Business Wire | May 11, 2021 04:15PM EDT

Houlihan Lokey Reports Fiscal Year and Fourth Quarter 2021 Financial Results

May 11, 2021

LOS ANGELES & NEW YORK--(BUSINESS WIRE)--May 11, 2021--Houlihan Lokey, Inc. (NYSE:HLI) ("Houlihan Lokey" or the "Company") today reported financial results for its fiscal year and fourth quarter ended March 31, 2021. For the fiscal year, revenues grew 32% to a fiscal year record of $1.53 billion, compared with $1.16 billion for the fiscal year ended March 31, 2020. For the fourth quarter ended March 31, 2021, revenues increased 65% to $501 million, compared with $303 million for the fourth quarter ended March 31, 2020.

Net income was $313 million, or $4.55 per diluted share, for the fiscal year ended March 31, 2021, compared with $184 million, or $2.80 per diluted share, for the fiscal year ended March 31, 2020. Adjusted net income for the fiscal year ended March 31, 2021 grew 51% to $317 million, or $4.62 per diluted share, compared with $211 million, or $3.20 per diluted share, for the fiscal year ended March 31, 2020.

Net income was $99 million, or $1.44 per diluted share, for the fourth quarter ended March 31, 2021, compared with $59 million, or $0.90 per diluted share, for the fourth quarter ended March 31, 2020. Adjusted net income for the fourth quarter ended March 31, 2021 was $104 million, or $1.51 per diluted share, compared with $63 million, or $0.96 per diluted share, for the fourth quarter ended March 31, 2020.

"Fiscal 2021 was a roller coaster year, with the first half led by restructuring and then followed by a very robust market for our M&A and valuation businesses. Houlihan Lokey's employees, once again, rose to the challenge and achieved record revenues for the 9th consecutive fiscal year. Our business performed exceptionally well and all three product lines did as they were designed to do. We remain committed to building upon a business model that will continue to provide growth and stability to our stakeholders" stated Scott Beiser, Chief Executive Officer of Houlihan Lokey.

Selected Financial Data

U.S. GAAP

(In thousands, except Three Months Ended March Year Ended March 31,per share data) 31,

2021 2020 2021 2020

Revenues $ 500,704 $ 302,694 $ 1,525,452 $ 1,159,368

Operating expenses:

Employee compensation 317,082 186,706 971,195 737,762 and benefits

Non-compensation 43,346 47,333 146,100 192,005 expenses

Operating income 140,276 68,655 408,157 229,601

Other (income)/ 473 (2,259) (1,071) (6,046) expense, net

Income beforeprovision for income 139,803 70,914 409,228 235,647 taxes

Provision for income 40,437 11,900 96,457 51,854 taxes

Net incomeattributable to $ 99,366 $ 59,014 $ 312,771 $ 183,793 Houlihan Lokey, Inc.



Diluted earnings per $ 1.44 $ 0.90 $ 4.55 $ 2.80 share

Revenues

For the fiscal year ended March 31, 2021, revenues increased to $1.53 billion, compared with $1.16 billion for the fiscal year ended March 31, 2020. For the fiscal year, Corporate Finance ("CF") revenues increased 24%, Financial Restructuring ("FR") revenues increased 52%, and Financial and Valuation Advisory ("FVA") revenues increased 17% when compared with the fiscal year ended March 31, 2020.

For the fourth quarter ended March 31, 2021, revenues increased to $501 million, compared with $303 million for the fourth quarter ended March 31, 2020. For the fourth quarter ended March 31, 2021, CF revenues increased 93%, FR revenues increased 38%, and FVA revenues increased 32% when compared with the fourth quarter ended March 31, 2020.

