HOULIHAN LOKEY, INC.

Previous wording

Compensation Expenses. Our compensation expenses are comprised of employee compensation and benefits and acquisition related compensation and benefits expenses. Compensation expenses account for the majority of our operating expenses, and are determined by management based on revenues earned, headcount, the competitiveness of the prevailing labor market, and anticipated compensation expectations of our employees. These factors may fluctuate, and as a result, our compensation expenses may fluctuate materially in any particular period. Accordingly, the amount of compensation expenses recognized in any particular period may not be consistent with prior periods or indicative of future periods.

Current wording

Compensation Expenses. Our compensation expenses are comprised of employee compensation and benefits and acquisition related compensation and benefits expenses. Compensation expenses account for the majority of our operating expenses, and are determined by management based on revenues earned, headcount, the competitiveness of the prevailing labor market, and anticipated compensation expectations of our employees. These factors may fluctuate, and as a result, our compensation expenses may fluctuate materially in any particular period. Accordingly, the amount of compensation expenses recognized in any particular period may not be consistent with prior periods or indicative of future periods. In connection with certain acquisitions, certain employees may be entitled to deferred consideration, primarily in the form of retention payments, should certain service and/or performance conditions be met in the future. As a result of these conditions, such deferred consideration would be expensed as compensation in current and future periods and has been accrued as liabilities on the Consolidated Balance Sheets as of December 31, 2025 and March 31, 2025.

Previous wording

Non-Compensation Expense. The balance of our operating expenses includes costs for travel, meals and entertainment, rent, depreciation and amortization, information technology and communications, professional fees, other operating expenses, and gains and/or losses associated with the reduction/increase in fair value of earnout liabilities. We refer to all of these expenses as non-compensation expenses. A portion of our non-compensation expenses fluctuates in response to changes in headcount.

Current wording

Non-Compensation Expense. The balance of our operating expenses includes costs for travel, meals and entertainment, rent, depreciation and amortization, information technology and communications, professional fees, other operating expenses, and gains and/or losses associated with changes in the fair value of earnout liabilities. We refer to all of these expenses as non-compensation expenses. A portion of our non-compensation expenses fluctuates in response to changes in headcount.

Previous wording

Other (income) expense, net includes (i) interest income earned on non-marketable and investment securities, cash and cash equivalents, loans receivable from affiliates, employee loans, and commercial paper, (ii) interest expense and fees on our HLI Line of Credit (defined herein) and (iii) other miscellaneous non-operating expenses.

Current wording

Other (income) expense, net primarily includes interest income and gains earned on non-marketable and investment securities, cash and cash equivalents, loans receivable from affiliates, employee loans, and commercial paper.

Previous wording

The following is a discussion of our results of operations for the three and six months ended September 30, 2025 and 2024.

Current wording

The following is a discussion of our results of operations for the three and nine months ended December 31, 2025 and 2024.

Previous wording

Revenues were $659.5 million for the three months ended September 30, 2025, compared with $575.0 million for the three months ended September 30, 2024, representing an increase of 15%. The increase in revenues were primarily driven by higher revenues from our CF and FVA business segments, as described in further detail below.

Current wording

Revenues were $717.1 million for the three months ended December 31, 2025, compared with $634.4 million for the three months ended December 31, 2024, representing an increase of 13%. The increase in revenues was primarily driven by higher revenues from our CF and FR business segments, as described in further detail below.

Previous wording

Operating expenses were $508.1 million for the three months ended September 30, 2025, compared with $444.3 million for the three months ended September 30, 2024, representing an increase of 14%. Compensation expenses, as a component of operating expenses, were $423.2 million for the three months ended September 30, 2025, compared with $360.6 million for the three months ended September 30, 2024, representing an increase of 17%. The increase was primarily a result of an increase in revenues for the quarter when compared with the same quarter last year. The Compensation Ratio was 64.2% for the three months ended September 30, 2025, compared with 62.7% for the three months ended September 30, 2024. Non-compensation expense, as a component of operating expenses, was relatively flat at $84.9 million for the three months ended September 30, 2025, compared with $83.7 million for the three months ended September 30, 2024, representing an increase of 2%.

Current wording

Operating expenses were $556.3 million for the three months ended December 31, 2025, compared with $498.3 million for the three months ended December 31, 2024, representing an increase of 12%. Compensation expenses, as a component of operating expenses, were $458.6 million for the three months ended December 31, 2025, compared with $403.0 million for the three months ended December 31, 2024, representing an increase of 14%. The increase was primarily a result of an increase in revenues for the quarter when compared with the same quarter last year. The Compensation Ratio was 64.0% for the three months ended December 31, 2025, compared with 63.5% for the three months ended December 31, 2024. Non-compensation expense, as a component of operating expenses, was $97.8 million for the three months ended December 31, 2025, compared with $95.4 million for the three months ended December 31, 2024, representing an increase of 3%.

