Houlihan lokey reports fiscal year and fourth quarter 2023 financial results
Los angeles & new york--(business wire)--houlihan lokey, inc. (nyse:hli) (“houlihan lokey” or the “company”) today reported financial results for its fiscal year and fourth quarter ended march 31, 2023. for the fiscal year, revenues declined (20)% to $1.81 billion, compared with $2.27 billion for the fiscal year ended march 31, 2022. for the fourth quarter ended march 31, 2023, revenues declined (6)% to $445 million, compared with $471 million for the fourth quarter ended march 31, 2022. net income was $269 million, or $3.98 per diluted share, for the fiscal year ended march 31, 2023, compared with $438 million, or $6.41 per diluted share, for the fiscal year ended march 31, 2022. adjusted net income for the fiscal year ended march 31, 2023 was $315 million, or $4.54 per diluted share, compared with $485 million, or $7.10 per diluted share, for the fiscal year ended march 31, 2022. net income was $75 million, or $1.10 per diluted share, for the fourth quarter ended march 31, 2023, compared with $65 million, or $0.97 per diluted share, for the fourth quarter ended march 31, 2022. adjusted net income for the fourth quarter ended march 31, 2023 was $77 million, or $1.11 per diluted share, compared with $88 million, or $1.30 per diluted share, for the fourth quarter ended march 31, 2022. “as we look towards a new fiscal year, we believe that our diversified business model will continue to help us produce solid profitability under the current market environment. our corporate finance business continues to see strong new business activity and some consistency in its quarterly results, notwithstanding the complexities in closing transactions in this market environment. our financial restructuring business had a solid fourth quarter and is poised to deliver strong results in fiscal 2024, and our financial and valuation advisory business modestly grew in fiscal 2023, maintaining its growth profile in a challenging m&a environment,” stated scott beiser, chief executive officer of houlihan lokey. selected financial data (in thousands, except per share data) u.s. gaap three months ended march 31, year ended march 31, 2023 2022 2023 2022 revenues by segment corporate finance $ 256,425 $ 279,019 $ 1,127,126 $ 1,593,083 financial restructuring 120,382 121,586 395,733 392,818 financial and valuation advisory 67,960 70,561 286,588 284,057 revenues $ 444,767 $ 471,166 $ 1,809,447 $ 2,269,958 operating expenses: employee compensation and benefits $ 282,937 $ 293,580 $ 1,147,879 $ 1,408,634 non-compensation expenses 71,206 78,977 319,830 248,460 operating income 90,624 98,609 341,738 612,864 other (income)/expense, net (4,678 ) 7,921 2,738 8,926 income before provision for income taxes 95,302 90,688 339,000 603,938 provision for income taxes 20,642 25,515 69,777 165,614 net income 74,660 65,173 269,223 438,324 net income attributable to noncontrolling interest — — — (573 ) net income attributable to houlihan lokey, inc. $ 74,660 $ 65,173 $ 269,223 $ 437,751 diluted earnings per share attributable to houlihan lokey, inc. $ 1.10 $ 0.97 $ 3.98 $ 6.41 revenues for the fiscal year ended march 31, 2023, revenues declined to $1.81 billion, compared with $2.27 billion for the fiscal year ended march 31, 2022. for the fiscal year ended march 31, 2023, cf revenues decreased (29)%, financial restructuring (“fr”) revenues increased 1%, and financial and valuation advisory (“fva”) revenues increased 1% when compared with the fiscal year ended march 31, 2022. for the fourth quarter ended march 31, 2023, revenues declined to $445 million, compared with $471 million for the fourth quarter ended march 31, 2022. for the fourth quarter ended march 31, 2023, cf revenues decreased (8)%, fr revenues decreased (1)%, and fva revenues decreased (4)% when compared with the fourth quarter ended march 31, 2022. expenses the company’s employee compensation and benefits expenses, non-compensation expenses, and provision for income taxes during the periods presented and described below are on a gaap and an adjusted basis. u.s. gaap adjusted (non-gaap) * year ended march 31, ($ in thousands) 2023 2022 2023 2022 expenses: employee compensation and benefits $ 1,147,879 $ 1,408,634 $ 1,112,809 $ 1,396,025 % of revenues 63.4 % 62.1 % 61.5 % 61.5 % non-compensation $ 319,830 $ 248,460 $ 272,534 $ 192,925 % of revenues 17.7 % 10.9 % 15.1 % 8.5 % provision for income taxes $ 69,777 $ 165,614 $ 113,150 $ 194,180 % of pre-tax income 20.6 % 27.4 % 26.4 % 28.6 % * 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. gaap adjusted (non-gaap) * three months ended march 31, ($ in thousands) 2023 2022 2023 2022 expenses: employee compensation and benefits $ 282,937 $ 293,580 $ 273,530 $ 289,768 % of revenues 63.6 % 62.3 % 61.5 % 61.5 % non-compensation $ 71,206 $ 78,977 $ 67,991 $ 59,377 % of revenues 16.0 % 16.8 % 15.3 % 