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Published: 2022-10-27 19:13:18 ET
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EX-99.1 2 q2fy23-ex991.htm EX-99.1 Document
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Houlihan Lokey Reports Second Quarter Fiscal 2023 Financial Results

– Second Quarter Fiscal 2023 Revenues of $490 million –
– Second Quarter Fiscal 2023 Diluted EPS of $0.87 –
– Adjusted Second Quarter Fiscal 2023 Diluted EPS of $1.19 –
– Announces Dividend of $0.53 per Share for Third Quarter Fiscal 2023 –

LOS ANGELES and NEW YORK - October 27, 2022 - Houlihan Lokey, Inc. (NYSE:HLI) (“Houlihan Lokey” or the “Company”) today reported financial results for its second quarter ended September 30, 2022.
For the second quarter ended September 30, 2022, revenues were $490 million, compared with $537 million for the second quarter ended September 30, 2021. Net income was $61 million, or $0.87 per diluted share, for the second quarter ended September 30, 2022, compared with $113 million, or $1.65 per diluted share, for the second quarter ended September 30, 2021. Adjusted net income for the second quarter ended September 30, 2022 was $83 million, or $1.19 per diluted share, compared with $117 million, or $1.71 per diluted share, for the second quarter ended September 30, 2021.
“Our second quarter results reflect the benefit of our diversified business model. In a challenging market environment, growth in Financial Restructuring and Financial and Valuation Advisory partly offset headwinds in our Corporate Finance business. We are proud to note that our Financial and Valuation Advisory business recorded its second-best quarter ever, as we continue to grow that business across all service lines. Market conditions for Financial Restructuring continue to improve and we see potential that this cycle may produce an elevated level of restructuring revenues over an extended period of time. In Corporate Finance, despite difficult year-over-year comparisons, we are starting to see an increase in deal closings leading into the second half of the fiscal year, and the quality of our new deal activity continues to improve. We remain confident the Firm is well positioned across various types of macro-economic environments” stated Scott Beiser, Chief Executive Officer of Houlihan Lokey.

Selected Financial Data
(In thousands, except per share data)
U.S. GAAP
Three Months Ended September 30,Six Months Ended September 30,
2022202120222021
Revenues by segment
Corporate Finance$315,016 $388,410 $578,967 $598,401 
Financial Restructuring97,694 83,184 176,532 181,959 
Financial and Valuation Advisory76,827 65,678 152,682 129,634 
Revenues
$489,537 $537,272 $908,181 $909,994 
Operating expenses:
Employee compensation and benefits$309,859 $333,374 $575,594 $565,678 
Non-compensation90,307 46,579 165,646 79,321 
Operating income
89,371 157,319 166,941 264,995 
Other expense, net5,104 853 6,853 752 
Income before provision for income taxes
84,267 156,466 160,088 264,243 
Provision for income taxes23,537 43,583 28,576 65,400 
Net income attributable to Houlihan Lokey, Inc.
$60,730 $112,883 $131,512 $198,843 
Diluted earnings per share
$0.87 $1.65 $1.90 $2.90 
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Revenues

For the second quarter ended September 30, 2022, revenues were $490 million, compared with $537 million for the second quarter ended September 30, 2021. Revenues decreased primarily as a result of a decrease in the number of closed transactions and the average transaction fee on closed transactions for our Corporate Finance (“CF”) business segment. For the second quarter ended September 30, 2022, CF revenues decreased (19)%, Financial Restructuring (“FR”) revenues increased 17%, and Financial and Valuation Advisory (“FVA”) revenues increased 17% when compared with the second quarter ended September 30, 2021. Revenues for the second quarter ended September 30, 2021 do not include GCA.

