Houlihan Lokey - Earnings Call - Q1 2020

Transcript

Operator (participant)

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan Lokey's first quarter fiscal 2020 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 that this conference is being recorded today, July 25th, 2019. I will now turn the call over to Christopher Crain, Houlihan Lokey's General Counsel. Please go ahead, sir.

Christopher Crain (General Counsel)

Thank you, operator, and hello everyone. By now, everyone should have access to our first quarter fiscal 2020 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, 2019, 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 then we will open the call to questions. With that, I'll turn the call over to Scott.

Scott Beiser (CEO)

Thank you, Christopher. Hello everyone, and welcome to our first quarter fiscal 2020 earnings call. We are pleased to report record revenues of $250 million and record adjusted earnings per share of $0.67 for the first quarter of fiscal 2020. All three of our product lines experienced growth from the prior year period, and we enter the second half of the calendar year with reasonable momentum in our businesses. During the last 12 months, a number of variables have caused market sentiment to shift from bullish to bearish and back again several times. This has created a challenging dynamic where the lack of a clear trend has resulted in a less steady M&A environment. In the mid-cap space, there has been a slowdown in global M&A transactions over the last several quarters.

Uncertainty in the direction of interest rates, global trade disputes, stock market volatility, Brexit, and a weak European market have all contributed to a weaker Global M&A market. Despite all of this, our platform has been resilient, and Houlihan Lokey has performed quite well. Our first quarter revenues and adjusted earnings per share grew 14% and 22% respectively year over year. Revenues in both Corporate Finance and Financial Advisory Services set first quarter records, and Financial Restructuring continues to perform quite well in a low default rate environment. Our Corporate Finance business continues to benefit from several factors. First, we are making good strides in expanding our Capital Markets business. Second, we are now a meaningful and growing M&A advisor in Europe, while many of our competitors struggle in a difficult European market environment.

Third, our recent acquisitions and senior hires have enabled us to expand our geographic and industry expertise. And fourth, our average deal size continues its long-term upward trend. While we have experienced success in the first half of this calendar year, the external factors previously mentioned may well produce volatile quarterly results in the future. Overall, new business activity continues to grow at a moderate pace, but we are keeping a watchful eye on the soft M&A environment in Europe and any trends that may develop in the U.S. that could impact our business. Our Financial Advisory business continues to focus on rounding out its various service offerings and expanding its dedicated industry expertise. This is a multi-year strategy, and we continue to make progress as shown in our financial results for this product line.

Overall, new business activity has been solid, but our FAS business has also been impacted both positively and negatively by the ongoing uncertain market environment. Financial Restructuring continues to perform very well in this low default rate environment. However, restructuring revenues were helped in the first quarter with a few late closings that resulted in a stronger first quarter than usual for this product line. New business activity remains solid, but there are limited mega fee assignments in today's business climate. During the quarter, we promoted 12 employees to Managing Director, and we recruited two MDs in Corporate Finance and our consumer and industrial sectors. We are in active discussions with several acquisition targets that would add depth to some of our industry sectors and geographic locations.

Overall, we had a good first quarter, but we are cognizant of the challenges we all face in this market environment, and we remain extra diligent as we navigate through these challenges. Having said that, we continue to believe that our balanced business model will allow us to achieve solid financial results even in an uncertain market environment. And with that, I'll turn the call over to Lindsey.

Lindsey Alley (CFO)

Thank you, Scott. Revenues in Corporate Finance were $134 million for the quarter, up about 1% when compared to the same quarter last year. We closed 61 transactions in the quarter compared to 69 in the same period last year, as our average transaction fee on closed deals was higher this quarter versus last year. Financial Restructuring revenues were $79 million for the quarter, a 57% increase from the same quarter last year. We closed 25 transactions this quarter compared to 13 in the same period last year, and our average transaction fee on closed deals was lower compared with the same quarter last year. Although our Financial Restructuring business often has large fee events, this quarter's strong performance was due to increased activity across a number of smaller fee transactions. This highlights restructuring's ability to drive revenues from a variety of sources, even in a low default rate environment.

