Houlihan Lokey (HLI -1.46%), a global investment bank known for its financial advisory services, released its fiscal 2025 second-quarter earnings on Oct. 30, 2024. For the period, which ended Sept. 30, it reported results well above market expectations, underscoring the effectiveness of its diversified service offerings across corporate finance, financial restructuring, and financial and valuation advisory. Adjusted earnings per share (EPS) rose 12% year over year to $1.46, outpacing the $1.31 analysts anticipated. Total net revenue increased by 7% to $575 million, ahead of the projected $538 million. This quarter's performance highlights Houlihan Lokey's adeptness at navigating a complex market landscape.
| Metric | Fiscal Q2 2025 | Fiscal Q2 2025 Analyst Estimate | Fiscal Q2 2024 | % Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $1.46 | $1.31 | $1.11 | 31.5% |
| Total net revenue | $575 million | $538 million | $467 million | 23.1% |
| Corporate finance revenue | $364 million | - | $282 million | 29.1% |
| Financial restructuring revenue | $132 million | - | $115 million | 14.8% |
| Effective tax rate | 31.3% | - | 28.4% | 290 basis points |
Source: Analyst estimates for the quarter provided by FactSet.
About Houlihan Lokey and Its Core Businesses
Houlihan Lokey's diverse advisory services specialties include corporate finance, financial restructuring, and financial and valuation advisory. The investment bank prides itself on its independence -- maintaining objectivity by avoiding potential conflicts inherent in lending or securities sales -- and delivers focused, unbiased advisory services.
This diversified strategy not only meets the needs of a varied array of clients, but also helps Houlihan Lokey maintain relatively stable revenues across fluctuating economic cycles. By employing senior-level experts and leveraging interdisciplinary collaboration, Houlihan Lokey excels where deep collaboration and sector specialization matter most. Its global reach -- it has offices in 36 major world cities -- also enables strategic connections with its vast client network, enriching both industry knowledge and capabilities.
Quarter Highlights and Segment Performance
In the second quarter of its fiscal 2025, Houlihan Lokey demonstrated notable successes across its service lines. The corporate finance segment led the charge with a 29% year-over-year revenue increase to $364 million. This was driven by a favorable transaction mix and increased deal closures, which jumped from 117 to 131. Financial restructuring also contributed with a 15% revenue rise to $132 million, credited largely to improved transaction types despite just a slight uptick in the number of closed deals.
The financial and valuation advisory segment grew at a relatively moderate 12% rate to $79 million in revenue, reflecting better M&A market conditions and more fee events.
Expenditures slightly increased in tandem with revenue growth. Employee compensation rose to $361 million from $297 million, which kept the compensation ratio stable at 61.5%. However, non-compensation expenses such as IT and general operating costs rose 4.3% to $84 million. These costs underscore ongoing investments in infrastructure to support its expanding market footprint.
The investment bank's effective tax rate rose to 31.3% from 28.4% in the prior-year period, influenced by higher state taxes and larger tax bills due to its foreign operations. That impacted net income. Yet Houlihan Lokey still grew its net income to $94 million compared to $67 million in the prior-year period.
Management's Guidance
Houlihan Lokey's management expressed optimism for the fiscal year based on its ongoing M&A activities and potential expansion in capital markets. This is based on an anticipated upswing in corporate finance activities and a positively diverse business model likened to its niche strategy execution so far.
The recent appointment of Scott Adelson as CEO presents both opportunities and challenges. Houlihan Lokey's focus remains firmly positioned on expanding capabilities through strategic acquisitions and talent development, ensuring that it continues on its upward trajectory in a highly competitive market. Investors should watch for any notable shifts in operational strategies or the integration of new business units that may impact future results.
