Greenhill & Co., Inc.
Q4 2016 Earnings Call Transcript

Published: 27 Jan 2017

[Operator:]

Good day, everyone and welcome to the Greenhill and Company Incorporated Fourth Quarter Earnings Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions]. Please also note that today’s event is being recorded. At this time, I would like to turn the conference call over to Mr. David Trone, Director of Investor Relations. Sir, please go ahead.

[David Trone:]

Thank you, Jamie. Good afternoon and thank you all for joining us today for Greenhill’s fourth quarter 2016 financial results conference call. I am David Trone, Greenhill’s Director of Investor Relations and joining me on the call today is Scott Bok, our Chief Executive Officer. Today’s call may include forward-looking statements. These statements are based on our current expectations regarding future events that by their nature are outside of the firm’s control and are subject to known and unknown risks, uncertainties and assumptions. The firm’s actual results and financial condition may differ possibly materially from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the firm’s future results, please see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no obligations to update any of these forward-looking statements after the date on which they are made. I will now turn the call over to Scott Bok.

[Scott L. Bok:]

Thank you, David. We finished the year strong with fourth quarter revenue of $101.6 million, up 34% from the prior year. For the full year we achieved revenue of $335.5 million, up 28% from the prior year. Our compensation ratio was 52% for the fourth quarter and 54% for the full year, down two points compared to 56% last year. Our non-compensation expenses for the fourth quarter and full year were down meaningfully in absolute terms resulting in a significantly lower cost ratio. Together, higher revenue combined with lower cost ratios result in the pre-tax profit margin of 32% for the fourth quarter and 26% for the full year. As is typical with us and in contrast to our peer group, all those figures reflect all GAAP compensation and other costs with no pro forma exclusions. Our effective tax rate was 27% for the fourth quarter and 31% for the full year, in both cases, well below last year’s levels as a result of increased foreign income and lower tax rate jurisdictions. Our earnings per share were $0.74 for the fourth quarter and $1.89 for the full year, both more than double last year's levels. In every respect our results for the quarter and year were consistent with or better than what we had indicated to investors throughout the year. Now, we will go into a bit more detail on revenue, cost, capital management, and the outlook. With respect to revenue 2016 was a very good year for us by any measure. First our 29% annual growth in advisory revenue came despite a decline in global transaction activity and a record year for deal failures. Second, our strong revenue growth compares very favorably to what public reports suggest is around 5% aggregate decline in advisory revenue for our full public competitor group. In fact ours was likely to be the highest or second highest annual growth rate of any of the 15 firms that publically report an advisory revenue figure. Our market share gain in 2016 follows a long history of the same demonstrated by the fact that over the 17 years of data available, our advisory revenue has tripled compared to the largest advisory firm Goldman Sachs and more than doubled versus the largest independent advisory firm Lazard. Third, our 2016 revenue performance demonstrated the breadth and diversity of our revenue sources as strength primarily in our U.S. and UK M&A businesses overcame very modest revenue contributions from Australia, Latin America, and Japan, the fact that foreign currency fees translated into fewer U.S. dollars given the strength of that currency, and a small decline in revenue from capital advisory which was more impacted by recurring market volatility throughout the year than our M&A business was. And fourth, our revenue performance demonstrated the value of our global network and our culture of teamwork as more than 40% of our revenue came from cross border transactions. With respect to cost and profitability 2016 was also a very good year for us. Our 26% pretax profit margin was the best in several years and the seventh time in the past 10 years we have achieved at least 25% margin on a GAAP basis, a level that only one of our peers has ever reported and that was in only a single year. Turning to capital management, it is worth noting the completion of another year of a strong dividend policy, which today provides shareholders with about 6.25% yield. If you use as a simple measure of our cash flow, the sum of our net income and the non-cash portion of our GAAP compensation, we spent 58% of that cash flow on our dividend last year. In the years since M&A activity sharply declined at the start of the financial crisis in 2008, our dividend required only a cumulative 62% of that cash flow and that is why we remain comfortable with our dividend policy and thereby paid out more than $500 million in dividends over that time. On top of maintaining our dividend, we repurchased 264,000 shares in the fourth quarter and 1.2 million shares or share equivalents for the full year. As a result our track record of having a share count almost unchanged from the day after we went public nearly 13 years ago remains intact and sharply differentiates us from our peer group. Despite the dividend and share repurchases, we ended the year with a strong balance sheet with significantly more cash than last year-end and with a cash balance in excess of our total debt. For 