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What changed in HOULIHAN LOKEY, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HOULIHAN LOKEY, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+193 added−190 removedSource: 10-K (2023-05-25) vs 10-K (2022-05-27)

Top changes in HOULIHAN LOKEY, INC.'s 2023 10-K

193 paragraphs added · 190 removed · 155 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

36 edited+4 added−5 removed69 unchanged
Biggest changeWhile we are not aware of any misstatements regarding any industry, market or similar data presented herein, such data involve uncertainties and are subject to change based on various factors, including those discussed under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Form 10-K. 10 Table of Contents In this Form 10-K, we use the term “independent investment banks” or “independent advisors” when referring to ourselves and other investment banks or financial advisors that are primarily focused on advisory services and that conduct no or limited commercial banking, lending, or securities sales and trading activities, which we believe are well positioned to provide uncompromised advice that is less subject to conflicts of interest arising from non-advisory services.
Biggest changeIn this Form 10-K, we use the term “independent investment banks” or “independent advisors” when referring to ourselves and other investment banks or financial advisors that are primarily focused on advisory services and that conduct no or limited commercial banking, lending, or securities sales and trading activities, which we believe are well positioned to provide uncompromised advice that is less subject to conflicts of interest arising from non-advisory services.
We believe that through our industry groups we have a meaningful presence in every major industry segment, including: business services; consumer, food and retail; energy; financial services; healthcare; industrials; real estate, lodging and leisure; and technology. We continue to expand and deepen our specialized industry capabilities through a combination of internal promotion, external hires and acquisitions.
We believe that through our industry groups we have a meaningful presence in every major industry segment, including: business services; consumer, food and retail; energy; financial services; fintech; healthcare; industrials; real estate, lodging and leisure; and technology. We continue to expand and deepen our specialized industry capabilities through a combination of internal promotion, external hires and acquisitions.
Singapore In Singapore, Houlihan Lokey conducts its business through Houlihan Lokey (Singapore) Private Limited and Houlihan Lokey Advisers Singapore Private Limited, both of which are registered with the Monetary Authority of Singapore (“MAS”) as “exempt corporate finance advisers”, and are therefore able to provide exempt corporate finance advisory services to accredited investors only, subject to compliance with regulation governing such status as applicable from time to time in Singapore.
Singapore In Singapore, Houlihan Lokey conducts its business through Houlihan Lokey (Singapore) Private Limited and Houlihan Lokey Advisers Singapore Private Limited, both of which are registered with the Monetary Authority of Singapore (“MAS”) as “exempt corporate finance advisors” and are therefore able to provide exempt corporate finance advisory services to accredited investors only, subject to compliance with regulation governing such status as applicable from time to time in Singapore.
In addition to those entities referenced above, we also provide unregulated corporate finance advisory services through other subsidiaries in Germany, Italy, France, the Netherlands, Sweden, Switzerland, and Spain. Each of HL EMEA, LLP, HL UK and HLCF Ltd are authorized and regulated by the United Kingdom’s Financial Conduct Authority.
In addition to those entities referenced above, we also provide unregulated corporate finance advisory services through other subsidiaries in Germany, Italy, France, the Netherlands, Sweden, Belgium, Switzerland, and Spain. Each of HL EMEA, LLP, HL UK, HLCF Ltd, and HLA Ltd are authorized and regulated by the United Kingdom’s Financial Conduct Authority.
Through our offices in the United States, Europe, Asia, Australia, and the Middle East, we serve a diverse set of clients worldwide, including corporations, financial sponsors and government agencies. We provide our financial professionals with an integrated platform that enables them to deliver meaningful and differentiated advice to our clients.
Through our offices in the United States, South America, Europe, Asia, Australia, and the Middle East, we serve a diverse set of clients worldwide, including corporations, financial sponsors and government agencies. We provide our financial professionals with an integrated platform that enables them to deliver meaningful and differentiated advice to our clients.
This marketing effort is combined with an extensive network of referral relationships with law firms, consulting firms, accounting firms and other professional services firms that have been developed by our financial professionals who maintain those relationships as potential referral sources and direct clients across all of our business practices. 2 Table of Contents Corporate Finance As of March 31, 2022, we had 202 CF Managing Directors utilizing a collaborative, interdisciplinary approach to provide our clients with extensive industry and product expertise and global reach in a wide variety of M&A and capital markets transactions.
This marketing effort is combined with an extensive network of referral relationships with law firms, consulting firms, accounting firms and other professional services firms that have been developed by our financial professionals who maintain those relationships as potential referral sources and direct clients across all of our business practices. 2 Table of Contents Corporate Finance As of March 31, 2023, we had 217 CF Managing Directors utilizing a collaborative, interdisciplinary approach to provide our clients with extensive industry and product expertise and global reach in a wide variety of M&A and capital markets transactions.
While the majority of our engagements are in the United States, we continue to enhance our presence in other geographies, including Europe, Asia, Australia and the Middle East and we believe there will be continued opportunities to grow in regions outside the United States.
While the majority of our engagements are in the United States, we continue to enhance our presence in other geographies, including Europe, Asia, South America, Australia and the Middle East and we believe there will be continued opportunities to grow in regions outside the United States.
We may be at a competitive disadvantage in certain situations with regard to certain of our competitors who are able to, and regularly do, provide financing or market making services that are often instrumental in effecting transactions. 5 Table of Contents Regulation United States As a financial services provider, Houlihan Lokey is subject to extensive regulation in the United States and across the globe.
We may be at a competitive disadvantage in certain situations with regard to certain of our competitors who are able to, and regularly do, provide financing or market making services that are often instrumental in effecting transactions. Regulation United States As a financial services provider, Houlihan Lokey is subject to extensive regulation in the United States and across the globe.
Incorporated, Stifel Financial Corp., William Blair & Company, L.L.C., and the bulge-bracket investment banking firms; for our FR practice, Evercore Partners, Lazard Ltd, Moelis & Company, N M Rothschild & Sons Limited and PJT Partners; and for our FVA practice, the “big four” accounting firms, Lincoln International LLC, Duff & Phelps Corp., Alvarez & Marsal and various global financial advisory and accounting firms.
Incorporated, Stifel Financial Corp., William Blair & Company, L.L.C., and the bulge-bracket investment banking firms; for our FR practice, Evercore Partners, Lazard Ltd, Moelis & Company, N M Rothschild & Sons Limited and PJT Partners; and for our FVA practice, the “big four” accounting firms, Lincoln International LLC, Kroll, LLC., Alvarez & Marsal and various global financial advisory and accounting firms.
HLE GmbH is approved to conduct regulated investment services by the German regulatory authority, Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”). HLE GmbH has exercised the appropriate European financial services passport rights to provide cross-border services into all other members of the EEA from Germany and to establish branches in France and Spain.
HLE GmbH is approved to conduct regulated investment services by the German regulatory authority, Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”). 6 Table of Contents HLE GmbH has exercised the appropriate European financial services passport rights to provide cross-border services into all other members of the EEA from Germany and to establish branches in France and Spain.
Our compensation structure for junior financial professionals is based on a system of meritocracy whereby bankers are rewarded for past performance and expectation of future development, and compensation levels are tested against prevailing market compensation for bankers at similar levels. The primary sources of recruitment for our junior financial professionals are leading undergraduate and graduate programs around the world.
Our compensation structure for junior financial professionals is based on a system of meritocracy whereby bankers are rewarded for past performance and expectation of future development, and compensation levels are tested against prevailing market compensation for bankers at similar levels. 4 Table of Contents The primary sources of recruitment for our junior financial professionals are leading undergraduate and graduate programs around the world.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov . 11 Table of Contents
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov . 9 Table of Contents
Europe Our European advisory business is conducted primarily through our subsidiaries namely, as regards the provision of regulated investment services: • in the United Kingdom, Houlihan Lokey EMEA, LLP ("HL EMEA, LLP"), Houlihan Lokey UK Limited ("HL UK") and Houlihan Lokey (Corporate Finance) Limited (“HLCF Ltd”), a limited liability partnership and private limited companies, respectively, each of which is organized under the laws of England and Wales; and • in Germany, Houlihan Lokey (Europe) GmbH (“HLE GmbH”) a private limited company organized under the laws of such jurisdiction with branches in England, France, and Spain in addition to its main office in Germany.
Europe Our European advisory business is conducted primarily through our subsidiaries and or one of their branches, namely, as regards the provision of regulated investment services: • in the United Kingdom, Houlihan Lokey EMEA, LLP ("HL EMEA, LLP"), Houlihan Lokey UK Limited ("HL UK"), Houlihan Lokey (Corporate Finance) Limited (“HLCF Ltd”), and Houlihan Lokey Advisory Limited ("HLA Ltd"), a limited liability partnership and private limited companies, respectively, each of which is organized under the laws of England and Wales; and • in Germany, Houlihan Lokey (Europe) GmbH (“HLE GmbH”) a private limited company organized under the laws of such jurisdiction with branches in England, France, and Spain in addition to its main office in Germany.
Additionally, the SEC’s uniform net capital rule imposes certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC for certain withdrawals of capital. Houlihan Lokey Financial Advisors, Inc.
Additionally, the SEC’s uniform net capital rule imposes certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC for certain withdrawals of capital. 5 Table of Contents Houlihan Lokey Financial Advisors, Inc.
This philosophy of investing in our people has been and will continue to be core to our culture and organization. As of March 31, 2022, 2021, and 2020, we employed 2,257, 1,574, and 1,491 people, respectively, worldwide. Competition Our competitors are other investment banking and financial advisory firms.
This philosophy of investing in our people has been and will continue to be core to our culture and organization. As of March 31, 2023, 2022, and 2021, we employed 2,610, 2,257, and 1,574 people, respectively, worldwide. Competition Our competitors are other investment banking and financial advisory firms.
We are organized around different service lines as each line has different regulatory or compliance specializations as well as different marketing channels. 4 Table of Contents Human Capital Resources Our goal is to attract, develop and retain the best talent in our industry across all levels.
We are organized around different service lines as each line has different regulatory or compliance specializations as well as different marketing channels. Human Capital Resources Our goal is to attract, develop and retain the best talent in our industry across all levels.
As of March 31, 2022, we had approximately 839 present and former employee shareholders that collectively owned approximately 27% of our equity with no single employee owning more than 2% of our equity. We believe that a strong emphasis on cultural fit during our recruiting process combined with broad employee ownership results in high retention rates.
As of March 31, 2023, we had approximately 1,000 present and former employee shareholders that collectively owned approximately 27% of our equity with no single employee owning more than 2% of our equity. We believe that a strong emphasis on cultural fit during our recruiting process combined with broad employee ownership results in high retention rates.
Financial and Valuation Advisory As of March 31, 2022, we had 34 Managing Directors in our FVA group, which we believe represents one of the largest and most respected valuation and financial opinion practices in the United States.
Financial and Valuation Advisory As of March 31, 2023, we had 39 Managing Directors in our FVA group, which we believe represents one of the largest and most respected valuation and financial opinion practices in the United States.
We maintain policies, procedures and internal controls intended to comply with those regulations. 8 Table of Contents Organizational Structure Overview Houlihan Lokey, Inc. is a holding company that operates our business through its subsidiaries, the primary subsidiaries being Houlihan Lokey Capital, HLFA and HL EMEA LLP, each of which is described above under “Regulation.” The diagram below depicts our current organizational structure and the percentages are as of March 31, 2022: HL Voting Trust Agreement In connection with the successful completion of the initial public offering ("IPO") of our Class A common stock in August 2015, we entered into the Voting Trust Agreement (the “HL Voting Trust Agreement”) dated as of August 18, 2015 with the HL Holders and the trustees of the HL Voting Trust.
Organizational Structure Overview Houlihan Lokey, Inc. is a holding company that operates our business through its subsidiaries, the primary subsidiaries being Houlihan Lokey Capital, HLFA and HL EMEA LLP, each of which is described above under “Regulation.” The diagram below depicts our current organizational structure and the percentages are as of March 31, 2023: HL Voting Trust Agreement In connection with the successful completion of the initial public offering ("IPO") of our Class A common stock in August 2015, we entered into the Voting Trust Agreement (the “HL Voting Trust Agreement”) dated as of August 18, 2015 with the HL Holders and the trustees of the HL Voting Trust.
We utilize, and intend to continue to utilize, certain of these exemptions. At the present time, the majority of our directors are independent and, as required by the New York Stock Exchange, we have a fully independent audit committee.
