Greenhill & Co Inc (GHL) 2016 Q3 法說會逐字稿

Good day, everyone, and welcome to the Greenhill third-quarter earnings call and webcast.

(Operator Instructions)

Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. David Trone, Director of Investor Relations. Sir, please go ahead.

Thank you, Jamie. Good afternoon, and thank you all for joining us today for Greenhill's third-quarter 2016 financial results conference call. I am David Trone, Greenhill's Director of Investor Relations 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 of the firm's control and are subject to known and unknown risks, uncertainties and assumptions. The firm's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements.

For a discussion of 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 will now turn the call over to Scott Bok.

Thank you, David. In the third quarter, we achieved revenue of $76.6 million, up 51% from last year's level. For the year to date, our revenue was $234 million, up 26% versus last year. Our compensation ratio was 53% for the quarter and 55% for the year to date. In both cases, lower than last year's levels, even as the absolute dollars of compensation available for our team rose significantly.

Our non-compensation costs were down in absolute terms versus last year for both the quarter and the year to date. Together, higher revenue combined with lower costs resulted in a pretax profit margin of 25% for the quarter and 24% for the year to date. As is typical with us and in contrast to our peer group, all those figures reflect all-GAAP compensation and other costs with no pro forma exclusions.

Our effective tax rate 32% for the quarter and 33% for the year to date, in both cases, well below last year's levels, reflecting the diverse regional sources of our earnings. Our earnings per share for the quarter was far higher than last year's low level and for the year to date, our earnings per share has more than doubled. And our strong cash flow allowed us to repurchase some stock in addition to making a payment on our acquisition-related term loan and paying our attractive dividend.

I believe everything I've just said in that summary is consistent with what we have been signaling all year: much improved revenue, lower cost ratios and taxes, higher profit margin and some share repurchases on top of comfortably paying our substantial dividend.

Now we'll go into a bit more detail on both our results and our outlook with respect to revenue, costs, and capital management. In terms of market environment, industry-wide transaction activity has continued to be relatively slow. If you annualize today's year-to-date data for announced transactions, the global number of deals $500 million or greater in size is on pace to be down around 20% relative to last year, while aggregate deal volume is on track to be down 24% despite a couple very large deal announcements in recent days.

The US market remains the healthiest with annualized volume and the number of $500 million deals both on track to be down materially from the level of the past two years but still above levels in the several years before that. Europe continues to be much weaker, with the number of $500 million deals on track to be down 22% versus last year to the lowest level since deal activity bottomed in 2009.

Against that challenging market back drop, we're very pleased with what we have achieved. We have benefited from strong revenue performance in US and European M&A and some improvement in restructuring, which together, have more than offset a very difficult period in other regions around the world. Industrials and healthcare continue to be the strongest sectors for us, though several other sectors have also achieved solid results.

In capital advisory, our year-to-date revenue continues to show improvement from last year, but the third quarter was quite soft as fundraising activity appeared to slow down as a result of market volatility post the Brexit vote.

Despite the difficult environment, it is now clear that this year will be a very strong one for us. Based on earnings announcements to date, aggregate advisory revenue for the large banks and independent advisory firms with which we compete is on track to be lower than last year, while our percentage increase will likely be at or near the highest among the many firms in that group. It is the diversity of our revenue sources that are key to that success.

Based on expectations for a number of important M&A and restructuring completions as well as a strong rebound in capital advisory, our fourth quarter is likely to be our strongest of the year. This further demonstrates the breadth and diversity of our business and suggest that we are not overly dependent on a few large transaction assignments. While sometimes a single large transaction is talked about as an outsized part of our pipeline, from a revenue perspective, we have not seen, for a number of years, a single transaction that contributed even 10% of a year's revenue.

Looking further ahead, our outlook for US M&A activity remains fairly positive and that should mean our strong performance carries over into next year. We also believe there is further upside in restructuring where assignments tend to have a long gestation period. And we continue to like our position in the capital advisory business both in primary fundraising and secondary market transactions.

The main source of further potential revenue upside for us relates to deal activity outside the US. We are a truly global firm as evidenced by the fact that in the year to date, nearly half our revenue came from cross border transactions. We are clearly very well positioned to benefit when deal activity in Europe and elsewhere picks up, as we believe it inevitably will.

