Breaking Down Houlihan Lokey, Inc. (HLI) Financial Health: Key Insights for Investors

You're looking at Houlihan Lokey, Inc. (HLI) and wondering if their record-breaking run is sustainable, and honestly, the numbers from their fiscal year 2025 report are compelling, but the market volatility is a real factor. The firm posted a record annual revenue of $2.39 billion, a jump of 25% from the prior year, with diluted earnings per share (EPS) climbing to a solid $5.82. That kind of performance, especially the 38% revenue surge in their Corporate Finance division, tells you their diversified model-from mergers and acquisitions (M&A) to Financial Restructuring-is defintely working in a tricky environment. We need to dig into what drove that massive Corporate Finance growth and what the modest 4% increase in Financial Restructuring revenue signals about the near-term distressed cycle, but the Street is optimistic, with a consensus price target hovering around $212.43. This isn't just a good year; it's a structural statement about their market position.

Revenue Analysis

If you're looking at Houlihan Lokey, Inc. (HLI), the direct takeaway from the fiscal year (FY) 2025 numbers is clear: the firm hit a new high-water mark, driven by a sharp rebound in deal-making. Total revenue for FY 2025, which ended March 31, 2025, climbed to a record $2.39 billion, representing a significant 25% increase from the prior year's $1.91 billion. That kind of growth in a single year is definetly a strong signal of market positioning.

This impressive top-line growth is a direct result of the firm's diversified business model, which spans three primary revenue streams. Honestly, this diversification is what makes their model so resilient; when one segment slows, another typically picks up the slack. For FY 2025, the breakdown shows a strong reliance on the Corporate Finance segment, but the other two groups still provide a crucial counter-cyclical balance.

Here is the quick math on how each segment contributed to that $2.39 billion in revenue, and how much they grew year-over-year:

The most significant change in the revenue mix is the massive lift in the Corporate Finance segment, which handles mergers and acquisitions (M&A) and capital solutions. Its revenue soared by 38% in FY 2025, pushing its contribution up to nearly two-thirds of the firm's total revenue. This tells you that M&A activity is back, and Houlihan Lokey, Inc. is capturing that market momentum effectively.

On the flip side, the Financial Restructuring (FR) segment, their traditional powerhouse for bankruptcy and debt advisory, saw a more modest 4% increase. This is a key insight:

• Strong CF growth signals a 'risk-on' environment for M&A.
• Muted FR growth suggests fewer large corporate defaults, but the segment remains resilient.
• The FR business is built on helping clients navigate distress, so its slower growth is actually a sign of improving economic health for many companies.

The Financial and Valuation Advisory (FVA) segment, which deals with fairness opinions and complex valuations, grew by a solid 11%. This growth is often tied to the overall transaction environment and regulatory needs, so its double-digit increase confirms that the underlying market for complex financial services is healthy. To understand the foundational principles driving this performance, you should review the Mission Statement, Vision, & Core Values of Houlihan Lokey, Inc. (HLI).

What this estimate hides, of course, is the cyclical nature of investment banking. While 38% growth in Corporate Finance is phenomenal, you need to watch interest rate trends. If rates spike again, M&A volume could cool quickly, and the FR segment would need to pick up the slack, just as it did in previous downturns. Your next step should be to model a sensitivity analysis where CF revenue drops by 20% and FR revenue rises by 15% to see how the bottom line holds up.

Profitability Metrics

You're looking at Houlihan Lokey, Inc. (HLI) because you want to know if their impressive advisory revenue growth actually translates into strong, sustainable profit. The direct takeaway is that HLI is highly profitable and operationally efficient, posting a GAAP net profit margin of 16.7% for the fiscal year ended March 31, 2025, which is a solid increase from the prior year.

For the 2025 fiscal year, Houlihan Lokey, Inc. reported record revenues of $2.39 billion. This strong top-line performance drove significant profitability across the board. Here's the quick math on the core margins:

• Gross Profit Margin: Approximately 36.4%.
• Operating Profit Margin: Approximately 21.2%.
• Net Profit Margin: 16.7% (based on $400 million in net income against $2.39 billion in revenue).

