Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Houlihan Lowkey Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, 29th of July, 2025. I will now turn the call over to the company. Please go ahead.

Thank you, Operator, and hello, everyone. By now, everyone should have access to our first quarter fiscal year 2026 earnings release, which can be found on the Houlihan-Loki 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 for 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 on 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 June 30, 2025, 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 Adelton, Houlihan-Loki's Chief Executive Officer, and Lindsey Alley, Chief Financial Officer. They will provide some opening remarks, and then we will open the line to questions. With that, I'll turn the call over to Scott.

Thank you, Christopher. Welcome, everyone, to our first quarter fiscal year 2026 earnings call. We ended the quarter with revenues of $605 million and adjusted earnings per share of $2.14. Revenues were up 18% and adjusted earnings per share were up 75% compared to the same quarter last year. We began fiscal 2026 with momentum and concluded the quarter with solid performance by all three of our business lines. Our views of current market conditions and our business are broadly consistent with what we shared last quarter. While market forecasts remain difficult, given a dynamic and volatile macro environment, we continue to see the benefits of our diversified business model, particularly across industry and geography. The markets in which we operate are showing resilience, adapting to the complexities and uncertainties of the current environment. Turning to our results, corporate finance produced $399 million of revenue in the first quarter, a 21% increase over last year's first quarter. Key metrics for our corporate finance business, including transaction size and average fee per transaction, continued to see steady improvement. This was achieved despite muted activity from the financial sponsor community, understoring the strength of our business, which we believe should pick up as sponsor activity eventually returns to more historic levels. We are cautiously optimistic that this momentum will continue through fiscal 2026, while we remain mindful of the potential headwinds, including tariffs and inflation. Our financial restructuring business produced $128 million in revenues for the first quarter, a 9% increase over last year's first quarter. Financial restructuring activity remains elevated, supported by persistently higher interest rates, macro uncertainty, and over-leveraged companies. Revenues in financial restructuring are diversified across industry and geography, and we are experiencing a balanced mix of debtor and creditor work. We expect to continue to see elevated restructuring revenues throughout fiscal 2026. Financial and Valuation Advisory produced $79 million in revenues for the first quarter, a 16% increase versus the first quarter last year. FBA had a very strong first quarter with continued growth in its non-cyclical service lines, while its pro-cyclical businesses benefited from improving M&A market conditions, particularly in the U.S. Our outlook for FEA is similar to our outlook for CF, as we expect to see continued year-over-year growth throughout the remainder of the fiscal year. In the first quarter, we hired three new managing directors and we continue to see a strong hiring market for senior talent drawn to our global platform and track record of growth our pipeline of acquisition opportunities remains robust and we are confident that the combination of our organic hires and strategic acquisitions will continue to help us expand our workforce across industry service line and geography On the marketing front, I'm very proud to announce that we hosted the inaugural Houlahan Loki One Conference in New York, dubbed the Woodstock of Dealmaking by Bloomberg. This major event showcased our one-firm approach and global scope, with more than 4,000 people in attendance and approximately 400 companies participating. We are thrilled with the feedback we received from clients who attended, and we're proud of the experience that we are curating for our clients and prospects around the world. We remain confident in our outlook for our fiscal year 2026. Despite volatility in global markets, companies appear to be adapting to the realities of decision-making in this environment. With our global reach, sector depth, and balanced business model, we continue to be well-positioned to help our clients navigate the environment and capitalize on new opportunities. Lindsey, over to you.

