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Greenhill & Co Inc  (NYSE:GHL)
Q4 2018 Earnings Conference Call
Jan. 30, 2019, 4:30 p.m. ET

Contents:

Prepared Remarks:

Operator

Good day, and welcome to the Greenhill Fourth Quarter 2018 Earnings Call and Webcast. All participants will be in a listen-only mode. (Operator Instructions) Please note, today's event is being recorded.

At this time, I would like to turn the conference call over to Mr. Patrick Suehnholz, Director of Investor Relations. Sir, please go ahead.

Patrick Suehnholz -- Director of Investor Relations

Thank you. Good afternoon, and thank you all for joining us today for Greenhill's Fourth Quarter 2018 Financial Results Conference Call. I am Patrick Suehnholz, Greenhill's Head of Investor Relations, and joining me on the call today is Scott Bok, our Chief Executive Officer.

Today's call may include forward-looking statements. These statements are based on our current expectations regarding future events that, by their nature, are outside of the firm's control and are subject to known and unknown risks, uncertainties and assumptions.

The firm's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the firm's future results, please see our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date on which they're made. I would now like to turn the call over to Scott Bok.

Scott L. Bok -- Chief Executive Officer

Thank you, Patrick. We reported fourth quarter revenue of $89.1 million, which is 33% above last year's level and operating profit margin of 24% and earnings per share of $0.45. Earnings per share would be $0.48 if you adjust for a tax charge on the vesting of restricted stock award pursuant to new accounting rules that took effect at the beginning of last year and certain other non-recurring tax adjustments related to changes made in the Tax Cuts and Jobs Act of 2017.

For the full year, we had revenue of $352 million, which is up 47 % relative to last year. Our operating margin for the year was 23%, which was negatively impacted by $4.5 million of non-cash costs related to the accounting for the earn-out on our 2015 acquisition of Cogent Partners. And our earnings per share was $1.42. That figure would be $1.61 if you adjust for the vesting of restricted stock awards and certain other non-recurring tax adjustments discussed above.

Focusing first on our top line, the fourth quarter was the fourth consecutive period of substantially increased revenue in comparison to last year. In a year, when advisory revenue growth for our broad competitor group appears to be at much less meaningfully versus last year, we are pleased that nearly every metric for our business is indicating significant improvement. In fact, as noted in our press release, we set a number of records for the year. We had our highest ever level of total fee paying clients, $1 million or greater clients, corporate advisory transaction announcements, capital advisory number of transactions volume and revenue from secondary transactions, as well as record for Canadian revenue, European revenue in local currency terms and global advisory revenue in local currency terms.

While market volatility in the fourth quarter undoubtedly impacted progress on some transactions, it continues to be our view that conditions are generally favorable for M&A activity globally, particularly for the larger transactions that have historically been our primary focus. Based on what we see in public data and here in client dialogues, it is not felt a lot like we are anywhere close to a peak in terms of deal activity.

For example, the number of deals $500 million or greater in size with a European buyer or seller in 2018 was similar to the level of the past eight years and more than 40% below the peak level of 2007. And as many analysts have commented at the level of global M&A activity relative to stock market capitalization remains well below peak levels. Apart from M&A, we are also seeing continued favorable conditions for capital advisory transactions.

Restructuring activity was light in 2018, but we've seen a notable uptick in recent activity likely as a result of a slowing economy and somewhat weaker credit market conditions. Last year, we made great progress in our objective of building a substantially larger team in that area, which have already start to pay off this year.

Finally, on top of the fact that we believe market conditions for advisory services continue to be reasonably favorable for all market participants, we believe that the trend toward increased use of independent financial advisors like our firm still has a long way to go. Turning to compensation cost, absolute dollars of compensation expense increased significantly for the year along with revenue, but our compensation ratio declined to 55% back within its historic range for the years prior to 2017. With respect to non-compensation operating costs, the quarterly and annual figures versus last year were impacted by non-cash accounting adjustments in the two periods relating to the earnout on our acquisition of Cogent. There is also a difference between the two periods relating to the fact that under new accounting standards, which became effective in 2018, we now include expenses that are reimbursed by clients as revenue rather than as an offset to operating expenses. Our non-compensation operating costs for the year were $75.9 million, which includes $4.5 million in non-cash charges related to the earnout adjustment noted earlier. Adjusting for the impact of the Cogent earnout in both 2018 and 2017 and the aforementioned accounting change for reimbursements, our non-compensation operating expenses would have been $64.4 million for the year as compared to $73.4 million for last year or down about 12%.

