Houlihan lokey reports first quarter fiscal 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 first quarter ended june 30, 2022. for the first quarter ended june 30, 2022, revenues were $419 million, compared with $373 million for the first quarter ended june 30, 2021. net income was $71 million, or $1.03 per diluted share, for the first quarter ended june 30, 2022, compared with $86 million, or $1.25 per diluted share, for the first quarter ended june 30, 2021. adjusted net income for the first quarter ended june 30, 2022 was $76 million, or $1.10 per diluted share, compared with $82 million, or $1.19 per diluted share, for the first quarter ended june 30, 2021. “we had a solid first fiscal quarter and our diversified business model is performing as we would expect it to in the face of current market conditions. we are seeing a slowdown in global m&a closings; however, new business activity in both our corporate finance and financial and valuation advisory business segments remains healthy. furthermore, we are beginning to experience a meaningful increase in distressed business opportunities. regardless of the business environment we encounter in the coming quarters, we believe we are well positioned to successfully address a variety of market conditions,” stated scott beiser, chief executive officer of houlihan lokey. selected financial data (in thousands, except per share data) u.s. gaap three months ended june 30, 2022 2021 revenues $ 418,644 $ 372,722 operating expenses: employee compensation and benefits 265,735 232,304 non-compensation 75,339 32,742 operating income 77,570 107,676 other (income)/expense, net 1,749 (101 ) income before provision for income taxes 75,821 107,777 provision for income taxes 5,039 21,817 net income attributable to houlihan lokey, inc. $ 70,782 $ 85,960 diluted earnings per share $ 1.03 $ 1.25 revenues for the first quarter ended june 30, 2022, revenues were $419 million, compared with $373 million for the first quarter ended june 30, 2021. for the first quarter ended june 30, 2022, corporate finance (“cf”) revenues increased 26%, financial restructuring (“fr”) revenues decreased (20)%, and financial and valuation advisory (“fva”) revenues increased 19% when compared with the first quarter ended june 30, 2021. expenses the company’s employee compensation and benefits expenses, non-compensation expenses, and provision for income taxes during the periods presented and described below are on a gaap and an adjusted basis. u.s. gaap adjusted (non-gaap) * three months ended june 30, ($ in thousands) 2022 2021 2022 2021 expenses: employee compensation and benefits $ 265,735 $ 232,304 $ 257,467 $ 229,225 % of revenues 63.5 % 62.3 % 61.5 % 61.5 % non-compensation $ 75,339 $ 32,742 $ 59,574 $ 31,678 % of revenues 18.0 % 8.8 % 14.2 % 8.5 % provision for income taxes $ 5,039 $ 21,817 $ 25,205 $ 29,844 % of pre-tax income 6.6 % 20.2 % 24.9 % 26.7 % * 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 $266 million for the first quarter ended june 30, 2022, compared with $232 million for the first quarter ended june 30, 2021. adjusted employee compensation and benefits expenses were $257 million for the first quarter ended june 30, 2022, compared with $229 million for the first quarter ended june 30, 2021. this resulted in an adjusted compensation ratio of 61.5% for both the first quarter ended june 30, 2022 and june 30, 2021. non-compensation expenses were $75 million for the first quarter ended june 30, 2022, compared with $33 million for the first quarter ended june 30, 2021. the increase in gaap non-compensation expenses was primarily a result of the inclusion of gca’s non-compensation expenses in the first quarter ended june 30, 2022, which were not included in the first quarter ended june 30, 2021, and the amortization of intangible assets recognized in connection with the acquisition of gca. adjusted non-compensation expenses were $60 million for the first quarter ended june 30, 2022, compared with $32 million for the first quarter ended june 30, 2021. the increase in adjusted non-compensation expenses was primarily a result of the inclusion of gca’s non-compensation expenses in the first quarter ended june 30, 2022, which were not included in the first quarter ended june 30, 2021, and an increase in travel, meals, and entertainment expenses. the provision for income taxes was $5 million, representing an effective tax rate of 6.6% for the first quarter ended june 30, 2022, compared with $22 million, representing an effective tax rate of 20.2% for the first quarter ended june 30, 2021. the decrease in the company’s gaap tax rate during the first quarter ended june 30, 2022, relative to the same period in 2021, was primarily a result of the release of the provision for an uncertain tax position as a result of the successful closure of a state audit. the adjusted provision for income taxes was $25 million, representing an adjusted effective tax rate of 24.9% for the first quarter ended june 30, 2022, compared with $30 million, representing an adjusted effective tax rate of 26.7% for the first quarter ended june 30, 2021. segment reporting for the first quarter corporate finance cf revenues were $264 million for the first quarter ended june 30, 2022, compared with $210 million for the first quarter ended june 30, 2021, representing an increase of 26%. revenues increased primarily due to a significant increase in the number of closed transactions. three months ended june 30, ($ in thousands) 2022 2021 corporate finance revenues $ 263,951 $ 209,991 # of managing directors 217 127 # of closed transactions (1) 124 84 financial restructuring fr revenues decreased (20)% to $79 million for the first quarter ended june 30, 2022, compared with $99 million for the first quarter ended june 30, 2021. revenues decreased primarily due to a significant decrease in the number of closed transactions. three months ended june 30, ($ in thousands) 2022 2021 financial restructuring revenues $ 78,838 $ 98,775 # of managing directors 55 52 # of closed transactions (1) 16 24 financial and valuation advisory fva revenues increased 19% to $76 million for the first quarter ended june 30, 2022, compared with $64 million for the first quarter ended june 30, 2021. revenues increased primarily due to an increase in the average fee per fee event and the number of fee events. three months ended june 30, ($ in thousands) 2022 2021 financial and valuation advisory revenues $ 75,855 $ 63,956 # of managing directors 42 35 # of fee events (1) 876 820 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. 