HLI - Earnings call transcript Q2 2021

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Houlihan Lokey's Second Quarter Fiscal Year 2021 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Christopher Crain, Houlihan Lokey's General Counsel.

Christopher Crain

Thank you, operator, and hello everyone. in have release, our on which Lokey at should year quarter the everyone section. website earnings Relations XXXX can www.hl.com now, access second to fiscal Houlihan By Investor the be found

Before to we need everyone which statements. the expect, that you such are other XX, Form forward-looking remarks, filed usually including or today results differ These include phrases detailed are the quarter should risks condition. use of regulatory operating for could when therefore, forward-looking guarantees that exercise financial performance. to of to as on and subject discussion September of will interpreting recent filings, when caution words we remind materially them. encourage SEC discussion investors expect, to risks These our similar our not our statements XX-Q a future for relying impact and future begin the review cause are anticipate, filings numerous formal SEC. what we statements, XXXX that to all results it identified by uncertainties and will, could more the should actual you and our We ended the of with We is from refer

remarks, have Officer; substitute Beiser, most the that, financial in is then on the we open call, not With Scott. Alley, presentation Financial and call Houlihan to measures They Officer to should some be be non-GAAP today's our call investor the the will During Lokey's GAAP our today, of hl.com GAAP. call directly the these we and opening over believe results performance. questions. Executive will provide or comparable measures release A website. will turn financial accordance These measures with considered a earnings measures, can company. company's as to we Chief I'll and of Lindsey the Chief which for Hosting Scott discuss the we our prepared available useful reconciliation isolation financial in in evaluating in

Scott Beiser

Christopher. to second you, fiscal Welcome earnings quarter call. Thank our everyone XXXX

Notwithstanding been of successfully seven little a effect have pandemic world provide the individuals and cases firm months personal with few COVID-XX. home the employees, for on business engineered work a We families can work now our had We've everything firm we has firm This challenges, do we as and primarily been for and very shareholders. successful as a terrible and help. solid best has to ongoing continue around over working to blessed our we and quarterly produced from as a as environment styles the can in our results. safe and clients order to

million, second reported first $XXX quarter fiscal the up from from last were slightly in XXXX Our improved million significantly the revenues and quarter. year $XXX

Our $X.XX, X% reported and adjusted earnings the first year up in were from the major $X.XX a last share per improvement from quarter.

balanced business significant the valuation Our capital conducive in environment to an overall model. from strong benefited very in economic is Financial our Restructuring, in improving M&A second quarter and market. closings a markets Currently, very increase

deal more outcome ongoing we about business said, of being and This firms to to levels business the over Financial asset importantly, our but the quarters. at few impact are still pandemic's new prospects That have activity, the in influence have to concerns our interest time. economies, elevated marketplace. Brexit. more subsequent we a versus Tempering have this for last Our elections M&A and year. increase led a Restructuring earlier months the uncertainty results has substantial stable valuations and environment confident closings rate reenter expect world levels the prompted record today on and outlook, QX, some should in feel sponsors we positive U.S. the which on favorable Meanwhile, ultimate strategic to the improved experience and about

Our business first in six for quarterly million year. months $XXX the revenues of million and reported $XXX Financial Restructuring our fiscal

We Great to they but have number only size then. than limited mega restructurings a relative did more Recession, of we are during today the mandates

deals We have levels. assignments year-to-date, and number closed record the a active at record is XX of

exhibit remains the the New elevated outset slowed business activity the at of new in toward of quarter but from the pandemic. levels, business pace second the pace at

at I the short-term But longer than expect will on elevated restructuring experience the be pandemic. originally than originally mentioned expect last call, results we we that outset revenues of our anticipated. As we to lower for of levels restructuring anticipated

business quarter. a in million growth, has record million second in XX quarter, of activity. quarter. we revenue quarter. Finance with in we closed level second Consistent $XX this business first quarter, we Corporate in deals from dramatically first In versus revenues quarter deals experienced versus $XXX the the XX the Furthermore, first the improved Our reported new the

into will this new revenues. it some for translate However, take business to time