On the cost side, there is not much new to say, as for the full year, we continue to see a slightly lower compensation ratio, lower non-compensation cost in absolute dollar terms and a reduced tax rate relative to last year. In terms of pretax profit margin, last year was the only time in the past decade that we were topped by another independent advisory firm and it looks like we're on track this year to return to our historic leadership positions.

Turning to capital management, on top of maintaining our substantial quarterly dividend at $0.45 a share, we repurchased 374,000 shares and share equivalents in the quarter and 946,000 for the year to date. Our track record of having a share count almost unchanged from the day after we went public 12-plus years ago continues to sharply differentiate us from other independent advisors as well as almost all of the larger banks.

We ended the quarter with a revolver balance slightly above our global cash position, but with some large collections shortly after quarter end, our cash today is, again, well in excess of the balance on the revolver. Based on the outlook for the fourth quarter described earlier, we expect our strong balance sheet position to remain in place through year-end.

I will close by noting that we added one more attractive managing director recruit since our last quarterly call for Latin America. That gets us to five for the year to date and we expect to announce at least one more in coming weeks. That would get us to a place consistent with my comment early in the year that we were targeting to hire several new MDs in 2016.

Next year, we are targeting an even larger number, as we that think issues at many of our competitors will make for a good recruiting environment. But I also want to highlight the potential for growth through internal promotions. MDs who rose up through our firm from junior levels have been key to many of our greatest successes this year and we believe they and those who follow them up the ranks will be major contributors to our long-term success. That concludes my remarks and we'll now open it up for questions.

(Operator Instructions)

Devin Ryan, JMP Securities.

Great. Scott, how are you?

Very well, Devin. How about you?

Doing well.

Maybe the first one, thinking about the outlook, it sounds like momentum into 2017 feels better. I'm just trying to get a sense, is that relative to the momentum into 2016, the beginning of 2016, which was obviously your softest quarter? So maybe it's a low bar and that's not really saying much? Or would you actually characterize the backdrop for Greenhill as actually improving, whereas you're maybe at a better point at this part of 2016 relative maybe you were at the same time last year?

I think it's -- what we're thinking is that the beginning of next year sort of looks broadly consistent with the last three quarters of this year as opposed to the first quarter which, as you say, was our softest of the year. It's been reasonably strong results since then and things at least feel like, based on the assignment pipeline like that is likely to continue into next year.

Okay. Got it. Helpful.

And then, with respect to the significant closings you highlighted in capital advisory that slipped in the quarter, can you just speak a little bit more to that? It sounded like the back drop changed a little bit for that business. Are those deals essentially pent up deals and so they're going to close in 4Q? Or something needs to shift in the backdrop a little bit to hopefully kind of reignite that engine and get things going there again?

No, I don't think it needs to be reignited. I think a lot of things just kind of changed a little bit in terms of timing. We think the fourth quarter will probably be a particularly strong one for that business, whereas the Q3 was a particularly weak one.

What happens in that business, unlike M&A, which is a very long tail business that deals can go on for a long time and develop a certain momentum and need to get done for whatever reason, a leak, regulatory requirement, or whatever it may be. On the capital advisory side, if you have a market dislocation with a lot of volatility, often things can move really just one quarter to the next while people wait to determine what, for example, what price they would pay relative to the net asset value of an existing fund or whether they want to invest in a new fund that is being formed or something like that. So the dislocations tend to be relatively short.

Okay. Great. And then just last one here, just on the buy back, good to see a little buy backs in the quarter. A lot of uses of cash moving forward and obviously moving closer to the bonus payout, so just thinking about the outlook for buy backs and something, is that something we should continue to expect just based on the outlook? How should we think about that?

I didn't want to make a statement as to any particular quarter and what we're going to do just because there is no need to signal that and we decide obviously just as quarters develop. But I think certainly going forward and for the near- to medium-term, we absolutely expect that we'll, if the results continue to play out the way they have and the way we hope they will, then certainly we'll continue to buy back some stock.

Got it. Okay. Great, I'll hop back in the queue. Thanks, Scott.

Conor Fitzgerald, Goldman Sachs.

Good afternoon.

Hello, Conor.

Just a quick question on the cost leverage you guys are seeing through the first three quarters of the year. Assuming your 4Q revenue materializes as you expect, how much additional comp leverage do you think you have?

What we try to generally do with our compensation is really look at it on an annualized basis and set the ratio as the quarters go on that way. I know some of the big banks tend to have a big sort of adjustment in the fourth quarter to get where they want to be for year-end.

