Greenhill. An Investment Bank Focused Exclusively on Advising Clients

Transcription

1 An Investment Bank Focused Exclusively on Advising Clients Q4 and Full Year 2018 Results January 30, 2019

2 Forward-Looking Statements Statements contained in this Presentation that are not based on current or historical fact are forward-looking in nature. Such forwardlooking statements are based on current plans, estimates and expectations and are made pursuant to the Private Securities Litigation Reform Act of Forward-looking statements are based on known and unknown risks, assumptions, uncertainties and other factors. For a further discussion of such factors, you should read the Company s Forms 10-K, Forms 10-Q, subsequent Forms 8-K and other periodic reports filed with the Securities and Exchange Commission. The Company s actual results, performance, or achievements may differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements. 1

3 Why Invest in? Global capabilities Well known and respected brand for advice Strong culture of teamwork and excellence Loyal and growing client base Minimal regulatory risks Minimal capital needs History of high profit margins and strong cash flow generation Focused on growth of talent, revenue, profit and cash flow Employees aligned with shareholders (own 41% of equity value) * * As of December 31, Includes restricted stock ownership. 2

4 Business Model Pure advisory: fully aligned with clients Independent advisors continue to gain market share from big banks Focused on wide range of complex matters Global approach via one unified team Excellent advice and transaction execution Collegial, team-oriented culture Goal of maximizing long term value creation for shareholders and team 3

5 Scope of the Firm Today 23 years old 15 offices on 5 continents 3 related advisory businesses M&A, restructuring / financing, capital advisory Expertise in all industry sectors But room to grow in each 76 Managing Directors * Median age 47 ~1/2 here 5+ years, ~1/3 10+ years ~2/3 recruited, ~1/3 internally developed * Client-facing, reflects announced recruits and departures 4

6 Q4 Financial Results Summary $89.1mm revenue Up 33% 4 th consecutive similarly robust quarterly revenue 24% operating margin $11.1mm net profit 45 cents GAAP EPS Reflects effective tax rate of 30% after tax charges incurred on the vesting of RSUs* and other one-time adjustments related to the 2017 Tax Act Absent those adjustments, the effective tax rate would have been 24% and EPS would have been 48 cents * Charge related to the tax effect of RSUs vesting at a value less than the grant price 5

7 Full Year 2018 Financial Results Summary $352.0mm revenue Up 47% 30% above Jan 1 consensus estimates 23% operating margin Negatively impacted by $4.5mm non-cash earnout adjustment $39.2mm net profit Negatively impacted by $4.7mm tax charge re RSU vesting* and $0.5mm other one-time adjustments related to the Tax Act $1.42 GAAP EPS Absent the tax charges noted above, EPS would have been $ % above Jan 1 consensus estimates * Charge related to the tax effect of RSUs vesting at a value less than the grant price 6

8 More Diverse Geographic Contribution Than Last Year, and More Deals Other 13% Other 10% Other 12% Europe 30% North America 57% Europe 17% North America 73% Europe 32% North America 56% Fee Paying Clients $1mm+ Clients Deal Announcements per Website Note: Geographic breakout represents revenue by client location 7

9 Varying Industry Sector Contributions Every Year, Reflecting a Diverse Business % 10% 6% 30% 9% 10% 19% 26% 16% 13% 5% 11% 3% 16% 24% 13% 9% 24% 8% 25% 8% Consumer Goods & Retail Energy & Utilities Healthcare General Industrial & Other Financial Services & Real Estate Technology, Communications & Media Capital Advisory (Fund Placement) 8

10 2018 Highlights Record # total fee paying clients and $1mm+ clients Record # corporate advisory transactions Record # capital advisory transactions, transaction volume and secondary revenue Record Canadian revenue Best Australian revenue in 4 years Best ever European revenue in local currency terms 2 nd in $ terms Best ever total advisory revenue in local currency terms 2 nd in $ terms Biggest MD recruiting year ever Major expansion of restructuring team Purchased 7.5mm shares (25% of pre-recap total) 9

11 Recent Results Demonstrate Strong Market Share Gains Advisory Revenue Growth 2018 vs (1) (1) Aggregated 5 US Big Banks (2) 8% 9% Aggregated 5 Advisory Focused Firms (3) 16% 49% 47% 34% (1) 2018 based on annualized figures as of Q for Lazard, Moelis and PJT (2) Based on selected publicly available data from Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America Merrill Lynch and Citigroup (3) Based on selected publicly available data from Lazard, Moelis, Evercore, Houlihan Lokey and PJT Source: Company Filings and Releases 10

12 Recent Performance Consistent with History of Long Term Market Share Gains Advisory Revenue vs Largest M&A Advisor and Largest Independent Advisor, since 1999 (earliest available data) GHL: 4.1x 300 LAZ: 2.2x 200 GS: 1.5x (1) (1) Lazard data based on annualized figures as of Q Source: Company filings and releases 11

13 Repeat Transaction Clients, Now Note: Selected transaction clients for which we have advised on multiple announced transactions 12

