Moelis & Company

Good afternoon and welcome to the Moelis & Company earnings conference call for the second quarter of 2026. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. To begin, I turn the call over to Mr. Matt Sukroff. Please go ahead.

Good afternoon, and thank you for joining us for Molson & Company's second quarter 2026 financial results conference call. On the phone today are Navid Mahmoodzadegan, CEO and co-founder, and Chris Callesano, 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 factor section of Molson & 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 serve adjusted financial measures. We believe these measures when presented together with comparable gap 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'll now turn the call over to Navid.

Thank you, Matt, and good afternoon, everyone. Appreciate your being with us today. The second quarter was another strong period for our firm. We reported revenues of $409 million, up 12% year over year. For the first half of 2026, revenues were $729 million, an increase of 9% from the prior year period. These results represent record revenues for both the quarter and the first half, driven by higher average fees per completed transaction and meaningful contributions from the businesses we have built and expanded in recent years. Collectively, our non-M&A businesses generated record revenues in the first half, led by Capital Markets, and the growing contribution from Private Capital Advisory. Since our last earnings call, we've advised on a number of notable transactions. These include Taylor Morrison's $8.5 billion sale to Berkshire Hathaway, Magnolia Oil & Gas' $4.1 billion acquisition of Wildfire Energy, Ty Beckley's $3.8 billion sale to Eli Lilly, and Bridgepoint's acquisition of Kane Anderson Real Estate. Beyond M&A, we advise Office Properties Income Trust on its $2.4 billion restructuring, Carlyle on its continuation vehicle for content partners, and we served as active book runner and lead placement agent on Doncaster's $1.1 billion IPO and concurrent private placement. Despite market volatility driven by the war in the Middle East, concerns about private credit redemptions, and the evolving impact of AI, client engagement and transaction activity has remained strong. At the end of the second quarter, our announced pipeline had increased over 80% versus the prior year period. In addition, new business origination accelerated in the second quarter, and we entered the back half of the year with a record total pipeline. These factors support a strong outlook for the remainder of the year. Now let me turn to each of our businesses. In M&A, market conditions continued to improve in the second quarter. Accessible financing and strong equity market performance are supporting increased transaction activity, while the strategic need for scale and a more constructive regulatory environment are driving greater interest in larger transactions. This is evident in our performance and pipeline, which includes a higher number of opportunities advising larger-cap clients and substantially higher average fee opportunities. While industry-wide sponsor M&A activity has remained modest year-to-date, our sponsor business continues to perform well. In the first half, announcement activity in our sponsor M&A business grew meaningfully over the prior year period, and our overall sponsor pipeline remains strong. We are encouraged by this and are confident in our ability to support our sponsor clients across a variety of market environments, given our broad capabilities, including continuation vehicles and bespoke private capital raising. and capital markets, our expanded capabilities continue to drive meaningful growth. Our capital markets business achieved record second quarter and first half revenues driven by constructive market conditions, strong demand for late stage growth in pre-IPO financings and healthy IPO activity. We remain active across the public markets with further IPO activity expected later this year. At the same time, demand for hybrid and structured financing solutions is robust. To support this growth, we've continued to invest in our capital markets platform. On our last earnings call, we referenced two managing director hires who have now joined our team. One brings deep expertise in debt capital markets and private credit. The second will help establish our securitization capabilities, expanding our offering into structured products and enabling us to provide clients with asset-backed financing solutions across the capital structure. Turning to private capital advisory, our PCA franchise was a meaningful contributor to our revenue growth in the first half of the year, and the team has significant momentum in deal completions and new client mandates. The market for GP-led secondaries remains very active, and its growth is structurally supported by sponsor liquidity needs and institutional investor demand for exposure to seasoned private market assets. To address this opportunity, we've aggressively expanded our GP-led secondaries capabilities, achieving critical mass with seven dedicated managing directors, including one MD who will be joining shortly. The team's early success is a testament to both the quality of talent we have hired and our collaborative model, where our sector bankers work closely with our PCA team to deliver exceptional client solutions. We are now expanding the business into complementary areas and have hired one managing director to launch our LP-led secondaries capability and another to develop our promoted co-investment expertise. Both of these areas will be important in building a comprehensive platform that serves the full PCA ecosystem. In capital structure advisory, we enter the second half of the year with high levels of engagement. Liability management continues to dominate deal activity and while well-positioned borrowers can still access capital, increasing lender selectivity is making refinancing more challenging for some highly levered companies. We are beginning to see AI create differentiation among software businesses and we expect that demand for liability management as well as capital market solutions will pick up for certain companies as the sector continues to evolve. Combined with the strength of our technology franchise, we are well positioned to support our clients as their needs develop. In addition, we are expanding our CSA team with an MD hire who will further enhance sponsor and creditor coverage when joining later this year. This brings me to our investment in talent, which continues to be one of our highest strategic priorities. To summarize, since our last earnings call, we have hired four managing directors, which include the two PCA hires and one CSA MD already mentioned, and an MD in Europe focused on infrastructure. This brings our total lateral MD hires year to date to 12, in addition to the 13 internal promotions announced at the beginning of the year. Recruiting exceptional bankers is a core priority, and we are excited about the quality of senior talent that is joining our firm.