With respect to interest expense, we incurred $5.9 million for the quarter and $22.4 million for the year, up from last year given the large borrowing we did as part of our recapitalization plan we announced the year-ago September. Going forward, interest expense should decline as we continue to pay down that debt.

With respect to taxes, our rate for the quarter was 30%, which was impacted by a $400,000 charge related to the tax effect of restricted stock unit awards, vesting at a value less than the grand price value and a non-recurring charge of $500,000 for certain expenses, which are non-deductible based on recent guidance pertaining to the Tax Cuts and Jobs Act signed into law in December 2017. For the year, our tax rate is 33%, which was impacted by a charge for RSU vesting for $4.7 million and other non-recurring charges discussed above of $500,000. Excluding those charges, the rate for both the quarter and the full year would have been 24%, which is consistent with our expectations going forward.

Turning now to capital returns to shareholders, we declared a dividend of $0.05 per share consistent with last quarter. Also in regard to return of capital, in the fourth quarter, we repurchased approximately 692,000 shares and share equivalents at an average price of $25.32 per share. As of year-end, we had accomplished 89% of our original $285 million share repurchase goal and had $32.6 million remaining under the share repurchase plan we announced as part of our recapitalization plan.

During the month of January, we have repurchased an additional 303,000 shares in open market transactions at an average price of $27.29 per share for a total cost of $8.5 million. That means that as of yesterday, we had purchased a total of 11.6 million shares since our September 2017 recapitalization announcement at an average cost of $22.52 per share for a total cost of $261 million. This represents 92% of the $285 million in planned share repurchases and leaves us with $24 million remaining to be spent on repurchases. Going forward, we will be opportunistic about the use of our remaining funds aiming to maximize the benefit for long-term shareholders. Given the reduced share count resulting from our repurchase activity, our employees collectively own today approximately 41% of the equity economics of our firm through their holdings of common stock and restricted stock.

At year-end, we had a cash balance of $156.4 million and term loan debt principal of $328.1 million, meaning we had net debt of $171.7 million . As we noted in our press release, the pace of our share repurchases has meant we never got close to the level of net leverage that our recapitalization plan initially contemplated. And we should soon start to deleverage further from the current level by means of scheduled debt repayments and the continued generation of cash flow. While focusing on deleveraging, we will also pursue further opportunistic share repurchases and dividend increases as our leverage declines.

I will close on an update on recruiting and the longer-term potential that creates for us. Including two managing director promotions we made as of January 1, we added 15 managing directors last year. Currently, we have 76 client-facing managing directors globally compared to 71 at the start of last year. Our recruiting pipeline remains strong and we remain intensely focused on continuing to expand our capabilities and increase our scale in order to further enhance the revenue generating potential of our firm. We are excited about the quality of bankers we are attracting and we are doubly excited about the way our recapitalization plan has leveraged the upside potential for both our shareholders and our senior team.

In conclusion, we see strong potential to generate considerably more revenue over time than we did in 2018. We added a lot of new senior talent during the year and that group was too new to have made any meaningful contribution toward our strong 2018 results. In addition for many parts of our firm, 2018 was not a particularly strong year relative to either their history or their potential. Particularly, in certain industry sectors and in the restructuring area, we see the potential for much stronger performance. More broadly, global M&A activity remains well below peak levels relative to market capitalization and European deal activity continues to lag significantly behind the US relative to its scale before the financial crisis. Lastly, a strong US dollar throughout last year reduced to the benefit of our very strong revenue and other currencies. Each of these factors represents further potential revenue upside for us going forward.

In closing, I note that we just posted on our website, a new investor presentation that summarizes much of what I've just said while also reviewing our overall position and strategy.

And with that we're happy to take questions.