We utilize, and intend to continue to utilize, certain of these exemptions. At the present time, the majority of our directors are independent, as required by the New York Stock Exchange, we have a fully independent audit committee, and our compensation and nominating and corporate governance committees are composed entirely of independent directors.
Israel In Israel we provide unregulated corporate finance advisory services through the Israel branch of Houlihan Lokey Israel Limited, a private limited company organized under the laws of England and Wales.
Israel In Israel we provide unregulated corporate finance advisory services through the Israel branch of Houlihan Lokey Israel Limited, a private limited company organized under the laws of England and Wales. The branch is registered with the Israeli Corporations Authority.
In addition to comprehensive financial restructurings, we work with distressed companies on changes of control, asset sales and other M&A and capital markets activities, many times involving the sale of a company or its assets quickly, and in contested or litigious settings on expedited timeframes.
The FR group has deep experience evaluating complex, highly leveraged situations. In addition to comprehensive financial restructurings, we work with distressed companies on changes of control, asset sales and other M&A and capital markets activities, many times involving the sale of a company or its assets quickly, and in contested or litigious settings on expedited timeframes.
Australia Houlihan Lokey (Australia) Pty Limited is licensed and subject to regulation by the Australian Securities & Investments Commission and must also comply with applicable provisions of the Corporations Act 2001 and other Australian legal and regulatory requirements, including capital adequacy rules, customer protection rules, and compliance with other applicable trading and investment banking regulations.
Asia Pacific Australia Houlihan Lokey (Australia) Pty Limited is licensed and subject to regulation by the Australian Securities & Investments Commission and must also comply with applicable provisions of the Corporations Act 2001 and other Australian legal and regulatory requirements, including capital adequacy rules, customer protection rules, and compliance with other applicable trading and investment banking regulations Hong Kong SAR In Hong Kong, the Securities and Futures Commission (the “SFC”) regulates our subsidiary, Houlihan Lokey (China) Limited.
Middle East Dubai, United Arab Emirates Effective September 25, 2017, the Dubai Financial Services Authority ("DFSA") granted a license under Article 48 of the Regulatory Law 2004 to Houlihan Lokey (MEA Financial Advisory) Ltd. to provide certain regulated financial services from its office in the Dubai International Financial Centre.
Middle East Dubai, United Arab Emirates Houlihan Lokey (MEA Financial Advisory) Ltd. is licensed under Article 48 of the Regulatory Law 2004 by the Dubai Financial Services Authority ("DFSA") to provide certain regulated financial services from its office in the Dubai International Financial Centre.
We are generally prohibited from engaging in transactions involving any country, government, entity, or person that is subject to such comprehensive sanctions. 6 Table of Contents Certain parts of our business are subject to compliance with laws and regulations of United States federal and state governments, non-United States governments, their respective agencies and/or various self-regulatory organizations or exchanges relating to, among other things, the privacy of client information, and any failure to comply with these regulations could expose us to liability and/or reputational damage.
Certain parts of our business are subject to compliance with laws and regulations of United States federal and state governments, non-United States governments, their respective agencies and/or various self-regulatory organizations or exchanges relating to, among other things, the privacy of client information, and any failure to comply with these regulations could expose us to liability and/or reputational damage.
Vietnam In Vietnam, Houlihan Lokey provides unregulated corporate finance advisory services through Houlihan Lokey Vietnam LLC. Other We are also subject to laws and regulations prohibiting corrupt or illegal payments to government officials and other persons, including the US Foreign Corrupt Practices Act and the UK Bribery Act.
South America Brazil In Brazil, Houlihan Lokey provides unregulated financial advisory services through Houlihan Lokey Assessoria Financeira Limitada. 7 Table of Contents Other We are also subject to laws and regulations prohibiting corrupt or illegal payments to government officials and other persons, including the US Foreign Corrupt Practices Act and the UK Bribery Act.
The SFC licenses the activities of the officers, directors, and employees of Houlihan Lokey (China) Limited, and requires the registration of such individuals as licensed representatives. India Houlihan Lokey’s Indian advisory business is conducted through GCA India Investment Advisers Private Limited, which is licensed by the Securities and Exchange Board of India (“SEBI”) as an Investment Adviser.
India Houlihan Lokey’s Indian financial and valuation advisory business is conducted through Houlihan Lokey Advisory (India) Private Limited, which is licensed by the Securities and Exchange Board of India (“SEBI”) as an Investment Adviser.
Our FR professionals bring to bear deep expertise and experience in restructurings in the United States, Canada, Europe, Asia, Australia, the Middle East, Latin America and Africa. Given the depth and breadth of the team’s expertise and the high barriers to entry for this expertise and experience, international and multi-jurisdictional restructurings represent an attractive opportunity for our FR group.
Our FR professionals bring to bear deep expertise and experience in restructurings in the United States, Canada, Europe, Asia, Australia, the Middle East, Latin America and Africa.
Our objective is to help clients create a capital structure that enables them to achieve their strategic priorities on the best terms available in the market, which often involves raising more than one type of capital. 3 Table of Contents Financial Restructuring As of March 31, 2022, we had 53 FR Managing Directors working around the globe, which we believe constitutes one of the largest restructuring groups in the investment banking industry.
Our objective is to help clients create a capital structure that enables them to achieve their strategic priorities on the best terms available in the market, which often involves raising more than one type of capital.
As of March 31, 2022, we had a team of 1,686 financial professionals across 35 offices globally, serving more than 1,000 clients annually over the past several years, ranging from closely held companies to Fortune Global 500 corporations.
We do not lend or engage in any securities sales and trading operations or research that might conflict with our clients’ interests. As of March 31, 2023, we had a team of 1,904 financial professionals across 37 offices globally, serving more than 2,000 clients annually over the past several years, ranging from closely held companies to Fortune Global 500 corporations.
The group employs an interdisciplinary approach to engagements, calling upon the expertise of our industry groups, Capital Markets Advisory group and Financial Sponsors group, and drawing on the worldwide resources of the FR team as each situation may require. The FR group has deep experience evaluating complex, highly leveraged situations.
Given the depth and breadth of the team’s expertise and the high barriers to entry for this expertise and experience, international and multi-jurisdictional restructurings represent an attractive opportunity for our FR group. 3 Table of Contents The group employs an interdisciplinary approach to engagements, calling upon the expertise of our industry groups, Capital Markets Advisory group and Financial Sponsors group, and drawing on the worldwide resources of the FR team as each situation may require.
These rules govern our financial advisory business in the United Kingdom, including regulated activities, record keeping, approval standards for individuals, anti-money laundering and periodic reporting.
The current U.K. regulatory regime is based upon the Financial Services and Markets Act 2000 (“FSMA”), together with secondary legislation and other rules made under FSMA and other relevant legislation. These rules govern our financial advisory business in the United Kingdom, including regulated activities, record keeping, approval standards for individuals, anti-money laundering and periodic reporting.
In addition, OFAC administers a number of comprehensive sanctions and embargoes that target certain countries, governments and geographic regions.
In addition, OFAC administers a number of comprehensive sanctions and embargoes that target certain countries, governments and geographic regions. We are generally prohibited from engaging in transactions involving any country, government, entity, or person that is subject to such comprehensive sanctions.
HL UK and HLCF Ltd were formerly named "GCA Altium Limited" and “Quayle Munro Limited”, respectively, and, following their acquisitions, we have continued to operate their businesses through such entities. The current U.K. regulatory regime is based upon the Financial Services and Markets Act 2000 (“FSMA”), together with secondary legislation and other rules made under FSMA and other relevant legislation.
HL UK, HL CF Ltd, and HLA Ltd were formerly named "GCA Altium Limited", “Quayle Munro Limited” and "Oakley Advisory Limited", respectively, and, following their acquisitions, we have continued to operate their businesses through such entities.
Under the lock-up agreements, our board of directors may consent to exceptions to those transfer restrictions, subject to any limitations or conditions imposed by it. Controlled Company The HL Voting Trust controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” under the rules of the New York Stock Exchange.
As of March 31, 2023, the HL Voting Trust controlled approximately 79.1% of the total voting power of the Company. 8 Table of Contents Controlled Company The HL Voting Trust controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” under the rules of the New York Stock Exchange.
The branch is registered with the Israeli Corporations Authority. 7 Table of Contents Asia Hong Kong In Hong Kong, the Securities and Futures Commission (the “SFC”) regulates our subsidiary, Houlihan Lokey (China) Limited. The compliance requirements of the SFC include, among other things, various codes of conduct and certain capital requirements.
The compliance requirements of the SFC include, among other things, various codes of conduct and certain capital requirements. The SFC licenses the activities of the officers, directors, and employees of Houlihan Lokey (China) Limited, and requires the registration of such individuals as licensed representatives.
Removed
We do not lend or engage in any securities sales and trading operations or research that might conflict with our clients’ interests. In addition to our three primary business practices discussed above, in 2021 we co-sponsored Advanced Merger Partners, Inc., a special purpose acquisition company, that completed an initial public offering and holds $287.5 million in trust.
Added
Financial Restructuring As of March 31, 2023, we had 57 FR Managing Directors working around the globe, which we believe constitutes one of the largest restructuring groups in the investment banking industry.
Removed
As of March 31, 2022, the HL Voting Trust controlled approximately 78.9% of the total voting power of the Company. 9 Table of Contents Lock-Up Agreements In connection with the IPO and subsequent grants of Class B common stock, each HL Holder depositing shares of our common stock into the HL Voting Trust also entered into an individual lock-up agreement with the Company.
Added
Vietnam In Vietnam, Houlihan Lokey provides unregulated corporate finance advisory services through Houlihan Lokey Vietnam LLC.
Removed
Under these lock-up agreements, shares of our common stock deposited into the HL Voting Trust and beneficially owned by the HL Holders generally were locked up for a period of three years following the effective date of the IPO, after which these shares become transferable in three equal installments on each of the third, fourth and fifth anniversaries of the IPO; provided that shares of our common stock held by managing directors and certain senior corporate officers of the Company whose employment with us or any of our subsidiaries terminated prior to the third anniversary of the IPO for reasons other than death or disability generally are subject to transfer restrictions, and are ineligible to participate in any follow-on offerings, in each case, through the seventh anniversary of the IPO.
Added
We maintain policies, procedures and internal controls intended to comply with those regulations.
Removed
The fifth anniversary of the IPO occurred on August 18, 2020, meaning that, except with respect to shares held by thirteen managing directors and senior corporate officers whose employment terminated prior to the third anniversary of the IPO and whose shares will remain subject to the lock-up until the seventh anniversary of the IPO, all shares of Class B common stock held by the HL Holders are now no longer subject to the IPO lock-up agreements.
Added
While we are not aware of any misstatements regarding any industry, market or similar data presented herein, such data involve uncertainties and are subject to change based on various factors, including those discussed under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Form 10-K.
Removed
Notwithstanding the foregoing, the lock-up agreements provide that: • up to 10% of each HL Holder’s shares held through the HL Voting Trust may be transferred for the purpose of charitable gifts and transfers to various family trusts for estate planning purposes, with any shares transferred under this exception reducing the number of shares that become transferable on the next transferability date; and • our board of directors may authorize sales in underwritten offerings in accordance with the terms of the registration rights agreement entered into between HL and the HL Holders; provided that any shares sold under this exception will reduce the number of shares that become transferable on the next transferability date.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

45 edited+19 added−21 removed138 unchanged
Biggest changeOur ability to conduct business and our operating results, including compliance costs, may be adversely affected as a result of any new requirements imposed by the SEC, FINRA or other United States or foreign governmental regulatory authorities or self-regulatory organizations that regulate financial services firms or supervise financial markets.
Biggest changeThe full extent of the effects of these actions and of legislative and regulatory initiatives (including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)) implemented in connection with, and as a result of, such extraordinary disruption and volatility is uncertain, both as to the financial markets and participants in general, and as to us in particular. 17 Table of Contents Our ability to conduct business and our operating results, including compliance costs, may be adversely affected as a result of any new requirements imposed by the SEC, FINRA or other United States or foreign governmental regulatory authorities or self-regulatory organizations that regulate financial services firms or supervise financial markets.