private business new are both clients. Business again. mid-summer. since diversified And and the accelerated across Many inquiries generated active industry described previously has now number from fairly on equity being as also is the hold New corporate we our of activity groups. is transactions of

engagements. earlier, are eventually on for close there that macroeconomic rates mentioned an our still As may several have factors impact new

results. quarter year. versus and as the revenues size MD the the per $XX last business year's Financial trends Finance. of fee million of same period up similar in $XX events, the quarter Valuation The in Corporate fee were to $XX second number average favorable is and now million same quarterly million and are in first Advisory from Our Revenues many last experiencing

we exhibit Transaction as business our to Portfolio Opinion and strong in growth, well. Our continues improvement Valuations are experiencing segment

of we great In and a our MVP August, Capital, off are closed to Turning acquisition previously they activity. our announced on to start. acquisition

targets. We several continue with to dialog an be active potential acquisition

the last strategy valuation to levels said, experienced However, we been the start have the expectations has find M&A global changes the incurred months other to our last price. year the over thrive our this we and the reasons right patient has firms believe positive market outlook that welcome to their We in overall rapidly That to acquisition increase right to most since of and quarter. unsupported. today. the remain calendar always has rebound the be exists from the closing, significant firms intensity some to this being and The the at at tempered of outlook activity discussions several may pessimistic spring in funds instances, independent the improving environment for in In business to right it. change, in are

turn to to Lindsey. commitment and that, will continue is the call effects we to business our and Our the the volatility shareholders over employees balanced to And with model I'll mitigate of that build results.

Lindsey Alley

way, result deals. monthly quarter, of to volume XX the Restructuring Finance the for and year a Scott. $XX to Higher from increase strong the last current second by and compared the in a Advisory, result the our fees driven the retainer decline million same period number quarter of for significant you, $XX period the the Corporate same $XXX In Valuation increase average in $XXX transaction number period Financial last of Lower a for fee the had revenues in last transactions revenues, the as were were of the engagements million the and year. million in fees were in increase XX% in on compared compared during Financial closed Thank had Portfolio retainer for increase is pandemic. compared million revenues same XX delivering with year. slight period last transactions closed revenues. in same saw results solid quarter which quarter Revenues results. to a lines year. the XXX of to closed service in transaction well the We the leading $XXX Valuations FVA as to quarterly drove year. fee decrease higher its last a improving period million the XXX Overall, events across same contributed We

expenses. to Turning

the second adjusted Our $XXX this related had for same adjustment the million $XXX expenses versus period for year. one were quarter payments quarter We to certain for last compensation acquisitions. deferred million

for XX.X% ratio our long-term is of Our compensation quarter, XX.X%. which ratio above compensation adjusted for XX.X% adjusted was target the and between

the result reimbursable for for XXXX ratio last in This over targeted lower our the is balance primarily that year-to-date of will of ratio Our a reflects expenses than expense reasonable our XX.X%, fiscal is year's. range increase significantly which be a proxy estimate year. compensation compensation

expense gross revenues revenues, fee to reimbursable as is tied is plus compensation calculated which ratio expenses. Our

While the lower for we to pay expenses compensation reimbursable based on increased fee revenues, result as account our expense of compensation a pandemic. incurred ratio COVID the

$XX This resulted the Our million orders implemented same expenses, decline and were to year. same the an all travel, of quarter entertainment adjusted for non-comp versus of decline pandemic. expenses last due the lower of a expense reduced adjusted other period office-related in at XX%. XX.X% million expenses of direct result $XX stay ratio year, non-compensation home the and versus is last the XX.X% in for operating a meals and lower marketing because This quarter

see two expenses least through year. significantly non-compensation the the We fiscal of in expect reduced to continue these categories, to balance at

Oracle of successfully $XXX,XXX quarter. Capital. amortization. expenses. accounting system system adjusted in cost $XXX,XXX of quarter acquisition-related items we represents new This MVP cost, The non-compensation and ERP system. $X.X implementation our replaces a our million we financial Oracle of in this for XX-year-old our which ERP acquisition three acquisition-related backbone And rolled out the in and out

of last $X.X other same year. quarter income million was expense $XXX,XXX to of a income the on result adjusted and of and cash lower interest the our investment earned approximately for income decreased Our versus primarily This period in balances.

