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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                     .

Commission file number 001-32147
______________________________________________________________________________________
GREENHILL & CO., INC.
(Exact Name of Registrant as Specified in its Charter)
______________________________________________________________________________________
Delaware
51-0500737
(State or Other Jurisdiction
of Incorporation or Organization)
(I.R.S. Employer
Identification No.)
300 Park Avenue
New York, New York
10022
(ZIP Code)
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (212) 389-1500
______________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.01 per shareGHLThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No   
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No   ☐
        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):  
Large accelerated filer¨Accelerated filerþNon-accelerated filer¨Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No   ☑ As of July 31, 2020, there were 18,963,567 shares of the registrant’s common stock outstanding.





TABLE OF CONTENTS
  Page
1.
2.
3.
4.
1.
1A.
2.
3.
4.
5.
6.
Exhibits

2



AVAILABLE INFORMATION
Greenhill & Co., Inc. files current, annual and quarterly reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the United States Securities and Exchange Commission (the “SEC”). Our SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov.
Our public internet site is http://www.greenhill.com. We make available free of charge through our internet site, via a link to the SEC’s internet site at http://www.sec.gov, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Also posted on our website in the “Corporate Governance” section, and available in print upon request of any stockholder to our Investor Relations Department, are the charters for our Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee, our Corporate Governance Guidelines, Related Party Transaction Policy and Code of Business Conduct & Ethics governing our directors, officers and employees. You may need to have Adobe Acrobat Reader software installed on your computer to view these documents, which are in PDF format. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.
3




Part I. Financial Information
Item 1. Financial Statements
Greenhill & Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Condition
(in thousands except share and per share data)
As of
June 30,December 31,
20202019
(unaudited)
Assets
Cash and cash equivalents ($9.6 million and $9.8 million restricted from use at June 30, 2020 and December 31, 2019, respectively)
$84,550  $113,975  
Fees receivable, net of allowance for doubtful accounts of $0.3 million and $1.1 million at June 30, 2020 and December 31, 2019, respectively
45,275  77,766  
Other receivables17,360  2,519  
Property and equipment, net of accumulated depreciation of $48.3 million and $47.7 million at June 30, 2020 and December 31, 2019, respectively
7,323  6,281  
Operating lease right-of-use asset83,282  28,346  
Goodwill203,940  205,992  
Deferred tax asset, net59,138  51,278  
Other assets13,008  8,218  
Total assets$513,876  $494,375  
Liabilities and Equity
Compensation payable$22,067  $26,878  
Accounts payable and accrued expenses13,525  12,412  
Current income taxes payable8,255  9,653  
Operating lease obligations87,079  30,750  
Secured term loan payable343,274  358,003  
Deferred tax liability26,208  12,004  
Total liabilities500,408  449,700  
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 48,526,550 and 46,801,812 shares issued as of June 30, 2020 and December 31, 2019, respectively; 18,887,477 and 18,355,907 shares outstanding as of June 30, 2020 and December 31, 2019, respectively
485  468  
Restricted stock units52,257  77,657  
Additional paid-in capital933,315  887,095  
Retained earnings43,881  69,093  
Accumulated other comprehensive income (loss)(38,325) (34,115) 
Treasury stock, at cost, par value $0.01 per share; 29,639,073 and 28,445,905 shares as of June 30, 2020 and December 31, 2019, respectively
(978,145) (955,523) 
Stockholders’ equity13,468  44,675  
Total liabilities and equity$513,876  $494,375  

See accompanying notes to condensed consolidated financial statements (unaudited).
4



Greenhill & Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (unaudited)
(in thousands except share and per share data)

For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
2020201920202019
Revenues$47,786  $56,084  $114,885  $107,279  
Operating Expenses
Employee compensation and benefits46,476  46,065  100,836  91,127  
Occupancy and equipment rental7,411  5,646  12,757  11,052  
Depreciation and amortization569  645  1,168  1,312  
Information services2,651  2,652  5,056  5,008  
Professional fees1,899  1,926  4,221  4,552  
Travel related expenses118  3,363  2,506  6,859  
Other operating expenses3,772  2,155  6,122  7,998  
Total operating expenses62,896  62,452  132,666  127,908  
Total operating income (loss)(15,110) (6,368) (17,781) (20,629) 
Interest expense3,728  10,621  8,511  16,472  
Income (loss) before taxes(18,838) (16,989) (26,292) (37,101) 
Provision (benefit) for taxes(3,870) (4,292) (3,751) (9,018) 
Net income (loss)$(14,968) $(12,697) $(22,541) $(28,083) 
Average shares outstanding:
Basic18,886,856  23,925,310  18,895,775  24,231,448  
Diluted18,886,856  23,925,310  18,895,775  24,231,448  
Earnings (loss) per share:
Basic$(0.79) $(0.53) $(1.19) $(1.16) 
Diluted$(0.79) $(0.53) $(1.19) $(1.16) 

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

5



Greenhill & Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(in thousands)

For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
2020201920202019
Net income (loss)$(14,968) $(12,697) $(22,541) $(28,083) 
Currency translation adjustment, net of tax9,822  (1,326) (4,210) (272) 
Comprehensive income (loss)$(5,146) $(14,023) $(26,751) $(28,355) 

