Houlihan Lokey Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: James Yaro - Goldman Sachs Group, Inc. - Analyst : Maybe just starting on Corporate Finance, which obviously had best-in-class trends, both year-on-year and quarter-on-quarter. As you think about the outlook from here, in the near term, is there any risk of less than normal seasonality in the calendar fourth quarter? And then longer term, how we should think about the trajectory from here? Is there anything in your view that could catalyze a notable acceleration other than perhaps the election?

Question: James Yaro - Goldman Sachs Group, Inc. - Analyst : That's very helpful. Maybe just quickly on the Prytania Solutions transaction. Anything more that you could just add on the strategic rationale, maybe where the business operates, potential synergies that you see? And anything else that we should be thinking about to help us understand the transaction?

Question: Brennan Hawken - UBS Securities LLC - Analyst : I'd like to follow up maybe on that last point on PSL. So this is the first deal, I think, that we've seen so helpful to get that flushed out a little bit. It sounds like this is going to be sitting in largely that recurring portion of the FEA. Is that right? And pro forma for this deal, what percentage of that FEA revenue do you expect to be recurring?

Question: Brennan Hawken - UBS Securities LLC - Analyst : Thank you for picking up on the subject. Okay. Scott, I think you also had some comments in your prepared remarks around restructuring and that it's looking good and will continue to look good likely into 2026. But also you touched on something that I wanted to ask about, actually, which was the idea that some of those restructuring mandates that the bankers have been working on are probably going to be showing up in capital markets revenue because you guys book based on product. So is that right? And if we adjust for that, would you be continuing to see restructuring growth here this year just, because that's probably a better indication around where the strength of the business and the resilience of the business?

Question: Brennan Hawken - UBS Securities LLC - Analyst : Okay. Got it. So the outlook on restructuring and your expectations even though you came in above that range, that sort of average range aren't changing for the year? Is it just -- quarter timing?

Question: Brennan Hawken - UBS Securities LLC - Analyst : For the restructuring activity basically, higher for longer -- .

Question: Aidan Hall - Keefe, Bruyette & Woods, Inc. - Analyst : Noted in your prepared remarks, Scott, the Capital Markets business performed well with strength in private capital, also the integration of the Triago transaction. Just wondering if there's any update as to how we should be thinking about the contribution of this business to the corporate finance line just given the recent additions? .

Question: Aidan Hall - Keefe, Bruyette & Woods, Inc. - Analyst : Okay. Got it. I appreciate the color there. Maybe just a follow-up on PSL. I understand kind of the specialty in structured credit there. Maybe how is this technology being utilized across other asset classes or verticals? And maybe you could just touch on a little more granular, the opportunity and kind of integrating that to the broader platform.

Question: Alexander Jenkins - Citizens JMP - Analyst : This is Alex Jenkins filling in for Devin Ryan. Congrats on a nice quarter. I guess just to start on the MD head count over the last four quarters or so, obviously, it went down a little bit this quarter, but you've basically been growing in the low single digits. Maybe you could just touch on the environment and competitive dynamics and how we should think about framing out senior talent going forward over the next year or so.

Question: Alexander Jenkins - Citizens JMP - Analyst : Okay. All right. I appreciate that. And then maybe a follow-up. Hopefully, this is the last question that you have to answer on the election, but obviously, you work with a lot of small businesses. Can you speak to their sentiment as we head into this election? What might happen once we get past election day? And just generally what are the puts and takes of these two administrations as it relates to activity for your business? .

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : I guess to start, I just wanted to touch on capital allocation. You guys have done quite a few deals over the past year or two. Just wanted to get a sense as to what the acquisition pipeline is looking like today, whether there is any need to take a bit of a breather here to focus on integrating all the deals that you've done recently and how that is influencing your thinking around capital return and buybacks.

Question: Brendan O'Brien - Wolfe Research, LLC - Analyst : That's great. And for my follow-up, I wanted to touch on sponsors. From the data that I can see, it's pretty apparent that there's been a bifurcation in -- default rates and liability management activity between corporate and sponsor-backed companies with sponsor defaults and liability management activity continuing to increase as corporate default rates have moderated. How much is the stress among sponsor portfolio companies has been a headwind to activity? And do we need to see these pressures abate before sponsor M&A activity like hits normalized levels?

Question: Alexander Bernstein - JPMorgan Securities LLC - Analyst : This is Alex Bernstein on for Ken. I wanted to double click on restructuring. I know you mentioned that some of the processes were taking longer to close. This quarter was strong in part due to the timing and that your pipeline going ahead continues to look attractive. I wanted to help us think through the different interest rate environment. Obviously, we've had a significant rise in rates over the past handful of years, and that's starting to abate and continuing to abate. Wanted to get your thoughts on how that impacts the rate cycle that is, the types of restructuring opportunities you're seeing. And as the pipeline continues to build today, due to those building blocks like different than they did say 18 or 12 months ago. Thanks so much.

Question: Alexander Bernstein - JPMorgan Securities LLC - Analyst : That's right. Thank you.

Question: Alexander Bernstein - JPMorgan Securities LLC - Analyst : Then just maybe one more thinking about the capital markets business and as that continues to grow. To start this year, there's, of course, a pretty significant wave of refinancing activity in the market broadly. To some extent, much of that was driven by the fact that the public markets were largely closed on the debt side, you had a lot of private credit funding that was going on to balance sheet at more expensive rates. And then a lot of that was flowing through and changing to the public markets in the past handful of quarters. Does that elevated level of activity impact what you're seeing in the Capital Markets business? And how are you looking at that going forward as that looks to be making its way through the system now broad market was?