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Houlihan Lokey Reports Second Quarter Fiscal 2022 Financial Results

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Second Quarter Fiscal 2022 Revenues of $537 million
Second Quarter Fiscal 2022 Diluted EPS of $1.65
Adjusted Second Quarter Fiscal 2022 Diluted EPS of $1.71
Announces Dividend of $0.43 per Share for Third Quarter Fiscal 2022

LOS ANGELES & NEW YORK, October 28, 2021--(BUSINESS WIRE)--Houlihan Lokey, Inc. (NYSE:HLI) ("Houlihan Lokey" or the "Company") today reported financial results for its second quarter ended September 30, 2021. For the second quarter ended September 30, 2021, revenues were $537 million, compared with $276 million for the second quarter ended September 30, 2020.

Net income was $113 million, or $1.65 per diluted share, for the second quarter ended September 30, 2021, compared with $49 million, or $0.70 per diluted share, for the second quarter ended September 30, 2020. Adjusted net income for the second quarter ended September 30, 2021 was $117 million, or $1.71 per diluted share, compared with $52 million, or $0.75 per diluted share, for the second quarter ended September 30, 2020.

"We are beginning our third fiscal quarter with record year-to-date results and the completion of the largest acquisition in the firm’s history. I want to welcome our new colleagues from GCA to the Houlihan Lokey family. As a combined firm, we meaningfully increase our capabilities in the strategically important technology and technology related industry sectors, and become an even more formidable provider of investment banking services in Europe and Asia. We believe that this acquisition creates significant strategic and shareholder value for our firm, and we look forward to achieving these goals over the coming years." 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,

2021

2020

2021

2020

Revenues

$

537,272

$

275,736

$

909,994

$

486,872

Operating expenses:

Employee compensation and benefits

333,374

177,249

565,678

314,370

Non-compensation

46,579

31,612

79,321

63,037

Operating income

157,319

66,875

264,995

109,465

Other (income)/expense, net

853

(196

)

752

(1,357

)

Income before provision for income taxes

156,466

67,071

264,243

110,822

Provision for income taxes

43,583

18,281

65,400

15,932

Net income attributable to Houlihan Lokey, Inc.

$

112,883

$

48,790

$

198,843

$

94,890

Diluted earnings per share

$

1.65

$

0.70

$

2.90

$

1.39

Revenues

For the second quarter ended September 30, 2021, revenues were $537 million, compared with $276 million for the second quarter ended September 30, 2020. For the second quarter ended September 30, 2021, Corporate Finance ("CF") revenues increased 259%, Financial Restructuring ("FR") revenues decreased (34)%, and Financial and Valuation Advisory ("FVA") revenues increased 55% when compared with the second quarter ended September 30, 2020.

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 September 30,

($ in thousands)

2021

2020

2021

2020

Expenses:

Employee compensation and benefits

$

333,374

$

177,249

$

330,421

$

175,090

% of Revenues

62.0

%

64.3

%

61.5

%

63.5

%

Non-compensation

$

46,579

$

31,612

$

43,327

$

28,730

% of Revenues

8.7

%

11.5

%

8.1

%

10.4

%

Provision for Income Taxes

$

43,583

$

18,281

$

45,311

$

19,655

% of Pre-Tax Income

27.9

%

27.3

%

27.9

%

27.3

%

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) *

Six Months Ended September 30,

($ in thousands)

2021

2020

2021

2020

Expenses:

Employee compensation and benefits

$

565,678

$

314,370

$

559,646

$

307,050

% of Revenues

62.2

%

64.6

%

61.5

%

63.1

%

Non-compensation

$

79,321

$

63,037

$

75,005

$

58,739

% of Revenues

8.7

%

12.9

%

8.2

%

12.1

%

Provision for Income Taxes

$

65,400

$

15,932

$

75,155

$

32,376

% of Pre-Tax Income

24.7

%

14.4

%

27.4

%

26.4

%

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 $333 million for the second quarter ended September 30, 2021, compared with $177 million for the second quarter ended September 30, 2020. Adjusted employee compensation and benefits expenses were $330 million for the second quarter ended September 30, 2021, compared with $175 million for the second quarter ended September 30, 2020. This resulted in an adjusted compensation ratio of 61.5% for the second quarter ended September 30, 2021, versus 63.5% for the second quarter ended September 30, 2020. The increase in GAAP and adjusted employee compensation and benefits expenses was primarily a result of an increase in fee revenues for the quarter when compared with the same quarter last year.

