Houlihan Lokey Inc (HLI) Q4 2021 Earnings Call Transcript

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Houlihan Lokey Inc (HLI -1.33%)
Q4 2021 Earnings Call
May 11, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan Lokey's Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, May 11, 2021.

I will now turn the call over to Christopher Crain, Houlihan Lokey's General Counsel.

Christopher M. Crain -- General Counsel

Thank you, operator, and hello everyone.

By now, everyone should have access to our fourth quarter and fiscal year 2021 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-K for the year ended March 31, 2021, 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 L. Beiser -- Chief Executive Officer and Director

Thank you, Christopher. Welcome everyone to our fourth quarter and fiscal year 2021 earnings call.

Fiscal 2021 was a roller coaster of a year that brought out the best in Houlihan Lokey's employees and highlighted the strength of our balanced business model. In the spring of 2020, with the rapid impact of the global pandemic, activity levels in our financial restructuring practice significantly increased, mitigating the reduction in M&A activity. By early fall of 2020, these trends reversed with similar speed as new financial restructuring opportunities returned to a more normal pace and our Corporate Finance business began to spring back from an almost complete pause in new business activity, and activity levels in our valuation business improved.

By the end of the fiscal year, we had produced a record $1.525 billion in revenues, an increase of 32% over last year. Fiscal 2021 is our ninth consecutive year of annual revenue growth and a 14% compounded annual growth rate over that nine-year period. We are especially proud that all three of our business segments achieved record results. For fiscal 2021, Financial Restructuring revenues grew 52%, Corporate Finance revenues grew 24% over last year's record level, and Financial and Valuation Advisory revenues grew 17% against last year's record level. We also achieved $4.62 in adjusted earnings per share, an increase of 44% over last year's results.

For the fourth quarter, we reported $501 million in revenues, up 65% over the last year; and adjusted earnings per share was $1.51, up 57% over last year; FVA achieved another record quarter; and Corporate Finance was up 93% over last year; Financial Restructuring revenues were down from last quarter's peak, but still up 38% over last year.

Our results were strong across all industry groups, most of which are operating at record levels and almost all of our sub-product lines and FVA achieved records this year. Furthermore, our investments outside the U.S. are paying dividends as our international revenues grew faster than our U.S. revenues. We enter fiscal 2022 with one of the most bullish market environments for our M&A, capital markets and valuation businesses in the firm's history. We are at record levels for new business activity, mandated engagements, transaction size and estimated transaction and project fees. We have seen this business environment improve consistently since summer of 2020, and we remain cautiously optimistic that it will continue through at least the balance of this calendar year.

While the bullish elements of our firm are operating at record levels, our Financial Restructuring practice, as highlighted in previous quarters, has slowed from its torrid pace in early fiscal 2021. The current business environment for restructuring is now at pre-pandemic levels and we expect revenues in fiscal 2022 to return to those levels. We continue to remain optimistic about the restructuring outlook over the medium and long term. There are several themes that we believe support our optimism, including record levels of company leverage, continued technology disruption across most major industries, the eventual end of pandemic-related government support programs, the continued global expansion of the restructuring product, and finally, the likely challenges that exist as companies adjust to society's new norm.

Although our restructuring revenues can be volatile during economic cycles like the one we just experienced, we have experienced consistent revenue growth for this business through the cycles, and believe this growth will continue over the next decade or so. As a frame of reference, from calendar year 2007, just prior to the Great Recession, to calendar year 2019, just prior to the pandemic, revenues for the Financial Restructuring business grew at a compound annual growth rate of almost 10%, punctuated by outsized activity during periods of financial dislocation, including the Great Recession, the oil and gas crisis and the pandemic.

Throughout the successful and challenging year, we've continued to invest in our people, and we promoted 16 employees to Managing Director in April, our largest and most capable class ever. Since April 1, we have announced the addition of three new MDs in both our healthcare and oil and gas groups. We remain very active in senior and junior employee recruiting, while noting that the cost of recruiting has risen recently.

On the acquisition front, we are in dialog with several firms and remain confident that we will continue to use M&A to effectively drive shareholder value.

In our goal to deploy our excess cash, we repurchased over $60 million of stock in our fourth fiscal quarter and expect to continue to repurchase more shares than we issue in order to manage our cash position.

Finally, consistent with our performance and our desire to return excess cash to our shareholders, we are pleased to announce a 30% increase in our quarterly dividend from $0.33 per share to $0.43 per share, payable on June 15th to shareholders of record as of June 2nd.

In closing, we are pleased with our success during this incredibly difficult year. We are proud of the women and men at Houlihan Lokey who worked so hard to achieve these results and are thrilled with the continued support we receive from our clients and shareholders. While there are always new challenges ahead, we believe we are well positioned for fiscal 2022 and beyond.

With that, I'll turn the call over to Lindsey.

J. Lindsey Alley -- Chief Financial Officer

Thank you, Scott.

Revenues in Corporate Finance were $301 million for the quarter, up 93% when compared to the same quarter last year. We closed 151 transactions this quarter compared to 84 in the same period last year, and our average transaction fee on closed deals increased this quarter when compared to the same period last year. As Scott suggested, we continue to see very strong momentum in our Corporate Finance business heading into fiscal 2022.