Our international operations carry special financial and business risks, which could include the following: • greater difficulties in managing and staffing foreign operations; • fluctuations in foreign currency exchange rates that could adversely affect our results; • unexpected changes in trading policies, regulatory requirements, tariffs and other barriers; • cultural and language barriers and the need to adopt different business practices in different geographic areas; • longer transaction cycles; • higher operating costs; • local labor conditions and regulations; • adverse consequences or restrictions on the repatriation of earnings; • potentially adverse tax consequences, such as trapped foreign losses; • potentially less stable political and economic environments; • terrorism, political hostilities, war and other civil disturbances or other catastrophic events, such as the recent Russian invasion of Ukraine and the resulting war, that reduce business activity; and • difficulty collecting fees.
Our international operations carry special financial and business risks, which could include the following: • greater difficulties in managing and staffing foreign operations; • fluctuations in foreign currency exchange rates that could adversely affect our results; • unexpected and costly changes in trading policies, regulatory requirements, tariffs and other barriers; • cultural and language barriers and the need to adopt different business practices in different geographic areas; • longer transaction cycles; • higher operating costs; • local labor conditions and regulations; • adverse consequences or restrictions on the repatriation of earnings; • potentially adverse tax consequences, such as trapped foreign losses; • potentially less stable political and economic environments; • terrorism, political hostilities, war and other civil disturbances or other catastrophic events, such as the Russian invasion of Ukraine and the resulting war, that reduce business activity; and • difficulty collecting fees.
Certain provisions of our amended and restated certificate of incorporation and our amended and restated bylaws that could prevent or delay a change in control of our company include: • the ability to issue “blank check” preferred stock, which could increase the number of outstanding shares and thwart a takeover attempt; • a classified board of directors so that not all members of our board of directors are elected at one time; • the ability to remove directors only for cause; 20 Table of Contents • no use of cumulative voting for the election of directors; • no ability of stockholders to call special meetings; • supermajority voting provisions for stockholder approval of amendments to our certificate of incorporation and by-laws; • the requirement that, to the fullest extent permitted by law and unless we agree otherwise, certain proceedings against or involving us or our directors, officers or employees be brought exclusively in the Court of Chancery in the State of Delaware; • the ability of stockholders to take action by written consent; and • advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Certain provisions of our amended and restated certificate of incorporation and our amended and restated bylaws that could prevent or delay a change in control of our company include: • the ability to issue “blank check” preferred stock, which could increase the number of outstanding shares and thwart a takeover attempt; • a classified board of directors so that not all members of our board of directors are elected at one time; • the ability to remove directors only for cause; • no use of cumulative voting for the election of directors; • no ability of stockholders to call special meetings; • supermajority voting provisions for stockholder approval of amendments to our certificate of incorporation and by-laws; • the requirement that, to the fullest extent permitted by law and unless we agree otherwise, certain proceedings against or involving us or our directors, officers or employees be brought exclusively in the Court of Chancery in the State of Delaware; • the ability of stockholders to take action by written consent; and • advance notice and duration of ownership requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Although we may take measures to mitigate the impact of this inflation, if these measures are not effective our business, financial condition, results of operations and liquidity could be materially adversely affected.
Although we may take measures to mitigate the impact of inflation, if these measures are not effective our business, financial condition, results of operations and liquidity could be materially adversely affected.
Although we determined that it is not more likely than not that the fair values of our goodwill and intangible assets were less than their carrying values during fiscal 2022 and fiscal 2021, annual impairment reviews of indefinite-lived intangible assets or any future impairment of goodwill or other intangible assets would result in a non-cash charge against earnings, which would adversely affect our results of operations.
Although we determined that it is not more likely than not that the fair values of our goodwill and intangible assets were less than their carrying values during fiscal 2023 and fiscal 2022, annual impairment reviews of indefinite-lived intangible assets or any future impairment of goodwill or other intangible assets would result in a non-cash charge against earnings, which would adversely affect our results of operations.
If our international business increases relative to our total business, these factors could have a more pronounced effect on our operating results or growth prospects. 13 Table of Contents In recent years, the United States Department of Justice and the SEC have devoted greater resources to enforcement of the FCPA.
If our international business increases relative to our total business, these factors could have a more pronounced effect on our operating results or growth prospects. 12 Table of Contents In recent years, the United States Department of Justice and the SEC have devoted greater resources to enforcement of the FCPA.
The impact of the conflict is currently unknown and could intensify other risks described herein, including cybersecurity-related risks, and otherwise have a material adverse effect on our business, financial condition and results of operations. 23 Table of Contents Item 1B. Unresolved Staff Comments None.
The impact of the conflict is currently unknown and could intensify other risks described herein, including cybersecurity-related risks, and otherwise have a material adverse effect on our business, financial condition and results of operations. 22 Table of Contents Item 1B. Unresolved Staff Comments None.
If we are unable to successfully manage these risks, we will not be able to implement our growth strategy, which ultimately could materially adversely affect our business, financial condition and results of operations. 12 Table of Contents In the case of joint ventures, we are subject to additional risks and uncertainties relating to governance and controls.
If we are unable to successfully manage these risks, we will not be able to implement our growth strategy, which ultimately could materially adversely affect our business, financial condition and results of operations. In the case of joint ventures, we are subject to additional risks and uncertainties relating to governance and controls.
A significant reduction in the number of fee-paying clients and/or the size of transactions on which we are advising in any given period could reduce our revenue and adversely affect our operating results in such period. Our clients may be unable to pay us for our services.
A significant reduction in the number of fee-paying clients and/or the size of transactions on which we are advising in any given period could reduce our revenue and adversely affect our operating results in such period. 15 Table of Contents Our clients may be unable to pay us for our services.
As a participant in the financial services industry, we are subject to extensive regulation in the United States and internationally. We are subject to regulation by governmental and self-regulatory organizations in the jurisdictions in which we operate.
As a participant in the financial services industry, we are subject to extensive regulation in the United States and internationally. We are subject to regulation by governmental and self-regulatory organizations in many of the jurisdictions in which we operate.
Because these factors are ever changing, due to market and general business conditions, our goodwill and indefinite-lived intangible assets may be impaired in future periods. Our international operations are subject to certain risks, which may affect our revenue. In fiscal 2022, we earned approximately 26% of our revenue from our international operations.
Because these factors are ever changing, due to market and general business conditions, our goodwill and indefinite-lived intangible assets may be impaired in future periods. Our international operations are subject to certain risks, which may affect our revenue. In fiscal 2023, we earned approximately 29% of our revenue from our international operations.
We accrued net bad debt expense of $3.7 million and $7.3 million in fiscal 2022 and 2021, respectively, related to uncollectible or doubtful accounts receivable and unbilled work in progress. We may not be able to generate sufficient cash in the future to service any future indebtedness.
We accrued net bad debt expense of $6.4 million and $3.7 million in fiscal 2023 and 2022, respectively, related to uncollectible or doubtful accounts receivable and unbilled work in progress. We may not be able to generate sufficient cash in the future to service any future indebtedness.
In response, market interest rates have risen in recent periods. While the timing and impact of rising interest rates are unknown, a continued increase in market interest rates could have an adverse effect on our transaction volumes, results of operations and financial condition.
While the timing and impact of rising interest rates are unknown, a continued increase in market interest rates could have an adverse effect on our transaction volumes, results of operations and financial condition.
The future market and economic climate may deteriorate because of many factors beyond our control, including rising interest rates or inflation, terrorism or political uncertainty. For example, the U.S. Federal Reserve raised the federal funds interest rate in March 2022 and May 2022 and has signaled concerns with respect to inflation.
The future market and economic climate may deteriorate because of many factors beyond our control, including rising interest rates or inflation, terrorism or political uncertainty. For example, the U.S. Federal Reserve has raised the federal funds interest rate and has signaled concerns with respect to inflation. In response, market interest rates have risen in recent periods.
As of March 31, 2022, we only had $75.4 million of other liabilities and loans payable to former shareholders, but may incur additional debt in the future. Our ability to make scheduled payments on or to refinance our debt obligations will depend on our business, financial condition and results of operations.
As of March 31, 2023, we had $60.1 million of other liabilities and loans payable to former shareholders, but may incur additional debt in the future. Our ability to make scheduled payments on or to refinance our debt obligations will depend on our business, financial condition and results of operations.
As of March 31, 2022, the HL Holders through the HL Voting Trust beneficially owned 18,866,058 shares of common stock representing approximately 27.3% of the economic interest, and controlled 78.9% of the voting power of our outstanding capital stock.
As of March 31, 2023, the HL Holders through the HL Voting Trust beneficially owned 18,866,058 shares of common stock representing approximately 27.3% of the economic interest, and controlled 79.1% of the voting power of our outstanding capital stock.
In a strong economic environment, the volume and size of recapitalization and restructuring transactions may decrease, thereby reducing the demand for the services provided by our FR business segment and increasing price competition among financial services companies seeking such engagements.
On the other hand, strong market or economic conditions may adversely affect our FR group. In a strong environment, the volume and size of recapitalization and restructuring transactions may decrease, thereby reducing the demand for the services provided by our FR business segment and increasing price competition among financial services companies seeking such engagements.
If, for any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, we will not be able to implement our growth strategy, which ultimately could materially adversely affect our business, financial condition and results of operations.
If, for any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, we will not be able to implement our growth strategy, which ultimately could materially adversely affect our business, financial condition and results of operations. 14 Table of Contents We may enter into new lines of business, which may result in additional risks and uncertainties in our business.
We may enter into new lines of business, which may result in additional risks and uncertainties in our business. We currently generate substantially all of our revenue from advisory services. However, while we have no current plans to do so, we may grow our business by entering into new lines of business other than advisory services.
We currently generate substantially all of our revenue from advisory services. However, while we have no current plans to do so, we may grow our business by entering into new lines of business other than advisory services.
As of March 31, 2022, 18,866,058 shares of our Class A common stock issuable upon conversion of outstanding Class B common stock (including restricted stock units) are eligible for sale, subject to the restrictions under the lock-up agreements described in the preceding sentence, and subject to certain restrictions under the Securities Act of 1933, as amended (the “Securities Act”).
As of March 31, 2023, 18,866,058 shares of our Class A common stock issuable upon conversion of outstanding Class B common stock (including restricted stock units) are eligible for sale, subject to certain restrictions under the Securities Act of 1933, as amended (the “Securities Act”).
We intend to continue to rely on some or all of these exemptions. As a result, at the present time, our compensation and nominating and corporate governance committees do not consist entirely of independent directors, although a majority of our board of directors consists of independent directors.
We intend to continue to rely on some or all of these exemptions. While at the present time, a majority of our board of directors consists of independent directors and our compensation and nominating and corporate governance committees consist entirely of independent directors, that may not continue to be the case.
Fluctuations in foreign currency exchange rates led to a net loss in cash of $(16.8) million for fiscal 2022, compared to a net gain in cash of $13.2 million for fiscal 2021.
Fluctuations in foreign currency exchange rates led to a net loss in cash of $(12.1) million for fiscal 2023, compared to a net loss in cash of $(16.8) million for fiscal 2022.
For example, in October 2021 we acquired GCA Corporation for approximately $589.6 million, which significantly expanded our presence in Asia and Europe and there can be no assurance that we will be able to successfully integrate GCA Corporation with our business or otherwise realize the expected benefits of the acquisition.
For example, in October 2021 we acquired GCA Corporation for approximately $589.6 million, which significantly expanded our presence in Asia and Europe and there can be no assurance that we will be able realize the full benefits of the acquisition, including the synergies, operating efficiencies, or sales or growth opportunities that are expected.
The holders of our Class B common stock will also be entitled to a separate vote in the event we seek to amend our amended and restated certificate of incorporation to increase or decrease the par value of a class of our common stock or in a manner that alters or changes the powers, preferences or special rights of the Class B common stock in a manner that affects its holders adversely.
Additionally, the holders of our Class B common stock may cause us to make strategic decisions or pursue acquisitions that could involve risks to holders of our Class A common stock or may not be in the best interests of holders of our Class A common stock. 18 Table of Contents The holders of our Class B common stock will also be entitled to a separate vote in the event we seek to amend our amended and restated certificate of incorporation to increase or decrease the par value of a class of our common stock or in a manner that alters or changes the powers, preferences or special rights of the Class B common stock in a manner that affects its holders adversely.
For example, we may be dependent upon, and subject to, liability, losses or reputational damage relating to personnel, controls and systems that are not fully under our control. In addition, disagreements between us and our joint venture partners may negatively impact our business and profitability.
For example, we may be dependent upon, and subject to, liability, losses or reputational damage relating to personnel, controls and systems that are not fully under our control.