In Financial Advisory Services, revenues were $37 million for the quarter, a 2% increase from the same quarter last year. We worked on 509 fee events in the quarter compared to 504 in the same period last year. New business activity in FAS remains steady, and we have continued to see improvements in managing director productivity in our FAS business. Over the last couple of years, FAS has increased its focus on productivity, resulting in solid revenue growth over a lower MD headcount. Turning to expenses, our adjusted compensation expenses were $153 million for the first quarter versus $133 million for the same period last year. Continuing this quarter, we adjusted for pre-IPO grants and for deferred consideration primarily related to acquisition agreements associated with our two fiscal 2019 acquisitions. The adjusted compensation ratio was 61% for the quarter, within our targeted range of between 60.5% and 61.5%.

Adjusted non-compensation expenses in the first quarter were $37 million, relatively flat when compared with the first quarter last year. In the last couple of fiscal years, we have experienced lower non-compensation expenses in the first quarter relative to the remaining quarters in the year. This is primarily a result of the timing of certain events that tend to result in higher non-comp expenses in subsequent quarters, and as a result, we expect to experience a similar dynamic this year as well. As a reminder, our long-term target for the adjusted non-compensation expense ratio is between 14 and 15%. This quarter, we adjusted out of our non-compensation expenses approximately $400,000 in primarily legal and accounting costs associated with the registered block trade, which we completed in May 2019, and $1.6 million of acquisition-related amortization.

We will continue to adjust for this and other similar types of expenses in the quarters in which they occur. Our adjusted other income and expense line item resulted in a gain for the quarter of approximately $1.5 million versus a gain during the same period last year of $0.9 million. Most of our income in this line item for the quarter was a result of interest income on our cash balances throughout the quarter. These cash balances and the interest income we receive in those cash balances tend to remain at their highest levels during the first half of our first quarter, just prior to paying out bonuses to our financial staff in May.

Also, because of the fact that we acquired the remaining equity that we didn't already own in our Italian joint venture, we will no longer be reporting gains and losses in Italy in this line item using the equity method. Our Italian entity is now a fully consolidated subsidiary of Houlihan Lokey. Our GAAP effective tax rate for the quarter was 13.5%. After adjusting for non-recurring items, our adjusted effective tax rate was 28.8%, towards the high end of our targeted range of between 27% and 29%. Last quarter, I mentioned that a portion of the deferred stock that we issue as compensation to employees would vest in May during the first quarter of the fiscal year. This vesting had a significant effect on our GAAP effective tax rate this quarter, as expected, which we adjusted for in order to give a more normalized effective tax rate for the quarter.

Turning to the balance sheet and uses of cash. As of the quarter-end, we had $245 million of unrestricted cash and equivalents and marketable securities. As a reminder, in the first quarter, we paid the bulk of our fiscal 2019 bonuses to our banking staff and paid out our quarterly dividend. In addition, as a result of ASC 842, beginning in the first quarter of fiscal 2020, we are now required to capitalize all operating leases on the balance sheet. We have two new balance sheet line items: operating right-of-use assets and operating lease liabilities. These line items represent the accumulated future liability of all of our operating leases, where historically they were reported in the footnotes to the financial statements. This change in accounting standard has no material impact on our P&L.

Lastly, as I have mentioned in the past, we are building out a new office in London that will house all of our London-based bankers, and we expect to move into that new location in our second quarter. As a result of the move and consolidation of office space, we expect there to be a significant accounting charge in our second quarter. We plan to adjust this charge out of our GAAP results in order to provide a more normalized non-compensation expense. With that, operator, we can open the line for questions.

Operator (participant)

Thank you. Ladies and gentlemen, if you'd like to ask a question at this time, please press star one on your telephone keypad. If you're on speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, for questions at this time, please press star one now. And our first question will come from Ken Worthington with J.P. Morgan.

Bill Coke (Managing Director)

Hi, Scott and Lindsey. This is Bill Coke, filling in for Ken. Thank you for taking our questions. Scott, so you touched on this in your prepared remarks. We've been in a volatile market, equity market, in the first half of the year, and we had the government shut down in calendar Q1. Could we expect a greater pickup in activity in the second half of this calendar year for your corporate advisory business?

