Moelis & Company Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 2, 2023

There are 10 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Sheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Moelis and Company Earnings Conference Call for the Q3 of 2023. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

On your telephone keypad. Thank you. I would now like to turn the call over to Mr. Matt Sue Croft. Please go ahead.

Speaker 1

Good afternoon, and thank you for joining us for Moelis and Company's Q3 2023 to the financial results conference call. On the phone today are Ken Moelis, Chairman and CEO and Joe Simon, Chief Financial Officer. Before we begin, I would like to note that the remarks made on this call may contain certain forward looking statements, which are subject to various risks and uncertainties, including those identified from time to time in the Risk Factors section of Molson Companies' filings with the SEC. Actual results could differ materially from those currently anticipated. The firm undertakes no obligation to update any forward looking statements.

Speaker 1

Our comments today include references to certain adjusted financial measures. We believe these measures, when presented together The reconciliation of these adjusted financial measures with the relevant GAAP financial information and other information required by Reg G is provided in the firm's earnings release, to

Speaker 2

the operator, which can be

Speaker 1

found on our Investor Relations website at investors. Moelis.com.

Speaker 3

I'll now turn the call over to Joe. Thanks, Matt. Good afternoon, everyone. On today's call, I'll go through our financial results and then Ken will comment further on the business. We reported $278,000,000 of adjusted revenues in the 3rd quarter, an increase of 19% versus the prior year.

Speaker 3

The revenue increase was driven by our restructuring business and some particularly large restructuring fee events. We do not expect this to recur next quarter. Our year to date adjusted revenues were $645,000,000 representing a decrease of 16% from the prior year period. The decline in revenues is primarily attributable to a decrease in M and A transaction completions. Moving to expenses, our year to date compensation was accrued at 83%, which is our best estimate of a full year ratio.

Speaker 3

Our elevated compensation ratio is a function of a revenue dislocation driven by the still challenging M and A environment and our decision to aggressively invest in talent during this downturn. Our Q3 adjusted non comp expenses were $50,000,000 which includes approximately $8,000,000 of co advisor And legal fee expense related to completed transactions, which includes our transitional SVB fee sharing agreement related to certain preselected mandates. Our non compensation expenses are expected to remain elevated through the Q1 of 2024 when our SVB fee sharing agreement terminates. However, the underlying quarterly run rate continue to be approximately $42,000,000 Based on our updated full year projection of income, we accrued tax expense to equal and effective rate of 1.7%. Our non deductible expenses are large relative to our pretax book income.

Speaker 3

Over the longer term, we expect to reflect a tax rate more consistent with our recent history once normalized productivity can be restored. Regarding capital allocation, the Board declared a regular quarterly dividend of 0 point 6 to share consistent with the prior period. And lastly, we continue to maintain a strong balance sheet with $297,800,000 of cash and no debt. I'll now turn the call over to Ken.

Speaker 4

Thanks, Joe, and good afternoon, everyone. The 3rd quarter marked a significant increase in revenues versus prior quarters. In addition, the pipelines for each of our 3 product areas continue to grow and the total pipeline is near record levels. However, M and A completions continue to be challenging. And although our Restructuring Capital Markets business have been quite active, the outsized restructuring Contribution is unlikely to repeat in the Q4.

Speaker 4

Liability management continues to be the main driver of restructuring activity. The team has been a leader in out of court engagements, having advised companies on 5 of the 10 largest out of court restructuring transactions since 2020. If the Fed maintains rates at current levels, out of court restructures will continue to be a significant opportunity for us. In order to help our clients not only grow, but also help them address liquidity and maturity issues, expanding our Capital Markets business has been a strategic priority for the firm. The team has grown in size and capability and we are advising clients on a broad range of capital markets transactions.

Speaker 4

We have significantly enhanced the firm's ability to address the largest sector fee pools. Over the last 12 months, we've hired 27 Managing Directors, while still managing overall headcount through targeted attrition. Although it is difficult to predict when the M and A business will recover, What we do know is that the cycle will turn and when it does, we are well positioned to capitalize on it for years to come. The investments we are making today have dramatically to the firm's earnings power. And with that, I'll open it up for questions.

Operator

Your first question comes from the line of Devin Ryan with JMP Securities. Devin, your line is open.

Speaker 5

Okay, great. Good afternoon, Ken and Joe. I guess first question, I just want to start on to compensation construct. So I guess first off, Joe, you may have said it, but in terms of just the full year, you're running at 83%. Is that the right way to think about The Q4 or is 87%, I guess the right way?

