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Moelis & Company  (NYSE:MC)
Q1 2019 Earnings Call
April 30, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Moelis & Company First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note that this event is being recorded.

At this time, I would like to turn the conference over to Michele Miyakawa, Head of Investor Relations. Please go ahead ma'am.

Michele Miyakawa -- Global Head of Human Resources, Investor Relations, Marketing & Communications

Great, thank you, and thank you for joining us for Moelis & Company's first quarter 2019 financial results conference call. On the phone today are Ken Moelis, Chairman and CEO; and Joe Simon, Chief Financial Officer.

Before we begin, I'd like to note that the remarks made on this call may contain certain forward-looking statements including regarding future performance 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 anticipated. The firm undertakes no obligation to update any forward-looking statements.

Our comments today include references to certain adjusted or non-GAAP financial measures are useful to investors to compare results across several periods and to better understand our operating results. The reconciliation of these adjusted financial measures with relevant GAAP financial information and other information required by Reg G are provided in the firm's earnings release, which can be found on our Investor Relations website on investors.moelis.com.

I'd now turn the call over to Joe.

Joseph Simon -- Chief Financial Officer

Thanks Michele. Good afternoon everyone. On today's I'll go through our results and then Ken will provide additional commentary on our business and outlook.

We reported $138 million of revenues in the first quarter which is down 37% from the prior year. This compares to the overall M&A market in which the number of global M&A completions greater than $100 million declined 18% during the same period. The decline in revenues was primarily driven by fewer transaction completions. Our M&A closed transactions were down during the period. Restructuring activity declined slightly, but continues to be a steady part of our overall business and was ranked number one both in the US and worldwide for completed transactions during the quarter. On a regional basis, Europe was disproportionately down as we continue to see softness in that part of the world.

Moving to expenses, adjusted compensation expense was accrued at 64.8% due to our lower revenue base. We expect our compensation ratio to fall back to our target level for the full year. Our quarter one non-compensation expenses increased 2% versus the prior-year period. The non-compensation ratio was 27.6% in the current period versus 17% in the prior-year period due to our lower revenue base. We expect our non-compensation base rate to remain near at $38 million next quarter.

Moving to taxes, our corporate tax rate is 25.3% for the quarter before the discrete tax benefit related to our equity award settlements. The tax benefit was approximately $8.7 million and it produced an overall net tax benefit in the quarter. As a reminder ,our adjusted net income presentation reflects all the firm's income tax that are calculated at effective corporate tax rate. We expect another benefit in the second quarter related to anticipated equity award settlements. Assuming a stock price near current levels, the EPS benefit should be about $0.09 or $0.10 in quarter two. Finally, our Board declared a quarterly dividend of $0.50 per share consistent with last quarter to be paid on June 25th to stockholders of record at May 10th. We ended the quarter with a strong financial position with no debt and $78 million of cash and liquid investments.

And I'll now turn the call over to Ken.

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Thanks Joe and good afternoon everyone. The financial results for the first quarter were clearly disappointing. However, from a qualitative basis, we remained active with our clients we expanded our client reach and saw an increase in the number of new business activity. As a result, our deal activity is strong and our bankers are busy. As Joe pointed out, the overall M&A market was down to start the year. And quarter one was an unusual quarter for us where an abnormal number of significant situations just did not come to completion. We expect some of this softness to continue into the first half of the year. But based on early indications, we expect our second half revenues to be much stronger in comparison.

We continue to invest in talent. We started the quarter with five recently promoted MDs and hired a new MD focused on data and analytics which is fundamentally and rapidly changing almost every industry that we cover. We continue to have an active talent pipeline of both internal promotes and external hires. The development of our internal talent is embedded in our culture and has always been a key part of our growth strategy. Internal promotes create a self-sustaining pool of talent and create the highest ROIC by far for shareholders. We expect that internal promotes will compromise the majority of our managing director additions in the near future.

Finally, we remain focused on our key objective which is to deliver confidential un-conflicted advice and outstanding results to our clients. Our model is powerful for our clients' employees and our shareholders. The outlook for the Company is strong. The fundamentals for M&A remain in place. We have a leading global franchise and we continue to execute on our organic growth plan.