Thank you, Scott. Revenues in corporate finance were $399 million for the quarter, up 21% compared to the same quarter last year. We closed 125 transactions this quarter, up from 116 in the same period last year, and Our average transaction fee was higher for the quarter versus the same quarter last year. Revenues and activity levels in the U.S. continue to outpace those in EMEA, and we expect this regional dynamic to persist through the summer. Financial restructuring revenues were $128 million for the quarter, a 9% increase versus the same period last year. We closed 35 transactions this quarter compared to 33 in the same quarter last year, and our average transaction fee on closed deals increased. For financial and valuation advisory, revenues were $79 million for the quarter, a 16% increase from the same period last year. We had 957 fee events during the quarter compared to 847 in the same period last year, a 13% increase. Turning to expenses, our adjusted compensation expenses were $372 million for the quarter versus $316 million for the same period last year. Our only adjustment was $21 million for deferred retention payments related to certain acquisitions. Our adjusted compensation expense ratio for the first quarter in both fiscal 2026 and 2025 was 61.5%. We expect to maintain our long-term target of 61.5% for our adjusted compensation expense ratio for the balance of the year. Our adjusted non-compensation expenses increased to $94 million for the quarter, compared to $80 million for the same period last year. Our adjusted non-compensation expense ratio for the first quarter in both fiscal 2026 and 2025 was 15.6%. On a per-employee basis, our adjusted non-compensation expense for the quarter increased to $35,000 versus $31,000 for the same quarter last year. The increase was primarily driven by our Hula and Loki One Conference, which combined six legacy conferences spread throughout the year in the U.S. into a single flagship conference. Excluding the cost of this event, non-compensation expense growth would generally have been in line with historical trends. For the quarter, we adjusted out of our non-compensation expenses $9.5 million in non-cash acquisition-related amortization, approximately $900,000 pertaining to professional fees associated with streamlining our global organizational structure, referred to as Project Solo, and approximately $18 million related to the increase in value of acquisition contingent consideration. We have always treated all acquisition contingent consideration as purchase price and adjust any significant changes to the value of such contingent consideration out of our P&L. Historically, the effects of the revaluation of acquisition contingent consideration occurred in other income and expense starting in fiscal 2026 we are including the effects of the revaluation of acquisition contingent consideration and non-compensation expense as a separate line item as a result any adjustments to this line item will occur in non-compensation expense going forward our other income and expense produced income of approximately eight million versus income of approximately five million in the same period last year. The improvement was primarily due to an increase in interest and other income generated by our investment securities. Our adjusted effective tax rate for the quarter was negative 0.8% compared to 31.2% for the same quarter last year. The decrease is due to a policy change, which we discussed in last quarter's remarks. We are no longer including the impact of stock-based compensation vesting on our adjusted effective tax rate this year and for the last several years stock vesting has had a positive impact on our gap effective tax rate for both the quarter and the year and we have adjusted out that benefit without the adjustment in q1 of fiscal 2025 our adjusted effective tax rate would have been 9.3 for the first quarter given the significant impact from stock busting, we expect to see our fiscal 2026 full-year adjusted effective tax rate between 25% and 26%. Without the adjustment for stock busting in fiscal year 2025, our adjusted effective tax rate for last year would have been 26%. For the first quarter fiscal 2026, we adjusted out of our effective tax rate the effects of acquisition-related non-deductible expenses. Turning to the balance sheet, we ended the quarter with approximately $867 million of unrestricted cash and investment securities. Our cash position declined this quarter as we paid a significant portion of our fiscal 2025 bonuses to employees in May. Also in our first quarter, we issued approximately $1.1 million shares to employees as part of our fiscal 2025 year-end compensation, and we repurchased through withholding cover approximately 800,000 shares during the month of May. With that, operator, we can open the line for questions.

If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. And if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Devin Ryan from Citizen. Please go ahead.

Great, hi Scott, hi Lindsay, how are you? So I heard the comment prepared remarks that your views to the business are broadly consistent with last quarter. And so I'm just curious as it relates to corporate finance, I would assume that there's been some market improvement just with sentiment, you know, improving and more optimism in the market more broadly. I'm just curious if you're seeing that with clients from where you were three months ago, and maybe three months ago you were already starting to see that re-acceleration and momentum, but just let's dig in there a bit more, and then just, if you can, just hit on kind of how backlogs and trended, kind of if doctors want to move forward on auctions and transactions, and then from a sector perspective as well, if you can touch on that. Thanks.