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

6



Greenhill & Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
(in thousands, except per share data)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Common stock, par value $0.01 per share
Common stock, beginning of the period$483  $462  $468  $450  
Common stock issued2  5  17  17  
Common stock, end of the period485  467  485  467  
Restricted stock units
Restricted stock units, beginning of the period47,430  47,214  77,657  71,596  
Restricted stock units recognized, net of forfeitures10,526  11,656  20,833  21,674  
Restricted stock units delivered(5,699) (1,959) (46,233) (36,359) 
Restricted stock units, end of the period52,257  56,911  52,257  56,911  
Additional paid-in capital
Additional paid-in capital, beginning of the period927,686  880,924  887,095  846,721  
Common stock issued5,629  3,722  46,220  37,925  
Additional paid-in capital, end of the period933,315  884,646  933,315  884,646  
Exchangeable shares of subsidiary
Exchangeable shares of subsidiary, beginning of the period  1,958    1,958  
Exchangeable shares of subsidiary delivered  (1,958)   (1,958) 
Exchangeable shares of subsidiary, end of the period        
Retained earnings
Retained earnings, beginning of the period, as previously reported60,202  46,695  69,093  63,427  
Cumulative effect of the change in accounting principle related to credit losses    (123)   
Retained earnings, beginning of the period, as adjusted60,202  46,695  68,970  63,427  
Dividends(1,353) (1,353) (2,548) (2,699) 
Net income (loss)(14,968) (12,697) (22,541) (28,083) 
Retained earnings, end of the period43,881  32,645  43,881  32,645  
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss), beginning of the period(48,147) (34,651) (34,115) (35,705) 
Currency translation adjustment, net of tax9,822  (1,326) (4,210) (272) 
Accumulated other comprehensive income (loss), end of the period(38,325) (35,977) (38,325) (35,977) 
Treasury stock, at cost, par value $0.01 per share
Treasury stock, beginning of the period(977,579) (910,485) (955,523) (886,084) 
Repurchased(566) (5,379) (22,622) (29,780) 
Treasury stock, end of the period(978,145) (915,864) (978,145) (915,864) 
Total stockholders’ equity$13,468  $22,828  $13,468  $22,828  

See accompanying notes to condensed consolidated financial statements (unaudited).
7



Greenhill & Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)

For the Six Months Ended
June 30,
20202019
Operating activities:
Net income (loss)$(22,541) $(28,083) 
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Non-cash items included in net income (loss):
Depreciation and amortization2,056  2,336  
Net investment (gains) losses502  (75) 
Restricted stock units recognized, net20,833  21,674  
Deferred taxes, net8,026  1,353  
Non-cash portion of loss on refinancing  1,759  
Loss on fair value of contingent obligation  575  
Allowance for doubtful accounts(32)   
Changes in operating assets and liabilities:
Fees receivable32,361  18,533  
Other receivables and assets(18,958) (18,926) 
Payment of contingent obligation due selling unitholders of Cogent  (5,724) 
Compensation payable(5,198) (30,105) 
Accounts payable and accrued expenses2,444  3,200  
Current income taxes payable(1,398) (5,809) 
Net cash provided by (used for) operating activities18,095  (39,292) 
Investing activities:
Purchases of investments(2,050)   
Proceeds from sales of investments847    
Distributions from investments27    
Purchases of property and equipment(2,240) (743) 
Net cash used in investing activities(3,416) (743) 
Financing activities:
Proceeds from refinancing of secured term loan, net  48,248  
Repayment of secured term loan(15,625) (8,750) 
Payment of contingent obligation due selling unitholders of Cogent  (13,144) 
Dividends paid(2,162) (3,076) 
Purchase of treasury stock(22,622) (29,780) 
Net cash used in financing activities(40,409) (6,502) 
Effect of exchange rate changes(3,695) (117) 
Net decrease in cash and cash equivalents(29,425) (46,654) 
Cash and cash equivalents, beginning of the period113,975  156,374  
Cash and cash equivalents, end of the period$84,550  $109,720  
Supplemental disclosure of cash flow information:
Cash paid for interest$8,102  $11,229  
Cash paid for taxes, net of refunds$4,843  $5,410  

See accompanying notes to condensed consolidated financial statements (unaudited).
8



Greenhill & Co., Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 — Organization
Greenhill & Co., Inc. and subsidiaries (the “Company” or “Greenhill”) is a leading independent investment bank that provides financial and strategic advice on significant domestic and cross-border mergers and acquisitions, restructurings, financings, capital raisings and other strategic transactions to a diverse client base, including corporations, partnerships, institutions and governments globally. The Company acts for clients located throughout the world from our global offices in the United States, Australia, Brazil, Canada, Germany, Hong Kong, Japan, Singapore, Spain, Sweden, and the United Kingdom. During the third quarter of 2020, we exited Brazil by selling our business there to the local team for a nominal sum.
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 LLP (“GCE”) 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 and GCE are engaged in investment banking activities in the United Kingdom and Europe, respectively, and are subject to regulation by the U.K. Financial Conduct Authority (“FCA”). Greenhill Australia engages in investment banking activities in Australia and New Zealand and is licensed and subject to regulation by the Australian Securities and Investment Commission (“ASIC”).
The Company also operates in other locations throughout the world, which are subject to regulation by other governmental and regulatory bodies and self-regulatory authorities.

