Greenhill & Co.'s (GHL) CEO Scott Bok on Q4 2015 Results - Earnings Call Transcript

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Greenhill & Co., Inc. (NYSE:GHL)

Q4 2015 Earnings Conference Call

January 27, 2016, 16:30 ET

Executives

Chris Grubb - CFO

Scott Bok - CEO

Analysts

Dan Paris - Goldman Sachs

Devin Ryan - JMP Securities

Jeffery Harte - Sandler O'Neill & Partners

Douglas Sipkin - Susquehanna Financial Group

Joel Jeffrey - KBW

Brennan Hawken - UBS

Steven Chubak - Nomura Securities

Michael Wong - Morningstar

Vincent Hung - Autonomous Research

Jonathan Casteleyn - Hedgeye

Operator

Welcome to the Greenhill Fourth Quarter and Full-Year Earnings Conference Call and Webcast. [Operator Instructions]. I would now like to turn the conference call over to Mr. Chris Grubb, Chief Financial Officer. Mr. Grubb, the floor is yours, sir.

Chris Grubb

Thank you. Good afternoon and thank you all for joining us today for Greenhill's fourth quarter and full-year 2015 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 result 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're 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 $76 million which is almost identical to that of last year's fourth quarter. The revenue outcome was driven by much higher fund placement fees, as well as an increase in M&A announcement fees which together offset a significant decline in M&A completion fees.

For the year, our total revenue of $262 million was down 5% compared to last year. As was the case for the quarter, for the full year we saw large increases in M&A announcement fees and capital advisory fees, together offsetting a substantial decline in M&A completion fees. Our pretax profit margin for the quarter was 19% and for the full year was 17%. As always with us, these figures reflect all GAAP, compensation and other costs with no pro forma exclusions. And our earnings per share for the quarter and year were $0.25 and $0.82, respectively.

We ended the year with a strong balance sheet. And our balance sheet is meaningfully stronger today than it was at year end. Based on our current balance sheet and our outlook for the year ahead, our Board has authorized up to $75 million of share repurchases for the calendar year of 2016. Our fourth quarter advisory revenue which was up nearly 50% from the prior quarter sequentially, demonstrate the point we make with each earnings release. That is, the quarterly results are very often not indicative of the state of our business. As the timing of transaction closings is out of our control and can be somewhat random as each deal has its own often unpredictable timetable of regulatory and other approvals. As we said last quarter, our third quarter was highly unusual in that very few transactions and no particularly large ones, happened to come to completion.

In the fourth quarter, we had a somewhat more typical quarter in terms of the number of transaction closings, but still no particularly large ones, yet got to a revenue level far higher than the prior quarter. As we suggested last quarter would be the case, an unusually large number of our most important announced transactions for 2015 rolled over into 2016. And we should therefore benefit from many more large transaction closings in the first half of 2016 than we saw in all of 2015.

In our view, some investors and analysts clearly read far too much into a third quarter that was an aberration in that it had very few transaction closings, and a full year that was an aberration in that so few of our most important announced deals got to completion before year end. With that in mind, let me make the following observations on the state of our business today as we celebrate our 20th anniversary as a firm.

First, our business is as strong as it has ever been. And we have very good momentum coming into the New Year. What is the basis for that statement? In 2015, we advised on 26% more announced transaction than the prior year. Those transactions were, in aggregate, significantly larger than in the prior year; and they had larger fees associated with them. Those were obviously the three key drivers of success in the advisory business, more deals, bigger deals with bigger fees.

In terms of [recent] [ph] momentum, in the fourth quarter we advised some 20 announced transactions, the best we've ever done for a quarter. Behind the scenes, we're also seeing a good flow of new large assignments. Today we're involved in many large fee assignments in addition to those relating to the transactions that were announced last year.

Second, we have that good momentum because our team of managing directors and other professionals is stronger than ever. The consistent quality of our managing director team across key sectors and key regions is simply better than it has ever been. Our coverage network of clients is both broader and deeper. And clients often tell us that our communication and teamwork in serving them on cross-border transactions or on deals in overlapping industry sectors is significantly better than they see at other firms. Clearly, our culture is one of our most valuable assets.

Third, in managing our talent pool to get to the strong team we have today, we've had to part ways with various managing directors over time. That has been the case since the very early days of our firm, when we were founded as a private partnership 20 years ago. Anyone who thinks that there's anything unusual about that has never worked on Wall Street or in any human capital business for that matter.

But it is important to note that despite what may sometimes seem like significant change from an outside perspective, we continue to have tremendous continuity in our team, with nearly two out of three managing directors having been with the firm for at least 5 years and one out of five having been with the firm at least 10 years.

Fourth, our team is more global than that of our peers, with nearly half of our managing directors based outside the U.S. That can be a short term disadvantage in a year like 2015 when M&A activity is heavily concentrated in the U.S. But we nonetheless got to a reasonable revenue outcome, despite modest contributions from our substantial teams in Australia, Brazil, Continental Europe and Japan. We're confident of improved results from jurisdiction outside the U.S. and the UK in 2016, as well as significantly improved results from the UK. More importantly, we're confident that over the course of the cycles, our deep global footprint will prove very valuable.

