NEW YORK, June 20, 2019 – Greenhill & Co., Inc. (GHL) recently stated revenues of $51.20M, a net loss of $15.40M and a loss per share of $0.64 for the quarter ended March 31, 2019.
The Firm’s first quarter 2019 revenues compare to revenues of $87.50M for the first quarter of 2018, which represents a decrease of $36.30M, or 42%. The Firm’s first quarter 2019 net loss and loss per share compare to net income of $6.40M and diluted earnings per share of $0.21 for the first quarter of 2018.
The Firm’s first quarter results were negatively influenced by a non-recurring charge of $0.60M related to the Cogent acquisition earnout and by a tax charge of $0.70M for the tax effect of the difference between the grant date value and the market value of restricted stock awards at the time of the vesting.
Revenues were $51.20M in the first quarter of 2019 contrast to $87.50M in the first quarter of 2018, a decrease of $36.30M or 42%. The decrease principally resulted from a decrease in the size of merger and acquisition transaction completion fees, particularly in Europe, partially offset by a slight increase in transaction declaration fees and capital advisory fees.
Our total operating expenses for the first quarter of 2019 were $65.50M, which contrast to $68.50M of total operating expenses for the first quarter of 2018. The decrease in total operating expenses of $3.00M, or 4%, resulted from a decrease in our compensation and benefits expenses offset by a boost in non-compensation operating expenses
Compensation and Benefits Expenses:
Our employee compensation and benefits expenses in the first quarter of 2019 were $45.10M as contrast to $49.20M for the first quarter of 2018. The decrease in expense of $4.10M, or 8%, was principally attributable to lower compensation accruals in line with lower quarterly revenues. The ratio of compensation to revenues increased to 88% for the first quarter of 2019 as contrast to 56% for the same period in 2018 as a result of spreading slightly lower compensation and benefits expenses over significantly lower revenues.
Non-Compensation Operating Expenses:
Our non-compensation operating expenses were $20.40M in the first quarter of 2019 contrast to $19.30M in the first quarter of 2018, representing a boost of $1.10M, or 6%.
For the three months ended March 31, 2019, we incurred interest expense of $5.90M as contrast to $5.30M for the same period in 2018. The increase in interest expense during 2019 related to a boost in our variable borrowing rate because of market rate increases throughout the prior year, partially offset by a decrease in the average outstanding loan amount because of quarterly principal repayments.
Provision for Income Taxes:
For the first quarter of 2019, because of our pre-tax loss we recognized an income tax benefit of $4.70M, reflecting an effective rate of 24%. This contrasts to a provision for income taxes for the first quarter of 2018 of $7.40M.
The provision for income taxes for the three months ended March 31, 2019 and 2018 included charges of $0.70M and $3.90M, respectively, related to the tax effect of the difference between the grant price value and the market price value of restricted stock awards at the time of the vesting. Excluding these charges, the effective income tax rates would have been comparable in both periods.
Liquidity and Capital Resources:
As of March 31, 2019, we had cash and cash equivalents of $80.50M and term loan debt with a principal balance of $319.40M. We made a mandatory principal installment repayment on the term debt facility of $8.80M in the first quarter of 2019.
During the first quarter of 2019, we repurchased in the open market 436,885 shares of our common stock at an average price of $26.68 per share, for a total cost of $11.70M. In addition, during the first quarter of 2019, we repurchased 499,786 restricted stock units from employees at the time of vesting to settle tax liabilities at an average price of $25.50per share, for a total cost of $12.70M.
On April 12, 2019, we refinanced our existing term debt facility and used proceeds of $375.0M to repay in full the outstanding principal balance of the term debt facility, pay fees and expenses and increase our cash balance. As a result of the refinancing, we lowered our borrowing rate by 50 basis points to LIBOR plus 3.25%, extended the maturity date of the term loan by eighteen months to April 12, 2024, lowered our annual amortization payments and increased the amounts permitted for dividend payments and repurchases of our common stock.
As part of the refinancing, the amount permitted for share repurchases was increased by $55.0M to $340.0M. Moreover, starting in 2020 the amount of repurchases may be further increased subject to our financial performance. As of March 31, 2019, we have repurchased under our recapitalization plan 11,712,068 shares of our common stock at an average price of $22.55 per share for a total cost of $264.10M. We presently have $75.0M remaining and authorized under our repurchase program. We intend to continue to implement our repurchase plan through various means, which could include one or more of the following: open market purchases (counting following 10b5-1 plans), tender offers, privately negotiated transactions and/or accelerated share repurchases. The price and timing of share repurchases, as well as the total funds eventually expended, will be subject to market conditions and other factors, such as our results of operations, financial position and capital requirements, general business conditions, legal, tax and regulatory constraints or restrictions, any contractual restrictions and other factors deemed relevant.