HLI - Earnings call transcript Q1 2025

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan Lokey First Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions]. Please note that this conference call is being recorded today, July 30, 2024.

the to turn company. now will call the over I

Christopher Crain

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

are subject expect. not to uncertainties cause statements should expect, relying guarantees usually of remarks, we future such need include them. when results forward-looking therefore, And performance. These forward-looking that remind to begin These should are identified use that words caution differ everyone actual what anticipate, are of and exercise by we will, and similar Before numerous from we the other you our materially risks as statements. statements, interpreting could formal to on phrases discussion will or which today

our We to June the impact that SEC for ended recent XX, filings refer for the future risks the it filed SEC. Form condition. XXXX, our encourage with you operating financial of more the filings, is could quarter including discussion our and regulatory We all of to XX-Q detailed when a review results investors

our is the in reconciliation measures on to these available of release the investor which During should in prepared A evaluating discuss will comparable call, our GAAP. results directly financial believe as GAAP a with These website. non-GAAP or in isolation today's financial be can measures accordance in and not useful the hl.com measures, most performance. we financial presentation considered company's earnings we measures be for substitute our

Chief opening open call and Executive have Lokey's we then we will provide questions. today, some Houlihan call remarks, Chief the They Officer; to Alley, and Lindsey Officer. Adelson, Financial will the Hosting Scott

turn I'll to the that, call Scott. With over

Scott Joseph Adelson

fiscal call. were per XX%, year. Revenues and compared $XXX up you, share earnings to Christopher. the ended our adjusted earnings with quarter last earnings of share same adjusted and everyone, $X.XX. were XXXX We up million the revenues quarter first quarter per Welcome, to Thank of XX%

all We restructuring X quarter began the corporate financial in And lines. business and with strength of concluded advisory finance, first increase improving valuation our we of levels elevated solid revenues. continued in a new fiscal year financial and services, with the

optimistic activity current the elections presidential year we market conditions of rate improved U.S. elements will and Overall, as including drive macro that the remain throughout M&A even uncertainty, environment persist. interest

Corporate to $XXX finance quarter quarter for quarter, first first produced Finance see a increase highest Key and million Corporate XX% revenues improvement. in corporate revenues over steady continue last Finance our business for our ever. the metrics year's

per and average Our and especially time lengthier historical transaction is fee transactions seeing size average outside the the transaction is on norms. rate though to close increasing, a The than transaction takes is slight improvement, it increasing, still close U.S.

finance remain, we these corporate our as As see trends versus long improvement the last should business same periods in year.

Finally, start the capital seeking our and business. to deploy resulting the middle a to markets are capital M&A market year for middle benefiting strong in providers market aggressively in capital,

this for revenues $XXX highest revenue million for in the the quarter, first business. Financial second restructuring first quarter produced

due over of in by restructuring next As levels elevated calls, XXXX. the occurring perform financial have accelerated our expect previous especially to corporate activity we of similarly dislocation, fiscal and couple in restructuring first Europe, fiscal These quarters to financial rates, business mentioned, are we of maturities XXXX, higher X for the supported interest political refinancings to persistently years.

and into is market opportunity. this improve, markets continue general refinancing could of to positioned advantage of business activity capital activity as our healthy take restructuring to conditions this However, well some turn

our business year. first affecting are that a X% underlying corporate impact for of our revenues trends FDA increase versus produced are and quarter last Advisory Valuation positively same the Financial business. $XX Many finance quarter, the in the starting million to first

cyclical services our started continued more portfolio gain have like businesses procyclical backdrop, momentum. economic this have less to while perform well throughout Our to challenging valuation

the fully completed making integrated make products geographies. to markets. our has and expansion adding team we Triago, success our us a adviser capabilities had primary, business. secondary, positive practice quarter, new funds GP in The private our across finance XX and the to and early professionals acquisition be managing a private of directs In holistic X than significant directors and funds of More capabilities positioning now momentum advisory our marketing up across globally,

directors through we added new congratulate directors and directors managing in XX to to Hiring who promoted managing Also, the quarter. of first who year-end in new managing mostly our XX the as part us part director had as we the In the quarter we fiscal were would X transaction, of managing process. the like XX total, Tiago from process, during X planned departures. joined Director addition the year-end

