QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended | ||||||||
OR | ||||||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from to . |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||
(ZIP Code) | |||||
(Address of Principal Executive Offices) |
Securities registered pursuant to Section 12(b) of the Act | ||||||||
Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||
Large accelerated filer | ¨ | þ | Non-accelerated filer | ¨ | Smaller reporting company | ||||||||||||||||||
Emerging growth company |
Page | ||||||||
1. | ||||||||
2. | ||||||||
3. | ||||||||
4. | ||||||||
1. | ||||||||
1A. | ||||||||
2. | ||||||||
3. | ||||||||
4. | ||||||||
5. | ||||||||
6. | ||||||||
Exhibits |
As of | ||||||||
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Cash and cash equivalents ($ | $ | $ | ||||||
Fees receivable, net of allowance for doubtful accounts of $ | ||||||||
Other receivables | ||||||||
Property and equipment, net of accumulated depreciation of $ | ||||||||
Operating lease right-of-use asset | ||||||||
Goodwill | ||||||||
Deferred tax asset, net | ||||||||
Other assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities and Equity | ||||||||
Compensation payable | $ | $ | ||||||
Accounts payable and accrued expenses | ||||||||
Current income taxes payable | ||||||||
Operating lease obligations | ||||||||
Secured term loan payable | ||||||||
Deferred tax liability | ||||||||
Total liabilities | ||||||||
Common stock, par value $ | ||||||||
Restricted stock units | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive income (loss) | ( | ( | ||||||
Treasury stock, at cost, par value $ | ( | ( | ||||||
Stockholders’ equity | ||||||||
Total liabilities and equity | $ | $ |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Employee compensation and benefits | |||||||||||||||||||||||
Occupancy and equipment rental | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Information services | |||||||||||||||||||||||
Professional fees | |||||||||||||||||||||||
Travel related expenses | |||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Total operating income (loss) | ( | ||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||
Income (loss) before taxes | ( | ||||||||||||||||||||||
Provision (benefit) for taxes | ( | ||||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
Average shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
Earnings (loss) per share: | |||||||||||||||||||||||
Basic | $ | $ | $ | ( | $ | ||||||||||||||||||
Diluted | $ | $ | $ | ( | $ |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||
Currency translation adjustment, net of tax | ( | ( | ( | ( | |||||||||||||||||||
Comprehensive income (loss) | $ | $ | $ | ( | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Common stock, par value $ | |||||||||||||||||||||||
Common stock, beginning of the period | $ | $ | $ | $ | |||||||||||||||||||
Common stock issued | |||||||||||||||||||||||
Common stock, end of the period | |||||||||||||||||||||||
Restricted stock units | |||||||||||||||||||||||
Restricted stock units, beginning of the period | |||||||||||||||||||||||
Restricted stock units recognized, net of forfeitures | |||||||||||||||||||||||
Restricted stock units delivered | ( | ( | ( | ( | |||||||||||||||||||
Restricted stock units, end of the period | |||||||||||||||||||||||
Additional paid-in capital | |||||||||||||||||||||||
Additional paid-in capital, beginning of the period | |||||||||||||||||||||||
Common stock issued | |||||||||||||||||||||||
Additional paid-in capital, end of the period | |||||||||||||||||||||||
Retained earnings | |||||||||||||||||||||||
Retained earnings, beginning of the period, as previously reported | |||||||||||||||||||||||
Dividends | ( | ( | ( | ( | |||||||||||||||||||
Net income (loss) | ( | ||||||||||||||||||||||
Retained earnings, end of the period | |||||||||||||||||||||||
Accumulated other comprehensive income (loss) | |||||||||||||||||||||||
Accumulated other comprehensive income (loss), beginning of the period | ( | ( | ( | ( | |||||||||||||||||||
Currency translation adjustment, net of tax | ( | ( | ( | ( | |||||||||||||||||||
Accumulated other comprehensive income (loss), end of the period | ( | ( | ( | ( | |||||||||||||||||||
Treasury stock, at cost, par value $ | |||||||||||||||||||||||
Treasury stock, beginning of the period | ( | ( | ( | ( | |||||||||||||||||||
Repurchased | ( | ( | ( | ( | |||||||||||||||||||
Treasury stock, end of the period | ( | ( | ( | ( | |||||||||||||||||||
Total stockholders’ equity | $ | $ | $ | $ |
For the Nine Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Operating activities: | |||||||||||
