ghl-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_____________________________________________________________________________________

FORM 10-Q

_____________________________________________________________________________________

(Mark one)


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
						For the quarterly period ended June 30, 2022
OR
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
						For the transition period from to .

Commission file number 001-32147

______________________________________________________________________________________

GREENHILL & CO., INC.

(Exact Name of Registrant as Specified in its Charter)

______________________________________________________________________________________


Delaware			51-0500737
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

1271 Avenue of Americas New York, New York			10020 (ZIP Code)
(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (212) 389-1500

______________________________________________________________________________________


Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.01 per share	GHL	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ As of July 29, 2022, there were 17,891,898 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS


		Page
PART I.	Financial Information
1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition as of June 3 0 , 2022 (unaudited) and December 31, 2021	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 3 0 , 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 3 0 , 2022 and 2021 (unaudited)	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 3 0 , 2022 and 2021 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2022 and 2021 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

3.	Quantitative and Qualitative Disclosures About Market Risk	28

4.	Controls and Procedures	28

PART II.	Other Information
1.	Legal Proceedings	28

1A.	Risk Factors	28

2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

3.	Defaults Upon Senior Securities	29

4.	Mine Safety Disclosures	29

5.	Other Information	29

6.	Exhibits	E-1

Signatures		1

Exhibits

AVAILABLE INFORMATION

Greenhill & Co., Inc. files current, annual and quarterly reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the United States Securities and Exchange Commission (the “SEC”). Our SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov.

Our public internet site is http://www.greenhill.com. We make available free of charge through our internet site, via a link to the SEC’s internet site at http://www.sec.gov, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Also posted on our website in the “Corporate Governance” section, and available in print upon request of any stockholder to our Investor Relations Department, are the charters for our Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee, our Corporate Governance Guidelines, Related Party Transaction Policy and Code of Business Conduct & Ethics governing our directors, officers and employees. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.

Part I. Financial Information

Item 1. Financial Statements

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition

(in thousands except share and per share data)


	As of
	June 30,		December 31,
	2022		2021
	(unaudited)
Assets
Cash and cash equivalents ($6.9 million and $6.9 million restricted from use at June 30, 2022 and December 31, 2021, respectively)	$	64,538	$	134,624
Fees receivable, net of allowance for doubtful accounts of $0.1 million and $0.3 million at June 30, 2022 and December 31, 2021, respectively	22,085		51,540
Other receivables	16,140		8,207
Property and equipment, net of accumulated depreciation of $20.3 million and $20.1 million at June 30, 2022 and December 31, 2021, respectively	22,392		22,919
Operating lease right-of-use asset	85,966		73,837
Goodwill	204,732		210,038
Deferred tax asset, net	62,778		58,579
Other assets	24,328		8,888
Total assets	$	502,959	$	568,632
Liabilities and Equity
Compensation payable	$	21,567	$	41,300
Accounts payable and accrued expenses	20,468		17,776
Current income taxes payable	2,944		12,345
Operating lease obligations	104,555		92,691
Secured term loan payable	268,736		267,840
Deferred tax liability	34,845		31,745
Total liabilities	453,115		463,697
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 52,350,271 and 50,621,563 shares issued as of June 30, 2022 and December 31, 2021, respectively; 17,881,323 and 18,066,226 shares outstanding as of June 30, 2022 and December 31, 2021, respectively	524		506
Restricted stock units	48,702		56,495
Additional paid-in capital	994,378		969,719
Retained earnings	96,581		132,559
Accumulated other comprehensive income (loss)	(36,245)		(30,443)
Treasury stock, at cost, par value $0.01 per share; 34,468,948 and 32,555,337 shares as of June 30, 2022 and December 31, 2021, respectively	(1,054,096)		(1,023,901)
Stockholders’ equity	49,844		104,935
Total liabilities and equity	$	502,959	$	568,632

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (unaudited)

(in thousands except share and per share data)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Revenues	$	36,049	$	43,237	$	81,490	$	112,161
Operating Expenses
Employee compensation and benefits	43,163		39,791		90,012		87,083
Occupancy and equipment rental	4,439		4,600		8,842		8,997
Depreciation and amortization	625		793		1,245		1,580
Information services	2,336		2,327		4,636		4,685
Professional fees	2,231		1,704		4,197		3,900
Travel related expenses	1,549		516		2,669		708
Other operating expenses	2,579		2,695		5,290		7,172
Total operating expenses	56,922		52,426		116,891		114,125
Total operating income (loss)	(20,873)		(9,189)		(35,401)		(1,964)
Interest expense	3,258		3,078		6,013		6,286
Income (loss) before taxes	(24,131)		(12,267)		(41,414)		(8,250)
Provision (benefit) for taxes	(5,399)		(3,442)		(10,576)		(1,509)
Net income (loss)	$	(18,732)	$	(8,825)	$	(30,838)	$	(6,741)
Average shares outstanding:
Basic	18,237,538		19,447,717		18,330,545		19,560,997
Diluted	18,237,538		19,447,717		18,330,545		19,560,997
Earnings (loss) per share:
Basic	$	(1.03)	$	(0.45)	$	(1.68)	$	(0.34)
Diluted	$	(1.03)	$	(0.45)	$	(1.68)	$	(0.34)

