Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Houlihan Lokey Fiscal First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, 29th of July 2025. I'll now turn the call over to the company. Please go ahead.

MD, General Counsel & Secretary: Thank you, operator, and hello, everyone. By now, everyone should have access to our first quarter fiscal year 2026 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 30, 2025, 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 line to questions. With that, I'll turn the call over to Scott.

Thank you, Christopher. Welcome, everyone, to our first quarter fiscal year 2026 earnings call. We ended the quarter with revenues of $605 million and adjusted earnings per share of $2.14. Revenues were up 18% and adjusted earnings per share were up 75% compared to the same quarter last year. We began fiscal 2026 with momentum and concluded the quarter with solid performance by all 3 of our business lines. Our views of current market conditions and our business are broadly consistent with what we shared last quarter. While market forecasts remain difficult given a dynamic and volatile macro environment, we continue to see the benefits of our diversified business model, particularly across industry and geography. The markets in which we operate are showing resilience, adapting to the complexities and uncertainties of the current environment. Turning to our results. Corporate Finance produced $399 million of revenue in the first quarter, a 21% increase over last year's first quarter. Key metrics for our Corporate Finance business, including transaction size and average fee per transaction, continue to see steady improvement. This was achieved despite muted activity from the financial sponsor community, underscoring the strength of our business, which we believe should pick up as sponsor activity eventually returns to more historic levels. We are cautiously optimistic that this momentum will continue through fiscal 2026, while we remain mindful of the potential headwinds, including tariffs and inflation. Our Financial Restructuring business produced $128 million in revenues for the first quarter, a 9% increase over last year's first quarter. Financial Restructuring activity remains elevated, supported by persistently higher interest rates, macro uncertainty and overleveraged companies. Revenues in Financial Restructuring are diversified across industry and geography, and we are experiencing a balanced mix of debtor and creditor work. We expect to continue to see elevated restructuring…

Thank you, Scott. Revenues in Corporate Finance were $399 million for the quarter, up 21% compared to the same quarter last year. We closed 125 transactions this quarter, up from 116 in the same period last year, and our average transaction fee was higher for the quarter versus the same quarter last year. Revenues and activity levels in the U.S. continue to outpace those in EMEA, and we expect this regional dynamic to persist through the summer. Financial Restructuring revenues were $128 million for the quarter, a 9% increase versus the same period last year. We closed 35 transactions this quarter compared to 33 in the same quarter last year, and our average transaction fee on closed deals increased. For Financial and Valuation Advisory, revenues were $79 million for the quarter, a 16% increase from the same period last year. We had 957 fee events during the quarter compared to 847 in the same period last year, a 13% increase. Turning to expenses. Our adjusted compensation expenses were $372 million for the quarter versus $316 million for the same period last year. Our only adjustment was $21 million for deferred retention payments related to certain acquisitions. Our adjusted compensation expense ratio for the first quarter in both fiscal 2026 and 2025 was 61.5%. We expect to maintain our long-term target of 61.5% for our adjusted compensation expense ratio for the balance of the year. Our adjusted non-compensation expenses increased to $94 million for the quarter compared to $80 million for the same period last year. Our adjusted noncompensation expense ratio for the first quarter in both fiscal 2026 and 2025 was 15.6%. On a per employee basis, our adjusted noncompensation expense for the quarter increased to $35,000 versus $31,000 for the same quarter last year. The increase was primarily driven…

[Operator Instructions] Your first question comes from Devin Ryan from Citizens.

So I heard the comment in the prepared remarks that your views of the business are broadly consistent with last quarter. And so I'm just curious as it relates to Corporate Finance, I would assume that there's been some market improvement just with sentiment improving and more optimism in the market more broadly. So I'm just curious if you're seeing that with clients from where you were 3 months ago, maybe 3 months ago, you're already starting to see that reacceleration and momentum. But just love to dig in there a bit more. And then just if you can just hit on kind of how backlogs have trended kind of sponsors willing to move forward on auctions and transactions and then from a [ sector ] perspective as well, if you can touch on that.

Really bad connection. So I will try and do my best with that. But I think that what we've been saying for a long time is that it keeps getting better quarter-by-quarter, but not necessarily month by month. So even within this quarter, you saw the momentum shift, if you will, a bit back and forth, and that's some of the uncertainty we see in the marketplace. Having said that, as I said in my remarks, I mean, the resiliency of our clients to really adjust to the market we are in continues to get better and better. And I think that is what we're feeling. It is getting better and better quarter-by-quarter, but not necessarily month by month. The second part of your question, quite honestly, was backlog, I think, but you were breaking up so bad, I wasn't really sure. If you want to try and repeat it, I'll give it a shot.

Yes. If I'm not through, I'll hop back in the queue. But [ sensibly ] I just wanted to give a little bit of a sense of how the backlog is refilling and then if there's sectors that are snapping back faster and then if there's any areas that aren't because they're still impacted by tariffs or otherwise?