Net income (loss) | $ | ( | $ | ||||||||
Adjustments to reconcile net income (loss) to net cash used for operating activities: | |||||||||||
Non-cash items included in net income (loss): | |||||||||||
Depreciation and amortization | |||||||||||
Net investment (gains) losses | ( | ||||||||||
Restricted stock units recognized, net | |||||||||||
Deferred taxes, net | ( | ||||||||||
Allowance for doubtful accounts | ( | ||||||||||
Changes in operating assets and liabilities: | |||||||||||
Fees receivable | |||||||||||
Other receivables and assets | ( | ( | |||||||||
Compensation payable | ( | ( | |||||||||
Accounts payable and accrued expenses | |||||||||||
Current income taxes payable | ( | ||||||||||
Net cash provided (used) by operating activities | ( | ||||||||||
Investing activities: | |||||||||||
Proceeds from sales of investments | |||||||||||
Distributions from investments | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Financing activities: | |||||||||||
Repayment of secured term loan | ( | ||||||||||
Dividends paid | ( | ( | |||||||||
Purchase of treasury stock | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
Effect of exchange rate changes | ( | ( | |||||||||
Net decrease in cash and cash equivalents | ( | ( | |||||||||
Cash and cash equivalents, beginning of the period | |||||||||||
Cash and cash equivalents, end of the period | $ | $ | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for taxes, net of refunds | $ | $ | ( |
As of September 30, | As of December 31, | ||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
(unaudited) | |||||||||||
Cash | $ | $ | |||||||||
Cash equivalents | |||||||||||
Restricted cash - letters of credit | |||||||||||
Total cash and cash equivalents | $ | $ |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of September 30, 2022 | ||||||||||||||||||||
(in thousands, unaudited) | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||
Cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
Total | $ | $ | $ | $ |
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 | $ | $ | $ | $ | |||||||||||||||||||
Total | $ | $ | $ | $ |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||
(in thousands, except per share amounts, unaudited) | |||||||||||||||||||||||||||||
Numerator for basic and diluted EPS — net income (loss) | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Denominator for basic EPS — weighted average number of shares | |||||||||||||||||||||||||||||
Add — dilutive effect of: | |||||||||||||||||||||||||||||
Restricted stock units | (1) | ||||||||||||||||||||||||||||
Denominator for diluted EPS — weighted average number of shares and dilutive securities | (1) | ||||||||||||||||||||||||||||
Earnings (loss) per share: | |||||||||||||||||||||||||||||
Basic EPS | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Diluted EPS | $ | $ | $ | ( | $ |
Restricted Stock Units Outstanding | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Units | Grant Date Weighted Average Fair Value | Units | Grant Date Weighted Average Fair Value | ||||||||||||||||||||
Outstanding, January 1, | $ | $ | |||||||||||||||||||||
Granted | |||||||||||||||||||||||
Delivered | ( | ( | |||||||||||||||||||||
Forfeited | ( | ( | |||||||||||||||||||||
Outstanding, September 30, | $ | $ |
As of | |||||||||||
September 30, | December 31, | ||||||||||
2022 | 2021 | ||||||||||
(in thousands) | |||||||||||
(unaudited) | |||||||||||
2022 (remainder) | $ | $ | |||||||||
2023 | |||||||||||
2024 | |||||||||||
2025 | |||||||||||
2026 | |||||||||||
Thereafter | |||||||||||
Total lease payments | $ | $ | |||||||||
Less: minimum future rental payments for which the lease has not commenced(1) | ( | ||||||||||
Total lease payments for which the Company has a right-of-use-asset and corresponding liability | |||||||||||
Plus: tenant incentive allowance utilized to finance leasehold improvements | |||||||||||
Less: Interest | ( | ( | |||||||||
Present value of operating lease liabilities | $ | $ |
As of | |||||||||||
September 30, | December 31, | ||||||||||
2022 | 2021 | ||||||||||
(unaudited) | |||||||||||
Weighted average remaining lease term in years | |||||||||||
Weighted average discount rate | % | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in millions, unaudited) | |||||||||||||||||||||||
Employee compensation and benefits expenses | $45.3 | $44.4 | $135.3 | $131.5 | |||||||||||||||||||
% of revenues | 56 | % | 50 | % | 83 | % | 65 | % | |||||||||||||||
Non-compensation operating expenses | 12.9 | 13.9 | 39.8 | 40.9 | |||||||||||||||||||
% of revenues | 16 | % | 16 | % | 24 | % | 20 | % | |||||||||||||||
