Earnings call transcript: Houlihan Lokey beats Q3 2025 forecasts

Houlihan Lokey Inc (NYSE:HLI). reported strong financial results for the third quarter of fiscal 2025, with earnings per share (EPS) of $1.64 surpassing analyst expectations of $1.49. The company’s revenue reached $634 million, exceeding the forecast of $591.45 million. According to InvestingPro data, the company currently appears overvalued based on its Fair Value analysis. Despite these impressive results, the stock saw a slight decline of 0.43% in after-hours trading, closing at $179.80 compared to $180.58 before the earnings announcement.

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Key Takeaways

• EPS of $1.64 exceeded forecasts by 10.1%.
• Revenue grew by 24% year-over-year to $634 million.
• Stock price dipped 0.43% in after-hours trading.
• Strong performance in Corporate Finance segment with a 36% increase.
• Positive outlook for fiscal 2026 with stable market conditions.

Company Performance

Houlihan Lokey demonstrated robust growth in the third quarter, with a notable 24% increase in revenue compared to the previous year. The Corporate Finance segment was a significant driver, showing a 36% rise in revenues. Overall, the company closed 170 Corporate Finance transactions, up from 117 in the same period last year, indicating a strong market position in mid-cap investment banking.

Financial Highlights

• Revenue: $634 million, up 24% year-over-year.
• Earnings per share: $1.64, a 34% increase year-over-year.
• Corporate Finance revenue: $422 million, up 36%.
• Financial Restructuring revenue: $131 million, up 2%.
• Financial and Valuation Advisory revenue: $82 million, up 14%.

Earnings vs. Forecast

Houlihan Lokey exceeded analyst expectations with an EPS of $1.64 compared to the forecast of $1.49, marking a 10.1% positive surprise. Revenue also surpassed expectations, reaching $634 million against a forecast of $591.45 million. This performance continues the company’s trend of exceeding market predictions in recent quarters.

Market Reaction

Despite the positive earnings surprise, Houlihan Lokey’s stock experienced a slight decline of 0.43% in after-hours trading, closing at $179.80. This movement contrasts with the broader market trend and may reflect investor caution or profit-taking following the earnings announcement. The stock remains near its 52-week high of $192.10.

Outlook & Guidance

Looking ahead, Houlihan Lokey maintains a positive outlook for fiscal 2026, expecting continued improvements in the M&A markets. The company anticipates similar seasonal patterns to previous years and has reaffirmed its full-year adjusted effective tax rate guidance of 31-32%.

Executive Commentary

CEO Scott Adelson expressed satisfaction with the company’s performance, stating, "We are all pleased with our results for the quarter as well as with our performance year to date." Adelson also highlighted the company’s strategic approach to acquisitions, saying, "We have better sonar today than we did before in identifying where the fish are." CFO Lindsay (NYSE:LNN) Alley noted the resilience in restructuring revenue, emphasizing, "We love the fact that we’re not seeing restructuring revenue decline."

Risks and Challenges

• Potential volatility in interest rates could impact market stability.
• Economic uncertainties may affect M&A activity.
• Competition in the mid-cap investment banking sector remains intense.
• Dependence on market conditions for restructuring and advisory services.
• Integration challenges with recent acquisitions, such as Waller Helms.

Q&A

During the earnings call, analysts focused on the recovery of the M&A market, the outlook for restructuring, and the potential for future acquisitions. Discussions also touched on geographic market conditions and the expansion of the private capital solutions business.

Full transcript - Houlihan Lokey Inc (HLI) Q3 2025:

Conference Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Houlihan Lokey’s Third Quarter Fiscal Year 2025 Earnings Conference Call. Please note that this conference call is being recorded today, January 28, 2025. I will now turn the call over to the company.