Really bad connection, so I will try and do my best with that, But I think that what we've been saying for a long time is that it keeps getting better quarter by quarter, but not necessarily month by month. So even within this quarter, you saw the momentum shift, if you will, a bit back and forth. And that's some of the uncertainty we see in the marketplace. Having said that, as I said in my remarks, I mean, the resiliency of our clients to really adjust to the market we are in continues to get better and better. And I think that is what we're feeling. It is getting better and better quarter by quarter, but not necessarily month by month.

Okay, thanks. Apologies for the back.

The second part of your question, quite honestly, was backlog, I think, but you were breaking up so bad I wasn't really sure. If you want to try and repeat it, I'll give it a shot.

Yeah, if I'm not going to throw it, I'll hop back in the queue. But essentially, I just wanted to give a little bit of a sense of how the backlog is refilling. and then if there's sectors that are snapping back faster, and then if there's any areas that aren't because they're still impacted by tariffs or otherwise.

Yeah, I'd say, Devin, on the backlog side, we try to stay away from backlog commentary. You know, having said that, you know, we continue to see good, solid performance across all the sectors. I made a comment regarding geography. We do think Europe, EMEA, has been a bit slower than the U.S. over the last three to six months. And we don't expect that to change this summer. But in terms of backlog, look, you know, some of our peers have made commentary around backlog. It's quite strong. We want to get away from comparing backlog this quarter versus last quarter versus the same time last year. in terms of backlog.

Got it. Okay, I'll leave it there, but thank you, guys.

Your next question comes from Brendan O'Brien from Wolf Research. Please go ahead.

Good afternoon, and thanks for taking my questions. You know, sorry, I just want to touch or follow up on Devin's question a bit. You know, within corporate finance, the top-line trends continue to look very strong, but the year-on-year growth and the number of deals completed has seemed to decelerate a bit. Just want to get a sense as to the breadth of activity that you're seeing in the market today and specifically around the quality of assets that you're seeing move and when we can start to see that aperture widen.

Yeah, I mean, again, same commentary about getting better kind of quarter by quarter, right? It's back to what we've talked about before, what's the slope of that improvement? But we clearly are in a good environment at this point. But again, kind of the bottom end of it is what I would say. In terms of volume of deals, I do think after Labor Day, we're going to see that even pick That certainly is the indication from everything we're seeing.

And look, I'd say from a deceleration standpoint, we had an extraordinary quarter one last year. I think our corporate finance revenues grew 44% or so. So, I mean, 21% growth is decelerating versus the same time last year, but it's still pretty strong, and it's over a much larger base. And so, I mean, we don't see a decelerating trend at all. We're just operating off of a higher base this year versus the same time last year.

I totally appreciate that. And I guess for my follow-up, I just wanted to clarify some of your comments around the non-comp side. You know, specifically, I know you got it to the high single-digit non-comp growth rate last quarter. Is that still your expectation for the full year this year, or, you know, has something changed, whether it's travel or inflation or anything like that?

No, we're still at that high single digits. Unfortunately, we just had our entire non-comp expense in our first quarter. I'm joking about that, but we did, you know, we had a higher first quarter. I think there's a specific reason why, but we do expect to see kind of that still that high single digits for the balance of the year. Now, part of that is driven by headcount growth, as you know. So, the faster our headcount grows this year, the higher our non-comp expense. And so, some of it is beyond our control and some of it is a good problem to have. But as we sit here today, no change from last quarter in terms of what the end of the year looks like.

Great. Thank you for taking my questions. Pleasure.

Thank you. Your next question comes from James Yarrow from Goldman Sachs. Please go ahead.

Good afternoon, and thanks for taking the question. Scott. Hey, guys. Restructuring remained elevated this quarter. I know you gave the outlook for the business as being elevated, but maybe you could just dig down a little bit into anything that you are seeing around liability management versus Chapter 11 traditional restructuring and then expectations for the forward for each of those.

