UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ______________ Commission File Number: 001-37537 Houlihan Lokey, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction o ...

Financial Data and Key Metrics - Revenues for Q2 FY2024 were $467 million, down 5% YoY but up 12% QoQ [109] - Adjusted EPS was $1.11, down 7% YoY but up 25% QoQ [109] - Corporate Finance revenues were $282 million, down 11% YoY but up from last quarter [40][68] - Financial Restructuring revenues were $115 million, up 17% YoY [91] - Financial and Valuation Advisory revenues were $71 million, down 8% YoY [41] - Adjusted compensation expense ratio remained at 61.5%, consistent with the long-term target [42] - Adjusted non-compensation expenses were $75 million, up $3 million YoY [72] - Adjusted effective tax rate was 28.4%, compared to 27.9% in the same quarter last year [44] Business Line Performance - Corporate Finance closed 117 transactions, up from 114 in the same period last year [40] - Financial Restructuring closed 31 transactions, up from 24 in the same period last year [91] - Financial and Valuation Advisory had 852 fee events, down from 890 in the same quarter last year [41] - The average transaction fee in Corporate Finance declined slightly due to deal mix, not trends in transaction value or fee size [54] Market Performance - The US restructuring market slowed, but Europe, Asia, and South America showed continued strength [70] - Capital Markets revenues improved, driven by better credit availability in the mid-cap space [69] - Private credit markets have been more robust than public debt or bank syndicate markets [15] Strategy and Industry Competition - The company expects elevated restructuring revenues over the next couple of years due to higher interest rates and a fast-approaching debt maturity wall [117][122] - Strategic buyers and sellers are slowly returning, buoyed by improving equity markets and stable financial performance [33] - The company is prioritizing balance sheet strength and flexibility for potential acquisitions and hiring opportunities [118][124] Management Commentary on Operating Environment and Future Outlook - Management believes the worst of the M&A downturn is behind, with improving client confidence and capital markets [116] - The pace of improvement in Corporate Finance and M&A markets is expected to be slow [116] - The company remains optimistic about market conditions but is realistic about macro pressures [110] Other Important Information - The company repurchased 239,000 shares at an average price of $104.33 per share [124] - Adjusted other income and expense increased to $2.5 million from an expense of $1.2 million in the same period last year [43] - The company expects non-compensation expenses to be seasonally higher in the second half of the year [27] Q&A Session Summary Question: Impact of higher long-term rates on middle market M&A - Middle market M&A deals are financed similarly to large-scale M&A, with a mix of debt and equity [98] - Higher financing costs may have a lasting negative impact on deal activity over the next 6-12 months [96] Question: Seasonality in Corporate Finance - The December quarter is historically the best for the industry, except for calendar 2022 [125] Question: Restructuring business outlook - The restructuring environment remains favorable due to higher interest rates and debt maturities [60] - The company expects steady business flow, with some companies acting proactively before hitting maturity walls [50] Question: Compensation ratio and expense management - The company has no plans to change its long-term target compensation ratio of 61.5% [104] - Non-compensation expenses are expected to remain consistent with historical trends [111] Question: Acquisitions and hiring - Acquisitions remain an important part of nonorganic growth, with opportunities in the current market [78] - The company has added significant value through senior hires, acquisitions, and geographic expansions over the last seven quarters [53]

Houlihan Lokey Lincoln International 37 37 13 Stout Houlihan Lokey | 12 We will continue to grow our talent pool through: GROWTH WILL BE DRIVEN BY: • Building out our Capital Markets and Fund Placement platforms • Increasingly complex balance sheets Financial and Valuation Advisory • Increasingly complex and ever-changing regulatory reporting, valuation and tax environments $7.7 $7.9 • HL has maintained solid MD productivity through the cycles. Productivity increased in FY21 and FY22 due to significantly le ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ______________ Commission File Number: 001-37537 Houlihan Lokey, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of inc ...

Company Overview - Houlihan Lokey is a global investment bank specializing in mergers and acquisitions, financial restructuring, and valuation advisory[84] - The company has a diversified revenue stream across clients, industries, geographies, transactions, and financial professionals, with no single professional responsible for more than 2% of revenues[124, 135] - As of June 30, 2023, the company has 35 locations worldwide, 2,595 global employees, and 326 managing directors[85] Financial Performance - The company's revenue for the fiscal year 2023 was $1.809 billion[91] - Adjusted pre-tax income for fiscal year 2023 was $428 million[89] - For the three months ended June 30, 2023, revenues were $416 million[49] Business Segments - Corporate Finance generated $1.090 billion in revenue, representing 61% of the total revenue for the last twelve months ended June 30, 2023[155] - Financial Restructuring generated $440 million in revenue, representing 24% of the total revenue for the last twelve months ended June 30, 2023[155] - Financial and Valuation Advisory generated $276 million in revenue, representing 15% of the total revenue for the last twelve months ended June 30, 2023[155] Market Position - Houlihan Lokey is the No 1 Global M&A Advisor Under $1 billion transactions[27] - The company is a market leader in placing bespoke capital in the private markets[31] - The company's market share in the Global mid-cap space is approximately 1%, based on the number of closed Corporate Finance transactions completed in CY 2022[28]

PART I [Business Overview](index=5&type=section&id=Item%201.%20Business) Houlihan Lokey is a leading global independent investment bank specializing in M&A, capital markets, financial restructuring, and financial and valuation advisory services, emphasizing independent advice and avoiding conflicts of interest - Houlihan Lokey is a leading global independent investment bank, offering M&A, capital markets, financial restructuring, and financial and valuation advisory services[17](index=17&type=chunk) - As of March 31, 2023, the company has **1,904 financial professionals** across **37 offices globally**, serving over **2,000 clients annually**[19](index=19&type=chunk) - The company's business is divided into three segments: Corporate Finance (CF), Financial Restructuring (FR), and Financial and Valuation Advisory (FVA), committed to providing independent, professional advisory services and avoiding conflicts of interest[17](index=17&type=chunk)[18](index=18&type=chunk) [Our Advisory Services](index=6&type=section&id=Our%20Advisory%20Services) The company offers specialized advisory services across Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory segments [Corporate Finance](index=7&type=section&id=Corporate%20Finance) The Corporate Finance division, with 217 Managing Directors as of March 31, 2023, focuses on M&A and capital markets transactions, particularly excelling in the mid-market and recognized as a prolific sell-side advisor - As of March 31, 2023, the Corporate Finance division has **217 Managing Directors**, focusing on M&A and capital market transactions, particularly prominent in the mid-market and considered one of the most prolific sell-side advisors[21](index=21&type=chunk)[24](index=24&type=chunk) - CF business covers a wide range of industry sectors, including business services, consumer, energy, financial services, healthcare, industrials, real estate, and technology, continuously expanding its global presence[22](index=22&type=chunk) [Financial Restructuring](index=7&type=section&id=Financial%20Restructuring) The Financial Restructuring division, with 57 Managing Directors as of March 31, 2023, is one of the largest restructuring teams in investment banking, known for handling large and complex restructuring projects - As of March 31, 2023, the Financial Restructuring division has **57 Managing Directors**, one of the largest restructuring teams in investment banking, known for handling large and complex restructuring projects[29](index=29&type=chunk) - FR business operates in