Greenhill & Co., Inc. (NYSE:GHL) Q1 2018 Earnings Conference Call - Final Transcript

May 03, 2018 • 04:30 pm ET


Greenhill & Co., Inc. (NYSE:GHL) Q1 2018 Earnings Conference Call - Final Transcript


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Scott Bok

our capital advisory business. As noted in our earnings release, the impact of the new accounting requirements were revenue recognition and for expense reimbursement, had minimal impact in our revenue results.

With respect to compensation costs, absolute dollars of compensation expense increased on the quarter, but the significantly increased level of revenue allow our compensation ratio to decline to 56%, back within its historic range for the years prior to 2017. As always, the compensation ratio represents a balancing of the goal of generating attractive profit margins for our shareholders against the need to reward our strong performers at all levels in a competitive manner.

With respect to non-compensation operating costs, the bulk of the large difference versus last year is simply due to a difference in non-cash accounting adjustments in the two periods relating to the earn-out on our acquisition of Cogent Partners three years ago. There's also a small difference relating to the fact that under new accounting standards, we now include expenses that are reimbursed by clients as revenue, rather than as an offset to operating expenses. Apart from those two factors, non-compensation operating costs were slightly higher than in last year's first quarter.

With respect to interest expense, we incurred $5.3 million for the quarter, up from last year, given the large borrowing we did as part of the recapitalization plan we announced last September. With respect to taxes, our rate for the quarter, excluding the impact of the accounting adjustment relating to RSU vestings referred to above, was 25%, which is within the expected range we indicated a quarter ago. The new US tax law is complex and impacts us in various ways both positive and negative, but clearly, overall, we are a major beneficiary of the new law, with a tax rate for the quarter that is 10 or more percentage points lower than we typically reported for past years. In addition, the increased ability to access cash from abroad in the event that becomes useful, is also beneficial for us.

Turning now to our dividend, our board declared a dividend of $0.05 a share consistent with last quarter. Now, I will turn to an update on the share repurchase we announced as part of our recapitalization plan. In the first quarter, we purchased 1.76 million shares and share equivalents at an average price of $19.70 per share. These repurchases were mostly pursuant to a tender offer, but also included a small amount of open market purchases, and some purchases from employees in connection with RSU vesting to settle tax liabilities.

As of quarter end, we had $191.1 million remaining under the share repurchase authority we announced as part of our recapitalization plan. During the month of April, we purchased an additional 1.25 million shares in open market transactions at an average price of $19.30 per share, for a total cost of $24.2 million. That means that as of the end of April, we have purchased a total of 6.43 million shares since our