S-1/A 1 a2222191zs-1a.htm S-1/A

Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
INDEX TO COMBINED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on November 17, 2014

Registration No. 333-200035


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 1
to

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



MOELIS & COMPANY
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
  6199
(Primary Standard Industrial
Classification Code Number)
  46-4500216
(I.R.S. Employer
Identification Number)

399 Park Avenue, 5th Floor
New York, New York 10022
(212) 883-3800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)



Osamu R. Watanabe Esq.
General Counsel
Moelis & Company
399 Park Avenue, 5th Floor
New York, New York 10022
(212) 883-3800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)



Copies to:

Joseph A. Coco, Esq.
Stacy J. Kanter, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000

 

Jay Clayton, Esq.
Glen T. Schleyer, Esq.
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
(212) 558-4000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

          If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Offering Price Per
Unit(2)

  Proposed Maximum
Aggregate Offering
Price(2)(3)

  Amount of
Registration Fee(4)

 

Class A common stock, par value $0.01 per share

  6,325,000   $35.36   $223,652,000   $25,988.36

 

(1)
Includes 825,000 shares the underwriters have the option to purchase.

(2)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c) under the Securities Act. The price per share and the maximum aggregate offering price are based on the average of the high and low sales price of the shares of Class A common stock on November 14, 2014, as reported by the New York Stock Exchange.

(3)
Includes the offering price of the 825,000 shares the underwriters have the option to purchase.

(4)
$17,826.24 was previously paid.

          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS (Subject to Completion)
Dated November 17, 2014

5,500,000 Shares

LOGO

Class A Common Stock



         Moelis & Company is offering 1,535,392 shares of Class A common stock. The selling stockholders named in this prospectus (which include certain of our directors and officers) are offering 3,964,608 shares of our Class A common stock. We will not receive any proceeds from the sale of our Class A common stock by the selling stockholders.

         We intend to use the proceeds from our issuance and sale of 1,535,392 shares of Class A common stock (or 1,826,678 shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock) to purchase from certain holders (including certain of our Managing Directors and employees) (i) outstanding Class A partnership units in Moelis & Company Group LP, (ii) outstanding shares of Class A common stock, (iii) units of an entity that holds Class A common stock and (iv) options to purchase shares of Class A common stock.

         Our Class A common stock is listed on the New York Stock Exchange (the "NYSE") under the symbol "MC." On November 14, 2014, the last sale price of our Class A common stock as reported on the NYSE was $35.01 per share.

         We are an "emerging growth company" under applicable Securities and Exchange Commission rules and are subject to reduced public company reporting requirements.



         Investing in our Class A common stock involves risks. See "Risk Factors" beginning on page 17.

         The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

               
 
 
  Price to public
  Underwriting
discounts and
commissions(1)

  Proceeds to
Moelis &
Company(2)

  Proceeds to
the selling
stockholders

 

Per Share

  $   $   $   $
 

Total

  $   $   $   $

 

(1)
See "Underwriting" for a description of the compensation payable to the underwriters.

(2)
See "Use of Proceeds" for a description of our intended use of the proceeds of our issuance and sale of Class A common stock.

         We and certain of the selling stockholders have granted the underwriters the right to purchase up to an additional 825,000 shares of Class A common stock at the price to public, with respect to additional shares of Class A common stock to be issued and sold by us, and at the price to public less the underwriting discounts and commissions, with respect to additional shares of Class A common stock to be sold by these selling stockholders. We will not receive any proceeds from the sale of any additional shares of Class A common stock by these selling stockholders. See "Use of Proceeds."

         The underwriters expect to deliver the shares of Class A common stock to purchasers on or about                        , 2014.

Goldman, Sachs & Co.       Morgan Stanley

Moelis & Company

 

J.P. Morgan

 

UBS Investment Bank

JMP Securities

 

 

 

Keefe, Bruyette & Woods
A Stifel Company

   

                , 2014


Table of Contents

GRAPHIC


Table of Contents


TABLE OF CONTENTS

 
  Page

MARKET AND INDUSTRY DATA

  ii

PROSPECTUS SUMMARY

  1

RISK FACTORS

  17

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

  31

ORGANIZATIONAL STRUCTURE

  32

USE OF PROCEEDS

  42

MARKET PRICE FOR COMMON STOCK

  43

DIVIDEND POLICY

  44

CAPITALIZATION

  45

UNAUDITED PRO FORMA FINANCIAL INFORMATION

  46

SELECTED HISTORICAL FINANCIAL AND OTHER DATA

  52

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  54

BUSINESS

  74

MANAGEMENT

  86

EXECUTIVE COMPENSATION

  92

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

  101

PRINCIPAL AND SELLING STOCKHOLDERS

  104

DESCRIPTION OF CAPITAL STOCK

  108

SHARES ELIGIBLE FOR FUTURE SALE

  112

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK

  115

UNDERWRITING (CONFLICTS OF INTEREST)

  118

VALIDITY OF COMMON STOCK

  123

EXPERTS

  123

WHERE YOU CAN FIND MORE INFORMATION

  123

INDEX TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)

  F-1

INDEX TO COMBINED FINANCIAL STATEMENTS

  F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  F-33

        Through and including                        , 2014 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

        We, the underwriters and selling stockholders have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectuses we have prepared. We, the underwriters and selling stockholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither the delivery of this prospectus nor the sale of our Class A common stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is an offer to sell the shares of Class A common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.


Map Legend

Moelis & Company office

/*\
Strategic alliance

i


Table of Contents


MARKET AND INDUSTRY DATA

        The industry, market and competitive position data referenced throughout this prospectus are based on research, industry and general publications, including surveys and studies conducted by third parties. Industry publications, surveys and studies generally state that they have been obtained from sources believed to be reliable. We have not independently verified such third party information. While we are not aware of any misstatements regarding any industry, market or similar data presented herein, such data involve uncertainties and are subject to change based on various factors, including those discussed under the headings "Special Note Regarding Forward-Looking Statements" and "Risk Factors" in this prospectus.

        In this prospectus, we use the term "independent investment banks" or "independent advisors" to refer to investment banks primarily focused on advisory services and that conduct limited or no commercial banking or sales and trading activities. We use the term "global independent investment banks" to refer to independent investment banks with global coverage capabilities across all major industries and regions. We consider the global independent investment banks to be our publicly traded peers, Evercore Partners Inc., Greenhill & Co., Inc., Lazard Ltd, and us.

ii


Table of Contents

 


PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our Class A common stock, you should carefully read this entire prospectus, including our financial statements and the related notes thereto and the information set forth under the sections "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes, in each case included in this prospectus. Some of the statements in this prospectus constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements." Unless the context requires otherwise, the words "Company," "we," "us" and "our" refer to Moelis & Company and its subsidiaries, and for periods prior to the reorganization described herein, the advisory business of Moelis Asset Management LP (formerly known as Moelis & Company Holdings LP). Unless the context otherwise requires, references to (1) "Moelis & Company" refer solely to Moelis & Company, a Delaware corporation, and not to any of its subsidiaries, (2) "Group LP" refer solely to Moelis & Company Group LP, a Delaware limited partnership, and not to any of its subsidiaries, (3) "Partner Holdings" refer to Moelis & Company Partner Holdings LP, a Delaware limited partnership, and (4) "Old Holdings" refer to Moelis Asset Management LP (formerly known as Moelis & Company Holdings LP), a Delaware limited partnership.


Moelis & Company

        Moelis & Company is a leading global independent investment bank that provides innovative strategic and financial advice to a diverse client base, including corporations, governments and financial sponsors. We assist our clients in achieving their strategic goals by offering comprehensive, globally integrated financial advisory services across all major industry sectors. Our team of experienced professionals advises clients on their most critical decisions, including mergers and acquisitions ("M&A"), recapitalizations and restructurings and other corporate finance matters.

        Since our inception, we have achieved rapid growth by hiring high-caliber professionals, expanding the scope and geographic reach of our advisory services, developing new client relationships and cultivating our professionals through training and mentoring. Today we serve our clients with over 375 advisory professionals, including 96 Managing Directors, based in 16 offices around the world. We have advised on over $1 trillion of transactions, including three of the ten largest announced global mergers and acquisitions and four of the ten largest announced global recapitalizations and restructurings in 2013.

        Moelis & Company was founded in 2007 by veteran investment bankers to create a global independent investment bank that offers multi-disciplinary solutions and exceptional transaction execution combined with the highest standard of confidentiality and discretion. We create lasting client relationships by providing focused innovative advice through a highly collaborative and global approach not limited to specific products or access to particular regions. Our compensation model fosters our holistic approach to clients by emphasizing quality of advice and is not a commission-based structure where employees are compensated on a defined percentage of the revenues they generate. We believe our discretionary approach to compensation leads to exceptional advice, strong client impact and enhanced internal collaboration.

        We have demonstrated strong financial performance, achieving revenues of $411 million and pre-tax income of $73 million in 2013, our sixth full year of operations. We have also won numerous awards for our client focus and innovation, including "Most Innovative Independent Investment Bank" by The Banker in 2010, 2011 and 2013 and "Best Global Independent Investment Bank" by Euromoney Magazine in 2010 and have served as financial advisor to our clients on many noteworthy assignments, including the following transactions.

 

1


Table of Contents

GRAPHIC

 

2


Table of Contents

 

Our Market Opportunity

        We believe that we will continue to grow revenues and gain market share as a result of being well positioned to benefit from the following market forces:

    Growing Demand for Independent Advice:    The demand for independent advice has increased dramatically in recent years. In 2013, independent advisors generated over 21% of the total advisory fee pool, up from less than 15% in 2009. Of the advisory revenue generated by independent advisors, Moelis & Company was responsible for almost 18% in 2013, up from less than 11% in 2009. We believe the shift toward independent advice has been driven largely by the actual or perceived conflicts at the large financial conglomerates where sizable sales and trading, underwriting and lending businesses coexist with an advisory business that comprises only a small portion of revenues and profits. We expect the momentum of the independent firms to continue as clients seek uncompromised confidential advice free of conflicts. We believe we are well positioned amongst the independent investment banks to deliver this advice given our global reach and product and industry depth.

    Ongoing Dislocation at Large Financial Conglomerates:    We will seek to continue to take advantage of growth opportunities arising from the ongoing dislocation at large financial conglomerates. These firms face increasing regulation and the pressure of managing large disparate business divisions, leading to confidentiality challenges, higher operating costs, compensation limitations and increased capital constraints, all of which we believe adversely affect their ability to serve clients and compete for talented professionals. As these firms continue to struggle with these issues, we see tremendous opportunities to enhance our industry coverage, expand our geographic reach and add new advisory expertise.

    Steady Improvement in Mergers & Acquisitions Activity:    While announced M&A volume was relatively restrained from the global financial crisis through 2013, we are seeing a steady improvement in the M&A environment driven by a stabilizing global macroeconomic environment, strong corporate balance sheets, attractive financing markets, a trend toward global consolidation and increased financial sponsor activity. We expect a more robust M&A environment to increase deal flow and enhance our growth. In addition, the recovery in Europe since the global financial crisis has lagged that of the U.S. We have made substantial investments in Europe, with over 60 advisory professionals in the region, while some of our competitors have scaled down their operations in Europe, and we believe we will be well positioned when the European M&A market rebounds.

    Continued Activity in Recapitalization and Restructuring Market:    We believe that, given the amount of leverage (including floating rate instruments) that companies have issued in recent years, a steady recapitalization and restructuring market will exist if interest rates rise or credit markets become more difficult to access, even with an improving macroeconomic environment and a steady improvement in M&A activity. Both 2012 and 2013 represented record years of leveraged finance issuance in the U.S., and 2014 issuance continues to be strong, as companies take advantage of historically low borrowing costs to leverage their capital structures. We believe we are well positioned to assist companies through our holistic approach, which combines sector expertise with M&A, recapitalization and restructuring and other advisory capabilities, to provide solutions to clients in both robust and challenging economic environments.

Our Key Competitive Strengths

        With 16 offices located around the world, capabilities in all major industries and deep advisory expertise, we believe we are well positioned to take advantage of the strong market opportunity for

 

3


Table of Contents

independent investment banks. Furthermore, we believe our business is differentiated from that of our competitors in the following respects:

    Globally Integrated Firm with Innovative Advisory Solutions:    We provide the high-touch and conflict free benefits of an independent investment bank with the global reach, sector depth and product expertise more commonly found at larger financial institutions. With 16 offices located in North and South America, Europe, the Middle East, Asia and Australia, we combine local and regional expertise with international market knowledge to provide our clients with highly integrated information flow and strong cross-border capabilities. We harness the deep industry expertise and broad corporate finance experience of our 96 global Managing Directors, which include 59 former sector and product heads from major investment banks. We reinforce our model with a discretionary compensation structure that encourages a high degree of collaboration and our "One Firm" mentality.

    Advisory Focus with Strong Intellectual Capital:    We primarily focus on advising clients, unlike most of our major competitors who derive a large percentage of their revenues from lending, trading and underwriting securities. We believe this independence allows us to offer advice free from the actual or perceived conflicts associated with lending to clients or trading in their securities. In addition, our focus on advisory services frees us from the pressure of cross-selling products, which we believe can distract from the dialogue with clients around their long-term strategy, compromising the advice. We provide intellectual capital based on our judgment, expertise and relationships combined with intense senior level attention to all transactions. The business of delivering intellectual capital allows us to operate a low risk and capital light model with attractive profit margins. We are not exposed to the financial risk and regulatory requirements that arise from, or the capital investments required in, balance sheet lending and trading activities.

    Fast Growing Global Independent Investment Bank:    Since our inception in 2007, we have achieved rapid growth, earning revenues of $411 million and pre-tax income of $73 million in 2013. During this time however, the global financial crisis contributed to a 51% decrease in global completed M&A volume from the peak levels of 2007. We took advantage of the dislocation in the financial services industry following the global financial crisis and capitalized on the unique opportunity to hire Managing Directors who have on average 20 years of investment banking experience. We believe the quality and scale of our global franchise and the speed at which it has been achieved would be a challenge to replicate today.

    Strong Financial Discipline:    We have remained financially disciplined with an intense focus on managing growth in a profitable manner, as demonstrated by the $73 million of pre-tax income achieved in our sixth full year of operations. We hired aggressively during the global financial crisis to take advantage of the dislocation among our competitors and have taken a more measured approach to hiring as the markets and compensation levels have stabilized. We incentivize our bankers as owners by awarding equity compensation in order to align the interests of our employees and equityholders, and our employees currently own a majority of our Company. Additionally, we have focused on entering new regions and sectors through creative and cost efficient strategies. We intend to maintain our financial discipline as we continue to grow our revenues, expand into new markets and increase our areas of expertise.

    Significant Organic Growth Opportunities:    We have made significant investments in our intellectual capital with the hiring of 56 Managing Directors and promotion of 22 internal professionals to Managing Director since 2010. In addition, we have invested time and resources in our recruiting and training programs. We established a meaningful presence at the top undergraduate programs in our first year of operations, which has resulted in the hiring of over 250 analysts from campus since our inception. We are poised to continue realizing meaningful organic growth from these investments. We have achieved critical size in key industry sectors and regions around the globe, as

 

4


Table of Contents

    well as recognition for advising on innovative transactions, which have enhanced our brand globally. We are positioned to continue to grow revenues as a result of increased individual productivity as our investments in people mature and as we continue to leverage our global platform through enhanced connectivity and idea generation and expanded brand recognition.

    High Standard of Confidentiality and Discretion:    Due to the highly sensitive nature of M&A discussions where confidentiality is of paramount importance to clients, the M&A business is most effectively operated on a "need to know" basis. We believe that large financial conglomerates with multiple divisions, "Chinese Walls" and layers of management have a significantly greater number of employees who have access to sensitive client information, which can increase the risk of confidential information leaking. Such leaks can materially impair the viability of transactions and other strategic decisions. We have established a high standard of confidentiality and discretion, as well as instituted procedures designed to protect our clients and minimize the risk of sensitive information leaking to the market.

    Diversified Advisory Platform:    Our business is highly diversified across sectors, types of advisory services and clients. Our broad corporate finance expertise positions us to advise clients through any phase of their life cycle and in any economic environment. We focus on a wide range of clients from large public multinational corporations to middle market private companies to individual entrepreneurs, and we deliver the full resources of our firm and the highest level of senior attention to every client, regardless of size or situation. In addition, we have no meaningful client concentration, with our top 10 transactions representing only 23% of our revenues in 2013. Our holistic "One Firm" approach also reduces dependence on any one product or banker and allows us to leverage our intellectual capital across the firm as necessary to offer multiple solutions to our clients, increase our client penetration and adapt to changing circumstances.

    Partnership Culture:    We believe that our momentum and commitment to excellence have created an environment that attracts and retains high quality talent. Our people are our most valuable asset and our goal is to attract, retain and develop the best and brightest talent in our industry across all levels. We strive to foster a collaborative environment, and we seek individuals who are passionate about our business and are a fit with our culture. We have established a compensation philosophy that reinforces our long-term vision and values by rewarding collaboration, client impact and lasting relationships and encourages employees to put the interests of our clients and our Company first. Above all, the "Moelis Standard" nurtures a culture of partnership, passion, optimism and hard work, which inspires the highest level of quality and integrity in every interaction with our clients and each other.

    Risk Factors

        Investing in our Class A common stock involves risks. You should carefully consider the risks described in "Risk Factors" beginning on page 17 before making a decision to invest in our Class A common stock. If any of these risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In such case, the trading price of our Class A common stock would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:

    our future growth will depend on, among other things, our ability to successfully identify, recruit and develop talent and will require us to commit additional resources;

    changing market conditions can adversely affect our business in many ways, including by reducing the volume of the transactions involving our business, which could materially reduce our revenue;

 

5


Table of Contents

    our revenue in any given period is dependent on the number of fee-paying clients in such period, and a significant reduction in the number of fee-paying clients in any given period could reduce our revenue and adversely affect our operating results in such period;

    our ability to retain our Managing Directors and our other professionals, including our executive officers, is critical to the success of our business; and

    substantially all of our revenue is derived from advisory fees and as a result, our revenue and profits are highly volatile on a quarterly basis and may cause the price of our Class A common stock to fluctuate and decline.

    Implications of Being an Emerging Growth Company

        As a company with less than $1.0 billion in revenues during our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to public companies in the United States. These provisions include:

    reduced compensation disclosure requirements; and

    an exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting.

        The JOBS Act also permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.

        When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. We will remain an emerging growth company until the earliest of:

    the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion;

    the last day of our fiscal year following the fifth anniversary of the completion of our initial public offering;

    the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or

    the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

        We have availed ourselves in this prospectus of the reduced reporting requirements described above with respect to executive compensation disclosure requirements. We expect to continue to avail ourselves of the emerging growth company exemptions described above. As a result, the information that we provide to stockholders will be less comprehensive than what you might receive from other public companies. We have not elected to avail ourselves of the exemption that allows emerging growth companies to extend the transition period for complying with new or revised financial accounting standards.



        Moelis & Company was incorporated in Delaware on January 9, 2014, in preparation for our initial public offering. We completed our initial public offering, or IPO, in April 2014. Our principal executive offices are located at 399 Park Avenue, 5th Floor, New York, NY 10022, and our phone number is (212) 883-3800.

 

6


Table of Contents


Our Structure

        Prior to our initial public offering in April 2014, we effected the reorganization described in "Organizational Structure." Following the reorganization and our initial public offering, Moelis & Company became a holding company and its only assets are its partnership interests in Group LP, its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC, and its interests in its subsidiaries. Moelis & Company operates and controls all of the business and affairs of Group LP and its operating entity subsidiaries indirectly through its equity interest in Moelis & Company Group GP LLC.

        The diagram below depicts our organizational structure following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under "Use of Proceeds."

GRAPHIC

 

7


Table of Contents

        Immediately following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under "Use of Proceeds":

    Moelis & Company will hold Class A partnership units in Group LP representing 35.0% of the total number of Class A partnership units in Group LP (or 36.5% if the underwriters exercise their option to purchase additional shares in full);

    certain of our existing Class A partnership unitholders (including all of our Managing Directors (other than certain non-U.S. based Managing Directors) indirectly through Partner Holdings) will hold Class A partnership units in Group LP representing 65.0% of the total number of Class A partnership units in Group LP (or 63.5% if the underwriters exercise their option to purchase additional shares in full);

    certain former Group LP Class A partnership unitholders and Old Holdings unitholders (including certain non-U.S. based Managing Directors and employees) will, directly or indirectly, own approximately 31.7% of the Class A common stock (or 30.2% if the underwriters exercise their option to purchase additional shares in full); and

    public stockholders will own 68.3% of the Class A common stock (or 69.8% if the underwriters exercise their option to purchase additional shares in full).

 

8


Table of Contents

 


The Offering

Class A common stock offered by us

  1,535,392 shares.

Class A common stock offered by the selling stockholders

 

3,964,608 shares.

Underwriters option to purchase additional shares

 

We and certain of the selling stockholders have granted the underwriters a 30-day option to purchase up to an additional 825,000 shares of our Class A common stock.