major global markets, providing a counter-cyclical hedge, with demand increasing during macroeconomic downturns, yet remaining active even in strong economies[29](index=29&type=chunk)[31](index=31&type=chunk) [Financial and Valuation Advisory](index=8&type=section&id=Financial%20and%20Valuation%20Advisory) The Financial and Valuation Advisory division, with 39 Managing Directors as of March 31, 2023, is one of the largest and most respected valuation and financial opinion businesses in the US, recognized for its technical expertise and thought leadership - As of March 31, 2023, the Financial and Valuation Advisory division has **39 Managing Directors**, one of the largest and most respected valuation and financial opinion businesses in the US, known for its technical expertise and thought leadership[34](index=34&type=chunk) - FVA's core capabilities lie in deep technical financial, accounting, and tax skills, providing corporate, securities, and asset valuation, transaction opinions, transaction accounting, tax, and due diligence services[35](index=35&type=chunk) [Human Capital Resources](index=8&type=section&id=Human%20Capital%20Resources) The company is committed to attracting, developing, and retaining top industry talent through competitive compensation plans and extensive employee ownership - The company is committed to attracting, developing, and retaining top industry talent through competitive compensation plans (including deferred cash and equity awards) and extensive employee ownership (as of March 31, 2023, approximately **1,000 employee shareholders held about 27% of equity**) to incentivize employees[36](index=36&type=chunk) - As of March 31, 2023, the company had **2,610 employees globally**, an increase from 2,257 in 2022 and 1,574 in 2021[39](index=39&type=chunk) [Competition](index=9&type=section&id=Competition) The company faces intense competition in the investment banking and financial advisory industry, driven by factors such as industry knowledge, execution capabilities, client relationships, reputation, and pricing - The company faces intense competition in the investment banking and financial advisory industry, with competitive factors including industry knowledge, transaction execution capabilities, client relationships, reputation, and pricing[40](index=40&type=chunk) - Key competitors include boutique investment banks like Jefferies LLC, Lazard Ltd, Moelis & Company, as well as large full-service investment banks and the "Big Four" accounting firms[40](index=40&type=chunk) [Regulation](index=9&type=section&id=Regulation) The company is extensively regulated in the US and globally by various authorities, requiring compliance with complex financial and anti-corruption laws - The company is subject to extensive regulation in the US and globally, including oversight by the SEC, FINRA, and various state securities regulators[42](index=42&type=chunk) - Key subsidiaries, Houlihan Lokey Capital, Inc. and Houlihan Lokey Advisors, LLC, are registered broker-dealers and subject to the SEC's Uniform Net Capital Rule (Rule 15c3-1)[42](index=42&type=chunk)[43](index=43&type=chunk) - International operations are authorized and regulated by local authorities in Europe, the Middle East, Asia Pacific, and South America, and must comply with anti-corruption laws (such as the US Foreign Corrupt Practices Act and the UK Bribery Act)[47](index=47&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) [Organizational Structure](index=12&type=section&id=Organizational%20Structure) Houlihan Lokey, Inc. operates as a holding company through its subsidiaries, with the HL Voting Trust controlling a significant majority of the total voting power - Houlihan Lokey, Inc. is a holding company operating through its subsidiaries, primarily Houlihan Lokey Capital, HLFA, and HL EMEA LLP[60](index=60&type=chunk) - As of March 31, 2023, the HL Voting Trust controlled approximately **79.1% of the company's total voting power**, making the company a "controlled company" under NYSE rules[60](index=60&type=chunk)[61](index=61&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) This section details various risks that could adversely affect the company's business, financial condition, and operating results, including market conditions, business operations, industry competition, organizational structure, Class A common stock, and general geopolitical events - Changes in market and economic conditions can adversely affect the company's business, with Corporate Finance (CF) and Financial and Valuation Advisory (FVA) volumes potentially decreasing during economic downturns, while Financial Restructuring (FR) volumes might decline during strong economies[66](index=66&type=chunk) - The company relies on Managing Directors and other senior professionals, and the loss of talent could harm client relationships and business success[81](index=81&type=chunk) - The company faces reputational and legal risks, potentially stemming from employee misconduct, conflicts of interest, failure to meet client expectations, or operational errors, especially in FVA business[82](index=82&type=chunk)[83](index=83&type=chunk)[100](index=100&type=chunk) - The company faces intense competition from other financial advisory firms, many of which have greater financial resources and broader product and service offerings, potentially leading to loss of business or pricing pressure[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - The company's dual-class stock structure and the HL Voting Trust's concentrated control over voting power (**79.1% as of March 31, 2023**) limit the influence of Class A common stockholders on company affairs[104](index=104&type=chunk) [Risks Related to Our Business](index=14&type=section&id=Risks%20Related%20to%20Our%20Business) The company's revenue and profit are highly volatile, primarily from advisory fees in Corporate Finance and Financial Restructuring, which are influenced by market conditions and third-party decisions - Company revenue and profit are highly volatile, primarily from advisory fees in Corporate Finance and Financial Restructuring businesses, which are typically collected upon transaction completion and are subject to market conditions and third-party decisions[69](index=69&type=chunk)[70](index=70&type=chunk) - Goodwill and other intangible assets constitute a significant portion of the company's assets (**$1.29 billion as of March 31, 2023**), and their impairment could have a material adverse effect on financial condition and operating results[74](index=74&type=chunk) - International operations (**29% of revenue in fiscal year 2023**) face risks such as exchange rate fluctuations, regulatory differences, political instability, and management complexities[75](index=75&type=chunk)[79](index=79&type=chunk) - The company relies on information systems and technology, facing risks of cybersecurity attacks, system disruptions, and data breaches[90](index=90&type=chunk)[91](index=91&type=chunk) - Clients may fail to pay for services, leading to difficulties in collecting accounts receivable and unbilled services, with bad debt expenses of **$6.4 million and $3.7 million recorded in fiscal years 2023 and 2022**, respectively[94](index=94&type=chunk) [Risks Related to our Industry](index=20&type=section&id=Risks%20Related%20to%20our%20Industry) The financial services industry is highly competitive and fragmented, exposing the company to litigation risks, especially in financial and valuation advisory, and extensive regulatory compliance costs - The financial services industry is highly competitive and fragmented, with the company facing competition from large institutions and emerging independent investment banks, potentially leading to pricing pressure and loss of market share[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - As a client advisor, the company faces significant litigation risks, particularly in its Financial and Valuation Advisory business, which could result in substantial legal liabilities and reputational damage[100](index=100&type=chunk) - The company's business is subject to extensive and evolving domestic and international regulations, incurring high compliance costs, and violations could lead to fines, penalties, and reputational harm[101](index=101&type=chunk)[102](index=102&type=chunk) [Risks Related to Our Organizational Structure](index=22&type=section&id=Risks%20Related%20to%20Our%20Organizational%20Structure) The company's dual-class stock structure and "controlled company" status concentrate voting power, limiting Class A common stockholders' influence and potentially hindering beneficial control changes - The company's dual-class stock structure (Class A shares with one vote per share, Class B shares with ten votes per share) results