Houlihan Lokey (HLI) 27 Jul 232024 Q1 Earnings call transcript

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan Lokey's First Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. conference being this XXth, today, that XXXX. note call recorded is July Please

turn to call Lokey's will the I now over Please ahead. General go Christopher Counsel. Houlihan Crain,

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

forward-looking our expect, include such everyone begin we These which that future forward-looking formal will phrases discussion today as or performance. need identified remind Before usually of similar remarks, to the words statements. not by anticipate, statements, are of guarantees are other we use should will,

what caution and relying that numerous These statements actual to when on are therefore, them. could uncertainties subject you should expect, interpreting we and materially and exercise results risks from cause to differ

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

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

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

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

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

adjusted and XX% per earlier. earnings down a year quarter, the X% from down share For were revenues were

challenging Advisory fiscal sluggish closings were to We first Valuation hopeful our remain the entered in but quarter and deal XXXX, growth a both Financial M&A soft. M&A after markets see some and

However, debt improving which affected saw M&A. markets, we client has result and the equity quarter, throughout confidence improvements of capital appetite a positively as the for in

too still a Although client trend, are renewed interest in call our and in early an deal the we to a in conditions improvement market it testing sidelines year. M&A seeing over sitting for today's on from after momentum

this statistics forward, likely look activity. we don't slow support material and down any might soft we As landing a economic overhangs momentum see and that macroeconomic M&A increased

Our decline Corporate $XXX year driven was our the Lower in results a period Finance last from This also seasonality, first market quarter M&A sluggish a both typical Finance but million business quarter. quarter first and by quarter. for revenues in Corporate the prior for were produced closings.

standpoint, while Finance Corporate headwinds. geographic over fact US due business in a our From economic ongoing Europe quarter lagged to grew quarter,

long As continues for the time, first time the M&A of we deal remain previous environment to we mentioned number a quality have seeing strong and in and opportunities in new in improvements the closings. discrete are quarters, for business

encouraging, hold on became been recently mandates active. Also that episodic, months, which is albeit for several have

been inflation market of in capital the this While in peak consensus quarters. higher stability, rate this debt it improving. rates has years, are especially the interest environment, market middle is for more near than recent is active at interest much several the markets and that remain or than With is firms, we cycle

year. steadily last new to the have when in business the same Our closed mandates the Financial producing quarter, had several increased quarterly the over periods strong compared Restructuring number and number revenues of $XXX million previous another of the both of transactions quarters

fast-approaching a continues Restructuring to Since maturity not over Financial we business restructuring expect wall. and of the to result achieve years. next debt interest rates revenues crisis, a this from continue of The to one-off cycle elevated benefit is restructuring the higher couple

Valuation our stable stalled slightly but grew in business produced Overall, quarterly market this more and million year, last revenues. in FEA Advisory Financial environment. has $XX

neutral market lines service continue the quarter. are to Our our be M&A are that performing tied the lines market but well, in fiscal to soft service first

Finance revenue the M&A year. seeing shoots half If the M&A activity, we of back FEA increase our in produce we green see do, markets overall would are an momentum Corporate in in and fact, in expect fiscal the to

firm IT we quarter, an in the signing X Carolina. investment Charlotte, the banking headquartered North announced our services of Mile Advisors, During acquisition of

the will Managing fiscal well XX Directors our deal this new from reported. six hired expect previously close quarter, second Managing in as promotions as internal added during We we as quarter. Also Directors

enter over most place that important through asset our we the cycle. workforce last in environment a have like and Whenever very so, people. the one challenging keep we motivated we And hard the we to M&A work or months XX recognize that experienced our is

have that believe In fact, is smaller we our workforce of crucial supplementing competitors strong acquisitions of benefits diversified our senior more and the don't many with as platform. hires that business

excellent important pleased cycle. most more returns, robust M&A job a that to we report market this extremely on to at recruiting as have asset retaining positioned are we am through our I done it capitalize and well whenever an

And I'll Lindsey. to over that, the with turn call

XX% were last last compared same quarter Finance the Corporate the fee the same versus year in XXX to compared was when closed year. transaction $XXX higher and the transactions same We for Revenues year. quarter down this period last quarter, million in the average Scott. for to our XX you, quarter quarter Thank