This is a firm that knows how to turn advisory fees into bottom-line earnings. That's a good sign for shareholders.

Operational Efficiency and Cost Management

In a people-driven business like investment banking, operational efficiency is mostly about managing compensation. Employee compensation and benefits are the firm's primary cost of service, totaling $1.52 billion in fiscal year 2025. This resulted in a GAAP compensation ratio of 63.8% of revenue.

The gross margin of 36.4% (or a reported 38.50% depending on precise cost of revenue classification) is what's left to cover all other operating expenses (non-compensation expenses) and, eventually, taxes. Non-compensation expenses for the year were $364 million. This includes everything from rent to technology, and it leaves a healthy operating profit of $506 million before other income/expenses and taxes. The slight increase in the GAAP compensation ratio to 63.8% from 63.4% in the prior year suggests a minor rise in the cost of talent, but it's a necessary investment to capture rising market activity.

Profitability Trends and Industry Comparison

The trend in HLI's profitability is defintely positive. Net income jumped from $280 million in fiscal year 2024 to $400 million in 2025, a massive increase. This pushed the net profit margin up from 15.3% to 16.7%. This is a clear signal that the rebound in M&A and capital markets activity is hitting their core Corporate Finance division, whose revenues increased by 38%.

When you compare HLI to the broader financial industry, their 16.7% net margin is competitive, especially for a boutique investment bank. Larger, diversified banks (often called Money Center Banks) can boast higher net profit margins, sometimes reaching an average of 30.89%, but their business model includes lending and trading, which HLI largely avoids. For a pure-play advisory firm, HLI's margin is robust, and the growth trajectory is what matters most.

For a deeper look into who is driving this performance, you should check out Exploring Houlihan Lokey, Inc. (HLI) Investor Profile: Who's Buying and Why?

The key risk here is that a high compensation ratio means profitability is highly sensitive to revenue dips; if the advisory market slows, that 63.8% compensation cost doesn't drop as fast as revenue, squeezing margins hard. Your action item is to track the adjusted compensation ratio (which was stable at 61.5%) to gauge management's control over variable costs.

Debt vs. Equity Structure

If you're looking at Houlihan Lokey, Inc. (HLI), the first thing to understand is that their balance sheet is built on a philosophy of minimal leverage. The company's financing model is heavily weighted toward equity, a conservative and low-risk approach that sets it apart from many larger, balance-sheet-driven financial institutions.

For the fiscal year 2025, Houlihan Lokey, Inc.'s debt profile is remarkably clean. The company reported $0 million in long-term debt for the quarter ending September 30, 2025, and their net current debt for the twelve months ending June 30, 2025, was also $0 million. This means the firm is essentially operating with a near-zero net debt position, which is defintely a strategic advantage in a volatile market.

This capital structure is a clear signal of financial strength, especially for an advisory-focused investment bank. They don't rely on debt to fund their operations or growth, so they avoid the interest expense and refinancing risk that plague heavily leveraged competitors.

Here's the quick math on their leverage compared to the industry:

• Houlihan Lokey, Inc. (HLI) Debt-to-Equity Ratio (Nov 2025): 0.19 [cite: 8 in first search].
• Capital Markets Industry Average (Nov 2025): 0.53.

The Debt-to-Equity ratio (D/E) measures how much debt a company uses to finance its assets relative to the value of shareholders' equity. HLI's ratio of 0.19 for the period ending November 2025 is less than half the Capital Markets industry average of 0.53 [cite: 6, 8 in first search]. A ratio this low confirms that Houlihan Lokey, Inc. is overwhelmingly funded by equity, not borrowed money.

Because the firm focuses on advisory services (M&A, restructuring, valuation) rather than proprietary trading or lending, they don't need the massive liquidity buffer that high-leverage banks require. The lack of debt issuance or refinancing activity in 2025 for the company itself simply reflects this strategy. They don't need to tap the bond market when their operational cash flow is so strong.

