Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan Lokey’s First Quarter Fiscal Year 2025 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, July 30th, 2024. I will now turn the call over to the company. Thank you, Operator, and hello everyone. By now, everyone should have access to our First Quarter Fiscal Year 2025 earnings release, which can be found on the Houlihan 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 ended June 30th, 2024, 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 Adelson, Houlihan Lokey's Chief Executive Officer, and Lindsey Alley, Chief Financial Officer. 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 First Quarter Fiscal 2025 Earnings Call. We ended the quarter with revenues of $514 million and adjusted earnings per share of $1.22. Revenues were up 24%, and adjusted earnings per share were up 37% compared to the same quarter last year. We began the new fiscal year with strength in all three of our business lines, and we concluded the first quarter with a solid increase in Corporate Finance, improving Financial and Valuation Advisory services, and continued elevated levels of Financial Restructuring revenues. Overall, we remain optimistic that current market conditions will drive improved M&A activity throughout the year, even as macro elements of uncertainty, including the interest rate environment and U.S. presidential elections, persist. Corporate Finance produced $328 million in revenues for the quarter, a 45% increase over last year's first quarter, and our highest first quarter Corporate Finance revenues ever. Key metrics for our Corporate Finance business continue to see steady improvement. Our transaction size and average fee per transaction is increasing, especially outside the U.S. The average close rate on transactions is increasing, and the time it takes to close a transaction is seeing slight improvement, though still lengthier than historical norms. As long as these trends remain, we should see improvement in our Corporate Finance business versus the same periods last year. Finally, capital providers in the middle market are aggressively seeking to deploy capital, benefiting middle market M&A and resulting in a strong start to the year for our Capital Markets business. Financial Restructuring produced $117 million in revenues for the first quarter, the second highest first quarter revenue for this business. As we have mentioned in previous calls, for fiscal 2025, we expect our Financial Restructuring business to perform similarly to the first three quarters of fiscal 2024. These elevated levels of Financial Restructuring activity are supported by persistently higher interest rates, political dislocation, especially in Europe, and accelerated refinancings due to corporate maturities occurring over the next couple of years. However, as general market conditions continue to improve, some of this restructuring activity could turn into healthy refinancing activity, and Capital Markets business is well positioned to take advantage of this opportunity. Financial and Valuation Advisory produced $68 million in revenues for the first quarter, a 4% increase versus the first quarter last year. Many of the same underlying trends that are affecting our Corporate Finance business are starting to positively impact our FVA business. Our less cyclical services, like Portfolio Valuation, have continued to perform well throughout this challenging economic backdrop, while our more pro-cyclical businesses have started to gain momentum. In the quarter, we completed the acquisition of Triago, making a significant expansion of our private funds capabilities and adding seven managing directors to our business. The team has had positive early momentum and success in marketing our new fully integrated capabilities across primary, secondary, direct, and GP advisory markets. More than 70 finance professionals now make up our private funds practice globally, positioning us to be a holistic advisor across products and geographies. In total, we added 27 new managing directors in the quarter, hiring six new managing directors in addition to the seven who joined us through the Triago transaction. We would like to congratulate the 14 managing directors who were promoted from director during the first fiscal quarter as part of our year-end process. Also, as part of the year-end process, we had 11 mostly planned managing director departures. We continue to see a very strong hiring market for new senior talent and a steady flow of new candidates as we add to the most talented workforce in our firm's history. We are optimistic about fiscal 2025, given the signs of improving M&A and Capital Markets activity. Given the investments we have made across our businesses over the last several years, we are especially well positioned to capitalize on this recovery as it unfolds. Lindsey, over to you. Thank you, Scott. Revenues in Corporate Finance were $328 million for the quarter, up 45% when compared to the same quarter last year. It closed 116 transactions this