Welcome to the Houlihan Lokey Fiscal Fourth Quarter and Full Year 2017 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 this conference call is being recorded today, May 9, 2017. I will now turn the conference over to Christopher Crain, Houlihan Lokey’s General Counsel. Please go ahead.

Thank you, operator, and hello everyone. By now, everyone should have access to our fiscal year and fourth quarter 2017 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 fiscal year ended March 31, 2017 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 Beiser, Houlihan Lokey’s Chief Executive Officer; and Lindsey Alley, Chief Financial Officer of the company. They will provide some opening remarks and will then open the call to questions. With that, I will turn the call over to Scott.

Thank you, Christopher. Hello everyone and welcome to our fiscal year and fourth quarter 2017 earnings call. Overall, this was a strong quarter for Houlihan Lokey. We reported record quarterly revenues of $257 million, 40% higher than the fourth quarter of fiscal 2016. Our full-year revenues were a record $872 million, an increase of 26% over last year's revenues of $694 million. We also achieved record fiscal year revenues in our corporate finance and financial advisory segments and had our second best year ever in financial restructuring. This year we experienced an unusual market environment that led to revenue growth in all three segments of our cyclically balanced business model. Our adjusted earnings per share for the quarter were $0.59 versus $0.43 from the previous year and our adjusted earnings per share for the full year were $1.89 versus $1.46 last year. Overall, we had the wind at our backs in fiscal 2017. We had a strong equity market, high client confidence, which helps support a stable M&A environment and access to capital remained robust, which resulted in a good year for private equity and drove strong results in our corporate finance business. This dynamic not only benefit corporate finance, but also drove good results in our financial advisory services business. In financial restructuring, we closed on several oil and gas transactions and we saw a broad rebound in restructuring activity across many industries and geographies. Now for some specific comments regarding each of our three business segments; corporate finance generated revenues of $435 million for the year, an increase of 17% over last year and our sixth year of record revenues. Our growth was driven by a 33% increase in the number of transactions that we closed versus last year. This compares to a 3% decline in the number…

Thank you, Scott. Revenues for the quarter were $257 million, up 40% from the same quarter last year. In addition, adjusted earnings per share also increased by 40% to $0.59. As Scott mentioned, all three product lines performed well to close out the year and expenses came in where we expected. In corporate finance, revenues were $115 million for the quarter, an increase of 45% from the previous years. We closed 62 transactions in the quarter compared to 40 in the same period last year and our average transaction fee on closed deals was essentially flat. This was a strong fourth quarter for corporate finance, but as a reminder we are comparing against a soft fourth quarter in fiscal 2016 when it collapse in oil prices led to dislocation in the equity markets and delayed some of our closings end of this fiscal year. Financial restructuring revenues were $104 million for the quarter, an increase of 44% from the prior year. We closed 30 transactions in the quarter, compared to 23 transactions in the same period last year and our average transaction fee on closed deals was more than 30% higher than in the same quarter last year. Energy represented the largest sector contributing revenues to financial restructuring for the fiscal year, but energy across all of our product lines represented less than 15% of firm-wide revenues. As we have said in the past, we expect the energy revenues will decline in fiscal 2018 as most of the initial restructuring engagements that were signed up during the collapse in oil prices have worked their way through the system. Financial restructuring revenues fluctuate more than our other business lines due to fewer but larger fee engagements and this quarter benefited from a couple of larger fees and favorable timing on closings.…

Thank you. [Operator Instructions] We'll take our first question from Devin Ryan with JMP Securities. Please go ahead.

Hey, thanks. Good afternoon guys.

Hey, Devin.

Hey, Devin.

Question here first on non-compensation expenses. I believe I heard the target range is 12% to 13% and I think that's down from 12.5% to 13.5% that you guys gave on the prior course. I just want to make sure I heard that correctly and then just get some perspective of whether that's just timing of expenses coming in and or a different revenue outlook just any perspective there?

No, I think we had originally thought we would be in the 12% to 13% range. We had some incremental costs associated with the acquisitions of Leonardo and McQueen in Europe. We adjusted them upwards that integration continues to be very effective for us and successful. And our revenues have grown this year I think a little bit more than we had expected at the beginning of the year. So on a go forward basis, we're more comfortable at that 12% to 13% range is kind of where we started.