12.6 % provision for income taxes $ 20,642 $ 25,515 $ 29,964 $ 34,011 % of pre-tax income 21.7 % 28.1 % 28.0 % 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. year ended march 31, 2023 compared to the year ended march 31, 2022 employee compensation and benefits expenses were $1.15 billion for the fiscal year ended march 31, 2023, compared with $1.41 billion for the fiscal year ended march 31, 2022. this resulted in a gaap compensation ratio of 63.4% for the fiscal year ended march 31, 2023, compared with 62.1% for the fiscal year ended march 31, 2022. adjusted employee compensation and benefits expenses were $1.11 billion for the fiscal year ended march 31, 2023, compared with $1.40 billion for the fiscal year ended march 31, 2022. this resulted in an adjusted compensation ratio of 61.5% for both the fiscal year ended march 31, 2023 and the fiscal year ended march 31, 2022. the decrease in gaap and adjusted employee compensation and benefits expenses was primarily a result of a decline in revenues for the year when compared with the prior year. non-compensation expenses were $320 million for the fiscal year ended march 31, 2023, compared with $248 million for the fiscal year ended march 31, 2022. adjusted non-compensation expenses were $273 million for the fiscal year ended march 31, 2023, compared with $193 million for the fiscal year ended march 31, 2022. the increase in gaap and adjusted non-compensation expenses was primarily a result of an increase in travel, meals, and entertainment expenses as employees continued to return to travel and an increase in other operating expenses. the provision for income taxes was $70 million, representing an effective tax rate of 20.6%, for the fiscal year ended march 31, 2023, compared with $166 million, representing an effective tax rate of 27.4%, for the fiscal year ended march 31, 2022. the decrease in the company’s effective tax rate during the fiscal year ended march 31, 2023 relative to the fiscal year ended march 31, 2022 was primarily the result of increased stock compensation deductions, the release of the provision for an uncertain tax position as a result of the successful closure of a state audit and the release of a valuation allowance. the adjusted provision for income taxes was $113 million, representing an adjusted effective tax rate of 26.4%, for the fiscal year ended march 31, 2023, compared with $194 million, representing an adjusted effective tax rate of 28.6%, for the fiscal year ended march 31, 2022. quarter ended march 31, 2023 compared to the quarter ended march 31, 2022 employee compensation and benefits expenses were $283 million for the fourth quarter ended march 31, 2023, compared with $294 million for the fourth quarter ended march 31, 2022. this resulted in a gaap compensation ratio of 63.6% for the fourth quarter ended march 31, 2023, compared with 62.3% for the fourth quarter ended march 31, 2022. adjusted employee compensation and benefits expenses were $274 million for the fourth quarter ended march 31, 2023, compared with $290 million for the fourth quarter ended march 31, 2022. this resulted in an adjusted compensation ratio of 61.5% for both the fourth quarter ended march 31, 2023 and the fourth quarter ended march 31, 2022. the decrease in gaap and adjusted employee compensation and benefits expenses was primarily a result of a decline in revenues when compared with the same quarter last year. non-compensation expenses were $71 million for the fourth quarter ended march 31, 2023, compared with $79 million for the fourth quarter ended march 31, 2022. the decrease in gaap non-compensation expenses was primarily a result of a decrease in amortization expense as the intangible assets recognized in connection with the acquisition of gca became predominantly amortized, and a decrease in other operating expenses. adjusted non-compensation expenses were $68 million for the quarter ended march 31, 2023, compared with $59 million for the fourth quarter ended march 31, 2022. the increase in adjusted non-compensation expenses was primarily a result of an increase in travel, meals, and entertainment expenses as employees continued to return to travel and an increase in rent expense, partially offset by a decrease in other operating expenses. the provision for income taxes was $21 million, representing an effective tax rate of 21.7%, for the fourth quarter ended march 31, 2023, compared with $26 million, representing an effective tax rate of 28.1%, for the fourth quarter ended march 31, 2022. the decrease in the company’s effective tax rate during the quarter ended march 31, 2023 relative to the quarter ended march 31, 2022 was primarily the result of the release of a valuation allowance. the adjusted provision for income taxes was $30 million, representing an adjusted effective tax rate of 28.0%, for the fourth quarter ended march 31, 2023, compared with $34 