Houlihan Lokey HLI Q3 2026 Earnings Transcript

Core Insights - The company reported revenues of $717 million and adjusted earnings per share of $1.94 for Q3 fiscal 2026, marking a 13% increase in revenues and an 18% increase in adjusted earnings per share compared to the previous year [1] - The positive results are attributed to improving investor sentiment, stronger company performance, and expectations of declining interest rates, which are expected to further support M&A recovery [1] - Private equity activity has accelerated, with more portfolio companies exploring liquidity options [1] Financial Performance - Corporate Finance generated $474 million in revenue, a 12% increase year-over-year, with both average fees and new business activity on the rise [5][11] - Financial Restructuring produced $156 million in revenue, reflecting a 19% increase compared to the same quarter last year [6][11] - Financial and Valuation Advisory revenues reached $87 million, a 6% increase from the previous year, with a notable rise in fee events [6][12] Business Developments - The company closed 177 transactions in Corporate Finance this quarter, up from 170 in the same period last year, with an increase in average transaction fees [11] - Recent acquisitions, including the real estate advisory business of Mellon Capital and a controlling interest in O'Dare Partners, are expected to enhance the company's capabilities and footprint in Europe [7][8] - The company was recognized as the most active M&A investment bank and the most active financial restructuring investment bank globally for 2025 [9] Market Outlook - The outlook for Corporate Finance remains positive, with expectations of continued growth in M&A activity, particularly in the private equity sector [21] - Restructuring is anticipated to face revenue pressures as the market improves, but geopolitical events may create new opportunities for restructuring activity [6][18] - The company is focused on expanding its workforce and capabilities across various geographies and sectors, with a strong emphasis on independent, high-quality advice [9][60] Capital Management - The company ended the quarter with approximately $1.2 billion in cash and investments and repurchased around 418,000 shares [15] - The capital deployment strategy prioritizes strategic acquisitions over share repurchases, with a strong acquisition pipeline in place [41][43] - The adjusted effective tax rate for the quarter was 30.6%, down from 33.3% in the same quarter last year, primarily due to decreased state taxes [14]