Houlihan Lokey (HLI) Q4 2026 Earnings Transcript

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DATE

Wednesday, May 6, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Scott Joseph Adelson
• Chief Financial Officer — Lindsey Alley
• General Counsel — Christopher Crain

TAKEAWAYS

• Total Revenue -- $2.6 billion for the fiscal year, representing 10% growth and a record level for the company.
• Adjusted EPS -- $7.56 for the fiscal year, increasing 20%.
• Q4 Revenue -- $636 million reported for the quarter.
• Q4 Adjusted EPS -- $1.63 for the quarter.
• Corporate Finance Segment Revenue -- $434 million for the quarter, up 5% with 171 transactions closed, though average transaction fee decreased.
• Financial Restructuring Revenue -- $110 million for the quarter and $529 million for the year, a decline of 3%; 30 transactions closed in the quarter, down 21%, with lower average fees.
• Financial and Valuation Advisory Segment Revenue -- $91 million for the quarter, up 3%, with 1,248 fee events, a 2% increase.
• Adjusted Compensation Expense Ratio -- 61.5% for the quarter, matching the same quarter of the previous year; management intends to maintain this ratio.
• Adjusted Non-Compensation Expenses -- $94 million in the quarter, up 10.5%, with $5.8 million in acquisition-related costs and $1.7 million in noncash acquisition-related amortization adjusted out; full-year ratio ended at 13.9%.
• Adjusted Effective Tax Rate -- 23.7% for the year, down from 29.8% previously, attributed to the policy change in stock compensation deductions.
• Cash and Investments -- Approximately $1.4 billion at quarter end, with a portion designated for bonus payments.
• Share Repurchases -- Around 300,000 shares repurchased in the quarter under the existing program.
• Dividend -- Quarterly dividend raised to $0.70 per share, a 17% increase, to be paid in June.
• Managing Director Talent -- Four managing directors hired in the quarter, totaling 33 for the year, with an additional 25 promotions announced for the new fiscal year.
• Capital Solutions Contribution -- Business represented over 20% of Corporate Finance revenues, rising over recent years.

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RISKS

• Management directly cited "M&A deal time lines have extended due to the geopolitical uncertainty created around the war in the Middle East," cautioning this dynamic "may moderate our growth a bit in our first quarter for fiscal year 2027.".
• Software sector volatility was stated as an exception to growth, with management noting, "Software is clearly a sector that is going to be impacted," and this expectation has been incorporated into fiscal 2027 planning.
• In Financial Restructuring, fewer transactions were closed, down 21% in the quarter, with segment revenues down year over year and average transaction fees lower; management said, "there are no trends." in average size, underlining continued variability.
• Management expects continued "pricing pressure" on Financial and Valuation Advisory products, though they described TAM growth as offsetting this effect to date.

SUMMARY

Management characterized the backlog and pipeline as record levels, with acquisition opportunities at a high across stages of completion. Corporate Finance revenues outside the U.S. surpassed domestic growth rates in both the quarter and full year, while Asian operations also outpaced European growth from a smaller base. Two strategic acquisitions—Audere Partners and Mellum Capital—were completed in the quarter, further diversifying the service platform. The company views its broad geographical and product diversification as a consistent advantage for navigating market volatility. Dividend policy and capital allocation remain oriented toward acquisition growth, share count management, and balancing repurchases with M&A flexibility.

• Scott Joseph Adelson said, "we have a record number of corporate acquisition opportunities in various stages of potential completion."
• Lindsey Alley provided that "adjusted non-compensation expenses grew 10.7% for the year" and signaled a similar increase expected in the coming fiscal period.
• Capital Solutions and Portfolio Valuation businesses are described as benefiting from structural industry shifts, with recurring demand for more frequent asset marks, especially given developments in private credit.
• Technology investment, including in AI applications, is allocated across all major business lines and is cited as supporting both scale and competitiveness.
• Geographic and business line expansion is guided primarily by "cultural fit," which management stated outweighs deal size as a selection criterion for acquisitions.