Fifth, as we seek continuous improvement in building a team of the best and brightest, it is obviously important to recruit new talent. 2015 was a year of significant progress in that regard. We added five strong M&A managing directors which significantly strengthened our coverage of the energy and technology sectors, as well as our position in Australia and Japan. And our acquisition of Cogent continues to look like a great success. The Cogent team which is clearly the leader in its space, has had a strong performance for the nine months they have been with us, particularly in the fourth quarter. And they continue to have a strong pipeline.

Looking to the year ahead and based on dialogues currently in progress, we expect to again recruit more new talent to the firm, as many bankers still seem anxious to leave the big banks, particularly those headquartered in Europe. It is always hard to predict exactly how many new managing directors we will bring on board, but we're planning to bring on several of them.

Sixth, we have an unparalleled track record of managing an advisory business in a manner that creates profits for shareholders, as demonstrated by our more than $1 billion of pretax profit generated since our IPO. Our pretax profit margin of 17% last year was below that of recent years. But we have achieved at least a 25% margin in six of the eight years since the onset of the financial crisis in 2008, while our closest peers have not done that even once. Given the inherent operating leverage in our business at higher revenue levels, our backlog of pending transactions, as well as new assignments, suggests that we should see significant improvement in margin levels in 2016.

Seventh, we have an unparalleled track record of converting advisory fees into dividends for our shareholders demonstrated by our having paid out more than $500 million in dividends since our IPO which is about 15% of our total revenue during that period. We expect that track record to remain in place going forward. In fact, given our current balance sheet, our book of announced and pending transactions and the pace of new assignments we're seeing, we find it difficult to visualize a realistic scenario in which we could not readily support a dividend of at least the current level.

Lastly, we have an unparalleled track record of avoiding dilution of our shareholders, despite using our stock in annual compensation and in acquisitions and despite our large dividend payout. In fact, our share count today is very similar to what it was on the day after our IPO 11.5 years ago.

Our share count ticked up after our Australian acquisition in 2010, then reversed back to the post-IPO level, as we had said it would. Our share count likewise ticked up after our acquisition of Cogent in early 2015. And we continue to believe what we said at that time which is that we will again revert back to the IPO level over time. Our 2016 share purchase authorization gives us the ability to start down that path this year. Where does our firm go from here? Our track record on profitability and return of capital is consistently strong. So for the next phase of our development, our strategic objectives can be boiled down essentially to two. One is to demonstrate meaningful and sustained revenue growth. And the other is to increase the diversification of our revenue streams in order to reduce earnings volatility over time.

On the question of growth, we showed growth last year in terms of number of deals, deal sizes and fees. And that should naturally flow through to revenue this year. Looking further ahead, we have a number of initiatives in place that we think bode well for our longer term growth potential.

On the question of diversification, we believe we have built a reasonably diverse business across different regions and industry sectors and in areas outside M&A, like restructuring and capital advisory. Last year was the year when diversification was actually a negative, given relatively little reconstructing activity and an M&A market that was heavily focused on mega deals and in the U.S. market.

2016 should be a different story, with meaningfully more revenue from the UK and Continental Europe; likely some improvement in other regions as well; increased restructuring advisory activity; and a continued good pace of capital advisory activity. Over time, diversification by region, industry sector and type of advice should be a significant benefit to us. And we will continue to look for opportunities to develop greater diversification, as we did this past year with the acquisition of Cogent.

Now I'll now turn it back to Chris.

Chris Grubb

Thank you. I will now go into a bit more detail on compensation costs, non-compensation costs, tax rate and capital management and balance sheet matters.

Starting with compensation costs, our compensation expense ratio for the fourth quarter was 57%, bringing our full-year compensation ratio to 56%, slightly higher than the 54% compensation ratio we achieved last year. Consistent with our historical approach, we include all GAAP compensation costs in these figures which means that unlike many of our peers, we include all recruiting, severance, acquisitions and related personnel expenses when discussing our compensation ratio.

While our full-year 2015 compensation ratio was slightly higher than that of the last several years due to the delay in transaction closings and the resulting full-year revenue outcome Scott discussed earlier, our goal remains to have a GAAP compensation ratio that is the lowest among our close peers. Despite the slight increase in our compensation ratio for 2015, it is likely we again achieved our goal, consistent with our results every year since our IPO while also being able to compensate our people competitively and recruit a very talented group of new managing directors to the firm in 2015.

Looking ahead to 2016, there are modest changes to our expectations for some of the components of compensation expense, largely due to the acquisition of Cogent in April 2015, but nothing of great consequence. We will continue to manage the business going forward, with a focus on productivity and profitability. Our compensation ratio is highly leveraged to productivity and the resulting revenue outcome which is part of why it gives us confidence in our view regarding an improved profit margin in 2016, as Scott highlighted in his remarks.

Moving to our non-compensation costs. Our non-comp costs were $18 million for the quarter, up compared to the fourth quarter of 2014, primarily due to the addition of Greenhill Cogent-related expenses and increased travel costs associated with business development activities.

Our full-year non-comp costs were $71.1 million, elevated by a variety of unusual items. These unusual items include transaction expenses related to the acquisition of Cogent; foreign exchange losses related to the way we financed our investment in our startup in Brazil; and duplicative lease costs in transitioning to new office space in Sydney. For the year, the total negative impact of non-comp costs from these unusual items was approximately $6 million.