Questions and Answers:

Operator

Ladies and gentlemen, at this time, we'll begin the question-and-answer session. (Operator Instructions) And our first question today comes from Devin Ryan from JMP Securities. Please go ahead with your question.

Devin Ryan -- JMP Securities -- Analyst

Great. Good afternoon, Scott and Patrick. How are you guys?

Scott L. Bok -- Chief Executive Officer

Very well, thanks.

Devin Ryan -- JMP Securities -- Analyst

Good. First question here, kind of heard the pipeline comments and just kind of the overall backdrop today, but I'd love to dig into that a little bit more and maybe get a sense of of where you feel like the pipeline is today relative to heading into last year where the tone of conversation are strong. And then Europe, obviously, you have a pretty large footprint there and there's a lot of uncertainty right now just with kind of the ongoing Brexit saga, so I'm just curious kind of your view on the European opportunity in 2019 with some of those moving parts.

Scott L. Bok -- Chief Executive Officer

Look, I would say, we feel pretty good about the level of client dialogue and the pace of winning new assignments and progressing those assignments pretty much everywhere. There are a lot of parts and we're starting easiest with the parts of the world that had good but not their best kind of performance in last year, I think, we feel really quite confident about the potential to do better in those places. Europe, we had a particularly strong year last year, a record year, in terms of local currency values and there were -- look, there was uncertainty about Brexit for the last two years now and notwithstanding that we had our best year ever there last year. So we feel very good about what's going on in our business over there and I think notwithstanding the uncertainty around Brexit, it at least feels like -- and unless there's some big surprise to come along that companies are focused on their strategies and consolidating and and growing through acquisitions. So we still feel good about Europe and likewise about the US and Canada, I noted was a record year for us and we feel very good about that as well. So it's pretty evenly distributed frankly. I mean, I think all parts of our firm are feeling like they've got a good opportunity and parts that were probably the weakest last year, I think, they feel particularly good and the ones that had extraordinary year last year I think feel well positioned to continue to build on that.

Devin Ryan -- JMP Securities -- Analyst

Okay, great. Thanks for the color question. Question on capital so -- I think the buyback was relatively small compared to what we would have thought just given the stock pullback during the quarter. So I -- if it all possible just a little more explanation on why the kind of the slow pace given the dislocation in the stock, if there's anything else going on there, and then, just to clarify as well, in April, once the debt could be repaid in full, how should we be kind of thinking about that? Would you look to refinance the debt or just look for additional stock buyback capacity or kind of what should we be expecting as we're moving closer to that period?

Scott L. Bok -- Chief Executive Officer

First on the buyback, I think we -- look, our stock was volatile throughout last year, and I think we frankly played it very well in retrospect in terms of sort of buying when it was low and buying less when it was high. The average repurchase price I feel extremely good about how inexpensively we've been able to buy and the shares we acquired.

We've slowed down kind of more recently when the share price got toward the higher end of its recent range, and obviously, in December there was a lot of -- somewhat extreme market volatility, not just that in our stock but across all markets and so we kept a little bit of dry powder in case things got even worse, so we can get the stock even cheaper. So really nothing more to read into it than that. We're kind of amateur stock traders here on our own stock, but I think we did a decent job over the last 18 months or so -- almost 18 months of buying in the stock at good prices.

As far as our debt arrangements, we do have the ability to potentially refinance as early as sometime in April and I think we'll wait and see what market conditions are like. I mean, until a couple of months ago, they looked terrific; in December, they looked terrible; and today they look a lot better again. So what it looks like in April, who knows. Clearly, at some point, we think there could well be an opportunity to refinance and bring down the rate because as a first-time issuer, one tends to pay a premium rate. En second lieu is probably inability to gain more flexibility in terms of capital management going forward. So we'll think about that. Clearly, the net debt level we're at today is a lot lower than we thought it would be when we launched our recapitalization plan. We just had a -- we had a very good year and we're able to pay down a lot of debt. We were judicious and somewhat patient about our buyback. So as we see that leverage come down, we'll look for -- again, it's already at a fairly comfortable level. We'll look for opportunities for other ways to return capital to shareholders in due course.

