Earnings Call Transcript - HLI Q1 2023

Operator, Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to Houlihan Lokey's First Quarter Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, July 28, 2022. I will now turn the call over to Christopher Crain, Houlihan Lokey's General Counsel.

Christopher Crain, General Counsel

Thank you, operator, and hello everyone. By now, everyone should have access to our first quarter fiscal year 2023 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. 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, 2022, 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 Beiser, Houlihan Lokey's Chief Executive Officer; and Lindsey Alley, Chief Financial Officer of the company. 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 Beiser, CEO

Thank you, Christopher. Welcome everyone to our first quarter fiscal year 2023 earnings call. We ended the quarter with record first quarter revenues of $419 million and earnings per share of $1.10. We are pleased with these results, particularly in light of some of the ongoing challenges in the macro environment. However, to give a more complete picture, while our revenues are higher than last year's reported results, if we include GCA's revenues as if we had acquired them on April 1, 2021, our comparable revenues would have declined approximately 14%. Throughout our fiscal first quarter and continuing into our second quarter, we are experiencing market headwinds that are impacting our Corporate Finance business, modestly impacting our Financial and Valuation Advisory business, and improving our financial restructuring opportunities. Our Corporate Finance business continues to exhibit trends which cut in both directions. Current market conditions are elongating the time to close transactions in selected sectors and geographies, lowering transaction valuations and fees. At the same time, corporate clients are performing well. The volume of new business activity remains quite healthy and market sentiment suggests that these headwinds are temporary. It is difficult to predict where the economy will take us over the next couple of quarters. We may slide into a recession that could significantly affect the M&A market, or we may continue along like this for a couple of quarters before seeing improving results. Nonetheless, we are confident in the fact that we are seeing strong activity levels in our Corporate Finance business, with the quality of clients at a level we have never seen before. Regardless of the timing of closing transactions, we continue to build high-quality potential deferred revenues in our backlog, suggesting that our reputation and market share continue to grow. Financial and Valuation Advisory continues to experience solid growth and recorded a 19% increase in revenues year-over-year for the fiscal first quarter. That being said, current market conditions are also having a modest impact on FEA's growth prospects. For the first quarter, our current mix of service lines, quality of the team, and meaningful increase in headcount enabled us to record solid revenue growth despite these market headwinds. FEA remains our least volatile business and given its diverse service offering has historically performed better than our Corporate Finance business in weaker M&A markets. Financial restructuring remains an important component of the firm's overall diversification strategy. Based on activity levels in Financial Restructuring, we believe we are in the initial stages of a stronger business environment for restructuring. The typical restructuring cycle starts with an increase in conversations, which progresses to verbal engagements, to contractual engagements, to execution work and finally to close transactions. Today, our number of verbal engagements is the highest in nearly 18 months. While these new opportunities will have limited financial impact on our fiscal 2023 results, if these verbal engagements translate into closed transactions, we anticipate improving results in fiscal 2024. Today's opportunities in restructuring have been broad-based across industries and, up until this point, greater in Europe and Asia versus the US. Given the size and importance of the US market, we are closely monitoring opportunities and we believe we are well-positioned if or when this market catches up with Europe and Asia. Turning to growth, in the quarter ended June 30, we internally promoted 29 employees to Managing Director. We also externally hired six Managing Directors. On the acquisition front, we remain selective and are pursuing opportunities we believe are a strategic fit to our business model and are accretive to shareholders. We are pleased with our current pipeline of acquisition opportunities and believe this pipeline will only increase if financial market conditions worsen. In closing, we are thrilled to be celebrating our 50th anniversary this year. Investment banking is quite competitive and I'm so proud of how well our employees in this firm have done over five decades. I want to thank all of our employees, our clients, and our shareholders for their part in making Houlihan Lokey the successful firm it has become. Collectively, we look forward to what we can build in the next half-century. And with that, I'll turn the call over to Lindsey.

