Houlihan Lokey Reports First-Quarter Fiscal 2027 Results as Advisory Demand Remains Resilient Despite Temporary Corporate Finance Headwinds
Houlihan Lokey, Inc. (NYSE: HLI), one of the world’s leading independent investment banks, announced its financial results for the first quarter of fiscal 2027, which ended June 30, 2026. While the company reported lower revenue and earnings compared with the exceptionally strong first quarter of the prior fiscal year, management emphasized that the business continues to demonstrate resilience across its diversified advisory platform and expects improved performance as market conditions stabilize.
The quarter reflected ongoing challenges in portions of the global mergers and acquisitions market, particularly within Corporate Finance, where geopolitical uncertainty and disruptions in parts of the technology sector weighed on transaction activity. However, Financial and Valuation Advisory continued to expand, partially offsetting weaker performance in other business lines.
Despite these near-term pressures, Houlihan Lokey maintained strong profitability, generated solid cash resources, continued returning capital to shareholders through dividends and share repurchases, and remains optimistic about transaction activity during the remainder of fiscal 2027.
First-Quarter Financial Performance
For the quarter ended June 30, 2026, Houlihan Lokey generated total revenues of $511 million, compared with $605 million during the same quarter of fiscal 2026.
Net income attributable to Houlihan Lokey totaled $78 million, compared with $98 million a year earlier.
Diluted earnings per share (EPS) came in at $1.15, compared with $1.42 in the prior-year quarter.
On an adjusted (non-GAAP) basis, net income attributable to Houlihan Lokey was $91 million, or $1.35 per diluted share, compared with adjusted net income of $148 million, or $2.14 per diluted share, during the first quarter of fiscal 2026.
Although earnings declined year over year, the company remained profitable while navigating a more challenging advisory environment.
CEO Discusses Market Environment
Chief Executive Officer Scott Adelson acknowledged that the first quarter was affected by temporary market disruptions, particularly in Corporate Finance.
According to Adelson, ongoing instability in the Middle East, together with disruption in segments of the technology industry—especially software—slowed client activity and delayed transactions.
However, management believes these issues are temporary rather than structural.
The company continues to view the broader economy as healthy, supported by resilient public equity markets and attractive valuation levels.
Because of these favorable long-term fundamentals, Houlihan Lokey expects advisory activity to strengthen as uncertainty subsides.
Management indicated that while the exact timing of a recovery remains difficult to predict, internal pipelines continue to support expectations for stronger performance during the balance of fiscal 2027.
Revenue by Business Segment
Houlihan Lokey operates through three primary advisory businesses:
- Corporate Finance
- Financial Restructuring
- Financial and Valuation Advisory
Each segment experienced different market conditions during the quarter.
Corporate Finance
Corporate Finance remained the firm’s largest business.
Revenue totaled $303 million, down from $398 million during the comparable quarter last year.
The decline primarily reflected lower average transaction fees rather than reduced client engagement.
Interestingly, transaction volume remained relatively stable.
The firm completed 127 closed transactions, compared with 125 during the prior-year quarter.
Management explained that the decrease in revenue resulted primarily from transaction mix, which affected average advisory fees on completed deals.
Importantly, Houlihan Lokey does not believe this reflects a long-term deterioration in fee levels.
The Corporate Finance platform continued expanding its advisory capabilities.
Managing Director headcount increased to 260, compared with 244 one year earlier.
The continued hiring demonstrates the firm’s commitment to investing through market cycles rather than reducing long-term growth initiatives.
Financial Restructuring
Financial Restructuring generated revenue of $119 million, compared with $128 million during the prior-year quarter.
Unlike Corporate Finance, the decline resulted primarily from fewer completed restructuring engagements.
The business completed 23 restructuring transactions, down from 35 in the comparable period last year.
However, the average advisory fee per completed restructuring assignment increased due to transaction mix.
Management emphasized that the lower transaction count largely reflected the timing of deal closings rather than weaker client demand.
Managing Director headcount remained unchanged at 58, illustrating continued investment in one of the firm’s historically strongest franchises.
Financial and Valuation Advisory
Financial and Valuation Advisory (FVA) was the strongest-performing segment during the quarter.
Revenue increased to $89 million, compared with $79 million during the prior-year period.
The improvement reflected growing demand across valuation, financial opinions, portfolio valuation, dispute consulting, and other advisory services.
Fee-generating engagements increased significantly.
The business recorded 1,042 fee events, compared with 957 during the prior-year quarter.
Managing Director headcount also expanded from 45 to 47, supporting future growth opportunities.
The continued strength of the FVA platform highlights Houlihan Lokey’s diversified business model, which allows certain advisory businesses to perform well even when traditional M&A activity slows.
Overall Revenue Trends
Total company revenue declined approximately 16% year over year, driven largely by softer Corporate Finance activity.
Breaking down the business:
- Corporate Finance revenue declined 24%
- Financial Restructuring revenue declined 8%
- Financial and Valuation Advisory revenue increased 13%
The results demonstrate how the firm’s diversified advisory platform helps balance market cycles across different business lines.