Devin Ryan -- JMP Securities -- Analyst

Got it. Okay, great. And then just last one here. Just -- obviously, 2018 was a good year for recruiting -- as you sit here today and based on the kind of conversations you're having, would you expect that you could do something similar in 2019? And you touched on restructuring, for example, where you added some senior people. Are there other areas whether it be restructuring where you want to get even larger because of the opportunity that's likely coming or how we think -- how should we think about kind of the areas that make the most sense to be focused on for recruiting this year?

Scott L. Bok -- Chief Executive Officer

We certainly are in talks with a lot of parties already and it's a diverse group. Certainly, we would like to grow more restructuring, feel great about what we built last year, but certainly we'd like to get even bigger. There are certain industry sectors where I think we're really underrepresented where we'd like to grow, but frankly some of the ones where we're very heavily represented we see opportunities to add people focus on additional sub-sectors and those areas. We're talking with some people in Europe, we're talking with some in Australia, a lot in the US, as we also did last year or so. I wouldn't necessarily predict a 15 number class of MDs this year, but could we get to possibly there, sure, we could. Would I feel more comfortable saying we might get to 10 or so, yes, I'd really feel reasonably comfortable with that. I mean, each recruitment is something we do very carefully and thoughtfully and it's always impossible until you get to the finish line and we decided and they decide to know how many you will get, but I do think it will be another strong year for recruiting based on the dialogues we have in progress right now.

Devin Ryan -- JMP Securities -- Analyst

Okay great. Thanks, Scott. I will hop back in the queue.

Scott L. Bok -- Chief Executive Officer

Thanks, Devin.

Operator

Our next question comes from Michael Brown from KBW. Please go ahead with your question.

Michael Brown -- KBW -- Analyst

Hi, good evening, guys.

Scott L. Bok -- Chief Executive Officer

Hi. How are you?

Michael Brown -- KBW -- Analyst

Good, good. So just a quick follow up on the recapitalization. So, with the buyback now 89% complete, so assuming the market conditions are favorable, would you expect to complete that this quarter?

Scott L. Bok -- Chief Executive Officer

We've never predicted along the way what we're doing. So it's so small what's left that it is not even really all that relevant. But, look, I think our odds are we will be doing this fairly quickly, but I think by keeping flexible and not forecasting too closely to the market, what we're going to do, I think we've done a terrific job getting the stock in cheap. So that's our main objective, is to get the stock in at the cheapest possible prices and we've done that so far and we'd like to do that to the extent we can with the last portion of it, but again it's not big enough to make a huge difference.

Michael Brown -- KBW -- Analyst

Okay. And then just on the just comp ratios at 55% for the full year, solid ratio, you had called out in the past that the reason the comp ratio is so low is people were leaving and leaving the unvested comp on the table and that was kind of offset by some new hires. So as we looked at 2019, how should we think about what's the right jumping off point. And then, when we look at 2018, how many percentage points of the comp ratio were really due to some of those departures?

Scott L. Bok -- Chief Executive Officer

I -- look, I think that's more detail than it's probably really worthwhile getting into. I mean, I certainly have not said that our comp ratio is where it is because of departures. We probably were able to do such an extraordinary amount of recruiting, 15 MDs in one year, in part, and at the same time keep a relatively attractive compensation ratio because we did have a few departures that happened early last year and we've talked about in prior calls. Going forward, as we put in our investor presentation today, we think the ratio will be -- kind of broadly comparable to where it has been, and the two factors that can swing one way or another are recruiting. I mean, if there's -- if you had a huge number of recruits, obviously, that can impact the comp ratio a bit on the high side, but hopefully lead to a lot faster growth. And on the other side, you're just monitoring what's going on in the market and what it takes to attract and retain people. So, we'll continue to do that as we have in the past. But I wouldn't read anything into a particular number of people who left or exited at some point our comp ratio other than in 2017 has been in a pretty consistent range over recent years.

Michael Brown -- KBW -- Analyst

Okay. Thanks. And just one last one on the tax rate, I think the guidance has trended in the low 20% zip code. Is that still relevant for 2019?