With that, I'll open it up to questions. Thanks.

Questions and Answers:

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) And your first questions will be from Ken Worthington from JPMorgan.

Ken Worthington -- JPMorgan -- Analyst

Hi, good afternoon, thank you for taking my question. Maybe first as we think about Europe, to what extent has the uncertainty around Brexit truly eliminated some M&A opportunities versus just delaying those opportunities? So I guess my question is, as we get more certainty around Brexit and when decisions are eventually made, does the pipeline there just sort of explode? Or does it sort of come back with a whimper because activity just truly wasn't delayed, it was just eliminated? Hopefully that makes sense.

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Yeah, look, it makes sense, but it's really a tough question to know the answer to. So Europe has been -- I mean our first quarter in Europe was just bad. There was not a lot of activity. I don't know. It's obvious that the uncertainty is causing issues. And look, people with allocation of capital not knowing what's going to happen is probably causing some of it. How much, Ken, is almost impossible to say. Look, the only thing I'll say is, it's a big economy. Europe taken as a whole is a sizable economy and it's hard to believe that this is the natural state of deal mechanics in that -- in an economy that size. So I don't know that it would explode, but I assume that if there were some comments, probably it's not just Brexit, you have elections going on in several of the major economies there this year that will fundamentally change some of those governances and so I think there's a lot of uncertainty. And my gut feel is it's a large economy, second-largest place you want to be in the world. And it will be relevant. I don't know if that means an explosion or a slow come back after all said and done.

Ken Worthington -- JPMorgan -- Analyst

Okay. Great. And then also kind of broadly, in conversations with CEOs in the C-suite broadly, what is sort of the sentiment that you are hearing from this group? Is the macro environment changing the narrative on M&A at all for them given rates are down and spreads have tightened again. Is there any urgency to kind of maybe push more quickly with deals? Or is the outlook for maybe the falling rate environment actually leading to greater uncertainty and maybe slowing things down? So just as you take their temperature, what are you sort of getting the sense of from them?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Again, it's hard for me to generalize but I'll tell you what we see which is I think that that broad middle-market, that deal activity was kind of shocked I think by the October. November, December decline in markets. So it was shook on the buyers side I think was worried that they'd be early January, February, March that they were buying into a false rebound. Obviously, December was a signal of a recession. I think people were, hey, I'm going to wait a while to see if this is real. In the middle market in that area where it's kind of cash buyers both ways, I think there's sensitivity to price, a very big sensitivity to price and by the way the buyers and -- the sellers don't want to wait into an uncertain market either.

So the volatility of October, November, December I think you had a bunch of sellers go look I don't want to put my company out there and talk about it into a very uncertain market. In the larger companies I think people are trying to execute on strategic imperatives and price is less of an issue. So -- and it's still very active Ken. I would say to you almost all companies are in active dialogues at the larger scale on strategic imperatives, maybe slowed down a little by market volatility on the margin but not as a whole. So-and I do think by the way when the Fed reversed its statements I guess that was in December and the stock market has now rallied and held its position, I do think you're seeing people slowly come back to say, well, this is the market. This is where it is, this is where we're going to transact and I do think that was leading to some comeback in the general activity.

Ken Worthington -- JPMorgan -- Analyst

Great. Thank you so much.

Operator

The next question will be from Devin Ryan from JMP Securities.

Devin Ryan -- JMP Securities -- Analyst

Great. Good afternoon, guys.

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Hi Devin.

Devin Ryan -- JMP Securities -- Analyst

So I guess first question here just in terms of the reacceleration and activity that you guys are seeing. I'm just curious if it's anywhere specific or if it's just kind of broad-based, things are kind of coming back online? And just based on the cadence of revenues expected on the year obviously comments about maybe it will be a slower first half relative to the second half, I'm just curious how you think about kind of 2018 revenue level obviously was a great year. Does that set high bar? Or could the back half just based on what you're seeing now get you back to something in that seems look good?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Look, I don't want to -- it's not that clear as you could tell from the last three months it's hard to know. So I would say that we've reaccelerated. One of the things and I've said it in the script at the beginning, the market was down and I don't want to underplay that and especially that broad range of middle market. But I think we actually had a period there and it was -- when we put our resources in the field, you're not -- you're covering a bunch of significant clients. And statisticall,y a certain amount of transactions close and move and by the way you've been in public now for five years and they've come in fairly regularly quarter-by-quarter.

