Houlihan Lokey, Inc. (HLI) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Houlihan Lokey, Inc. is a global financial advisory firm operating through three segments: Corporate Finance (CF), Financial Restructuring (FR), and Financial and Valuation Advisory (FVA). The company provides M&A, capital markets, restructuring, and valuation services to public and private clients.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenues | $511 million | $605 million |
| Operating Income | $78 million | $90 million |
| Net Income | $78 million | $98 million |
| Diluted EPS | $1.15 | $1.42 |
| Operating Cash Flow | ($336 million) used | ($132 million) used |
| Cash & Equivalents | $745 million | $798 million (end of period) |
| Debt Outstanding | $0 | $0 |
| Compensation Ratio | 64.3% | 64.9% |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 16% year-over-year, driven primarily by a 24% drop in Corporate Finance revenues due to lower average transaction fees. Financial Restructuring revenues fell 8% due to fewer closed transactions.
- Profitability: Net income declined 20% to $78 million. Operating income decreased 13% to $78 million.
- Segment Performance: While CF and FR declined, the Financial and Valuation Advisory (FVA) segment grew 13% in revenue and 34% in profit, driven by increased fee events.
- Cash Flow: Operating cash outflows increased significantly to $336 million (vs. $132 million prior year), primarily due to the timing of cash bonus payments in May 2026.
- Balance Sheet: Cash and cash equivalents decreased from $1,189 million to $745 million. Accrued salaries and bonuses dropped from $1,077 million to $589 million following bonus payouts.
Guidance, Outlook, and Risks
- Management Commentary: Management attributes the decline in CF revenues to transaction mix and lower average fees, noting this does not represent a short-term trend. FVA growth is attributed to strong market demand.
- Capital Allocation: The company repurchased $50 million of Class A common stock and paid $61 million in dividends during the quarter. Approximately $180 million remains available under the share repurchase program.
- Dividends: A quarterly cash dividend of $0.70 per share was declared on July 22, 2026, payable September 15, 2026.
- Risks: The filing notes no material changes to risk factors. Liquidity remains dependent on the successful completion of transactions and timing of receivables. The company maintains a $150 million revolving credit facility with no outstanding borrowings.
Investor Verification Checklist
- Transaction Volume: Verify the sustainability of the 24% revenue decline in the Corporate Finance segment and the impact of transaction mix on future fee averages.
- Cash Flow Timing: Confirm the seasonality of bonus payments and their impact on quarterly operating cash flow volatility.
- Segment Growth: Assess the drivers behind the 13% revenue growth in the FVA segment to determine if this trend can offset declines in other areas.
- Shareholder Returns: Review the remaining $180 million repurchase authorization and the consistency of the $0.70 quarterly dividend.
- Debt Covenants: Confirm continued compliance with the leverage ratio covenant (less than 2.00 to 1.00) on the $150 million credit facility.