HLI - Earnings call transcript Q3 2025

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Houlihan Lokey's Third Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, January 28, 2025. I will now turn the call over to the company.

Christopher Crain

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

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

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

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

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

Scott Joseph Adelson

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

with with the our quarter pleased of our year-to-date, We across as last results are and as well momentum lines. quarter business continued performance X for all with all our we have fiscal entered our

Financial continue markets, Finance Financial another improvements solid Restructuring remain and persistently in rates. and Corporate as to record We Advisory benefit M&A to Valuation the benefit leverage from while quarter and it interest continues higher financing from had markets macro optimistic the have the and a results balance rates the stable, this improved election will fiscal appears given we inflation the about U.S. of to environment. year confidence. stronger of improve as believe Interest continue and

and continued compared strategic business widespread, generation business period each at $XXX XX% rates, metrics geographies for segments. revenue the same both in time-to-close new private of transaction of year's by a occurring last with increase our business, Looking when our to year. last representing Corporate Growth and including for third Finance Finance quarter. is over produced transactions, the improve Finance and volume clients. driven quarter, close industries equity and Key Corporate Corporate million across our

period of the million quarter, revenue $XXX for produced third X% increase versus Restructuring last Financial same the a year.

elevated we continued anticipated quarter, with restructuring confidence to us that the and backlog we During provide will market to year ago. new maintain a generate enough our continued remain this longer business for than

business in business a and noncyclical climate. of quarter, Corporate for its an M&A improving businesses, million are result of last third $XX our cyclical produced Advisory important Valuation as of the saw for strength quarter XX% the FVA increase our and same year, factors many affecting well. versus the and revenue across optimism Financial the third present FVA Finance both the

We added strong X acquisitions, and early through our quarter, off a partners managing our new hires. and in new December, start, to in Waller Helms XX are results. directors individual we acquisitions our closed Regarding XX contributing acquisition the of through to

for and positive. continued are our encouraging beyond our quarter, fiscal strength fiscal XXXX growth. fourth restructuring over private I is to equity turn activity continued our for Improving all look and in Lindsey. With indicators M&A we business will the As outlook that, increase market in call sentiment

J. Alley

for Scott. fiscal transaction decreased We were same . Financial mix. of quarter Consistent you, a to Corporate Revenues Thank last XX Restructuring with to in our result up as transaction the from Finance. fee our average million third of our strongest transactions Finance deals past a a quarter year. this last in year-to-date quarter mix. year, We million was in again closed for X% as this the period same transactions compared quarter, year, same $XXX revenues same Corporate quarter, our the period but transaction but result were quarter the up last fee the quarter $XXX XXX compared modestly closed XXX decreased on the average year. quarter transaction in XX versus many increase years, XX% last closed

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

Turning to expenses.

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

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

our this quarter XX.X%, Our to we in and XXXX fiscal both expense of target and for ratio. was third ratio fiscal XX.X% adjusted compensation long-term maintain expect the XXXX for

compared This same for the adjusted Our same million year. for to for XX.X% last expenses adjusted million of compared last $XX year. XX.X% increased non-compensation the period the expense $XX ratio in period non-compensation an quarter the to resulted slightly quarter to for

quarter, employee with basis, last for consistent expense same was quarter year. this non-compensation $XX,XXX adjusted our the per a On

in Helms. integration Waller Prytania associated real estate This of associated well acquisition-related quarter, out Waller non-compensation $X.X Helms with and million noncash costs of acquisitions costs. as we adjusted and the expenses, million charge our For acquisition-related in as included transaction Solutions amortization $X.X impairment and with a

as to fees pertaining professional also organizational million $X.X associated Project with of referred Solar. global our adjustment an had also streamlining We to structure

produced improvement was category and income $X income. approximately of primarily expense last an the due versus other income to $X this interest of approximately in income million in million year. increase adjusted in same period Our The

