Houlihan Lokey, Inc. (NYSE: HLI), a leading global investment bank, has reported its financial results for the fourth quarter and fiscal year ended March 31, 2024. The company delivered strong performance, with revenues reaching $1.91 billion for the full year and net income of $280.3 million.
Financials
Fourth Quarter Results
In the fourth quarter, Houlihan Lokey generated revenues of $520 million, up 17% year-over-year, and adjusted earnings per share of $1.27, an increase of 14% compared to the same period last year. The company's diversified business model proved resilient, with all three of its core segments - Corporate Finance (CF), Financial Restructuring (FR), and Financial and Valuation Advisory (FVA) - contributing to the solid quarterly and annual results.
The Corporate Finance segment reported revenues of $288 million in Q4, a 12% increase from the prior year period. The company closed 121 transactions during the quarter, a high for fiscal 2024, and saw an increase in average transaction fees. In the Financial Restructuring segment, revenues grew 29% year-over-year to $155 million, driven by larger transactions and favorable timing. The Financial and Valuation Advisory business also performed well, with revenues of $77 million, up 14% compared to Q4 2023.
Full Year Results
For the full fiscal year 2024, Houlihan Lokey generated revenues of $1.91 billion, up 6% from the prior year. Net income for the year was $280.3 million, while operating cash flow reached $328.5 million and free cash flow was $261.7 million.
Lindsay Alley, Chief Financial Officer of Houlihan Lokey, commented on the results: "Revenues were up 17% and adjusted earnings per share were up 14% compared to the same quarter last year. The company also ended the fiscal year with revenues up 6% versus last year, a good result in a challenging market."
Business Overview
The company's diversified business model has been a key strength, with the Financial Restructuring segment performing well even as the M&A market has been sluggish. Scott Beiser, Chief Executive Officer of Houlihan Lokey, noted: "Over the past year, in an otherwise sluggish M&A market, the corporate finance and financial and valuation advisory businesses were relatively stable while the financial restructuring business grew."
Outlook
Looking ahead, the company remains optimistic about the market environment and its ability to capitalize on opportunities. Beiser added: "The company begins the new fiscal year with momentum in all three of its business lines and remains optimistic that improving market conditions will continue throughout the year."
Corporate Finance
In the Corporate Finance segment, the company is seeing a steady improvement in the M&A market, with financing available albeit at higher rates. Beiser noted: "Some of the highlights in the last quarter include $288 million in corporate finance revenues, representing the highest fourth quarter corporate finance revenues in three years."
Financial Restructuring
The Financial Restructuring business continues to operate at elevated levels, and the company expects these elevated levels to continue through fiscal 2025, albeit with some quarterly volatility. Beiser stated: "The financial restructuring business remains at elevated levels, and the company reiterates its expectations that these elevated levels will continue through fiscal 2025, albeit with some level of quarterly volatility."
Financial and Valuation Advisory
The Financial and Valuation Advisory segment also performed well, with revenues of $77 million in the fourth quarter, a 14% increase from the same period last year.
Financials
Expenses
On the expense side, Houlihan Lokey's adjusted compensation expense ratio for the fourth quarter and full fiscal year 2024 was 61.5%, in line with the company's long-term target. The adjusted non-compensation expense ratio for the quarter was 15.6%, compared to 15.3% in the same period last year.
Alley commented: "The company expects that absolute dollar growth in non-compensation expense will temper in fiscal 2025. For the fiscal year on a pro-employee basis, the adjusted non-compensation expense grew 8% from $112,000 per employee in fiscal 2023 to $121,000 per employee in fiscal 2024."
Liquidity
Houlihan Lokey ended the quarter with approximately $759 million in unrestricted cash and equivalents and investment securities. The company's board of directors also approved a 3.5% increase to the quarterly dividend, raising it to $0.57 per share.
Conclusion
Overall, Houlihan Lokey's solid performance in fiscal 2024, with revenues of $1.91 billion and net income of $280.3 million, demonstrates the strength and resilience of its diversified business model. The company's continued investments in talent and geographic expansion, coupled with its strong financial position, position it well to capitalize on future growth opportunities in the investment banking industry.