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. GAAP Adjusted (Non-GAAP) *

Year Ended March 31,

(Dollars in thousands) 2021 2020 2021 2020

Expenses:

Employee compensation and $ 971,195 $ 737,762 $ 953,409 $ 706,019 benefits

% of Revenues 63.7 % 63.6 % 62.5 % 60.9 %

Non-compensation $ 146,100 $ 192,005 $ 139,527 $ 176,476

% of Revenues 9.6 % 16.6 % 9.1 % 15.2 %

Provision for Income Taxes $ 96,457 $ 51,854 $ 116,418 $ 71,078

% of Pre-Tax Income 23.6 % 22.0 % 26.9 % 25.2 %

? 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. GAAP Adjusted (Non-GAAP) *

Three Months Ended March 31,

(Dollars in thousands) 2021 2020 2021 2020

Expenses:

Employee compensation and $ 317,082 $ 186,706 $ 311,531 $ 184,415 benefits

% of Revenues 63.3 % 61.7 % 62.2 % 60.9 %

Non-compensation $ 43,346 $ 47,333 $ 42,265 $ 45,063

% of Revenues 8.7 % 15.6 % 8.4 % 14.9 %

Provision for Income Taxes $ 40,437 $ 11,900 $ 42,410 $ 11,230

% of Pre-Tax Income 28.9 % 16.8 % 29.0 % 15.1 %

? 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.

Year Ended March 31, 2021 Compared to the Year Ended March 31, 2020

Employee compensation and benefits expenses were $971 million for the fiscal year ended March 31, 2021, compared with $738 million for the fiscal year ended March 31, 2020. This resulted in a GAAP compensation ratio of 63.7% for the fiscal year ended March 31, 2021, compared with 63.6% for the fiscal year ended March 31, 2020. Adjusted employee compensation and benefits expenses were $953 million for the fiscal year ended March 31, 2021, compared with $706 million for the fiscal year ended March 31, 2020. This resulted in an adjusted compensation ratio of 62.5% for the fiscal year ended March 31, 2021, compared with 60.9% for the fiscal year ended March 31, 2020. The increase in GAAP and adjusted employee compensation and benefits expenses was primarily a result of an increase in revenues for the year when compared with last year.

Non-compensation expenses were $146 million for the fiscal year ended March 31, 2021, compared with $192 million for the fiscal year ended March 31, 2020. Adjusted non-compensation expenses were $140 million for the fiscal year ended March 31, 2021, compared with $176 million for the fiscal year ended March 31, 2020. The decrease in GAAP and adjusted non-compensation expenses was primarily driven by lower travel, meals, and entertainment expenses and other operating expenses. The decrease in travel, meals, and entertainment expenses was primarily driven by reduced travel and entertainment activity as a result of the COVID-19 pandemic. The decrease in other operating expenses was due to a reduction in other miscellaneous costs, also driven in large part by the COVID-19 pandemic.

The provision for income taxes was $96 million, representing an effective tax rate of 23.6% for the fiscal year ended March 31, 2021, compared with $52 million, representing an effective tax rate of 22.0% for the fiscal year ended March 31, 2020. The adjusted provision for income taxes was $116 million, representing an adjusted effective tax rate of 26.9% for the fiscal year ended March 31, 2021, compared with $71 million, representing an adjusted effective tax rate of 25.2% for the fiscal year ended March 31, 2020. The increase in the Company's GAAP and adjusted effective tax rate during the year ended March 31, 2021 relative to the year ended March 31, 2020 was primarily the result of a beneficial state true-up that occurred in the quarter ended March 31, 2020 that did not repeat in the quarter ended March 31, 2021.

Quarter Ended March 31, 2021 Compared to the Quarter Ended March 31, 2020

Employee compensation and benefits expenses were $317 million for the fourth quarter ended March 31, 2021, compared with $187 million for the fourth quarter ended March 31, 2020. This resulted in a GAAP compensation ratio of 63.3% for the fourth quarter ended March 31, 2021, compared with 61.7% for the fourth quarter ended March 31, 2020. Adjusted employee compensation and benefits expenses were $312 million for the fourth quarter ended March 31, 2021, compared with $184 million for the fourth quarter ended March 31, 2020. This resulted in an adjusted compensation ratio of 62.2% for the fourth quarter ended March 31, 2021, compared with 60.9% for the fourth quarter ended March 31, 2020. The increase in GAAP and adjusted employee compensation and benefits expenses was primarily a result of an increase in revenues.