Instead of debt, the company prioritizes returning capital to shareholders, which is the other side of the equity coin. For instance, they announced a 5% increase in the quarterly dividend to $0.60 per share for the fourth quarter of fiscal 2025. This move shows management's confidence in sustained earnings and their commitment to rewarding equity holders directly.

This highly conservative capital structure means you, as an investor, face lower financial risk. The company has a significant cushion to absorb market downturns without triggering debt covenants (promises made to lenders). The trade-off is that they forgo the potential for outsized returns that debt-fueled growth can provide, but for a firm like Houlihan Lokey, Inc., stability is the core value proposition. You can read more about the firm's overall financial picture in Breaking Down Houlihan Lokey, Inc. (HLI) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You want to know if Houlihan Lokey, Inc. (HLI) can cover its near-term obligations, and the quick answer is yes, with a solid margin. As of the fiscal year ended March 31, 2025, the firm's liquidity position is strong, primarily driven by robust operating cash flow and a healthy cash balance. The firm's balance sheet is defintely built for stability in a volatile market.

The core of this assessment lies in two key ratios and the firm's cash generation. Houlihan Lokey, Inc. maintains a Current Ratio of 1.14, meaning it holds $1.14 in current assets for every $1.00 of current liabilities. For an investment bank, which generally carries little to no inventory, this is a very comfortable ratio. Here's the quick math on their immediate liquidity:

• Current Assets (FY 2025): $1.23 Billion
• Current Liabilities (FY 2025): $1.08 Billion
• Current Ratio: 1.14

Quick Liquidity and Working Capital

The Quick Ratio (or Acid-Test Ratio) removes less-liquid assets like inventory from the current assets calculation, giving you a truer picture of immediate cash strength. Since Houlihan Lokey, Inc. is a service-based firm, its current assets are already highly liquid, mostly comprising cash, investment securities, and accounts receivable (fees owed). Their cash and equivalents alone stood at $975.58 Million at the end of fiscal 2025.

What this estimate hides is the high quality of their accounts receivable, which, for a financial advisory firm, typically converts to cash within 60 days. The firm's Working Capital (Current Assets minus Current Liabilities) is a positive $150 Million ($1.23 Billion - $1.08 Billion). This surplus provides a significant buffer for unexpected expenses or market downturns, well above the zero-debt-to-equity ratio that many firms strive for.

Cash Flow Statement Overview

The cash flow statement for the fiscal year ended March 31, 2025, shows a classic picture of a mature, profitable service business. The firm generates substantial cash from its operations, which it then uses to invest in the business and return capital to shareholders. This is a very healthy cycle.

The net cash provided by operations (CFO) at $848.61 Million is the clear strength. This massive cash generation easily covers the $265.06 Million used in investing activities, which typically includes strategic acquisitions or technology upgrades. Also, the $329.07 Million in negative financing cash flow reflects a commitment to shareholders through dividends and buybacks, which is a sign of management confidence and a lack of immediate debt concerns.

Overall, Houlihan Lokey, Inc. has no immediate liquidity concerns. Its high cash balance, positive working capital, and massive operating cash flow provide a strong foundation, especially as you look deeper into the firm's overall financial health, which you can read about in Breaking Down Houlihan Lokey, Inc. (HLI) Financial Health: Key Insights for Investors.

Valuation Analysis

Is Houlihan Lokey, Inc. (HLI) overvalued or undervalued? The short answer is that the market is pricing in significant future growth, suggesting a premium, but analysts still see upside. The firm's valuation multiples are elevated compared to historical averages, but its strong fiscal year 2025 performance-with revenues hitting a record $2.39 billion and diluted earnings per share (EPS) at $5.82-justifies the higher price tag for many investors.

You need to look past the sticker price and focus on the ratios.

Key Valuation Multiples: Premium Pricing

Houlihan Lokey, Inc. (HLI) trades at a clear premium, reflecting its position as a dominant player in the restructuring and advisory space. The trailing Price-to-Earnings (P/E) ratio is around 28.81, which is higher than the industry average. More telling, the forward P/E ratio, based on expected earnings, sits at approximately 21.41, suggesting analysts anticipate strong earnings growth to compress the multiple over the next year.