Christopher, Unspecified Corporate Representative, Houlihan Lokey: Thank you, operator, and hello, everyone. By now, everyone should have access to our Q3 fiscal year 2025 earnings release, which can be found on the Houlihan Lokey website at www.hl.com in the Investor Relations section. Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward looking statements. These forward looking statements, which are usually identified by use of words such as will, expect, anticipate, should or other similar phrases, are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and therefore, you should exercise caution when interpreting and relying upon them.

We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. We encourage investors to review our regulatory filings, including the Form 10 Q for the quarter ended December 31, 2024, when it is filed with the SEC. During today’s call, we will discuss non GAAP financial measures, which we believe can be useful in evaluating the company’s financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our earnings release and our investor presentation on the hl.com website.

Hosting the call today, we have Scott Adelson, Houlihan Lokey’s Chief Executive Officer and Lindsay Alley, Chief Financial Officer. They will provide some opening remarks and then we will open the call to questions. With that, I’ll turn the call over to Scott.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Thank you, Christopher. Welcome everyone to our Q3 fiscal 2025 earnings call. We ended the quarter with revenues of $634,000,000 and adjusted earnings per share of $1.64 Revenues were up 24% and adjusted earnings per share were up 34% compared to the same period last year. We are all pleased with our results for the quarter as well as with our performance year to date and we have entered our last fiscal quarter with continued momentum across all three of our business lines. Corporate Finance and Financial Valuation Advisory continue to benefit from improvements in the M and A and financing markets, while Financial Restructuring had another solid quarter as it continues to benefit from record leverage and persistently higher interest rates.

We remain optimistic about the balance of this fiscal year as we believe the markets will continue to improve given a stronger macro environment. Interest rates and inflation appear stable and the results of the U. S. Election have improved confidence. Looking at each of our segments, Corporate Finance produced $422,000,000 of revenue for the quarter, representing a 36% increase over last year’s Q3.

Key metrics for our Corporate Finance business, including close rates, time to close transactions, new business generation and transaction volume continue to improve when compared with the same period last year. Growth in our Corporate Finance business is widespread, occurring across geographies, industries and driven by both strategic and private equity clients. Financial Restructuring produced $131,000,000 of revenue for the Q3, a 2% increase versus the same period last year. During the quarter, we continue to generate enough new business to maintain our backlog and provide us with continued confidence that this restructuring market will remain elevated for longer than we anticipated a year ago. Financial and valuation advisory produced $82,000,000 of revenue for the Q3, a 14% increase versus the Q3 last year, an important result of the improving M and A climate.

FBA saw strength across both its cyclical and non cyclical businesses and many of the same factors affecting the optimism for our Corporate Finance business are present in our FBA business as well. Regarding acquisitions, we closed our acquisition of Waller Helms in early December and our new partners are off to a strong start contributing to our results. We had 17 new managing directors in the quarter, 14 through acquisitions and 3 through individual hires. As we look beyond our fiscal Q4, our outlook for fiscal 2026 is positive, improving M and A market sentiment, an increase in private equity activity and continued strength in our restructuring business are all encouraging indicators for continued growth. With that, I will turn the call over to Lindsay.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Thank you, Scott. Revenues in Corporate Finance were $422,000,000 for the quarter, up 36% compared to the same quarter last year. We closed 170 transactions this quarter, up from 117 in the same period last year, but our average transaction fee modestly decreased as a result of transaction mix. Consistent with many past years, our 3rd fiscal quarter was our strongest quarter year to date in Corporate Finance. Financial restructuring revenues were $131,000,000 for the quarter, a 2% increase versus the same period last year.

We closed 41 transactions this quarter compared to 30 in the same quarter last year, but our average transaction fee on closed deals decreased again as a result of transaction mix. For Financial and Valuation Advisory, revenues were $82,000,000 for the quarter, a 14% increase from the same period last year. We had 1,005 fee events during the quarter compared to 926 in the same period last year. Turning to expenses. Our adjusted compensation expenses were $390,000,000 for the quarter versus $314,000,000 for the same quarter last year.

