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    HLI
    Earnings call· Mar 2026(Q4 FY26)

    HOULIHAN LOKEY Q4 FY26 earnings call HLI

    May 6, 2026 Source

    Executive summary

    Houlihan Lokey Q4 FY26 — Record Annual Revenue and EPS, Strong Backlog

    Houlihan Lokey delivered record annual revenue and adjusted EPS in FY26, showcasing the strength and resilience of its diversified business model despite Q4 headwinds from geopolitical uncertainty and software sector volatility. The firm enters FY27 with a robust backlog, an expanded managing director count, and an active acquisition pipeline, positioning it for continued performance across varying market conditions.

    Highlights

    5

    • Achieved record FY26 revenue of $2.6 billion, up 10% year-over-year.

    • Reported record FY26 adjusted EPS of $7.56, an increase of 20% year-over-year.

    • Corporate Finance and Financial Valuation and Advisory segments produced record annual revenues.

    • Financial Restructuring business had one of its strongest years on record.

    • Ended the fiscal year with a record level of backlog and pipeline, and a record number of managing directors.

    Concerns

    3

    • Q4 results were impacted by the closing of 2 larger Financial Restructuring transactions extending beyond quarter end.

    • Growth in Q4 Corporate Finance and Financial Valuation and Advisory was affected by geopolitical uncertainty and market volatility in the software sector.

    • Average transaction fee on closed deals decreased in both Corporate Finance and Financial Restructuring for the quarter.

    Guidance & targets

    5
    CategoryTargetConfidence
    Adjusted compensation expense ratio
    61.5%
    high materiality
    High
    Adjusted non-compensation expenses growth
    similar growth to fiscal 2026
    medium materiality
    Medium
    Financial Restructuring business performance
    continue to perform at elevated levels
    high materiality
    High
    Financial and Valuation Advisory business growth
    growth
    medium materiality
    Medium
    Adjusted effective tax rate
    about half of our fourth quarter adjusted effective tax rate
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Corporate Finance
    Experienced solid backlog growth and improved transaction metrics across most industry groups, with technology being an exception. Revenues outside the U.S. grew significantly faster than U.S. revenues in both Q4 and FY26. M&A deal timelines extended due to geopolitical uncertainty.
    Transactions closed: 171 (up from 147 YoY)Average transaction fee on closed deals: decreased
    		$434 million5%——
    Financial Restructuring
    Q4 results were impacted by the delayed closing of 2 larger transactions. Expectations for FY27 have improved due to tailwinds like widening credit spreads, private credit dislocation, and energy volatility, driving increased activity levels.
    FY26 Revenue: $529 million (down 3% from FY25)Transactions closed: 30 (down 21% YoY)Average transaction fee on closed deals: decreased
    		$110 million———
    Financial and Valuation Advisory
    Segments of the business saw disruption from macro events in Q4, but momentum has returned to more normal levels. Management expects growth in fiscal year 2027.
    Fee events: 1,248 (up 2% YoY from 1,224)
    		$91 million3%——

    Operational metrics

    16
    Adjusted EPS
    $7.56up 20% YoY
    FY26

    Record adjusted EPS for the fiscal year.

    Adjusted EPS
    $1.63
    Q4 FY26

    Adjusted EPS for the fourth quarter.

    Adjusted compensation expenses
    $391 millionvs $410 million YoY
    Q4 FY26

    Adjusted compensation expenses for the fourth quarter, with a $18 million adjustment for deferred retention payments.

    Adjusted compensation expense ratio
    61.5%flat YoY
    Q4 FY26

    Adjusted compensation expense ratio for the fourth quarter, consistent with the prior year.

    Adjusted non-compensation expenses
    $94 millionup 10.5% YoY
    Q4 FY26

    Adjusted non-compensation expenses for the fourth quarter, after adjusting out $5.8 million in acquisition-related costs and $1.7 million in noncash acquisition-related amortization.

    Adjusted non-compensation expenses growth
    10.7%
    FY26

    Growth in adjusted non-compensation expenses for the full fiscal year.

    Adjusted non-compensation expense ratio
    13.9%
    FY26

    Adjusted non-compensation expense ratio for the full fiscal year.

    Adjusted effective tax rate
    23.7%vs 29.8% in FY25
    FY26

    The decrease was primarily due to a change in policy regarding the impact of stock compensation deductions.

    Cash and investments
    $1.4 billion
    Q4 FY26

    Balance at the end of the quarter, with a significant portion earmarked for accrued but unpaid bonuses.

    Share repurchases
    300,000 shares
    Q4 FY26

    Shares repurchased as part of the share repurchase program.

    Quarterly dividend
    $0.70up 17% vs FY26 quarterly dividend
    Q1 FY27

    Board approved increase in quarterly dividend, to be paid in June.

    Managing Directors hired/acquired
    33
    FY26

    Total number of managing directors hired or acquired during the fiscal year.

    Managing Directors promoted
    25
    Q1 FY27

    Number of colleagues promoted to Managing Director in the first quarter of fiscal year 2027.

    Total employees
    2,700
    Q4 FY26

    Total number of employees at the company.

    Capital Solutions revenue as % of Corporate Finance revenue
    above 20%
    Q4 FY26

    Capital Solutions business represents a significant portion of Corporate Finance revenues, with exceptional outlook and momentum.

