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HL

HOULIHAN LOKEY, INC. (HLI)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY26 revenue was $659.5M and GAAP diluted EPS $1.63; adjusted diluted EPS $1.84. Adjusted EPS and revenue were modest beats versus S&P Global consensus (EPS $1.70*, revenue $653.1M*) on stronger Corporate Finance and steady Restructuring, with lower adjusted non‑comp ratio and higher interest income in OIE aiding profitability .
  • Corporate Finance revenue rose 21% YoY to $438.7M on a surge in closed transactions; management flagged atypical seasonality with Q4 expected to be stronger than Q3, reflecting backlog timing and momentum in Capital Solutions (now ≥20% of CF) .
  • Restructuring remained elevated ($133.8M, +2% YoY) with backlog robust despite a slowdown in new formations as rates ease; FVA grew 10% ($87.0M) on more fee events; non‑U.S. regions (EMEA/APAC) outperformed on improving indicators .
  • Guidance/tone: CFO reiterated a 61.5% adjusted comp ratio target and high single‑digit non‑comp growth for FY26; adjusted ETR for Q2 was 29.7% with full‑year ETR previously guided to 25–26%; declared a $0.60 dividend payable Dec 15, 2025 .
  • Stock catalysts: evidence of sponsors returning, strong CF backlog into Q4, and expanding Capital Solutions contribution support estimate upward revisions; resilience in Restructuring tempers downside risk even if macro further improves .

What Went Well and What Went Wrong

What Went Well

  • Corporate Finance delivered $439M (+21% YoY) with 171 closed transactions—the highest volume since late‑2021 peak; “Capital markets are wide open, and capital is plentiful… All this has increased overall confidence in the deal‑making appetite” .
  • FVA grew 10% YoY on 1,075 fee events, benefiting from improving M&A markets and non‑cyclical lines; management highlighted non‑U.S. strength across EMEA and APAC .
  • OIE improved to ~$9M vs ~$5M YoY on higher interest income; adjusted non‑comp ratio fell to 12.5% vs 14.1% YoY, supporting operating leverage .

What Went Wrong

  • Average transaction fees declined in CF and FR due to mix, partially offsetting volume gains; comp ratio rose on GAAP to 64.2% (vs 62.7% YoY) reflecting revenue‑linked compensation accruals .
  • Restructuring new business formation began to slow as rates eased and macro improved, though backlog remains robust; management cautioned episodic shocks can still spike activity .
  • Management noted productivity per banker in EMEA/APAC still lags U.S., suggesting continued ramp investment and potential near‑term margin friction outside the U.S. .

Financial Results

Sequential Trend (oldest → newest)

MetricQ4 FY25Q1 FY26Q2 FY26
Revenue ($USD Millions)$666.4 $605.3 $659.5
Diluted EPS (GAAP)$1.76 $1.42 $1.63
Adjusted Diluted EPS$1.96 $2.14 $1.84
Operating Income ($USD Millions)$139.2 $89.8 $151.3
Total Operating Expenses ($USD Millions)$527.2 $515.5 $508.1

YoY Comparison

MetricQ2 FY25Q2 FY26
Revenue ($USD Millions)$575.0 $659.5
Diluted EPS (GAAP)$1.37 $1.63
Adjusted Diluted EPS$1.46 $1.84

Margins & Ratios

MetricQ2 FY25Q1 FY26Q2 FY26
Compensation Ratio (GAAP)62.7% 64.9% 64.2%
Compensation Ratio (Adjusted)61.5% 61.5% 61.5%
Non‑Comp Ratio (GAAP)14.5% 20.3% 12.9%
Non‑Comp Ratio (Adjusted)14.1% 15.6% 12.5%
Effective Tax Rate (GAAP)31.3% 0.5% 30.2%
Effective Tax Rate (Adjusted)31.3% (0.8)% 29.7%
Net Income Margin %16.5%*16.1%*17.0%*

Values with asterisks retrieved from S&P Global.

Segment Breakdown (oldest → newest)

Segment Revenue ($USD Millions)Q2 FY25Q1 FY26Q2 FY26
Corporate Finance (CF)$364.0 $398.5 $438.7
Financial Restructuring (FR)$131.6 $128.2 $133.8
Financial & Valuation Advisory (FVA)$79.4 $78.6 $87.0

KPIs

KPIQ2 FY25Q2 FY26
CF Closed Transactions (#)131 171
FR Closed Transactions (#)33 37
FVA Fee Events (#)903 1,075
Managing Directors – CF224 242
Managing Directors – FR58 58
Managing Directors – FVA41 45

Results vs Estimates (Q2 FY26)

MetricConsensusActualSurprise
Revenue ($USD)$653.1M*$659.5M+$6.4M*
Adjusted EPS$1.70*$1.84+$0.14*
EPS Estimates (#)8*——
Revenue Estimates (#)6*——

