Greenhill & Co Inc (GHL) 2014 Q1 法說會逐字稿

Good afternoon. Welcome to the Greenhill & Company first quarter 2014 earnings conference call. All participants will be in listen-only mode. After today's presentation this will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Chris Grubb, Chief Financial Officer. Please go ahead.

Thank you. Good afternoon. And thank you all for joining us today for Greenhill's first quarter 2014 financial results conference call. I am Chris Grubb, Greenhill's Chief Financial Officer, and joining me on the call today is Scott Bok, our Chief Executive Officer.

Today's call may include forward-looking statements. These statements are based on our current expectations regarding future events that by their nature are outside the firm's control, and are subject to known and unknown risks, uncertainties, and assumptions. The firm's actual results and financial conditions may differ possibly materially from what is indicated in those forward-looking statements. For a discussion at some of the risks and factors that could affect the firm's future results, please see our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K,Quarterly reports on Form 10-Q and current reports on Form 8-K.

Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date on which they are made.

I would now like to turn the call over to Scott Bok.

Thank you, Chris. I will start with a brief overview of the quarter, then comment on the broader market environment, and finally speak to how we see the opportunity for us as we look forward to the remainder of the year and beyond. The first quarter was a quiet one for us in terms of significant transaction completions, and that resulted in a relatively weak number for advisory revenue.

This advisory revenue outcome should not be a big surprise as it was foreshadowed by the fact that we have relatively few large transaction announcements late last year, and is not far off expectations. Our total revenue outcome was further negatively impacted by an unexpected write-down on our last significant principal investment, and while our expenses in absolute terms were well under control, our cost ratios were significantly above historical levels, due to the low first quarter revenue figure, and we ended the quarter with net income of only a penny. Notwithstanding the weak quarter, there are a lot of positive things to say regarding the market environment, our current book of business, and the position we are in for the rest of the year and beyond.

But first let me go back to the quarterly advisory revenue figures as that is what drives our cost ratios and bottom line every quarter. First shareholders who have been with us for a while know that one shouldn't read anything too much into any single quarter. Since the downturn of M&A began in early 2008, we have had several quarters like the one that we are reporting today, yet in each case our full year outcome was quite satisfactory. We often speak of our four ongoing objectives of growing our market share of the advisory people, having the highest profit margin among our closest peers, maintaining a strong dividend policy, and maintaining a flat or even declining share count.

Despite intermittent low quarterly advisory revenue features, on an annual basis, we've increased our share of the people for each of the past five years, continued our track record of having the highest profit margin among our closest peers every year, maintained a strong dividend, and maintained a flat share count, just as we have since our IPO ten years ago. Second, a quiet first quarter for transaction completions says nothing about the quality of our business, as it was actually quite a busy quarter for us. We advised on two of the ten largest transactions announced globally, had our highest first quarter announced transaction volumes since the 2007 peak, and for those who focus on leak tables, it is noteworthy that we had our second-highest Q1 ranking for announced transaction volume since 2007.

Now let me turn to the market environment. Similar to our own outcome for the quarter, the market statistics relative to last year reflect a weak quarter for transaction completions, but a reasonably strong one for transaction announcements, which will be primarily reflected in industry revenue for future quarters. The number of transaction completions was down 11%, and completed volume was essentially flat. By comparison, the number of transaction announcements was down slightly, but announced transaction volume was up a strong 51% compared to last year, driven by an increase in large transaction announcements. While it is true that there's been more than one false dawn since the M&A downturn began six years ago, our sense is that in terms of deal announcements, as well as behind the scenes activity in the year-to-date, there's finally been a meaningful improvement in global transaction activity.

By region, Europe certainly earns the title of most improved, and that is particularly important to us, given our longstanding and strong position in that market. Last year we had a strong finish and a much improved full-year result in Europe, and in the year-to-date several of our significant announced transactions have been in that market. Meanwhile the US market had been the first to show some improvement, and that improvement seems to be continuing. Australia has been a bit quieter both for us and the market generally, but we continue to like our competitive position in that important market. And we have only been in Brazil for several months, but we have a very strong team and they see a lot of transaction opportunities, in part because that has become a somewhat more challenging economic environment which could be a catalyst for deals.

