Houlihan Lokey reported fewer closed transactions this quarter and recorded financing outflows that included dividends and share repurchases.
On the headline lines, revenue slid from $605.0M to $511.0M, a 15.5% drop; net income fell to $78.0M, down 20.4%, and diluted EPS dropped to $1.15, down 19.0%.
The plumbing makes the quarter feel sharper: operating cash flow moved from a $132.0M outflow to a $336.0M outflow, and cash conversion worsened from -1.35x to -4.31x even as the firm still held about $745.0M of cash.
Management’s filing points squarely at transaction timing and mix as the cause.
"The reduction in transaction volume was driven by timing of transaction closings, while the higher average transaction fee on closed transactions resulted from transaction mix and we believe does not represent a trend."
Houlihan Lokey / 10-Q 2026-07-31
Fewer deals closed this quarter, and management says the higher average fees on closed transactions do not represent a trend.
The company repeats the same description elsewhere in its filings.
"The decrease in revenues was primarily due to a decrease in the number of closed transactions, which was driven by less favorable market conditions for restructuring."
Houlihan Lokey / 10-K 2026-05-22
That language frames the core tension: revenue is lumpy and sensitive to deal closings. On the margin side, Houlihan kept costs moving: gross profit dropped in line with sales but operating margin ticked slightly higher, from 14.9% to 15.3%, suggesting the firm leaned on expense control rather than fee expansion to protect earnings.
Cash activity complicates the picture. Financing activities produced a $217M net outflow this period, the filing says, "primarily attributable to payments made to settle employee tax obligations on share-based awards, dividends paid, and share repurchases." Investing showed about $110M of inflows from sales or maturities of securities, which softened the cash hit but did not offset operating cash burn.
The historical context is straightforward: Houlihan’s annual revenue has been growing over the last two years, with the latest full-year figure at $2.6B and revenue up 9.5% year over year for the fiscal year, but the business has always been deal-driven and volatile quarter to quarter. This quarter shows operating discipline, weaker deal timing, and cash outflows tied to capital returns that reduced liquidity.
Whether this was timing or a deeper slowdown should become clearer in the next 10-Q, which will show whether the number of closed transactions rebounds and whether operating cash flow improves as deal activity normalizes.
Despite modest cost reductions and steady margins, cash flowed out of the business this quarter and financing outflows included shareholder payouts.
All figures from Houlihan Lokey 10-Q filed 2026-07-31 and related 10-K disclosures.