Previous wording

The provision for income taxes for the three months ended September 30, 2025 was $48.3 million, which reflected an effective tax rate of 30.2%. The provision for income taxes for the three months ended September 30, 2024 was $42.5 million, which reflected an effective tax rate of 31.3%.

Current wording

The provision for income taxes for the three months ended December 31, 2025 was $53.1 million, which reflected an effective tax rate of 31.3%. The provision for income taxes for the three months ended December 31, 2024 was $49.8 million, which reflected an effective tax rate of 34.3%. The decrease in the Company’s effective tax rate was primarily a result of decreased state taxes and decreased non-deductible expenses.

Previous wording

Operating expenses were $1,023.7 million for the six months ended September 30, 2025, compared with $863.2 million for the six months ended September 30, 2024, an increase of 19%. Compensation expenses, as a component of operating expenses, were $816.0 million for the six months ended September 30, 2025, compared with $690.8 million for the six months ended September 30, 2024, an increase of 18%. The increase in compensation expenses was primarily a result of higher revenues when compared with the same period last year. The Compensation Ratio was 64.5% for the six months ended September 30, 2025, compared with 63.5% for the six months ended September 30, 2024. Non-compensation expense, as a component of operating expenses, was $207.6 million for the six months ended September 30, 2025, compared with $172.4 million for the six months ended September 30, 2024, representing an increase of 20%. The increase in non-compensation expense was primarily a result of an increase in revaluation of acquisition contingent consideration and increased depreciation and amortization when compared with the same period last year.

Current wording

Operating expenses were $1.58 billion for the nine months ended December 31, 2025, compared with $1.36 billion for the nine months ended December 31, 2024, an increase of 16%. Compensation expenses, as a component of operating expenses, were $1.27 billion for the nine months ended December 31, 2025, compared with $1.09 billion for the nine months ended December 31, 2024, an increase of 17%. The increase in compensation expenses was primarily a result of higher revenues when compared with the same period last year. The Compensation Ratio was 64.3% for the nine months ended December 31, 2025, compared with 63.5% for the nine months ended December 31, 2024. Non-compensation expense, as a component of operating expenses, was $305.4 million for the nine months ended December 31, 2025, compared with $267.8 million for the nine months ended December 31, 2024, representing an increase of 14%. The increase in non-compensation expense was primarily a result of an increase in revaluation of acquisition contingent consideration and increased depreciation and amortization when compared with the same period last year.

Previous wording

Other (income) expense, net was $(8.7) million for the three months ended September 30, 2025, compared with $(5.4) million for the three months ended September 30, 2024. Other (income) expense, net increased primarily due to higher interest income.

Current wording

Other (income) expense, net was $(25.9) million for the nine months ended December 31, 2025, compared with $(19.6) million for the nine months ended December 31, 2024. Other (income) expense, net increased primarily due to higher interest income.

Previous wording

The provision for income taxes for the six months ended September 30, 2025 was $48.8 million, which reflected an effective tax rate of 18.9%. The provision for income taxes for the six months ended September 30, 2024 was $53.5 million, which reflected an effective tax rate of 22.7%. The decrease in the Company’s effective tax rate was primarily a result of increased stock-based compensation deductions.

Current wording

The provision for income taxes for the nine months ended December 31, 2025 was $101.9 million, which reflected an effective tax rate of 23.8%. The provision for income taxes for the nine months ended December 31, 2024 was $103.3 million, which reflected an effective tax rate of 27.1%. The decrease in the Company’s effective tax rate was primarily a result of increased stock-based compensation deductions and decreased state taxes.

Previous wording

Revenues for FR were $133.8 million for the three months ended September 30, 2025, compared with $131.6 million for the three months ended September 30, 2024, representing an increase of 2%. Revenues increased due to an increase in the number of closed transactions during the quarter, which was driven by favorable market conditions for restructuring transactions. This increase was partially offset by a decrease in the average transaction fee on closed transactions, which was driven by transaction mix and does not represent a trend in the average fee on closed transactions.

Current wording

Revenues for CF were $473.7 million for the three months ended December 31, 2025, compared with $421.6 million for the three months ended December 31, 2024, representing an increase of 12%. Revenues increased due to an increase in the average transaction fee on closed transactions, which was driven by transaction mix and does not represent a short-term trend in the average fee on closed transactions. Revenues also increased due to an increase in the number of closed transactions during the quarter, which was driven by favorable market conditions.