Our result same was adjusted to the quarter was quarter our increase tax The of rate a in for primarily the rate timing issues. effective last year. XX.X% compared effective XX.X% tax adjusted for

We expect XX% our adjusted effective tax settle XX%. between the and rate for fiscal to year full

Turning to sheet. the balance

during approximately securities. and As any of $XXX of quarter. not had equivalents the repurchase We we quarter end, cash unrestricted and investment shares million did

expected portion be XXXX. year the would a in May year, this be our bonuses cash cash fiscal will of of As pay unrestricted used for to time significant

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

Operator

today be from Hawken with question first your UBS. Brennan And will Instructions] [Operator

Brennan Hawken

any about your we we've It or context refining here thinking from seen and tone strengthening Corporate should environment. prepared moving could comments in in the sounds your you that that in point Is historical about and like to for be there remarks Finance growth continued revenue to, how the help think a period that forward? potential us the business

Scott Joseph Adelson

it restructuring same is we a when really was the And that last and, that a progress today same is time, correct following or from nothing which certainly which to think anticipated, much see changed at has date, has occur, really, about improving elevated. is going to at thing it. way been least, what think few we strong seeing have environment just and, the to very I steady of things the quarters. And the

J. Alley

just XX%. Yes. change roughly go QX, thinking, say, improvements consolidated on a In grew if And roughly I QX, back continuation I I'm XX%. there is not It XX%. In QX, same roughly need mean last an your basis, grew to we to versus you quarters year. the is Brennan. a of sure we I'd not grew XX%, you we mean acceleration.

Brennan Hawken

Is dynamics? recently. be Corporate the is just that half strongest. a how your back And think have we that in recent when think wanted you normally, How the it fiscal given improving the pretty slower don't said the little a but would the about on to you a think Got about would in of see flesh March fair it because we Finance, typical to December And confidence it. bit. upside? sort there ballpark is really you back of But out is quarter the to similar the then year quarter? normally cycle the constructive I seasonality typical those the year-end? it a that being haven't would of seen election, about think here you Is

Scott Joseph Adelson

this second Yes. seasonality think year reasonable we're sort of that years, into average, quarter. we're March to well. look pretty Look, to over the in seasonality that's the going I reason if there's XX% X, roughly you That's of XX% had back getting year. same -- the not right? were half I not the no we've seen of will past, year, We're 'XX X, the fiscal We of first believe be kind to half -- X business. that as say, good

change. do year in pressures. be seeing that saw There's macroeconomic we the previous this last Now, year seasonality But obviously, some all years. things and we seem can same to

bad the not not is a And proxy. so that's bad a -- historical

Operator

come next with will your today And Sachs. question Yaro James from Goldman

James Yaro

restructuring continues end for longer in the upside. . that the actually restructuring especially long recently? so you we've calendar Maybe higher rates to with given -- grow remain and XXXX, on appear could that Starting surprise likelihood could seen to steepening comment just the

Scott Joseph Adelson

beyond elevated. of for performing in awful the kind factors we expect ago, of year a better depends for Interest and What and and to to it rates continues mean, be completely our that on that been thought actually predict. I we've continue. actual nets lot remain that ability of look, to saying numbers Yes. a have while we is remarks, that an are than elevated, it would prepared

James Yaro

clear. Very Okay.

M&A of, steadily now not improving, I of we're So environment. another clearly sort you year as snapping think, described, back entering

some the has probably deal years now. a competitors environment small given somewhat And so number that for has weak ramifications been negative of on

able your I and at this pace, continues do months, steady hiring say? and improve you that does to Does mean outlook slow acquisitions XX So backdrop? that for if your be for and hiring and to potentially activity impact to more should acquiring guess, the let's that deals continue how next

Scott Joseph Adelson

believer of I couple are that, continuing things to to right? would a bad, But Clearly, a statement. in good weeks. that and companies. we regardless markets I improving, both markets think virtually, opportunities continue. find Yes. talent that say, again, of I that, that to lost think we and I acquire I And want get will that are mean, have

J. Alley

share would not sure I different any think from I'm James, And been. say, it's standpoint, is than market I a look, Yes. market the gain

we'll different But middle sense our firms focus okay, sense after the banking on who And Our just not any performing that some M&A go than sort perform, markets we market to I coming well. am. better are through. peers know market. pretty market of came in the is but we our people expect The And just are do middle who investment we markets not previous is are performing take that of where recession share back.

