In This Article:
Release Date: May 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Houlihan Lokey Inc (NYSE:HLI) reported record annual revenue of $2.4 billion for fiscal year 2025, marking a 25% increase from the previous year.
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The company achieved a 28% increase in quarterly revenue and a 54% rise in adjusted earnings per share compared to the same quarter last year.
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HLI successfully executed three acquisitions during the year, expanding its industry, geographic, and product reach, which contributed significantly to its growth.
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The Corporate Finance division saw a 44% increase in revenue for the quarter, with the average transaction fee and transaction size both growing.
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The company rebranded its capital markets business to 'Capital Solutions,' reflecting its strategic expansion and diversification into high-growth, less volatile revenue streams.
Negative Points
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The company faces challenges in forecasting due to current market volatility, making it difficult to predict future performance accurately.
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Despite strong results, the financial restructuring business is subject to cyclical fluctuations, which could impact future revenue consistency.
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Adjusted non-compensation expenses increased to $85 million for the quarter, reflecting higher costs associated with headcount growth and technology investments.
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The adjusted compensation expense ratio remained high at 61.5%, indicating significant costs related to employee compensation.
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The company anticipates high single-digit growth in adjusted non-compensation expenses for fiscal 2026, which could pressure profit margins if revenue growth does not keep pace.
Q & A Highlights
Q: Can you provide insights on how revenues have been tracking quarter-to-date and any differences between sponsor and strategic clients? A: Scott Adelson, CEO: It's too early to provide meaningful indications due to the volatile environment. However, pitch level activity and deals are moving at a normal rate. Certain sectors and geographies are more impacted than others.
Q: How do you view the restructuring market, particularly in terms of liability management versus Chapter 11? A: Scott Adelson, CEO: We expect restructuring to remain at elevated levels, and recent events have reinforced this outlook. The mix of restructuring types is less relevant as they are all considered restructurings.
Q: What are your thoughts on the fundraising trends for private equity, especially for smaller firms? A: Scott Adelson, CEO: The primary fundraising business has been constrained due to inadequate capital recycling. However, there are various ways to fill these voids, such as continuation funds and direct selling.