to strong a new steady market as add We and very hiring for history. flow the our firm's workforce continue talented candidates most to see in we senior of new talent a

optimistic signs are We of activity. M&A and markets XXXX capital fiscal the improving about given

we as several we positioned investments unfolds. the are the it businesses our across Given to have capitalize well years, especially on over made last this recovery

you. Lindsey, to over

J. Alley

fee same versus $XXX compared the average to closed in the last closed . Net last last quarter We transactions closed in fee Scott. you, deals were compared to Finance the quarter, period million the same restructuring XX year. XXX in for but transactions same for the a year, quarter and last higher the the XX% Corporate was quarter up same the quarter last our quarter to XX decrease transaction $XXX year. year. transaction average Revenues in X% million Thank decreased. XX on versus were this our compared for same when quarter, period the year, We quarter revenues

of business, lumpy As the past, in in Restructuring our business given nature the Financial the mentioned quarter-to-quarter. we've revenues be can

period $XX last year. during from For same increase XXX period We the last to the for same million compared XXX Financial in and the were had a [indiscernible] quarter, Valuation revenues the Advisory, year. X% events quarter

Turning to expenses.

same for year. compensation the Our were $XXX for $XXX the last million adjusted expenses million period versus quarter

million to $XX.X was payments retention related adjustment only acquisitions. deferred for certain Our

Our first adjusted in quarter for compensation ratio and XX.X%. fiscal expense XXXX XXXX, the both was

expense XX.X% target our of ratio. expect adjusted compensation maintain our for long-term We to

last Our adjusted noncompensation quarter, an a $XX,XXX for XX.X% compared period in over the this expense noncompensation quarter XX.X% employee noncompensation resulted the quarter the of ratio same per quarter X% million for for adjusted the This for were expenses last the of basis, On to last an year. expense adjusted was $XX,XXX same our same $XX year. year. versus period increase

assumed of quarter, as New of $X.X write-down York in the in acquisition. For adjusted was primarily part the Tiago we and acquisition-related Which lease the the acquisition-related costs. to amortization noncompensation million our for noncash $X.X related million expenses, out of

an streamlining pertaining had our also of organizational referred as fees We structure professional adjustment to $XXX,XXX associated to global Project Solo. with also

of P&L, and loss in of related our earn-out treat adjust the produced primarily net of one these approximately an of changes $X interest a of We due expense versus million to purchase and a income other with earn-outs income value in approximately income. adjusted this $X.X of the to liability out increase same in category our of out value improvement in income any the prior The at significant price associated income expense, $XXX,XXX, million We increase year. was and period Our adjusted last all earnouts. other acquisition-related in of acquisitions.

a primarily received nondeductible our for Our same the of for to increased reversal also first adjusted The the adjusted out of we effective adjusted rate, of we the quarter quarter, a GAAP was onetime We in the driven benefit significant rate for our stock quarter out adjusted effective was result increase last tax tax by our quarter. tax rate XX.X% that deferred a XX.X% as expenses asset. year. a tax vesting in compared

Our at expect the range. XXXX long-term XX% and high between end up adjusted our is target rate end effective of for and to XX%, we fiscal tax that

the to Turning sheet. balance

of investment of approximately quarter end, As and equivalents and $XXX securities. cash had we unrestricted million

fiscal XXX,XXX we declined employees cover approximately year-end employees paid the Our quarter, bonuses to significant a in our Also XXXX during our our of shares cash May. part of we new through position approximately fiscal million portion we and as repurchased to first to shares of withhold as compensation, May. issued month in this X XXXX quarter

that, with And line we operator, questions. the open for can

Operator

Instructions]. [Operator

with from first Brennan question Hawken The comes the UBS. of line

Brennan Hawken

like the sounds like prior that your Good the certainly and prepared outlook to remarks, Finance. on I it Corporate from for out range, would improve. of breaking to see business to start continues

that be the situation? give? is could a way you we there should Or we is to indicators potential So which historical we continue about thinking growth and context the monitor watching as in a there be what should

