Houlihan Lokey(US:HLI)2025-07-29 22:02Financial Data and Key Metrics Changes - The company reported revenues of $605 million for the first quarter, an 18% increase compared to the same quarter last year, and adjusted earnings per share of $2.14, up 75% year-over-year [6][11][20] - Adjusted compensation expenses were $372 million, up from $316 million in the same period last year, maintaining an adjusted compensation expense ratio of 61.5% [14][15][20] - The adjusted effective tax rate for the quarter was negative 0.8%, a significant decrease from 31.2% in the same quarter last year [19][20] Business Line Data and Key Metrics Changes - Corporate Finance generated $399 million in revenue, a 21% increase year-over-year, with 125 transactions closed, up from 116 [7][12] - Financial Restructuring revenues were $128 million, a 9% increase, with 35 transactions closed compared to 33 in the same quarter last year [8][13] - Financial and Valuation Advisory produced $79 million in revenues, a 16% increase, with 957 fee events, up from 847 [9][13] Market Data and Key Metrics Changes - The U.S. market continues to outpace EMEA in terms of revenue and activity levels, with expectations that this trend will persist [12][30] - The company noted that while the financial sponsor community's activity has been muted, there is optimism for a return to historic levels as market conditions improve [7][54] Company Strategy and Development Direction - The company is focused on maintaining a diversified business model across industries and geographies, which has shown resilience in the current macro environment [6][11] - The company hosted the inaugural Houlihan Lokey ONE conference, which attracted over 4,000 attendees, showcasing its global reach and commitment to client engagement [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the business environment, acknowledging ongoing volatility but noting improvements in client resilience [11][61] - The outlook for fiscal year 2026 remains positive, with expectations for continued growth across all business lines despite potential headwinds from tariffs and inflation [8][11] Other Important Information - The company ended the quarter with approximately $867 million in unrestricted cash and investment securities, reflecting a decline due to bonus payments made in May [20][21] - The hiring environment remains strong, with three new managing directors added in the first quarter, indicating a commitment to expanding talent across the organization [10][80] Q&A Session Summary Question: Insights on Corporate Finance market improvement - Management noted that while there has been improvement quarter by quarter, the market remains uncertain, and they are seeing resilience in client adjustments to current conditions [26][27] Question: Backlog trends and sector performance - Management refrained from commenting on backlog specifics but indicated solid performance across sectors, with EMEA lagging behind the U.S. [29][30] Question: Quality of assets and deal activity - Management acknowledged a strong environment but noted that the volume of deals is expected to pick up after Labor Day, with a focus on the quality of assets moving [34][35] Question: Non-compensation expense growth expectations - Management confirmed expectations for high single-digit growth in non-compensation expenses for the year, driven by headcount growth [36][48] Question: Restructuring market outlook - Management indicated that restructuring activity remains elevated, with a strong pipeline across both in-court and out-of-court transactions [41][43] Question: Growth of the secondaries business - Management expressed satisfaction with the growth of the secondaries business, indicating a positive outlook for its integration within the Capital Solutions group [44][45] Question: Sponsor market activity post-Labor Day - Management expects an increase in sponsor activity after Labor Day, noting that current activity levels are muted but showing signs of improvement [54][55] Question: Hiring strategy and focus areas - Management emphasized a commitment to hiring across all sectors, without a specific focus on any particular business or sector [81][82]