Introduction: Record Earnings and Strategic Growth Catalysts#
Houlihan Lokey, Inc. (HLI recently delivered a remarkable financial performance for fiscal year 2025, posting a revenue increase of +24.81% to $2.39 billion and net income growth of +42.6% to $399.7 million. This surge highlights the firm's strengthened foothold in the competitive M&A advisory and restructuring market. Concurrently, Houlihan Lokey has accelerated its strategic expansion into the Capital Solutions segment by appointing seasoned industry veteran Kevin Ryan as Managing Director, underpinning its ambitions in private credit and structured finance.
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These developments underscore a pivotal phase in Houlihan Lokey’s growth trajectory, marked by record financial results and diversification efforts designed to solidify its market position and justify its premium valuation multiples.
Financial Performance: FY2025 Earnings Analysis#
Houlihan Lokey’s FY2025 financial results illustrate robust operational execution and profitable growth. Revenue climbed to $2.39 billion, up from $1.91 billion in FY2024, reflecting a +24.81% year-over-year increase. This growth was broadly driven by the Corporate Finance segment, which surged +38% YoY, alongside strong contributions from Financial Restructuring and Valuation Advisory services.
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Net income expanded to $399.7 million, a +42.6% increase, supported by disciplined cost management evidenced by operating expenses of $275.58 million, down from $374.19 million the prior year. The firm’s operating margin improved to 20.99%, up from 18.95% in FY2024, signaling enhanced profitability across core service lines.
Earnings per share (EPS) rose sharply to $5.83 from $4.11, reflecting both net income growth and prudent capital allocation. The company’s price-to-earnings (P/E) ratio stands at a premium 31.37x, consistent with its leadership status and growth outlook.
FY2025 vs. Historical Financial Metrics#
| Metric | FY2025 | FY2024 | FY2023 | FY2022 |
|---|---|---|---|---|
| Revenue (USD billions) | $2.39 (+24.81%) | $1.91 | $1.81 | $2.27 |
| Net Income (USD MM) | $399.7 (+42.6%) | $280.3 | $254.2 | $437.8 |
| Operating Margin | 20.99% (+2.04%) | 18.95% | 18.89% | 27.0% |
| EPS | $5.83 (+41.61%) | $4.11 | $3.82 | $6.41 |
Source: Monexa AI Financials
Strategic Expansion: Capital Solutions Group#
Houlihan Lokey’s recent strategic initiative to expand into the Capital Solutions market represents a significant evolution in its service offering. The firm appointed Kevin Ryan, a veteran with deep expertise in private credit and structured finance, to lead this group. This move aligns with broader industry trends where financial advisory firms are integrating debt origination and capital structuring to offer end-to-end solutions for clients.
The private credit market has witnessed rapid expansion driven by institutional investors seeking alternative yield sources amid low interest rates. Houlihan Lokey’s entry into this space enables it to leverage its existing advisory capabilities while generating new fee-based revenue streams, enhancing overall business resilience.
This initiative is expected to complement its core M&A and restructuring advisory, allowing clients to access tailored debt financing solutions alongside traditional advisory services.
Profitability and Operational Efficiency#
Houlihan Lokey’s profitability metrics remain robust, supported by its high-margin advisory business model. The firm sustained a gross profit margin of 38.5% in FY2025, consistent with historical levels, while improving operating margins to 20.99%.
Operating expenses decreased notably to $275.58 million in FY2025 from $374.19 million in FY2024, reflecting effective cost controls and operational discipline. Selling, general, and administrative expenses also contracted significantly from $185.32 million to $41.2 million, contributing to margin expansion.
The firm’s return on equity (ROE) stands at 19.88%, and return on invested capital (ROIC) at 10.39%, highlighting efficient capital use and shareholder value creation.
Balance Sheet and Cash Flow Strength#
Houlihan Lokey’s balance sheet exhibits strong liquidity and conservative leverage. As of March 31, 2025, the company held $971 million in cash and equivalents and $1.14 billion in cash and short-term investments, providing ample financial flexibility.