Expenses

The Company’s employee compensation and benefits expenses, non-compensation expenses, and provision for income taxes during the periods presented and described below are on a GAAP and an adjusted basis.
U.S. GAAPAdjusted (Non-GAAP) *
Three Months Ended September 30,
($ in thousands)2022202120222021
Expenses:
Employee compensation and benefits$309,859 $333,374 $301,063 $330,421 
% of Revenues63.3 %62.0 %61.5 %61.5 %
Non-compensation$90,307 $46,579 $72,358 $43,327 
% of Revenues18.4 %8.7 %14.8 %8.1 %
Provision for income taxes$23,537 $43,583 $32,084 $45,311 
% of Pre-tax income27.9 %27.9 %27.9 %27.9 %
*Adjusted figures represent non-GAAP information. See “Non-GAAP Financial Measures” and the tables at the end of this release for an explanation of the adjustments and reconciliations to the comparable GAAP numbers.
U.S. GAAPAdjusted (Non-GAAP) *
Six Months Ended September 30,
($ in thousands)2022202120222021
Expenses:
Employee compensation and benefits$575,594 $565,678 $558,530 $559,646 
% of Revenues63.4 %62.2 %61.5 %61.5 %
Non-compensation$165,646 $79,321 $131,932 $75,005 
% of Revenues18.2 %8.7 %14.5 %8.2 %
Provision for income taxes$28,576 $65,400 $57,289 $75,155 
% of Pre-tax income17.9 %24.7 %26.5 %27.4 %
*Adjusted figures represent non-GAAP information. See “Non-GAAP Financial Measures” and the tables at the end of this release for an explanation of the adjustments and reconciliations to the comparable GAAP numbers.

Employee compensation and benefits expenses were $310 million for the second quarter ended September 30, 2022, compared with $333 million for the second quarter ended September 30, 2021. Adjusted employee compensation and benefits expenses were $301 million for the second quarter ended September 30, 2022, compared with $330 million for the second quarter ended September 30, 2021. This resulted in an adjusted compensation ratio of 61.5% for both the second quarter ended September 30, 2022 and the second quarter ended September 30, 2021. The decrease in GAAP and adjusted employee compensation and benefits expenses was primarily a result of a decrease in fee revenues for the quarter when compared with the same quarter last year.

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Non-compensation expenses were $90 million for the second quarter ended September 30, 2022, compared with $47 million for the second quarter ended September 30, 2021. The increase in GAAP non-compensation expenses was primarily a result of the inclusion of GCA’s non-compensation expenses in the second quarter ended September 30, 2022, which were not included in the second quarter ended September 30, 2021, amortization of intangible assets recognized in connection with the acquisition of GCA, integration related costs associated with our acquisition of GCA and an increase in other operating expenses and travel, meals, and entertainment expenses. Adjusted non-compensation expenses were $72 million for the second quarter ended September 30, 2022, compared with $43 million for the second quarter ended September 30, 2021. The increase in adjusted non-compensation expenses was primarily a result of GCA’s non-compensation expenses in the second quarter ended September 30, 2022, which were not included in the second quarter ended September 30, 2021, and an increase in other operating expenses and travel, meals, and entertainment expenses.

The provision for income taxes was $24 million, representing an effective tax rate of 27.9% for the second quarter ended September 30, 2022, compared with $44 million, representing an effective tax rate of 27.9% for the second quarter ended September 30, 2021. The adjusted provision for income taxes was $32 million, representing an adjusted effective tax rate of 27.9% for the second quarter ended September 30, 2022, compared with $45 million, representing an adjusted effective tax rate of 27.9% for the second quarter ended September 30, 2021.


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Segment Reporting for the Second Fiscal Quarter

Corporate Finance
CF revenues were $315 million for the second quarter ended September 30, 2022, compared with $388 million for the second quarter ended September 30, 2021, representing a decrease of (19)%. Revenues decreased primarily due to a decrease in the number of closed transactions.
Three Months Ended September 30,Six Months Ended September 30,
($ in thousands)2022202120222021
Corporate Finance
Revenues$315,016 $388,410 $578,967 $598,401 
# of Managing Directors210 126 210 126 
# of Closed transactions (1)
114 134 238 218 

Financial Restructuring
FR revenues increased 17% to $98 million for the second quarter ended September 30, 2022, compared with $83 million for the second quarter ended September 30, 2021. Revenues increased primarily due to an increase in the number of closed transactions and the closing of a significant fee event during the quarter.
Three Months Ended September 30,Six Months Ended September 30,
($ in thousands)2022202120222021
Financial Restructuring
Revenues$97,694 $83,184 $176,532 $181,959 
# of Managing Directors56 51 56 51 
# of Closed transactions (1)
24 20 40 44 

Financial and Valuation Advisory
FVA revenues increased 17% to $77 million for the second quarter ended September 30, 2022, compared with $66 million for the second quarter ended September 30, 2021. Revenues increased primarily due to an increase in the number of fee events.
Three Months Ended September 30,Six Months Ended September 30,
($ in thousands)2022202120222021
Financial and Valuation Advisory
Revenues$76,827 $65,678 $152,682 $129,634 
# of Managing Directors40 37 40 37 
# of Fee Events (1)
890 806 1,404 1,242 
(1)A Fee Event includes any engagement that involves revenue activity during the measurement period based on a revenue minimum of one thousand dollars. References in this press release to closed transactions should be understood to be the same as transactions that are “effectively closed” as described in our periodic reports on Forms 10-K and 10-Q.

