Houlihan Lokey, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Houlihan-Loki's fourth 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, May 12, 2022. I will now turn the call over to Christopher Crane, Houlihan-Loki's general counsel. Please go ahead.

Thank you, operator, and hello, everyone. By now, everyone should have access to our fourth quarter and 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 conditions. We encourage investors to review our regulatory filings, including the Form 10-K for the year ended March 31, 2022, 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'll open the call to questions. With that, I'll turn the call over to Scott.

Thank you, Christopher. Welcome everyone to our fourth quarter and full fiscal year 2022 earnings call. We are pleased to report another record year for the firm. We ended the fiscal year with $2.27 billion in revenues, up 49% from fiscal 21's revenues of $1.53 billion. This is our 10th straight year of annual revenue growth. Corporate finance achieved just under $1.6 billion in revenues, up nearly 100% year over year. Financial and valuation advisory reported $284 million in revenues, up just over 50% from last year. And financial restructuring reported $393 million in annual revenues, down 27% year over year, but the second highest annual result in its history. Our adjusted earnings were a record $7.10 per share, up 54% from an adjusted $4.62 per share last year. In addition to strong financial results of the year, we had several notable accomplishments that are worth highlighting. We remain number one in the relevant league tables for all three of our product lines. We successfully completed the acquisition of GCA, further increasing our global scale and reach. With the completion of GCA and the addition of over 500 new employees, the firm now has approximately 2,300 employees 295 of which are managing directors operating out of 35 offices worldwide. We also hired 13 managing directors during fiscal year 2022 and in early April promoted 29 employees to managing directors, our largest class ever. We head into fiscal year 2023 with strong activity levels in our corporate finance and FBA businesses and early signs of improving market conditions and financial restructuring. While our fiscal 2022 full year results were very strong, the fourth quarter for fiscal year 2022 was weaker than we anticipated only a few months ago. For the quarter, we achieved $471 million in revenues, down 6% from the $501 million recorded a year ago. Adjusted earnings per share were $1.30, down from $1.51 last year. Corporate finance revenues for the quarter were down 7% versus the same period last year, and down materially from the prior quarter's extraordinary results. FEA continued to achieve strong results. Its revenues grew 23% for the fourth quarter compared to the same quarter last year. Financial restructuring ended the year stronger than we anticipated, but was down relative to a very strong record fourth quarter last year, which is driven by COVID-related restructurings. With respect to our corporate finance business, there were several factors that led to the relative softness in our fourth quarter. First, as we suggested on last quarter's call, the timing on transaction closings in our third quarter benefited that quarter to the detriment of our fourth quarter. Second, we started to see a slowdown in deal closings as the market reacted to the buildup and invasion of Ukraine in mid-February, which lasted through the end of the quarter. Third, and overlaying all of this, we believe the market is still assessing the impact of higher inflation and higher interest rates, and we believe, on the margin, this is extending the time it takes to close transactions and maybe delaying certain closings. FEA did not experience the same softness as corporate finance in our fourth fiscal quarter, and FEA's prospects remain quite strong entering fiscal year 2023. We've experienced slowdowns similar to this one over the last few decades, and while each trigger event is different, the impact on our business trends, our business tends to follow similar patterns. First, the timing to close active transactions stretches out, allowing buyers and sellers to reassess the marketplace. If the negative trends stabilize, like what happened in the summer of calendar 2020 with COVID, the market comes back quickly and current lower revenues are made up for in subsequent quarters. If the negative trends persist, certain deals are put on hold and may eventually go away, resulting in prolonged softness in the M&A markets. As we sit here near the middle of May, almost halfway through our first fiscal quarter, we are still seeing strong new deal activity in both corporate finance and FBA and good momentum going into fiscal year 2023. However, we are facing headwinds that did not exist at this time last year, namely increased geopolitical risk, inflation, and rising interest rates. If these headwinds get worse, we may see increased pressure on revenues in our corporate finance and FEA businesses in subsequent quarters, and likely increased activity in our financial restructuring business. Given where we are in the year, any new restructuring activity is likely to more meaningfully impact fiscal year 2024 revenues, given the typical length of a restructuring. Whenever we complete a year, we reflect on our strategy going forward. For over a decade, our general business strategy has not changed. Stay true to our needing, focus on growth, and build a firm that is highly diversified across industry, geography, banker, product, and economic climate. In fiscal year 2022, we significantly increased our presence in technology, diversifying into arguably one of the most important drivers of growth in the world economies over the next several years. In fiscal year 2022, we increased our non-US business to represent 26% of total revenues, up from 22% a year ago. Our non-M&A business remains at approximately 50% of revenues, as we have seen continued strong growth in FBA, capital markets, private funds placement, and continued strength in our core financial restructuring business. In fiscal year 2022, we added almost 100 new managing directors to the firm. And in fiscal year 2022, no single client, no single banker, and no single transaction represented more than 2% of our revenues for the fiscal year. We remain committed to this business strategy and believe fiscal year 2022 was one of our most successful to date. Finally, given our success this year and the strength of the platform heading into the new fiscal year, effective Q1 of fiscal year 2023, we are raising our quarterly dividend 23% to 53 cents per share, up from 43 cents per share for the previous quarter. The board has also authorized $500 million to repurchase shares in the open marketplace. And with that, I'll turn the call over to Lindsey.