What is the outlook for sponsor monetization given record portfolio duration and dry powder, and how will the tech sector's setback impact transaction volumes?

Sponsor activity is picking up, with the last few weeks being the most active in years, indicating significant pent-up demand. While some companies may face price differentials, this is not the majority. The software sector will be impacted, but management believes there will be winners and losers, and not all software companies will be disfavored. The company has incorporated software sector impact into its FY27 assumptions. “And as we sit here today, even in the last few weeks have been the most active we have seen in years. And so that activity level is increasing again at a pace that we feel good about.”

Will the increased scrutiny on private credit valuation drive more demand for FDA services, particularly portfolio valuation?

Yes, the portfolio valuation group has been growing, and the TAM is expanding. The need for more regular marks, especially in situations like private credit dislocation, directly contributes to this growth. Management is positive about the business's direction. “And that is -- that TAM is continuing to grow and some of the things that you're talking about just -- are what grows it, is at the more -- getting marks more regularly is certainly 1 of those things and situations like we are seeing in private credit is a great example of why they need those marks on a more regular basis.”

How will AI impact the FDA business, considering potential productivity gains versus pricing pressures, and how is the company investing in it?

The company has been investing in technology and AI for a long time. While pricing pressure has always existed in FDA, the TAM is growing faster than any pricing decline. AI will drive industry consolidation, benefiting firms like Houlihan Lokey that can invest significantly in technology. The data from extensive valuations also enhances their models. “And look, we have experienced pricing pressure on our FDA products for a decade, as Scott said, or more. And we have sort of reacted by growing our TAM at a rate significantly faster than the pricing pressure.”

HLI

Houlihan Lokey (HLI) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q4 FY26)· Financials· May 6, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Adjusted compensation expense ratio	61.5% high materiality	FY27	High
Adjusted non-compensation expenses growth	similar growth to fiscal 2026 medium materiality	FY27	Medium
Financial Restructuring business performance	continue to perform at elevated levels high materiality	FY27	High
Financial and Valuation Advisory business growth	growth medium materiality	FY27	Medium
Adjusted effective tax rate	about half of our fourth quarter adjusted effective tax rate medium materiality	Q1 · FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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 million	5%	—	—
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 million	3%	—	—

HLI operating KPIs by quarter

HLI operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q4 FY26	Jun 2026 Q1 FY27	Change vs prior quarter
Closed transactions Corporate Finance	171 We closed 171 transactions this quarter, up from 147 in the same period last year and our average transaction fee on closed deals decreased. Source: earnings call transcript	127 We closed 127 transactions this quarter basically flat with the same period last year. Source: earnings call transcript	-25.7%
Closed transactions Financial Restructuring	30 We closed 30 transactions this quarter, down 21% from the same quarter last year and our average transaction fee on closed deals decreased. Source: earnings call transcript	23 We closed 23 transactions this quarter, down 34% from the same period last year, but our average transaction fee on closed deals increased. Source: earnings call transcript	-23.3%
Fee events Financial and Valuation Advisory	1,248 We had 1,248 fee events during the quarter compared to 1,224 in the same period last year, a 2% increase. Source: earnings call transcript	1,042 We had 1,042 fee events during the quarter compared to 957 in the same period last year, a 9% increase. Source: earnings call transcript	-16.5%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Audere Partners Welcoming new colleagues from Audere Partners

Acquisition closed in the fourth quarter of fiscal year 2026.

Mellum Capital Welcoming 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

Geopolitical uncertainty and macroeconomic pressures Q4 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 sector Q4 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 fees Q4 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 commoditization Longer 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

Corporate Finance deal velocity and closing timing

Q1 FY27

Current Slowed in Q4 FY26 due to uncertainty, but picking up

Target Continued 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.

Find out whether HLI delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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 disruptions, 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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.