By industry sector, the healthcare sector continues to be a particularly active one, both for us and for the market generally. But we are also seeing good activity in consumer retail, as well as most other sectors. By type of advice, we continue to generate the majority of our advisory revenue from M&A transactions. Within M&A completion fees as always were the biggest driver, but it's noteworthy that revenue from announcement fees was up compared to a year ago. Activity in our financing and restructuring advisory business continues to be constrained by the very favorable credit environment. Our capital advisory business however is off to a stronger start this year. We are encouraged by the engagement of investors with the funds we currently have in the market, and by the improved pace with which investor commitments are being made, and we're hopeful for another significant full-year revenue increase in that business.

Let me close with a few thoughts on our relative performance and on our outlook for the year. I think that it goes without saying that one quarter is too short a period from which the draw meaningful comparisons. In each the last several years we have experienced one quarter that is meaningfully below our run rate for the full year, yet each time achieved solid full year results. Looking at our pipeline of pending activity, we are pleased with the number, size and diversity of the types of assignments we are currently working on. We are encouraged by the level of activity in the market generally, and we're hopeful that M&A activity has finally turned the corner after an unusually long downturn. We believe we are well-positioned to benefit that both over the course of the rest of the year and beyond.

Now I'll turn it over to Chris.

Thank you Scott. I'll start with the comments on the write-down relating to our last principal investment, and then go into a bit more detail on compensation costs, non-compensation costs, and dividend and share repurchases.

Let me start on our remaining principal investments. As you know, we exited the merchant banking business and the active management of private equity funds in 2009 to focus entirely on the client advisory business. Thereafter we have essentially taken our valuation marks based on the information provided to us by the relevant management of each fund. As of the end of 2013, we have substantially finished the liquidation of our investment portfolio. We ended the year with only $11 million in principal investments, and no commitments to make future investments. The breakdown of this $11 million was one investment in a previously sponsored fund valued at $6.5 million, and a number of smaller investments with none valued at over $0.5 million. Our investment loss of $4.9 million in the first quarter resulted from the substantial write-down of this last remaining meaningful investment, which was slightly offset by some interest income and other small gains.

While this write-down was a surprise to us, and obviously disappointing, our disappointment is mitigated by four factors. The loss has no impact on cash. It is pretaxed, so should essentially be reduced by a tax benefit from the loss in the future. It won't be repeated, as we now have only $6 million in the remaining portfolio, made up of many very small investments. And lastly, this loss underscores the benefit of our decision four-plus years ago to exit merchant banking, in order to focus entirely on our Client Advisory business moving forward. Even as we finalize our exit from this business, it's worth remembering that notwithstanding some unwelcome losses as we liquidate the last remains of our portfolio. The principal investing has still generated net revenue for the firm of over $260 million since our IPO.

Turning to compensation costs. The absolute dollar amount of our compensation costs benefited in the first quarter from a lower accrual of cash bonuses compared to the prior year, as well as lower amortization costs from the restricted stock units due to higher forfeitures. The increased ratio of compensation of revenue was the function of the lower revenue result in the first quarter compared to a year ago. As we've commented previously, we have consistently achieved our goal of a GAAP compensation ratio that's the lowest among our close peers, and we expect to get back to that position as our revenue rebounds to higher levels.

Moving to our non-compensation costs. Our first quarter non-comp costs were $14.4 million comparable to our run rate of non-comp costs for the third and fourth quarter of 2013, and a decrease from the first quarter of last year. The decrease of $1.3 million compared to the first quarter of 2013 resulted primarily from the lower amortization of intangibles relating to our Australian acquisition, which are now fully amortized, as well as slightly lower travel and general operating costs. We continue to expect fairly stable non-compensation costs for the foreseeable future.

Finally, looking at our dividends and share repurchases, our dividend this quarter was again $0.45 per share, consistent with the quarterly distribution made over the last several years. During the first quarter, we repurchased approximately 323,000 share equivalents, at an average cost of $52.06 per share, for a total cost of $16.8 million. As a result of our ongoing share repurchase activities, we ended the quarter with a lower share count than a year ago and we continue to maintain a share count that is effectively flat with our 2004 IPO despite significant annual stock-based compensation and the acquisition in Australia, which compares very favorably to both our large and small competitors.

We ended the quarter with cash of $36.5 million, and debt of $36.3 million. Our Board of Directors has authorized the repurchase of up to $75 million of our common stock through the end of 2014, of which approximately $58 million remains available. The level and timing of stock repurchase activity going forward will primarily be driven by the timing of cash generated in our advisory business over the course of the year.

Now let me turn it back to Scott.