$XXX were closed revenues last compared the period We in closed transactions Restructuring, to XX in from the year, though deals on transaction Financial same XX last increase average period the declined. million the XX% same quarter a year, fee quarter, for the In

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

first for the $XXX million quarter for last compensation same Turning our expenses year. to $XXX quarter adjusted expenses, versus were million the

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

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

environment, we do Given compensation change for to our target long-term to our of XX.X% expense the expect ratio. adjusted current not

XX.X% non-compensation and million last of quarter compared Our for $XX the same increase an in period the of and ratio non-compensation last $X quarter an This for an of the an adjusted year over year of expenses from quarter, the previous million the were previous resulted same to adjusted XX.X% ratio increase $XX quarter. non-compensation adjusted quarter. XX.X% for for million the

the per basis, previous was well expense On quarter non-comp our per quarter employee employee year as the same last a for employee $XX,XXX this quarter. as adjusted versus per $XX,XXX

in As non-compensation rest the our timing first expense and we normally for year. quarter not occur the seasonality result represents have did of the a the of of our that better a outcome certain results in quarter first expenses, likely lower that

all to line general However, across of non-compensation pressure is especially inflation we much our as higher items inflation. see in than TM&E continue travel expense running for

continue Beyond ratio XX% over in expect to will adjusted non-compensation settle that this somewhere the our year, we long-term. between XX%

in quarter, of expenses, the we transaction. amortization, to $X.X million was the non-cash which adjusted related For acquisition GCA out related our majority of non-compensation the

the category higher expense interest balances was approximately for interest globe cash Our higher of quarter year. adjusted an expense in by on rates, of decreased $XXX,XXX same across $X a million interest in driven higher income the and rates. last income The versus of to this other result our approximately the period income improvement as

items some the Our Last favorable adjusted quarter to year, effective compared tax had year. for quarter last for we effective XX.X% rate. our XX.X% that rate was tax the same lowered

April increased as corporate XXXX. our addition, our In effective a in tax slightly from in effective to quarter the XX% rate tax increase the XX% of result first in UK rate Xst, the

tax out effective range. and a our result We long-term for in higher we of will our effective at GAAP tax end rate our that the rate of the effective that between a first XX%, rate, we benefit that of received range be our of tax our maintain year We of the stock but expect quarter. vesting XX% adjusted as

Turning balance to sheet. the

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

employees cash position quarter paid of this XXXX declined fiscal Our significant May. bonuses we in a portion to as our

X.X Also through fiscal to shares shares issued and repurchased withhold during XXXX new compensation year-end in we approximately of the part employees XXX,XXX as approximately our first our cover quarter, million to month we May. of

vest Shares fiscal will XXXX issued four-year into share as diluted count period compensation over a fully issued. of part our the date from

a and hiring to We advantage balance this to take market. in conservative are opportunities continue sheet acquisition we repurchases to as flexibility prioritizing of approach take share

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

this gentlemen, be Thank at we Instructions] session. time, you. question-and-answer conducting [Operator a Ladies will and

with line of Brennan Hawken comes UBS. question question. the first your Please Our from proceed with

This in going? Hi, for filling Brennan. Ben is guys. Rubin it How's

Ben. Hey,

finance given corporate Hey, challenging guys. headwinds. a for quarter Obviously, industry

you that $X.XX, I around change you think the kind and structural new was of which we inflect results did in to around revenue environment kind way. guys of previously per But or $X.XX lower their Were when in environment this a Thanks. June didn't we this of the backdrop, last kind performance? about quarter that more a of the low. kind of of quarter the either range kind spoke, quarter of seems something reached deal timing the led time it reasonable assuming assumed

it fall maybe quarter. I quarter there like look does suggest year trough. and Having far that, is is would through trend that next whole so this fiscal timing so revenues into that fail this said from a standpoint through far, Yes. anything fall don't think they'll to April and our the our

existed for. improved And just the of in I had months. ongoing we that Just the over produce headwinds quarter last surely the especially that slowly results part hoped results think kind but earlier several didn't seen

