Houlihan Lokey's Q3 Revenue Jumps 14.7%, Net Income Up 19.5%

TL;DR

**HLI is crushing it with double-digit revenue and net income growth, signaling strong demand for their advisory services – definitely a buy.**

AI Summary

Houlihan Lokey, Inc. reported a robust financial performance for the three and six months ended September 30, 2025. For the three-month period, revenues increased by 14.7% to $659.45 million from $574.96 million in the prior year, while net income rose by 19.5% to $111.78 million from $93.55 million. Diluted EPS also saw a significant jump to $1.63 from $1.37. Over the six-month period, revenues climbed 16.2% to $1.26 billion from $1.09 billion, and net income increased by 14.7% to $209.31 million from $182.49 million. Diluted EPS for the six months was $3.04, up from $2.67. Operating expenses increased, notably employee compensation and benefits rising to $405.56 million for the quarter and $777.85 million for the six months, reflecting growth in operations. The company's balance sheet shows total assets of $3.79 billion as of September 30, 2025, a slight decrease from $3.82 billion at March 31, 2025, primarily due to a decrease in cash and cash equivalents from $971.01 million to $923.58 million. Stockholders' equity increased to $2.25 billion from $2.17 billion over the same period. A key change in presentation is the reclassification of revaluation of acquisition contingent consideration to a separate line item on the Consolidated Statements of Comprehensive Income, which amounted to $17.90 million for the six months ended September 30, 2025.

Why It Matters

Houlihan Lokey's strong revenue and net income growth, particularly the 14.7% increase in net income for the six months, signals a healthy demand for its financial advisory services across Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory segments. This performance is crucial for investors as it demonstrates the company's ability to thrive in a competitive financial services landscape, potentially outperforming peers by securing more completion fees. For employees, increased profitability often translates to better compensation and career opportunities, as evidenced by the rise in employee compensation and benefits. Customers benefit from a robust and active advisory firm, while the broader market sees a strong player continuing to expand its influence, potentially leading to further consolidation or innovation in the advisory sector.

Risk Assessment

Risk Level: medium — The company's revenue model relies heavily on 'Completion Fees,' which are contingent on successful transaction outcomes, as stated in Note 1 for Corporate Finance and Financial Restructuring segments. This introduces inherent volatility, as transactions can fail for reasons outside the company's control. Additionally, a significant portion of operating expenses, specifically employee compensation and benefits, increased to $777.85 million for the six months ended September 30, 2025, representing a large fixed cost that could impact profitability if revenue growth slows.

Analyst Insight

Investors should consider HLI's consistent growth in revenue and net income as a positive indicator of its market position and operational efficiency. Given the strong performance, particularly the 19.5% increase in net income for the quarter, investors might consider initiating or increasing their position, especially if they believe the M&A and restructuring markets will remain active. Monitor future filings for sustained growth in completion fees and any shifts in the economic environment that could impact transaction volumes.

Financial Highlights

revenue

$1.26B

total Assets

$3.79B

net Income

$209.31M

eps

$3.04

cash Position

$923.58M

revenue Growth

+16.2%

Revenue Breakdown

Key Numbers

• $659.45M — Quarterly Revenue (Increased 14.7% from $574.96M in Q3 2024)
• $111.78M — Quarterly Net Income (Increased 19.5% from $93.55M in Q3 2024)
• $1.63 — Quarterly Diluted EPS (Increased from $1.37 in Q3 2024)
• $1.26B — Six-Month Revenue (Increased 16.2% from $1.09B in the prior six-month period)
• $209.31M — Six-Month Net Income (Increased 14.7% from $182.49M in the prior six-month period)
• $3.04 — Six-Month Diluted EPS (Increased from $2.67 in the prior six-month period)
• $923.58M — Cash and Cash Equivalents (As of September 30, 2025, down from $971.01M at March 31, 2025)
• $2.25B — Total Stockholders' Equity (As of September 30, 2025, up from $2.17B at March 31, 2025)
• $17.90M — Revaluation of acquisition contingent consideration (For the six months ended September 30, 2025, a new separate line item)
• $777.85M — Six-Month Employee Compensation and Benefits (Increased from $669.47M in the prior six-month period)