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)

(in thousands)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net income (loss)	$	(18,732)	$	(8,825)	$	(30,838)	$	(6,741)
Currency translation adjustment, net of tax	(7,722)		(602)		(5,802)		(1,153)
Comprehensive income (loss)	$	(26,454)	$	(9,427)	$	(36,640)	$	(7,894)

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

(in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Common stock, par value $0.01 per share
Common stock, beginning of the period	$	519	$	502	$	506	$	487
Common stock issued	5		3		18		18
Common stock, end of the period	524		505		524		505
Restricted stock units
Restricted stock units, beginning of the period	45,796		41,325		56,495		59,412
Restricted stock units recognized, net of forfeitures	8,660		6,693		16,403		15,039
Restricted stock units delivered	(5,754)		(3,887)		(24,196)		(30,320)
Restricted stock units, end of the period	48,702		44,131		48,702		44,131
Additional paid-in capital
Additional paid-in capital, beginning of the period	988,215		962,651		969,719		937,025
Common stock issued	6,163		3,832		24,659		29,458
Additional paid-in capital, end of the period	994,378		966,483		994,378		966,483




Retained earnings
Retained earnings, beginning of the period, as previously reported	117,895		96,192		132,559		95,424


Dividends	(2,582)		(1,253)		(5,140)		(2,569)
Net income (loss)	(18,732)		(8,825)		(30,838)		(6,741)
Retained earnings, end of the period	96,581		86,114		96,581		86,114
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss), beginning of the period	(28,523)		(26,052)		(30,443)		(25,501)
Currency translation adjustment, net of tax	(7,722)		(602)		(5,802)		(1,153)
Accumulated other comprehensive income (loss), end of the period	(36,245)		(26,654)		(36,245)		(26,654)
Treasury stock, at cost, par value $0.01 per share
Treasury stock, beginning of the period	(1,043,733)		(993,324)		(1,023,901)		(978,780)
Repurchased	(10,363)		(9,299)		(30,195)		(23,843)
Treasury stock, end of the period	(1,054,096)		(1,002,623)		(1,054,096)		(1,002,623)
Total stockholders’ equity	$	49,844	$	67,956	$	49,844	$	67,956

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	For the Six Months Ended June 30,
	2022		2021
Operating activities:
Net income (loss)	$	(30,838)	$	(6,741)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Non-cash items included in net income (loss):
Depreciation and amortization	2,142		2,476
Net investment (gains) losses	—		(372)
Restricted stock units recognized, net	16,403		15,039
Deferred taxes, net	2,176		3,019


Allowance for doubtful accounts	(413)		43

Changes in operating assets and liabilities:
Fees receivable	29,869		53,810
Other receivables and assets	(23,372)		(17,163)

Compensation payable	(20,529)		(17,099)
Accounts payable and accrued expenses	2,907		(2,591)
Current income taxes payable	(9,401)		(1,635)
Net cash provided (used) by operating activities	(31,056)		28,786
Investing activities:

Proceeds from sales of investments	—		1,190
Distributions from investments	—		22
Purchases of property and equipment	(898)		(4,119)

Net cash used in investing activities	(898)		(2,907)
Financing activities:





Repayment of secured term loan	—		(20,000)

Dividends paid	(4,344)		(2,570)
Purchase of treasury stock	(30,195)		(23,843)
Net cash used in financing activities	(34,539)		(46,413)
Effect of exchange rate changes	(3,593)		349
Net decrease in cash and cash equivalents	(70,086)		(20,185)
Cash and cash equivalents, beginning of the period	134,624		112,703
Cash and cash equivalents, end of the period	$	64,538	$	92,518
Supplemental disclosure of cash flow information:
Cash paid for interest	$	5,063	$	5,453
Cash paid for taxes, net of refunds	$	4,556	$	128

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 — Organization

Greenhill & Co., Inc. and subsidiaries (the “Company” or “Greenhill”) is a leading independent investment bank that provides financial and strategic advice on significant domestic and cross-border mergers and acquisitions, restructurings, financings, capital raisings and other strategic transactions to a diverse client base, including corporations, partnerships, institutions and governments globally. The Company acts for clients located throughout the world from our global offices in the United States, Australia, Canada, France, Germany, Hong Kong, Japan, Singapore, Spain, Sweden, and the United Kingdom.

The Company’s wholly-owned subsidiaries provide advisory services in various jurisdictions. Our most significant operating entities include: Greenhill & Co., LLC (“G&Co”), Greenhill & Co. International LLP (“GCI”), Greenhill & Co. Europe GmbH & Co. KG (“Greenhill Europe”) and Greenhill & Co. Australia Pty Limited (“Greenhill Australia”).