quarter, compared to 95 in the same period last year, and our average transaction fee was higher for the quarter versus the same quarter last year. Net restructuring revenues were $117 million for the quarter, a 5% decrease versus the same period last year. We closed 33 transactions in the quarter, compared to 30 in the same quarter last year, but our average transaction fee on closed deals decreased. As we've mentioned in the past, given the nature of the business, revenues in our Financial Restructuring business can be lumpy quarter to quarter. For Financial and Valuation Advisory, revenues were $68 million for the quarter, a 4% increase from the same period last year. We had 847 fee events during the quarter, compared to 786 in the same period last year. Turning to expenses, our adjusted compensation expenses were $316 million for the quarter versus $256 million for the same period last year. Our only adjustment was $14.2 million for deferred retention payments related to certain acquisitions. Our adjusted compensation expense ratio for the first quarter in both fiscal 2025 and 2024 was 61.5%. We expect to maintain our long-term target of 61.5% for our adjusted compensation expense ratio. Our adjusted non-compensation expenses were $80 million for the quarter, an increase of 6% over the same period last year. This resulted in an adjusted non-compensation expense ratio of 15.6% for the quarter, compared to 18.2% for the same period last year. On a per-employee basis, our adjusted non-compensation expense was $31,000 this quarter versus $29,000 for the same quarter last year. For the quarter, we adjusted out of our non-compensation expenses $3.5 million in non-cash acquisition-related amortization and $3.6 million for acquisition-related costs, which was primarily related to the write-down of the assumed lease in New York as part of the Triago acquisition. We also had an adjustment of $500,000 pertaining to professional fees associated with streamlining our global organizational structure, also referred to as Project Solo. Our adjusted other income and expense produced income of approximately $5.1 million versus income of approximately $3 million in the same period last year. The improvement in this category was primarily due to a net increase in interest income. We adjusted out of other income and expense a loss of $828,000 related to the increase in value of an earn-out liability associated with one of our prior acquisitions. We treat all acquisition-related earn-outs as purchase price and adjust out of our P&L any significant changes in the value of these earn-outs. Our adjusted effective tax rate for the quarter was 31.2%, compared to 29.2% for the same quarter last year. The increase in our adjusted tax rate was driven primarily by increased non-deductible expenses for the quarter. We adjusted out of our GAAP effective tax rate a significant benefit that we received as a result of our stock vesting in the first quarter, and we also adjusted out a one-time reversal of a deferred tax asset. A long-term target for our adjusted effective tax rate is between 28% and 30%, and we expect fiscal 2025 to end up at the high end of that range. Turning to the balance sheet, as of quarter end, we had approximately $485 million of unrestricted cash and equivalents and investment securities. Our cash position declined this quarter as we paid a significant portion of our fiscal 2024 bonuses to employees in May. Also, in our first quarter, we issued approximately one million new shares to employees as part of our fiscal 2024 year-end compensation, and we repurchased, through withhold to cover, approximately 800,000 shares during the month of May. With that, Operator, we can open the line for questions. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question comes from the line of Brennan Hawken with UBS. Please go ahead. Good afternoon, Scott and Lindsey. Thanks for taking my questions. Would like to start on Corporate. Hey, guys, how are you? Would like to start on Corporate Finance. Good to see breaking out of the prior range. It certainly sounds like, from your prepared remarks, the outlook for that business continues to improve. Is there a historical context that you could give, or is there a way in which we should be thinking about the potential growth and what indicators we should be watching as we continue to monitor the situation? I think it's really consistent with what we've been saying for a number of quarters now, that we continue to see things improving, and they are continuing to improve. And we have benefited, as we've said, particularly in Europe, from a very different reputation than we had prior to our transaction of a couple of years ago. As the market increases, we are seeing improvement in average deal size, in our close rates, in our fees, and so forth, and all of that just inuring to our benefit. The only thing I'd add, Brennan, is we do have a seasonal business, as I think most of you know. So we do think about it in terms of how the next quarter will perform