the target adjusted compared XX%, was non-tax is effective such XX.X% and at of year. long-term same certain items in with entertainment The decline during range lower a other deductible tax the between the rate significant the XX.X% tax expenses. as Our of XX% by end our adjusted and effective last driven quarter for rate period

our expect closer XX%. fiscal As a result, to rate be to we tax for adjusted XXXX

cash. to and balance of uses sheet Turning the

investment we As and of equity which equivalents an end, $XXX offering May. cash includes in of cash the in quarter securities, raised and had unrestricted million the

accrued, per a December you with shares approximately And of December will XXXX, $X.XX part in paid we an of for XXX,XXX dividend XX average share reminder, are unpaid to and Also but cash on of can per this our cover fiscal finally, payable shareholders as for operator, portion announce paying lines for program. the bonuses a price we to that, is share share, in cash the of questions. XXXX as repurchase bonuses fiscal our of a at quarter, And past X. open of record to that we're November. $XX.XX which deferred be this As earmarked repurchased pleased

Operator

you. first Thank Instructions] [Operator Morgan with today question take Gosalia Stanley. We'll our from Manan

Manan Gosalia

Hi, afternoon. good

the due fact than prior cycle that quarter downturns. sort deals in years is pre-COVID the uptick through revenues versus how this of You come of much on already the with closed were that of nominated activity closings deals the on quarter, much from will versus was in cards new the number I that last of of pending the to how the announced number that's during is activity spoke hold that is the favorable it quarter? about deals more wondering, and

Lindsey Alley

necessarily within the track have and what's what information. specifically is transactions same don't that go we year, of been closed We find can pre-COVID back that and sure sort announced versus I'm

I were think Finance Corporate can have month the you in put that in been transactions of some so. that nine though hold. or process is previously assume transactions The are a M&A that on our process revenues

but in up goes post likely March and that them of majority well will XX, have transactions of new quarters four. all them closed, three have assuming come some close, So, the

transactions of that pre-COVID kind chunk on that in and have is hold XXX big of was are put that -- a were likely reconstituted. So, place

Manan Gosalia

Great.

the or expenses? clarification ratio Should suggesting forward for going that to look take we a come And you if your and then ratio of you at the the comp year reimbursable year-to-date were impact ratio the would from comp the rest the can that quantify ratio. Just comp on closer XX.X%? on comp your lower

Lindsey Alley

Yes.

year the for should I with notes, target. kind So, XX% year-to-date and estimating of of mentioned estimates. it, relatively to we've my the reimbursable terms think conservative expenses on we're But how XX.X%, we to been of I share and model that the in how prefer thinking about you not it is our you. balance are in number respect it I our with

Manan Gosalia

Great, you. thank

Lindsey Alley

The XX.X% first was a nearly quarter. catch-up from the

Manan Gosalia

thanks. it, Got

Operator

with Ryan Devin from hear we'll Securities. JMP Next

Devin Ryan

Good guys. afternoon,

Scott Beiser

Devin. Hey,

Devin Ryan

sounds issued looking first some bit happen. the the million in And that here that maybe or I don't potentially commentary been X your on they a acquisition. like obviously acquisitions shares some cash you've Just pushed question year, timing of was it you on know when then paid out that toward at, of earlier the

you here, having or along of of specific just or as returning to of through along do that additional happening. kind I'm buffer increase these those beyond increasing like they're So you buyback Do something if not move curious, or operating else extent you deals, with flexibility looks about dividend we that comes some of the like kind think situations?

