Greenhill & Co Corporation CEO Discusses Q2 2012 Results - Earnings Call Transcript

Greenhill & Co Corporation (GHL)

Q2 2012 Earnings Call

July 18, 2012 04:30 AM ET

Executives

Chris Grubb - CFO

Scott Bok - CEO

Analysts

Joel Jeffrey - KBW

Devin Ryan - Sandler O'Neill

Alex Blostein - Goldman Sachs

Howard Chen - Credit Suisse

Douglas Sipkin - Susquehanna

Michael Wong - Morningstar

Presentation

Operator

Good afternoon and welcome to the Greenhill Second Quarter 2012 Earnings Conference Call. (Operator Instructions). I would now like to turn the conference over to Chris Grubb, Chief Financial Officer. Please go ahead.

Chris Grubb

Thank you. Good afternoon and thank you all for joining us today for Greenhill's second quarter 2012 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 of 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 these 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'd now like to turn the call over to Scott Bok.

Scott Bok

Thank you Chris. The second quarter was obviously a slow one both for the entire transaction market and for us. We had very few significant transactions close in the period and also had fewer non-public assignments come to fruition than usual. As we have always had quarterly results will vary widely based on the timing of individual assignments and it's best to evaluate our results over longer periods. With respect to this quarter that is particular true.

Notwithstanding the soft quarter we feel good about how the year is developing for us both on absolute terms and relative to our competitors. Let me start with the data and then provide some more color.

Our advisory revenue for the quarter was down substantially compared to 2011 but on the year-to-date basis is down only 12%. Our total revenue is also down modestly on a year-to-date basis benefiting from positive movements in the value of our remaining principal investments in addition to our advisory revenue results.

For the second quarter our pre-tax profit margin was 7% and we had earnings per share of $0.07, while on the year-to-date basis we achieved a pre-tax profit margin of 22% the same as last year’s first half margin and achieved earnings per share of $0.60 which is down slightly from $0.64 last year.

You will recall that we have consistently talked about having four main objectives for our firm, one to increase our market share of the global pool of advisory fees, two, to consistently achieve the highest profit margin on one of our closest peers. Three, to maintain the strong dividend policy and four, to maintain a flat or even a declining share count.

I will focus on the first of those and then turn it back to Chris for the others. In terms of increasing our market share our year-to-date 12% decline in advisory revenue far outpace the markets statistics for global M&A activity as well as substantially exceeded the year-to-date results announced so far by the large banks with which we compete.

Globally, the volume of completed M&A transactions for the first half was down 30% versus the prior year. Five of our nine large global bank competitors have reported second quarter results so far and their aggregate year-to-date advisory revenue was down 19% versus ours down 12%.

You will recall that the trend of our growing advisory revenue faster than the nine large banks which are our primary competition has been in place for some time. Coming into 2012 we have grown our advisory revenue 39% over the preceding 3 years while the aggregate advisory revenue of the big bank group actually fell 17%. We are pleased that this trend towards significantly increased market share remains very much in place in the first two quarters of 2012.

In terms of how we want to build our firm we are focused on breadth of industry coverage, geographic diversity and offering many types of advice outside of traditional M&A including financing and restructuring advisory as well as capital advisory or fund placement.

It is the breadth of our revenue sources that has allowed us to continue gaining market share during this challenging transaction environment. In terms of geographic diversity in year-to-date we have seen significant improvement in our revenue from European clients despite the continuing economic and market challenges there that you all are familiar with. This is probably offset to reduced level of revenue in Australia which comes after a very strong couple of years in that market.

By industry we also showed good breadth, as listed in our press release we completed six transactions in the second quarter across a range of industries and this industry breadth combined with what we showed in the first quarter also reflects the range of industries that are active in our pipeline of ongoing advisory assignments.

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