Scott Joseph Adelson

we improve. what as we a in ago. to continue I things reputation had we've continuing now, we've couple quarters a think improving are have Europe they a of particularly really And that from and consistent with our very different of than prior we been number to for it's see benefited, transaction said, to saying years

in increases, size, and fees market benefit. that of forth, seeing average in just in close are we the rates, As our improvement our enuring deal to our and so all

J. Alley

is, have thing I And add, the only know. do a most seasonal you business, think we of I'd as Brennan,

QX. about think business. us versus primarily year, our same our how it quarter of finance that's terms quarter that in in corporate just the third we next for so the And moved in quarter perform and FDA And the last will into and

quarter we you look, less the if and maybe improve to a good And expect are lumpy conditions last Corporate seasonal, restructuring see FDA, think are, comments little to they -- be or way growth I quarter-over-quarter. around, behave our certainly know, versus to for As a continue year. but are, business the same tends bit were Finance generally way they we should our the growth comparing

Brennan Hawken

recently behind given that's Lending years. On is of your case, provide that this. that sign recent might restructurings the you this do management? in we've on clear. full-blown think the more That's Curious tend seen all full-blown one-off? liability views hear to creditor And than be it. could is restructuring, Got liability be restructuring stress if Direct that of what believe more first we've some this upside management of and a from Maybe I a to do Group. profitable building Or seen of mandates the the

J. Alley

familiar Brennan, our stab mentioned. not capital. I mean that still quite source markets We at primary I'll And I'm healthy. to remain of that in middle take restructuring think a you the credit the market, be with the continue that.

that -- some well restructuring this there things that do others leverage bit And mentioned of out that there. not to players not. be a we so come. perform and at But we're as looking quite There you don't sign a is will of

Operator

with from the Yaro comes Goldman line question Sachs. James Next of

James Yaro

come rates Maybe could time how just would provide And Finance if Maybe you to to would starting just side period much you then few of for the business. expect last on And your those specifically sponsor and improved we fully normalize? Corporate need M&A what down that see months? over the occur? with sponsor thoughts the on over to

Scott Joseph Adelson

set well. it improvement think questions. when I world I mean of a you Good in that the take continued -- been as look, has sponsor

in again, exactly peak die. do That deals everything that it. right you we You been moving in We've crystal will is available to to. I said everything and when will quarters, confidence and of expected for have direction this just it a forward. saying here we it that, gaining that are continuation ball that, the seeing Having says is is And see me. sit just tell can't we now or that continue. continuing not people [indiscernible]

James Yaro

the helpful. just on private That's very Maybe funds businesses. Okay.

your take you opportunities about take are industry seeing pockets in that business very But maybe market best of business the on a you we're -- that within those numbers of see business back, if your You just size helpful. the grow the that to step and share? durability the which and the growth talked in -- views the

Scott Joseph Adelson

the we've directs you're talking the of early part really -- a our more when about and that still days on is as the evolving side, of funds the less and it think primary so there stakes I group, rapidly made that we ] very we [ in are market, private very the view, in we've on secondaries there entire of how alternative think growth, are a asset that's and as thinking industry pleased along indications the like we of with that And investments an is this, that early things going. matures in are it. things why made and really our class lot

Operator

from Next of line Ryan with comes Securities. Devin question the JMP

Devin Ryan

it's been I U.S. been has catalyst outside on business. And to comment it that fee like up European And on size GCA average for want the the sounds nice the the a pick integrated. now

average trying it's Just to so were I'm think might given this curious potentially just into for bankers about added like for or network seeing the upside GCA there effects implies it be European productivity bankers of And counterparts. with the on sounds either productivity going pretty kind banker all that that their U.S. and to over within legacy even you what Houlihan well. time, just many connectivity

Scott Joseph Adelson

footprint capabilities type think certainly -- an as on of with I a ability see and to you to a has is before. individual there Each we are different And with I momentum. is very to expect Yes. to individuals very our say either that a importance will, before markets our us seeing deliver I if the than firm, capabilities different different sponsor marketplace. combined international than for our mean continue that we're business truly afterwards basis a we the the And driven than would was markets firm. return, capital transaction

Devin Ryan

the the outlook And has started relatively obviously, kind market All with the activity traditional right. business restructuring a a result. has restructuring It has may follow-up capital well and interplay to up, maybe business. tick healthy And just as been and curious, just as open down, may just of M&A been more up pick but I'm depressed. the capital on markets

been but the two, So curious that kind that I'm business just is the down, And business trending. how, slowed with M&A interplay restructuring picking then business one, has of up?