Previous wording

Segment profit for CF was $147.3 million for the three months ended September 30, 2025, compared with $109.7 million for the three months ended September 30, 2024, an increase of 34%. Profitability increased primarily as a result of an increase in revenues and lower compensation expenses as a percentage of revenues when compared to the same quarter last year.

Current wording

Segment profit for CF was $150.7 million for the three months ended December 31, 2025, compared with $131.6 million for the three months ended December 31, 2024, an increase of 15%. Profitability increased primarily as a result of an increase in revenues when compared to the same quarter last year.

Previous wording

Revenues for CF were $837.2 million for the six months ended September 30, 2025, compared with $692.4 million for the six months ended September 30, 2024, representing an increase of 21%. Revenues increased primarily due to an increase in the number of closed transactions during the period, driven by favorable market conditions for M&A and capital solutions transactions.

Current wording

Revenues for CF were $1.31 billion for the nine months ended December 31, 2025, compared with $1.11 billion for the nine months ended December 31, 2024, representing an increase of 18%. Revenues increased primarily due to an increase in the number of closed transactions during the period, driven by favorable market conditions.

Previous wording

Segment profit for CF was $274.1 million for the six months ended September 30, 2025, compared with $210.1 million for the six months ended September 30, 2024, an increase of 30%. Profitability increased primarily as a result of an increase in revenues and lower compensation expenses as a percentage of revenues when compared to the same period last year.

Current wording

Segment profit for CF was $424.8 million for the nine months ended December 31, 2025, compared with $341.6 million for the nine months ended December 31, 2024, an increase of 24%. Profitability increased primarily as a result of an increase in revenues and lower non-compensation expenses as a percentage of revenues when compared to the same period last year.

Previous wording

Revenues for FR were $262.0 million for the six months ended September 30, 2025, compared with $249.0 million for the six months ended September 30, 2024, representing an increase of 5%. Revenues increased due to an increase in the number of closed transactions during the period, which was driven by favorable market conditions for restructuring transactions. This increase was partially offset by a decrease in the average transaction fee on closed transactions, which was driven by transaction mix and does not represent a trend in the average fee on closed transactions.

Current wording

Revenues for FR were $156.3 million for the three months ended December 31, 2025, compared with $130.9 million for the three months ended December 31, 2024, representing an increase of 19%. Revenues increased due to an increase in the average transaction fee on closed transactions, which was driven by transaction mix and does not represent a trend in the average fee on closed transactions.

Previous wording

Segment profit for FR was $93.7 million for the six months ended September 30, 2025, compared with $100.1 million for the six months ended September 30, 2024, a decrease of (6)%. Profitability decreased primarily as a result of higher compensation expenses as a percentage of revenues when compared to the same period last year.

Current wording

Segment profit for FR was $151.3 million for the nine months ended December 31, 2025, compared with $144.3 million for the nine months ended December 31, 2024, an increase of 5%. Profitability increased primarily as a result of an increase in revenues, partially offset by higher compensation expenses as a percentage of revenues when compared to the same period last year.

Previous wording

Revenues for FVA were $87.0 million for the three months ended September 30, 2025, compared with $79.4 million for the three months ended September 30, 2024, representing an increase of 10%. Revenues increased due to an increase in the number of Fee Events, driven by improvements in the M&A markets.

Current wording

Revenues for FVA were $87.1 million for the three months ended December 31, 2025, compared with $81.9 million for the three months ended December 31, 2024, representing an increase of 6%. Revenues increased due to an increase in the number of Fee Events, driven by improvements in the M&A markets.

Previous wording

Segment profit for FR was $50.1 million for the three months ended September 30, 2025, compared with $60.9 million for the three months ended September 30, 2024, a decrease of (18)%. Profitability decreased primarily as a result of an increase in compensation expenses as a percentage of revenues when compared to the same quarter last year.

Current wording

Segment profit for FVA was $22.4 million for the three months ended December 31, 2025, compared with $23.3 million for the three months ended December 31, 2024, a decrease of (4)%. Profitability decreased primarily as a result of higher compensation expenses as a percentage of revenues, partially offset by an increase in revenues when compared to the same quarter last year.

Previous wording

Revenues for FVA were $165.6 million for the six months ended September 30, 2025, compared with $147.1 million for the six months ended September 30, 2024, representing an increase of 13%. The increase in revenues was primarily due to an increase in the number of Fee Events, driven by improvements in the M&A markets.

Current wording

Revenues for FVA were $252.7 million for the nine months ended December 31, 2025, compared with $229.0 million for the nine months ended December 31, 2024, representing an increase of 10%. The increase in revenues was primarily due to an increase in the number of Fee Events, driven by improvements in the M&A markets.