I think, for us, the better guidance, as we've said all year, is that we'll end up with a comp ratio a bit lower than last year. That is obviously where we already are and I think that is the best guidance for the fourth quarter as opposed to some significant move in either direction, frankly.

That's helpful. And then I think I heard you mentioned that restructuring was a tail wind for your results. Any way you could help us quantify how much of a benefit or year-over-year improvement you saw and then just given some of the healing we saw in the capital and credit markets, do you still think the restructuring cycle is as attractive from a revenue opportunity standpoint as you would have said say six months ago?

Yes. On the first question, I would say, frankly, unfortunately, it is difficult to quantify. Some of the bigger restructuring can be like the bigger M&A deals. They can come some large lumps and you don't know exactly which quarter they're going to fall in, but they are quite nice when they come. And certainly, as I look at 2016 as a whole, it looks like a meaningful improvement from what, granted, has been a very slow restructuring environment for the last several years.

As far as going forward, I'm actually reasonably optimistic about both restructuring and M&A. It is not one of those cycles where you think restructuring is going to boom and M&A is going to be very weak or vice versa. Between the two, I'm probably more optimistic about M&A because, at least in the US market across a lot of different industry verticals, it seems like there is quite a lot of, in the desire among companies, to continue to consolidate their industries, so I'm really quite optimistic about that, while restructuring continues to be largely, not completely, but largely, focussed in the energy area. So it is almost by definition going to be a bit less of an opportunity in relative terms than M&A.

Thank for answering my questions.

Sure.

Jim Mitchell, Buckingham Research.

Hello, good afternoon.

Hello.

Hello. Maybe we could just talk a little bit about non-US activity. As you pointed out, it has been sluggish. You're still more bullish on the US. What do you think has to change? Is Brexit just going to be an overhang for a year or two, or do you see something else that could help start to kind of ignite more activity overseas?

Look, it has been, obviously, in Europe in particular, a frustrating several years, really. It didn't really have the rebound from the slump in M&A activity in the early days of the financial crisis. Last year was a pretty good one for us in terms of European announcements, and therefore, this year is good one in terms of European completions and resulting revenue. But still, Europe, there's no question, it is lagging the US in terms of activity.

You heard the statistics I cited and I'm sure you have your own. I guess I'm still reasonably optimistic things will pick up. I mean, this year I would have thought might have built on last year's improvement in Europe, but I think the market in the first part of the year was more worried about Brexit than I would have guessed and, by the way, the market turned out to be right and Brexit did happen and there was clearly some anxiety and some volatility that followed that.

But it does feels like there is a kind of developing view in Europe that whatever Brexit turns out to be, it is going to take a very long time to get done. It is going to clearly involve compromises on all sides and I don't think companies are going to wait around for years to figure out what exactly it means.

I think they're going to continue, as their US and other global counterparts do, and figure out how to consolidate their industry. So, I think this year, perhaps, is a bit of an aberration, in that you're right in the thick of Brexit falling right in the middle of the year, at least the Brexit vote, and I'm reasonably hopeful that things will pick up off what has been a fairly low pace.

Okay. Fair. But should we take from that, that perhaps the tax rate could creep back up a little bit until -- I guess if completions in Europe are a big part of this year and maybe a little less of next year, should we not get too carried away in annualizing this tax rate?

I mean, I probably wouldn't -- would be reasonable to annualize it for this year. For next year, it is obviously early to say. Certainly, the beginning of the year pipeline looks a little more weighted to the US. So, over time, I guess maybe our tax rate has been maybe in the 36%, 37% rate. It is a little bit lower this year.

You know, if we -- if European activity picks up, we'll probably be closer to where we are now. If it falls off and we end up with a more predominantly US business, it may be a few points higher than this year.

Right. Okay, great. Thanks.

Sure.

Steven Chubak, Nomura.

Good evening, guys. This is actually Julian filling in Steven.

Okay. You're welcome anyway.

Hello. My first question actually pertains to Scott's recent remarks around upside to 4Q consensus. How has M&A activity been tracking so far in the quarter for you guys? And do you think revenues can match or even surpass your initial expectations from when you made those comments? I know it is still early days, but any color would be greatly appreciated.

Well, as I said in my remarks, I do think that it is likely that the fourth quarter will be our strongest revenue quarter of the year and that is certainly quite a dramatic difference from what at least expectations were some weeks ago when I made the remarks you're referring to. I know expectations have moved up a little bit since then, but I think you'll find still a fairly meaningful difference between what I said about the fourth quarter and what some of the analysts and your own colleagues are expecting.

