Houlihan Lokey Reports Fiscal Year and Fourth Quarter Fiscal 2019 Financial Results

– Record Fiscal Year 2019 Revenues of $1,084 million –

– Fiscal Year 2019 Diluted EPS of $2.42 –

– Adjusted Fiscal Year 2019 Diluted EPS of $2.87 –

– Fourth Quarter Fiscal 2019 Revenues of $291 million –

– Fourth Quarter Fiscal 2019 Diluted EPS of $0.69 –

– Adjusted Fourth Quarter Fiscal 2019 Diluted EPS of
$0.86 –

– Increased Dividend 15% to $0.31 per Share for First
Quarter Fiscal 2020 –

LOS ANGELES & NEW YORK–(BUSINESS WIRE)–Houlihan Lokey, Inc. (NYSE:HLI) (“Houlihan Lokey” or the “Company”)
today reported financial results for its fiscal year and fourth quarter
ended March 31, 2019. For the fiscal year, revenues grew 13% to a fiscal
year record of $1,084 million, compared with $963 million for the fiscal
year ended March 31, 2018. For the fourth quarter, revenues increased
19% to $291 million, compared with $245 million for the fourth quarter
ended March 31, 2018.

Net income was $159 million, or $2.42 per diluted share, for the fiscal
year ended March 31, 2019, compared with $172 million, or $2.60 per
diluted share, for the fiscal year ended March 31, 2018. Adjusted net
income for the fiscal year ended March 31, 2019 grew 19% to $189
million, or $2.87 per diluted share, compared with $159 million, or
$2.39 per diluted share, for the fiscal year ended March 31, 2018.

Net income increased 19% to $45 million, or $0.69 per diluted share, for
the fourth quarter ended March 31, 2019, compared with $38 million, or
$0.58 per diluted share, for the fourth quarter ended March 31, 2018.
Adjusted net income for the fourth quarter ended March 31, 2019 grew 30%
to $56 million, or $0.86 per diluted share, compared with $43 million,
or $0.65 per diluted share, for the fourth quarter ended March 31, 2018.

“We are pleased to report another record year at Houlihan Lokey, with
all three business segments contributing to our growth. Our corporate
finance business continued to capture market share around the world to
produce another record year; our financial restructuring business
delivered strong results for the year in a low default rate environment;
and our financial advisory services business had its best year ever with
continued productivity improvements across the service lines. We enter
fiscal 2020 with positive momentum in all three of our product lines and
a generally healthy business environment. Our performance in fiscal 2019
could not have been achieved without the hard work and success from our
nearly 1,400 employees. I would like to thank all of our employees,
clients and shareholders for helping us achieve record results once
again this year.” stated Scott Beiser, Chief Executive Officer of
Houlihan Lokey.

Revenues

For the fiscal year ended March 31, 2019, revenues increased to $1,084
million, compared with $963 million for the fiscal year ended March 31,
2018. For the fiscal year, Corporate Finance (“CF”) revenues increased
15%, Financial Restructuring (“FR”) revenues increased 8%, and Financial
Advisory Services (“FAS”) revenues increased 13% when compared with the
fiscal year ended March 31, 2018. Revenues for the fiscal year ended
March 31, 2019 included $33.6 million in expense reimbursements as a
result of the adoption of ASC 606 effective April 1, 2018 that now
clarifies that reimbursements of out-of-pocket expenses should be
included in revenues, whereas prior to adoption we had been reporting
non-compensation expenses net of such reimbursements.

For the fourth quarter ended March 31, 2019, revenues increased to $291
million, compared with $245 million for the fourth quarter ended
March 31, 2018. For the quarter, CF revenues increased 11%, FR revenues
increased 28%, and FAS revenues increased 27% when compared with the
fourth quarter ended March 31, 2018. Revenues for the quarter ended
March 31, 2019 included $8.3 million in expense reimbursements as a
result of the adoption of ASC 606.

Expenses

The Company’s employee compensation and benefits, non-compensation
expenses, and provision for income taxes during the periods presented
and described below are on a GAAP and an adjusted basis.

(Unaudited and in thousands)

(Unaudited and in thousands)

*Note: The adjusted figures represent non-GAAP information. See
“Non-GAAP Financial Measures” and the tables at the end of this release
for an explanation of the adjustments and reconciliations to the
comparable GAAP numbers.

Employee compensation and benefits expenses were $692 million for the
fiscal year ended March 31, 2019, compared with $637 million for the
fiscal year ended March 31, 2018. Adjusted employee compensation and
benefits expenses were $660 million for the fiscal year ended March 31,
2019, compared with $612 million for the fiscal year ended March 31,
2018. This resulted in an adjusted compensation ratio of 60.9% for the
fiscal year ended March 31, 2019, versus 63.5% for the fiscal year ended
March 31, 2018. The increase in GAAP and adjusted employee compensation
and benefits expenses was primarily a result of an increase in fee
revenues for the year when compared with last year.