Scott Beiser (CEO)

Historically, we have done better in our second half than first half. There's nothing right now that gets us to view that the markets are materially different, where we will see something different in terms of second half versus first half compared to what we've seen in the past. And once again, I'm talking about because you've asked the question on the calendar side. But mostly, I think we have continually seen a couple of months of good activity, and then a couple of months they slow down, a couple of months it gets a little better. And to us, what we've seen is a constant movement in the trend, where it's been much more difficult, I think, to be able to anybody to forecast with some level of certainty, is there a particular trend of being more bullish or bearish?

It's worked out well for our business, but that's kind of the market observations that we have.

Bill Coke (Managing Director)

Got it. Understood. Thank you. And then given the noise on the interest rate outlook and how things have been moving there, does a falling rate environment impact the middle-market M&A business? And how should we think about a falling rate environment impacting your restructuring business?

Scott Beiser (CEO)

So, the falling interest rate environment, I would say at the size levels that we've seen in the interest rate, are not as impactful as really the availability of capital. And right now, the availability of capital for M&A transactions, we still feel for the mid-cap space, is good and really have not seen a change over the last probably quarter or two in terms of availability of capital. And yes, at times it's gotten a little more expensive, a little less expensive. And on the restructuring side, yes, every time that rates continue to tick downward, it does allow companies with some level of financial distress to at least be able to kick the can down a little further. And so that's probably slightly negative to the business. But mostly what's driving the Financial Restructuring business at the moment isn't necessarily interest rates.

It's a variety of issues that we've described in the past, from technology disruptors to just questionable management, accounting issues, trade issues. There's a lot of other things that are impacting our ability to get the restructuring business probably more so than interest rates right now.

Bill Coke (Managing Director)

Okay. Is there anything in particular among that group, like technology, accounting, trade that's driving it currently?

Scott Beiser (CEO)

It's really very broad-based. It's not centered on a particular industry or geography or market fact pattern at this point. It's really just, like I said, it's a broad-based opportunity set that we see. Still less than what we've experienced in previous recessions, but we feel we're actually doing pretty good in this low default rate environment.

Bill Coke (Managing Director)

All right. Great. Thank you for taking our questions.

Scott Beiser (CEO)

Thank you.

Operator (participant)

Our next question will come from Mike Needham with Bank of America.

Mike Needham (Equity Research Analyst)

Hey, good afternoon, guys. So I just really want to ask about your Europe build-out. You touched on a little bit in your prepared remarks. It seems like the acquisitions are doing quite well. I would guess that there are a number of boutiques there still that would like to be part of a bigger U.S. institution. Are there interesting businesses for sale, and is that still the best way for you to grow in Europe?

Scott Beiser (CEO)

First, we have come a long way in terms of our total bank or headcount today from where we were a couple of years ago. A lot from acquisitions, a lot from hiring, some from transferring from different locations, internal promotions, etc. We still think there is a good amount of growth profile that we can achieve in Europe in the foreseeable future, but specific to your question regarding acquisitions, I think we are looking at acquisitions that both have some additive elements in geography as well as sub-industries, sometimes slightly new products, and I think we've always been open-minded, whether it's in Europe or other places, we could grow through both internal promotions, through external hirings, or from acquisitions.

Lindsey Alley (CFO)

Yeah. We don't, Mike, we don't have a preference one over the other. It's really opportunistic, and I think if you look at a lot of our hirings in the last couple of years, we've been very aggressive in Europe. Acquisitions tend to make a bit more splash because they tend to bring on more employees, but we have a three-pronged strategy in terms of growth over there, as Scott mentioned.

Mike Needham (Equity Research Analyst)

Got it. And just in terms of brand recognition, both for your client base there as well as the kind of labor market, I think you have made pretty big strides, particularly in the labor market there. Can you just kind of talk about that and how receptive people are when if you call on them with kind of the Houlihan name?

Scott Beiser (CEO)

I think they're very receptive, but the recognition of what we've accomplished in probably the last three years, our reality is much ahead of probably what the marketplace understands, and it just takes time for people to better understand what we have, to see us involved in more transactions, to get more deals announced, etc., and I think it's always the fact that you tend to grow first, and the brand recognition follows with some lag to it.

Mike Needham (Equity Research Analyst)

Okay. Thank you.

Operator (participant)

Our next question will come from Michael Brown with KBW.

