Executive Summary / Key Takeaways

• Moelis & Company is strategically positioned for a multiyear M&A cycle, driven by a robust pipeline, an accommodative regulatory environment, and accelerated sponsor activity. The firm's strong balance sheet and focused investments in high-growth areas like Private Capital Advisory (PCA) and technology are central to its expansion.
• The firm delivered strong financial performance in the first nine months of 2025, with adjusted revenues increasing 37% year-over-year to $1.05 billion, reflecting significant growth in M&A and Capital Markets, and demonstrating operating leverage with a year-to-date adjusted compensation ratio of 68%.
• Under new CEO Navid Mahmoodzadegan, Moelis is intensifying its focus on clients, culture, and growth, particularly through aggressive talent acquisition in PCA, which is expected to become a "meaningful fourth pillar" of the business.
• While temporary market volatility from policy decisions and potential government shutdowns pose near-term risks, management anticipates these will be short-lived, with client appetite for strategic transactions remaining strong.
• Moelis' independent model, free from the conflicts and capital restrictions of larger banks, provides a distinct competitive advantage in attracting top talent and offering unbiased advice, reinforcing its long-term growth trajectory.

A New Era of Independent Advisory Excellence

Moelis & Company, established in 2007, has evolved into a leading global independent investment bank, renowned for providing innovative strategic advice across mergers and acquisitions, recapitalizations, restructurings, and capital markets transactions. Operating from over 20 locations spanning North and South America, Europe, the Middle East, Asia, and Australia, the firm serves a diverse client base including multinational corporations, financial sponsors, governments, and sovereign wealth funds. This global footprint and client-centric approach are foundational to its competitive strength in a highly dynamic industry.

The investment banking landscape is intensely competitive, with Moelis & Company vying against other independent advisory firms like Evercore (EVR), Lazard (LAZ), and PJT Partners (PJT), as well as the advisory arms of larger universal banks. Moelis differentiates itself through an entrepreneurial culture and a focus on bespoke solutions, which can provide a unique value proposition, particularly for niche clients. The firm's strategic alliance network, for instance, in regions like Australia, enhances its geographic reach and offers efficient market entry, potentially providing faster access to local expertise compared to competitors. This model allows for operational flexibility and agile execution in international deals, although it may present a challenge in achieving the sheer scale of some larger, more established players.

Moelis' competitive advantage is further amplified by its strong balance sheet, characterized by substantial cash and no debt. This financial independence is a critical differentiator, especially in volatile markets, as it allows the firm to attract top talent who may be wary of the conflicts and capital restrictions inherent in heavily levered major banks. As the transaction financing economy shifts from being bank-centric to institutional-centric, Moelis' independent model and conflict-free advice become increasingly appealing to both clients and bankers.

Strategic Investments Fueling Growth and Technological Edge

Moelis & Company's growth trajectory is deeply rooted in its strategic investments in talent and capabilities. A significant milestone was the firm's Initial Public Offering in 2014, which formalized its structure and provided a platform for sustained expansion. More recently, the firm embarked on a period of aggressive investment, particularly in 2023, by building out its technology, industrials, and energy sector teams. These investments have yielded substantial returns, with the technology sector emerging as the largest revenue contributor in 2024, and both industrials and energy sectors demonstrating significant activity. The success of the "tech team" has not only generated significant revenue and backlog but has also enhanced the firm's overall impact within the sponsor community.

While Moelis & Company does not disclose a singular proprietary "core technology" in the traditional sense, its technological differentiation lies in two key areas: its advisory expertise in the technology sector and its internal adoption of technology and data, including AI, to enhance operational efficiency and service delivery. The firm's strategic hiring of technology-focused Managing Directors, including recent additions in Europe, underscores its commitment to staying at the forefront of this rapidly evolving sector. This specialized expertise allows Moelis to advise clients on transformative deals driven by rapid technological change, such as those in the burgeoning data center and AI infrastructure space. The "so what" for investors is that this focus on technology-driven advisory strengthens Moelis' competitive moat, enabling it to capture a larger share of high-value transactions in a critical growth area of the global economy.

The firm's investments in technology also extend to its internal operations, driving efficiencies and supporting its global platform. While specific quantifiable benefits of internal technology adoption are not detailed, the increased non-compensation expenses related to "continued investments in technology and data, including AI" suggest an ongoing commitment to leveraging these tools. This strategic intent aims to improve service quality, streamline operations, and ultimately contribute to better financial performance and market positioning.

Financial Performance and Operational Momentum

Moelis & Company has demonstrated robust financial performance, reflecting its strategic initiatives and an improving market environment. For the first nine months of 2025, the firm reported adjusted revenues of $1.05 billion, a substantial 37% increase compared to the same period in 2024. This growth was primarily fueled by significant increases in M&A and Capital Markets activity. In the third quarter of 2025 alone, adjusted revenue reached $376 million, up 34% year-over-year. The business mix for both the third quarter and the first nine months of 2025 was approximately two-thirds M&A and one-third non-M&A, indicating a strong core M&A franchise complemented by other advisory services.

