Moelis & Company — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. Moelis is a global independent investment bank focused primarily on M&A, restructuring, capital markets and other financial advisory services.
Financial performance and liquidity
- Revenue: $1,540.6 million, up 63% from $943.3 million in 2020. Management attributed growth to more completed transactions and higher average fees per completed transaction.
- Profit: Operating income was $495.9 million, up 87%; operating margin was approximately 32%. Net income was $423.0 million, up 94%, including $365.2 million attributable to Moelis & Company. Diluted EPS was $5.34, versus $2.95.
- Expenses and margins: Operating expenses rose 54% to $1,044.7 million, or 68% of revenue versus 72% in 2020. Compensation was $913.9 million (59% of revenue in both years); non-compensation expense was $130.8 million (8% of revenue versus 12%).
- Cash flow: Operating cash flow was $937.0 million, compared with $429.2 million in 2020. Cash, cash equivalents and restricted cash ended the year at $521.0 million, up $317.7 million.
- Liquidity and debt: Cash and cash equivalents were $520.2 million; investments totaled $263.3 million, including $201.0 million of U.S. Treasury instruments. The company reported no borrowings under its credit facilities, with $64.2 million available on its general facility and $30.0 million available to its U.S. broker-dealer. Lease liabilities were $191.9 million. The filing reports $307.4 million due under the tax receivable agreement, with an estimated $5.7 million payable within one year.
- Capital returns: Dividends paid during 2021 totaled $6.80 per share, including $4.50 of special dividends. The board declared a further $0.60-per-share dividend for payment in March 2022. The company repurchased $104.2 million of treasury stock in 2021; $148.1 million remained authorized at year-end.
Changes versus 2020
- Revenue, operating income and net income rose substantially amid strong deal activity. Fee-paying clients increased from 316 to 404; clients generating at least $1 million in fees increased from 205 to 282.
- Other income increased to $40.4 million from $4.4 million. It included a $20.2 million gain on sale of MA Financial shares and $9.9 million of dilution gains from MA Financial share issuances; unrealized investment losses partly offset these gains.
- Cash and cash equivalents increased from $202.5 million to $520.2 million, while accounts receivable fell from $89.3 million to $41.9 million.
- International operations generated approximately 15% of 2021 revenue. No client accounted for more than 10% of revenue.
Outlook, risks and other notable matters
- Outlook: Management said underlying drivers supported the potential for strong M&A activity in the near to intermediate term, absent market volatility or major regulatory shifts. Restructuring mandates slowed as economic conditions and financing availability improved; management noted accumulated corporate debt and pandemic effects could support longer-term restructuring demand. The filing provides no numerical earnings or revenue guidance.
- Key risks: Revenue depends on transaction activity, completion timing and negotiated fees, making results volatile. Other key risks include recruiting and retaining senior bankers, intense competition and fee pressure, economic and market disruption, COVID-19, unhedged foreign-exchange exposure, regulatory and litigation exposure, and cybersecurity or operational failures.
- Contingencies and governance: The company said it was not party to material pending proceedings expected to have a material effect, while noting potential losses in proceedings could not be estimated. Kenneth Moelis held approximately 43% of voting power at year-end. The firm lost NYSE “controlled company” status in February 2021 and may incur additional governance costs.
- Audit and controls: Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Revenue recognition for transaction fees near period-end was identified as a critical audit matter due to management judgment.
Important facts for investors to verify
- Whether unusually strong 2021 transaction activity and fees persisted in subsequent periods; annual results may not predict quarterly or future performance.
- The composition and sustainability of 2021 earnings, including MA Financial gains and the unusually high special dividend.
- The timing and cash impact of incentive compensation, dividends, repurchases and the tax receivable agreement obligation.
- Current utilization, renewal terms and availability of credit facilities, along with lease and other contractual obligations.
- Developments in banker retention, transaction pipeline, restructuring demand, regulatory matters and the risks of foreign-exchange exposure.