Houlihan Lokey, Inc. (HLI) Bundle
Understanding Houlihan Lokey, Inc. (HLI) Revenue Streams
Understanding Houlihan Lokey, Inc.’s Revenue Streams
Houlihan Lokey, Inc. reported revenues of $574.96 million for the three months ended September 30, 2024, a 23% increase compared to $466.99 million for the same period in 2023. For the six months ended September 30, 2024, revenues reached $1,088.57 million, also reflecting a 23% increase from $882.82 million in 2023.
Breakdown of Primary Revenue Sources
The revenue is primarily generated from three business segments:
- Corporate Finance: Revenues were $364.03 million for the three months ended September 30, 2024, up from $281.68 million, marking a 29% increase. For the six months, revenues were $692.45 million, a 36% increase from $508.74 million.
- Financial Restructuring: Revenues increased to $131.57 million for the three months ended September 30, 2024 from $114.67 million, a 15% growth. For the six months, revenues stood at $249.00 million, rising 5% from $238.03 million.
- Financial and Valuation Advisory: This segment reported revenues of $79.36 million for the three months ended September 30, 2024, compared to $70.64 million, reflecting a 12% increase. For the six months, revenues totaled $147.13 million, an 8% rise from $136.05 million.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for the key segments for the three and six months ended September 30, 2024, compared to 2023, are summarized below:
| Segment | 3 Months Growth Rate | 6 Months Growth Rate |
|---|---|---|
| Corporate Finance | 29% | 36% |
| Financial Restructuring | 15% | 5% |
| Financial and Valuation Advisory | 12% | 8% |
Contribution of Different Business Segments to Overall Revenue
For the three months ended September 30, 2024, the contributions of each segment to total revenue were:
- Corporate Finance: 63.3% (i.e., $364.03 million)
- Financial Restructuring: 22.9% (i.e., $131.57 million)
- Financial and Valuation Advisory: 13.8% (i.e., $79.36 million)
Analysis of Significant Changes in Revenue Streams
Notably, the Corporate Finance segment experienced the most significant growth, attributed to an increase in the average transaction fee on closed transactions. The Financial Restructuring segment also demonstrated strong performance, driven by favorable market conditions leading to an increase in closed transactions. Conversely, the Financial and Valuation Advisory segment showed moderate growth, primarily due to an increase in the number of Fee Events.
A Deep Dive into Houlihan Lokey, Inc. (HLI) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 30, 2024, gross profit was $130,669,000, resulting in a gross profit margin of approximately 22.7%. In comparison, for the same period in 2023, gross profit was $90,277,000, yielding a gross profit margin of 19.3%.
Operating Profit Margin: The operating profit for the three months ended September 30, 2024, stood at $130,669,000, giving an operating profit margin of about 22.7%. This is an increase from the previous year, where the operating profit was $90,277,000, equating to an operating profit margin of 19.3%.
Net Profit Margin: For the three months ending September 30, 2024, net income was $93,549,000, leading to a net profit margin of approximately 16.3%. This compares favorably to the net income of $67,031,000 for the same quarter in 2023, which resulted in a net profit margin of 14.3%.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit | $130,669,000 | $90,277,000 | 45% |
| Operating Profit | $130,669,000 | $90,277,000 | 45% |
| Net Income | $93,549,000 | $67,031,000 | 40% |
| Gross Profit Margin | 22.7% | 19.3% | 4.1% |
| Operating Profit Margin | 22.7% | 19.3% | 4.1% |
| Net Profit Margin | 16.3% | 14.3% | 2.0% |
Trends in Profitability Over Time: The profitability metrics show a consistent upward trend from Q3 2023 to Q3 2024. Gross profit increased by 45%, operating profit also increased by 45%, and net income rose by 40%.
Comparison with Industry Averages: The average gross profit margin in the financial advisory industry is approximately 21%, placing the company's gross profit margin slightly above average. The average operating profit margin in this sector is around 20%, indicating that the company is performing well in comparison to its peers.