million, representing an adjusted effective tax rate of 27.9%, for the fourth quarter ended march 31, 2022. segment reporting for the fourth quarter corporate finance cf revenues were $256 million for the fourth quarter ended march 31, 2023, compared with $279 million for the fourth quarter ended march 31, 2022. revenues decreased primarily due to a decrease in the average transaction fee on closed transactions, which was driven by the size and timing of transactions that closed during the quarter, and does not represent a trend in the average fee on closed transactions. three months ended march 31, year ended march 31, ($ in thousands) 2023 2022 2023 2022 corporate finance revenues $ 256,425 $ 279,019 $ 1,127,126 $ 1,593,083 # of managing directors 217 202 217 202 # of closed transactions (1) 140 144 503 600 financial restructuring fr revenues were $120 million for the fourth quarter ended march 31, 2023, compared with $122 million for the fourth quarter ended march 31, 2022. revenues remained relatively flat primarily due to a decrease in the average transaction fee on closed transactions, offset by an increase in the number of closed transactions. the decrease in the average transaction fee was driven by the size and timing of transactions that closed during the quarter, and does not represent a trend in the average fee on closed transactions. the increase in the number of closed transactions was driven by favorable market conditions for restructuring transactions. three months ended march 31, year ended march 31, ($ in thousands) 2023 2022 2023 2022 financial restructuring revenues $ 120,382 $ 121,586 $ 395,733 $ 392,818 # of managing directors 57 53 57 53 # of closed transactions (1) 38 25 106 90 financial and valuation advisory fva revenues were $68 million for the quarter ended march 31, 2023, compared with $71 million for the fourth quarter ended march 31, 2022. revenues decreased primarily due to a decrease in the number of fee events. the decrease in the number of fee events was driven by softness in the m&a markets, which affected one or more of the service lines within our fva business. three months ended march 31, year ended march 31, ($ in thousands) 2023 2022 2023 2022 financial and valuation advisory revenues $ 67,960 $ 70,561 $ 286,588 $ 284,057 # of managing directors 39 34 39 34 # of fee events (1) 957 999 2,257 2,183 (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. other announcements the board of directors of the company declared a regular quarterly cash dividend of $0.55 per share of class a and class b common stock. the dividend will be payable on june 15, 2023 to stockholders of record as of the close of business on june 2, 2023. investor conference call and webcast the company will host a conference call and live webcast at 5:00 p.m. eastern time on tuesday, may 9, 2023, to discuss its full year and fourth quarter fiscal 2023 results. the number to call is 1-877-226-0954 (domestic) or 1-212-231-2901 (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 may 9, 2023 through may 16, 2023, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the passcode 151918000#. 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 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. 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 americas, 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 global m&a transactions under $1 billion, the no. 1 m&a advisor for the past eight consecutive years in the u.s., the no. 1 global restructuring advisor for the past nine consecutive years, and the no. 1 global m&a fairness opinion advisor over the past 25 years, all based on number of transactions and according to data provided by refinitiv. for more information, please visit www.hl.com. appendix condensed consolidated balance sheets (unaudited) condensed consolidated statements of income (unaudited) reconciliation of gaap to adjusted financial information (unaudited) houlihan lokey, inc. and subsidiaries condensed consolidated balance sheets (unaudited) (in thousands, except share data and par value) march 31, 2023 march 31, 2022 assets cash and cash equivalents $ 714,439 $ 833,697 restricted cash 373 373 investment securities 37,309 109,143 accounts receivable, net of allowance for credit losses 182,029 144,029 unbilled work in process, net of allowance for credit losses 115,045 104,751 income taxes receivable 17,693 — deferred income taxes 104,941 95,278 property and equipment, net 88,345 52,176 operating lease right-of-use assets 333,877 171,942 goodwill 1,087,784 1,070,442 other intangible assets, net 203,370 247,333 other assets 83,609 57,646 total assets $ 2,968,814 $ 2,886,810 liabilities and stockholders' equity liabilities: accrued salaries and bonuses $ 765,877 $ 953,604 accounts payable and accrued expenses 113,421 126,190 deferred income 40,695 28,753 income taxes payable — 61,266 deferred income taxes 544 789 loans