Key Players & Entities

• HOULIHAN LOKEY, INC. (company) — Registrant for the 10-Q filing
• SEC (regulator) — U.S. Securities and Exchange Commission
• FASB (regulator) — Financial Accounting Standards Board
• $659,452 (dollar_amount) — Revenues for the three months ended September 30, 2025
• $574,957 (dollar_amount) — Revenues for the three months ended September 30, 2024
• $111,781 (dollar_amount) — Net income for the three months ended September 30, 2025
• $93,549 (dollar_amount) — Net income for the three months ended September 30, 2024
• $1,264,801 (dollar_amount) — Revenues for the six months ended September 30, 2025
• $1,088,566 (dollar_amount) — Revenues for the six months ended September 30, 2024
• $209,314 (dollar_amount) — Net income for the six months ended September 30, 2025

FAQ

Risk Factors

• Reliance on Key Personnel and Client Relationships [high — operational]: The Company's success is heavily dependent on its ability to attract and retain highly skilled professionals and maintain strong client relationships. A significant portion of revenue is derived from fees contingent upon successful transaction closings, making the business susceptible to the loss of key individuals or a decline in client engagement.
• Sensitivity to Transaction Volumes and Market Conditions [high — market]: The Company's revenues are directly tied to the volume and value of M&A, capital markets, and restructuring transactions. Downturns in the overall economy or specific industry sectors can significantly reduce transaction activity, impacting revenue and profitability. For the six months ended September 30, 2025, revenues increased 16.2% to $1.26 billion, indicating a strong market, but this can be volatile.
• Contingent Consideration and Valuation Risks [medium — financial]: The company engages in acquisitions where contingent consideration is part of the purchase price. Fluctuations in the fair value of this consideration, as reflected in the new separate line item 'Revaluation of acquisition contingent consideration' ($17.90 million for the six months ended September 30, 2025), can impact reported earnings. This also highlights the inherent complexities in valuing acquired businesses.
• Integration of Acquisitions [medium — operational]: The company has grown through acquisitions, which carry inherent risks related to integration. Successfully integrating acquired businesses, technologies, and personnel is crucial for realizing the expected synergies and benefits. Failure to do so could disrupt operations and negatively impact financial performance.
• Evolving Regulatory Environment [medium — regulatory]: As a financial services firm, Houlihan Lokey is subject to extensive regulation. Changes in regulations related to financial advisory, M&A, capital markets, and restructuring could increase compliance costs and impact business operations. The company must continually adapt to these evolving requirements.
• Information Technology and Cybersecurity Risks [medium — operational]: The company relies heavily on its information technology systems for operations and client service. Disruptions due to system failures, cyberattacks, or data breaches could lead to significant financial losses, reputational damage, and regulatory penalties. The company reported $34.516 million in IT and communications expenses for the six months ended September 30, 2025.
• Credit Risk [low — financial]: While primarily a fee-based business, the company does have accounts receivable and unbilled work in progress. The allowance for credit losses was $14.645 million for accounts receivable and $9.488 million for unbilled work in progress as of September 30, 2025, indicating some exposure to client creditworthiness.
• Litigation and Legal Proceedings [low — legal]: The company may be subject to various legal proceedings and claims arising in the ordinary course of its business. Adverse outcomes in litigation could result in significant financial liabilities and reputational damage. Specific details are not provided in this section of the 10-Q.

Industry Context

Houlihan Lokey operates in the financial advisory sector, a highly competitive landscape dominated by large investment banks and specialized boutique firms. The industry is characterized by its cyclical nature, heavily influenced by macroeconomic conditions and the volume of M&A, capital markets, and restructuring activities. Recent trends show a robust deal environment, as evidenced by HLI's strong revenue growth, but this is subject to shifts in interest rates, regulatory policies, and overall economic sentiment.

