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Houlihan Lokey, Inc. (HLI) SEC Filing 8-K Material Event for the period ending Tuesday, February 8, 2022

Houlihan Lokey, Inc.

CIK: 1302215 Ticker: HLI
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Houlihan Lokey Reports Third Quarter Fiscal 2022 Financial Results

Third Quarter Fiscal 2022 Revenues of $889 million
Third Quarter Fiscal 2022 Diluted EPS of $2.54
Adjusted Third Quarter Fiscal 2022 Diluted EPS of $2.90
Announces Dividend of $0.43 per Share for Fourth Quarter Fiscal 2022

LOS ANGELES and NEW YORK - February 8, 2022 - Houlihan Lokey, Inc. (NYSE:HLI) (“Houlihan Lokey” or the “Company”) today reported financial results for its third quarter ended December 31, 2021.
For the third quarter ended December 31, 2021, revenues were $889 million, compared with $538 million for the third quarter ended December 31, 2020. Net income attributable to the Company was $174 million, or $2.54 per diluted share, for the third quarter ended December 31, 2021, compared with $119 million, or $1.71 per diluted share, for the third quarter ended December 31, 2020. Adjusted net income attributable to the Company for the third quarter ended December 31, 2021 was $198 million, or $2.90 per diluted share, compared with $123 million, or $1.77 per diluted share, for the third quarter ended December 31, 2020.
“We are thrilled with our results for the third fiscal quarter and are proud of how well each of our product lines performed within their service sectors in calendar 2021. Corporate Finance is the #1 global M&A advisor based on number of transactions closed, Financial Restructuring is the #1 global restructuring advisor based on both dollar value and number of transactions closed and Financial and Valuation Advisory is the #1 global fairness opinion advisor measured over the last twenty years based on the number of transactions closed. Also in our third quarter, we made excellent progress on the integration of GCA and could not be happier with the collaboration that exists between our firms,” stated Scott Beiser, Chief Executive Officer of Houlihan Lokey.
Selected Financial Data
(In thousands, except per share data)
U.S. GAAP
Three Months Ended December 31,Nine Months Ended December 31,
2021202020212020
Revenues by segment
Corporate Finance$715,663 $306,171 $1,314,064 $502,191 
Financial Restructuring89,273 177,995 271,232 392,006 
Financial and Valuation Advisory83,862 53,710 213,496 130,551 
Revenues
$888,798 $537,876 $1,798,792 $1,024,748 
Operating expenses:
Employee compensation and benefits$549,376 $339,743 $1,115,054 $654,113 
Non-compensation90,162 39,717 169,483 102,754 
Operating income
249,260 158,416 514,255 267,881 
Other (income)/expense, net253 (187)1,005 (1,544)
Income before provision for income taxes
249,007 158,603 513,250 269,425 
Provision for income taxes74,699 40,088 140,099 56,020 
Net income
174,308 118,515 373,151 213,405 
Net income attributable to noncontrolling interest(573)— (573)— 
Net income attributable to Houlihan Lokey, Inc.$173,735 $118,515 $372,578 $213,405 
Diluted earnings per share attributable to Houlihan Lokey, Inc.
$2.54 $1.71 $5.44 $3.11 
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Revenues

For the third quarter ended December 31, 2021, revenues were $889 million, compared with $538 million for the third quarter ended December 31, 2020. Revenues increased primarily as a result of (i) the completion of our acquisition of GCA Corporation (“GCA”) during the third quarter ended December 31, 2021, resulting in the consolidation of their operating results and (ii) a significant increase in the number of closed transactions and the average transaction fee on closed transactions for our Corporate Finance (“CF”) business segment. For the third quarter ended December 31, 2021, CF revenues increased 134%, Financial Restructuring (“FR”) revenues decreased (50)%, and Financial and Valuation Advisory (“FVA”) revenues increased 56% when compared with the third quarter ended December 31, 2020. All revenues associated with GCA for the third quarter ended December 31, 2021 are included in our CF business segment.

Expenses

The Company’s employee compensation and benefits expenses, non-compensation expenses, and provision for income taxes during the periods presented and described below are on a GAAP and an adjusted basis.
U.S. GAAPAdjusted (Non-GAAP) *
Three Months Ended December 31,
($ in thousands)2021202020212020
Expenses:
Employee compensation and benefits$549,376 $339,743 $546,611 $334,828 
% of Revenues61.8 %63.2 %61.5 %62.3 %
Non-compensation$90,162 $39,717 $58,543 $38,523 
% of Revenues10.1 %7.4 %6.6 %7.2 %
Provision for income taxes$74,699 $40,088 $85,014 $41,632 
% of Pre-tax income30.0 %25.3 %30.0 %25.3 %
*Adjusted figures represent non-GAAP information. See “Non-GAAP Financial Measures” and the tables at the end of this release for an explanation of the adjustments and reconciliations to the comparable GAAP numbers.
U.S. GAAPAdjusted (Non-GAAP) *
Nine Months Ended December 31,
($ in thousands)2021202020212020
Expenses:
Employee compensation and benefits$1,115,054 $654,113 $1,106,257 $641,878 
% of Revenues62.0 %63.8 %61.5 %62.6 %
Non-compensation$169,483 $102,754 $133,548 $97,262 
% of Revenues9.4 %10.0 %7.4 %9.5 %
Provision for income taxes$140,099 $56,020 $160,169 $74,008 
% of Pre-tax income27.3 %20.8 %28.7 %25.8 %
*Adjusted figures represent non-GAAP information. See “Non-GAAP Financial Measures” and the tables at the end of this release for an explanation of the adjustments and reconciliations to the comparable GAAP numbers.

