Greenhill & Co., Inc.

Christopher Thomas Grubb - Chief Financial Officer Scott L. Bok - Chief Executive Officer, President and Executive Director

Howard Chen - Crédit Suisse AG, Research Division Alexander Blostein - Goldman Sachs Group Inc., Research Division Brennan Hawken - UBS Investment Bank, Research Division Joel Jeffrey - Keefe, Bruyette, & Woods, Inc., Research Division Michael Wong - Morningstar Inc., Research Division

Thank you. Good afternoon, and thank you all for joining us today for Greenhill's first quarter 2013 financial results conference call.

I'm Chris Grubb, Greenhill's Chief Financial Officer; and joining me on the call today is Scott Bok, our Chief Executive Officer. Today's call may include forward-looking statements.

These statements are based on our current expectations regarding future events that, by their nature, are outside the firm's control and are subject to known and unknown risks, uncertainties and assumptions. The firm's actual results and financial condition may differ, possibly materially, from what is indicated in these 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.

We should not rely upon forward-looking statements as predictions of future events. We're under no duty to update any of these forward-looking statements after the date on which they are made.

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

Thank you, Chris. Well, I want to start by discussing our first quarter results.

I recognize that many of you will be equally, if not more focused on our views on the first quarter transaction environment and where the market may be headed from here. And in addition to commenting on the market environment, I'll speak to how Greenhill's positioned for continued success this year and beyond.

Focusing on our first quarter results, we're pleased with our performance in what continued to be a challenging transaction environment, which was quite different from the fairly robust environment that characterized the last quarter of 2012. Our advisory revenue for the quarter was up 11% compared to 2012, while our total revenue declined modestly, due to a large gain in our stake in Iridium in the first quarter of 2012 compared to a small decline in the most recent quarter.

For the first quarter, our pre-tax profit margin was 27%, our tax rate returned to a more typical 37% as we've suggested within our last quarterly call. And we had earnings per share of $0.45.

As quarterly results can be difficult to evaluate in isolation, on a rolling 4 quarter basis, our advisory revenue was approximately $300 million, which is our third best following any quarter over the last 4 years. You'll recall we consistently talked about having 4 main objectives for the firm: one, to increase our market share of the global pool advisory fees; two, to consistently achieve the highest profit margin among our closest peers; three, to maintain a strong dividend policy; and four, to maintain a flat or even declining share count.

I will focus on the first of those and then turn it back to Chris for the others. In order to put our first quarter 11% increase in advisory revenue and contact, as it relates to continued market share gains, let me make a few observations on the global market statistics and the results of the large banks that have reported first quarter results to date.

Taken at face value, global completed M&A volume for the first quarter was up 22% versus last year's first quarter. However, a quarter of the total reported completed volume in the first quarter relates to only 2 large, but somewhat unusual, transactions, neither of which were of the types that typically generate particularly large advisory fees.

What is probably more indicative of the broader level of activity, the number of completed transactions, which actually fell by 18% versus last year's first quarter. And you will recall that early last year was not seen as a particularly strong period for deal activity.

The announced transaction statistics tell a similar story, with global announced transaction activity up by 6%, but inflated by misleading data, such as the potential Dell transaction listed once for each of 3 competing bids, and that is not the only anomaly in that data. If we again, look at the total number of announced transactions as an indicator of activity levels, that is similar to the data for completed activity with announcements down 12% compared to last year's first quarter.

While the database has always had some noise in their statistics, we felt this quarter's summary statistics were particularly misleading when evaluating both our results and the health of the broader M&A market and therefore, that this was worth highlighting. With only 4 of our 9 global large bank competitors having reported first quarter results, so far, the results are mixed.

In aggregate, advisory revenue was up in line with our results of 11%. Another major firm outside those 9 reported weaker advisory results.

Coming to 2013, we have grown our advisory revenue 34% over the preceding 4 years. While the advisory revenue of the big bank group actually fell 27% in aggregate with not a single bank showing a gain.

Based on first quarter results announced to date, and our current backlog of announced transactions and active assignments, we feel good about our ability to grow our share of the global pool of advisory fees by a meaningful margin again this year. As we think about the key drivers of our strong relative performance compared to the 9 large global investment banks, we believe our client-focused and conflict-free advisory model continues to differentiate us and to enable us to attract both new clients and talented bankers away from our large competitors.

The structural challenges and the regulatory constraints faced by our large bank competitors are only becoming more intense. And none of the restrictions proposed have mitigated the inherent conflicts impacting their client advisory businesses.

