Houlihan Lokey, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan-Lowkey's Third 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 is being recorded today, February 8, 2022. I will now turn the call over to Christopher Crane, Houlihan-Lowkey's General Counsel.

Thank you, Operator, and hello, everyone. By now, everyone should have access to our third 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 December 31st, 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 an 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 third quarter fiscal year 2022 earnings call. We are pleased to report another very strong quarter. We achieved $889 million in third quarter revenues of 65% from the same quarter a year ago. All three of our business segments performed exceptionally well in their respective environments. Corporate finance and financial and valuation advisory delivered record quarterly results in a robust market environment, and financial restructuring delivered solid results in a challenging restructuring environment. We also experienced strong earnings growth, delivering $2.90 in adjusted earnings per share, up 63% from the same quarter a year ago. More important than a single quarter of results is our leadership position in each of our business lines. That is where we look to assess the long-term quality and durability of our earnings. Gullihan Loki maintained its status as a leader across all three product lines for calendar year 2021. We ranked as the number one global M&A investment banking firm based on the number of transactions closed. And we are proud to announce that we were the number two M&A investment banking firm in Europe based on the number of transactions closed. We were also the number one global restructuring advisor based on both the number of transactions closed and the dollar value of restructured debt. And finally, we remain the number one global M&A fairness opinion provider over the past 20 years based on the number of transactions announced or closed. Moving back to the quarter. A record third fiscal quarter results were driven by a combination of several positive events, some of which are not likely to fully repeat over the next several quarters. First, corporate finance revenues for the quarter included the results of GCA, which makes last year's third quarter revenues not directly comparable, and GCA's contribution to the quarter exceeded expectations. Second, in corporate finance, we had a significant number of higher fee transactions close in our third fiscal quarter relative to previous quarters and a significantly higher number than what is expected to close in the next couple of quarters. Third, for our corporate finance business, not including GCA, the third quarter has historically, on average, represented a seasonal high relative to our other quarters. In addition, the fourth calendar quarter for GCA has historically represented a seasonal high for them as well. Both Houlihan Loki and GCA performed extremely well for our third fiscal quarter, highlighting the seasonality of both businesses. Finally, our corporate finance and our FEA business are benefiting from the most robust M&A market we have ever seen, with strength across industry and geography. It is well publicized that financial sponsors have been a strong influence on these markets, and financial sponsor clients remain close to 50% of our client base. As we head into calendar year 2022, we are still experiencing a very strong M&A and capital markets environment for our mid-cap clients. There remains historically high levels of private equity dry powder. Large strategic clients remain flush with cash, and interest rates remain low. However, we expect growth in the M&A market to level off in calendar 2022, and we have seen a slowing rate of growth. in our new engagement activity levels over the last several months when compared to the same period last year. Moving on to some comments more specific to FEA, this business has performed at record levels for us throughout our fiscal year, and our fiscal third quarter was no exception. For each of the last six consecutive quarters, FEA has achieved an increase over the prior year's quarter, and year-to-date, FEA is up 64% over the same period last year. Given the diversification of revenues in this business, these results are extraordinary. Growth is broad-based across all of the FEA's major product lines, with several of them benefiting from strong M&A market conditions. FEA continues to see higher average revenues per fee event, higher average productivity per banker, and increasing number of seven-figure engagement fees. In fact, in the third fiscal quarter, FEA recognized one of the largest fees in its history. Financial restructuring had another solid quarter despite ongoing limited opportunities in the marketplace. This business is currently experiencing new activity levels at or below pre-pandemic periods. Headwinds for this product line include a weak restructuring environment, which is impacting our near-term revenue prospects, and the completion of a couple of large fee events this year that may not repeat in fiscal year 2023. Positives for this business include our belief that we are winning and closing more than our fair market share of restructuring mandates in the current environment and our continued success in Asia, particularly China, as we take advantage of our leading market position in this very attractive market. We're also starting to see an uptick in interest rates globally, which tends to drive restructuring activity. Before concluding, I wanted to highlight several factors that look beyond our third quarter results, and we believe set the stage for our midterm and long-term success. First, our brand and reputation are significantly greater and more recognizable than just a few years ago. This has and will enable us to attract better talent at all levels, as well as being an attractive acquirer of businesses. We've never seen a more attractive pipeline of talent than we're seeing today. Second, starting in fiscal year 2023, we will have a full year of GCA results versus only six months of results in fiscal 2022. We are quite pleased with the GCA acquisition to date and integration efforts are on track. Nevertheless, we expect it will take several years to fully realize potential revenue synergies between our businesses. Third, FVA is experiencing a new growth profile beyond just current market conditions and we remain excited about the long-term growth prospects of this business. The growth in our continued investment in this product line has created enough scale for FVA to achieve ongoing growth and success as it enters new markets. And fourth, while financial restructuring is currently experiencing a very lean market for its services, Our strong leadership position, the absolute size of corporate leverage globally, the inevitable rise in interest rates, the expectation of less active central bank intervention, and ongoing technology and global trade disruption establish a clear path to long-term revenue growth. We ended the calendar year with over 2,200 employees and 12-month pro forma revenues in excess of $2.5 billion. In addition to adding over 75 new MDs to our senior banking group through the GCA acquisition, we hired five managing directors this quarter, three in corporate finance and two in financial restructuring. We are very proud of how well all of our employees have done over the last several years, and we welcome all of our new partners to the firm. Collectively, we look forward to continued success in the years ahead. With that, I'll turn the call over to Lindsay.