For 2016, we currently estimate flat to slightly lower non-comp costs on an absolute dollar basis, as the elimination of the unusual items for 2015 could be partly offset by some small accounting entries over the next several quarters relating to the earn out structure of the Cogent transaction. In terms of our non-comp expense ratio, obviously the relatively fixed nature of our cost structure implies that the cost ratio would come down significantly at higher revenue outcomes.

Touching briefly on our tax rate. As discussed in today's earnings release, our fourth quarter tax rate was 44%. And our full-year tax rate was 41%. This higher-than-usual tax rate is driven by a greater proportion than usual of our earnings being in the U.S. relative to other jurisdictions where we operate that have lower tax rates, plus the impact of nondeductible foreign losses in Brazil in 2015.

Going forward, our tax rate will, as always, be a function of the jurisdictions in which we generate earnings, with the U.S. having the highest tax rate of any region where we operate. However, we expect our tax rate to be meaningfully lower in 2016, due to our outlook for increased revenue outside the U.S. and our expectation of avoiding another nondeductible loss in Brazil in 2016.

Looking at our capital management activity, our dividend this quarter was again $0.45 per share. For the full year, we repurchased approximately 340,000 shares by means of tax withholdings on employee restricted stock vestings, for a total cost of $11.9 million. As we said when we acquired Cogent earlier last year, our near term focus was on repaying the modest amount of acquisition debt we incurred.

Our current expectation is to repay the remaining $11.25 million outstanding on the first tranche of the acquisition financing shortly. And then return to our historic repurchase program in parallel with repaying the second tranche of the acquisition financing which is a three-year tranche. To that end, our Board has authorized up to $75 million of share repurchases for 2016.

With the Cogent acquisition, our share count has ticked up slightly above where it was post our 2004 IPO. But our long term track record for avoiding dilution of shareholders remains very strong relative to our peers and maintaining that position remains a core objective of the firm. We ended the year with cash of $70 million, investments of $3.4 million and a revolver balance of $39.8 million, returning to our usual position of having a global cash balance in excess of our revolver balance.

Now let me turn it back to Scott.

Scott Bok

In closing, let me try to preempt the usual questions about where we're in the M&A cycle. The first point I want to make is that while analysts and investors need to focus on this question, we're focused on winning individual clients and assignments and building the business in that way regardless of what happens in terms of overall market activity. As for where we're in the cycle today, I think the answer to that is a lot more complicated than it was for most of my career.

Deal volume which is the sum of all deal sizes, was always a simple figure that seemed to sum up the current state of activity. But last year, we saw doubling in the number of $10 billion or greater transactions skew the data, so that there was a huge increase in announced deal volume even though the number of deals was essentially flat.

In 2016, of course we have no idea how many mega transactions will take place. But it is quite possible that there could be fewer mega deals, resulting in reduced overall deal volume yet for the M&A market to be actually be more active, more broad-based and for the fee opportunity for us to be greater. As for where transaction activity levels are today, we would describe corporate strategic dialogue as reasonably active, particularly in the U.S. and the UK, but also showing signs of improvement in Europe.

Now we're happy to take questions.

Question-and-Answer Session

Operator

[Operator Instructions]. The first question we have comes from Dan Paris of Goldman Sachs. Please go ahead.

Dan Paris

Looks like you mentioned that you had a really strong December month in terms of announcements and actually really strong Q4. January looks off to a very slow start. I want to get your thoughts on how much of that relates to kind of the choppy market backdrop that we have been in and looking forward you talked a little bit about some increased conversations, so curious if any indications of kind of February, March looking closer to December or looking closer to January?

Scott Bok

I think it's honestly impossible to measure the business on a quarterly basis, on a monthly -- even a quarterly is difficult of course, but I haven't seen really anything that I think is significantly impacted by market volatility. I think it is just kind of again sort of the random nature of when deals get announced. Clearly as I allude to in terms of new assignment activity, we're feeling quite good about the business right now. Don't feel any significant impact from market volatility other than the fact that we're seeing quite a lot more street structuring advisory opportunities, certainly more than we have seen for the last few years. That is clearly a positive that would offset at least to some degree whatever negatives may come to the M&A market as a result of volatility.

Dan Paris

Maybe switching gears quickly, we saw nice uptick in the cash balance this quarter. I am assuming some of that is seasonal. Can you give us a sense of what you expect that to look like in 1Q? Obviously we don't know the earnings picture, but how much seasonality is there in that line?

Scott Bok

I don't think people are going to be that focused on our cash balance in coming quarters. Given what we’ve said about -- I think the answer is a positive one, but I just don't think it is going to be an area of focus when you look at where we're now and what the backlog of significant transactions look like. Obviously we alluded to the fact that even the balance sheet is materially better than it was at year end, so I think the days of people needing to worry about those kinds of issues I think are past us at least until the next cycle.

Dan Paris

Last one for me in terms of -- I just want to make sure I heard the message right. The near term priority is paying back that next tranche of debt and then after that occurs in April it is more kind of shifting back to the buyback plan of keeping share count flattish?

Scott Bok

That is correct. Obviously there's not much outstanding on that last tranche, it's only $11.25 million but, yes, that's correct. That clearly ranks as the higher priority, but then we're back on our usual path of repurchasing shares, working back toward a flat share count.

Operator

Next we have Devin Ryan of JMP Securities.