Total operating expenses | 58.2 | 58.3 | 175.1 | 172.4 | |||||||||||||||||||
% of revenues | 72 | % | 66 | % | 108 | % | 86 | % | |||||||||||||||
Total operating income (loss) | 23.0 | 30.4 | (12.4) | 28.4 | |||||||||||||||||||
Operating profit margin | 28 | % | 34 | % | NM | NM |
Period | Total Number of Shares Repurchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2) | |||||||||||||||||||
July 1 - 31 | — | $0.00 | — | $ | 44,611,326 | ||||||||||||||||||
August 1 - 31 | — | $0.00 | — | 44,371,756 | |||||||||||||||||||
September 1 - 30 | — | $0.00 | — | 44,371,756 | |||||||||||||||||||
Total | — | — | $ | 44,371,756 |
Exhibit Number | Description | |||||||
31.1 | ||||||||
31.2 | ||||||||
32.1** | ||||||||
32.2** | ||||||||
101.INS | The following materials from Greenhill's Form 10-Q Report for the quarterly period ended September 30, 2022, formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Financial Condition; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Changes in Stockholders' Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to the Condensed Consolidated Financial Statements. | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |||||||
104 | The cover page of Greenhill's Form 10-Q Report for the quarter ended September 30, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments). |
* | Management contract or compensatory plan or arrangement | ||||
** | This information is furnished and not filed herewith for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934. |
GREENHILL & CO., INC. | ||||||||
By: | /s/ SCOTT L. BOK | |||||||
Scott L. Bok | ||||||||
Chairman and Chief Executive Officer | ||||||||
By: | /s/ HAROLD J. RODRIGUEZ, JR. | |||||||
Harold J. Rodriguez, Jr. | ||||||||
Chief Financial Officer |
/s/ Scott L. Bok | ||||||||
Scott L. Bok | ||||||||
Chairman and Chief Executive Officer | ||||||||
Date: | November 8, 2022 |
/s/ Harold J. Rodriguez, Jr. | ||||||||
Harold J. Rodriguez, Jr. | ||||||||
Chief Financial Officer | ||||||||
Date: | November 8, 2022 |
/s/ Scott L. Bok | |||||
Scott L. Bok | |||||
Chairman and Chief Executive Officer |
/s/ Harold J. Rodriguez, Jr. | |||||
Harold J. Rodriguez, Jr. | |||||
Chief Financial Officer |
Condensed Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Cash and cash equivalents, restricted from use | $ 6,817 | $ 6,927 |
Fees receivable, allowance for doubtful accounts | 100 | 300 |
Property and equipment, accumulated depreciation | $ 20,200 | $ 20,100 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (shares) | 52,433,947 | 50,621,563 |
Common stock, shares outstanding (shares) | 17,936,308 | 18,066,226 |
Treasury stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Treasury stock, shares (shares) | 34,497,639 | 32,555,337 |
Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Revenues | ||||
Revenues | $ 81,145 | $ 88,646 | $ 162,635 | $ 200,807 |
Operating Expenses | ||||
Employee compensation and benefits | 45,265 | 44,390 | 135,277 | 131,473 |
Occupancy and equipment rental | 4,954 | 4,628 | 13,796 | 13,625 |
Depreciation and amortization | 635 | 722 | 1,880 | 2,302 |
Information services | 2,504 | 2,476 | 7,140 | 7,161 |
Professional fees | 1,774 | 2,431 | 5,971 | 6,331 |
Travel related expenses | 1,541 | 815 | 4,210 | 1,523 |
Other operating expenses | 1,492 | 2,822 | 6,782 | 9,994 |
Total operating expenses | 58,165 | 58,284 | 175,056 | 172,409 |
Total operating income (loss) | 22,980 | 30,362 | (12,421) | 28,398 |
Interest expense | 4,369 | 2,985 | 10,382 | 9,271 |
Income (loss) before taxes | 18,611 | 27,377 | (22,803) | 19,127 |
Provision (benefit) for taxes | 4,400 | 7,233 | (6,176) | 5,724 |
Net income (loss) | $ 14,211 | $ 20,144 | $ (16,627) | $ 13,403 |
Average shares outstanding: | ||||
Basic (shares) | 17,935,848 | 19,046,407 | 18,197,533 | 19,387,582 |
Diluted (shares) | 21,095,880 | 23,751,697 | 18,197,533 | 24,192,080 |
Earnings (loss) per share: | ||||
Basic (usd per share) | $ 0.79 | $ 1.06 | $ (0.91) | $ 0.69 |
Diluted (usd per share) | $ 0.67 | $ 0.85 | $ (0.91) | $ 0.55 |
Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 14,211 | $ 20,144 | $ (16,627) | $ 13,403 |
Currency translation adjustment, net of tax | (10,326) | (4,035) | (16,128) | (5,188) |
Comprehensive income (loss) | $ 3,885 | $ 16,109 | $ (32,755) | $ 8,215 |
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement of Stockholders' Equity [Abstract] | ||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Treasury stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Organization |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | 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.