Yes. I'd say, Devin, on the backlog side, we don't -- we try to stay away from backlog commentary. Having said that, we continue to see good solid performance across all the sectors. I made a comment regarding geography. We do think Europe, EMEA has been a bit slower than the U.S. over the last 3 to 6 months, and we don't expect that to change this summer. But in terms of backlog, look, some of our peers have made commentary around backlog. It's quite strong. We want to get away from comparing backlog this quarter versus last quarter versus the same time last year in terms of backlog.

Your next question comes from Brendan O'Brien from Wolfe Research.

To start, I just want to touch or follow up on Devin's question a bit. Within Corporate Finance, the top line trends continue to look very strong, but the year-on-year growth in the number of deals completed has seemed to decelerate a bit. So just want to get a sense as to the breadth of activity that you're seeing in the market today and specifically around the quality of assets that you're seeing move and when we can start to see that aperture widen.

Yes. I mean, again, same commentary about getting better kind of quarter-by-quarter, right? It's back to what we've talked about before, what's the slope of that improvement. But we clearly are in a good environment at this point, but again, at kind of the bottom end of it is what I would say. The -- in terms of volume of deals, I do think after Labor Day, we're going to see that even pick up more. That certainly is the indication from everything we're seeing.

And look, I'd say from a deceleration standpoint, we had an extraordinary quarter 1 last year. I think our Corporate Finance revenues grew 44% or so. I mean 21% growth is decelerating versus the same time last year, but it's still pretty strong, and it's over a much larger base. And so I mean, we don't see a decelerating trend at all. We're just operating off of a higher base this year versus the same time last year.

I totally appreciate that. And I guess for my follow-up, I just wanted to clarify some of your comments around the non-comp side. Specifically, I know you guided to the high single-digit non-comp growth rate last quarter. Is that still your expectation for the full year this year? Or has something changed, whether it's travel or inflation or anything like that?

No, we're still at that high single digits. Unfortunately, we just had our entire noncomp expense in our first quarter. I'm joking about that. But we did -- we had a higher first quarter. I think there was a specific reason why, but we do expect to see kind of that still that high single digits for the balance of the year. Now part of that is driven by headcount growth, as you know. So the faster our headcount grows this year, the higher our non-comp expense and so some of it is beyond our control and some of it is a good problem to have. But as we sit here today, no change from last quarter in terms of what the end of the year looks like.

Your next question comes from James Yaro from Goldman Sachs.

Restructuring remained elevated this quarter. I know you gave the outlook for the business as being elevated. But maybe you could just dig down a little bit into anything that you are seeing around liability management versus Chapter 11 traditional restructuring and then expectations for the forward for each of those?

Yes. I mean I think it's consistent. Again, we kind of think about it as in court and out-of-court, if you will. But the -- it continues to be active on both sides with obviously some of the not as large transactions leaning more towards the out-of-court. And -- but there does seem to be a good pipeline kind of across the board, and we're seeing it just continue to be a strong restructuring environment are certainly elevated.

And James, our commentary for restructuring hasn't really changed much. I mean we don't -- we consider liability management traditional restructuring. So we don't really differentiate it. And look, the market has been and think we will continue -- will continue to be reasonably strong for liability management transactions given that we've just had a really long runway. And we don't see that changing certainly through fiscal '26, which is why we -- you see -- you hear a little bit of confidence in terms of elevated restructuring for the balance of the year.

That's great. Scott or Lindsey, maybe just any thoughts around or any color around the growth of your secondaries business since you did the deal? And then I guess, any thoughts around the cyclical versus structural drivers and perhaps your expectations for how much growth that business can have over time?

Yes. I think that we're very happy with that. That is now all involved within our Capital Solutions group, which, as you know, is part of Corporate Finance. And that integrated approach seems to be serving us very well, and we're extremely happy with many parts of that. Even on the primary side, we see that picking up. But certainly on the secondary side, the GP stakes healthy stakes. That whole piece and directs is something that we're really seeing the benefit of them coming on to our platform and not just in terms of results, but also in terms of thinking about the business differently and how it can even scale much larger than I think maybe people thought it could have. I mean, feeling really good about it. A lot more to come.

Perfect. And then one quick ticky-tacky one for you, Lindsey. I just want to clarify a previous point. So your commentary is that the growth of non-comp dollars for the fiscal year is still expected to be in the high single digits range year-on-year. Is that correct?

Yes, that's correct.

Your next question comes from Alex Bond from KBW.

Just wanted to maybe drill down on the sponsor side of the market currently. And I know you referenced earlier that the post Labor Day market is shaping up, expecting to see an increase there, but kind of across the market more broadly. But I'm wondering if that is consistent with what you're seeing in terms of -- in the sponsor market as well. And then especially just given some of the recent market tailwinds that we've had. So yes, I guess, just summarizing, would you expect to see an increase in sponsor activity kind of after that Labor Day period? Or could a more broader resumption in sponsor activity maybe take a little bit longer than that? Any color there would be great.