Speaker 5

And then I guess the bigger question is just trying to think about This year and appreciating this year is far from normal. If we look at the 83% year to date and compare that to where I think you guys have historically said comp ratio close to 60% is more normal. The delta is like $150,000,000 of compensation. So I guess the question is like, is virtually all of that just tied to this kind of elevated recruiting Or how much is kind of competitive dynamics? Because I guess everybody should kind of think about like where we revert back to in a more normal environment and how much Inflation, if you will, and compensation is just in the system.

Speaker 5

And I think that's a question every firm is getting asked right now. Thanks.

Speaker 3

Yes. So I'll answer the first part of your question, which has to do with the ratio. The 83% is The target for the full year of the $87,000,000 for the quarter was basically the catch up for the 1st two quarters that were accrued for at 80%.

Speaker 4

And addressing your issue, look, there are 2 events going on and they're intermingled. One is downturn in revenues due to a pretty difficult M and A environment. And yes, that would cause A significant elevation in the comp ratio no matter what. But then two things happened this year. We decided and again, I've done this I've been doing this for many years.

Speaker 4

There are 4 times in the last 40 years where I thought you could take advantage of significant Disruption, lengthy difficult disruption in the banker market. The first was when we the last was when we founded the company in the great financial crisis where we really created the company. I look back, I went to Drexel DLJ from Drexel Burnham in 1990 and they created a firm In the midst of a disaster in the junk bond market, they created a firm that ultimately was extremely valuable off of that franchise. And even UBS did that after the tech downturn in 2,001. This felt like that opportunity, A huge disruption in talent, people's desire to stay where they were, We took advantage of it.

Speaker 4

We hired 27 people in a year. It's almost it's more than 20% of the existing Managing Director base. And by the way, Devin, while we did that, you'll see that the headcount is only up 3% to 4% at the end of the year. So we actively managed a very significant amount of people out. We don't schedule any of that.

Speaker 4

We run it right through our income statements. So some of that other people might have put as a charge for to terminations or one timers. We're kind of running it all through the income statement. I don't know the exact breakdown of what it would be, but I think the earnings power of the firm is significantly expanded And that in a through the cycle normal business, that we'll be back to our normal comp ratio. I'd say this, there's probably and we'll see what happens over the next years.

Speaker 4

There's probably 1%, maybe 2% of comp ratio that is going to the junior non MDs that will not be recoverable, just because we've raised comp throughout the non managing directors on The Street, And I suspect that might be sticky.

Speaker 5

Got it. Okay. Terrific color. Thanks, Ken. Just a quick follow-up on just the M and A market more broadly.

Speaker 5

And just want to get a little bit more texture around how you guys are Feeling, maybe today relative to 3 months ago, on one hand, I think October was Better month than we've seen in some time for announcements and some larger deals were in that. But the tone has been a bit better. At the same time, Yes, there is still kind of a fair amount of macro uncertainty. So love to just get a little bit of sense of whether you're seeing kind of maybe more activity or sponsors engaging more

Speaker 6

They were a

Speaker 5

few months ago and just what the general tone is appreciating that it's still pretty complex and dynamic backdrop. Thanks.

Speaker 6

Yeah. I thought you were

Speaker 4

going to ask me how I felt today versus 2 days ago. Let me say this, our backlog our pipelines Are extremely strong. And let me about a year ago, I think we talked about having a decent to pipeline, but I describe it as fragile. And I think I felt it was fragile because it was a pipeline gathered during a better to the interest rate environment that was then facing a bad financing market. And so that you just knew you were fragile, whether it involved SPACs or all the kind of things that were going to be eliminated.

Speaker 4

At this point, I feel like the pipeline is actually very strong. There is an enormous amount of deal backlog that wants to hit the market. And I've been saying my new analogy for the As I've stopped, I don't like the green shoots analogy because I said the Fed has a big weed killer and so I don't know how you manage your green shoots when somebody could just Troy, your crop at any moment. But especially as of yesterday, I feel like this market is more, and you'll forgive me, I Fell in love with Drive to Survive during COVID. I'm not a real Formula 1 fan.

Speaker 4

But it feels more like that market where as of yesterday, My favorite part of the show is when the red lights go down, there are 5 red lights if you haven't watched it, and then the race starts. But the noise and the amount of energy that's pent up as the lights click, is always very exciting. The cars are on the track, the engines are revving, everybody's ready Go, but you can't move till the 5th light goes down. And it feels to me that yesterday that was the 4th light clicking off, meaning that The Fed felt like they're getting to the end. There was a real signal yesterday that we are extremely close to the end.