And I said I felt like I was in a four, five, six-month period here where we were in a coin flipping game and 10 tails came up in a row. That's what I mentioned an abnormal amount of situations. Look, sometimes deals don't get to completion. And for whatever reason I think we went into a period where we didn't complete too. I don't -- some of this was the market but some of this is us. So when you say the reacceleration, I think market seems to have been down about 18%, so you can reaccelerate off of that pretty good. And then on our own situation, I think we'd probably go back to normal distribution, things we're working on reach completion. And that combination should be pretty powerful as it happens. But it doesn't go away in one 4-week period because you sort of have deals, you think you are going to execute on that might have completed sometime over the first half.

Devin Ryan -- JMP Securities -- Analyst

Yes. Got it, that's good context. I was just looking for a little more, so I appreciate that. And then with respect to the restructuring business just based on the revenues in aggregate for the quarter, it doesn't look like from the upside probably a big contribution. And I know last quarter on the call you talked about you had a record 2018, but still felt like your short-term outlook into 2019 could be maybe as good or even potentially better. So I'm just curious if the read is still if it may be starting a little bit slower note you could see a big reacceleration there as well in terms of contribution? Or just how we should think about restructuring more broadly just given that it looked like probably a little slower there as well?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Yeah, but you know, probably statistically and significantly slower, it has been pretty rock solid. the teams are ranked number one, we love our restructuring business. And I'll say this when the Fed was at 2.5% and had a plan to keep raising, I thought that we could have been in a big restructuring cycle. I'd think of it as the same sort of continuous to last year. Because I don't expect the economy to have an issue. I don't expect the Fed to raise rates in the short term. So I think it will be similar. I think you can depend on it being pretty similar and pretty stable through the last couple of years.

Devin Ryan -- JMP Securities -- Analyst

Okay. Got it. And then just last one here to make sure I understand the comment correctly. So obviously I understand the comp ratio dynamic to start the year, but is the expectation based on your comments, Ken, just the full year you still feel pretty comfortable that you'll be able to get back to on a full year basis kind of where you've been call it in the 57.5% level that's the current expectation?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Yes. I mean we've made -- it's a commitment we have made. We want to stay at that level. We do think this was an unusual quarter and we expect to be at 57.5%.

Devin Ryan -- JMP Securities -- Analyst

Okay. Great. Thanks very much.

Operator

The next question will be from Michael Needham with Bank of America Merrill Lynch.

Michael Needham -- Bank of America -- Analyst

Yes, hey, thanks. So the first question I have is on completed transaction trend. So if I just look at that number that you guys give every year, that trend it just hasn't grown very much in the last few years despite really strong headcount growth. Can you help me better understand that difference? I'm sure there's some delay in production from the people you're developing. You touched on the ROI potential for them. It just -- it is a decently large gap.

Kenneth D. Moelis -- Chairman and Chief Executive Officer

I don't have an exact number, but completion's in front of me. But remember, our average fee level has picked up pretty dramatically in that time. So far I think someone in the order of 30% or 50% on an average fee. So to the extent we're doing bigger and larger fee transactions, that might account for some of it. But look, I'd like to get back to you. I have a number of transactions, hold on, I'm looking at them right now.

Michael Needham -- Bank of America -- Analyst

Yes. I was kind of looking over a long period. But over the last five years, the headcount's up 80% and the number of transactions is up 17%.

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Look, let me get back to you on it. I -- we have pushed hard to increase our average fee over that time period. So we maybe on larger transactions and just doing -- it just might be larger transactions and less of the smaller deal size. But let me come back to you and exactly answer to that.

Michael Needham -- Bank of America -- Analyst

Sure.