Scott L. Bok -- Chief Executive Officer

Yes, what we've said consistently since the new tax law is low- to mid-20s and what we've said today is other than these one-off things, it would have been 24% for both the quarter and the year, and we still feel like that going forward. I mean, we were somewhat impacted to the negative side by the fact that some RSUs that were granted at higher prices than were at today, vested it at lower prices, and therefore, you get hit in terms of the tax rate. I think it's very possible that swings in the other direction for us. If you look at how much our stock has moved up relative to last year, for example, the grant price of RSUs when it was particularly kind of low price to grant that went out, it could very well go in the other direction for us and we may be sitting here next year where the share price at the time is materially higher than the last few RSU grants and then we're going to end up lower than that 24% figure. So the 24% is kind of a base case figure and whether we're a bit higher than that, as we were this year or a bit lower than that as we could be next year, really boils down to what price is your stock at relative to where you've granted RSUs over the prior four years or so.

Michael Brown -- KBW -- Analyst

Great. And then, just one last one. So as we saw the intense market volatility and the dramatic move up in credit spreads in the quarter, did you notice any real impact on deals or the ability for deals to get financing?

Scott L. Bok -- Chief Executive Officer

We did not. I mean, our business tends to be more skewed toward public companies and frankly public companies that have a strong credit profile, so we did not see a lot of things being set back by the credit market. I mean, clearly -- I'm sure -- as I noted in my comments, I'm sure some deals, the progress was set back across all areas of the market because, obviously, there were no high yield offerings, for example, in the month of December, but other than that kind of brief month, it feels to us like it's pretty much business as usual in terms of pretty favorable credit market conditions to do M&A.

Michael Brown -- KBW -- Analyst

All right. Thanks. That's it for me.

Operator

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

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

Good afternoon. Just a quick question, just back on the capital management strategy from here, as you get finish off the buyback program, it sounds to me like you want -- you're comfortable with current debt levels and you want to remain flexible and be able to buy back stock. But why not -- why not, when that's done and you generate obviously free cash flow put that toward debt pay-down, why not get that net debt down further because that should also be helpful to the stock price just by delivering?

Scott L. Bok -- Chief Executive Officer

Yes, that absolutely is the plan and that's highlighted in hopefully in my comments certainly in our investor presentation. And we absolutely -- we already feel good about how much net debt has reduced since we did this. We are absolutely focus on bringing it down more. All I'm really saying is, we are going to take every penny of cash flow and put it toward that. So, we'll have a debate based on credit market opportunities, as well as the equity price from time to time as to what the rate of deleveraging should be. In other words, you apply every penny of cash flow or do you think about some other -- some capital return along the way and not try to pay the debt down and sort of record time, we'll do that. But we are -- overriding objective is to continue to pay down debt and you can be sure, that's our focus.

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

Okay. And then when we think about -- last year, you had a lot of hires, but you also had some departures. How do you feel about sort net MD headcount this year. If you can sort of get to that, maybe not quite 15, but if you can get to the high single digits or close to 10 and do you envision that being more of a net headcount increase this year?

Scott L. Bok -- Chief Executive Officer

Yes. And as we noted on the release, we have 76 now, we had 71 this time last year, so obviously a meaningful net increase. I noted in our investor presentation, the first time we really ever got quite specific and it's only kind of a general target but we think it's realistic to aim for something like 10% net MD growth; that's a function of three things. We're obviously going to do -- continue to do a lot of recruiting and we see a lot of opportunity there. We're going to have some level of promotions, some years it'll be few, some years it'll be a lot more just depending on who's up in terms of the queue, in terms of our internal people moving up the organization chart. And then you get -- a firm that's 23 years old, it's going to have attrition. You're going to have people retire; we've had a number of people go work for clients over the years; we've had people who didn't work out well and we've had the exit and we've had people who decided that we weren't the best place for them to carry on their career. So there's going to clearly be some of that, but the net of all that, we feel comfortable that we ought to be able to do sort of 10% net increase. We almost even did that last year, but really last year, it was impacted to some degree by the fact that with the recap, as we said at the time we announced that, we were going to take a hard look at at people we're going to bring in a lot of new talent but we're also going to exit some people who are more in the margins and so I think we're largely through that. So I think between external additions, internal promotions and normal attrition, we think aim for something like a 10% annual net MD growth seems about right.