Lindsey Alley, CFO

Thank you, Scott. Revenues in Corporate Finance were $264 million for the quarter, up 26% when compared to the same quarter last year. We closed 124 transactions this quarter compared to 84 in the same period last year, but our average transaction fee on closed deals decreased for the quarter. As a reminder, for comparative purposes, since we did not complete the acquisition of GCA until October 2021, Houlihan Lokey's revenue for the quarter ended June 30, 2021, did not include revenues for GCA of approximately $112 million for that quarter. Financial Restructuring revenues were $79 million for the quarter, a 20% decrease from the same period last year. We closed 16 transactions in the quarter compared to 24 in the same quarter last year, and our average transaction fee on closed deals increased for the quarter. This quarter ends up as expected, given that during the fourth quarter of fiscal year 2022, ending in March, we had several transactions close that were expected to close in the first quarter of fiscal year 2023. Financial and Valuation Advisory revenues were $76 million for the quarter, a 19% increase from the same period last year. We had 876 fee events during the quarter compared to 820 in the same period last year. FEA continues to see growth across almost all service lines and has good momentum as we enter our second fiscal quarter despite the headwinds that Scott mentioned. Turning to expenses, our adjusted compensation expenses were $257 million for the first quarter versus $229 million for the same period last year. Our only adjustment was $8.3 million for deferred retention payments related to certain acquisitions. Our adjusted compensation expense ratio was 61.5% for the first quarter, equal to the same period last year. Our adjusted non-compensation expenses were $60 million for the quarter. This was similar to our adjusted non-compensation expense in each of the last two quarters, which included GCA's non-compensation expenses. Last year's quarter that ended June 30, 2021, does not include non-compensation expenses for GCA of approximately $13 million, which led to some of the increase when comparing this year's first quarter to last year's first quarter. Non-compensation expenses also increased as a result of an increase in travel, meals, and entertainment expenses as our bankers have significantly increased work-related travel and other operating expenses due to increased in-person meetings, in-person training, and conferences. We expect to continue to see increases in all categories of non-compensation expense due to increased travel, information technology and real estate investment, and in some cases, inflation. This resulted in an adjusted non-compensation expense ratio of 14.2% for the quarter versus 8.5% in the same quarter last year. For the quarter, we adjusted out of our non-compensation expenses, $16 million in non-cash acquisition-related amortization, the vast majority of which was amortization related to the GCA transaction. We expect significantly elevated levels of amortization relating to this acquisition through fiscal year 2023. Our adjusted other income and expense increased for the quarter to an expense of approximately $500,000 versus income of approximately $100,000 in the same period last year. We adjusted out of our other income and expense $1.3 million related to a non-cash revaluation of a warrant that was assumed as part of the GCA acquisition. Our adjusted effective tax rate for the quarter was 24.9% compared to 26.7% during the same quarter last year. We maintain our long-term range for our effective tax rate of between 27% and 29%. We had two adjustments to our effective tax rate this quarter. We adjusted out of our GAAP effective tax rate, a benefit that we received as a result of our stock vesting in the first quarter, and we adjusted out the benefit we received for the reversal of an uncertain tax position we had relating to a state audit. Turning to the balance sheet and uses of cash. As at the quarter end, we had approximately $525 million of unrestricted cash and equivalents and investment securities. Our cash position declined this quarter as we paid a significant portion of our fiscal year 2022 bonuses to employees in May. Also in our first quarter, we issued approximately $1.8 million net new shares to employees as part of our fiscal year 2022 year-end compensation. In the first quarter, we repurchased approximately 430,000 shares at an average price of $84.86 per share as part of our share repurchase program. Historically, we have sought to repurchase throughout the year whatever compensation shares we issue in May in order to offset the dilution associated with those shares. Given the reduced amount of excess cash due to the size of the GCA acquisition and our belief that during times of stress, we have an increased potential to be opportunistic in our M&A activity, we may be more conservative in our share repurchases in the first half of this year. With that, operator, we can open the line for questions.

Operator, Operator

Thanks. And we will go first to Brennan Hawken of UBS.

Scott Beiser, CEO

Good afternoon. Thanks for taking my questions. Hope you're well, Scott and Lindsey. Hi, Brennan.

Brennan Hawken, Analyst

I want to start by mentioning that Scott commented on restructuring in his prepared remarks and highlighted an improving environment for restructuring, especially in Europe and Asia. I understand that much of the outlook will depend on the economic trajectory, but based on what you can see today, what is the consensus view of the current outlook? What kind of opportunities do you think we might expect? Is there a historical period you could reference that would serve as a fair comparison?

