Houlihan Lokey, Inc. (NYSE:HLI) Q3 2023 Earnings Call Transcript

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So the expectations and just where the marketplace is, kind of where interest rates are, where financing is, kind of the never ending movements in the maturity wall, all that leads us to believe that it will be a good, and probably, better environment for Financial Restructuring for at least the foreseeable future.

Lindsey Alley: And just going back to Brennan’s question, which was kind of the million-dollar question, which how should we think about M&A over the next 12 months and that’s probably not just for Houlihan but for anyone in the industry is, we are in an unusual circumstance where we are seeing increased activity in Corporate Finance relative to the last quarter and increased activity in Restructuring relative to the last quarter, which is unusual. It just normally does not happen that way and so there is, call it, half the population out there that believes in the soft landing and half the population out there that thinks it’s going to get ugly. And so very hard to go back and answer Brennan’s question until we really see some inflection point that shows a direction.

Unidentified Analyst: Yeah. Makes sense. And then kind of just switching gears, just thinking about kind of your capital priorities from here. I know this quarter, you guys announced that you would be keeping the dividend flat for this coming quarter and the second quarter of relatively light buybacks. So just coupling this with the comments you made last quarter kind of citing a pickup in conversations with acquisition, targets, as well as the announced Oakley Advisory acquisition. I guess how should we think about the M&A outlook from here, I am assuming there’s still more by way of conversations, but just kind of curious on any updates there on capital priorities overall, as well as M&A specifically?

Lindsey Alley: So I will let Scott handle the M&A question and I will just start with the capital priorities. I think with respect to the dividend, if you just go back in time, our normal cadence is our Q4, which is next quarter and so it would be unusual for us to increase the dividend this quarter or have any effect on the dividend this quarter. With respect to share repurchases, I think, we have called out for the last couple of quarters that we are going to be conservative with respect to share repurchases. As you saw during COVID and as you heard from Scott in his comments, we do tend to see a bit more M&A activity during periods like this and making sure that we have balance sheet flexibility, I think, is prudent, going through a dislocation in the market, so not dislocation, it’s probably too strong a word, but stubbornness in the markets like the way we are going through — like what we are going through now.

And then I think with respect to M&A activity, I think, I have kind of answered that question. That is an important component of capital allocation for us. We feel like it is the most accretive to shareholders and that’s going to continue to be a priority for us to put money to work through our acquisition strategy. I think with respect to what we are seeing out there, Scott, can highlight some of what he talked about.

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