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Greenhill & Co.'s (GHL) CEO Scott Bok on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Results Earnings Conference Call

April 20, 2016, 04:30 PM ET


Scott Bok - Chief Executive Officer

Christopher Grubb - Chief Financial Officer


Dan Paris - Goldman Sachs

Devin Ryan - JMP Securities

Brennan Hawken - UBS

Steven Chubak - Nomura Securities

Vincent Hung - Autonomous Research


Good afternoon everyone and welcome to the Greenhill First Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note that today's event is being recorded.

At this time, I would like to turn the conference call over to Mr. Chris Grubb, Chief Financial Officer. Sir, please go ahead.

Christopher Grubb

Thank you. Good afternoon and thank you all for joining us today for Greenhill's first quarter 2016 financial results conference call. I am Chris Grubb, Greenhill's Chief Financial Officer and joining me on the call today is Scott Bok, our Chief Executive Officer.

Today's call may include forward-looking statements. These statements are based on our current expectations regarding future events that, by their nature, are outside the firm's control and are subject to known and unknown risks, uncertainties and assumptions. The firm's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements.

For a discussion of some of the risks and factors that could affect the firm's future results, please see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date on which they are made.

I would now like to turn the call over to Scott Bok.

Scott Bok

Thank you, Chris. In the fourth quarter, we achieved revenue of $67 million which is 8% higher than last year's first quarter result despite the fact that almost none of our large pending transaction assignments got completion in the quarter and the fact that market volatility resulted in a slow start to the year in terms of new deal announcements.

Our compensation ratio for the quarter was higher than typical, but should decline to a more normal level over the course of the year. Our non-compensation costs were lower in absolute terms than last year's run rate as we have suggested they would be. Together those costs resulted in a pretax profit margin of 10% for the quarter. As always with us those figures reflect all GAAP compensation of the costs but not pro forma exclusions.

Our tax rate was lower than usual of 33% given the regional sources of our revenue. Our earnings per share for the quarter was $0.14 and our cash flow was sufficient to pay out dividend and repurchase a modest amount of stock by means of tax withholding and restricted stock that vested.

I will provide some color on the market environment, our sources of revenue and the revenue outlook and Chris will then speak further to costs and balance sheet matters.

In terms of the environment, I am sure everyone would agree the deal activity of all kind got off to a much slower start this year than anyone had predicted likely because of the extraordinary volatility in stock, credit and commodity markets.

To give you some specifics on that, consider then in the first quarter the number of announced deals globally with the size of $500 million or greater result was at a level, but if the same pace continued throughout the year would result in about a third fewer such deals than last year. Per deal for the European acquired or target of that size, the first quarter pace would lead to fewer such deals in more than 20 year and the data is similarly weak in many other markets around the world.