Note 2 — Summary of Significant Accounting Policies
Basis of Financial Information
These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP), which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and these footnotes, including compensation accruals and other matters. Management believes that it has made all necessary adjustments so that the condensed consolidated financial statements are presented fairly and that the estimates used in preparing the condensed consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates. Certain reclassifications have been made to prior year information to conform to current year presentation.
Given the uncertainty of the COVID-19 pandemic and resulting economic impact on the Company, estimates may need to be revised in the future, which could materially impact the Company’s future results of operations and/or financial condition.
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, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC. The condensed consolidated financial information as of December 31, 2019 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
9



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 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 $5.8 million and $3.9 million as of June 30, 2020 and December 31, 2019, respectively. Deferred revenue is included in accounts payable and accrued expenses in the condensed consolidated statements of financial condition. During the six months ended June 30, 2020 and June 30, 2019, the Company recognized $1.9 million and $3.2 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 $1.4 million for the three months ended June 30, 2020 and 2019, respectively and $1.9 million and $2.5 million for the six months ended June 30, 2020 and 2019, 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 a reversal of bad debt expense of $0.8 million in the three months ended June 30, 2020 and $0.1 million in bad debt expense in the three months ended June 30, 2019. The Company recorded a net reversal of bad debt expense of $0.1 million in the six months ended June 30, 2020 and $0.4 million in bad debt expense in the six months ended June 30, 2019.
Included in the fees receivable balances at June 30, 2020 and December 31, 2019 were $6.9 million and $10.5 million, respectively, of long term receivables related to primary 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.
On January 1, 2020 the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) under the modified retrospective approach. ASU 2016-13 replaces the incurred loss impairment methodology for financial instruments with the current expected credit loss (CECL) model which requires an estimate of future credit losses. Upon adoption, a cumulative adjustment was recorded which decreased retained earnings by $0.1 million, net of tax, as of January 1, 2020.

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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. 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.
We test for impairment, at a minimum, on an annual basis or earlier where certain events or changes in circumstances indicate that goodwill may more likely than not be impaired. As of June 30, 2020, we do not believe it is more likely than not that our goodwill was impaired. If there are decreases in our stock price for a sustained period (including as a result of the impact of the COVID-19 pandemic on equity securities), a decline in our revenues or other unfavorable factors, we may be required to recognize an impairment, which could be material to our condensed consolidated financial statements.
Compensation Payable
Included in compensation payable are discretionary compensation awards comprised of accrued cash bonuses and long-term incentive compensation, consisting of deferred cash retention awards, which are non-interest bearing, and generally amortized ratably over a three to five-year service period after the date of grant.
Restricted Stock Units
The Company accounts for its share-based compensation payments by recording the fair value of restricted stock units (RSUs) granted to employees as compensation expense. The restricted stock units are generally amortized ratably over a three to five-year service period following the date of grant. Compensation expense is determined based upon the fair value of the Company’s common stock at the date of grant. In certain circumstances the Company issues share-based compensation, which is contingent on achievement of certain performance targets. Compensation expense for performance-based awards begins at the time it is deemed probable that the performance target will be achieved and is amortized into expense over the remaining service period. The Company includes a forfeiture estimate in the aggregate compensation cost to be amortized.
As the Company expenses the awards, the restricted stock units recognized are recorded within stockholders’ equity. The restricted stock units are reclassified into common stock and additional paid-in capital upon vesting. The Company records as treasury stock the repurchase of stock delivered to its employees in settlement of tax liabilities incurred upon the vesting of restricted stock units. The Company records dividend equivalent payments on outstanding restricted stock units eligible for such payment as a dividend payment and a charge to stockholders’ equity.
Earnings per Share
The Company calculates basic earnings per share (“EPS”) by dividing net income by the weighted average number of shares outstanding for the period.
The Company calculates diluted EPS by dividing net income by the sum of (i) the weighted average number of shares outstanding for the period and (ii) the dilutive effect of the common stock deliverable pursuant to restricted stock units for which future service is required as calculated using the treasury stock method. See “Note 8 — 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.
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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. As of June 30, 2020, we believe that no additional valuation allowance is required with respect to our deferred tax assets. However, if there are material declines in the assumptions underlying such assessment (including as a result of the impact of the COVID-19 pandemic on the U.S. and global economies), we may be required to record a valuation allowance, which could have a material impact on our condensed consolidated financial statements.
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.
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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 10 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 capital advisory services.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which requires the recognition of lease assets and lease liabilities for operating leases, among other changes. The Company adopted this standard on January 1, 2019 utilizing a modified retrospective approach. The Company elected to apply practical expedients provided in the standard that allowed the Company to not reassess whether expired or existing contracts are or contain leases, not reassess lease classification for expired or existing leases (e.g., pre-existing operating leases are classified as operating leases under the new standard), and not reassess initial direct costs for existing leases. The impact of adopting ASU 2016-02 was an increase of $38.1 million to the Company’s assets and liabilities for the operating lease right-of-use assets and operating lease obligations on the condensed consolidated statement of financial condition as of January 1, 2019. Upon adoption, the Company also reclassified $3.2 million of deferred rent from accounts payable and accrued expenses to operating lease obligations on the condensed consolidated statement of financial condition. Differences in the operating lease right-of-use asset and operating lease obligations are due to straight-lining rent expense and the resulting deferred rent. There was no net impact to the condensed consolidated statement of operations.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU changes how companies measure credit losses on most financial instruments, including accounts receivable. Companies will be required to estimate lifetime expected credit losses, which is generally expected to result in earlier recognition of credit losses. The Company adopted this standard effective on January 1, 2020 under a modified retrospective approach. The cumulative effect of adopting this ASU was a net decrease to retained earnings of $0.1 million.
Accounting Developments
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. Under the new 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 is currently evaluating the impact of the future adoption of ASU 2019-12 on the Company's consolidated financial statements. Adoption could be material to the Company in periods of enactment of new tax laws or rates. The standard is effective for the Company on January 1, 2021 under a prospective approach and can be early adopted prior to that date.

