MC earnings call transcript, November 5, 2026

Either as part of that transaction, because sometimes you see that, you see M&A out of restructuring, or you see M&A on the back heels of restructuring, because we have a collaborative approach to that, you know, those handoffs are super seamless in our firm.

Okay, thanks. That makes sense. Maybe just one more on the restructuring side of things. How would you think about the impacts of potential stress on parts of the AI financing complex, and how could this... potentially impact your restructuring business, or your CSA business, I should say? So look, if there's stress anywhere in the system, if there's disruption happening in any sector, especially where there's been lots of... capital formation, you know, clearly our CSA team is well positioned to take advantage of that. And yes, AI infrastructure has been, you know, an area of massive capital formation, you know, which really been the dominant theme. of the capital markets here, you know, for the last few years. And if, you know, some of these situations should tip in or if a broad base set of these situations should tip in to more liability management, restructuring, workout, etc. Certainly, again, the combination of the fact that we have a very strong, you know, data center, emerging telecom team that has been working and is working on, you know, many of these, you know, financings and M&A transactions and a strong CSA team, you know, certainly we'd be well positioned.

Okay. Thanks a lot.

Your next question comes from the line of Alex Bond with KBW. The line is open. Please go ahead.

we're going to take a look at the next year. Is a little sluggish, a little muted. It's improving, but it's not where everybody wants it to be. And yet, you know, our share of sponsor wallet we think is improving. Got it. That makes sense. And then maybe as a follow-up, just wanted to ask around. Comp expectations for 4Q. So just given where the year-to-date revenue numbers stand, can you just maybe speak to how confident you are in being able to drive additional leverage here in the fourth quarter and how, you know, we're just thinking about how should we be thinking about comp kind of more generally? As we think, you know, starting to think about 27 as well, just any additional color there would be great. Thank you. Look, I think we entered the year with the expectation that we would get some comp leverage. We haven't adjusted the comp ratio, as you can see, for the first nine months of the year, but our expectation continues to be that, you know, by the time the year finishes up, you know, we will be able to exhibit some comp leverage and a reduction in the comp ratio. So, you know, that's still. That still continues to be our expectation. Great.

Thanks, David.

Thank you, Alex.

Your next question comes from the line of Stephen Chuback with Wolf Research. Your line is open.

Yeah, thanks for the question. You know, it's going to be difficult to start by forecasting 2020. Seven at this time, we are currently going through our needed what opportunities we have for savings. We'll continue to focus on improving cost savings. And pre-tax margins. I would say if you're looking in particular on technology, you know, that's a line item that I can imagine continue to grow in 2027. Whereas, for instance, other line items that won't grow. As much would be real estate. But at this time, I mean, I think seven, except that we'll be in a position to.

Let me add something to that. Look, you're right, Stephen. There's increased technology spend because of AI and other things. Like everybody else, we're adopting, as I mentioned, adopting AI, experimenting with AI. We're excited. about what we think it could do for our business. Those costs will continue to increase. Having said that, we're laser focused on making sure that we're being most efficient in how we utilize these tools. I think as we move more towards token-based consumption, which is likely around the corner for us and our peers, making sure we're being very, very focused on efficiency and using the right tools for the right task is going to be very, very important. Secondly, at some point, we're going to have to get efficiencies, you know, in our efficiencies in our organizational structure, and most importantly, in terms of productivity. And so we do believe that there will be a positive return. over time on the AI spend. And we're very, very focused on making sure that, you know, we can track that and can demonstrate that, you know, once we get through this update period. No, that's really helpful, caller. And for my follow-up. I did want to ask on the 162M tax provision that's expected to go into effect beginning next year. It looks like for you and some of your peers, it could have a pretty material. impact on the tax rate and was hoping that you could speak to at least some of your preliminary findings based on the work that you've done thus far.

Yeah, thanks for that. Yes, we are. Currently evaluating the impact. There are, as you can imagine, many variables that will affect the rates as we head into year end. However, for a start, we can imagine adding a few points to our tax rate. And then for what we'll be able to, again, provide more information at our next earnings call.

But to start- You can add the guardrails around that? I think at this point, there's too many variables that are- Open. So I think we're going to stick with- a few points is probably, give or take, a point or two on either side. Understood.

Your next question comes from the line of Gabriel Angelini with Bank of America. Your line is open. Please go ahead.