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

Okay. That's helpful. And then just one ticky-tack question on the tax rate. I mean, given where your stock price is today, should we expect the '19 to be sort of neutral in terms of the accounting for stock awards? Or should we still expect a little bit of a hit this year? I think you alluded to maybe it's even a positive. I am just trying to get a sense how do we think about first quarter where the biggest impact is.

Scott L. Bok -- Chief Executive Officer

I would think of 2019 as being broadly neutral. And I think where I would be probably pretty optimistic about 2020 and beyond is that we're really -- our current share price is quite favorable relative to the last three RSU annual grants and it's unfavorable relative to the one, four years ago. So that one rolls off with this one. We go from about neutral at the current share price to something that is a much lower hurdle for next year and so frankly even if our share price was exactly where it is today, a year from now, we would be looking at a benefit in terms of the RSU vesting impact.

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

Okay. Great. Thanks.

Scott L. Bok -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Richard Ramsden from Goldman Sachs. Please go ahead with your question.

James Yaro -- Goldman Sachs -- Analyst

Hi, this is James Yaro filling in for Richard. Thanks for taking my questions. Could you give us a little more detail on sizing the cash available for debt paydowns and buybacks after setting aside a portion of your $156 million in cash for bonuses?

Scott L. Bok -- Chief Executive Officer

I don't want to go into that level of detail. Frankly, we don't even really forecasted in that -- that detail the way. We have a meaningful scheduled debt repayments that we'll be making every quarter; we've already started that's why the debt is down quite a bit from the time we borrowed it and we're going to continue to make those. So that's not really the way these debts, these leverage loans are structured. There's not really much of an incentive; I am telling people the disincentive to sort of prepay. So we'll make those significant scheduled payments and then if and when we get around to refinancing and I alluded to that a few minutes ago, if the strategy is around that, we'll think then about how much do we want to borrow, at what terms, what pace of repayment, et cetera. But I was just saying in answer to one of the other questions, I mean, clearly, the net debt is down a lot. It's down to a much lower level than we had forecasted at the time of the recap that would be at this point and we're going to continue to work to bring that down to -- over time to a fairly modest level.

James Yaro -- Goldman Sachs -- Analyst

Okay, that makes sense. And then, in light of recent market volatility, could you give us any further clarity on how the restructuring business is performing and is this an area you expect to provide a larger contribution to revenue heading into 2019?

Scott L. Bok -- Chief Executive Officer

Yes. That's a good question. As I alluded to briefly in the remarks, we really have seen an uptick in terms of new restructuring opportunities and including some that we've won so that that's always a good sign as well. And so, yes, 2018, I would characterize as a really -- rather quiet year in restructuring. It was wonderful that we got to build a big team and get them out in front of a lot of clients and prospective clients and we're starting to see an increased level of activity with higher rates, tighter credit market, problems in the oil market, et cetera. And I would certainly hope that we have a much larger contribution in 2019 and frankly probably a bigger one than that in 2020 from that group relative to what they did in 2018. It's definitely one of the areas where it's pretty -- we are pretty comfortable that there's going to be a meaningful uptick versus last year and part of what gives us hope for the overall outcome from firm.

James Yaro -- Goldman Sachs -- Analyst

Got it. And then finally, could you talk a little bit about how you're thinking about the pace of non-comp growth for 2019?

Scott L. Bok -- Chief Executive Officer

We don't expect much change there. We -- and I would set aside of course the impact of the non-cash earnout adjustment because that's essentially over those one tiny further impact in Q1, but irrelevant really. So we're expecting a very similar level of non-comp and so I wouldn't look for much change there at all.

James Yaro -- Goldman Sachs -- Analyst

Okay. Thanks.

Scott L. Bok -- Chief Executive Officer

Thank you.

Operator

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

Michael Needham -- Bank of America Merrill Lynch -- Analyst

Hi, good evening. The first question I have is big picture -- what are the main drivers you attribute the strong results to last year? I think your team in Europe did really well. Has that been the primary driver?

