Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenues for the first quarter of fiscal 2025 were $514 million, up 24% compared to the same quarter last year.
- Adjusted earnings per share increased by 37% to $1.22.
- Corporate Finance revenues reached $328 million, marking a 45% increase and the highest first-quarter corporate finance revenues ever.
- The acquisition of Triago expanded private funds capabilities, adding seven managing directors and positioning the company as a holistic adviser across products and geographies.
- The company added 27 new managing directors in the quarter, indicating strong hiring and talent acquisition.
Negative Points
- Financial Restructuring revenues decreased by 5% to $117 million compared to the same period last year.
- Adjusted compensation expenses increased to $316 million from $256 million in the same period last year.
- The average transaction fee on closed deals in the Financial Restructuring business decreased.
- The adjusted effective tax rate increased to 31.2% from 29.2% in the same quarter last year.
- The company's cash position declined due to significant bonus payments and share repurchases.
Q & A Highlights
Q: Good to see a breaking out of the prior range in Corporate Finance. Is there a historical context or indicators we should watch for potential growth?
A: We continue to see improvements, particularly in Europe, with increasing average deal size and close rates. Seasonal business trends also play a role, and we expect good growth quarter-over-quarter if conditions remain favorable. (Scott Adelson, CEO; J. Lindsey Alley, CFO)
Q: On restructuring, is the recent full-blown restructuring from a direct lending group a sign of building stress?
A: We believe the credit markets remain healthy, especially in the middle market. We don't see this restructuring as indicative of broader trends. (Scott Adelson, CEO)
Q: How has sponsor M&A improved, and what is the outlook for normalization?
A: Sponsor activity is gaining confidence and moving deals forward. While we can't predict exactly when it will peak, the trend is positive. (Scott Adelson, CEO)
Q: Can you provide views on the durability of growth in the private funds business and areas of opportunity?
A: The private funds market, especially in secondaries and directs, is rapidly evolving. We see significant growth potential and have made investments accordingly. (Scott Adelson, CEO)
Q: How is the European business trending relative to the US, and has the ECB's rate cuts impacted activity?
A: Activity in Europe is picking up similarly to the US, though it has lagged slightly. The direction is positive. (Scott Adelson, CEO)
Q: Can you unpack the improvement in the time to close corporate finance transactions?
A: The M&A market is picking up, reducing delays in deal closures. While not back to normal, the trend is improving. (Scott Adelson, CEO)
Q: How is the rotation to mid-cap and value stocks impacting sponsor activity?
A: This isn't a major focus for sponsors. The mentality between public and private markets differs significantly. (Scott Adelson, CEO)
Q: Can you provide more detail on the variance in Financial and Valuation Advisory (FDA) revenue growth?
A: FDA has performed well even during M&A downturns. The mix of service lines affects growth rates, with non-cyclical businesses performing better in tough markets. (J. Lindsey Alley, CFO)
Q: What is driving the higher tax rate, and what is the outlook?
A: Higher tax jurisdictions in Europe and Japan are performing well, driving the tax rate higher. We expect to remain at the high end of our range. (J. Lindsey Alley, CFO)
Q: Can you provide an update on non-compensation expenses and their trajectory?
A: We expect non-comp expenses to normalize, with mid to high single-digit growth. The ratio will depend on revenue recovery. (J. Lindsey Alley, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