Values marked with asterisks retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Compensation RatioFY2661.5% target 61.5% target reiterated Maintained
Adjusted Non‑Comp Expense GrowthFY26High single digits High single digits reaffirmed (YTD +9.7%) Maintained
Adjusted Effective Tax RateFY2625–26% full‑year No update in Q2; Q2 adjusted ETR = 29.7% Maintained (full‑year)
Corporate Finance SeasonalityFY26 H2Typical H2>H1 Q4 > Q3 expected; atypical seasonality Updated (timing)
DividendQ3 FY26$0.60 (prior run‑rate) $0.60 payable Dec 15, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY25)Previous Mentions (Q1 FY26)Current Period (Q2 FY26)Trend
Macro/Capital MarketsVolatile backdrop; mid‑market more resilient Cautious optimism; momentum improving QoQ “Capital markets are wide open… capital is plentiful”; improving confidence Improving
Sponsors ActivitySponsor community ~50% of client base; backlog strong Muted but picking up post‑Labor Day Sponsors back since early FY; momentum increasing into year‑end Rising
Restructuring CycleElevated; strong Q4 seasonality Elevated through FY26 New formation slowing as rates ease; backlog robust, episodic spikes possible Moderating but resilient
Capital Solutions (Directs/Secondaries)Record year; strategic growth area Integrated within CF; growth continues ≥20% of CF; expanding capabilities/hiring Expanding
Regional Trends (EMEA/APAC)Non‑U.S. gaining share U.S. outpacing EMEA near term EMEA/APAC performed notably well; productivity ramps over time Improving ex‑U.S.
Tariffs/RegulatoryTariff impacts sector/geography dependent Tariffs a headwind; clients adapting Tariff volatility has quieted; confidence improved Easing headwind

Management Commentary

  • CEO: “We ended the quarter with revenues of $659 million and adjusted earnings per share of $1.84… Capital markets are wide open, and capital is plentiful… Should current conditions persist, we believe the second half of the year will show improvement versus the second half of last year” .
  • CFO: “Our adjusted compensation expense ratio… was 61.5%. We expect to maintain our long‑term target of 61.5% for the balance of the year… Our adjusted effective tax rate for the quarter was 29.7%” .
  • CEO on CF timing: “We expect corporate finance to deliver a strong fourth quarter relative to the third quarter… a departure from our typical seasonal patterns and underscoring the momentum” .
  • CEO on Restructuring: “We have started to see the pace of things slowing, but our backlog is still quite robust… episodic shocks continue to add to it” .
  • CEO on regions: “Our non‑U.S. business performed notably well in the second quarter… performance in both EMEA and Asia‑Pacific showed solid growth” .

Q&A Highlights

  • Restructuring: New business formation slowing with easing rates, but backlog remains robust; episodic shocks can spike activity; mix between liability management and in‑court remains healthy .
  • Sponsors: Sponsor activity has been back since early FY; momentum increasing into year‑end; mix of sponsor vs strategic similar to historical .
  • Capital Solutions contribution: At or above 20% of CF revenues, growing faster than M&A this cycle; specifics withheld but trajectory strong .
  • Regional performance: EMEA/APAC growth outpacing U.S. YTD; long‑term goal for EMEA fee pool to match U.S. over time; productivity per banker ramps with maturation .
  • Capital allocation: ~$1.1B unrestricted cash/investments; repurchased ~210k shares in Q2; buybacks used to offset dilution and after funding acquisitions; dividend $0.60 declared .

Estimates Context

  • Q2 FY26 results modestly beat consensus: adjusted EPS $1.84 vs $1.70* and revenue $659.5M vs $653.1M*, with 8 EPS and 6 revenue estimates contributing*. Potential for upward estimate revisions driven by CF seasonality (Q4 > Q3), expanding Capital Solutions, and resilient Restructuring backlog .
    Values marked with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential strength with atypical seasonality sets up Q4 CF outperformance; traders can position for HLI’s calendar Q4 catalysts as backlog converts and Capital Solutions mix remains elevated .
  • Restructuring’s resilience provides downside protection even as macro improves, supporting earnings durability into FY26/27 .
  • Margin discipline persists: adjusted comp ratio anchored at 61.5% and adjusted non‑comp trending in high single digits; OIE tailwind from higher cash yields adds incremental EPS support .
  • Non‑U.S. expansion is working: EMEA/APAC growth and senior hires should expand fee pools and diversify cycles; productivity gap vs U.S. likely narrows over time .
  • Capital allocation balanced: $0.60 dividend maintained and opportunistic buybacks offset dilution while preserving capacity for acquisitions .
  • Estimate revisions: Modest beat and Q4 setup likely drive near‑term upward EPS/Revenue revisions; watch sponsor activity momentum and CF conversion rates .
  • Risk checks: Fee mix pressure (lower average fees), EMEA/APAC productivity ramp, and any macro/tariff noise could temper margins near term .