The Price-to-Book (P/B) ratio, which measures the stock price against the company's book value of equity, was 4.9x as of March 2025. This is a high multiple for a financial services firm, indicating the market values Houlihan Lokey, Inc.'s intangible assets-like its advisory talent and brand-far above its tangible net assets. The Enterprise Value-to-EBITDA (EV/EBITDA) ratio, a useful metric for capital-light advisory firms, is around 16.25 (as of November 2025).

• P/E (Trailing): 28.81
• P/E (Forward): 21.41
• P/B (Fiscal Year 2025): 4.9x
• EV/EBITDA: 16.25

Here's the quick math: with the stock trading around $173.61 (as of November 21, 2025), a P/E of 28.81 means the market is paying nearly 29 times the last twelve months' earnings for a share of the business.

Stock Performance and Dividend Stability

The stock price trend over the last 12 months has been mixed, but resilient. The 52-week range shows a low of $137.99 and a high of $211.78, indicating volatility but also a clear appetite for the stock at its peaks. Overall, the stock price has seen a modest decline of about -2.28% over the last year, suggesting investors are reassessing expectations after a long period of growth, but the five-year return is still up over 179%.

For income-focused investors, Houlihan Lokey, Inc. offers a stable dividend. The annual dividend is $2.40 per share, translating to a dividend yield of approximately 1.4%. The payout ratio is a healthy 38.71%, which is defintely sustainable and leaves plenty of room for reinvestment in the business or future dividend increases.

Analyst Consensus: Upside Potential

Wall Street's collective view is cautiously optimistic. The consensus rating from a group of analysts is a Moderate Buy. The average 12-month price target is set at $212.43, which suggests an implied upside from the current price.

What this estimate hides is the range of opinions; some analysts have a 'Hold' rating, while others maintain a 'Strong Buy.' This split reflects the tension between the firm's high valuation multiples and its strong operational performance, especially in its counter-cyclical Financial Restructuring segment.

If you want to dive deeper into the drivers behind this valuation, you can read the full breakdown here: Breaking Down Houlihan Lokey, Inc. (HLI) Financial Health: Key Insights for Investors.

Next step: Review the peer group's P/E and P/B ratios to confirm if Houlihan Lokey, Inc.'s premium is warranted by its superior return on equity.

Risk Factors

You're looking at Houlihan Lokey, Inc. (HLI) after a record fiscal year 2025, but a seasoned analyst knows you must map the risks, not just celebrate the wins. The biggest near-term risk is the high cost structure paired with market volatility; if deal flow slows, margins get squeezed fast.

The firm's success is tightly linked to the overall health of the mergers and acquisitions (M&A) market and capital solutions activity. External risks like interest rate volatility and broader economic uncertainty can quickly mute deal flow, which directly impacts the core Corporate Finance (CF) segment, which made up 64% of the firm's total revenue of $2.39 billion in fiscal year 2025. This is a cyclical business, and a market downturn would hit the top line hard.

Here's the quick math on the operational risk: compensation and non-compensation expenses stand at 61.5% and 15.6% of revenue, respectively, as of the most recent data. That's a total cost-to-revenue ratio of 77.1%. That high fixed cost base, driven by senior talent hiring, means any revenue dip will disproportionately crush the adjusted pre-tax margin, which was 25.9% for fiscal year 2025. You can't cut senior banker pay overnight.

• External Risk: Muted deal activity outside the U.S.
• Financial Risk: High cost structure from talent acquisition.
• Operational Risk: Integrating acquired firms and personnel.

Another major financial risk is the sheer size of the firm's intangible assets. As of March 31, 2025, goodwill and other intangible assets totaled $1.50 billion on the balance sheet. If a major acquisition underperforms or market conditions deteriorate significantly, this asset is subject to impairment, which would lead to a substantial non-cash charge against earnings. It's a defintely a watch item.