Employee compensation and benefits expenses were $549 million for the third quarter ended December 31, 2021, compared with $340 million for the third quarter ended December 31, 2020. Adjusted employee compensation and benefits expenses were $547 million for the third quarter ended December 31, 2021, compared with $335 million for the third quarter ended December 31, 2020. This resulted in an adjusted compensation ratio of 61.5% for the third quarter ended December 31, 2021, versus 62.3% for the third quarter ended December 31, 2020. The increase in GAAP and adjusted employee compensation and benefits expenses was primarily a result of an increase in fee revenues for the quarter when compared with the same quarter last year.

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Non-compensation expenses were $90 million for the third quarter ended December 31, 2021, compared with $40 million for the third quarter ended December 31, 2020. The increase in GAAP non-compensation expenses was primarily a result of non-compensation expenses attributable to GCA, amortization of intangible assets recognized in connection the acquisition of GCA, integration and acquisition related costs associated with our acquisition of GCA and an increase in travel, meals, and entertainment expenses and other operating expenses. Adjusted non-compensation expenses were $59 million for the third quarter ended December 31, 2021, compared with $39 million for the third quarter ended December 31, 2020. The increase in adjusted non-compensation expenses was primarily a result of non-compensation expenses attributable to GCA and an increase in travel, meals, and entertainment expenses and other operating expenses.

The provision for income taxes was $75 million, representing an effective tax rate of 30.0% for the third quarter ended December 31, 2021, compared with $40 million, representing an effective tax rate of 25.3% for the third quarter ended December 31, 2020. The increase in the Company’s tax rate during the third quarter ended December 31, 2021 relative to the same period in 2020 was primarily a result of increased state taxes, increased non-deductible expenses and increased foreign taxes. The adjusted provision for income taxes was $85 million, representing an adjusted effective tax rate of 30.0% for the third quarter ended December 31, 2021, compared with $42 million, representing an adjusted effective tax rate of 25.3% for the third quarter ended December 31, 2020.

Segment Reporting for the Third Fiscal Quarter

Corporate Finance
CF revenues were $716 million for the third quarter ended December 31, 2021, compared with $306 million for the third quarter ended December 31, 2020, representing an increase of 134%. Revenues increased primarily due to (i) the completion of our acquisition of GCA during the third quarter ended December 31, 2021, resulting in the consolidation of their revenues into our CF business segment and (ii) a significant increase in the number of closed transactions and the average transaction fee on closed transactions.
Three Months Ended December 31,Nine Months Ended December 31,
($ in thousands)2021202020212020
Corporate Finance
Revenues$715,663 $306,171 $1,314,064 $502,191 
# of Managing Directors198 123 198 123 
# of Closed transactions (1)
238 121 456 209 

Financial Restructuring
FR revenues decreased (50)% to $89 million for the third quarter ended December 31, 2021, compared with $178 million for the third quarter ended December 31, 2020. Revenues decreased primarily due to a decrease in the number of closed transactions.
Three Months Ended December 31,Nine Months Ended December 31,
($ in thousands)2021202020212020
Financial Restructuring
Revenues$89,273 $177,995 $271,232 $392,006 
# of Managing Directors52 47 52 47 
# of Closed transactions (1)
21 44 65 103 

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Financial and Valuation Advisory
FVA revenues increased 56% to $84 million for the third quarter ended December 31, 2021, compared with $54 million for the third quarter ended December 31, 2020. Revenues increased primarily due to an increase in the number of fee events.
Three Months Ended December 31,Nine Months Ended December 31,
($ in thousands)2021202020212020
Financial and Valuation Advisory
Revenues$83,862 $53,710 $213,496 $130,551 
# of Managing Directors34 31 34 31 
# of Fee Events (1)
901 639 1,673 1,134 
(1)A Fee Event includes any engagement that involves revenue activity during the measurement period based on a revenue minimum of one thousand dollars. References in this press release to closed transactions should be understood to be the same as transactions that are “effectively closed” as described in our periodic reports on Forms 10-K and 10-Q.
Balance Sheet and Capital Allocation

The Board of Directors of the Company declared a regular quarterly cash dividend of $0.43 per share of Class A and Class B common stock. The dividend will be payable on March 15, 2022 to stockholders of record as of the close of business on March 2, 2022.