Non-compensation expenses were $43 million for the fourth quarter ended March 31, 2021, compared with $47 million for the fourth quarter ended March 31, 2020. Adjusted non-compensation expenses were $42 million for the quarter ended March 31, 2021, compared with $45 million for the fourth quarter ended March 31, 2020. The decrease in GAAP and adjusted non-compensation expenses was primarily driven by lower travel, meals, and entertainment expenses. The decrease in travel, meals, and entertainment expenses was primarily driven by reduced travel and entertainment activity as a result of the COVID-19 pandemic.

The provision for income taxes was $40 million, representing an effective tax rate of 28.9% for the fourth quarter ended March 31, 2021, compared with $12 million, representing an effective tax rate of 16.8% for the fourth quarter ended March 31, 2020. The adjusted provision for income taxes was $42 million, representing an adjusted effective tax rate of 29.0% for the fourth quarter ended March 31, 2021, compared with $11 million, representing an adjusted effective tax rate of 15.1% for the fourth quarter ended March 31, 2020. The increase in the Company's GAAP and adjusted effective tax rate during the quarter ended March 31, 2021 relative to the quarter ended March 31, 2020 was primarily the result of a beneficial state true-up that occurred in the quarter ended March 31, 2020 that did not repeat in the quarter ended March 31, 2021.

Segment Reporting for the Fourth Quarter

Corporate Finance

CF revenues increased 93% to $301 million for the fourth quarter ended March 31, 2021, compared with $156 million for the fourth quarter ended March 31, 2020. Revenues increased primarily due to a significant increase in the number of closed transactions and the average transaction fee on closed transactions.

Three Months Ended March Year Ended March 31, 31,

(Dollars in thousands) 2021 2020 2021 2020

Corporate Finance

Revenues $ 300,662 $ 156,081 $ 802,853 $ 646,788

# of Managing Directors 120 123 120 123

# of Closed transactions 151 84 360 309 ^(1)

Financial Restructuring

FR revenues increased 38% to $143 million for the fourth quarter ended March 31, 2021, compared with $103 million for the fourth quarter ended March 31, 2020. Revenues increased primarily due to an increase in the number of closed transactions and average transaction fee on closed transactions.

Three Months Ended March Year Ended March 31, 31,

(Dollars in thousands) 2021 2020 2021 2020

Financial Restructuring

Revenues $ 142,741 $ 103,079 $ 534,747 $ 352,517

# of Managing Directors 47 45 47 45

# of Closed transactions 35 29 138 99 ^(1)

Financial and Valuation Advisory

FVA revenues increased 32% to $57 million for the quarter ended March 31, 2021, compared with $44 million for the fourth quarter ended March 31, 2020. Revenues increased primarily due to an increase in the number of fee events and average fee per fee event.

Three Months Ended Year Ended March 31, March 31,

(Dollars in thousands) 2021 2020 2021 2020

Financial and Valuation Advisory

Revenues $ 57,301 $ 43,534 $ 187,852 $ 160,063

# of Managing Directors 31 30 31 30

# of Fee Events ^(1) 765 624 1,540 1,385

* A Fee Event includes any engagement that involves revenue activity during the measurement period based on a revenue minimum of $1,000. 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 June 15, 2021 to stockholders of record as of the close of business on June 2, 2021.

As of March 31, 2021, the Company had $1.1 billion of cash and cash equivalents and investment securities, and $56 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 5:00 p.m. Eastern Time on Tuesday, May 11, 2021, to discuss its full year and fourth quarter fiscal 2021 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 May 11, 2021 through May 18, 2021, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the passcode 13718782#. 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. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors (including the significant effect that the COVID-19 pandemic has had on our business and is expected to continue to have on our business) which are, in some cases, beyond the Company's control and could materially affect actual results, performance, or achievements. 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.

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 M&A advisor for the past six consecutive years in the U.S., the No. 1 global restructuring advisor for the past seven 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.