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Note 3 — Cash and Cash Equivalents
The carrying values of the Company’s cash and cash equivalents are as follows:
As of
June 30,
As of December 31,
20202019
(in thousands)
(unaudited)
Cash$53,447  $59,455  
Cash equivalents21,492  44,751  
Restricted cash - letters of credit9,611  9,769  
Total cash and cash equivalents$84,550  $113,975  
The carrying value of the Company’s cash equivalents approximates fair value. See “Note 4 — Fair Value of Financial Instruments”.
Letters of credit are secured by cash held on deposit.

Note 4 — Fair Value of Financial Instruments
Assets and liabilities are classified in their entirety based on their lowest level of input that is significant to the fair value measurement. As of June 30, 2020 and December 31, 2019, the Company had Level 1 assets measured at fair value.
Assets Measured at Fair Value on a Recurring Basis
The following tables set forth the measurement at fair value on a recurring basis of the investments in money market funds, short-term cash instruments and U.S. government securities. The securities are categorized as a Level 1 asset, as their valuation is based on quoted prices for identical assets in active markets. See “Note 3 — Cash and Cash Equivalents”.
Assets Measured at Fair Value on a Recurring Basis as of June 30, 2020
Quoted Prices in
Active  Markets for
Identical Assets
(Level 1)
Significant Other
Observable  Inputs
(Level 2)
Significant
Unobservable  Inputs
(Level 3)
Balance as of
June 30, 2020
(in thousands, unaudited)
Assets
Cash equivalents$21,492  $  $  $21,492  
Total$21,492  $  $  $21,492  
Assets Measured at Fair Value on a Recurring Basis as of December 31, 2019
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, 2019
(in thousands)
Assets
Cash equivalents$44,751  $  $  $44,751  
Total$44,751  $  $  $44,751  

Note 5 — Related Parties
At June 30, 2020 and December 31, 2019, the Company had no amounts receivable from or payable to related parties.

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Note 6 — Loan Facilities
In October 2017, as part of a recapitalization plan, the Company entered into a credit agreement with a syndicate of lenders, who lent a face amount of $350.0 million under a five-year secured term loan facility (“2017 Term Loan Facility”) and provided a three-year secured revolving credit facility (“Revolving Loan Facility”) for $20.0 million, which was undrawn at closing.
On April 12, 2019, the Company refinanced its 2017 Term Loan Facility with borrowings of $375.0 million from a new five-year secured term loan facility (“Term Loan Facility”). These borrowings were used to repay in full the $319.4 million outstanding principal balance of the 2017 Term Loan Facility, pay fees and expenses and resulted in net cash proceeds of $48.2 million, which increased the Company’s cash balance. Under the terms of the 2017 Term Loan Facility, the Company was eligible to repay, refinance or reprice the outstanding principal amount of the loan facility as of April 12, 2019 without any incremental premium or other charge.
Effective with the refinancing in April 2019, borrowings under the Term Loan Facility bear interest at either U.S. Prime plus 2.25% or LIBOR plus 3.25%, which represents a 50 basis point reduction from the applicable borrowing rates of the 2017 Term Loan Facility. Borrowings under the Term Loan Facility and 2017 Term Loan Facility had a weighted average interest rate for the six months ended June 30, 2020 and June 30, 2019 of 4.2% and 6.1%, 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. In addition, beginning for the year ended December 31, 2019, the Company may be required to make annual repayments of principal on the Term Loan Facility within ninety days of year-end of up to 50% of its annual excess cash flow as defined in the credit agreement based on a calculation of net leverage. The Company is also required to repay certain amounts in connection with the non-ordinary course sale of assets, receipt of insurance proceeds, and the issuance of debt obligations, subject to certain exceptions. For the year ended December 31, 2019, based upon the Company’s financial results for 2019 an excess cash flow payment was not required. The Revolving Loan Facility was not refinanced as part of the 2019 refinancing and the amount, interest rate and maturity remain unchanged from the original terms. There have been no borrowings under the Revolving Loan Facility.
The Term Loan Facility and Revolving Loan Facility are both 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 facilities contain 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 and the Revolving Loan Facility is subject to a springing total net leverage ratio financial covenant, subject to certain step downs, if the Company’s borrowings under the Revolving Loan Facility exceed $12.5 million. The Company is also subject to certain other non-financial covenants. At June 30, 2020, the Company was compliant with all loan covenants.
In conjunction with the refinancing of the 2017 Term Loan Facility in April 2019, the Company incurred fees of $5.7 million, of which $2.7 million was recorded as deferred financing costs and $3.0 million was expensed. In addition, as a result of the refinancing, $1.8 million of previously deferred fees, or fees in aggregate of $4.8 million, were charged to expense and recorded as interest expense in the condensed consolidated statements of operations. The deferred financing costs incurred in connection with the refinancing, along with the remaining unamortized costs from the 2017 Term Loan Facility which, as of the date of the refinancing, were $9.0 million, are being amortized into interest expense over the remaining life of the obligation and recorded as a reduction in the carrying value of the Term Loan Facility in the condensed consolidated statement of financial condition. The Company incurred incremental interest expense of $0.4 million related to the amortization of deferred financing costs for each of the three months ended June 30, 2020 and 2019 and incremental interest expense of $0.9 million and $1.0 million related to the amortization of such costs for the six months ended June 30, 2020 and 2019, respectively.
As of June 30, 2020, the Term Loan Facility had a principal balance of $350.0 million and its carrying value was $343.3 million and no amounts were outstanding under the Revolving Loan Facility. At June 30, 2020, the fair value of the Term Loan Facility was approximately 94% of the outstanding principal balance. As 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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During the six months ended June 30, 2020, the Company made principal payments on the Term Loan Facility of $15.6 million, which were applied in full to the quarterly installments of $4.7 million due in March, June and September 2020 and the remainder applied to a portion of the quarterly installment due in December 2020. All mandatory repayments of the Term Loan Facility are applied without penalty or premium. Effective April 14, 2020 all voluntary prepayments, including refinancing of all or part of the borrowings, under the Term Loan Facility are permitted to be made without penalty.