Operating Expenses
Operating expenses declined alongside revenue.
Compensation Expenses
Compensation expense totaled $328 million, compared with $393 million during the prior-year quarter.
The compensation ratio improved slightly to 64.3% of revenue, versus 64.9% one year earlier.
On an adjusted basis:
- Compensation expense totaled $314 million
- Adjusted compensation ratio remained 61.5%
The decline primarily reflected lower revenue generation rather than significant workforce reductions.
Houlihan Lokey continues prioritizing retention of senior advisory talent despite temporary market softness.
Non-Compensation Expenses
Non-compensation expenses decreased to $105 million, compared with $122 million during the prior-year period.
Lower expenses resulted primarily from:
- Reduced acquisition-related contingent consideration adjustments
- Lower depreciation
- Lower amortization expenses
These savings were partially offset by higher professional services costs.
On an adjusted basis, non-compensation expenses increased modestly to $100 million, versus $94 million last year, mainly because of higher professional fees supporting ongoing business initiatives.
Operating Profitability
Operating income totaled $78 million, compared with $90 million during the prior-year quarter.
Income before taxes reached $86 million, while net income totaled $78 million.
Although earnings declined year over year, Houlihan Lokey continued producing healthy operating profitability despite lower transaction revenue.
The firm’s disciplined expense management helped preserve margins even in a softer advisory environment.
Tax Rate
The company’s effective tax rate increased to 9.8%, compared with 0.5% during the first quarter of fiscal 2026.
Adjusted effective tax rate increased to 12.6%, compared with negative 0.8% during the prior-year period.
Management explained that the higher tax rates primarily resulted from reduced tax deductions associated with stock-based compensation.
The increase reflects normal variations in tax benefits rather than changes in the firm’s underlying tax strategy.
Corporate Finance Activity Remains Active
Although Corporate Finance revenue declined, several underlying indicators remained encouraging.
The firm maintained virtually identical transaction volume compared with last year while continuing to expand its Managing Director base.
This suggests that client engagement remains healthy even though average advisory fees were temporarily lower.
Management believes the current fee environment reflects deal composition rather than reduced pricing power.
As market confidence improves, transaction values and advisory fees could normalize.
Restructuring Business Maintains Strong Position
Financial Restructuring remains an important contributor to Houlihan Lokey’s overall business.
While transaction volume declined during the quarter, higher average fees demonstrated the firm’s continued ability to secure complex, high-value engagements.
Given ongoing uncertainty across certain industries, restructuring advisory remains positioned to benefit should market volatility increase.
Financial and Valuation Advisory Continues Expanding
The firm’s valuation business continues benefiting from increasing demand for:
- Fairness opinions
- Portfolio valuation services
- Financial reporting support
- Dispute consulting
- Transaction advisory
- Independent valuation services
Growth in fee events demonstrates that clients continue seeking specialized advisory expertise regardless of broader M&A market conditions.
This segment provides an important source of recurring and countercyclical revenue.
Capital Allocation Remains Shareholder Friendly
Houlihan Lokey continued returning capital to shareholders during the quarter.
The Board of Directors declared a regular quarterly cash dividend of $0.70 per share for both Class A and Class B common stock.
The dividend will be paid on September 15, 2026, to shareholders of record as of September 1, 2026.
The company also continued its share repurchase program.
During the quarter, Houlihan Lokey repurchased approximately 348,000 shares of common stock.
These repurchases demonstrate management’s confidence in the firm’s long-term prospects while enhancing shareholder value.
Strong Balance Sheet Supports Future Growth
Houlihan Lokey finished the quarter with approximately $797 million in cash, cash equivalents, and investment securities.
The substantial liquidity provides flexibility to:
- Invest in strategic hiring
- Expand advisory capabilities
- Pursue acquisitions
- Return additional capital to shareholders
- Support long-term business growth
The firm’s conservative balance sheet remains one of its competitive strengths.
Continued Investment in Talent
Even amid temporary revenue pressure, Houlihan Lokey continues expanding its professional workforce.
Managing Director counts increased across multiple business segments, reinforcing management’s confidence in future client demand.
Rather than reducing investment during slower periods, the company continues strengthening its advisory platform for the next market expansion.
This long-term approach has historically positioned Houlihan Lokey to capture market share when transaction activity accelerates.
Management remains cautiously optimistic about fiscal 2027 despite near-term uncertainty.
Current headwinds affecting Corporate Finance—including geopolitical instability and temporary weakness within portions of the technology sector—are viewed as short-lived rather than signs of a prolonged downturn.
Healthy economic fundamentals, resilient public market valuations, and an active client pipeline support expectations for stronger advisory activity later in the fiscal year.
Meanwhile, the firm’s diversified business model, disciplined expense management, expanding advisory team, and robust balance sheet position Houlihan Lokey to capitalize on improving market conditions while continuing to deliver value to clients and shareholders.
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