The firm's operational effectiveness is evident in its profitability metrics. Operating expenses for the nine months ended September 30, 2025, were $883 million, representing 86% of revenues, a notable improvement from 95% in the prior year period. The adjusted compensation expense ratio for the first nine months of 2025 stood at 68%, down from 69% in the first half of the year, demonstrating management's commitment to achieving operating leverage as revenues grow. Non-compensation expenses for the same period were $163 million, or 15.6% of revenues, driven by increased deal-related travel and entertainment, client conferences, and continued investments in technology and higher occupancy costs due to headcount growth. This investment in infrastructure and talent is a deliberate strategy to support future growth.

Other income and expenses significantly contributed to the firm's results, with $43.7 million in income for the first nine months of 2025. This included a $19.1 million gain from the partial sale of its investment in MA Financial (MAF), $13.4 million in net gains on financial assets, and $6.5 million from compensation forfeitures. The reclassification of gains from MA Financial to revenues for compensation evaluation purposes highlights the firm's view of these gains as a direct result of banker contributions.

Moelis maintains a strong liquidity position, with approximately $620 million in cash and liquid investments and no debt as of September 30, 2025. This robust balance sheet provides significant financial flexibility for strategic investments and capital returns. The Board's declaration of a regular quarterly dividend of $0.65 per share, consistent with the prior quarter, and the ongoing share repurchase program (with $46.6 million remaining as of September 30, 2025) underscore management's confidence in sustained cash generation and commitment to shareholder returns.

Outlook and Strategic Imperatives

Moelis & Company is optimistic about the continued improvement in the transaction environment, anticipating a "steadily improving multiyear M&A cycle." This outlook is supported by several key factors: an accommodative regulatory environment in the U.S. that is fostering larger, transformative deals; a robust financing environment; and the significant pent-up need for financial sponsors to return capital to their limited partners. While a potential U.S. government shutdown could temporarily delay regulatory reviews, management believes this will not impact clients' long-term appetite for strategic transactions.

A central strategic imperative for Moelis is the aggressive build-out of its Private Capital Advisory (PCA) business, also referred to as Private Funds Advisory or Secondaries. This segment, particularly GP-led secondaries and continuation vehicles, is viewed as a "key engine of growth" and a "meaningful fourth pillar" for the firm. Management believes this product has a "permanence" that transcends the health of the broader M&A or IPO markets, as sponsors will consistently seek liquidity and long-term ownership for certain assets. The firm plans to aggressively scale PCA into a market leader, recognizing its strategic importance in providing holistic solutions to private equity firms and enhancing the core M&A business. This includes ongoing hiring of "difference makers" at all levels to build out the team.

The Capital Markets business is also expected to continue its strong performance, benefiting from a "risk-on environment" and the "massive expansion in private credit." Moelis views private credit as a significant opportunity, enabling clients to access an important asset class that operates outside traditional banking systems. While the Capital Structure Advisory (CSA) business has seen a decline due to ample liquidity and fewer traditional restructurings, the team remains a leader in out-of-court solutions, and management expects 2025 to be similar to 2024 for this segment, absent external shocks.

Under the new leadership of CEO Navid Mahmoodzadegan, who assumed the role on October 1, 2025, the firm will maintain its intense focus on clients, culture, and growth. This includes continuing to invest in talent and fostering innovation through the adoption of new ideas and technologies. The firm's commitment to bringing its adjusted compensation expense ratio down further from the current 68% as the market improves and investments yield returns, while balancing this with the competitive environment for talent, underscores its disciplined approach to growth and profitability.

Conclusion

Moelis & Company stands at the cusp of a new growth chapter, strategically positioned to capitalize on an improving M&A market and the evolving financial landscape. The firm's history of calculated expansion, particularly its successful investments in technology and high-growth advisory areas like Private Capital Advisory, has created a robust foundation. Its independent model, coupled with a strong balance sheet and a commitment to attracting top talent, provides a distinct competitive edge against both boutique rivals and larger financial institutions.

While macroeconomic uncertainties and policy-related volatility present near-term challenges, Moelis' leadership views these as temporary disruptions, maintaining a bullish long-term outlook. The firm's focus on building out its PCA business as a "fourth pillar" and leveraging its technological advisory capabilities in sectors like AI-driven infrastructure are critical drivers for future revenue and profitability. For discerning investors, Moelis & Company represents a compelling opportunity to participate in the growth of a nimble, strategically focused independent investment bank, poised for accelerated performance in a market increasingly valuing specialized expertise and conflict-free advice.