HLI Q1 2026: 21% Growth in Corporate Finance as Deal Momentum Builds
- Improving Market Momentum: Executives noted that deal activity is “getting better” quarter by quarter with expectations for a post‐Labor Day pickup—highlighting a positive sentiment shift in the sponsor and M&A markets.
- Resilient, Diversified Business Model: The Q&A highlighted strength across multiple lines, including Corporate Finance and Financial Restructuring, demonstrating that the firm’s diversified revenue sources continue to perform well even in volatile conditions.
- Robust Talent Acquisition: The company’s active MD and senior talent hiring, as discussed in Q&A, supports future growth and further scalability of its business platform.
- Market Volatility and Cautious Outlook: Executives repeatedly emphasized a cautious tone by noting they are “cautiously optimistic” and measured in their language amid a dynamic, volatile macro environment. This uncertainty raises the risk of slower deal flow and potential future headwinds.
- Deceleration in Corporate Finance Growth: While Corporate Finance remains strong with 21% revenue growth this quarter, it represents a deceleration from the exceptional 44% growth seen in the previous year's quarter, suggesting potential challenges in sustaining momentum over time.
- Reliance on Seasonal Sponsor Activity Recovery: Management highlighted muted sponsor activity and expressed expectations for a post‐Labor Day pickup. This reliance on seasonal recovery introduces risk if the anticipated rebound in sponsor activity fails to materialize.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Growth | FY 2026 | no prior guidance | Corporate Finance revenues are expected to continue growing, with a positive outlook for FY 2026, despite some muted activity from the financial sponsor community. The company expressed cautious optimism that momentum would continue through FY 2026. | no prior guidance |
Financial Restructuring | FY 2026 | no prior guidance | Elevated restructuring revenues are anticipated throughout FY 2026, supported by persistently higher interest rates, macro uncertainty, and overleveraged companies. | no prior guidance |
Financial and Valuation Advisory | FY 2026 | no prior guidance | Continued year-over-year growth is expected throughout the remainder of FY 2026. | no prior guidance |
Adjusted Compensation Expense Ratio | FY 2026 | no prior guidance | The company expects to maintain a long-term target of 61.5% for the adjusted compensation expense ratio for the balance of FY 2026. | no prior guidance |
Adjusted Non-Compensation Expenses | FY 2026 | no prior guidance | Growth of non-compensation expenses for FY 2026 is expected to be in the high single digits range year-on-year. | no prior guidance |
Adjusted Effective Tax Rate | FY 2026 | no prior guidance | The full-year adjusted effective tax rate for FY 2026 is expected to be between 25-26%. | no prior guidance |
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Corporate Backlog
Q: How is deal pipeline holding up?
A: Management noted consistent momentum in Corporate Finance with resilient client engagement while purposely not commenting in detail on backlog, reflecting steady execution amid uncertainty. -
Deal Activity
Q: How are deal volume and quality?
A: They reported robust performance with 21% revenue growth and healthy deal flow on an expanded base, despite a minor deceleration compared to an extraordinary prior quarter. -
Sponsor Activity
Q: When will sponsor activity rebound?
A: The team expects an uptick post-Labor Day, noting seasonal patterns and positive dialogues that signal a gradual recovery in sponsor markets. -
Non-Comp Guidance
Q: Is non-comp expense growth as projected?
A: Management confirmed expectations of high single-digit growth driven by headcount expansion, with guidance unchanged despite current elevated first-quarter expenses. -
Restructuring Trends
Q: How is restructuring evolving?
A: They indicated a robust restructuring environment with balanced in-court and out-of-court activity, underscoring strong liability management performance. -
Acquisition Pipeline
Q: Are acquisitions getting harder to close?
A: Management maintained confidence in a robust acquisition environment, suggesting that tougher conditions haven’t dampened their ability to close deals. -
Senior Hiring
Q: Why are MD hires accelerating?
A: The uptick in senior hires reflects opportunistic growth rather than a strategic shift away from junior recruitment, maintaining a balanced approach. -
Market Caution
Q: Why remain cautious amidst highs?
A: Despite buoyant market signals, they stress being measured given inherent volatility and uncertainty, ensuring prudence in their outlook. -
Secondaries Growth
Q: What about secondaries business trends?
A: Management is enthusiastic about secondaries growth within Capital Solutions, signaling potential for significant scaling in this integrated platform.
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