As a result, we see our simple business model as a long-term sustainable advantage, building on this advantage, we continue to focus on developing the strength and breadth of our client relationships and are developing a business that is diversified by geography, by industry sector and by type of advice. In terms of geographic diversity, North America and, specifically, the U.S.

M&A business continues to be the strongest performing region for us. Our European and Australian revenue is down slightly compared to the prior year but one quarter is a short period for comparison and, as we look forward, both regions have an improving level of activity relative to what was evident in the first quarter.

By industry, we are showing good breadth. As listed in our press release, we completed 11 transactions in the first quarter across a range of industries, in one of the more balanced quarters we've had in this regard.

A quarter is a very short period but interestingly, industrials, health care and energy was all down after a very robust level of activity last year, while media, retail, financials and technology were all up. Looking forward, we expect to see continued diversity in revenue by industry.

As we commented on the last call, 2012 highlighted our ability to generate significant revenue from sources other than traditional M&A completion fees with financing and restructuring advisory, special committee assignments, fund placement assignments and a record level of retainer fees, all contributing meaningfully. The first quarter results were an exception to this trend with a significantly higher portion of our revenue generated in M&A advisory than in prior periods.

And a particularly large part of that driven by completion fees. With announcement fees down, largely due to the lack of activity noted above, and restructuring, financing advisory and fund placement fees all fairly soft as well.

On a positive note, retainer revenue was up slightly from the first quarter of last year and, hopefully, that is our precursor to increased transaction announcements and fee opportunities over quarters to come. And then our Capital Advisory business, we are seeing encouraging signs that after a relatively flat year-over-year result in 2012, could see growth in that business in 2013.

Let me now say a few words on current market conditions. Almost exactly a year ago, I made the following statement on our call: "It has been a couple of years now, 2 steps forward and almost 2 steps back in the transaction environment, and the last few months have reinforced that it will not be a straight line recovery."

That quote felt equally appropriate relative to the strong finish to 2012 followed by the slower start to 2013. Obviously, the improved level of activity in the fourth quarter translated into very high expectations for a robust recovery in the M&A market this year.

And these expectations were reinforcing the middle of the quarter by several high-profile announcements. However, it is clear when looking at the market statistics, that I discussed earlier, that the first quarter reflected a continuation of the fairly difficult transaction environment that we've been in for the last 5 or so years.

Despite all that, we continue to believe the advisory business is an attractive business for the long term and we believe we can continue to expand our share of this business over an extended period. Our brand and global teams have never been stronger and the demand by management teams and boards for independent advice continues to grow.

The building blocks for a recovery in the M&A business have been in place for some time now and many of the factors delaying recovery appear to have stabilized or abated. Despite those encouraging factors though, in a market where buyers continue to be conservative and sellers' expectations have risen with their improved market valuations following recent strength in the equity markets, it's not surprising that activity levels do not immediately accelerate to more robust levels.

But over time, we do expect buyer confidence to trend upward as economies and markets continue the healing process and corporations inevitably look to the M&A market to achieve some of their strategic objectives. As we saw, starting in about June last year, and many times in the past, transaction activity, generally, as well as the Greenhill, specifically, is capable of accelerating very quickly.

Now, I'll turn it over to Chris.

Thank you. As Scott introduced earlier in the call, we remain focused on 4 main objectives for the firm.

While we can't control the overall level of market activity, we can continue to stay very focused on the elements of the business that we are able to impact to help us achieve these objectives. Specifically, I'm going to address compensation costs, non-compensation costs, dividend and share repurchases and finally, I will provide an update on the continuing liquidation of our remaining principal investments.

Starting with compensation. As we've commented previously, our goal is to achieve a compensation ratio that's the lowest among our close peers.

In addition, in absolute terms, we aim to be below 50%, consistent with our first several years as a public company and driven by revenue productivity per employee, that is the best among our peer group. Given the challenging transaction environment, we had a 53% ratio of compensation to revenue in the first quarter, consistent with our full year ratio for 2012.

While this is above our target, we expect it will be, by far, the lowest GAAP compensation ratio among our closest peers. Our full year compensation ratio will be dependent on our results of the remainder of the year, balancing our target of the compensation ratio below 50% with the need to pay our employees competitively.

Both of which we aim to accomplish through high productivity per employee as we demonstrated historically. Suffice it to stay that we want to start the year cautiously given the slowdown in activity, we are hopeful to bring the ratio down some over the rest of the year.