Class A common stock outstanding as of the date of this prospectus

 

15,259,835 shares.

 

This number excludes 39,013,183 shares of Class A common stock issuable in exchange for Group LP Class A partnership units and upon conversion of shares of our Class B common stock, each as described under "—Exchange Rights." If all outstanding Group LP Class A partnership units were exchanged and all outstanding shares of Class B common stock were converted, we would have 54,273,018 shares of Class A common stock outstanding as of the date of this prospectus.

Class A common stock to be outstanding immediately following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under "Use of Proceeds"

 

18,985,461 shares.

 

This number excludes 35,287,557 shares of Class A common stock issuable in exchange for Group LP Class A partnership units and upon conversion of shares of our Class B common stock following this offering, each as described under "—Exchange Rights." If all outstanding Group LP Class A partnership units were exchanged and all outstanding shares of Class B common stock were converted, we would have 54,273,018 shares of Class A common stock outstanding immediately following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under "Use of Proceeds."

Class B common stock outstanding as of the date of this prospectus

 

36,128,995 shares.

Class B common stock to be outstanding immediately following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under "Use of Proceeds"

 

32,407,374 shares.

 

9


Table of Contents

Use of proceeds

 

We intend to use the gross proceeds from our issuance and sale of 1,535,392 shares of Class A common stock (or 1,826,678 shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock) to purchase from certain holders (including certain of our Managing Directors and employees) (i) outstanding Class A partnership units in Group LP, (ii) outstanding shares of Class A common stock, (iii) units of an entity which holds Class A common stock and (iv) options to purchase shares of Class A common stock.

 

We will not receive any proceeds from the sale of our Class A common stock by the selling stockholders.

 

We are conducting this offering to facilitate organized liquidity in our Class A common stock and to increase the public float of our Class A common stock.

 

See "Use of Proceeds."

Voting rights

 

Each share of our Class A common stock entitles its holder to one vote on all matters to be voted on by stockholders generally.

 

Each share of our Class B common stock entitles Partner Holdings to (i) for so long as the Class B Condition (as defined below in "Organizational Structure") is satisfied, ten votes per share, and (ii) after the Class B Condition ceases to be satisfied, one vote per share. Partner Holdings holds a number of shares of Class B common stock in Moelis & Company that is equal to the aggregate number of vested and unvested Class A partnership units in Group LP held by Partner Holdings. Based on Mr. Moelis's control of Partner Holdings, until the Class B Condition ceases to be satisfied, Mr. Moelis has all of the voting power of the Class B common stock.

 

Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise provided in our amended and restated certificate of incorporation or as required by applicable law. See "Description of Capital Stock—Class B Common Stock."

 

Upon completion of this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under "Use of Proceeds," holders of our Class A common stock who are not affiliated with our directors and executive officers will own approximately 89.1% of Moelis & Company's Class A common stock and will have approximately 4.9% of the voting power in Moelis & Company (or approximately 89.7% and 5.3%, respectively, if the underwriters exercise their option to purchase additional shares in full).

 

10


Table of Contents

Exchange Rights

 

Subject to the terms and conditions of the Group LP amended and restated limited partnership agreement and the lock-up restrictions described below, each Group LP Class A unitholder has the right to exchange Group LP Class A partnership units, either for shares of our Class A common stock on a one-for-one basis, or cash (based on the market price of the shares of Class A common stock), at Group LP's option. If Group LP chooses to exchange such units for our Class A common stock, Moelis & Company will deliver an equivalent number of shares of Class A common stock to Group LP for further delivery to the exchanging holder and receive a corresponding number of newly issued Group LP Class A partnership units. The exchanging holder's surrendered Group LP Class A partnership units will be cancelled by Group LP. As Group LP Class A unitholders exchange their Group LP Class A partnership units, Moelis & Company's percentage of economic ownership of Group LP will be correspondingly increased. Following each such exchange, Partner Holdings will be required to surrender to Moelis & Company a corresponding number of shares of Class B common stock, and each such share will be converted into approximately 0.00055 shares of Class A common stock, which will be delivered to Partner Holdings. Group LP will also convert an equivalent number of Class B partnership units held by Moelis & Company into Class A partnership units based on the same conversion rate. See "Organizational Structure—Amended and Restated Limited Partnership Agreement of Group LP—Exchange Rights."

Lock-up

 

Group LP Class A partnership units and Moelis & Company Class A common stock held by our Managing Directors (including through Partner Holdings) are subject to lock-up agreements for four years from the date of our initial public offering. After this period, Group LP Class A partnership units held by a Managing Director will become exchangeable into Class A common stock or cash as described above and Moelis & Company Class A common stock held by a Managing Director will become transferable, in each case in three equal installments on each of the fourth, fifth and sixth anniversary of our initial public offering. If a Managing Director terminates his or her employment with the Company prior to the end of the lock-up period, the Company will be entitled to extend the lock-up period until up to the tenth anniversary of our initial public offering. In connection with this offering, we are partially releasing this lock-up to allow our Managing Directors to sell shares of Class A common stock in this offering or to sell such shares or Group LP Class A partnership units to us for purchase from the gross proceeds of our issuance and sale of shares of Class A common stock in this offering. Managing Directors will generally be entitled to sell approximately 10.3% of their

   

 

11


Table of Contents

 

interest (or approximately 12.5% if the underwriters exercise their option to purchase additional shares in full), which would otherwise be released on the fourth anniversary of our initial public offering.

 

Group LP Class A partnership units and Moelis & Company Class A common stock held by our non-Managing Director employees and other existing Group LP unitholders are generally subject to lock-up agreements under which 50% of such securities became transferable on October 13, 2014 and the remainder of such securities will become transferable after April 22, 2015. If the underwriters exercise their option to purchase additional shares in full, we are partially releasing this lock-up to allow employees to sell shares of Class A common stock in this offering or to sell such shares or Group LP Class A partnership units to us for purchase from the gross proceeds of our issuance and sale of shares of Class A common stock in this offering.

Stockholders Agreement

 

Moelis & Company has entered into a stockholders agreement with Partner Holdings pursuant to which, for so long as the Class B Condition is satisfied, Partner Holdings has certain approval rights.

 

After the Class B Condition ceases to be satisfied, for so long as the Secondary Class B Condition is satisfied, Partner Holdings will have certain more limited approval rights.

 

See "Organizational Structure—Rights of Partner Holdings and Stockholders Agreement."

Registration Rights

 

Moelis & Company has granted registration rights pursuant to which:

 

Moelis & Company is required to use its reasonable best efforts to file a shelf registration statement providing for the exchange of Group LP Class A partnership units held by certain Group LP non-Managing Director Class A unitholders for an equivalent number of shares of its Class A common stock and the resale of shares of Class A common stock held by certain non-Managing Directors at any time and from time to time thereafter, subject to applicable restrictions imposed by Moelis & Company. Moelis & Company intends to file this shelf registration statement once it becomes eligible to file registration statements using Form S-3;

 

12


Table of Contents

 

Moelis & Company is required to use its reasonable best efforts to file a shelf registration statement within three months of the expiration of the lock-up period relating to our Managing Directors described above, providing for the exchange of Group LP Class A partnership units held by such Managing Directors for an equivalent number of shares of Moelis & Company Class A common stock and the resale of shares of Moelis & Company Class A common stock by our Managing Directors at any time and from time to time, subject to applicable restrictions imposed by Moelis & Company;

 

certain Group LP Class A unitholders have the ability to cause Moelis & Company to register the shares of its Class A common stock they could acquire upon exchange of their Group LP Class A partnership units, subject to certain contractual restrictions; and

 

certain Group LP Class A unitholders have the ability to cause Moelis & Company to register the shares of its Class A common stock they could acquire upon exchange of their Group LP Class A partnership units, subject to certain contractual restrictions, in any public underwritten offerings by Moelis & Company after the expiration or earlier termination (if any) of the lock-up agreements referred to above, subject to customary pro rata cutbacks.

 

See "Organizational Structure—Registration Rights."

Board Representation

 

Our board of directors will nominate individuals designated by Partner Holdings equal to a majority of the board of directors, for so long as the Class B Condition is satisfied. See "Organizational Structure—Rights of Partner Holdings and Stockholders Agreement."

Dividend Policy

 

We currently intend to pay a quarterly cash dividend equal to $0.20 per share of Class A common stock. Any declaration and payment of future dividends to holders of our Class A common stock will be at the sole discretion of our board of directors and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our board of directors deems relevant.

 

On October 28, 2014, our board of directors declared a special dividend of $1.00 per share of Class A common stock in addition to a regular quarterly dividend of $0.20 per share reflecting our strong cash flow generation and commitment to returning capital to stockholders. The dividends will be paid on November 24, 2014 to holders of record on November 10, 2014. Purchasers of shares of Class A common stock in this offering will not be entitled to these dividends.

  See "Dividend Policy."

 

13


Table of Contents

Conflicts of Interest

 

Moelis & Company controls Moelis & Company LLC, a participating underwriter in this offering. Therefore, Moelis & Company LLC is deemed to have a "conflict of interest" within the meaning of Financial Industry Regulatory Authority, Inc. ("FINRA") Rule 5121(f)(5)(B). In addition, Moelis & Company and other affiliates of Moelis & Company LLC will be deemed to receive more than 5% of net offering proceeds and will have a "conflict of interest" pursuant to FINRA Rule 5121(f)(5)(C)(ii). This offering is being made in compliance with the requirements of FINRA Rule 5121. Since Moelis & Company LLC is not primarily responsible for managing this offering, pursuant to FINRA Rule 5121(a)(1)(A), the appointment of a qualified independent underwriter is not necessary. Moelis & Company LLC will not confirm sales to discretionary accounts without the prior written approval of the customer. See "Underwriting."

Risk Factors

 

See "Risk Factors" for a discussion of risks you should carefully consider before investing in our Class A common stock.

New York Stock Exchange Trading Symbol

 

"MC."

        The number of shares of our Class A common stock outstanding as of the date of this prospectus excludes 39,013,183 shares of Class A common stock issuable in exchange for Group LP Class A partnership units and upon conversion of shares of our Class B common stock, each as described under "Organizational Structure—Amended and Restated Limited Partnership Agreement of Group LP—Exchange Rights." If all outstanding Group LP Class A partnership units were exchanged and all outstanding shares of Class B common stock were converted, we would have 54,273,018 shares of Class A common stock outstanding as of the date of this prospectus.

        Unless the context requires otherwise, in this prospectus the number of shares of Class A common stock outstanding as of the date of this prospectus:

    excludes shares of Class A common stock reserved for issuance under our 2014 Omnibus Incentive Plan described in "Executive Compensation—Moelis & Company 2014 Omnibus Incentive Plan," including 3,248,511 shares issuable upon outstanding options with an exercise price of $25.00 and 2,242,879 shares issuable upon settlement of outstanding restricted stock units;

    excludes 176,170 unvested restricted shares of our Class A common stock held by certain employees, which are treated by us as equivalents of restricted stock units; and

    includes 277,195 shares of our Class A Common stock issuable upon exercise of nil-strike options held by certain non-U.S. employees, 38,140 of which nil-strike options will be purchased by us with a portion of the proceeds of this offering.

        Unless otherwise indicated, the information in this prospectus assumes no exercise by the underwriters of their option to purchase additional shares.

 

14


Table of Contents

 


Summary Historical Financial and Other Data

        The summary historical financial and operating data for the nine months ended September 30, 2014 and 2013 and as of September 30, 2014 have been derived from our unaudited condensed consolidated and combined financial statements included elsewhere in this prospectus. The summary historical financial data as of September 30, 2013 presented below have been derived from our unaudited condensed combined financial statements which are not included in this prospectus. In the opinion of management, the unaudited financial and operating data for the interim periods included in this prospectus include all normal and recurring adjustments that we consider necessary for a fair presentation of the financial condition and operating results for these periods. The operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

        The summary historical financial and operating data as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 presented below have been derived from our audited combined financial statements included elsewhere in this prospectus.

        The summary historical financial data as of December 31, 2011 presented below have been derived from our audited combined financial statements which are not included in this prospectus.

        You should read the summary historical financial and operating data set forth below in conjunction with the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated and combined financial statements and notes thereto included elsewhere in this prospectus.

 

15


Table of Contents

 
  Nine Months Ended
September 30,
  Year Ended December 31,  
($ in thousands)
  2014(1)   2013   2013   2012   2011  

Statement of Operations Data

                               

Revenues

  $ 374,855   $ 257,091   $ 411,386   $ 385,871   $ 268,024  

Expenses:

                               

Compensation and benefits

    300,793     166,952     264,944     274,941     200,368  

Non-compensation expenses

    71,661     53,680     76,333     72,885     78,526  
                       

Total operating expenses

    372,454     220,632     341,277     347,826     278,894  

Operating income (loss)

    2,401     36,459     70,109     38,045     (10,870 )

Other income and expenses

    622     (968 )   (771 )   333     245  

Income (loss) from equity method investments

    (2,966 )   2,588     3,681     (658 )   5,737  
                       

Income (loss) before income taxes

    57     38,079     73,019     37,720     (4,888 )

Provision for income taxes

    5,790     1,782     2,794     2,498     3,642  
                       

Net income (loss)

  $ (5,733 ) $ 36,297   $ 70,225   $ 35,222   $ (8,530 )
                       
                       

Net income (loss) attributable to noncontrolling interest

    6,777                          
                               

Net income (loss) attributable to Moelis & Company

  $ (12,510 )                        
                               

Weighted-average shares of Class A common stock outstanding

                               

Basic

    15,262,940                          
                               

Diluted

    15,262,940                          
                               

Net income (loss) per share attributable to holders of shares of

                               

Class A common stock

                               

Basic

  $ (0.82 )                        
                               
                               

Diluted

  $ (0.82 )                        
                               
                               

Statement of Financial Condition Data (period end)

                               

Total assets

  $ 352,189   $ 334,145   $ 443,463   $ 402,668   $ 204,929  

Total liabilities

    177,501     71,182     134,093     142,560     92,754  

Equity

    174,688     262,963     309,370     260,108     112,175  

Other Data and Metrics

   
 
   
 
   
 
   
 
   
 
 

Bankers at period-end

    377     318     317     340     335  

Managing directors at period-end

    96     83     86     80     76  

Number of fee-paying clients

    206     201     263     236     182  

Number of fee-paying clients ³ $1M

    99     74     109     107     72  

% of total revenue from top 10 transactions

    N/A     N/A     23 %   22 %   34 %

N/A=Not Applicable

(1)
Results of operations for the nine months ended September 30, 2014 include approximately $110.9 million of pre-tax one-time charges primarily associated with accelerating the vesting of pre-IPO equity held by Managing Directors in connection with the Company's IPO completed in April 2014. Following the vesting acceleration, pre-IPO equity held by our Managing Directors is subject to a minimum four to six year lock-up.

 

16


Table of Contents


RISK FACTORS

        Investing in our Class A common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained in this prospectus, including our financial statements and the related notes thereto, before investing in our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the following risks materialize, our business, financial condition and results of operations could be materially adversely affected. In that case, the trading price of our Class A common stock could decline, and you may lose some or all of your investment.

Risks Related to Our Business

Our future growth will depend on, among other things, our ability to successfully identify, recruit and develop talent and will require us to commit additional resources.

        We have experienced rapid growth over the past several years, which may be difficult to sustain at the same rate. Our future growth will depend on, among other things, our ability to successfully identify and recruit individuals and teams to join our firm. It typically takes time for these professionals to become profitable and effective. During that time, we may incur significant expenses and expend significant time and resources toward training, integration and business development aimed at developing this new talent. If we are unable to recruit and develop profitable professionals, we will not be able to implement our growth strategy and our financial results could be materially adversely affected.

        In addition, sustaining growth will require us to commit additional management, operational and financial resources and to maintain appropriate operational and financial systems to adequately support expansion, especially in instances where we open new offices that may require additional resources before they become profitable. See "—Our growth strategy may involve opening or acquiring new offices and expanding internationally and would involve hiring new Managing Directors and other senior professionals for these offices, which would require substantial investment by us and could materially and adversely affect our operating results." There can be no assurance that we will be able to manage our expanding operations effectively, and any failure to do so could materially adversely affect our ability to grow revenue and control our expenses.

Changing market conditions can adversely affect our business in many ways, including by reducing the volume of the transactions involving our business, which could materially reduce our revenue.

        As a financial services firm, we are materially affected by conditions in the global financial markets and economic conditions throughout the world. For example, our revenue is directly related to the volume and value of the transactions in which we are involved. During periods of unfavorable market or economic conditions, the volume and value of M&A transactions may decrease, thereby reducing the demand for our M&A advisory services and increasing price competition among financial services companies seeking such engagements. In addition, during periods of strong market and economic conditions, the volume and value of recapitalization and restructuring transactions may decrease, thereby reducing the demand for our recapitalization and restructuring advisory services and increasing price competition among financial services companies seeking such engagements. Our results of operations would be adversely affected by any such reduction in the volume or value of such advisory transactions. Further, in the period following an economic downturn, the volume and value of M&A transactions typically takes time to recover and lags a recovery in market and economic conditions.

        Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in revenue relating to changes in market and economic conditions. The future market and economic climate may

17


Table of Contents

deteriorate because of many factors beyond our control, including rising interest rates or inflation, terrorism or political uncertainty.

Our revenue in any given period is dependent on the number of fee-paying clients in such period, and a significant reduction in the number of fee-paying clients in any given period could reduce our revenue and adversely affect our operating results in such period.

        Our revenue in any given period is dependent on the number of fee-paying clients in such period. We had 109 clients and 107 clients paying fees equal to or greater than $1 million in 2013 and 2012, respectively. We may lose clients as a result of the sale or merger of a client, a change in a client's senior management, competition from other financial advisors and financial institutions and other causes. A significant reduction in the number of fee-paying clients in any given period could reduce our revenue and adversely affect our operating results in such period.

Our ability to retain our Managing Directors and our other professionals, including our executive officers, is critical to the success of our business.

        Our future success depends to a substantial degree on our ability to retain qualified professionals within our organization, including our Managing Directors. However, we may not be successful in our efforts to retain the required personnel as the market for qualified investment bankers is extremely competitive. Our investment bankers possess substantial experience and expertise and have strong relationships with our advisory clients. As a result, the loss of these professionals could jeopardize our relationships with clients and result in the loss of client engagements. For example, if any of our Managing Directors or other senior professionals, including our executive officers, or groups of professionals, were to join or form a competing firm, some of our current clients could choose to use the services of that competitor rather than our services. There is no guarantee that our compensation and non-competition arrangements with our Managing Directors provide sufficient incentives or protections to prevent our Managing Directors from resigning to join our competitors. In addition, some of our competitors have more resources than us which may allow them to attract some of our existing employees through compensation or otherwise. The departure of a number of Managing Directors or groups of professionals could have a material adverse effect on our business and our profitability.

        We depend on the efforts and reputations of Mr. Moelis and our other executive officers. Our senior leadership team's reputations and relationships with clients and potential clients are critical elements in the success of our business. The loss of the services of any of them, in particular Mr. Moelis, could have a material adverse effect on our business, including our ability to attract clients.

Substantially all of our revenue is derived from advisory fees. As a result, our revenue and profits are highly volatile on a quarterly basis and may cause the price of our Class A common stock to fluctuate and decline.

        Our revenue and profits are highly volatile. We derive substantially all of our revenue from advisory fees, generally from a limited number of engagements that generate significant fees at key transaction milestones, such as closing, the timing of which is outside of our control. We expect that we will continue to rely on advisory fees for most of our revenue for the foreseeable future. Accordingly, a decline in our advisory engagements or the market for advisory services would adversely affect our business. In addition, our financial results will likely fluctuate from quarter to quarter based on the timing of when fees are earned, and high levels of revenue in one quarter will not necessarily be predictive of continued high levels of revenue in future periods. Because we lack other, more stable, sources of revenue, which could moderate some of the volatility in our advisory revenue, we may experience greater variations in our revenue and profits than other larger, more diversified competitors in the financial services industry. Fluctuations in our quarterly financial results could, in turn, lead to large adverse movements in the price of our Class A common stock or increased volatility in our stock price generally.

18


Table of Contents

        Because in many cases we are not paid until the successful consummation of the underlying transaction, our revenue is highly dependent on market conditions and the decisions and actions of our clients, interested third parties and governmental authorities. For example, we may be engaged by a client in connection with a sale or divestiture, but the transaction may not occur or be consummated because, among other things, anticipated bidders may not materialize, no bidder is prepared to pay our client's price or because our client's business experiences unexpected operating or financial problems. We may be engaged by a client in connection with an acquisition, but the transaction may not occur or be consummated for a number of reasons, including because our client may not be the winning bidder, failure to agree upon final terms with the counterparty, failure to obtain necessary regulatory consents or board or stockholder approvals, failure to secure necessary financing, adverse market conditions or because the target's business experiences unexpected operating or financial problems. In these circumstances, we often do not receive significant advisory fees, despite the fact that we have devoted considerable resources to these transactions.