Non-compensation expenses were $173 million for the fiscal year ended
March 31, 2019, compared with $112 million for the fiscal year ended
March 31, 2018. Adjusted non-compensation expenses were $164 million for
the fiscal year ended March 31, 2019, compared with $109 million for the
fiscal year ended March 31, 2018. The increase in GAAP and adjusted
non-compensation expenses was primarily driven by (i) the recognition of
reimbursements of out-of-pocket expenses as revenues rather than
reporting non-compensation expense net of such amounts as was the case
in the prior year period, (ii) higher rent expense primarily as a result
of standard increases to base rent across several offices, and
duplicative rent and occupancy costs associated with an office move and
consolidation in London, and (iii) higher professional fees and general
operating expenses associated with the growth of the Company.

The provision for income taxes was $65 million, representing an
effective tax rate of 29.1% for the fiscal year ended March 31, 2019,
compared with $46 million, representing an effective tax rate of 20.9%
for the fiscal year ended March 31, 2018. The increase in the Company’s
effective tax rate was primarily a result of the adoption of ASU
2016-09, Compensation – Stock Compensation, which resulted in a decrease
to the provision for income taxes for the fiscal year ended March 31,
2018 due to the vesting of share awards that were accelerated during
calendar year 2017, as well as the Tax Cuts and Jobs Act (the “Tax Act”)
that was enacted into law in December 2017 and created a rate benefit
upon enactment in the fiscal year ended March 31, 2018 due to the
Company’s re-measurement of deferred tax items. The adjusted provision
for income taxes was $75 million, representing an adjusted effective tax
rate of 28.5% for the fiscal year ended March 31, 2019, compared with
$85 million, representing an adjusted effective tax rate of 35.0% for
the fiscal year ended March 31, 2018. The decrease in the Company’s
adjusted effective tax rate was primarily a result of a lower statutory
federal tax rate per the Tax Act.

Employee compensation and benefits expenses were $190 million for the
fourth quarter ended March 31, 2019, compared with $156 million for the
fourth quarter ended March 31, 2018. Adjusted employee compensation and
benefits expenses were $177 million for the fourth quarter ended
March 31, 2019, compared with $153 million for the fourth quarter ended
March 31, 2018. This resulted in an adjusted compensation ratio of 60.8%
for the fourth quarter ended March 31, 2019, versus 62.6% for the fourth
quarter ended March 31, 2018. The increase in GAAP and adjusted employee
compensation and benefits expenses was primarily a result of an increase
in fee revenues for the quarter when compared with the same quarter last
year.

Non-compensation expenses were $40 million for the fourth quarter ended
March 31, 2019, compared with $29 million for the fourth quarter ended
March 31, 2018. Adjusted non-compensation expenses were $38 million for
the fourth quarter ended March 31, 2019, compared with $28 million for
the fourth quarter ended March 31, 2018. The increase in GAAP and
adjusted non-compensation expenses was primarily driven by (i) the
recognition of reimbursements of out-of-pocket expenses as revenues
rather than reporting non-compensation expense net of such amounts as
was the case in the prior year period, (ii) higher rent expense
primarily as a result of standard increases to base rent across several
offices and duplicative rent and occupancy costs associated with an
office move and consolidation in London, and (iii) higher professional
fees and general operating expenses associated with the growth of the
Company.

The provision for income taxes was $17 million, representing an
effective tax rate of 27.4% for the fourth quarter ended March 31, 2019,
compared with $23 million, representing an effective tax rate of 37.4%
for the fourth quarter ended March 31, 2018. The adjusted provision for
income taxes was $21 million, representing an adjusted effective tax
rate of 27.5% for the fourth quarter ended March 31, 2019, compared with
$22 million, representing an adjusted effective tax rate of 33.6% for
the fourth quarter ended March 31, 2018. The decrease in the effective
tax rate and adjusted effective tax rate was a result of a lower
statutory federal tax rate per the Tax Act.

Segment Reporting for the Fourth Quarter

Corporate Finance revenues increased 11% to $144 million for the fourth
quarter ended March 31, 2019, compared with $130 million in the fourth
quarter ended March 31, 2018. Revenues increased primarily as a result
of an increase in the number of transactions that closed during the
quarter compared to the same period last year, coupled with the
recognition of reimbursements of out-of-pocket expenses as revenues. CF
closed 64 transactions in the fourth quarter ended March 31, 2019,
versus 56 transactions in the fourth quarter ended March 31, 2018. CF’s
average transaction fee for the quarter was slightly lower when compared
with the same period last year.

(Unaudited and $ in thousands)

For the fourth quarter ended March 31, 2019, Financial Restructuring
revenues increased 28% to $100 million, compared with $78 million in the
fourth quarter ended March 31, 2018. FR closed 27 transactions in the
fourth quarter ended March 31, 2019, versus 26 transactions in the
fourth quarter ended March 31, 2018, and FR’s average transaction fee
for the quarter was significantly higher when compared with the same
period last year.

(Unaudited and $ in thousands)

For the fourth quarter ended March 31, 2019, Financial Advisory Services
revenues increased 27% to $47 million, compared with $37 million in the
fourth quarter ended March 31, 2018. The growth in revenues was
primarily a result of higher average fees per fee event.