Scott Beiser

raised we where one the the always terms is finding of we in to transactions, period. May, when time ultimately year think viewed two a which back we and are this the two not probably time I really one in to on to is closing capital horizon relative quarter, a

still dialog We of are mentioned companies, on in handful the a active as call. with we

of they the stated. reasons conversations may maybe had we that have Some the months away, ago I come for several back slipped

special don't ultimately deploy still So as mentioned, you a not bit. find that's what excess little maybe road. we're it that we would we acquisitions. been happens the a significant if a view dividend. down the said, on timing, probably if capital attractive But elongated hold through amount to I And or will the we of we a has will buyback our we don't, capital then use is

Devin Ryan

outlook curious for been Okay. and color. guys in And a And the well? well. how trended scaling out if contribution to that's of has the I as your that on around you expectations you firm? just little activity can of and and of just capital a the way as business how will. a parameters the have And put guess there's bit terms any appreciate within contribution, you been a any advisory, contribution? differentiated in then if the business then there frame there's lot follow Obviously, I up market I'm there just

Scott Beiser

pandemic, that now financing growth strongly now very debt in and more days avenues capital a a have for We primarily much equity it's But And of our growing. have. was early still and than various some type into in rescue still many be of business. capital believe important companies on some needed difficulties. financing of it assist the to call part side our Finance the might It's of area. it we to to That It's side. seems that cases, our growing transactions capital still into the be to of it was in Corporate evolving do that the form will And that total some very part you turning might companies continue in tend business.

Devin Ryan

Okay, guys. Thank it there. great. I'll you, leave

Scott Beiser

Thanks, Devin.

Lindsey Alley

Thanks, Devin.

Operator

our Sachs Richard next has Ramsden with Goldman question.

Unidentified Analyst

filling in Richard Hey, question. for thanks. my Ramsden. It's James Thanks Yaro for taking

expect in one is, the how you the world? first the the of the COVID do about acquire shutdowns of impact revenue ability this firms cases either of thinking of impact the in are factors Europe? that accelerating one So to pipeline? the you is perhaps and mounting number this impacting to And And part

Scott Beiser

on I going think all means ball pandemic. have us we're with none any of of the by crystal the where

last improving For a couple like mean, case. the much I while, it of was look than Europe it's faster reversed its weeks U.S.

companies were speaking things; in environment. couple investors financiers, this think all how generally to live I figured of and a one, out

have our marketplace. well, I an clearly we think have seen, as peers So, as improved

hand, come the think other I group another exactly all volatility that that think magic slowdown the deals, performance be incremental still know bump is when could period time. will to we over On time end. that some could in restructuring don't I to there this there's

and we out because longer a pandemic. reengaged be the than saw the in of think between ones smooth will today some of we of may increasing, closing but a timing it is sailing clearly activity the pre-COVID the do we there on close brand bumps why little take road. that on deals, to be continue commentary may our even a part that's on we expect the So And just new, potentially have what not

Unidentified Analyst

or off-cycle lot this the And shift That didn't of it from more a catch-up of six obviously bit other increases ago dividend of a at increased then dividend a return makes you should to increase we of question, about a just sense. just increased there have fiscal be the beginning future timing an year when in to think years. Is the priorities? more little relative prior capital is more cleanup and some you that the your had is, your months historically in in which the fact you of

Scott Beiser

Yes.

you May, I we comes change the etc., have better about making business it. think it the didn't to I of May and historically, a it the in felt analyzing change and seem We this newness to July cycle. time in board our us found would probably better our raise much if feel happened right in think, make in was continue model, And July pandemic just economy, our to to We wanted do the dividends. at dividend, our cycle. about just clearly the to recognizing time

normally decided a say, particular period we is of typically, it. this right. look to In for So delay at kind quarter. I the May time you're would we decision that when year, just

Unidentified Analyst

Thanks Understood. lot. a

Scott Beiser

you. Thank

Operator

Next from UBS. we'll with Brennan hear Hawken

Brennan Hawken

Hey, Lindsey? good you, are Scott and afternoon. How

Scott Beiser

Brennan. Hey,

Brennan Hawken

similar things not step activity? And any mandates? in activity the saw velocity parts result if world? back should up A a Europe bit And so quick things things. whether like had with more actually, Whether such following experience the the that resurge saw focusing in restructuring of virus Europe restructuring in on you any happen we not We in saw one whether sort thing interested in under shake a to then to narrowly shift lockdowns, you of or there would head but it lead to on question or a region, on that that and side of you other now it where control. of or the increased the looked expect