G&Co is engaged in investment banking activities principally in the United States. G&Co is registered as a broker-dealer with the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”), and is licensed in all 50 states and the District of Columbia. GCI is engaged in investment banking activities in the United Kingdom and Europe, and is subject to regulation by the U.K. Financial Conduct Authority (“FCA”). Greenhill Europe engages in investment banking activities in Europe and is subject to regulation by Bundesanstalt für Finanzdienstleistungsaufsicht (“Bafin”), Greenhill Australia engages in investment banking activities in Australia and New Zealand and is licensed and subject to regulation by the Australian Securities and Investment Commission (“ASIC”).

The Company also operates in other locations throughout the world, which are subject to regulation by other governmental and regulatory bodies and self-regulatory authorities.

Note 2 — Summary of Significant Accounting Policies

Basis of Financial Information

These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP), which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and these footnotes, including compensation accruals and other matters. Management believes that it has made all necessary adjustments so that the condensed consolidated financial statements are presented fairly and that the estimates used in preparing the condensed consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates. Certain reclassifications have been made to prior year information to conform to current year presentation.

The condensed consolidated financial statements of the Company include all consolidated accounts of Greenhill & Co., Inc. and all other entities in which the Company has a controlling interest after eliminations of all significant inter-company accounts and transactions.

These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC. The condensed consolidated financial information as of December 31, 2021 has been derived from audited consolidated financial statements not included herein. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Revenue Recognition

The Company recognizes revenue when (or as) services are transferred to clients. Revenue is recognized based on the amount of consideration that management expects to receive in exchange for these services in accordance with the terms of the contract with the client. To determine the amount and timing of revenue recognition, the Company must (1) identify the contract with the client, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company generally recognizes revenues for mergers and acquisitions engagements at the earlier of the announcement date or transaction date, as the performance obligation is typically satisfied at such time. Upfront fees and certain retainer fees are generally deferred until the announcement or transaction date as they are considered constrained (subject to significant reversal) prior to the announcement or transaction date. Fairness opinion fees are recognized when the opinion is delivered.

The Company recognizes revenues for financing advisory and restructuring engagements as the services are provided to the client, based on the terms of the engagement letter. In such arrangements, the Company’s performance obligations are to provide financial and strategic advice throughout an engagement.

The Company recognizes revenues for private capital advisory fees when (1) the commitment of capital is secured (primary capital raising transactions) or the sale or transfer of the capital interest occurs (secondary market transactions) and (2) the fees are earned from the client in accordance with terms of the engagement letter. Upfront fees and certain retainer fees are deferred until the commitment is secured or the sale or transfer of the capital interest occurs, as the fees are considered constrained (subject to significant reversal) prior to such time.

As a result of the deferral of certain fees, deferred revenue (also known as contract liabilities) was $13.3 million and $7.7 million as of June 30, 2022 and December 31, 2021, respectively. Deferred revenue is included in accounts payable and accrued expenses in the condensed consolidated statements of financial condition. During the six months ended June 30, 2022 and June 30, 2021, the Company recognized $2.4 million and $3.6 million of revenues, respectively, that were included in the deferred revenue (contract liabilities) balance at the beginning of each respective period.

The Company’s clients reimburse certain expenses incurred by the Company in the conduct of advisory engagements. Client reimbursements totaled $0.8 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $1.2 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively. Such reimbursements are reported as revenues and operating expenses with no impact to operating income.

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of (i) cash held on deposit with financial institutions, (ii) cash equivalents and (iii) restricted cash. The Company maintains its cash and cash equivalents with financial institutions with high credit ratings. The Company considers all highly liquid investments with an original maturity date of three months or less, when purchased, to be cash equivalents. Cash equivalents primarily consist of money market funds and other short-term highly liquid investments with original maturities of three months or less and are carried at cost, plus accrued interest, which approximates the fair value due to the short-term nature of these investments.

Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. See “Note 3 — Cash and Cash Equivalents”.

Fees Receivable

Receivables are stated net of an allowance for doubtful accounts. The estimate for the allowance for doubtful accounts is derived by the Company by utilizing past client transaction history and an assessment of the client’s creditworthiness. The Company recorded net reversals of bad debt expense of $0.2 million and $0.1 million in the three months ended June 30, 2022 and 2021, respectively. The Company recorded a net reversal of bad debt expense of $0.4 million and bad debt expense of $0.1 million in the six months ended June 30, 2022 and 2021, respectively.

Included in the fees receivable balances at June 30, 2022 and December 31, 2021 were $2.0 million and $1.5 million, respectively, of long term receivables related to primary private capital advisory engagements which are generally paid in installments over a period of three years.

Credit risk related to fees receivable is disbursed across a large number of clients located in various geographic areas. The Company controls credit risk through credit approvals and monitoring procedures but does not require collateral to support accounts receivable.

Goodwill

Goodwill is the cost in excess of the fair value of identifiable net assets at the acquisition date. The Company tests its goodwill for impairment at least annually or more frequently where certain events or changes in circumstances indicate that goodwill may more likely than not be impaired. An impairment loss is triggered if the estimated fair value of an operating unit is less than the estimated net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value.

