EPS of $1.30 increased by 42.7% from previous year
Gross margin of 35.7%
Net income of 88.94M
""The team has had positive early momentum and success in marketing our new fully integrated capabilities across primary, secondary, directs and GP advisory markets."" - Scott Adelson
Houlihan Lokey Inc (HLI) Q1 2025 Results: A Strong Start to the Fiscal Year with Positive Momentum in M&A and Advisory Services
Executive Summary
Houlihan Lokey delivered a robust performance in Q1 2025, reporting revenues of $514 million, representing a 24% increase year-over-year. Adjusted earnings per share (EPS) surged by 37% to $1.22, driven by significant growth in corporate finance revenues, which hit a record $328 million, up 45% from the previous year. The financial restructuring segment also showed resilience, generating $117 million in revenue, indicating sustained demand despite fluctuating market conditions. Management highlighted that positive trends in transaction sizes and close rates bolster confidence for enhanced M&A activities going forward, even amidst macroeconomic uncertainties such as interest rates and geopolitical factors. The firm is strategically positioned for growth, particularly following the recent acquisition of Triago, expanding its capabilities in private funds and valuation services.
Key Performance Indicators
Revenue
513.61M
QoQ: -1.32% | YoY:23.51%
Gross Profit
183.49M
35.73% margin
QoQ: -3.90% | YoY:20.44%
Operating Income
95.57M
QoQ: -6.94% | YoY:30.30%
Net Income
88.94M
QoQ: 9.70% | YoY:44.88%
EPS
1.37
QoQ: 8.73% | YoY:42.71%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $514 million (YoY: +24%, QoQ: -1.32%)
**Net Income:** $89.4 million (YoY: +44.88%, QoQ: +9.7%)
**Gross Profit Margin:** 35.7%
**Operating Income Margin:** 18.6%
**Net Income Margin:** 17.3%
Financial Highlights
Key Financial Metrics:
- Revenue: $514 million (YoY: +24%, QoQ: -1.32%)
- Net Income: $89.4 million (YoY: +44.88%, QoQ: +9.7%)
- Gross Profit Margin: 35.7%
- Operating Income Margin: 18.6%
- Net Income Margin: 17.3%
- EPS: $1.37, Diluted EPS: $1.30 Balance Sheet Health:
- Total Assets: $2.94 billion
- Total Liabilities: $1.11 billion
- Total Stockholders' Equity: $1.83 billion
- Cash and Cash Equivalents: $449.7 million Cash Flow:
Net cash provided by operating activities was negative at $64.5 million, attributable to seasonal bonus payouts, but long-term cash position remains solid at $450.3 million.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
513.61M
23.51%
-1.32%
Gross Profit
183.49M
20.44%
-3.90%
Operating Income
95.57M
30.30%
-6.94%
Net Income
88.94M
44.88%
9.70%
EPS
1.37
42.71%
8.73%
Key Financial Ratios
currentRatio
1.34
grossProfitMargin
35.7%
operatingProfitMargin
18.6%
netProfitMargin
17.3%
returnOnAssets
3.02%
returnOnEquity
4.86%
debtEquityRatio
0.24
operatingCashFlowPerShare
$-0.99
freeCashFlowPerShare
$-1.16
dividendPayoutRatio
57.6%
priceToBookRatio
4.81
priceEarningsRatio
24.74
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Corporate Finance Growth: Management stated, "Corporate Finance produced $328 million in revenues for the quarter, a 45% increase... Key metrics for our Corporate Finance business continue to see steady improvement."
- Market Optimism: Scott Adelson remarked, "Overall, we remain optimistic that current market conditions will drive improved M&A activity throughout the year..."
- Financial Restructuring Demand: Revenue for this segment remained strong despite market fluctuations, with Lindsey Alley noting, "Financial Restructuring revenues were $117 million for the quarter, a 5% decrease, but we expect this business to perform solidly."
- Acquisition Impact: The acquisition of Triago was highlighted as a significant enhancement, with Adelson stating, "We completed the acquisition of Triago, making a significant expansion of our private funds capabilities..."
- Hiring Strategy: Management continues to hire aggressively, with 27 new managing directors added during the quarter, reinforcing growth and competitive positioning.
"The team has had positive early momentum and success in marketing our new fully integrated capabilities across primary, secondary, directs and GP advisory markets."
â Scott Adelson
"As long as these trends remain, we should see improvement in our Corporate Finance business versus the same periods last year."
â Scott Adelson
Forward Guidance
Looking ahead, management is optimistic about the potential to capitalize on improving M&A activity driven by favorable economic conditions. They anticipate continued strength in the Corporate Finance and Financial Restructuring segments, supported by sustained demand in the private capital markets. However, macroeconomic factors, including interest rate fluctuations and geopolitical uncertainties, remain areas for investor monitoring. Management has set a long-term target effective tax rate of 28% to 30%, projecting an EPS growth trajectory aligned with improving overarching market conditions.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
HLI Focus
35.73%
18.60%
4.86%
24.74%
LAZ
95.50%
9.67%
9.10%
26.09%
PJT
30.50%
16.40%
18.70%
18.72%
MC
24.40%
2.67%
4.55%
59.53%
PIPR
94.20%
16.10%
3.86%
17.98%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment outlook for Houlihan Lokey remains positive as the firm demonstrates strong revenue growth, particularly in its Corporate Finance segment, which is expected to benefit from a recovering M&A market. The acquisition of Triago enhances their service offerings, positioning the firm well to capture opportunities in the private funds market. Key monitoring factors include interest rate movements and potential geopolitical disruptions. Investors should consider Houlihan Lokey as a strong candidate for capital appreciation given its solid operating model and growth trajectory driven by strategic initiatives.
Key Investment Factors
Growth Potential
Growth in corporate finance driven by increased transaction volume and improvement in average transaction fees, especially internationally.
Profitability Risk
Exposure to fluctuations in economic conditions, interest rates, and geopolitical events that can impact deal making and restructuring activities.
Financial Position
Strong balance sheet with significant cash reserves and manageable liabilities, allowing for flexibility and resilience in operations.
SWOT Analysis
Strengths
Strong revenue growth across Corporate Finance and Financial Restructuring segments.
Robust cash position and financial stability with significant equity.
Expertise in investment banking services with a broad international footprint.
Weaknesses
Seasonal fluctuations impacting cash flow due to bonus payouts.
Dependence on market conditions for M&A activity and restructuring services.
Opportunities
Expansion of private funds capabilities post-Triago acquisition.
Potential growth in mid-market M&A driven by increased capital deployment.
Strengthening of international presence and transaction sizes.
Threats
Increased competition in financial services sector impacting market share.
Geopolitical risks and changes in regulatory environments affecting operations.