Houlihan Lokey Q1 Earnings Call Highlights

Houlihan Lokey NYSE: HLI reported first-quarter fiscal 2027 revenue of $511 million and adjusted earnings per share of $1.35, with management characterizing the quarter as a temporary disruption rather than a fundamental change in its outlook.

Chief Executive Officer Scott Adelson said Corporate Finance results were pressured by extended transaction timelines, particularly for larger-fee assignments, amid geopolitical uncertainty in the Middle East and disruption in the software sector as investors evaluate the longer-term effects of artificial intelligence.

Financial Restructuring performed generally in line with expectations, while Financial and Valuation Advisory posted growth across its service lines.

Corporate Finance revenue totaled $303 million, down 24% from the prior-year quarter.

The firm closed 127 transactions, essentially unchanged from a year earlier, but average fees on completed deals declined significantly.

Adelson said the delays were concentrated in consumer-facing businesses sensitive to inflation and consumer sentiment, as well as software companies where lower valuations prompted transactions to be reassessed.

He said many transactions expected to close during the quarter were delayed into later periods and that larger-fee assignments were disproportionately affected.

“The vast majority of delayed transactions continue to move through the pipeline, but timelines remain extended,” Adelson said.

He added that Corporate Finance new-business activity and backlog were at record levels and that the company had not seen a meaningful change in typical rates of transactions being terminated or placed on hold.

Chief Financial Officer Lindsey Alley said the company has experienced relatively greater softness in Europe than in the United States since the fourth quarter of fiscal 2026.

She said deal closings could remain uneven in the near term if macroeconomic events continue to affect transaction timing, but noted that pipeline, backlog and new-mandate activity had not deteriorated in the way they typically would in recessionary markets.

Management described the broader M&A market as “K-shaped,” with large-cap activity remaining strong while the middle market has not returned to normal conditions.

Adelson said the firm continues to see improvement in new mandates, the types of assignments being signed, and the percentage of deals entering the market.

“The party’s been going on for a while in the large cap,” Adelson said.

Financial Restructuring revenue was $119 million, generally meeting the company’s expectations.

The group closed 23 transactions during the quarter, down 34% from a year earlier, though average fees on completed transactions increased.

Adelson said restructuring activity...