|
Summary of Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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 $13.9 million and $7.7 million as of September 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 nine months ended September 30, 2022 and September 30, 2021, the Company recognized $3.8 million and $3.7 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 $0.7 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively, and $1.9 million and $1.7 million for the nine months ended September 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 bad debt expense of $0.1 million in each of the three months ended September 30, 2022 and 2021, respectively. The Company recorded a net reversal of bad debt expense of $0.3 million and bad debt expense of $0.1 million in the nine months ended September 30, 2022 and 2021, respectively. Included in the fees receivable balances at September 30, 2022 and December 31, 2021 were $3.5 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 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 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.
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Cash and Cash Equivalents |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents The carrying values of the Company’s cash and cash equivalents are as follows:
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.
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | 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 September 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 September 30, 2022 Assets Measured at Fair Value on a Recurring Basis as of December 31, 2021
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Loan Facilities |
9 Months Ended |
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Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Loan Facilities | 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 4.4% and 3.4% for the nine months ended September 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 September 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 September 30, 2022, the Company was compliant with all loan covenants. As of September 30, 2022, the Term Loan Facility had a principal balance of $271.9 million and its carrying value was $269.2 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 September 30, 2022 and 2021, and incremental interest expense of $1.3 million related to the amortization of such costs for each of the nine months ended September 30, 2022 and 2021. At September 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.
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Equity |
9 Months Ended |
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Sep. 30, 2022 | |
Stockholders' Equity Note [Abstract] | |
Equity | Equity Total dividend payments of $0.30 per share and $0.15 per share were paid to common stockholders for the nine months ended September 30, 2022 and 2021, respectively. In addition, dividend equivalent payments of $2.1 million and $1.0 million were paid to or accrued for holders of restricted stock units for each of the nine months ended September 30, 2022 and 2021, respectively. During the nine months ended September 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 nine months ended September 30, 2022, 1,790,070 restricted stock units vested and were settled in shares of common stock of which the Company is deemed to have repurchased 812,094 shares at an average price of $16.83 per share for a total cost of $13.7 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 nine months ended September 30, 2021, the Company repurchased 1,390,374 common shares through open market transactions at an average price of $15.47, for a total cost of $21.5 million. Additionally, during the nine months ended September 30, 2021, 1,835,216 restricted stock units vested and were settled in shares of common stock, of which the Company is deemed to have repurchased 786,974 shares at an average price of $15.08 per share for a total cost of $11.9 million in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units.
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share The computations of basic and diluted EPS are set forth below:
____________________ (1) Excludes 4,255,000 unamortized restricted stock units that were antidilutive for the nine months ended September 30, 2022, 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:
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Income Taxes |
9 Months Ended |
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Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 nine months ended September 30, 2022 and 2021 include a net benefit of $0.8 million and a net charge of $0.7 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 September 30, 2022, the Company does not expect any material changes in its tax provision related to any current or future audits.
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 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:
(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:
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Regulatory Requirements |
9 Months Ended |
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Sep. 30, 2022 | |
Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract] | |
Regulatory Requirements | Regulatory RequirementsCertain 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 September 30, 2022, G&Co’s net capital was $3.2 million, which exceeded its requirement by $2.6 million. G&Co’s aggregate indebtedness to net capital ratio was 2.9 to 1 at September 30, 2022. Certain distributions and other capital withdrawals of G&Co are subject to certain notifications and restrictive provisions of the Rule. At September 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 September 30, 2022, GCI, Greenhill Europe, Greenhill Australia, and our other regulated operations were in compliance with local capital adequacy requirements.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company evaluates subsequent events through the date on which the financial statements are issued. On November 2, 2022, the Board of Directors of the Company declared a quarterly dividend of $0.10 per share. The dividend will be payable on December 21, 2022 to the common stockholders of record on December 7, 2022.
