- Quarterly revenues of $45.4 million, down 34% from prior year
given fewer significant completion fees
- Compensation costs slightly less than last year’s first
quarter, but ratio elevated as a result of lower revenues
- Non-compensation costs modestly lower than last year’s first
quarter
- Loss of $0.66 per share given low level of quarterly
revenues
- Repurchased 1,062,685 shares of common stock and common stock
equivalents during the quarter for $19.8 million at an average
price of $18.66 per share
Greenhill & Co., Inc. (NYSE: GHL) today reported revenues of
$45.4 million, a net loss of $12.1 million and a loss per share of
$0.66 for the quarter ended March 31, 2022.
The Firm’s first quarter 2022 revenues compare to revenues of
$68.9 million in the first quarter of 2021, which represents a
decrease of $23.5 million. The Firm’s first quarter 2022 net loss
and loss per share compare to net income of $2.1 million and
diluted earnings per share of $0.09 for the first quarter 2021.
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.
“The pace of client activity at our Firm has remained robust,
although first quarter revenue was light given relatively few
significant transaction closings. Our backlog suggests that this
year should play out like the last few, with revenue production
weighted toward the second half resulting in a solid full year
result. Indeed, we would be disappointed not to see our third full
year revenue increase in a row, despite a reduced level of
transaction activity in the market as a whole. In other words,
recent economic developments should benefit us in areas like
energy, mining, Australia and Canada more than they will hurt us in
some other segments. Given we continue to be disciplined on costs,
we therefore expect another year of strong cash flow generation,
which we will direct primarily toward share repurchases so long as
we see our stock as significantly undervalued,” Scott L. Bok,
Chairman and Chief Executive Officer, commented.
Revenues
Revenues were $45.4 million in the first quarter of 2022
compared to $68.9 million in the first quarter of 2021, a decrease
of $23.5 million, or 34%. The decrease principally resulted from
fewer significant merger and acquisition transaction completion
fees.
Expenses
Operating Expenses
Our total operating expenses for the first quarter of 2022 were
$60.0 million, which compared to $61.7 million of total operating
expenses for the first quarter of 2021. The decrease in total
operating expenses of $1.7 million, or 3%, resulted from slightly
lower compensation and benefits expenses and 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,
2022
2021
(in millions,
unaudited)
Employee compensation and benefits
expenses
$46.8
$47.3
% of revenues
103%
69%
Non-compensation operating expenses
13.1
14.4
% of revenues
29%
21%
Total operating expenses
60.0
61.7
% of revenues
132%
90%
Total operating income (loss)
(14.5)
7.2
Operating profit margin
NM
10%
Compensation and Benefits Expenses
Our employee compensation and benefits expenses of $46.8 million
in the first quarter of 2022 decreased $0.5 million as compared to
$47.3 million for the first quarter of 2021. The ratio of
compensation to revenues was elevated in the first quarter of 2022
due to low quarterly 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, 2022, our non-compensation
operating expenses of $13.1 million decreased $1.3 million, or 9%,
as compared to $14.4 million in the same period in 2021. The
decrease principally resulted from lower general operating expenses
and the absence of a foreign exchange loss, which we incurred in
the first quarter of 2021, partially offset by increased costs for
business travel and entertainment.
Non-compensation expenses as a percentage of revenues for the
three months ended March 31, 2022 were 29% compared to 21% for the
same period in 2021. The increase in non-compensation expenses as a
percentage of revenues resulted from the effect of spreading
modestly lower non-compensation costs over much lower revenues in
the first quarter of 2022 as compared to the same period in
2021.
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, 2022, we incurred interest
expense of $2.8 million as compared to $3.2 million for the same
period in 2021. The decrease of $0.4 million principally related to
lower borrowings outstanding as a result of accelerated debt
repayments made during 2021.
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, 2022, due to our pre-tax
loss we recognized an income tax benefit of $5.2 million as
compared to an income tax expense of $1.9 million for the same
period in 2021.
The income tax benefit recognized during the first quarter of
2022 included an additional benefit of $1.1 million related to the
tax effect of the vesting of restricted stock units at a market
price higher than the grant price. For the first quarter of 2021,
our income tax provision included a charge of $0.9 million related
to the vesting of restricted stock units at a market price lower
than the grant price. Excluding these benefits/charges, the
effective tax rates for the three months ended March 31, 2022 as
compared to the same period in 2021 would have been 24% and 26%,
respectively. The slightly lower effective rate for the three
months ended March 31 2022 principally resulted from higher U.K.
earnings in 2022 as compared to 2021. The U.K. has a lower tax rate
than the U.S.
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, 2022, we had cash and cash equivalents of $83.3
million and term loan debt with a principal balance of $271.9
million. 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 2022, we repurchased in the open
market 481,674 shares of our common stock at an average price of
$18.57 per share, for a total cost of $8.9 million. Also during the
first quarter of 2022, we repurchased 581,011 restricted stock
units from employees at the time of vesting to settle tax
liabilities at an average price of $18.74 per share, for a total
cost of $10.9 million.
For the twelve month period through January 31, 2023, our Board
of Directors has authorized $70 million in purchases of shares and
share equivalents (via tax withholding on vesting of restricted
stock units). As of April 27, 2022, we have $55.0 million remaining
under that authorization. Going forward, we intend to take a
balanced approach to our use of available cash, allocating funds
for a combination of deleveraging, share repurchases and dividends
depending on such factors as our financial position, capital
requirements, results of operations and outlook, as well as any
legal, tax, regulatory or contractual constraints and any other
factors deemed relevant.
Dividend
The Board of Directors of Greenhill & Co., Inc. has declared
a dividend of $0.10 per share to be paid on June 15, 2022 to common
stockholders of record on June 1, 2022.
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, April 27, 2022, accessible via telephone
and the internet. Scott L. Bok, Chairman and Chief Executive
Officer, will review the Firm’s first quarter 2022 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: 7816930. 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: 6619759.
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 2021 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,
2022
2021
Revenues
$
45,441
$
68,924
Operating Expenses
Employee compensation and benefits
46,849
47,292
Occupancy and equipment rental
4,403
4,397
Depreciation and amortization
620
787
Information services
2,300
2,358
Professional fees
1,966
2,196
Travel related expenses
1,120
192
Other operating expenses
2,711
4,477
Total operating expenses
59,969
61,699
Total operating income (loss)
(14,528
)
7,225
Interest expense
2,755
3,208
Income (loss) before taxes
(17,283
)
4,017
Provision (benefit) for taxes
(5,177
)
1,933
Net income (loss)
$
(12,106
)
$
2,084
Average shares outstanding:
Basic
18,424,585
19,675,536
Diluted
18,424,585
23,700,175
Earnings (loss) per share:
Basic
$
(0.66
)
$
0.11
Diluted
$
(0.66
)
$
0.09
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220427006045/en/
Patrick Suehnholz Director of Investor Relations Greenhill &
Co., Inc. (212) 389-1800
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