INDUSTRY GLOSSARY

• FDA: Financial and Valuation Advisory, Houlihan Lokey’s segment focused on asset, business, and securities valuation services, including fairness and solvency opinions.
• TAM: Total Addressable Market, referring to the total potential market demand for a company’s relevant services or products.
• Capital Solutions: A business line within Corporate Finance providing clients with financing, recapitalization, and liability management advisory.

Full Conference Call Transcript

Christopher Crain: Thank you, operator, and hello, everyone. By now everyone should have access to our fourth quarter and fiscal year 2026 earnings release, which can be found on the Houlihan Lokey website at www.hl.com in the Investor Relations section. Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward-looking statements. These forward-looking statements which are usually identified by use of words such as will, expect, anticipate, should or other similar phrases are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. And therefore, you should exercise caution when interpreting and relying on them.

We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. We encourage investors to review our regulatory filings, including the Form 10-K for the fiscal year ended March 31, 2026, when it is filed with the SEC. During today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or as more important than the financial information prepared and presented in accordance with GAAP.

In addition, these non-GAAP measures have limitations in that they do not reflect all the items associated with the company's results of operations as determined in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our earnings release and our investor presentation on the hl.com website. Hosting the call today, we have Scott Adelson, Houlihan Lokey's Chief Executive Officer; and Lindsey Alley, Chief Financial Officer. They will provide some opening remarks, and then we will open the call to questions. With that, I'll turn the call over to Scott.

Scott Joseph Adelson: Thank you, Christopher. We ended fiscal year 2026 with a record $2.6 billion in revenue, up 10% versus last year and adjusted EPS of $7.56, up 20% versus last year. Both Corporate Finance and Financial Valuation and Advisory produced record revenues for the year and our Financial Restructuring business had 1 of the strongest years on record. Delivering these results against the backdrop of significant geopolitical uncertainty and macroeconomic pressures underscores the strength and resilience of our business. Since we went public 10 years ago, we have reported annual revenue growth in 9 of the 10 years. We ended the fourth quarter with revenues of $636 million, and adjusted earnings per share of $1.63.

It is worth highlighting that our CF and FDA businesses each produce their highest fourth quarter revenues ever. Our quarterly results are typically more volatile than our annual results due to both external macro events and the timing of revenues. In FR, our fourth quarter results were impacted as the closing of 2 larger transactions extended beyond the quarter end. While the growth in our fourth quarter results in CF and FDA were impacted by recent external market disruptions, including renewed geopolitical uncertainty from the conflict in the Middle East and market volatility affecting the software sector. Notwithstanding the turbulence exhibited in the marketplace over the last few months, our business is in the best shape in its history.

We have a record level of backlog and pipeline. We have a record number of managing directors and we have a record number of corporate acquisition opportunities in various stages of potential completion. In the fourth quarter, CF continued to see solid backlog growth and improved transaction metrics across most of our industry groups, technology being an exception. In addition, CF revenues outside the U.S. grew significantly faster than U.S. revenues in both the fourth quarter and fiscal year. Capital Solutions performed well in fiscal year 2026 and we enter year fiscal 2027 with strong backlog and high expectations for those services.

Segments of our FDA business saw the same disruption from macro events in the fourth quarter, while others did not. But momentum for that business has returned to more normal levels, and we expect growth in fiscal year 2027. In FR, our expectations for fiscal year 2027 have improved. We are seeing multiple tailwinds, widening credit spreads, dislocation in private credit and the software sector and energy volatility. These factors are driving increased activity levels, including several notable recent wins, leading to higher expectations for fiscal year 2027. Based on these dynamics, we expect this business to continue to perform at elevated levels in fiscal year 2027.