Devin Ryan

Just a few here, I want to make sure I heard correctly on the completions comment. You expect more completions in the first half of this year than all of 2015?

Scott Bok

In terms of large ones, obviously those are the ones that have the bigger fees attached and, look, we made a point for a couple of quarters already that a lot of the biggest things we announced last year were rolled over into 2016 and so there is a benefit that comes with that when you get to 2016 and we're finally here.

Devin Ryan

With respect to what is driving the uptick in actual deal announcement engagements you've had kind of a nice string to end 2015. So just curious if that is driven by some change in certain sectors or geographies or seasoning of newer bankers or anything else that maybe is driving an acceleration for you guys?

Scott Bok

I don't think there really we can put our finger on. I realize we have quarterly ups and downs and somewhat you can even have a year like last year where you have this sort of funny timing play out, but business continues to develop. We have a team that we think gets stronger all the time. We certainly see ebbing and flowing in terms of industry sectors and some like industrials last year had a really very active year around the world for us. I don't think anything dramatic has caused it and hopefully you will see it continue.

Devin Ryan

And then with respect to the restructuring commentary, would it be strange for restructuring to pick up at the same time that M&A is still operating at a high level? I know that historically they kind of counterbalance. Is that the expectation for 2016 where the cycle is different than the past? Just some perspective there because I know that those trends tend to not go together.

Scott Bok

Right, I certainly agree that was the long term trend. That trend ended I would say probably in 2010 when the Fed went to a zero interest rate policy, financing markets became very open, restructuring activity, bankruptcy filings ground almost to a complete halt and yet M&A was still quite depressed relative to pre-financial crisis as well. So for the first time in my thirty-something years of doing this at a time for the last two years when M&A and restructuring both quite weak. I've always thought it might be possible in a rebound to see both of them get active and that is the way the world looks to us at least at this moment. Remember, to some degree at least the distress is isolated to a limited number of industries.

Clearly in energy there's going to be a tremendous amount of restructuring and that is where we're seeing most of the activity. Most of the things we're winning in recent weeks have been in that sector. That obviously has absolutely nothing to do with what's going on in healthcare. Industrials low energy prices undoubtedly helped the business. So I think we may actually be in a period where you will see a reasonable level activity in both M&A and restructuring.

Devin Ryan

Lastly if you can, just help us with the level of non-cash expenses in 2015. Obviously a few million in D&A, but if there's anything you can give us on non-cash compensation contribution in the year would be helpful.

Scott Bok

I would watch the 10K for the detail of that kind of thing. There's nothing peculiar that I think you'll find relative to past years, but we don't have that particular detail handy right now.

Operator

Next we have Jeffery Harte, Sandler O'Neill.

Jeffery Harte

A few things, the $75 million buyback authorization, it is nice to see that. Is that a probable level of buybacks or are you just kind of being safe with that. That is just a lot more than I would've thought.

Scott Bok

Look, how much we end up doing obviously depends on results as they play out over the course of the year. Obviously we have said some pretty clear things both -- about the first half, both in a negative sense last year about how things were getting pushed to 2016 and obviously as I just said again sort of the positive as you get it now. We will certainly be disappointed if we don't do significant share buybacks, but where exactly we end up is honestly it's probably going to depend on what the second half looks like. As I said, we're seeing lots of new assignments, but there's always the question of how many things get to announcement and then to completion.

Jeffery Harte

Okay. As we look at where expenses came in the quarter, should we be thinking of expense levels including some investment for growth, whether it is hiring or whatever else or is it kind of more a function we're hitting kind of the dollar minimums and going forward from here revenue starts falling through the bottom line. I am trying to get a sense of whether the expense increase in the quarter is investment driven or just kind of you're hitting as low as you are realistically going to hit.

Scott Bok

I think that's just in a difficult revenue year making sure you’re competitive in compensation and obviously we had some unusual sort of costs on the non-comp side which we don't think should be repeated this year. The way I would think about -- I would think about 2015, to be honest, as somewhat of an aberration as I said a couple of times. For 2016 I think it is fairly clear that non-comp we think in absolute terms is going to be the same or a bit better, a bit lower than it was in 2015 and on the comp side I don't think we're going to be bumping any bottoms. I think it's going to be a matter of where does revenue end up and what's the right comp ratio for that and, as Chris said, the comp ratio is pretty levered to revenue so if revenue progresses as we hope and expect, you are going to see the comp ratio reflect that to some degree.

Jeffery Harte

Okay. Can you give us any ideas as to how Cogent revenues trended in the year now that we're kind of year out versus what we were looking at last year?

Scott Bok

They are running ahead -- I think first off it's fair to point out they're running a bit ahead of what was required for their earn out, so our expectation is that they will get the earn out as was always our expectation and our hope certainly they would exceed that level. Seasonality, I still think it is too early for us to make any grand pronouncements about that. There is probably a little bit more in the fourth quarter for them than the rest of the year, but I don't think dramatically so. It still looks like theirs is a business where things essentially all close on the last day of a quarter, the first day of a quarter as private equity funds change the name on the registry of who owns the fund interest, but I do not think there's a lot of real seasonality that at least we have been able to identify yet.

Jeffery Harte

If I recall, we were looking at like an annual run rate of something in the $40 million area when you bought Cogent?

Scott Bok

That's correct, and that's where the earn out was set and, as I said, they are kind of on a run rate that's a bit better than that.