Goodwill is translated at the rate of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Any translation gain or loss is included in the foreign currency translation adjustment, which is included as a component of other comprehensive income (loss) in the condensed consolidated statements of changes in stockholders’ equity.

Compensation Payable

Included in compensation payable are discretionary compensation awards comprised of accrued cash bonuses and long-term incentive compensation, consisting of deferred cash retention awards, which are non-interest bearing, and generally amortized ratably over a three to five-year service period after the date of grant.

Restricted Stock Units

The Company accounts for its share-based compensation payments by recording the fair value of restricted stock units (RSUs) granted to employees as compensation expense. The restricted stock units are generally amortized ratably over a three to five-year service period following the date of grant. Compensation expense is determined based upon the fair value of the Company’s common stock at the date of grant. In certain circumstances the Company issues share-based compensation, which is contingent on achievement of certain performance targets. Compensation expense for performance-based awards begins at the time it is deemed probable that the performance target will be achieved and is amortized into expense over the remaining service period. The Company includes a forfeiture estimate in the aggregate compensation cost to be amortized.

As the Company expenses the awards, the restricted stock units recognized are recorded within stockholders’ equity. The restricted stock units are reclassified into common stock and additional paid-in capital upon vesting. The Company records as treasury stock the repurchase of stock delivered to its employees in settlement of tax liabilities incurred upon the vesting of restricted stock units. The Company records dividend equivalent payments on outstanding restricted stock units eligible for such payment as a dividend payment and a charge to stockholders’ equity.

Earnings per Share

The Company calculates basic earnings per share (“EPS”) by dividing net income by the weighted average number of shares outstanding for the period. The Company calculates diluted EPS by dividing net income by the sum of (i) the weighted average number of shares outstanding for the period and (ii) the dilutive effect of the common stock deliverable pursuant to restricted stock units for which future service is required as calculated using the treasury stock method. See “Note 7 — Earnings per Share”.

Provision for Taxes

The Company accounts for taxes in accordance with the accounting guidance for income taxes which requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities.

The Company follows the guidance for income taxes in recognizing, measuring, presenting and disclosing in its financial statements uncertain tax positions taken or expected to be taken on its income tax returns. Income tax expense is based on pre-tax accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The recognition or derecognition of income tax expense related to uncertain tax positions is determined under the guidance, and the Company’s policy is to treat interest and penalties related to uncertain tax positions as part of pre-tax income.

Deferred tax assets and liabilities are recognized for the future tax attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period of change. Management applies the “more-likely-than-not criteria” when determining tax benefits.

The realization of deferred tax assets arising from timing differences and net operating losses requires taxable income in future years in order to deduct the reversing timing differences and absorb the net operating losses. We assess positive and negative evidence in determining whether to record a valuation allowance with respect to deferred tax assets. This assessment is performed separately for each taxing jurisdiction.

Foreign Currency Translation

Assets and liabilities denominated in foreign currencies have been translated at rates of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Income and expenses transacted in foreign currency have been translated at average monthly exchange rates during the period. Translation gains and losses are included in the foreign currency translation adjustment, which is included as a component of other comprehensive income (loss) in the condensed consolidated statements of changes in stockholders’ equity. Foreign currency transaction gains and losses are included in the condensed consolidated statements of operations in other operating expenses.

Financial Instruments and Fair Value

The Company accounts for financial instruments measured at fair value in accordance with accounting guidance for fair value measurements and disclosures which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the pronouncement are described below:

Basis of Fair Value Measurement

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are subject to these disclosures. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3. Transfers between levels are recognized as of the end of the period in which they occur. See “Note 4 — Fair Value of Financial Instruments”.

Leases

The Company leases office space for its operations around the globe. Certain leases include options to renew, which can be exercised at the Company’s sole discretion. The Company determines if a contract contains a lease at contract inception. Operating lease assets represent the Company’s right to use the underlying asset and operating lease liabilities represent the Company’s obligation to make lease payments. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. When determining the lease term, the Company generally does not include options to renew as it is not reasonably certain at contract inception that the Company will exercise the option(s). The Company uses the implicit rate when readily determinable and its incremental borrowing rate when the implicit rate is not readily determinable. The Company’s incremental borrowing rate is determined using its secured borrowing rate and giving consideration to the currency and term of the associated lease as appropriate.