We successfully closed 2 previously announced transactions in the fourth quarter, welcoming new colleagues from Audere Partners and Mellum Capital. Additionally, we hired 4 managing directors in the quarter, bringing our total hired and acquired for the fiscal year to 33. We are also pleased to announce that we promoted 25 colleagues to Managing Director in the first quarter of fiscal year 2027. I would like to congratulate our new partners and recent promotes and wish them great success in the years to come. As we enter fiscal year 2027, our diversified business model positions us well to navigate whatever market conditions emerge.

This diversification has consistently enabled us to perform through volatile periods, and we believe that advantage remains as strong as ever. And our global workforce continues to be the key differentiator. We recognize with gratitude the strength of our talented workforce now more geographically diverse and with a wider range of expertise and specialties than ever before. We continue to see a strong hiring market for senior talent. On the M&A front, our acquisition pipeline is as active as it has ever been with no shortage of compelling opportunities to further strengthen our platform. I would like to thank our more than 2,700 employees for continuing to deliver excellence to our clients and to 1 another.

I would also like to thank our clients and shareholders who continue to entrust us on our journey of building the best investment banking advisory business in the world. And with that, I will turn it over to Lindsey.

J. Alley: Thank you, Scott. Revenues in Corporate Finance were $434 million for the quarter, up 5% compared to the same period last year. We closed 171 transactions this quarter, up from 147 in the same period last year and our average transaction fee on closed deals decreased. M&A deal time lines have extended due to the geopolitical uncertainty created around the war in the Middle East and its ripple effects and we expect that dynamic to persist as long as there is uncertainty. These time line shifts may moderate our growth a bit in our first quarter for fiscal year 2027, similar to the impact on our growth in the fourth quarter.

While the near term may show variability due to closing timing, the fundamental trajectory of the Corporate Finance business for the full year remains encouraging. Financial Restructuring revenues were $110 million for the quarter, ending the fiscal year with revenues of $529 million, down 3% from fiscal year 2025. We closed 30 transactions this quarter, down 21% from the same quarter last year and our average transaction fee on closed deals decreased. For Financial and Valuation Advisory, revenues were $91 million for the quarter, a 3% increase from the same period last year. We had 1,248 fee events during the quarter compared to 1,224 in the same period last year, a 2% increase. Turning to expenses.

Our adjusted compensation expenses were $391 million for the quarter versus $410 million for the same period last year. Our only adjustment was $18 million for deferred retention payments related to certain acquisitions. Our adjusted compensation expense ratio for the fourth quarter in both fiscal 2026 and 2025 was 61.5%. We expect to maintain our long-term target of 61.5% for our adjusted compensation expense ratio for fiscal 2027. Our adjusted non-compensation expenses grew 10.5% to $94 million for the quarter compared to $85 million for the same period last year. For the quarter, we adjusted out of non-compensation expenses $5.8 million in acquisition-related costs and $1.7 million in noncash acquisition-related amortization.

Our adjusted non-compensation expenses grew 10.7% for the year, and we ended fiscal 2026 with an adjusted non-compensation expense ratio of 13.9%. We expect to see similar growth in adjusted non-compensation expenses in fiscal 2027. Our adjusted effective tax rate for fiscal year 2026 was 23.7% compared to 29.8% for fiscal year 2025. The decrease was primarily a result of the change in our policy where we are no longer adjusting out the impact of stock compensation deductions on our effective tax rate.

For fiscal 2027, similar to last year, we expect our first quarter adjusted effective tax rate to benefit from the vesting of shares in May at grab prices for which the majority were significantly below where our stock is currently trading. Based on where our stock is trading today, we think that benefit may reduce our adjusted effective tax rate in our first quarter for fiscal 2027 to about half of our fourth quarter adjusted effective tax rate. Turning to the balance sheet. We ended the quarter with approximately $1.4 billion in cash and investments.