Speaker 4

And I do think the pipeline will take off as soon as that last red light goes off and it will be quick And it will be fast and there will be a lot of activity.

Speaker 5

Okay. Great. I had to get back and watch that. But thank you very much.

Speaker 4

It's a great show. It's a great show.

Operator

Your next question comes from the line of Ken Worthington with JPMorgan. Ken, your line is open.

Speaker 7

Hi, good afternoon. Thanks for taking the questions. You're losing money year to date. Do you expect to lose money for the year Unless there's a meaningful improvement in deal activity, and does this matter?

Speaker 4

I think We don't yes, we'll probably lose money, because even if the deal activity starts tomorrow, you're not going to see the closings till the first The Q2, we have what we have, plus or minus a very little bit from here to the year end. And does it matter? Sure, it matters. I mean, I'm not but what we decided to do was recreate to a firm that faces, I mean, half of the 27 Managing Directors were in the technology hire at a Silicon Valley Bank. It's a fee pool that will be extremely large and relevant for years to come.

Speaker 4

And look, we didn't we don't get to capitalize it. We might have bought talent that equals 20% of our firm and there's no capitalization That cost, it runs right through our income statement. We exited, as you can tell, exited a significant amount of people keep our headcount within a 3% to 4% range while we did this. And it goes it's an investment that by accounting reasons in our business goes through Your comp ratio and your earnings. Does it matter?

Speaker 4

Sure. Was it an extremely difficult decision for us to take this The decisions to do this, yes, you can imagine there was the debate on this is significant. Do I think that it will pay back extremely well over time and always has in every past cycle. You can't create these franchises When you want to, you have to create them when you can.

Speaker 7

Okay. Fair enough. And then just maybe moving to the balance sheet, we don't have the Q yet. So Talk about the cash balance, given the dividend and the compensation accrual, do you guys think you'll have to draw down on the revolver? Or is there enough cash to kind of meet the dividend in the year end bonus payouts?

Speaker 3

Yes. We obviously are pretty attentive to that area. We do not expect to have to draw on the line. We expect to have adequate cash to service the dividend as well as the compensation at the end of the year.

Speaker 7

Okay, great. Thank you very much.

Operator

Your next question comes from James Yaro with Goldman Sachs. James, your line is open.

Speaker 8

Good afternoon and thanks for taking my question. I take your point on the strong restructuring this quarter not repeating, but How is the challenging macro backdrop affecting the medium term trajectory for restructuring?

Speaker 4

We had a really good restructuring quarter. And by the way, we have a really good restructuring business going forward as well. It was outsized even for the us for this quarter, but it's at the top end of its range. Our backlog on restructuring is very good. And I feel very good about it going forward because our out of court expertise is something that most people want.

Speaker 4

Most of the deals that have been done in the last few years have been capitalized with a significant larger amount of equity than in prior downturns. So The route to for most of these transactions is not straight into bankruptcy. It is to do capital markets extend runway and liquidity, which we beefed up our capital markets for that and liability management exercises to create room. And I think the fact that Most of the transactions had so much equity under the debt capital, gives you the ability to do innovative solutions without going to court. So yes, I think the Restructuring business will continue.

Speaker 4

There are a lot of firms that will continue to have trouble with higher rates, But they do have options and flexibility to address them.

Speaker 8

Okay. That's very clear. Maybe we can just turn to your hiring plans.

Speaker 4

I guess, should we expect you

Speaker 8

to continue to hire at an elevated pace into next year? I'd imagine, obviously, it won't be at the level you've been hiring at, Especially earlier in this year, but will it remain elevated into next year?

Speaker 4

I don't think nothing like this. We've gotten look, these were a couple of the large sectors we wanted to address. Technology, again, was over half of the Managing Directors. We established an energy transition team, which is, as a result of the IRA, Just became a market that we wanted to be in and wanted to be in significantly and found a great team there. The Credit Suisse debacle Freed up some exceptional talent in Industrials and we took advantage of that.