        In addition, we face the risk that certain clients may not have the financial resources to pay our agreed-upon advisory fees. Certain clients may also be unwilling to pay our advisory fees in whole or in part, in which case we may have to incur significant costs to bring legal action to enforce our engagement agreement to obtain our advisory fees.

Our joint ventures, strategic investments and acquisitions may result in additional risks and uncertainties in our business.

        In addition to recruiting and internal expansion, we may grow our core business through joint ventures, strategic investments or acquisitions.

        In the case of joint ventures, such as our 50% investment in our Australian joint venture, Moelis Australia Holdings Pty Ltd (the "Australian JV"), we are subject to additional risks and uncertainties relating to governance and controls, in that we may be dependent upon, and subject to, liability, losses or reputational damage relating to personnel, controls and systems that are not fully under our control. In addition, disagreements between us and our joint venture partners may negatively impact our business. Although our Australian JV must abide by certain market risk limits approved by us with respect to its trading activities, there is a risk that such limits will be insufficient to protect us against significant losses. In addition, investments made by our Australian JV could be unprofitable.

        In the event we make further strategic investments or acquisitions, we would face numerous risks and would be presented with financial, managerial and operational challenges, including the difficulty of integrating personnel, financial, accounting, technology and other systems and management controls.

If the number of debt defaults, bankruptcies or other factors affecting demand for our recapitalization and restructuring advisory services declines, our recapitalization and restructuring business could suffer.

        We provide various financial recapitalization and restructuring and related advice to companies in financial distress or to their creditors or other stakeholders. A number of factors affect demand for these advisory services, including general economic conditions, the availability and cost of debt and equity financing, governmental policy and changes to laws, rules and regulations, including those that protect creditors. In addition, providing recapitalization and restructuring advisory services entails the risk that the transaction will be unsuccessful or take considerable time and can be subject to a bankruptcy court's authority to disallow or discount our fees in certain circumstances. If the number of debt defaults, bankruptcies or other factors affecting demand for our recapitalization and restructuring advisory services declines, our recapitalization and restructuring business would be adversely affected.

19


Table of Contents

Our failure to deal appropriately with actual, potential or perceived conflicts of interest could damage our reputation and materially adversely affect our business.

        We confront actual, potential or perceived conflicts of interest in our business. For instance, we face the possibility of an actual, potential or perceived conflict of interest where we represent a client on a transaction in which an existing client is a party. We may be asked by two potential clients to act on their behalf on the same transaction, including two clients as potential buyers in the same acquisition transaction, and we may act for both clients if both clients agree to us doing so. In each of these situations, we face the risk that our current policies, controls and procedures do not timely identify or appropriately manage such conflicts of interest.

        It is possible that actual, potential or perceived conflicts could give rise to client dissatisfaction, litigation or regulatory enforcement actions. Appropriately identifying and managing actual or perceived conflicts of interest is complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation which could materially adversely affect our business in a number of ways, including a reluctance of some potential clients and counterparties to do business with us.

Employee misconduct, which is difficult to detect and deter, could harm us by impairing our ability to attract and retain clients and by subjecting us to legal liability and reputational harm.

        There is a risk that our employees could engage in misconduct that would adversely affect our business. For example, our business often requires that we deal with confidential matters of great significance to our clients. If our employees were to improperly use or disclose confidential information provided by our clients, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial position, current client relationships and ability to attract future clients. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases. If our employees engage in misconduct, our business could be materially adversely affected.

We may face damage to our professional reputation if our services are not regarded as satisfactory or for other reasons.

        As an advisory service firm, we depend to a large extent on our relationships with our clients and reputation for integrity and high-caliber professional services to attract and retain clients. As a result, if a client is not satisfied with our services, it may be more damaging in our business than in other businesses.

We face strong competition from other financial advisory firms, many of which have the ability to offer clients a wider range of products and services than those we can offer, which could cause us to fail to win advisory mandates and subject us to pricing pressures that could materially adversely affect our revenue and profitability.

        The financial services industry is intensely competitive, and we expect it to remain so. Our competitors are other investment banking and financial advisory firms. We compete on both a global and a regional basis, and on the basis of a number of factors, including depth of client relationships, industry knowledge, transaction execution skills, our range of products and services, innovation, reputation and price. In addition, in our business there are usually no long-term contracted sources of revenue. Each revenue-generating engagement typically is separately solicited, awarded and negotiated.

        We have experienced intense competition over obtaining advisory mandates in recent years, and we may experience further pricing pressures in our business in the future as some of our competitors may seek to obtain increased market share by reducing fees.

20


Table of Contents

        Our primary competitors are large financial institutions, many of which have far greater financial and other resources than us and, unlike us, have the ability to offer a wider range of products, from loans, deposit taking and insurance to brokerage and trading, which may enhance their competitive position. They also regularly support investment banking, including financial advisory services, with commercial lending and other financial services and products in an effort to gain market share, which puts us at a competitive disadvantage and could result in pricing pressures or loss of opportunities, which could materially adversely affect our revenue and profitability. In addition, we may be at a competitive disadvantage with regard to certain of our competitors who are able to and often do, provide financing or market making services that are often a crucial component of the types of transactions on which we advise.

        In addition to our larger competitors, over the last few years a number of independent investment banks that offer independent advisory services have emerged, with several showing rapid growth. As these independent firms or new entrants into the market seek to gain market share there could be pricing pressures, which would adversely affect our revenues and earnings.

As a member of the financial services industry, we face substantial litigation risks.

        Our role as advisor to our clients on important transactions involves complex analysis and the exercise of professional judgment, including rendering "fairness opinions" in connection with mergers and other transactions. Our activities may subject us to the risk of significant legal liabilities to our clients and affected third parties, including shareholders of our clients who could bring securities class actions against us. In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against financial services companies have been increasing. These risks often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time. Our engagements typically include broad indemnities from our clients and provisions to limit our exposure to legal claims relating to our services, but these provisions may not protect us in all cases, including when a client does not have the financial capacity to pay under the indemnity. As a result, we may incur significant legal expenses in defending against or settling litigation. In addition, we may have to spend a significant amount to adequately insure against these potential claims. Substantial legal liability or significant regulatory action against us could have material adverse financial effects or cause significant reputational harm to us, which could seriously harm our business prospects.

Prior to our initial public offering in April 2014, our management had not previously managed a public company.

        Prior to our initial public offering in April 2014, our management team had operated our business as a privately-owned company. The individuals who constitute our management had not previously managed a publicly traded company.

        Compliance with public company requirements has placed significant additional demands on our management and has required us to enhance our investor relations, legal, financial reporting and corporate communications functions. These additional efforts may strain our resources and divert management's attention from other business concerns, which could adversely affect our business and profitability.

        In addition, the reorganization that took place in connection with the consummation of our initial public offering involved separating our advisory business from the asset management business of Old Holdings. These two businesses had historically utilized common management and operational structures, including facilities and technology platforms as well as legal, compliance, marketing and other support personnel and senior management oversight. The process of separating these businesses, and of operating our advisory business on a stand-alone basis, may result in increased costs and

21


Table of Contents

inefficiencies and other impediments to the regular operations of our business, the occurrence of any of which could adversely affect our business and profitability.

Extensive and evolving regulation of our business and the business of our clients exposes us to the potential for significant penalties and fines due to compliance failures, increases our costs and may result in limitations on the manner in which our business is conducted.

        As a participant in the financial services industry, we are subject to extensive regulation in the U.S. and internationally. We are subject to regulation by governmental and self-regulatory organizations in the jurisdictions in which we operate. As a result of market volatility and disruption in recent years, the U.S. and other governments have taken unprecedented steps to try to stabilize the financial system including providing assistance to financial institutions and taking certain regulatory actions. The full extent of the effects of these actions and of legislative and regulatory initiatives (including the Dodd-Frank Wall Street Reform and Consumer Protection Act) effected in connection with, and as a result of, such extraordinary disruption and volatility is uncertain, both as to the financial markets and participants in general, and as to us in particular.

        Our ability to conduct business and our operating results, including compliance costs, may be adversely affected as a result of any new requirements imposed by the Securities and Exchange Commission ("SEC"), FINRA or other U.S. or foreign governmental regulatory authorities or self-regulatory organizations that regulate financial services firms or supervise financial markets. We may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. In addition, some of our clients or prospective clients may adopt policies that exceed regulatory requirements and impose additional restrictions affecting their dealings with us. Accordingly, we may incur significant costs to comply with U.S. and international regulation. In addition, new laws or regulations or changes in enforcement of existing laws or regulations applicable to our clients may adversely affect our business. For example, changes in antitrust enforcement could affect the level of M&A activity and changes in applicable regulations could restrict the activities of our clients and their need for the types of advisory services that we provide to them.

        Our failure to comply with applicable laws or regulations could result in adverse publicity and reputational harm as well as fines, suspensions of personnel or other sanctions, including revocation of the registration of us or any of our subsidiaries as a financial advisor and could impair executive retention or recruitment. In addition, any changes in the regulatory framework could impose additional expenses or capital requirements on us, result in limitations on the manner in which our business is conducted, have an adverse impact upon our financial condition and business and require substantial attention by senior management. In addition, our business is subject to periodic examination by various regulatory authorities, and we cannot predict the outcome of any such examinations.

Our business is subject to various operational risks.

        We face various operational risks related to our business on a day-to-day basis. We rely heavily on financial, accounting, communication and other information technology systems, and the people who operate them. These systems, including the systems of third parties on whom we rely, may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or otherwise, including for reasons beyond our control.

        Our clients typically provide us with sensitive and confidential information. We are dependent on information technology networks and systems to securely process, transmit and store such information and to communicate among our locations around the world and with our clients, alliance partners and vendors. We may be subject to attempted security breaches and cyber-attacks and, while none have had a material impact to date, a successful breach could lead to shutdowns or disruptions of our systems or

22


Table of Contents

third-party systems on which we rely and potential unauthorized disclosure of sensitive or confidential information. Breaches of our or third-party network security systems on which we rely could involve attacks that are intended to obtain unauthorized access to our proprietary information, destroy data or disable, degrade or sabotage our systems, often through the introduction of computer viruses, cyber-attacks and other means and could originate from a wide variety of sources, including unknown third parties outside the firm. Although we take various measures to ensure the integrity of our and third-party systems on which we rely, there can be no assurance that these measures will provide adequate protection. If our or third-party systems on which we rely are compromised, do not operate properly or are disabled, we could suffer a disruption of our business, financial losses, liability to clients, regulatory sanctions and damage to our reputation.

        We operate a business that is highly dependent on information systems and technology. Any failure to keep accurate books and records can render us liable to disciplinary action by governmental and self-regulatory authorities, as well as to claims by our clients. We rely on third-party service providers for certain aspects of our business. Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair our operations, affect our reputation and adversely affect our business.

        In addition, a disaster or other business continuity problem, such as a pandemic, other man-made or natural disaster or disruption involving electronic communications or other services used by us or third parties with whom we conduct business, could lead us to experience operational challenges, and our inability to timely and successfully recover could materially disrupt our business and cause material financial loss, regulatory actions, reputational harm or legal liability.

We may not be able to generate sufficient cash in the future to service any future indebtedness.

        Our ability to make scheduled payments on or to refinance any future debt obligations depends on our financial condition and operating performance. We cannot provide assurance that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal of, and interest on, any future indebtedness. If our cash flows and capital resources are insufficient to fund any future debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance such indebtedness.

Our international operations are subject to certain risks, which may affect our revenue.

        In 2013, we earned approximately 19% of our revenues from our international operations. We intend to grow our non-U.S. business, and this growth is important to our overall success. In addition, many of our larger clients are non-U.S. entities seeking to enter into transactions involving U.S. businesses. Our international operations carry special financial and business risks, which could include the following:

    greater difficulties in managing and staffing foreign operations;

    language and cultural differences;

    fluctuations in foreign currency exchange rates that could adversely affect our results;

    unexpected changes in trading policies, regulatory requirements, tariffs and other barriers;

    longer transaction cycles;

    higher operating costs;

    adverse consequences or restrictions on the repatriation of earnings;

    potentially adverse tax consequences, such as trapped foreign losses;

23


Table of Contents

    less stable political and economic environments; and

    civil disturbances or other catastrophic events that reduce business activity.

        If our international business increases relative to our total business, these factors could have a more pronounced effect on our operating results.

Our growth strategy may involve opening or acquiring new offices and expanding internationally and would involve hiring new Managing Directors and other senior professionals for these offices, which would require substantial investment by us and could materially and adversely affect our operating results.

        Our ability to grow our advisory business organically depends in part on our ability to open or acquire new offices, expand internationally and hire new Managing Directors and other senior professionals for these offices. We may not be successful in any efforts to open new offices, expand internationally or hire new Managing Directors and other senior professionals for these offices. The costs of opening a new office, expanding internationally and hiring the necessary personnel to staff the office are substantial. If we are not successful in these efforts, we may not be able to recover our investments or our substantial cost outlays, and new international operations may not achieve profitability.

We may enter into new lines of business which may result in additional risks and uncertainties in our business.

        We currently generate substantially all of our revenue from advisory transactions. However, we may grow our business by entering into new lines of business. To the extent we enter into new lines of business, we will face numerous risks and uncertainties, including risks associated with actual or perceived conflicts of interest because we would no longer be limited to the advisory business, the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, the required investment of capital and other resources and the loss of clients due to the perception that we are no longer focusing on our core business.

        Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. In addition, certain aspects of our cost structure, such as costs for compensation, occupancy and equipment rentals, communication and information technology services, and depreciation and amortization will be largely fixed, and we may not be able to timely adjust these costs to match fluctuations in revenue related to our entering into new lines of business. If a new business generates insufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations could be materially adversely affected.

Fluctuations in foreign currency exchange rates could adversely affect our results.

        Because our financial statements are denominated in U.S. dollars and we receive a portion of our net revenue in other currencies (including euros and pound sterling), we are exposed to fluctuations in foreign currencies. In addition, we pay certain of our expenses in such currencies. We have not entered into any transactions to hedge our exposure to these foreign exchange fluctuations through the use of derivative instruments or otherwise. An appreciation or depreciation of any of these currencies relative to the U.S. dollar would result in an adverse or beneficial impact, respectively, to our financial results.

The cost of compliance with international broker-dealer, employment, labor, benefits and tax regulations may adversely affect our business and hamper our ability to expand internationally.

        Since we operate our business both in the U.S. and internationally, we are subject to many distinct broker-dealer, employment, labor, benefits and tax laws in each country in which we operate, including

24


Table of Contents

regulations affecting our employment practices and our relations with our employees and service providers. If we are required to comply with new regulations or new interpretations of existing regulations, or if we are unable to comply with these regulations or interpretations, our business could be adversely affected or the cost of compliance may make it difficult to expand into new international markets. Additionally, our competitiveness in international markets may be adversely affected by regulations requiring, among other things, the awarding of contracts to local contractors, the employment of local citizens and/or the purchase of services from local businesses or favoring or requiring local ownership.

Risks Related to Our Organizational Structure

Moelis & Company's only assets are its partnership interests in Group LP, its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC, and its interests in its subsidiaries, and Moelis & Company is accordingly dependent upon distributions from Group LP to pay dividends, taxes and other expenses.

        Moelis & Company is a holding company, and its only assets are its partnership interests in Group LP, its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC, and its interests in its subsidiaries. Moelis & Company has no independent means of generating revenue. Moelis & Company intends to cause Group LP to make distributions to its partners in an amount sufficient to cover all applicable taxes payable, other expenses and dividends, if any, declared by us.

        Group LP is generally prohibited under Delaware law from making a distribution to a partner to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Group LP (with certain exceptions) exceed the fair value of its assets. Furthermore, certain subsidiaries of Group LP may be subject to similar legal limitations on their ability to make distributions to Group LP. Moreover, our regulated subsidiaries may be subject to regulatory capital requirements that limit the distributions that may be made by those subsidiaries.

        Deterioration in the financial condition, earnings or cash flow of Group LP and its subsidiaries for any reason could limit or impair their ability to pay such distributions. Additionally, to the extent that Moelis & Company requires funds and Group LP is restricted from making such distributions under applicable law or regulation or under the terms of financing arrangements, or is otherwise unable to provide such funds, our liquidity and financial condition could be materially adversely affected.

We will be required to pay our Managing Directors for certain tax benefits we may claim as a result of the tax basis step-up we receive in connection with this offering and related transactions. In certain circumstances, payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual tax benefits we realize.

        Group LP Class A partnership units may be exchanged for shares of Class A common stock. See "Organizational Structure—Amended and Restated Limited Partnership Agreement of Group—Exchange Rights." On the date of our initial public offering, we were treated for U.S. federal income tax purposes as having directly purchased Class A partnership units in Group LP from the then existing unitholders which resulted in an increase in the tax basis of the assets of Group LP that otherwise would not have been available. The exchange and purchases of Class A partnership units in Group LP in connection with this offering, as well as future exchanges, may also result in increases in the tax basis of the assets of Group LP that otherwise would not have been available. Such increases in tax basis are likely to increase (for tax purposes) depreciation and amortization deductions and therefore reduce the amount of income tax we would otherwise be required to pay in the future. These increases in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent the increased tax basis is allocated to those capital assets. The Internal Revenue Service (the "IRS") may challenge all or part of these tax basis increases, and a court could sustain such a challenge.

25


Table of Contents

        We have entered into a tax receivable agreement with our Managing Directors that provides for the payment by us to our Managing Directors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (a) the increases in tax basis attributable to our Managing Directors and (b) tax benefits related to imputed interest deemed to be paid by us as a result of this tax receivable agreement. See "Organizational Structure—Tax Receivable Agreement." While the actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, and the amount and timing of our income, we expect that, as a result of the size of the increases in the tax basis of the tangible and intangible assets of Group LP attributable to our interests in Group LP, during the expected term of the tax receivable agreement, the payments that we may make to our Managing Directors could be substantial.

        Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, our Managing Directors generally will not reimburse us for any payments that may previously have been made under the tax receivable agreement. As a result, in certain circumstances we could make payments to the Managing Directors under the tax receivable agreement in excess of our cash tax savings. Our ability to achieve benefits from any tax basis increase, and the payments to be made under the tax receivable agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income.

        In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes of control or if, at any time, we elect an early termination of the tax receivable agreement, our (or our successor's) obligations with respect to exchanged or acquired Class A partnership units (whether exchanged or acquired before or after such change of control or early termination) would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement, and, in the case of certain early termination elections, that any Class A partnership units that have not been exchanged will be deemed exchanged for the market value of the Class A common stock at the time of termination. Consequently, it is possible, in these circumstances also, that the actual cash tax savings realized by us may be significantly less than the corresponding tax receivable agreement payments.

If Moelis & Company were deemed an "investment company" under the Investment Company Act of 1940 as a result of its ownership of Group LP, applicable restrictions could make it impractical for us to continue our business as contemplated and could materially and adversely affect our operating results.

        If Moelis & Company were to cease participation in the management of Group LP, its interests in Group LP could be deemed an "investment security" for purposes of the Investment Company Act of 1940 (the "1940 Act"). Generally, a person is deemed to be an "investment company" if it owns investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items), absent an applicable exemption. Moelis & Company has no assets other than its partnership interests in Group LP and its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC and its interests in its subsidiaries. A determination that this interest in Group LP was an investment security could result in Moelis & Company being an investment company under the 1940 Act and becoming subject to the registration and other requirements of the 1940 Act. We intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and

26


Table of Contents

have a material adverse effect on our business and operating results and the price of our Class A common stock.

We and Old Holdings have entered into various arrangements, including a master separation agreement, which contains cross-indemnification obligations of us and Old Holdings.

        The master separation agreement that we entered into with Old Holdings provides, among other things, that Old Holdings generally will indemnify us for losses that we incur arising out of, or relating to, the businesses conducted by Old Holdings and losses that we incur arising out of, or relating to, Old Holdings' breach of the master separation agreement. In addition, we generally will indemnify Old Holdings for losses that Old Holdings incurs arising out of, or relating to, our business and losses Old Holdings' incurs arising out of, or relating to, our breach of the master separation agreement. We may not be able to recover any or all of the amount of indemnified losses from Old Holdings should it be financially unable to perform under its indemnification obligations. In addition, we may be required to make substantial payments under our indemnity obligations to Old Holdings, which could materially adversely affect our results of operations.

The use of the "Moelis" brand name by Old Holdings and its subsidiaries may expose us to reputational harm that could adversely affect our business should they take actions that damage the brand name.

        Old Holdings operates as a separate legal entity, and we have licensed to Old Holdings and its subsidiaries the use of the "Moelis" brand name for certain purposes, including in connection with asset management activities. As Old Holdings and its subsidiaries historically have and will continue to use the "Moelis" brand name, and because we no longer control these entities, there is a risk of reputational harm to us if Old Holdings and its subsidiaries, among other things, have engaged, or in the future were to engage in poor business practices, or were to experience adverse results or otherwise damage the reputational value of the "Moelis" brand name. These risks could adversely affect our revenue and our business prospects.

Risks Related to Our Class A Common Stock and this Offering

Control by Mr. Moelis of the voting power in Moelis & Company may give rise to actual or perceived conflicts of interests.

