Houlihan Lokey : Announces an Increase in the Quarterly Dividend to $0.55 per Share - Form 8-K
May 10, 2023 at 11:12 am
Share
-Announces an Increase in the Quarterly Dividend to $0.55 per Share -
LOS ANGELES and NEW YORK - May 9, 2023 - 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
1
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.
2
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.
3
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.
4
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.
5
Contact Information
Investor Relations
212.331.8225
IR@HL.com
OR
Public Relations
212.331.8223
PR@HL.com
Appendix
Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Statements of Income (Unaudited)
Reconciliation of GAAP to Adjusted Financial Information (Unaudited)
6
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
7
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
8
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.
Houlihan Lokey Inc. published this content on 10 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 May 2023 10:11:37 UTC.
Houlihan Lokey, Inc. is a global investment bank that focuses on mergers and acquisitions, capital markets, financial restructuring, and valuation. It provides its financial professionals with an integrated platform that enables them to deliver meaningful and differentiated advice to its clients. The Company's segments include Corporate Finance (CF), Financial Restructuring (FR), and Financial and Valuation Advisory (FVA). CF provides general financial advisory services in addition to advice on mergers and acquisitions and capital markets offerings. FR segment provides advice to debtors, creditors, and other parties in interest in connection with recapitalization/deleveraging transactions implemented both through bankruptcy proceedings and through out-of-court exchanges. FVA primarily provides valuations of various assets, including companies, illiquid debt and equity securities, and intellectual property (among other assets and liabilities).