Operator

question Brown today will Michael And Fargo. your Wells with from next come

Michael Brown

for the bit market wanted to for to scrutiny, we strategic about administration the the be will ask not for M&A are deregulation, large-cap have And little kind potential I more positive sponsor outlook here change what a mid-market -- the of think small less a deal M&A as large-cap that impacts activity? But activity. here. of M&A I tend or the and knock-on sponsor, the portion here.

business? that focus And here when the interested about I'd could and to activity think on how add again, international you of deals immune? your to uncertainty hear about of then, some tariffs, cross-border. more of I start the size impact be your some is like it guess, somewhat things M&A Or course, we

Scott Joseph Adelson

happy Yes, to.

of think, M&A, I just receptive people couple more overall is On just being environment, overall a things. So to the helpful.

more helpful it size. of people's Just about is thinking regardless mindsets

we that obviously, not impacted regulatory environment rather some are have as focused large-cap our transactions. as So in been on by negatively of

think elements We overused it Having just of to tariffs that doing far is of at be create threats dampening but tariffs instinct animal any or been, we will that When term, there portfolio be or I think and look get in that, you industries, I overall. across when something what a take the said the those whether the that, there across get we think occur. the market number a a one deals noticeable. the to change is everybody in they to And I benefits of the geographies, have of effect back it everybody that other on is landscape wanting be expect of will does really diversity benefit changes from of return certainly some of have obviously winners losers.

Michael Brown

the for Any what's range to maybe million about? And range. the should the Great. gears, adjusted comment Okay. expense in guidance low $XX has that just then quarter? non-comp switch Like non-comp Lindsey, think or we on right next expense been for

J. Alley

saying sort I have single digits. Look, of high been Yes.

expect timing a had of couple sort to sort went this QX. way. quarter, things same our single-digit of benefits of we other applying I growth some think that still I and high

QX QX from it brought what we quarter versus really last So down suggested think some I last year just that little this year. this had bit I benefits had maybe a quarter.

still back that theme. I'm . So on same

Operator

today come next JPMorgan. will question your Ken with And Worthington from

Kenneth Worthington

wanted the about environment Houlihan the to deal talk from of an perspective acquirer. I as

'XX calendar that XX? stock what the will takes, And is Your time be partners? from Houlihan less are sort more were environment buyer? puts funding given the And all a you and potential highs. for is now similarly to targets be what reasonable in Is it in good think or or of good. Houlihan and The near versus active to is you quite feedback a getting

Scott Joseph Adelson

somebody with the if just in at an these in we we, with people are our a in say, acquisitions businesses, doing how are are and than parties. would point anything, more anything I honestly. any markets interested do think when transaction, a gotten, a organized have those portion dialogue has about When individuals But more in lot else, array it. time, So to of again, it quite hit, is of and,

so I drives but said And know more less everything or deals. is you that, don't necessarily that factual,

know go when will think them. happen. of opportunities is timing are don't our that continue view will there them, I to there, they out and The that we after

Kenneth Worthington

is let's it there have or continuous? happening bite know a different going said, a is a now, the like dialogue just try more you knowledge depends in as lot water more you analogy. But is on, Or if So fishing there you Do of lines don't in now? fish -- factors? to it not,

Scott Joseph Adelson

would today I say did we are. we question. I've and than sonar fish done better buying good the Very them have before, where

Kenneth Worthington

Perfect.

you're maybe in client all. the dialogue Corporate curious Okay. if in geography love then engagement by a Finance, differ seeing analogy. perspective, this at I thinking about And terms region hear of from to