versus the same quarter last year, and that moves into the third quarter for us in Q4. That's primarily in our Corporate Finance and our FVA business. As you know, our restructuring business tends to be a bit lumpier and maybe a little less seasonal, but certainly for Corporate Finance and FVA, we are comparing versus the same quarter last year. I think our comments were generally around, "Look, if conditions continue to behave the way they are and improve the way they are, we should expect to see good growth quarter-over-quarter." Got it. That's clear. Thanks very much. On restructuring, we've recently seen what I believe is the first full-blown restructuring from the creditor of direct lending group. Curious to hear your views on this. Maybe is this more of a one-off, or do you think this might be a sign of building stress behind all of the liability management mandates that we've seen in recent years? And if that's the case, could that provide some upside, given that full-blown restructurings do tend to be more profitable than liability management? I mean, I'll take a stab at that. Brennan, I'm not familiar with the restructuring that you mentioned. We still think that the credit markets remain quite healthy and continue to be, in the middle market, our primary source of capital. And so there is quite a bit of leverage out there. There will be some players that perform well and others that do not, but we're not looking at this restructuring that you mentioned as a sign of things to come. Okay. Thanks for taking my questions. Thank you. Next question comes from the line of James Yaro with Goldman Sachs. Please go ahead. Good afternoon, Scott and Lindsey, and thanks for taking my questions. Maybe just starting with Corporate Finance and specifically on the sponsor side of the business, maybe if you could just provide your thoughts on how much those have improved over the last few months, and then over what time period would you expect sponsor M&A to fully normalize, and would we need to see rates come down for that to occur? Thanks. Good set of questions. I mean, I think when you take a look, it has been that continued improvement in the sponsor world as well. You do see people gaining confidence and moving deals forward. We've been saying that, again, for quarters, and this is just a continuation of it. I can't sit here and tell you when that will exactly peak or that crystal ball is not available to me. Having said that, everything is continuing in the direction that we have expected it to, and everything that we are seeing right now says it will continue. Okay. That's very helpful. Maybe just on the private funds businesses, you talked about the size of the business. Those numbers are very helpful. But maybe just, if you take a step back, your views on the durability of the industry growth that we're seeing in that business and which pockets within the business you see the best opportunities to grow and take market share. I think when you're talking about the Private Funds Group, it really is, in our view, a rapidly evolving part of the market, less so on the primary side, more on the secondaries and directs and stakes, that we are still in very early days of that as the entire alternative asset class really matures as an industry along thinking about things like this. And we think that there is a lot of growth, and that's why we've made the investments that we've made in it, and we are very pleased with our early indications of how things are going. Very helpful. Thank you so much. Appreciate it. Thank you. Next question comes from the line of Devin Ryan with JMP Securities. Please go ahead. Hi, Scott. Hi, Lindsey. How are you? Hey, Devin. I want to pick up on the comment on the average fee size outside the U.S. And it sounds like GCA has been a nice catalyst for the European business. And now that it's been integrated, just curious kind of the network effects that you might be seeing on productivity for either the legacy European bankers within Houlihan or even connectivity into their U.S. counterparts. And I'm just trying to think about what this all implies potentially for upside to average banker productivity over time, just given that there were so many bankers out of GCA, and it sounds like it's going pretty well. Thanks. Yeah. I mean, I think that we are a very different firm. Each individual firm, if you will, is very different than before the transaction than we are on a combined basis afterwards in our importance to the marketplace. And the ability for us to truly deliver an international footprint with our Capital Markets capabilities, with our sponsor capabilities, has certainly driven a different type of business than I would say either group of individuals was seeing before. And as markets return, we expect to continue to see that momentum. All right. Thanks. Just to follow up on just the Capital Markets outlook and maybe the interplay as well with just the restructuring business. I'm curious. Obviously, the M&A business has been relatively depressed and is starting