As of December 31, 2021, the Company had $1,098 million of cash and cash equivalents and investment securities, and $134 million of other liabilities and loans payable to former shareholders.

Investor Conference Call and Webcast

The Company will host a conference call and live webcast at 8:00 a.m. Eastern Time on Tuesday, February 8, 2022, to discuss its third quarter fiscal 2022 results. The number to call is 1-877-407-4018 (domestic) or 1-201-689-8471 (international). A live webcast will be available in the Investor Relations section of the Company’s website. A replay of the conference call will be available from February 8, 2022 through February 15, 2022, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the passcode 13726446#. A replay of the webcast will be archived and available on the Company’s website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. You can identify these statements by our use of the words “assumes,” “believes,” “estimates,” “expects,” “guidance,” “intends,” “plans,” “projects,” and similar expressions that do not relate to historical matters. For a further description of such factors, you should read the Company’s filings with the Securities and Exchange Commission. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. The Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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Non-GAAP Financial Measures

Adjusted net income, total and on a per share basis, and certain adjusted items used to determine adjusted net income, are presented and discussed in this earnings press release and are non-GAAP measures that management believes, when presented together with comparable GAAP measures, are useful to investors in understanding the Company’s operating results. These adjusted items remove the significant accounting impact of one-time or non-recurring charges associated with the Company’s one-time/non-recurring matters, as set forth in the tables at the end of this release.

The adjusted items included in this earnings press release as calculated by the Company are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these adjusted amounts are not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative to the Company’s financial information determined under GAAP. For a description of the Company’s use of these adjusted items and a reconciliation with comparable GAAP items, see the section of this press release titled “Reconciliation of GAAP to Adjusted Financial Information.” Please refer to our financial statements, prepared in accordance with GAAP, for purposes of evaluating our financial condition, results of operations, and cash flows.

About Houlihan Lokey

Houlihan Lokey (NYSE:HLI) is a global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation. The firm serves corporations, institutions, and governments worldwide with offices in the United States, Europe, the Middle East, and the Asia-Pacific region. Independent advice and intellectual rigor are hallmarks of the firm’s commitment to client success across its advisory services. Houlihan Lokey is the No. 1 investment bank for all global M&A transactions, the No. 1 M&A advisor for the past seven consecutive years in the U.S., the No. 1 global restructuring advisor for the past eight consecutive years, and the No. 1 global M&A fairness opinion advisor over the past 20 years, all based on number of transactions and according to data provided by Refinitiv.

For more information, please visit www.HL.com.



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Contact Information
Investor Relations
212.331.8225
IR@HL.com
ORPublic Relations
212.331.8223
PR@HL.com

Appendix

Condensed Consolidated Balance Sheet (Unaudited)
Condensed Consolidated Statement of Income (Unaudited)
Reconciliation of GAAP to Adjusted Financial Information (Unaudited)

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HOULIHAN LOKEY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data and par value)December 31, 2021March 31, 2021
Assets
Cash and cash equivalents$1,058,603 $846,851 
Restricted cash373 373 
Investment securities39,829 208,618 
Accounts receivable, net of allowance for credit losses195,912 108,409 
Unbilled work in process, net of allowance for credit losses86,504 118,115 
Deferred income taxes39,575 28,332 
Property and equipment, net51,750 46,370 
Operating lease right-of-use assets161,997 152,031 
Goodwill1,082,934 671,065 
Other intangible assets, net263,493 195,156 
Other assets64,792 50,747 
Total assets$3,045,762 $2,426,067 
Liabilities and Stockholders' Equity
Liabilities:
Accrued salaries and bonuses$986,043 $648,399 
Accounts payable and accrued expenses123,395 67,468 
Deferred income27,319 27,868 
Income taxes payable57,617 68,339 
Deferred income taxes1,159 52 
Loans payable to former shareholders539 818 
Operating lease liabilities187,264 174,516 
Other liabilities133,010 55,046 
Total liabilities1,516,346 1,042,506 
Stockholders' equity:
Class A common stock, $0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 50,924,798 and 51,245,442 shares, respectively51 51 
Class B common stock, $0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 16,727,176 and 16,951,696 shares, respectively17 17 
Additional paid-in capital668,765 803,573 
Retained earnings886,995 600,096 
Accumulated other comprehensive loss(26,412)(20,176)
Total stockholders’ equity1,529,416 1,383,561 
Total liabilities and stockholders’ equity$3,045,762 $2,426,067 
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HOULIHAN LOKEY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended December 31,Nine Months Ended December 31,
(In thousands, except share and per share data)2021202020212020
Revenues$888,798 $537,876 $1,798,792 $1,024,748 
Operating expenses:
Employee compensation and benefits549,376 339,743 1,115,054 654,113 
Travel, meals, and entertainment11,090 1,338 17,464 4,416 
Rent14,352 10,086 33,627 30,010 
Depreciation and amortization20,074 3,949 28,589 11,291 
Information technology and communications12,398 9,281 28,217 22,532 
Professional fees14,372 6,188 27,988 16,422 
Other operating expenses17,876 8,875 33,598 18,083 
Total operating expenses639,538 379,460 1,284,537 756,867 
Operating income249,260 158,416 514,255 267,881 
Other (income)/expense, net253 (187)1,005 (1,544)
Income before provision for income taxes249,007 158,603 513,250 269,425 
Provision for income taxes74,699 40,088 140,099 56,020 
Net income174,308 118,515 373,151 213,405 
Net income attributable to noncontrolling interest(573)— (573)— 
Net income attributable to Houlihan Lokey, Inc.$173,735 $118,515 $372,578 $213,405 
Weighted average shares of common stock outstanding:
Basic64,914,373 66,547,587 65,259,927 65,680,516 
Fully diluted68,279,939 69,356,347 68,520,849 68,596,503 
Earnings per share attributable to Houlihan Lokey, Inc.
Basic$2.68 $1.78 $5.71 $3.25 
Fully diluted$2.54 $1.71 $5.44 $3.11 