2017 our Board has authorized up to $75 million of share repurchases. Another topic related to capital management is the earn out on our acquisition of Cogent Partners as we approach its second anniversary at the end of the current quarter. As our press release notes, this business needs a stronger than typical revenue result in the current quarter despite the fact that the first quarter is historically a lower revenue quarter than average in order to achieve the earn out on the first of two tries that are provided for in the acquisition agreements. If the earn out is achieved we have multiple alternatives for funding the resulting $18.9 million cash payment including cash and or additional bank borrowings. If revenue falls slightly short, there is a second chance to achieve the earn out after two more years. And the last topic we're touching on in relation to capital management is the prospect of a reduction in the U.S. corporate tax rate. If the rate were to be reduced to a level in the range of possibilities being discussed in Washington, we would not only benefit from significantly higher earnings and cash flow but we could bring significant cash from overseas to the U.S. with little or no tax leakage in order to reduce debt, and or increase returns of capital to shareholders. Looking ahead to 2017, we expect a strong start to the year in revenue terms. With respect to the full year ahead based on what we can see internally, client dialogues regarding M&A continue to be strong in the U.S. and UK. We expect a better year than last year in Australia, Japan, and Latin America, and we expect to do better than last year in restructuring advisory. Assuming the reasonably stable markets we also expect to generate more revenue in both the primary and secondary capital advisory businesses. For this year and beyond our largest potential source of revenue outside is probably Europe given the fact that we have a strong brand presence there and in 2016 the number of transactions $500 million or greater in size fell to a level now 54% below its 2007 peak. When Europe returns to its historic place of having a M&A market comparable to the size of the U.S. market clearly we should heavily benefit. Separately with respect to this year and beyond, we also believe that regulatory and tax changes proposed by our new President should add further momentum to transaction activity in the U.S. and perhaps elsewhere around the world if economic growth accelerates as many commentators currently expect. With respect to cost in 2017 our compensation ratio will likely be similar to the level in 2016 with the ultimate figure a function of our revenue level as well as the amount of recruiting we accomplished. On the non-compensation cost side we expect our 2017 cost in absolute dollars to be similar to what they were in 2016 which was $6 million below where they had been in 2015. With respect to taxes we expect an effective rate in the low to mid 30% range before any impact from a reduction in the U.S. corporate tax rate. Looking further out we are focused on continuing to grow the firm in three directions, more geographic coverage, more industry sector coverage, and more types of advisory services offered. We recruited six Managing Directors from outside the firm last year and based on the status of current discussions expect to recruit more perhaps substantially more in 2017. In addition as noted in our press release we promoted six client facing bankers to Managing Director earlier this month. Several of our top performers among Managing Directors in 2016 were people who came up through the ranks starting as long as almost 20 years ago, and we expect that homegrown group to be an increasingly important part of our senior talent pool going forward. With the promotions announced today we are at 73 client facing Managing Directors, about a third of whom have been with the firm at least 10 years. And a substantial majority of whom have been with us for at least five years. Finally, as we look ahead to the future it's worth noting that analysts seem to have repeatedly underestimated the continuing strength and diversity of our business. Our fourth quarter earnings per share was more than 100% above where consensus estimates stood a month before that quarter began and were 10 times higher than the lowest estimate at that time. Similarly our third quarter EPS results were 37% above where consensus estimates stood a month before that quarter began. And our second quarter results were 51% above where consensus estimates stood a month before that quarter began. Clearly we are generating revenue from our client base in ways that may not be visible to or accurately measured by external databases. Our goal as we continue to develop and expand our business is to further grow and diversify our sources of revenue for continued strong performance over the long-term. With that I'm happy to take questions.

[Operator:]

[Operator Instructions]. Our first question comes from Brennan Hawken from UBS. Please go ahead with your question.

[Brennan Hawken:]

Oh hey, good afternoon, how you doing.

[Scott L. Bok:]

Hey, how are you.

[Brennan Hawken:]

Good, thanks. So one question just generally on recruiting, how are you feeling about the recruiting picture here next year, we're going to -- it's seems like there's a pretty decent amount of optimism among some of the larger banks, do you think that that's going to maybe slow the opportunity for recruiting or do you think that the idea that we could get M&A going and you feel like you've gotten more momentum at your own firm here would allow for and make Greenhill more attractive place and you will actually be able to recruit a greater amount than last year?