to pick up. Restructuring has been healthy and may tick down, but more traditional kind of Capital Markets activity may open up as a result. I'm just kind of curious how, one, that business has been trending, and then, two, the interplay with that business if restructuring slows down, but the M&A business is picking up. Thanks. Yeah. I mean, Capital Markets business has continued to grow, I think, for a number of reasons. And as we continue to see growth in the private Capital Markets, obviously being one of them, as that market heats up, obviously, there are certain restructurings that, in a less robust financing environment, may have become restructurings may wind up being Capital Markets opportunities we think we're well positioned in either direction that those head, but Capital Markets business is continuing to grow for multiple reasons, not just that. Okay. Great. Thank you very much. Thank you. Thank you. Next question comes from the line of Ken Worthington with JP Morgan. Please go ahead. Hi. Good afternoon. On FVA, revenue is up quarter-over-quarter, but as we look sort of year-over-year, growth at sort of 4% in what seems like an easier comparison. We've seen deceleration in growth from what we've seen in recent quarters. So you can give us a little more detail on the variance in revenue generation from this quarter last year and maybe why we're not seeing better growth more recently in that area, given how strong markets are and sort of the rebound we're starting to see in M&A and the impact that we would expect would have there versus what we saw this time last year. What are the puts and takes? Yeah. I mean, I think, yeah, for FVA, as a reminder, the last couple of years when I'd say the M&A markets were down pretty significantly, not only for our peers, but for us, FVA was flat. And so they had a pretty good couple of years where most certainly M&A-focused firms were down. And so for us, we're actually quite happy with the growth in M&A this quarter or sorry, with FVA this quarter. There are several business lines within FVA, some of which are traditionally kind of M&A market-driven, others of which have nothing to do with the current state of the market. And so I think coming off a couple of good years in FVA on a relative basis, I think quarter-over-quarter growth here is something we're pretty happy about. I'd say the mix of the service lines is probably going to result in FVA growing slower than Corporate Finance as these markets come back. And that's the nature of the business. In good, strong M&A markets, it tends to grow a little bit slower than a pure M&A business because of the non-cyclical businesses that it's in, or I'd say the non-cyclical businesses it's in. And then in tougher markets, it tends to perform better. And so I think that's probably what you're seeing. Okay. Can you actually give us a little more color on those non-market-sensitive businesses and how they're doing and even on the rebound that you're seeing in the more market-sensitive businesses? Again, can you just take us one level deeper and give us a little more color? Yeah. We don't get into specific line item performance in FVA. I will say the non-market-sensitive businesses did certainly better than the businesses that were M&A-focused in FVA. But we don't get into the details, Ken, on which businesses are performing in terms of the specifics in terms of how the businesses are performing within FVA. Okay. Then a super simple one on tax. You mentioned tax for the rest of the year kind of should come at the high end of the historic range. What's driving the tax to be at the high end versus the low end? Again, it's a mix of business. I think it's. What's happening in the mix? Yeah. It's a few things. I think it is, as you know, we have pretty big businesses in some of the higher jurisdictions in Europe. So it's the higher tax jurisdictions in Europe, so U.K., Germany. We have a big business in Japan, all of which are performing pretty well. So that's going to drive our tax rate a little bit higher. And that's probably the primary thing driving it. And so I think as long as we're optimistic about some of the larger markets with higher taxes that we're in, you're going to see us towards the higher end of that range. Okay. High-quality problem. Thank you very much. Yeah. It's a high-quality problem. Thank you. Thank you. Next question comes from the line of Brendan O'Brien with Wolfe Research. Please go ahead. Hey. Good afternoon. Thanks for taking my questions. I guess to start, I just wanted to follow up on the European business. I just wanted to get a sense as to how activity is trending in Europe relative to the U.S., specifically whether the recent rate cuts by the ECB have had any material impact on activity levels in the region. I mean, really, from our perspective, we continue to see it picking up like it has in the U.S. If anything, I would say it has lagged it a little bit in that pickup, but directionally, everything is heading in the same direction. It is just more about