In addition, our business is subject to periodic examination by various regulatory authorities, and we cannot predict the outcome of any such examinations. 19 Table of Contents Risks Related to Our Organizational Structure The dual class structure of our common stock and the ownership of our Class B common stock by the HL Holders through the HL Voting Trust have the effect of concentrating voting control with the HL Voting Trust for the foreseeable future, which limits the ability of our Class A common stockholders to influence corporate matters.
Risks Related to Our Organizational Structure The dual class structure of our common stock and the ownership of our Class B common stock by the HL Holders through the HL Voting Trust have the effect of concentrating voting control with the HL Voting Trust for the foreseeable future, which limits the ability of our Class A common stockholders to influence corporate matters.
The trading price of our Class A common stock may be volatile or may decline regardless of our operating performance, which could cause the value of our Class A common stock to decline.
The reduction in or elimination of our dividend payments could have a negative effect on our stock price. 20 Table of Contents The trading price of our Class A common stock may be volatile or may decline regardless of our operating performance, which could cause the value of our Class A common stock to decline.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred. 17 Table of Contents Risks Related to our Industry We face strong competition from other financial advisory firms, many of which have the ability to offer clients a wider range of products and services than those we offer, which could cause us to lose engagements to competitors and subject us to pricing pressures that could materially adversely affect our revenue and profitability.
Risks Related to our Industry We face strong competition from other financial advisory firms, many of which have the ability to offer clients a wider range of products and services than those we offer, which could cause us to lose engagements to competitors and subject us to pricing pressures that could materially adversely affect our revenue and profitability.
Our dividend payments may change from time to time, and we may not continue to declare dividends in any particular amounts or at all. The reduction in or elimination of our dividend payments could have a negative effect on our stock price.
Our dividend payments may change from time to time, and we may not continue to declare dividends in any particular amounts or at all.
In addition, the General Corporation Law of the State of Delaware (the “DGCL”), to which we are subject, prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock.
In addition, the General Corporation Law of the State of Delaware (the “DGCL”), to which we are subject, prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock. 19 Table of Contents The provision of our amended and restated certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors, officers and stockholders.
If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business. 22 Table of Contents We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock.
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock.
Our primary competitors include bulge-bracket institutions, many of which have far greater financial and other resources and greater name recognition than we do and have a greater range of products and services, more extensive marketing resources, larger customer bases, more managing directors to serve their clients' needs, as well as greater global reach and more established relationships with their customers than we have.
If we are unable to compete successfully with our existing competitors or with any new competitors, we will not be able to implement our growth strategy, which ultimately could materially adversely affect our business, financial condition and results of operations. 16 Table of Contents Our primary competitors include bulge-bracket institutions, many of which have far greater financial and other resources and greater name recognition than we do and have a greater range of products and services, more extensive marketing resources, larger customer bases, more managing directors to serve their clients' needs, as well as greater global reach and more established relationships with their customers than we have.
As a financial services firm, we are materially affected by conditions in the global financial markets and economic conditions throughout the world. Unfavorable market or economic conditions may adversely affect our businesses; in particular, where revenue generated is directly related to the volume and size of the transactions in which we are involved.
Unfavorable market or economic conditions, including reduced expectations for, or further declines in, the U.S. and global economic outlook, may adversely affect our businesses; in particular, where revenue generated is directly related to the volume and size of the transactions in which we are involved.
If our employees engage in misconduct or fail to follow appropriate security measures, we could be subject to legal liability and reputational harm, which could impair our ability to attract and retain clients and in turn materially adversely affect our business. 15 Table of Contents We may be unable to execute on our growth initiatives, business strategies, or operating plans.
Should any employee not follow appropriate security measures, the improper release or use of confidential information could result. If our employees engage in misconduct or fail to follow appropriate security measures, we could be subject to legal liability and reputational harm, which could impair our ability to attract and retain clients and in turn materially adversely affect our business.
The potential issuance of preferred stock may delay or prevent a change in control of us, discourage bids for our Class A common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our Class A common stock.
The potential issuance of preferred stock may delay or prevent a change in control of us, discourage bids for our Class A common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our Class A common stock. 21 Table of Contents General Risks Consequences of the current conflict between Russia and Ukraine could have a material adverse effect on our business, financial condition, liquidity and results of operations.
Substantial legal liability or significant regulatory action against us could have material adverse financial effects or cause significant reputational harm to us, which could seriously harm our business prospects, financial condition and results of operations. 18 Table of Contents Extensive and evolving regulation of our business and the businesses of our clients exposes us to the potential for significant penalties and fines due to compliance failures, increases our costs and may result in limitations on the manner in which our business is conducted.
Extensive and evolving regulation of our business and the businesses of our clients exposes us to the potential for significant penalties and fines due to compliance failures, increases our costs and may result in limitations on the manner in which our business is conducted.
Moreover, in the period following an economic downturn, the volume and size of transactions typically takes time to recover and lags a recovery in market and economic conditions. On the other hand, strong market or economic conditions may adversely affect our FR group.
Moreover, in the period following an economic downturn, the volume and size of transactions typically takes time to recover and lags a recovery in market and economic conditions. In particular, our clients engaging in M&A transactions often rely on access to the credit and/or capital markets to finance their transactions.
Goodwill is the excess of cost over the fair market value of net assets acquired in business combinations. We review goodwill and intangible assets at least annually for impairment. We may need to perform impairment tests more frequently if events occur or circumstances indicate that the carrying amount of these assets may not be recoverable.
We may need to perform impairment tests more frequently if events occur or circumstances indicate that the carrying amount of these assets may not be recoverable.
If our systems or third-party systems on which we rely are compromised, do not operate properly or are disabled, we could suffer a disruption of our business, financial losses, liability to clients, regulatory sanctions and damage to our reputation. 16 Table of Contents In addition, a disaster or other business continuity problem, such as a pandemic, other man-made or natural disaster or disruption involving electronic communications or other services used by us or third parties with whom we conduct business, could lead us to experience operational challenges.
In addition, a disaster or other business continuity problem, such as a pandemic, other man-made or natural disaster or disruption involving electronic communications or other services used by us or third parties with whom we conduct business, could lead us to experience operational challenges.
Although we currently pay a quarterly cash dividend to our stockholders, we have no obligation to do so, and our dividend policy may change at any time. Returns on stockholders' investments will primarily depend on the appreciation, if any, in the price of our Class A common stock.
While we currently pay a quarterly cash dividend to our stockholders, we may change our dividend policy at any time and we may not continue to declare cash dividends. Although we currently pay a quarterly cash dividend to our stockholders, we have no obligation to do so, and our dividend policy may change at any time.
We are subject to reputational and legal risk arising from, among other things, actual or alleged employee misconduct, conflicts of interest, failure to meet client expectations or other operational failures. As a professional services firm, our ability to secure new engagements is substantially dependent on our reputation and the individual reputations of our financial professionals.
The departure of a number of Managing Directors or groups of senior professionals could have a material adverse effect on our business, financial condition and results of operations. 13 Table of Contents We are subject to reputational and legal risk arising from, among other things, actual or alleged employee misconduct, conflicts of interest, failure to meet client expectations or other operational failures.
Goodwill and other intangible assets represent a significant portion of our assets, and an impairment of these assets could have a material adverse effect on our financial condition and results of operations. Goodwill and other intangible assets represent a significant portion of our assets, and totaled $1.32 billion as of March 31, 2022.
In addition, disagreements between us and our joint venture partners may negatively impact our business and profitability. 11 Table of Contents Goodwill and other intangible assets represent a significant portion of our assets, and an impairment of these assets could have a material adverse effect on our financial condition and results of operations.
We are executing on a number of growth initiatives, strategies and operating plans designed to enhance our business. For example, we intend to continue to expand our platform into new industry and product sectors, both organically and through acquisitions, and to expand our existing expertise into new geographies.
For example, we intend to continue to expand our platform into new industry and product sectors, both organically and through acquisitions, and to expand our existing expertise into new geographies. The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate.
Item 1A. Risk Factors Risks Related to Our Business A substantial portion of our revenue is derived from advisory engagements in our CF and FR business segments, including engagements under which our fees include a significant component based upon goals, such as the completion of a transaction.
In addition, the operating environment and public trading prices of financial services sector securities can be highly correlated, in particular in times of stress, which may adversely affect the trading price of our Class A common stock and potentially our results of operations. 10 Table of Contents A substantial portion of our revenue is derived from advisory engagements in our CF and FR business segments, including engagements under which our fees include a significant component based upon goals, such as the completion of a transaction.
As a financial services firm, we are materially affected by conditions in the global financial markets and economic conditions throughout the world.
Item 1A. Risk Factors Risks Related to Our Business Changing market conditions can adversely affect our business in many ways, including by reducing the volume of the transactions involving our business, which could materially reduce our revenue. As a financial services firm, we are materially affected by conditions in the global financial markets and economic conditions throughout the world.
Removed
In addition, even if our operations are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, operating efficiencies, or sales or growth opportunities that are expected.
Added
The uncertainty of available credit and interest rates and the volatility of the capital markets and the fact that we do not provide financing or otherwise commit capital to clients can adversely affect the size, volume, timing and ability of such clients to successfully complete M&A transactions and adversely affect our CF and FVA groups.
Removed
The departure of a number of Managing Directors or groups of senior professionals could have a material adverse effect on our business, financial condition and results of operations. 14 Table of Contents Changing market conditions can adversely affect our business in many ways, including by reducing the volume of the transactions involving our business, which could materially reduce our revenue.
Added
In addition, our profitability would be adversely affected due to our fixed costs and the possibility that we would be unable to reduce our variable costs without reducing revenue or within a timeframe sufficient to offset any decreases in revenue relating to changes in market and economic conditions.
Removed
Should any employee not follow appropriate security measures, the improper release or use of confidential information could result.
Added
In addition, recently, concerns have arisen with respect to the financial condition of a number of banking organizations in the United States, in particular those with exposure to certain types of depositors and large portfolios of investment securities.
Removed
The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate.
Added
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed receiver of SVB. On March 12, 2023, the FDIC was appointed receiver of Signature Bank.
Removed
Each revenue-generating engagement typically is separately solicited, awarded and negotiated. If we are unable to compete successfully with our existing competitors or with any new competitors, we will not be able to implement our growth strategy, which ultimately could materially adversely affect our business, financial condition and results of operations.
Added
While we do not have any exposure to SVB or Signature Bank, we do maintain our cash at financial institutions, often in balances that exceed the current FDIC insurance limits.
Removed
The full extent of the effects of these actions and of legislative and regulatory initiatives (including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)) implemented in connection with, and as a result of, such extraordinary disruption and volatility is uncertain, both as to the financial markets and participants in general, and as to us in particular.
Added
If other banks and financial institutions enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and investments, including transferring funds, making payments or receiving funds, may be threatened and could have a material adverse effect on our business and financial condition.
Removed
Additionally, the holders of our Class B common stock may cause us to make strategic decisions or pursue acquisitions that could involve risks to holders of our Class A common stock or may not be in the best interests of holders of our Class A common stock.
Added
Goodwill and other intangible assets represent a significant portion of our assets, and totaled $1.29 billion as of March 31, 2023. Goodwill is the excess of cost over the fair market value of net assets acquired in business combinations. We review goodwill and intangible assets at least annually for impairment.
Removed
The provision of our amended and restated certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors, officers and stockholders.
Added
As a professional services firm, our ability to secure new engagements is substantially dependent on our reputation and the individual reputations of our financial professionals.
Removed
Certain former employees that own 723,834 shares of Class B common stock are subject to lock-up agreements that restrict their ability to transfer shares of our capital stock until August 18, 2022.
Added
We may be unable to execute on our growth initiatives, business strategies, or operating plans. We are executing on a number of growth initiatives, strategies and operating plans designed to enhance our business.
Removed
Stockholders who are subject to any of the lock-up agreements described above may be permitted to sell shares prior to the expiration of the applicable lock-up agreement in certain circumstances or as a result of a waiver approved by the Board of Directors. 21 Table of Contents While we currently pay a quarterly cash dividend to our stockholders, we may change our dividend policy at any time and we may not continue to declare cash dividends.
Added
If our systems or third-party systems on which we rely are compromised, do not operate properly or are disabled, we could suffer a disruption of our business, financial losses, liability to clients, regulatory sanctions and damage to our reputation.
