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Houlihan Lokey NYSE: HLI reported third-quarter fiscal 2026 results highlighted by revenue growth across each of its major business lines and a management team that expressed increased confidence in the firm’s visibility into deal activity heading into fiscal 2027.
Quarterly results and management commentary
Chief Executive Officer Scott Adelson said the firm ended the quarter with revenue of $717 million and adjusted earnings per share of $1.94. Revenue rose 13% year over year, while adjusted EPS increased 18%.
Adelson attributed the backdrop to improving investor sentiment, supported by stronger company performance and expectations for declining interest rates, which he said “should continue to further the M&A recovery.” He added that private equity activity has accelerated, with more portfolio companies exploring liquidity.
Segment performance: Corporate Finance, Restructuring, and Advisory
Corporate Finance generated $474 million of revenue, up 12% from the year-ago quarter. Chief Financial Officer Lindsey Alley said the firm closed 177 transactions versus 170 a year earlier, and that the average transaction fee on closed deals increased. Adelson said both average fee and new business activity have continued to move upward and that the firm entered its final fiscal quarter with a “positive inflection” in activity levels.
When asked about seasonality, management emphasized that the reduced seasonal strength discussed on the call applied to restructuring, not corporate finance. Alley said corporate finance had seen “quite solid growth year to date,” and suggested that year-to-date performance was “probably not a bad proxy for Q4.” Adelson described private equity-related activity as increasing “even more so” than in recent history and said the firm had good visibility that momentum would continue “for a while.”
Financial Restructuring revenue was $156 million, up 19% year over year. Alley said the firm closed 41 transactions, consistent with the year-ago period, and that the average transaction fee increased. She noted Houlihan Lokey benefited from several transactions closing earlier than expected—deals originally anticipated for the fiscal fourth quarter—contributing to what she called the firm’s “second strongest third quarter ever.” As a result, management expects fourth-quarter restructuring results to be weaker than the third quarter, “reversing” the typical seasonal pattern, and more similar to the first two quarters of fiscal 2026.
Looking forward, Adelson said restructuring is likely to face revenue pressure as markets improve, given plentiful capital and likely declining interest rates. However, he also noted geopolitical events could become a variable that drives activity higher. In response to questions about private credit concerns, management said it did not yet see those factors translating into consistent new restructuring opportunities, even though they could create pockets of activity by sector or geography. Adelson characterized the environment as an “ebb period” for restructuring and said the firm was not “concerned about the magnitude of the decline,” emphasizing the business is global and diversified.
Financial and Valuation Advisory produced $87 million of revenue, up 6% year over year. Alley reported 1,103 fee events during the quarter, compared with 1,005 in the same period last year, a 10% increase. Adelson said the segment continued to benefit from an improving M&A climate and strong capital markets, with solid new business generation heading into the fourth quarter.
Hiring, acquisitions, and Europe strategy
Adelson said the firm hired six new managing directors during the quarter. He also discussed two European expansion moves:
- Mellum Capital real estate advisory acquisition: In early January, Houlihan Lokey closed the acquisition of the real estate advisory business of Mellum Capital, which management said bolsters Capital Solutions capabilities. The deal added 11 colleagues across Munich and London.
- Audere Partners agreement: Houlihan Lokey announced an agreement for a controlling interest in Audere Partners, a French corporate finance firm. Management said the transaction is expected to close in the fiscal fourth quarter.
Alley said the France transaction is structured as a combination of Houlihan Lokey’s French operations with Audere, resulting in 51% ownership for Houlihan Lokey and 49% for Audere’s prior shareholders, with mechanisms to increase ownership over time under certain circumstances. Adelson said the deal would expand the firm’s footprint in France to around 80 colleagues, making it one of Houlihan Lokey’s largest European offices.
In response to analyst questions, Adelson said the U.S. remains the firm’s largest and most important market, but described Europe as growing “incredibly well” and said the firm believes it offers a differentiated product there. He also said being underweighted in France had ripple effects across Europe, and that strengthening the France platform should “lift kind of all the boats” across the region.
Expenses, taxes, balance sheet, and capital deployment
On expenses, Alley reported adjusted compensation expense of $441 million, compared with $390 million a year ago. The quarter included an $18 million adjustment for deferred retention payments related to certain acquisitions. The adjusted compensation expense ratio was 61.5%, unchanged year over year, and management reiterated its long-term target of 61.5% for the balance of the year.
The adjusted non-compensation expense ratio was 13.1%, consistent with the prior-year quarter. The company adjusted non-compensation expenses for $2.2 million in integration and acquisition-related costs, $1.3 million of non-cash acquisition-related amortization, and $600,000 in professional fees tied to “Project Solo,” a program to streamline its global organizational structure. Alley said adjusted non-compensation expenses were up 11% year to date, and she expects fourth-quarter year-over-year growth to be consistent with that trend. Looking to fiscal 2027, she said the firm is thinking about non-comp expense growth in the “high single digits.”
The adjusted effective tax rate was 30.6%, down from 33.3% in the prior-year quarter, primarily due to decreased state taxes and lower non-deductible expenses. The company adjusted the effective tax rate for the effects of non-deductible acquisition-related costs.
Houlihan Lokey ended the quarter with approximately $1.2 billion of cash and investments. Alley said the firm repurchased approximately 418,000 shares during the quarter and would continue to evaluate balance sheet flexibility between acquisitions and share repurchases. Management reiterated a preference to deploy excess cash through strategic acquisitions first, followed by dividends and share repurchases, noting that the acquisition pipeline remains “quite strong.”
Adelson also pointed to industry recognition during 2025, saying the firm was named the number one most active M&A investment bank in the world and the number one most active financial restructuring investment bank in the world.
About Houlihan Lokey NYSE: HLI
Houlihan Lokey, Inc is a global investment bank and financial services firm founded in 1972 and headquartered in Los Angeles, California. The company specializes in advisory services across a broad range of transaction types and financial matters. Since its founding, Houlihan Lokey has grown to serve corporations, financial sponsors, and government entities worldwide, providing expertise in complex and high-stakes engagements.
The firm’s core service offerings include mergers and acquisitions advisory, capital markets advisory, financial restructuring and distressed M&A, and valuation and fairness opinions.
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