Financial Restructuring revenues were $143 million for the quarter, a 38% increase from the same period of last year. We closed 35 transactions this quarter compared to 29 in the same period last year, and our average transaction fee on closed deals was significantly higher this quarter when compared to the same period last year. As Scott stated, restructuring activity has returned to more normal pre-pandemic levels, and unless something changes, we expect to see solid but significantly lower restructuring revenues in fiscal 2022.

In Financial and Valuation Advisory, revenues were $57 million for the quarter, a 32% increase from the same period last year. We had 765 fee events during the quarter compared to 624 in the same period last year, and we continue to see an increase in revenues per fee events as our business mix continues to evolve. For fiscal 2021, FVA business grew 17%, and the momentum that drove its growth continues as we enter 2022 -- fiscal 2022.

Turning to expenses, our adjusted compensation expenses were $312 million for the fourth quarter versus $184 million for the same period last year. Our only adjustment was for deferred payments related to certain acquisitions. Our adjusted compensation expense ratio was 62.2% for the quarter, and we ended fiscal 2021 with an adjusted compensation expense ratio of 62.5%. As we have discussed on previous calls, the compensation ratio is slightly higher than our long-term target, primarily as a result of lower revenue attributable to reimbursable expenses for fiscal 2021 due to impacts from the pandemic. For fiscal 2022, we expect to return to our long-term target for the adjusted compensation ratio -- expense ratio of between 60.5% and 61.5%. Although based on continued lower reimbursable expenses, we expect to be toward the higher end of the range.

Our adjusted non-compensation expenses were $42 million for the quarter versus $45 million for the same period last year, a decline of 6%. This resulted in an adjusted non-compensation expense ratio of 8.4% for the quarter versus 14.9% in the same quarter last year. This quarter, we adjusted out of our non-compensation expenses $1.1 million in acquisition-related amortization. We ended fiscal 2021 with a non-compensation expense ratio of 9.1% versus 15.2% in fiscal 2020. We expect to see a significant increase in non-compensation expenses in fiscal 2022 as we begin to return to more normalized travel and operations, especially in the latter part of the fiscal year. As a reminder, our long-term range for the adjusted non-compensation expense ratio is between 14% and 15% of revenues. We believe it is likely that we will end up below that range in fiscal 2022.

Our adjusted other income and expense decreased for the quarter to an expense of approximately $473,000 versus income of approximately $1 million in the same period last year. This was primarily a result of lower interest earned on our cash and investment balances and an increase in the expected value of future earn-out payments related to acquisitions.

Our adjusted effective tax rate for the quarter was 29% compared to 15.1% during the same period last year. And for the fiscal year, our adjusted effective tax rate was 26.9% compared to 25.2% for the prior fiscal year. For future years, we anticipate an effective tax rate at our long-term targeted range of between 27% and 29%. For fiscal 2021, we ended up slightly below this long-term range as a result of COVID-related factors that I have discussed in previous quarters.

Turning to the balance sheet and uses of cash, as of the quarter end, we had over $1 billion of unrestricted cash and equivalents and investment securities. As a reminder, a significant portion of this cash is earmarked to cover accrued, but unpaid bonuses for fiscal 2021 that will be paid this month and in the month of November. In addition to our cash bonuses to be paid this month, we expect to issue approximately 2 million shares to employees as part of their compensation for fiscal 2021. Similar to previous years, we intend to offset these new shares with share repurchases throughout fiscal 2022 and it is likely given our excess cash position that our repurchases for fiscal 2022 will exceed what we plan to issue this month. In our fourth quarter, we purchased -- we repurchased 907,000 shares at an average price of $66.58 per share as part of our share repurchase program.

And with that, operator, we can open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Manan Gosalia of Morgan Stanley. Please state your question.

Manan Gosalia -- Morgan Stanley -- Analyst

Hi, good afternoon.

Scott L. Beiser -- Chief Executive Officer and Director

Hi, Manan.

Manan Gosalia -- Morgan Stanley -- Analyst

Hi. So, your 20% pre-tax margins last year, I mean it's 30% if we look at the last six months. And even if I normalize for travel returning to maybe, say, 75% of what it used to be, I might go down only 1 percentage point or so. So, I guess the question is, do you think that pre-tax margins will stay in this range for the foreseeable future until the M&A cycle turns, or is there something that we're not thinking about?

J. Lindsey Alley -- Chief Financial Officer

No, look, I think that certainly while you have TM&E at levels below where we were pre-pandemic, you're going to have elevated -- slightly elevated pre-tax margins. And it's a little too early for us to tell where we're going to settle on our non-compensation expense kind of once we're out of all this. Before we went into the pandemic, we were right around 15%. It's hard to tell where we're going to settle. Our business has grown quite a bit. So, I do expect some upside on our pre-tax margins versus pre-pandemic. But I think it's, we need to understand kind of what TM&E -- how TM&E is going to come back, at what levels and kind of where we end up settling on our non-comp expense.

Manan Gosalia -- Morgan Stanley -- Analyst

Got it. And then I guess on the M&A side, just based on your conversations with clients, how reliant do you think the current level of activity is on the fact that share prices have been near their highs for a while? So, if we were to get some sort of market correction here without there being some big shock in the system, is there still enough momentum for activity to continue at these levels?