Operational Efficiency Analysis: The company has shown effective cost management with total operating expenses increasing by only 18% compared to a 23% increase in revenues for the three months ended September 30, 2024. Employee compensation and benefits have also increased by 22%, reflecting a strategic investment in human resources to support revenue growth.
Compensation Ratio: The compensation ratio for the three months ended September 30, 2024, was 62.7%, down from 63.5% in the previous year, indicating improved efficiency in managing personnel costs relative to revenue growth.
Debt vs. Equity: How Houlihan Lokey, Inc. (HLI) Finances Its Growth
Debt vs. Equity: How Houlihan Lokey, Inc. Finances Its Growth
Overview of the Company’s Debt Levels
As of September 30, 2024, the total long-term debt for the company stood at $0, while short-term debt was $0. The company maintains a strong liquidity position with cash and cash equivalents amounting to $691,410,000 and investment securities worth $56,829,000.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Houlihan Lokey is 0.0, indicating no reliance on debt financing. This is significantly lower than the industry average, which typically ranges from 0.5 to 1.5.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
There were no recent debt issuances as of September 30, 2024. The company has maintained a revolving credit facility of $100 million, which allows for an uncommitted expansion option up to $200 million, with no principal outstanding under this line of credit as of the latest report. The company has consistently received strong credit ratings, indicating robust financial health.
How the Company Balances Between Debt Financing and Equity Funding
The company primarily relies on equity funding, which is evident from its total stockholders' equity of $1,957,087,000 as of September 30, 2024. This includes 53,403,939 shares of Class A common stock and 16,082,738 shares of Class B common stock. The focus on equity financing over debt reflects a conservative approach to capital structure, minimizing financial risk.
| Type | Amount (in thousands) |
|---|---|
| Cash and Cash Equivalents | $691,410 |
| Investment Securities | $56,829 |
| Total Long-term Debt | $0 |
| Total Short-term Debt | $0 |
| Total Stockholders' Equity | $1,957,087 |
| Debt-to-Equity Ratio | 0.0 |
Assessing Houlihan Lokey, Inc. (HLI) Liquidity
Assessing Liquidity and Solvency
As of September 30, 2024, the liquidity position of the company is assessed through key ratios and cash flow statements, which provide insights into its operational efficiency and financial health.
Current and Quick Ratios
The current ratio, a measure of liquidity calculated as current assets divided by current liabilities, is indicative of the company's ability to meet short-term obligations. As of September 30, 2024, the current assets totaled $748,239,000 while current liabilities were not explicitly stated but can be derived from the balance sheet. The quick ratio, which excludes inventory from current assets, also reflects the company's short-term liquidity position.
| Liquidity Measure | Value |
|---|---|
| Current Assets | $748,239,000 |
| Current Liabilities | Derived from financial statements |
| Current Ratio | Calculated as Current Assets / Current Liabilities |
| Quick Ratio | Calculated as (Current Assets - Inventory) / Current Liabilities |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is crucial for daily operations. As of September 30, 2024, accounts receivable net of credit losses stood at $219,100,000, and unbilled work in progress was $138,300,000. This indicates a solid inflow of cash expected from ongoing projects.
Cash Flow Statements Overview
The cash flow statement provides an overview of cash generated and used during the periods. As of September 30, 2024, the cash flows from operating, investing, and financing activities were as follows:
| Cash Flow Category | Six Months Ended September 30, 2024 (in thousands) | Six Months Ended September 30, 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $224,711 | $2,252 |
| Net Cash Used in Investing Activities | ($71,311) | ($32,974) |
| Net Cash Used in Financing Activities | ($200,626) | ($178,833) |
| Net Decrease in Cash | ($28,992) | ($220,510) |
Potential Liquidity Concerns or Strengths
The company has significant liquidity strength with cash and cash equivalents amounting to $691,410,000 as of September 30, 2024. Furthermore, the total cash, cash equivalents, and restricted cash, including investment securities, totaled $749,691,000. The reliance on cash receipts from clients, which typically occur within 60 days of billing, highlights the importance of effective receivables management.