state follow-up, approach of do sponsor kind especially Great. as financial in of anticipate peers heard Thanks. some then say sponsor-like your that for of the And transactions, we is on question the calendar pertains as based they next the the my the you guys reengage a back market. We've pickup my extent, middle we have, you on especially a one half conversations of can when when market? -- expect the to greater year. to -- it them to But guys this

the any between to and say, distinction of Thanks. willingness US between, there sponsors markets? is the lastly, domestic international transact And

we sponsors point, to We're answering US At I ago months something six terms ago. don't and that in months or see sponsor are parts today on marketplace dialogue, do or the of think question between wanting the in active to the this see globe. first, significant versus difference, your starting already more of to a other interested three Europe last

this close. hold, we're still actively we're at which several before deals it's The note on cautionary versus those is deals would that going involved even months in point for now take to more

it improvements, immediately. but So, translate we're clearly doesn't or revenues seeing into

to going seeing up more likely before activity or holds, another you'll two back level kinds of the current revenues think It'll I of quarter versus still take XXXX start half are show those calendar still calendar if in of this XXXX.

color. Got it. very helpful That's Thank you.

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

for to restructuring Good actually and taking ecosystem XX that you you bankruptcy. credit a afternoon, private and ecosystem questions. companies and less restructuring my or talk given activity willingness think I Scott the credit could cap ecosystem, has about Lindsey, private thanks on Chapter to just Maybe how the the puts not? default bring suspect impacted

the not Yes. a any or private growing is of of making of sure terms that restructuring of I'm in slowing difference the credit down much existence stalling activity.

where occurring. total from for it leverage we've of of been we years couple a of about indebtedness One, couple had years a talking things amount think was just up is the as substantially ago. I

had You interest higher. of rates putting not feds are which money anymore, they're doing in materially system, in the the all

interest So, today ago restructuring willing provide there to are had people that reorganization capital, for alternatives even some you lenders was were are exist who if years to or a of is higher at what do a form if does couple it of it doesn't a other there rate.

point, reasons of be what's it's on there another direct think impact you in we the happening we others businesses as space. couple it's at to that restructuring other think But the is continue amongst why are buoyant restructuring the material So, rather don't to of going world. is these And blending any this mentioned having alternatives, for helpful all in that years.

just this very Okay. break parts those the and businesses there Maybe just broad the are Finance. clear. performing That's could of on non-M&A of in you how buckets if environment? Corporate down sort Maybe in

call be the the for in a capital in is kind We of still us. team Corporate we'll our is the have M&A pieces. markets, mean, placement do there'll I So, overwhelming what Finance. playing agent majority couple the or predominantly of capital. which debt advisor of

a a been existing funds because get are looking hedge still nature. also they've and equity liquidity deployed. for things It's and We fundraising of money just think that environment in to private funds tough do capital and some for I LPs raising

money, as cause on to starting it. Versus classical and one more point we M&A we eventually that the describe activity will new more think capital markets

more We last quarters. getting, private there multiple that hearing at you looking seen again or just couple actively something the and lenders are clearly and once know, more transactions, are lenders we're the sheets, are offer generally months in we actually couple that hadn't

is Still early see So before into that I activity. business starting to hopefully revenues. some translates more think, additional it more days,

That's very much. clear. so Thank you

next Ken proceed with with Worthington Our from Please question your of JPMorgan. comes line the question.

to the versus that. clients And you some market following or developing evening. what maybe saw well? extent Good And for Thanks financing calendar restructuring particularly today M&A developing the for taking to today is up on first what customers? in as accessible Hi. availability the earlier your for is of question. middle How financing year,

first of what the might. on growing last if XX there over of last of would very, found is capital very little windows six activity is the years we been for but to we a say handful you best or there's probably was continues the So, what the been where months. credits, piece, there's grow. or and But all over providers that number

it's capital say robust there still a companies. of would to are good look more not extraordinary but a who to period, that no no people may be but willing they period willing at By activity. and not are in Now, companies, deploy we more means we're companies are they're

