Houlihan Lokey (NYSE:HLI) Posts Quarterly Earnings Results

Key Points

• Houlihan Lokey missed quarterly earnings expectations: Adjusted EPS was $1.35 versus the $1.64 consensus, while revenue fell amid a 24% year-over-year decline in Corporate Finance activity. Management attributed weaker results to delayed deal closings and market uncertainty.
• Executives said the slowdown appears to be a temporary delay, citing record backlog, pipeline and mandate activity. Financial and Valuation Advisory revenue rose 13%, while restructuring activity remained strong due to energy-market volatility, private-credit dislocation and software-sector stress.
• The company raised its quarterly dividend to $0.70 per share and expects to complete its acquisition of Intrepid Financial Partners by the end of the second fiscal quarter. Analysts maintain a “Moderate Buy” consensus with an average price target of $180.50, despite shares trading near $138.83.

Houlihan Lokey (NYSE:HLI - Get Free Report) announced its quarterly earnings results on Wednesday. The financial services provider reported $1.35 EPS for the quarter, missing the consensus estimate of $1.64 by ($0.29), Zacks reports. Houlihan Lokey had a net margin of 16.26% and a return on equity of 22.88%.

Here are the key takeaways from Houlihan Lokey's conference call:

• First-quarter results were weak: Revenue was $511 million and adjusted EPS was $1.35, with Corporate Finance revenue down 24% year over year to $303 million. Deal closings were delayed by geopolitical uncertainty, consumer-sector weakness, and disruption in software valuations, disproportionately affecting larger-fee transactions.
• Management characterized the Corporate Finance slowdown as a temporary delay rather than a structural deterioration. Backlog, pipeline, and new mandate activity remain at record levels, but executives cautioned that persistent Middle East-related uncertainty makes the timing of a broader middle-market recovery difficult to predict.
• Financial and Valuation Advisory revenue increased 13% to $89 million, supported by growth across all three service lines and strong large-cap activity. Financial Restructuring revenue was $119 million, and management expects elevated restructuring activity to continue amid energy-market volatility, private-credit dislocation, and software-sector stress.
• Houlihan Lokey expects to close its acquisition of energy-sector investment bank Intrepid Financial Partners by the end of the second fiscal quarter, adding 32 employees. The company also reported a robust acquisition and senior-talent pipeline and said it remains committed to strategic expansion despite near-term revenue pressure.

Houlihan Lokey Price Performance

Shares of HLI traded down $6.64 during mid-day trading on Wednesday, hitting $138.83. The company's stock had a trading volume of 870,278 shares, compared to its average volume of 676,851. The firm has a 50-day moving average price of $140.59 and a 200 day moving average price of $153.00. Houlihan Lokey has a fifty-two week low of $130.72 and a fifty-two week high of $211.78. The stock has a market capitalization of $9.59 billion, a price-to-earnings ratio of 22.32, a PEG ratio of 1.20 and a beta of 0.95.

Houlihan Lokey Increases Dividend

The firm also recently disclosed a quarterly dividend, which was paid on Monday, June 15th. Stockholders of record on Monday, June 1st were given a dividend of $0.70 per share. This is a positive change from Houlihan Lokey's previous quarterly dividend of $0.60. The ex-dividend date was Monday, June 1st. This represents a $2.80 annualized dividend and a dividend yield of 2.0%. Houlihan Lokey's payout ratio is 45.02%.

Wall Street Analyst Weigh In

HLI has been the subject of a number of recent analyst reports. Weiss Ratings reissued a "hold (c)" rating on shares of Houlihan Lokey in a report on Friday, July 17th. US Capital Advisors set a $187.00 price target on Houlihan Lokey in a research note on Thursday, July 9th. Keefe, Bruyette & Woods lowered their price target on Houlihan Lokey from $172.00 to $160.00 and set an "outperform" rating on the stock in a report on Friday, July 10th. Bank of America began coverage on shares of Houlihan Lokey in a research note on Friday, July 10th. They set a "buy" rating and a $164.00 price objective on the stock. Finally, The Goldman Sachs Group set a $164.00 price objective on shares of Houlihan Lokey in a report on Friday, July 10th. Five investment analysts have rated the stock with a Buy rating and five have given a Hold rating to the company's stock. According to data from MarketBeat, Houlihan Lokey presently has a consensus rating of "Moderate Buy" and a consensus target price of $180.50.

Insider Activity at Houlihan Lokey

In other news, Chairman Scott L. Beiser sold 6,265 shares of the firm's stock in a transaction on Thursday, May 21st. The stock was sold at an average price of $150.26, for a total transaction of $941,378.90. Following the completion of the sale, the chairman directly owned 6,265 shares of the company's stock, valued at $941,378.90. This trade represents a 50.00% decrease in their position. The transaction was disclosed in a legal filing with the SEC, which is available through this link. Company insiders own 22.83% of the company's stock.

Institutional Investors Weigh In On Houlihan Lokey

Institutional investors and hedge funds have recently modified their holdings of the stock. Royal Bank of Canada increased its stake in Houlihan Lokey by 362.1% in the 4th quarter. Royal Bank of Canada now owns 1,703,369 shares of the financial services provider's stock worth $296,706,000 after purchasing an additional 1,334,769 shares in the last quarter. Bank of Montreal Can lifted its stake in Houlihan Lokey by 2,723.2% during the fourth quarter. Bank of Montreal Can now owns 1,199,459 shares of the financial services provider's stock valued at $208,934,000 after buying an additional 1,156,973 shares in the last quarter. Qube Research & Technologies Ltd boosted its holdings in shares of Houlihan Lokey by 153.8% in the second quarter. Qube Research & Technologies Ltd now owns 274,387 shares of the financial services provider's stock worth $49,376,000 after buying an additional 166,285 shares during the period. AQR Capital Management LLC lifted its position in shares of Houlihan Lokey by 62.2% in the fourth quarter. AQR Capital Management LLC now owns 379,478 shares of the financial services provider's stock worth $66,101,000 after purchasing an additional 145,454 shares in the last quarter. Finally, Caisse de depot et placement du Quebec grew its position in Houlihan Lokey by 411.1% during the third quarter. Caisse de depot et placement du Quebec now owns 170,617 shares of the financial services provider's stock valued at $35,031,000 after purchasing an additional 137,237 shares in the last quarter. 78.07% of the stock is owned by institutional investors and hedge funds.

About Houlihan Lokey

Houlihan Lokey, Inc is a global investment bank and financial services firm founded in 1972 and headquartered in Los Angeles, California. The company specializes in advisory services across a broad range of transaction types and financial matters. Since its founding, Houlihan Lokey has grown to serve corporations, financial sponsors, and government entities worldwide, providing expertise in complex and high-stakes engagements.

The firm's core service offerings include mergers and acquisitions advisory, capital markets advisory, financial restructuring and distressed M&A, and valuation and fairness opinions.

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