The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation when determinable and are recognized in operating lease assets in the condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The straight-lining of rent expense results in differences in the operating lease right-of-use asset and operating lease obligations on the condensed consolidated statement of financial condition. Temporary differences are recognized for tax purposes and reflected separately in the condensed consolidated statement of financial condition as deferred lease assets and lease liabilities within deferred tax assets and deferred tax liabilities.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the life of the assets. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the life of the asset or the remaining term of the lease. Estimated useful lives of the Company’s fixed assets are generally as follows:

Equipment – 5 years

Furniture and fixtures – 7 years

Leasehold improvements – the lesser of 15 years or the remaining lease term

Business Information

The Company’s activities as an investment banking firm constitute a single business segment, with substantially all revenues generated from advisory services, which includes engagements relating to mergers and acquisitions, financing advisory and restructuring, and private capital advisory services.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. Under this guidance, companies will reflect the effect of an enacted change in tax law or rates in the period that includes the enactment date of the new legislation, among other changes. This will align the timing of recognizing the effects of new tax law or rates on the effective tax rate with the effect on the deferred tax assets and liabilities. The Company adopted this guidance on January 1, 2021 with no material impact on its consolidated financial statements.

Note 3 — Cash and Cash Equivalents

The carrying values of the Company’s cash and cash equivalents are as follows:


	As of June 30,		As of December 31,
	2022		2021
	(in thousands)
	(unaudited)
Cash	$	39,298	$	57,008
Cash equivalents	18,355		70,689
Restricted cash - letters of credit	6,885		6,927
Total cash and cash equivalents	$	64,538	$	134,624

The carrying value of the Company’s cash equivalents approximates fair value. See “Note 4 — Fair Value of Financial Instruments”.

Letters of credit are secured by cash held on deposit.

Note 4 — Fair Value of Financial Instruments

Assets and liabilities are classified in their entirety based on their lowest level of input that is significant to the fair value measurement. As of June 30, 2022 and December 31, 2021, the Company had Level 1 assets measured at fair value.

Assets Measured at Fair Value on a Recurring Basis

The following tables set forth the measurement at fair value on a recurring basis of the investments in money market funds, short-term cash instruments and U.S. government securities. The securities are categorized as a Level 1 asset, as their valuation is based on quoted prices for identical assets in active markets. See “Note 3 — Cash and Cash Equivalents”.

Assets Measured at Fair Value on a Recurring Basis as of June 30, 2022


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2022
	(in thousands, unaudited)
Assets
Cash equivalents	$	18,355	$	—	$	—	$	18,355
Total	$	18,355	$	—	$	—	$	18,355

Assets Measured at Fair Value on a Recurring Basis as of December 31, 2021


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2021
	(in thousands)
Assets
Cash equivalents	$	70,689	$	—	$	—	$	70,689
Total	$	70,689	$	—	$	—	$	70,689

Note 5 — Loan Facilities

In April 2019, the Company refinanced borrowings made under its 2017 recapitalization plan with borrowings of $375.0 million from a new five-year secured term loan facility (“Term Loan Facility”). Borrowings under the Term Loan Facility bear interest at either U.S. Prime plus 2.25% or LIBOR plus 3.25% and had weighted average interest rates of 3.7% and 3.4% for the six months ended June 30, 2022 and 2021, respectively.

The Term Loan Facility requires quarterly principal amortization payments of $4.7 million (or $18.8 million annually), from September 30, 2019 through March 31, 2024, with the remaining outstanding balance due at maturity on April 12, 2024. The Term Loan Facility permits voluntary principal payments to be made in advance without penalty and such payments are applied to the next successive quarterly installments. As of June 30, 2022, the Company has repaid in advance all required quarterly amortization payments of the Term Loan Facility and the remaining outstanding principal balance of $271.9 million is due at maturity. Under the terms of the credit agreement, the Company may also be required to repay certain amounts in advance of maturity in connection with an annual excess cash flow calculation, the non-ordinary course sale of assets, receipt of insurance proceeds, and the issuance of debt obligations, subject to certain exceptions.

The Term Loan Facility is guaranteed by the Company’s existing and subsequently acquired or organized wholly-owned U.S. restricted subsidiaries (excluding any registered broker-dealers) and secured with a first priority perfected security interest in certain domestic assets and 100% of the capital stock of each U.S. subsidiary and 65% of the capital stock of each non-U.S. subsidiary, subject to certain exclusions which, for the avoidance of doubt, such security interest shall not include any assets of regulated subsidiaries that are not permitted to be pledged by law, statute or regulation, including cash held by regulated subsidiaries and any other capital required to meet and maintain regulatory capital requirements. The credit facility contains certain covenants that limit the Company’s ability above certain permitted amounts to incur additional indebtedness, make certain acquisitions, pay dividends and repurchase shares. The Term Loan Facility does not have financial covenants but is subject to certain other non-financial covenants. At June 30, 2022, the Company was compliant with all loan covenants.

As of June 30, 2022, the Term Loan Facility had a principal balance of $271.9 million and its carrying value was $268.7 million. Deferred financing costs of $9.0 million are being amortized into interest expense over the remaining life of the obligation and recorded as a reduction in the carrying value of the Term Loan Facility in the condensed consolidated statement of financial condition. The Company incurred incremental interest expense of $0.4 million related to the amortization of deferred financing costs for each of the three months ended June 30, 2022 and 2021, and incremental interest expense of $0.9 million related to the amortization of such costs for each of the six months ended June 30, 2022 and 2021. At June 30, 2022, the fair value of the Term Loan Facility was approximately 97.5% of its outstanding principal balance. Since the borrowing is not accounted for at fair value, the fair value is not included in the Company’s fair value hierarchy in “Note 4 - Fair Value of Financial Instruments,” however, had the borrowing been included, it would have been classified in Level 2.