Scott Beiser, CEO

Well, I think we've said for quite some time, the opportunity has always been larger today than it has been in previous periods. Just the total amount of leverage indebtedness is much greater than any period we've seen; there are just more companies with leverage. We think what happened especially coming out of or during COVID, a lot of companies were just able to stall any difficulties they might've had, probably due to central bank intervention. And so, while clearly ongoing distress in the economy, higher interest rates, inflation, etc. will improve prospects for Financial Restructuring, we think many of these companies, which probably in a normal cycle would have had some difficulties one or two years ago, they're just coming into play now. And we're obviously seeing a bit more stress as we mentioned in Europe and Asia. So I don't see at this juncture the kind of very sharp downward decline that we saw for a very short period in COVID or a more lengthy period we saw in the Great Recession. But at the moment, this just feels like a longer duration of some level of distress and probably some of the companies that could have entered into difficulties previously are now in that stage in the current moment. Although, as we said, it will take some time before these produce actual and sizable financial results, but the volume of conversations is clearly up.

Brennan Hawken, Analyst

Okay, that's helpful. And then switching gears to the Corporate Finance business. The release pointed to healthy new business activity despite the fact that it also said there was a slowdown in global M&A. So maybe if you could help square that. Is the idea that maybe there's just more resilience in deals under $1 billion, or is the resilience in the Corporate Finance business more about a pickup in non-M&A advisory activity?

Scott Beiser, CEO

I think it's partly what we've built. I believe we're very diversified across geographies now, very diversified across different industry sectors, and we do have some diversification away from traditional M&A whether that's capital markets, private funds placement, etc. So all of that, as well as, I think an ongoing increased presence and brand reputation of the firm has continued to enable us to do better than the macro market statistics. At the moment, we do think that the mid-cap deals that we're working on, there is a good amount of volume out there. I know there's been a lot of commentary by others on what the financial sponsors are doing, but we still see activity level in the financial sponsors. I think also the fact that we're now, call it, five or six months into at least this stock market, bond market business downturn, sellers and buyers are getting closer to parity in terms of how they view assets, which is a better comment than maybe where we were three months ago. I wouldn't say that they're identical at this point, but usually when these downturns occur, after a while, eventually sellers can move into buyers' perspectives, which tend to move quicker than sellers.

Brennan Hawken, Analyst

Great. Thanks for the color. Really appreciate it.

Scott Beiser, CEO

Thanks, Brennan.

Lindsey Alley, CFO

Thanks, Brennan.

Operator, Operator

We'll go next to James Yaro of Goldman Sachs.

James Yaro, Analyst

Hey. Thanks for taking my questions. So maybe I'll just turn to FEA, which continued to see really robust growth and reaching a record this quarter. You've been growing at roughly 20% year-on-year for almost two years now in that business. As we head into what could be a more challenging M&A backdrop? What's the ability to continue this cadence of growth given that, as you've talked about in the past, some businesses in FEA are more M&A activity related?

Scott Beiser, CEO

Yeah, we still feel very good about the FEA business and whether it's mid-term to long-term, we think we've got a lot of growth potential out there. As we mentioned, the headwinds that are impacting M&A still do impact FEA as well, but not as much. There are certain components of the service lines that are not nearly impacted by what's happening in the market environment. I think we've added some great talented people, we've expanded into some new geographies and become probably a little bit more sector-focused in this area. We think there is still plenty of potential for growth out here. All things being equal, it will grow faster if we weren't in the market environment that we are, but we still think we can continue to grow that business for the foreseeable quarters and years if market conditions stay at least where they're at.

Lindsey Alley, CFO

Yeah. And I think that the key is, in these market conditions, the headwinds are more manageable, but if we drop into a more severe M&A market, we'll start to see some of the product lines and some of the service lines in FEA affected in a much more meaningful way.

James Yaro, Analyst

Okay. That makes a lot of sense. Maybe if I just turn to your capital return priorities at this point and specifically around the attractiveness of inorganic growth. Maybe if you could just talk about whether you think that's – that inorganic growth opportunity has increased over the course of the year? And maybe if you could perhaps compare it against what you saw in 2021 when I know you had talked about the attractiveness of going out and doing some deals.

Scott Beiser, CEO

I think we've been active for probably at least a decade of always talking to a certain number of companies. For different reasons, I think when times get a little tougher, companies that are much smaller than ours realize that the expanded platform that we have should enable their bankers to do much better on a platform like ourselves than the platform that they might have. So that starts the conversations; there still needs to be a good strategic fit, there needs to be a good people fit. So I think at any given time we are always looking at a handful or maybe more than a handful of different companies across some different geographies, industry sectors, or incremental service lines.

James Yaro, Analyst

Okay. Thank you so much.

Scott Beiser, CEO

Thanks.