        Moelis & Company is controlled by Mr. Moelis, through his control of Partner Holdings. Mr. Moelis' interests may differ from those of other stockholders. Immediately following this offering and the application of the proceeds of our issuance and sale of shares of Class A common stock as described under "Use of Proceeds," Mr. Moelis will control approximately 95.1% of the voting interest in Moelis & Company primarily through his control of Partner Holdings, which currently holds all outstanding Class B common stock. The shares of Class B common stock entitle Partner Holdings to (i) for so long as the Class B Condition is satisfied, ten votes per share and (ii) after the Class B Condition ceases to be satisfied, one vote per share. See "Organizational Structure—Amended and Restated Limited Partnership Agreement of Group LP—Voting and Economic Rights." In addition, Moelis & Company has entered into a stockholders agreement with Partner Holdings, pursuant to which, for so long as the Class B Condition is satisfied, Partner Holdings has certain approval rights over certain transactions. See "Organizational Structure—Rights of Partner Holdings and Stockholders Agreement." As a result, because Mr. Moelis has a majority of the voting power in Moelis & Company and our amended and restated certificate of incorporation provides for cumulative voting, he has the ability to elect all of the members of our board of directors and thereby to control our management and affairs, including determinations with respect to acquisitions, dispositions, borrowings, issuances of Class A common stock or other securities, and the declaration and payment of dividends. Mr. Moelis is able to determine the outcome of all matters requiring stockholder approval and is able to cause or prevent a change of control of Moelis & Company or a change in the composition of our board of

27


Table of Contents

directors and could preclude any unsolicited acquisition of Moelis & Company. Mr. Moelis' voting control could deprive our stockholders of an opportunity to receive a premium for their Class A common stock as part of a sale of Moelis & Company and might ultimately affect the market price of our Class A common stock. As a result of the control exercised by Mr. Moelis over us, our agreements entered into with him prior to or in connection with our initial public offering may not have been have been negotiated on "arm's length" terms. We cannot assure you that we would not have received more favorable terms from an unaffiliated party.

We are a "controlled company" within the meaning of the rules of the New York Stock Exchange and, as a result, qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        Mr. Moelis, through his control of Partner Holdings, holds more than 50% of the voting power of our shares eligible to vote. As a result, we are a "controlled company" under the rules of the New York Stock Exchange ("NYSE"). Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including the requirements that (i) a majority of the board of directors consist of independent directors and (ii) that the board of directors have compensation and nominating and corporate governance committees composed entirely of independent directors.

        For at least some period, we intend to utilize these exemptions. As a result, we do not have a majority of independent directors on our board of directors. Accordingly, although we may transition to a board with a majority of independent directors prior to the time we cease to be a "controlled company," for such period of time you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements set by the NYSE. In the event that we cease to be a "controlled company" and our shares continue to be listed on the NYSE, we will be required to comply with these provisions within the applicable transition periods. These exemptions do not modify the independence requirements for our audit committee, and we intend to comply with the applicable requirements of the SEC and the NYSE with respect to our audit committee within the applicable time frame.

We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

        We are an emerging growth company and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to "emerging growth companies," including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company until December 31, 2019. We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of our initial public offering in April 2014, (ii) the first fiscal year after our annual gross revenues are $1.0 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our Class A common stock

28


Table of Contents

less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Class A common stock, and the price of our common stock may be more volatile.

        Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this accommodation, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

The historical financial information in this prospectus may not permit you to predict our costs of operations.

        The historical financial information in this prospectus for the periods prior to our initial public offering in April 2014 does not reflect the added costs we incur as a public company, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act of 2002. As a result of these matters, among others, it may be difficult for investors to compare our future results to historical results or to evaluate our relative performance or trends in our business. For more information on our historical financial information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements included elsewhere in this prospectus.

If securities analysts do not publish research or reports about our business or if they downgrade our Company or our sector, the price of our Class A common stock could decline.

        The trading market for our Class A common stock depends in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our Company or our industry, or the stock of any of our competitors, the price of our Class A common stock could decline. If one or more of these analysts ceases coverage of our Company, we could lose visibility in the market, which in turn could cause the price of our Class A common stock to decline.

Our share price may decline due to the large number of shares eligible for future sale and for exchange.

        The market price of our Class A common stock could decline as a result of sales of a large number of shares of Class A common stock in the market after the offering or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. As of the date of this prospectus, we have outstanding 15,259,835 shares of Class A common stock, most of which may be resold immediately in the public market. See "Shares Eligible for Future Sale."

        We, the selling stockholders, all of our directors, officers, Partner Holdings (through which our U.S. based Managing Directors and certain non-U.S. based Managing Directors hold Group LP Class A partnership units) and the entity through which the remaining Managing Directors hold shares of Class A common stock have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their Class A common stock or securities convertible into or exchangeable for shares of Class A common stock during the period from the date of this offering continuing through the date that is 90 days (or 45 days in the case of our pre-IPO external equityholder selling stockholders) after the date of this offering, except with the prior written consent of the representatives of the underwriters. This agreement does not apply to any existing employee benefit plans. See "Shares Eligible for Future Sale" for a discussion of certain transfer restrictions.

        Existing Group LP Class A partnership unitholders (including certain Managing Directors) own, as of the date of this prospectus, an aggregate of 38,993,199 Class A partnership units in Group LP and, immediately following this offering and the application of the proceeds of our issuance and sale of shares of Class A common stock as described under "Use of Proceeds," will own an aggregate of

29


Table of Contents

35,269,631 Class A partnership units. Our amended and restated certificate of incorporation allows the exchange of Class A partnership units in Group LP (other than those held by us) for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. Further, immediately following this offering and the application of the proceeds of our issuance and sale of shares of Class A common stock as described under "Use of Proceeds," Partner Holdings will hold 32,407,374 shares of our Class B common stock, which will be convertible into 17,926 shares of our Class A common stock. Shares of Class A common stock (including those issuable upon exchange of Group LP partnership units) that are held by the Group LP Class A partnership unitholders (including our Managing Directors) will be eligible for resale from time to time, subject to certain contractual restrictions and to restrictions under the Securities Act of 1933, as amended (the "Securities Act").

        Certain Class A partnership unitholders in Group LP and holders of our Class A common stock are parties to agreements with us pursuant to which we have granted them registration rights. Under those agreements, these persons will have the ability to cause us to register the shares of our Class A common stock (including the shares they could acquire upon exchange of Class A partnership units in Group LP), subject to certain contractual restrictions. See "Organizational Structure—Registration Rights."

The market price of our Class A common stock may be volatile, which could cause the value of your investment to decline.

        Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our Class A common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our Class A common stock could decrease significantly. You may be unable to resell your shares of our Class A common stock at or above the public offering price.

Anti-takeover provisions in our organizational documents and Delaware law could delay or prevent a change in control.

        Our amended and restated certificate of incorporation and bylaws may delay or prevent a merger or acquisition that a stockholder may consider favorable by permitting our board of directors to issue one or more series of preferred stock, requiring advance notice for stockholder proposals and nominations and placing limitations on convening stockholder meetings. In addition, there is no cumulative voting in the election of directors, and our amended and restated certificate of incorporation provides that directors may be removed, with or without cause, only with the affirmative vote of at least 80% of the voting interest of stockholders entitled to vote; provided, however, that for so long as the Class B Condition is satisfied, directors may be removed, with or without cause, with the affirmative vote of a majority of the voting interest of stockholders entitled to vote. In addition, we are subject to provisions of the Delaware General Corporation Law that restrict certain business combinations with interested stockholders. These provisions may also discourage acquisition proposals or delay or prevent a change in control, which could harm our stock price. See "Description of Capital Stock."

30


Table of Contents


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include, but are not limited to, those described under "Risk Factors." These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

31


Table of Contents


ORGANIZATIONAL STRUCTURE

    Overview

        Prior to our initial public offering in April 2014, we effected the reorganization described below. Following the reorganization and our initial public offering, Moelis & Company became a holding company and its only assets are its partnership interests in Group LP, its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC, and its interests in its subsidiaries. Moelis & Company operates and controls all of the business and affairs of Group LP and its operating entity subsidiaries indirectly through its equity interest in Moelis & Company Group GP LLC.

        The diagram below depicts our organizational structure following this offering and the application of the proceeds from our issuance and sale of shares of Class A common stock as described under "Use of Proceeds."

GRAPHIC

32


Table of Contents

        Immediately following this offering and the application of the proceeds of our issuance and sale of shares of Class A common stock as described under "Use of Proceeds":

    Moelis & Company will hold Class A partnership units in Group LP representing 35.0% of the total number of Class A partnership units in Group LP (or 36.5% if the underwriters exercise their option to purchase additional shares in full);

    certain of our Class A partnership unitholders (including all of our Managing Directors (other than certain non-U.S. based Managing Directors) indirectly through Partner Holdings) will hold Class A partnership units in Group LP representing 65.0% of the total number of Class A partnership units in Group LP (or 63.5% if the underwriters exercise their option to purchase additional shares in full);

    certain former Group LP Class A unitholders and Old Holdings unitholders (including certain non-U.S. based Managing Directors and employees) will, directly or indirectly, own approximately 31.7% of the Class A common stock (or 30.2% if the underwriters exercise their option to purchase additional shares in full); and

    public stockholders will own 68.3% of the Class A common stock (or 69.8% if the underwriters exercise their option to purchase additional shares in full).

    The Reorganization

        On January 9, 2014, in preparation for our initial public offering, Moelis & Company was incorporated in Delaware. Prior to our initial public offering in April 2014, Moelis & Company held no assets and had no subsidiaries other than Moelis & Company Group GP LLC.

        Prior to our initial public offering in, our business was owned by Moelis Asset Management LP (formerly known as Moelis & Company Holdings LP), which we refer to in this prospectus as Old Holdings. In connection with the consummation of our initial public offering, a reorganization of the businesses of Old Holdings was effected pursuant to which the advisory business of Old Holdings was transferred to Group LP. Old Holdings retains the asset management business, which includes managers of direct lending funds, hedge funds, private equity funds, collateralized loan obligation funds and certain other asset management businesses. We refer to these transactions as the "reorganization."

        As part of the reorganization, Old Holdings distributed to its partners, directly or indirectly, all of the Group LP Class A partnership units it held. However, Old Holdings and Moelis & Company, in lieu of Group LP Class A partnership units, issued an equivalent number of shares of Moelis & Company Class A common stock to certain partners of Old Holdings. Following the reorganization and our initial public offering, we and Old Holdings are party to certain agreements. See "Certain Relationships and Related Person Transactions—Agreements with Old Holdings."

        As a result of the reorganization, Moelis & Company became a holding company and its only assets are its partnership interests in Group LP, its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC, and its interests in its subsidiaries. Through our control of the sole general partner of Group LP, we operate and control all of the business and affairs of Group LP and its operating entity subsidiaries.

    Amended and Restated Limited Partnership Agreement of Group LP

        We operate our business through Group LP and its subsidiaries. The provisions governing the operations of Group LP and the rights and obligations of its partners are set forth in the amended and restated limited partnership agreement of Group LP, the material terms of which are described below. The amended and restated limited partnership agreement of Group LP is filed as an exhibit to the registration statement of which this prospectus forms a part.

33


Table of Contents

    Governance

        Through our control of the general partner of Group LP, we have unilateral control (subject to the consent of Partner Holdings on various matters) over the affairs and decisions of Group LP. As such, we, through our officers and directors, are responsible for all operational and administrative decisions of Group LP and the day-to-day management of Group LP's business. Furthermore, Moelis & Company Group GP LLC, Group LP's general partner, cannot be removed as the general partner without Moelis & Company's approval. No Group LP unitholders, in their capacity as such, have any authority or right to control the management of Group LP or to bind it in connection with any matter. However, Partner Holdings has the ability to exercise majority voting control over Moelis & Company by virtue of its ownership of all shares of Class B common stock. See "Risk Factors—Risks Related to Our Class A Common Stock and this Offering—Control by Mr. Moelis of the voting power in Moelis & Company may give rise to actual or perceived conflicts of interest."

    Voting and Economic Rights

        Group LP issued Class A partnership units to Moelis & Company and to the holders of Old Holdings units at the time of the reorganization. In addition, Group LP issued Class B partnership units to Moelis & Company. The Group LP Class B partnership units correspond with the economic rights of shares of Moelis & Company's Class B common stock. Group LP Class A unitholders have no voting rights by virtue of their ownership of Group LP partnership units, except for the right to approve certain amendments to the amended and restated limited partnership agreement of Group LP, certain changes to the capital accounts of the limited partners of Group LP and any conversion of Group LP to a corporation other than for purposes of a sale transaction. Partner Holdings holds all shares of Moelis & Company Class B common stock, enabling it to exercise majority voting control over Moelis & Company and, indirectly, over Group LP. See "Risk Factors—Risks Related to Our Class A Common Stock and this Offering—Control by Mr. Moelis of the voting power in Moelis & Company may give rise to actual or perceived conflicts of interest."

        Pursuant to the Group LP amended and restated limited partnership agreement, we have the right to determine when distributions will be made to the partners of Group LP and the amount of any such distributions. If we authorize a distribution, such distribution will be made to the partners of Group LP (i) in the case of a tax distribution (as described below), to the holders of partnership units in proportion to the amount of taxable income of Group LP allocated to such holder and (ii) in the case of other distributions, pro rata in accordance with the percentages of their respective partnership units, except as required under applicable tax law.

        The holders of partnership units in Group LP, including Moelis & Company, incur U.S. federal, state and local income taxes on their allocable share of any net taxable income of Group LP. Net profits and net losses of Group LP are generally allocated to its partners pro rata in accordance with the percentages of their respective partnership units, except as required under applicable tax law. In accordance with the partnership agreement, we intend to use commercially reasonable efforts to cause Group LP to make cash distributions to the holders of partnership units of Group LP for purposes of funding their tax obligations in respect of the income of Group LP that is allocated to them. Generally, these tax distributions will be computed based on our estimate of the net taxable income of Group LP allocable to such holder of partnership units multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporation (taking into account the nondeductibility of certain expenses and the character of our income).

34


Table of Contents

    Coordination of Moelis & Company and Group LP

        At any time we issue a share of Class A common stock for cash, unless we use the proceeds for certain specified permitted purposes (including the acquisition Group LP Class A partnership units or other property), the proceeds received by us will be promptly transferred to Group LP, and Group LP will issue to us one of its Group LP Class A partnership units. At any time we issue a share of Class A common stock pursuant to our equity incentive plan we will contribute to Group LP all of the proceeds that we receive (if any), and Group LP will issue to us one of its Group LP Class A partnership units, having the same restrictions, if any, attached to the shares of Class A common stock issued under the equity incentive plan. Conversely, if we redeem or repurchase any of our shares of Class A common stock, Group LP will, immediately prior to our redemption or repurchase, redeem or repurchase an equal number of Group LP Class A partnership units held by us, upon the same terms and for the same price, as the shares of Class A common stock are redeemed or repurchased. We can only redeem or repurchase shares of Class A common stock if Group LP first redeems or repurchases an equivalent amount of Group LP Class A partnership units that we hold.

        Under the terms of the Group LP amended and restated limited partnership agreement, we may in the future cause Group LP to issue Group LP partnership units or other, newly created classes of Group LP securities to one or more investors having such rights, preferences and other terms as we determine, and in such amount as we may determine. In addition, we may in the future elect to compensate our employees by granting them, directly or indirectly, Group LP partnership units, whether or not subject to forfeiture, or profits interests or other securities. Any such issuance would have a dilutive effect on the economic interest we hold in Group LP. In addition, in connection with any future issuances of Group LP Class A partnership units to Partner Holdings, we will issue an equivalent number of shares of Class B common stock having, for so long as the Class B Condition is satisfied, ten votes per share, which would have a dilutive effect on the voting power of our then current holders of shares of Class A common stock. The tax receivable agreement will cover any exchanges of Group LP Class A partnership units issued to the current parties to that agreement, and it is possible that new investors in the Group LP Class A partnership units after the offering may become parties to the tax receivable agreement as well.

        Pursuant to the Group LP amended and restated limited partnership agreement, we agree that we will not conduct any business other than the management and ownership of Group LP, its general partner, and its operating entity subsidiaries, or own any other assets (other than cash or cash equivalents to be used to satisfy liabilities or other assets held on a temporary basis).

    Material Corporate Transactions

        In the event that Group LP proposes to engage in a material corporate transaction, including a merger, consolidation, dissolution or sale of substantially all of its assets, we, through Moelis & Company Group GP LLC, in its capacity as the sole general partner of Group LP shall have the power and authority to approve such a transaction. In addition, in the event that we, through Moelis & Company Group GP LLC, in its capacity as the sole general partner of Group LP, determine that all (or any portion) of the partnership units of Group LP, should be sold to a third party purchaser, we have the right to compel the holders of the partnership units of Group LP to sell all or the same portion of their partnership units of Group LP to this third party purchaser.

    Exchange Rights

        Subject to the transfer and exchange restrictions set forth in the Group LP amended and restated limited partnership agreement and described below and other restrictions, if any, imposed by us, holders of fully vested Group LP Class A partnership units (other than Moelis & Company) may exchange these units for shares of Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.

35


Table of Contents

        Following this offering and the application of the proceeds of our issuance and sale of shares of Class A common stock as described under "Use of Proceeds," we will have reserved for issuance 35,269,631 shares of Class A common stock in respect of the aggregate number of shares of Class A common stock expected to be issued over time upon the exchanges by Group LP Class A partnership unitholders, unless Moelis & Company exercises its option to pay cash in lieu of shares of Class A common stock for some or all of such exchanged Group LP Class A partnership units. The cash amount will be based on the market price of the shares of Class A common stock. We may in the future cause Group LP to issue additional Group LP Class A partnership units that would also be exchangeable for shares of Class A common stock.

        Group LP Class A partnership units and Moelis & Company Class A common stock held by our Managing Directors (including through Partner Holdings) are subject to lock-up agreements for four years from the date of our initial public offering. After this period, Group LP Class A partnership units held by a Managing Director will become exchangeable into Class A common stock or cash as described above and Moelis & Company Class A common stock held by a Managing Director will become transferable, in each case in three equal installments on each of the fourth, fifth and sixth anniversary of our initial public offering. If a Managing Director terminates his or her employment with the Company prior to the end of the lock-up period, the Company will be entitled to extend the lock-up period until up to the tenth anniversary of our initial public offering. We may waive the transfer and exchange restrictions set forth in the Group LP amended and restated limited partnership agreement, including in connection with an offering of shares of our Class A common stock by our Managing Directors. In addition, these restrictions cease to apply upon the death or termination of employment by us due to disability of the applicable Managing Director with respect to such Managing Director's Group LP Class A partnership units.

    Conversion of Class B Common Stock

        Following each exchange of Group LP Class A partnership units held by Partner Holdings for shares of Class A common stock, Partner Holdings is required to surrender to Moelis & Company a corresponding number of shares of Class B common stock for conversion into shares of Class A common stock at a conversion rate based on the subscription price for such shares of Class B common stock to the initial public offering price of the Class A common stock in our initial public offering of $25.00. The conversion rate is approximately 0.055%. Group LP will also convert an equivalent number of Class B partnership units held by Moelis & Company into Class A partnership units based on the same Class B to Class A common stock conversion rate. Following this offering and the application of the proceeds of our issuance and sale of shares of Class A common stock as described under "Use of Proceeds," we will have reserved 17,926 shares of Class A common stock in respect of shares of Class A common stock that may be issued upon conversion of shares of Class B common stock.

    Indemnification and Exculpation

        To the extent permitted by applicable law, Group LP will indemnify its general partner, its executive officers and agents from and against any losses, liabilities, damages, costs, expenses, fees or penalties incurred by any acts or omissions of these persons, provided that the acts or omissions of these indemnified persons are not the result of fraud, intentional misconduct or a violation of the implied contractual duty of good faith and fair dealing, or any lesser standard of conduct permitted under applicable law.

        Group LP's general partner and its executive officers and agents will not be liable to Group LP, its limited partners or their affiliates for damages incurred by any acts or omissions of these persons, provided that the acts or omissions of these exculpated persons are not the result of fraud, intentional misconduct or a violation of the implied contractual duty of good faith and fair dealing, or any lesser standard of conduct permitted under applicable law.

36


Table of Contents

    Dissolution

        Group LP may be dissolved only upon the occurrence of certain unlikely events specified in the Group LP amended and restated limited partnership agreement.

    Restrictive Covenants of our Managing Directors

        Prior to the expiration of the Managing Director lock-up, our Managing Directors are generally subject to forfeiting their interests in vested Group LP partnership units and Moelis & Company Class A common stock they held as of the initial public offering if they terminate their employment without good reason and compete with the Company within 12 months thereafter, except for a certain limited number of designated units and stock which were awarded to replace equity of a former employer forfeited upon joining.

        Our Managing Directors have agreed not to solicit our employees during the term of their employment and for 12 months thereafter.