Before we take questions, left me refocus on the big picture. It was a weak revenue quarter which combined with an unexpected investment loss resulted in only a nominal amount of net income for quarter, but we actually had quite a busy quarter in transaction announcements. We've seen a material increase in client activity, and that seems to mirror increased market activity as evidenced by increased deal announcements. Meanwhile we've maintained our trademark discipline around costs, and thus all it takes it is a rebound in revenue to return our cost ratios and profit margin toward the attractive levels that we've achieved throughout our history. Finally, as we consistently have done in the past, during the quarter we returned a lot of cash to shareholders in the form of dividends and share repurchases, thus maintaining our unique position of avoiding any shareholder dilution for what is now a full decade.

Let me end with a final comment to put the volatility of our quarter advisory revenue in perspective. It's interesting to note that prior to 2007, $50 million in advisory revenue was a high end result for us. We achieved it about a third of the time with the other two-thirds of quarters lower, often significantly. However, since the expansion we undertook in the first years of the financial crisis and despite a significantly less active global M&A market throughout the time since then, around $50 million of advisory revenue has been a very low end result for us, but now with most quarters better than that often by very significant margins, leading to repeatedly satisfactory annual results, in terms of growth, profitability, and return of capital to shareholders. With a long downturn in M&A perhaps now finally coming to an end, we're hopeful to again move to a higher range of revenue outcomes, both in the high and low ends of the range in the years to come.

With that we are happy to take questions.

(Operator Instructions). Our first question comes from Alex Blostein at Goldman Sachs.

Thanks. Good afternoon everybody. Scott, I just want to pick up on the point where you left off the call. Thinking about the M&A broadly, maybe you can help us understand what it means for you guys for this year, and understanding that things are fairly lumpy, and I don't expect you to put a specific number on revenues of course, but just thinking about the type of discussions guys are in with various clients, and the type of assignments that are still considered outside of the public domain, I guess how should we think about the advisory revenue backdrop this year, relative to the more recent run rate we've seen over the last kind of 12 or 13 or so?

I would just say that I think what we're seeing internally is probably mirrored by what you're seeing publicly, in terms of there seem to be more deals. They seem to be larger ones. There are certainly more in the very large category that we and the market in general have seen, and that we're working on. And things seem to be moving at a faster pace. That's probably one of the biggest changes I would say is just a perception that clients for whatever reason are now at a point where when they want to do something, they want to do it in a much shorter time than they probably would have wanted to call it one, two, three years ago.

Okay. But no kind of more specifically in terms of revenue for you guys, so outside of the broader backdrop which obviously we can kind of see and track. What I'm trying to get to is first quarter is obviously very light, revenues on the completion front. And the backlog is building, but it still feels maybe somewhat light, so I'm just kind of curious to see if there's something else going on behind the scenes that could get you to a much higher level of revenues for the year where you've been over the last two years?

I mean I think I have said what I've said, which is reasonably positive in terms of what we're working on that's not public yet. Obviously we've never forecasted a revenue and we're certainly not going to start. The business is always going to be one that impacted quarter-to-quarter by the number of large transactions and when exactly they close. So I think I'll leave it with what I said

Got you. Thanks. And Chris, just one quick one for you. On comp, I think in the past we thought about kind of like a fixed amount of compensation in the low -30s range for you guys per quarter. Understanding it could go below that on previously accrued bonuses, but given the fact it was the first quarter, I guess it was a little surprised that comp was $29 million, versus kind of like your fixed run rate is in the 30s. Can you kind of run through that dynamic for the quarter?

I wouldn't expect a different run rate than effectively what you've been assuming. There were some forfeitures that were related to RSUs that brought down the first quarter as to dollar compensation, but I wouldn't adjust your view of what the run rate fixed comp is.

Got it. So this basically implies that you guys didn't really accrue any cash bonuses in the first quarter?

It was lower than last year.

Got it. Thanks.

The next question comes from Devin Ryan at JMP Securities.

Good afternoon, guys. I guess just following up, last quarter you guys said specifically that you had a significant number of large transactions in house, and many of those had just come to life in the opening weeks of the year. I have know that we've seen a couple of nice announcements for you guys in the public domain over the past couple of months here. But again, it seems like that significant number really hasn't showed through yet. I'm just curious, has there been any change there, or should we just expect that comment is still true today, and expect that there could be some more big announcements to come here in the near term?