in the HL Voting Trust concentrating the vast majority of voting power (**79.1% as of March 31, 2023**), limiting the influence of Class A common stockholders[104](index=104&type=chunk) - As a "controlled company," the company is exempt from certain NYSE corporate governance requirements, which may prevent Class A common stockholders from receiving the same protections as shareholders of other companies[106](index=106&type=chunk)[107](index=107&type=chunk) - Anti-takeover provisions in the company's charter and Delaware law may prevent or delay changes in company control, even if such changes would be beneficial to shareholders[108](index=108&type=chunk)[110](index=110&type=chunk) [Risks Related to Our Class A Common Stock](index=24&type=section&id=Risks%20Related%20to%20Our%20Class%20A%20Common%20Stock) The potential future sale of a large number of shares, including Class A shares converted from Class B, could depress the Class A common stock price, and future dividend payments are not guaranteed - The potential future sale of a large number of shares (including Class A shares converted from Class B shares) could lead to a decrease in the Class A common stock price[112](index=112&type=chunk)[113](index=113&type=chunk) - The company currently pays quarterly cash dividends, but the dividend policy may change at any time, and future dividend payments are not guaranteed, which could negatively impact the stock price[114](index=114&type=chunk)[115](index=115&type=chunk) - The market price of Class A common stock may fluctuate or decline due to various factors, including company performance, market expectations, industry news, and macroeconomic factors[116](index=116&type=chunk) [General Risks](index=26&type=section&id=General%20Risks) The conflict between Russia and Ukraine and resulting sanctions could cause global economic and financial market volatility, adversely affecting the company's business, financial condition, and operating results - The conflict between Russia and Ukraine and the resulting sanctions could cause volatility and disruption in global economic and financial markets, which may materially adversely affect the company's business, financial condition, and operating results[120](index=120&type=chunk) [Unresolved Staff Comments](index=27&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company states that as of the filing date of this report, there are no unresolved SEC staff comments - The company has no unresolved SEC staff comments[122](index=122&type=chunk) [Properties](index=27&type=section&id=Item%202.%20Properties) The company's headquarters are in leased office space in Los Angeles, California, with additional leased offices globally, and it does not own any real estate - The company's headquarters are in leased office space in Los Angeles, and it leases office premises in over **30 cities across the US and globally**[123](index=123&type=chunk) - The company does not own any real estate and believes its current lease arrangements are sufficient for its present and future needs[124](index=124&type=chunk) [Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal or regulatory proceedings in its ordinary course of business but believes no pending litigation will materially adversely affect its financial condition - The company is involved in legal or regulatory proceedings in its ordinary course of business, including contractual and employment matters[125](index=125&type=chunk) - The company believes, based on current knowledge and legal advice, that no pending litigation, individually or in aggregate, will have a material adverse effect on its financial condition[125](index=125&type=chunk) [Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This disclosure item is not applicable to the company - Mine safety disclosures are not applicable to the company[126](index=126&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section provides information on the trading of the company's Class A common stock on the NYSE, the conversion mechanism for Class B common stock, dividend policy, unregistered equity securities issuance, stock performance, and remaining authorization for share repurchase programs - The company's Class A common stock trades on the NYSE under the symbol "HLI"; Class B common stock has no public trading market but is convertible into Class A common stock on a one-for-one basis[129](index=129&type=chunk) - The company regularly declares and pays quarterly dividends and plans to continue doing so, but future dividend declarations and payments are at the sole discretion of the Board of Directors[131](index=131&type=chunk)[132](index=132&type=chunk) - As of March 31, 2023, approximately **$483 million** worth of shares remained available for purchase under the existing repurchase program[137](index=137&type=chunk) - In January and February 2023, the company issued unregistered Class B common stock for the acquisition of former employees' businesses and Oakley Advisory Limited[133](index=133&type=chunk)[134](index=134&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and operating results for fiscal year 2023, showing a 20% revenue decrease and 42% net income decline, with Corporate Finance revenue significantly down while Financial Restructuring and Financial and Valuation Advisory revenues slightly grew | Indicator (Thousand USD) | FY 2023 | FY 2022 | Change (%) | | :----------------------- | :------ | :------ | :--------- | | Revenue | 1,809,447 | 2,269,958 | (20)% | | Operating Expenses | 1,467,709 | 1,657,094 | (11)% | | Operating Income | 341,738 | 612,864 | (44)% | | Other (Income)/Expense, Net | 17,738 | 8,926 | 99% | | Income Before Taxes | 324,000 | 603,938 | (46)% | | Provision for Income Taxes | 69,777 | 165,614 | (58)% | | Net Income | 254,223 | 438,324 | (42)% | - Fiscal year 2023 total revenue decreased by **20%**, primarily due to a **29% decline in Corporate Finance (CF) revenue**, while Financial Restructuring (FR) and Financial and Valuation Advisory (FVA) revenues both increased by **1%**[160](index=160&type=chunk) - Fiscal year 2023 employee compensation and benefits expenses decreased by **19%**, mainly influenced by lower revenue; the compensation ratio increased from **62% in fiscal year 2022 to 63% in fiscal year 2023**[161](index=161&type=chunk) - Net other (income)/expense increased by **99%**, primarily due to a **$15 million SEC settlement accrual**[162](index=162&type=chunk) - The effective tax rate for fiscal year 2023 decreased to **22%**, benefiting from increased stock compensation deductions, successful closure of state audits, and release of valuation allowances[163](index=163&type=chunk) [Executive Overview](index=30&type=section&id=Executive%20Overview) Houlihan Lokey is a leading global independent investment bank specializing in M&A, capital markets, financial restructuring, and financial valuation advisory, with 1,904 financial professionals including 313 Managing Directors globally - Houlihan Lokey is a leading global independent investment bank, specializing in M&A, capital markets, financial restructuring, and financial valuation advisory, with **1,904 financial professionals**, including **313 Managing Directors globally**[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - The company expands its business through organic growth and acquisitions (such as GCA Corporation and Oakley Advisory), particularly in the technology and digital infrastructure sectors[141](index=141&type=chunk) [Business Environment and Outlook](index=30&type=section&id=Business%20Environment%20and%20Outlook) Fiscal year 2023 revenue was $1.81 billion, a 20% decrease from fiscal year 2022, with current economic conditions providing a stable environment for M&A and capital markets but uncertainty from inflation and geopolitical events - Fiscal year 2023 revenue was **$1.81 billion**, a **20% decrease** from fiscal year 2022; international revenue was **$520 million**, a decrease from fiscal year 2022[145](index=145&type=chunk)[146](index=146&type=chunk) - Current economic conditions provide a stable environment for M&A and capital market activities, but inflation threats and the war in Ukraine introduce uncertainty[147](index=147&type=chunk) - Financial restructuring activity moderately improved, and the company remains optimistic about the medium-to-long-term restructuring outlook due to record corporate leverage, inflation, supply chain issues, geopolitical events, and tightening monetary policy[148](index=148&type=chunk) [Key Financial Measures](index=31&type=section&id=Key%20Financial%20Measures) Revenue primarily derives from advisory service fees, including retainer, progress, and completion fees, with completion fees forming the majority of Corporate Finance revenue and being largely outside company