Total liabilities stood at $1.64 billion against stockholders’ equity of $2.17 billion, resulting in a modest debt-to-equity ratio of 0.20x. The firm’s net debt is negative at -$532.82 million, indicating a net cash position.
Cash flow from operations surged to $848.6 million in FY2025, more than doubling the prior year’s $328.5 million, driven by strong earnings and favorable working capital changes. Free cash flow reached $808.9 million, enabling continued shareholder returns through dividends and share repurchases.
Key Balance Sheet and Cash Flow Metrics#
| Metric | FY2025 | FY2024 |
|---|---|---|
| Cash & Cash Equivalents | $971.0 MM | $721.2 MM |
| Total Assets | $3.82 B | $3.17 B |
| Total Liabilities | $1.64 B | $1.33 B |
| Stockholders' Equity | $2.17 B | $1.84 B |
| Net Debt | -$532.8 MM | -$305.8 MM |
| Operating Cash Flow | $848.6 MM | $328.5 MM |
| Free Cash Flow | $808.9 MM | $261.7 MM |
Source: Monexa AI Financials
Market Valuation and Analyst Outlook#
Houlihan Lokey’s valuation metrics reflect its premium positioning. The current P/E ratio of 31.37x contrasts with forward P/E estimates declining from 49.33x in 2024 to 19.83x by 2028, indicating market expectations for strong earnings growth moderation but sustained profitability.
The enterprise value to EBITDA multiple also compresses from 23.68x in 2024 to 14.81x in 2028, consistent with growth normalization. Analysts forecast a compound annual growth rate (CAGR) in revenue of 14.33% and EPS CAGR of 20.08% through 2028, underpinning the firm’s growth narrative.
| Year | Estimated Revenue (Billion USD) | Estimated EPS | Forward P/E | Forward EV/EBITDA |
|---|---|---|---|---|
| 2025 | $2.35 | $5.98 | 31.08x | 20.51x |
| 2026 | $2.62 | $7.07 | 25.76x | 18.38x |
| 2027 | $2.97 | $8.19 | 21.66x | 16.24x |
| 2028 | $3.26 | $9.38 | 19.83x | 14.81x |
Source: Monexa AI Analyst Estimates
Competitive Landscape and Sector Trends#
Houlihan Lokey operates primarily in the middle-market M&A advisory and restructuring sector, a space characterized by intense competition from both global investment banks and specialized boutique firms. Its focus on complex transactions and restructuring advisory has carved a niche that is less susceptible to commoditization.
The firm’s strategic expansion into Capital Solutions aligns with broader industry trends where advisory firms seek to offer integrated financing solutions amid growing private credit markets. This diversification is expected to mitigate cyclicality risks inherent in M&A and restructuring businesses.
What Does This Mean for Investors?#
- Strong Earnings Momentum: Houlihan Lokey's record FY2025 earnings growth and improved margins demonstrate operational strength and effective cost management.
- Strategic Diversification: Expansion into Capital Solutions positions the firm to capture new revenue streams in a growing private credit market, enhancing resilience.
- Robust Financial Health: A strong balance sheet and substantial free cash flow provide flexibility for growth investments and shareholder returns.
- Premium Valuation Justified: Consistent earnings growth and a diversified service offering support the firm’s premium market multiples.
Key Takeaways#
- Houlihan Lokey achieved record FY2025 revenue of $2.39 billion (+24.81%) and net income of $399.7 million (+42.6%), driven by M&A advisory and restructuring.
- The firm improved operating margins to 20.99%, aided by disciplined cost controls.
- Expansion into the Capital Solutions segment, led by Managing Director Kevin Ryan, signals strategic diversification into private credit.
- Strong cash flow generation and a net cash position enhance financial flexibility.
- Analyst forecasts suggest continued double-digit revenue and EPS growth through 2028, supporting a premium valuation.
Conclusion#
Houlihan Lokey’s latest financial results and strategic initiatives reveal a firm executing effectively on its growth strategy. The combination of record earnings, margin expansion, and entry into the Capital Solutions market underpins its premium valuation and competitive positioning. Investors should consider these developments in the context of Houlihan Lokey’s resilience to market cycles and its ability to leverage industry trends for sustained growth.