Jeffery Harte

Okay. Finally, the commentary on restructuring is interesting. Can you talk a little bit about your restructuring franchise? It's certainly not a new business for you but then again we're not used to kind of seeing you toward the top of the league tables there either.

Scott Bok

It's true that we have always clearly had more of an emphasis on M&A. We have what I think is a very high quality and significant restructuring capability, but we don't have as big a group as some other places. The way we tend to manage is we've got some hard-core M&A specialists, we have got some hard-core restructuring specialists who know all the ins and outs of Chapter 11 and similar things and then we have a lot of probably the majority of our bankers are actually industry sector focused. If you’re an energy-focused banker living in Houston and like two years ago you were going to be spending your time doing M&A. In a year like this year you're going to spending your time working with our restructuring people working on restructuring. So there is a big sort of swing factor in there of the industry folks and where they are spending their time which gives us sort of the ability to flex our capacity in a favorable way.

Operator

Douglas Sipkin, Susquehanna.

Douglas Sipkin

First question for Chris and I'm going to see if you're going to provide it, but if you don't, that's okay. Fixed compensation, can you give us what it was in 2015 and sort of what the projection would be for 2016? The bases and the stock stuff?

Chris Grubb

We're not going to get into the specific numbers of 2015 until the K comes out and you'll see that. I think you've seen what the total comp number was which is the important one. I think at the beginning of last year we talked about fixed comp kind of being similar to 2012 and 2013 plus Cogent and I think we're in a similar place for 2016 which is you've got a little more from Cogent and you've got some savings elsewhere due to team shape and FX benefit. So, I think as we get into the year with how revenue is trending, it is going to be more about what is the right ratio relative to that revenue outcome and it will be about are you bumping up against your fixed comp dollars.

Scott Bok

I think we sort of kind of in the thick of the financial crisis got into when M&A was really bouncing along the bottom started talking about the sort of fixed compensation almost as if how low can revenue go and have you still maintain a reasonable compensation ratio. As I said, I would think that era is at least for now is behind us and it is really more about how much do you want to accrue in bonuses and strike the right balance between rewarding shareholders and rewarding employees rather than how low can revenue get before you have a problem.

Douglas Sipkin

My second question on Cogent, there has been a lot of talk in the markets about sovereign wealth funds selling stocks and bonds to fund the deficits because of what oil is doing, but part of the issue is a lot of that stuff is in less liquid or alternative stuff, so I am wondering is Cogent seeing or anticipating seeing a pickup from maybe some of these sovereign funds that own interest in private equity vehicles that need the money and need to bring it back home. Is that potentially a catalyst for that market?

Scott Bok

I think it certainly could be. I think one of the things they are seeing is that prices have been quite strong, i.e. discounts relatively small and in that environment it is easier for investors of all kinds, whether it is a pension fund or a university endowment or sovereign wealth fund who want liquidity. You don't have that big penalty you used to have if you want to get liquidity by selling some of your private equity funds. I think it is a market that somebody who wants liquidity can turn to in a way that is more accessible than it used to be. I think when they do that, especially if you have got a lot of funds, kind of a complex group of funds to sell, I think Cogent is reasonably uniquely positioned to help you with that.

Douglas Sipkin

And then finally maybe just an update on the fund placement business on the primary side, sort of your legacy real estate practice. How did that fair in 2015 and what is your thought for 2016?

Scott Bok

It faired well, pretty similar to the prior year which was quite a strong one relative to the size of that team. It's not a team nearly as big as Cogent, but it is significant. They've had a couple of good years in a row now. Certainly you have to pick up any newspaper to find out that real estate values are quite high. Real estate funds are generating big returns, i.e. pretty quickly returning capital to investors and of course that always means you go out and raise the next fund, so I think they feel quite good about their business for 2016 as well.

Operator

Joel Jeffrey, KBW.

Joel Jeffrey

Just a follow-up on the question about sort of the capital return, how you're going to use your cash. In terms of how we think about the first quarter, given the debt repayment, should we think about the share count rising at that point just given the seasonality and the share issuance at that time plus the debt repayment?

Scott Bok

By very small amount, obviously in a quarter it doesn't move that much. I'm not saying we're rushing to the market tomorrow to buy back $75 million worth of shares. That is for a year and clearly based on our cash balance backlog all the rest, it's a real number in the sense that we just did not put it out for publicity purposes. We put it out because we wanted to have the authority to buy back a significant amount of stock. You may still see some further modest evolution of the share count up, but certainly our goal for the year is to be going in the other direction.

Joel Jeffrey

Okay. Excuse me. On the 20 announced deals that you had in the fourth quarter, did any of those actually close in the fourth quarter or are those all still kind of active in the New Year?

Scott Bok

I think some of them did. Some small ones can be quite quick. They don't often have the same regulatory and maybe shareholder approvals and so on. Some did, but certainly a fair number carried over as they normally do. Obviously you don't close and announce within the same quarter. Certainly in public deals you can possibly do that.

Joel Jeffrey

Okay. I apologize if I missed it, but did you give us the current managing director count and total head count?

Scott Bok

You will see it is not that different from what you have seen before, but you'll see that in the 10K filing as well shortly.