Yeah, I mean, I think it's consistent. Again, we kind of think about it as in-court and out-of-court, if you will. But it continues to be active on both sides with obviously some of the not-as-large transactions leaning more towards the out-of-court. But there does seem to be a good pipeline kind of across the board, and we're seeing it just continue to be a strong restructuring environment or certainly elevated.

And, James, our commentary for restructuring hasn't really changed much. I mean, we consider liability management traditional restructuring, so we don't really differentiate it. And, look, the market has been and think we will continue to be reasonably strong for liability management transactions, given that we've just had a really long runway. And we don't see that changing, certainly through fiscal 26, which is why you hear a little bit of confidence in terms of elevated restructuring for the balance of the year.

That's great. Scott or Lindsay, maybe just any thoughts around or any color around the growth of your secondaries business since you did the deal? And then, I guess, any thoughts around the cyclical versus structural drivers and perhaps your expectations for how much growth that business can have over time?

Yeah, I think that we're very happy with that. That is now all involved within our capital solutions group, which, as you know, is part of corporate finance. And that integrated approach seems to be serving us very well, and we're extremely happy with many parts of that. Even on the primary side, we see that picking up, but certainly on the secondary side, the GP stakes, healthy stakes. That whole piece and directs is something that we're really seeing the benefit of coming on to our platform, and not just in terms of results, but also in terms of thinking about the business differently and how it can even scale much larger than I think maybe people thought it could have. I mean, feeling really good about it. A lot more to come.

Perfect. And then one quick tiki-tiki one for you, Lindsay. I just want to clarify a previous point. So your commentary is that the growth of non-comp dollars for the fiscal year is still expected to be in the high single digits range year on year. Is that correct?

Yes, that's correct.

Thank you so much. Of course.

Thank you. Your next question comes from Alex Bond from KBW. Please go ahead.

Hey, good afternoon, everyone. I just wanted to maybe drill down on the sponsor side of the market currently. And I know, you know, referenced earlier that, you know, the post-Labor Day market is shaping up, you know, expecting to see an increase there, but kind of across the market more broadly. But I'm wondering if that is, you know, consistent with what you're seeing in terms of in the sponsor market as well. And then especially just given, you know, some of the recent market tailwinds that we've had. And so, yeah, I guess just summarizing, you know, would you would you expect to see, you know, an increase in sponsor activity kind of after that Labor Day period? Or could I, you know, a more broader resumption and sponsor activity maybe take a little bit longer than that? Any color there would be great.

Yeah, I think that it's consistent. The sponsor activity has been muted, no doubt about that. And I think that's one of the reasons we're pretty happy with where things are, given the muted level of activity sponsors at the moment. But we certainly have seen it continue to pick up. Again, it is continuing to pick up, and we do expect it to pick up even more based upon dialogues that we're having right now.

And Labor Day for sponsors happens to be a nice inflection point to go to market. And so, yes, different than strategics, they tend to operate a bit more with the seasons, just given summer and vacation.

Got it. Okay, that's helpful. And then maybe just as a quick follow-up, I know you mentioned that, you know, you continue to expect the U.S. market to kind of outpace the EMEA region just from an M&A perspective. But I'm curious if, you know, if you could maybe just drill down a little bit more there and, you know, maybe any trends that you're seeing that are differing there or is, you know, or are you expecting to see, you know, a broader recovery in volumes in Europe as well? But maybe just, you know, stronger in the U.S., just any color there would be great as well.

Yeah, I think that our history is that they don't move, tend to move in exact unison. And I can tell you that when things started to turn down a number of quarters ago, the EMEA was slower to turn down than the U.S. And I think that this is just a cycle time. It's just coming out slightly slower. It's not dramatic differences.

Got it. Understood. That's helpful.