Scott Beiser

Yes.

period. or timeline, at difference really think don't happen none has much with fine-tune rest think Europe which at you that time I what might to new us that up, of down if look we in statistics of in a it engagements the wanted closing of was out did, the I world. opening weather do But to monthly or weekly of map

I businesses or going found business is the there think will whose to percentage of worked meaningfully not that work is models we even still across globe, what forward. be modified certain a once need

is some these long-term And solution, on in Some a lesser to whose equity able because model putting been they of were to not be helped money, able a company short-term needs raise money. additional business to be debt extent be altered effectively a have solution. companies out may it still debt

some think well. shutdowns. of pipe don't, restructuring by incremental I the we're week-by-week going see said, business what's in have happening to I So, particular waves month-by-month don't down like per changes I or se, been influenced, as But think I

that impact our less Corporate on think has restructuring on probably I short-term business more the business. and Finance impact

Brennan Hawken

fees then composition? you a revenue, when Okay. rough and as idea restructuring far such? breaks Is give or the how as a you And rough or can composition of what success us of retainers give a think could indication it down about way you there that

Lindsey Alley

Yes. we question. versus have a to creditor our disclosed of haven't disclose is, before I that. retainer regarding and mean, fees, Brian, it's probably but like I think keep debtor prefer of gotten we We good the that. kind breakdown what it specifics don't into

Brennan Hawken

Okay.

on perspective, about, about a it know we think modeling should this restructuring repeated it or mull think I'll volatility is lot not and a a then, Let when line. believe for to we When at jumping I take the past be or way robust there this particularly quarter How that get from volatility and from me a that reasonable of quarters' near-term? again in there for in there results try Lindsey. here quarter-to-quarter is too be a maybe different it there's that reason point restructuring the was much the necessarily was one. still might about off a

Lindsey Alley

a say Yes. did quarter there's QX, close Having this in to I look to we that volatility what continue proxy have cases normally as QX and that, will that I and might and a too say close number said QX. of of or would take much started QX would those cases use to on into QX like.

million, QX is there. in quarters elevated still volatility $XX continued and that expect do but engagement million, of we million a QX, $XX $XX So,

So you're profile to not the restructuring. near anywhere see same going in

got I going going saw caution seek But up a think out don't I like to shock, think say, you you to it QX. in previous over QX you're Corporate look I years. in of in that. you it's I and to coming growth see in at in to going elevated are look like But restructuring Finance QX, coming

Scott Beiser

in And and restructuring of values Brennan, and I million might $XXX between troughs kind and the you million, add. Pre-pandemic, have. we normal probably quarter-by-quarter $XX quarterly just that's range

of troughs higher that you post-pandemic. dynamic we just before. higher think kind have we're and It's I peaks still than at saw

Brennan Hawken

that for Thanks color. Okay.

Operator

with We'll now hear Worthington J.P. Morgan. Ken from

Ken Worthington

exist Hi. Good call No good political conference can afternoon. without question. a

Finance, how environment, threaten a the then here, either business? at gains do with in flow how So, political play market if of or enhance middle big magnitude And wealthy business? capital through higher of the a taxes politics into And might timing might maybe coming the may restructuring way terms in all? and or the the for any is not that Corporate impact be M&A any stimulus dividend in of through Thanks. valuation there business, the change round thoughts

Scott Beiser

order. in answering Absolutely. it be questions. may No difficulty I in a those take reverse

see decent in beyond changes outcome tax the fiscal that Long-term, when actually and valuation the if can that in just changes, the there if because or work you actually certain of two. usually rates the will on different could tax people side, rates, good XXXX planning the in next in is will in in for think change strategies. terms are work week quarter a is have start of there and -- valuation state amount of tax people a elections, we I our think depending kind on third increase of if

they're positive and the tax the the terms elections. outcome So, in in code I neutral either think changes of or of

even XX. close want there purposely we the a would and it's the who hire side, juncture, XX. say At to December might with this that. go quarters December for several do hard companies quarter have by accelerate Finance that anybody in On to to months us talked to Maybe it some close be try of last to was get two it for by transaction Corporate pretty and amount impractical