Note 6 — Equity

Total dividend payments of $0.20 per share and $0.10 per share were paid to common stockholders for the six months ended June 30, 2022 and 2021, respectively. In addition, dividend equivalent payments of $1.5 million and $0.6 million were paid to or accrued for holders of restricted stock units for each of the six months ended June 30, 2022 and 2021, respectively.

During the six months ended June 30, 2022, the Company repurchased 1,130,208 common shares through open market transactions at an average price of $14.84, for a total cost of $16.8 million. Additionally, during the six months ended June 30, 2022, 1,716,969 restricted stock units vested and were settled in shares of common stock of which the Company is deemed to have repurchased 783,403 shares at an average price of $17.14 per share for a total cost of $13.4 million in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units.

During the six months ended June 30, 2021, the Company repurchased 787,537 common shares through open market transactions at an average price of $15.87, for a total cost of $12.5 million. Additionally, during the six months ended June 30, 2021, 1,754,799 restricted stock units vested and were settled in shares of common stock, of which the Company is deemed to have repurchased 752,584 shares at an average price of $15.07 per share for a total cost of $11.3 million in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units.

Note 7 — Earnings per Share

The computations of basic and diluted EPS are set forth below:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021
	(in thousands, except per share amounts, unaudited)
Numerator for basic and diluted EPS — net income (loss)	$	(18,732)		$	(8,825)		$	(30,838)		$	(6,741)
Denominator for basic EPS — weighted average number of shares	18,238			19,448			18,331			19,561
Add — dilutive effect of:
Restricted stock units	—		(1)	—		(1)	—		(1)	—		(1)
Denominator for diluted EPS — weighted average number of shares and dilutive securities	18,238		(1)	19,448		(1)	18,331		(1)	19,561		(1)
Earnings (loss) per share:
Basic EPS	$	(1.03)		$	(0.45)		$	(1.68)		$	(0.34)
Diluted EPS	$	(1.03)		$	(0.45)		$	(1.68)		$	(0.34)

____________________

(1) Excludes 3,811,000 and 4,593,000 unamortized restricted stock units that were antidilutive for the three months ended June 30, 2022 and 2021, respectively, and 4,404,000 and 4,396,000 for the six months ended June 30, 2022 and 2021, respectively, and thus were not included in the above calculation. The incremental shares that could be included in the diluted EPS calculation in future periods will vary based on a variety of factors, including the future share price and the amount of unrecognized compensation cost. The incremental shares included, if any, would be less than the number of outstanding restricted stock units.

The activity related to the restricted stock units is set forth below:


	Restricted Stock Units Outstanding
	2022			2021
	Units	Grant Date Weighted Average Fair Value		Units	Grant Date Weighted Average Fair Value
Outstanding, January 1,	7,799,509	$	13.78	7,587,078	$	14.68
Granted	1,802,436	16.13		2,356,183	12.96
Delivered	(1,763,049)	14.33		(1,830,792)	16.61
Forfeited	(47,598)	14.70		(298,885)	14.54
Outstanding, June 30,	7,791,298	$	14.05	7,813,584	$	13.80

Note 8 — Income Taxes

The Company is subject to U.S. federal, state and local, as well as foreign, corporate income taxes and its effective tax rate varies depending on the jurisdiction in which the income is earned.

The Company is required to record a charge or benefit in its income tax provision for the tax effect of the difference between the grant date value of restricted stock units and the market value of such awards at the time of vesting. The provisions for income taxes for the six months ended June 30, 2022 and 2021 include a net benefit of $1.0 million and a net charge of $0.6 million, respectively, related to the tax effect of the vesting of restricted stock units at a market value greater than their grant price in 2022 and less than their grant price in 2021.

Based on the Company’s historical taxable income and its expectation for taxable income in the future, management expects that its largest deferred tax asset, which relates principally to compensation expense deducted for book purposes but not yet deducted for tax purposes, will be realized as offsets to future taxable income.

Any gain or loss resulting from the translation of deferred taxes for foreign affiliates is included in the foreign currency translation adjustment incorporated as a component of other comprehensive income (loss), net of tax, in the condensed consolidated statements of changes in stockholders’ equity and the condensed consolidated statements of comprehensive income.

The income tax laws in the jurisdictions in which the Company operates are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. Management must make judgments in assessing the likelihood that a tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position. In the normal course of business, the Company may be under audit in one or more of its jurisdictions in an open tax year for that particular jurisdiction. As of June 30, 2022, the Company does not expect any material changes in its tax provision related to any current or future audits.

Note 9 — Leases

The Company leases office space for its operations around the globe. All of the Company’s leases are operating leases and have remaining lease terms ranging from less than 1 year to 14 years.