In summary, the company's liquidity and solvency position appears robust, with a solid cash balance and positive cash flow from operating activities, despite the challenges posed by investing and financing activities.
Is Houlihan Lokey, Inc. (HLI) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of Houlihan Lokey, Inc. (HLI), we will examine key financial metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios. Additionally, we will analyze stock price trends, dividend yield, and analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a key indicator of how much investors are willing to pay per dollar of earnings. As of September 30, 2024, the earnings per share (EPS) was $2.79, with the current stock price at approximately $134.08. Thus, the P/E ratio can be calculated as follows:
- P/E Ratio = Stock Price / EPS = $134.08 / $2.79 ≈ 48.0
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. As of September 30, 2024, the total stockholders' equity was $1.96 billion and the number of shares outstanding was 53,403,939. The book value per share can be calculated as:
- Book Value per Share = Total Stockholders' Equity / Shares Outstanding = $1,957,087,000 / 53,403,939 ≈ $36.61
- P/B Ratio = Stock Price / Book Value per Share = $134.08 / $36.61 ≈ 3.67
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we first need to determine the enterprise value (EV). The formula for EV is:
- EV = Market Capitalization + Total Debt - Cash and Cash Equivalents
As of September 30, 2024:
- Market Capitalization = Stock Price Shares Outstanding = $134.08 53,403,939 ≈ $7.16 billion
- Total Debt = $0 (no long-term debt reported)
- Cash and Cash Equivalents = $691,410,000
- EV = $7.16 billion + $0 - $691.41 million ≈ $6.47 billion
- EBITDA for the last twelve months was approximately $226.24 million.
- EV/EBITDA = EV / EBITDA = $6.47 billion / $226.24 million ≈ 28.6
Stock Price Trends
The stock price of Houlihan Lokey has shown significant movement over the past 12 months. The following table summarizes the stock price trends:
| Date | Stock Price |
|---|---|
| September 30, 2023 | $104.36 |
| December 31, 2023 | $120.50 |
| March 31, 2024 | $125.00 |
| June 30, 2024 | $130.00 |
| September 30, 2024 | $134.08 |
Dividend Yield and Payout Ratios
As of September 30, 2024, the company declared dividends totaling $85.96 million. With a current stock price of $134.08, the dividend yield can be calculated as follows:
- Dividend Yield = Annual Dividends per Share / Stock Price = ($85,958,000 / 53,403,939) / $134.08 ≈ 0.12%
The payout ratio, which indicates the proportion of earnings distributed as dividends, can be calculated as:
- Payout Ratio = Dividends / Net Income = $85.96 million / $182.49 million ≈ 47.2%
Analyst Consensus on Stock Valuation
As of the latest reports, analyst consensus on the stock valuation is predominantly positive:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 1 analyst
Key Risks Facing Houlihan Lokey, Inc. (HLI)
Key Risks Facing Houlihan Lokey, Inc.
The financial health of the company is influenced by various internal and external risk factors. Below is an overview of the key risks impacting the company's performance as of 2024.
Industry Competition
Intense competition in the financial advisory sector poses a constant threat. The company competes with numerous established firms, which can lead to pricing pressures and reduced margins. In the six months ended September 30, 2024, the company reported revenues of $1,088,566 thousand, reflecting a growth of 23% compared to the previous period, yet competition remains a significant concern.
Regulatory Changes
Changes in regulations can affect operational strategies and profitability. The company maintains compliance with industry standards, but potential regulatory shifts could introduce unforeseen costs or operational constraints. As of September 30, 2024, the provision for income taxes was reported at $53,473 thousand, a 29% increase from the previous year, illustrating the impact of regulatory environments.
Market Conditions
The performance of the company is highly sensitive to market conditions. Fluctuations in the M&A markets can directly influence revenue from advisory services. The revenues for Financial and Valuation Advisory were reported at $147.1 million for the six months ended September 30, 2024, indicating an 8% increase year-over-year, driven by favorable market conditions.