Note 7 — Equity
On June 17, 2020, a dividend of $0.05 per share was paid to stockholders of record on June 3, 2020. For both the six months ended June 30, 2020 and 2019, total dividend payments of $0.10 per share were paid to stockholders. Dividend equivalent payments of $0.7 million and $0.6 million were paid to or accrued for holders of restricted stock units for the six months ended June 30, 2020 and 2019, respectively.
During the six months ended June 30, 2020, the Company repurchased 489,704 common shares through open market transactions at an average price of $17.18, for a total cost of $8.4 million. Additionally, during the six months ended June 30, 2020, 1,706,917 restricted stock units vested and were settled in shares of common stock of which the Company is deemed to have repurchased 703,464 shares at an average price of $20.20 per share for a total cost of $14.2 million in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units.
During the six months ended June 30, 2019, the Company repurchased 737,190 common shares through open market transactions at an average price of $22.60, for a total cost of $16.7 million. Additionally, during the six months ended June 30, 2019, 1,275,051 restricted stock units vested and were settled in shares of common stock, of which the Company is deemed to have repurchased 519,017 shares at an average price of $25.27 per share for a total cost of $13.1 million in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units.

Note 8 — Earnings per Share
The computations of basic and diluted EPS are set forth below:
For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
2020201920202019
(in thousands, except per share amounts, unaudited)
Numerator for basic and diluted EPS — net income (loss)$(14,968) $(12,697) $(22,541) $(28,083) 
Denominator for basic EPS — weighted average number of shares18,887  23,925  18,896  24,231  
Add — dilutive effect of:
Restricted stock units  (1)  (1)  (1)  (1)
Denominator for diluted EPS — weighted average number of shares and dilutive securities18,887  (1)23,925  (1)18,896  (1)24,231  (1)
Earnings (loss) per share:
Basic EPS$(0.79) $(0.53) $(1.19) $(1.16) 
Diluted EPS$(0.79) $(0.53) $(1.19) $(1.16) 
____________________
(1) In periods of income, the fully diluted denominator for diluted EPS would have been 20,973,282 and 24,116,240 for the three months ended June 30, 2020 and 2019, respectively, and 21,866,548 and 24,654,855 for the six months ended June 30, 2020 and 2019, respectively. The calculation of the diluted EPS denominator in periods of income is based on the weighted average number of incremental shares issuable from unvested restricted stock units as calculated using the treasury stock method and will vary based on a variety of factors, including the future share price and the amount of unrecognized compensation cost.
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The activity related to the restricted stock units is set forth below:

Restricted Stock Units Outstanding
20202019
Units
Grant Date
Weighted
Average Fair
Value
Units
Grant Date
Weighted
Average Fair
Value
Outstanding, January 1,6,781,475  $21.60  6,210,282  $22.73  
Granted3,915,997  8.78  2,159,813  23.13  
Delivered(1,738,281) 26.80  (1,297,476) 27.91  
Forfeited (3,657) 25.68  (192,349) 23.37  
Outstanding, June 30,
8,955,534  $14.91  6,880,270  $21.85  


Note 9 — Income Taxes
The Company is subject to U.S. federal, state and local, as well as foreign, corporate income taxes and its effective tax rate varies depending on the jurisdiction in which the income is earned.
The Company is required to record a charge or benefit in its income tax provision for the tax effect of the difference between the grant date value of restricted stock units and the market value of such awards at the time of vesting. The provisions for income taxes for the six months ended June 30, 2020 and 2019 include net charges of $2.6 million and $0.8 million, respectively, related to the tax effect of the vesting of restricted stock units at a market value below their grant price.
Based on the Company’s historical taxable income and its expectation for taxable income in the future, management expects that its largest deferred tax asset, which relates principally to compensation expense deducted for book purposes but not yet deducted for tax purposes, will be realized as offsets to future taxable income.
Any gain or loss resulting from the translation of deferred taxes for foreign affiliates is included in the foreign currency translation adjustment incorporated as a component of other comprehensive income (loss), net of tax, in the condensed consolidated statements of changes in stockholders’ equity and the condensed consolidated statements of comprehensive income.
The income tax laws in the jurisdictions in which the Company operates are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. Management must make judgments in assessing the likelihood that a tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position. In the normal course of business, the Company may be under audit in one or more of its jurisdictions in an open tax year for that particular jurisdiction. As of June 30, 2020, the Company does not expect any material changes in its tax provision related to any current or future audits.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) was enacted in response to the COVID-19 pandemic which included temporary changes to income and non-income based tax laws including: (i) the elimination of the 80% of taxable income limitation by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 and 2020; (ii) allowing NOLs originating in 2018, 2019 and 2020 to be carried back five years; (iii) increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for tax years beginning January 1, 2019 and 2020; and (iv) other related provisions including the deferral of certain tax payments. The CARES Act is not expected to have a material impact on the Company’s condensed consolidated financial statements based on current financial projections.