Speaker 4

And prior to that, we had been very aggressive in healthcare going back 12 months ago. So I think we've done a very good job in the sectors that we really wanted to turn the firm to address Coming to the next M and A cycle, there is and I'm not going to say which one, but there is one more sector that we're kind of looking at, but there'll be nothing of the magnitude of this. We think we've put in place a significant amount of the talent that we have to address the markets. And if the 5th light goes off, You don't

Speaker 3

have the opportunity. Right. It's just

Speaker 4

I have to wait for them to all watch Drive to Survive or else I can't continue with the analogy. But yes, if It feels like we're much closer to the start of the race happening. And at that point, I think it would be tough to find, it's going to be tough. The talent will get busy, And people will stay in their seats again. So if that happens, I do think we'd slow down as well.

Speaker 9

All right. We'll have

Speaker 8

to watch the newest season. Thanks so much.

Speaker 2

Thanks.

Operator

Your next question comes from the line of Steven with Wolfe Research. Steven, your line is open.

Speaker 9

Good afternoon. This is Brandon O'Brien filling in for Steven. I guess to start, just on the M and A outlook commentary, Your views on how quickly activity could ramp next year was maybe a bit more optimistic than what we've heard from some of your peers, which have indicated that this would be more of a stop start recovery. I want to get a sense as to whether you're saying that we could see a ramp in activity that is similar to what we saw during COVID, and I guess circling back to the Drive to Survive reference, what is that 5th light in your view that could kick start activity?

Speaker 4

Well, that's a good question because you're actually right. I think the reason is, I think yesterday was a big day. I think that I took yesterday to be the 4th light to tell you the truth. And I might not have the same outlook, had it been had this call been 5 days ago. So, I have the I just happen to have the benefit of going after the Fed yesterday.

Speaker 4

It felt to me Like they were saying, and I believe that rates have not fully been reflected in the statistics they're seeing. I do think companies are having much more difficult time. Some of the consumption part of the economy has kept GDP up, but I think companies are having enormous problems with the higher rates. And I thought yesterday, I read it that we are starting to look at waiting to see if these rates have issues that we haven't been able to measure yet. And so I just want to acknowledge that I don't think I would have had the exact same commentary That I wouldn't have thought again to stretch the analogy that the 4th light had gone off on the race.

Speaker 4

And I do think so we may be one light away from it where the Fed just Confirms that we're at the end of the red cycle. There are several things that can trigger it. Would it be COVID like? Probably not. I mean, COVID was triggered by a drop of interest rates.

Speaker 4

I forgot from where to where, but almost to 0 interest rates and a flooding of the capital markets with money, but I do think it would ramp up pretty quickly because there are a lot of transactions. Remember, COVID only deferred transactions for 3 or 4 months. I guess it was from like the beginning of March to maybe it got triggered again by July August. There's a 2 year backlog of LPs that want capital, of sponsors that need to either buy or sell something and companies that also want to get into the market strategically. So I don't it doesn't feel like COVID in terms of the dropping cost of money, but maybe the backlog of 2 years will drive a similar transaction volume.

Speaker 9

That's great color. Thanks. And I guess for my follow-up, restructuring was a big driver of the results this quarter, and I know that Joe indicated that you don't expect this to repeat next quarter. I just wanted to get a sense as to how we should be thinking about what was typically a seasonally stronger quarter in 4Q and whether that's an indication that we should expect some decline in revenues. And if you could give some context around how large of a contributor restructuring was to this quarter's results, that would be great.

Speaker 4

We always say that restructuring capital markets is 20% to 25%. For the year, it's probably at the high end of that, which is 25% or better. And for the quarter, It was almost 50% higher than that. So it was but we don't again, what Quarter these revenues fall in is a bad way to look at it. They just happen to fall in and out of certain periods.

Speaker 4

I'd look at it, we're at the high end Of the contribution we've had as a firm, probably a little north of 25%. If you include Capital Markets in that, it's probably close to a third for the year. And Capital Markets, I included in that because it has become an alternative in a lot of these capital raises are Finding liquidity for companies that are sort of in a restructuring or how do I get liquidity mode. On the Q4, I think you just take the run rate of the 9 months. We had Again, I'm not giving guidance, but I think if you look at the year, it's kind of if you smooth out for the quarters, the run rate for the year seems to be have I think the whole year is going to

Speaker 3

be I think the idea was that we just didn't want you to extrapolate the Q3 to the 4th That we have an unusual multiple when you guys look at deal logic that's probably a bad way to look at it for the 4th.

Speaker 9

Actually, no, that's exactly what I was trying to answer. Thanks for taking my questions.

Operator

Your next question comes from the line of Brennan Hawken with UBS. Brennan, your line is open.