Removed
General Risks The scale, scope, and duration of the impact of the COVID-19 pandemic on our business are unpredictable and depend on a number of factors outside of our control. The rapid, worldwide spread of a novel strain of coronavirus and the pandemic caused thereby (collectively, “COVID-19”) has created global economic disruption and uncertainty.
Added
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.
Removed
While COVID-19 did not have a material adverse impact on our business in fiscal 2022, the scale, scope, and duration of the impact of the COVID-19 pandemic are unpredictable and the prolonged impact of COVID-19 could heighten the impact of one or more other risk factors described herein.
Added
Each revenue-generating engagement typically is separately solicited, awarded and negotiated.
Removed
During periods of unfavorable market or economic conditions, the volume and value of M&A and capital markets transactions decreases, thereby reducing the demand for our M&A and capital markets advisory services and increasing price competition among financial services companies seeking such engagements.
Added
Substantial legal liability or significant regulatory action against us could have material adverse financial effects or cause significant reputational harm to us, which could seriously harm our business prospects, financial condition and results of operations.
Removed
The continued impact of the pandemic on our business is largely dependent on efforts to stem the spread of COVID-19, including governmental efforts to distribute vaccines and overall vaccination rates in the areas in which we operate.
Added
For example, on May 10, 2023, the staff of the SEC's Division of Enforcement proposed a potential settlement with the Company to resolve an investigation of the Company's compliance with records preservation requirements related to business communications sent over off-channel electronic messaging platforms.
Removed
We have implemented various initiatives to reduce the impact of COVID-19 on our firm, such as employees working remotely from home, while also seeking to maintain business continuity. We face various cybersecurity and other operational risks related to our business on a day to day basis, which are heightened by COVID-19.
Added
The SEC has conducted similar investigations of other financial institutions as part of a widely publicized industry sweep that has included publicly announced settlements with 14 firms to date.
Removed
We rely heavily on financial, accounting, communication, and other information technology systems, including, without limitation, cloud based storage systems, and the people who operate them. These systems, including the systems of third parties on whom we rely, may experience a disruption as a result of COVID-19 or increased cybersecurity threats.
Added
The Company is cooperating fully with the SEC and has notified the SEC's Division of Enforcement of its present intention to agree to a settlement to resolve the investigation that includes a $15 million civil penalty.
Removed
If we were unable to timely and successfully recover from such a disruption, our business could be materially impacted and could cause material financial loss, regulatory actions, reputational harm or legal liability. An extended period of remote working by our employees could strain our technology resources and introduce operational risks, including heightened cybersecurity risk.
Added
In addition, our business is subject to periodic examination by various regulatory authorities, and we cannot predict the outcome of any such examinations.
Removed
Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic. COVID-19 presents a threat to our employees’ well-being.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease the space in the United States for our offices in Atlanta, Boston, Chicago, Dallas, Houston, McLean (Virginia), Miami, Minneapolis, New York City, and San Francisco; and internationally in Amsterdam, Beijing, Dubai, Frankfurt, Fukuoka, Ho Chi Minh City, Hong Kong, Lausanne, London, Madrid, Manchester, Milan, Mumbai, Munich, Nagoya, Osaka, Paris, Shanghai, Singapore, Stockholm, Sydney, Tel Aviv, Tokyo and Zurich.
Biggest changeWe lease the space in the United States for our offices in Atlanta, Boston, Chicago, Dallas, Houston, McLean (Virginia), Miami, Minneapolis, New York City, and San Francisco; and internationally in Amsterdam, Antwerp, Beijing, Dubai, Frankfurt, Fukuoka, Gurugram, Ho Chi Minh City, Hong Kong, London, Madrid, Manchester, Milan, Mumbai, Munich, Nagoya, Osaka, Paris, São Paulo, Shanghai, Singapore, Stockholm, Sydney, Tel Aviv, Tokyo and Zurich.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed4 unchanged
Biggest changeWhere appropriate, provisions for losses are established in accordance with Accounting Standards Codification ("ASC") 450, “Contingencies” when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change. Item 4. Mine Safety Disclosures Not applicable. 24 Table of Contents PART II
Biggest changeWhere appropriate, provisions for losses are established in accordance with Accounting Standards Codification ("ASC") 450, “Contingencies” when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change. Item 4. Mine Safety Disclosures Not applicable. 23 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 24 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 36 Item 8. Financial Statements 37
Biggest changeItem 4. Mine Safety Disclosures 23 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 35 Item 8. Financial Statements 36

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+3 added−3 removed7 unchanged
Biggest changeThe foregoing issuance of unregistered equity securities did not involve any underwriters, underwriting discounts or commissions, or any public offering, and, to the extent any such issuances constituted a sale of unregistered equity securities, we believe that such transaction was originally exempt from the registration requirements of the Securities Act in reliance on Rule 701 promulgated under the Securities Act as a transaction pursuant to a compensatory benefit plan approved by our board of directors, or Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering, based in part on representations from the recipients regarding their investment intention, sophistication, net worth and access to information concerning us. 25 Table of Contents Stock Performance The stock performance graph below compares the cumulative total stockholder return on our Class A common stock from March 31, 2017 through March 31, 2022, with that of the S&P 500 Index and the S&P Financial Index.
Biggest changeThe foregoing issuance of unregistered equity securities did not involve any underwriters, underwriting discounts or commissions, or any public offering, and, to the extent any such issuances constituted a sale of unregistered equity securities, we believe that such transaction was originally exempt from the registration requirements of the Securities Act in reliance on Rule 701 promulgated under the Securities Act as a transaction pursuant to a compensatory benefit plan approved by our board of directors, or Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering, based in part on representations from the recipients regarding their investment intention, sophistication, net worth and access to information concerning us. 24 Table of Contents Stock Performance The stock performance graph below compares the cumulative total stockholder return on our Class A common stock from March 29, 2018 through March 31, 2023, with that of the S&P 500 Index and the S&P 500 Financials Index.
As of May 23, 2022, there were approximately twenty eight holders of record of our Class A common stock and one holder of record of our Class B common stock. This does not include the number of shareholders that hold shares in "street-name" through banks or broker-dealers or through the HL Voting Trust.
As of May 23, 2023, there were approximately twenty-five holders of record of our Class A common stock and one holder of record of our Class B common stock. This does not include the number of shareholders that hold shares in "street-name" through banks or broker-dealers or through the HL Voting Trust.
The graph assumes $100 was invested in each of our Class A common stock, the S&P 500 Index and the S&P Financial Index on March 31, 2017. It also assumes that dividends were reinvested on the date of payment without payment of any commissions.
The graph assumes $100 was invested in each of our Class A common stock, the S&P 500 Index and the S&P 500 Financials Index on March 29, 2018. It also assumes that dividends were reinvested on the date of payment without payment of any commissions.
Unregistered Sales of Equity Securities and Use of Proceeds On January 10, 2022, the Company issued 9,847 shares of Class B common stock to certain former employees of a business acquired in 2019.
Unregistered Sales of Equity Securities and Use of Proceeds On January 12, 2023, the Company issued 11,258 shares of Class B common stock to certain former employees of a business acquired in 2019.
Removed
Purchases of Equity Securities The following table summarizes all of the repurchases of Houlihan Lokey, Inc. equity securities during the quarter ended March 31, 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased and Retired As Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) January 1, 2022 - January 31, 2022 307,338 $ 104.26 307,338 $ 136,977,763 February 1, 2022 - February 28, 2022 340,400 105.64 340,400 101,016,323 March 1, 2022 - March 31, 2022 596,727 96.53 596,727 43,411,495 Total 1,244,465 $ 100.93 1,244,465 $ 43,411,495 (1) The shares of Class A common stock repurchased through this program have been retired.
Added
On February 8, 2023, the Company issued 76,817 restricted shares of the Company's Class B common stock in connection with the acquisition of Oakley Advisory Limited.
Removed
In July 2021, the Company’s board of directors authorized an increase to the existing January 2021 share repurchase program, providing for share repurchases of a new aggregate amount of up to $250 million of the Company's Class A common stock and Class B common stock.
Added
The Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering and received no proceeds in connection with this issuance.
Removed
In April 2022 (after the periods for which disclosure is provided above), the Company’s board of directors authorized a replacement program to the existing July 2021 share repurchase program, which provides for share repurchases of a new aggregate amount of up to $500 million of the Company's Class A common stock and Class B common stock. 26 Table of Contents
Added
Purchases of Equity Securities The Company did not complete any share repurchases during the quarter ended March 31, 2023. As of March 31, 2023, the approximate dollar value of shares that may yet be purchased under the existing repurchase program is $482,657,397. 25 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

62 edited+12 added−6 removed35 unchanged
Biggest changeOur 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 March 31, 2022 and 2021, we had $144 million and $108 million of Accounts receivable, net of credit losses, respectively.
Biggest changeAs of each fiscal year end, a material portion of our Cash and cash equivalents is reserved to cover accrued, but unpaid bonuses, that are paid the following May and November. 31 Table of Contents 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.
Corporate expenses represent expenses that are not allocated to individual business segments such as office of the executives, accounting, information technology, compliance and legal, marketing, human capital, including related compensation expense for corporate employees. Business Environment and Outlook Economic and global financial conditions can materially affect our operational and financial performance.
Corporate expenses represent expenses that are not allocated to individual business segments such as office of the executives, accounting, information technology, legal and compliance, marketing, human capital, including related compensation expense for corporate employees. Business Environment and Outlook Economic and global financial conditions can materially affect our operational and financial performance.
Segment Profit may vary significantly between periods depending on the levels of collaboration among the different segments. (2) Corporate expenses represent expenses that are not allocated to individual business segments such as office of the executives, accounting, information technology, compliance, legal, marketing, and human capital.
Segment Profit may vary significantly between periods depending on the levels of collaboration among the different segments. (2) Corporate expenses represent expenses that are not allocated to individual business segments such as office of the executives, accounting, information technology, legal and compliance, marketing, and human capital.
We advise public and private institutions on a wide variety of situations, including buy-side and sell-side transactions, as well as leveraged loans, private mezzanine debt, high-yield debt, initial public offerings, follow-ons, convertibles, equity private placements, private equity, and liability management transactions, and advise financial sponsors on all types of transactions. The majority of our CF revenues consists of Completion Fees.
We advise public and private institutions on a wide variety of situations, including buy-side and sell-side transactions, as well as leveraged loans, private mezzanine debt, high-yield debt, initial public offerings, follow-ons, convertibles, equity private placements, private equity, and liability management transactions, and advise financial sponsors on all types of transactions. The majority of our CF revenues consists of Completion Fees.
A CF transaction can fail to be completed for many reasons that are outside of our control. In these instances, our fees are generally limited to Retainer Fees and in some cases Progress Fees that may have been received.
A CF transaction can fail to be completed for many reasons that are outside of our control. In these instances, our fees are generally limited to Retainer Fees and in some cases Progress Fees that may have been received.
FR provides advice to debtors, creditors and other parties-in-interest in connection with recapitalization/deleveraging transactions implemented both through bankruptcy proceedings and through out-of-court exchanges, consent solicitations or other mechanisms, as well as in distressed mergers and acquisitions and capital markets activities.
FR provides advice to debtors, creditors and other parties-in-interest in connection with recapitalization/deleveraging transactions implemented both through bankruptcy proceedings and through out-of-court exchanges, consent solicitations or other mechanisms, as well as in distressed mergers and acquisitions and capital markets activities.
As part of these engagements, our FR business segment offers a wide range of advisory services to our clients, including: the structuring, negotiation, and confirmation of plans of reorganization; structuring and analysis of exchange offers; corporate viability assessment; dispute resolution and expert testimony; and procuring debtor-in-possession financing.
As part of these engagements, our FR business segment offers a wide range of advisory services to our clients, including: the structuring, negotiation, and confirmation of plans of reorganization; structuring and analysis of exchange offers; corporate viability assessment; dispute resolution and expert testimony; and procuring debtor-in-possession financing.
Although atypical, FR transactions can fail to be completed for many reasons that are outside of our control. In these instances, our fees are generally limited to the Retainer Fees and/or Progress Fees. FVA primarily provides valuations of various assets, including: companies; illiquid debt and equity securities; and intellectual property (among other assets and liabilities).
Although atypical, FR transactions can fail to be completed for many reasons that are outside of our control. In these instances, our fees are generally limited to the Retainer Fees and/or Progress Fees. FVA primarily provides valuations of various assets, including: companies; illiquid debt and equity securities; and intellectual property (among other assets and liabilities).