Note 10 — 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 15 years.
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The undiscounted aggregate minimum future rental payments are as follows:
As of
June 30,December 31,
20202019
(in thousands)
(unaudited)
2020 (remainder)$6,140  $15,789  
202111,474  13,374  
202211,222  11,795  
202310,249  10,523  
20249,362  9,602  
Thereafter85,513  88,757  
     Total lease payments $133,960  $149,840  
Less: minimum future rental payments for which the lease has not commenced (1)
  (115,870) 
     Total lease payments for which the Company has a right-of use-asset and corresponding liability133,960  33,970  
Less: Interest(46,881) (3,220) 
Present value of operating lease liabilities$87,079  $30,750  
____________________
(1) On May 16, 2019, the Company entered into a new office lease (the “Lease”) for its new principal executive office in New York, N.Y. Rental payments are scheduled to commence on January 1, 2021 and shall continue for a term of 15 years and 3 months. As of April 1, 2020, the Company obtained the right-to-use the premises for build out purposes and as such, recorded the operating lease right-of-use asset and operating lease obligation on the condensed consolidated statement of financial condition. The Company also began recording straight-line operating lease costs in occupancy and equipment rental in the condensed consolidated statement of operations as of April 1, 2020.

The weighted average remaining lease term and weighted average discount rate of our operating leases are as follows:
As of
June 30,December 31,
20202019
(unaudited)
Weighted average remaining lease term in years, including the lease for which the right to use had not commenced at December 31, 201912.512.1
Weighted average discount rate6.8 %5.8 %

Note 11 — Regulatory Requirements
Certain subsidiaries of the Company are subject to various regulatory requirements in the United States, United Kingdom, Australia and certain other jurisdictions, which specify, among other requirements, minimum net capital requirements for registered broker-dealers.
G&Co is subject to the SEC’s Uniform Net Capital requirements under Rule 15c3-1 (the “Rule”), which specifies, among other requirements, minimum net capital requirements for registered broker-dealers. The Rule requires G&Co to maintain a minimum net capital of the greater of $5,000 or 1/15 of aggregate indebtedness, as defined in the Rule. As of June 30, 2020, G&Co’s net capital was $14.5 million, which exceeded its requirement by $13.1 million. G&Co’s aggregate indebtedness to net capital ratio was 1.0 to 1 at June 30, 2020. Certain distributions and other capital withdrawals of G&Co are subject to certain notifications and restrictive provisions of the Rule.
GCI and GCE are subject to capital requirements of the FCA. Greenhill Australia is subject to capital requirements of the ASIC. We are also subject to certain capital regulatory requirements in other jurisdictions. As of June 30, 2020, GCI, GCE, Greenhill Australia, and our other regulated operations were in compliance with local capital adequacy requirements.

Note 12 — Subsequent Events
The Company evaluates subsequent events through the date on which the financial statements are issued.
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On July 22, 2020, the Board of Directors of the Company declared a quarterly dividend of $0.05 per share. The dividend will be payable on September 16, 2020 to the common stockholders of record on September 2, 2020.
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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Greenhill”, “we”, “our”, “Firm” and “us” refer to Greenhill & Co., Inc.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the risk factors in item 1A of this Quarterly Report on Form 10-Q and subsequent Current Reports on Form 8-K.
Cautionary Statement Concerning Forward-Looking Statements
The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this report. We have made statements in this discussion that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “could”, “expect”, “plan”, “outlook”, “anticipate”, “believe”, “estimate”, “intend”, “predict”, “potential” or “continue”, the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include current views and projections of our operations and future financial performance, growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These factors include, among other things, uncertainties associated with the coronavirus (“COVID-19”) pandemic, including the negative effect that the COVID-19 pandemic has had and the significant and adverse effect it is expected to continue to have on our business. You should consider the various risks outlined under “Risk Factors” in our 2019 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot give assurances that these expectations will be achieved, nor can we guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update or review any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised expectations, whether as a result of new information, future developments or otherwise.

Overview
Greenhill is a leading independent investment bank that provides financial and strategic advice on significant domestic and cross-border mergers and acquisitions, divestitures, restructurings, financings, capital raising and other transactions to a diverse client base, including corporations, partnerships, institutions and governments globally. We serve as a trusted advisor to our clients throughout the world on a collaborative, globally integrated basis from our offices in the United States, Australia, Canada, Germany, Hong Kong, Japan, Singapore, Spain, Sweden, and the United Kingdom.
We were established in 1996 by Robert F. Greenhill, the former President of Morgan Stanley and former Chairman and Chief Executive Officer of Smith Barney. Since our founding, Greenhill has grown significantly, by recruiting talented managing directors and other senior professionals, acquiring complementary advisory businesses and training, developing and promoting professionals internally. We have expanded beyond merger and acquisition advisory services to include financing, restructuring, and capital advisory services, and we have expanded the breadth of our sector expertise to cover substantially all major industries. Since the opening of our original office in New York, we have expanded globally to 16 offices across four continents.
Over our 24 years as an independent investment banking firm, we have sought to opportunistically recruit new managing directors with a range of industry and transaction specialties, as well as high-level corporate and other relationships, from major investment banks, independent financial advisory firms and other institutions. We also have sought to expand our geographic reach both through recruiting managing directors in new locations and through strategic acquisitions, such as our acquisition of Caliburn Partnership Pty Limited (now Greenhill Australia) in Australia in 2010. Additionally, we expanded the breadth of our advisory services through our acquisition in 2015 of Cogent, which extended our services to capital advisory related to the secondary fund placement market as well as through the recent recruitment of a number of managing directors focused on financing and restructuring advisory services. Through our recruiting and acquisition activity, we have significantly increased our geographic reach by adding offices in the United States, United Kingdom, Germany, Canada, Japan, Australia, Sweden, Hong Kong, Spain and Singapore. We expect to open a Paris office later this year following completion of regulatory conditions. We intend to continue our efforts to recruit new managing directors with industry sector experience and/or geographic reach who can help expand our advisory capabilities. During 2020, we have recruited 2 additional client facing managing directors to expand our reach in the U.K. and enhance our restructuring efforts. We also announced the addition of 2
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senior advisors focused on France and Japan. Adjusted for the Managing Directors who are departed as a result of the sale of our Brazil business, as of July 31, 2020, we had 76 client facing managing directors.