Our only adjustment was $13,000,000 for deferred retention payments related to certain acquisitions. Our adjusted compensation expense ratio for the Q3 in both fiscal 2025 and fiscal 2024 was 61.5%. We expect to maintain our long term target of 61.5 percent for this ratio. Our adjusted non compensation expenses increased slightly to $83,000,000 for the quarter compared to $82,000,000 for the same period last year. This resulted in an adjusted non compensation expense ratio of 13.1 percent for the quarter compared to 16.1% for the same period last year.

On a per employee basis, our adjusted non compensation expense was $31,000 for this quarter consistent with the same quarter last year. For the quarter, we adjusted out of non compensation expenses $4,100,000 in non cash acquisition related amortization and $4,700,000 in integration and acquisition related costs. This included transaction costs associated with our acquisitions of Waller Helms and Pertenius Solutions as well as a real estate impairment charge associated with Waller Helms. We also had an adjustment of $3,600,000 pertaining to professional fees associated with streamlining our global organizational structure, also referred to as Project Solo. Our adjusted other income and expense produced income of approximately $9,000,000 versus income of approximately $6,000,000 in the same period last year.

The improvement in this category was primarily due to an increase in interest income. Our adjusted effective tax rate for the quarter was 33.3% compared to 30.3% for the same quarter last year. The increase in our adjusted effective tax rate was primarily a result of timing issues. We expect our adjusted effective tax rate for the full fiscal year to settle between 31% 32%. Turning to the balance sheet.

As of quarter end, we had approximately $903,000,000 of unrestricted cash and equivalents and investment securities. We did not repurchase any shares during the quarter. As would be expected this time of year, a significant portion of the unrestricted cash will be used to pay our cash bonuses in May for fiscal year 2025. And with that, operator, we can open the line for questions. Thank

Conference Operator: you. We will now begin the question and answer session. And your first question today will be from Brennan Hawken with UBS. Please go ahead.

Brennan Hawken, Analyst, UBS: Good afternoon, Scott, Lindsay. How are you?

Unidentified Speaker: Hey, Brennan.

Brennan Hawken, Analyst, UBS: It sounds like from your comments and your tone here in the prepared remarks that we’ve seen continued strengthening in the Corporate Finance environment. Is there a period or a historical context that you could point to help us think about how we should be refining and thinking about the potential for revenue growth in that business moving forward?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: I think when it is very much following what we have anticipated, which was going to occur, which is really just this steady progress of things improving and at the same time seeing a strong restructuring environment are certainly elevated. And that is the same thing we see today and that really nothing has changed from the last few quarters And at least to date, that has been a correct way to think about it.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Yes. I mean, I’m not sure you need to change your thinking, Bret. And I’d say, if you go back to Q1 on a consolidated basis, we grew roughly 23%, 24%. In Q2, we grew roughly 23% and Q3, we grew roughly 24%. I mean, there is a there is not an acceleration.

It is just a continuation of improvements versus the same quarters last year.

Brennan Hawken, Analyst, UBS: Got it. Thanks for that. And then when we think about the typical seasonality that you see in Corporate Finance, normally the back half of your fiscal year is the strongest. And we haven’t really seen a sort of typical cycle here recently. But is it normally fair to think about the March quarter being in a similar ballpark to the December quarter?

Is there upside? Is it a little slower because you don’t have the year end? How would you think about those dynamics? I would think it would be pretty constructive given how you said that the confidence is improving on the back of the recent election, but just wanted to

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: flesh that out a bit. Yes. Look, I think without getting into the March quarter, I will say fiscal 2024 had pretty reasonable seasonality to the business. We were roughly 46% first half of the year, 54% second half of the year. That’s if you look back over 5, 6, 7 years, that’s pretty good average, right?

We’re the no reason to believe we’re not going to be kind of in that same sort of seasonality that we’ve seen in the past this year as well. Now, obviously, I think all things can change, there’s some macroeconomic pressures, but we do seem to be seeing the same seasonality this year that we saw last year and in previous years. And so that’s not a bad historical is not a bad proxy.