Joseph Simon -- Chief Financial Officer

It will also be important to just differentiate between total fee paying clients versus clients paying over $1 million. I'm not sure which one you're referring to but we can certainly help you with that offline.

Michael Needham -- Bank of America -- Analyst

Yes. Yes. Just the total and that kind of move upmarket, is that a fairly conscious decision you're making where you're telling your bankers, it isn't really worth going after or covering a client where the fee potential is below a certain minimum? Or is it more of just a general evolution of the firm and the brand?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Okay. And by the way I'm just trying to find your numbers. I don't think that there's a published number of our closed transactions, so I'd like to go over that with you. I just don't want anybody in the call to think that I don't know that we published or anywhere our closed transactions are published. You might be looking at some other announced number or something other than that. So I just want to -- we'll work with you to clarify what your number you're looking at because we don't see it. I don't have the number you're looking at. So...

Michael Needham -- Bank of America -- Analyst

I'm sorry it's from the K. Yes. Just on...

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Okay. I'll let you over that. Then on the fees, yes, we made a very, very definitive decision as a Group by the way at one of our off-sites to definitely move the average fee up over the last few years which usually means moving up size, getting rid of marginal transactions. Yes, we did that purposely.

Michael Needham -- Bank of America -- Analyst

Okay. Great and the only other thing I have is on the restructuring business. I think your team's done a really good job of gaining market share in a pretty benign environment. Can you talk about how that team's positioned for potential downturn in terms of like mix of business at the firm and how that team should perform?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Look, the team, we have retained the whole team and promoted from within, so we have a larger capable team. Because we do think there will be a downturn. It's hard to believe sometimes because nothing seems to turn down anymore, but we think there is a cycle that happens. And secondly, they've all stayed together. That's number two. So it's a team that has been together for a while. And lastly, because we don't have a commission structure, each individual banker does not have their own either sector or specialties. So there are some I think restructuring groups that are paid on their own restructuring exclusive from the other call it bankers -- coverage bankers. We don't do that. So, in the last crisis, we literally were able to move -- we could account in the last downturn '09-'10 every single banker except one was actively working on a restructuring during that time. So we -- because we have one bonus pool, we were able to move a significant amount of talent and move them over to help. And I think that will give us a big advantage again in a rapidly -- in a rapid downturn. It's hard to hire into your restructuring group. So you have to use the resources that you have.

Michael Needham -- Bank of America -- Analyst

Makes sense. Thank you.

Operator

The next question will be from Michael Brown of KBW.

Michael Brown -- Analyst

Hi, good evening. So Ken, I just wanted to kind of ask one question on China. So I mean obviously it's kind of a smaller piece of your business, but if we should see on resolution on trade with China, I just kind of want to hear your thoughts maybe for yourself and for the industry on kind of what your expectations would be for the kind of pickup in cross-border activity? I mean I know it's not again that meaningful for you guys, but do you kind of see a pent-up of demand for activity with China?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

First of all, it was meaningful for us, when you're allowed to actually do cross-border with the US, I would say allowed in a closed fashion. But we had a large -- we did a lot of deals in 2016. That was pretty good line item for us. Look, I don't think this is just a trade deal. I think the trade deal will probably be, if it's done well, will probably good for markets. But look, there's a continuing underlying weariness of allowing some cross-border M&A and significant Chinese ownership of American companies. And I don't know that the trade deal will stop that. So no, I don't expect that M&A will go back to where it was before we started to really ramp-up CFIUS and the technology cold war with China at this point. So no, I don't know that that will snap back at all.

Michael Brown -- Analyst

Okay. That's helpful. Very interesting. And then just a follow-up on comp expense, you know we saw that the comp dollars came down to about $89 million this quarter and obviously there's some seasonality to kind of quarterly run rate, but is that kind of a fair way to think about essentially how low you can take down the comp dollars in a tough revenue environment? Or is that kind of not the right way to think about it? Thanks.

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Joe, do you have a follow on that?