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Balance Sheet and Capital Allocation

The Board of Directors of the Company declared a regular quarterly cash dividend of $0.53 per share of Class A and Class B common stock. The dividend will be payable on December 15, 2022 to stockholders of record as of the close of business on December 2, 2022.

As of September 30, 2022, the Company had $540 million of cash and cash equivalents and investment securities, and $51 million of other liabilities and loans payable to former shareholders.

Investor Conference Call and Webcast

The Company will host a conference call and live webcast at 5:00 p.m. Eastern Time on Thursday, October 27, 2022, to discuss its second quarter fiscal 2023 results. The number to call is 1-888-254-3590 (domestic) or 1-646-828-8193 (international). A live webcast will be available in the Investor Relations section of the Company’s website. A replay of the conference call will be available from October 27, 2022 through November 3, 2022, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the passcode 3937326#. A replay of the webcast will be archived and available on the Company’s website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. You can identify these statements by our use of the words “assumes,” “believes,” “estimates,” “expects,” “guidance,” “intends,” “plans,” “projects,” and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors (including the significant effect that the COVID-19 pandemic has had on our business and may continue to have on our business) which are, in some cases, beyond the Company’s control and could materially affect actual results, performance, or achievements. For a further description of such factors, you should read the Company’s filings with the Securities and Exchange Commission. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. The Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

Adjusted net income, total and on a per share basis, and certain adjusted items used to determine adjusted net income, are presented and discussed in this earnings press release and are non-GAAP measures that management believes, when presented together with comparable GAAP measures, are useful to investors in understanding the Company’s operating results. These adjusted items remove the significant accounting impact of one-time or non-recurring charges associated with the Company’s one-time/non-recurring matters, as set forth in the tables at the end of this release.

The adjusted items included in this earnings press release as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these adjusted amounts are not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative to the Company’s financial information determined under GAAP. For a description of the Company’s use of these adjusted items and a reconciliation with comparable GAAP items, see the section of this press release titled “Reconciliation of GAAP to Adjusted Financial Information.” Please refer to our financial statements, prepared in accordance with GAAP, for purposes of evaluating our financial condition, results of operations, and cash flows.

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About Houlihan Lokey

Houlihan Lokey (NYSE:HLI) is a global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and financial and valuation advisory. The firm serves corporations, institutions, and governments worldwide with offices in the United States, Europe, the Middle East, and the Asia-Pacific region. Independent advice and intellectual rigor are hallmarks of the firm’s commitment to client success across its advisory services. Houlihan Lokey is the No. 1 investment bank for all global M&A transactions, the No. 1 M&A advisor for the past seven consecutive years in the U.S., the No. 1 global restructuring advisor for the past eight consecutive years, and the No. 1 global M&A fairness opinion advisor over the past 20 years, all based on number of transactions and according to data provided by Refinitiv.

For more information, please visit www.HL.com.



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Contact Information
Investor Relations
212.331.8225
IR@HL.com		ORPublic Relations
212.331.8223
PR@HL.com

Appendix

Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Statements of Income (Unaudited)
Reconciliation of GAAP to Adjusted Financial Information (Unaudited)