Regulatory Implications

As a financial services firm, Houlihan Lokey is subject to stringent regulatory oversight from various bodies. Changes in regulations concerning mergers and acquisitions, capital markets, and financial advisory services could impact compliance costs and operational procedures. The company's disclosure of a new line item for 'Revaluation of acquisition contingent consideration' suggests an adaptation to evolving accounting standards or reporting requirements.

What Investors Should Do

1. Monitor revenue growth drivers: Analyze the performance of each segment (CF, FR, FVA) to understand what is fueling the 16.2% year-to-date revenue increase and assess its sustainability.
2. Evaluate expense management: While revenues are up, employee compensation and benefits increased significantly. Assess the efficiency of this spending relative to revenue generation and operating income.
3. Assess balance sheet strength: Review the decrease in cash and cash equivalents ($923.58M) and the increase in goodwill ($1.29B) to understand the company's liquidity and the impact of past acquisitions.
4. Understand contingent consideration impact: Track the 'Revaluation of acquisition contingent consideration' line item for its potential volatility on earnings and its implications for acquisition strategy.
5. Analyze market risk exposure: Given the sensitivity to transaction volumes, investors should monitor broader economic indicators and M&A market trends.

Key Dates

• 2025-09-30: End of Second Fiscal Quarter 2025 — Reporting period for the 10-Q, showing strong revenue and net income growth for both the quarter and year-to-date.
• 2025-03-31: End of Fiscal Year 2025 — Prior balance sheet date for comparison, showing a slight decrease in total assets and cash but an increase in stockholders' equity.
• 2025-06-30: End of First Fiscal Quarter 2025 — The beginning of the period where revaluation of acquisition contingent consideration is presented on a separate line item, impacting comparability with prior periods' presentation.

Glossary

Completion Fees

Fees earned by Houlihan Lokey upon the successful closing of a transaction or engagement. (A primary revenue driver for the Corporate Finance and Financial Restructuring segments, making revenue highly dependent on successful deal closures.)

Retainer Fees

Fees paid at the time an engagement letter is signed. (Represents a baseline revenue stream, particularly when transactions do not close, providing some stability.)

Progress Fees

Fees paid during the course of an engagement. (Contributes to revenue during the engagement period, especially if a transaction is ongoing or does not close.)

Acquisition contingent consideration

Additional payment made to the seller of a business if certain future performance targets are met. (Its revaluation impacts the company's income statement, as seen with the new separate line item, and reflects the inherent uncertainty in acquisition valuations.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. (A significant asset on the balance sheet ($1.29 billion as of Sep 30, 2025), indicating past acquisitions and potential for impairment charges if future performance falters.)

Operating lease right-of-use assets

An asset representing the right to use an underlying leased asset for the lease term. (Represents a significant portion of the company's assets ($352.6 million as of Sep 30, 2025), reflecting the company's office footprint.)

Accumulated other comprehensive loss

A component of equity that includes unrealized gains and losses on certain investments and foreign currency translation adjustments. (Shows a loss of $29.0 million as of Sep 30, 2025, primarily due to foreign currency fluctuations, impacting total equity.)

Diluted EPS

Earnings per share calculated by dividing net income by the total number of diluted shares outstanding. (A key profitability metric for investors, showing a strong increase to $1.63 for the quarter and $3.04 for the six months.)

Year-Over-Year Comparison

Compared to the prior year's six-month period, Houlihan Lokey has demonstrated significant top-line growth, with revenues increasing by 16.2% to $1.26 billion. Net income also saw a healthy increase of 14.7% to $209.31 million, and diluted EPS rose from $2.67 to $3.04. Operating expenses, particularly employee compensation and benefits, have risen substantially, reflecting investment in growth. The balance sheet shows a slight decrease in total assets, primarily due to lower cash reserves, but an increase in total stockholders' equity. A notable change in presentation is the separate reporting of 'Revaluation of acquisition contingent consideration', which was previously included in other income/expense.

