Houlihan Lokey, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan-Lowkey's third quarter fiscal 2021 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, January 28th, 2021. I will now turn the call over to Mr. Christopher Crane, Houlihan-Lowkey's general counsel.

Thank you, Operator, and hello, everyone. By now, everyone should have access to our third quarter fiscal 2021 earnings release, which can be found on the Houlihan Loki 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. And 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 December 31, 2020, 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 Loki'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.

Thank you, Christopher. Welcome, everyone, to our third quarter fiscal 2021 earnings call. By every measure, the firm's quarterly results were very strong. We've recorded $1.77 in adjusted earnings per share, an increase of 84% above our previous quarterly record of 96 cents. We achieved $538 million in revenues, 61% above our previous quarterly record of $334 million. All three of our business segments recorded record quarterly results. Corporate finance achieved $306 million in revenues, 52% above its previous record, Financial restructuring achieved $178 million in revenues, 42% above its previous record. And financial and valuation advisory achieved $54 million in revenues, 13% above its previous record. Year-to-date revenues were $1.25 billion, up 20% versus the same period last year, notwithstanding the material impact of the COVID-19 pandemic on our first and second fiscal quarters. and all three business segments are at record highs through the first nine months of the fiscal year. Overall, the firm benefited this quarter from a confluence of events that enabled us to achieve record results, which will be a challenge to repeat in the near term. We entered calendar 2020 with expectations of solid performance for the year. By spring, everything changed with the onset of the effects of the pandemic. Corporate finance revenues and prospects quickly deteriorated, while financial restructuring prospects rapidly increased. Similar to previous shocks to the economy, we redeployed our industry and valuation bankers towards focusing on distressed businesses and financial restructuring opportunities, and our capital market bankers pivoted to helping raise capital for companies suddenly under stress. Our differentiated, resilient business model worked the way it's supposed to and consistent with previous distressed cycles. By summer of 2020, the business environment, most notably the capital markets, took a positive turn, and this trend has steadily accelerated. The downturn in corporate finance and valuation activity reversed course and turned upward. Current activity levels in both corporate finance and financial and valuation advisory are at all-time highs. However, near-term prospects for new financial restructuring engagements have meaningfully slowed. I'll now provide some specific comments for each of our business segments. Corporate finance closed a record 121 transactions this quarter, 27% higher than any previous quarter. Up to one-third of our closed transactions came from pre-COVID engagements put on hold that might have closed in our first or second fiscal quarter without the impact of the pandemic. Additionally, a small portion of our closed transactions this quarter were likely accelerated as a result of concern about potential tax law changes in calendar 2021. Offsetting the factors that positively impacted this quarter's results was the lack of new business generated in spring and early summer, reducing the number of engagements that would likely have closed in our third fiscal quarter. Now a few specifics about the quarter and year-to-date performance for the corporate finance business segment. We did not exhibit any unusual mega fee projects this quarter, All industry sectors are performing well. Our international revenues are growing faster than our U.S. revenues. Our capital markets business is up substantially versus last year, and it's proven itself to be recession resistant through this calendar challenging year. The number of new engagements this quarter set a record, up nicely from our second quarter and up substantially from our first quarter. And finally, the number of dead deals and deals on hold this quarter are now at normal levels versus what we were experiencing early this fiscal year. Our FEA results were driven by strength in almost all of our subproduct lines. Our portfolio valuation business, which is our largest subproduct line, continues to produce record results and has proven to do so in both bull and bear markets. Also, the improvement in M&A activity has positively impacted our transaction opinion practice, which does work for both corporate and financial sponsor clients. The resilience of our FBA segment, even during the business trough created by the pandemic, has been impressive. Revenues barely declined earlier in the year and have been growing since summer. New business activity and the average size of fee events continues to improve. Financial restructuring revenues for the quarter and year-to-date are significantly higher than any other comparable period. Our practice benefited from the distress caused by the pandemic and the historic amount of global debt. In general, our financial restructuring revenues have been strong across geographies and industries, and year-to-date revenues are slightly weighted towards debtor assignments versus creditor assignments. Financial restructuring tends to be more volatile on a quarterly basis and didn't benefit from both a large number of quarterly closings and a few mega events. As described over the last two quarters, new business activity in restructuring has been slowing. and in our third quarter, it slowed substantially, driven by one of the strongest equity and debt capital markets in recent history. The current business environment suggests restructuring revenues have likely peaked for the time being. However, the amount of worldwide leverage continued to grow during the pandemic, and an extraordinary amount of debt has been added to the balance sheets of struggling businesses. Given government support and unprecedented access to capital, There may be a short-term decline in new restructuring activity. However, the mid- and long-term prospects for financial restructuring are stronger today than they were pre-COVID. Rounding out other firm news for the quarter, we added Pame, Bassey, and Cyrus Walker as independent board members. Pame and Cyrus bring a wealth of knowledge and experience, and we fully expect them to be great additions to our boards. On the acquisition front, the renewed bullish environment has benefited sellers of financial services businesses and slowed our progress, but we remain more active with potential acquisitions than pre-COVID levels and currently have two situations that look promising. With respect to league table rankings, which come out every year in January, Houlihan Loki was recognized for the sixth year in a row as the number one firm in the U.S. in M&A based on the number of of completed M&A transactions. And for the seventh year in a row, we were recognized as the number one restructuring firm globally based upon the number of completed restructuring transactions. We're very proud of these accomplishments and congratulate all of our employees for achieving these rankings. In closing, I want to thank our employees who have continued to show incredible energy and perseverance despite these unusual times. I wanted to thank our clients who continue to entrust us with their important strategic business decisions and also their difficult business challenges. And I wanted to thank our shareholders who have continued to have faith in our business model and who have supported us throughout a turbulent year. We are very pleased with our results this quarter and feel we are well positioned for calendar 2021 and beyond. With that, I'll turn the call over to Lindsay.