I'll so to you North and getting engagement and strikes Asia? Trump America back that's on. anything curious versus versus are try interesting elections you worth as dialogue Europe different it But Like calling and out? or that

Scott Joseph Adelson

private if at up it . It a gap as a across in up. time, will, faster. -- the seeing faster. is is said, as I board. that, and really really around in it a picking territories, my say you pockets strategic moving they're really, There And are said pockets, all look But like at in, prepared to bit in comments, pickup are and point are of are so the them pulse. a is but is they everywhere. those feel those little you But defined do we that each regions little both it's pick when fair equity There broadly

Operator

JMP. Ryan And come Devin Citizens your from will today next question with

Devin Ryan

evolution highlighted the drivers just of growth Finance the fees. is In have that Corporate and of deal you and deal the deal just size size on guys there. one increasing Question presentation,

years that just later And selling a and firms of more your natural so want a much out then just to a larger it few get size, around and company sense really a deals growth? that versus how is winning a how so flesh the equity of private and kind just effort buying much concerted twice is progression that there's bit natural of

drive deal? is fees Lokey here that Or per doing anything else there Houlihan to higher

Scott Joseph Adelson

just part, the as correct And very to but to not expect steady answer deal squarely space, to directionally of don't within for size that mid-cap said mean fee linear, we that right? is the a that But and perfectly see, both it's in -- size I'm correspondingly. well most for going on focused is year-over-year, of we that, the time. that And all I are long Having increase do period, mentioned. we continue say that, a above simple Combination really you the change. been has

J. Alley

think said. answer Scott FVA, that Restructuring a different sort slightly Finance, focus your for question Corporate of and of And was which but for the I

Devin Ryan

then more some follow-up the recently. Got 'and -- hires there financing a it. private efforts. obviously of news capital just on

to You invest. continue guys

the I'd there update business that and of on So kind the get . part love an over optimism the next year. to expectations just of for

Scott Joseph Adelson

mean, newer And of part an really, I that capital Yes. set a believe of is hotter I is area stay. It obviously, greater that a a There's another to while outside. it's solutions for area. having businesses. out. been here think positioned would we for broader advantage they But that as has they their continue and that. to how well And sponsors take years X of ago on just to do had set have we're run to of a what with than we alternatives mean,

Operator

Your today next with question come O'Brien Brendan from Wolfe Research. will

Brendan O'Brien

a start, just follow-up business. on to markets guess, the I capital

further of as One group threat solutions you're the will would be on I that that growth of could imagine bold you give and announced their competition after a outlook competition banks to of to with. down color move? to whether for you that sense could much a . And guys. creating bracket types further want just capital services be get TAM the down some space the seems they're increased these see if for the as a that going -- pose business. similar whether the market that to own in I much you working size private companies you lower also, the

Scott Joseph Adelson

not competition. that on market have the there in capital side, your answer a question is doesn't To business we're

been feel continue so more Capital be in understand about Private to we our the absolutely actually significant that to just to our growth continue that given think be, We that different. players Markets growth has and grow do business business very meaningfully We ability to so obviously is ecosystem years overall. will no space, good the to that, Capital the in And There the in in come. needs obviously. the

J. Alley

they'll peers. the to some publicly say kind referring sure different come our likely And of from . Goldman's some the M&A business. Capital I business, of to Solutions creating a with the look going But Capital their world, compete I'd you're business similar Capital and Solutions for solutions but business. M&A, of increase going solutions Evercores very Markets our the mid-cap Goldman the just we'll in that of we're the is to at if And well. of more into other not is article on we I'm likely and down of to sizes kind competition, business to We're competition business, dip our Yes. to sort staying traded is going have capital business, think yes, into as world, our general, playing probably fields but dip companies.

