- Quarterly revenues of $49.7 million, up 9% from prior year’s
first quarter
- Compensation costs for the quarter up 29% from the same period
in 2022, largely as a result of the timing of an accounting charge
for incentive compensation
- Non-compensation costs were within our target range but
increased 14% for the quarter due to higher travel expenses and
one-off relocation costs for our new London office
- Repaid $1.8 million on the term debt facility during the
quarter
- Repurchased 577,349 shares of common stock and common stock
equivalents during the quarter for $7.9 million
Greenhill & Co., Inc. (NYSE: GHL) today reported revenues of
$49.7 million, a net loss of $23.3 million and a loss per share of
$1.27 for the quarter ended March 31, 2023.
The Firm’s first quarter 2023 revenues compare to revenues of
$45.4 million in the first quarter of 2022, which represents an
increase of $4.3 million. The Firm’s first quarter 2023 net loss
and net loss per share compare to a net loss of $12.1 million and a
loss per share of $0.66 for the first quarter 2022.
The Firm’s revenues and net income can fluctuate materially
depending on the number, size and timing of completed transactions
on which it advised and other factors. Accordingly, the revenues
and net income in any particular period may not be indicative of
future results.
“Our first quarter revenue showed modest improvement from last
year’s level despite what was obviously a very challenging
operating environment. But notwithstanding what was a relatively
quiet revenue quarter, we are seeing a level of engagement,
particularly with our corporate clients, that feels stronger than
recent M&A market commentary has been suggesting. We are also
seeing restructuring activity accelerate from last year’s slow
pace. Accordingly, we expect our year to date revenue improvement
to grow significantly in the second quarter, leading to our best
first half in recent years. On the cost side, our compensation
costs were elevated for the quarter as a result of the timing of an
accounting charge for incentive compensation. But already in the
second quarter the absolute dollar level of compensation will fall
to a more typical level, and our compensation ratio should do
likewise as these costs decline and higher revenue materializes.
Looking further ahead, we are well positioned to benefit as markets
continue to stabilize, credit conditions improve, a more robust
level of deal activity develops and costs normalize,” Scott L. Bok,
Chairman and Chief Executive Officer, commented.
Revenues
Revenues were $49.7 million in the first quarter of 2023
compared to $45.4 million in the first quarter of 2022, an increase
of $4.3 million, or 9%. The increase principally resulted from a
higher level of fees from financing advisory and restructuring
retainers.
Recruiting Update
Today we are announcing the recruitment of Jakub Mleczko (most
recently Managing Director at Perella Weinberg Partners) who will
join our New York office as a Managing Director focused on
Financing Advisory & Restructuring.
The Firm remains in dialogue with numerous other Managing
Director candidates and continues to see opportunities to grow
senior banker headcount.
Including all Managing Directors whose recruitment we have
announced to date, we have 78 client-facing Managing Directors. As
of January 1, 2023, we had 79 such Managing Directors.
Expenses
Operating Expenses
Our total operating expenses for the first quarter of 2023 were
$75.5 million, which compared to $60.0 million of total operating
expenses for the first quarter of 2022. The increase in total
operating expenses of $15.5 million resulted from increases in both
our compensation and benefits expenses and our non-compensation
operating expenses, each as described in more detail below.
The following table sets forth information relating to our
operating expenses.
For the Three Months Ended
March 31,
2023
2022
(in millions,
unaudited)
Employee compensation and benefits
expenses
$60.6
$46.8
% of revenues
122%
103%
Non-compensation operating expenses
14.9
13.1
% of revenues
30%
29%
Total operating expenses
75.5
60.0
% of revenues
152%
132%
Total operating income (loss)
(25.8)
(14.5)
Operating profit margin
NM
NM
Compensation and Benefits Expenses
Our employee compensation and benefits expenses were $60.6
million in the first quarter of 2023 as compared to $46.8 million
for the first quarter of 2022. The increase in expense of $13.8
million, or 29%, was largely a result of the timing of an
accounting charge for incentive compensation. The ratios of
compensation to revenues for the first quarters of 2023 and 2022
were elevated due to lower than average revenues.
