Executive Summary / Key Takeaways
- Houlihan Lokey achieved record annual revenue of $2.39 billion in fiscal year 2025, a 25% increase year-over-year, driven by broad-based strength across its diversified Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory segments.
- The firm's strategic focus on independent advisory services, particularly in the mid-cap market, and its countercyclical Financial Restructuring business provide resilience and allow it to capitalize on opportunities across varying market conditions, advising both healthy and distressed companies.
- Fiscal year 2025 was marked by significant inorganic growth, with three key acquisitions (Triago, Prytania Solutions, Waller Helms) expanding capabilities in private funds, tech-enabled valuation, and financial services, demonstrating successful integration and contribution to results.
- Proprietary technology, especially within the Financial and Valuation Advisory segment, offers quantifiable benefits like faster processing and cost reduction, enhancing efficiency and competitive positioning, while the firm explores further integration of AI.
- Management's outlook for fiscal year 2026 is positive, anticipating continued growth driven by improving M&A sentiment, increased private equity activity, and sustained elevated restructuring levels, while maintaining expense discipline with a target 61.5% compensation ratio and high-single-digit non-compensation expense growth.
The Power of Independence and Diversification in Advisory
Established in 1972, Houlihan Lokey has built a reputation as a leading global independent investment bank. Its core strategy centers on providing specialized financial advisory services across three primary business segments: Corporate Finance (CF), Financial Restructuring (FR), and Financial and Valuation Advisory (FVA). This focus on independence means the firm avoids lending, securities sales and trading, or research activities that could create conflicts of interest, positioning it as a trusted advisor. The firm's historical journey has reinforced the value of this model, particularly the countercyclical nature of its FR practice, which often sees increased activity during economic downturns when M&A and capital markets slow.
Operating through a global network of offices, Houlihan Lokey serves a diverse client base ranging from closely held companies to Fortune Global 500 corporations, with a significant emphasis on the mid-cap market (transactions under $1 billion) in its CF business. This segment is viewed as attractive and often underserved by larger bulge-bracket firms. The competitive landscape is intense, featuring larger, more diversified institutions like Evercore (EVR), Lazard (LAZ), Moelis & Company (MC), and PJT Partners (PJT), as well as boutique firms and large accounting/advisory practices. While larger competitors may possess greater financial resources and broader product suites, HLI differentiates itself through deep sector expertise, senior-level involvement in engagements, strong financial sponsor relationships, and its integrated global platform.
Broad industry trends, including fluctuating interest rates, geopolitical events, and the evolution of private capital markets, significantly impact the advisory business. Elevated interest rates and high corporate leverage, for instance, fuel demand for restructuring services, while improved market sentiment can boost M&A and capital raising activities. HLI's diversified segment mix is designed to navigate these varied conditions, providing a degree of resilience that is a cornerstone of its investment thesis.
Technological Edge in Valuation and Beyond
Technology plays an increasingly important role in enhancing Houlihan Lokey's service delivery and competitive standing. Within the Financial and Valuation Advisory segment, the firm leverages proprietary valuation tools and methodologies. These tools contribute to efficiency and analytical rigor, offering tangible benefits such as faster processing speeds and reduced costs per engagement compared to less technologically advanced competitors. Specifically, analysis suggests HLI's proprietary valuation technology offers approximately 20% faster processing, leading to an estimated 15% reduction in costs per engagement. This technological capability is a key differentiator, particularly in complex valuation, diligence, and opinion work, where analytical depth and speed are critical.
The firm is also actively exploring the integration of artificial intelligence (AI) technologies into its operations, aiming to further enhance efficiency and capabilities. While still in early stages, this initiative reflects a commitment to leveraging advanced technology, though it also introduces risks related to data security and the potential for competitors to adopt AI more effectively. Recent acquisitions, such as Prytania Solutions, a U.K.-based tech-enabled valuation platform specializing in structured products, underscore HLI's strategy to acquire specialized technology that complements existing strengths, like the portfolio valuation group, and expands capabilities in key areas. This integration adds geographic reach and technological depth, supporting the firm's growth in less cyclical FVA services.
The strategic intent behind these technological investments and acquisitions is to bolster the firm's competitive moat, improve operational efficiency, and enhance the quality and speed of client service. For investors, this focus on technology suggests a commitment to maintaining a competitive edge, potentially leading to better margins and sustained market positioning in an evolving industry.
Record Performance Across Diversified Segments
Fiscal year 2025 was a landmark year for Houlihan Lokey, with revenues reaching a firm record of $2.39 billion, a substantial 25% increase from the $1.91 billion reported in fiscal 2024. This growth was not confined to a single area but reflected strength across all three business segments. Corporate Finance revenues saw a significant 38% increase, reaching $1.53 billion, driven by a 25% rise in closed transactions and increasing average transaction fees, particularly outside the U.S. The Capital Solutions business, a strategic part of CF, performed very well, bolstered by strength in private capital markets and contributing diversified, high-growth revenues.
The Financial Restructuring revenues increased by 4% to $544.48 million, marking a record year for the segment. This growth was supported by a 15% increase in closed transactions, reflecting persistently elevated interest rates, record corporate leverage, and geopolitical factors that continue to drive demand for restructuring and liability management services. The Financial and Valuation Advisory segment also achieved record revenues, growing 11% to $318.18 million. This performance was fueled by an increase in Fee Events, benefiting from improvements in the M&A markets impacting its cyclical service lines, while market-neutral services like portfolio valuation continued their steady growth.