control - Revenue primarily derives from advisory service fees, including Retainer Fees, Progress Fees, and Completion Fees, with Completion Fees constituting the majority of Corporate Finance revenue, and their occurrence and timing are generally outside the company's control[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Operating expenses are primarily composed of employee compensation and benefits, influenced by revenue, headcount, labor market competitiveness, and expected compensation[154](index=154&type=chunk)[155](index=155&type=chunk) - Net other (income)/expense includes interest income, interest expense, equity gains/losses, changes in contingent consideration liabilities, and other non-operating expenses[157](index=157&type=chunk) [Results of Consolidated Operations](index=32&type=section&id=Results%20of%20Consolidated%20Operations) Fiscal year 2023 saw a 20% decrease in revenue and a 42% decrease in net income, with non-compensation expenses increasing by 29% and the effective tax rate decreasing to 22% Consolidated Operating Results for Fiscal Years 2023 and 2022 | Indicator (Thousand USD) | FY 2023 | FY 2022 | Change (%) | | :----------------------- | :------ | :------ | :--------- | | Revenue | 1,809,447 | 2,269,958 | (20)% | | Employee Compensation and Benefits | 1,147,879 | 1,408,634 | (19)% | | Non-Compensation Expenses | 319,830 | 248,460 | 29% | | Total Operating Expenses | 1,467,709 | 1,657,094 | (11)% | | Operating Income | 341,738 | 612,864 | (44)% | | Other (Income)/Expense, Net | 17,738 | 8,926 | 99% | | Income Before Taxes | 324,000 | 603,938 | (46)% | | Provision for Income Taxes | 69,777 | 165,614 | (58)% | | Net Income | 254,223 | 438,324 | (42)% | - Fiscal year 2023 non-compensation expenses increased by **29%**, primarily due to increased travel, meals, and entertainment expenses, as well as other operating expenses[161](index=161&type=chunk) - Fiscal year 2023 provision for income taxes was **$69.8 million** with an effective tax rate of **22%**; in fiscal year 2022, it was **$165.6 million** with an effective tax rate of **27%**. The decrease in tax rate was mainly due to increased stock compensation deductions, successful closure of state audits, and release of valuation allowances[163](index=163&type=chunk) [Business Segments](index=34&type=section&id=Business%20Segments) Corporate Finance revenue decreased by 29% and segment profit by 42%, while Financial Restructuring and Financial and Valuation Advisory revenues both increased by 1%, with FR segment profit up 21% and FVA down 8% Performance by Business Segment for Fiscal Years 2023 and 2022 | Indicator (Thousand USD) | FY 2023 | FY 2022 | Change (%) | | :----------------------- | :------ | :------ | :--------- | | **Revenue** | | | | | Corporate Finance | 1,127,126 | 1,593,083 | (29)% | | Financial Restructuring | 395,733 | 392,818 | 1% | | Financial and Valuation Advisory | 286,588 | 284,057 | 1% | | **Segment Profit** | | | | | Corporate Finance | 354,075 | 606,268 | (42)% | | Financial Restructuring | 121,618 | 100,882 | 21% | | Financial and Valuation Advisory | 81,388 | 88,136 | (8)% | | **Number of Managing Directors** | | | | | Corporate Finance | 217 | 202 | 7% | | Financial Restructuring | 57 | 53 | 8% | | Financial and Valuation Advisory | 39 | 34 | 15% | | **Completed Transactions/Fee Events** | | | | | Corporate Finance | 503 | 600 | (16)% | | Financial Restructuring | 106 | 90 | 18% | | Financial and Valuation Advisory | 2,257 | 2,183 | 3% | - Corporate Finance (CF) revenue decreased by **29%**, primarily due to a reduction in average transaction fees and transaction volume for completed deals; segment profit decreased by **42%**[169](index=169&type=chunk)[170](index=170&type=chunk) - Financial Restructuring (FR) revenue increased by **1%**, primarily due to an increase in the number of completed transactions, partially offset by a decrease in average transaction fees; segment profit increased by **21%**[171](index=171&type=chunk)[172](index=172&type=chunk) - Financial and Valuation Advisory (FVA) revenue increased by **1%**, primarily due to an increase in the number of fee events; segment profit decreased by **8%**[173](index=173&type=chunk)[174](index=174&type=chunk) - Company expenses increased by **18%**, primarily due to increased compensation expenses[175](index=175&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company's total unrestricted cash and investment securities were $752 million, a decrease from 2022, with liquidity highly dependent on client cash collections Cash, Cash Equivalents, and Investment Securities | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :--------------------------------------- | :------------- | :------------- | | Cash and cash equivalents | 714,439 | 833,697 | | Investment securities | 37,309 | 109,143 | | **Total unrestricted cash and cash equivalents, including investment securities** | **751,748** | **942,840** | | Restricted cash | 373 | 373 | | **Total cash, cash equivalents, and restricted cash, including investment securities** | **752,121** | **943,213** | - As of March 31, 2023, the company's cash and cash equivalents were **$714.4 million**, investment securities were **$37.3 million**, totaling **$751.7 million** in unrestricted cash and investment securities, a decrease from 2022[178](index=178&type=chunk) - The company's liquidity is highly dependent on cash collections from clients, typically within **60 days of invoicing**. As of March 31, 2023, net accounts receivable were **$182 million**, and net unbilled work-in-process was **$115 million**[180](index=180&type=chunk) - The company has a **$100 million** syndicated revolving credit facility, with no outstanding principal as of March 31, 2023, and is in compliance with all loan covenants[183](index=183&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.55 per share**, payable on June 15, 2023[181](index=181&type=chunk) - The company expects to pay a **$15 million SEC settlement** in the first quarter of fiscal year 2024[182](index=182&type=chunk) [Cash Flows](index=37&type=section&id=Cash%20Flows) Fiscal year 2023 saw a significant decrease in net cash provided by operating activities to $136.3 million, while net cash used in investing activities decreased to $3 million, and net cash used in financing activities was $240.5 million Cash Flows for Fiscal Years 2023 and 2022 | (Thousand USD) | FY 2023 | FY 2022 | | :--------------------------------------- | :------ | :------ | | Net cash provided by operating activities | 136,273 | 736,604 | | Net cash used in investing activities | (3,004) | (273,914) | | Net cash used in financing activities | (240,462) | (459,060) | | Effect of exchange rate changes | (12,065) | (16,784) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | (119,258) | (13,154) | | Cash, cash equivalents, and restricted cash at end of period | 714,812 | 834,070 | - Net cash provided by operating activities was **$136.3 million** in fiscal year 2023, primarily from net income and non-cash expenses, but offset by decreases in other operating activities[188](index=188&type=chunk) - Net cash used in investing activities was **$3 million** in fiscal year 2023, primarily for property and equipment purchases, the acquisition of Oakley Advisory, and purchases of investment securities, partially offset by sales or maturities of investment securities[188](index=188&type=chunk) - Net cash used in financing activities was **$240.5 million** in fiscal year 2023, primarily for dividend payments, share repurchases, and payment of tax obligations for employee stock awards[188](index=188&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements require significant estimates and assumptions for items like credit loss allowances, deferred tax assets, goodwill, intangible assets, accrued expenses, and equity compensation - The company makes significant estimates and assumptions when preparing financial statements, including allowances for credit losses, valuation of deferred tax assets, valuation of goodwill and intangible assets, accrued expenses, and equity compensation[191](index=191&type=chunk) - Revenue recognition policies vary based on the nature of services (Corporate Finance, Financial Restructuring, Financial and Valuation Advisory) and contract terms (retainer, progress, completion fees), recognized either at a point in time or over time[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Business combination accounting requires management to make significant estimates and assumptions regarding the fair value of acquired tangible and intangible assets and assumed liabilities[197](index=197&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's non-capital-intensive business generally avoids significant market risks, including interest rate and credit risks (except for accounts receivable), and manages foreign exchange risk through hedging - The company's business is not capital-intensive and generally does not issue debt or invest in derivative instruments, thus not facing significant market risks (including interest rate risk) or credit risk (except for accounts receivable)[200](index=200&type=chunk) - The company faces foreign exchange risk, primarily reflected in cash balances and other assets and liabilities denominated in Euros and British Pounds, where exchange rate fluctuations can impact reported results[201](index=201&type=chunk)[204](index=204&type=chunk) - The company hedges a portion of its foreign exchange fluctuation risk through derivative instruments (such as forward foreign exchange contracts); as of March 31, 2023, it held one forward foreign exchange contract between the Euro and British Pound with a notional value of **€6.5 million**[206](index=206&type=chunk) - The company regularly reviews accounts receivable and allowances for credit losses to address potential impacts on client payment ability[202](index=202&type=chunk) [Financial Statements](index=40&type=section&id=Item%208.