Unknown Executive

to one capital markets Obviously, in just being markets capital opportunities. think up mean I number We become of -- a restructurings markets of we reasons. the may market heats capital positioned that as are had. grow, Yes. think, see them I with in a those business markets, to that to -- reasons that up. continue wind for grow there financing has restructurings business being environment direction on And either obviously, private in certain we're well that. as But growth may continuing continued capital the is less have robust multiple for

Operator

of line the Worthington from comes JPMorgan. question with Next Ken

Kenneth Worthington

seen was sort from On quarter-over-quarter. growth seen growth comparison, But in easier year-over-year we've what up of sort of deceleration look an X%, comp we what FDA, we've like revenue in as at seems quarters. recent in

see the give markets in growth variance you sort last there in and If the would are the in given from the maybe that revenue on little rebound and of expect what this takes? that, time why to year. a year and we're What seeing have not saw how M&A us we're detail last would better quarter we more versus starting are puts that strong impact we area, generation can and recently more this

J. Alley

the not Yes. years, couple I I but pretty think, markets FDA, mean, our for flat. for peers, were for as reminder, significantly, a yes, the last us, of when was M&A only I'd down say FDA

And were M&A-focused couple years of had most so pretty where a firms good down. certainly we

current with market. lines traditionally to There quarter others quite some state this the business are happy driven, for market FDA of so actually which nothing us, -- are several -- the with in sorry, of of or have And M&A we're M&A this quarter. growth do within which with are FDA, of kind the

FDA growth is the pretty I say a I off of think And something slower we're about. than Finance a probably result here basis, lines growing is so in in relative coming back. service Corporate good FDA I'd couple years come quarter-over-quarter as on going markets mix these the think of And to happy

better. M&A in the tends markets, perform noncyclical And noncyclical in. business strong tougher it's slower or it of pure that than the a it to businesses a good grow little And M&A nature markets, that the bit then to And that's businesses tends of business. in it's because say

what probably And so I that's seeing. you're think

Kenneth Worthington

how seeing more the us in businesses Okay. rebound color? take those us us actually Again, more us businesses. little level and on one just on and -- and can you you're color the they're doing more deeper give nonmarket-sensitive that market-sensitive even give little Can you a a give

J. Alley

don't performing FDA. FDA. in of get We But Yes. details, businesses in is performance businesses, FDA. businesses are will focused the performing don't on into the we get terms into in within businesses say, of certainly item specifics, in which than are did specific the sensitive how that M&A the I non-market were Ken, better terms line the

Kenneth Worthington

super on a Then one Right. simple tax.

the tax what's of mentioned should end rest the Against the in low year of tax for end range. to the historic of You versus kind high at mix. the driving happening at the mix the be business, end? come of What's high the in

J. Alley

Yes, it's a things. -- It's a few

is I think have it higher some big of Europe. jurisdictions -- as pretty know, in you businesses we and the

tax the in So Europe. higher jurisdictions

performing all which a have Japan, we in are Germany, well. U.K., of So big pretty business

going that's And to primary it. driving the our little bit So that's rate drive thing tax a probably higher.

with in, of so us some think And the higher to about we're as high larger range. we're end towards see markets that taxes the as of optimistic I going that you're long

Operator

Next of O'Brien line the with question comes Wolfe Brendan from Research.

Brendan O'Brien

to follow guess just Europe the activity specifically impact as European the I ECB up wanted to whether rate the on have I relative to business. on get in recent had material activity the how sense cuts to wanted I start, by the a just U.S. in any trending levels to is region?