The undiscounted aggregate minimum future rental payments are as follows:


	As of
	June 30,		December 31,
	2022		2021
	(in thousands)
	(unaudited)
2022 (remainder)	$	6,855	$	13,583
2023	11,915		11,755
2024	10,906		10,976
2025	12,127		12,414
2026	10,734		11,016
Thereafter	86,575		88,121
Total lease payments	$	139,112	$	147,865
Less: minimum future rental payments for which the lease has not commenced(1)	—		(26,542)
Total lease payments for which the Company has a right-of-use-asset and corresponding liability	139,112		121,323
Plus: tenant incentive allowance utilized to finance leasehold improvements	10,189		10,560
Less: Interest	(44,746)		(39,192)
Present value of operating lease liabilities	$	104,555	$	92,691

______________________

(1) In December 2021, the Company entered into a new office lease in London for a 10 year term commencing with its right to use the premises in June 2022.

The weighted average remaining lease term and weighted average discount rate of our operating leases are as follows:


	As of
	June 30,		December 31,
	2022		2021
	(unaudited)
Weighted average remaining lease term in years	11.3		11.5
Weighted average discount rate	6.8	%	6.8	%

Note 10 — Regulatory Requirements

Certain subsidiaries of the Company are subject to various regulatory requirements in the United States, United Kingdom, Germany, Australia and certain other jurisdictions, which specify, among other requirements, minimum net capital requirements for registered broker-dealers.

G&Co is subject to the SEC’s Uniform Net Capital requirements under Rule 15c3-1 (the “Rule”), which specifies, among other requirements, minimum net capital requirements for registered broker-dealers. The Rule requires G&Co to maintain a minimum net capital of the greater of $5,000 or 1/15 of aggregate indebtedness, as defined in the Rule. As of June 30, 2022, G&Co’s net capital was $8.0 million, which exceeded its requirement by $7.3 million. G&Co’s aggregate indebtedness to net capital ratio was 1.2 to 1 at June 30, 2022. Certain distributions and other capital withdrawals of G&Co are subject to certain notifications and restrictive provisions of the Rule.

At June 30, 2022, GCI is subject to capital requirements of the FCA. Greenhill Europe is subject to capital requirements of Bafin. Greenhill Australia is subject to capital requirements of the ASIC. We are also subject to certain capital regulatory requirements in other jurisdictions. As of June 30, 2022, GCI, Greenhill Europe, Greenhill Australia, and our other regulated operations were in compliance with local capital adequacy requirements.

Note 11 — Subsequent Events

The Company evaluates subsequent events through the date on which the financial statements are issued.

On August 2, 2022, the Board of Directors of the Company declared a quarterly dividend of $0.10 per share. The dividend will be payable on September 28, 2022 to the common stockholders of record on September 14, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Greenhill”, “we”, “our”, “Firm” and “us” refer to Greenhill & Co., Inc.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, the risk factors in item 1A of this Quarterly Report on Form 10-Q and subsequent Current Reports on Form 8-K.

Cautionary Statement Concerning Forward-Looking Statements

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this report. We have made statements in this discussion that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “could”, “expect”, “plan”, “outlook”, “anticipate”, “believe”, “estimate”, “intend”, “predict”, “potential” or “continue”, the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include current views and projections of our operations and future financial performance, growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These factors include, among other things, uncertainties associated with catastrophes such as the coronavirus (“COVID-19”) pandemic and other economic and geopolitical events. You should consider the various risks outlined under “Risk Factors” in our 2021 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot give assurances that these expectations will be achieved, nor can we guarantee future results, level of activity, performance or achievements. Moreover, 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 or review any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised expectations, whether as a result of new information, future developments or otherwise.

Overview

Greenhill is a leading independent investment bank that provides financial and strategic advice on significant domestic and cross-border mergers and acquisitions, divestitures, restructurings, financings, capital raising and other transactions to a diverse client base, including corporations, partnerships, private equity sponsors, institutional investors, family offices and governments globally. We serve as a trusted advisor to our clients throughout the world on a collaborative, globally integrated basis from our offices in the United States, Australia, Canada, France, Germany, Hong Kong, Japan, Singapore, Spain, Sweden, and the United Kingdom.

We were established in 1996 by Robert F. Greenhill, the former President of Morgan Stanley and former Chairman and Chief Executive Officer of Smith Barney. Since our founding, Greenhill has grown significantly, by recruiting talented managing directors and other senior professionals, acquiring complementary advisory businesses and training, developing and promoting professionals internally. We have expanded beyond merger and acquisition advisory services to include financing, restructuring, and private capital advisory services, and we have expanded the breadth of our sector expertise to cover substantially all major industries. Since the opening of our original office in New York, we have expanded globally to 15 offices across four continents.