Brendan O'Brien

And divergence liability my restructuring then color. to on helpful outlook. traditional follow-up, I activity significant There's restructuring in cycle. been That's this for wanted just a the touch and management

of up within years. anywhere XX% Chapter the I undergo speaking, next XX as filing as, LME that historically to high transaction from X However, think, end companies XX%

does restructuring? for over optimistic And expect the time? outlook mix how restructuring do you management How this versus liability much evolve inform your dynamic traditional to between

Scott Joseph Adelson

rates number But a period of. of you the of balance that correct out the than those people just some to time higher care of sick result have It mean, to a really taken piece at would increasing you sick there you've if where that anticipated is rates hoped just interest be sheets end of does factor or in. is are, stated, contributing are and of information balance perhaps needing have that's I as Yes. obviously sheets the for of look would more a for rapidly interest if you at it day. the just in

we itself look look different and of as at we And confident in that just that we'll continue longer. for And ways. at manifests we the to level we feel higher that be inquiry various it have,

Operator

come with Ryan And today will Stanley. question your next Morgan Kenny from

Ryan Kenny

we pickup the in bit conversations dig with outsized sponsor more little M&A? what Finance clients in should a more gradual, across also your you're Just seeing on Or some that side? like business. expect Is wanted the to on broad-based momentum more Corporate

Scott Joseph Adelson

it activity And picked the about sentiment more, Yes. up. up and dialogue sponsor is sponsor Certainly, good has correct. does heading. the and doubt it. The of feeling about picked activity you're feel think level where their even just both has picked do like it materially. that's No and up we I sponsored are

Operator

And come Seaport your today with will Jim [Operator question from Instructions] Global Mitchell Securities. next

James Mitchell

to Scott, I pre-pandemic think this like you about sounds It transaction little velocity better a quarter. talked on improving, the back call, got it last but not levels.

So a getting ways are still we are velocity traditional much back or away? more to closer getting levels

Scott Joseph Adelson

yet. We're but still said, -- it is yet. we're to I there mean I just we're not improve, there continuing not as

James Mitchell

it And this so open. slower What hesitation Is there? pretty seems or causing is -- it it what financing still gets transactions? like is wide

Scott Joseph Adelson

be Yes. about but I just right? don't time, want time. takes It to cavalier it

James Mitchell

where Are bid-ask wide still spread to -- in terms relative of expectations?

Scott Joseph Adelson

our I -- takes time, that it. water. it. will really examples. it is that, running and will the keep in That's getting not speed that as I that are not it with but That's before, of and to And the has up, back people just history just water in mean, still you water. to about that into say They're over because really we've talked time. continue not see think The

James Mitchell

Right.

on in follow-up you that of the X upward everything you else the revenues these -- may some higher Is sort trajectory levels here it story feel is you've incrementally elevated next to like and still in just tougher And longer still keeps years, be Okay. going see but Or in Restructuring. couple rates described of do can for restructuring? grow? decent

J. Alley

a grow lower. business, and versus higher think the sort pressure it's I to former look, see higher so in rates you the I M&A restructuring think markets think on interest as start -- just hard long -- robust, -- the pressure are it's of unless I to direct

this I incremental we It's don't just potentially in for saying feel they're higher think could so longer. market I think we're growth. comfortable saying -- be comfortable

on M&A, upward and some obviously, changes, pressure on see Now financial you'll pressure you'll start to if market see restructuring. the then

current we they're condition, to better, the this love seeing it kind get market fact from of an the heroic keep And assuming the -- increasing revenue think that they We continues in restructuring flat love where are. a I it's that we're holding we us to not decline. at team M&A effort But fact that environment.

Operator

I over conference That company like to for to back would the the turn any remarks. concludes session. question-and-answer closing our

Christopher Crain

I fourth earnings want full for year you third to forward when updating thank coming look quarter all everyone our our fiscal quarter spring. our participating XXXX call. and We we this XXXX in discuss on to progress results for fiscal .

Operator

concluded. The you today's conference for has presentation. now attending Thank

You may now disconnect.

Houlihan Lokey (HLI) 28 Jan 252025 Q3 Earnings call transcript