Houlihan Lokey (2HL) Q2 2027 Earnings Report

The call was broadly constructive. Revenue grew 5%, Corporate Finance and FVA produced year-over-year growth, deal activity is improving, and management raised confidence in the second-half and restructuring outlook. The company also reported strong liquidity, acquisition activity, and share repurchases. Offsetting factors included flat adjusted EPS, lower restructuring transaction volume and revenue, higher non-compensation expenses, weaker software activity, and continued macroeconomic and geopolitical uncertainty. Highlights significantly outweighed the lowlights.

Management expects Corporate Finance backlog and activity levels to suggest growth for the balance of the year, with capital solutions and non-M&A businesses performing similarly by the end of the year, no divergence between M&A and non-M&A businesses through fiscal '27, and Europe and the U.S. looking about the same by the end of the year; it expects an unseasonably higher seasonality in our second half and a good solid second half that's better than normal for us. Financial Restructuring is expected to have a stronger second half of the year, elevated restructuring revenues through fiscal 2028, and record backlog and strong activity levels approaching calendar 2027, while software engagements are expected to begin contributing to revenues in calendar '27, with revenues from software activity expected in calendar '27 and calendar '28. Management expects to maintain its long-term target of 61.5% for its adjusted compensation expense ratio for fiscal 2027, a fiscal 2027 full year adjusted effective tax rate of between 26% and 28%, and non-compensation expenses to grow similarly to last year by the time we reach the end of the fiscal year.