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HOULIHAN LOKEY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data and par value)September 30, 2022March 31, 2022
Assets
Cash and cash equivalents$503,806 $833,697 
Restricted cash373 373 
Investment securities35,742 109,143 
Accounts receivable, net of allowance for credit losses135,191 144,029 
Unbilled work in process, net of allowance for credit losses155,935 104,751 
Deferred income taxes112,092 95,278 
Property and equipment, net62,206 52,176 
Operating lease right-of-use assets168,291 171,942 
Goodwill1,051,294 1,070,442 
Other intangible assets, net214,598 247,333 
Other assets70,671 57,646 
Total assets$2,510,199 $2,886,810 
Liabilities and Stockholders' Equity
Liabilities:
Accrued salaries and bonuses$685,568 $953,604 
Accounts payable and accrued expenses98,182 126,190 
Deferred income35,482 28,753 
Income taxes payable3,869 61,266 
Deferred income taxes538 789 
Loans payable to former shareholders506 539 
Operating lease liabilities188,937 197,091 
Other liabilities50,449 74,873 
Total liabilities1,063,531 1,443,105 
Stockholders' equity:
Class A common stock, $0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 49,780,875 and 49,853,564 shares, respectively50 50 
Class B common stock, $0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 18,874,122 and 17,649,555 shares, respectively19 18 
Additional paid-in capital559,605 564,761 
Retained earnings981,204 922,223 
Accumulated other comprehensive loss(94,210)(43,347)
Total stockholders’ equity1,446,668 1,443,705 
Total liabilities and stockholders’ equity$2,510,199 $2,886,810 
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HOULIHAN LOKEY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended September 30,Six Months Ended September 30,
(In thousands, except share and per share data)2022202120222021
Revenues$489,537 $537,272 $908,181 $909,994 
Operating expenses:
Employee compensation and benefits309,859 333,374 575,594 565,678 
Travel, meals, and entertainment12,370 4,687 23,420 6,374 
Rent13,285 9,050 25,075 19,275 
Depreciation and amortization19,475 4,344 38,618 8,515 
Information technology and communications13,183 8,858 24,173 15,819 
Professional fees9,598 6,915 16,067 13,616 
Other operating expenses22,396 12,725 38,293 15,722 
Total operating expenses400,166 379,953 741,240 644,999 
Operating income89,371 157,319 166,941 264,995 
Other expense, net5,104 853 6,853 752 
Income before provision for income taxes84,267 156,466 160,088 264,243 
Provision for income taxes23,537 43,583 28,576 65,400 
Net income attributable to Houlihan Lokey, Inc.$60,730 $112,883 $131,512 $198,843 
Weighted average shares of common stock outstanding:
Basic63,422,701 65,156,968 63,350,545 65,433,649 
Fully diluted69,800,028 68,566,127 69,316,792 68,641,962 
Earnings per share
Basic$0.96 $1.73 $2.08 $3.04 
Fully diluted$0.87 $1.65 $1.90 $2.90 

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HOULIHAN LOKEY, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED FINANCIAL INFORMATION
(UNAUDITED)
Three Months Ended September 30,Six Months Ended September 30,
(In thousands, except per share data)2022202120222021
Revenues$489,537 $537,272 $908,181 $909,994 
Employee compensation and benefits expenses
Employee compensation and benefits expenses (GAAP)$309,859 $333,374 $575,594 $565,678 
Less: Acquisition related retention payments(8,796)(2,953)(17,064)(6,032)
Employee compensation and benefits expenses (adjusted)301,063 330,421 558,530 559,646 
Non-compensation expenses
Non-compensation expenses (GAAP)$90,307 $46,579 $165,646 $79,321 
Less: Integration and acquisition related costs(2,325)(1,640)(2,325)(1,640)
Less: Acquisition amortization(15,624)(1,612)(31,389)(2,676)
Non-compensation expenses (adjusted)72,358 43,327 131,932 75,005 
Operating income
Operating income (GAAP)$89,371 $157,319 $166,941 $264,995 
Plus: Adjustments (1)
26,745 6,205 50,778 10,348 
Operating income (adjusted)116,116 163,524 217,719 275,343 
Other expense, net
Other expense, net (GAAP)$5,104 $853 $6,853 $752 
Less: Warrant revaluation(1,014)— (2,264)— 
Less: Increase in acquisition earnout liability(2,841)— (2,841)— 
Other expense, net (adjusted)1,249 853 1,748 752 
Provision for income taxes
Provision for income taxes (GAAP)$23,537 $43,583 $28,576 $65,400 
Plus: Impact of the excess tax benefit for stock vesting— — 8,102 6,922 
Plus: Release of the provision for an uncertain tax position as a result of the successful closure of a state audit— — 5,762 — 
Adjusted provision for income taxes23,537 43,583 42,440 72,322 
Plus: Resulting tax impact (2)
8,547 1,728 14,849 2,833 
Provision for income taxes (adjusted)32,084 45,311 57,289 75,155 
Net income
Net income (GAAP)$60,730 $112,883 $131,512 $198,843 
Plus: Adjustments (3)
22,053 4,477 27,170 593 
Net income (adjusted)82,783 117,360 158,682 199,436 
Diluted EPS (GAAP)$0.87 $1.65 $1.90 $2.90 
Diluted EPS (adjusted)$1.19 $1.71 $2.29 $2.91 
(1)The aggregate of adjustments from employee compensation and benefits and non-compensation expenses.
(2)Reflects the tax impact of utilizing the adjusted effective tax rate on the non-tax adjustments identified above.
(3)Consists of all adjustments identified above net of the associated tax impact.
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