Joseph Simon -- Chief Financial Officer

I think that's the -- you're right, that's probably the lowest it can go. That is our fixed comp. It's slightly exaggerated because of the amortization of some new awards that are retirement eligible, so that that ultimately accelerates. But on a fixed basis it's probably going forward about $80 million a quarter and so I think that that's certainly the baseline.

Michael Brown -- Analyst

Okay. Thank you. Thank you for taking my questions. That's it for me.

Operator

The next question will be from Betsy Graseck of Morgan Stanley. Please go ahead.

Betsy Graseck -- Morgan Stanley -- Analyst

Hey, thanks, good afternoon. One question on the expenses, if the revenue environment does not pull back -- pull up like you're expecting, is there any other expense lines that you could pull back on or manage or not really?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Yes. There probably are some things we could -- well, usually, again, some of what happened in the first quarter was not like activity was down. We just didn't complete some things. But when activity goes down , travel -- a lot of the expenses that are non-comp associated with business activity go down slightly. Obviously, if we look forward and saw the revenues were not looking like they'd come up, you probably could be reductions in headcount and that would lower. But as of right now, that's not on the -- none of that is on the table. We don't think this was a -- this is or was a permanent change. In fact, we feel pretty good about the future. As I said, we think the world had it down 18% year and we had an unusual number of deals that just didn't go. So the answer is, yes, but that's not where we're looking right now. We're not moving into that mode.

Betsy Graseck -- Morgan Stanley -- Analyst

Yes. So then the other question I have for you, Ken, is regarding your comment around AI professionals that you hired. Just wanted to understand how you plan on leveraging the data specialists that you brought in? Is that something that's cross-industry? Is that more of a consultant role? Or is that somebody who you're anticipating is going to be bringing in business in a specific vertical in the data vertical?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Well, we expect to get two things from them. One, we do want and talk to -- be client facing and going to talk to our clients about things they're doing in the space for their own business and businesses they are thinking of acquiring to help them with their own data analytics, and we think that's important. And secondly, we feel like every industry in the world has been affected by data analytics and AI in their own business. And we think there's data in the world of M&A in the sense we're thinking and we wanted to be early. We didn't want to wake up one day and have what happened to many industries happen to us. So we're starting to organize around our own data analytics and things that will be helpful to us in the M&A environment. And interestingly, there are -- there's plenty of information out there if you could get it and figure out how to use it for the benefit of our clients. So really we look at it as 50-50, 50 external and 50% of the time internal.

Betsy Graseck -- Morgan Stanley -- Analyst

Got it, OK, cool. And then separately on repurchases I think the Board approved $100 million in February. And it doesn't seem like you did any -- you used that at all, correct me maybe I'm wrong but I just wanted to understand how you're thinking about using it. How we should think about share count over the next quarter or so, that kind of thing, what kind of average price we should be looking for, that kind of thing?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

We did buy a little under, 100,000, 95,000 shares of stock in the market so that's in the press release, in the quarter. And the way we think about it is, again, we like distributing our -- look, we will distribute our excess capital as soon as we have enough to make a meaningful distribution. We think about all the time whether we should do that versus stock repurchase or dividend. Dividend is a very efficient way to get into everybody's hands. Stock repurchase we -- as our stock has changed very dramatically where it was trading, we tried to be pretty aggressive in December, we were -- we did some stock in as you could tell earlier you could tell by the price where it was. Our belief is it's really a value proposition. I don't want to be in a market with continually stock repurchase. I don't think that's the most efficient way to do it but as I've said I look at it as kind of like the football field. The stock is within the 80% of the field. That is somewhat fair, valued well. I don't think you'll see us in the market. If it gets into what I call the red zone at the 20% that I think it's clearly demonstrably underpriced, we'll be aggressive. And the reason that we kept the company unlevered and we think that's very important in a personal services company, so we'll use excess cash to do that. And if it got well within that red zone, we might become more aggressive. But we're not big believers in leverage in the personal services business.

Betsy Graseck -- Morgan Stanley -- Analyst

Yes, I get it. Okay. Thank you.

Operator

The next question will be from Jim Mitchell of Buckingham Research. Please go ahead.