Scott L. Beiser -- Chief Executive Officer and Director

I mean, the momentum has been building, as we said, really for probably the last six months and each month seems to be better than the previous months. So, there is quite a bit of momentum. That being said, you're right, all things being equal, when asset values are rising, typically that's more positive for M&A activity, and when they decline, it's more negative. Whether that's a week or month's decline is a difference than if we actually entered into a couple of quarters or a year's worth of decline. But right now, everything we see it's still very positive in M&A, capital markets and the valuation side of our practice.

J. Lindsey Alley -- Chief Financial Officer

I would say, as a reminder, though, 80% or so of our M&A business is private. 20% is public. And as a result, we are probably a little bit less susceptible to swings in the stock markets. I think to Scott's point, if they are longer term, if they start to have fundamental effects on valuation, we will see an effect. If it is monthly swings, we just tend to be a little bit more insulated from that because of our mix.

Manan Gosalia -- Morgan Stanley -- Analyst

Got it. Thank you.

Operator

Our next question is from Devin Ryan of JMP Securities. Please state your question.

Devin Ryan -- JMP Securities -- Analyst

Hey. Great. Good evening, guys.

Scott L. Beiser -- Chief Executive Officer and Director

Hi, Devin.

Devin Ryan -- JMP Securities -- Analyst

Maybe staying on the [Technical Issues]

Scott L. Beiser -- Chief Executive Officer and Director

Devin, you're cutting out a little. Devin? Why don't we circle up to the next caller.

Operator

All right. Devin, if you can hear us, please just dial back into the queue. Our next question is from Ken Worthington of J.P. Morgan. Please state your question.

Ken Worthington -- J.P. Morgan -- Analyst

Hi, good afternoon.

Scott L. Beiser -- Chief Executive Officer and Director

Hi, Ken.

Ken Worthington -- J.P. Morgan -- Analyst

So, thank you for your comments on restructuring. As we think about the outlook, you talked about returning to pre-pandemic levels. I'm trying to get a better idea of what this might look like. Does either fiscal 2020 or 2019 represent sort of a better outlook here? And are you still working through some of the elevated pipeline or is Houlihan already at the point where the pipeline is balanced with the replenishment rate?

Scott L. Beiser -- Chief Executive Officer and Director

Yeah. What we're clearly seeing is, like I said, a long-term growth rate in our restructuring business. We continue to expect it to have a long-term growth profile based upon many of the factors we described. There are always periods that seem -- and whether these periods last a couple of quarters or two years, we've seen really over the last several decades, we're not right now in one of those periods that escalates the results above, I'll call it, that normal upward trend line. So, I think our best example for people to think about it is to look at that trend line, assume it continues to increase, but it's not going to punch meaningfully above that trend line unless there is a dramatic change out in the marketplace. But we would still expect business, like I said, whether you look at fiscal '19 or fiscal '20, those are clearly levels that we saw in the pre-pandemic environment, and we think there is many good reasons why we can continue to grow from that. Just short term, don't expect another fiscal '21 to occur in fiscal '22.

J. Lindsey Alley -- Chief Financial Officer

And when we talk about pre-pandemic, we're talking about activity levels. I mean, it's not hard to put numbers on revenues. Our product mix does change, so our client mix does change in restructuring. And we have outsized fee some years and some years we don't. So -- but activity levels are pre-pandemic where revenues fallout are going to depend a little bit on the nature of the transactions we're working on.

Ken Worthington -- J.P. Morgan -- Analyst

Okay, great. Thank you. And I know we've talked about tax in prior calls, but it feels like changes to capital gains rates a little bit more real than maybe it was following elections. So, to what extent is the tax environment having an impact on the discussions in middle-market M&A? And to what extent does it seem tangible that you'll get a pull forward from maybe future years into current years, or does it not feel like that? Both from your business perspective and then from your own sort of companies growth through M&A perspective, might you participate in more deals because you've got more willing sellers looking to get in prior to possibly a year end deadline? I think, I wrapped like eight questions into that. So, just to be clear. Thanks.

Scott L. Beiser -- Chief Executive Officer and Director

So, I think there's really two core questions. As it pertains to our clients and their desire to do transactions in today's tax environment and a pending change in the tax environment. I think we noted back in probably summer of 2020, we thought there would be some amount of -- if you might pull forward in terms of doing transactions to beat a potential change that might occur. Ultimately, we saw a little of that, but not a whole lot. Obviously, now the calendar year has moved on, the presidential and congressional elections are done, we all read the same thing in the newspapers, I would say, it is clearly a discussion point among our clients, but it's not a driving force. I believe, right now, that's convincing clients do something today in case if there is a change, and when that change might occur. So, right now, I'd say, it's a decent talking point, but it's not a significant component of why people are doing deals, and not sure it's going to be driving deal flow. If you get closer to usually at December 31, maybe that occurs. But right now, it's not something that we would say is a top handful of reasons people are participating in M&A activity.

As it pertains to Houlihan Lokey's ability to do acquisitions of companies, same thing in all the companies that we're talking to, there are very specific reasons why we might want to do a deal with them and they might want to do a deal with us. But there really is almost nothing out there that people are specifically talking to us or urgently wanting to close something in the next quarter before this calendar year in anticipation or concerned about tax rate changes. That also just not a driving force that we think is going to influence the outcome of our M&A activity when we're looking to acquire businesses.

Ken Worthington -- J.P. Morgan -- Analyst

Awesome. Thank you so much.

Operator

Our next question is from Richard Ramsden of Goldman Sachs. Please state your question.