[Scott L. Bok:]

I think in general my comment about recruiting is based on very specific discussions with specific individuals at this point, all of whom received today's press release a few minutes ago and hopefully were further encouraged to join us. But in general terms look there is no doubt that big banks are looking better than they were in October. Had a good quarter for trading revenue and so on but I still think there will be a significant flow of M&A bankers who decide that notwithstanding that they'd rather be in a firm like ours. So we think and there are just so many specific circumstances in every bank where somebody loses out in a political battle, somebody else gets ahead of the group job, or whatever it may be where -- I mean there's just a constant movement of people I'm sure you realize at all firms and I think we can benefit from that.

[Brennan Hawken:]

Okay, that's fair. And then getting to the point on revenues becoming trickier to see using traditional methods and databases, that's a really fair point, can you maybe point us to what you think might be a better indicator or I know that you guys have been really pleased with the Cogent transaction. They are really close to the earn out as you referenced in your comments. Is that a larger contributor than in the past and is that what's causing some of the difficulty and if it is it maybe -- is that something that you guys might break out and disclose as its own line item on a go forward?

[Scott L. Bok:]

It's definitely not that issue at all. I mean as I know in the in the press release and in the comments in fact having been sort of a little bit ahead of the run rate to achieve the earn out or they're actually slightly behind. And in general why did it end up being somewhat of a slightly down year for capital advisor both primary and secondary as I noted in the release. So it's not like we got sort of a surprising amount of revenue from though there is in fact those were more impacted as I said by sort of Brexit and other volatility related things in the M&A business was. So I think -- I mean frankly where we made a lot of our money, a very, very large amount of our money last year was in the good old fashioned M&A business in the U.S. and UK. I don't know why the databases maybe don't get that right. I mean I think look they certainly don't track restructuring as much as they do M&A with them and with an M&A if possible. They're underestimating the roles we are playing and the fees we are getting. But unfortunately there's no easy answer for you. We're making it right in the absolute core business of M&A and I think at least from what I see translated from data bases sort of analyst reports I think people are not seeing everything that we're doing.

[Brennan Hawken:]

Okay, okay, that's fair. And then last one on that Cogent earn out, just a clarification question, I believe I read in the Q that that is an $80 million target over a two year period right and I think you referenced this in your comments too where there's one two year window that's this April. And then the next is basically two years after that, do I have that right?

[Scott L. Bok:]

You have that exactly right. They get two shots at getting to the $80 million level or call it $10 million a quarter average level for eight quarters and that is exactly right.

[Brennan Hawken:]

Okay, great. Thanks for all the color Scott.

[Scott L. Bok:]

Okay. Thank you.

[Operator:]

Our next question comes from Devin Ryan from JMP Securities. Please go ahead with your question.

[Devin Ryan:]

Hey, good afternoon Scott, how are you?

[Scott L. Bok:]

Great, how are you Devin.

[Devin Ryan:]

Doing well, so yes, just on the broader kind of picture for M&A, obviously there's kind of this discussion in the market around activity getting an air pocket just as expectation seem to be recalibrated, doesn't really seem to be happening in volume at the start of this year. So, to kind of think about timing of announcements, when you look at your backlog and the clients you are speaking with you, how much do you see all the developments do you see impacting timing if at all? And then I know it's not the same across every sector so if you can just give a little flavor of maybe what sectors seem to be perking up a little bit or if there's any areas that maybe are hurting your opinion just given what's going on?

[Scott L. Bok:]

Look I think in general the change of administration has been seen as a very pro business kind of shift in terms of economic and fiscal and regulatory policy in the U.S. I think it has caused the so called animals spirits to begin to be unleashed and I think companies are feeling pretty positive about the future. And I think they're feeling in the mood to sort of do things that will strategically expand their business. I won't say that all these changes are going to affect everybody equally. Certainly some companies will be impacted more than others. But I think in a lot of different sectors the people we talk to seem pretty optimistic about what's happening even though the details of it certainly haven't been either unbilled or implemented at this point. But I don't get the sense people are sort of waiting around to see what's going to happen. I certainly don't have that sense likewise in the UK where you have the uncertainty about Brexit that could in terms of the details of how to implement it could be a multi-year thing to see how that unfolds. But we also don't get the sense that people are sitting on their hands waiting for the details to come out there. It just feels to us at least like there's certainly a shift in terms of pro-business mood. Obviously you're seeing that reflected in a very robust stock market seemingly day after day and I think some of the same enthusiasm driving that is what we're hearing people talk about in strategic dialogues.

