Houlihan Lokey(HLI) - 2026 Q1 - Quarterly Results

Executive Summary / Q1 FY26 Financial Highlights Key Financial Highlights Houlihan Lokey reported strong first-quarter fiscal 2026 results with significant revenue growth and increased diluted EPS, both on a GAAP and adjusted basis, compared to the prior year Q1 FY26 vs Q1 FY25 Financial Highlights | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | YoY Change | | :----- | :----------------- | :----------------- | :--------- | | Revenues | $605 | $514 | +17.7% | | Net Income (GAAP) | $98 | $89 | +10.1% | | Diluted EPS (GAAP) | $1.42 | $1.30 | +9.2% | | Adjusted Net Income | $148 | $84 | +76.2% | | Adjusted Diluted EPS | $2.14 | $1.22 | +75.4% | CEO Commentary CEO Scott Adelson highlighted strong Q1 FY26 momentum across all business lines, expressing cautious optimism for continued growth - Began fiscal 2026 with momentum across all three business lines, demonstrating solid performance despite an uncertain environment[3] - Benefits of a diversified business model are evident across industry and geography[3] - Cautiously optimistic about building on this momentum in fiscal 2026, despite difficult forecasts[3] Consolidated Financial Performance Revenues Q1 FY26 total revenues significantly increased year-over-year, driven by growth across all three business segments Q1 FY26 Revenues by Segment (GAAP) | Segment | Q1 FY26 (Thousands) | Q1 FY25 (Thousands) | YoY Change | YoY Growth | | :---------------------- | :------------------ | :------------------ | :--------- | :--------- | | Corporate Finance | $398,519 | $328,417 | +$70,102 | +21% | | Financial Restructuring | $128,216 | $117,422 | +$10,794 | +9% | | Financial and Valuation Advisory | $78,614 | $67,770 | +$10,844 | +16% | | Total Revenues | $605,349 | $513,609 | +$91,740 | +17.9% | Operating Expenses Employee Compensation and Benefits Q1 FY26 employee compensation and benefits increased due to higher revenues, maintaining a consistent adjusted compensation ratio Employee Compensation and Benefits Expenses (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Thousands) | Q1 FY25 (Thousands) | YoY Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | | GAAP Employee Compensation & Benefits | $392,837 | $330,116 | +$62,721 | | Adjusted Employee Compensation & Benefits | $372,289 | $315,869 | +$56,420 | | GAAP % of Revenues | 64.9% | 64.3% | +0.6 pp | | Adjusted % of Revenues | 61.5% | 61.5% | 0.0 pp | - Increase in GAAP and adjusted employee compensation and benefits expenses was primarily a result of an increase in revenues for the quarter[10] Non-Compensation Expenses Q1 FY26 non-compensation expenses increased, driven by revaluation of acquisition contingent consideration and other operating costs Non-Compensation Expenses (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Thousands) | Q1 FY25 (Thousands) | YoY Change | | :---------------------- | :------------------ | :------------------ | :--------- | | GAAP Non-compensation | $122,712 | $88,753 | +$33,959 | | Adjusted Non-compensation | $94,469 | $80,330 | +$14,139 | | GAAP % of Revenues | 20.3% | 17.3% | +3.0 pp | | Adjusted % of Revenues | 15.6% | 15.6% | 0.0 pp | - Increase in GAAP non-compensation expenses primarily due to increases in revaluation of acquisition contingent consideration, depreciation and amortization, and other operating expenses[11] - Increase in adjusted non-compensation expenses primarily due to increases in other operating expenses and professional fees[11] Income and Earnings Per Share Net Income and Diluted EPS (GAAP) GAAP net income and diluted earnings per share both increased in Q1 FY26 compared to the prior year GAAP Net Income and Diluted EPS (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | YoY Change | | :-------------------- | :-------- | :-------- | :--------- | | Net Income (Thousands) | $97,533 | $88,940 | +$8,593 | | Diluted EPS | $1.42 | $1.30 | +$0.12 | Adjusted Net Income and Diluted EPS (Non-GAAP) Adjusted net income and diluted EPS showed substantial growth in Q1 