Richard Ramsden -- Goldman Sachs -- Analyst

Hey, good afternoon, guys. So, perhaps, I can ask a question on productivity. You've obviously seen this very significant improvement in productivity in the Corporate Finance business in particular, and I wondered if you could just help us break it down into factors that you think a cyclical, such as the improvement in the environment, the fact that people are working remotely, so they can just get more done in the day versus perhaps more structural factors that you think are likely to stick, such as having a broader product set, the fact you've got a more recognizable brand, you've got a broader client base and so on?

Scott L. Beiser -- Chief Executive Officer and Director

Yeah. I would mention a few things. One, I think our brand continues to improve. And as on notoriety as a result, as our brand improves, we were able to work on more transactions and bigger transactions with bigger fees. And that I think has just been part of the DNA for years. Two, as asset values have increased, the size of businesses that we're selling today are just bigger than they were six months ago, a year ago, five years ago. So part of that is just the escalation of asset valuations.

In terms of the productivity per se, as it comes down to whether you do this per MD per employee, so I think we and others have clearly benefited by the lack of travel, you just get a lot more done effectively. Once the marketplace is willing to do transactions remotely, then our bankers will able to do everything remotely, and they didn't have to go to the airport. They didn't have to be on the planes. They weren't going to meetings. And we do expect some of that is going to come back. So, all other things being equal, it will eat a little bit in the productivity when that occurs, but I do think there's probably some longer-term fundamental shift where the method and types of in-person meetings are needed. We may never come back completely to where we were pre-pandemic, but hard to believe that fiscal '22, '23, '24 etc. is going to look like it was in '21. So, I think some of those things are still positive to our productivity level, the efficiency level of people. You have to assume, at some point, we will start traveling again, which is a negative.

And then the last thing I'd say is as the last class of new hires that we had, especially with the junior level, we train them as best we could, but training them remotely is never as good as in-person. So I actually think the most junior of our team members will get much better once we're all back in the office, and once they can more easily work with their colleagues, and that probably has an improvement in productivity.

J. Lindsey Alley -- Chief Financial Officer

I just want to add I guess a couple of things to it. The first is, given the age of our European Corporate Finance operations, which is much younger than our U.S. operations, productivity of the average banker there has tended to be lower than the productivity in the U.S. We saw very strong financial performance from that group in Europe. This year, there has been a little bit of a drag in European economies over the last couple of years and we saw some really strong results, which helped drive our productivity, which we think are sustainable.

And then the second thing I'd note is -- middle market is -- the mid-cap space is a bit different than the large cap space, and that we see a fair amount of origination from our Director class. And so when you look at just the productivity per MD, quite a bit of business is generated at Houlihan Lokey from those folks that are just about to become MD. And you'll see -- Richard, you'll see a pretty big promote class across all three product lines because those directors this year really delivered for us, and a lot of them have made their way to Managing Director. And so you -- in Houlihan Lokey, we do have a kind of a group below the MD class that does quite a bit of business for us that's not picked up in these numbers.

Richard Ramsden -- Goldman Sachs -- Analyst

Okay, that's really, really helpful. But secondly, can we just spend a couple of minutes just talking about the cash on the balance sheet? Because I think as you mentioned, it's over $1 billion. And I just want to kind of think through what the steady state cash level looks like in the business? And I guess look there various things that have changed, your business is obviously a lot bigger. I guess you learned some stuff through the pandemic around what the appropriate level of cash is. So, what do you think the steady state level of cash looks like today? And then, what do you think is a realistic timeline to get to that level of cash?

J. Lindsey Alley -- Chief Financial Officer

I'm not sure what you mean by steady state, but let me answer the question, and then maybe you can tell me if I captured it. So, we have excess cash in the balance sheet we did last quarter. And we're addressing it, I think, in a couple of ways. The first is through an increase in our quarterly dividend, which we announced -- we picked up at the last Board meeting, and we announced today. And then the second is, we have been increasing our share repurchases over and above the amount of shares that we issue as regular way compensation. We do believe this will start to address and have started to address our excess cash position. We do think it will take several quarters of increased cash repurchases to address it. We don't feel any -- we don't feel like we are in a rush to do so. I think we're going to do it methodically.

And I think we need to, because we continue to have dialog with a number of very interesting M&A targets, and at any stage, one of those could become a bit more material than they are now. And we would need some excess cash. We would need some cash to effectuate the transaction. So, it's a little bit of a balancing act in terms of rushing it and ending up with a steady state of cash and acquisitions staring you in the face versus share repurchases that address the cash situation while continuing dialog on the M&A side. So, I'm hoping that answers your question, but as a reminder, a big chunk of that $1 billion is going out the door in the next week to two weeks. And so next quarter, you'll have a better sense of kind of where we're -- what we're looking at from an excess cash standpoint.

Richard Ramsden -- Goldman Sachs -- Analyst

Okay. No, you answered it perfectly. Thanks a lot.

Operator

Our next question is from Steven Chubak of Wolfe Research. Please state your question.

Steven Chubak -- Wolfe Research -- Analyst

Hi, good afternoon.

Scott L. Beiser -- Chief Executive Officer and Director

Hey, Steven.

J. Lindsey Alley -- Chief Financial Officer

Hi, Steven.