Joel Jeffrey

Okay. And then just lastly for me, your tone seems pretty optimistic, I understand given the backlog that is rolling into the new year, but I think historically when we have looked at M&A activity it has typically been the strongest when you've seen global growth in the economy at very high levels. If things are slowing, just curious as to why you feel as optimistic as you do?

Scott Bok

I think it's mostly just looking at what we're doing. I can't say too much about what the rest of our competitors may be doing or the rest of corporate America and the global equivalent might be doing. I think each sector is really quite different. Restructuring is going to be clearly a lot of restructuring and I don't know how much M&A there will be. There will probably be some. I think some energy firms are trying to sell assets to cover debt, to cover dividends, things like that.

Other sectors there is still actually a lot of growth like in healthcare and areas like industrials I think there is a lot of top-line pressure that is going to drive consolidation to cut costs further. So you kind of have to look at it sector by sector and region by region. Remember, Europe has been really depressed in terms of M&A activity for several years now, so barring an apocalypse over there, you would think at some point it has to turn up to a higher level and certainly for us at least we think Europe will be meaningfully better this year than it was last year.

Operator

Next we have Brennan Hawken of UBS.

Brennan Hawken

Just wanted to come back to the fixed cost, I know that you had said that you gave this sort of in the depth and such and were not all that inclined to give it again. In the past it was in the ballpark of $130 million and you guys have acquired Cogent and this year we saw comp for full year 147, so it certainly seems as though the question is relevant and so I guess I would like to ask it again. Is it different substantially than it had been in the past and can you give us some help on how to think about the fixed cost base from here?

Scott Bok

I think again for the history you'll see the detail in the 10K and I don't think there's anything terribly startling there. For 2016, I think the run rate we have had in recent years plus something for Cogent, so add a 10 or something like that to the 130 we talked about for kind of a run rate a few years before just to get a round figure and obviously it can change as we recruit more people. Obviously you add salary and restricted stock amortization with those recruits and obviously the whole gist of what we're saying is that last year was a bit of an aberration in terms of deal closings which impacts revenue and this year we're seeing the flip side of that. Again, I don't think kind of the fixed costs are going to be frankly at all relevant to our comp ratio comes out in 2016 based on the revenue picture we see.

Brennan Hawken

I figured I would give it a shot. Can you help us maybe understand the balance that you struck in between the cash building versus buybacks because the cash certainly out build was impressive this quarter and you've got the $11.25 million pay down that you've got coming, but the buybacks were pretty minimal and of course you had an announcement, but the announcement isn't actually stock buying back. So, how did you think about that, especially given some of the weakness in shares and maybe what I would've thought would have been an opportunity for you guys to buy back a bit?

Scott Bok

No. That is a good question. You have to remember we have closed periods in terms of trading and when the stock was hitting its most attractive points was what you are really very close to those periods and we're still in one of those periods as we speak today. That probably explains as much as anything.

Brennan Hawken

Last one, you hit on restructuring which we haven't heard you talk about a lot. Can you give us a sense for restructuring revenue at Greenhill over time? What sort of range they are roughly as percent of total and how we can kind of help think about it and frame the opportunity for Greenhill in 2016?

Scott Bok

Honestly, it is difficult for us to do that. I know Lazard breaks it out which is always interesting for us and probably for you as well to sort of get a sense of the restructuring market. What we found and said this many years ago when we first went public, that so many restructuring deals turn into M&A transactions and of course in a distressed market a lot of M&A can be buying things that are in distress where your bankruptcy and restructuring team may be a part of that team.

So it becomes somewhat artificial. As I said, we have people and sector specialists who swing back and forth between the two. If we had totally separate silos in the two businesses, we could break it out more easily, but I think it would be somewhat artificial for us to do so.

All I can tell you is that in some years, 2009, go back to 2001, 2002, 2003, it was quite a significant business for us and has a real impact in overall revenue picture in those periods and offsetting a weaker M&A market. And then you have periods like the last few years where as you said, you haven't heard us talk much about it because there's been such a low level of defaults and bankruptcies that it just hasn't been really relevant to talk about for the last couple years. I think this year you will hear us talk about it a fair amount.

Operator

Steven Chubak of Nomura.

Steven Chubak

Scott, I appreciated the commentary that you had given on the outlook for the coming year. I guess try to take -- what we had heard from some of your [indiscernible] competitors I will tell you it was broadly consistent in terms of the expectations for maybe not an increase in overall volume but likely seeing more deal counts and potentially greater contributions outside the U.S. But we had also heard from quite a few of them that if the elevated volatility that we have seen thus far, if it persists, that we could expect to see a slowdown in M&A as well, so I would say their commentary in that regard was a little bit more measured. I didn't know if you were getting that same sense at least talking to corporate or management teams in the board room?

Scott Bok

I really don't feel in a position to sort of make any grand pronouncements about what is going to happen with the market or the impact of that on M&A. As I've said, sort of in some ways, like in the oil prices, volatile on the way down, so not a lot of bouncing up in oil and that's going to drive a lot of restructuring activity. There are other situations where it's a public company deal, stock for stock deal where market gyrations will sometimes cause a deal to be put aside or put on hold for some period of time while the two companies try to figure out what a stable price is for the two stocks before they talk about a culmination.

So, there is no question that volatility hurts you in M&A in some respect. It drives transactions in others in that it puts more pressure on companies and all I can say for us so far is I have not seen a lot of transactions impacted negatively by it. I have seen a pickup in restructuring. How it plays out for the rest of the year, you'll have to see how markets play out.

