Houlihan Lokey FY revenue hits record $2.6bn; Q4 EPS misses

Houlihan Lokey reported record full-year revenue of $2.6bn for fiscal 2026, up 10 per cent on the prior year, while fourth-quarter earnings per share fell short of analyst estimates as geopolitical uncertainty extended M&A deal timelines and a slowdown in software-sector advisory weighed on the period.

The investment bank, which ranks first globally by M&A deal count, posted adjusted diluted EPS of $1.63 for the three months to March, missing the $1.79 consensus estimate compiled by Investing.com. Quarterly revenue of $636m came in below the roughly $686m analysts had forecast, marking the first top-and-bottom-line miss in eight quarters. GAAP diluted EPS for the quarter was $1.47.

The shares edged 1.15 per cent higher in after-hours trading to $151.89. Investors appeared to look through the quarterly shortfall toward a deal pipeline that chief executive Scott Adelson described as “the best shape in its history.”

For the full year, adjusted EPS rose 20 per cent to $7.56, while adjusted pre-tax income reached $678m at a margin of 25.9 per cent. The board raised the quarterly dividend by 17 per cent to $0.70 per share, payable in June. The firm repurchased roughly 300,000 shares during the quarter and held about $1.4bn in cash and investments at period-end, though much of that balance was earmarked for bonus payments.

What drove the quarter

Corporate finance, the firm’s largest division, delivered $434m in quarterly revenue, up 5 per cent year on year, with 171 deals closed compared with 147 in the same period a year earlier. The average transaction fee declined, consistent with a mix shift toward smaller mid-market mandates. Capital solutions, the financing and recapitalisation advisory unit, now accounts for more than 20 per cent of corporate finance revenue, which chief financial officer Lindsey Alley said reflected “exceptional momentum over the last two years.”

Financial restructuring generated $110m for the quarter and $529m for the full year, down 3 per cent. Just 30 deals closed in the period, a 21 per cent year-on-year decline, after two large transactions slipped past the quarter-end cut-off. Alley told analysts on the post-earnings call that the pipeline remains robust, with Adelson citing “multiple tailwinds, widening credit spreads, dislocation in private credit and the software sector and energy volatility” as drivers of elevated restructuring activity in fiscal 2027.

Financial and valuation advisory brought in $91m, up 3 per cent, across 1,248 fee events. Pricing pressure in the division is a known headwind. Alley said the firm has “experienced pricing pressure on our FDA products for a decade” but argued that growth in the total addressable market more than offsets the erosion.

The M&A machine

Houlihan Lokey’s market position provides a buffer against a choppy quarter. The firm ranked first globally by M&A deal count in calendar 2025 with 458 transactions, ahead of Goldman Sachs at 441 and Rothschild & Co at 400. It was the most active adviser to private equity globally, with 286 sponsor-backed deals against 232 for Rothschild and 196 for Jefferies. In restructuring, the firm led with 83 distressed and bankruptcy mandates versus 55 for PJT Partners and 50 for Lazard.

The firm now has 354 managing directors across 33 offices, having hired or acquired 33 MDs in fiscal 2026 and promoted a further 25 at the start of fiscal 2027. Two bolt-on acquisitions closed during the year: Audere Partners, a French-focused investment bank, and Mellum Capital, a real estate capital adviser. Adelson told analysts that the acquisition pipeline remains active, with “cultural fit” the primary screen, and that the firm has “a record number of corporate acquisition opportunities in various stages of potential completion.”

Revenue per managing director stood at $7.6m for the year. No single transaction or professional represents more than 2 per cent of revenues, a diversification that limits exposure when individual sectors slow. The technology vertical, which accounted for 128 deals in 2025, is the one area of concern heading into the new fiscal year.

What’s next

Management guided to fiscal 2027 revenue of roughly $2.99bn and EPS of $8.24, implying top-line growth of about 15 per cent. Caveats came with the numbers. Alley flagged that “M&A deal time lines have extended due to the geopolitical uncertainty created around the war in the Middle East” and that the drag “will persist as long as geopolitical uncertainty remains.”

The software sector faces particular headwinds. “Software is clearly a sector that is going to be impacted,” Alley said, adding that the firm has “assumed that software will be affected in fiscal year '27.” She cautioned against indiscriminate sector aversion, noting a risk that high-quality assets may be temporarily undervalued because of broader market sentiment.

The first quarter of fiscal 2027 is expected to show some moderation from the timeline shifts, though Alley noted that the vesting of restricted stock may reduce the adjusted effective tax rate in the period to roughly half the fourth-quarter level of 23.7 per cent.

The restructuring franchise provides a partial hedge. Widening credit spreads and energy-sector volatility are pushing more companies toward liability management mandates, the kind of work that sustained the firm through the 2020 downturn. With over half of private-equity portfolio company holding periods now exceeding five years, the pressure to return capital to limited partners is intensifying. “The last few weeks have seen the most active go-to-market levels for deals in several years,” Adelson said.

The stock remains 28 per cent below its 52-week high of $211.78, changing hands at about 17.5 times forward earnings. For a firm whose chief executive says the business is in the best shape in its history, the quarterly miss was modest and the medium-term narrative of a widening M&A funnel, a restructuring upswing, and a capital-light model returning cash to shareholders remains intact.