Houlihan Lokey, Inc.

Greetings, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan-Loki's second quarter fiscal year 2022 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, October 28, 2021. I will now turn the call over to Christopher Crane, Houlihan-Loki's general counsel. Thank you, sir. You may begin.

Thank you, Operator, and hello, everyone. By now, everyone should have access to our second quarter fiscal year 2022 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 September 30, 2021 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 Lindsay 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 second quarter fiscal year 2022 earnings call. We are pleased to report another very strong quarter. We achieved $537 million in second quarter revenues, up 95% from a year ago. This significant increase was driven by the ongoing robust business environment that we have experienced since the summer of 2020 and and the comparison to a relatively weak second quarter last year as a result of the pandemic. All three of our business segments performed very well. Corporate finance and financial and valuation advisory produced record quarterly results, and financial restructuring delivered solid results during a very challenging restructuring market environment. On the expense side, although we are starting to see some increases in travel and marketing costs consistent with increased business activity, we are maintaining an adjusted pre-tax margin of approximately 30%, which is well above pre-pandemic margins. For the second fiscal quarter of 2022, we reported $1.71 in adjusted earnings per share, up 128% from the same quarter last year. Our corporate finance business continues to operate at a record pace, with trailing 12-month revenues over $1.2 billion. Activity levels remain strong with both corporate and sponsor clients, and all industry sectors are showing growth over previous years. All metrics regarding active number of engagements, estimated fees, and pipeline visibility remain at record levels. Our non-U.S. business is performing quite well as we have seen the European M&A market stabilize and grow over the last few quarters. And finally, our capital markets business continues to be one of the fastest growing components within our corporate finance business. Although the momentum we have in our corporate finance business sees no signs of letting up, we recognize that the economy, stock market, and global M&A activity has been in an upward cycle for nearly 12 years now. That said, we constantly look for ways to further improve our business profile through diversification of clients, industry, product, geography, and banker. Our FVA business reached a record 66 million in quarterly revenues and delivered the fifth consecutive quarter of revenue growth. FVA has a trailing 12-month revenue run rate of nearly 250 million with every major subproduct area contributing to our growth. Although FVA is our least volatile business segment given the nature of the work, it has produced compound annual revenue growth in excess of 10% over the last five years. an impressive statistic for this business segment. The FBA business has benefited from a healthy market environment, exceptional execution, several new senior hires, and additional revenues from SPAC activity. Currently, we have a record number of MDs, active projects, and new business activity continues to grow. Our financial restructuring business continues to perform as expected in this bullish market environment. Accrued revenues and new business activity are off significantly from the peak levels of last year. However, as we have said in previous quarters, business activity is similar to pre-pandemic levels, and we believe that we continue to hold onto our leading market share through this challenging restructuring cycle. We don't normally discuss single transactions during our earnings call, but in this latest quarter, we were hired on a restructuring assignment in China that highlights the strength and reputation of our global restructuring practice. In September, it was announced that we were hired by Evergrande to advise on one of the largest restructurings in the world. We have been doing business in China for years and have invested a lot of time and resources in that part of the world as many of the Asian economies work to bring Western law and maturity to their capital markets. We continue to believe that one of the most exciting growth prospects for our restructuring business is the expansion of the restructuring product into these economies over the coming decades. The Evergrande engagement convinces us that we are well positioned for this growth. On the acquisition front, we are excited that we successfully closed the first step of the tender offer for GCA right after our quarter close on October 4th. And as of today, we own 90% of GCA shares. We expect to complete the acquisition of the remaining 10% during the month of November. Lindsay will highlight some of the financial metrics associated with the transaction. On the integration front, we have had several welcome events across the globe to mutually introduce our firms. We are already pitching business together, identifying opportunities for new business, and executing mandates on a collaborative basis. Although Lindsay and I refer to GCA for ease of discussion, we will be operating as a single firm, and we are very pleased with the integration efforts thus far. As previously reported by GCA, they continue to experience very strong results and are projecting a record calendar 2021. Our historical experience with prior acquisitions suggests it typically takes one to two years to get through integration and to begin to see measurable revenue synergies. To date, nothing suggests this transaction won't experience the same timeline. Bringing our two companies together, enhances the profile of Houlihan Loki, and I'm pleased to summarize some of the highlights. On a combined pro forma basis, we operate in 17 countries, significantly increasing our global diversification. We have over 2,200 employees with nearly 300 client-facing managing directors. We serve well over 2,000 clients annually. On a pro forma basis, we have trailing 12-month revenues of approximately $2.3 billion, and adjusted pre-tax income of approximately $600 million. Most importantly, we maintain a shared set of values and goals, and we believe cultural consistency is one of the hallmarks of our firm. In addition to the GCA transaction, during the second quarter, we hired or acquired four managing directors, one in corporate finance, one in financial restructuring, and two in financial and valuation advisory. Overall, we are very pleased with our financial results, and we look forward to continuing our recent strong performance with our new colleagues from GCA. With that, I'll turn the call over to Lindsey.