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HOULIHAN LOKEY, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED FINANCIAL INFORMATION
(UNAUDITED)
Three Months Ended December 31,Nine Months Ended December 31,
(In thousands, except per share data)2021202020212020
Revenues$888,798 $537,876 $1,798,792 $1,024,748 
Employee compensation and benefits expenses
Employee compensation and benefits expenses (GAAP)$549,376 $339,743 $1,115,054 $654,113 
Less: Acquisition related retention payments(2,765)(4,915)(8,797)(12,235)
Employee compensation and benefits expenses (adjusted)546,611 334,828 1,106,257 641,878 
Non-compensation expenses
Non-compensation expenses (GAAP)$90,162 $39,717 $169,483 $102,754 
Less: Secondary offering related costs— — — (418)
Less: Integration and acquisition related costs(16,165)— (17,805)(1,258)
Less: Acquisition amortization(15,454)(1,194)(18,130)(3,080)
Less: Oracle ERP implementation— — — (736)
Non-compensation expenses (adjusted)58,543 38,523 133,548 97,262 
Operating income
Operating income (GAAP)$249,260 $158,416 $514,255 $267,881 
Plus: Adjustments (1)
34,384 6,109 44,732 17,727 
Operating income (adjusted)283,644 164,525 558,987 285,608 
Other (income)/expense, net
Other (income)/expense, net (GAAP)$253 $(187)$1,005 $(1,544)
Other (income)/expense, net (adjusted)253 (187)1,005 (1,544)
Provision for income taxes
Provision for income taxes (GAAP)$74,699 $40,088 $140,099 $56,020 
Plus: Impact of the excess tax benefit for stock vesting— — 6,922 13,408 
Adjusted provision for income taxes74,699 40,088 147,021 69,428 
Plus: Resulting tax impact (2)
10,315 1,544 13,148 4,580 
Provision for income taxes (adjusted)85,014 41,632 160,169 74,008 
Net income
Net income (GAAP)$174,308 $118,515 $373,151 $213,405 
(Less)/plus: adjustments (3)
24,069 4,565 24,662 (261)
Net income (adjusted)198,377 123,080 397,813 213,144 
Net income attributable to noncontrolling interest(573)— (573)— 
Net income attributable to Houlihan Lokey, Inc. (GAAP)173,735 118,515 372,578 213,405 
Net income attributable to Houlihan Lokey, Inc. (adjusted)197,804 123,080 397,240 213,144 
Diluted EPS attributable to Houlihan Lokey, Inc. (GAAP)$2.54 $1.71 $5.44 $3.11 
Diluted EPS attributable to Houlihan Lokey, Inc. (adjusted)$2.90 $1.77 $5.79 $3.11 
(1)The aggregate of adjustments from employee compensation and benefits and non-compensation expenses.
(2)Reflects the tax impact of utilizing the adjusted effective tax rate on the non-tax adjustments identified above.
(3)Consists of all adjustments identified above net of the associated tax impact.
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Ticker: HLI
CIK: 1302215
Form Type: 8-K Corporate News
Accession Number: 0001302215-22-000003
Submitted to the SEC: Tue Feb 08 2022 6:04:32 AM EST
Accepted by the SEC: Tue Feb 08 2022
Period: Tuesday, February 8, 2022
Industry: Investment Advice
Events:
  1. Earnings Release
  2. Financial Exhibit

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