    Registration Rights

        Moelis & Company has granted registration rights pursuant to which:

    Moelis & Company is required to use its reasonable best efforts to file a shelf registration statement providing for the exchange of Group LP Class A partnership units held by certain Group LP non-employee Class A unitholders for an equivalent number of shares of its Class A common stock and the resale of shares of Class A common stock held by certain non-Managing Directors at any time and from time to time thereafter, subject to applicable restrictions imposed by Moelis & Company. Moelis & Company intends to file this shelf registration statement once it becomes eligible to file registration statements using Form S-3;

    Moelis & Company is required to use its reasonable best efforts to file a shelf registration statement within three months of the expiration of the lock-up period relating to our Managing Directors described above, providing for the exchange of Group LP Class A partnership units held by such Managing Directors for an equivalent number of shares of Moelis & Company Class A common stock and the resale of shares of Moelis & Company Class A common stock by our Managing Directors at any time and from time to time, subject to applicable restrictions imposed by Moelis & Company;

    certain Group LP Class A unitholders have the ability to cause the Company to register the shares of its Class A common stock they could acquire upon exchange of their Group LP Class A partnership units, subject to certain contractual restrictions; and

    certain Group LP Class A unitholders have the ability to cause the Company to register the shares of its Class A common stock they could acquire upon exchange of their Group LP Class A partnership units, subject to certain contractual restrictions, in any public underwritten offerings by the Company after the expiration or earlier termination (if any) of an applicable lock-up agreement subject to customary pro rata cutbacks.

        Our registration obligations are subject to certain restrictions on, among other things, the frequency of requested registrations, the number of shares to be registered and the duration of these rights.

        Effective January 1, 2012, we entered into a strategic alliance with Sumitomo Mitsui Banking Corporation ("SMBC") and its subsidiary, SMBC Nikko Securities Inc. ("Nikko"). Pursuant to the strategic alliance agreement, we granted SMBC the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act shares of our Class A common

37


Table of Contents

stock issuable upon exchange of their Class A partnership units. Such securities registered under any registration statement will be available for sale in the open market unless restrictions apply.

    Rights of Partner Holdings and Stockholders Agreement

        Moelis & Company is party to a stockholders agreement with Partner Holdings pursuant to which, for so long as the Class B Condition is satisfied, Partner Holdings has approval rights over the following transactions:

    any incurrence of indebtedness (other than inter-company indebtedness) in excess of $20 million;

    any issuance by us of equity or equity-related securities (other than preferred stock) that would represent, after such issuance or upon conversion, exchange or exercise, as the case may be, at least three percent (3%) of the total voting power of our outstanding shares of Class A common stock (except in certain circumstances);

    the issuance by us of preferred stock;

    any debt or equity investment by us (including any commitment to invest) in an amount greater than $20 million;

    any entry by us into a new line of business that requires a principal investment in excess of $20 million;

    the adoption of stockholder rights plans;

    the appointment or termination of Section 16 officers;

    any amendments to Moelis & Company's amended and restated certificate of incorporation or bylaws;

    any amendments to Group LP's amended and restated limited partnership agreement;

    renaming Moelis & Company;

    the adoption of annual budgets and business plans;

    distributions to stockholders (except in certain circumstances);

    entry into any merger, consolidation, recapitalization, liquidation or sale of Moelis & Company or all or substantially all of its assets or certain similar transactions involving Moelis & Company or entering into any agreement providing therefor (except in certain circumstances);

    voluntarily initiating any liquidation, dissolution or winding up of Moelis & Company or permitting the commencement of a proceeding for bankruptcy, insolvency, receivership or similar action with respect to Moelis & Company or any of its subsidiaries or controlled affiliates;

    the entry into or amendment of certain material contracts;

    the entry into related party transactions;

    the initiation or settlement of material legal actions; and

    changes to our taxable or fiscal year.

        The effect of the agreement is that Partner Holdings may maintain control over our significant corporate transactions even if it holds less than a majority of the combined total voting power of our shares of Class A and Class B common stock.

        Our board of directors will nominate individuals designated by Partner Holdings equal to a majority of the board of directors, for so long as the Class B Condition is satisfied.

38


Table of Contents

        The "Class B Condition" is defined as Mr. Moelis satisfying all of the following conditions:

              (i)  he maintains directly or indirectly ownership of an aggregate of at least 4,458,445 shares of Class A common stock of Moelis & Company and Equivalent Class A Shares (as defined below), subject to customary adjustments, which represent approximately one-third of his ownership immediately following our initial public offering;

             (ii)  he maintains directly or indirectly beneficial ownership (as defined below) of at least five percent (5%) of the Class A common stock of Moelis & Company (calculated, without duplication, on the basis that all issued and outstanding Group LP Class A partnership units not held by Moelis & Company or its subsidiaries had been exchanged for shares of Class A common stock of Moelis & Company);

            (iii)  he has not been convicted of a criminal violation of a material U.S. federal or state securities law that constitutes a felony or a felony involving moral turpitude;

            (iv)  he is not deceased; and

             (v)  his employment agreement has not been terminated in accordance with its terms because of a breach of his covenant to devote his primary business time and effort to the business and affairs of the Company and its subsidiaries or because he suffered an "incapacity" (i.e., order of incompetence or of insanity or permanent physical incapacity).

        "Equivalent Class A Shares" means, on any date, the number of shares of Class A common stock represented by any shares, units, interests, options, warrants, evidence of indebtedness, stock awards or other securities or awards which by their terms are directly or indirectly convertible into, exchangeable for, exercisable for or pursuant to which the holder is entitled to receive shares of Class A common stock, whether immediately, only after the passage of time or only after the satisfaction of conditions and notwithstanding any right to pay cash in lieu of shares of Class A common stock.

        "Beneficial ownership" has the same meaning given to it in Section 13(d) under the Exchange Act and the rules thereunder, except that a person will be deemed to have "beneficial ownership" of all securities that person has the right to acquire, whether the right is exercisable immediately, only after the passage of time or only after the satisfaction of conditions and notwithstanding any right to pay cash in lieu of such securities.

        After the Class B Condition ceases to be satisfied, for so long as the Secondary Class B Condition is satisfied, Partner Holdings will have certain approval rights over the following transactions:

    the appointment or termination of the Chief Executive Officer;

    any amendments to Moelis & Company's amended and restated certificate of incorporation or bylaws that materially and adversely affect in a disproportionate manner the rights of Mr. Moelis; and

    any amendments to Group LP's amended and restated limited partnership agreement that materially and adversely affect in a disproportionate manner the rights of Mr. Moelis.

        After the Class B Condition ceases to be satisfied, for so long as the Secondary Class B Condition is satisfied, our board of directors will nominate individuals designated by Partner Holdings equal to one quarter of the board of directors.

        For so long as either the Class B Condition or the Secondary Class B Condition is satisfied, Partner Holdings will retain the right to remove any director previously designated by it.

39


Table of Contents

        The "Secondary Class B Condition" is defined as Mr. Moelis satisfying all of the following conditions:

    he maintains directly or indirectly ownership of an aggregate of at least 2,229,222 shares of Class A common stock of Moelis & Company and Equivalent Class A Shares, subject to customary adjustments, which represent approximately one-sixth of his ownership immediately following our initial public offering; and

    conditions (ii)-(v) required under the Class B Condition.

    Tax Receivable Agreement

        On the date of our initial public offering, Moelis & Company was treated for U.S. federal income tax purposes as having directly purchased Class A partnership units in Group LP from the then existing unitholders. In the future, additional Group LP Class A partnership units may be exchanged for shares of Class A common stock. We expect that, as a result of the initial purchase, the exchanges and purchases of Group LP Class A partnership units in connection with this offering and future exchanges of Group LP Class A partnership units for shares of Class A common stock, the tax basis of Group LP's assets attributable to our interests in Group LP will be increased. These increases in the tax basis of Group LP's assets attributable to our interests in Group LP would not have been available to us but for the initial purchase, the exchanges and purchases in connection with this offering and future exchanges of Group LP Class A partnership units for shares of Class A common stock. Such increases in tax basis are likely to increase (for tax purposes) depreciation and amortization deductions and therefore reduce the amount of income tax we would otherwise be required to pay in the future. These increases in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent the increased tax basis is allocated to those capital assets. The IRS may challenge all or part of these tax basis increases, and a court could sustain such a challenge.

        We are party to a tax receivable agreement with our eligible Managing Directors that provides for the payment by us to our eligible Managing Directors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (a) the increases in tax basis attributable to exchanges by our eligible Managing Directors and (b) tax benefits related to imputed interest deemed to be paid by us as a result of this tax receivable agreement. We expect to benefit from the remaining 15% of cash savings, if any, in income tax that we realize. For purposes of the tax receivable agreement, cash savings in income tax are computed by comparing our actual income tax liability to the amount of such taxes that we would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of Group LP as a result of the exchanges and had we not entered into the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivable agreement for an amount based on an agreed value of payments remaining to be made under the agreement.

        Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, our eligible Managing Directors will not reimburse us for any payments previously made under the tax receivable agreement. As a result, in certain circumstances we may make payments to the eligible Managing Directors generally under the tax receivable agreement in excess of our actual cash tax savings. While the actual amount and timing of any payments under this agreement will vary depending upon a number of factors, including the timing of exchanges, the price of shares of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that, as a result of the size of the increases of the tangible and intangible assets of Group LP attributable to our interests in Group LP, during the expected term of the tax receivable agreement, the payments that we may make to our eligible Managing Directors could be substantial. Payments made under the tax receivable agreement are required to be made

40


Table of Contents

within 225 days of the filing of our tax returns. Because we generally expect to receive the tax savings prior to making the cash payments to the eligible Managing Directors, we do not expect the cash payments to have a material impact on our liquidity.

        In addition, the tax receivable agreement provides that, upon a merger, asset sale, or other form of business combination or certain other changes of control or if, at any time, we elect an early termination of the tax receivable agreement, our (or our successor's) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control or early termination) will be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement, and, in the case of certain early termination elections, that any units that have not been exchanged are deemed exchanged for the market value of the Class A common stock at the time of termination. Consequently, it is possible in these circumstances that the actual cash tax savings realized by us may be significantly less than the corresponding tax receivable agreement payments.

41


Table of Contents


USE OF PROCEEDS

        We intend to use the gross proceeds from our issuance and sale of 1,535,392 shares of Class A common stock (or 1,826,678 shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock) to purchase from certain holders (including certain of our Managing Directors and employees) (i) outstanding Class A partnership units in Group LP, (ii) outstanding shares of Class A common stock, (iii) units of an entity which holds Class A common stock and (iv) options to purchase shares of Class A common stock. Certain holders of these securities (including our current Managing Directors) have agreed to reimburse us for their portion of the underwriting commissions payable in connection with this offering, which represents over 95% of the underwriting commissions payable in connection with our issuance and sale of shares of Class A common stock.

        We will not receive any proceeds from the sale of our Class A common stock by the selling stockholders.

        We are conducting this offering to facilitate organized liquidity in our Class A common stock and to increase the public float of our Class A common stock.

42


Table of Contents


MARKET PRICE FOR COMMON STOCK

        Our Class A common stock has traded on the NYSE under the symbol "MC" since April 16, 2014. Before then, there was no public market for our Class A common stock. The following table sets forth the high and low sales prices per share of our Class A common stock as reported by the NYSE. On November 14, 2014, the closing price of our Class A common stock was reported by the NYSE as $35.01. On November 14, 2014, there were approximately 165 holders of record of our Class A common stock and one holder of record of our Class B common stock.

Period
  Low   High  

Second Quarter of 2014 (April 16, 2014 to June 30, 2014)

  $ 25.75   $ 35.85  

Third Quarter of 2014

  $ 29.66   $ 37.37  

Fourth Quarter of 2014 (October 1, 2014 to November 14, 2014)

  $ 29.76   $ 36.22  

43


Table of Contents


DIVIDEND POLICY

        Subject to applicable law, we currently intend to pay a quarterly cash dividend equal to $0.20 per share of Class A common stock. Any declaration and payment of future dividends to holders of our Class A common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our board of directors deems relevant.

        Holders of our Class B common stock will be entitled to receive dividends of the same type as any dividends payable on outstanding Class A common stock. Dividends on shares of Class B common stock will be calculated based on the applicable subscription amount such that the aggregate dividends payable with respect to Class B common stock will equal the dividends payable with respect to an equivalent dollar amount of Class A common stock. See "Description of Capital Stock—Class B Common Stock."

        On September 8, 2014, Moelis & Company paid a dividend of $0.20 per share of Class A common stock to holders of record on August 25, 2014. On September 8, 2014, Moelis & Company also paid a dividend to holders of its Class B common stock based on the calculation described above.

        On October 28, 2014, our board of directors declared a special dividend of $1.00 per share of Class A common stock in addition to a regular quarterly dividend of $0.20 per share reflecting our strong cash flow generation and commitment to returning capital to stockholders. The dividends will be paid on November 24, 2014 to holders of record on November 10, 2014. Purchasers of shares of Class A common stock in this offering will not be entitled to these dividends.

        Moelis & Company is a holding company and its only assets are its partnership interests in Group LP, its equity interest in the sole general partner of Group LP, Moelis & Company Group GP LLC, and its interests in its subsidiaries. Under Delaware law, dividends may be payable only out of surplus, which is calculated as our assets less our liabilities and our capital, or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. We intend to cause Group LP to make distributions to Moelis & Company in an amount sufficient to cover dividends, if any, declared by us. If Group LP makes such distributions, each other Group LP Class A unitholder will be entitled to receive equivalent distributions from Group LP on its units.

44


Table of Contents


CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2014:

    on an actual basis;

    on an as adjusted basis to give effect to the sale by the Company and the selling stockholders of 5,500,000 shares of Class A common stock in this offering, and the application of the proceeds of the Company's issuance and sale of 1,535,392 shares of Class A common stock as described under "Use of Proceeds."

        You should read this table in conjunction with the sections entitled "Organizational Structure," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated and combined financial statements and related notes included elsewhere in this prospectus.

 
  As of September 30, 2014  
(in thousands, except share amounts)
  Actual   As adjusted  

Cash and cash equivalents(1)

  $ 142,098   $ 142,098  
           
           

Accumulated other comprehensive income

    521     521  

Stockholders' equity:

             

Class A common stock, par value $0.01 per share (1,000,000,000 shares authorized, 15,260,806 issued and outstanding, actual; 1,000,000,000 shares authorized, 18,982,427 issued and outstanding, as adjusted)

    153     190  

Class B common stock, par value $0.01 per share (1,000,000,000 shares authorized, 36,149,180 issued and outstanding, actual; 1,000,000,000 shares authorized, 32,427,559 issued and outstanding, as adjusted)

    362     325  

Additional paid-in-capital

    94,367     116,713  

Retained earnings (accumulated deficit)

    (15,517 )   (15,517 )

Noncontrolling interests

    94,802     85,761  
           

Total capitalization(1)

    174,688     187,993  
           
           

(1)
These amounts do not reflect the payment of a special dividend of $1.00 per share of Class A common stock and regular quarterly dividend of $0.20 per share, each declared by our board of directors on October 28, 2014. Following the payment of these dividends, our cash and cash equivalents and total capitalization will be reduced by approximately $65.3 million. The dividends will be paid on November 24, 2014 to holders of record on November 10, 2014. Purchasers of shares of Class A common stock in this offering will not be entitled to these dividends. See "Dividend Policy."

45


Table of Contents


UNAUDITED PRO FORMA FINANCIAL INFORMATION

        The following unaudited pro forma condensed consolidated and combined financial statements have been derived by applying pro forma adjustments to our historical consolidated and combined financial statements included elsewhere in this prospectus.

        The adjustments necessary to fairly present the unaudited pro forma condensed consolidated and combined financial statements have been based on available information and assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated and combined financial statements are presented for illustrative purposes only and do not purport to represent our results of operations that would actually have occurred had the transactions referred to below been consummated on January 1, 2013 for the statements of operations, as applicable, and on September 30, 2014 for the statement of financial condition. The adjustments are described in the notes to the unaudited pro forma condensed consolidated and combined financial statements.

        The pro forma adjustments principally give effect to the following items:

        Statements of Operations

    A provision for corporate income taxes based on an allocation of earnings to Moelis & Company and to noncontrolling interests as if the Company had been operating in its new corporate structure following the reorganization and ownership following our initial public offering and this offering since the beginning of the period presented; and

    The granting of restricted stock units ("RSUs"), stock options and shares of Class A common stock to employees of the Company at the time of our initial public offering.

        Statement of Financial Condition

    An increase in Moelis & Company's interest in Group LP in connection with this offering.

        The unaudited pro forma condensed consolidated and combined financial information is included for informational purposes only and does not purport to reflect our results of operations that would have occurred had we operated as a public company or had this offering been consummated during the periods presented. You should read this unaudited pro forma condensed consolidated and combined financial information together with the other information contained in this prospectus, including

46


Table of Contents

"Organizational Structure," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated and combined financial statements and the notes thereto.

 
  Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 2013
 
($ in thousands, except per share data)
  Moelis &
Company
Historical
  Reorganization
Adjustments
  As Adjusted
Before Initial
Public Offering
  Initial Public
Offering
Adjustments
  As Adjusted
Before Secondary
Offering
  Secondary
Offering
Adjustments
  Moelis &
Company Pro
Forma
 

Revenues

  $ 411,386   $   $ 411,386   $   $ 411,386   $   $ 411,386  

Expenses:

                                           

Compensation and benefits

    264,944         264,944     7,512 (d)   272,456         272,456  

Non-compensation expenses

    76,333         76,333         76,333         76,333  
                               

Total operating expenses

    341,277         341,277     7,512     348,789         348,789  

Operating income

    70,109         70,109     (7,512 )   62,597         62,597  

Other income and expenses

    (771 )       (771 )       (771 )       (771 )

Income from equity method investments

    3,681         3,681         3,681         3,681  
                               

Income before income taxes

    73,019         73,019     (7,512 )   65,507         65,507  

Provision for income taxes

    2,794     4,353 (a)   7,147     2,229 (e)   9,376     1,605 (h)   10,981  
                               

Net income

    70,225     (4,353 )   65,872     (9,741 )   56,131     (1,605 )   54,526  

Net income attributable to noncontrolling interests

        58,652 (b)   58,652     (13,572 )(f)   45,080     (4,299 )(i)   40,781  
                               

Net income attributable to Moelis & Company

  $ 70,225   $ (63,005 ) $ 7,220   $ 3,831   $ 11,051   $ 2,694   $ 13,745  
                               
                               

Weighted average shares of Class A common stock outstanding:

                                           

Basic

                7,699,851 (c)         15,263,653 (g)   3,721,621 (j)   18,985,274  

Diluted

                7,699,851 (c)         15,263,653 (g)   3,721,621 (j)   18,985,274  

Net income available to holders of shares of Class A common stock per share:

                                           

Basic

              $ 0.94 (c)       $ 0.72 (g)       $ 0.72  

Diluted

              $ 0.94 (c)       $ 0.72 (g)       $ 0.72  

(a)
In connection with the reorganization, 16.48% of the outstanding partnership interests were converted directly into 7,699,851 shares of Class A common stock of Moelis & Company. An adjustment has been made to increase our effective tax rate to 40%, which assumes the Company was taxed as a corporation.

Income before income taxes

  $ 73,019  

Noncontrolling interest %

    83.52 %
       

Income attributable to noncontrolling interest

  $ 60,986  
       

Income attributable to common shareholders

  $ 12,033  

Effective tax rate

    40 %
       

Provision for income taxes

  $ 4,813  

Less: Prior recorded provision attributable to common shareholders

  $ 460  
       

Adjustment to provision for income taxes

  $ 4,353  
(b)
Reflects an adjustment to record the 83.52% noncontrolling interests, net of tax, that partners of Old Holdings (other than the Company) own in Group LP relating to their partnership units. As part of the reorganization, 7,699,851 shares of Class A common stock were outstanding in Moelis & Company and 39,022,902 partnership units were held by partners of Old Holdings.

(c)
Reflects net income attributable to common stockholders divided by weighted average Class A common stock outstanding.

Basic and diluted weighted average Class A common stock outstanding is calculated as follows:

 
  Basic and Diluted  

Class A common stock outstanding upon completion of the reorganization

    7,699,851  

Class A partnership units(1)

     
       

Weighted average shares of Class A common stock outstanding upon completion of the reorganization

    7,699,851  
       
       

(1)
Class A partnership units may be exchanged for our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications and compliance with applicable lock-up, vesting and transfer restrictions. If all Class A partnership units were to be exchanged for Class A common stock immediately following the reorganization, fully diluted Class A common stock outstanding would be 46,722,753. In computing the dilutive effect, if any, that the aforementioned exchange would have on earnings per share, we consider that net income available to holders of Class A common stock would increase due to elimination of the noncontrolling interest in consolidated entities associated with the Group LP Class A partnership units (including any tax impact). For the year ended December 31, 2013, such exchange is not reflected in diluted earnings per share as the assumed exchange is not dilutive.