Business Environment and Outlook /Factors Affecting Our Results
Recent Developments. During the first half of 2020, COVID-19 became a global pandemic of extraordinary proportion and impact. In response most governmental authorities issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of the pandemic. It is possible that additional and more restrictive proclamations and/or directives may be issued in the future. While a majority of our employees have worked remotely since March 2020, some of our employees have begun a gradual return to our office locations, in compliance with local government guidelines. During the period our employees have been working remotely, they have successfully utilized technology to employ virtual and secure cloud-based systems to continue communicating, collaborating and conducting client business in this new environment.
As a result of the global pandemic, there has been significant disruption and volatility in the domestic and international economies and financial markets and there continues to be much uncertainty about both the short and longer term economic implications. As a financial services firm, we are materially affected by conditions in the global financial markets and economic conditions throughout the world. During periods of unfavorable market or economic conditions, including current market conditions as a consequence of COVID-19, it is expected that the volume of global M&A transactions will decrease and the timing of transaction closings will be extended or disrupted, with some announced transactions being terminated.
Beginning in the first quarter of 2020 and continuing through the second quarter, we were impacted by the unfavorable market conditions that COVID-19 caused on our business. During the first half of 2020 M&A activity fell to the lowest levels since the 2008 global financial crisis. M&A volume as a percentage of total stock market capitalization, a measure investors have historically used to monitor the M&A cycle, is at the lowest level since that figure was first measured in the 1980s. Despite the lack of M&A transaction activity during the first half of 2020, we have actually seen an increase in new assignment activity for M&A as compared to the same period last year. If market uncertainty declines and the economies rebound, we expect an improvement in M&A going forward. The challenge is simply determining the speed at which the transaction process will proceed given uncertainty and volatility created by the pandemic.
Similarly, the increase in market volatility that began at the early stages of the pandemic immediately impacted our capital advisory business and our transaction volume is far below its level for the same period in the prior year. The capital advisory business is typically adversely impacted during periods of market volatility. During the first half of 2020, there was a significant decrease in the market value of equity securities in the first quarter, followed by a substantial increase in the market value of such securities in the second quarter. This market volatility significantly reduced transaction volume in our capital advisory business. Further, as a result of this market volatility, it is expected that third quarter transaction activity will be impacted negatively as well. With institutional investment portfolio managers continuing to increase their private equity allocations and specialized funds focused on the secondary private market continuing to grow, we expect that the secondary market capital advisory business will return to pre-pandemic levels, and grow from there, once the level of volatility declines and there is greater clarity surrounding the global economic outlook.
On the other hand, during the first half of 2020, the activity of our financing advisory and restructuring business, which provides financing, restructuring and bankruptcy advice to companies in financial distress or their creditors or other stakeholders, has increased substantially compared to prior years. This increase in activity results from both an increase in assignments due to greater market opportunities arising as a result of the pandemic’s impact on many businesses and an increase in the size of our restructuring team, which was significantly expanded over the past two years. For the first six months of 2020, we have realized an increase in retainer fees and are beginning to realize an increase in completion fees. Given the time required for the restructuring process to get to completion, we expect that the restructuring business will increase its contribution to our total revenue in the second half of this year. Further, we expect the restructuring cycle to continue for the next few years as the impacts of the pandemic propagate and evolve, and based on our current assignments, some of which we expect to complete next year, we expect our restructuring revenues will continue to significantly contribute to our total revenues. However, our financial advisory and restructuring business is smaller than our mergers and acquisitions advisory business, and the revenues we generate from that business are unlikely to fully offset weakness in the revenue generation from our merger and acquisition advisory and capital advisory services.
The extent to which the COVID-19 pandemic and the related global economic crisis adversely affects our business, results of operations and liquidity and financial condition, will depend on the future developments that are highly uncertain and beyond our control. These developments include the scope and duration of the pandemic and any recovery period, future actions taken by governmental authorities, central banks and other third parties in response to the pandemic; and the effect on our clients, employees and third-party providers.
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During the third quarter, we exited Brazil by selling our business there to the local team for a nominal sum. In Brazil, we did not find the kind of larger cross border opportunities we have found in other markets. As a result, particularly given the weakness of the Brazilian currency, we generated modest dollar revenue and proved unable to generate a return on our investment in that market. Accordingly, we expect this move to be modestly accretive to our productivity and profitability statistics going forward.
For additional information, see “Risk Factors” in our 2019 Annual Report on Form 10-K and in “Item 1A — Risk Factors” in this Form 10-Q.
Global and Regional Transaction Activity. Economic conditions and global financial markets can materially affect our financial performance. We are solely an advisory firm and our revenues are derived from fees we earn on advisory services related to M&A, financing advisory and restructuring, and capital advisory transactions. Throughout the global pandemic we have remained fully operational and continue to maintain client dialogues, win new assignments and assist clients in getting to agreement and completion of important transactions. However, the economic and market reaction to the pandemic negatively affected our results for the first half of 2020, as many M&A and capital advisory transactions were impacted. Offsetting this decline, we have benefited from a significant increase in restructuring assignments and related retainer fees.
The decreased volume of global and regional transactional activity has had a significant impact on our results of operation. In the first half of 2020, we experienced a decrease in the number of M&A transaction completions, however, this decrease in completions was more than offset by the larger size (and related fees) of the deals that were completed, particularly in Europe. Globally, deal activity in the first half of 2020, as compared to the same period in the prior year, declined substantially in terms of both the number and volume of announced and completed transactions. The number and volume of announced transactions globally decreased by 9% and 41%, respectively, in the first half of 2020 versus the same period in the prior year. The number and volume of completed transactions globally each decreased by 8% in the same period1.
We maintain a positive outlook for the second half of the year, particularly the fourth quarter, based on some large announced M&A transactions that remain pending, a rapidly growing book of restructuring advisory assignments and the potential for rebounding capital advisory activity as institutional investment portfolio managers continue to grow their private equity allocations. However, although we have experienced an increase in new assignment activity, in the market generally, many M&A transactions have either paused or are progressing slowly given the uncertainty created by the global pandemic. Depending on the duration of the pandemic and its expected impact on future economic activity it is possible that pending transactions may be terminated prior to closing, one party may seek not to close or the timing to complete deals could be further prolonged. We receive only a portion of our fee, or in some cases no fee, if the deals we advise on are terminated or otherwise do not close and our receipt of fees may be delayed if transactions take longer to close than expected.
We believe our business performance is best measured over longer periods of time, as we generally experience significant variations in revenues and profits from quarter to quarter. These variations can generally be attributed to the fact that our revenues are typically earned in large amounts upon the successful completion of a transaction or restructuring, the timing of which is uncertain and is not subject to our control. Accordingly, revenues, operating income and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter.
Competition. We operate in a highly competitive environment where there are no long-term contracted sources of revenue. Each revenue-generating engagement is separately awarded and negotiated. Our list of clients with whom there are active engagements changes continually. To develop new client relationships, and to develop new engagements from historic client relationships, we maintain, on an ongoing basis, active business dialogues with a large number of clients and potential clients. We gain new clients each year through our business development initiatives, through recruiting additional senior investment banking professionals who bring with them client relationships and expertise in certain industry sectors or geographies, and through referrals from members of boards of directors, attorneys and other parties with whom we have relationships. At the same time, we lose clients each year as a result of the sale or merger of a client, bankruptcy, a change in a client’s senior management team, turnover of our senior banking professionals, competition from other investment banks and other similar reasons.
1 Excludes transactions less than $100,000 and withdrawn/canceled deals. Source: Thomson Financial as of July 31, 2020.