Okay, that’s terrific, great to see. One maybe just on FAS, nice to see fee events increasing, I know there's some seasonality there as well. But in portfolio valuation advisory, are you seeing an expansion in your client list? Is that driving some of it? Or is it just more activity with existing clients? And just bigger picture how do you feel about the opportunity to increase I guess clients or thinking about kind of the market share opportunity?

I think yes to all of those questions. We see the market continues to grow. The number of new clients that we're bringing on continues to grow and generally the amount of work or the number of marks that were analyzed in any given time continues to grow. So it's really a feature of both market improvements as well as just we continue to gain clients and number of particular instruments that are being asked to value either on a quarterly or annual basis.

Okay, terrific. Last one just on MD headcount in corporate finance, it looks like it's stepped out a bit over the past few quarters, not sure if there's anything to highlight there in terms of the drivers and then just how we should think about the trajectory of kind of external hiring over the next year? It sounded like the comments were recently constructive, but just wanted to understand that dynamic a little bit.

Yeah, I think one, two years ago, we did a lot of headcount growth mostly through acquisitions, some through hiring, promotions, et cetera, did not do any acquisitions in the corporate finance side in the last 12 months, still continue to do some opportunistic hirings, did have some normal promotions and had a few departures and net, net I think headcount was relatively flat in most of our product lines really year-over-year.

Okay, great. Thanks a lot guys.

Thanks, Devin.

Thanks, Devin.

And we’ll take our next question from Mike Needham with Bank of America Merrill Lynch. Please go ahead.

Hey, good afternoon everyone.

Hi, Mike.

So, I guess, first on restructuring I think you were pretty candid in your remarks on the outlook and how strong this quarter was. I'm wondering how big of a chunk did the quarter take out of your active mandate. And there's still a number of things that you're working on or is the retainer fee run rate or whatever meaningfully lower?

Actually our monthly retainer fees continue to be up from where they were a quarter or a year or so ago to the total amount of work that we still have in the system, whether that it's engagements pipelines, is still actually strong in some regards actually still higher than what we've seen in the past. That being said what we've continued to note is a lot of the energy related transactional work. We continue to close a lot this last quarter, the previous quarter. We still think there's more to close, but it feels like we're more at the tail end of working through the energy restructurings. And at the moment while there is broad based other restructurings going on, there isn't another industry at the moment that is anywhere of the same size and trouble, but the energy patch started to present itself one, two years ago.

That makes sense. Okay. And then on acquisitions, you did the Blackstone deal this year. I guess after a couple of years almost as a public company had a much higher share price. Does that make it easier for you to do kind of more acquisitions or maybe a bigger deal today versus a year or two ago?

First of all, I think, all of the acquisitions we've done to date are much more small mid-sized almost tuck-ins. And I don't really think whether our stock prices at $20, $30 $40 or $50 a share is influencing what we buy or how we structure it. I think what has helped is being public, which is more well known people are – we get more inbound inquiries either through intermediaries or directly from companies and that part has helped, but like I said I think what we're looking for, what we're willing to buy, how we think about diligence seen and structuring and is at this juncture hugely influenced by our stock price. And if we were to do a much, much larger transaction, I think we’d have different commentary to that, but at this point it's not a driving future.

Okay. Thank you.

[Operator Instructions] We’ll take our next question from Conor Fitzgerald with Goldman Sachs.

Hi, good afternoon. Scott, just thank you for the color on restructuring. I think it's very helpful walking through kind of the pluses and minuses. And I know it's tough to get too specific just given how lumpy the revenue line can be, but any way to help us get a sense of how much larger the expected decline in energy is relative to the restructuring pick-up destruction pick up you’re expecting to see in a couple of other sectors just anyway to kind of give color on the relative pluses and minus?

Not necessarily much more than what we said before. Energy has been the largest percentage of our restructuring business in the last year or two. It's still you know one important part, but by no means the largest part of the total firms revenue stream we clearly expect the amount of energy restructurings to come down in the upcoming quarters or year. And as we've said though I think over the last one or two calls, we continue to see a broader base of new opportunities just at this juncture. It's a little hard to tell exactly where all that nets out, but I think it's an unusual fact pattern where I think we had such a large industry go through such turmoil like we saw in the energy patch. And while there is retail and there’s shipping and there's other things that continue to have issues, they're just not of the same size at least at this juncture to what we and our peers have seen on the energy side.