the getting slow and in part And as is on a to just the the expectation people participate certainty darn to peak. pretty is more previous who expect incremental are sure just it mentioned There's the and think of in cetera. we are think that will question, I marketplace willing continue I've going, going, interest the they economy a the et company bit pace close rates at where are likely is

on the your a to participate you restructuring. in restructuring are to have private a people and capital question, solution. who And willing yes, restructuring, in ultimately, are providers are a also need And

out a necessarily good or there's for hire to that that or not that's get advisers. will business, so there And if desire form a a solution restructuring the help solution our avoids a to to of party some it's necessity

a before not restriction. restructuring said is today. helpful see So, a the hand and we what I in marketplace actually they're as They're negative. perspective

Awesome. Okay.

my real you read restructuring that. about Thank mind And you. You quick then a on Houlihan? estate follow-up. talk Can the in opportunity for

Okay.

is out in still I think there in spots turbulence everybody a lot specific there estate. believes of real

they Some stack one they're things probably do depends still one hire some it to mortgage and They'll solution, advisers come need the lender go to through on really if will a classically not just cap but may structuring, it. property. to

It's a very, marketplace. big very

real tell, needed on not It's and they in estate. in singular owners point direct think hire or the or just the do participating things advisers lenders go early to reorganization on how themselves? handle much are restructurings We point it. Clearly, what too what at will so and to we I much at

on real category. And fair group will side industry transactions expertise in estate we to Great industry and add restructurings smaller estate I back that groups, the of our that during our won other Recession although the in real share relative is our

years are estate prospects the years. same at expertise at did folks think ago, excited real the the are it I business the over in here have Houlihan. So, the are about ago, restructuring coming And they that XX years who XX still ones

great. much. Thanks Okay, very

from JMP comes your line with Please with the of question next Securities. Our question. Ryan Devin proceed

Michael you? for are Falco actually Devin. How is filling This in Hi.

How are morning. you? Good

Good.

other term inevitable? of of and on higher stent factors, is outlook and continue M&A and topic the market too the at the or interest maturities, down So markets it cycle restructuring for maybe feels just equity intermediate are all? a restructuring, settling these the just lumen kind are Or be powerful, so that credit impact to recently, recovering that to whether rates prolonged does

all lines up. at our we just, of and The little call and bit three is we're the should quick a both pent over future, more rates. product in are But a the Demand just side, restructuring issues higher on I'll primary it's environment color grow new do that yes. foreseeable we the entering interest answer and can think there, it,

if that foreseeable we much And believe future. for don't or back zero so even least maybe go going they're not coming up to they're the not down more, to ever at

of feel, work there said, marketplace for from finance FDA corporate that hopefully, like the and moving away the to it side So, there's for the and in slowly restructuring follow M&A tends feel lot a the there we've headwinds does one couple but does next on of as out as years, surely well. tailwinds just net

potential be seeing That's the then an the do about and of clear. in some M&A could you recovery market, uneven? think you when Great. And very you're it expect for improvement that

of by And sit, assets will to high mean, to cycle scenario asset see sold quality will with a the upside? could be sit could interest, I the continue which while a that, lot we maybe where tied or mute maybe macro the or

I of probably bought great assets time in in trade. assets periods sold. think worst can find average are in average or still even the very always below And you robust and that times,

call deals. market in we've So, been experienced the exceptional very still I'll the it good and businesses, middle businesses the even doing

months. we're with before certain and note, getting quarter that businesses. we take different there's in just cautionary see M&A on possible the suggest results. are XX the maybe another stops It's more to But happen and meaningful start starts revenue into over could I think do XX, days some further of We've going forward you think that you'll of just over the factors seen it's XX, some the core kinds still And today last the and the going to moving evidence just XX marketplace last in again.

Thank Okay. you. I'll hop queue. back in the

Our Wolfe line from next Research. of Chubak Please Steven the question. with question comes with your proceed

is start, Good touch O'Brien just filling Brendan to guess to Europe. in on afternoon. for I want This I Steven.

some particular Sounds like that in this business saw weakness and finance corporate quarter.