Michael Brown (Equity Research Analyst)

Hi. Good afternoon, guys.

Scott Beiser (CEO)

Hi, Michael.

Michael Brown (Equity Research Analyst)

First, I just wanted to kind of talk about the quarter. I'm just interested to hear about the pace of completion activity in the quarter. Normally, I wouldn't be all that focused on the month-to-month trends, but I'm just kind of interested to hear how completion activity trended throughout the quarter. Did it really accelerate into quarter end at kind of more than usual?

Scott Beiser (CEO)

I'd break it in two pieces. In Corporate Finance, I would say we had a weaker first six weeks of the quarter, and then we had a stronger final six weeks of the quarter meshed together, probably a very normal-looking quarter. But it goes to my earlier comment that we are continually seeing changes in the trends in a much shorter duration than we normally have. In restructuring, we have typically had the number of closings in our first fiscal quarter is just the lowest generally of the four quarters. And this particular quarter, as noted by the number of transactions we closed this quarter, were just a little larger than we had typically seen in the first quarter.

Lindsey Alley (CFO)

Michael, I would not read into the slight decline in transactions in Corporate Finance or the significant increase in transactions in restructuring for the quarter. I think that's just timing, and it's one quarter's worth of data. I don't think either of those are a trend that would substantiate a year.

Michael Brown (Equity Research Analyst)

Okay. I appreciate the color there. And just to follow up on the hiring front, I mean, I appreciate the acquisitions can certainly skew things, but how should we think about kind of your targeted net MD growth per year, I guess, in total and then specifically for Corporate Finance?

Scott Beiser (CEO)

We don't have a set target that we're trying to achieve. I think if you look through all of the announcements and what we've reported, we tend to probably hire about 12 MDs per year, kind of one a month. But like I said, it's not a target. That's just kind of what it's been. Sometimes we will tend to do more acquisitions that maybe slows down what we do on the hiring, and sometimes it's the other way around.

Michael Brown (Equity Research Analyst)

Okay. Thank you for taking my questions.

Scott Beiser (CEO)

Thank you, Michael.

Operator (participant)

And once again, ladies and gentlemen, if you'd like to ask a question at this time, please press star one. And next, we'll go to Richard Ramsden with Goldman Sachs.

James Yaro (VP of Equity Research)

Hi. This is James Yaro filling in for Richard. Could you talk about the progress you've seen in the HL Finance business, especially in light of changing global interest rate expectations? Do you expect that that could accelerate the growth in this business, or is it more of a non-event?

Scott Beiser (CEO)

Remember, we started it less than a year ago. From a statistical improvement, we've got very large increases just because we started so new. We are seeing more and more opportunities all the time. We've started to close transactions. We haven't seen different activity in the marketplace that is either necessarily helping or hurting us. I think it's more, once again, kind of this branding issue. We need to make sure that everybody understands what we're doing in that business, what our capabilities are. We would expect over the long term it will continue to grow and eventually become a more meaningful part of our Capital Markets business.

James Yaro (VP of Equity Research)

Got it. And then in light of continued retrenching of certain bulge brackets, notably in Europe, are you seeing any hiring or market share gain opportunities, especially in the context of your recent acquisitions in Europe?

Scott Beiser (CEO)

Yeah. I mean, I think that in general, the answer is no. There is enough dislocation in Europe that I think when it all shakes out, we will probably see some opportunities. But we are not necessarily seeing anything specifically from the retrenchment of some of the bigger banks in Europe. I think our expectations are that we will, but it's probably a little early still.

James Yaro (VP of Equity Research)

Thanks a lot.

Operator (participant)

Next, we'll go to Devin Ryan with JMP Securities.

Devin Ryan (Director of Financial Technology Research)

Great. Good afternoon, guys. How are you?

Scott Beiser (CEO)

Hey, Devin.

Devin Ryan (Director of Financial Technology Research)

I want to just come back to some of the outlook commentary and apologize. I'd just like to parse through it a little bit more and just to get a sense of the message here so I'm not confused. The business is obviously operating at a high level. It sounds like you're still seeing some growth and new engagements, but then on the other hand, you mentioned some of the challenges. I'm just trying to understand, is it the right interpretation that maybe 2020 doesn't see the same growth as some of the outside levels the past few years, or is it just that the range of potential outcomes could be wider given some of that volatility such as clouding the outlook more?