Speaker 2

Good afternoon. Thanks for taking my questions. Ken, thanks for making the Holiday gift for you, very clear, some sort of Formula 1 team round sponsored by Roundup The weed killer type of outfit. So Seriously though, when you think about, we all know the environment is challenging, right? And so like the comp ratio, yes, it's elevated, no kidding, You're doing a lot of hiring, but you've got an aspiration to get the comp ratio back down to that 60% that we got used to.

Speaker 2

So what kind of a revenue environment do you need in order to get there given the additional fixed expenses that you've added?

Speaker 4

Look, you can look through from us from the bottom of the cycle to the top of the cycle. The average revenue per MD has Kind of been from $8,000,000 to $12,000,000 Somewhere in that, you can even go $7,500,000 to 12 to

Speaker 3

normal times.

Speaker 4

That's through the cycle. I'm talking about from the bottom to the top and without people coming in and out. I mean, when you hire 27 Managing Directors who, let's say, average started in June, you're not going to get a lot of revenue from those people, But they're in the comp pool. We have a mid-150s managing director pool and I believe a better fee facing pool than we've ever had. I'm not going to you can do the math, but I think any of the numbers that fall into a normal M and A cycle would easily return the firm to a 60% comp ratio.

Speaker 4

And the key was to make sure we were covering The fee pools that are going to generate that and that included technology, healthcare, industrials, I think those are 3 of the 4 largest by far. And I feel like we've done that. We've repositioned the firm on the move to do it without having to incur M and A type expenses. Now again, the bad news is we don't get to capitalize the cost, but I think the investment is way more efficient and we'll prove to be a much higher return on invested capital for everybody on the call. By the way, Brendan, I really don't not a fan.

Speaker 4

I just want to make clear. I don't really know much about Formula 1. I just watched the show. It's like that Holiday Inn Express thing. So I think I'm an expert, but I don't know much about Formula 1.

Speaker 2

Yes. Let's not let the truth get in the way of a good story here, Ken. Okay. That's fair. So look, when I look back at the last 2021 was a remarkable one, right, which was where You were at the 12.5%.

Speaker 2

But like, 2022 typical on a trailing basis, 8%, 7.5% in 2020, 6% in 2019, 7.5%, 6.7%. So like if we use to the upper end of the ex 2021 range, and we say 7.5 and multiply it, that's about 1.25 1,000,000,000 yen. So are you saying that basically at that level, you could get back to the 60% comp ratio?

Speaker 4

Yes. I think that's I would hope we do better than that. I think we've addressed better fee pools. We substantially improved the brand the firm and our go to market. I think, but if we did that, I think we'd be at 60% comp ratio, yes.

Speaker 3

Yes, we have mind you though, I think that's true Broadly, but there is elevated fixed costs that are going to go into next year as well. So it might be a couple of points different, but Materially, you're on the right track and certainly 25 for sure.

Speaker 2

Yes. Got it. And then when we think about the kind of the impact of The additional commitments via this very active recruiting and we just sort of think tactically about the various costs on the cash. I was just doing a little quick math. Is it reasonable to think that the commitments from all of this recruiting could Effectively double what your cash incentive pool would be would have looked like absent this remarkable opportunity?

Speaker 4

No, no. We're pretty disciplined. We want partners. We hire partners. If you're asking did we guarantee, we hold pretty closely to making sure That the people entering our system are getting comped the same way as our existing group.

Speaker 4

We like to have Equity partners, people who want to see the value of the firm go up. So we're pretty disciplined on that.

Speaker 2

Okay. But it is right. It's not like I'm off in thinking that the Recruiting would put upward pressure on what the cash incentive pool would look like absent the recruiting, right? There is no commitment.

Speaker 4

Yes. Whatever the incentive pool would look like, we've hired 27 more of them and yes. That's why we're at 83. And that's what she and that is why we're that's one of the main reasons

Speaker 2

we're at 83. Yes, yes. Okay. And then just last one on that point. Like given that you're going to have Some liquidity drain that as typically happens in the beginning of next year as the incentive gets paid out.

Speaker 2

Should we continue you had a nice liquidity build here in this quarter. Should we continue to expect liquidity to build in the year end so that you're in a position To cover those demands?

Speaker 4

Yes. Well, yes, we've looked at it closely. We have no concerns about we have $300,000,000 of cash going into the end of the year. We've looked at it dozen ways we stress tested and we're fine on the dividend, we're fine on the bonus pool. We have multiple levers we could pull and we're think we're in great shape.

Speaker 4

I mean, the last the low point of our liquidity will be the day we pay bonuses, and we think we're in very good shape to do that.