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Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Financial Information | 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.
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Revenue Recognition | 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 $13.9 million and $7.7 million as of September 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 nine months ended September 30, 2022 and September 30, 2021, the Company recognized $3.8 million and $3.7 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 $0.7 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively, and $1.9 million and $1.7 million for the nine months ended September 30, 2022 and 2021, respectively. Such reimbursements are reported as revenues and operating expenses with no impact to operating income.
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Cash and Cash Equivalents | 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”.
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Fees Receivable | 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 bad debt expense of $0.1 million in each of the three months ended September 30, 2022 and 2021, respectively. The Company recorded a net reversal of bad debt expense of $0.3 million and bad debt expense of $0.1 million in the nine months ended September 30, 2022 and 2021, respectively. Included in the fees receivable balances at September 30, 2022 and December 31, 2021 were $3.5 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.
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Goodwill | 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.
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Compensation Payable | 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 to five-year service period after the date of grant.
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Restricted Stock Units | 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 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.
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Earnings per Share | 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”.
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Provision for Taxes | 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.
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Foreign Currency Translation | 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.
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Financial Instruments and Fair Value | 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”.
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Leases | 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.
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Property and Equipment | 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
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Business Information | Business InformationThe 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 | 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.
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Cash and Cash Equivalents (Tables) |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | The carrying values of the Company’s cash and cash equivalents are as follows:
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Restrictions on Cash and Cash Equivalents | The carrying values of the Company’s cash and cash equivalents are as follows:
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring | 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 September 30, 2022 Assets Measured at Fair Value on a Recurring Basis as of December 31, 2021
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations of Basic and Diluted Earnings Per Share | The computations of basic and diluted EPS are set forth below:
____________________ (1) Excludes 4,255,000 unamortized restricted stock units that were antidilutive for the nine months ended September 30, 2022, 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.
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Schedule of Share-based Payment Arrangement, Restricted Stock Unit, Activity | The activity related to the restricted stock units is set forth below:
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Operating Lease, Liability, Maturity | The undiscounted aggregate minimum future rental payments are as follows:
(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.
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Lease, Cost | The weighted average remaining lease term and weighted average discount rate of our operating leases are as follows:
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Organization (Details) |
Sep. 30, 2022
state
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of states in which the entity is licensed | 50 |
Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
Sep. 30, 2021 |
Dec. 31, 2020 |
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Cash and Cash Equivalents [Abstract] | ||||
Cash | $ 36,511 | $ 57,008 | ||
Cash equivalents | 20,984 | 70,689 | ||
Restricted cash - letters of credit | 6,817 | 6,927 | ||
Total cash and cash equivalents | $ 64,312 | $ 134,624 | $ 100,435 | $ 112,703 |
Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | |
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Sep. 30, 2022 |
Sep. 30, 2021 |