I guess I'm just trying to understand the comment given the trailing revenues are at a record level, and it sounds like business is still building.

Scott Beiser (CEO)

Yeah. I think what we're trying to describe, if you went back one or two or three years ago, we would probably have a belief that would say, "Hey, for the rolling forward 12 months, we feel like we're in a positive business environment or a slowing business environment," or whatever the case might be. And what's happening now is we feel like it's almost every one to three months, whatever our view of the marketplace, it tends to change because of these whipsawing fact patterns with trade issues, with where interest rates are going. Will the stock market go higher? Is it going to go lower? Are IPOs in favor or not? Just things seem to be condensing in terms of trends. So instead of getting yearly trends, we almost feel like we're getting almost monthly trends.

That does tend to cause business activity, at least in M&A, to slow down versus where it was before. But we're still, as we mentioned, we're still growing, and we're still seeing the new activity continues to increase.

Devin Ryan (Director of Financial Technology Research)

Got it. Very helpful. Thank you. And then I believe you guys mentioned just an increase in average fees. And I'm trying to get a sense of whether that's just kind of normal course as valuations rise and so deals increase, or is it following clients further into their life cycle as they grow and do more deals? Or is there actually something going on here where maybe you're going after or have an opportunity to go after some larger deals just given the broader capability set of the firm and brand and global reach?

Lindsey Alley (CFO)

I really think probably more the last two that you mentioned. I think that we will advise companies through their life cycles. A great example is we may sell a company to a private equity group, and four years later, they may ask us to sell it on their behalf, and that company has grown during the four years. So we've got a little bit of that, and I think just reputationally, as our reputation increases both in the U.S. and Europe, we're just able to chase larger transactions with higher successes. Having said all that, I think our average transaction fee and average transaction size has moved up very slowly and methodically over a 10 to 15-year period and is still well in the mid-cap space. So, we don't have any intention to aim higher for the sake of aiming higher. I think it's happening naturally.

Devin Ryan (Director of Financial Technology Research)

Got it. Helpful. Just last one on the model. So the rent expense charge next quarter, how should we think about kind of the ongoing rent expense once that charge has run through?

Lindsey Alley (CFO)

Yeah. I think that barring any significant changes, we expect that there will be a slight decline in rent starting in Q3 as a result of the fact that two of the locations that we're currently in, we won't be paying rent on any longer because we will have consolidated them into a facility in London. So I think you're going to see a little bit of downward pressure on rent, certainly for a short period of time. But then you've got general inflation and general increasing costs of vacancy, I'm sorry, of real estate, and you're just going to see rent grow at probably a faster pace than any of us want us to. I think no different than anyone else in this business.

Scott Beiser (CEO)

Yeah. Devin, what I'd add to it is I think Lindsey was commenting on what we would expect in London because we're going from multiple locations to effectively one. But in almost every other place, if we are re-signing a lease today, it is more expensive than it was three, five, 10 years ago, just the nature of where real estate leases are. And until we get some downturn in the economy or real estate prices, we're witnessing the same thing that everyone else is, which is rental rates are going up, and they're going up faster than inflation.

Devin Ryan (Director of Financial Technology Research)

Yeah. Okay. That's helpful. Yeah. I just knew that that kind of incremental rent that would roll off was kind of temporarily elevating that line, so. But that's helpful. Thank you, guys.

Operator (participant)

Next, we'll take a question from Brennan Hawken with UBS.

Brennan Hawken (Senior Equity Research Analyst)

Hey, guys. Good afternoon. Thanks for taking the question. Just to follow up on the HL Finance business. I'm understanding this is a nascent business for you, but it seems as though it's our sense that year-to-date, some of the financing markets for deals have become a bit tighter and credit availability a bit trickier. And I know you referenced that it hasn't had a big mid-cap deal market. But in some of the areas in which you play, where you've seen some of these financing markets tighten up a bit, number one, is HL Finance involved in those markets? And number two, have you seen any changes or shifts in demand in the customer base yet, or is it just too early to know that for sure?