Yes. I think it's consistent. But the sponsor activity has been muted. No doubt about that. And I think that's one of the reasons we're pretty happy with where things are given the muted level of activity sponsors at the moment. But we certainly have seen it continue to pick up. Again, it is continuing to pick up, and we do expect it to pick up even more based upon dialogues that we're having right now.

And Labor Day for sponsors happens to be a nice inflection point to go to market. And so yes, different than strategics, they tend to operate a bit more with the seasons, just given summer and vacation.

Got it. Okay. That's helpful. And then maybe just as a quick follow-up, I know you mentioned that you continue to expect the U.S. market to kind of outpace the EMEA region just from an M&A perspective. But curious if you could maybe just drill down a little bit more there and maybe any trends that you're seeing that are differing there? Or is -- are you expecting to see a broader recovery in volumes in Europe as well, but maybe just stronger in the U.S.? Just any color there would be great as well.

Yes. I think that our history is that they don't move -- tend to move in exact unison. And I can tell you that when things started to turn down a number of quarters ago, the EMEA was slower to turn down than the U.S. And I think that this is just a cycle time. It's just coming out slightly slower. It's not -- there's not dramatic differences.

Your next question comes from Ryan Kenny from Morgan Stanley.

So you mentioned that you're cautiously optimistic on the environment. And my question is, with markets at all-time highs and deal announcements picking up and tariff headlines coming through, why not just optimistic? And what are you hearing from clients that maybe would make them slow down a bit in getting more deals moving through the pipeline?

Yes. I think just by our nature, we're measured, number one. Number two is really that we are living in an environment that has demonstrated a degree of uncertainty and volatility. And so that causes us to be measured in those statements. Having said that, if things continue on the way they are at the moment, feel very good about it. But it's just a recognition that we are living in more volatile times at the moment.

Your next question comes from Jim Mitchell from Seaport Global Securities.

Scott, you talked about the acquisition environment still being robust and the pipeline being good. But as the environment picks up, does it get a little tougher to close the deals? Or do you still think regardless of the environment, there's still a lot of opportunity to consolidate?

That, at least based upon our history, that has not been a particularly strong indicator. And actually, if anything, it tends to work the other way when things get really tough, people don't want to do deals. And so it doesn't change my view at all.

Okay. And then just a follow-up on restructuring. I hear you right now, the environment is still pretty good. But I guess based on your history and cyclicality, do you see if the Fed is cutting rates, we get through these tariffs, the economic environment does better. Does that business slow? Or is it just different because of the liability management environment and there's still plenty of room to kind of grow that piece of the puzzle?

I think 3 years ago, we would have told you, yes, we would expect to see restructuring decline as M&A started to pick up, and that had happened many times in the past for us. Look, in this environment, restructuring has shown real resilience. And I think there are a whole bunch of factors for that lead to that resilience. And so yes, I don't want to sound too optimistic. But look, this may be the new trough for restructuring. And when we see interest rates come down a little bit, which I think most people expect over time, if we see an improving economy with less volatility in the macro environment, I mean, shoot, we may see restructuring revenues kind of where they are today and waiting for the next cycle. So we've stopped kind of guessing what the trough might look like for restructuring based on just how well it's performed over the last couple of years.

Right. So peak is the new trough?

Yes, peak is the...

If interest rates go back to 0, then. Yes. I mean normal cuts.

Your next question comes from Ken Worthington from JPMorgan.

This is Madeline Daleiden on for Ken. You mentioned a strong MD hiring environment in your prepared remarks, and I think you've mentioned it in previous quarters as well. But we've been noticing your MD headcount growth has been significantly outpacing overall headcount growth for about the last 12 months. Is this a cognizant choice on your end to concentrate talent at more senior levels or maybe even consolidating junior talent or administrative roles? Or is this more so just reflecting the opportunistic hiring that you're pursuing?

I think that we are always looking for talent. That is part of our business model. And we are very fortunate that given the success in our growth and the resilience of our business model, we've been able to continue to attract really fantastic talent. And so -- and that's really all over the world and across our product lines, and we're going to stay committed to that.

But I don't think that there is no structural design that says we're growing senior talent and slowing down junior talent growth. It just probably happens, [ dance ], in the numbers. My guess is we will revert back to kind of the structure that we've historically had. It just may be that the numbers aren't suggesting that right now.

Okay. Great. And are there any particular businesses or sectors you're focusing on for future hiring?

No. I mean we really feel that in every one of our sectors and our products, there is opportunity for growth, and we are always looking for great people that we think are a strong cultural fit.

There are no further questions at this time. I'll now hand the call back over to the company for closing remarks.

I want to thank you all for participating in our first quarter fiscal year 2026 earnings call. We look forward to updating everyone on our progress when we discuss our second quarter results for fiscal year 2026 this fall.

And that does conclude our conference for today. Thank you for participating. You may now disconnect.