Scott Joseph Adelson

mean, has directions, pace. continue just bit a it more up it picking everything we same that in U.S. the like the it is pickup. heading I from is perspective, I to in about in really, it But see lagged directionally, If would little say it has anything, our

Brendan O'Brien

indicating past, that ceilings of more to M&A businesses. up to of floors continue if And pivoting you. we guys activity between the grow. a sense tail in higher relationships higher restructuring in your kind to Got spoken the X and historical I you you the the as seeing have given know business which pick guess sort I were could and meaningfully, comments off activity makes see

where how thinking next want the of I about over just couple maybe out? should of trajectory number restructuring could as the be to years sense settle and So that get to we a

Scott Joseph Adelson

that so it I it's as default debt market always reason one a more so we can some capital and continue even we just think time. have been period There is people right for of it, the time, in just have, at that business, multiple we've rates drive almost markets, How it, solutions the so time elevated normal for the M&A new been will still for is that haven't will I'll picks much, looking prior to without really even at That than is we capital be in we our of percentage call wind or new levels will to [indiscernible] a situations. distressed -- And our When cycle reach mean used around another. And persist distressed long have gotten just default a I is to, to rates we're growing. -- tell, world. debt but minds, but likely up rates M&A, interest -- over we of now, levels what clear, nonexistent when while. up exists there very availability the that. you never more still increasingly Yes. for but This more really, this to to seen in default elevated extraordinary be rates. normal. utilize and expect default It's tranches --

Operator

Next with line of from Morgan Stanley. question Ryan the Kenny comes

Ryan Kenny

corporate prepared to on improvement. finance year. about Can -- remarks feels the we a we around in were in When earnings you were and last seeing calls. comment talking than transactions discussion close like environment That at lags some better unpack much the time

change? what's driving really So that

Scott Joseph Adelson

one we we're everything market, reasons some where discussed, we've and that all discussing had that want our peers discussing are M&A been more is, piece information schedule. [ there and sentiment that as on the of deals why of that dragging the of look, more as as the one well ] have in mean, been pickup just I

that would say call to it, subside. back it that good or in of even is I Some but starting way and improving, not probably see. we time are any that frame, to I'd is is optimistic to, normal

Ryan Kenny

on that sponsor to you rotation with Can the improving. recent value sponsors. their to I earlier catalyst a meaningful sponsors, movement get stocks how conversations heard on stocks is portfolio of the comments Is and activity around just through companies? mid-cap impacting walk And

Scott Joseph Adelson

isn't and years fixated when different mentality That markets. people bit is we attitude a you're of that It's a that would buying it. and something stock I something massively versus are for seen. different really a private just effectively say on, certainly renting between a have public It

Operator

Global. comes Seaport of Next line with from question Mitchell Jim the

James Mitchell

than Maybe last sponsors talked to to financial you terms the out playing Is that in just On -- Generally, larger smaller rebounding question. following question, up are deals. How positive the and you've market the terms you that smaller more deals that? of, deals. coming how smaller of in on market? part in think maybe quickly I seeing Are of relative overall is the past, typically last just the outlook? deals about it

Scott Joseph Adelson

are we I can't just a larger, really, [indiscernible] mean our mix point. There's to no fairly are normal trend at I of or a this portfolio within point would things I smaller they mix say is seeing normal that it there.

James Mitchell

terms of But then at And lumpy, that on you quarters, pick that. we head of growth think count has environment from to in a last Okay. that sort look it's I MD should that how X% and about things hirings Was pace the to kind like around been X deliberate should MD Or headcount. here? and and maybe we slowing if leaving up? year-over-year appreciate in the -- X%. expect just of

Scott Joseph Adelson

pick I We a the as see and looking. we process few. us, joke, we fit. talent. unfortunately, think go are agree constantly good to a that talent. best our we for attract banker is think we mutually looking -- always are we that will talent up do is and investment And when I for it I store And constantly to you mean, can't a

about this that about we're think hey, think XX like not hire that. or much we don't the we going it way -- And quarter as, so go so That's something is MDs it. to

James Mitchell

mid-high you've forward? going head But ] historical that think single digits. about fair of years? should a we to couple expect [ more perspective, the at net been I next now of growth way count from Is mean a least sort

J. Alley

think and had we, in And firm fair. markets. that's Look, last of took other slowdown couple think every M&A do I the years, else. a want did probably some of last workforce Yes, we I the within rightsize step with couple to along kind that of said, a our years, everybody changes back the with along we of the organization make we kind I think around to and

And exist and probably puts terms of versus the seeing new in last won't departures high years capacity so you're takes some a that of in couple hires over environment.