Brennan Hawken, Analyst, UBS: Okay, great. Thanks a lot. Appreciate it.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Thanks, Brennan.

Conference Operator: And your next question today will comes from James Yaro with Goldman Sachs. Please go ahead.

Unidentified Speaker: Good afternoon and thanks for taking my questions. Starting with restructuring

James Yaro, Analyst, Goldman Sachs: Hey, guys.

Unidentified Speaker: So restructuring continues to surprise the upside. Maybe you could just comment on the likelihood that it could actually grow in calendar 2025, especially given that rates appear to remain higher for longer and the long end steepening we’ve seen recently?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Yes. I mean, look, we’ve been saying for a while and actually in the prepared remarks that it is performing better than we would have thought of a year ago. And it continues to be elevated. Interest rates remain elevated and we expect that to continue. What that nets for actual numbers depends on an awful lot of factors that are kind of beyond our ability to completely predict.

Unidentified Speaker: Okay. Very clear. So we’re now entering another year of, I think, as you described, sort of a steadily improving, clearly not snapping back M and A environment. And so that probably has some negative ramifications on smaller competitors given the deal environment has been somewhat weak for a number of years now. So if activity continues to improve at this slow and steady pace, how does that impact your hiring and acquiring Backdrop?

Does that mean that you should be able to continue to potentially do more deals? And I guess your outlook for acquisitions and hiring for the next 12 months, let’s say?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Yes. I mean, I think a couple of things. Clearly, again, things are improving, right? I don’t want that to get lost in that statement. But we have kind of good markets and bad, I would say, continue to find opportunities to both acquire talent and companies.

And I think that we are a believer that virtually regardless of markets that that will continue.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Yes. And I would say, James, look, I think from a market share gain standpoint, I’m not sure that market is any different than it’s been. Our sense is that middle market investment banking firms are performing okay, not just Houlihan. And we’ll know better after some of our peers go who focus on the middle market. But our sense is in the markets where we perform, people are performing pretty well.

The markets are coming back, and we do expect to take market share, but not any different than sort of previous M and A recession that we just came through.

Unidentified Speaker: Great. That’s very clear. Thank you.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Thanks, Jeff. Our pleasure.

Conference Operator: And your next question today will come from Michael Brown with Wells Fargo (NYSE:WFC). Please go ahead.

Michael Brown, Analyst, Wells Fargo: Great. Good afternoon, Scott and Lindsay. I wanted to ask a little bit more about the M and A outlook here. And as we have the administration change here, I tend to think that deregulation, less deal scrutiny will be a positive for the large cap sponsor or not sponsor, large cap strategic M and A activity. But what are kind of the potential knock on impacts here for the small mid market portion of the market for M and A activity?

And then I guess tariffs of course add some uncertainty here when we start to think about some of the international M and A activity and things like cross border. I’d be interested to hear about how that could impact your business or is again is it the size of deals you focus on somewhat more immune? Thank you.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Yes, happy to. So a couple of things. On just the overall environment, people being more receptive to M and A, I think is just overall helpful. Just people’s mindsets thinking about it more is helpful regardless of size. Obviously, we have not been as negatively impacted by regulatory environment as some of our brethren that are focused on large cap transactions.

Having said that, it does just create a dampening on the market overall. The return

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: of

Scott Adelson, Chief Executive Officer, Houlihan Lokey: a far overused term, but the animal instincts of everybody wanting to get back to doing deals is something that it is certainly noticeable. When you take a look at whether it be tariffs or threats of tariffs or any other elements of the landscape that I think everybody expect to change from what they have been. I think there will obviously be a number of winners

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: in that and there will be some losers.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: And I think one of the benefits we have is in the diversity across industries, across geographies, we really get the benefit of that portfolio effect when those changes occur.