%20Financial%20Statements) This section presents the company's consolidated financial statements for the fiscal years ended March 31, 2023, and 2022, including the Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Stockholders' Equity, and Consolidated Statements of Cash Flows, along with detailed notes - KPMG LLP issued an unqualified audit report, stating that the company's consolidated financial statements for the fiscal years ended March 31, 2023, and 2022, are fairly presented in all material respects, in conformity with US GAAP[212](index=212&type=chunk) - KPMG LLP also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of March 31, 2023[213](index=213&type=chunk)[222](index=222&type=chunk) - Revenue recognition is a critical audit matter, requiring significant judgment from auditors in assessing uncollected completion fees for Corporate Finance and Financial Restructuring transactions to determine effective completion and resolution of variable consideration constraints[217](index=217&type=chunk)[218](index=218&type=chunk) [Report of Independent Registered Public Accounting Firm](index=41&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on the company's consolidated financial statements for fiscal years 2023 and 2022, identifying revenue recognition as a key audit matter - KPMG LLP issued an unqualified opinion on the company's consolidated financial statements for the fiscal years ended March 31, 2023, and March 31, 2022[212](index=212&type=chunk) - Revenue recognition, particularly uncollected completion fees for Corporate Finance and Financial Restructuring transactions, was identified as a critical audit matter due to the high judgment involved in determining effective transaction completion and resolution of variable consideration constraints[217](index=217&type=chunk)[218](index=218&type=chunk) [Report of Independent Registered Public Accounting Firm (Internal Control)](index=43&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20(Internal%20Control)) KPMG LLP affirmed that the company maintained effective internal control over financial reporting in all material respects as of March 31, 2023 - KPMG LLP concluded that the company maintained effective internal control over financial reporting in all material respects as of March 31, 2023[222](index=222&type=chunk) [Consolidated Balance Sheets](index=44&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets increased to $2.97 billion, while total liabilities decreased to $1.36 billion, and total stockholders' equity increased to $1.61 billion Key Data from Consolidated Balance Sheets | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :--------------------------------------- | :------------- | :------------- | | Cash and cash equivalents | 714,439 | 833,697 | | Investment securities | 37,309 | 109,143 | | Accounts receivable, net | 182,029 | 144,029 | | Unbilled work-in-process, net | 115,045 | 104,751 | | Goodwill | 1,087,784 | 1,070,442 | | Other intangible assets, net | 203,370 | 247,333 | | Total assets | 2,968,814 | 2,886,810 | | Accrued compensation and benefits | 765,877 | 953,604 | | Operating lease liabilities | 374,869 | 197,091 | | Other liabilities | 60,111 | 74,873 | | Total liabilities | 1,355,517 | 1,443,105 | | Total stockholders' equity | 1,613,297 | 1,443,705 | - As of March 31, 2023, total assets were **$2.969 billion**, an increase from **$2.887 billion** as of March 31, 2022[230](index=230&type=chunk) - As of March 31, 2023, total liabilities were **$1.356 billion**, a decrease from **$1.443 billion** as of March 31, 2022[230](index=230&type=chunk) - As of March 31, 2023, total stockholders' equity was **$1.613 billion**, an increase from **$1.444 billion** as of March 31, 2022[230](index=230&type=chunk) [Consolidated Statements of Comprehensive Income](index=45&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Fiscal year 2023 revenue decreased by 20% to $1.81 billion, with net income attributable to Houlihan Lokey, Inc. falling by 42% to $254.2 million, and diluted EPS decreasing Key Data from Consolidated Statements of Comprehensive Income | (Thousand USD) | FY 2023 | FY 2022 | FY 2021 | | :--------------------------------------- | :------ | :------ | :------ | | Revenue | 1,809,447 | 2,269,958 | 1,525,452 | | Total operating expenses | 1,467,709 | 1,657,094 | 1,117,295 | | Operating income | 341,738 | 612,864 | 408,157 | | Income before taxes | 324,000 | 603,938 | 409,228 | | Net income | 254,223 | 438,324 | 312,771 | | Net income attributable to Houlihan Lokey, Inc. | 254,223 | 437,751 | 312,771 | | Comprehensive income attributable to Houlihan Lokey, Inc. | 234,756 | 414,580 | 335,703 | | Basic earnings per share | 4.01 | 6.74 | 4.75 | | Diluted earnings per share | 3.76 | 6.41 | 4.55 | - Fiscal year 2023 revenue was **$1.809 billion**, a **20% decrease** from **$2.270 billion** in fiscal year 2022[232](index=232&type=chunk) - Fiscal year 2023 net income attributable to Houlihan Lokey, Inc. was **$254.2 million**, a **42% decrease** from **$438.3 million** in fiscal year 2022[232](index=232&type=chunk) - Fiscal year 2023 diluted earnings per share was **$3.76**, a decrease from **$6.41** in fiscal year 2022[232](index=232&type=chunk) - Foreign currency translation adjustments resulted in a net other comprehensive loss of **$19.47 million** in fiscal year 2023 and **$23.17 million** in fiscal year 2022[232](index=232&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=46&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased to $1.61 billion as of March 31, 2023, with $143.4 million in dividends paid and $90.9 million in stock repurchases during fiscal year 2023 Summary of Changes in Stockholders' Equity | (Thousand USD) | March 31, 2023 | March 31, 2022 | March 31, 2021 | | :--------------------------------------- | :------------- | :------------- | :------------- | | Beginning balance of stockholders' equity | 1,443,705 | 1,383,561 | 984,382 | | Stock issuances | 16,775 | 14,185 | 223,173 | | Stock compensation vesting | 151,769 | 84,320 | 50,152 | | Dividends | (143,374) | (115,624) | (89,464) | | Other stock repurchases/forfeitures | (90,904) | (337,794) | (120,036) | | Net income | 254,223 | 437,751 | 312,771 | | Foreign currency translation adjustments | (19,467) | (23,171) | 22,932 | | Ending balance of stockholders' equity | 1,613,297 | 1,443,705 | 1,383,561 | - As of March 31, 2023, total stockholders' equity was **$1.613 billion**, an increase from **$1.444 billion** as of March 31, 2022[235](index=235&type=chunk) - Total dividend payments in fiscal year 2023 were **$143.4 million**, and total stock repurchases were **$90.9 million**[235](index=235&type=chunk) [Consolidated Statements of Cash Flows](index=48&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased to $136 million in fiscal year 2023, while net cash used in investing activities substantially reduced to $3 million, and financing activities used $240 million Key Data from Consolidated Statements of Cash Flows | (Thousand USD) | FY 2023 | FY 2022 | FY 2021 | | :--------------------------------------- | :------ | :------ | :------ | | Net cash provided by operating activities | 136,273 | 736,604 | 579,837 | | Net cash used in investing activities | (3,004) | (273,914) | (99,748) | | Net cash used in financing activities | (240,462) | (459,060) | (26,823) | | Effect of exchange rate changes | (12,065) | (16,784) | 13,212 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | (119,258) | (13,154) | 466,478 | | Cash, cash equivalents, and restricted cash at end of period | 714,812 | 834,070 | 847,224 | - Net