I would say our view of kind of what our backlog, and I know that's a word that has lots of different meanings but just the book of assignments we're working on, I think we feel much better about it now than we did in late January when we announced our earnings. Again, there are more transactions, there are more large ones, and they seem to be moving at a faster pace.

Okay. I mean just what I'm trying to get at, to the extent that industry volumes are up this year, completed volumes are up this year year-over-year, is there any reason that you feel your firm wouldn't, I guess maintain market share or gain market share in that environment? I know it's hard to judge over even a couple quarter period, but I'm just trying to think through after a slow start what a full-year picture could look like relative to the industry backdrop?

Clearly for the last several years and for almost every year of our history, we've grown at a faster rate than the market, but certainly again I'm not sort of giving specific forecasts on that sort of thing. I just wouldn't read too much into a first quarter. We've had quarters in the past as I look back even in thinking about this, where the first quarter we were kind of outside gains, versus the market shrinking. It didn't mean that much for the whole year, and likewise for this year I don't think it will either.

Got it. Okay. Just looking for a little color there, appreciate it. And then just lastly with a little bit softer start to the year but maybe things starting to pick up, how does that impact, or does it impact at all your full-year expectations for recruiting, and kind of the balance between driving bottom line, and obviously growing the firm as well? I think you've mentioned in the past conference calls that you thought 2014 could be a good year for hiring, so just some update there would be helpful as well?

I would say I don't think our revenue outlook has much of a impact on our hiring sort of stance. I think we're always in the market talking to people. We are looking for very high quality people who very importantly also fit well in our culture of kind of team work and collegiality, and that sort of thing, and obviously integrity, and we'll take all of the ones we can get that meet those criteria regardless, and it's not like we're going to rush out and hire a lot more because we think the market is picking up. Again our hiring has lot more to do with the quality of the people we come across and how well we think they'll fit in and fill specific needs that we have, than it does any near-term views. Hopefully these are 10 or 15-year hires that we're doing, so we're certainly not going to drive it based on what the next two quarters may look like.

Got it. And so the outlook for recruiting still feels pretty good right now for the year?

I think it's hard to say. But then again it always is. We're always talking to people about a variety of things. It can be geography, it could be industries, types of advice. We always have a lot of balls in the air, and we'll see as the discussions continue, how many we bring on board. Again it's really driven very much for us by who is available, frankly on what terms, and what kind of holes they can fill in our organization, whether by sector type of advice or geography, and over time, look I think the exodus of people from the big banks I think is going to continue for all kind of reasons, compensation controls, the difficulty almost all of them are having in getting to even 10% ROE, the fact that regulatory pressure does not seem to be letting up. So I don't doubt we're going to continue to grow, as well as grow our own talent internally

Good. Thanks for the update.

Okay, thanks.

The next question comes from Brennan Hawken at UBS.

Hi, guys

Hi, Brennan.

It seems like you guys sound a lot more confident on the environment than I've heard, and I might just be reading too much into that, so if so, please correct me. I guess what caused the change there? And what gives you that confidence? Because when we look at the results, we've had a couple rough quarters here in the last, in the trailing three quarters, and so I'm sort of struggling I guess to bridge what we're seeing in the financial results with what you guys have in your outlook?

Well, look, I think you've just got to look at the data. I think last year ended up to be a reasonably good year for us. I think we grew our Advisory revenue strength by a couple percent, whereas the market and our big bank competitors were down by more than that. I think last year turned out fine, and this year is just one quarter. We came in a few million dollars below what analysts were expecting on our advisory revenue. Not what I would call a dramatic change in outcome. I mean you could read our word sort of however you choose, but I mean every single day now the newspapers are filled with stories of big M&A deals. That's what makes me confident, and we're working on quite a lot of them of them as well. If you're a CEO in a lot of different industries, you're waking up every morning to read about somebody in your industry doing a large deal, and I think that gets people thinking about what's happening in my industry, what's still available in terms of a strategic acquisition, and what we might do to capitalize on that? So I really do think that the tone of the market again not just number of discussions, but the pace of them, I really do think has improved.

Okay. And I think it sounded like you guys made reference to buy-back having some dependence on revenues. So is there a revenue level that we should think about where there would be an inflection on the buy-backs, and the buy-backs would get cut back a bit more dramatically to a point where maybe share count, we would see some share creep here in 2014?