Michael Brown, Analyst, Wells Fargo: Okay, great. And then just to switch gears, Lindsay, the adjusted non comp expense has been in that low $80,000,000 range. Any comment on or maybe guidance for the non comp expense for next quarter? Like what’s the right range we should think about?

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Yes. Look, I have been saying sort of high single digits. I think this quarter, we had some sort of timing benefits and a couple of other things went our way. I still expect that sort of same high single digit growth applying to Q4. So really Q4 this year versus Q4 last year.

I just think we had some benefits this quarter that brought it down a little bit from what I had suggested maybe in that last quarter. So I’m still back on that same theme.

Michael Brown, Analyst, Wells Fargo: Okay, great. Thank you both.

Conference Operator: And your next question today will come from Ken Worthington with JPMorgan. Please go ahead.

James Yaro, Analyst, Goldman Sachs: Hi, good afternoon. Thanks for taking the question. I wanted to talk about the deal environment from the perspective of Houlihan as an acquirer. Your stock is near the highs, the funding environment is quite good. Is now a good time for Houlihan to be a buyer?

And what sort of feedback are you getting from potential targets and partners? And given all the puts and takes, is it reasonable to think that Houlihan will be more or less or similarly active in calendar 2025 versus what you were in 2024?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: So we, if anything, have just gotten, I would say, more organized in how we think about our acquisitions and at any point in time are in dialogue with an array of parties. When those hit, when somebody is interested in doing a transaction, markets are a portion of it. But again, these are people businesses and it has a lot more to do with the individuals than anything else quite honestly. And so everything you said is factual, but I don’t know that that necessarily drives more or less deals. I think that our view is that there are opportunities out there and we will continue to go after them.

The timing of them, don’t know when they will happen. So let’s try it

James Yaro, Analyst, Goldman Sachs: in a fishing analogy. Do you have more lines in the water now? Technology, you don’t know if a fish is going to bite or not depends on, as you said, a lot of different factors. But is there is there more dialogue happening now? Or is it just continuous?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Very good question. I would say we have better sonar today than we did before in identifying where the fish are.

James Yaro, Analyst, Goldman Sachs: Perfect. Okay. Love the analogy. And then maybe in terms of client dialogue and corporate finance, thinking about this from a geography perspective, curious to hear if you’re seeing engagement differ by region at all. I’ll try it back to Trump and elections and so on.

But are you getting different engagement and dialogue North America versus Europe versus Asia? Like anything that strikes you as interesting or curious that’s worth calling out?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: It’s really as I said in my prepared comments, it really is across the board. There are pockets, if you will, that at a point in time do feel a little bit like they’re picking up faster. But they but each of those regions broadly defined is really seeing a pickup and both in, as we said, private equity and strategic support. It is an all around pickup. There are pockets that are a little slower or moving a little faster.

But when you look at them in those territories, it is fair to say it’s picking up everywhere.

James Yaro, Analyst, Goldman Sachs: Okay, great. Thank you much.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Thanks, Ken.

Conference Operator: And your next question today will come from Devin Ryan with Citizens JMP. Please go ahead.

Devin Ryan, Analyst, Citizens JMP: Great. Hi, Scott. Hi, Lindsay. How are you?

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Hey, Gavin. Hey, Kevin. Yes.

Devin Ryan, Analyst, Citizens JMP: A question on just deal size and the evolution there. In the presentation, one of the drivers of corporate finance growth that you guys have highlighted is just increasing deal size and deal fees. And so let me just flesh that out a bit more and really kind of get a sense of how much is a concerted effort around winning larger deals versus just how much is that natural progression of your private equity firm is buying a company and then selling it a a few years later, it’s twice the size, so there’s just that natural growth? Or is there anything else that Houlihan Lokey is doing here to drive higher fees per deal?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Combination of all of the above that you mentioned. But I mean, simple answer is we are squarely focused on the mid cap space, period. Having said that, within that, we do continue to see year over year just a steady increase in both deal size and for the most part, the size as well correspondingly. And that has I’m not going to say it’s perfectly linear, but that has been directionally correct for a very long time. And we don’t really expect that to change.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: And slightly different answer for restructuring and FDA, but for COVID finance, which I think was the sort of focus of your question,

Scott Adelson, Chief Executive Officer, Houlihan Lokey: I think Scott said it.