Turning to our non-compensation costs. Our first quarter non-comp costs were $15.7 million, a slight increase from the run rate over the last 3 quarters but down by a good margin compared to the first quarter of 2012.

There are, obviously, some differences each quarter, but as we commented on the last call, we do not expect the full year 2013 non-comp costs to be up meaningfully over 2012 levels. Moving to dividends and share repurchases.

Our dividend held steady this quarter at $0.45 per share, consistent with the last few years. During the quarter, we repurchased almost 350,000 shares at an average price of $58.90 per share, for a total cost of $20.5 million.

These repurchases were almost evenly split between the cash settlement of vesting employee RSUs and open-market repurchases. Our dividend and share repurchases, as well as payment of annual bonuses, we, again, ended the quarter in a net cash position with cash of $34 million and debt of $26.5 million.

Our Board of Directors has authorized the repurchases of up to $100 million of our common stock through the end of 2013, of which approximately $80 million remains available. It's too early to comment on where repurchases will come out for the full year.

But they will be driven primarily by cash generated in the advisory business, and our continuing sale of our shares of Iridium. As we've highlighted on previous calls, it's important to note, in connection with our share repurchase activities, that we continue to maintain a share count that's effectively flat with our 2004 IPO, despite stock-based compensation and stock acquisition, which compares very favorably with our large and small competitors.

Finally, let me comment on our remaining principal investments. We ended the first quarter with investments valued at $42.2 million, which includes both our LP investments and our previously sponsored and other merchant banking funds of $16.6 million.

And our remaining Iridium stake valued at approximately $25.6 million. Our principal investments generate a first quarter loss of $1.9 million, resulting from a decline in the share price of Iridium.

We continue to methodically sell our Iridium shares. During the first quarter we sold 840,000 shares at an average price of $6.69 per share for total proceeds of $5.6 million.

And as we have stated before, it's our intention that proceeds from these sales will be returned to shareholders in the form of dividends and/or additional share repurchases. Now let me turn it back to Scott.

Let me close with an update on personnel and recruiting opportunities. First of all, our existing team remains focused on clients and highly motivated despite the market challenges.

I can't think of a single significant personnel loss globally following either of the last 2 annual bonus rounds. In terms of recruiting, we continue to see a flow of strong candidates who are seeking to leave the large universal bank model to join us.

We recently added senior bankers in U.S. insurance, European financial services and U.S.

industrials, as well as a Senior Advisor for the French market. We continue to be cautious about expanding our headcount too rapidly in a market environment that's still seems challenging, but we expect to continue to add talented and experienced bankers who fit our culture of teamwork, collegiality and excellence.

Finally, I want to comment briefly on our European business. As you know, we focused from the start on building a truly global business.

While we still see ourselves as a relatively young firm with its best days ahead of us, last night we celebrated the 15th anniversary of our London office with a client-focused event for several hundred people at the British Museum. Many of the leading companies in London and even across Europe, were represented by their chairmen, CEOs or other senior officers.

We were founded in the U.S. but we're charged from the start to ensure that whether you are in London or Sydney or in fact, essentially across all the world's developed markets, we are seen as having all the strengths of a locally based firm, while also delivering the benefits of a truly unified global network, that sense of being both local and global was very much in evidence last night in London.

With that, we're happy to take any questions.

Scott, I was hoping to get a sense of the specific drivers that make you hopeful as you look forward. How much of that commentary is driven by the broader market factors that you noted versus your confidence level around specific pending deals and projects that you all might have a high visibility on?

I mean, it's a little bit of both, clearly. I mean, I think we -- a little further, as I think others have said on their call, there are a lot of dialogues out there, there's a lot of interest in strategic activity for whatever reason, there just weren't as many things that got to the announcement stage in the first quarter, whether for us or, certainly, for the market, more broadly as noted by the actual statistics.

So it feels to us like markets perhaps need a little more time to heal to get back to what's really a robust M&A environment, but frankly, we still feel like we're making progress in turning the corner to a more of an up cycle and just was a bit of a pause after a couple strong quarters.

Okay. Great.

And then sorry if I missed this, but you made a comment last quarter that your revenue backlog from announced and pending deals was significantly stronger than in the same point of last year. Given that evolving backdrop that you just laid out in that data, and how's that progressed since the beginning of '13?

I probably don't want to be too specific on that. I think what I said specifically last time was that our backlog of announced transactions and pending transactions for the first half of the year were significantly higher than it was for last year, that remains the case.