As a reminder, a significant portion of our cash is earmarked to cover accrued but unpaid bonuses for fiscal year 2026 that will be paid this month end in November. Also in our fourth quarter, we repurchased approximately 300,000 shares as part of our share repurchase program. We will continue to evaluate balance sheet flexibility for acquisitions versus excess cash for share repurchases. Finally, the Board approved an increase in our quarterly dividend to $0.70 per share, 17% higher than our quarterly dividend in fiscal year 2026. The first quarter dividend will be paid in June. And with that, operator, we can open the line for questions.

Operator: [Operator Instructions] The first question is from Brennan Hawken with BMO.

Brennan Hawken: So you flagged really some pretty constructive comments on the outlook, even though that was it was maybe couched by some uncertainty to start out the year in 1Q. But I'd love to drill down on Restructuring. So last quarter, you guys said you expect Restructuring to face some revenue pressures, but now you've got an improved outlook. So does that mean that you're no longer seeing the pressures and you think the stability or growth are possible? Is it possible to put a finer point on that?

Scott Joseph Adelson: Yes. Thanks, Brennan. I appreciate the question. I think that what you're seeing is kind of the flip side of the troubles that occurred on the Corporate Finance side during the quarter also created opportunity in -- on the Restructuring side. And I think that a number of people had the perspective even going in -- we were being a bit conservative last quarter when we talked about it because we did not actually see the new mandates coming in and the pace of that change, after the -- really the events in software and the war and energy all started to converge. We have seen that really change and the activity levels and Restructuring pick up materially.

That gave us the -- as well as we said in our remarks, including some recent important wins to really give us confidence that we can continue to operate in Restructuring at elevated levels next year and probably beyond that as well.

Brennan Hawken: Excellent. I appreciate that, Scott. And then you spoke to the backlog building in Corporate Finance. Maybe aside from tech. So we've been hearing about the need for sponsors to begin to transact. What are you seeing in regards to sponsors and the pressure for them to actually monetize? And how is the setback that maybe they're seeing in some of the tech-oriented investments playing through? And how do you expect that to impact as far as transaction volumes go when we move forward on Corp Fin?

Scott Joseph Adelson: Let's take that in 2 separate pieces. Let's park tech for a moment. And just overall, if you look at sponsor activity, before really the conflict started what we had said was we had really seen things picking up quite a bit. And then obviously, that started and it created much more of a -- stop, we got to figure out what's going on here for a moment. And then if you really look the activity levels from a pitch standpoint, even in February, before it started, were really quite strong, more important metric is really the go to market when deals actually kick off.

And as we sit here today, even in the last few weeks have been the most active we have seen in years. And so that activity level is increasing again at a pace that we feel good about. And software is -- I haven't talked really about software more than tech. Software is clearly a sector that is going to be impacted. And I don't think anybody really has an answer on how much yet. And I do think that there is a -- going to baby out with the bath water problem at the moment that everything that looks or smells like software is all of a sudden, not in favor.

I think that will change as people dig in and there will be winners and losers like there are in every sector that you see a dislocation and it clearly will not be all software companies.

J. Alley: And to put a finer point on it, Brennan, we have assumed that software will be affected in fiscal year '27 in our comments.

Operator: The next question is from Devin Ryan with Citizens Bank.

Devin Ryan: I just want to ask another 1 on sponsor slightly different angle. If you're trying to think about like order of magnitude of pent-up activity. We've seen larger deals in the market. And I think the argument of sponsors are going to come to be more active, but just trying to think about like how much more active, we have record duration of portfolios. There's record dry powder in the market. So how do you guys think about that? And the other part of the question is just, are buyers and sellers going to get aligned on price? The current vintage, some of those assets were bought at high valuation.

So is that a risk or just not something that you guys see as an issue here as we get to maybe sponsors being able to exit some of these positions?