Thanks. And then just hopefully get your perspective. Obviously, credit normalization/credit problems are back in the investor discussion, like you talked about. Just wondering from what you're seeing on the restructuring pipeline? Do you think this is part of a credit normalization? We're just coming off the lows post the great recession. Or are we actually in the start of a credit cycle that can maybe give sustained strength to your restructuring business?

I think there's been so many years now post the recession people are starting to talk about eventually you would expect some kind of a downturn, you will expect some kind of you know credit issues. I won't say that we have seen anything yet that would be industry wide, but there's clearly far more indebtedness high yield debt that we see out today that there was even in the last cycle. So why I think we've continue to be able to well even put aside the energy comment is just the size of the marketplace has increased not withstanding the default rates are still at I'd say below average amounts. We do know eventually we'll see another downturn in the economy don't know how or when, but I think we'll just really try to, once again, always build the business, so that we can do well regardless of whatever those cycles might be. So, I think we hear little things out in the marketplace, but nothing that I would yet note is a brand new trend that would suggest a significant change in default rates.

That's helpful, thanks. And then last one for me. The Trump administration has talked about lowering small business taxes to 15%. Just want to get your take on we thought the ramifications of that would be on your client base and M&A activity more broadly?

Well, I think change is good for a business like ours, any kind of change there are clearly going to be some winners and losers. People are going to have to reassess their values what they want to own, how they want to finance side. But at this point, I think well people are still net expecting some form of tax reform and some changes, we really don't have a large set of clients yet are saying here's exactly what I think is going to happen and I either want to wait till that happens or I will only do something if something happens. I think it's still in talk mode with the expectation, something would happen but I don't really think you know the client base is fixated on a particular percentage or exactly how it will all shake out and what's going to be deductible or not. And I think people are listening, but they're reeling not yet driving to new businesses decisions until they get to some more clarity I think from the administration and Congress on what might happen.

That's helpful. Thank you.

Thanks, Conor.

[Operator Instructions] We will take our next question from Ann Dai with KBW. Please go ahead.

Hi, good afternoon. Thanks.

Hi, Ann.

There were some news reports around you guys opening an office in Dubai. And I was hoping you could talk a little bit about the opportunity set you see there, and what we might expect to see in terms of some headcount and costs associated with that build out?

We’ve talked about – we've done a number of assignments in the Middle East over the last couple of years. We predominately have done it out of our London office with personnel there. So we have talked about opening up a presence just to get closer to our client base. And you know both I think in working for some of the sovereign wealth funds, working for some of the companies early days on what we can continue to do in the Middle East. It'll be a relatively smaller-sized operation, at least initially. So I wouldn’t expect any significant new cost factors to consider when we ultimately open up a Dubai office.

Okay, great. And earlier, you talked about maturing of some of the newer managing directors or those that came on board with the acquisitions. Is there anything that you might be able to call out for us, whether the sector or geography, where you've just really seen productivity ramp?

Our acquisitions have been on the European continent and the consumer area in the tech and TMT side. So it's really been in all of those areas that we've either acquired. We've hired people really across multiple industries and we just know having managed the business for many, many years, regardless of whether you acquire these senior people or you hire these senior people or even if you promote these senior people, it does take some time for them to either meld into the culture for them to get their business cards – their new business cards out to the marketplace. And so we do find a ramp up that occurs somewhere some people quicker than others but somewhere in the next one, two, three years usually is what it takes before, I'd say we typically get to where people have fully matured on the Houlihan Lokey platform. And then it is going to grow normally with the marketplace and with all the other services we have. So it's not a particular location or industry or set product we'd point you to. It's just a recognition due to, I think, the large number of acquisitions and hirings and promotions that we note that – this was across the firm. There is across the firm was the comment of about a quarter of our client-facing MDs are still relatively new. The vast majority of those are in our Corporate Finance area. And they're still, I think, building in terms of productivity and result on our platform.

Okay, thanks, Scott. That’s it for me.

Thanks, Ann.

And appears there are no further questions. I'd like to turn the conference back over to our speakers for any additional remarks.

All right, well, I want to thank you all for participating in our fiscal year and fourth quarter 2017 call and we look forward to updating everybody in our progress when we discuss our first quarter results for 2018 in the summer. Thank you everyone.

And once again that does conclude today's presentation. We thank you all for your participation and you may now disconnect.