Previous wording

Segment profit for FVA was $25.4 million for the three months ended September 30, 2025, compared with $19.4 million for the three months ended September 30, 2024, an increase of 31%. Profitability increased primarily as a result of increased revenues and lower compensation expenses as a percentage of revenues when compared to the same quarter last year.

Current wording

Segment profit for FVA was $65.2 million for the nine months ended December 31, 2025, compared with $60.4 million for the nine months ended December 31, 2024, an increase of 8%. Profitability increased primarily as a result of increased revenues, partially offset by an increase in non-compensation expenses as a percentage of revenues when compared to the same period last year.

Previous wording

Corporate expenses were $71.5 million for the three months ended September 30, 2025, compared with $59.3 million for the three months ended September 30, 2024. This 21% increase was driven primarily by increased compensation expense.

Current wording

Corporate expenses were $70.0 million for the three months ended December 31, 2025, compared with $63.0 million for the three months ended December 31, 2024. This 11% increase was driven primarily by increased compensation expense when compared to the same quarter last year.

Previous wording

Corporate expenses were $169.5 million for the six months ended September 30, 2025, compared with $121.8 million for the six months ended September 30, 2024. This 39% increase was driven primarily by increased compensation expense and increased revaluation of acquisition contingent consideration when compared to the same period last year.

Current wording

Corporate expenses were $239.4 million for the nine months ended December 31, 2025, compared with $184.8 million for the nine months ended December 31, 2024. This 30% increase was driven primarily by increased compensation expense and increased revaluation of acquisition contingent consideration when compared to the same period last year.

Previous wording

Our current assets are primarily comprised of cash and cash equivalents, investment securities, accounts receivable, and unbilled work in progress related to fees earned from providing advisory services. Our current liabilities primarily include accrued salaries and bonuses, accounts payable and accrued expenses, and deferred income.

Current wording

Our current assets are primarily comprised of cash and cash equivalents, investment securities, accounts receivable, and unbilled work in progress related to fees earned from providing advisory services. Our current liabilities are primarily comprised of accrued salaries and bonuses and accounts payable and accrued expenses.

Previous wording

Our cash and cash equivalents include cash held at banks. We maintain moderate levels of cash on hand in support of regulatory requirements for our registered broker-dealer. As of September 30, 2025 and March 31, 2025, we had $714.4 million and $686.2 million of cash in foreign subsidiaries, respectively. Our excess cash may be invested from time to time in short-term investments, including treasury securities, commercial paper, certificates of deposit, and investment grade corporate and government debt securities. Please refer to Note 6 for further detail.

Current wording

Our cash and cash equivalents include cash held at banks. We maintain moderate levels of cash on hand in support of regulatory requirements for our registered broker-dealer. As of December 31, 2025 and March 31, 2025, we had $825.7 million and $686.2 million of cash in foreign subsidiaries, respectively. Our excess cash may be invested from time to time in short-term investments, including treasury securities, commercial paper, certificates of deposit, and investment grade corporate and government debt securities. Please refer to Note 6 for further detail.

Previous wording

Our liquidity is highly dependent upon cash receipts from clients that are generally dependent upon the successful completion of transactions, as well as the timing of receivables collections, which typically occur within 60 days of billing. As of September 30, 2025, accounts receivable, net of allowance for credit losses was $251.2 million. As of September 30, 2025, unbilled work in progress, net of allowance for credit losses was $191.2 million.

Current wording

Our liquidity is highly dependent upon cash receipts from clients that are generally dependent upon the successful completion of transactions, as well as the timing of receivables collections, which typically occur within 60 days of billing. As of December 31, 2025, accounts receivable, net of allowance for credit losses was $210.9 million. As of December 31, 2025, unbilled work in progress, net of allowance for credit losses was $232.7 million.

Previous wording

On August 23, 2019, the Company entered into a syndicated revolving line of credit with Bank of America, N.A. and certain other financial institutions party thereto, which was amended by the First Amendment to Credit Agreement dated as of August 2, 2022, and further amended by the Second Amendment to Credit Agreement on August 19, 2025 (as amended, the "HLI Line of Credit"). The HLI Line of Credit allows for borrowings of up to $150 million (and, subject to certain conditions, provides the Company with an uncommitted expansion option, which, if exercised in full, would provide for a total credit facility of $200 million) and matures on August 19, 2030 (or if such date is not a business day, the immediately preceding business day). Borrowings under the HLI Line of Credit bear interest at a floating rate, which can be either, at the Company's option, (i) a term Secured Overnight Financing Rate ("SOFR") plus a 0.95% margin per annum or (ii) a base rate, which is the highest of (a) the Federal Funds Rate plus one-half of one percent (0.50%), (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) a term SOFR rate plus a 1.00% margin. Commitment fees apply to unused amounts. The HLI Line of Credit contains certain financial covenants and other restrictions, including a financial loan covenant to maintain a consolidated leverage ratio of less than 2.00 to 1.00. As of September 30, 2025, we were, and expect to continue to be, in compliance with this financial covenant. As of September 30, 2025 and March 31, 2025, no principal was outstanding under the HLI Line of Credit.