I mean, we obviously had some improvement in revenues as part of -- we have a number of quite significant things still in the hopper that should close fairly soon, if all goes as planned. So I think my old statement remains true.

But -- and I wouldn't want to officially give a sort of quarterly update on exactly what the backlog measures up to.

Understood. And then just last one for me.

What do you attribute to relative improvement in activity, in Europe and Australia, specifically to?

I think there's no question things are getting somewhat better there as well. I think, I mean Australia has been a more robust market throughout the entire downturn than even the U.S., let alone in Europe.

So it was a little bit of a slowdown last year against some very robust level of years before for them. And it just didn't -- it's a small -- it's not a huge business, obviously, only one part of Greenhill's probably call it, 20%, 25% of our firm.

So the fact that they didn't have that many things that got done this quarter, doesn't really mean much of anything. We still feel very confident about that business for the full year and beyond.

Thanks, Scott, for broader M&A comments, I think those are super helpful. If we focus a little more on the firm, I guess from the data, I guess that we could see it feels like the back half of the year is really what I guess is most folks are concerned about, just given the fact that we've seen some deals that you've announced in the second quarter, it feels I guess a little bit better.

But help us maybe understand a little bit more from the conversation that, Alex, you guys are having at some level, maybe a little more level of confidence than how the second half of the year could have offered you guys?

I think you'll see that in the coming couple of, call it, 3 months because those will be the deals that we'll end up closing before the year is over. I mean, we know -- what's nice for us last year, that it was very, very back-end loaded.

I mean, this year we're off to a strong start. I think it'll be even stronger as we go through the second quarter.

So there's a lot of time left in the year. So I still feel very good about where things will develop to.

But only time will tell as we get more deals announced.

Understood. And then when you talk about the recruiting pipeline, it sounds like things are still progressing quite well.

And you are still having lots of dialogues with folks. When you talk to your prospects to bring them onboard, to Greenhill, what are, I guess, some of the more compelling arguments do your hear from people who wanted to make the switch?

I guess, is it the culture, competition level, compensation structure? Maybe all of the above.

But curious to hear, I guess, a little bit more flavor on the recruiting pipeline and the reasons.

Sure. Yes.

I mean, first of all, I think, that -- I think, last time I said we felt we -- if we had to guess, would say we would maybe add sort of 5 to 10 MDs. I think that's still right.

It could be anywhere in that range just depending on the number of quality people we see and bring all the way to the finish line. But I think this is just part of a very long term trend that really started heavily in 2008 and has really continued ever since then.

I mean it's a big bank. You're obviously seeing very substantial layoffs even in recent weeks.

You still have a lot of regulatory overhang, there's still questions about what kind of -- are we the banks are we going to really be able to get back to. JPMorgan, for federal court saying big banks are uninvestable, which has been much commented on.

I think, from an employee's point of view, if you're not in a business that requires a big balance sheet, which is the case with M&A advisers, I think you have to ask yourself, do you want to work in a sector where some people think it's so bad, it's uninvestable, in terms of returns. Or do you want to come to a place like ours that is really a very simple business, where there's a lot of continuity, a very collegial structure, frankly no politics, just people focused on clients, it's pretty appealing from almost any perspective.

Got you. I guess, I was just trying to get up to you the bigger emphasis that I think some of the larger banks might have on non-capital intensive businesses like advisory.

Could I guess maybe create a little bit more competition for talent? I don't know if you guys are seeing the same or is it just kind of because you're in the bigger bank, you're all kind of part of the same pool, so it doesn't really matter?

Yes, I'm glad you clarified that. I don't see that as an issue.

What I've said many times to investors who ask that question, why won't you have more competition against the big banks that want to go on non-capital intensive businesses? My answer has always been, I don't think you can try harder than the big banks have been trying for the last 5 years.

I mean, they have absolutely massive resources pointed at this market. Not just to an M&A, but to an equity mandate and debt financing, and all the rest.

So they're not building up those businesses. They may be trying to do some upgrading but they're still not shrinking that businesses in terms of the number of people focused on them.

And I think there's just no doubt that fewer clients will get coverage, they will get coverage in a less thorough way. I mean, we hear lots of things out of big banks from people recruiting saying the big banks are focusing very much on the very biggest clients.

The clients who buy lots of different products from that. And frankly, the more they leave behind, the companies in the several hundred million to a few billion dollar category, which maybe don't need financing and derivatives and hedging and all those things, so aren't that appealing to them, we love clients like that because they tend to be quite active strategically.