These valuations are used for financial reporting, tax reporting, and other purposes. In addition, our FVA business segment renders fairness opinions in connection with mergers and acquisitions and other transactions, and solvency opinions in connection with corporate spin-offs and dividend recapitalizations, and other types of financial opinions in connection with other transactions.
These valuations are used for financial reporting, tax reporting, and other purposes. In addition, our FVA business segment renders fairness opinions in connection with mergers and acquisitions and other transactions, and solvency opinions in connection with corporate spin-offs and dividend recapitalizations, and other types of financial opinions in connection with other transactions.
Also, our FVA business segment provides dispute resolution services to clients where fees are usually based on the hourly rates of our financial professionals. Unlike our CF or FR segments, the fees generated in our FVA segment are generally not contingent on the successful completion of a transaction.
Also, our FVA business segment provides dispute resolution services to clients where fees are usually based on the hourly rates of our financial professionals. Unlike our CF or FR segments, the fees generated in our FVA segment are generally not contingent on the successful completion of a transaction.
The amounts and useful lives assigned to acquisition-related intangible assets impact the amount and timing of future amortization expense. Recent Accounting Developments For additional information on recently issued accounting developments and their impact or potential impact on our consolidated financial statements, see Note 2 included in Part II, Item 8 of this Form 10-K. 35 Table of Contents
The amounts and useful lives assigned to acquisition-related intangible assets impact the amount and timing of future amortization expense. Recent Accounting Developments For additional information on recently issued accounting developments and their impact or potential impact on our consolidated financial statements, see Note 2 included in Part II, Item 8 of this Form 10-K. 34 Table of Contents
Results of Consolidated Operations The following is a discussion of our results of operations for the years ended March 31, 2022 and 2021. For a more detailed discussion of the factors that affected the revenues and the operating expenses of our CF, FR, and FVA business segments in these periods, see "Business Segments" below.
Results of Consolidated Operations The following is a discussion of our results of operations for the years ended March 31, 2023 and 2022. For a more detailed discussion of the factors that affected the revenues and the operating expenses of our CF, FR, and FVA business segments in these periods, see "Business Segments" below.
Reimbursements of certain out-of-pocket deal expenses are recorded on a gross basis and are therefore included in both Revenues and Operating expenses on the Consolidated Statements of Comprehensive Income. 28 Table of Contents Employee Compensation and Benefits Expense.
Reimbursements of certain out-of-pocket deal expenses are recorded on a gross basis and are therefore included in both Revenues and Operating expenses on the Consolidated Statements of Comprehensive Income. 27 Table of Contents Employee Compensation and Benefits Expense.
The decrease in revenues was primarily due to a decrease in the number of closed transactions, partially offset by an increase in the average transaction fee for the year ended March 31, 2022, compared with the year ended March 31, 2021.
The increase in revenues was primarily due to an increase in the number of closed transactions, partially offset by a decrease in the average transaction fee for the year ended March 31, 2023, compared with the year ended March 31, 2022.
As of March 31, 2022, we were, and expect to continue to be, in compliance with such covenants. The majority of the Company's payment obligations and commitments pertain to routine operating leases.
As of March 31, 2023, we were, and expect to continue to be, in compliance with such covenants. The majority of the Company's payment obligations and commitments pertain to routine operating leases.
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 March 31, 2022 and 2021. 33 Table of Contents Cash Flows Our operating cash flows are primarily influenced by the amount and timing of receipt of advisory fees and the payment of operating expenses, including payments of incentive compensation to our employees.
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 March 31, 2023 and 2022. 32 Table of Contents Cash Flows Our operating cash flows are primarily influenced by the amount and timing of receipt of advisory fees and the payment of operating expenses, including payments of incentive compensation to our employees.
The increase in revenues was primarily due to an increase in the number of fee events for the year ended March 31, 2022, compared with the year ended March 31, 2021.
The increase in revenues was primarily due to an increase in the number of fee events for the year ended March 31, 2023, compared with the year ended March 31, 2022.
Other (Income)/Expense, Net 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 2019 Line of Credit (defined herein), (iii) interest expense on the loan payable to affiliate, loans payable to former shareholders, and the loan payable to non-affiliates, (iv) equity income and/or gains or losses from funds and partnership interests where we have more than a minor ownership interest or more than minor influence over operations, but do not have a controlling interest and are not the primary beneficiary, and (v) gains and/or losses associated with the reduction/increase of earnout liabilities.
Other (Income)/Expense, Net 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), (iii) interest expense on the loan payable to affiliate, loans payable to former shareholders, and the loan payable to non-affiliates, (iv) equity income and/or gains or losses from funds and partnership interests where we have had more than a minor ownership interest or more than minor influence over operations, but do not have a controlling interest and are not the primary beneficiary, (v) gains and/or losses associated with the reduction/increase of earnout liabilities, and (vi) other miscellaneous non-operating expenses.
For discussion related to changes in financial condition and the results of operations for fiscal year 2020-related items, refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2021, which was filed with the Securities and Exchange Commission on May 21, 2021.
For discussion related to changes in financial condition and the results of operations for fiscal year 2021-related items, refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2022, which was filed with the Securities and Exchange Commission on May 27, 2022.
For the fiscal years ended March 31, 2022, 2021, and 2020, we earned revenues of $579 million, $333 million, and $184 million, respectively, from our international operations. 27 Table of Contents Based on historical experience, we believe current economic conditions provide a stable environment for M&A and capital markets activities, but the continued threat from inflation and the war in Ukraine provide a measure of uncertainty in the coming quarters.
For the fiscal years ended March 31, 2023, 2022, and 2021, we earned revenues of $520 million, $579 million, and $333 million, respectively, from our international operations. 26 Table of Contents Based on historical experience, we believe current economic conditions provide a stable environment for M&A and capital markets activities, but the continued threat from inflation and the war in Ukraine provide a measure of uncertainty in the coming quarters.
Subsequent to the end of fiscal 2022, our Board of Directors declared a quarterly cash dividend of $0.53 per share of common stock, payable on June 15, 2022 to shareholders of record as of the close of business on June 2, 2022.
Subsequent to the end of fiscal 2023, our Board of Directors declared a quarterly cash dividend of $0.55 per share of common stock, payable on June 15, 2023 to shareholders of record as of the close of business on June 2, 2023.
Our FVA business segment is one of the largest and most respected valuation, financial opinion and financial consulting practices in the United States. As of March 31, 2022, we served our clients globally with 1,686 financial professionals, including 289 Managing Directors.
Our FVA business segment is one of the largest and most respected valuation, financial opinion and financial consulting practices in the United States. As of March 31, 2023, we served our clients globally with 1,904 financial professionals, including 313 Managing Directors.
On August 23, 2019, the Company entered into a new syndicated revolving line of credit with the Bank of America, N.A. and certain other financial institutions party thereto, which allows for borrowings of up to $100 million (and, subject to certain conditions, provides the Company with an expansion option, which, if exercised in full, would provide for a total credit facility of $200 million) and matures on August 23, 2022 (the "2019 Line of Credit").
On August 23, 2019, the Company entered into a syndicated revolving line of credit with the Bank of America, N.A. and certain other financial institutions party thereto, which allows for borrowings of up to $100 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), which was amended by a First Amendment to Credit Agreement dated as of August 2, 2022, and matures on August 23, 2025 (the "HLI Line of Credit").
Financial and Valuation Advisory Year Ended March 31, 2022 Compared to the Year Ended March 31, 2021 Revenues for FVA were $284 million for the year ended March 31, 2022, compared with $188 million for the year ended March 31, 2021, representing an increase of 51%.
Financial and Valuation Advisory Year Ended March 31, 2023 Compared to the Year Ended March 31, 2022 Revenues for FVA were $287 million for the year ended March 31, 2023, compared with $284 million for the year ended March 31, 2022, representing an increase of 1%.
See “Risk Factors” for a discussion of some of the factors that can affect our performance. Our fiscal year ends on March 31 of each year. For the fiscal year ended March 31, 2022, we earned revenues of $2.27 billion, an increase of 49% from the $1.53 billion earned during the fiscal year ended March 31, 2021.
See “Risk Factors” for a discussion of some of the factors that can affect our performance. Our fiscal year ends on March 31 of each year. For the fiscal year ended March 31, 2023, we earned revenues of $1.81 billion, a decrease of (20)% from the $2.27 billion earned during the fiscal year ended March 31, 2022.
The increase in segment profit was primarily a result of higher revenues and lower compensation and non-compensation expenses as a percentage of revenues for the year ended March 31, 2022, compared with the year ended March 31, 2021. 31 Table of Contents Financial Restructuring Year Ended March 31, 2022 Compared to the Year Ended March 31, 2021 Revenues for FR were $393 million for the year ended March 31, 2022, compared with $535 million for the year ended March 31, 2021, representing a decrease of (27)%.
The decrease in segment profit was primarily a result of lower revenues and higher non-compensation expenses for the year ended March 31, 2023, compared with the year ended March 31, 2022. 30 Table of Contents Financial Restructuring Year Ended March 31, 2023 Compared to the Year Ended March 31, 2022 Revenues for FR were $396 million for the year ended March 31, 2023, compared with $393 million for the year ended March 31, 2022, representing an increase of 1%.
The Compensation Ratio was 62% and 64% for the years ended March 31, 2022 and 2021, respectively. Non-compensation expenses, as a component of operating expenses, were $248 million for the year ended March 31, 2022, compared with $146 million for the year ended March 31, 2021, an increase of 70%.
The Compensation Ratio was 63% and 62% for the years ended March 31, 2023 and 2022, respectively. Non-compensation expenses, as a component of operating expenses, were $320 million for the year ended March 31, 2023, compared with $248 million for the year ended March 31, 2022, an increase of 29%.
In our CF business segment, we believe we are an established leader in M&A and capital markets advisory services. Through our FR business segment, we advise on some of the largest and most complex restructurings around the world.
We operate in three segments: Corporate Finance ("CF"); Financial Restructuring ("FR"); and Financial and Valuation Advisory ("FVA"). In our CF business segment, we believe we are an established leader in M&A and capital markets advisory services. Through our FR business segment, we advise on some of the largest and most complex restructurings around the world.
Employee compensation and benefits expense, as a component of operating expenses, was $1,409 million for the year ended March 31, 2022, compared with $971 million for the year ended March 31, 2021, an increase of 45%. The increase in employee compensation and benefits expense was primarily due to the increase in revenues for the fiscal year.
Employee compensation and benefits expense, as a component of operating expenses, was $1,148 million for the year ended March 31, 2023, compared with $1,409 million for the year ended March 31, 2022, a decrease of (19)%. The decrease in employee compensation and benefits expense was primarily due to the decrease in revenues for the fiscal year.
Corporate Expenses Year Ended March 31, 2022 Compared to the Year Ended March 31, 2021 Corporate expenses were $182 million for the year ended March 31, 2022, compared with $113 million for the year ended March 31, 2021, representing an increase of 61%.
Corporate Expenses Year Ended March 31, 2023 Compared to the Year Ended March 31, 2022 Corporate expenses were $215 million for the year ended March 31, 2023, compared with $182 million for the year ended March 31, 2022, representing an increase of 18%.
We plan to continue to grow our firm across industry sectors, geographies and products to deliver quality advice and innovative solutions to our clients, both organically and through acquisitions. Acquisitions over the last several years include: Leonardo & Co.
We plan to continue to grow our firm across industry sectors, geographies and products to deliver quality advice and innovative solutions to our clients, both organically and through acquisitions.
The provision for income taxes for the year ended March 31, 2022 was $165.6 million, which reflected an effective tax rate of 27%. The provision for income taxes for the year ended March 31, 2021 was $96.5 million, which reflected an effective tax rate of 24%.
The provision for income taxes for the year ended March 31, 2023 was $69.8 million, which reflected an effective tax rate of 22%. The provision for income taxes for the year ended March 31, 2022 was $165.6 million, which reflected an effective tax rate of 27%.
Investing activities resulted in a net outflow of $(273.9) million for the year ended March 31, 2022, primarily due to cash consideration used for the acquisition of GCA. Financing activities resulted in a net outflow of $(459.1) million primarily due to share repurchases completed during the year ended March 31, 2022.
Financing activities resulted in a net outflow of $(459.1) million primarily due to share repurchases completed during the year ended March 31, 2022.
For our fiscal year ended March 31, 2021, revenues increased 32% over our fiscal year ended March 31, 2020 revenues of $1.16 billion.