Current wording

On August 23, 2019, the Company entered into a syndicated revolving line of credit with Bank of America, N.A. and certain other financial institutions party thereto, which was amended by the First Amendment to Credit Agreement dated as of August 2, 2022, and further amended by the Second Amendment to Credit Agreement on August 19, 2025 (as amended, the "HLI Line of Credit"). The HLI Line of Credit allows for borrowings of up to $150 million (and, subject to certain conditions, provides the Company with an uncommitted expansion option, which, if exercised in full, would provide for a total credit facility of $200 million) and matures on August 19, 2030 (or if such date is not a business day, the immediately preceding business day). Borrowings under the HLI Line of Credit bear interest at a floating rate, which can be either, at the Company's option, (i) a term Secured Overnight Financing Rate ("SOFR") plus a 0.95% margin per annum or (ii) a base rate, which is the highest of (a) the Federal Funds Rate plus one-half of one percent (0.50%), (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) a term SOFR rate plus a 1.00% margin. Commitment fees apply to unused amounts. The HLI Line of Credit contains certain financial covenants and other restrictions, including a financial loan covenant to maintain a consolidated leverage ratio of less than 2.00 to 1.00. As of December 31, 2025, we were, and expect to continue to be, in compliance with the financial covenants. As of December 31, 2025 and March 31, 2025, no principal was outstanding under the HLI Line of Credit.

Previous wording

Operating activities resulted in a net inflow of $193.4 million, primarily attributable to net income, partially offset by cash bonus payments in May 2025. Investing activities resulted in a net outflow of $4.6 million, primarily attributable to purchases of investment securities and purchases of property and equipment, partially offset by sales or maturities of investment securities. Financing activities resulted in a net outflow of $268.8 million, primarily attributable to payments made to settle employee tax obligations on share-based awards, dividends paid, and share repurchases.

Current wording

Operating activities resulted in a net inflow of $411.1 million, primarily attributable to net income, partially offset by changes in our operating assets and liabilities, which includes the cash bonus payments in May 2025. Investing activities resulted in a net inflow of $51.8 million, primarily attributable to sales or maturities of investment securities, partially offset by purchases of investment securities and purchases of property and equipment. Financing activities resulted in a net outflow of $400.2 million, primarily attributable to payments made to settle employee tax obligations on share-based awards, dividends paid, and share repurchases.

Previous wording

Operating activities resulted in a net inflow of $224.7 million, primarily attributable to net income, partially offset by cash bonus payments paid in May 2024. Investing activities resulted in a net outflow of $71.3 million, primarily attributable to the acquisition of Triago during the three months ended June 30, 2024, purchases of investment securities, and purchases of property and equipment. Financing activities resulted in a net outflow of $200.6 million, primarily attributable to payments made to settle employee tax obligations on share-based awards and dividends paid.

Current wording

Operating activities resulted in a net inflow of $490.2 million, primarily attributable to net income, partially offset by cash bonus payments paid in May 2024. Investing activities resulted in a net outflow of $158.7 million, primarily attributable to the purchase of investment securities and several acquisitions closing during the nine months ended December 31, 2024. Financing activities resulted in a net outflow of $238.0 million, primarily attributable to dividends paid and payments made to settle employee tax obligations on share-based awards.

Previous wording

There have been no material changes outside of the ordinary course of business to our known contractual obligations, which are included in Item 7 of our 2025 Annual Report.

Current wording

There have been no material changes outside of the ordinary course of business to our known contractual obligations, which are included in Item 7 of our 2025 Annual Report. We entered into a new routine lease commitment during the quarter to support ongoing operations (see Note 16 included in Part I, Item 1 of this Form 10-Q).

Previous wording

During the six months ended September 30, 2025, there were no significant changes to our critical accounting policies and estimates. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended March 31, 2025, for a more complete discussion of our critical accounting policies and estimates.

Current wording

During the nine months ended December 31, 2025, there were no significant changes to our critical accounting policies and estimates. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended March 31, 2025, for a more complete discussion of our critical accounting policies and estimates.