Operator, Operator

And we'll hear next from Manan Gosalia of Morgan Stanley.

Manan Gosalia, Analyst

Hey, good afternoon. I wanted to follow up on restructuring. I appreciate all the comments on the fact that distressed opportunities are ramping up. There is a view out there that given the share of volume of refinancing done last year while rates were low, that liquidity ratio is just still healthy and that will give some of the high-yield and equivalent borrowers a little bit more time. But it sounds like that's not what you're seeing. So I was wondering if you can comment on that?

Scott Beiser, CEO

I will begin by discussing the core aspects of the company and its business strategy, evaluating whether it is effective or needs adjustments in today's market. Next, I will consider the company's capital structure. Some businesses may require changes to their strategies, others might only need updates to their capital structure, and some may require liquidity or liability management rather than a traditional restructuring. Therefore, I wouldn't conclude that what you've described will necessarily reduce the amount of restructuring activity. The process really hinges on the nature of the company's operations and how relevant it is within the current market. Additionally, it's important to also consider any capital structure challenges.

Manan Gosalia, Analyst

Sure. As a follow-up to that, are there any clear leaders or clear problem sectors that you see? I appreciate you called out Asia and Europe. But are there any companies maybe on the tech side or companies that may be exposed to the consumer? And if it stacked, is there an opportunity here for you to get additional business given the GCA acquisition, or is it too early to talk about synergies on the restructuring side?

Scott Beiser, CEO

I believe the situation is quite broad across various sectors; it's difficult to pinpoint a specific one. However, I can highlight a few aspects. The crypto landscape, which didn't exist a few years back, has emerged as a new area. On the technology front, our abilities have significantly improved thanks to the GCA acquisition. Additionally, looking back about a decade, most tech firms traditionally had little debt in their capital structures. Yet, many tech companies, especially those with recurring business models, have taken on significant debt in recent years, which may open up opportunities for potential restructuring. The ongoing conflict in Ukraine has notably affected many European countries more than the US at this time, contributing to some of the stress we see. There are also discussions about real estate issues in China and other regions that have been escalating. In the US, I wouldn't yet identify a specific industry facing challenges. Overall, the situation remains quite broad.

Manan Gosalia, Analyst

Great. Thanks so much.

Operator, Operator

And we'll go next to Devin Ryan with JMP Securities.

Devin Ryan, Analyst

Thanks. Good afternoon guys. How are you?

Scott Beiser, CEO

Hey, Devin.

Devin Ryan, Analyst

Maybe to come back to the conversation on the M&A advisory outlook. So, good to hear kind of new business activities coming in. On the other side, hearing about the elongation, deal closings and just maybe a slowdown of the deal closing, which I think is being seen by most in the industry. Are you guys actually seeing deals, because now we're maybe a couple of quarters into that, are you seeing deals actually breaking off yet or people still kind of kicking the can down the road? And then is the issue just uncertainty around just the macro and the outlook that's creating a wide bid-ask spread or is financing or maybe financing friction creating meaningful challenges as well?

Scott Beiser, CEO

In comparison to the 2008-2009 recession and possibly the COVID-2020 period, where we observed a significant amount of business entering a state of hold or falling into debt, we are not experiencing that in our business at this time. It’s difficult to determine whether something will be put on hold or will collapse until we are directly involved. We are noticing that fewer new buyers are approaching sellers, which diminishes the urgency to persuade buyers to close quickly. Buyers now have greater leverage than they previously did, and lenders are similarly in a stronger position. This dynamic is leading buyers and lenders to ask more questions, potentially request additional time for financial results, and engage in some price renegotiation. These factors are contributing to delays in timing. From the perspective of an M&A investment banker, we prefer deals to close faster, but the process is taking longer. We are not observing any significant or even minor reductions in the number of deals that we believe will not happen; instead, they are simply taking longer than they did three months, six months, or a year ago.

Lindsey Alley, CFO

And as Scott has said in the past, I mean, if we're still having the same conversation next quarter, I think you're going to start, those on-hold deals will likely start to move into a different category. This really depends on how long this choppiness in the market occurs and which direction we come out of it.

Devin Ryan, Analyst

Yeah. Understood. I appreciate the color there. And then, I guess somewhat interrelated, but the capital markets business, I believe, it sounded like it was doing relatively well. I would think that it could perform well in this environment; there might be a need for your services; there is a little bit more complication in the backdrop. But can you maybe just talk about how that business is actually doing now? And then, just the outlook over the intermediate term for the capital markets business specifically?