Steven Chubak

Just as a quick follow-up. Just given the increase and the widening of credit spreads of late, has any uptick in financing costs impacted activity or is the absolute level of funding still low enough where it's not really a deterrent?

Scott Bok

I think if you look at where we work which is different from where a lot of firms work, I think financing is still very attractive and is not an impediment to transactions. I think if you are working on more smaller cap and mid-cap deals and you're doing more work with private equity funds, then probably it is more of an impact. We tend to do most of our work with larger companies, public companies, very often investment grade or sort of close to it companies that have good access to financing and so far we -- I think they still view it in large part as quite an attractive financing market.

Operator

Michael Wong of Morningstar.

Michael Wong

I believe that you said a quarter or two ago that there are companies that want to buy energy companies but that energy companies don't want to sell themselves. Has that changed or do you have any timing on when you might start to see distressed energy sales not because they want to but because they have to like if energy hedges are close to running off?

Scott Bok

I don't recall specifically saying in that regard, but there is no question when you're in a market that really falls steeply, whether it's an entire stock market or whether it's one sector like with energy companies, it can put a pause -- there can be a pause in M&A activity while people wait to see where the price settles out. No one is going to be an enthusiastic seller after their stock fell 25% or 50%, of course.

You're right that as the price stays there it does increase the pressure. You may end up having to do a deal you don't want to do and certainly a lot of credit analysts in the energy space have talked about marking to market things like the value of reserves and what impact that is going to have on credit lines and how that is going to force de-leveraging and sales and restructuring and kind of more extreme cases. Yes, I do think 2016 will be a pretty active year in the energy patch, certainly in restructuring terms and quite possibly in M&A terms as well.

Michael Wong

Okay. In terms of the geographical revenue breakout, is the large uptick in Asia and Latin America due to Cogent or is it some kind of international financial advisory gaining traction?

Scott Bok

It's a lot of different things. That's a catch all for the entire rest of the planet, so it's not even just Asia and Latin America, it's everything that's not U.S. or North America or Europe or Australia. There are a lot of little things that went into it. They do have quite a globally diverse business. Certainly we have more clients in the Middle East, for example, than we ever had. We never really had many clients at all in the Middle East, but Cogent does some work for them just like it probably has a bigger presence in Asia than we do. They are one factor in that, one of many.

Operator

Vincent Hung of Autonomous.

Vincent Hung

On restructuring again, how many MDs do you have in restructuring and how many of the restructuring deals done in the past by the specialists that is the industry bankers?

Scott Bok

The reason I don't want to put a number on it is again whether you're talking about revenue our headcount it's just the way we manage the business which is different from the way some other firms do. You just can't break it out that way because, as I said, we do have industry sector bankers for example in energy that will be spending a lot of time on restructuring this year. It's not like they do the deal without the restructuring team, it's just like instead of teaming up with an M&A specialist to do an energy M&A transaction, they would be teaming up with a restructuring specialist to do a restructuring transaction.

Some of those deals, restructuring is really what it's all about and you don't need to know much about the industry by the time you really get entrenched in all the complexities of say Chapter 11 and in other deals industry sector knowledge is incredibly important because maybe you are going to solve the problem by selling assets and you need to know the buyers and the valuation and so on, so it is really hard to sort of break people. One of our features of our firm is that we don't have people that are terribly siloed by sector or even by region. We have people who kind of work kind of floating teams with colleagues all over the world on transactions, so we can't break out an organization chart the way you would probably like to see it.

Vincent Hung

Okay. Excluding Cogent, in previous years you have been reluctant to commit to large numbers of managing direct for hires and today you are saying you expect to hire several MDs this year. Has something changed in your hiring source?

Scott Bok

No. I wouldn't say so. I think what we've always said is we don't have a preconceived target every year. I know some firms do where want to bring in X number of managing directors each year. We're very much sort of opportunity driven and if we see a lot of good opportunities, we will take a lot of them. If we don't see what we feel like are good opportunities, we won't take that money.

Last year we saw five on the M&A side and we obviously had the very significant Cogent acquisition as well. This year I'm literally not just sort of guessing what we might run into. I am literally thinking of individuals that we're talking to right now and that's where I get to at least the hope that we end up getting to terms with several of them over coming months.

Vincent Hung

Okay. Last one for me. When we think about the number of [Technical Difficulty] that have taken place over the last few years, how many clients attached to those MDs and typically retain your services?

Scott Bok

That is obviously the kind of thing you can't really quantify. I will certainly say this and I've talked about the way we manage the talent, I certainly don't feel like we've lost significant clients as a result of people who left the firm. And as I said, sometimes if a newspaper makes a bit story about one or two people it sort of seems like a big thing, but as I said, we really have tremendous continuity in our team and so it's really not an issue that we've worried about too much internally.

Operator

Jonathan Casteleyn of Hedgeye.

Jonathan Casteleyn

I apologize if you mentioned this. Curious in the 5% revenue decline in 2015, what was the organic Greenhill result outside of Cogent? I don't know if you disclosed that?

Scott Bok

We didn't. You could come up with some back-of-the-envelope math and probably come up with your own conclusions, but we have not gone into that level of detail.