Appendix

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

HOULIHAN LOKEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except share data and par value) March 31, March 31, 2021 2020

Assets

Cash and cash equivalents $ 846,851 $ 380,373

Restricted cash 373 373

Investment securities 208,618 135,389

Accounts receivable, net of allowance for credit 108,409 80,912 losses

Unbilled work in process, net of allowance for 118,115 39,821 credit losses

Income taxes receivable - 4,282

Deferred income taxes 28,332 6,507

Property and equipment, net 46,370 42,372

Operating lease right-of-use assets 152,031 135,240

Goodwill and other intangibles, net 866,221 812,844

Other assets 50,747 38,890

Total assets $ 2,426,067 $ 1,677,003



Liabilities and Stockholders' Equity

Liabilities:

Accrued salaries and bonuses $ 648,399 $ 420,376

Accounts payable and accrued expenses 67,468 53,883

Deferred income 27,868 26,780

Income taxes payable 68,339 -

Deferred income taxes 52 664

Loans payable to former shareholders 818 1,393

Loan payable to non-affiliate - 3,283

Operating lease liabilities 174,516 154,218

Other liabilities 55,046 32,024

Total liabilities 1,042,506 692,621



Stockholders' equity:

Class A common stock, $0.001 par value.Authorized 1,000,000,000 shares; issued and 51 46 outstanding 51,245,442 and 46,178,633 shares,respectively

Class B common stock, $0.001 par value.Authorized 1,000,000,000 shares; issued and 17 19 outstanding 16,951,696 and 19,345,277 shares,respectively

Additional paid-in capital 803,573 649,954

Retained earnings 600,096 377,471

Accumulated other comprehensive (loss) (20,176) (43,108)

Total stockholders' equity 1,383,561 984,382

Total liabilities and stockholders' equity $ 2,426,067 $ 1,677,003



HOULIHAN LOKEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

Three Months Ended March 31,

Year Ended March 31,

(In thousands, except share and per share data)

2021

2020

2021

2020

Revenues

$

500,704

$

302,694

$

1,525,452

$

1,159,368

Operating expenses:

Employee compensation and benefits

317,082

186,706

971,195

737,762

Travel, meals, and entertainment

2,111

9,185

6,527

41,945

Rent

9,223

10,239

39,233

44,693

Depreciation and amortization

3,937

5,011

15,228

17,291

Information technology and communications

9,114

7,427

31,646

26,904

Professional fees

8,259

5,210

24,681

21,704

Other operating expenses

10,702

10,261

28,785

39,468

Total operating expenses

360,428

234,039

1,117,295

929,767

Operating income

140,276

68,655

408,157

229,601

Other (income)/expense, net

473

(2,259)

(1,071)

(6,046)

Income before provision for income taxes

139,803

70,914

409,228

235,647

Provision for income taxes

40,437

11,900

96,457

51,854

Net income attributable to Houlihan Lokey, Inc.

$

99,366

$

59,014

$

312,771

$

183,793

Weighted average shares of common stock outstanding:

Basic

66,104,427

62,011,301

65,785,042

62,152,870

Fully diluted

68,899,634

65,590,918

68,671,248

65,725,516

Earnings per share

Basic

$

1.50

$

0.95

$

4.75

$

2.96

Fully diluted

$

1.44

$

0.90

$

4.55

$

2.80

HOULIHAN LOKEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

Three Months Ended March Year Ended March 31, 31,

(In thousands,except share and 2021 2020 2021 2020per share data)

Revenues $ 500,704 $ 302,694 $ 1,525,452 $ 1,159,368

Operating expenses:

Employeecompensation and 317,082 186,706 971,195 737,762 benefits

Travel, meals, and 2,111 9,185 6,527 41,945 entertainment

Rent 9,223 10,239 39,233 44,693

Depreciation and 3,937 5,011 15,228 17,291 amortization

Informationtechnology and 9,114 7,427 31,646 26,904 communications

Professional fees 8,259 5,210 24,681 21,704

Other operating 10,702 10,261 28,785 39,468 expenses

Total operating 360,428 234,039 1,117,295 929,767 expenses

Operating income 140,276 68,655 408,157 229,601

Other (income)/ 473 (2,259) (1,071) (6,046) expense, net

Income beforeprovision for 139,803 70,914 409,228 235,647 income taxes

Provision for 40,437 11,900 96,457 51,854 income taxes

Net incomeattributable to $ 99,366 $ 59,014 $ 312,771 $ 183,793 Houlihan Lokey,Inc.



