Houlihan Lokey, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Houlihan-Loki Second Quarter Fiscal Year 2023 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 27, 2022. I would now like to hand 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 second quarter fiscal year 2023 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, 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 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.

Welcome, everyone, to our second quarter fiscal year 2023 earnings call. We ended the quarter with revenues of $490 million, and adjusted earnings per share of $1.19. Revenues were down 9% versus the same quarter last year and down over 25% pro forma if we had included GCA's revenues for the quarter end of September 30, 2021. However, we achieved some positive momentum this quarter with revenues improving 17% versus last quarter. Corporate finances quarterly revenues of $315 million were down year over year but we're 19% higher than last quarter as we continue to see small improvements in market conditions heading into the second half of our fiscal year. For instance, we've started to see a nearing in the bid-ask spread between sellers and buyers. Nevertheless, middle market financing remains constrained as capital is more expensive, although selective leverage transactions are still getting done. These transactions involve higher quality companies, which are more resilient or recession resistant, and in most cases are getting done with less leverage. As mentioned in previous quarters, new business activity remains healthy. Still, the average time to close transactions remains elongated, and we continue to see elevated number of transactions being put on hold. Overall, I would characterize our corporate finance business today to be slightly improved from last quarter, but still operating in a challenging market environment. Financial valuation and advisory recorded $77 million of revenues, its second-best quarter ever, and 17 percent higher than the same period last year. We continue to grow our FEA business across all service lines, driven by an expansion of our employee base and several years of investing in senior hires. A portion of our FEA business is tied to the M&A markets and is facing many of the same headwinds as our corporate finance business. Partly offsetting those headwinds, we believe we continue to take market share in a few areas where we would typically see pressure in a market environment like the one we're in. Also, a portion of FEA operates in service lines and for clients that are not as correlated to the M&A markets and market conditions in general, and that portion of FEA generally operates well in most market environments. Financial restructuring produced 98 million of revenues, up 17% when compared to the same quarter last year. The quarter benefited from a very sizable fee, which periodically occurs in this business segment, and market conditions for financial restructuring continue to improve, and we continue to see elevated levels of restructuring work in fiscal 2024 as a result of new business activity over the last couple of quarters. The number of distressed companies and amount of distressed debt in the marketplace is meaningfully up versus earlier this year. Generally, the market opportunities are growing faster outside the US and there are fewer mega sized restructurings than in past downturns. However, in the last couple of months we've seen a significant increase in activity levels in the US. Furthermore, market current market conditions do not represent the same crisis environment that existed in the financial crisis or early days of the pandemic. However, it is quite possible that this environment may produce an elevated level of restructuring revenues over a longer period of time. As we step back and assess our business model, we are pleased by how all three product lines are performing in this environment. We believe our balanced business and our well-diversified footprint continue to give us a leg up versus our competitors. With the addition of GCA, we are more geographically diversified than at any time in our history, and our industry depth and breadth continues to improve as we add unique industry subsectors. Finally, we believe we benefit greatly from our mix of both strategic and financial sponsor transactions. Our focus on growth continues despite current market conditions. As we hired four managing directors this quarter, we added new subsector industry coverage this quarter, We are actively engaged with a few acquisition targets, and we are greatly expanding our presence in India and expect to add new offices across the globe in the next few quarters. Overall, the current business environment is more challenging than the last few years, but our brand reputation continues to grow, and we believe our long-term prospects are quite positive. And with that, I'll turn the call over to Lindsay.