For our fiscal year ended March 31, 2022, revenues increased 49% over our fiscal year ended March 31, 2021 revenues of $1.53 billion.
As of March 31, 2022 and 2021, we had $105 million and $118 million of Unbilled work in progress, net of credit losses, respectively.
As of March 31, 2023 and 2022, we had $182 million and $144 million of Accounts receivable, net of credit losses, respectively. As of March 31, 2023 and 2022, we had $115 million and $105 million of Unbilled work in progress, net of credit losses, respectively.
NV in November 2015 in Germany, the Netherlands and Spain, and Leonardo's investment banking operations in Italy in June 2019 (collectively, "Leonardo"), which enable us to provide a much greater breadth of services and coverage to our clients both in continental Europe and across the globe; Fidentiis Capital in November 2019, an independent advisory business providing independent corporate finance advisory services relating to mergers and acquisitions, capital raising, and financing; Freeman & Co. in December 2019, an independent advisory business providing mergers and acquisitions advisory, capital raising, and other investment banking advisory services for the financial services sector; MVP Capital, LLC, in August 2020, an independent advisory firm that provides a range of financial advisory services to clients in the technology, media, and telecommunications sectors; and in October 2021, GCA Corporation ("GCA"), a global technology-focused investment bank providing M&A advisory and capital markets advisory services in Europe, Japan/Asia, and the United States.
Acquisitions over the last several years include: Fidentiis Capital in November 2019, an independent advisory business providing corporate finance advisory services relating to mergers and acquisitions, capital raising, and financing; Freeman & Co. in December 2019, an independent advisory business providing mergers and acquisitions advisory, capital raising, and other investment banking advisory services for the financial services sector; MVP Capital, LLC, in August 2020, an independent advisory firm that provides a range of financial advisory services to clients in the technology, media, and telecommunications sectors; and in October 2021, GCA Corporation ("GCA"), a global technology-focused investment bank providing M&A advisory and capital markets advisory services in Europe, Japan/Asia, and the United States.
Corporate Finance Year Ended March 31, 2022 Compared to the Year Ended March 31, 2021 Revenues for CF were $1,593 million for the year ended March 31, 2022, compared with $803 million for the year ended March 31, 2021, representing an increase of 98%.
Corporate Finance Year Ended March 31, 2023 Compared to the Year Ended March 31, 2022 Revenues for CF were $1,127 million for the year ended March 31, 2023, compared with $1,593 million for the year ended March 31, 2022, representing a decrease of (29)%.
The increase in the Company’s tax rate during the year ended March 31, 2022 relative to the year ended March 31, 2021 was primarily a result of increased state taxes, increased foreign taxes and decreased stock compensation deductions. 30 Table of Contents Business Segments The following table presents revenues, expenses, and contributions from our continuing operations by business segment.
The decrease in the Company’s tax rate during the year ended March 31, 2023 relative to the year ended March 31, 2022 was primarily a result of increased stock compensation deductions, the release of the provision for an uncertain tax position as a result of the successful closure of a state audit and the release of a valuation allowance. 29 Table of Contents Business Segments The following table presents revenues, expenses, and contributions from our continuing operations by business segment.
Our excess cash may be invested in short term investments, including treasury securities, commercial paper, certificates of deposit, investment grade corporate debt securities, and special purpose acquisition companies. Please refer to Note 6 for further detail.
As of March 31, 2023 and 2022, we had $475 million and $477 million of cash in foreign subsidiaries, respectively. Our excess cash may be invested in short term investments, including treasury securities, commercial paper, certificates of deposit, and investment grade corporate debt securities. Please refer to Note 6 for further detail.
A summary of our operating, investing, and financing cash flows is as follows: Year Ended March 31, (In thousands) March 31, 2022 March 31, 2021 Operating activities: Net income $ 438,324 $ 312,771 Non-cash charges 115,902 86,837 Other operating activities 182,378 180,229 Net cash provided by operating activities 736,604 579,837 Net cash used in investing activities (273,914) (99,748) Net cash used in financing activities (459,060) (26,823) Effects of exchange rate changes on cash and cash equivalents (16,784) 13,212 Net increase/(decrease) in cash, cash equivalents, and restricted cash (13,154) 466,478 Cash, cash equivalents and restricted cash – beginning of period 847,224 380,746 Cash, cash equivalents and restricted cash – end of period $ 834,070 $ 847,224 Year Ended March 31, 2022 Operating activities resulted in a net inflow of $736.6 million for the year ended March 31, 2022, primarily due to increased net income.
A summary of our operating, investing, and financing cash flows is as follows: Year Ended March 31, (In thousands) 2023 2022 Operating activities: Net income $ 254,223 $ 438,324 Non-cash charges 250,560 115,902 Other operating activities (368,510) 182,378 Net cash provided by operating activities 136,273 736,604 Net cash used in investing activities (3,004) (273,914) Net cash used in financing activities (240,462) (459,060) Effects of exchange rate changes on cash and cash equivalents (12,065) (16,784) Net increase/(decrease) in cash, cash equivalents, and restricted cash (119,258) (13,154) Cash, cash equivalents and restricted cash – beginning of period 834,070 847,224 Cash, cash equivalents and restricted cash – end of period $ 714,812 $ 834,070 Year Ended March 31, 2023 Operating activities resulted in a net inflow of $136.3 million for the year ended March 31, 2023, primarily due to net income of $254.2 million and non-cash charges of $250.6 million, partially offset by a decrease in other operating activities of $(368.5) million.
Segment profit for CF was $606 million for the year ended March 31, 2022, compared with $251 million for the year ended March 31, 2021, representing an increase of 142%.
Segment profit for CF was $354 million for the year ended March 31, 2023, compared with $606 million for the year ended March 31, 2022, representing a decrease of (42)%.
Segment profit for FR was $101 million for the year ended March 31, 2022, compared with $224 million for the year ended March 31, 2021, a decrease of (55)%.
Segment profit for FR was $122 million for the year ended March 31, 2023, compared with $101 million for the year ended March 31, 2022, an increase of 21%.
The decrease in segment profit was primarily a result of a decrease in revenues and increased compensation expenses as a percentage of revenues for the year ended March 31, 2022, compared with the year ended March 31, 2021.
The increase in segment profit was primarily a result of a decrease in compensation expenses, partially offset by a higher non-compensation expenses for the year ended March 31, 2023, compared with the year ended March 31, 2022.
Accordingly, revenue and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter.
The occurrence and timing of milestone-related payments, such as upon the closing of a transaction, are generally not within our control. Accordingly, revenue and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter.
Investing activities resulted in a net outflow of $(99.7) million for fiscal 2021, primarily due to purchases of new investment securities, partially offset by the sale or maturity of investment securities and acquisitions of property and equipment.
Investing activities resulted in a net outflow of $(3.0) million for the year ended March 31, 2023, primarily due to acquisitions of property and equipment, cash consideration used for the acquisition of Oakley Advisory, LLC, and purchases of investment securities, partially offset by the sale or maturity of investment securities.
Actual results may differ from those estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period for which they are determined to be necessary.
Actual results may differ from those estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period for which they are determined to be necessary. 33 Table of Contents Recognition of Revenue CF provides general financial advisory services in addition to advice on mergers and acquisitions and capital markets offerings.
Year Ended March 31, Change ($ in thousands) 2022 2021 '21-'22 Revenues $ 2,269,958 $ 1,525,452 49 % Operating expenses: Employee compensation and benefits 1,408,634 971,195 45 % Non-compensation expenses 248,460 146,100 70 % Total operating expenses 1,657,094 1,117,295 48 % Operating income 612,864 408,157 50 % Other (income)/expense, net 8,926 (1,071) (933) % Income before provision for income taxes 603,938 409,228 48 % Provision for income taxes 165,614 96,457 72 % Net income 438,324 312,771 40 % Net income attributable to noncontrolling interest (573) — 100 % Net income attributable to Houlihan Lokey, Inc. $ 437,751 $ 312,771 40 % 29 Table of Contents Year Ended March 31, 2022 versus March 31, 2021 Revenues were $2,270 million for the year ended March 31, 2022, compared with $1,525 million for the year ended March 31, 2021, representing an increase of 49%.
Year Ended March 31, Change ($ in thousands) 2023 2022 '22-'23 Revenues $ 1,809,447 $ 2,269,958 (20) % Operating expenses: Employee compensation and benefits 1,147,879 1,408,634 (19) % Non-compensation expenses 319,830 248,460 29 % Total operating expenses 1,467,709 1,657,094 (11) % Operating income 341,738 612,864 (44) % Other (income)/expense, net 17,738 8,926 99 % Income before provision for income taxes 324,000 603,938 (46) % Provision for income taxes 69,777 165,614 (58) % Net income 254,223 438,324 (42) % Net income attributable to noncontrolling interest — (573) 100 % Net income attributable to Houlihan Lokey, Inc. $ 254,223 $ 437,751 (42) % 28 Table of Contents Year Ended March 31, 2023 versus March 31, 2022 Revenues were $1,809 million for the year ended March 31, 2023, compared with $2,270 million for the year ended March 31, 2022, representing a decrease of (20)%.
Year Ended March 31, Change ($ in thousands) 2022 2021 21-'22 Revenues by segment Corporate Finance $ 1,593,083 $ 802,853 98 % Financial Restructuring 392,818 534,747 (27) % Financial and Valuation Advisory 284,057 187,852 51 % Revenues $ 2,269,958 $ 1,525,452 49 % Segment profit (1) Corporate Finance $ 606,268 $ 250,513 142 % Financial Restructuring 100,882 224,215 (55) % Financial and Valuation Advisory 88,136 46,642 89 % Total segment profit 795,286 521,370 53 % Corporate expenses (2) 182,422 113,213 61 % Other (income)/expense, net 8,926 (1,071) (933) % Income before provision for income taxes $ 603,938 $ 409,228 48 % Segment Metrics: Number of Managing Directors Corporate Finance 202 120 68 % Financial Restructuring 53 47 13 % Financial and Valuation Advisory 34 31 10 % Number of closed transactions/Fee Events (3) Corporate Finance 600 360 67 % Financial Restructuring 90 138 (35) % Financial and Valuation Advisory 2,183 1,540 42 % (1) We adjust the compensation expense for a business segment in situations where an employee residing in one business segment is performing work in another business segment where the revenues are accrued.
Year Ended March 31, Change ($ in thousands) 2023 2022 22-'23 Revenues by segment Corporate Finance $ 1,127,126 $ 1,593,083 (29) % Financial Restructuring 395,733 392,818 1 % Financial and Valuation Advisory 286,588 284,057 1 % Revenues $ 1,809,447 $ 2,269,958 (20) % Segment profit (1) Corporate Finance $ 354,075 $ 606,268 (42) % Financial Restructuring 121,618 100,882 21 % Financial and Valuation Advisory 81,388 88,136 (8) % Total segment profit 557,081 795,286 (30) % Corporate expenses (2) 215,343 182,422 18 % Other (income)/expense, net 17,738 8,926 99 % Income before provision for income taxes $ 324,000 $ 603,938 (46) % Segment Metrics: Number of Managing Directors Corporate Finance 217 202 7 % Financial Restructuring 57 53 8 % Financial and Valuation Advisory 39 34 15 % Number of closed transactions/Fee Events (3) Corporate Finance 503 600 (16) % Financial Restructuring 106 90 18 % Financial and Valuation Advisory 2,257 2,183 3 % (1) We adjust the compensation expense for a business segment in situations where an employee residing in one business segment is performing work in another business segment where the revenues are accrued.
Executive Overview Established in 1972, Houlihan Lokey is a leading global independent investment bank with expertise in mergers and acquisitions, capital markets, financial restructurings, and financial and valuation advisory. With offices the United States, Europe, the Middle East, and the Asia-Pacific region, the Company serves a diverse set of clients including corporations, financial sponsors and government agencies worldwide.
Executive Overview Established in 1972, Houlihan Lokey is a leading global independent investment bank with expertise in mergers and acquisitions, capital markets, financial restructurings, and financial and valuation advisory.
The increase in revenues was primarily a result of (i) the completion of our acquisition of GCA during the third quarter ended December 31, 2021, resulting in the consolidation of their revenues into our CF business segment, (ii) a significant increase in the number of transactions that closed, and (iii) an increase in the average transaction fee on closed transactions for the year ended March 31, 2022, compared with the year ended March 31, 2021.
