Houlihan Lokey, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan-Loki's third 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, January 31st, 2023. I will now turn the call over to Christopher Crane, Houlihan-Loki's general counsel.

Thank you, operator, and hello, everyone. By now, everyone should have access to our third quarter fiscal year 2023 earnings release, which can be found on the Fulton & Lokey 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 end at December 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 Fizer, 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 year 2023 earnings call. We ended the quarter with revenues of $456 million and adjusted earnings per share of $1.14. Revenues were down 49% versus the same quarter last year and down 7% from the previous quarter. When comparing to last year's third quarter, bear in mind that our December 2021 quarter was extraordinary. In fact, the prior year quarter was substantially higher than any previous quarter in our firm's history, both in revenues and adjusted EPS. Furthermore, numerous external market factors have altered the typical seasonality of the M&A market globally. This year, our results are consistent with industry trends in that our December 2022 quarter was less than our September 2022 quarter. This is the first time our December quarter results were lower than our September quarter results since December 2008. While this quarter's financial results are disappointing, we are encouraged by the fact that our nine-month year-to-date results are the second best in the firm's history. Corporate finance quarterly revenues were $292 million. We saw an increase in transaction closings this quarter versus last quarter, offset by a reduction in average transaction fees. New business activity remains robust as the number of new engagements was a quarterly high for this fiscal year. Partially offsetting these positive factors is that the financing market remains challenged. Mid-cap transactions can still get financing, but lenders are more selective. The cost of debt is up significantly, and some lenders have opted to sit on the sidelines until they perceive better visibility on the economy. This has resulted in pent-up demand in M&A, which we believe will ultimately be a positive for our business once there is more broad-based confidence in the economy. Financial and valuation advisory recorded $66 million in revenues. The decline in revenues versus the same quarter last year was primarily driven by lower revenues in transaction opinion and transaction advisory services. Both service lines were affected by reduced M&A activity, especially in the public marketplace. However, our portfolio valuation service line continues to do well, and in certain circumstances, benefits from a more volatile market. Financial restructuring produced $99 million of revenues, another very strong quarter. For each quarter of this fiscal year, financial restructuring experiencing an increased number of closed transaction and an increased number of new engagements versus the prior quarter. Restructuring continues to see strong new business activity, adding to our confidence in this business segment in the second half of the calendar year and throughout calendar 2024. New business and financial restructuring is broad-based across all major geographies and most industry sectors. Our long-term focus on growing our business both internally and externally continues. We hired five managing directors this quarter. We announced the acquisition of Oakley Advisory, a digital infrastructure investment banking firm in the UK, and we continue to have a robust pipeline of quality acquisition targets. Finally, I wanted to end today's comments with a recognition to all three of our business segments, and the bankers that continue to deliver exceptional results to our clients and our shareholders. In calendar 2022, we continued our string of league table successes. Bullihan Loki was ranked as the number one investment banking firm for all global M&A transactions under one billion and all transactions regardless of size in the U.S. based on transaction volume. We are again ranked the number one investment banking firm for all financial restructuring transactions both in terms of value and volume. In addition, we were ranked as the most active fairness opinion firm by volume when measured for the period over the last 25 years. Overall, we are proud of our accomplishments in calendar 2022, and we fundamentally believe that our business model positions us effectively for long-term growth and strong shareholder returns. And with that, I'll turn the call over to Lindsay.