And there is always some question about which deals will close, so you never can get too precise about this. But when I make a comment that is on the near-term like that, I mean, you're really focused very largely on deals that have clear completion dates in the relatively near-term as opposed to new M&A activity that's just becoming known. So I wouldn't -- clearly, I repeated it today and said it even maybe even in stronger terms, so clearly, the confidence, if anything, is probably increased around the fourth quarter.

Okay. Thank you.

Just a quick follow-up on restructuring. I know that you reiterated today how you expect structuring to pick up toward the end of 2016 and early 2017. Is that still going to be the case if spreads continue to tighten just how we saw in the previous quarter? And how should we think about the potential fee contribution from restructuring versus M&A? I know you that said that you're more optimistic on M&A, but just wanted to see if restructuring is an even more meaningful part of the revenue pool going into 2017.

I would say I think it is going to be fairly similar next year to this year in terms of overall contribution. And part of that is that there is a fair amount of confidence in the way the M&A pipeline is developing. Again, it is hard to give you a specific view as to the break down of revenue sources between those two and, as I said for years, what is tricky about it is that a lot of restructuring assignments end up in M&A transactions and some M&A transactions relate to restructuring situations.

It is very hard to draw lines between which is which. But we think we're in a period and we think we're going to be in a period where the restructuring team is reasonably busy and the M&A team is at least as busy. If you had things like interest rates come down or spreads tighten to the point where there is less restructuring activity because it is even easier to finance things, that is probably a good thing for M&A.

I think we're kind of well covered which ever way the credit markets go. If they get tougher for borrowers, I think we'll see a little more of a swing toward restructuring. If they get more open for borrowers, then obviously, that is a great thing for the M&A business.

All right. Thank you, guys.

Jeff Harte, Sandler O'Neill.

Hello. Good afternoon, guys.

Hello, Jeff.

A couple of things for me. One, I don't want to put words in your mouth, but you may have actually done it. If you're talking about the fourth quarter potentially being the strongest quarter of the year, you were north of $90 billion revenues in the second quarter, that suggests a lot of potential revenue upside from what you're seeing now in the fourth quarter.

Your math is correct. The second quarter is what it was and I said we think it is likely the fourth quarter will be the best of the year.

Okay. And then looking at kind of how comp ratio versus revenues are trending in the year, some of your revenues are trending over $300 million on a full-year basis through the first nine months, yet your comp ratio is what? A little over 55%. Looking back versus history, a $300 million revenue, I would typically have thought you'd be more in the 50% plus or minus 300% guidance range you used to give.

Is it just that Greenhill is now a bigger company? Is that kind of the floor on what that comp revenue number can go down to adjusted or more simply put, why are we running so high above what we used to target for comp?

Well, look, we're still below our peer group, because I frankly think we're a more efficient firm in the sense that I think, because I know employee numbers are hard to get, but I think if you had them, and based on anecdotal, that evidence, we have some sense that I think our revenue per employee is probably higher than most or all of our competitors. So we are more efficient, I think, than most.

But we are also a bigger firm than we were when -- there was a day when $300 million plus of revenue would be a huge outcome and we would have an even lower compensation ratio. That bar has just moved higher. It doesn't mean it is stopped at the level it is today. It just means that the threshold at which you can have lower compensation ratios is the higher one.

So we'll see exactly how the fourth quarter turns out and where we set things for the year, but I think we're clearly moving in the right direction. I think we'll still be both below our peer group and able to pay our people and reward them for what is going to be a pretty good year overall.

Okay. And finally, looking at non-comp, especially if we have a good 2017 and the fourth quarter is strong, should we be thinking of that $16.5 million a quarter-ish dollar run rate or is that something that maybe, if revenues accelerate, turns more into a non-comp ratio, as far as how we are kind of looking at it going forward?

No, I really think the best way to look at non-comp is as a fixed number that can move not so much with revenues but with scale of the firm. If you look at it, it obviously went up when we acquired Cogent. We had lots more people and a few more offices. It went up in 2008, 2009, 2010 when we probably more than doubled the number of offices we had and hired a lot of people, so you need more travel, more IT, et cetera.