[Devin Ryan:]

Okay, that's helpful. And then just with respect to the outlook for restructuring just given kind of that improved business confidence. I mean are new mandates slowing significantly or is that the expectation in 2017 but maybe that's offset by a look better M&A backdrop than was anticipated, just trying to think through how that business gets impacted?

[Scott L. Bok:]

I mean we're feeling pretty positive and as I said I think we'll make more money in restructuring advisory in 2017 and 2016. I mean these tend to be long tailed assignments as you know. So a lot of the things that generate revenue for us certainly in the first half in some cases even throughout the year are going to be things that we started quite a while ago. But we're also seeing a fair number of the new mandate possibilities. As was said a few minutes ago I mean, it's not like every sector is being impacted by changes similarly. We've seen interest rates move up a little bit and I think that could have an impact on some companies. So we're feeling reasonably positive about both M&A and restructuring although I’ll grant you that we're all going to learn a lot more about what's going to happen with the Economic Policy and then with the economy as the weeks and months unfold here.

[Devin Ryan:]

Got it, okay. And then just the last one around the outlook, I know I can't get too specific but just thinking through the context of people have underappreciated either revenues over the back half of last year and here we are in 2017 and the data sources are what they are, but the expectation is for a much stronger start to 2017 than 2016. I know the bar was maybe low from the beginning of the first quarter of 2016. As far as you can see into 2017 based on the backup you see today I mean is the expectation that if you look at maybe the first half with you try out some visibility in the first half of the year that that could look quite a bit better than the first half of last year, just trying to think through what that comment of kind of the year starting better, what that really means, is that just the first quarter versus the low first quarter barb last year if nothing else we can read through to that?

[Scott L. Bok:]

Well, look I mean we are obviously not giving quarterly revenue forecast. I think my point on the estimates which to some degree has something to do maybe with databases but I think it is broader than that is that there was a sense certainly among a lot of the reports I read that at one point we were going to have a great first half but a terrible second half and then it turned out we had a good third quarter. So there was the sense we're going to have terrible fourth quarter. Then I said the fourth quarter is actually I mean best of the year and so you see a lot of skepticism about the next year. I think what people may be missing is just the recurring ongoing nature of the business in the sense that every day we're getting opportunities for a new mandate and signing things up. It is not every day we have a deal announcement but there's a lot of granularity and diversity to the business that means that it is a recurring business as opposed to maybe a sense people, at least some people have expressed that there is sort of some successes and they're going to roll for it and there's nothing after that. I mean that's just -- we've been doing this 21 years and that's just not the way it works.

[Devin Ryan:]

Got it, okay and then maybe just last one around the recruiting as you mentioned hopeful and thinking that this could be an even better year than last year from a recurring perspective. How does that impact kind of use around managing the comp ratio and are you comfortable if you do have an opportunity to recruit a lot of bankers let the comp ratio go a little bit and obviously if you obviously had better revenue year you still have a higher comp ratio. How are you think about the interplay between the revenue growth and managing the comp ratio?

[Scott L. Bok:]

I think we recruit without thinking about the year one financial impact. We're going to take all the really good people we can find who we also think fit well in our culture and fits specific needs. You know reality is that you're not going to find 30 of those in a year, so you sort of take on the number you can find and you think will fit in appropriately. So I don't expect any significant impact on the comp ratio but look if we got an extraordinary opportunity to really add a lot of people or to do and it could be an acquisition, it could be anything. If we got an opportunity to really strategically advance the business and it had short-term negative impact on the comp ratio I think we would be flexible to let that happen and I would guess that our shareholders would applaud that.

[Devin Ryan:]

Got it, okay, great. Thanks a lot Scott.

[Scott L. Bok:]

Sure.

[Operator:]

Our next question comes from Jim Mitchell from Buckingham Research. Please go ahead with your question.

[James Mitchell:]

Thank you, good afternoon guys. Scott maybe on -- maybe in terms of the outlook in Europe, it seems like January has gotten off to a pretty decent start with a couple of large transactions in Europe. What's your sense there, I know last year was such a tough year, do you do you feel -- do you get a sense that Europe is starting to come back and that could be a positive for you guys given your exposure there, how do you -- what's your sense on the ground in Europe in particular?