Over our 26 years as an independent investment banking firm, we have sought to opportunistically recruit new managing directors with a range of industry and transaction specialties, as well as high-level corporate and other relationships, from major investment banks, independent financial advisory firms and other institutions. We also have sought to expand our geographic reach both through recruiting managing directors in new locations and through strategic acquisitions. Through our recruiting and acquisition activity, we have significantly increased our geographic reach by adding offices in the United States, United Kingdom, Germany, Canada, Japan, Australia, Sweden, Hong Kong, Spain, Singapore and France.

During 2022, we have recruited 3 additional client facing managing directors. With these recruits we have expanded our teams focused on coverage of financial sponsors, telecom infrastructure, and private capital advisory. In addition, as previously announced effective January 1, 2022, as part of our annual evaluation and promotion process we named 7 new client facing Managing Directors. We remain focused on adding more senior talent in the months to come. As of July 29, 2022, we had 80 client facing managing directors, including those whose recruitment we have announced to date.

Business Environment and Outlook /Factors Affecting Our Results

Global and Regional Transaction Activity. Economic conditions and global financial markets can materially affect our financial performance. We are solely an advisory firm and our revenues are derived from fees we earn on advisory services related to M&A, financing advisory and restructuring, and private capital advisory transactions. In the first six months of 2022, market uncertainty and volatility caused by the war in Ukraine, inflationary pressures, supply chain issues and rising interest rates slowed the level of M&A announcements from the rapid pace of 2021. While we have continued to have a high level of client engagement, our revenue generation was light in the first half of 2022 due to the relative lack of large transaction completions. However, our backlog of activity continues to suggest that revenue generation this year is likely to play out very much like the three years before it, when we had a weak first half followed by a better second half and particularly a strong fourth quarter.

In terms of client activity and revenue, recent economic and market developments are impacting our expected sources of revenue in varying ways. By sector, we expect relatively good performances in consumer, energy, mining and telecom infrastructure. By region, we expect significant improvement in Europe relative to a weak performance last year, and we expect a second year of strong performances in Australia and Canada given higher commodity prices. By type of advice, the restructuring business is relatively quiet given low default rates, financing advisory is slower given tighter credit markets but M&A remains active even if overall global deal activity is well below last year's level.

While our historic focus on M&A advice for public companies is serving us well this year, we remain committed to the three strategic initiatives. First is expanding our coverage of financial sponsors. That client type is one that can make use of all our services, from M&A to financing and restructuring to capital raising and secondary sales of fund limited partner interests. We believe we made good progress on this initiative over the past 18 months. Second is winning more financing advisory roles. This activity is highly complementary to our restructuring advisory businesses for companies that are in financial distress. We made some progress in this area last year, but believe that the tremendous growth in the direct lending market creates a very large opportunity worth pursuing. Third is our private capital advisory business, where in the past 18 months we have built out a global team to raise primary capital for private funds of many types, including private equity, infrastructure, credit and others. That team is already in the market with a number of high quality fund offerings, and we expect that area to be a significant contributor to Firm revenue in years to come. At the same time, we continue to develop the secondary aspect of this business globally.

Globally, the number and volume of announced transactions decreased by 19% and 24%, respectively, in the six months ended June 30, 2022 versus the same period in the prior year. The number of completed transactions globally decreased by 18% while the volume of completed transactions increased by 7% in the same period due to the closings of larger transactions.

We believe our business performance is best measured over longer periods of time, as we generally experience significant variations in revenues and profits from quarter to quarter. These variations can generally be attributed to the fact that our revenues are typically earned in large amounts upon the successful completion of a transaction or restructuring, the timing of which is uncertain and is not subject to our control. Accordingly, revenues, operating income and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter.

Competition. We operate in a highly competitive environment where there are no long-term contracted sources of revenue. Each revenue-generating engagement is separately awarded and negotiated. Our list of clients with whom there are active engagements changes continually. To develop new client relationships, and to develop new engagements from historic client relationships, we maintain, on an ongoing basis, active business dialogues with a large number of clients and potential clients. We gain new clients each year through our business development initiatives, through recruiting additional senior investment banking professionals who bring with them client relationships and expertise in certain industry sectors or geographies, and through referrals from members of boards of directors, attorneys and other parties with whom we have relationships. At the same time, we lose clients each year as a result of the sale or merger of a client, bankruptcy, a change in a client’s senior management team, turnover of our senior banking professionals, competition from other investment banks and other similar reasons.

1 Excludes transactions less than $100,000 and withdrawn/canceled deals. Source: Thomson Financial as of July 29, 2022.

Results of Operations

Revenues

Our revenues are derived from both corporate advisory services related to M&A, financings and restructurings, and private capital advisory services related to sales or capital raises pertaining to alternative assets. A majority of our revenue is contingent upon the closing of a merger, acquisition, financing, restructuring, or other advisory transaction. While fees payable upon the successful conclusion of a transaction generally represent the largest portion of our corporate advisory fees, we also earn other fees, including on-going retainer fees, substantially all of which relate to non-success-based strategic advisory, financing advisory and restructuring assignments, and fees payable upon the commencement of an engagement or upon the achievement of certain milestones such as the announcemen