Got it. That's helpful. Thank you. And then maybe as a quick follow-up, it sounds like the business mix may have shifted slightly more toward M&A this quarter versus the typical sort of two-thirds, one-third. So just wondering if that was driven by more strength in M&A this quarter, and I understand you don't break out the non-M&A businesses, but maybe any caller you could provide there on the relative strengths between them would be helpful. Thanks. I just think that a business like ours, especially now that we... We have expanded capabilities. It's hard to extrapolate too much on any one quarter or two. Look, we, as I said before, I think we have a healthy and vibrant M&A business demonstrated by the continued growth in that business. CSA has had a good year and a very good past quarter. We had a softer quarter in capital markets despite the fact that they had a record year last year and a record for six months of the year. So I think when you're looking at any specific quarter to there are vagaries of client activity and impact the timing and very client specific things and sometimes market specific things that impact, you know, some of the composition of the revenue in any one period and I'm not sure I'd extrapolate too much on any quarter or two.

Thank you very much.

Thank you, Gabriel.

Your next question comes from the line of Nathan Stein with Deutsche Bank.

You know, a lot of the market for the last year or two, certainly the financing markets and the... Public equity markets have been driven by, you know, all the capital formation around AI and digital infrastructure. And we've certainly taken advantage of that. And so if there's a shift there, you know, it could hurt parts of our business on financing and M&A and some of those markets. But help other parts of our business. I do think one of the things that has happened over the last 12 to 18 months is there's been so much focus and so much emphasis on the AI trade and capital formation around that, that it's really crowded out capital form. and other areas that where there is growth happening and there is vibrancy there's been just so much attention going to and so much capital going to you know the hot sector that it's been you know a little. bit more challenging to raise money for companies that aren't growing at the same magnitude but still are very healthy companies and very vibrant and so one of the silver linings if there is a blip or a major blip on the AI infrastructure side is. You know there could be a recalibration back to you know more traditional businesses that are worthy of capital. So we'll see. We're monitoring all this carefully. All of this is real time and but it's a very good question.

Thanks. Appreciate the color there. And then I did want to ask really quickly on the non-comp expense dollars. So back in July you had talked about the non-comp being in the mid to high 60 million range in both 3Q and 4. Q of this year. So it came in lower than that this quarter, but based on the full year comments, it sounds like 4Q levels will be near the high end of the range. So I wanted to ask, was there a lumpy cost that maybe was taken out or pushed into 4Q? And longer term, is that mid to high $60 million range a good way to think about non-comp dollars? Thanks. Yeah, I would say that this quarter Q3 was a little lighter due to some seasonality. Lower travel during the summer months. There also was less underwriting syndication costs associated with capital markets business. However, as you can imagine, costs do shift from one quarter to the next, so it's probably best to look at non-comp on a four-year basis. And as I said in the prepared remarks, we expected to grow approximately 19%. So I think we were pretty consistent from the beginning of the year that we thought it was going to grow in the high teens, and it looks like that's probably- where we'll end. Thank you.

Your next question comes from the line of Mike Brown with UBS. Your line is open. Please go ahead.

In the M&A world, we're definitely seeing, you know, in certain parts of the software sector, cyber being a good example, both take private activity and private company M&A. So there is some M&A happening in pockets. You know, the software industry certainly. It's not broad-based yet. I still think there's a, you know, healthy part of the ecosystem where people just aren't sure, even though they're not seeing business model impact yet from AI, there's still concerns around, you know. You have terminal value and terminal multiples and things of that nature. And for a sub-segment of those companies that have a heavy amount of leverage, there's certainly, you know, dialogue and work that our teams are doing around thinking through. Opportunistic liability management for some of those companies. So it's keeping, you know, our CSA team busy on some of those names. So I think there's some differentiation happening, but it's still early days.

Okay, great. Maybe just a quick clarification on your last point. Where are you, is the team starting to see some of the software restructuring reliability management exercises coming through at this point? And then if not, what's your, what's your view, best guess on timing? Is that something that's more of a. a 27 event or later in the second half of 27, just, you know, any views there would be helpful. We're seeing some, but it's still, I would say, pre liability management work advice and and. conversations. So I still think it's going to a little bit, take a little bit more time for some of those conversations to ripen. It's hard to say whether the bulk of that will happen in 27 or 28. Although, you know, I would note that, you know, starting in 28, 29, you know, there's a fair amount of debt maturities that are coming due. And software is a very healthy portion of some of those debt maturities. So I think it's, I think you're you're likely to see some a fair amount of liability management happen over the next 12 to 18 months.

Okay, great.

Thanks for taking my questions.

Thanks, Mike.

There are no further questions at this time. I will now turn the call back to Navid for closing remarks.

Thank you for attending.

You may now disconnect.