Finally, there's the strategic risk of valuation. Houlihan Lokey, Inc. trades at a premium, with a price-to-earnings (P/E) ratio of 30.8x in November 2025, significantly higher than the peer average of 17.1x. This premium prices in robust, sustained earnings growth. If the firm fails to deliver on its growth targets-say, if a restructuring cycle is shorter than expected or M&A stalls-the stock is vulnerable to a sharp correction as the multiple contracts.

The firm's primary mitigation strategy is its diversified, full-cycle business model. The Financial Restructuring segment (23% of FY2025 revenue) acts as a counter-cyclical hedge; when M&A slows, restructuring activity typically picks up. Also, the Financial and Valuation Advisory (FVA) segment provides stability, with over 50% of its revenue being recurring in nature, plus the firm has low client concentration, serving over 1,200 unique clients. This diversification is the core defensive mechanism against market volatility.

To understand the full picture, you should also look at the firm's core business drivers in our full post: Breaking Down Houlihan Lokey, Inc. (HLI) Financial Health: Key Insights for Investors. Your next step should be to model a scenario where Corporate Finance revenue drops by 20% and see how the 25.9% adjusted pre-tax margin holds up.

Growth Opportunities

You're looking for a clear map of where Houlihan Lokey, Inc. (HLI) goes from here, and the answer is simple: their growth is less about market tailwinds and more about deliberate, structural expansion. The firm's strategy is a classic three-pronged attack-talent, geographic reach, and product innovation-which drove their fiscal year 2025 revenue to a record $2.39 billion and an adjusted diluted earnings per share (EPS) of $6.29. That kind of performance in a volatile market isn't luck; it's a model.

Strategic Pillars: Talent, Innovation, and Expansion

Houlihan Lokey's future revenue trajectory, which analysts forecast to climb by 11.2% per year, is fundamentally tied to its human capital strategy. They've consistently grown their Managing Director (MD) headcount, and in fiscal year 2025, revenue per MD remained strong at $7.0 million. This focus on senior talent acquisition, especially in high-growth areas, is the core engine.

The firm is actively deepening its sector expertise and global footprint. Recent senior hires in November 2025, for instance, are a clear push to grow their European business and deepen client relationships there. Plus, strategic acquisitions, like the October 2024 addition of PRYTANIA SOLUTIONS SERVICES LIMITED, which specializes in structured credit, show a commitment to adding niche, high-value services.

Product innovation is also a key driver. The launch of their proprietary Private Credit DataBank platform is a smart move, boosting transparency in a rapidly evolving private credit market. It's a clear example of using digital capabilities as a long-term differentiator, not just a passing trend.

• Hire senior talent for organic growth.
• Expand geographically, especially in Europe.
• Develop niche, high-value services.

Near-Term Projections and Competitive Edge

The near-term outlook is solid, evidenced by the strong third quarter 2025 revenue of $659.45 million and EPS of $1.84. While the investment banking world is cyclical, HLI has a unique competitive advantage that acts as a powerful hedge: their market-leading position in Financial Restructuring. Honestly, that segment is their secret weapon.

They are consistently ranked as the No. 1 Global Restructuring Advisor. This counter-cyclical strength means that when the mergers and acquisitions (M&A) market slows down-as it often does when interest rates are high-their restructuring business picks up the slack. This built-in diversification stabilizes fee income, which is defintely a key factor for investors seeking less volatility in the boutique investment banking space. The following table shows how analyst consensus views the forward revenue and earnings growth.

What this estimate hides is the potential for a massive M&A rebound, which would accelerate the Corporate Finance segment's growth beyond these projections. Their revenue is also highly diversified; no single industry accounts for more than 23% of their fees, meaning a downturn in one sector won't sink the ship. If you want a deeper dive into the firm's financial stability, check out our full report: Breaking Down Houlihan Lokey, Inc. (HLI) Financial Health: Key Insights for Investors.

Next step: Compare HLI's compensation ratio of 61.5% against its closest independent peers to assess operational efficiency and margin sustainability.