    Private equity portfolios over 5 years old
    over 50%
    as of December 31

    Indicates significant pent-up demand for transactions from private equity sponsors.

    Deals & partnerships

    2
    Audere PartnersWelcoming new colleagues from Audere Partners

    Acquisition closed in the fourth quarter of fiscal year 2026.

    Mellum CapitalWelcoming new colleagues from Mellum Capital

    Acquisition closed in the fourth quarter of fiscal year 2026, strengthening the firm's presence in Europe, particularly in real estate and France.

    Risks & headwinds

    4
    Geopolitical uncertainty and macroeconomic pressuresQ4 FY26 and Q1 FY27

    Impacted Q4 CF and FDA growth; extended M&A deal timelines

    Mitigation: Diversified business model, strong backlog, and adaptability to market conditions.

    Market volatility in the software sectorQ4 FY26 and FY27

    Impacted Q4 CF and FDA growth; assumed to affect FY27

    Mitigation: Diversified industry groups within Corporate Finance; expectation of 'winners and losers' as market differentiates.

    Decreased average transaction feesQ4 FY26

    Decreased in CF and FR for Q4 FY26

    Mitigation: Management notes that FR average transaction size varies by quarter and is not a trend; CF backlog growth and improved metrics in other areas.

    Pricing pressures in Financial and Valuation Advisory due to AI commoditizationLonger term

    Discussed as a potential future pressure

    Mitigation: Investing in technology and AI to leverage data and enhance models; TAM growth expected to outpace pricing declines; industry consolidation benefiting larger firms.

    What to watch in Q1 FY27

    5

    Corporate Finance deal velocity and closing timing

    Q1 FY27
    CurrentSlowed in Q4 FY26 due to uncertainty, but picking up
    TargetContinued increase in activity and deal closures

    Why it matters

    Indicates the pace of M&A activity and conversion of strong backlog into revenue, crucial for Corporate Finance performance.

    M&A deal time lines have extended due to the geopolitical uncertainty🌐 created around the war in the Middle East and its ripple effects and we expect that dynamic to persist as long as there is uncertainty. These time line shifts may moderate our growth a bit in our first quarter for fiscal year 2027, similar to the impact on our growth in the fourth quarter.

    Q&A highlights

    7

    Why has the outlook for Restructuring improved from last quarter's expectation of revenue pressures to now expecting elevated performance?

    The improved outlook is due to increased activity levels and new mandates driven by recent market disruptions, such as issues in the software sector, geopolitical events, and energy volatility. Management is confident the business will perform at elevated levels in FY27 and potentially beyond.

    “I think that what you're seeing is kind of the flip side of the troubles that occurred on the Corporate Finance side during the quarter also created opportunity in -- on the Restructuring side.”

    asked by Brennan Hawken · answered by Scott Joseph Adelson

    2 min read6 chapters

    Detailed Narrative

    01

    FY26 Performance Highlights

    Houlihan Lokey concluded fiscal year 2026 with record revenues of $2.6 billion, marking a 10% increase year-over-year, and adjusted EPS of $7.56, up 20%. Both Corporate Finance and Financial Valuation and Advisory segments achieved their highest annual revenues ever, while the Financial Restructuring business recorded one of its strongest years. These results underscore the firm's robust performance despite a challenging macroeconomic environment.

    02

    Q4 Headwinds and Business Resilience

    The fourth quarter saw revenues of $636 million and adjusted EPS of $1.63. However, Q4 growth in Corporate Finance and Financial Valuation and Advisory was moderated by external market disruption🌐s, including renewed geopolitical uncertainty🌐 and volatility in the software sector. The Financial Restructuring segment's Q4 results were also impacted by the delayed closing of two large transactions. Despite these short-term turbulences, management emphasized the underlying strength and resilience of its diversified business model.

    03

    Strong Backlog and Pipeline for FY27

    The company enters fiscal year 2027 with a record level of backlog and pipeline across its businesses. Corporate Finance is experiencing solid backlog growth and improved transaction metrics in most industry groups, with the exception of technology. This strong forward visibility, combined with a record number of managing directors and active corporate acquisition opportunities, positions the firm for continued success.

    04

    Improved Restructuring Outlook

    Expectations for the Financial Restructuring business have improved for FY27, driven by multiple tailwinds such as widening credit spreads, dislocation in private credit, and energy volatility. These factors are increasing activity levels, including several notable recent wins, leading management to anticipate the business will continue to perform at elevated levels throughout the fiscal year.

    05

    Global Growth and Strategic Acquisitions

    Corporate Finance revenues outside the U.S. grew significantly faster than U.S. revenues in both Q4 and FY26, with Europe and Asia showing strong activity. The firm successfully closed two previously announced acquisitions, Audere Partners and Mellum Capital, in Q4, and hired 33 managing directors in FY26, with 25 promotions in Q1 FY27. The acquisition pipeline remains active, focusing on cultural fit and strategic expansion across geographies and product lines.

    06

    Technology Investment and AI Implications

    Houlihan Lokey continues to invest significantly in technology, particularly for its Financial Valuation and Advisory business, to enhance productivity and leverage its extensive data. While acknowledging potential pricing pressures from AI commoditization, management believes the total addressable market (TAM) growth, coupled with the firm's investment capacity, will outpace any pricing declines. This strategy is expected to lead to industry consolidation, benefiting larger, tech-enabled firms.

    AI-generated summary of the company’s earnings call. Not investment advice.