Devin Ryan, Analyst, Citizens JMP: Got it. Thanks guys. And then just a follow-up on the private capital financing efforts, obviously some news of more hires there recently, you guys continue to invest. So love to just get an update on kind of the optimism for that part of the business and expectations there over the next year? Thanks.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Yes. I mean, obviously, that is an area that is a newer, hotter area. There’s no doubt it has been for a while now. But I mean, we believe it’s here to stay and really as part of a greater set of capital solutions for sponsors, just having a broader set of alternatives than they would have had 5 years ago on what to do with and how they run their businesses. And we think that we’re well positioned to continue to take advantage of that.

Devin Ryan, Analyst, Citizens JMP: All right. Thanks so much. Appreciate it.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Thank you, Kevin.

Conference Operator: And your next question today will come from Brendan O’Brien with Wolfe Research. Please go ahead.

Christopher, Unspecified Corporate Representative, Houlihan Lokey0: Good afternoon and thanks for taking my questions. I guess to start, just to follow-up on the Capital Markets business. 1 of the bold frac at banks announced that they’re creating their own private capital solutions group that seems to be going after a similar TAM as you guys. I just want to get a sense as to whether you see increased competition in the space and whether that could pose a threat to the growth outlook for the business. And also if you could give some color on the size of companies that you’re working with, I would imagine that competition for these types of services will be much further down much lower the further down market you move.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Yes. To answer your question on the Capital Markets side, there is not a business we’re in that doesn’t have competition. And so we understand that and our capital markets business is absolutely no different. We actually do think that the growth in private capital has been so significant that we’ll obviously continue to be more players in the space. Obviously, there needs to be just given the growth in the ecosystem overall.

We feel very good about our ability to continue to grow that business meaningfully in the ears to come.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Yes. I’d say if the article you’re referring to is Goldman kind of creating solutions business, Capital Solutions business. We kind of look at the Capital Markets business very similar to our M and A business. We’re going to have competition, but that competition is likely going to come from other mid cap companies. Coleman’s Capital Solutions business is more likely going to compete with the Evercore’s of the world, the Molasses of the world, some of our publicly traded peers.

And yes, I’m sure they’ll dip down into our business and we’ll increase some sizes to dip into their business. But in general, I think we’re staying in different playing fields and not just for M and A, but probably our Capital Solutions business as well.

Christopher, Unspecified Corporate Representative, Houlihan Lokey0: That’s helpful color. And then for my follow-up, I just wanted to touch on the restructuring outlook. There’s been a That’s helpful color. And then for my follow-up, I just wanted to touch on the restructuring outlook. There’s been a significant divergence in traditional restructuring and liability management activity this cycle.

However, historically speaking, anywhere from 15% to as high as I think 35% of companies that undergo LME transaction end up filing Chapter 11 within the next 2 years. How much does this dynamic inform your optimistic outlook for restructuring? And how do you expect the mix between traditional restructuring versus liability management to evolve over time?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Yes. I mean, you are correct in the information that you stated and that obviously does factor in. But that’s just a piece of it. At the end of the day, it just is if you look at where interest rates are, if you the number of sick balance sheets out there as a result of rapidly increasing interest rates for a higher period of time than perhaps people would have anticipated or some would have hoped for, is really contributing to just more of those sick balance sheets needing to be taken care of. And that manifests itself in various different ways.

And as we look at it and we just look at the level of inquiry that we have, we continue to feel confident that we’ll be higher for longer.

