Houlihan Lokey Inc Q4 2025 Earnings Call Transcript

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

Question: Brendan O'Brien - Wolfe Research - Analyst : I guess just to start, I understand that it's difficult to forecast near term just given the volatility, but I was hoping you could help frame how revenues have been tracking quarter-to-date and whether there's been any dispersion between some of your sponsor and strategic clients.

Question: Brendan O'Brien - Wolfe Research - Analyst : As for my follow-up, you alluded to this a bit in response to the question, but a theme that started to emerge a bit is that there's some bifurcation in the M&A market between sectors that are more or less impacted by tariffs. Just want to get a sense as to what you're seeing across the different sectors within your own business. I know you're very large in industrials, which feels like an area that might be disproportionately impacted by the tariff implementation.

Question: James Yaro - Goldman Sachs - Analyst : Scott, really excellent restructuring results again. Could you help us think through the moving parts of restructuring here in terms of liability management versus Chapter 11? And then has anything that has happened over the past few weeks affected your outlook that you've given previously, which I think was a strong multi-year restructuring cycle?

Question: James Yaro - Goldman Sachs - Analyst : Yes, yes, that makes sense. Yes, I was just referring to the fact that it was up 6% year on year. That's really, really helpful. Could I just ask another one, on a somewhat different topic, which is related to private equity firms and the fact that it appears that small private equity is having a harder time raising capital than some of the very largest sponsor firms. So you obviously have strong relationships with the smaller sponsors, but you've also increased your average deal size over the past few years. So maybe you could just talk about what you're seeing in terms of those fundraising trends and what that means for the sorts of clients that you're servicing and whether those have evolved and perhaps need to evolve going forward.

Question: Ben Rubin - UBS Equities - Analyst : I was hoping to double-click on Corporate Finance. Obviously, a great deal of optimism coming into this year around the pickup in M&A and IPOs. So I just wanted to get your general thoughts on the backdrop for cap markets. Does the outlook kind of differ as you move between the middle market, which is kind of your core business versus large-scale M&A? And then lastly, if you could just comment on how your deal backlog is looking for fiscal year '26 and whether there's been any movement there in recent weeks?

Question: Ben Rubin - UBS Equities - Analyst : Yes, I was just kind of asking how you're viewing -- does the outlook differ in terms of the middle-market M&A versus large-scale M&A as a result of the potential impact of recent volatility.

Question: Ben Rubin - UBS Equities - Analyst : Appreciate it. For my second question, obviously, you guys were active in fiscal year '25 on the strategic acquisition front. So I was just hoping if you could share any color on the state of your bolt-on pipeline as we look to fiscal year '26. And is there any areas of white space you're looking to backfill or look more attractive here in your view? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:00PM, HLI.N - Q4 2025 Houlihan Lokey Inc Earnings Call

Question: Devin Ryan - Citizens - Analyst : I want to ask a question first on just the Capital Solutions and kind of the private capital part of the business. Obviously, sponsor M&A still recovering from a pretty low level, but it just seems like there's a lot going on within that community. You have universities now starting to sell positions. LPs more broadly are looking for liquidity, and continuation funds have been really active. So just love to get a sense of kind of the sizing of that business. If you can give us anything on just kind of contribution in the quarter and what some of the biggest factors are that are driving kind of your results right now and then just kind of how you see that business growing over the next year and really kind of longer term as well, but just love to kind of just dig in a little bit given the confluence of things going on there and within that business as well.

Question: Devin Ryan - Citizens - Analyst : Okay. Appreciate that. And then a follow-up here just on restructuring and liability management. I'd love to just kind of think about the capacity to do more in that business today than in the past. So if I look at the number of managing directors, it's up, I think, 35% from COVID time. You're obviously generating strong results today, but we're not really even in a stressed market. So a lot of liability management, a little bit of kind of restructuring. But love to hear about kind of how much bigger you think the contribution could be in a more stressed macroenvironment. I'm assuming that the deals would change in size. The fees would be larger, probably more complex. But just based on the team you have today versus the past, kind of how do you think about capacity to do more from here in a, call it, more challenging economy? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:00PM, HLI.N - Q4 2025 Houlihan Lokey Inc Earnings Call

Question: Ken Worthington - JPMorgan - Analyst : We're doing a round trip around your income statement here. So a big step-up in FVA this quarter and -- after a big step-up in 3Q. So maybe -- we know there's fairness opinions in there, but walk through some of the other items that have sort of come together here to really drive that business and the results in 4Q. And then maybe bigger picture on the same topic, do you see a more dynamic policy under the new US administration as sort of a tailwind or a headwind for valuation, tax and advisory needs? I assume it's the former, not the -- I'm sorry, yes, the former, not the latter. But I thought I'd throw that one out there, too.

Question: Ryan Kenny - Morgan Stanley - Analyst : So on restructuring, are there any numbers you can share on just how much conversations or mandates have picked up since the beginning of April? Is it a wave of inbounds coming in? Is it more of a modest increase? Is it material enough to really drive the P&L over the next couple of quarters? Just how big of an increase in inbounds are you seeing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:00PM, HLI.N - Q4 2025 Houlihan Lokey Inc Earnings Call

Question: Ryan Kenny - Morgan Stanley - Analyst : All right. That's helpful. And then as a follow-up on Europe, it sounded like you're a little bit more positive on the non-US side of the business. Is that just tariff driven? Or is there anything else going on behind the surface with regulatory changes that are driving more demand for M&A outside of the US?