Jonathan Casteleyn

Okay. And then for Chris, I know the businesses reflect so, but curious what you think baseline cash generation is in the business across cycle, if we can sort of try and understand what your liquidity and available cash is?

Chris Grubb

I think it is such a simple P&L when you look into it that you got the add back of the non-cash RSUs and a little bit of amortization and depreciation in the non-comps. I don't have the precise number in front of me, but I think if you pull up our K and look at our results this year similar to your first questions, you're not going to be far off with your math.

Jonathan Casteleyn

Okay.

Scott Bok

Just by nature, certainly as anybody in the M&A business has learned over the years, it's a cyclical business and so with us the non-comp costs tend to be very close to fixed and the comp ebbs and flows from a ratio that's a few points above 50 in low revenue times and around 50 or a bit better in high revenue times and so the cash flow can swing quite significantly, not just the revenue can swing quite significantly, but that's exacerbated with what happens at the margin line.

Jonathan Casteleyn

So GAAP net income is pretty close from cash flow from operations is my question.

Chris Grubb

No. You have to add in all the non-cash compensation.

Jonathan Casteleyn

That's my question. I'm trying to understand. You're supporting a $55 million payout annually on a dividend, so I am just curious what you think across cycle the cash flow generation is on an annual basis and obviously the model reflects it. M&A comp is up 10% or comps down 10% that's going to impact the model, but if we sort of stretch out the cycle over five, six, seven years what do you think mean cash flow generation is?

Chris Grubb

I think median is honestly -- I appreciate the effort and I know in all cyclical of industries we try to do this for clients as well, figure out what that looks like, but I don't think it is terribly meaningful. If you look at our history, we've been through some very difficult years in terms of weak M&A activity and we managed to generate enough cash flow to pay a quite generous dividend and even to keep a share count that was pretty close to flat and obviously we generate tremendous amounts of cash in better years like you saw before the financial crisis. I think that sort of cyclical ebb and flow remains very much in place today.

Jonathan Casteleyn

And then you called out a lag of sorts in your non-U.S. businesses, in the advisory business, whether it be European or Asian. What factors do you think have slowed that business behind the U.S. business and what gives you confidence that 2016 is going to sort of drag those results through to higher levels?

Scott Bok

I think even over the course of my career in M&A cycles I have always had the sense that the U.S. came out of downturns to a higher level of activity before Europe did. I don't know that we have a more active restructuring market that we're more risk-taking in America or whatever that may be, Europe is a little more conservative perhaps, but I think that was just exacerbated this time by the financial crisis.

Clearly you look at economic growth rates in the U.S. versus Europe. It is not great in the U.S. but certainly the U.S. has recovered economically to a much greater extent and much sooner than Europe did and I think that flows through to an impact on M&A as well and I think that's why you have seen very little pickup until now at least in European activity while you've seen a sizable pickup in the U.S. recently.

Jonathan Casteleyn

Understood. Last question, is there any analog in your career? Can you think of a time period where actually M&A comped up, restructuring comped up and then your new advisory business on the fundraising side. Can these businesses working cyclically together, meaning can they all sort of improve results year-over-year together or are they completely counter cyclical?

Scott Bok

Look, I always thought they were counter cyclical until they weren't. Certainly for the 80s, 90s, the first 25 years of my career you thought it was either going to be a good year in M&A probably three quarters of the time or it was going be a good year in restructuring probably one quarter of the time. That was really broken by the financial crisis and certainly I'm not 120 years old so I can't remember the last crisis of that magnitude which occurred a very long time ago, so I think it had a big impact. Obviously there was never a zero interest rate policy, so you never had a market where it was so easy for troubled companies to find financing somewhere.

Look, we've been through a unique period. Frankly, that's a significant story in recent years for us. It's been a unique period. I think we've come through it quite strong. At least as we sit here today it looks like, at least feels to us like M&A is still a pretty active business. I agree with one of analysts who said that is what a lot of the big banks are saying as well and I think equally at least in one very big and important sector we're going to see a lot of restructuring, too.

Operator

A follow-up from Devin Ryan of JMP Securities.

Devin Ryan

Just a quick follow-up here on the repurchase capacity and maybe your thought process there and whether you'd contemplate using the revolver or think about increasing debt to buy the stock if it remained at current levels which we haven't seen before?

Scott Bok

Look, as I said, we didn't put the share repurchase there as some sort of a PR thing. We really do want to be in a position, hope to be in a position to buy back significant stock. I would also say we've always had the policy of wanting to stay unleveraged. We do have some cash overseas which is why we have generally debt to offset that. We sort of set a number of years a goal of just making sure we had cash balance globally that was a bit better than whatever surrounded our revolver, so it is kind of a match between the two and we still feel that way.

I realize there are moments like right now where people can sort of muse about wouldn't it be great to lever up a lot and buy back a lot of stock, but we're in this for the long term and I think to have a firm with a strong balance sheet and a stable business that can ride out the inevitable downturns that come from time to time is a good thing even though you give up those theoretical chances to sort of really get aggressive and buying back a lot of stock at low points.

Scott Bok

Okay. Thank you. I think that was the last of a long list of questions today. We thank you all for your time and we will speak to you again in a few months. Bye now.

Operator

And we thank you, Sir and to the rest of the management team for your time also today. Your conference call is now concluded. At this time, you may disconnect your lines. Thank you and have a great day, everyone.

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