Scott Beiser (CEO)

I'd break it in two pieces. Put HL Finance aside for the moment. The core of what we generally do when we're acting as an agent in financing, the more complex the situation, the more difficult it is to actually find capital, the better it is for our business. Right now, our biggest competitor is really effectively the executives of a company thinking they can do it themselves instead of going out to hire an agent. We'll actually benefit from what we have seen in the last couple of years of trends and where we actually think the market will go. HL Finance would be a little different. If there was a more meaningful change in interest rates or if there was a more meaningful change in availability of capital, it would slow down its prospects.

But as I said earlier, we're still so new in it, we could still expect it to grow even if certain market conditions turn negative. Obviously, it would depend upon the magnitude of that.

Brennan Hawken (Senior Equity Research Analyst)

Okay. So, if we have a more difficult M&A or financing is less available, it's not that you think it would drive demand for restructuring or recognition that the value of an agent is more clear, but rather just pulled back at the activity levels enough broadly that it would probably hurt the outlook. Okay. Did I interpret that fair?

Scott Beiser (CEO)

Yeah. I think we would say in what you've described, overall total amount of debt to be placed on behalf of companies would shrink, but the number of participants who are trying to do it on their own would also statistically shrink, and they will tend to look more for advisors to help them because it's gotten more difficult, and everybody, therefore, participating in that marketplace actually probably comes out of that business cycle in better shape just because advisors become more important versus I'll call it going from a self-serve concept to really an agency-served concept.

Brennan Hawken (Senior Equity Research Analyst)

Great. Thanks for the color.

Scott Beiser (CEO)

Okay, Brennan.

Operator (participant)

And once again, ladies and gentlemen, that is star one if you'd like to ask a question at this time. And if you're on the speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Next, we'll go to Jeff Harte with Sandler O'Neill.

Jeff Harte (Principal of Equity Research)

Good afternoon, guys. Most of my questions have been hit, but just a couple. One, when it comes to Europe, can you kind of remind me or give a refresh as to where your real pockets of strength are over there and then also kind of where your real opportunities or weaknesses are?

Scott Beiser (CEO)

Yeah. We started probably 20 years ago, predominantly known as a restructuring franchise out there, and it's still a very significant and dominant restructuring franchise. But right now, our Corporate Finance footprint is actually bigger than our restructuring footprint in Europe. We're now in roughly a half a dozen countries in the EU. So part of it is just the geographical capabilities we've had. Some of the recent acquisitions, we're focused on particular industries in the consumer and food space as well as data analytics. We also brought on a team to start a Private Funds Group. We have continued, if you've looked at probably many of the senior MD hires that we've had in the last year, have been in industry experts that we already had in the United States, but now we're also putting them in predominantly London, but also some other locations.

And really, the expectation is that we can continue to build out some of the industry expertise that we've had in the U.S. We can bring it over to Europe, and it just allows us to be a larger and better not only performing services within Europe, but also to do cross-border transactions as well.

Jeff Harte (Principal of Equity Research)

Okay. Understanding that the U.S. is bigger than Europe for you guys, can you give any kind of current commentary on what the environment's like over there? And I kind of come from the perspective of the public data we can look at suggests activity levels in Europe have kind of stepped up nicely over, say, the last four weeks. Are you guys seeing and feeling that?

Scott Beiser (CEO)

I think you're probably commenting on more the mega-sized deals. And I know I think even Lazard had mentioned it earlier in their call today. I'd still say clearly the European marketplace that we operate in is weaker than the United States, but our market share is much larger in the United States, once again, because we're starting at a lower base from Europe. So near term, we still think it's what we can tactically do is going to be more important than the macro fact patterns in Europe. But otherwise, if some people are seeing some improvement in Europe and some of the larger-sized deals, that's just not really relevant to us, at least right now.

Jeff Harte (Principal of Equity Research)

Okay. Thank you.

Operator (participant)

That concludes our question-and-answer session today. I'd like to turn the call back to Scott Beiser for closing remarks.

Scott Beiser (CEO)

I want to thank you all for participating in our first quarter 2020 earnings call. We look forward to updating everyone on our progress when we discuss our second quarter results for fiscal 2020 in the fall.

Operator (participant)

That does conclude our conference for today. Thank you for your participation.