And terms cycle. are the behind rates US. the in uncertain has in rate And of banks path impacted the are seen Fed we've central Europe the they in uncertainty a where in how hike of activity bit running

out how the perspective playing the close to are to guys you would the get at Given relative that it US great market, are that moment? be on dynamics region to your in

for earnings same had their very than So, although that part our And yes, a the Europe the soft M&A operating we as question at was in bankers the are not response of markets much US. pace this cycle. the in different QX

So, in optimism levels, we're the as at in exists term markets seeing to test desire the well. the the Europe that activity these short least US,

to the looking of of over that next kind So the the similarly markets are perform that markets we quarters, perform. the forward to way hoping based hoping on couple European are US

that in months. did an next and itself it several impact the quarter and reversed so outsized last we'll have And we're see that's hoping

a private. been within lot There's credit just of just I'm opportunities follow-up Suisse you're how seeing the going on going And hear region. under a market Rothschild share there's Europe, gain a about actually. interested to

would get integrating continued sense market? but the you've general what M&A the invest prospects the GCA growth a there acquisition, to after to and it beyond have the to know just are I been as be great platform,

couple years in of in We awareness brand think from today from just ago. a strides Europe our substantial made we where we out are have

negative less positive the Fact been is us. to to still be they [ph] much Credit Penn or private. and the to versus a think what public do Suisse whether do very, has competitor just Rothschild or I we in great impact And going of a what they're tend

financial attract specialize round might retain continued Europe think Europe, in the able we to we've years and a to we have out different that to that out have. I able that to not quality industry sponsor been have coverage we didn't couple we meaningfully added of and ago, be bankers to we continue the sectors in

it's would US of European I to was headcount, softer sector is US. it other minute percentage one than the technology a is add for our is our Finance business that business also thing the addressing bigger than while comment a Lindsey's a European practice ago, piece And of part our of of Corporate

industry as other And across sector compared has technology the some not industry well year-over-year globe groups. to performed the

So, ongoing well. that to we relative sub sectors And part be the industry US out in been see to the sponsor in business. headway it as in has and to of very economy coverage the US suspect European various the Above will beyond do continue in successful I continued the as make strategy think and European economy. I financial improvements we've Europe to build in whatever does our we as there, the

That's Thanks my taking for great questions. color.

Brendan. Thanks

your of Stanley. comes question next question. Our from the Morgan proceed Kenny Ryan line with Please with

afternoon. Good Hi.

Ryan. Hey,

to Wanted around expenses. comments on follow-up non-comp

elevated elevated You it on reported for range basis mentioned on and like basis that a that per also sounds they're headcount and in both future. remain a they'll foreseeable the

good anything as there think maybe shows that? thing a cost doing offset the you're those business as should that Thanks. up it environment think improves? you're should headwinds front we the about clients it's in doing we because Is just getting of picking activities How through and of or to and the

the cycle. think most have I that the TM&E help obvious probably during the on revenue not is one. back expenses And drive we pulled

bankers to our get to encourage are of continuing We in clients. front

that expectations quite are our markets all a wave the along are with return. to think we peers, here once M&A I going

face-to-face -- answer interaction the ever as is with so on we TM&E important been. side the our And the think as is we that are clients no, it's

spent largest think a side, a and those money expanding rent I four shown or bit of and our of rent. due or three quite all last come the in had our over up perfect costly so. little it's kind of We XX We the locations a on storm. locations bit On months it's we had

growth year And really in and this significant months, XX last seen some I we've rent. the think

a this return of describe You lack second will see better of and it. the normal that start year for to half towards way to stabilized

those of comp front I'd two what it's are bankers to And the of returning I that driven kind and from think clients. think really have non increases. call sort their outsized within rent items of timing a I standpoint line So, in

On the run the are on it's and little to going terms that's look I'd side hard rate TM&E tell make but two is, non-comp. comments in of post-COVID like what to the those a what that

helpful. That's Thanks.

the further to There Scott like to are call I'd questions hand the Beiser queue. remarks. in no back you closing for

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

this conclude today's teleconference. Ladies and Thank participation. your you gentlemen, does for

lines a may time and have You disconnect your at this day. wonderful