Steven Chubak -- Wolfe Research -- Analyst

So, wanted to just start off with a question with regards to the revenue outlook. I mean, Scott, you did note that the Corporate Finance backdrop is quite favorable. It would likely remain constructive for the remainder of the calendar year. At the same time, you are lapping these tougher restructuring comps, which based on your earlier remarks implies about a $200 million headwind relative to this last fiscal year. And you noted you've delivered nine straight years of revenue growth. I was hoping you might speak to just given all those different puts and takes, your confidence level around your ability to grow revenues in this coming fiscal year?

Scott L. Beiser -- Chief Executive Officer and Director

We always tend not -- in our business, not to look at it quarter-by-quarter, even year-by-year. I have, obviously, a lot of confidence, I think, in the reasons we can continue to grow the business over the years. Obviously, we're not expecting 32% increases year-over-year. We haven't had a decline, as we noted, in 10 years.

Right now, I'd say a couple of things. We have noted clearly on the restructuring side, we believe at this moment, we peaked in revenues, so we expect them to continue to come down. Whether that headwind is $200 million or some different number, ultimately, time will tell. On the flip side, if you look at our Corporate Finance business, we clearly had two very good second half quarters. And you could argue the first half of the year, we're kind of blah from the pandemic. And if we're not in that, you would think that also there is some more positives in what Corporate Finance can do.

And on the valuation side, I think it's been on a roll actually now for the last couple of years, and clearly the last couple of quarters. And we've noted over many quarters, we don't think there is some aberrational issues going on with the valuation business that says, you should not assume that will continue to repeat itself for grow. So, we think there are many elements that have both very positive components, but duly note that the restructuring business will shrink.

We don't really give ever a particular one-year forecast. And I think we've said for some time, assume through organic and acquisition matters, thinking of our business growing by 7% to 10% as a target is not an unrealistic assumption, and we've, as noted earlier, succeeded -- exceeded that for quite many years. I think that's the best guidance that we can probably give you on what to expect for the next year or couple of years.

Steven Chubak -- Wolfe Research -- Analyst

That's great color. And just for my follow-up, I wanted to touch on the FVA business. You did allude to the fact that there has been some really nice momentum there, particularly over the last couple of quarters. I know in the prepared remarks, you had alluded to the fact that there've been some mixed benefits, some higher fee mandates have been won. And I'm just -- was hoping to get some perspective on how we should be thinking about the new normal run rate here? It does sound like there's been a step function higher in that particular business. I just want to make sure we're thinking about it appropriately for a modeling perspective.

Scott L. Beiser -- Chief Executive Officer and Director

I think there is a couple of things. One, that part of our business does have some true kind of contractual repeat components to it. And as long as we live in a world that's desiring of some form of transparency, some taxation, litigation environment, all of which we think exist. In fact, it always seems to be getting more versus less, those are all positive signs on the valuation business. It's still predominantly a U.S.-focused business, but it continues to have some elements outside of the U.S. that we think can and will continue to grow.

And we've added many, I'll call it, sub-services that we're now doing over the last one, three, five years that we didn't do five or ten years ago. And I think in the totality of the bench and whether it's at the MD level or at the analyst level, we just have more FVA folks that have more talent and more skills than we ever have, and we've clearly been a recipient of hiring, I think some mid and senior level people relative to what departures that we had. So, we think it's all stacked up for some ongoing growth over the next handful of years.

Steven Chubak -- Wolfe Research -- Analyst

That's great. Thank you so much for taking my questions.

Scott L. Beiser -- Chief Executive Officer and Director

Thanks, Steven.

Operator

Our next question comes from Brennan Hawken of UBS. Please state your question.

Brennan Hawken -- UBS -- Analyst

Thanks. Thanks for taking my questions. Just curious, when you talk about restructuring, and I'm not trying to split this to carefully, but talk about getting back to the pre-pandemic range, is that a suggestion about the run rate for the full year, or is it more an idea that you expect in the coming year to get back to a sort of pace that would be more in line with the pre-pandemic? Initially when you made your comments, I thought it was the latter. But just wanted to make sure.

J. Lindsey Alley -- Chief Financial Officer

Yeah. Look, I think you are splitting the hairs a little bit. So, I think we started seeing pre-pandemic levels in restructuring the second half of fiscal '21, which will have a direct impact on first half revenues of this year. So, I think it's not the latter, it's the former.

Brennan Hawken -- UBS -- Analyst

Got it. Hey, one of fifth question on restructuring and we're splitting some hairs. All right. Fair enough. You're -- you guys have been talking about being in active discussions with some potential targets for a while. So, how -- what can you tell us about those discussions? How should we think about them as far as the likelihood for them to become relevant or actionable at some point? It's starting to feel a little bit like waiting for Godot. So, I'm just curious how close you are? And what do you think might be holding progress, or the ability to close anything on that front?

J. Lindsey Alley -- Chief Financial Officer

So, I think, Brennan, with acquisitions, we're going to be a lot more conservative in our dialog about them. There are two parties involved. And what I will tell you is we have been super consistent on our acquisitions since pre-IPO. And we do one or two a year. And we have really since then. Scott and I don't see any reason why that's going to change. And so, where we are in discussions, whether it's next quarter or the quarter after or three quarters from now, we just going to be careful about conversations regarding acquisitions, because things can change. But I think our history there and our precedent sort of speaks for itself in terms of what we're doing.

