Houlihan Lokey(HLI) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenues of $659 million for the quarter, a 15% increase year-over-year, and adjusted earnings per share of $1.84, up 26% compared to the same period last year [4][5] - Adjusted compensation expenses were $406 million, up from $354 million year-over-year, maintaining an adjusted compensation expense ratio of 61.5% [9][10] - The adjusted effective tax rate for the quarter was 29.7%, down from 31.3% in the same quarter last year [10][11] Business Line Data and Key Metrics Changes - Corporate finance revenues were $439 million, a 21% increase year-over-year, with 171 transactions closed, up from 131 in the same period last year [5][8] - Financial restructuring revenues reached $134 million, a 2% increase, with 37 transactions closed compared to 33 last year [6][8] - Financial and valuation advisory generated $87 million in revenues, a 10% increase, with 1,075 fee events, up from 903 in the same period last year [6][8] Market Data and Key Metrics Changes - The non-U.S. business performed well, particularly in the EMEA and Asia-Pacific regions, showing solid growth and improving key indicators [6] - The company noted that EMEA and Asia have outperformed the U.S. corporate finance business year-to-date, indicating strong growth potential in these regions [48] Company Strategy and Development Direction - The company is focused on maintaining strong growth in corporate finance and capital solutions, with expectations for a strong fourth quarter relative to the third quarter [5][6] - The acquisition pipeline remains strong, with ongoing efforts to attract senior talent and expand the global platform [6][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the macro environment, noting that easing interest rates and improving market conditions have bolstered deal-making confidence [4][5] - The outlook for the second half of fiscal 2026 is positive, with expectations for year-over-year growth if current conditions persist [7][12] Other Important Information - The company ended the quarter with approximately $1.1 billion in unrestricted cash and investment securities, with plans to evaluate balance sheet flexibility for acquisitions versus share repurchases [12] - The company repurchased approximately 210,000 shares during the quarter [12] Q&A Session Summary Question: Trends in restructuring business and new business activity - Management acknowledged a slowdown in new business activity in restructuring but noted a robust backlog supporting continued strength [17][18] Question: Corporate finance activity and sponsor engagement - Management confirmed an uptick in corporate finance activity, particularly after Labor Day, with sponsors actively engaging in the market [20][22][23] Question: Growth profile of financial and valuation advisory - Management described the growth profile as consisting of cyclical and non-cyclical segments, with expectations for growth in strong M&A cycles [27][29] Question: Impact of macro-negative headlines on deal-making - Management indicated that recent macro-negative headlines have not materially impacted client sentiment or acquisition strategies [68] Question: Share repurchase strategy - Management clarified that share repurchases are primarily driven by employee compensation needs and available excess cash, rather than stock performance [70][71]