Scott Joseph Adelson: Clearly, it has -- we talked about this a lot. We talked about the velocity of transactions. At the velocity has -- again, it is picking up. The -- we need to have some level of certainty in geopolitical issues where it's not to hit these road bumps along the way. But everything we are seeing is that sponsors want to begin to transact. There has -- you are correct that there are certain companies that will be under the price differentials that will be too difficult for them to deal with. There's no doubt about that.

But that is -- from every indication we have, that is not the preponderance of the deal flow that is out there or anywhere near it. It really is -- there's different qualities, if you will, of assets that come out and the outstanding assets throughout the cycles have traded at really healthy prices with really no price degradation at all. It is really the ones below that as the market heats up, there is a greater receptivity to those companies and believing that you can really improve them and make them better and add that those companies are the ones that we really start to see in a healthier market begin to transact on a more regular basis.

J. Alley: And Devin, we have a pretty compelling graph in our investor presentation, courtesy of Pitch Book that just shows the number of transactions within private equity, the growth over the last 10 years and the aging in this last year as of December 31, and over half of them are over 5 years old. And so -- I mean, there -- to answer your question with an exclamation point, there is a lot of pent-up demand. And we had started experiencing it well before the fourth quarter. I'd say it slowed down a bit in the fourth quarter, and we're seeing it tick right back up to where it was.

So there's -- the market has gotten some comfort that there is at least containment in what's going on in the Middle East and software, I think, is a different story.

Devin Ryan: Got it. I appreciate that color. And then as a follow-up, in Financial and Valuation Advisory, is that benefiting or going to benefit from the, call it, group scrutiny on private credit valuation driven just private equity more broadly, thinking that maybe that could drive more demand for valuation work and you guys would get involved in more situations with your clients? Just curious if that maybe a second derivative of some of this focus on private credit.

Scott Joseph Adelson: Yes. We've talked about that a fair amount. That's really our portfolio valuation group, which has been growing quite nicely through all cycles and we feel very good about where that business is heading. And that is -- that TAM is continuing to grow and some of the things that you're talking about just -- are what grows it, is at the more -- getting marks more regularly is certainly 1 of those things and situations like we are seeing in private credit is a great example of why they need those marks on a more regular basis.

Operator: The next question is from Brendan O'Brien with Wolfe Research.

Brendan O'Brien: I guess to start, your comments on activity in Europe last year, certainly caught my attention. There's obviously a lot of interesting dynamics at play in the region at the moment. On the 1 hand, you have higher reliance on energy or an exporter of energy and so more sensitive to the price shock, but there's also clearly a push towards deregulation and more economically favorable simulative policies. Just want to get a sense as to what you're seeing or hearing from clients in the region at the moment and whether you expect that outperformance in terms of growth rate to persist?

Scott Joseph Adelson: I think some of this is -- we just have a differentiated business in Europe at this point, and that is continuing to grow and the market is continuing to understand that. And obviously, our recent acquisition in France only adds to that. And so some of that growth is just -- we are in earlier stages in our business there and the market is really recognizing our differentiated product. The activity levels in Europe, broadly defined, we continue to see as being strong. And there's no doubt that some of the headwinds that you're discussing exist whether or not those wind up having a material impact on the year, we will see.

But we feel good about our European and Asian businesses. And I think as we've said, even our Asian business even grew faster.

Brendan O'Brien: Great. And I guess for my follow-up, I guess, on the FDA business, and specifically just AI implications for that business. On the 1 hand, I do see this as an area where you could see significant productivity gains given there are a lot of recurring cash. However, I've also been hearing some concerns on pricing pressures if this becomes more commoditized. Just wanted to get a sense as to how you're thinking about the implications of AI for this business longer term? How you're investing to kind of get ahead of the curve? And how you see that kind of impacting overall profitability of that business over time?

Scott Joseph Adelson: Great. Thanks. The -- couple of things. We have been investing ahead of that technological corp for a very long time, actually, and FDA and 1 of our acquisitions. In the U.K. 2 years ago was along those lines as well. We certainly understand those pressures. And those -- none of those are new to us. And yet, we think that, that TAM is going to -- and it has been growing, as you can tell by our performance faster than any decline in pricing.