Brennan Hawken -- UBS -- Analyst

Okay. And then maybe just sneak one last one in here. You had mentioned, I believe, 16 promotions and three recruits. Were the recruits all on the Corporate Finance business? And what was the breakdown of that large promotion class by line of business?

Scott L. Beiser -- Chief Executive Officer and Director

The three hires at the MD level, post April 1, were all in Corporate Finance. And within the 16 MDs that we have promoted, maybe one or two up roughly, a little over a third was in restructuring, a little over a third was in Corporate Finance, a little under a third was in FVA. So, it was pretty evenly split. And it may have been something like six, six and four, somewhere around that vicinity is my recollection.

Brennan Hawken -- UBS -- Analyst

Great. Thanks for taking my questions.

Scott L. Beiser -- Chief Executive Officer and Director

Okay.

Operator

Our next question is from Jim Mitchell of Seaport Global. Please state your question.

James Mitchell -- Seaport Global -- Analyst

Hey, good afternoon. Maybe just on the revenue front and digging into Corporate Finance a little bit, I was -- we think we are all a little surprised that this quarter was almost the strong or as strong as last quarter, which was a blowout for everybody. So, you see a little unusual versus your peers, and it seems like you're very constructive going forward. So, if we look at the last two quarters, you're about 50% higher than your best-ever quarter. And it almost seems like you're implying you can still kind of hanging on to that level. So, I'm just trying to -- I'm not trying to put words in your mouth, but can you just sort of maybe talk about what's driving? Is it just M&A? Is it sort of non-M&A type stuff that we don't see as much, just growth and debt advisory stuff like that? Like what are we seeing -- or is it just how you're getting bigger deals, bigger fees, just maybe a little more color on the drivers and how confident you feel going forward?

Scott L. Beiser -- Chief Executive Officer and Director

So, a couple of comments. In our December quarter, we felt and commented that there were probably some unusual fact patterns and maybe there was some catch-up type revenues that explained why we had such a great third fiscal quarter, because we were light in the first and second, and deals that were put on hold came into play, etc., etc. Obviously, as you stated, our fourth fiscal quarter was almost right on top of what we did in the third, which is different and probably better than what most of our competitors have announced so far. Don't really view that this fourth fiscal quarter had any unusual activity where we gave you some of the commentary in the third quarter. So, most of it is just the improved market environment, the improved efficiency of our staff, and it's really all over. There weren't a small handful of mega deals or fees that caused this. It's really in almost all of our industry sectors and all of our key geographies, reasonably spread out between M&A and capital markets, mid -- I wouldn't really highlight a particular sub area that did phenomenally better than others. Right now, we are just working on more projects with more talented people in a very strong marketplace and sitting here today, five, six weeks, once again into a new quarter, this activity continues to be out there. You always worry about what's going to happen on the stock market and what's going to happen with any new regulations or tax changes etc., but as we sit here today, it's a very bullish environment. And we feel that we can continue on the pace that we're at and hopefully continue to grow up from there.

J. Lindsey Alley -- Chief Financial Officer

Yeah. I mean I would caution you that we do have some seasonality in our business. And the first two quarters generally are lower than the last two quarters for us just given the way the calendar falls. But, yeah, I think to Scott's point, we're relative to same quarter as last year where we're at great momentum going into fiscal 2022.

James Mitchell -- Seaport Global -- Analyst

And any thoughts maybe on just the SPAC market that impact? I mean, there's almost a trillion of new buying power, the average size of transactions or SPACs tend to be smaller, a couple of billion range. Is that something that affects you, or is that just a little too large to have a real impact in your business model?

Scott L. Beiser -- Chief Executive Officer and Director

Well, it's a great new -- almost, if you might describe, asset class, looking to do deals, and there is a host of ways that we are and can continue to do, participate in. But since we're not in the underwriting business, which is where I think a lot of fees so far have come from, I wanted to say that our results have been statistically massively impacted by SPACs. But we do valuation work on the SPACs. We represent SPACs on the sell side to buy side. At times, we can do some of the co-underwriting or participate in PIPEs. We announced the formation of our SPAC a couple of months ago. So, we're very aware of SPACs, and it is a brand new class of group of would-be buyers and sellers that we can and will continue to participate in. But right now, it's not a large driving financial number within our results that we've posted in the last quarter or two.

James Mitchell -- Seaport Global -- Analyst

No, certainly not, right. Okay. Thanks a lot. Bye.

Scott L. Beiser -- Chief Executive Officer and Director

Okay. Thanks.

Operator

Our next question is from Devin Ryan of JMP Securities. Please state your question.

Devin Ryan -- JMP Securities -- Analyst

Okay. Great. Let me try again here. Most have been asked. But I do want to come back on the Corporate Finance and kind of the capital markets advisory business. I mean, it feels like that business was a pretty important contributor to the prior year results, 2021. And I know you guys have made a concerted effort to scale that business. So, you're scaling it, at the same time, it's very active backdrop. So, maybe just parse through kind of the outlook for that? Specifically, like how large if you can give us any context that has become in terms of contribution, and then the ability to grow in those capabilities from here?

Scott L. Beiser -- Chief Executive Officer and Director

We understood your question. Is it specific to how well our capital markets business is doing within Corporate Finance?

Devin Ryan -- JMP Securities -- Analyst

Yes, correct.