But I think if you if you looked at next year in a range of outcomes from similar revenue to a bit less to a bit more, I think that non-comp is going to stay relatively consistent with where it has been in absolute terms. And even if revenue moved up fairly significantly, if the team size was broadly as it is today with some modest growth in that, I don't think that would have much of an impact on non-comp. So I would think of that more in terms of absolute dollars that can evolve as the team grows and not as a ratio that is tied to revenue.

Okay. Thank you.

Sure.

Brennan Hawken, UBS.

Thanks for taking the question. Just wanted to ask a follow-up on the your very constructive comments on the fourth quarter, Scott, maybe help understand a little bit. Obviously, you know we're limited in what we can look at, and the public pipelines don't suggest a quarter nearly that robust. I know you hit on restructuring, but can you give some more color to help us understand a little better some of the components that are driving that?

Sure. I mean, I think if I look at even our website and troll through the transactions and look at public announcements about when things are going to close, I mean, frankly, I can see a lot of it there. I mean, as you'll know, if you have a lead advisory role or, even better, a sole advisory role, you'll get more attractive economics than if you're in a lesser role, or with a lot of co-advisors. And I think we, throughout this year, have had quite a lot of our assignments have fallen into the solar lead advisor category so the fee outcomes have been reasonably good even on the deals you can see.

From things that you may not be seeing quite as well, I think there probably are some restructuring things going on that may tend not to be quite as tangible in public as a classic M&A announcement and lastly, I would say that while, as I noted, the capital advisory outcome was fairly weak in the third quarter. We think it's going to be the opposite of that in the fourth quarter. So that is just good M&A rolls and outcomes, and a bit more restructuring and a much better capital advisory and that adds up to our optimism for Q4.

So when we think about Cogent, should we use that 4Q? I know that the quarterly disclosures on the revenue have been limited. But I think it was 4Q 2014 where they had nearly $30 million of revenue out of Cogent. Is that the type of number we should be thinking about with Cogent here as we come into the quarter or can it be even bigger?

I would not be nearly that optimistic. I think that was a real outlier. Their business, as I've said, you're going back a good couple of years here. As I've said a number of times about that business, it's been remarkably consistent since we acquired it and had the almost like clockwork, very similar revenue outcomes.

All I'm really saying is that that part of the capital advisory business was weaker in Q3, but not disastrous and Q4 likewise will be stronger, but not multiple quarters worth of revenue. So there's nothing in that area that solely explains sort of a big discrepancy in revenue. It's really the mix of things: good M&A outcomes, little more restructuring in both the primary fundraising and the Cogent business, making up for a weaker Q3.

Okay. Thanks for putting up with all the questions about revenue here and helping us walk through that. A couple quick ones on the balance sheet. So I think you had said that, and sorry, geography first, I think you had said that overseas activity has been soft, but we had the lower tax rate this quarter. Does that mean that your experiences this quarter were different than what you expect over the coming several quarters? Because is it right to assume that the lower tax rate assumes a higher overseas mix of business this quarter?

Not in just this quarter, but really we set the tax rate, as I believe you're supposed to, on an estimate of where the annual is going to come out. So this year, as I said, it's a little bit tricky, but it's actually quite a good year in non-US revenue. It's not as good a year in non-US announcements. So a lot of our announcement activity for M&A has been focused on US transactions. But we still have had really quite good revenue from Europe in particular coming out of a lot announcements last year and early this year.

So I think the tax rate that you see for the year to date is broadly our estimate of where we think we'll come out at year-end. Obviously, it'll be tweaked in either direction based on what exactly happens in Q4. And next year, if we end up with a bit of a rebound in European activity, we could end up with a very similar rate.

If it ends up being a little weaker so we're more concentrated in the US, it might be a few points higher as it has been in past history. But that's probably the range of outcomes. It's not terribly wide, but we're certainly at the better end of it this year.

Okay. And overseas cash, overall cash decreased $8 million. I want to say that last quarter, the overseas cash was $45 million. Should we just -- was the overseas cash balances meaningfully changed this quarter?

Not meaningfully. You'll see our 10-Q filed probably later this week and you'll see that. But we continued to, again, like some companies that are much, much larger and more important that ours, we continue to basically, to some degree, fund our needs by letting overseas cash offset domestic borrowing. And at the kind of interest rates one can borrow these days, that works fine and we'll continue on that path for the foreseeable future until there's some corporate tax or forma along the way that would allow us to just treat cash on the global basis again.

Is that why the revolver went up about $7.5 million this quarter? A --

Yes, essentially. Essentially.

Yes.