Our compensation expense is generally based upon revenues and
can fluctuate materially in any particular period depending upon
changes in headcount, amount of revenues recognized, as well as
other factors. Accordingly, the amount of compensation expense
recognized in any particular period may not be indicative of
compensation expense in a future period.
Non-Compensation Operating Expenses
For the three months ended March 31, 2023, our non-compensation
operating expenses of $14.9 million increased $1.8 million, or 14%,
as compared to $13.1 million in the same period in 2022. The
increase principally resulted from higher travel and entertainment
expenses, which we believe have normalized from the low pandemic
level, as well as incremental costs related to our relocation to
new space in London.
Non-compensation expenses as a percentage of revenues for the
three months ended March 31, 2023 were 30% compared to 29% for the
same period in 2022.
Our non-compensation operating expenses can vary as a result of
a variety of factors such as changes in headcount, the amount of
recruiting and business development activity, the amount of office
expansion, the amount of client reimbursed expenses, the impact of
currency movements and other factors. Accordingly, the
non-compensation operating expenses in any particular period may
not be indicative of the non-compensation operating expenses in
future periods.
Interest Expense
For the three months ended March 31, 2023, we incurred interest
expense of $5.8 million as compared to $2.8 million for the same
period in 2022. The increase of $3.0 million related to
significantly higher market borrowing rates in the first quarter of
2023 compared to the same period in 2022.
The rate of interest on our borrowing is based on LIBOR and can
vary from period to period. Accordingly, the amount of interest
expense in any particular period may not be indicative of the
amount of interest expense in future periods. There can be no
certainty that our borrowing rate will not increase in future
periods as a result of the transition from LIBOR to SOFR or another
alternative rate.
Provision for Income Taxes
For the three months ended March 31, 2023, we recognized an
income tax benefit of $8.3 million as compared to an income tax
benefit for the three months ended March 31, 2022 of $5.2 million.
The tax benefit recognized in the first quarter of 2023 increased
as compared to the same period in 2022 as a result of a higher
pre-tax loss.
The effective tax rate can fluctuate as a result of variations
in the relative amounts of income earned and the tax rate imposed
in the tax jurisdictions in which we operate. Accordingly, the
effective tax rate in any particular period may not be indicative
of the effective tax rate in future periods.
Liquidity and Capital Resources
As of March 31, 2023, we had cash and cash equivalents of $58.8
million and term loan debt with a principal balance of $270.1
million. Our net debt was $211.3 million. During March 2023, we
made a required excess cash flow repayment of $1.8 million on our
term loan. The remaining principal balance of the term loan is due
at maturity on April 12, 2024 and may be repaid further in advance
of maturity without penalty.
During the first quarter of 2023, we repurchased 508,237
restricted stock units from employees at the time of vesting to
settle tax liabilities at an average price of $13.85 per share, for
a total cost of $7.0 million. We also repurchased in the open
market 69,112 shares of our common stock at an average price of
$11.88 per share, for a total cost of $0.8 million.
For the twelve month period through January 31, 2024, our Board
of Directors has authorized up to $30 million in purchases of
shares and share equivalents (via tax withholding on vesting of
restricted stock units). As of March 31, 2023, we have $22.7
million remaining under that authorization.
Going forward, we intend to apply our available cash flow
primarily to deleveraging, while also maintaining our dividend and
making repurchases of common shares and common share equivalents as
and when appropriate.
In light of the upcoming maturity of our term loan, we intend to
seek to refinance or extend the loan facility in the relatively
near term at such time as we believe market conditions are optimal
to do so.
Dividend
The Board of Directors of Greenhill & Co., Inc. has declared
a dividend of $0.10 per share to be paid on June 21, 2023 to common
stockholders of record on June 7, 2023.