FY26, significantly outperforming the prior year Adjusted Net Income and Diluted EPS (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | YoY Change | | :-------------------- | :-------- | :-------- | :--------- | | Adjusted Net Income (Thousands) | $148,005 | $84,305 | +$63,700 | | Adjusted Diluted EPS | $2.14 | $1.22 | +$0.92 | Provision for Income Taxes GAAP effective tax rate decreased due to increased stock-based compensation deductions; adjusted rate also fell due to a policy change Provision for Income Taxes and Effective Tax Rates (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Thousands) | Q1 FY25 (Thousands) | YoY Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | | GAAP Provision for Income Taxes | $517 | $10,934 | -$10,417 | | GAAP Effective Tax Rate | 0.5% | 10.9% | -10.4 pp | | Adjusted (Benefit)/Provision for Income Taxes | ($1,164) | $38,239 | -$39,403 | | Adjusted Effective Tax Rate | (0.8)% | 31.2% | -32.0 pp | - Decrease in GAAP effective tax rate primarily a result of increased stock-based compensation deductions[12] - Decrease in adjusted effective tax rate primarily a result of a policy change to no longer adjust out the impact of stock-based compensation deductions[12] Segment Performance Corporate Finance Corporate Finance revenues increased by 21% in Q1 FY26, primarily due to a higher average transaction fee on closed transactions Corporate Finance Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | YoY Change | | :------------------------ | :-------- | :-------- | :--------- | | Revenues (Thousands) | $398,519 | $328,417 | +$70,102 | | of Managing Directors | 244 | 228 | +16 | | of Closed transactions | 125 | 116 | +9 | - Revenues increased primarily due to an increase in the average transaction fee on closed transactions, driven by transaction mix[13] Financial Restructuring Financial Restructuring revenues grew by 9% in Q1 FY26, mainly due to an increase in closed transactions and favorable market conditions Financial Restructuring Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | YoY Change | | :------------------------ | :-------- | :-------- | :--------- | | Revenues (Thousands) | $128,216 | $117,422 | +$10,794 | | of Managing Directors | 58 | 58 | 0 | | of Closed transactions | 35 | 33 | +2 | - Revenues increased primarily due to an increase in the number of closed transactions, driven by favorable market conditions for restructuring transactions[15] Financial and Valuation Advisory Financial and Valuation Advisory revenues increased by 16% in Q1 FY26, driven by an expanded client base and broader scope of work Financial and Valuation Advisory Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 | Q1 FY25 | YoY Change | | :-------------------- | :-------- | :-------- | :--------- | | Revenues (Thousands) | $78,614 | $67,770 | +$10,844 | | of Managing Directors | 45 | 42 | +3 | | of Fee Events | 957 | 847 | +110 | - Revenues increased primarily due to an increase in the number of Fee Events, driven by increasing client base and expanding scope of work for existing clients[17] Financial Position and Capital Allocation Balance Sheet Highlights As of June 30, 2025, Houlihan Lokey maintained a strong liquidity position with substantial cash and investment securities - As of June 30, 2025, the Company had $867 million in cash and cash equivalents and investment securities[19] - Other liabilities totaled $93 million as of June 30, 2025[19] Dividend Announcement The Board of Directors declared a regular quarterly cash dividend of $0.60 per share for the second quarter of fiscal 2026 - Regular quarterly cash dividend of $0.60 per share of Class A and Class B common stock declared[19] - Dividend payable on September 15, 2025, to stockholders of record as of September 2, 2025[19] Additional Information Investor Conference Call and Webcast Houlihan Lokey will host a conference call and live webcast on July 29, 2025, to discuss Q1 FY26 results, with replay options - Conference call and live webcast scheduled for 5:00 p.m. Eastern Time on Tuesday, July 29, 