47


Table of Contents

(d)
Reflects compensation expense associated with RSUs and stock options issued in connection with our initial public offering. The total fair value of these RSUs and stock options granted were $33,644 and vest over a five-year period. Awards with an aggregate fair value of $16,554 cliff-vest at the end of year 5 and are recognized as compensation expense ratably over that five-year period. Awards with an aggregate fair value of $17,090 vest on a graded vesting basis and are recognized as compensation expense as follows: 25% in each of years 1-3, 15% in year 4 and 10% in year 5. This adjustment does not reflect one-time compensation expense of $4,014 associated with the issuance of cash and fully vested shares of Class A common stock in settlement of appreciation rights issued in prior years. This adjustment does not reflect compensation expense related to awards issued contemporaneously with our initial public offering that relate to the Company's annual compensation process. Excludes one-time non-cash acceleration of unvested equity held by Managing Directors, which resulted in expense of approximately $87,601 shortly after our initial public offering.

(e)
In connection with the initial public offering, 7,475,000 shares of the Company were sold. An adjustment has been made to increase our effective tax rate to 40%, which assumes the Company was taxed as a corporation.

Income before income taxes

  $ 65,507  

Noncontrolling interest %

    71.88 %
       

Income attributable to noncontrolling interest

  $ 47,088  
       

Income attributable to common shareholders

  $ 18,418  

Effective tax rate

    40 %
       

Provision for income taxes

  $ 7,367  

Less: Prior recorded provision attributable to common shareholders

  $ 5,139  
       

Adjustment to provision for income taxes

  $ 2,229  
(f)
Reflects an adjustment to record the 71.88% noncontrolling interests, net of tax, that partners of Old Holdings (other than the Company) own in Group LP relating to their partnership units. After our initial public offering, 15,263,653 shares of Class A common stock were outstanding and 39,022,902 partnership units were held by partners of Old Holdings.

(g)
Reflects net income attributable to common stockholders divided by weighted average Class A common stock outstanding.

Basic and diluted weighted average Class A common stock outstanding is calculated as follows:

 
  Basic and Diluted  

Class A common stock outstanding upon completion of the reorganization

    7,699,851  

Issuance of fully vested shares of Class A common stock

    88,802  

Issuance of shares of Class A common stock in connection with the initial public offering

    7,475,000  
       

Total Class A common stock outstanding upon completion of the reorganization and IPO

    15,263,653  

RSUs and options(1)

     

Class A partnership units(2)

     
       

Weighted average shares of Class A common stock outstanding upon completion of the reorganization and IPO

    15,263,653  
       
       

(1)
We issued unvested RSUs and stock options to employees in connection with our initial public offering. Basic weighted average shares of Class A common stock outstanding are not impacted by the RSUs or stock options. Further, the RSUs and stock options are not reflected in diluted weighted average shares as the calculation is dependent upon the average stock price for the year, which is not determinable.

(2)
Class A partnership units may be exchanged for our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications and compliance with applicable lock-up, vesting and transfer restrictions. If all Class A partnership units were to be exchanged for Class A common stock immediately following the reorganization and IPO, fully diluted Class A common stock outstanding would be 54,286,555. In computing the dilutive effect, if any, that the aforementioned exchange would have on earnings per share, we consider that net income available to holders of Class A common stock would increase due to elimination of the noncontrolling interest in consolidated entities associated with the Group LP Class A partnership units (including any tax impact). For the year ended December 31, 2013, such exchange is not reflected in diluted earnings per share as the assumed exchange is not dilutive.

We have not included the impact of shares of Class B common stock because these shares are entitled to an insignificant amount of economic participation.

(h)
In connection with this offering, Moelis & Company will increase its ownership of Group LP by 3,721,621 Class A partnership units and Class A common stock outstanding will increase by 3,721,621 shares. An adjustment has been made to the tax provision as if this offering had taken place as of January 1, 2013.

Income before income taxes

  $ 65,507  

Noncontrolling interest %

    65.03 %
       

Income attributable to noncontrolling interest

  $ 42,598  
       

Income attributable to common shareholders

  $ 22,909  

Effective tax rate

    40 %
       

Provision for income taxes

  $ 9,164  

Less: Prior recorded provision attributable to common shareholders

  $ 7,559  
       

Adjustment to provision for income taxes

  $ 1,605  

48


Table of Contents

(i)
Reflects an adjustment to record the allocation of earnings, net of tax, to Moelis & Company (34.97%) and noncontrolling interests (65.03%) as if the Company had been operating in its new corporate structure and ownership since January 1, 2013. After this offering 18,985,274 weighted average shares of Class A common stock will be outstanding and 35,301,281 partnership units will be held by partners of Old Holdings.

(j)
In connection with this offering, Moelis & Company will increase its ownership of Group LP by 3,721,621 Class A partnership units and Class A common stock outstanding will increase by 3,721,621 shares. Class A partnership units may be exchanged for our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications and compliance with applicable lock-up, vesting and transfer restrictions. If all Class A partnership units were to be exchanged for Class A common stock immediately following the reorganization, IPO and this offering, fully diluted Class A common stock outstanding would be 54,286,555. In computing the dilutive effect, if any, that the aforementioned exchange would have on earnings per share, we consider that net income available to holders of Class A common stock would increase due to elimination of the noncontrolling interests exchanged for shares (including any tax impact), and therefore, such exchange is not dilutive.


 
  Unaudited Pro Forma Condensed Consolidated and Combined Statement of Operations
Nine Months Ended September 30, 2014
 
($ in thousands, except per share data)
  Moelis &
Company
  Reorganization
Adjustments
  As Adjusted
before Initial
Public Offering
  Initial Public
Offering
Adjustments
  As Adjusted
before Secondary
Offering
  Secondary
Offering
Adjustments
  Moelis &
Company Pro
Forma
 

Revenues

  $ 374,855   $   $ 374,855   $   $ 374,855   $   $ 374,855  

Expenses:

                                           

Compensation and benefits

    300,793         300,793     2,825 (c)   303,618         303,618  

Non-compensation expenses

    71,661         71,661         71,661         71,661  
                               

Total operating expenses

    372,454         372,454     2,825     375,279         375,279  
                               

Operating income (loss)

    2,401         2,401     (2,825 )   (424 )       (424 )

Other income and expenses

    622         622         622         622  

Income (loss) from equity method investments

    (2,966 )       (2,966 )       (2,966 )       (2,966 )
                               

Income (loss) before income taxes

    57         57     (2,825 )   (2,768 )       (2,768 )

Provision for income taxes

    5,790     2,654 (a)   8,444     1,534 (d)   9,978     1,974 (f)   11,952  
                               

Net income (loss)

    (5,733 )   (2,654 )   (8,387 )   (4,359 )   (12,746 )   (1,974 )   (14,720 )

Net income (loss) attributable to noncontrolling interests

    6,777     (4,962 )(b)   1,815     (5,478 )(e)   (3,663 )   256 (g)   (3,407 )
                               

Net income (loss) attributable to Moelis & Company

  $ (12,510 ) $ 2,308 (b) $ (10,202 ) $ 1,119 (e) $ (9,083 ) $ (2,230 )(g) $ (11,313 )
                               
                               

Weighted-average shares of Class A common stock outstanding

                                           

Basic

    15,262,940           15,262,940           15,262,940     3,721,621 (h)   18,984,561  
                                     
                                     

Diluted

    15,262,940           15,262,940           15,262,940     3,721,621 (h)   18,984,561  
                                     
                                     

Net income (loss) attributable to holders of shares of Class A common stock per share

                                           

Basic

  $ (0.82 )       $ (0.67 )       $ (0.60 )       $ (0.60 )
                                     
                                     

Diluted

  $ (0.82 )       $ (0.67 )       $ (0.60 )       $ (0.60 )
                                     
                                     

(a)
Reflects an adjustment to the tax provision based on the allocation of earnings to Moelis & Company (16.48%) and to noncontrolling interests (83.52%) as if the Company had been operating in its new corporate structure and ownership since January 1, 2013. This adjustment does not remove the tax impact associated with the one-time non-cash acceleration of unvested equity held by Managing Directors.

(b)
Reflects an adjustment to record the allocation of earnings, net of tax, to Moelis & Company (16.48%) and to noncontrolling interests (83.52%) as if the Company had been operating in its new corporate structure and ownership since January 1, 2013.

(c)
Adjustment to compensation expense associated with RSUs and stock options issued in connection with our initial public offering, as if these awards had been granted on January 1, 2013. The total fair value of these RSUs and stock options granted at the initial public offering were $33,644 and vest over a five-year period. Awards with an aggregate fair value of $16,554 cliff-vest at the end of year 5 and are recognized as compensation expense ratably over that five-year period. Awards with an aggregate fair value of $17,090 vest on a graded vesting basis and are recognized as compensation expense as follows: 25% in each of years 1-3, 15% in year 4 and 10% in year 5. This adjustment does not remove the one-time compensation expense of $4,014 associated with the issuance of cash and fully vested shares of Class A common stock in settlement of appreciation rights issued in prior years. This adjustment does not remove the one-time non-cash acceleration of unvested equity held by Managing Directors, which resulted in expense of approximately $87,601.

(d)
Reflects an adjustment to the tax provision based on the allocation of earnings to Moelis & Company (28.12%) and to noncontrolling interests (71.88%) as if the Company were public since January 1, 2013. This adjustment does not remove the tax impact associated with the one-time non-cash acceleration of unvested equity held by Managing Directors.

(e)
Reflects an adjustment to record the allocation of earnings, net of tax, to Moelis & Company (28.12%) and to noncontrolling interests (71.88%) as if the Company had been operating in its new corporate structure and ownership since January 1, 2013.

49


Table of Contents

(f)
In connection with this offering, Moelis & Company will increase its ownership of Group LP by 3,721,621 Class A partnership units and increase Class A common stock outstanding by 3,721,621 shares. An adjustment has been made to the tax provision based on the allocation of earnings to Moelis & Company (34.97%) and noncontrolling interests (65.03%) as if this offering had taken place as of January 1, 2013.

(g)
Reflects an adjustment to record the allocation of earnings, net of tax, to Moelis & Company (34.97%) and to noncontrolling interests (65.03%) as if the Company had been operating in its new corporate structure and ownership since January 1, 2013. After this offering, 18,984,561 weighted average shares of Class A common stock will be outstanding and 35,301,281 partnership units will be held by partners of Old Holdings.

(h)
In connection with this offering, Moelis & Company will increase its ownership of Group LP by 3,721,621 Class A partnership units and increase Class A common stock outstanding by 3,721,621 shares. Class A partnership units may be exchanged for our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications and compliance with applicable lock-up, vesting and transfer restrictions. If all Class A partnership units were to be exchanged for Class A common stock immediately following the reorganization, IPO and this offering, fully diluted Class A common stock outstanding would be 54,285,842. In computing the dilutive effect, if any, that the aforementioned exchange would have on earnings per share, we consider that net income available to holders of Class A common stock would increase due to elimination of the noncontrolling interests exchanged for shares (including any tax impact), and therefore, such exchange is not dilutive.

 

 
  Unaudited Pro Forma Condensed Consolidated and Combined Statement of Financial Condition
As of September 30,
2014
 
($ in thousands)
  Moelis & Company   Secondary
Offering
Adjustments
  Moelis &
Company Pro
Forma
 

Cash and cash equivalents

  $ 142,098   $   $ 142,098  

Restricted cash

    912         912  

Total receivables

    30,770         30,770  

Deferred compensation

    4,404         4,404  

Investments at fair value

    73,999         73,999  

Equity method investments

    16,634         16,634  

Equipment and leasehold improvements, net

    5,860         5,860  

Deferred tax asset

    69,379     77,136 (a)(b)   146,515  

Prepaid expenses and other assets

    8,133         8,133  
               

Total assets

    352,189     77,136     429,325  
               
               

Compensation payable

    95,856         95,856  

Accounts payable and accrued expenses

    13,789         13,789  

Amount due pursuant to tax receivable agreement

    51,761     63,831 (a)   115,592  

Other liabilities

    16,095         16,095  
               

Total liabilities

    177,501     63,831     241,332  
               
               

Accumulated other comprehensive income (loss)

    521         521  

Class A common stock, par value $0.01 per share

    153     37 (c)   190  

Class B common stock, par value $0.01 per share

    362     (37 )(c)   325  

Additional paid-in-capital

    94,367     22,346(a)(b)(d)     116,713  

Retained earnings (accumulated deficit)

    (15,517 )       (15,517 )
               

Total Moelis & Company equity

    79,886     22,346     102,232  

Noncontrolling interests

    94,802     (9,041 )(d)   85,761  
               

Total equity

    174,688     13,305     187,993  
               

Total liabilities and equity

  $ 352,189   $ 77,136   $ 429,325  
               
               

(a)
Reflects the tax impact in connection with this offering which is treated for U.S. federal income tax purposes as an acquisition of 3,721,621 Class A partnership units in Group LP from certain partners of Old Holdings. This transaction results in an estimated deferred tax asset of approximately $76,634. $75,095 of this deferred tax asset is attributable to exchanges by certain partners of Old Holdings who are party to the tax receivable agreement. Pursuant to this agreement, 85% (or $63,831) of the tax benefits associated with this portion of the deferred tax

50


Table of Contents

    asset are payable to these partners of Old Holdings over the next 15 years. The residual balance of $12,803 is allocable to the Company. To the extent that we believe we will not realize the full benefit represented by the deferred tax asset, based on an analysis of expected future earnings, we will reduce the deferred tax asset with a valuation allowance. This adjustment does not reflect any interim activities between September 30, 2014 and the date of the actual transaction executed in connection with this offering. Other activities from October 1, 2014 to the date of transaction in connection with this offering may include additional income/(loss), contributions, and distributions from the partnership, which may result in additional tax impact.

(b)
Reflects an adjustment in tax impact associated with the existing book and tax basis difference for items that will be allocated to the Company as if the offering had taken place on September 30, 2014. The additional deferred tax asset recorded for these items is $502, with the offset recorded within additional paid-in-capital.

(c)
In connection with this offering, Moelis & Company will increase its ownership of Group LP by 3,721,621 Class A partnership units and increase Class A common stock outstanding by 3,721,621 shares. Following each exchange of Class A partnership units for shares of Class A common stock, Partner Holdings will be required to surrender to Moelis & Company a corresponding number of shares of Class B common stock for conversion into Class A common stock at a ratio of .00055 to 1.

(d)
Reflects an increase in Moelis & Company equity of $9,041 and a decrease in noncontrolling interests by the same amount. This reallocation of equity is due to Moelis & Company's increase in ownership of Group LP.

51


Table of Contents


SELECTED HISTORICAL FINANCIAL AND OTHER DATA

        The following selected financial and other data should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes included elsewhere in this prospectus.

        The selected historical financial data for the nine months ended September 30, 2014 and 2013 and as of September 30, 2014 have been derived from our unaudited condensed consolidated and combined financial statements included elsewhere in this prospectus. The selected historical financial data as of September 30, 2013, has been derived from our unaudited condensed consolidated and combined financial statements which are not included in this prospectus. In the opinion of management, the unaudited condensed consolidated and combined financial and operating data for the interim periods included in this prospectus include all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and operating results for these periods. The operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014.

        The selected historical financial data as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 presented below have been derived from our audited combined financial statements included elsewhere in this prospectus.

        We derived the selected historical financial data as of December 31, 2011 from our audited combined financial statements which are not included in this prospectus.

        We derived the selected historical financial data as of December 31, 2010 and 2009 and for the years ended December 31, 2010 and 2009 from our unaudited combined financial statements which are not included in this prospectus. The unaudited combined financial statements for the years ended December 31, 2010 and 2009 have been prepared on substantially the same basis as the audited combined financial statements and include all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and operating results for these periods.

52


Table of Contents

 
  Nine Months Ended
September 30,
  Year Ended December 31,  
($ in thousands)
  2014(1)   2013   2013   2012   2011   2010   2009  

Statement of Operations Data

                                           

Revenues

  $ 374,855   $ 257,091   $ 411,386   $ 385,871   $ 268,024   $ 315,421   $ 178,817  

Expenses:

                                           

Compensation and benefits

    300,793     166,952     264,944     274,941     200,368     197,456     115,132  

Non-compensation expenses

    71,661     53,680     76,333     72,885     78,526     66,784     43,218  
                               

Total operating expenses

    372,454     220,632     341,277     347,826     278,894     264,240     158,350  

Operating income (loss)

    2,401     36,459     70,109     38,045     (10,870 )   51,181     20,467  

Other income and expenses

    622     (968 )   (771 )   333     245     173     425  

Income (loss) from equity method investments

    (2,966 )   2,588     3,681     (658 )   5,737     (479 )    
                               

Income (loss) before income taxes

    57     38,079     73,019     37,720     (4,888 )   50,875     20,892  

Provision for income taxes

    5,790     1,782     2,794     2,498     3,642     3,666     611  
                               

Net income (loss)

  $ (5,733 ) $ 36,297   $ 70,225   $ 35,222   $ (8,530 ) $ 47,209   $ 20,281  
                               
                               

Net income (loss) attributable to noncontrolling interest

    6,777                                      
                                           

Net income (loss) attributable to Moelis & Company

  $ (12,510 )                                    
                                           

Weighted-average shares of Class A common stock outstanding

                                           

Basic

    15,262,940                                      
                                           

Diluted

    15,262,940                                      
                                           

Net income (loss) per share attributable to holders of shares of Class A common stock

                                           

Basic

  $ (0.82 )                                    
                                           
                                           

Diluted

  $ (0.82 )                                    
                                           
                                           

Statement of Financial Condition Data (period end)

                                           

Total assets

  $ 352,189   $ 334,145   $ 443,463   $ 402,668   $ 204,929   $ 267,878   $ 238,650  

Total liabilities

    177,501     71,182     134,093     142,560     92,754     120,527     126,837  

Equity

    174,688     262,963     309,370     260,108     112,175     147,351     111,813  

Other Data and Metrics

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Bankers at period-end

    377     318     317     340     335     262     178  

Managing Directors at period-end

    96     83     86     80     76     58     40  

Number of fee-paying clients

    206     201     263     236     182     175     123  

Number of fee-paying clients ³ $1M

    99     74     109     107     72     96     63  

% of total revenue from top 10 transactions

    N/A     N/A     23 %   22 %   34 %   26 %   27 %

N/A=Not Applicable

(1)
Results of operations for the nine months ended September 30, 2014 include approximately $110.9 million of pre-tax one-time charges primarily associated with accelerating the vesting of pre-IPO equity held by Managing Directors in connection with the Company's IPO completed in April 2014. Following the vesting acceleration, pre-IPO equity held by our Managing Directors is subject to a minimum four to six year lock-up.

53


Table of Contents


MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our "Selected Historical Financial and Other Data" and our historical financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled "Risk Factors" and elsewhere in this prospectus.

Executive Overview

        Moelis & Company is a leading global independent investment bank that provides innovative strategic advice and solutions to a diverse client base, including corporations, governments and financial sponsors. With 16 offices located in North and South America, Europe, the Middle East, Asia and Australia, we advise clients around the world on their most critical decisions, including mergers and acquisitions, recapitalizations and restructurings and other corporate finance matters.

        We were founded in July 2007 by veteran investment bankers to create a global independent investment bank that offers multi-disciplinary solutions and exceptional transaction execution. We opened for business in New York and Los Angeles with a team of top tier advisory professionals. The dislocation in the financial services industry caused by the global financial crisis provided us with a unique opportunity to rapidly build a firm with global scale and broad advisory expertise, and we more than tripled our professional headcount from the end of 2008 through the end of 2011. Since our founding, we have added new Managing Directors with sector, regional or transactional expertise and with strong client relationships. In addition, we have established recruiting programs at top universities to hire talented junior professionals and instituted training programs to help develop them into advisory specialists.

        We have added Managing Directors to expand our sector expertise, and currently provide capabilities across all major industries including Consumer, Retail & Restaurants; Financial Institutions; Financial Sponsors; General Industrials; Healthcare; Natural Resources; Real Estate, Gaming, Lodging & Leisure and Technology, Media & Telecommunications. In addition, we hired professionals to broaden our global reach and opened a network of offices, expanding into London in 2008, Sydney in 2009, Dubai in 2010, Hong Kong and Beijing in 2011, Frankfurt, Mumbai and Paris in 2012 and Melbourne and São Paulo in 2014. We also added regional capabilities in the U.S., opening offices in Boston in 2007, Chicago in 2008 and Houston and Palo Alto in 2011. We have developed additional areas of advisory expertise to complement our strong M&A capabilities and to meet the changing needs of our clients. Our early investment in recapitalization and restructuring talent in mid-2008 positioned us to capitalize on the significant increase in restructuring volume during the global financial crisis. In 2009, we added expertise in advising clients on capital markets matters and advising financial institutions on complex risk exposures. Most recently in 2014, we added capabilities to provide capital raising, secondary transaction and other advisory services to private fund sponsors and limited partners. Our ability to provide services to our clients across sectors and regions and through all phases of the business cycle has led to long-term client relationships and a diversified revenue base.

        As of September 30, 2014, we served our clients globally with 377 advisory bankers, including 96 Managing Directors. We plan to continue to grow our firm across sectors, geographies and products to deliver the most relevant advice and innovative solutions to our clients.