No, I think we've had that statement probably in every quarterly report we have put out. We're not looking to lever up and add debt to the firm, so our buy-back timing and amounts always depend on the cash flow that obviously comes from with us, and really entirely from the advisory business. So it's always dependent on that. I mean we bought back a fair amount of stock in Q1. I certainly wouldn't expect any significant share dilution this year or going forward. I mean I don't think we're going to have a hard time just as we did for the last ten years to keep the share count flat, even down a little bit.

Okay. And then on the forfeitures, Chris I think you mentioned that you had that. What was that driven by? Were there departures or were there lay-offs? What cause the forfeitures on the RSUs?

There were no lay-offs. We've really never had that. But we've made a change in management that was well disclosed and publicized some time ago, putting new leadership in place in Australia, and one person left sort of in connection with that, and then we had a couple of individuals there, again it's all written about in the press, who had been our leaders of that business I guess as of what, 16 months ago, or something like that. We put other people in charge, and they have both now retired. So our original transaction over there as I think people who have followed us know was about four years ago, and a lot of it was linked to five-year outcomes, including the second part of an earn out that we had in place at the time of the deal, and so on. So that had some impact.

Okay, got it. And then you guys have made a couple new hires here in 2013. Maybe could you help us understand how the productivity of those new hires is coming along, and whether they're fully ramped, or still have some ways to go?

People we hired in 2013?

Yes, in the past year.

Yes, because we had a couple who were announced in 2013 who started early in 2014 as well.

Obviously they're not going to have ramped much.

That's why I wanted to clarify. Look, I think people are off to a great start. How quickly people can become productive frankly has more to do with the environment, than it does to do with anything else. And I think the last couple of years we've made some really good hires, and I think they're going to have a significant impact. But each one's case-by-case. If you have a client that happens to be wanting to do something significant shortly after you move, that's going to be a good thing. If you have a client base that's not active right away, which would certainly be the case the last few years, you're going to be slower to have an impact. But we feel great about everybody who works here right now, including certainly the folks who have been brought on board over the last 18 months or so.

Thanks for the color.

Thank you.

Our next question comes from Ashley Serrao at Credit Suisse.

Good afternoon guys. I just wanted to ask Brennan's question a little differently. As you talk to clients, what really has changed that has made them more inclined to pursue M&A versus a bias to its buy-backs and dividends that you noted in prior quarters? What I'm basically trying to understand is RCU is finding really more difficult now to justify returning capital to shareholders, which is doing a deal?

I think it's kind of the Holy Grail that everybody in this industry including all of the analysts like you guys, try to figure out exactly what exactly makes people do M&A in a particular moment or not. But look, I do think the trend, I think I was one of the people who really highlighted the focus on buy-backs and dividends, opposed to M&A several months ago. I do think there's been a bit of inflection point in that regard. I just noticed in recent weeks, I just wrote down the names of a few headlines that I thought were kind of interesting. Signs of a possible inflection point. The FP had a story entitled Pressure on Buy-backs Starting to Build. There was another piece I saw that BofA Merrill Lynch survey of fund managers showed near record support for capital spending and plunging support for returning cash to shareholders. You may also have seen Blackrock's Larry Spinks wrote a letter I believe it was reported to the entire S&P 500 CEOs, and the title was Blackrock's Spinks sounds the alert. The alert was on, you are spending too much money giving it back to shareholders rather than building growth in your business for the future. And I think there was a story about IBM the other day, and the question about how far can you really drive earnings by just repurchasing a lot of stock, as opposed to doing things whether it's capital investment, or whether it's acquisitions to drive growth? So I don't know what made, it's like a wind shift. I don't know what made the change take place, but I do think it's perceptible, and I think that's the only explanation I can at this point of why suddenly you see a pretty dramatic increase in deal announcements in Q1, and certainly a lot of chatter about other ones that are being talked about out there.

Got it. And then with some of the recent headline deals, you've really seen some smaller boutiques emerge as risers. We can all see the longer term shift away from the bulge brackets. What do you see of this smaller breed of rival that seems to be gaining more traction?

I don't make much of it, to be honest. It's always been the case that somebody who spent a long time in a senior position at a major firm can have some carryover assignments from the time they spent there. Maybe they spent a long time with a particular client or even on a particular deal that's been kicked around for years. And it's no surprise that they might among a group of co-advisors get some roll on a transaction that they've been around for a very long time.