And so yes, proxy probably and Maybe take proxy. [indiscernible] what our growth and looked look to out, like a count for a our years X the decent GCA could that's that's X for like. years ago prior then decent head growth

Operator

line question of from comes with next Our Sachs. Goldman James Yaro the

James Yaro

on touch to to should wanted fall second Maybe consecutive quarter, revenue. noncomp for expenses. the updated trajectory that be noncomp much just the It for could about? you stronger again the despite thinking and talk did just I the we

I a normalized like? any for past what And guess lot then your -- ratio on with travel few the that's any changed noncomp maybe and looks with obviously, increasing. and maybe best then just there? But know over thoughts years COVID thoughts a

J. Alley

Yes.

with before, the respect James. probably think, think I've noncomp, to I made I similar, comments are

noncomp year. that don't to -- expect expect noncomp We been has this this last be couple the XX%, XX% that like of at We year growth. years, it

normalize high-single of digits, sure kind mid- whether it of. We to of not expect to it kind normalizes and

that's of investments think on roughly standpoint, expect to year's technology. bad I because in are And expenses our still quickly to last versus in But there. expect going revenue inflation there hard was I just reimbursable a a quarter We a noncomp same and pressure depends of And X%, about noncomp. then It's concerns. think factors, looks normal return. way this PME tell hard of from don't given terms are in what tell. to some revenues still and think think on it it to it's how to noncomp. We a quarter information number pressure managing the like a on was including good quarter, respect I with whole ratio

recession a it so driven years, of, we've of been And I'm is the because XXX% that in an mention couple of hesitant here said, to little revenues. and last like just kind M&A I for by sort

to is question like of of both. answer have what and hard quarters for But we of ratio that revenue And what we we in until the prediction better think optimistic is It's for I a much question, terms how a going look your do answer how to so me feel look noncomp I sense your will we next X have revenues like. remain quick going to better to on like return.

Operator

question from Next the with Aidan of Hall KBW. comes line

Aidan Hall

one a been the at just firm. growth has large inorganic of Inorganic the on story side. Maybe part the

Just wondering around, conversations if or us that pipeline kind you could just the characterize, of give any having. color you're

you areas across the -- building industry. any And Just that would perspective giving there's particularly you that the if activity seen of flag? are attractive to from organic an

Scott Joseph Adelson

dialogue really when like are bit you fit rest the strong again, the don't that as should fall think driving in stated and that in bankers along number it, we cultural of business we our dialogue to with a is it's constantly past. at a day, most they're been our whom the it we a finding question. growth, super we've is is constant in, -- things continue be thing to that model they of moving of and And in think organization. we but I part are the with could little people a of and that part are our going obviously And great towards have and end are know parties. assure And the exactly Yes, committed to

J. Alley

a just follow-up And on the specifics.

makes out want underweighted. of the And XXX to to we some Scott's in I we underweighted some most game the them person we one to is have we subsectors in through strong kind and help become our lever. for think in ultimate on acquisition is single us -- that look And which we acquisitions right in to hires. objective. organic organic we're the of U.S. That's industry, or really of it think this subsector, strong it if it that ones that hire XXX, The are point, every way, we'll pull will. And which we an fill about of an sense, if find the are

whole so filling those sectors them. And up and of underweighted industry, strategy really, believe in there is the are we hundreds

Operator

session. and the would of to like have closing turn end you. over the we comments. Scott for Thank to floor gentlemen, now Ladies Adelson question-and-answer I reached

Scott Joseph Adelson

in Thank want for forward on our to to thank results participating look progress call. you. when earnings fall. fiscal discuss our We XXXX updating fiscal you second our XXXX quarter I we all quarter for coming everyone this first

Operator

teleconference. This concludes Thank today's you.

You your may Thank lines participation. time. for disconnect your you at this

Houlihan Lokey (HLI) 30 Jul 242025 Q1 Earnings call transcript