations around lateral md hiring as you know lateral md hiring is not the only way we grow our firm internal talent development and promotion is a very very important what we do as well but it's augmented by lateral hiring this year we've we'll have nine as as of today nine new mds joining the firm this year some of whom have started some of whom will be joining us later in the year and we're really excited about that all of those people fall into the label you mentioned of difference makers we believe and you're right it it really does matter the quality of the person the quality of their client relationships and dialogue their ability if they're a product person to really add value to a situation. We've just found over the years that it's better to not have coverage in a space than to have average coverage in a space. We'd rather wait, be patient. There's many, many parts of the world that we're covering well and doing an incredible job with difference makers. And there's other parts of the world that we're still developing talent or we're going to be hiring talent to cover those companies. And I'd rather be patient than hire an average player. The vast majority of the client, um, and, and transaction activity usually goes to the best bankers in a space. Um, and you know, my goal is to bring as many of those bankers onto the platform as possible consistent with, you know, our culture. And that's, that's what I spent a lot of my time thinking
about. So we're in a cyclical upswing for MNA banking activity, and we're seeing some increased competitive pressure on MD compensation. So how do you think about balancing hiring plans need to
grow with efficiency? So both are important. We are building the franchise for the long term. So all of our decision making on people and investments are, you know, long term decisions, but we can't be oblivious to, to the short term as well. So we try to do things in a balanced measured way. You know, having said that, you mentioned that it's super competitive for talent. It is. It is very, very competitive. We're not the only ones who believe that difference makers matter. And those people are highly sought after. So we have to work really hard to convince them to join our firm. We have to convince them that a collaborative platform that has many, many growth levers ahead of it is the right place for them to be. We have to be competitive on how we bring them in. And we have to think about being prudent in the short run in terms of how much of that we do, but all consistent with building the very, very best franchise we possibly can.
So putting it all together, hiring plans, revenue growth, that impacts your comp ratio mechanically. So any update on comp ratio expectations for this year?
I don't have an update beyond what we said on our first quarter earnings call. Look, we, I think, have made meaningful progress over the last few years to bring the comp ratio more in line, given the market dynamics and given the heavy investments we've made in really upgrading our platform over the last bunch of years. I do believe, as I said in the last earnings call, there's opportunity to move our comp ratio, and we intend to bring our comp ratio down further. how much further on what timeline you know i think a lot of that will depend on you know the pace of hiring and also on the revenue performance of the firm uh this year and into the future but i i you know i want all of our investors to know we're very very focused on on doing on trying to do that the right way again consistent with um um the long-term nature of our
built. And on long-term view, is there a comp ratio level that you think would be appropriate?
It's hard to say. I think just so much of that does depend on the competitive nature of what we do. Again, we're in the market for talent, attracting and retaining talent. And we on our own can't determine what our comp ratio should be if the marketplace is in a different spot. That's an input, along with many other inputs and us figuring out where we can get that comp ratio down to. I will tell you again, though, the intent is to bring that ratio down further, again, consistent with continuing to build a vibrant, healthy, great long-term franchise.
All right, let's turn to capital allocation. So you continue to balance a strong balance sheet, capital return, investment in the platform. So how do you think about capital allocation in the
current environment? We just think about it in terms of orders of priority. I think the first priority, as I mentioned, is using our capital to make smart, great long-term investments in people and in the platform. I think second, maintaining our dividend. We have, I think, a good, healthy dividend. And, you know, we don't want to do anything that's going to risk that. I think after that, I do think on balance, you know, as you've seen recently, we've leaned more into share repurchases than we have, you know, things like special dividends. And I suspect that'll continue to, you know, that'll continue to be the order of priority for a while. We bought back, you know, a fair number of our, a very good chunk of our, you know, annual dilution in the first quarter. which I'm happy about. I think that was the right thing to do. And, you know, I think you'll continue to see actions, maybe not at that magnitude every quarter, but, you know, we continue to believe that prudent share repurchases are part of a smart capital allocation strategy.
And then some of your peers recently have announced acquisitions on both the M&A advisory side and the private capital advisory side. So how do you assess inorganic opportunities?
So really, we are very open to doing an acquisition that falls within a certain set of criteria. I think those criteria are fairly straightforward, which is it's got to be in a space where we want to add talent or bolster our existing capabilities. It has to be with a team of, back to the term, difference makers who can really elevate our franchise. And third, it's got to be consistent with our culture. And fourth, you know, we have to do a sensible deal. We know that any very high quality firm, you know, no one's going to be able to, you know, do an incredible deal there. But it's got to be sensible and it's got to be aligned, maybe even more than sensible. The word is aligned so that we're in it together to create long term value. We have been actively looking at many of the opportunities that are out there, including some of the deals that have been announced by others. We haven't found the right one yet for us, but, you know, if that comes across and if we can hit the criteria I talked about with people we want to be in business with and they see the upside in our platform, we wouldn't hesitate to do that.
And it could be in either part of the business?
Yeah, it could be sectors. It could be geographies. It could be products, probably less likely to be products, but I think sectors for sure, and geographies is a possibility.
So before we wrap, I want to give you an opportunity to answer what you think the market most underappreciates about the MOLA story.
Look, I think when you look at our franchise, we're still a very, very young firm. We've been in business for 19 years. The brand is still young relative to a lot of the firms we compete with. If you look at the composition of our bankers, you know, about a third of them have really only been on the platform for a short period of time, two or three years. And so the maturation of the brand, the maturation of the people on the platform, all the investments we've made to really significantly expand our product capabilities, some of our sectors, the hiring we're doing, I think there's much payoff to come from a lot of that work that we've been doing that we continue to work and can we continue to do. And I could not be more optimistic about the future of the firm. Excellent. Well, Navit, thank you so much
for your time and for supporting the conference. Great to be here.