J. Alley: And look, we have experienced pricing pressure on our FDA products for a decade, as Scott said, or more. And we have sort of reacted by growing our TAM at a rate significantly faster than the pricing pressure. And we expect that to continue. So we will continue to see pricing pressure. We also believe -- and you alluded to it at an earlier question -- it was alluded to in another question, that market for our TAM product, especially if private equity opens is going to double. And so we're, I think, pretty excited about all of that.

And the other advantage is, very few firms have the wherewithal to invest in technology at the same pace that we are or that the big 4 accounting firms are. So this -- there is going to be a consolidation in this industry. A lot of the boutiques that are in and now just won't be able to keep up. And we think that for firms the size of Houlihan's, that is a huge competitive advantage for a business that requires a fairly significant spend in technology over the next 3 to 5 years.

Scott Joseph Adelson: And we've talked about it before, but the data that we have from being enormous amount of marks that we do, obviously just makes our models that much better.

Operator: The next question is from Ryan Kenny with Morgan Stanley.

Ryan Kenny: Just a follow-up there on the need to spend on technology. Is there any update on non-comp outlook for this year or maybe longer term need to spend on non-comp?

J. Alley: No. I mean, I think the technology spend that you've seen us making over the last several years is not expected to change. So non-comp is, as I mentioned on the call, expected to look a lot like fiscal '26 non-comp increases. I think 1 thing important when we spend money on technology for our Portfolio Valuation business or FDA business, that technology spend is transferable to our Corporate Finance business. Both businesses are high-volume businesses. And so it is -- we're able to spread the investments we make, whether it's in AI or whatever across really those 2 businesses, in particular, also will benefit our Restructuring business as well.

So it's incorporated in the numbers and the assumptions we've made.

Scott Joseph Adelson: I think you can think about it more -- I'm sorry about that. I think it's really more a matter of shifting priorities and to accomplish that.

Ryan Kenny: Got it. And then separately on the capital side, you guys raised your dividend. Any update on how you're thinking about capital allocation to buybacks versus dividend versus potentially M&A?

J. Alley: Yes. It hasn't changed. I think the quarterly dividend is really -- were increases a measure of our continued growth and our outlook for the next year. And our priority continues to be making acquisitions that we think are incredibly accretive to our shareholders and share repurchases after that. Now having said that, our goal is to maintain our share count, which we've done a pretty good job over the last several years. But we have maintained that balance sheet flexibility to make the acquisitions similar to what we did in February. And as Scott mentioned, we're going into fiscal '27, I think quite optimistic about the outlook for M&A for us this year.

Operator: And next, we have James Yaro with Goldman Sachs.

James Yaro: Scott, Corporate Finance did slow quickly relative to your previous guidance for the quarter having better than normal seasonality. You did talk about things already beginning to improve. How quickly can these deals turn back on and close? And then stepping back, do you think that there have been any permanent impacts to the Corporate Finance client backdrop from any of the either geopolitical or software issues?

Scott Joseph Adelson: I don't think there's been -- the software, I don't know. Just flat out. We can't -- don't know. I don't think that it should have a permanent effect. I think it will have a permanent effect on some. And certainly, I don't think it should have on all, but I don't know. On the overall business, not at all, that we've talked about it throughout that we have been operating in a world where we have had just an elevated level of uncertainty, particularly geopolitical uncertainty.

And when it rises above a level for whatever reason, in this case, it was conflict in the Middle East, people put their foot on the brakes, and they say, wait a minute, I need to understand what is going on, and that is what we saw. It clearly impacted our results.

But as Lindsey pointed out, as it has subsided and people really just keep getting their head around higher levels of uncertainty and say, we have to get on with business and being an optimist, I do look at that and recognize there's a -- given the level of uncertainty, when it does subside to any reasonable level there is such a strong demand for activity to really ramp back up because we are seeing it in its early, early stages today, but again, there still is a reasonable amount of uncertainty. If that continues to subside, it will only get better and better.