cash provided by operating activities was **$136 million** in fiscal year 2023, a significant decrease from **$737 million** in fiscal year 2022[238](index=238&type=chunk) - Net cash used in investing activities was **$3 million** in fiscal year 2023, a substantial decrease from **$274 million** in fiscal year 2022, primarily due to reduced cash consideration for business acquisitions[238](index=238&type=chunk) - Net cash used in financing activities was **$240 million** in fiscal year 2023, primarily for dividend payments and stock repurchases[238](index=238&type=chunk) [Notes to Consolidated Financial Statements](index=49&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to the consolidated financial statements, offering comprehensive information on the company's accounting policies, financial instruments, and other relevant disclosures [Note 1 — Background](index=49&type=section&id=Note%201%20%E2%80%94%20Background) The company, a Delaware corporation, provides financial services and advisory through subsidiaries, organized into Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory segments - The company is a Delaware corporation providing financial services and advisory through its subsidiaries, primarily Houlihan Lokey Capital, Inc., Houlihan Lokey Financial Advisors, Inc., and Houlihan Lokey EMEA, LLP[240](index=240&type=chunk) - The company's business is divided into three segments: Corporate Finance (CF), Financial Restructuring (FR), and Financial and Valuation Advisory (FVA), each offering specialized advisory services[241](index=241&type=chunk) [Note 2 — Summary of Significant Accounting Policies](index=50&type=section&id=Note%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are prepared under US GAAP, with revenue recognized based on performance obligations, and goodwill and intangible assets reviewed annually for impairment - Financial statements are prepared in accordance with US Generally Accepted Accounting Principles (GAAP) and include all necessary disclosures[242](index=242&type=chunk) - Revenue recognition is based on the satisfaction of performance obligations, recognized either over time or at a point in time, with variable consideration included in the transaction price only when it is highly probable that a significant revenue reversal will not occur[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - Goodwill and intangible assets are reviewed annually for impairment, with qualitative or quantitative analysis performed in accordance with ASC Topic 350 and ASU 2017-04[274](index=274&type=chunk)[275](index=275&type=chunk) - The company applies lease accounting standards, combining lease and non-lease components into a single lease component, and utilizes an exemption for short-term leases[270](index=270&type=chunk)[272](index=272&type=chunk) [Note 3 — Revenue Recognition](index=55&type=section&id=Note%203%20%E2%80%94%20Revenue%20Recognition) The company disaggregates revenue by business segment and geography, recording accounts receivable when revenue is recognized before collection and deferred revenue when collection precedes service delivery - The company disaggregates revenue by business segment and geographic region to reflect the impact of economic factors on revenue and cash flows[278](index=278&type=chunk) - The company records accounts receivable when revenue is recognized before collection and an unconditional right to payment exists; deferred revenue (contract liabilities) is recorded when collection precedes service provision[279](index=279&type=chunk) Contract Balances | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :--------------------------------------- | :------------- | :------------- | | Accounts receivable, net | 175,023 | 139,680 | | Unbilled work-in-process, net | 115,045 | 104,751 | | Contract assets | 7,006 | 4,349 | | Contract liabilities | 40,695 | 28,753 | - In fiscal years 2023 and 2022, **$16.8 million** and **$19.7 million** of revenue, respectively, were recognized from beginning deferred revenue balances[282](index=282&type=chunk) [Note 4 — Related Party Transactions](index=55&type=section&id=Note%204%20%E2%80%94%20Related%20Party%20Transactions) The company provided financial advisory services to related parties, collecting $284,000 in fiscal year 2023, and held employee loans receivable of $28.87 million as of March 31, 2023 - The company provided financial advisory services to related parties, collecting approximately **$284,000**, **$0**, and **$2.875 million** in fees for fiscal years 2023, 2022, and 2021, respectively[284](index=284&type=chunk) - As of March 31, 2023, and March 31, 2022, employee loans receivable included in other assets were **$28.87 million** and **$17.10 million**, respectively[285](index=285&type=chunk) [Note 5 — Fair Value Measurements](index=56&type=section&id=Note%205%20%E2%80%94%20Fair%20Value%20Measurements) The company values financial assets using a fair value hierarchy, with most investment securities classified as Level 2 and valued by third-party pricing services Financial Assets Measured at Fair Value by Level | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :----------------------- | :------------- | :------------- | | **Total assets measured at fair value** | **37,309** | **105,252** | | Corporate debt securities | 23,617 | 87,074 | | U.S. Treasury securities | 12,990 | 17,662 | | Common stock | 184 | — | | Certificates of deposit | 518 | 516 | - The company values financial assets using a fair value hierarchy (Level 1, Level 2, Level 3), with major investment securities (corporate debt and U.S. Treasury securities) classified as Level 2, and their fair values provided by third-party pricing services[256](index=256&type=chunk)[260](index=260&type=chunk)[286](index=286&type=chunk) [Note 6 — Investment Securities](index=56&type=section&id=Note%206%20%E2%80%94%20Investment%20Securities) The investment securities portfolio, primarily corporate debt and U.S. Treasury securities, had a fair value of $37.3 million as of March 31, 2023, a significant decrease from $105 million in 2022 Amortized Cost and Fair Value of Investment Securities Portfolio | (Thousand USD) | Amortized Cost March 31, 2023 | Fair Value March 31, 2023 | Amortized Cost March 31, 2022 | Fair Value March 31, 2022 | | :----------------------- | :---------------------------- | :------------------------ | :---------------------------- | :------------------------ | | Corporate debt securities | 24,936 | 23,617 | 88,475 | 87,074 | | U.S. Treasury securities | 13,400 | 12,990 | 17,891 | 17,662 | | Common stock | 768 | 184 | — | — | | Certificates of deposit | 518 | 518 | 516 | 516 | | **Total** | **39,622** | **37,309** | **106,882** | **105,252** | - Investment securities primarily include corporate debt and U.S. Treasury securities, with original maturities exceeding **90 days**, measured at fair value[263](index=263&type=chunk) - As of March 31, 2023, the fair value of the investment securities portfolio was **$37.3 million**, a significant decrease from **$105 million** as of March 31, 2022[288](index=288&type=chunk)[291](index=291&type=chunk) [Note 7 — Allowance for Credit Losses](index=57&type=section&id=Note%207%20%E2%80%94%20Allowance%20for%20Credit%20Losses) The allowance for credit losses increased to $14.4 million as of March 31, 2023, with net bad debt provisions rising to $6.43 million in fiscal year 2023 Changes in Allowance for Credit Losses | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :----------------------- | :------------- | :------------- | | Beginning balance | 13,274 | 11,782 | | Provision for bad debts, net | 6,429 | 3,718 | | Recoveries/write-offs of uncollectible accounts, net | (5,308) | (2,226) | | Ending balance | 14,395 | 13,274 | - As of March 31, 2023, the ending balance of the allowance for credit losses was **$14.4 million**, an increase from **$13.27 million** as of March 31, 2022[293](index=293&type=chunk) - Net bad debt provisions were **$6.43 million** in fiscal year 2023, an increase from **$3.72 million** in fiscal year 2022[293](index=293&type=chunk) [Note 8 — Property and Equipment](index=57&type=section&id=Note%208%20%E2%80%94%20Property%20and%20Equipment) Net property and equipment significantly increased to $88.35 million as of March 31, 2023, primarily due to higher leasehold improvement costs Net Property and Equipment | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :----------------------- | :------------- | :------------- | | Equipment | 10,178 | 9,692 | | Furniture and fixtures | 19,508 | 22,704 | | Leasehold improvements | 107,156 | 59,462 | | Computers and software | 12,086 | 14,308 | | Other | 7,411 | 7,476 | | Total cost | 156,339 | 113,642 | | Less: Accumulated depreciation | (67,994) | (61,466) | | **Total net book