Key Financial Figures

• $0.001 — stered Class A Common Stock, par value $0.001 HLI New York Stock Exchange Indicate

Filing Documents

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FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements 1 Consolidated Balance Sheets 1 Consolidated Statements of Comprehensive Income 2 Consolidated Statements of Changes in Stockholders' Equity 3 Consolidated Statements of Cash Flows 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 27 Item 4.

Controls and Procedures

Controls and Procedures 28

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 28 Item 1A.

Risk Factors

Risk Factors 28 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28 Item 3. Defaults Upon Senior Securities 29 Item 4. Mine Safety Disclosures 29 Item 5. Other Information 29 Item 6. Exhibits 30

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements HOULIHAN LOKEY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data and par value) September 30, 2025 March 31, 2025 Assets: Cash and cash equivalents $ 923,576 $ 971,007 Investment securities 184,642 195,624 Accounts receivable, net of allowance for credit losses of $ 14,645 and $ 13,843 , respectively 251,156 257,326 Unbilled work in progress, net of allowance for credit losses of $ 9,488 and $ 6,764 , respectively 191,248 157,760 Property and equipment, net 145,193 149,350 Operating lease right-of-use assets 352,622 362,669 Goodwill 1,292,121 1,284,589 Other intangible assets, net 200,881 212,670 Other assets 251,926 228,713 Total assets $ 3,793,365 $ 3,819,708 Liabilities and stockholders' equity Liabilities: Accrued salaries and bonuses $ 822,763 $ 936,619 Accounts payable and accrued expenses 108,861 137,228 Operating lease liabilities 432,899 438,185 Other liabilities 181,950 132,799 Total liabilities 1,546,473 1,644,831 Commitments and contingencies (Note 16) Stockholders' equity: Class A common stock, $ 0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 54,573,369 and 53,822,189 shares, respectively 55 54 Class B common stock, $ 0.001 par value. Authorized 1,000,000,000 shares; issued and outstanding 15,564,859 and 16,021,106 shares, respectively 16 16 Additional paid-in capital 759,693 843,350 Retained earnings 1,516,154 1,394,738 Accumulated other comprehensive loss ( 29,026 ) ( 63,281 ) Total stockholders' equity 2,246,892 2,174,877 Total liabilities and stockholders' equity $ 3,793,365 $ 3,819,708 See accompanying Notes to Consolidated Financial Statements 1 HOULIHAN LOKEY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended September 30, Six Months Ended September 30, (In thousands, except share and per share data) 2025 2024 2025 2024 Revenues $ 659,452 $ 5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In thousands, except share data or as otherwise stated) Note 1 — Background Houlihan Lokey, Inc. is a Delaware corporation. Unless the context otherwise requires, as used in this Quarterly Report on Form 10-Q, the terms "Houlihan Lokey", "HL, Inc.", "the Company", "we", "our", and "us", refer to Houlihan Lokey, Inc., and, in each case, unless otherwise stated, all of its subsidiaries. The Company offers financial services and financial advice to a broad clientele through more than thirty offices in the United States of America, South America, Europe, the Middle East, and the Asia-Pacific region. The Company earns professional fees by providing focused services across the following three business segments: Corporate Finance ("CF") provides general financial advisory services and advice on mergers and acquisitions and capital markets offerings. We advise public and private institutions, including financial sponsors, on a wide variety of matters, including buy-side and sell-side M&A transactions, debt and equity financings in both the private and public markets, and other corporate finance transactions. The majority of our CF revenues consists of fees paid upon the successful completion of the transaction or engagement ("Completion Fees"). A CF transaction can fail to be completed for many reasons that are outside of our control. In these instances, our fees are generally limited to the fees paid at the time an engagement letter is signed ("Retainer Fees") and, in some cases, fees paid during the course of the engagement ("Progress Fees"). Financial Restructuring ("FR") provides advice to debtors, creditors and other parties-in-interest in connection with recapitalization/deleveraging transactions implemented through bankruptcy proceedings and out-of-court exchanges, consent solicitations or other mechanisms, as well as in distressed mergers and acquisitions and capital markets activities. As part of th