Operational Risks
Operational risks include internal processes, systems failures, and human resource challenges. The company reported total operating expenses of $862,329 thousand for the six months ending September 30, 2024, with employee compensation and benefits amounting to $690,753 thousand. The rising compensation costs may affect overall profitability if not managed effectively.
Financial Risks
Financial risks encompass credit risks, liquidity risks, and market risks. As of September 30, 2024, the company had cash and cash equivalents totaling $691,410 thousand, indicating a robust liquidity position, but reliance on cash receipts from clients poses a risk if market conditions deteriorate.
Strategic Risks
Strategic risks arise from the company’s decision-making processes. The company’s ability to adapt to market changes and innovate its service offerings is critical. In the six months ended September 30, 2024, the segment profit for Corporate Finance was $210,077 thousand, reflecting a 38% increase. However, failure to maintain this growth trajectory could expose the company to strategic vulnerabilities.
Mitigation Strategies
The company employs various strategies to mitigate these risks, including enhancing operational efficiencies, diversifying service lines, and maintaining a strong compliance framework to adapt to regulatory changes. The company is committed to continuous improvement in its operational processes and risk management practices.
| Risk Factor | Description | Impact | Current Financial Data |
|---|---|---|---|
| Industry Competition | High competition in financial advisory | Pricing pressures, reduced margins | Revenues: $1,088,566 thousand |
| Regulatory Changes | Impact of changing regulations | Increased compliance costs | Provision for Taxes: $53,473 thousand |
| Market Conditions | Fluctuations in M&A markets | Revenue variability | FVA Revenues: $147.1 million |
| Operational Risks | Internal process failures and HR challenges | Increased expenses | Total Op. Expenses: $862,329 thousand |
| Financial Risks | Liquidity and credit risks | Cash flow dependency | Cash & Equivalents: $691,410 thousand |
| Strategic Risks | Failure to adapt and innovate | Growth stagnation | CF Segment Profit: $210,077 thousand |
Future Growth Prospects for Houlihan Lokey, Inc. (HLI)
Future Growth Prospects for Houlihan Lokey, Inc.
Analysis of Key Growth Drivers
The company is poised for growth through several key drivers, including product innovations, market expansions, and strategic acquisitions. For the six months ended September 30, 2024, the company reported revenues of $1,088.6 million, a 23% increase from $882.8 million in the same period of 2023 .
Future Revenue Growth Projections and Earnings Estimates
Analysts project continued revenue growth with earnings estimates suggesting an increase in net income from $182.5 million in the six months ending September 30, 2024, compared to $128.4 million in the same period of 2023, reflecting a growth rate of 42% .
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has engaged in strategic acquisitions, including the acquisition of Triago Advisors, contributing to a goodwill balance of $1,177.8 million as of September 30, 2024 . This move is expected to enhance service offerings and market reach.
Competitive Advantages That Position the Company for Growth
With a total of 1,521,505 in total assets and a strong balance sheet, the company maintains a competitive edge in the financial advisory sector . Furthermore, the company’s ability to generate substantial cash flows, with cash and cash equivalents of $691.4 million as of September 30, 2024, supports its growth initiatives .
| Financial Metrics | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | Year-over-Year Change |
|---|---|---|---|
| Revenues | $1,088.6 million | $882.8 million | +23% |
| Net Income | $182.5 million | $128.4 million | +42% |
| Total Assets | $3,212.8 million | N/A | N/A |
| Cash and Cash Equivalents | $691.4 million | N/A | N/A |
| Goodwill | $1,177.8 million | N/A | N/A |
Houlihan Lokey, Inc. (HLI) DCF Excel Template
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Updated on 16 Nov 2024
Resources:
- Houlihan Lokey, Inc. (HLI) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Houlihan Lokey, Inc. (HLI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Houlihan Lokey, Inc. (HLI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.