value** | **88,345** | **52,176** | - As of March 31, 2023, net property and equipment was **$88.35 million**, a significant increase from **$52.18 million** as of March 31, 2022, primarily due to increased leasehold improvement costs[294](index=294&type=chunk) - Depreciation expense was **$13.25 million** in fiscal year 2023 and **$14.60 million** in fiscal year 2022[295](index=295&type=chunk) [Note 9 — Goodwill and Other Intangible Assets](index=58&type=section&id=Note%209%20%E2%80%94%20Goodwill%20and%20Other%20Intangible%20Assets) Net goodwill and other intangible assets totaled $1.29 billion as of March 31, 2023, a slight decrease from $1.32 billion in 2022, with goodwill primarily attributed to the Corporate Finance segment Net Goodwill and Other Intangible Assets | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :----------------------- | :------------- | :------------- | | Goodwill | 1,087,784 | 1,070,442 | | Trade name - Houlihan Lokey | 192,210 | 192,210 | | Other intangible assets | 93,917 | 92,941 | | Total cost | 1,373,911 | 1,355,593 | | Less: Accumulated amortization | (82,757) | (37,818) | | **Goodwill and other intangible assets, net** | **1,291,154** | **1,317,775** | - As of March 31, 2023, net goodwill was **$1.088 billion**, and net other intangible assets were **$203 million**, totaling **$1.291 billion**, a slight decrease from **$1.318 billion** as of March 31, 2022[297](index=297&type=chunk) - Amortization expense for finite-lived intangible assets was approximately **$44.97 million** in fiscal year 2023 and **$33.94 million** in fiscal year 2022[297](index=297&type=chunk) - Goodwill is primarily attributed to the Corporate Finance business segment, increasing by **$17.34 million** in fiscal year 2023, mainly related to the acquisition of Oakley Advisory Limited[298](index=298&type=chunk) [Note 10 — Loans Payable](index=58&type=section&id=Note%2010%20%E2%80%94%20Loans%20Payable) The company has a $100 million syndicated revolving credit facility with no outstanding principal and has assumed various unsecured notes and contingent consideration liabilities from past acquisitions - The company has a **$100 million** syndicated revolving credit facility (HLI Line of Credit), with no outstanding principal as of March 31, 2023, and March 31, 2022[299](index=299&type=chunk) - The company assumed several unsecured notes and contingent consideration liabilities from the acquisitions of Quayle Munro Limited, BearTooth Advisors, Freeman & Co., and MVP Capital, LLC[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) - As of March 31, 2023, the fair value of contingent consideration related to the MVP Capital acquisition was **$12.9 million**, and for the Baylor Klein acquisition, it was **$18.1 million**[303](index=303&type=chunk)[304](index=304&type=chunk) [Note 11 — Accumulated Other Comprehensive (Loss)](index=59&type=section&id=Note%2011%20%E2%80%94%20Accumulated%20Other%20Comprehensive%20(Loss)) Accumulated other comprehensive loss, primarily from foreign currency translation adjustments, increased to negative $62.81 million as of March 31, 2023 Accumulated Other Comprehensive (Loss) | (Thousand USD) | March 31, 2023 | March 31, 2022 | March 31, 2021 | | :----------------------- | :------------- | :------------- | :------------- | | Foreign currency translation adjustments | (19,467) | (23,171) | 22,932 | | **Ending balance** | **(62,814)** | **(43,347)** | **(20,176)** | - Accumulated other comprehensive (loss) primarily consists of foreign currency translation adjustments, totaling **negative $62.81 million** as of March 31, 2023, an increase from **negative $43.35 million** as of March 31, 2022[305](index=305&type=chunk)[306](index=306&type=chunk) [Note 12 — Income Taxes](index=60&type=section&id=Note%2012%20%E2%80%94%20Income%20Taxes) Fiscal year 2023 income tax provision was $69.78 million, with an effective tax rate of 21.5%, a decrease from 27.4% in 2022, and net deferred tax assets increased to $104.4 million Provision for Income Taxes and Effective Tax Rate | (Thousand USD) | FY 2023 | FY 2022 | FY 2021 | | :----------------------- | :------ | :------ | :------ | | Provision for income taxes | 69,777 | 165,614 | 96,457 | | Effective tax rate | 21.5% | 27.4% | 23.6% | - Fiscal year 2023 provision for income taxes was **$69.78 million**, with an effective tax rate of **21.5%**, a decrease from **27.4%** in fiscal year 2022[307](index=307&type=chunk) Deferred Income Tax Assets and Liabilities | (Thousand USD) | March 31, 2023 | March 31, 2022 | | :----------------------- | :------------- | :------------- | | Total deferred tax assets | 251,091 | 206,321 | | Deferred tax asset valuation allowance | (3,376) | (9,234) | | Total deferred tax liabilities | (143,318) | (102,597) | | **Net deferred tax assets** | **104,397** | **94,490** | - As of March 31, 2023, net deferred tax assets were **$104.4 million**, an increase from **$94.49 million** as of March 31, 2022[309](index=309&type=chunk) - The company recorded a valuation allowance against U.S. foreign tax credits and certain foreign deferred tax assets, as it is more likely than not that these assets will not be realized in the future[309](index=309&type=chunk) - As of March 31, 2023, total unrecognized tax positions were **$14.83 million**, with an estimated **$4.1 million** expected to decrease within the next 12 months[312](index=312&type=chunk)[313](index=313&type=chunk) [Note 13 — Earnings Per Share](index=62&type=section&id=Note%2013%20%E2%80%94%20Earnings%20Per%20Share) Basic EPS for fiscal year 2023 was $4.01, and diluted EPS was $3.76, both decreasing from fiscal year 2022 Earnings Per Share Calculation | (Thousand USD, except per share data) | FY 2023 | FY 2022 | FY 2021 | | :--------------------------------------- | :------ | :------ | :------ | | Net income attributable to Houlihan Lokey, Inc. | 254,223 | 437,751 | 312,771 | | Basic weighted-average common shares outstanding | 63,358,408 | 64,970,287 | 65,785,042 | | Diluted weighted-average common shares outstanding | 67,586,263 | 68,259,708 | 68,671,248 | | **Basic earnings per share** | **4.01** | **6.74** | **4.75** | | **Diluted earnings per share** | **3.76** | **6.41** | **4.55** | - Fiscal year 2023 basic earnings per share was **$4.01**, and diluted earnings per share was **$3.76**, both decreasing from fiscal year 2022[316](index=316&type=chunk) [Note 14 — Employee Benefit Plans](index=63&type=section&id=Note%2014%20%E2%80%94%20Employee%20Benefit%20Plans) The company offers 401(k) and defined contribution plans, with $10.64 million contributed in fiscal year 2023, and granted restricted stock and RSUs under its 2016 Incentive Award Plan - The company offers a 401(k) plan for domestic employees and defined contribution retirement plans for international employees, contributing **$10.64 million** in fiscal year 2023[317](index=317&type=chunk) - The company grants restricted stock and restricted stock units (RSUs) under its 2016 Incentive Award Plan, typically vesting over four years[318](index=318&type=chunk) Unvested Stock Award Activity | Unvested Stock Awards | Shares as of March 31, 2023 | Shares as of March 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | | Beginning balance | 4,314,375 | 2,744,605 | | Granted | 2,266,088 | 2,689,459 | | Vested | (1,175,311) | (1,039,535) | | Repurchased/forfeited | (123,373) | (80,154) | | Ending balance | 5,281,779 | 4,314,375 | - Total compensation expense related to equity and liability classified awards was **$157 million** in fiscal year 2023, a significant increase from **$91.88 million** in fiscal year 2022[325](index=325&type=chunk) - As of March 31, 2023, unrecognized compensation cost related to unvested stock awards was **$368 million**, to be recognized over a weighted-average period of **2.3 years**[325](index=325&type=chunk) [Note 15 — Stockholders' Equity](index=66&type=section&id=Note%2015%20%E2%80%94%20Stockholders'%20Equity) The company has Class A and Class B common stock, with the HL Voting Trust holding 18,048,345 Class B shares, and $483 million remaining for repurchases under the authorized $500 million plan - The company has Class A and Class B common stock, with Class A shares having one vote per share and Class B shares having ten votes per share, and Class B shares are convertible into Class A shares[329](index=329&type=chunk) - As of March 31, 2023, the HL Voting Trust held **18,048,345 shares of Class B common stock**[332](index=332&type=chunk) - The Board of Directors authorized an increase to the existing share repurchase program, totaling **$500 million**, with **$483 million** remaining available for repurchases as of March 31, 2023[335](index=335&type=chunk) - In fiscal year 2023, the company repurchased **507,511 shares of Class B common