Scott L. Beiser -- Chief Executive Officer and Director

Yeah. So, we've stated for the last, I think, couple of years, it's a major piece of our business. It has continued to be a great growth component of Corporate Finance. It had the benefit of being able to straddle what we call this roller coaster year. In the front half, it was doing financings and more distressed or troubled situations, and now it's back to doing financings and more healthy and growth situations. The number of deals we're working on has grown across different industries and different geographies within the capital structures of clients itself, and we still believe that this is just -- when you look at it from a secular standpoint, this is a area that is going to continue to grow for us and our peers, and fully expect as we define capital markets to be a growing and meaningful part of not only the firm Corporate Finance and important services that we provide to clients.

Devin Ryan -- JMP Securities -- Analyst

Okay, great. And then [Technical Issues] here, Scott, I know you've talked about kind of the fees are increasing on deals and kind of the deal sizes are increasing, your clients are growing, but are you guys taking proactive steps to, call it, increase your average deal size, whether that's increasing the minimum fee that you'll take or just obviously when times are busy, you can kind of take the assignment you want to work on and get the best return on time. So, I guess [Technical Issues] any kind of proactive steps that are having a meaningful impact on kind of the average fee that you're seeing and expect to see over the next two years or so if the backdrop remains favorable?

Scott L. Beiser -- Chief Executive Officer and Director

All of our businesses whether you define it on a product or an industry, geography standpoint, all have a variety of new business committees. And so they're always looking at the potential to take on a new assignment. Do we think we can complete it, what's the probability of completing it, what do we think is the fees, what kind of staff we're going to need, in more busy times like now, you're going to be a little more critical and sharpen your pencil and answering all those questions, and in slower times, you're little more relax. We're never per se, focused on the size of the deal, probably much more focused on the absolute fee or the probability of achieving that fee. And we also recognize that probably each industry group for some project or geography needs to have its own unique discipline. And so there isn't a one size that fits all for everything in our firm. But, yeah, I would say that right now we're scrutinizing what we take on and whether we think we can complete it and what's the timeframe and amount of staffing that we need, and all of that is helping to improve close rates and those average fees.

Devin Ryan -- JMP Securities -- Analyst

Okay, great. And just one more quick one here, if I may, just on the expenses in the commentary around kind of scaling up over the coming year and particularly into the back half. I mean, do you guys have any sense in the absolute like how much of the delta in the TM -- the travel, meals and entertainment may come back in? Or kind of any framework for us to think about how that could have evolved once we get maybe into the back half of the year and, hopefully, people are traveling and meeting again in-person?

Scott L. Beiser -- Chief Executive Officer and Director

So, first of all, I'd put it in two buckets that should probably define the travel, meals entertainment as we describe it. And the second is conferences/marketing within conferences. Right now, it feels like we will eventually once again start doing in-person conferences. Maybe, half will be in-person and half might still be virtual. So I expect some incremental costs coming from that. And then we are starting to see some increased travel, but I think it's still several quarters away before we get back to a new normalized run rate if you might. And our expectation is as good as our crystal ball can be is we don't think we will be traveling on average per human being if you might at the same amount that we used to pre-pandemic, because at the moment, I don't think our clients are requiring it.

So, we do expect an increase in those conference costs and an increase in the travel, meals and entertainment, not to the level that we saw pre-pandemic. And the second quarter of fiscal '22 should have some more costs than the first on those two categories, and the third more than the second, etc. So, it's just -- we're slowly starting to see some traveling and people are talking about doing in-person conferences not pre summer but probably post summer. Whether that materializes or not? Don't know. That's kind of our best way to look at, and that's why Lindsey and I have not reestablished targets on non-comp, because we just don't know where we will land, other than I think it's clear we will land having probably less costs in those two categories than we used to, but clearly we're going to have more costs than what we experienced in fiscal '21.

Devin Ryan -- JMP Securities -- Analyst

Great. Appreciate it. I'll leave it there. Thanks, guys.

Operator

Our next question is from Jeff Harte of Piper Sandler. Please state your question.

Jeffrey Harte -- Piper Sandler & Co. -- Analyst

Hey, good afternoon, guys. A couple of cleanups from me. One, same-day announcements and completions are somewhat more unique in the middle market space. How has that performed in this recovery versus kind of past recoveries? And can you give us any kind of ideas how much kind of that immediate announcement and completion has kind of contributed to the Corporate Finance over the last six months since we've been recovering?

J. Lindsey Alley -- Chief Financial Officer

I don't know that -- it's a good question. I don't know that the same-day announcements and completions as a percentage of our overall completions has changed. So, I'm not sure that there is a trend there. In Corporate Finance, there is -- there are kind of three categories, broadly speaking. There is the public deals, which you all are able to track, which unfortunately is a sliver of our business. There is the private deals that require Hart Scott, which can get completed in anywhere from, call it, 15 to 25 days. So, it's all within the same month. And then there is the same-day completions. And I'm not sure that the mix of those three has changed much. And so I think -- I might understand where your question is coming from, I think the data logic and the information services that track our deal pipelines are just as bad today as they were pre-pandemic. I don't know that they've gotten any better.

Jeffrey Harte -- Piper Sandler & Co. -- Analyst

Okay. Thanks. That's clear. And one other. On the M&A front, and I guess I'm talking to you guys as acquirers, we've kind of gone from M&A is dead environmentally to all of sudden M&A is vast. How big of an impact does that have or you found that having on targets potential willingness to sell? I'm just kind of trying to get a feel of six to eight months ago, there were probably a lot of boutiques looking to sell. I'm wondering if there is a lot less looking to sell today.