And as I said, even since quarter ended, we had an unusual degree of early-in-the-quarter receivables. So we're now with cash well in excess of the revolver again.

Okay. Thank you.

Thank you.

Ashley Serrao, Credit Suisse.

Good afternoon.

Hello, Ashley.

Scott, I just wanted to just clarify your line of sight into the business net right now. Are you comments for strength confined to 1Q 2017, or is it the entire first half of 2017 being better than the first half of 2016?

I mean, there's a limit, obviously, to how precise I can be or want to be. All I can say is that we certainly are ending this year in a more robust way than probably a lot of people thought we would when they thought we were maybe too tied to a couple of key transactions. It's pretty clear to us that a fair amount of that momentum will carry over into next year.

It's obviously difficult to say what's going to close in Q1 versus Q2. But we feel reasonably good entering next year that we're going to continue similar momentum to what we've had. Certainly compare favorably to what was a relatively weak start to 2016 and, but we'll see exactly how it develops as the quarters go on.

Okay. And then I just wanted to also clarify the tax rate commentary. Should we assume that 4Q will be the best EPS quarter, as well, for the firm this year?

Well, if it's the best revenue quarter and non-comp costs are relatively flat, I think that's probably a reasonable assumption, because our non-comp costs are, as I've said, they are best looked at in absolute terms. We certainly don't expect a huge move in tax rate, or we would be adjusting our tax rate differently for the year to date. As I've said, you tend to fix that on an estimated basis for the annual. So, yes. I think that's a fair assumption you're making there with your math.

Okay. And then where is fixed comp running today between bases and salaries on an annual basis?

I don't have that handy. I would say this, though, that I think that the kinds of revenue levels we're at now, that's kind of not that much of a relevant question. I mean, it became a relevant question when we had grown some and, for example, last year had a relatively soft revenue year in part because a lot of things rolled over into this year.

Then, questions like okay, how much comp is really fixed becomes quite important because it can impact your comp ratio. We're now at the level of revenue run rate and profitability where comp is all about upside and discretionary comp to people as opposed to how much do you contractually need to pay them.

Okay and then just on your recruitment commentary, just curious, on a net basis, where do you hope to have MD count? And next year? And also, can you remind us how many client-facing MDs you have right now?

We have about low-70s right now. I wouldn't want to put a specific number on it for end of next year. I mean, as I've said, we're quite hopeful of a significant recruiting year next year, including with a maybe even another one or two before this year is out. So we'll have a few promotes. I'm sure we'll have a few people either retire or move to senior advisor, whatever the status may be. So there'll be pluses and minuses, but I certainly expect we'll see significant net growth net year just based on the recruiting pipeline that we're looking at.

Okay. Thank you for taking my questions.

All right. Thank you.

(Operator Instructions)

Vincent Hung, Autonomous.

Hello. Can you talk about whether your new hires this year have gained much traction? And also how last year's crop faired, as well?

I wouldn't want to try to draw a conclusion so quickly. I mean, anybody who joined this year, I mean, some of them literally joined in the last several weeks, having committed to join us four or five months ago and then working through their so-called gardening leave or their notice period before they could join. So we certainly hire people on a long-term basis, not on the expectation that they could agree to join us in April, actually come in July, and produce revenue before the year's over.

I wish it was that easy, but it's not. And I think last year's recruits are making good progress. You first measure that will the quality of client dialogs they have. Then you measure it with the ability to get engagement letters signed with assignments whether or not it leads to a transaction. Then of course, over time, you want to see those actually turn into assignments and that ultimately to transactions, and that ultimately to completion revenue.

But you have to go through all those steps before revenue actually appears on the income statement. And so we can say that we're happy with our recent recruits and we think they're doing all the right things and hopefully going to have great success here, but it's not in a way you can measure in revenues real quickly.

Okay. And, given your constructive comments on the pipeline, do you think you can grow revenues next year?

Well, I don't want to make a forecast as to what next year's going to be. We obviously don't do that and we're still working through this year. We're trying to push this year, obviously, as far as we can and have all of our efforts focused on that. It's starting to feel like we have a nice pipeline going into next year. How exactly the year plays out, there are many variables there, but at least as of right now, again, in the US in particular, it feels like the M&A market is reasonable active and we think we're going to get our share of the opportunity.

Okay. Thanks.

All right. Thank you. And I think that's our last question. Thanks, everybody, for calling in and we'll speak to you again in three months. Bye, now.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.