Scott Beiser, CEO

Yeah. Short-term market conditions make it a little more choppy to complete deals in the capital markets area, but mid-term and long-term, we actually think the amount of choppiness out there is actually good for us and our competitors. Because the real competition is always been clients themselves believing that they can complete the deals. So it's not as easy for somebody to do financings. I think there is continually being a shift away from the traditional bank lending marketplace to the non-bank or direct lenders. And that's been much more where we can participate. So I think the outlook actually looks better and I think the business is doing well. And probably on a percentage basis this fiscal year, it will do a larger percentage of Corporate Finance than it did last year, mostly just because the M&A marketplace was much stronger in our fiscal ‘22 and it's clearly tailed off into fiscal ‘23.

Devin Ryan, Analyst

Yeah, that makes sense. Okay, terrific. I'll leave it there. Thanks, guys.

Scott Beiser, CEO

Thanks, Devin.

Operator, Operator

And we will go for the next question from Steven Chubak of Wolfe Research.

Brendan O'Brien, Analyst

Good afternoon, this is Brendan O'Brien filling in for Steven. So I guess first, the comments on the pace of new activity are encouraging, given the current environment. I just wanted to get a sense as to how the current pace compares with last quarter and maybe relative to 2019 levels? I was also hoping you could provide some color as to how things are trending so far this quarter. I just want to get a sense as to how things progress since we last heard from you.

Scott Beiser, CEO

In terms of absolute new business activity, the June quarter compared to the March quarter is likely flat or slightly better. New activity hasn't been a challenge for our company or the industry. When we look back at 2019, it's a bit more complicated since that was before the acquisition. The amount of new business, in terms of both the number of deals and dollar value, is significantly higher today than it was in 2019. Including the acquisition, the new business remains strong, but comparing periods is tricky due to the size and significance of the GCA acquisition.

Lindsey Alley, CFO

And then I think relating to how is the quarter going. I mean, clearly, our comments today reflect what we've seen so far in this quarter even though they're supposedly as of June 30. So I'd say our comments reflect the first 27, 28 days of July as well.

Brendan O'Brien, Analyst

Got you. That's very helpful. And I guess, on the Corporate Finance business again. You noted how Europe is obviously facing more significant headwinds arguably given proximity to war in Ukraine and greater reliance on Russian exports. And as well as the weakening global growth outlook in China. I was hoping you could maybe discuss the differences in activity levels that you're seeing between the different geographies across both traditional M&A and restructuring.

Scott Beiser, CEO

So two different tasks, obviously, on M&A versus restructuring. In Europe, the economy does clearly feel worse than the United States. Having said that, I think because of the substance and quality of people we have, in part because of the recent acquisition we did, our presence is much greater. In fact, the number of significantly larger-sized transactions and therefore potentially larger-sized fees is much greater today than we've seen before. And I think that's a testament to, once again, combining with our new partners and what we're able to achieve. In Asia, we still tend to do more work or see more volume on the restructuring side. We do have a very good and strong presence in Japan as well on the healthy M&A side. And in the United States, we haven't seen the speed of increased volume on restructuring like we mentioned in our comments that we had in either Europe or Asia at this point. But the US marketplace for restructuring potentials is just much greater; it's just a bigger market. So I think we'll have to see kind of how the US economy, US interest rates, US supply issues, etc. continue to fold out. When we look at the actual amount of sponsor activity, it's still doing rather well, not only in the United States, but also in Europe. And like I said, we've continued to see relatively good results in terms of new activities. We are really waiting and hoping that we'll be able to start shrinking the timeframe and be able to take a lot of that new activity and turn it into revenues. It just hasn't happened at the pace that we would have thought or in a comparison basis if you were asking us that question six or nine months ago.

Brendan O'Brien, Analyst

That's great color. Thanks for taking my questions.

Operator, Operator

And we move to a question from Michael Brown with KBW.

Michael Brown, Analyst

Hi, Scott. Hi Lindsey. How are you guys?

Scott Beiser, CEO

Hi, Mike.

Lindsey Alley, CFO

Hi, Mike.

Michael Brown, Analyst

I want to follow up on the capital markets advisory commentary from the earlier question. Scott, you mentioned that the contribution will likely be higher this year, which makes sense. Could you just put a finer point on that? I don't think we've ever really heard what the contribution is from that business. I know you've been investing to grow HLI Finance. So generally, what would be the range in terms of the revenue contribution? And what is the MD headcount in that business now?