some actually have elections, there thought the probably as tax code, potential cetera. we have not by be. transactions would of think et many We we amount motivated changes been in But as

to sure of So much I'm there. as there's a change be going not

works longer woods. it's I think actually of of again, money influence much figure to plan plans no pandemic to negative out what Finance work in business people the the in clearly a help positive completely going on lot out abilitate for delay to business economy, the somebody working need would into which juncture are a not you has to business at of the our it remotely, out that today's more or get may companies still This stimulus working, or to, comes in Corporate activity. once you terms that there not not this happens into than funnel restructuring will have the elections the M&A and in And how I'm meaningfully can down things, tax rates. I but think help restructuring. otherwise sure if not go stimulus going stimulus,

it to knew post even think we the prospects outcome. time. talking clients So, of We're happen what us all smart what's we are if know enough all and going that it None happen about our will the to outcome the time. about to

politically multiple questions should there in a And so we of of thoughts And some your lines. product terms on my we can be do guess the charged I planning. best and

Ken Worthington

very Thank you, great. much. Awesome,

Scott Beiser

Ken. Thanks,

Operator

Our final Steven question with Research. comes from Chubak Wolfe

Unidentified Analyst

[Brandon It's Fancher] guys. Hey, speaking.

and your locales? driven by guess And the so would U.S. difference different by to have deal the it while I middle what has U.S. cooking do is has first Europe U.S. market would how question been in guess, I take you middle in So, different been market, be like activity. would European between get more largely in to activity deal driven market? the what large recovery pertaining think you conversations think been

Lindsey Alley

start think I with U.S. let's

are comments, activity mentioned are I Scott in business really we we market think as the cooking. middle his M&A much seeing It's, as is receiving. U.S. as

Now complete. that engagements new and activity takes is engagement to months new

revenues And so at picture, coming by for now, but you in driven really market. the M&A also And not won't But very, corporate activity especially market a couple is quarters, strategic. middle and right just it good least. the see of equity back that's private in a very into this the and

higher seeing transact some is activity known should. going in space, we're the market, as the you're a it pretty but the levels So, on benefiting well there lot large we much cap name from at of in middle and

dissimilar with think I respect it's Europe, not to a comment.

September. But weeks, both really to the were may significantly. U.S. beginning it are really pretty us the if prior -- shutdowns spikes markets and We couple of good the now unclear the may of Europe. how in since quite going as of European It's of recent it active, and to last seeing and subtract, the activity recent the are the beginning June -- to sorry,

Unidentified Analyst

you of guess one of follow-up case forward And pull you of sustainable? much tax? feel Great. on the is How how increase feel it privates. I in capital And like gains, actually the do is much do in it

Scott Beiser

it? We Can repeat just of maybe first half the your you question. missed

Unidentified Analyst

Sorry.

on private you mentioned, raising a of there's of gain that terms obviously, lot discussion the capital In just side. around

that do you So activity sustainable? guess, guess how feel much much And how feel I do I pull of like forward? you is

Scott Beiser

kind said a deal the later your our I of pull question forward think overall to of minor motivation to versus relatively earlier, the think firm. scheme I whole and sooner I done get been

we're on today material of as that the been I it things that giant working it's or things closed. describe a have wouldn't Just a rush, not part

Lindsey Alley

the -- see it in We revenues Yes. might point, QX, incremental of is rest I very some but it's sustainable. mean it's, Scott to

Unidentified Analyst

Great. Thank my you for taking questions.

Scott Beiser

you. Thank

Operator

Scott turn now remarks. question-and-answer will I Beiser for additional today's or over session. closing conclude will That the conference to any

Scott Beiser

our I'd like on to And we earnings third quarter XXXX forward when in updating for quarter you coming our participating call. this results Bye-bye. all our XXXX second look progress everybody discuss fiscal fiscal thank winter. we to for

Operator

That will your participation. conclude today’s conference. Thank you for

You now may disconnect.

Houlihan Lokey (HLI) 31 Oct 202021 Q2 Earnings call transcript