I guess just a question here. When we were looking at the public data, I know that, that's not always indicative of actual revenue.

But closed transaction volume for you guys, actually, was tracking really, really strong for the quarter. And so, I guess maybe, could you give a little color to help us understand why, even though the volumes were up so much, revenues were -- didn't show nearly as much relative strength sequentially and year-over-year?

Sure. Yes.

I think what that -- and that's why we tried to give the color about sort of different types of fees and announcements versus closings, and all that kind of things. I mean, the history -- and again, I don't subscribe to all the databases that a lot of you do, but the history has been that we have achieved results that are far, far above what the databases are predicting.

I mean, I think we've averaged something like 100% above, is at least what I've seen quoted in various analysts' reports. The reason we so frequently did that, I mean, of course, it varies quarter-to-quarter, but the reason we so frequently did that, is because there's a lot of kind of hidden revenue.

There's -- I think they don't try to track deal announcement fees, there's financing advisory restructuring, government advisory, all those other kinds of things that typically have had us exceeding the -- whatever a database may calculate as our M&A revenue by a substantial margin. Now this quarter , with just very few announcements, obviously, fewer in the whole industry and, certainly, fewer for us, and with fewer financing, restructuring, the government, the fund placement, all that kind of Other category that usually gets us to a big margin over what the database is saying, we just didn't have that much of that this quarter.

We certainly don't think that's any kind of a trend or anything, which is why I pointed out that our retainers were actually up. We're certainly as busy as ever, and so I think that was kind of a one quarter phenomenon.

But this is a quarter where the bulk of the money came in very visible ways that you can all see from M&A completions and some of the other stuff that's not as visible to you typically, we know just didn't happen this quarter.

Yes, okay. That actually helps.

And is there -- when we look at the -- we tend to look for pending revenue as announced but not yet closed. And a lot of that has shrunk here.

As you closed a lot of deals in the quarter, is there anything that's, number one, is there anything in that pipe that we can see that would lead you to believe that's either similar or dissimilar to the experience we had in this quarter? And then, given that we've seen that pipe, the visible pipe shrink, any -- can you maybe help us gauge your confidence level in periods that are a bit further out?

No, I don't think anything has changed throughout the business, in the sense that it's always a little bit hard to see further out. I mean, last year, if you'll -- I think we had a pretty neutral to -- commentary on the first quarter call.

And I mean our entire year, which was quite a good one, was driven by deals that got announced in June or later. We had just a remarkable streak for about 7 months.

So that kind of thing can happen in this business, and frequently does. We feel like we've got a lot of stuff that's very near-term visible and we got a bunch of other things that we hoped to see announced in the coming weeks and months.

And you'll see them as we get them on the tape.

Okay. And then last one for me.

In the past, you've given an expectation for fixed compensation costs, salaries plus RSUs. Do you have any visibility or expectation around that for 2013 at this point?

Basically, it is. The same range we gave last year would be accurate.

There's no meaningful change to that. It's just some type of -- comp didn't change much in year-over-year, so it's basically the same.

Just to kind of follow up on the last questions. I mean, is there any way we can think about how retainer fees tend to typically turn into announcement fees?

Just to get a gauge for how quickly or the percentage of which actually turned into announced fees?

I don't think you can do that in any sort of precise way. I mean, clearly, we've seen the retainer part of our business grow just as the number of clients we serve and earn fees from has grown pretty consistently over the last few years.

And there aren't a huge number of things where you earn some retainers and the thing goes away forever. I mean, typically, there is some transaction that comes out of it.

Even if there are false starts along the way, and it ends up happening a year later, or something like that. So I think retainers are a good measure of the activity level, they're a good measure of the long-term growth of our business.

But I don't think there's a way you can use that data to sort of predict that 1 or 2 or 3 quarters out, what the revenue might be.

Okay. And then just appreciate the color you guys gave on, certainly, the buybacks and the dividends.

But, I mean, you guys said that you got about $34 million in cash right now. And I guess my math may be off a little bit here, but if I kind of run the numbers here, it looks like you might have spent about that much in the past quarter on dividends and repurchases.

I'm just wondering, given that cash position, how you feel about potential buybacks going forward or the dividend?

Me, I certainly feel great about the dividend. And I feel good about continuing to buy back shares.

I think it's just a matter of how many. I mean, we have many -- you really can't, in a firm like ours, look just at the earnings per share and sort of say, what's the dividend payout ratio?