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

Hey, good afternoon. Maybe just talk a little bit about sort of the non-M&A non-restructurings, capital markets advisory, fund advisory, things like that where I know you've been expanding. It's been a growth driver in the past. Just any kind of thoughts there? It seemed like that might also been a slow quarter. How do we think about that the trajectory of that in those areas?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Yes, in the funds business, I think on a quarter basis, financially it was probably off a little bit. But everything about the funds business is on a very good growth path. You're just talking about a 12-week period in which a fund has to close. Those are really lumpy. So if it doesn't close, it doesn't close. There's just so many we do a year. But they are -- I feel great about that. We hired into Europe to help our a while back -- a year-and-a-half back and that's been very successful. So that's gone well. I think our IPO advisory work is going extremely well. It's primarily a European and we do some in the Americas, but it's primarily IPO advisory, it's more of an non-American business. And so the slowdown hasn't helped them, but they're on substantial deals. And what was the other -- just capital markets? Look, it was all in the first quarter. In the first quarter, all products were down, some slightly down. And some of that is just the lumpiness of things like fund advisory. It's hard to really look at as a quarterly business.

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

Okay. And maybe for Joe I noticed that overall cash levels were down. Is that just a function of the buyback in the fourth quarter and the lower earnings? Or is there anything else to call out on the cash usage side?

Joseph Simon -- Chief Financial Officer

No. There's nothing unusual to call out. It was a combination of earnings and share buybacks.

Michael Brown -- Analyst

Okay. Thanks.

Joseph Simon -- Chief Financial Officer

Sure.

Operator

The next question will be from Richard Ramsden of Goldman Sachs. Please go ahead.

Richard Ramsden -- Goldman Sachs -- Analyst

Hi, Ken. So I guess at the start of the year or even late last year, there was some optimism that financial sponsor activity was going to pick up and offset but plateauing on the strategic M&A side. Has that panned out the way that people were expecting? Or have prices kind of got to a level where financial sponsors are sitting on the sidelines?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

No. It's kind of -- it has not panned out and I think it's the volatility. So I always swear I hate the word dry powder, but obviously there is a lot of money raised in this section. The allocation of capital to private equity is just spectacular. I mean it's -- a lot of the money is left to hedge fund allocation in the alternative world and gone to private equity. So there is a lot of money to be spent. Now what happened again I think what happened is between October and December last year you had a move. And that move was based on -- people declaring the end of the cycle. It had to do with the third, it had to do with lots of indications that somebody saw the end of the cycle.

And when I say somebody, the markets thought the cycle was ending. But then you had a comeback gradually over the first quarter. And Richard, what I find is, it's really hard to get a private equity person who just saw in December prices go down by 3 multiple points to com pay February's rebound price. Everybody's so like, well, hey, do you remember companies were valued this much lower in December. And then it's also difficult to get sponsors who own a lot of the companies to come to market and sell an asset when they just saw the volatility and they're not sure they could execute at the price. So it was more of the speed and I think the certainty within the economic market that the fourth quarter was previewing a downturn in the economy. That they would not allow -- that was the agreed-upon reason. So it's not the prices. I think the fact that the prices are now leveling off and are fairly not volatile, fairly stable, I think will lead to more transactions. People are much more able to pull the trigger when they see a price level that feels stable.

Richard Ramsden -- Goldman Sachs -- Analyst

And how would you characterize the availability of credit for LBO transactions say relative to where we were six or nine months ago? Have things fully recovered? Or is there still some resistance in that market?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

I think it's again I'd say close to fully recovered. It's 90% or 95%, I haven't tested. But I think most people are active in the credit markets and almost they're probably a tad below, bank gets trading a tad lower than that, so give it 90%, 95% to where it was. I don't think it's going to prevent the deal. I think that credit is not an issue in executing a transaction.

Richard Ramsden -- Goldman Sachs -- Analyst

Okay. All right. Thank you very much.

Operator

And the next question will be from Jeff Harte of Sandler O'Neill. Please go ahead.