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 september 15, 2022, to stockholders of record as of the close of business on september 2, 2022. as of june 30, 2022, the company had $525 million of cash and cash equivalents and investment securities, and $53 million of other liabilities, loan payable to non-affiliate, 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, july 28, 2022, to discuss its first quarter fiscal 2023 results. the number to call is 1-800-263-0877 (domestic) or 1-646-828-8143 (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 july 28, 2022 through august 4, 2022, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the passcode 1239305#. 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. 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. appendix condensed consolidated balance sheet (unaudited) condensed consolidated statement 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) june 30, 2022 march 31, 2022 assets cash and cash equivalents $ 488,949 $ 833,697 restricted cash 373 373 investment securities 35,587 109,143 accounts receivable, net of allowance for credit losses 132,039 144,029 unbilled work in process, net of allowance for credit losses 108,604 104,751 deferred income taxes 101,955 95,278 property and equipment, net 52,955 52,176 operating lease right-of-use assets 165,803 171,942 goodwill 1,062,408 1,070,442 other intangible assets, net 230,944 247,333 other assets 56,247 57,646 total assets $ 2,435,864 $ 2,886,810 liabilities and stockholders' equity liabilities: accrued salaries and bonuses $ 573,472 $ 953,604 accounts payable and accrued expenses 98,644 126,190 deferred income 35,803 28,753 income taxes payable 68,409 61,266 deferred income taxes 683 789 loans payable to former shareholders 537 539 operating lease liabilities 188,039 197,091 other liabilities 52,714 74,873 total liabilities 1,018,301 1,443,105 stockholders' equity: class a common stock, $0.001 par value. authorized 1,000,000,000 shares; issued and outstanding 49,649,765 and 49,853,564 shares, respectively 50 50 class b common stock, $0.001 par value. authorized 1,000,000,000 shares; issued and outstanding 19,136,952 and 17,649,555 shares, respectively 19 18 additional paid-in capital 527,666 564,761 retained earnings 955,484 922,223 accumulated other comprehensive loss (65,656 ) (43,347 ) total stockholders’ equity 1,417,563 1,443,705 total liabilities and stockholders’ equity $ 2,435,864 $ 2,886,810 houlihan lokey, inc. and subsidiaries condensed consolidated statements of income (unaudited) three months ended june 30, (in thousands, except share and per share data) 2022 2021 revenues $ 418,644 $ 372,722 operating expenses: employee compensation and benefits 265,735 232,304 travel, meals, and entertainment 11,050 1,687 rent 11,790 10,225 depreciation and amortization 19,143 4,171 information technology and communications 10,990 6,961 professional fees 6,469 6,701 other operating expenses 15,897 2,997 total operating expenses 341,074 265,046 operating income 77,570 107,676 other (income)/expense, net 1,749 (101 ) income before provision for income taxes 75,821 107,777 provision for income taxes 5,039 21,817 net income attributable to houlihan lokey, inc. $ 70,782 $ 85,960 weighted average shares of common stock outstanding: basic 63,277,596 65,713,370 fully diluted 68,828,246 68,718,629 earnings per share basic $ 1.12 $ 1.31 fully diluted $ 1.03 $ 1.25 houlihan lokey, inc. and subsidiaries reconciliation of gaap to adjusted financial information (unaudited) three months ended june 30, (in thousands, except per share data) 2022 2021 revenues $ 418,644 $ 372,722 employee compensation and benefits expenses employee compensation and benefits expenses (gaap) $ 265,735 $ 232,304 less: acquisition related retention payments (8,268 ) (3,079 ) employee compensation and benefits expenses (adjusted) 257,467 229,225 non-compensation expenses non-compensation expenses (gaap) $ 75,339 $ 32,742 less: acquisition amortization (15,765 ) (1,064 ) non-compensation expenses (adjusted) 59,574 31,678 operating income operating income (gaap) $ 77,570 $ 107,676 plus: adjustments (1) 24,033 4,143 operating income (adjusted) 101,603 111,819 other (income)/expense, net other (income)/expense, net (gaap) $ 1,749 $ (101 ) less: warrant revaluation (1,250 ) — other (income)/expense, net (adjusted) 499 (101 ) provision for income taxes provision for income taxes (gaap) $ 5,039 $ 21,817 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 taxes 18,903 28,739 plus: resulting tax impact (2) 6,302 1,105 provision for income taxes (adjusted) 25,205 29,844 net income net income (gaap) $ 70,782 $ 85,960 (less)/plus: adjustments (3) 5,117 (3,884 ) net income (adjusted) 75,899 82,076 diluted eps (gaap) $ 1.03 $ 1.25 diluted eps (adjusted) $ 1.10 $ 1.19 the aggregate of adjustments from employee compensation and benefits and non-compensation expenses. reflects the tax impact of utilizing the adjusted effective tax rate on the non-tax adjustments identified above. consists of all adjustments identified above net of the associated tax impact.