(Unaudited and $ in thousands)

1. A Fee Event includes any engagement that involves revenue
activity during the measurement period based on a revenue minimum of
$1,000 (one thousand dollars).

Balance Sheet and Capital Allocation

The Board of Directors of the Company declared a regular quarterly cash
dividend of $0.31 per share of Class A and Class B common stock. The
dividend will be payable on June 14, 2019 to stockholders of record as
of the close of business on June 3, 2019.

As of March 31, 2019, the Company had $411 million of unrestricted cash
and cash equivalents and investment securities, and loans payable and
other liabilities aggregating $31 million.

Investor Conference Call and Webcast

The Company will host a conference call and live webcast at 5:00 p.m.
Eastern Time on Wednesday, May 8, 2019, to discuss its fiscal year and
fourth quarter fiscal 2019 results. The number to call is 1-888-394-8218
(domestic) or 1-323-794-2588 (international). A live webcast will be
available in the Investor Relations section of the Company’s website. A
replay of the conference call will be available from May 8, 2019 through
May 15, 2019, by dialing 1-844-512-2921 (domestic) or 1-412-317-6671
(international) and entering the passcode 6838739#. A replay of the
webcast will be archived and available on the Company’s website.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the federal securities laws. You can identify these
statements by our use of the words “assumes,” “believes,” “estimates,”
“expects,” “guidance,” “intends,” “plans,” “projects,” and similar
expressions that do not relate to historical matters. You should
exercise caution in interpreting and relying on forward-looking
statements because they involve known and unknown risks, uncertainties,
and other factors which are, in some cases, beyond the Company’s control
and could materially affect actual results, performance, or
achievements. For a further description of such factors, you should read
the Company’s filings with the Securities and Exchange Commission. The
Company does not undertake any obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events, or otherwise.

Non-GAAP Financial Measures

Adjusted net income, total and on a per share basis, adjusted operating
expenses and adjusted provision for income taxes are presented and
discussed in this earnings press release and are non-GAAP measures that
management believes, when presented together with comparable GAAP
measures, are useful to investors in understanding the Company’s
operating results. Adjusted net income, adjusted operating expenses and
adjusted provision for income taxes remove the significant accounting
impact of one-time or non-recurring charges associated with the
Company’s one-time/non-recurring matters, as set forth in the tables at
the end of this release.

Adjusted net income as calculated by the Company is not necessarily
comparable to similarly titled measures reported by other companies.
Additionally, adjusted net income is not a measurement of financial
performance or liquidity under GAAP and should not be considered as an
alternative to the Company’s financial information determined under
GAAP. For a description of the Company’s use of adjusted net income and
a reconciliation with net income, as well as a reconciliation of the
specific line items in adjusted net income, see the section of this
press release titled “Reconciliation of GAAP to Adjusted Financial
Information.” Please refer to our financial statements, prepared in
accordance with GAAP, for purposes of evaluating our financial
condition, results of operations, and cash flows.

About Houlihan Lokey

Houlihan Lokey (NYSE:HLI) is a global investment bank with expertise in
mergers and acquisitions, capital markets, financial restructuring, and
valuation. The firm serves corporations, institutions, and governments
worldwide with offices in the United States, Europe, the Middle East,
and the Asia-Pacific region. Independent advice and intellectual rigor
are hallmarks of the firm’s commitment to client success across its
advisory services. Houlihan Lokey is ranked as the No. 1 M&A advisor for
all U.S. transactions in number of transactions, the No. 1 global
restructuring advisor in both number of transactions and value, and the
No. 1 global M&A fairness opinion advisor in number of transactions over
the past 20 years, according to Thomson Reuters. For more information,
please visit www.HL.com.

Appendix

Consolidated Balance Sheet (Unaudited)

Consolidated Statement of Income (Unaudited)

Reconciliation of GAAP to Adjusted Financial Information (Unaudited)

____________________________

Note: Figures may not sum due to rounding

1. Consists of pre-IPO grant vesting, including grants re-awarded
following forfeiture, if any (($5,902) in Q4 FY19 and ($2,421) in Q4
FY18 and ($24,319) YTD FY19 and ($24,917) YTD FY18), and deferred
consideration from acquisition-related agreements (($7,366) in Q4 and
YTD FY19).

2. Includes costs associated with Houlihan Lokey’s secondary offering of
stock (($498) in YTD FY19; ($809) in Q4 FY18 and ($2,084) in YTD FY18),
completed acquisitions (($1,929) in YTD FY19; ($744) in Q4 and YTD
FY18), acquisition-related amortization (($1,573) in Q4 FY19; ($6,034)
in YTD FY19), and HL Finance setup costs (($619) in YTD FY19).

3. Includes adjustments from (1) and (2) above.

4. Includes Australia related transaction expenses ($166 in YTD FY18)
and the reduction of an earnout liability ($719 in YTD FY19; $1,386 in
YTD FY18).

Contacts

Investor Relations
212.331.8225
[email protected]
OR
Public
Relations
212.331.8223
[email protected]

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