Houlihan Lokey (HLI) Q1 2025 earnings summary

Executive summary

• Revenues for Q1 FY2025 reached $514 million, up 24% year-over-year, driven by strong Corporate Finance performance and improved M&A activity.

• Net income increased 45% year-over-year to $89 million ($1.30 diluted EPS), with adjusted EPS of $1.22, up 37%.

• All three business lines—Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory—showed strength, with Corporate Finance achieving record first quarter revenues.

• Maintains a capital-light, low-leverage model with strong cash flow and disciplined expense management.

• Optimism remains for improved M&A and capital markets activity, despite macro uncertainties such as interest rates and the U.S. presidential election.

Financial highlights

• Corporate Finance revenues were $328 million, up 45% year-over-year, with 116 transactions closed and higher average transaction fees.

• Financial Restructuring revenues were $117 million, down 5% year-over-year, with 33 transactions closed and lower average fees.

• Financial and Valuation Advisory revenues were $68 million, up 4% year-over-year, with 847 fee events.

• Adjusted compensation expenses were $316 million (61.5% ratio), and adjusted non-compensation expenses were $80 million (15.6% ratio).

• Cash and cash equivalents plus investment securities totaled $485 million at quarter end.

Outlook and guidance

• Management expects continued improvement in Corporate Finance and FVA if current trends persist, with optimism for FY2025 amid improving M&A and capital markets activity.

• Financial Restructuring activity anticipated to remain elevated, supported by high interest rates and refinancing needs.

• Non-compensation expense growth expected to normalize to mid-to-high single digits, with ongoing pressure from IT and T&E investments.

• Adjusted effective tax rate for fiscal 2025 expected at the high end of the 28%-30% range.

• MD headcount growth expected to return to historical mid-to-high single digits as M&A activity recovers.