Christopher, Unspecified Corporate Representative, Houlihan Lokey0: Thank you for taking my questions.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: Thank you. Pleasure.

Conference Operator: And your next question today will come from Ryan Kenny with Morgan Stanley (NYSE:MS). Please go ahead.

Christopher, Unspecified Corporate Representative, Houlihan Lokey1: Hi, thanks for taking my question. Just wanted to dig in a little bit more on your conversations with sponsor clients in the Corporate Finance business. Is that pickup also more gradual like what you’re seeing broad based across M and A? Or should we expect some more outsized momentum on the sponsor side?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Yes. Certainly, the level of sponsor activity has picked up, no doubt about it. And it is they’re both picked up materially. I do think you’re correct. The sponsor activity and just the sponsor dialogue and sentiment does feel like it has picked up even more.

And we are feeling good about where that’s heading.

Christopher, Unspecified Corporate Representative, Houlihan Lokey1: Thank you.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Thanks.

Conference Operator: And your next question today will come from Jim Mitchell with Seaport Global Securities. Please go ahead.

Christopher, Unspecified Corporate Representative, Houlihan Lokey1: Hey, good afternoon. Scott, I think on the last call you talked about transaction velocity improving, but not back to pre pandemic levels. It sounds like it got a little better this quarter. So are we getting much closer or getting back to more traditional velocity levels or still a ways away?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: We’re still we’re not there yet, right? I mean, it is continuing to improve, just as I said, but we’re not there yet.

Christopher, Unspecified Corporate Representative, Houlihan Lokey1: And so what gets it there? Is it it seems like financing is pretty wide open. What is causing still this hesitation or slower actions?

Unidentified Speaker: Yes. I don’t want to

Scott Adelson, Chief Executive Officer, Houlihan Lokey: be cavalier about it, but time, right? It just takes time.

Christopher, Unspecified Corporate Representative, Houlihan Lokey1: Our bid ask spread is still wide relative to where in terms of expectations?

Scott Adelson, Chief Executive Officer, Houlihan Lokey: That’s not really it. That’s not really it. I mean, as we’ve talked about before, it is still people are getting back in the water. They’re not running into the water.

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: And that as to keep

Scott Adelson, Chief Executive Officer, Houlihan Lokey: with our water based examples. And because of that over time, I think that you will just see that in history, I’d say that will continue to speed up, but it just takes time.

Christopher, Unspecified Corporate Representative, Houlihan Lokey1: Right. Okay. And just one follow-up on restructuring. Is it is the story here higher for longer rates and everything else you’ve described that sort of keeps these elevated levels going, but maybe incrementally tougher to grow? Or do you still feel like in the next couple of years, you can still see some decent upward trajectory in revenues and restructuring?

Lindsay Alley, Chief Financial Officer, Houlihan Lokey: I think look, I think the former. I think it’s so long as the M and A markets are robust, it’s just hard to grow a restructuring business. Unless you start to see pressure on interest rates in higher direct in sort of higher versus pressure lower. It’s just so I think we feel comfortable saying higher for longer. I don’t think we’re comfortable saying that potentially in this market could be incremental growth.

Now if the market changes, obviously, then you’ll start to see pressure on M and A and you’ll see some upward pressure on financial restructuring. But in this current market condition, assuming that it continues to get better, we love the fact that we’re not seeing restructuring revenue decline. We love the fact that they’re holding where they are. And we think it’s kind of a heroic effort from the team to keep us flat in an increasing M and A environment.

Christopher, Unspecified Corporate Representative, Houlihan Lokey1: Yes. Okay. Understood. Thanks for your color, Lindsay and Scott.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: Of course.

Conference Operator: It concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.

Scott Adelson, Chief Executive Officer, Houlihan Lokey: I want to thank you all for participating in our Q3 fiscal 2025 earnings call. We look forward to updating everyone on our progress when we discuss our Q4 and full year results for fiscal 2025 this coming spring.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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