In Q2 2025, Houlihan Lokey Inc (HLI) reported a robust revenue of $575 million, reflecting a significant year-on-year growth of 23% and a quarter-on-quarter increase of 11.94%. The adjusted earnings per share saw a substantial rise of 32%, reaching $1.46. These results were driven by a strong performance in the Corporate Finance segment, which generated $364 million in revenue—a 29% increase compared to the previous year. The company remains optimistic about growth in the second half of the fiscal year despite ongoing geopolitical and macroeconomic uncertainties. Management continues to emphasize the upward trend in M&A activity and the strength of the restructuring market, which positions HLI well for future growth.
Key Performance Indicators
Revenue
574.96M
QoQ: 11.94% | YoY:23.12%
Gross Profit
221.36M
38.50% margin
QoQ: 20.64% | YoY:29.87%
Operating Income
130.67M
QoQ: 36.73% | YoY:44.74%
Net Income
93.55M
QoQ: 5.18% | YoY:39.56%
EPS
1.42
QoQ: 3.65% | YoY:36.54%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $575 million (YoY: +23%, QoQ: +11.94%)
**Gross Profit**: $221.4 million (YoY: +29.87%, QoQ: +20.64%)
**Operating Income**: $130.7 million (YoY: +44.74%, QoQ: +36.73%)
**Net Income**: $93.5 million (YoY: +39.56%, QoQ: +5.18%)
**EPS**: $1.42 (YoY: +36.54%, QoQ: +3.65%)
Financial Highlights
### Financial Metrics
- Revenue: $575 million (YoY: +23%, QoQ: +11.94%)
- Gross Profit: $221.4 million (YoY: +29.87%, QoQ: +20.64%)
- Operating Income: $130.7 million (YoY: +44.74%, QoQ: +36.73%)
- Net Income: $93.5 million (YoY: +39.56%, QoQ: +5.18%)
- EPS: $1.42 (YoY: +36.54%, QoQ: +3.65%)
- Current Ratio: 1.41
- Cash Flow from Operating Activities: $289.2 million
- Free Cash Flow: $278.7 million
### Overview of Changes
Revenue growth reflects a strong performance in Corporate Finance amid an uptick in market activity and the successful integration of recent acquisitions. Gross profit improved as operating efficiency increased, contributing to a higher operating income ratio of 22.73%. Key elements like interest rate fluctuations and geopolitical factors were discussed as potential influences on future performance, yet management is adaptive to these conditions.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
574.96M
23.12%
11.94%
Gross Profit
221.36M
29.87%
20.64%
Operating Income
130.67M
44.74%
36.73%
Net Income
93.55M
39.56%
5.18%
EPS
1.42
36.54%
3.65%
Key Financial Ratios
currentRatio
1.41
grossProfitMargin
38.5%
operatingProfitMargin
22.7%
netProfitMargin
16.3%
returnOnAssets
2.91%
returnOnEquity
4.78%
debtEquityRatio
0.22
operatingCashFlowPerShare
$4.39
freeCashFlowPerShare
$4.23
dividendPayoutRatio
41.1%
priceToBookRatio
5.31
priceEarningsRatio
27.8
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights
- Scott Adelson (CEO): "...Revenues were up 23% and adjusted earnings per share were up 32% compared to the same period last year. Our outlook for the second half of fiscal 2025 remains positive..."
- Discussed ongoing strength in Corporate Finance due to M&A improvements: "Corporate Finance produced $364 million in revenues for the quarter, representing a 29% increase..."
- Commenting on risks: "We recognize the challenges posed by the current macro environment...but we continue to experience a steady upward trajectory for markets and the business environment."
- Lindsey Alley (CFO): "We expect to maintain our long-term target of 61.5% for this compensation expense ratio..." The effective tax rate is targeted between 28% and 30% for the year, indicating stable financial management principles.
"This heightened activity is expected to benefit our restructuring business well into fiscal 2026..."
— Scott Adelson (CEO)
"We extend a warm welcome to all our new colleagues joining as a result of this transaction."
— Scott Adelson (CEO)
Forward Guidance
Management remains optimistic about HLI's trajectory in the second half of fiscal 2025, expecting continued momentum across its three business lines—Corporate Finance, Financial Restructuring, and Valuation Advisory. They anticipate elevated levels of activity within the restructuring segment and strong M&A sentiment. However, they acknowledge potential delays due to macroeconomic factors, particularly ongoing high interest rates and geopolitical volatility. Key metrics to monitor include transaction volumes and integration of acquisitions such as Prytania Solutions and Waller Helms.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
HLI Focus
38.50%
22.70%
4.78%
27.80%
LAZ
94.90%
12.10%
10.90%
18.03%
PJT
30.50%
17.90%
21.20%
24.69%
MC
25.20%
7.58%
3.68%
78.31%
PIPR
90.90%
8.32%
3.09%
26.48%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment outlook for Houlihan Lokey appears favorable, particularly given its diversified revenue streams and strong performance against competitors. With a healthy balance sheet, HLI is poised to navigate the current challenges while capitalizing on the expected recovery in the latter half of fiscal 2025. Investors should closely watch for the integration success of recent acquisitions and broader market trends, especially in the M&A space, which could catalyze further growth.
Key Investment Factors
Growth Potential
HLI displays strong growth potential due to a diversified services portfolio, increasing M&A activity, and market responsiveness. Adjusted EPS growth of 32% year-on-year demonstrates effective operational leverage.
Profitability Risk
Key risks revolve around macroeconomic uncertainties, including fluctuations in interest rates, geopolitical tensions, and market competition that might constrain transaction speed.
Financial Position
HLI boasts a strong balance sheet with cash and equivalents totaling $691 million and a current ratio of 1.41, indicating good short-term liquidity. Debt levels remain manageable with a total debt-to-capitalization ratio of 18.1%.
SWOT Analysis
Strengths
Strong revenue growth in Corporate Finance segment
Diverse service offerings across M&A, restructuring, and valuation
Solid cash position providing operational flexibility
Weaknesses
High dependency on M&A market performance
Potential overhang from geopolitical risks
Opportunities
Growing demand for financial advisory in restructuring
Market recovery in M&A leading to increased deal flow
Strategic acquisitions enhancing service capabilities