        We generate revenues primarily from providing advisory services on transactions that are subject to individually negotiated engagement letters which set forth our fees. We generally generate fees at key transaction milestones, such as closing, the timing of which is outside of our control. As a result,

54


Table of Contents

revenues and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter. The performance of our business depends on the ability of our professionals to build relationships with clients over many years by providing trusted advice and exceptional transaction execution.

Reorganization and Initial Public Offering

        In April 2014, we reorganized our business in connection with Moelis & Company's initial public offering of Class A common stock. See Note 4 in the September 30, 2014 condensed consolidated and combined financial statements included elsewhere in this prospectus for further information. In connection with the reorganization and initial public offering described above, several transactions took place which had a significant impact on our results of operations for the nine months ended September 30, 2014 including the following:

    $87,601 of compensation and benefits expense associated with the one-time non-cash acceleration of unvested equity held by Managing Directors;

    $763 ($384 for the three months ended September 30, 2014) of compensation and benefits expense associated with the amortization of RSUs granted in connection with our initial public offering (excludes expense associated with RSUs granted at the time of the initial public offering in connection with 2013 incentive compensation); amortization expense of RSUs granted in connection with the initial public offering will be recognized over a five year vesting period;

    $2,046 ($1,094 for the three months ended September 30, 2014) of compensation and benefits expense associated with the amortization of stock options granted in connection with the initial public offering; amortization expense of stock options granted in connection with the initial public offering will be recognized over a five year vesting period;

    $4,014 of compensation and benefits expense associated with the issuance of cash (expense of $2,004) and fully vested shares of Class A common stock (expense of $2,010) in settlement of appreciation rights issued in prior years;

    $1,240 of professional fees expense associated with the one-time non-cash acceleration of unvested equity held by non-employee members of Moelis & Company's Global Advisory Board; and

    $4,916 of expenses associated with the one-time non-cash acceleration of unvested equity held by employees of the Australian JV. Half of the expenses associated with acceleration of equity held by employees of the Australian JV is included in other expenses and the other half is included in income (loss) from equity method investments.

Business Environment and Outlook

        Economic and global financial conditions can materially affect our operational and financial performance. See "Risk Factors" elsewhere in this prospectus for a discussion of some of the factors that can affect our performance. Revenues and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter.

        For the nine months ended September 30, 2014, we earned revenues of $374.9 million, or an increase of 46% from the $257.1 million earned during the same period in 2013. This compares favorably with an 11% increase in the number of global completed M&A transactions and a 9% increase in global completed M&A volume in the same period (source: Thomson Financial as of October 8, 2014; includes all transactions greater than $100 million in value).

55


Table of Contents

        While announced M&A volume was relatively restrained from the global financial crisis through 2013, we are seeing a steady improvement in the M&A environment as demonstrated by the increase in transaction announcements in the first nine months of 2014. During this period, the dollar volume of global announced M&A transactions increased 57% and the number of global announced M&A transactions increased 22% over the prior year period (source: Thomson Financial as of October 8, 2014; includes all transactions greater than $100 million in value).

        Based on historical experience, we believe the current economic backdrop (high corporate cash balances, healthy capital markets and low interest rates) provides a strong foundation for continued improvement in the M&A environment. Our clients have increasing confidence in the U.S. economy and financing remains readily available at historically low cost which should fuel continued growth in U.S. M&A activity. Additionally, European M&A activity is beginning to pick up, but we expect this recovery to be gradual reflecting the region's slow economic recovery. We also continue to experience a growing demand for independent advice as clients evaluate a wide range of strategic alternatives.

Results of Operations

        The following is a discussion of our results of operations for the three and nine months ended September 30, 2014 and 2013 and the years ended December 31, 2013, 2012 and 2011.

 
  Three Months
Ended
September 30,
  Variance   Nine Months Ended
September 30,
  Variance  
 
  2014 vs. 2013   2014 vs. 2013  
($ in thousands)
  2014   2013   2014   2013  

Revenues

  $ 128,651   $ 98,728     30 % $ 374,855   $ 257,091     46 %

Expenses:

                                     

Compensation and benefits

    68,148     64,966     5 %   300,793     166,952     80 %

Non-compensation expenses

    24,730     19,245     29 %   71,661     53,680     33 %
                           

Total operating expenses

    92,878     84,211     10 %   372,454     220,632     69 %

Operating income (loss)

    35,773     14,517     146 %   2,401     36,459     -93 %

Other income and expenses

    617     (1,101 )   N/M     622     (968 )   N/M  

Income (loss) from equity method investments

    1,105     1,739     -36 %   (2,966 )   2,588     N/M  
                           

Income (loss) before income taxes

    37,495     15,155     147 %   57     38,079     N/M  

Provision for income taxes

    4,710     705     568 %   5,790     1,782     225 %
                           

Net income (loss)

  $ 32,785   $ 14,450     127 % $ (5,733 ) $ 36,297     N/M  
                           
                           

 

 
   
   
   
  Variance  
 
  Year Ended December 31,  
 
  2013 vs. 2012   2012 vs. 2011  
($ in thousands)
  2013   2012   2011  

Revenues

  $ 411,386   $ 385,871   $ 268,024     7 %   44 %

Expenses:

                               

Compensation and benefits

    264,944     274,941     200,368     -4 %   37 %

Non-compensation expenses

    76,333     72,885     78,526     5 %   -7 %
                       

Total operating expenses

    341,277     347,826     278,894     -2 %   25 %

Operating income (loss)

    70,109     38,045     (10,870 )   84 %   N/M  

Other income and expenses

    (771 )   333     245     N/M     36 %

Income (loss) from equity method investment

    3,681     (658 )   5,737     N/M     N/M  
                       

Income (loss) before income taxes

    73,019     37,720     (4,888 )   94 %   N/M  

Provision for income taxes

    2,794     2,498     3,642     12 %   -31 %
                       

Net income (loss)

  $ 70,225   $ 35,222   $ (8,530 )   99 %   N/M  
                       
                       

    N/M = not meaningful

56


Table of Contents

Revenues

        We operate in a highly competitive environment. Each revenue-generating engagement is separately solicited, awarded and negotiated, and there are usually no long-term contracted sources of revenue. As a consequence, our fee-paying client engagements are not likely to be predictable, and high levels of revenues in one quarter are not necessarily predictive of continued high levels of revenues in future periods. To develop new business, our professionals maintain an active business dialogue with a large number of existing clients and potential clients, as well as with their legal and other advisors. We add new clients each year as our bankers continue to expand their relationships, as we hire senior bankers who bring their client relationships and as we receive introductions from our relationship network of senior executives, board members, attorneys and other third parties. We also lose clients each year as a result of the sale or merger of clients, changes in clients' senior management, competition from other financial services firms and other causes.

        We earn substantially all of our revenues from advisory engagements, and, in many cases, we are not paid until the successful completion of an underlying transaction. Complications that may terminate or delay a transaction include failure to agree upon final terms with the counterparty, failure to obtain required regulatory consents, failure to obtain board or stockholder approvals, failure to secure financing, adverse market conditions or unexpected operating or financial problems related to either party to the transaction. In these circumstances, we often do not receive significant advisory fees despite the fact that we may have devoted considerable time and resources to the transaction. Barriers to the completion of a restructuring transaction may include a lack of anticipated bidders for the assets of our client or the inability of our client to restructure its operations or indebtedness due to a failure to reach agreement with its creditors. In these circumstances, our fees are generally limited to monthly retainer fees and reimbursement of certain out-of-pocket expenses.

        We do not allocate our revenues by the type of advice we provide (M&A, recapitalizations and restructurings or other corporate finance matters) because of the complexity of the transactions on which we may earn revenues and our holistic approach to client service. For example, a restructuring engagement may evolve to require a sale of all or a portion of the client, M&A assignments can develop from relationships established on prior restructuring engagements and capital markets expertise can be instrumental on both M&A and restructuring assignments.

    Three Months Ended September 30, 2014 versus 2013

        Revenues were $128.7 million for the three months ended September 30, 2014 compared with $98.7 million for the same period in 2013, representing an increase of 30%. The growth in revenues was primarily driven by an improving M&A environment which has led to increased dialogue with clients evaluating a wide range of strategic alternatives.

    Nine Months Ended September 30, 2014 versus 2013

        Revenues were $374.9 million for the nine months ended September 30, 2014 compared with $257.1 million for the same period in 2013, representing an increase of 46%. This compares favorably with an 11% increase in the number of global completed M&A transactions and a 9% increase in global completed M&A volume in the same period and demonstrates our continued advisory market share gains. (Source: Thomson Financial as of October 8, 2014; includes all transactions greater than $100 million in value).

        While the number of clients we advised was relatively consistent year-over-year (we earned revenues from 206 clients as compared with 201 clients during the same period in 2013), the number of clients who paid fees equal to or greater than $1 million increased from 74 clients in the first nine months of 2013 to 99 clients in the same period of 2014.

57


Table of Contents

    Year Ended December 31, 2013 versus 2012

        Revenues were $411.4 million for the year ended December 31, 2013 compared with $385.9 million in 2012, representing an increase of 7%. This result compares favorably with a 12% decline in the number of global completed M&A transactions and a 4% decline in global completed M&A volume during the year.

        Select advisory assignments completed in 2013 include:

    the representation of the Transaction Committee of the Board of Directors of H.J. Heinz Company on its sale to Berkshire Hathaway Inc. and 3G Capital, Inc.;

    the sale of NYSE Euronext, Inc. to IntercontinentalExchange Group, Inc.;

    the representation of the Official Committee of Unsecured Creditors of AMR Corporation (American Airlines) on its Chapter 11 Reorganization and merger with US Airways Group, Inc.;

    the representation of the Ad Hoc Committee of Lower Tier 2 Noteholders of The Co-operative Bank plc on its recapitalization;

    the sale of Local TV Holdings, LLC to Tribune Company;

    the representation of the Consortium of Senior Secured Lenders of Nine Entertainment Group Limited on its restructuring;

    the acquisition by Reliance Steel & Aluminum Co. of Metals USA Holdings Corp.;

    the representation of the Official Committee of Unsecured Creditors of Residential Capital, LLC on its Chapter 11 Reorganization;

    the representation of the Ad Hoc Committee of Noteholders of Sino-Forest Corporation on its restructuring; and

    the representation of the State of Ohio on the legalization of gaming in the State.

        In 2013, we earned revenues from 263 clients, up from 236 clients in the prior year. The total number of clients paying fees equal to or greater than $1 million in 2013 increased to 109 from 107 in the prior year. Our top 10 transactions in 2013 contributed 23% of our total revenue, up slightly from 22% in 2012.

    Year Ended December 31, 2012 versus 2011

        Revenues were $385.9 million for the year ended December 31, 2012 compared with $268.0 million for the year ended December 31, 2011, representing an increase of 44%. This result compares favorably with a 13% decline in global completed M&A volume and a 5% decline in the number of global completed M&A transactions for the same period.

        Select advisory assignments completed in 2012 include:

    the sale of The London Metal Exchange Limited to Hong Kong Exchanges and Clearing Limited;

    the representation of Frank McCourt and the Los Angeles Dodgers on the sale of the Dodgers to Guggenheim Baseball Management LLC;

    the acquisition by Cigna Corporation of Healthspring, Inc.;

    the representation of DIFC Investments LLC (Dubai International Financial Centre) on its Sukuk refinancing;

    the representation of the Second Lien Creditors Committee of eircom Group PLC on its restructuring;

    the sale of Solutia Inc. to Eastman Chemical Company;

58


Table of Contents

    the spin-off and Listing by Introduction of Swire Properties Limited on the Hong Kong Stock Exchange;

    the representation of the Official Committee of Unsecured Creditors of Tribune Company on its Chapter 11 Reorganization;

    the representation of Woolworths Limited on the creation and de- merger of SCA Property Group and associated equity raising; and

    the representation of Wynn Resorts, Limited on its stock redemption.

        An increased number of clients contributed to our advisory revenue growth, and in 2012, we generated revenues from 236 clients as compared with 182 clients in 2011. The total number of clients paying fees equal to or greater than $1 million increased to 107 in 2012 from 72 in the prior year. Additionally, our top 10 transactions in 2012 contributed 22% of our total revenues, as compared with 34% in 2011.

Operating Expenses

        The following table sets forth information relating to our operating expenses, which are reported net of reimbursements of certain expenses by our clients:

 
  Three Months
Ended
September 30,
  Variance   Nine Months
Ended
September 30,
  Variance  
 
  2014 vs. 2013   2014 vs. 2013  
($ in thousands)
  2014   2013   2014   2013  

Expenses:

                                     

Compensation and benefits

  $ 68,148   $ 64,966     5 % $ 300,793   $ 166,952     80 %

% of revenues

    53 %   66 %         80 %   65 %      

Non-compensation expenses

  $ 24,730   $ 19,245     29 % $ 71,661   $ 53,680     33 %

% of revenues

    19 %   19 %         19 %   21 %      
                           

Total operating expenses

  $ 92,878   $ 84,211     10 % $ 372,454   $ 220,632     69 %

% of revenues

    72 %   85 %         99 %   86 %      

Income (loss) before income taxes

  $ 37,495   $ 15,155     147 % $ 57   $ 38,079     N/M  

% of revenues

    29 %   15 %         N/M     15 %      

 

 
   
   
   
  Variance  
 
  Year Ended December 31,  
 
  2013 vs. 2012   2012 vs. 2011  
($ in thousands)
  2013   2012   2011  

Expenses:

                               

Compensation and benefits

  $ 264,944   $ 274,941   $ 200,368     -4 %   37 %

% of revenues

    64 %   71 %   75 %            

Non-compensation expenses

  $ 76,333   $ 72,885   $ 78,526     5 %   -7 %

% of revenues

    19 %   19 %   29 %            
                       

Total operating expenses

  $ 341,277   $ 347,826   $ 278,894     -2 %   25 %

% of revenues

    83 %   90 %   104 %            

Income (loss) before income taxes

  $ 73,019   $ 37,720   $ (4,888 )   94 %   N/M  

% of revenues

    18 %   10 %   N/M              

N/M = not meaningful

        Our operating expenses are classified as compensation and benefits expenses and non-compensation expenses, and headcount is the primary driver of the level of our expenses. Compensation and benefits expenses account for the majority of our operating expenses.

59


Table of Contents

Non-compensation expenses, which include the costs of professional fees, travel and related expenses, communication, technology and information services, occupancy, depreciation and other expenses, generally have been less significant in comparison with compensation and benefits expenses. Expenses are recorded on the combined statements of operations, net of any expenses reimbursed by clients. Our 2014 operating expenses (both compensation and non-compensation expenses) were impacted by the significant reorganization and initial public offering related expenses as described above in "Reorganization and Initial Public Offering."

    Three Months Ended September 30, 2014 versus 2013

        Operating expenses were $92.9 million for the three months ended September 30, 2014 and represented 72% of revenues, compared with $84.2 million for the same period in 2013 which represented 85% of revenues. Our income before taxes increased significantly, improving from income of $15.2 million for the three months ended September 30, 2013 to income of $37.5 million for the same period in 2014.

    Nine Months Ended September 30, 2014 versus 2013

        Operating expenses were $372.5 million for the nine months ended September 30, 2014 and represented 99% of revenues, compared with $220.6 million for the same period in 2013 which represented 86% of revenues. Our income before income taxes decreased significantly, declining from income of $38.1 million for the nine months ended September 30, 2013 to income of $0.1 million for the same period in 2014.

    Year Ended December 31, 2013 versus 2012

        Operating expenses were $341.3 million for the year ended December 31, 2013 and represented 83% of revenues, compared with $347.8 million in 2012 which represented 90% of revenues. Our income before income taxes increased significantly, growing from $37.7 million in 2012 to $73.0 million in 2013, which represented 18% of revenues as compared with 10% in the prior year.

    Year Ended December 31, 2012 versus 2011

        Operating expenses were $347.8 million for the year ended December 31, 2012 and represented 90% of revenues, compared with $278.9 million of operating expenses in the year ended December 31, 2011 which represented 104% of revenues. Our income before income taxes of $37.7 million grew to 10% of revenues in the year ended December 31, 2012 as compared with a loss before income taxes of $4.9 million in the prior year period.

Compensation and Benefits Expenses

        Our compensation and benefits expenses are determined by management based on revenues earned, the competitiveness of the prevailing labor market and anticipated compensation requirements for our employees, the level of recruitment of new Managing Directors, the amount of compensation expenses amortized for equity awards and other relevant factors.

        Our compensation expenses consist of base salary and benefits, annual incentive compensation payable as cash bonus awards, including certain amounts subject to clawback and contingent upon a required period of service ("contingent cash awards") and amortization of equity-based compensation awards. Base salary and benefits are paid ratably throughout the year. Equity awards are amortized into compensation expenses on a graded basis (based upon the fair value of the award at the time of grant) during the service period over which the award vests, which is typically four to five years. The awards are recorded within equity as they are expensed. Contingent cash awards are amortized into compensation expenses over the required service period, which is typically two to three years. Cash

60


Table of Contents

bonuses, which are accrued each quarter, are discretionary and dependent upon a number of factors including the performance of the Company and are generally paid during the first two months of each calendar year with respect to prior year performance. The equity component of the annual incentive award is determined with reference to the Company's estimate of grant date fair value, which in turn determines the number of equity awards granted subject to a vesting schedule.

        Due to our rapid expansion in the early years of our operations, the ratio of our compensation expenses to revenues has been higher than what we intend to target in the future. Newly hired bankers typically require a ramp up period before they and their client relationships begin to contribute meaningful revenues to the Company. As a result, our compensation ratio has been higher in prior periods of significant headcount growth. We have reduced our compensation ratio in recent periods primarily through increased production due to the continued maturation of our advisory platform as the tenure of our bankers has increased. These factors were more than offset by the large expense realized in the second quarter of 2014 as a result of the one-time vesting acceleration of equity held by Managing Directors. Based on these factors and an improving macroeconomic environment, we intend to target a compensation ratio of approximately 57% to 58%. However, if we identify opportunities to grow revenues through significant expansion or to position our Company during challenging market conditions for future growth, we may report a compensation ratio in excess of this target. We intend to compensate our personnel competitively in order to continue building our business and growing our firm.

        Our compensation expenses are primarily based upon revenues, prevailing labor market conditions and other factors that can fluctuate, including headcount, and as a result, our compensation expenses may fluctuate materially in any particular period. Accordingly, the amount of compensation expenses recognized in any particular period may not be consistent with prior periods or indicative of future periods.

    Three Months Ended September 30, 2014 versus 2013

        For the three months ended September 30, 2014, compensation-related expenses of $68.1 million represented 53% of revenues, compared with $65.0 million which represented 66% of revenues in the prior year period. The increase in compensation expenses primarily relates to an increase in headcount as well as a higher discretionary bonus accrual, partially offset by lower equity amortization during 2014 as compared with 2013.

        Our fixed compensation costs, which are primarily the sum of base salaries, payroll taxes and benefits and the amortization of previously issued equity and contingent cash awards, were $39.1 million and $37.7 million for the three months ended September 30, 2014 and 2013, respectively. The aggregate amount of discretionary cash bonus expenses, which generally represents the excess amount of total compensation over base compensation and amortization of equity and contingent cash awards, was $29.0 million and $27.3 million for the three months ended September 30, 2014 and 2013, respectively. The increase in discretionary cash bonus expense is related to our increase in revenues for the period.

    Nine Months Ended September 30, 2014 versus 2013

        For the nine months ended September 30, 2014, compensation-related expenses of $300.8 million represented 80% of revenues, compared with $167.0 million of compensation-related expenses which represented 65% of revenues in the prior year period. The increase in compensation expenses primarily relates to a higher discretionary bonus accrual and the acceleration of equity compensation expense associated with the IPO that occurred during 2014 as compared with 2013.

        Our fixed compensation costs, which are primarily the sum of base salaries, payroll taxes and benefits and the amortization of previously issued equity and contingent cash awards, were

61


Table of Contents

$205.9 million and $118.1 million for the nine months ended September 30, 2014 and 2013, respectively. The increase in fixed compensation costs relates to the acceleration of equity compensation expense associated with the IPO that occurred in April 2014. The aggregate amount of discretionary cash bonus expenses, which generally represents the excess amount of total compensation over base compensation and amortization of equity and contingent cash awards, was $94.9 million and $48.9 million for the nine months ended September 30, 2014 and 2013, respectively. The increase in discretionary cash bonus expense is primarily related to our increase in revenues for the period.

    Year Ended December 31, 2013 versus 2012

        For the year ended December 31, 2013, compensation-related expenses of $264.9 million represented 64% of revenues, down from 71% of revenues in the prior year. The decline in compensation expenses primarily relates to a lower discretionary bonus accrual during 2013 as compared with 2012, which is driven by a combination of the Company's performance, labor market conditions, the continued maturation of our platform and actions we took to improve the efficiency of our operations by rationalizing our headcount.