But I look at most of the things we work on and to be honest, we wouldn't have a chance of winning if we didn't have people in all of the right places, whether it's a Tokyo to London acquisition where we've got people in both places, or Australia to US. If we had other people who had deep 20-plus year industry sector expertise to deal with, whether the details of an insurance situation or a pharmaceutical situation, or whatever it may be. So we constantly harp on the need for more and better team work in this firm, and the reason we do that is we just don't think one person can be that effective in this business. I take my hat off to the people who have had some successes in one or two cases. I think it's terrific for them, but I don't think that's going to have a material impact on our business or anybody else's.

Got it. And then finally, I sense a little bit of a debate between some of you were peers as to an outlook, as far as the restructuring business goes. I was wondering what your view is and what you're seeing currently?

I would say we're not that optimistic about restructuring. Nothing like we are say about M&A. We still have the situation where credit markets are open. High yield coupons are remarkably low. Very easy to refinance things, and sort of postpone a need for a more significant restructuring. So I mean until that changes, sure there are going to be one-offs, and we've had some great one-offs. We've done some particularly restructurings in Europe that have ended in recent months, and those have all been terrific, but a broad based increase in the number of Chapter 11 filings, is not something at least we foresee at this moment. Again, at some point interest rates will go up. Credit markets will tighten and there will be a lot of restructuring but we at least haven't seen that yet, and certainly you don't see it in the economic statistics.

Great. Thanks for taking my questions

Sure.

The next question comes from Doug Sipkin at Susquehanna

Thanks. Good afternoon guys, how are you?

Good. How are you, Doug?

not too bad. Just wanted to drill down two questions. No. 1, so it does look like you guys are making a lot of noise with hires in Brazil, and I'm just curious, how big of an opportunity are you seeing there, and based on geography, I mean how important can that become to you in a certain duration?

I'm sure those guys are listening down there so I don't want to say anything

Next month, right?

I want huge revenue near term. Now look, it's obviously an impossible thing to forecast about a new business. I can tell you this, the people we have are truly top tier. I mean I know people say that about anybody they hire, but it's a very high quality group if you look at their pedigree and where they've worked, and already we've seen their access to major companies, the owners of major companies. It's very good, so we've already had people from elsewhere around the world down to visit them with their clients and kind of share the global industry sector expertise in ways that they can use it. So I'm very hopeful, and I can tell you the team down there is more than very helpful about building a significant business. But is it going to be the next US or Europe real soon? I mean that's going to take time clearly to have anything nearly that dramatic. But could it be material to the firm? Yes, I think it could relatively soon, and let's say relatively soon is about as specific as I can get.

That is okay. And then my next question, more of a strategic one. You guys have historically made acquisitions outright, whereas some of your competitors have kind of done partnerships or strategic investments, and have you guys ever considered moving more towards that route? It feels like that's a little safer way to get talent, and maybe not absorb all of the costs. It's kind of like if it works, we win, they win. If it doesn't work, it doesn't kill us, that type of deal. Have you ever changed your thought process on those type of deals, or if still you guys want to do something, you're going to take 100% and that's it?

Granted I could be wrong about this, but no, we have not changed our perspective. I have worked on lots of joint ventures over the years, even as a banker advising companies, and I just don't see that many of them that work out. They're complicated. They almost never are stable in the sense that somebody either ends up buying their freedom back some years later, or you end up buying, they acquirer ends up buying a larger stake. It's complicated to explain to clients.

What we love about our status which is everything, everywhere is wholly-owned by the firm is one pool of revenue and profit and compensation, and it's one team. It's just very simple to explain to clients. We've had a very nice business in Australia obviously since we did our acquisition, but we had kind of a quiet but very friendly alliance with them for several years before that. That bore no fruit at all, and the reason you had to start a client meeting, let me talk about Greenhill and then let me tell you a group that we have an alliance with in Australia, and now let me tell you how we like to work together, and fourth, you're trying to get to the client's problem. By then they don't care, they don't care about your structure.

To simply go to a client and say, we have a truly global team, whether in Japan, whether in Australia, whether in Brazil, Canada, the US, Europe, we can provide anything you need whether industry sector expertise or transaction expertise, and you don't have to worry about the internal machinations of how we structure ourselves, or what our fee sharing or anything is. So we like the simplicity of it, but you can tell about our whole business model we like simplicity.