James Yaro: Okay. Great. Just 1 more on Restructuring. You talked about in the press release, lower average transaction fees on closed transactions. I'd just love to get your perspective on what -- but you -- and then in addition, you know that's not a trend. But maybe just comment on why this isn't a trend, what happened in the quarter? And then also, you talked about 2 -- I think you talked about 2 deals that stretched beyond the quarter. Does that mean that we should have a seasonally elevated fiscal first quarter?

J. Alley: So it's a good question. Look, I think that the transaction, the average transaction size for Restructuring, there are no trends. Some quarters, it's higher than others simply because of size of transaction. Corporate Finance does have an upward trend to it. And FDA in some cases, is flat given some of the comments we've made. Financial Restructuring is going to vary quarter by quarter, just depending on the size and makeup of the transaction that closed out quarters. So nothing to read into there. I think with respect to the second part of your question on...

Christopher Crain: The 2 deals.

J. Alley: The 2 transactions. Look, we're very comfortable saying they're going to close in fiscal '27. When you start pinning us down for quarters, we get a little bit antsy, but we do think that 1 of the reasons why we're comfortable at elevated restructuring revenues for fiscal '27 is simply because those 2 transactions are included in it, along with all of the other things that Scott mentioned. So we do expect them to close and likely in the first half of the year, as I said, but I don't really want to pin it on a space quarter.

Scott Joseph Adelson: I think based upon what I know today, it's unlikely for them both to close in the same quarter as it sits today. If that were the case, I think we might say something different to you, but I think that because there's going to be spread out is something that I think just think about it as a normal elevated level.

Operator: The next question is from Nathan Stein with Deutsche Bank.

Nathan Stein: I wanted to ask a revenue split for the M&A and Capital Solutions businesses within Corporate Finance. What was this revenue split in the fourth quarter? And do you expect those levels to be sustained in fiscal '27?

J. Alley: So we don't -- we won't give splits by quarter, but our Capital Solutions business is above 20% of our Corporate Finance revenues. Think of it that way. And I'd say the last couple of years, that number has gotten higher as a percentage of the overall Corporate Finance business. What happens next year? I don't want to get into that level of detail. But we have said before that business, the outlook for that business and the momentum in that business is exceptional. And so we'd love to be able to comment looking backwards a year from now and give you a bit more color.

But looking forward, I don't want to get into that level of detail for Capital Solutions. But over 20% is kind of how I would think about it.

Nathan Stein: And then I guess just on AI, do you have any updates for investors as to how you're looking at implementing AI across your business?

Scott Joseph Adelson: I can get in an awful lot of details, depends on the time you really want me to take. Yes, I mean, we are embracing it fully, and there's really want to think about it. There's multiple ways to think about it. There's a front-end component to it. There's a workflow component to it. There's a operational or back office component to it. There's a moonshot component to it. And we have basically work streams in all those areas occurring.

Operator: The next question would be from Alex Bond with KBW.

Alexander Bond: So I heard the commentary on the strengthening M&A backlog, which is obviously good to hear. But curious how you would describe maybe how, if at all, the preannounce pipeline has shifted in terms of composition recently, whether it be sponsors versus strategics or any geographical mix shift. Just trying to drill down on where you've seen activity be most prevalent at the moment given everything that's going on in the market?

Scott Joseph Adelson: Yes. Thanks, Alex. Good question. I mean it really has been across the board. I mean, our mix sponsored, non-sponsored doesn't change that dramatically. A lot of people talk about that a lot, but it is -- it's been -- it is fairly constant points different from period to period. So there are these dramatic swings that I think people may expect. Clearly, a number of the -- when we talk about pitch pipelines and things that have just kind of more visibility to it that tends to be more sponsor-driven simply because they just -- there's a cadence to that. And so that is clearly picking up as we were saying.