And certainly, I mean, I think you'll see that's the same amount of cash on our balance sheet at the end of each quarter. It's not like we're going to spend that money to buy back shares and pay our dividend.

We're going to continue to generate revenue and that's what's going to go to pay a dividend and buy back shares. So if you look at our EPS and add to it quite significant noncash compensation, you could do a pretty substantial cash flow, which is way beyond what's needed to pay the dividend.

And that's why it's not a matter of whether we'll buy back shares, it's -- every year, it's just a matter of how much. Last year, we did about 80, I think, and this year we did, 1/4 of 80 in the first quarter.

So I think we feel good about continuing those 2 trends given just the high cash flow generative nature of our business.

In your commentary, a disconnect between buyer and seller price expectations was specifically mentioned. Have you found that to be the second largest obstacle recently to M&A, after general executive confidence regarding the economy?

You know, as I said, that every deal is unique. So I really don't want to be one of those people who claims he's got the magical answers to why deals are or are not happening.

But I do think, yes, clearly isn't just a leftover residual conservatism that clearly comes out of a financial crisis and people being somewhat scarred by that. I do think that there is somewhat of a disconnect between what buyers are hoping to get something for and what sellers are hoping to get has been somewhat of a driver.

I mean, there have been a number of deals, even the ones we haven't even announced -- haven't been involved with at all, and that had been reported in the press, where people thought it was headed for an M&A sale and then the seller pulls in and says, "No, actually we're going to do an IPO." I mean, you're seeing that in some pretty high profile, very high quality assets.

So between what we're seeing privately and some of the things we're reading about other deals, I do think there are cases where buyers are struggling to get to a premium and sellers are not going to sell without a premium. So I think for example, that's part of why you haven't seen a lot of private equity deals.

I mean, you've got some unusual sort of deals like a Heinz or a Dell, where there's either a Warren Buffett or there's a big shareholder like a Michael Dell involved. But it’s not like you're reading about a lot of it going private transactions.

And I think that's because private equity is among the groups that are looking into thinking, "Hey, stock prices ran pretty quickly, do I really want to pay a 30% premium on top of where the share price is now.

Okay, that's very interesting. And can you just remind us of the capacity of your Japan office?

And if you're seeing more activity there?

We have 2 partners there and a meaningful-sized team of 12 or so professionals that is focused almost entirely on cross-border transactions. That's -- they're really an important part of our global network.

During the first quarter, we closed a very large deal for Dentsu buying Aegis in the U.K., about a $5 billion deal. So that's the kind of thing we're looking for over there.

And yes, I would say we are seeing a lot of same interest out of Japan. It's a little bit counterintuitive for people who always think currency drives things, because the currency is a lot weaker and yet, I think, Japanese companies are clearly coming to realize, over time, that they do need to become more global and so we're seeing a number of different sectors -- companies that are more interested in finding things in -- probably particularly in the U.S., but also Europe.

Just a question of clarification. So I'm just trying to figure out, because when you started 2012, you had about -- just looking at the model here, I mean, you had about $146 million -- $135 million in cash.

And if you also include some of the investments, and you had about $29 million in the revolving bank loan. Today, that cash has been -- is down and the investments are down.

So you're kind of down on that, the way I'm looking at it, you're down to about, I mean, $51 million-ish plus the $27 million in debt. But the $51 million is not all liquid because of the private equity pool.

So it's adjusted, it's a little bit lower. So I guess my question is, I mean, how sustainable is the buyback, with kind of where we are, what the revenue outlook is today versus your current, like, net cash position?

As I said a minute ago, I don't think the net cash position has anything to do with the buyback capacity or the dividend capacity. We -- I think you're comparing our cash and investments to where they were 15 months ago.

It is true and, of course, yes, we always said that, and we were liquidating our investments and the whole plan was to liquidate those over time and return the money to shareholders with buybacks. That's part of why we had a very substantial buyback last year.

But where we are today, we can run a very efficient balance sheet. We don't really need any net cash on our balance sheet.

We have assets that are still being liquidated, we have substantial flow of retainers, we have a constant flow of deals that are getting done that generate cash and so, we kind of have a certain amount of cash we run the balance sheet on and essentially, everything above that goes back to shareholders, either in dividends and buybacks. So I would look more at our kind of earnings capacity add and add back to that our noncash compensation expense to figure out what really is the run rate cash flow return to shareholders rather than look at a balance sheet figure.

Okay. Well, thank you all for joining and we look forward to you speaking to you again in 3 months.

Bye now.