Okay. And I guess just to sort of adjust the questioning a little bit. I guess had a would go for maybe strategic investments where maybe you have a very strong international partner, who really doesn't say much but maybe introduces you to people, and sort of, and I know you guys are not capital intense at all. You're like the exact opposite, but just sort of a way to maybe bridge into a territory where you don't have the relationships, like just like a strategic investment, not as much a joint venture-type deal. Is it the same line of thinking I'm assuming?

We don't need anybody's capital so we have certainly have had offers over the years from various places, China, Korea, places in Europe, and other parts of the world where they've been interested, and we get approached all of the time, can we be friends, have an alliance, have a cross ownership. We just don't think it works as well, and I think you can see it in Australia. You can see it in Japan for us. We've had really quite a lot of success for a firm, we don't have a huge team in Japan, but the team that's there is us. They have the same business card I have, and the same kind of title I do, and the same kind of economic opportunity I do, and we think that works very well. It doesn't constrain us at all. If we see opportunity there, we can continue to build on the team. If we see less opportunity, we can shrink the teams. So we do have a strong bias in favor of, it's a one-firm firm, as one of my former boss's used to say at another firm.

Great, that's very helpful and thanks for sharing your thoughts on that, Scott.

Sure. Thank you, Doug.

Our last question comes from Michael Wong at Morningstar Equity Research.

Good afternoon. looking at the uptick in your travel expenses compared to the previous two quarters, and even further back, is that any representation of increased deal dialogue, or conversely the old dialog that didn't come to fruition so that it wasn't reimbursed?

I wouldn't read anything specific into it. I mean, we've said that we're seeing increased activity so I'm sure among other things that leads to a bit more travel. Travel is probably slightly more expensive than it was as well. I wouldn't read too much into it. You do have to remember though, just following up on the question from a minute ago, we are a global firm. When we add a new business like Brazil, clearly we're going to be sending people back and forth to try to win business there, just like we do with our other businesses. But I wouldn't read anything dramatic into a quarter's numbers on costs.

Okay. And not looking at the quarter but let's say over the last several years with the general improvement in the US economy, I would have expected more growth in your general North America segment revenue. Is there anything technical going on there like M&A revenue grew significantly, but was offset by a cyclical decline in restructuring revenue, which you don't break out?

I'm sorry, could you just repeat that question. I didn't quite hear what you said?

Okay. So when I look at your North America segment revenue, it actually looks relatively flat over let's say the last four years. So I was just wondering, did you actually have significant uptick in M&A revenue which would have been expected but was offset by restructuring revenue declines, which you don't separately break out so I wouldn't be able to just automatically assume that?

I mean there are a lot of things going on there, certainly with M&A and restructuring and even the way we may be working by, where the client sits so it can be a US deal for an European company, and what was our client, so we will kind of do European revenue. I wouldn't read too much into any particular region's numbers over a period of time. And clearly what happened in the M&A business for everybody is that it fell dramatically from 2007 to 2008. It fell further from 2008 to 2009. It has been roughly sideways since then. Not a big further decline certainly, but not a material increase either for really the last five years now, and I think our numbers sort of reflect that. We've tried to do the best we can to continue to build the firm in terms of capabilities, and to manage our costs throughout that period of going sideways, and what we're perhaps getting excited about as probably a lot of people are, if you read the deal announcements is that it feels like that long downturn may finally be coming to an end.

Okay. Thank you.

Our last question comes from John Dunn of Sidoti & Company.

Good afternoon, guys. Just quickly on the fund placement, touch on that. Can you give us an update on the outlook there and the potential for that to potentially accelerate in 2014?

I think we feel pretty good about that business. It had a pickup last year as I alluded to. We're hopeful it will have a pickup this year. Certainly it did from the beginning of the year. Both on the real estate and the private equity side, we are seeing deals that are happening a little faster, and we're seeing more deals that end up being over subscribed, where you end up arguing with the general partner raising the fund about how high they want to push the cap on fund size, and so on. So that's obviously very encouraging. And probably the most meaningful change at the margin has been the interest in European opportunities. For a while, it was very, very difficult to get institutional investors anywhere in the world to invest in something in Europe, clearly the first group to break that trend were the distress debt-type funds, but now you see a lot of interest in European real estate, and some European private equity situations that should help. I mean again we're a global firm, so if when Europe is really quiet whether on the M&A side or even on the fund placement side, that has an impact, and that really does feel like it's changed for the better.

Got it. Thank you very much.

Okay. I think that's our last question. So thank you all for joining us, and we'll speak to you again in about three months.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.