Morningstar | After a Year of Consistent Revenue, Greenhill Has a Major Down Quarter
Greenhill's first-quarter revenue and earnings are a vivid reminder of how volatile investment banking results can be. The company reported a net loss of $15.4 million, or $0.64 per share, on $51 million of revenue. Since 2014, there have been only three other quarters with revenue below this. The $51 million is also in stark contrast to 2018's quarterly revenue results, that were in a tight range of $86.8 million-$89.1 million. We don't anticipate making a material change to our $23 fair value estimate for narrow-moat Greenhill.The biggest swing factor in Greenhill's results seems to be Europe. The company had strong results in its European business in 2018, booking $125 million of revenue. In local currency terms, it was the company's strongest year in Europe. However, the major revenue shortfall in the first quarter of 2019 was from Europe, with multiple measures of European financial advisory activity being down over 30% from the first quarter of 2018. We currently forecast higher revenue in the remaining quarters of 2019 but expect that Greenhill's total 2019 revenue will be below 2018's level.
Greenhill recently added more flexibility to its capital structure, but repurchases could have been done more opportunistically, in our opinion. The company recently refinanced its debt. The loan size was increased to $375 million from the $319 million that was on its books at the end of the first quarter, the interest rate on the debt was reduced, and the company can repurchase more shares. A lower interest rate and pushing out the maturity to 2024 from 2022 is great. However, since the company's recapitalization, the average repurchase price of its shares has been around $22.50 compared with our current fair value estimate of $23. The $22.50 looks reasonable compared to the high $20s to low $30s the shares have occasionally traded at, but we don't view the aggregate repurchases as having been that accretive to shareholder value.
Greenhill & Co is an investment bank that provides financial advice on domestic and cross-border mergers and acquisitions, divestitures, restructurings, financings, capital raising and other transactions to corporations, partnerships, institutions and governments. The company serves as an advisor to its clients throughout the world on a collaborative integrated basis from its offices located in the U.S., Australia, Brazil, Canada, Germany, Hong Kong, Japan, Spain, Sweden, and the U.K. The company provides corporate advisory services related to mergers and acquisitions and financings and restructurings and capital advisory services related to sales or capital raises pertaining to alternative assets.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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