Jeff Harte -- Sandler O'Neill -- Analyst

Good afternoon, guys. A couple for me. As far as the kind of MD recruitment and efforts, can you talk to your speaking there a little bit, I'm kind of coming from what appears to have been a lack of hiring announcements year-to-date. And your comments earlier about growth being kind of promotion heavy in the near future. Are you backing away from recruiting a bit?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

No. We'll be out there. I think the first quarter is always a tricky quarter because if you're hiring some people who have a job in the industry, they're usually going to wait for their bonus check to clear. That's kind of late February, March event. And then it's just hard to get everything done. The first quarter is tough if you're in industry hiring, if you're hiring someone who's kind of not in the cycle of a bonus pool, you might be able to get them. I think we have a healthy backlog. We're talking to lots of people. Most of them are in cycle, meaning we have a strong backlog of candidates we're talking to and interested in and really you'd be amazed at how people do not (inaudible) probably wouldn't be rolling in the industry, so you know what I'm talking about. But the desire for somebody to get a call, show up on their desk from Ken Moelis a week before bonuses are decided, it's not hi. So just in case they get caught, so people go dark for a period of time. It's very hard to conduct those conversations. And I think it's just that function you only have a few weeks at the end of the first quarter where you're through bonuses and can get a transaction done. No we -- the short answer is we anticipate being active and -- but I think almost everybody we are talking to has a job at this point.

Jeff Harte -- Sandler O'Neill -- Analyst

Okay. And just to clarify your comments earlier kind of completions not hitting in the first quarter, you're referring to kind of closing delays and timing issues as opposed to terminations or mistransactions, or things like that?

Kenneth D. Moelis -- Chairman and Chief Executive Officer

No. No I'm talking about everything. As I've said sometimes you feel like you flip 10 tails in a row. I'm talking about deals we thought we were close to doing were either us or the client both decided let's not proceed, deals that -- there were deals by the way that we're going to complete, they were timing moves. There were -- it was all sort of things where you put your best on the table for a long time, you devoted a lot of resources, and for whatever reason and there's dozens of reasons, regulatory, economy, price, those transactions do not go forward or complete. Now that's the business we're in. Look, let me just say this because I think that's the last question. We ask you not to evaluate us on a 12-week basis and this is the reason why during those 12 weeks we could have told a client not to proceed on a deal, that would have made our numbers come out better. But the absolute right thing for us to do is to over the long-term and the health of the company is to give the best possible advice.

So there are a thousand reasons why in a 12-week period you could end up with a transaction that didn't reach completion. When I say completion, announcement, completion, closure any of the spots where our firm might get compensated. And by the way, for me personally, it felt like we incurred all 1,000 ways over the last five months. It's not fun to live through, but it happens every once in a while. And it's just happened on a larger and an abnormal percentage of the deals than it normally does. I know I have some of those good news though. Most of those people are clients. There may not be deals that were put off, but they're clients that still use us and we're in good stead with and something might happen down the road. But no, they were not all just based on timing to closure, if that makes sense.

Jeff Harte -- Sandler O'Neill -- Analyst

Okay. Thank you.

Operator

And ladies and gentlemen, that will conclude our question-and-answer session. I would like to hand the conference back over to Ken Moelis for his closing thoughts.

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Well, I appreciate everybody being on the call. And I know it was a difficult quarter to explain and understand, but we still feel great about the model and what we can deliver and I appreciate all of you showing up and listening to our discussion. Thank you.

Operator

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today's presentation. At this time, you may disconnect your lines.

Duration: 41 minutes

Call participants:

Michele Miyakawa -- Global Head of Human Resources, Investor Relations, Marketing & Communications

Joseph Simon -- Chief Financial Officer

Kenneth D. Moelis -- Chairman and Chief Executive Officer

Ken Worthington -- JPMorgan -- Analyst

Devin Ryan -- JMP Securities -- Analyst

Michael Needham -- Bank of America -- Analyst

Michael Brown -- Analyst

Betsy Graseck -- Morgan Stanley -- Analyst

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

Richard Ramsden -- Goldman Sachs -- Analyst

Jeff Harte -- Sandler O'Neill -- Analyst

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