Scott L. Bok -- Chief Executive Officer

You know what, I talked about this so much in the past, but to be honest, the primary driver in a fantastically better year was people doing the exact same thing they did the year before and just having sort of better luck in terms of timing and outcomes. Our -- take our European, obviously, we did have a very substantial increase in Europe. It was a particularly soft year than the year before and our record year there in 2018 . But it's essentially the same team. They were there in 2016 for what was a good year in Europe, in 2017 for what was a very low revenue year, and for 2018 which was a record revenue year. So -- from our side, it's hard -- you obviously can't smooth everything out completely and we just can't control the pace at which a client transaction occurs and we can control even less the pace at which that transaction closes after various approvals and other steps before completion. So there's no real magic to what we did to get fix whatever it was 52% better -- 47% better revenue for the year. I think what we really demonstrated -- I know some people worried about of, you know, some people were exited early -- earlier in the year, did you lose the rainmakers. Obviously, we didn't lose the rainmakers and that's why we had such a great result in so many parts of the firm. But there's really no magic beyond that. All the new recruits really and even some have had very immaterial impact on these numbers. So that's all hopefully to provide more upside in the future.

Michael Needham -- Bank of America Merrill Lynch -- Analyst

Okay. And the volatility or difference in results between the two years is that -- can I have it again? I mean, you've been doing this for a long time. I haven't seen that kind of a year-to-year delta. Is it -- was it just really unusual or would you expect results to continue to be a little bit volatile?

Scott L. Bok -- Chief Executive Officer

Look, I think there's always going to be some volatility for any firm in our business. I mean, it's -- what was unusual this year is we have four quarters that were almost identical. I think, literally, a couple of million dollars difference in revenue between the best and the worst, so that was the other extreme. But look, that was a once in 23-year outlier. We had a year that was in the other direction, an outlier like that in 2007, where particularly, in Europe, we had a truly extraordinary year that year and the pound was worth $2 to -- and so when we converted it, it was a really extraordinary year for us, even more so than it was for every other financial institution. So that was once in a quarter-century outlier on the high end and 2017 was on the low end.

I would add that we continue to take a lot of steps, which I think will smooth out volatility over time. I mean, I think having a much larger restructuring business as a hedge against M&A will help. I think the fact that the capital advisory business is growing to be really quite significant and that's a kind of a more granular business with lots and lots of assignments relative to sort of larger M&A deals. We've added more depth in a lot of different regions, whether it's Canada, whether it's Australia, whether it's Spain, that should over time smooth out differences according to where -- which regions there's more M&A in and we've done the same in industry sector groups. So modeling, yes, 2017, I think was a once in a quarter-century kind of negative random volatility on the downside. And so hopefully, it will be nothing like that for another quarter-century and I'll be gone by then. But I think we're also taking a lot of steps to smooth that out to even less than it has been in other years.

Michael Needham -- Bank of America Merrill Lynch -- Analyst

Okay, that makes sense. And then for kind of ongoing competition that you pay in stock, what -- if the buyback is kind of ending and I'm thinking about how the model share count creep apart from any more buybacks that you may do, what's the normal course share dilution from ongoing comp expense?

Scott L. Bok -- Chief Executive Officer

You know, I would suggest you just try to sort of figure that out from the public disclosure and the detail that will be in the 10-K, but don't expect anything sort of dramatic or unusual. I mean, we -- some people sort of overly focused on the awards we made, the five-year clip vesting awards we made to some key people at the time we announced the recapitalization, but from a shareholder point of view, those are really quite modest. We've not done anything unusual that will sort of change the pace, and remember, in addition to the kind of announced recapitalization plan with the $285 million of repurchases, we continue to repurchase share equivalents through the vesting of RSUs. Every time they vest, we get close to half of them back through a repurchase and that will continue apart from the recap plan. So I wouldn't expect any meaningful change in the rate of delusion relative to what you've seen in recent years.

Michael Needham -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you.

Scott L. Bok -- Chief Executive Officer

Thank you.

Operator

(Operator Instructions) Our next question comes from Brennan Hawken from UBS. Please go ahead with your question.