14 New Transaction Clients, Now Note: Selected first-time transaction clients 13

15 2018 Selected M&A Highlights Country Client Size Description $NA Buyout of Novartis JV, divestment of Horlicks (India), JV with Pfizer $7.1bn Acquisition of Frutarom $3.9bn $3.5bn $1.6bn Investment by Constellation Brands Acquisition of the Trans Mountain Pipeline system, the Trans Mountain Expansion Project and related pipeline terminal assets Renewal of strategic partnership with Yakult West Street Infrastructure Partners $1.1bn $0.9bn $0.8bn $0.6bn $0.5bn $NA Sale of US business to Hearthside Food Solutions 75% partial takeover of Restaurant Brands New Zealand Take-private of CityFibre Infrastructure Holdings Acquisition of Aventics Acquisition of Suncorp s Australian Life Insurance Business Credit card program agreement with Capital One 14

16 Major Expansion of Restructuring Team Entered business 17 years ago Strong but historically undersized team Added Neil Augustine, longtime Rothschild U.S. group co-head Also adding Dacre Barrett-Lennard from Rothschild London 25+ professionals fully dedicated, with additional resources available Well positioned to benefit as restructuring activity increases 15

17 Strong Position in Capital Advisory Highly successful 2015 Cogent acquisition Global team and network of GP and LP relationships Market leader in secondary market deals globally Record year in 2018 Market activity remains robust, and we are exploring opportunities for growth 16

18 We Have Significant Untapped Potential to Drive Further Growth Of 17 overlapping businesses, a few contributed disproportionately to 2018 results, and nearly all have potential for significant improvement Consumer & Retail Energy & Utilities Financial Services / RE Healthcare Industrials Mining Tech / Media / Telecom US UK EU Australia Canada LatAm Japan M&A Restructuring Capital Advisory 17

19 Data Also Suggests Further Growth Potential ~20% of MDs just arrived, haven t contributed materially Global M&A relative to market cap far below market peak EU deals need to increase ~50% to get to pre-crisis levels vs U.S. Restructuring activity has been light, but now picking up Strong $ negatively impacted our global revenue 18

20 Strong History of High Profitability Pre-Tax Operating Margin (Including All GAAP Compensation Costs) (1) (2) 2018 (3) GHL 38% 21% 23% 25% 25% 25% 17% 26% (0%) 23% EVR 7% 9% 7% 11% 18% 19% 11% 19% 21% 27% HLI n.a. n.a. n.a. n.a. 18% 19% 18% 20% 22% 21% LAZ (12%) 8% 13% 6% 11% 23% 23% 22% 24% 25% MC 12% 16% (2%) 10% 18% 9% 26% 27% 25% 26% PJT n.a. n.a. n.a. n.a. (3%) 2% (1%) 3% 2% 6% 25%+ GAAP Pre-Tax Margin 5 of Last 10 Years; Sector Best 6 of 10 Years Note: HLI figures calendarized to 12/31 (1) LAZ adjusted for tax receivable agreement in 2015 (2) MC, LAZ, EVR and PJT adjusted for tax receivable agreement impact in 2017 in connection to the Tax Cut and Jobs Act; MC adjusted for impact of Australian IPO (3) Represents 2018 YTD margin through Q for MC, LAZ and PJT Source: Public filings 19

21 Expense Outlook Going Forward Comp Ratio: Non-comp Operating Costs*: Objective is broadly consistent with 2018, subject to revenue outcomes and rate of expansion Objective is broadly consistent with 2018 (ex any non-cash adjustments) Interest Expense: Declining as debt repaid Taxes: Expected rate in low / mid 20%s * Now includes client reimbursements and excludes interest expense 20

22 Strong History of Generating/Returning Capital $1.5 billion* in dividends / share repurchases since 2004 IPO Stock Repurchases Dividends Paid ($ in millions) $201 $6 $162 $73 $75 $37 $72 $88 $94 $122 $56 $140 $57 $112 $56 $92 $71 $90 $127 $48 $195 $5 $14 $59 $21 $53 $125 $50 $22 $54 $34 $57 $37 $66 $83 $55 $56 $36 $59 $12 $62 $28 $ * As of December 31, Includes restricted stock ownership. 21

23 Update on Recapitalization Plan (Announced Sept. 2017) Dividend reduced to fund large share repurchase Borrowed $350mm on attractive terms Net debt down to only $172mm at year end $20mm combined equity investment by Chairman and CEO Plus $10mm in open market repurchases Additional equity incentive grants to key people 5 year cliff vest Announced $285mm share repurchase plan 92% completed as of January 30 ($22.52 average price) Separate from the plan, ongoing repurchases via withholding on RSU vestings continue 22

24 Why Did We Do Our Recapitalization? Management viewed stock as significantly undervalued Equity investor sentiment too negative Could borrow at very attractive cost Created catalyst to pivot to next chapter in Firm history Increased employee ownership Increased recruiting Exit weak team members Tighter cost controls Created leveraged upside potential for employees and shareholders 23

25 Strategic Plan Going Forward Maintain historic business model, including strong culture Increase scale and productivity of team Continued heavy MD recruiting Equally heavy focus on internal development Aim for 10% annual net MD growth while maintaining high performance standards Substantially increase scale and diversity of revenue Broader industry sector coverage Expanded restructuring team Building scale in each geography Focus on deleveraging, but not exclusively Opportunistic repurchases and increased dividends as leverage declines Goal is maximizing the leveraged upside potential created by the recap, for the benefit of our shareholders and team 24