[Scott L. Bok:]

I mean you know how the business works in terms of announcements versus completions and when you tend to get paid based on completion. So I would say last year was a very weak year in terms of the whole industry and European announcements. But we actually had quite a lot of closings so we did quite well in Europe. But I think we and everybody else had a lighter year in terms of announcements. Look I think at some point it's going to get a lot better than it has been. I think last year the uncertainty and then the shock around Brexit had a meaningful impact on deal announcements in Europe. And if you look at statistics like the UK alone it was just a really dramatic effect in terms of a decline in announcements. So I sort of feel like it has to get better this year than last year in terms of announcements in Europe without a Brexit shock like that. And I do think at some point, just like in past cycles when you have been in the healthier part of the cycle with the European market in size looks similar to the U.S. market and we're a long, long way from that today. But when we get there, we really think we should benefit significantly.

[James Mitchell:]

Right, makes sense. And if you do or if you're adding some headcount and we continue to see growth, can you continue to keep non-comp slashed or do we at some point start to see that growing?

[Scott L. Bok:]

Well, if you look back at our history there has been a little bit of a step on where our non-comp tends to stay quite flat and then if you do a really big expansion like in 2008 to 2010 we had a lot of offices. So moved up some, then later we acquired Cogent, that was quite a lot of people. So moved up some, I think with sort of a reasonable level of growth I wouldn't expect it to move much at all this year which is why we said the non-comps should be similar. I mean yes, you have a little bit more in some cost but our office pays us such that we have room for these people and we are welcome on board and we are pretty good about managing other costs. So I don't think there's any impact there. Obviously if we get really very substantial opportunities to grow there could be some impact but I wouldn’t expect a lot in near-term.

[James Mitchell:]

Okay and then just last one on the new accounting guidance on the tax change for compensation, how should we think about that in the first quarter for you guys?

[Scott L. Bok:]

I mean in my mind it’s from an investors point of view business spend that is kind of irrelevant frankly. I mean it’s an accounting adjustment in the way you treat restricted stock that at best it has no impact on cash. So we will report to investors on numbers that complies with the new GAAP regulations but we will also indicate to investors what the tax rate would be and would have been on sort of a historic policy. And so to me it’s a lot the company's going to be doing. It is going to cause some probably strange movements up and down and it will vary over time. So I think it's one of those things that investors will want to probably just look through.

[James Mitchell:]

It's another volatility gift from FASB but it's not -- I think the key is it's not a cash item so, we got to do that. Okay, thanks, that's it for me.

[Scott L. Bok:]

Alright, thank you.

[Operator:]

Our next question comes from Jeff Harte from Sandler O'Neill. Please go ahead with your question.

[Jeffrey Harte:]

Good afternoon guys. You mentioned a revenue recovery in some of the areas that had been weaker in 2016 in Australia, LatAm. Are you actually seeing activity levels pick up in some of those areas or just pointing out that 2016 was so low there's only one way to go from there?

[Scott L. Bok:]

You know both frankly but no, I'm saying specific things we are doing that make me quite confident that some of those weaker areas will do better in 2017. So obviously no one can forecast what's going to happen in the whole world over the course of the year. There are just some areas we’re pointing out that we're quite confident we should do materially better in and there are others like restructuring advisory also said we think we will do better then but it's not -- we're not just sort of giving you a general statement there. We have a real sense of what people are working on and what's going on in those markets.

[Jeffrey Harte:]

Okay and we tend to focus a lot on MD counts when you talk about hiring. Is there a revenue benefit to be had by building out the non MD level banker account for Greenhill so like expanding beyond just hiring MD's?

[Scott L. Bok:]

We're always ready to add people at that level and we do. I mean frankly if you even look at people who've been promoted to MD here a lot of them, I mean some started right out of business schools are very young people. Others were laterally recruited as senior associates or VP’s or something like that. So -- and very often when we sort of put out a press release but when we recruit an MD in a new area we very often are bringing in one or two or sometimes more people who may have worked for them in the past or may at least have the skills in whatever sector those people work in. So we are -- I think we're doing what it takes there. We've got an absolutely fabulous team I truly believe globally at that mid-level and I think they can do some more. But I think we will also be glad to add some recruits if they get too busy.

[Jeffrey Harte:]

Okay, thank you.

[Scott L. Bok:]

Thank you.

[Operator:]

Our next question comes from Mike Needham from Bank of America Merrill Lynch. Please go ahead with your question.

[Michael Needham:]

Hey, good afternoon everyone. I just have a couple of questions on your hiring focus. Over the last two years I think a lot of the new hires have been outside the U.S. in Latin America, Canada, London, I think energy also. Can you just give us a sense of how they've performed as a group and are you still focused on expanding outside the U.S.?