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Stockholders Equity Note [Line Items] | ||
Dividends declared and paid per share (usd per share) | $ 0.30 | $ 0.15 |
Dividend equivalents paid | $ 2,100 | $ 1,000 |
Purchase of treasury stock | $ 30,434 | $ 33,370 |
Restricted Stock Units | ||
Stockholders Equity Note [Line Items] | ||
Restricted stock units vested and issued as common stock (shares) | 1,790,070 | 1,835,216 |
Repurchased shares for award | 812,094 | 786,974 |
Average repurchase price of shares for award (usd per share) | $ 16.83 | $ 15.08 |
Treasury stock, value, acquired, cost method | $ 13,700 | $ 11,900 |
Common stock, par value $0.01 per share | ||
Stockholders Equity Note [Line Items] | ||
Treasury stock, shares, acquired | 1,130,208 | 1,390,374 |
Treasury stock acquired, average cost per share (usd per share) | $ 14.84 | $ 15.47 |
Purchase of treasury stock | $ 16,800 | $ 21,500 |
Earnings per Share - Reconciliation (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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Earnings Per Share [Abstract] | ||||
Numerator for basic and diluted EPS — net income (loss) | $ 14,211 | $ 20,144 | $ (16,627) | $ 13,403 |
Denominator for basic EPS — weighted average number of shares | 17,935,848 | 19,046,407 | 18,197,533 | 19,387,582 |
Add — dilutive effect of: | ||||
Restricted stock units | 3,160,000 | 4,705,000 | 0 | 4,804,000 |
Denominator for diluted EPS — weighted average number of shares and dilutive securities | 21,095,880 | 23,751,697 | 18,197,533 | 24,192,080 |
Earnings (loss) per share: | ||||
Basic (usd per share) | $ 0.79 | $ 1.06 | $ (0.91) | $ 0.69 |
Diluted (usd per share) | $ 0.67 | $ 0.85 | $ (0.91) | $ 0.55 |
Antidilutive securities excluded from EPS (shares) | 4,255,000 |
Earnings per Share - Activity Related to Restricted Stock Units (Details) - Restricted Stock Units - $ / shares |
9 Months Ended | |
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Sep. 30, 2022 |
Sep. 30, 2021 |
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Units | ||
Beginning balance of shares outstanding | 7,799,509 | 7,587,078 |
Grants in period (in shares) | 1,810,570 | 2,461,261 |
Delivered (in shares) | (1,836,150) | (1,911,209) |
Forfeited (in shares) | (251,177) | (407,930) |
Ending balance of shares outstanding | 7,522,752 | 7,729,200 |
Grant Date Weighted Average Fair Value | ||
Beginning balance, weighted average grant date fair value, shares outstanding (in dollars per share) | $ 13.78 | $ 14.68 |
Weighted average grant date fair value, granted (in dollars per share) | 16.10 | 13.07 |
Weighted average grant date fair value, delivered (in dollars per share) | 14.77 | 16.99 |
Weighted average grant date fair value, forfeited (in dollars per share) | 14.12 | 13.87 |
Ending balance, weighted average grant date fair value, shares outstanding (in dollars per share) | $ 13.91 | $ 13.71 |
Income Taxes (Details) - USD ($) $ in Millions |
9 Months Ended | |
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Sep. 30, 2022 |
Sep. 30, 2021 |
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Income Tax Disclosure [Abstract] | ||
Excess tax (benefit) expense | $ (0.8) | $ 0.7 |
Leases - Additional Information (Details) |
Sep. 30, 2022 |
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Minimum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, remaining lease term | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, remaining lease term | 14 years |
Leases - Operating Lease, Future Rental Payments, Maturity (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Leases [Abstract] | ||
2022 (remainder) | $ 3,346 | $ 13,583 |
2023 | 11,630 | 11,755 |
2024 | 11,709 | 10,976 |
2025 | 12,875 | 12,414 |
2026 | 11,608 | 11,016 |
Thereafter | 89,084 | 88,121 |
Total lease payments | 140,252 | 147,865 |
Less: minimum future rental payments for which the lease has not commenced | 0 | (26,542) |
Total lease payments for which the Company has a right-of-use-asset and corresponding liability | 140,252 | 121,323 |
Plus: tenant incentive allowance utilized to finance leasehold improvements | 10,004 | 10,560 |
Less: Interest | (44,539) | (39,192) |
Present value of operating lease liabilities | $ 105,717 | $ 92,691 |
Term of lease not yet commenced | 10 years |
Leases - Weighted Average Remaining Lease Term and Weighted Average Discount Rate (Details) |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Leases [Abstract] | ||
Weighted average remaining lease term in years | 11 years 1 month 6 days | 11 years 6 months |
Weighted average discount rate | 6.80% | 6.80% |
Regulatory Requirements (Details) |
9 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
| |
Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract] | |
Minimum net capital required | $ 5,000 |
Net capital | 3,200,000 |
Excess net capital | $ 2,600,000 |
Aggregate indebtedness to net capital ratio (percent) | 2.9 |
Description of minimum net capital requirements | The greater of $5,000 or 1/15 of aggregate indebtedness |
Minimum capital requirements, portion of aggregate indebtedness | 6.67% |
Subsequent Events (Details) |
Nov. 02, 2022
$ / shares
|
---|---|
Subsequent Event | |
Subsequent Event [Line Items] | |
Dividends declared per common share (usd per share) | $ 0.10 |
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