Greenhill & Co. (GHL) Tops Q4 EPS by 2c

Greenhill & Co. (NYSE: GHL) reported Q4 EPS of $0.25, $0.02 better than the analyst estimate of $0.23. Revenue for the quarter came in at $75.7 million versus the consensus estimate of $62.2 million.

"The fourth quarter was a very active one for our Firm in terms of M&A transaction announcements, with the 20 on which we advised equaling the best quarterly level in our history. In terms of revenue, we achieved a solid result for the quarter, as increased M&A announcement fees and fund placement fees offset a decline in M&A completion fees. As we had previously indicated was our expectation, an unusually high portion of our largest agreed M&A transactions carried over into 2016. On the capital advisory side of our business, the substantial increase in fund placement fees is indicative of a strong finish to the year, particularly in terms of secondary transactions executed by the Greenhill Cogent team that we acquired earlier in the year. As a result of the solid revenue outcome, we ended the year in our usual balance sheet position, with a global cash balance comfortably in excess of the balance on our revolving credit facility," Robert F. Greenhill, Chairman, said.

"By many measures, 2015 was a strong year for our Firm. We advised on 26% more announced transactions than in the prior year. As measured by aggregate deal volume, those transactions were considerably larger than the announced deals on which we advised in the prior year. And the contractual fees associated with those transactions, a large portion of which had yet to be earned as of year end, also showed a significant increase. Despite all those positives, the fact that an unusually large number of our largest agreed M&A transactions were delayed into 2016 prevented us from showing an increase in revenue for the year. Looking forward, that book of agreed but not yet completed M&A transactions, combined with a continued robust level of activity in the primary and secondary fund placement markets, bodes well for much improved revenues in the first half of 2016. While the second half is, as always, more dependent on transactions yet to be announced, we have seen strong momentum in terms of significant new client assignments in recent months, which suggests the improved pace of revenue should continue, barring a meaningful deterioration in market conditions. Given the relatively fixed nature of our non-compensation costs, and the fact that certain of our costs in 2015 were nonrecurring in nature, if revenue develops as we expect, we also should see significant improvement in our profit margin. Likewise, our tax rate should be considerably lower than the unusually high rate of this quarter and year. Considering our balance sheet, near term expected transaction completions and longer term backlog of assignments, our cash position looks likely to far exceed what is necessary to support our dividend, and thus we expect to be in a position to return to our historic practice of repurchasing a significant amount of our common stock over the course of the year. Accordingly, our Board has authorized up to $75.0 million of share repurchases for the calendar year. While we will be highly focused on producing significantly improved financial results in the near term, we also will remain focused on the long term strategic development of our Firm. In keeping with this focus, we recruited several strong M&A bankers and acquired the highly successful Cogent business in 2015, and expect, based on current recruiting discussions, to bring significant further additional talent into the Firm over the course of 2016," Scott L. Bok, Chief Executive Officer, commented.

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