pace. Gotcha. I guess pivoting to restructuring and your comments indicating that we could see a tail off in activity if M&A activity were to pick up more meaningfully, which makes sense given the historical relationships between the two businesses. I know in the past you guys have spoken to the business kind of seeing higher floors and higher ceilings as you continue to grow. I just want to get a sense as to how we should be thinking about the trajectory of restructuring over the next couple of years and maybe where that number could settle out. Yeah. I mean, I think that just to be clear, as M&A, but even more so Capital Markets, the availability of capital picks up is more so than M&A is really what can drive some solutions to more distressed situations. When we're looking at our distressed business, we have seen it over time reach new levels. As people continue to utilize debt and multiple tranches of debt increasingly around the world, that market is just growing. There will always be a percentage that wind up in default for one reason or another. And even without that, we still have elevated interest rates and likely will for a period of time. And right now, we still have, I'll call it, we haven't been in this cycle at extraordinary default rates. It's just been normal default rates, but we've gotten so used to really almost nonexistent default rates prior to that. This is, in our minds, very much the new normal. How long that exists for, time will tell, but we expect the elevated levels to persist for a while. Great. Thank you for taking my questions. Thank you. Next question comes from the line of Ryan Kenny with Morgan Stanley. Please go ahead. Hi. Good afternoon. Thanks for taking my question. You're right. Can you unpack the comment in the prepared remarks around time to close Corporate Finance transactions seeing some improvement? That feels like a much better environment and discussion than we were in last year. We're talking about lags on all the earnings calls. So what's really driving that change? I mean, look, the sentiment that everything that we're discussing and all of our peers have been discussing as well is the pickup in the M&A market. And some of that is, as we've discussed, there are reasons why deals had been dragging on just one more piece of information that we want one more schedule. Some of that is starting to subside. I would not say that we are back in any way to, I'd call it, optimistic or even probably normal timeframe, but it is improving. And that is good to see. On sponsors, the comments earlier around sponsor activity improving, can you just walk through how the recent rotation to mid-cap stocks and value stocks is impacting conversations with sponsors? Is that a meaningful catalyst to get movement on their portfolio companies? That really isn't something that I would say people are massively fixated on. It's certainly something that we have seen. It is a bit of a different attitude when you're buying a stock for years versus effectively renting it. It's just a different mentality between public and private markets. Thank you. Thank you. Next question comes from the line of Jim Mitchell with Seaport Global. Please go ahead. Hey. Good afternoon. Maybe just following up on that last question. Hey, how are you? On that last question in terms of maybe just smaller deals generally, I think in the past you've talked about smaller deals and financial sponsors typically rebounding more quickly than larger deals. Are you seeing that? Is that part of the positive outlook? How is it playing out in terms of the smaller deals coming to market relative to the overall market? I mean, I would say we are just seeing a normal mix within our portfolio of things. I can't point to that they are smaller or larger. Really, it is a fairly normal mix at this point. There's no trend there. Okay. And then just maybe on MD headcount, I appreciate that it's lumpy in terms of leavings and hirings and things like that. But if you look at the last four quarters, year-over-year growth has been around 1%-2%. Was that sort of a kind of deliberate slowing in the environment, and we should expect that pace to pick up? Or how should we think about MD headcount from here? I think we are constantly looking for talent. And unfortunately, as I always joke, you can't go to the investment banker store and pick up a few. I mean, it is a process for us, and we are constantly looking. And when we see talent that we think we mutually agree is a good fit, we do our best to attract that talent. And so we don't think about it so much as, "Hey, we're going to go hire 10 MDs this quarter," or something like that. That's just not the way we think about it. Should we expect at least sort of more historical growth going forward? I mean, from a net headcount perspective, you've been mid-high single digits. Is that a fair way to think about the next couple of years? Yeah. I think that's fair. Look, I think the last couple of years, we had a slowdown in the M&A markets. And I think we, along with every