In terms of U.S. is clearly a part of that. Europe is part of that. We have said Europe is growing faster, but to be fair, it's from a smaller base. And Asia is growing faster than that, but that's from a smaller base. So we are seeing activity in all 3 regions. I would say, appropriate for where they are in their maturation.

J. Alley: And Alex, I mean, look, if there's some optimism in our voice, even given sort of the uncertainty of the last quarter, it's because it's firing on all cylinders across industry, across geography with the 1 exception of technology. And technology as pressure on it, and we've incorporated that into our thinking. And technology is a decent-sized business for our software is. But the other industries are -- and again, not hard to point to why, it goes right back to that there is a huge pent-up demand particularly from private equity to transact, and we're kind of right in the middle of that.

Operator: Next question is from Michael Brown with KBW.

Michael Brown: I wanted to ask Restructuring, maybe just to kind of narrow in a little bit there. So the activity levels there seem like they can be certainly broadening out. And I think you talked about an element of that they can stay elevated. They've been running at a healthy pace here for a while. So maybe just help us kind of frame what elevated kind of means now? So when we look at fiscal '27 and obviously, it's early days here, but fiscal '27 versus fiscal '26, does that just kind of mean potential for growth here? Is it possible in your view that we see kind of a new record for the business as we get to fiscal '27?

Any kind of view on that based on what you're seeing in the activity?

J. Alley: So I would answer it this way. We have been saying elevated levels for the last 3 years for Financial Restructuring, and we're using the same terminology. So I would just start there.

Michael Brown: Right. Okay. Great. And maybe just switch gears to the follow-up on the capital allocation question earlier and the M&A question. So you talked about how the M&A pipeline is as active as ever. Maybe just talk a little bit about what's your top criteria there? You did some acquisitions in Europe, so maybe anything you kind of do geography-wise or industry vertical capability. And what deal size are you targeting now? Are you starting to think maybe about some larger-sized deals that could have more of a needle mover on the franchise? Or is that just kind of too hard to do just given the size and scale to platform that?

Scott Joseph Adelson: I think we've talked about it before. I mean, first of all, there are geographic ones, there are product ones, there are industry ones, there is a complete portfolio. But really what drives it is cultural fit. I mean that is the single most important thing to us. Much more so than size or any of the other attributes that I just articulated, it really is cultural fit. And when we find groups of people that really fit with our culture, and we believe we'll be successful in our organization. We work on getting those deals done. And that feels comfortable that you will see more of that in the years to come.

It will vary in size, but what hopefully won't vary is the cultural fit.

J. Alley: And it's -- we have a lot of flexibility. I mean, remember, we keep saying the market is huge, and we are an incredibly small player in a huge market. And our last 3 transactions we've done are good examples of just the variability you're going to continue to see. The Waller Helms transaction was a transaction within the FIG space and a couple of niches within FIG where we were meaningfully underweighted, and it has been incredibly successful. The transactions that we did in February, one was on the product side in our Capital Solutions business, we were underweighted in real estate particularly in Europe, and we had a transaction that identified an opportunity to fill that in.

And finally, we were significantly underweighted in the markets in France, and we found a geographic fit. And there are more of each of those. And so it's hard to answer the questions about what we're focused on. As Scott said, we have so many unfilled areas in product, geography and industry that it is much more about finding the right partners than it is about focusing on a particular niche because we're underweighted in it.

Operator: Well, with this question, this is our last question in the queue. If there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Scott Adelson for any closing remarks.

Scott Joseph Adelson: Thank you, Debbie. I want to thank you all for participating in our fourth quarter and fiscal 2026 earnings call. We look forward to updating everyone on our progress when we discuss our first quarter results for fiscal 2027 this summer.

Operator: This concludes our conference. Thank you for attending today's presentation. You may now disconnect.

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