stock** to satisfy tax withholding requirements and an additional **677,287 shares of common stock**, with a total repurchase price of **$58.07 million**[336](index=336&type=chunk) [Note 16 — Leases](index=67&type=section&id=Note%2016%20%E2%80%94%20Leases) Operating lease liabilities totaled $375 million as of March 31, 2023, with a weighted-average remaining lease term of 12 years and a discount rate of 4.7% Operating Lease Liability Maturities | (Thousand USD) | March 31, 2023 | | :----------------------- | :------------- | | 2024 | 31,617 | | 2025 | 49,298 | | 2026 | 47,968 | | 2027 | 44,337 | | 2028 | 43,370 | | 2029 and thereafter | 290,203 | | Total | 506,793 | | Less: Discount to present value | (131,924) | | **Operating lease liabilities** | **374,869** | - As of March 31, 2023, operating lease liabilities were **$375 million**, with a weighted-average remaining lease term of **12 years** and a weighted-average discount rate of **4.7%**[339](index=339&type=chunk)[341](index=341&type=chunk) - Operating lease expense was **$37.49 million** in fiscal year 2023, and variable lease expense was **$18.56 million**[340](index=340&type=chunk) - In fiscal year 2023, right-of-use assets obtained in exchange for operating lease liabilities were **$195 million**[343](index=343&type=chunk) [Note 17 — Commitments and Contingencies](index=68&type=section&id=Note%2017%20%E2%80%94%20Commitments%20and%20Contingencies) The company is involved in various legal proceedings but management believes their ultimate resolution will not materially adversely affect its financial condition, operations, or cash flows - The company is involved in various legal proceedings in the normal course of business, but management believes the ultimate resolution of these matters will not have a material adverse effect on the company's financial condition, operations, and cash flows[344](index=344&type=chunk) - The company provides customary indemnifications related to real estate lease agreements, but the maximum indemnification amount cannot be estimated due to unspecified maximum obligations, thus no related liability has been recorded[344](index=344&type=chunk) [Note 18 — Segment and Geographical Information](index=69&type=section&id=Note%2018%20%E2%80%94%20Segment%20and%20Geographical%20Information) Fiscal year 2023 revenue was $1.29 billion from the US and $520 million internationally, with total assets of $1.86 billion in the US and $1.11 billion internationally as of March 31, 2023 Revenue and Profit by Business Segment | (Thousand USD) | FY 2023 Revenue | FY 2022 Revenue | FY 2021 Revenue | FY 2023 Segment Profit | FY 2022 Segment Profit | FY 2021 Segment Profit | | :----------------------- | :-------------- | :-------------- | :-------------- | :--------------------- | :--------------------- | :--------------------- | | Corporate Finance | 1,127,126 | 1,593,083 | 802,853 | 354,075 | 606,268 | 250,513 | | Financial Restructuring | 395,733 | 392,818 | 534,747 | 121,618 | 100,882 | 224,215 | | Financial and Valuation Advisory | 286,588 | 284,057 | 187,852 | 81,388 | 88,136 | 46,642 | | **Total** | **1,809,447** | **2,269,958** | **1,525,452** | **557,081** | **795,286** | **521,370** | Revenue and Assets by Geographical Region | (Thousand USD) | FY 2023 Revenue | FY 2022 Revenue | FY 2021 Revenue | Assets as of March 31, 2023 | Assets as of March 31, 2022 | Assets as of March 31, 2021 | | :----------------------- | :-------------- | :-------------- | :-------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | 1,289,365 | 1,690,708 | 1,192,720 | 1,861,296 | 2,032,390 | 1,837,332 | | International | 520,082 | 579,250 | 332,732 | 1,107,518 | 854,420 | 588,735 | | **Total** | **1,809,447** | **2,269,958** | **1,525,452** | **2,968,814**

Financial Data and Key Metrics Changes - For the fiscal year, Corporate Finance revenues were $1.13 billion, down significantly from the previous fiscal year but still the second-best year in the firm's history [3] - Revenues for the fourth quarter were $445 million, down 6% year-over-year, and adjusted earnings per share were $1.11, down 15% from a year earlier [7][10] - Adjusted compensation expenses for the fourth quarter were $274 million, down from $290 million in the same quarter last year, with an adjusted compensation expense ratio of 61.5% [4][9] Business Line Data and Key Metrics Changes - Corporate Finance revenues for the quarter were $256 million, down 8% compared to the same quarter last year, with 140 transactions closed [4][7] - Financial Restructuring revenues were $120 million for the quarter, slightly down from the same period last year, but up 22% from the previous quarter [4][30] - Financial and Valuation Advisory (FVA) revenues were $68 million for the quarter, a 4% decrease from the same period last year, but fiscal year revenues of $287 million were a record for FVA [8][30] Market Data and Key Metrics Changes - The current environment for financial restructuring is not crisis-driven but influenced by various factors, allowing this business segment to perform well for an extended period [8] - The disruption in regional banking is negatively impacting FVA in the short term, but increased banking regulations are expected to benefit FVA in the long term [8][30] Company Strategy and Development Direction - The company is focused on hiring talent, having added 8 new managing directors globally, and is selective in acquisitions to ensure cultural and strategic fit [8][10] - The firm is maintaining a conservative approach to share repurchases to retain balance sheet flexibility for acquisitions and hiring opportunities [10] Management's Comments on Operating Environment and Future Outlook - Management noted that the second half of fiscal 2023 did not see the typical increase in results due to current market conditions, but the diversified service and geographic platform helped achieve strong yearly revenues [7][8] - The firm expects continued strong new business activity, although the time to close transactions has extended due to market uncertainties [30] Other Important Information - The Board approved an increase in the quarterly dividend to $0.55 per share from $0.53, to be paid in June [10] - The company has approximately $752 million in unrestricted cash and equivalents, with a significant portion earmarked for accrued bonuses [10] Q&A Session Summary Question: How does the company view the potential for corporate finance revenue in a challenging environment? - Management indicated that if the market conditions remain unchanged, fiscal 2023 revenue levels could be a reasonable expectation for fiscal 2024 [34] Question: What is the outlook for the restructuring business given current market conditions? - Management believes the restructuring environment is not crisis-driven and expects a long tail of business opportunities due to fundamental market changes [42] Question: How is the recruiting environment affecting the company? - The company noted a somewhat better recruiting environment but acknowledged challenges in attracting talent from competitors [18] Question: What impact do tighter capital markets have on deal closures? - Management stated that while there are headwinds due to tighter capital markets, they believe the market remains open for the deals they are working on, albeit with longer closing times [16][62] Question: How does the company view acquisition opportunities in the current market? - Management sees increased acquisition activity as more attractive in the current environment but remains cautious and selective in their approach [64]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ______________ Commission File Number: 001-37537 Houlihan Lokey, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of ...

Houlihan Lokey, Inc. (NYSE:HLI) Q3 2023 Earnings Conference Call January 31, 2023 5:00 PM ET Company Participants Christopher Crain - General Counsel Scott Beiser - Chief Executive Officer Lindsey Alley - Chief Financial Officer Conference Call Participants Brennan Hawken - UBS Manan Gosalia - Morgan Stanley Devin Ryan - JMP Securities James Yaro - Goldman Sachs Steven Chubak - Wolfe Research Ken Worthington - JPMorgan Jim Mitchell - Seaport Global Operator Good day, ladies and gentlemen. Thank you for stan ...

309 1. As of December 31, 2022 2. Excludes Corporate MDs. 3. LTM ended December 31, 2022. Houlihan Lokey | 4 Investment Tenets Strong Track Record of Growth and Profitability HLI has significant room to grow all three businesses globally. High Quality, Diversified Revenues Houlihan Lokey | 5 • Strong pretax margins with evidence of operating leverage since going public 50% 55% 56% 56% 53% 70% 35% 30% 29% 30% 35% 17% 15% 15% 15% 14% 12% 13% $872 $963 $1,084 $1,159 $1,525 $2,270 2017 2018 2019 2020 2021 2022 ...