other firm, kind of took a step back and said, "Do we want to make some changes within the organization to kind of right-size a workforce around the last couple of years?" And we probably did that along with everybody else. And so you're probably seeing some puts and takes in terms of new hires versus departures over the last couple of years that won't exist in a high-capacity environment. And so yes, probably what our growth looked like for the five years prior to two years ago. And then that's a decent proxy. Maybe take GCA out. That's a decent proxy for what our growth and headcounts should look like. Right. Great. Thanks. Thank you. Next question comes from the line of James Yaro with Goldman Sachs. Please go ahead. Thanks for taking my follow-up. I just wanted to touch on the non-comp expenses. We did fall for the second consecutive quarter again, and despite the much stronger revenue. Maybe you could just talk to the updated trajectory for non-comp that we should be thinking about. And then maybe any thoughts on maybe your best guess for what a normalized non-comp ratio looks like. I know that's changed a lot over the past few years with COVID and then, obviously, with travel increasing. But just any thoughts there? Yeah. I think with respect to non-comp, the comments I've made before, I think, are probably similar, James. We expect non-comp this year. The last couple of years, non-comp's been at that 15%-16% growth. We don't expect it to be like that this year. We expect it to kind of normalize. Whether it normalizes kind of mid to high single digits, not sure of. I think it depends on a whole number of factors, including revenue, because there's reimbursable expenses in there. But I don't think that's a bad way to think about non-comp. I think this quarter was roughly 6% versus last year, same quarter. It was a good quarter with respect to managing non-comp. We still expect pressure on our investments in information technology. We still expect pressure on T&E just given some of the inflation concerns. Then in terms of what a normal non-comp looks like from a ratio standpoint, it's hard to tell. It's hard to tell how quickly revenues are going to return. So I'm a little hesitant to mention that just because we've been in sort of, like I said, kind of an M&A recession here for the last couple of years. It is 100% driven by revenues. So in terms of how to answer your question, we feel like that we have a much better prediction of what non-comps are going to look like for the next three quarters than we do what revenue is going to look like. But I think we remain optimistic on both. It's hard for me to answer your ratio question until I have a better sense of how quick revenues will return. Very fair. Thanks for taking my follow-up. Thank you. Next question comes from the line of Aidan Hall with KBW. Please go ahead. Great. Good afternoon, everyone. Thanks for taking my question. Maybe just one on the inorganic side. Inorganic growth has been a large part of the story at the firm. Just wondering if you'd just give us any color around or characterize kind of the pipeline or conversations that you're having, just given the building activity seen across the industry. If there's any areas that are particularly attractive to you from an inorganic perspective that you would flag. Yeah. Great question. And I think that we've obviously stated that is a part of our business model and a part of our growth. And we continue to be committed towards it. And we are in constant dialogue with a number of parties. And at the end of the day, the thing that is driving it most is finding groups that we really think are a super strong cultural fit to our organization. And again, a little bit like bankers don't know exactly when they're going to fall in, but you can rest assured that we are constantly in dialogue with people, and things are moving along as they have been in the past. And just to follow up on the specifics, I think, look, think about it this way. We have 3,400 subsectors in industry, some of which we are strong in and some of which we are underweighted. The ones that we're underweighted is kind of game on for acquisitions or organic hires. And really, to Scott's point, we want to fill every single one of them out in the U.S. That's our ultimate objective. And if we find the right person through an organic hire to help us become strong in that subsector, we will. And if an acquisition makes the most sense, we'll pull that lever. And so really, the whole strategy is filling up those underweighted sectors in industry. And we believe there are hundreds of them. Got it. Appreciate the color. Thanks for taking my question. Sure thing. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to Scott Adelson for closing comments. I want to thank you all for participating in our First Quarter Fiscal 2025 Earnings Call. We look forward to updating everyone on our progress when we discuss our second quarter results for fiscal 2025 this coming fall. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.