Brennan Hawken -- UBS Investment Bank -- Analyst

Hi, Scott. Thanks for taking the question. Just wanted to follow up on some comments you just made on Cogent. Can you help us think about how to frame that revenue base? I really hear you that this is a different -- it's a -- that the idea that it's a bunch of small transactions, a lot more stable. Clearly, we had the trim below the earnout and then the come back into the earnout last year, so that helps frame, at least to some degree, but do you feel as though the 2017 performance was weak for certain idiosyncratic reasons and '18 is really more how you feel that the group is now fully stable and secure and able to achieve and perform at that level? And if you could maybe help us out in understanding those dynamics, that would be great.

Scott L. Bok -- Chief Executive Officer

Sure. Good question, actually. You know, we've bought that business on the assumption that it would be a good acquisition if it made about $40 million a year of revenue. And that's why we set the earnout at that level and frankly, in the first couple of years, they really barely missed the earnout. So they were kind of in that ballpark, but just short of it. The business has grown a lot, really starting in 2017 and significantly more in 2018. I don't think it's as cyclical as the M&A business in terms of when you get into a downturn or recession. I think, arguably, there may be more forced sellers of secondary interest in PE funds and so on. So, I do feel like the more recent performance by them is more typical. I don't think it's some unusual period and frankly, I think we can build on it. There are areas of the business where they really are that team, really dominates them, have extraordinary market share.

There are other aspects of the business where they have a much smaller market share and it should be a lot bigger, if we apply all the resources of our firm to help that team win more in some of those other areas. So we feel like 2017 was a very good year for them, 2018 was another record year for them and we'd be pleased if they did the same in 2019, but frankly, I'm hopeful that they'll do better. So that, hopefully gives you some sense.

Brennan Hawken -- UBS Investment Bank -- Analyst

Yes, it does. Thanks for that Scott. And then thinking about -- you guys haven't always highlighted Europe and the proportion of revs but it looked pretty strong and actually kind of got back to the level where it was many years ago for you guys. You referenced that you're feeling a lot better about Europe and it could get back and be even stronger, if it's able to get back to how the region has performed in prior cycles. But is there -- do you think that, that's reasonable in the near term or were there some particular trends -- obviously, it's a lumpy business, so maybe there's some transactions that could of fallen. How can you help us level set in thinking about that component of the mix for you? And then was that what had to do with the FX gain being a swing in the positive this quarter versus a year ago? Thanks.

Scott L. Bok -- Chief Executive Officer

Yes. These are -- first on the FX gain, it really had nothing to do with that. There's kind of random movements between -- frankly, Brazil's been a very kind of volatile currency. There is been some movement back and forth in sterling and euro. And sometimes, just a random timing, when you collect a fee versus -- I'm sorry, when you earn a fee versus when it's collected, there are going to be small movements. So I wouldn't read anything particular into the FX move.

As far as Europe, in general, look, we've always felt like we have a great business there literally for a full 10-year period, from 1998 through 2007, we made as much money from European clients as American clients. Look, I don't think that's probably realistic at this moment because we have kind of a disproportionate number of senior bankers in the US versus Europe but that is a terrific franchise over there. I think it can continue to grow. We have added some resources while a lot of our recruiting test year was US focused. Toward the end of their, we added a senior telecom person in London. We added an industrial banker in Stockholm. Obviously, it wasn't that long ago. We launched a team in Madrid. So we're hopeful that we can build in what's now a 21-year history in that market and continue to grow it. And I think if European M&A activity generally returns to kind of a reasonable relation relative to the scale of US M&A activity that would be a big move and a big tailwind in our favor and certainly would help firms like ours that have a big European history and footprint.

Brennan Hawken -- UBS Investment Bank -- Analyst

Great. Thanks for the color, Scott.

Scott L. Bok -- Chief Executive Officer

All right. Thank you everybody for dialing in and we look forward to speaking to you again in about three months. Bye now.

Operator

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

Duration: 43 minutes

Call participants:

Patrick Suehnholz -- Director of Investor Relations

Scott L. Bok -- Chief Executive Officer

Devin Ryan -- JMP Securities -- Analyst

Michael Brown -- KBW -- Analyst

James Mitchell -- The Buckingham Research Group Incorporated -- Analyst

James Yaro -- Goldman Sachs -- Analyst

Michael Needham -- Bank of America Merrill Lynch -- Analyst

Brennan Hawken -- UBS Investment Bank -- Analyst

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