Key Points
- Revenue and adjusted EPS exceeded analysts' estimates.
- The investment bank's corporate finance segment showed a significant year-over-year revenue increase of 45%.
Houlihan Lokey (HLI -1.46%), a leading independent investment bank, released results for the first quarter of its fiscal 2025 on July 30. For the period, which ended June 30, the financial company reported revenues of $513.6 million and adjusted diluted earnings per share (EPS) of $1.22, topping analysts' consensus estimates by 1% and 1.7%, respectively. Its diversified service offerings -- particularly in the corporate finance segment -- were key contributors to this robust performance. However, its financial restructuring segment saw a slight revenue decline.
| Metric | Fiscal Q1 2025 Result | Fiscal Q1 2025 Analyst Estimate | Fiscal Q1 2024 Result | % Change (YoY) |
|---|---|---|---|---|
| Revenue | $513.6 million | $508.7 million | $415.8 million | 23.6% |
| Adjusted EPS | $1.22 | $1.20 | $0.89 | 37.1% |
| Net income | $89 million | N/A | $61 million | 46.0% |
| Employee compensation and benefits | $330 million | N/A | $263 million | 25.5% |
| Source: Analyst estimates for the quarter provided by FactSet. |
Business Overview
Houlihan Lokey operates as a global investment bank, offering services in mergers and acquisitions (M&A), capital markets advisory, financial restructuring, and financial and valuation advisory. It caters to a diverse clientele globally, leveraging its robust service portfolio for growth.
Recently, Houlihan Lokey has focused on expanding its geographical footprint and enhancing its capabilities in various sectors through strategic acquisitions.
Quarterly Highlights
During Q1 fiscal 2025, the corporate finance segment reported revenues of $328 million -- its highest result ever for a first quarter, and a 45% increase year over year. Thanks to favorable market conditions for M&A and capital markets transactions, it closed 116 transactions compared to 95 in the prior-year period.
The financial restructuring segment's revenues of $117 million fell 5% from $123 million in Q1 fiscal 2024. This decrease was largely due to lower average transaction fees and retainer fees. Although restructuring activities increased, reflecting typical volatility in this part of the business, the number of closed transactions rose to 33 from 30 last year.
In the financial and valuation advisory segment, revenues increased by 4% to $68 million. This growth was fueled by improved market conditions and rising demand from established clients.
Employee compensation and benefits expenses rose to $330 million from $263 million in the prior-year quarter. Non-compensation expenses also increased modestly, reaching $88 million compared to $79 million last year.
Notably, Houlihan Lokey's acquisition of advisory firm Triago, completed during the quarter, enhanced the capabilities of its private funds group and contributed to the addition of 14 new managing directors. The company also announced a dividend of $0.57 per share for the second quarter of fiscal 2025, maintaining its consistent dividend policy.
Looking Ahead
Management expressed optimism about the future, with expectations of improved M&A and capital markets activity throughout the fiscal year. The company aims to continue its geographic and sector expansion to capture growth opportunities in emerging markets. Plans include additional hiring and acquisitions to bolster capabilities in underweighted sectors.
Investors should watch for developments in the corporate finance and financial and valuation advisory segments, which are anticipated to drive future growth. Meanwhile, the financial restructuring business will remain important due to its countercyclical nature, helping to stabilize the investment bank's revenues during economic slowdowns.