The firm's profitability metrics reflect this strong top-line performance. Operating income increased significantly to $501.54 million in fiscal 2025 from $362.86 million in fiscal 2024. Net income attributable to Houlihan Lokey, Inc. rose 43% to $399.71 million. The Compensation Ratio saw a slight increase to 64% in fiscal 2025 from 63% in fiscal 2024, primarily due to higher revenues. Non-compensation expenses increased by 8%, reflecting investments in depreciation, amortization, technology, and communications, partially offset by lower professional fees. The effective tax rate decreased to 25% from 28%, benefiting from the resolution of a tax position.
Strategic Growth and Talent Investment
Houlihan Lokey's growth strategy actively combines organic talent development with strategic acquisitions. Fiscal year 2025 was the firm's most active year for acquisitions, successfully integrating three key businesses. The acquisition of Triago expanded the firm's private funds capabilities globally, adding seven Managing Directors and positioning HLI as a holistic advisor in primary, secondary, directs, and GP advisory markets. Prytania Solutions enhanced the FVA segment with tech-enabled valuation expertise for structured products. Waller Helms Advisors significantly bolstered the financial services industry group, particularly in insurance and wealth management, adding 13 Managing Directors. These acquisitions have been noted as performing well and contributing positively to the firm's results, demonstrating the success of the integration strategy.
Beyond acquisitions, the firm continues to invest in talent through organic hiring and internal promotions. In fiscal 2025, HLI added 20 Managing Directors through hiring and promoted 16 colleagues to Managing Director, bringing the total number of Managing Directors to 339 as of March 31, 2025. The firm emphasizes broad employee ownership, with approximately 24% of equity held by present and former employees, aligning incentives and fostering a collaborative culture that supports talent retention.
The firm's liquidity position remains robust, with $1.17 billion in unrestricted cash and cash equivalents, including investment securities, as of March 31, 2025. Net cash provided by operating activities was strong at $848.61 million for the year. This financial strength supports strategic investments, including acquisitions, and enables capital returns to shareholders. The company maintains a $100 million revolving credit facility, which was undrawn as of fiscal year-end. A share repurchase program remains active with $405.5 million available, used for both managing dilution from equity awards and opportunistic buybacks. The recent 5.3% increase in the quarterly dividend to $0.60 per share further signals confidence in the firm's financial health and future prospects.
Competitive Dynamics and Outlook
Houlihan Lokey operates in a highly competitive environment against a range of firms. Compared to bulge-bracket institutions, HLI's independent advisory model avoids potential conflicts from lending or trading, which can be a competitive advantage. Against independent peers like Evercore, Lazard, Moelis & Company, and PJT Partners, HLI differentiates through its diversified segment mix, particularly the strength of its FR and FVA practices, which provide greater resilience during M&A downturns. While some peers may have larger global networks or specialized strengths in certain niche areas (e.g., Evercore in large-cap M&A, PJT in distressed assets), HLI's focus on the mid-cap market, its growing Capital Solutions business, and its investment in technology offer distinct competitive advantages. The firm's ability to capture market share, as evidenced by its strong revenue growth, suggests its strategy is resonating with clients.
Management's outlook for fiscal year 2026 is positive, anticipating continued growth. This optimism is grounded in the expectation of ongoing improvements in M&A market sentiment, increased activity from private equity clients, and the sustained elevated levels of restructuring activity driven by macroeconomic factors. The firm expects typical seasonality in its CF and FVA businesses. Expense management remains a focus, with a target adjusted compensation ratio of 61.5% and expected high-single-digit growth in adjusted non-compensation expenses reflecting continued investment in the platform and talent.
Despite the positive outlook, risks persist. Global market volatility, geopolitical uncertainty, and the potential for changes in interest rate trajectories could impact transaction volumes and timing. The contingent nature of a significant portion of revenue introduces quarterly volatility. Integrating acquired businesses and retaining key talent in a competitive market are ongoing challenges. Operational risks, including cybersecurity threats and the complexities of international operations, require continuous management. However, the firm's diversified business model, strategic investments in talent and technology, and strong financial position are intended to mitigate these risks and position it to capitalize on opportunities as market conditions evolve.
Conclusion
Houlihan Lokey concluded fiscal year 2025 with record financial performance, underscoring the effectiveness of its independent, diversified advisory model. The firm's strategic focus on the mid-cap market, coupled with the complementary strengths of its Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory segments, provides a resilient platform capable of generating growth across varying economic cycles. Significant investments in talent and strategic acquisitions in fiscal 2025 have expanded its capabilities and geographic reach, particularly in high-growth areas like private funds and tech-enabled valuation.
Looking ahead, the positive outlook for fiscal 2026 is supported by improving market conditions and the firm's strong competitive positioning. While macroeconomic uncertainties and competitive pressures remain, Houlihan Lokey's differentiated approach, operational efficiency enhanced by technology, and robust financial health position it well to continue executing its growth strategy and delivering value to shareholders. The ability to maintain momentum in both cyclical and countercyclical businesses, alongside disciplined expense management and strategic capital allocation, will be key indicators for investors to monitor.