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Results of Operations
Revenues
Our revenues are derived from both corporate advisory services related to M&A, financings and restructurings and capital advisory services related to sales or capital raises pertaining to alternative assets. A majority of our revenue is contingent upon the closing of a merger, acquisition, financing, restructuring, or other advisory transaction. While fees payable upon the successful conclusion of a transaction generally represent the largest portion of our corporate advisory fees, we also earn other fees, including on-going retainer fees, substantially all of which relate to non-success-based strategic advisory, financing advisory and restructuring assignments, and fees payable upon the commencement of an engagement or upon the achievement of certain milestones (such as the announcement of a transaction or the rendering of a fairness opinion). Additionally, we generate capital advisory revenues from sales of alternative assets in the secondary market and from capital raises.
Revenues were $47.8 million in the second quarter of 2020 compared to $56.1 million in the second quarter of 2019, a decrease of $8.3 million, or 15%. Increases in transaction completion fees and restructuring retainer fees were more than offset by declines in capital advisory fees and transaction announcement and opinion fees.
For the six months ended June 30, 2020, revenues were $114.9 million compared to $107.3 million in 2019, an increase of $7.6 million, or 7%. Increases in transaction completion fees, particularly in Europe, and restructuring retainer fees were partially offset by a decline in capital advisory fees.
We generally experience significant variations in revenues during each quarterly period. These variations can generally be attributed to the fact that a majority of our revenues is usually earned in large amounts throughout the year upon the successful completion of transactions, the timing of which are uncertain and are not subject to our control. Accordingly, the revenues earned in any particular period may not be indicative of revenues earned in future periods.

Operating Expenses
We classify operating expenses as employee compensation and benefits expenses and non-compensation operating expenses. Non-compensation operating expenses include the costs for occupancy and equipment rental, communications, information services, professional fees, recruiting, travel and entertainment, insurance, depreciation and amortization, and other operating expenses.
Our total operating expenses for the second quarter of 2020 were $62.9 million, which compared to $62.5 million of total operating expenses for the second quarter of 2019. The slight increase in total operating expenses of $0.4 million, or 1%, resulted from an increase in our compensation and benefits expenses, as described in more detail below.
For the six months ended June 30, 2020, our total operating expenses were $132.7 million, which compared to $127.9 million of total operating expenses for the first half of 2019. The increase in total operating expenses of $4.8 million, or 4%, resulted from an increase in our compensation and benefits expenses, partially offset by a decrease in our non-compensation operating expenses, both as described in more detail below.
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The following table sets forth information relating to our operating expenses.
For the Three Months Ended June 30,
For the Six Months Ended
June 30,
2020201920202019
(in millions, unaudited)
Employee compensation and benefits expenses$46.5$46.1$100.8$91.1
% of revenues
97 %82 %88 %85 %
Non-compensation operating expenses16.416.431.836.8
% of revenues
34 %29 %28 %34 %
Total operating expenses62.962.5132.7127.9
% of revenues
132 %111 %115 %119 %
Total operating income (loss)(15.1)(6.4)(17.8)(20.6)
Compensation and Benefits Expenses
The largest component of our operating expenses is employee compensation and benefits expenses, which we determine annually based on a percentage of revenues. The actual percentage of revenues, which we refer to as our compensation ratio, is determined by management in consultation with the Compensation Committee at each year end and is based on factors such as the relative level of revenues, anticipated compensation requirements to retain and reward