Non-compensation expenses were $47 million for the second quarter ended September 30, 2021, compared with $32 million for the second quarter ended September 30, 2020. Adjusted non-compensation expenses were $43 million for the second quarter ended September 30, 2021, compared with $29 million for the second quarter ended September 30, 2020. The increase in GAAP and adjusted non-compensation expenses was primarily a result of an increase in other operating expenses and travel, meals, and entertainment expenses.

The provision for income taxes was $44 million, representing an effective tax rate of 27.9% for the second quarter ended September 30, 2021, compared with $18 million, representing an effective tax rate of 27.3% for the second quarter ended September 30, 2020. The adjusted provision for income taxes was $45 million, representing an adjusted effective tax rate of 27.9% for the second quarter ended September 30, 2021, compared with $20 million, representing an adjusted effective tax rate of 27.3% for the second quarter ended September 30, 2020.

Segment Reporting for the Second Fiscal Quarter

Corporate Finance

CF revenues were $388 million for the second quarter ended September 30, 2021, compared with $108 million for the second quarter ended September 30, 2020, representing an increase of 259%. Revenues increased primarily due to a significant increase in the number of closed transactions and the average transaction fee on closed transactions.

Three Months Ended September 30,

Six Months Ended September 30,

($ in thousands)

2021

2020

2021

2020

Corporate Finance

Revenues

$

388,410

$

108,049

$

598,401

$

196,020

# of Managing Directors

126

125

126

125

# of Closed transactions (1)

134

53

218

88

Financial Restructuring

FR revenues decreased (34)% to $83 million for the second quarter ended September 30, 2021, compared with $125 million for the second quarter ended September 30, 2020. 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)

2021

2020

2021

2020

Financial Restructuring

Revenues

$

83,184

$

125,391

$

181,959

$

214,011

# of Managing Directors

51

47

51

47

# of Closed transactions (1)

20

30

44

59

Financial and Valuation Advisory

FVA revenues increased 55% to $66 million for the second quarter ended September 30, 2021, compared with $42 million for the second quarter ended September 30, 2020. 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)

2021

2020

2021

2020

Financial and Valuation Advisory

Revenues

$

65,678

$

42,296

$

129,634

$

76,841

# of Managing Directors

37

31

37

31

# of Fee Events (1)

806

539

1,242

798

  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.

Balance Sheet and Capital Allocation

The Board of Directors of the Company declared a regular quarterly cash dividend of $0.43 per share of Class A and Class B common stock. The dividend will be payable on December 15, 2021 to stockholders of record as of the close of business on December 2, 2021.

The Board of Directors of the Company increased the size of its share repurchase program from $200 million to $250 million.

As of September 30, 2021, the Company had $963 million of cash and cash equivalents and investment securities, and $65 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 28, 2021, to discuss its second quarter fiscal 2022 results. The number to call is 1-877-407-4018 (domestic) or 1-201-689-8471 (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 28, 2021 through November 4, 2021, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the passcode 13724237#. 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. 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 valuation. 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 M&A advisor for the past six consecutive years in the U.S., the No. 1 global restructuring advisor for the past seven 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)

September 30, 2021

March 31, 2021

Assets

Cash and cash equivalents

$

923,009

$

846,851

Restricted cash

373

373

Investment securities

40,425

208,618

Accounts receivable, net of allowance for credit losses

127,274

108,409

Unbilled work in process, net of allowance for credit losses

115,732

118,115

Deferred income taxes

36,401

28,332

Property and equipment, net

43,295

46,370

Operating lease right-of-use assets

143,341

152,031

Goodwill and other intangibles, net

883,964

866,221

Other assets

43,015

50,747

Total assets

$

2,356,829

$

2,426,067

Liabilities and Stockholders' Equity

Liabilities:

Accrued salaries and bonuses

$

577,698

$

648,399

Accounts payable and accrued expenses

60,273

67,468

Deferred income

26,923

27,868

Income taxes payable

24,540

68,339

Deferred income taxes

45

52

Loans payable to former shareholders

711

818

Operating lease liabilities

164,209

174,516

Other liabilities

64,693

55,046

Total liabilities

919,092

1,042,506

Stockholders' equity:

Class A common stock, $0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 50,927,005 and 51,245,442 shares, respectively