Speaker 5

All right.

Speaker 2

Thank you for taking my questions.

Operator

Our final question comes from the line of Ryan Kenny to Morgan Stanley. Brian, your line is open.

Speaker 6

Hi. This is Connell Schmitz filling in for Ryan Kenny. So I guess I just want to go back to the sponsor question. We've heard a lot on the narrative on why sponsors will ultimately Go back to transacting and come off the sidelines, but can you just give an update on how sponsors are feeling in this environment and what like What the next catalyst is to see sponsors transact and what kind of pressure they're seeing from LPs at the moment and Any color you can give there would be helpful.

Speaker 4

So the answer is, yes. We do think there is a large A bit of pressure on distributing proceeds to LPs. If people want to raise a new fund, they're going to have to some of the old investments. Most investments that were targeted for disposition as of about 20 months ago Have been on hold. And so those might be 2016 investments, 2017 or 2018 investments, but they're certainly not supposed to be held for 10 years.

Speaker 4

So the pressure is out there to do transactions to recognize where the market is. You might have thought you had a 5 times return on the asset and it might only be a 3 times return. And we think people are Getting to that point where they're facing the fact that the realization of what they might have to take slightly different pricing than peak pricing. And we see it in the fact and when I talk about our pipeline is that there is a serious amount of allocated to transactions pending a market to go to market on. And I think that that market is when the Fed Says we're done.

Speaker 4

I don't think we need a rate cut. Obviously, that would be extremely helpful. But It's starting to feel like this might have been the last couple or very close to it. And when that happens, I think There'll be a lot of transactions that will go to market. The amount of capital, let me say one thing, the amount of capital that is accumulating in the private credit system And the creation of funding mechanisms around the banks is also reaching a significant proportion.

Speaker 4

And so the ability to finance is coming back up, which multiple bidders to put forth financing. And the last thing I'll say about my optimism for the next 5 years and why I'm happy to build into it is I do think that the large Thanks. Are going to continue to face a regulatory challenge of being in the let's give out below market funding in order to get advice business. And if they are put out of that business through regulations and I think the new Basel negotiations and the regulatory environment Are pointing to that more and more as a result of what happened with Credit Suisse and Silicon Valley Bank. I think the regulators are again starting to believe That the government guaranteeing deposits of large institutions so that they can speculate in all kinds of business is not to the right structure for capital markets.

Speaker 4

And I think it will be very healthy to have private credit build up that's not levered 10 to 1, but is levered 1 to 1 Ann is not free to, use the government backed deposit base to go compete with FinTech Companies and Independent Advisory using the government guaranteed money, and that will be very positive for us. And I think that's a long term structural to a tailwind that we'll see over the next 10 years that will continue to drive, I believe, a wedge between advisory businesses and the ability for those institutions to use below market lending to generate business and has to redound to the benefit of the independent investment banks.

Speaker 6

That's really helpful color. I guess On your point on rates in the near term though, like can you just speak to like volatility in yields over the past few weeks? Like Has that impacted the pipeline and elongated deals more so, and has that affected financing conditions? Any color there would be helpful.

Speaker 4

Deals were slow to get out of the gate. I mean, again, I think there might have been a signal in the last 24 hours from the Fed that you can move from having a toe in the water to a full leg. But yes, before that and again, it's only been 24 hours, so I can't say I've Seen anything change in the in our go to market on these transactions. But yes, things were What was happening is transactions were being assigned, work was beginning and the idea was we want to be ready When the market is ready for us. And a substantial amount of transactions have that sort of structure around them.

Speaker 4

And so as I see the market get ready to accept those deals either via the Fed. By the way, I think the turning of the year will be Most people between about Thanksgiving and Christmas just try to keep their jobs versus take risk. Then in the beginning of the year, they think about how to create capital. So I think there could be a lot of momentum around the Fed decision, Markets, turn of the year, New Year, a lot of those things might come look, this could all change. There's a lot of macro events out there that to change that.

Speaker 4

But as of right now, it feels like we're heading to that type of transition in the market. Thank you.

Operator

I will now turn the call back over to Ken for closing remarks.

Speaker 4

Thank you. I'll leave you with one recommendation. I think Drive to Survive is Fun show and maybe you'll understand Mike. Then you'll go back and listen to this call and see if you can make out what I was trying to say. But I look forward to talking to you next call after you've all caught up on there are 3 or 4 seasons.

Speaker 4

So good luck. Thank you.

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