payable to former shareholders — 539 operating lease liabilities 374,869 197,091 other liabilities 45,111 74,873 total liabilities 1,340,517 1,443,105 stockholders' equity: class a common stock, $0.001 par value. authorized 1,000,000,000 shares; issued and outstanding 50,638,924 and 49,853,564 shares, respectively 51 50 class b common stock, $0.001 par value. authorized 1,000,000,000 shares; issued and outstanding 18,048,345 and 17,649,555 shares, respectively 18 18 additional paid-in capital 642,970 564,761 retained earnings 1,048,072 922,223 accumulated other comprehensive loss (62,814 ) (43,347 ) total stockholders’ equity 1,628,297 1,443,705 total liabilities and stockholders’ equity $ 2,968,814 $ 2,886,810 houlihan lokey, inc. and subsidiaries condensed consolidated statements of income (unaudited) three months ended march 31, year ended march 31, (in thousands, except share and per share data) 2023 2022 2023 2022 revenues $ 444,767 $ 471,166 $ 1,809,447 $ 2,269,958 operating expenses: employee compensation and benefits 282,937 293,580 1,147,879 1,408,634 travel, meals, and entertainment 13,391 5,001 51,082 22,465 rent 17,911 14,120 55,838 47,747 depreciation and amortization 6,347 19,948 58,221 48,537 information technology and communications 15,201 13,497 54,125 41,714 professional fees 9,078 10,361 32,940 38,349 other operating expenses 9,278 16,050 67,624 49,648 total operating expenses 354,143 372,557 1,467,709 1,657,094 operating income 90,624 98,609 341,738 612,864 other (income)/expense, net (4,678 ) 7,921 2,738 8,926 income before provision for income taxes 95,302 90,688 339,000 603,938 provision for income taxes 20,642 25,515 69,777 165,614 net income 74,660 65,173 269,223 438,324 net income attributable to noncontrolling interest — — — (573 ) net income attributable to houlihan lokey, inc. $ 74,660 $ 65,173 $ 269,223 $ 437,751 weighted average shares of common stock outstanding: basic 63,351,104 64,085,273 63,358,408 64,970,287 fully diluted 68,107,465 67,461,779 67,586,263 68,259,708 earnings per share attributable to houlihan lokey, inc. basic $ 1.18 $ 1.02 $ 4.25 $ 6.74 fully diluted $ 1.10 $ 0.97 $ 3.98 $ 6.41 houlihan lokey, inc. and subsidiaries reconciliation of gaap to adjusted financial information (unaudited) three months ended march 31, year ended march 31, (in thousands, except share and per share data) 2023 2022 2023 2022 revenues $ 444,767 $ 471,166 $ 1,809,447 $ 2,269,958 employee compensation and benefits expenses employee compensation and benefits expenses (gaap) $ 282,937 $ 293,580 $ 1,147,879 $ 1,408,634 less: acquisition related retention payments (9,407 ) (3,812 ) (35,070 ) (12,609 ) employee compensation and benefits expenses (adjusted) 273,530 289,768 1,112,809 1,396,025 non-compensation expenses non-compensation expenses (gaap) $ 71,206 $ 78,977 $ 319,830 $ 248,460 less: integration and acquisition related costs — (3,793 ) (2,325 ) (21,598 ) less: acquisition amortization (3,215 ) (15,807 ) (44,971 ) (33,937 ) non-compensation expenses (adjusted) 67,991 59,377 272,534 192,925 operating income operating income (gaap) $ 90,624 $ 98,609 $ 341,738 $ 612,864 plus: adjustments (1) 12,622 23,412 82,366 68,144 operating income (adjusted) 103,246 122,021 424,104 681,008 other (income)/expense, net other (income)/expense, net (gaap) $ (4,678 ) $ 7,921 $ 2,738 $ 8,926 less: warrant revaluation — — (2,264 ) — less: spac wind-down write-off — — (2,742 ) — plus/(less): change in acquisition earnout liability fair value 738 (7,613 ) (2,103 ) (7,613 ) other (income)/expense, net (adjusted) (3,940 ) 308 (4,371 ) 1,313 provision for income taxes provision for income taxes (gaap) $ 20,642 $ 25,515 $ 69,777 $ 165,614 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 — plus: release of valuation allowance 5,881 — 5,881 — adjusted provision for income taxes 26,523 25,515 89,522 172,536 plus: resulting tax impact (2) 3,441 8,496 23,628 21,644 provision for income taxes (adjusted) 29,964 34,011 113,150 194,180 net income net income (gaap) $ 74,660 $ 65,173 $ 269,223 $ 438,324 plus: adjustments (3) 2,562 22,529 46,102 47,191 net income (adjusted) 77,222 87,702 315,325 485,515 net income attributable to noncontrolling interest — — — (573 ) net income attributable to houlihan lokey, inc. (gaap) 74,660 65,173 269,223 437,751 net income attributable to houlihan lokey, inc. (adjusted) 77,222 87,702 315,325 484,942 fully diluted shares outstanding fully diluted shares outstanding (gaap) 68,107,465 67,461,779 67,586,263 68,259,708 plus: impact of unvested gca retention and deferred share awards 1,591,157 — 1,927,786 — fully diluted shares outstanding (adjusted) 69,698,622 67,461,779 69,514,049 68,259,708 diluted eps attributable to houlihan lokey, inc. (gaap) $ 1.10 $ 0.97 $ 3.98 $ 6.41 diluted eps attributable to houlihan lokey, inc. (adjusted) $ 1.11 $ 1.30 $ 4.54 $ 7.10 (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.