51

51

Class B common stock, $0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 17,348,305 and 16,951,696 shares, respectively

17

17

Additional paid-in capital

720,579

803,573

Retained earnings

741,678

600,096

Accumulated other comprehensive (loss)

(24,588

)

(20,176

)

Total stockholders' equity

1,437,737

1,383,561

Total liabilities and stockholders' equity

$

2,356,829

$

2,426,067

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)

2021

2020

2021

2020

Revenues

$

537,272

$

275,736

$

909,994

$

486,872

Operating expenses:

Employee compensation and benefits

333,374

177,249

565,678

314,370

Travel, meals, and entertainment

4,687

964

6,374

3,078

Rent

9,050

10,301

19,275

19,924

Depreciation and amortization

4,344

3,670

8,515

7,342

Information technology and communications

8,858

6,868

15,819

13,251

Professional fees

6,915

5,227

13,616

10,234

Other operating expenses

12,725

4,582

15,722

9,208

Total operating expenses

379,953

208,861

644,999

377,407

Operating income

157,319

66,875

264,995

109,465

Other (income)/expense, net

853

(196

)

752

(1,357

)

Income before provision for income taxes

156,466

67,071

264,243

110,822

Provision for income taxes

43,583

18,281

65,400

15,932

Net income attributable to Houlihan Lokey, Inc.

$

112,883

$

48,790

$

198,843

$

94,890

Weighted average shares of common stock outstanding:

Basic

65,156,968

66,787,832

65,433,649

65,244,611

Fully diluted

68,566,127

69,615,060

68,641,962

68,214,505

Earnings per share

Basic

$

1.73

$

0.73

$

3.04

$

1.45

Fully diluted

$

1.65

$

0.70

$

2.90

$

1.39

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)

2021

2020

2021

2020

Revenues

$

537,272

$

275,736

$

909,994

$

486,872

Employee compensation and benefits expenses

Employee compensation and benefits expenses (GAAP)

$

333,374

$

177,249

$

565,678

$

314,370

(Less)/plus: Acquisition related retention payments

(2,953

)

(2,159

)

(6,032

)

(7,320

)

Employee compensation and benefits expenses (adjusted)

330,421

175,090

559,646

307,050

Non-compensation expenses

Non-compensation expenses (GAAP)

$

46,579

$

31,612

$

79,321

$

63,037

(Less)/plus: Secondary offering related costs

(418

)

(Less)/plus: Acquisition related costs

(1,640

)

(1,258

)

(1,640

)

(1,258

)

(Less)/plus: Acquisition amortization

(1,612

)

(888

)

(2,676

)

(1,886

)

(Less)/plus: Oracle ERP implementation

(736

)

(736

)

Non-compensation expenses (adjusted)

43,327

28,730

75,005

58,739

Operating income

Operating income (GAAP)

$

157,319

$

66,875

$

264,995

$

109,465

(Less)/plus: Adjustments (1)

6,205

5,041

10,348

11,618

Operating income (adjusted)

163,524

71,916

275,343

121,083

Other (income)/expense, net

Other (income)/expense, net (GAAP)

$

853

$

(196

)

$

752

$

(1,357

)

Other (income)/expense, net (adjusted)

853

(196

)

752

(1,357

)

Provision/(benefit) for income taxes

Provision/(benefit) for income taxes (GAAP)

$

43,583

$

18,281

$

65,400

$

15,932

(Less)/plus: Impact of the excess tax benefit for stock vesting

6,922

13,408

Adjusted provision/(benefit) for income taxes

43,583

18,281

72,322

29,340

(Less)/plus: Resulting tax impact (2)

1,728

1,374

2,833

3,036

Provision/(benefit) for income taxes (adjusted)

45,311

19,655

75,155

32,376

Net income

Net income (GAAP)

$

112,883

$

48,790

$

198,843

$

94,890

(Less)/plus: adjustments (3)

4,477

3,667

593

(4,826

)

Net income (adjusted)

117,360

52,457

199,436

90,064

Diluted EPS (GAAP)

$

1.65

$

0.70

$

2.90

$

1.39

Diluted EPS (adjusted)

$

1.71

$

0.75

$

2.91

$

1.32

  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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006080/en/

Contacts

Investor Relations
212.331.8225
IR@HL.com

OR

Public Relations
212.331.8223
PR@HL.com

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