Houlihan Lokey (HLI -0.38%), a global investment banking advisory firm known for its mergers and acquisitions, financial restructuring, and valuation advisory services, released its earnings for Q1 FY2026 on July 29, 2025. The company reported non-GAAP earnings per share of $2.14, exceeding the analyst forecast of $2.08 (non-GAAP). However, revenue came in at $605 million, missing the consensus estimate by more than 10% (GAAP). Despite the revenue miss, all three business lines delivered year-over-year gains, and operating income (GAAP) dipped compared to the same period last year. The quarter showed continued expansion in key talent and segment performance, offset by higher expenses and a significantly low effective tax rate (GAAP, 0.5%) that helped bolster net income.
| Metric | Q1 FY26(Ended Jun 30, 2025) | Q1 Estimate(Ended Jun 30, 2025) | Q1 FY25(Ended Jun 30, 2024) | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $2.14 | $2.08 | $1.22 | 75.4% |
| Revenue (GAAP) | $605 million | $675.16 million | $514 million | 17.7% |
| Operating Margin (GAAP) | 14.8% | 18.4% | (3.6 pp) | |
| Net Income (GAAP) | $97.5 million | $88.9 million | 9.7% | |
| Employee Compensation Ratio (Non-GAAP) | 61.5% | 61.5% | 0.0% |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Recent Strategic Focus
Houlihan Lokey is a specialist advisory firm operating in three main areas: mergers and acquisitions (buying and selling of companies), financial restructuring (helping companies manage or reorganize their debt), and financial and valuation advisory (providing independent opinions and valuations). It serves clients globally, with a particular strength in transactions involving mid-sized businesses, and is regularly recognized as a leader in these domains.
The company’s recent focus has been on growing its team of senior bankers, capturing a larger share in mid-cap advisory, and expanding its global presence. It views expertise, talent acquisition, and industry-specific knowledge as the main success factors for maintaining long-term client relationships, while also stressing compliance with financial regulations in the U.S. and abroad.
Quarter in Review: Segment Performance, Metrics, and Notable Developments
All three of Houlihan Lokey’s advisory segments recorded growth. In Corporate Finance, which is the mergers and acquisitions division, Corporate Finance revenues increased 21% for the quarter ended June 30, 2025, compared to the same period in 2024. This was attributed to a higher average transaction fee for completed deals and a rise in the number of closed transactions, which reached 125, up from 116 a year ago. The division also added new Managing Directors, growing its senior ranks to 244 from 228 in Q1 FY2025. Management flagged that the fee increases were tied to the mix of deals this quarter rather than a sustainable shift.
The Financial Restructuring division, focused on helping distressed companies, posted a 9% year-over-year revenue increase (GAAP), supported by a higher number of closed transactions and stable headcount at 58 Managing Directors. Leadership cautioned that this activity tends to be cyclical and that restructuring demand sees seasonal peaks, often in later quarters of the year.
The Financial and Valuation Advisory unit, which provides independent valuations and fairness opinions, achieved 16% GAAP revenue growth. The jump was driven by an expanded client base and an increase in “fee events,” which are billable milestones for advisory services, up to 957 from 847 versus Q1 FY2025. Managing Directors in this unit rose from 42 to 45.
Expenses rose across the board. While the company kept its non-GAAP employee compensation ratio was flat at 61.5%, overall GAAP expenses—including non-compensation costs related to acquisitions and technology—grew faster than revenue. The most striking impact came from an unusually low effective tax rate of 0.5% (GAAP), mainly due to stock-based compensation deductions. This sharply reduced the company’s GAAP tax expense, boosting net income and earnings per share.
Looking Ahead: Management Outlook and Investor Focus Areas
Management did not provide concrete financial guidance for the upcoming quarter or fiscal year, citing challenges in predicting deal flow and market conditions. In prepared remarks, leadership said, “forecasts remain difficult in the current environment. We are cautiously optimistic that we can continue to build on this momentum in FY2026,”” Investors were reminded that seasonality, especially in the restructuring segment, can create significant swings between quarters.
For those tracking Houlihan Lokey’s progress, key signals in coming quarters will be the normalization of the tax rate, the pace of dealmaking activity (especially in mid-cap M&A and restructuring), and any shifts in the expense structure.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