Investor Presentation
An updated investor presentation highlighting the Firm’s results
for the first quarter and other matters relevant for investors has
been posted on its website today (www.greenhill.com).
Earnings Call
Greenhill will host a conference call beginning at 4:30 p.m.
Eastern Time on Wednesday, May 3, 2023, accessible via telephone
and the internet. Scott L. Bok, Chairman and Chief Executive
Officer, will review the Firm’s first quarter 2023 financial
results and related matters. Following the review, there will be a
question and answer session.
Investors and analysts may participate in the live conference
call by dialing (888) 317 - 6003 (toll-free domestic) or (412) 317
- 6061 (international); passcode: 5215522. Please register at least
10 minutes before the conference call begins. The conference call
will also be accessible as an audio webcast through the Investor
Relations section of Greenhill’s website at www.greenhill.com.
There is no charge to access the call.
For those unable to listen to the live broadcast, a replay of
the call will be available for one month via telephone starting
approximately one hour after the call ends. The replay can be
accessed at (877) 344 - 7529 (toll-free domestic) or (412) 317 -
0088 (international); passcode: 9866349.
Greenhill & Co., Inc. is a leading independent investment
bank entirely focused on providing financial advice on significant
mergers, acquisitions, restructurings, financings and capital
raising to corporations, partnerships, institutions and governments
globally. It acts for clients located throughout the world from its
offices in New York, Chicago, Frankfurt, Hong Kong, Houston,
London, Madrid, Melbourne, Paris, San Francisco, Singapore,
Stockholm, Sydney, Tokyo and Toronto.
Cautionary Note Regarding Forward-Looking
Statements
The preceding discussion should be read in conjunction with our
condensed consolidated financial statements and the related notes
that appear below. We have made statements in this discussion that
are forward-looking statements. In some cases, you can identify
these statements by forward-looking words such as “may”, “might”,
“will”, “should”, “expect”, “plan”, “anticipate”, “believe”,
“estimate”, “intend”, “predict”, “potential” or “continue”, the
negative of these terms and other comparable terminology. These
forward-looking statements, which are subject to risks,
uncertainties and assumptions about us, may include projections of
our future financial performance, based on our growth strategies
and anticipated trends in our business. These statements are only
predictions based on our current expectations and projections about
future events. There are important factors that could cause our
actual results, level of activity, performance or achievements to
differ materially from the results, level of activity, performance
or achievements expressed or implied by the forward-looking
statements. In particular, you should consider the numerous risks
outlined under ‘‘Risk Factors’’ in our Report on Form 10-K for the
fiscal year 2022 as well as other public filings. We are under no
duty and we do not undertake any obligation to update or review any
of these forward-looking statements after the date on which they
are made, whether as a result of new information, future
developments or otherwise.
Greenhill & Co., Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations (Unaudited)
(In thousands, except share and
per share data)
For the Three Months Ended
March 31,
2023
2022
Revenues
$
49,678
$
45,441
Operating Expenses
Employee compensation and benefits
60,576
46,849
Occupancy and equipment rental
4,989
4,403
Depreciation and amortization
887
620
Information services
2,356
2,300
Professional fees
1,995
1,966
Travel related expenses
1,923
1,120
Other operating expenses
2,771
2,711
Total operating expenses
75,497
59,969
Total operating income (loss)
(25,819
)
(14,528
)
Interest expense
5,813
2,755
Income (loss) before taxes
(31,632
)
(17,283
)
Provision (benefit) for taxes
(8,314
)
(5,177
)
Net income (loss)
$
(23,318
)
$
(12,106
)
Average shares outstanding:
Basic
18,315,231
18,424,585
Diluted
18,315,231
18,424,585
Earnings (loss) per share:
Basic
$
(1.27
)
$
(0.66
)
Diluted
$
(1.27
)
$
(0.66
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005920/en/
Patrick Suehnholz Director of Investor Relations Greenhill &
Co., Inc. (212) 389-1800
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