[Scott L. Bok:]

Look I think it is hard to sort of give a measurement of how people are doing. In some cases they have only been here for months but I am very pleased with the early signs from people we've recruited and they've been a pretty good mix I think. If you think about within the U.S. obviously a lot of the Cogent team was in the U.S. We've built up the energy team quite a lot in the U.S. You're right we added also in Canada and the UK. The Latin America team works to some degree at least the non-Brazil team works out of New York, so they're here as well. So I am excited to recruit frankly in every direction. I mean we expect to add more M&A bankers in the U.S. We also expect to continue to build out in Canada. We have some interesting possibilities in Europe where we are hopeful that activity will increase back to a historic norm. So I think you'll see us add to the firm in almost everything we do over the course of 2017. And that frankly is an easier way to sort of grasp people out of the organization anyway rather than add a huge number of people in one space. If you added one to each business area, one to each office, something like that it becomes very easy to integrate people to be part of the team and the way we work here.

[Michael Needham:]

Okay, thanks. And then just so I understand for 2016 the gross versus net headcount changes, you started the year at 71 Managing Directors and ended at 67 ex the 6 promotes. So, on the like I guess that basis you're down 4 and I think you hired six externally and if you did a handful of promotions does that imply like 15 Managing Directors departed last year or I'm missing something?

[Scott L. Bok:]

I think you're missing a lot because it's nothing like that. I mean it also we sometimes have people move from Managing Director roles to what we call Senior Advisor which is a slightly different role and allows people to do some different things. So it's nothing like what you suggested. And if you want to talk to us individually and go through anything like that, that's fine. But I don't actually think it's that useful to try to do sort of an accounting exercise of all the comings and goings because the goings have been very, very modest in recent years in terms of any impact on revenue which is why we had such a great year this year. And I think the comings are having an impact on these numbers but I think we’ll have a much bigger impact on our numbers in the next couple of years.

[Michael Needham:]

Okay, got it. Thank you.

[Scott L. Bok:]

Thank you.

[Operator:]

[Operator Instructions]. Our next question comes from Steven Chubak from Nomura. Please go ahead with your question.

[Sharon Leung:]

Hi, this is actually Sharon Leung filling in for Steven. My first question is, one of the things that's been proposed as a source of funding for a reduction in the U.S. tax rate is that interest expense may no longer be tax deductible moving forward. Obviously nothing is certain yet, so we won't know for sure but how does this inform your business outlook and how do you think corporates are handicapped in this risk?

[Scott L. Bok:]

I don't think that would have really any direct impact on us in the sense that we don't have much debt and if we had a lot tax rate we would have even less because we bring cash back home. I mean it could have some impact pro and con on the M&A side. I mean frankly it could lead to a lot of transactions as highly leveraged companies looked to be acquired by companies with stronger balance sheets. But I don't think companies are spending a huge amount of time thinking about that particular issue at least yet. I think if the markets felt like there was a high probability of losing the deductibility of interest you would see highly leveraged companies in the stock market getting crushed and you would see those with very strong balance sheets doing a lot better. And I don't at least get the sense that that’s happening. So in my view that would be a pretty dramatic change in tax policy and I think like a lot of other business people, I probably am going to be skeptical of something that dramatic at least without some long transition period.

[Sharon Leung:]

Okay, great that was helpful. And then just another one on the potential impact of the GOP regime. You just noted that over 40% of your revenues are from cross border activity and while it's still early days, what are your thoughts on the GOP's protectionist rhetoric and whether or not that could derail some of the cross border activity in the near to immediate term?

[Scott L. Bok:]

I'm honestly not too worried about that and I think you're saying transactions even announced in the early part of this year. I think you've seen some abilities come from us but we will echo that. I am honestly just not that worried about that right now. I mean again if the market believed we were going to have a shift to high level of protectionism and trade wars, I think the stock market would be behaving differently than it is right now. So I think there's rhetoric and certainly there will be I’m sure intervention in certain particular corporate situations or transactions. But I think on the whole our perception and I think perception of the clients we talk to is that we have a very pro business regime in Washington now with a lot of senior appointees who business people are quite familiar with and in many cases like quite a lot. So, I think that is outweighing any risks of policies that business people won't like.

[Sharon Leung:]

Okay, great. That's it for me thanks.

[Scott L. Bok:]

Okay, thanks. So, I think that concludes our last question. So thank you all for joining and we will speak to you again in a few months.

[Operator:]

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