The decrease in revenues was primarily a result of (i) a decrease in the average transaction fee on closed transactions and a decrease in the number of transactions that closed for the year ended March 31, 2023, compared with the year ended March 31, 2022.
The increase in segment profit was primarily a result of the increase in revenues and lower compensation expenses as a percentage of revenues for the year ended March 31, 2022, compared with the year ended March 31, 2021.
Segment profit for FVA was $81 million for the year ended March 31, 2023, compared with $88 million for the year ended March 31, 2022, representing a decrease of (8)%. The decrease in segment profit was primarily a result of higher non-compensation expenses for the year ended March 31, 2023, compared with the year ended March 31, 2022.
As of March 31, 2022 and 2021, our Cash and cash equivalents, Investment securities, and Restricted cash were as follows: (In thousands) March 31, 2022 March 31, 2021 Cash and cash equivalents $ 833,697 $ 846,851 Investment securities 109,143 208,618 Total unrestricted cash and cash equivalents, including investment securities 942,840 1,055,469 Restricted cash (1) 373 373 Total cash, cash equivalents, and restricted cash, including investment securities $ 943,213 $ 1,055,842 (1) Represents a deposit in support of a letter of credit issued for our Frankfurt office. 32 Table of Contents As of each fiscal year end, a material portion of our Cash and cash equivalents is reserved to cover accrued, but unpaid bonuses, that are paid the following May and November.
As of March 31, 2023 and 2022, our Cash and cash equivalents, Investment securities, and Restricted cash were as follows: (In thousands) March 31, 2023 March 31, 2022 Cash and cash equivalents $ 714,439 $ 833,697 Investment securities 37,309 109,143 Total unrestricted cash and cash equivalents, including investment securities 751,748 942,840 Restricted cash (1) 373 373 Total cash, cash equivalents, and restricted cash, including investment securities $ 752,121 $ 943,213 (1) Represents a deposit in support of a letter of credit issued for our Frankfurt office.
Liquidity and Capital Resources Our current assets comprise cash and cash equivalents, investment securities, receivables from affiliates, accounts receivable, and unbilled work in progress related to fees earned from providing advisory services. Our current liabilities include deferred income, accounts payable and accrued expenses, accrued salaries and bonuses, income taxes payable, and current portion of loan obligations.
The increase in corporate expenses was primarily a result of higher compensation expenses for the year ended March 31, 2023, compared with the year ended March 31, 2022. Liquidity and Capital Resources Our current assets comprise cash and cash equivalents, investment securities, accounts receivable, and unbilled work in progress related to fees earned from providing advisory services.
Other (income)/expense, net increased to an expense of $8.9 million for the year ended March 31, 2022, compared with income of $(1.1) million for the year ended March 31, 2021.
The increase in non-compensation expenses was primarily a result of an increase in travel, meals, and entertainment expenses as employees continued to return to travel and an increase in other operating expenses. Other (income)/expense, net increased to $17.7 million for the year ended March 31, 2023, compared with $8.9 million for the year ended March 31, 2022.
Financing activities resulted in a net outflow of $(26.8) million primarily related to (i) dividend distributions, (ii) share repurchases, and (iii) payments to settle employee tax obligations on share-based awards, partially offset by the proceeds from the Company's May 2020 offering.
Financing activities resulted in a net outflow of $(240.5) million primarily due to dividends paid, share repurchases, and payments to settle employee tax obligations on share-based awards during the year ended March 31, 2023.
As of March 31, 2022, no principal was outstanding under the 2019 Line of Credit. The agreement governing this facility provides that borrowings bear interest at an annual rate of LIBOR plus 1.00%, commitment fees apply to unused amounts, and contains debt covenants which require that the Company maintain certain financial ratios.
Commitment fees apply to unused amounts, and the HLI Line of Credit contains debt covenants which require that the Company maintain certain financial ratios.
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 March 31, 2022 and 2021, we had $477 million and $283 million of cash in foreign subsidiaries, respectively.
Our current liabilities include deferred income, accounts payable and accrued expenses, accrued salaries and bonuses, income taxes payable, and current portion of loan obligations. 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-dealers.
For the year ended March 31, 2022, CF revenues increased 98%, FR revenues decreased (27)%, and FVA revenues increased 51% when compared with the year ended March 31, 2021. Operating expenses were $1,657 million for the year ended March 31, 2022, compared with $1,117 million for the year ended March 31, 2021, an increase of 48%.
Operating expenses were $1,468 million for the year ended March 31, 2023, compared with $1,657 million for the year ended March 31, 2022, a decrease of (11)%.
Houlihan Lokey’s financial professionals deliver meaningful and differentiated advice to clients on strategy and financial decisions employing a rigorous analytical approach coupled with deep product and industry expertise. We operate in three segments: Corporate Finance ("CF"); Financial Restructuring ("FR"); and Financial and Valuation Advisory ("FVA").
With offices in the United States, South America, Europe, the Middle East, and the Asia-Pacific region, the Company serves a diverse set of clients including corporations, financial sponsors and government agencies worldwide. Houlihan Lokey’s financial professionals deliver meaningful and differentiated advice to clients on strategy and financial decisions employing a rigorous analytical approach coupled with deep product and industry expertise.
The addition of GCA significantly increases the Company's position in the technology sector, which is critical to meeting the needs of our clients as technology increasingly touches every business sector. We generate revenues primarily from providing advisory services on transactions that are subject to individually negotiated engagement letters that set forth our fees.
The addition of GCA significantly increases the Company's position in the technology sector, which is critical to meeting the needs of our clients as technology increasingly touches every business sector. Most recently, the Company acquired Oakley Advisory in February 2023, further increasing our global coverage of the digital infrastructure sector and significantly augments the existing sector coverage in Europe.
A significant portion of our engagements include Progress Fees (as defined herein) consisting of both periodic and milestone-related payments. The occurrence and timing of milestone-related payments, such as upon the closing of a transaction, are generally not within our control.
We generate revenues primarily from providing advisory services on transactions that are subject to individually negotiated engagement letters that set forth our fees. A significant portion of our engagements include Progress Fees (as defined herein) consisting of both periodic and milestone-related payments.
Year Ended March 31, 2021 Operating activities resulted in a net inflow of $579.8 million for fiscal 2021, which was greater than the prior year due primarily to higher net income for the year and an increase in accrued salaries and bonuses.
Year Ended March 31, 2022 Operating activities resulted in a net inflow of $736.6 million for the year ended March 31, 2022, primarily due to increased net income. Investing activities resulted in a net outflow of $(273.9) million for the year ended March 31, 2022, primarily due to cash consideration used for the acquisition of GCA.
Removed
The increase in non-compensation expenses was primarily a result of non-compensation expenses attributable to GCA, amortization of intangible assets recognized in connection with the acquisition of GCA, integration and acquisition related costs associated with our acquisition of GCA and an increase in other operating expenses.
Added
The decrease in revenues was primarily attributable to a decrease in CF revenues as described in more detail below. For the year ended March 31, 2023, CF revenues decreased (29)%, FR revenues increased 1%, and FVA revenues increased 1% when compared with the year ended March 31, 2022.
Removed
The increase in other (income)/expense, net was primarily due to a loss recognized in connection with the increase in the fair value of an earnout liability associated with one of our previous acquisitions, with no comparable increase for the year ended March 31, 2021.
Added
The increase in other (income)/expense, net was primarily due to a $15 million accrual relating to an anticipated settlement with the SEC.
Removed
Segment profit for FVA was $88 million for the year ended March 31, 2022, compared with $47 million for the year ended March 31, 2021, representing an increase of 89%.
Added
On May 10, 2023 the staff of the SEC's Division of Enforcement proposed a potential settlement with the Company to resolve an investigation of the Company's compliance with records preservation requirements related to business communications sent over off-channel electronic messaging platforms.
Removed
The increase in corporate expenses was primarily a result of non-compensation expenses attributable to GCA, amortization of intangible assets recognized in connection with the acquisition of GCA and integration and acquisition related costs associated with the acquisition of GCA.
Added
The Company has notified the SEC's Division of Enforcement of its present intention to agree to a settlement to resolve the investigation that includes a $15 million civil penalty.
Removed
Recognition of Revenue The Company adopted ASU 2014-09, Revenue from Contracts with Customers, on April 1, 2018, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Added
The potential settlement is subject to the negotiation of definitive documentation, which is expected to include terms consistent with previously announced settlements between other firms and the SEC, and any formal offer, proposed civil penalty, and additional terms submitted by the Company would be subject to approval by the Commission.
Removed
The Company used the modified retrospective method that resulted in the Company prospectively changing the presentation of reimbursements of certain out-of-pocket expenses from a net presentation within non-compensation expenses to a gross basis in revenues. 34 Table of Contents CF provides general financial advisory services in addition to advice on mergers and acquisitions and capital markets offerings.
Added
As a result of the foregoing, the Company determined that it should recognize a $15 million accrual in other (income)/expense, net for the fourth fiscal quarter and fiscal year ended March 31, 2023 relating to the anticipated settlement with the SEC.
Added
The decrease in the average transaction fee on closed transactions was driven by the size and timing of transactions that closed and does not represent a trend in the average fee on closed transactions.
Added
The decrease in the average transaction fee was driven by the size and timing of transactions that closed during the quarter, and does not represent a trend in the average fee on closed transactions. The increase in the number of closed transactions was driven by favorable market conditions for restructuring transactions.
Added
Subsequent to the end of fiscal 2023, on May 10, 2023 the staff of the SEC's Division of Enforcement proposed a potential settlement with the Company to resolve an investigation of the Company's compliance with records preservation requirements related to business communications sent over electronic messaging channels that have not been approved by the Company.
Added
The Company has notified the SEC's Division of Enforcement of its present intention to agree to a settlement to resolve the investigation that includes a $15 million civil penalty. This is expected to be paid during the first quarter of fiscal 2024.
Added
As of March 31, 2023, no principal was outstanding under the HLI Line of Credit.
Added
Borrowings under the HLI Line of Credit bear interest at a floating rate, which can be either, at the Company’s option, (i) Term Secured Overnight Financing Rate (“SOFR”) plus a 0.10% SOFR adjustment plus a 1.00% margin or (ii) 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) Term SOFR plus a 0.10% SOFR adjustment.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed11 unchanged
Biggest changeFor the years ended March 31, 2022, 2021, and 2020, the net impact of the fluctuation of foreign currencies in other comprehensive income within the Consolidated Statements of Comprehensive Income was $(23.2) million, $23 million, and $(13) million, respectively.
Biggest changeFor the years ended March 31, 2023, 2022, and 2021, the net impact of the fluctuation of foreign currencies in other comprehensive income within the Consolidated Statements of Comprehensive Income was $(19.5) million, $(23.2) million, and $22.9 million, respectively.
The magnitude of this impact will depend on the timing and volume of revenues and expenses of, and the amounts of assets and liabilities in, our foreign subsidiaries along with the timing of changes in the relative value of the U.S. dollar to the currencies of the non-U.S. countries in which we operate. 36 Table of Contents
The magnitude of this impact will depend on the timing and volume of revenues and expenses of, and the amounts of assets and liabilities in, our foreign subsidiaries along with the timing of changes in the relative value of the U.S. dollar to the currencies of the non-U.S. countries in which we operate. 35 Table of Contents
From time to time, we enter into transactions to hedge our exposure to certain foreign currency fluctuations through the use of derivative instruments or other methods. As of March 31, 2022, we had one foreign currency forward contract between the euro and pound sterling with an aggregate notional value of €15.7 million.
From time to time, we enter into transactions to hedge our exposure to certain foreign currency fluctuations through the use of derivative instruments or other methods. As of March 31, 2023, we had one foreign currency forward contract between the euro and pound sterling with an aggregate notional value of €6.5 million.
The fair value of these foreign currency forward contracts represented a gain/(loss) included in Other operating expenses of $33 thousand and $38 thousand during the year ended March 31, 2022 and March 31, 2021, respectively.
The fair value of these foreign currency forward contracts represented a gain included in Other operating expenses of $35 thousand and $33 thousand during the year ended March 31, 2023 and March 31, 2022, respectively.
As of March 31, 2021, we had two foreign currency forward contracts between the euro and pound sterling with an aggregate notional value of $7.1 million.
As of March 31, 2022, we had one foreign currency forward contract between the euro and pound sterling with an aggregate notional value of €15.7 million.

Other HLI 10-K year-over-year comparisons