Weighted averageshares of common stock outstanding:

Basic 66,104,427 62,011,301 65,785,042 62,152,870

Fully diluted 68,899,634 65,590,918 68,671,248 65,725,516

Earnings per share

Basic $ 1.50 $ 0.95 $ 4.75 $ 2.96

Fully diluted $ 1.44 $ 0.90 $ 4.55 $ 2.80

HOULIHAN LOKEY, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED FINANCIAL INFORMATION

(UNAUDITED)

Three Months Ended March 31,

Year Ended March 31,

(In thousands, except per share data)

2021

2020

2021

2020

Revenues

$

500,704

$

302,694

$

1,525,452

$

1,159,368

Employee compensation and benefits expenses

Employee compensation and benefits expenses (GAAP)

$

317,082

$

186,706

$

971,195

$

737,762

(Less)/plus: Pre-IPO grant vesting

-

(6,055)

-

(24,324)

(Less)/plus: Acquisition related retention payments

(5,551)

3,764

(17,786)

(7,419)

Employee compensation and benefits expenses (adjusted)

311,531

184,415

953,409

706,019

Non-compensation expenses

Non-compensation expenses (GAAP)

$

43,346

$

47,333

$

146,100

$

192,005

(Less)/plus: Secondary offering related costs

-

-

(418)

(665)

(Less)/plus: Acquisition related costs

-

-

(1,258)

(579)

(Less)/plus: Acquisition amortization

(1,081)

(2,270)

(4,161)

(7,454)

(Less)/plus: Oracle ERP implementation

-

-

(736)

-

(Less)/plus: London office buildout

-

-

-

(6,831)

Non-compensation expenses (adjusted)

42,265

45,063

139,527

176,476

Operating income

Operating income (GAAP)

$

140,276

$

68,655

$

408,157

$

229,601

(Less)/plus: Adjustments (1)

6,632

4,561

24,359

47,272

Operating income (adjusted)

146,908

73,216

432,516

276,873

Other (income)/expense, net

Other (income)/expense, net (GAAP)

$

473

$

(2,259)

$

(1,071)

$

(6,046)

Less/(plus): Reduction of acquisition earnout liabilities

-

1,220

-

1,220

Other (income)/expense, net (adjusted)

473

(1,039)

(1,071)

(4,826)

Provision for income taxes

Provision for income taxes (GAAP)

$

40,437

$

11,900

$

96,457

$

51,854

(Less)/plus: Impact of the excess tax benefit for stock vesting

-

-

13,408

7,605

Adjusted provision for income taxes

40,437

11,900

109,865

59,459

(Less)/plus: Resulting tax impact (2)

1,973

(670)

6,553

11,619

Provision for income taxes (adjusted)

42,410

11,230

116,418

71,078

Net income

Net income (GAAP)

$

99,366

$

59,014

$

312,771

$

183,793

(Less)/plus: adjustments (3)

4,659

4,011

4,398

26,828

Net income (adjusted)

104,025

63,025

317,169

210,621

Diluted EPS (GAAP)

$

1.44

$

0.90

$

4.55

$

2.80

Diluted EPS (adjusted)

$

1.51

$

0.96

$

4.62

$

3.20

* The aggregate of adjustments from employee compensation and benefits and non-compensation expenses. * Reflects the tax impact of utilizing the adjusted effective tax rate on the non-tax adjustments identified above. * Consists of all adjustments identified above net of the associated tax impact. View source version on businesswire.com: https://www.businesswire.com/news/home/20210511006112/en/

CONTACT: Investor Relations 212.331.8225 IR@HL.com

CONTACT: Public Relations 212.331.8223 PR@HL.com