Scott Beiser, CEO

We never disclosed the MD headcount in that business. We have said on previous calls, I believe, that the revenues for that business is anywhere from 15% to 25% and expected to be towards the higher end of the range this year, but in previous years depending on just how strong the M&A markets are, it's been towards the lower end of the range. But it contributes significantly to the total revenue for Corporate Finance.

Michael Brown, Analyst

Okay, great. And Lindsey, just on the expenses, clearly, there is inflationary pressure on the expense base. How should we think about maybe the right jumping-off point from here when we're thinking about the expenses going forward?

Lindsey Alley, CFO

Well, we've had consistency for three quarters, which has been nice. I do think there is some seasonality in these numbers, just based on sort of investments we make in the business throughout the year, whether it's training, or whether it's in the off-sites we have. So if you take a look at some historical years in terms of how that business or how our non-compensation expenses have moved, I'd say, you're likely to see some pressure certainly in the second half of the year on the $60 million we delivered this quarter. Next quarter, I'd say probably you're going to see slightly higher non-compensation expenses. But I would take a look at the seasonality view that last two or three years is a kind of proxy and that's probably not a bad estimate for this year.

Michael Brown, Analyst

Okay. That's helpful. Thanks for taking my questions.

Operator, Operator

And we'll go next to Jeff Harte with Piper Sandler.

Jeff Harte, Analyst

Good afternoon, everyone. I have a couple of follow-up questions. You mentioned financing availability. Can you elaborate on that? I'm particularly interested in how it affects the middle market compared to some of the larger transactions you are observing. How accessible is financing, and how crucial is it for the middle market business?

Lindsey Alley, CFO

The availability of financing is always significant, but it's essential to maintain the right perspective. We are far from the situation in 2008 and 2009 when financing was virtually unavailable. As we approach this downturn, the number of financiers is significantly higher than it was 15 years ago. The financial stability of banks has improved, and there are more creative solutions being developed. Although financing is more challenging to obtain now compared to a year ago, and traditional bank lending has definitely slowed, there are still financing options available for the deals we are discussing with executives or private equity firms. While interest rates are higher and there may be different structures or covenants involved, I don't believe that the deals we are pursuing are unachievable due to a lack of financing.

Jeff Harte, Analyst

Okay. And then sticking with the middle market, can you give us some kind of incremental color on changes you're seeing if you are seeing any intent of dialogs and planned transaction appetite? I’d suppose I'm thinking of middle market activity as kind of a leading indicator. It seems to slow first and restart first in prior cycles.

Scott Beiser, CEO

We have mentioned that the timeline for closing middle market deals is typically shorter than for large-cap deals. Many of the larger deals that are being completed now were initiated a few months ago, and some date back to 2021. Currently, there is still interest from both strategic and private equity investors in pursuing deals. However, the number of participants in general transactions or auctions is lower than in the past. Despite this, there are still enough interested parties to complete transactions successfully.

Jeff Harte, Analyst

Okay. Finally, restructuring, you mentioned faster acceleration or pickup in kind of Europe and Asia than the US. Can you tie any of that to kind of the GCA transaction? You used to have a bigger business over there, some cross-sell opportunities from existing bankers, or is it too soon to draw that conclusion?

Scott Beiser, CEO

Clearly, we have achieved more results on all three of our primary business segments, including the restructuring from the event of having incrementally much bigger and broader staff in Europe and in Asia and with the skills that they brought on the technology space, etc. But I'd say most of the new dialogue and activity that we're seeing in restructuring is coming from the marketplace changes and not necessarily because we've dramatically changed our headcount and skills. It's clearly helpful, but I would say at this point, it's more market-driven than something unique to Houlihan Lokey versus other firms.

Jeff Harte, Analyst

Okay, thank you.

Scott Beiser, CEO

Thanks, Jeff.

Lindsey Alley, CFO

Thanks, Jeff.

Operator, Operator

And it appears there are no further questions at this time. I'd now like to turn the conference to Scott Beiser for any additional or closing remarks.

Scott Beiser, CEO

I want to thank you all for participating in our first quarter fiscal year 2023 earnings call. And we look forward to updating everyone on our progress when we discuss our second quarter results for fiscal 2023 this coming fall.

Operator, Operator

And so, this concludes today's call. Thank you for your participation. You may now disconnect.