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (In thousands, except share data or as otherwise stated) In connection with certain acquisitions, contingent consideration is issued as part of the purchase price. Historically, the associated quarterly fair-value remeasurements of this consideration were recorded in Other (income) expense, net. Beginning with the Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, these remeasurements are presented on the face of the Consolidated Statements of Comprehensive Income under the line item Revaluation of acquisition contingent consideration. Prior period amounts have been recast to conform with this presentation. These reclassifications did not affect net income, stockholders' equity, or cash flows as previously reported. Additionally, certain other prior year amounts have been reclassified to conform to the current period's presentation. These reclassifications had no impact on net income, shareholders' equity or net cash flows as previously reported. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries where it has a controlling financial interest. All intercompany balances and transactions have been eliminated. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements. Management estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period, and disclosure of contingent assets and liabilities at the reporting date. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (In thousands, except share data or as otherwise stated) The carrying value of cash and cash equivalents, restricted cash, accounts receivable, unbilled work in progress, accounts payable and accrued expenses, and deferred income approximates fair value due to the short maturity of these instruments. The carrying value of loans to employees included in other assets approximates fair value due to the variable interest rate borne by those instruments. Cash and Cash Equivalents, and Restricted Cash Cash and cash equivalents include cash held at banks and highly liquid investments with original maturities of three months or less. The following table provides a reconciliation of cash and cash equivalents and restricted cash included within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows. September 30, 2025 March 31, 2025 Cash and cash equivalents $ 923,576 $ 971,007 Restricted cash (1) 4,822 4,572 Total cash, cash equivalents, and restricted cash $ 928,398 $ 975,579 (1) Restricted cash included cash deposits in support of two letters of credit for our Frankfurt office, cash held in escrow accounts, and collateral to support rent guarantees. Restricted cash is included within Other assets in the Consolidated Balance Sheets. Recent Accounting Pronouncements The Company has evaluated all recently issued accounting pronouncements and, except as discussed below, has determined that there are no such standards that are not yet effective that, if and when they become effective, would have a material impact on the Company's consolidated financial statements and related disclosures. In September 2025, the Financial Accounting Standards Board ("FASB") issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. T

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (In thousands, except share data or as otherwise stated) The change in the Company's contract assets and liabilities during the period primarily reflects the timing difference between the Company's performance and the customer's payment. The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers: April 1, 2025 Increase/(Decrease) September 30, 2025 Receivables (1) $ 247,622 $ ( 5,739 ) $ 241,883 Unbilled work in progress, net of allowance for credit losses 157,760 33,488 191,248 Contract Assets (1) 9,704 ( 431 ) 9,273 Contract Liabilities (2) 48,215 ( 6,047 ) 42,168 (1) Included within Accounts receivable, net of allowance for credit losses in the Consolidated Balance Sheets. (2) Represents deferred income which is included within Other liabilities in the Consolidated Balance Sheets. During the six months ended September 30, 2025, $ 28,762 of revenues were recognized that were included in the deferred income balance at the beginning of the period. As a practical expedient, the Company does not disclose information about remaining performance obligations pertaining to (i) contracts that have an original expected duration of one year or less, and/or (ii) contracts where the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that is or forms part of a single performance obligation. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material as of September 30, 2025. Note 4 — Related Party Transactions Other assets in the accompanying Consolidated Balance Sheets includes loans receivable from certain employees of $ 34,695 and $ 44,290 as of September 30, 2025 and March 31, 2025, respectively. Note 5 — Fair Value Measurements The followi

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