Thank you, guys. thank you thank you your next question comes from ryan kenny from logan stanley please go ahead hi thanks for taking my question so you mentioned that you're cautiously optimistic on the environment and my question is with markets at all-time highs and deal announcements picking up and tariff headlines coming through why not just optimistic and what are you hearing from clients that maybe would make them slow down a bit and getting more deals moving through the pipeline?

Yeah, I think just by our nature, we're measured, number one. Number two is really that we are living in an environment that has demonstrated a degree of uncertainty and volatility. And so that causes us to be measured in those statements. Having said that, if things continue on the way they are at the moment, feel very good about it. But it's just a recognition that we are living in more volatile times at the moment. Thank you.

Thank you. Your next question comes from Jim Mitchell from Seaport Global Securities. Please go ahead.

Hey, good afternoon. Hey, Jim. Scott, you talked about the acquisition environment still being robust and the pipeline being good. But as the environment picks up, does it get a little tougher to close the deals, or do you still think, regardless of the environment, there's still a lot of opportunity to consolidate?

That, at least based upon our history, that has not been a particularly strong indicator. And actually, if anything, it tends to work the other way. When things get really tough, people don't want to do deals.

And so it doesn't change my view at all. okay um and then just to follow up on restructuring i hear you right now the environment's still pretty good but i guess based on your history and encyclicality do you see if the fed's cutting rates we get through these tariffs the environment the economic environment does better does that business slow or is it just different because of liability management environment and you know there's still plenty of room to kind of grow that piece of the puzzle.

I think three years ago, we would have told you, yes, we would expect to see restructuring, you know, decline as M&A started to pick up. And that had happened many times in the past for us. You know, look, in this environment, restructuring has shown real resilience. And I think there are a whole bunch of factors for that resilience that lead to that resilience. And so, yeah, I don't want to sound too optimistic, but look, this may be the new trough for restructuring, you know, and when we see interest rates come down a little bit, which I think most people expect over time, if we see an improving economy with less volatility in the macro environment, I mean, shoot, we may see restructuring revenues kind of where they are today and waiting for the next cycle. So, we've stopped kind of guessing what the trough might look like for restructuring based on just how well it's performed over the last couple of years.

So, peak is the new trough.

Yeah, peak is the new trough. Okay.

If the interest rates go back to zero, that's right. Yeah, yeah, yeah.

I mean, normal cuts. That makes sense. Sure.

Thank you. Once again, if you do wish to ask a question, please press dial 1. Your next question comes from Ken Worthington from J.P. Morgan. Please go ahead.

Good afternoon. This is Madeline Delighted. And on for Ken, thanks for taking our question. You mentioned a strong MD hiring environment in your prepared remarks, and I think you've mentioned it in previous quarters as well. But we've been noticing your MD headcount growth has been significantly outpacing overall headcount growth for about the last 12 months. Is this a cognizant choice on your end to concentrate talent at more senior levels, or maybe even consolidating junior talent or administrative roles? Or is this more so just reflecting the opportunistic hiring that you're pursuing?

I think that we are always looking for talent. That is part of our business model. And we are very fortunate that given the success in our growth and the resilience of our business model, we've been able to continue to attract really fantastic talent. And that's really all over the world and across our product lines, and we're going to stay committed to that.

But I don't think there's no structural design that says we're growing senior talent and slowing down junior talent growth. It just probably happens in the numbers. My guess is we will revert back to kind of the structure that we've historically had. It just may be that the numbers aren't suggesting that right now.

Okay, great. Thank you. And are there any particular businesses or sectors you're focusing on for future hiring?

No, I mean, we really feel that in every one of our sectors and our products there is opportunity for growth and we are always looking for great people that we think are a strong cultural fit.

Thank you so much.

Thanks very much. Pleasure.

Thank you. There are no further questions at this time. I'll now hand the call back over to the company for closing remarks.

I want to thank you all for participating in our first quarter fiscal year 2026 earnings call. We look forward to updating everyone on our progress when we discuss our second quarter results for fiscal year 2026 this fall.

And that does conclude our conference for today. Thank you for participating. You may now disconnect.