        Our fixed compensation costs, which are primarily the sum of base salaries, payroll taxes and benefits and the amortization of previously issued equity and contingent cash awards, were $163.3 million and $165.9 million for the years ended December 31, 2013 and 2012, respectively. The aggregate amount of discretionary cash bonus expenses, which generally represents the excess amount of total compensation over base compensation and amortization of equity and contingent cash awards, was $101.6 million and $109.0 million for the years ended December 31, 2013 and 2012, respectively.

    Year Ended December 31, 2012 versus 2011

        For the year ended December 31, 2012, compensation-related expenses of $274.9 million represented 71% of revenues, down from 75% in the prior year. A substantial portion of compensation expenses include discretionary bonuses, which are driven by a combination of Company performance and the competitiveness of the prevailing labor market.

        Our fixed compensation costs were $165.9 million and $141.6 million for the years ended December 31, 2012 and 2011, respectively. Our fixed compensation costs may vary from year to year based on such factors as changes to headcount, changes to the composition of headcount, prevailing market conditions which affect salary levels and changes in charges for the amortization of equity awards and other related matters. The aggregate amount of discretionary cash bonus expenses of $109.0 million and $58.8 million was recognized for the years ended December 31, 2012 and 2011, respectively.

Non-Compensation Expenses

        Our non-compensation expenses include the costs of occupancy, professional fees, communication, technology and information services, travel and related expenses, depreciation and other expenses. Reimbursed client expenses are netted against non-compensation expenses.

        Historically, our non-compensation expenses, particularly occupancy and travel costs associated with business development, have increased as we have grown our business and made strategic investments. This trend may continue as we expand into new sectors, geographies and products to serve our clients' evolving needs. In addition, we will experience increased non-compensation expenses in connection with having become a public company.

62


Table of Contents

    Three Months Ended September 30, 2014 versus 2013

        Non-compensation expenses were $24.7 million in the three months ended September 30, 2014, representing 19% of revenues, consistent with the ratio of 19% in the prior year period. In addition to incremental costs associated with operating as a public company, the increase in non-compensation expenses of $5.5 million was primarily driven by increased recruiting activity and new business development.

    Nine Months Ended September 30, 2014 versus 2013

        Non-compensation expenses were $71.7 million in the nine months ended September 30, 2014, representing 19% of revenues, up from $53.7 million, or 21% in the prior year period. The increase in non-compensation expense was primarily driven by increased travel expenses and professional fees, reflecting a more active business and recruiting environment.

    Year Ended December 31, 2013 versus 2012

        Non-compensation expenses were $76.3 million in the year ended December 31, 2013, representing 19% of revenues, the same percentage as in 2012. The year-over-year increase in non-compensation expenses of $3.4 million was primarily attributable to an increase in travel and related expenses and professional fees.

    Year Ended December 31, 2012 versus 2011

        Non-compensation expenses were $72.9 million in the year ended December 31, 2012, representing a 7% decrease from the $78.5 million of non-compensation expenses recorded in the year ended December 31, 2011. The decrease in non-compensation expenses was primarily attributable to a $5.0 million legal settlement which was recorded in 2011 and related to our role advising on the sale of a company. Excluding the legal settlement, a decrease in professional fees was partially offset by increases in occupancy and communication, technology and information services in 2012. Non-compensation expenses as a percentage of revenues were 19% in 2012, down from 29% (or 27% excluding the legal settlement) in 2011. The decline in the non-compensation ratio was primarily due to increased revenues.

Income (Loss) From Equity Method Investments

        On April 1, 2010, we entered into the Australian JV, investing a combination of cash and certain net assets in exchange for a 50% interest in the Australian JV. The remaining 50% of the Australian JV is owned by an Australian trust established by and for the benefit of Australian executives. The Australian JV's primary business is offering advisory services, much like the Company. The Australian JV also has an equity capital markets and research, sales and trading business covering Australian public equity securities.

    Three Months Ended September 30, 2014 versus 2013

        Income (loss) from equity method investments, which relates to our share of gains and losses of the Australian JV, was income of $1.1 million and $1.7 million for the three months ended September 30, 2014 and 2013, respectively. During the three months ended September 30, 2014, the Australian JV generated $9.9 million of revenues and $7.7 million of expenses, resulting in net earnings of $2.2 million, of which we recognized our 50% share, or $1.1 million. For the same period in 2013, the Australian JV generated $10.8 million of revenues and $7.3 million of expenses, resulting in net earnings of $3.5 million, of which we recognized our 50% share, or $1.7 million. The Australian JV's revenues decreased by 9% for the three months ended September 30, 2014 compared with the same period in 2013. The Australian JV generally derives revenues from a varying number of engagements

63


Table of Contents

each period which may result in revenues that vary significantly from period to period. Operating expenses increased 5% during the three months ended September 30, 2014 when compared with the same period in 2013 primarily due to increased compensation and benefits expenses as well as professional fees associated with recruiting.

    Nine Months Ended September 30, 2014 versus 2013

        Income (loss) from equity method investments, which relates to our share of gains and losses of the Australian JV, was a loss of $3.0 million and income of $2.6 million for the nine months ended September 30, 2014 and 2013, respectively. During the nine months ended September 30, 2014, the Australian JV generated $17.4 million of revenues and $23.4 million of expenses, resulting in a net loss of $5.9 million, of which we recognized our 50% share, or $3.0 million. For the same period in 2013, the Australian JV generated $30.4 million of revenues and $25.2 million of expenses, resulting in net income of $5.2 million, of which we recognized our 50% share, or $2.6 million. The Australian JV's revenues decreased by 43% for the nine months ended September 30, 2014 compared with the same period in 2013. The Australian JV generally derives revenues from a varying number of engagements each period which may result in revenues that vary significantly from period to period. Operating expenses decreased 7% during the nine months ended September 30, 2014 when compared with the same period in 2013 primarily due to lower compensation expenses as a result of the lower revenues generated.

    Year Ended December 31, 2013 versus 2012

        Income (loss) from equity method investment, which relates to our share of gains and losses of the Australian JV, was income of $3.7 million and a loss of $0.7 million for the years ended December 31, 2013 and 2012, respectively. During 2013, the Australian JV generated $41.7 million of revenues and $34.3 million of expenses, resulting in net income of $7.4 million, of which we recognized our 50% share, or $3.7 million. In 2012, the Australian JV generated $35.8 million of revenues and $37.1 million of expenses, resulting in a net loss of $1.3 million, of which we recognized our 50% share, or a loss of $0.7 million. The Australian JV's revenues increased by 16% for the year ended December 31, 2013 compared with 2012. The Australian JV generally derives revenues from a varying number of engagements each period which may result in revenues that vary significantly from period to period. Operating expenses decreased 8% during the year ended December 31, 2013 when compared with 2012 primarily due to lower compensation expenses.

    Year Ended December 31, 2012 versus 2011

        Income (loss) from equity method investment was a loss of $0.7 million and income of $5.7 million for the years ended December 31, 2012 and 2011, respectively. For the year ended December 31, 2012, the Australian JV generated $35.8 million of revenues and $37.1 million of expenses, resulting in a net loss of $1.3 million, of which we recognized our 50% share, or a $0.7 million loss. For the year ended December 31, 2011, the Australian JV generated $52.3 million of revenues and $40.9 million of expenses, resulting in net income of $11.5 million, of which we recognized our 50% share, or $5.7 million. The Australian JV's revenues decreased by 32% for the year ended December 31, 2012 compared with 2011 due to the earlier year including more significant transactions. The Australian JV's operating expenses decreased during the year ended December 31, 2012 when compared with 2011 primarily due to lower incentive compensation expenses as a result of lower revenues during the year.

Provision for Income Taxes

        Prior to the Company's reorganization and initial public offering of Moelis & Company, the Company had been primarily subject to the New York City unincorporated business tax ("UBT") and certain other state and local taxes. The Company's operations were historically comprised of entities

64


Table of Contents

that are organized as limited liability companies and limited partnerships. For U.S. federal income tax purposes, taxes related to income earned by these entities represent obligations of the individual partners and members and have historically not been reflected in the condensed consolidated and combined statements of financial condition. In connection with the Company's reorganization and initial public offering, the Company became subject to U.S. corporate federal, state and local income tax on its allocable share of result of operations from Group LP.

    Three Months Ended September 30, 2014 versus 2013

        During the three months ended September 30, 2014, the provision for income taxes was $4.7 million, which reflected an effective tax rate of 13%. The income tax provision and effective tax rate for the period primarily reflect the effect of the Company's allocable share of earnings from Group LP at the prevailing U.S. federal, state and local corporate income tax rate.

        During the three months ended September 30, 2013, the provision for income taxes was $0.7 million, which reflected an effective tax rate of 5%. The income tax provision and effective tax rate for the period reflect the effect of certain nondeductible expenses, primarily related to the vesting of partnership units. None of the earnings for the period was subject to corporate income taxes for U.S. federal, state and local tax purposes.

    Nine Months Ended September 30, 2014 versus 2013

        During the nine months ended September 30, 2014, the provision for income taxes was $5.8 million on income before taxes of $0.1 million. The income tax provision for the period primarily reflects the effect of certain nondeductible expenses related to the vesting of Class A partnership units in Group LP in connection with the Company's reorganization and IPO. Only a portion of the earnings related to the post-IPO period was subject to U.S. federal, state and local income tax at the prevailing corporate income tax rate.

        During the nine months ended September 30, 2013, the provision for income taxes was $1.8 million, which reflected an effective tax rate of 5%. The income tax provision and effective tax rate for the period reflect the effect of certain nondeductible expenses, primarily related to the vesting of partnership units. None of the earnings for the period was subject to corporate income tax for U.S. federal, state and local tax purposes.

    Year Ended December 31, 2013 versus 2012

        During the year ended December 31, 2013, the provision for income taxes was $2.8 million, which reflected an effective tax rate of 4% as compared with a provision for income taxes of $2.5 million and an effective tax rate of 7% for the year ended December 31, 2012. The decline in the effective tax rate primarily related to the impact of the relative decrease in the proportion of non-deductible partner compensation to pretax income.

    Year Ended December 31, 2012 versus 2011

        During the year ended December 31, 2012, the provision for income taxes was $2.5 million, which reflected an effective tax rate of 7% as compared with a provision for income taxes of $3.6 million on a net loss before taxes for the year ended December 31, 2011. The difference in the effective tax rates is primarily due to (i) the Company having net taxable income in New York City in both periods but the overall net loss in 2011 resulting in a negative effective tax rate; and (ii) the inclusion in the 2011 income tax provision of an expense of $1.9 million relating to a valuation allowance which reduced the Company's deferred tax assets pertaining to foreign jurisdictions. At December 31, 2011, we concluded that a full valuation allowance should be established with regard to the tax benefits associated with certain foreign net operating losses.

65


Table of Contents

Liquidity and Capital Resources

        Our current assets have historically comprised cash, short-term liquid investments and receivables related to fees earned from providing advisory services. Our current liabilities include accrued expenses, including accrued employee compensation. We pay a significant portion of incentive compensation during the first two months of each calendar year with respect to the prior year's results. We have also historically distributed estimated partner tax payments in the first quarter of each year in respect of the prior year's operating results. Therefore, levels of cash generally have declined during the first quarter of each year after incentive compensation was paid to our employees and estimated tax payments were distributed to partners. Cash then gradually increased over the remainder of the year. We expect these practices to continue.

        We evaluate our cash needs on a regular basis in light of current market conditions. Cash and cash equivalents include all short-term highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less from the date of purchase. As of September 30, 2014 and December 31, 2013, the Company had cash equivalents of $64.0 million and $260.8 million, respectively, invested in U.S. Treasury Bills, bank time deposits and government securities money market funds. Additionally, as of September 30, 2014 and December 31, 2013, the Company had cash of $78.1 million and $42.2 million, respectively, maintained in U.S. and non-U.S. bank accounts, of which most U.S. account balances exceeded the FDIC coverage limit of $250,000.

        In addition to cash and cash equivalents, we hold U.S. treasury bills classified as investments on our statement of financial condition as they have original maturities of three months or more from the date of purchase. As of September 30, 2014 and December 31, 2013, the Company held $74.0 million and $66.2 million of U.S. treasury bills classified as investments, respectively.

        Our liquidity is highly dependent upon cash receipts from clients which are generally dependent upon the successful completion of transactions as well as the timing of receivable collections, which typically occurs within 60 days of billing. As of September 30, 2014 and December 31, 2013 accounts receivable were $23.0 million and $28.8 million, respectively, net of allowances of $1.6 million and $0.8 million, respectively.

        To provide for working capital and other general corporate purposes, we maintain a $25.0 million unsecured revolving credit facility that matures on June 30, 2015. Advances on the facility bear interest at the greater of a fixed rate of 3.50% per annum or at the Company's option of (i) LIBOR plus 1% or (ii) Prime minus 1.50%. As of September 30, 2014, the Company had no borrowings under the credit facility.

        As of September 30, 2014, the Company's available credit under this facility was $16.7 million as a result of the issuance of an aggregate amount of $8.3 million of various standby letters of credit, which were required in connection with certain office leases and other agreements. The Company incurs a 1% per annum fee on the outstanding balances of issued letters of credit.

        On October 28, 2014, the Board of Directors of Moelis & Company declared a special dividend of $1.00 per share and a regular quarterly dividend of $0.20 per share. The aggregate $1.20 per share will be paid on November 24, 2014 to common stockholders of record on November 10, 2014. During the nine months ended September 30, 2014 the Company declared and paid dividends of $0.20 per share.

Regulatory Capital

        We actively monitor our regulatory capital base. Our principal subsidiaries are subject to regulatory requirements in their respective jurisdictions to ensure general financial soundness and liquidity. This requires, among other things, that we comply with certain minimum capital requirements, record-keeping, reporting procedures, experience and training requirements for employees and certain other requirements and procedures. These regulatory requirements may restrict the flow of funds to and from

66


Table of Contents

affiliates. See Note 12 of the condensed consolidated and combined financial statements as of September 30, 2014 for further information. These regulations differ in the United States, United Kingdom, Hong Kong and other countries in which we operate a registered broker-dealer. The license under which we operate in each such country is meant to be appropriate to conduct an advisory business. We believe that we provide each of our subsidiaries with sufficient capital and liquidity, consistent with their business and regulatory requirements.

Tax Receivable Agreement

        In conjunction with the IPO, we have entered into a tax receivable agreement with our eligible Managing Directors that will provide for the payment by us to our eligible Managing Directors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (a) the increases in tax basis attributable to exchanges by our eligible Managing Directors and (b) tax benefits related to imputed interest deemed to be paid by us as a result of this tax receivable agreement. We expect to benefit from the remaining 15% of cash savings, if any, in income tax that we realize.

        In connection with the IPO, the Company made a one-time cash distribution which is treated as an acquisition for U.S. federal income tax purposes of Class A partnership units in Group LP from certain partners of Old Holdings. This distribution resulted in a deferred tax asset of which approximately $60.9 million is attributable to exchanges by certain of the partners of Old Holdings who are party to the tax receivable agreement. Pursuant to this agreement, 85% (or $51.8 million) of the tax benefits associated with this portion of the deferred tax asset are payable to partners of Old Holdings over the next 15 years and recorded as amount due pursuant to tax receivable agreement in the condensed consolidated and combined statements of financial condition. The remaining tax benefit is allocable to the Company and is recorded in additional paid-in-capital.

        For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing our actual income tax liability to the amount of such taxes that we would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of Group LP as a result of the exchanges and had we not entered into the tax receivable agreement. The term of the tax receivable agreement commenced upon consummation of the IPO and will continue until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivable agreement for an amount based on an agreed value of payments remaining to be made under the agreement.

        Payments made under the tax receivable agreement are required to be made within 225 days of the filing of our tax returns. Because we generally expect to receive the tax savings prior to making the cash payments to the eligible selling holders of Group LP partnership units, we do not expect the cash payments to have a material impact on our liquidity.

        In addition, the tax receivable agreement provides that, upon a merger, asset sale, or other form of business combination or certain other changes of control or if, at any time, we elect an early termination of the tax receivable agreement, our (or our successor's) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control or early termination) will be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement, and, in the case of an early termination election, that any units that have not been exchanged are deemed exchanged for the market value of the Class A common stock at the time of termination. Consequently, it is possible, in these circumstances, that the actual cash tax savings realized by us may be significantly less than the corresponding tax receivable agreement payments.

67


Table of Contents

Cash Flows

        Our operating cash flows are primarily influenced by the amount and timing of receipt of advisory fees, which are generally collected within 60 days of billing, and the payment of operating expenses, including payments of incentive compensation to our employees. We distribute estimated partner taxes and pay a significant portion of incentive compensation during the first two months of each calendar year with respect to the prior year's results. A summary of our operating, investing and financing cash flows is as follows:

 
  Nine Months Ended
September 30,
  Year Ended December 31,  
($ in thousands)
  2014   2013   2013   2012   2011  

Cash Provided By (Used In)

                               

Operating Activities:

                               

Net income (loss)

  $ (5,733 ) $ 36,297   $ 70,225   $ 35,222   $ (8,530 )

Non-cash charges

    121,773     37,549     52,562     50,115     26,277  

Other operating activities

    1,788     (79,621 )   (5,130 )   25,398     (37,651 )
                       

Total operating activities

    117,828     (5,775 )   117,657     110,735     (19,904 )

Investing Activities

    (14,115 )   51,212     71,668     (113,122 )   (31,224 )

Financing Activities

    (263,816 )   (70,283 )   (73,503 )   67,284     (52,427 )

Effect of exchange rate changes

    (823 )   75     1,579     494     293  
                       

Net increase (decrease) in cash

    (160,926 )   (24,771 )   117,401     65,391     (103,262 )

Beginning Cash

    303,024     185,623     185,623     120,232     223,494  
                       

Ending Cash

  $ 142,098   $ 160,852   $ 303,024   $ 185,623   $ 120,232  
                       
                       

    Nine Months Ended September 30, 2014

        Cash and cash equivalents were $142.1 million at September 30, 2014, a decrease of $160.9 million from $303.0 million of cash and cash equivalents at December 31, 2013. Operating activities resulted in a net inflow of $117.8 million primarily attributable to the impact of non-cash equity compensation charges on net income (loss). Investing activities resulted in a net outflow of $14.1 million primarily attributable to purchases of investments, partially offset by proceeds from sales of investments. Financing activities resulted in a net outflow of $263.8 million primarily related to the pre and post offering distributions to partners and tax distributions to partners, partially offset by net proceeds received related to the issuance of Class A common stock.

    Nine Months Ended September 30, 2013

        Cash and cash equivalents were $160.9 million at September 30, 2013, a decrease of $24.8 million from $185.6 million at December 31, 2012. Operating activities resulted in a net outflow of $5.8 million primarily related to a decrease in compensation payable, partially offset by net income and non-cash equity compensation charges. Investing activities resulted in a net inflow of $51.2 million primarily attributable to net proceeds from sales of investments of U.S. Treasury Bills and bank time deposits. Financing activities resulted in a net outflow of $70.3 million, primarily related to tax and dividend distributions to partners.

    Year Ended December 31, 2013

        Cash and cash equivalents were $303.0 million at December 31, 2013, an increase of $117.4 million from $185.6 million of cash and cash equivalents at December 31, 2012. Operating activities resulted in a net inflow of $117.7 million primarily related to net income and non-cash equity compensation charges, partially offset by a decrease in compensation payable. Investing activities resulted in a net

68


Table of Contents

inflow of $71.7 million primarily attributable to net proceeds from sales of investments of U.S. Treasury Bills and bank time deposits. Financing activities resulted in a net outflow of $73.5 million primarily related to tax and dividend distributions to partners.

    Year Ended December 31, 2012

        Cash and cash equivalents were $185.6 million at December 31, 2012, an increase of $65.4 million from $120.2 million at December 31, 2011. Operating activities resulted in a net inflow of $110.7 million primarily related to an increase in compensation payable, non-cash equity compensation charges and net income. Investing activities resulted in a net outflow of $113.1 million primarily attributable to net purchases of investments of U.S. Treasury Bills and bank time deposits. Financing activities resulted in a net cash inflow of $67.3 million, primarily attributable to a cash investment of $93.2 million made by our Japan alliance partner, SMBC, in Old Holdings, which was partially offset by tax distributions to partners.

    Year Ended December 31, 2011

        Cash and cash equivalents were $120.2 million at December 31, 2011, a decrease of $103.3 million from $223.5 million at December 31, 2010. Operating activities resulted in a net cash outflow of $19.9 million primarily related to a decrease in compensation payable and a net loss for the year, partially offset by non-cash equity compensation charges. Investing activities resulted in a net cash outflow of $31.2 million primarily attributable to net purchases of investments of U.S. Treasury Bills. Financing activities resulted in a net cash outflow of $52.4 million primarily related to tax distributions to partners.

Contractual Obligations

        The following table sets forth information relating to our contractual obligations as of December 31, 2013:

 
  Payment Due by Period  
($ in thousands)
  Total   Less than
1 Year
  1 - 3 Years   3 - 5 Years   More than
5 Years
 

Operating leases

  $ 67,480   $ 10,946   $ 18,131   $ 18,579   $ 19,824  
                       

Total

  $ 67,480   $ 10,946   $ 18,131   $ 18,579   $ 19,824  
                       
̴