Scott L. Beiser -- Chief Executive Officer and Director

Yeah. I think, we've commented in the past quarters. But if you contrast May of 2021 to, call it, May of 2020, there are probably less companies either anxious or necessarily needing to do a -- needing to sell to somebody like our firm or others. And to the price of those companies interested in selling has risen as has the stock market, as has our peer stock price, etc. So, we think all of that has caused us to be a little slower than what we would have anticipated a year ago. There's still a lot of activity out there, but it is slower than it was a year ago for the reasons that I mentioned and price expectations have risen as well.

Jeffrey Harte -- Piper Sandler & Co. -- Analyst

Okay. Thank you.

Operator

Our next question is from Michael Brown of KBW. Please state your question.

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

Great, thank you. So, I wanted to start off on Corporate Finance, and maybe just take a bit of a longer-term perspective here. So, Scott, we are looking at the data. Obviously, we've seen record -- from a margin perspective, saw a record fourth quarter, the first quarter in global basis came in a little bit about that, and 2Q is on track for another record quarter. If I play devil's advocate here and try and look a little bit further out and figure out what could cause activity to really hit a wall, just curious what you see as that risks now -- that risk now? Because it's certainly not very clear to me at this stage, but I'm curious what may be coming up in conversations? And if you could, just characterize what the C-Suite are kind of talking about in terms of top of mind today? Is it still a lingering effects of the virus, or have any other items going to taken center stage in terms of key risks?

Scott L. Beiser -- Chief Executive Officer and Director

I'll take your question in two pairs. Actually, I think the conversations we're having in the C-Suite's end or the private equity shops, they're all focused on positive attributes, and they're really not fretting over negative attributes. So, I wouldn't tell you that if we pulled all of our clients of prospects, they'd say, oh, here's the top three or five things they worried about. Having said that, the host of, I'll call it, normal things out there, which could spook or change negatively marketplace in a particular order is a significant rise in interest rates, lack of availability, especially debt capital, a meaningful drop in a longer timeframe in that drop in the stock market, increase in tax rates, some new regulatory changes, all of those things I'd say are always out there that people consider and worry about. I think in the mid-cap space and in the private space, we're not as positively impacted by favorable comments and not as negatively impacted by some of those things up there. But right now, the client base, not overly focused on many negative attributes. They're more focused on a very good marketplace whether they're buyer, sellers, lenders or borrowers.

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

Yeah. That's what I suspected. I appreciate that. And then I guess the second question is kind of along the same vein, it's another restructuring-related question. But again, I want to take a longer-term focus here. As you think out maybe it's fiscal 2023, maybe beyond that, but just curious as you think about the lingering effects of COVID, do you expect to see another wave of restructuring activity? And then what would be the catalyst to see that happen? Is it possible for it to have a little bit of a sooner pickup when things like stimulus ultimately fade out? And is it -- or is it kind of rising rate environment that maybe starts to really put a lot of pressure on those that are over-levered? I'm just curious to hear your take on that.

Scott L. Beiser -- Chief Executive Officer and Director

I think if you look at the damage done by the pandemic, there are going to be certain fundamental negative impacts on many businesses and industries, many of which we would have thought would have entered into a restructuring in April, May, June, July, etc. of 2020. And for a variety of reasons, a lot having to do with government interventions and stimulus, which in certain cases have postponed potentially the inevitable. In certain cases, companies probably will survive and do well. But we always look at it as does the business plan that you have will it succeed in the go forward world, and if it won't, it's just a matter of time when eventually it will hit the wall. If on the other hand, the business plan can evolve and succeed in today's new world, whether it's because of the pandemic, because of its ongoing technology disruptors and relatively amount of debt you have and interest rates, that's what feeds our restructuring business. So to your specific question, we do think there is another wave, not necessarily the same size that we saw six, nine, 12 months ago, but there is still companies out there that we believe have some trouble ahead, they've just been able to at least kick the can down the road and we'll see how long that will last.

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

Okay. Great. Thanks for the thoughts there, Scott.

Scott L. Beiser -- Chief Executive Officer and Director

Thanks, Mike.

Operator

We have reached the end of the question-and-answer session. I will now turn the call back over to Scott Beiser for closing remarks.

Scott L. Beiser -- Chief Executive Officer and Director

I want to thank you all for participating in our fourth quarter and fiscal year 2021 earnings call, and we look forward to updating everyone on our progress when we discuss our first quarter results for fiscal 2022 this coming summer. Thank you, everyone.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Christopher M. Crain -- General Counsel

Scott L. Beiser -- Chief Executive Officer and Director

J. Lindsey Alley -- Chief Financial Officer

Manan Gosalia -- Morgan Stanley -- Analyst

Devin Ryan -- JMP Securities -- Analyst

Ken Worthington -- J.P. Morgan -- Analyst

Richard Ramsden -- Goldman Sachs -- Analyst

Steven Chubak -- Wolfe Research -- Analyst

Brennan Hawken -- UBS -- Analyst

James Mitchell -- Seaport Global -- Analyst

Jeffrey Harte -- Piper Sandler & Co. -- Analyst

Michael Brown -- Keefe, Bruyette & Woods -- Analyst

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