2025[20] - Replay of the conference call available from July 29, 2025, through August 5, 2025[20] Forward-Looking Statements The press release includes forward-looking statements involving known and unknown risks, cautioning against undue reliance - Press release contains forward-looking statements identifiable by words like 'assumes,' 'believes,' 'estimates,' 'expects,' 'guidance,' 'intends,' 'plans,' 'projects,' and similar expressions[21] - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that could materially affect actual results[21] Non-GAAP Financial Measures Adjusted non-GAAP financial measures are presented to clarify operating results for investors, not as a substitute for GAAP - Adjusted net income and other adjusted items are non-GAAP measures presented to help investors understand operating results[22] - Non-GAAP measures are not a measurement of financial performance or liquidity under GAAP and should not be considered an alternative to GAAP financial information[22] About Houlihan Lokey Houlihan Lokey is a global investment bank specializing in M&A, capital solutions, and advisory services, recognized for top rankings - Houlihan Lokey is a global investment bank with expertise in mergers and acquisitions, capital solutions, financial restructuring, and financial and valuation advisory[23] - Serves corporations, institutions, and governments worldwide with offices across the Americas, Europe, the Middle East, and Asia Pacific[23] - Ranked No. 1 investment bank for all global M&A transactions (past two years), No. 1 M&A advisor in the U.S. (past 10 years), No. 1 global restructuring advisor (past 11 years), and No. 1 global M&A fairness opinion advisor (past 25 years)[23] Financial Statements & Reconciliations (Appendix) Condensed Consolidated Balance Sheets Unaudited condensed consolidated balance sheets detail the company's financial position as of June 30, 2025, compared to March 31, 2025 Condensed Consolidated Balance Sheets (Unaudited) | Metric | June 30, 2025 (Thousands) | March 31, 2025 (Thousands) | Change | | :-------------------------- | :------------------------ | :------------------------- | :------- | | Total Assets | $3,517,803 | $3,819,708 | -$301,905 | | Total Liabilities | $1,339,987 | $1,644,831 | -$304,844 | | Total Stockholders' Equity | $2,177,816 | $2,174,877 | +$2,939 | Condensed Consolidated Statements of Income Unaudited condensed consolidated statements of income present revenues, operating expenses, and net income for Q1 FY26 and Q1 FY25 Condensed Consolidated Statements of Income (Unaudited) | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | YoY Change | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :--------- | | Revenues | $605,349 | $513,609 | +$91,740 | | Total Operating Expenses | $515,549 | $418,869 | +$96,680 | | Operating Income | $89,800 | $94,740 | -$4,940 | | Income before provision for income taxes | $98,050 | $99,874 | -$1,824 | | Net Income | $97,533 | $88,940 | +$8,593 | | Diluted EPS | $1.42 | $1.30 | +$0.12 | Reconciliation of GAAP to Adjusted Financial Information This section reconciles GAAP and adjusted financial figures, detailing adjustments for compensation, expenses, taxes, and their impact Reconciliation of GAAP to Adjusted Financial Information (Unaudited) | Metric | GAAP Q1 FY26 (Thousands) | Adjusted Q1 FY26 (Thousands) | GAAP Q1 FY25 (Thousands) | Adjusted Q1 FY25 (Thousands) | | :------------------------------------ | :------------------------- | :--------------------------- | :------------------------- | :--------------------------- | | Employee compensation and benefits | $392,837 | $372,289 | $330,116 | $315,869 | | Non-compensation expenses | $122,712 | $94,469 | $88,753 | $80,330 | | Operating income | $89,800 | $138,591 | $94,740 | $117,410 | | Provision for income taxes | $517 | ($1,164) | $10,934 | $38,239 | | Net income | $97,533 | $148,005 | $88,940 | $84,305 | | Fully diluted shares outstanding | 68,887,970 | 69,303,552 | 68,501,059 | 69,123,455 | | Diluted EPS | $1.42 | $2.14 | $1.30 | $1.22 |