Q3 2020 Earnings Call
Thank you for standing by welcome to Houlihan Lokey third quarter fiscal 2020 earnings conference call. At this time, all participants are in listen only mode.
A question and answer session will follow the formal presentation.
Please note that this conference call is being recorded today February Threerd 2020, I will now turn the call over to Christopher Crane, Houlihan Lokey General counsel.
Thank you operator, and Hello, everyone I.
I know everyone should have access to our third quarter fiscal 2020 earnings release, which can be found on the houlihan Lokey website at www Dot HL dotcom 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 we'll 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 could 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 FCC filings for a more detailed discussion of risks that could impact our future operating results and financial condition.
We encourage investors to review, our regulatory filings, including the form 10-Q.
Quarter ended December 31, 2019, when it's filed with the FCC.
During today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the companys financial performance.
These measures should not be considered isolation or as a substitute for our financial results prepared in accordance with gap a.
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 Dotcom web site.
Hosting the call today, we have Scott Bizer, Houlihan, Lokey, Chief Executive Officer, and Lindsay Ali Chief Financial Officer of the company.
They will provide some opening remarks, and then we will open the call the questions.
With that I'll turn the call over to Scott.
Thank you Christopher Hello, everyone and welcome to our third quarter fiscal 2020 earnings call.
We had a strong fiscal third quarter, we generated a record 334 million in revenues an increase of almost 12% versus the same quarter last year and this was the first time, we've achieved quarterly revenues in excess of 300 million.
Adjusted earnings per share or 88 cents, a quarterly record for the firm and an increase of 14% versus the same quarter last year.
We also announced our quarterly dividend of 31 cents per share for the fourth quarter.
Year to date revenues of 857 million are up 8% compared to the same period last year and we continue to see good momentum across all three of our business lines as we entered the fourth quarter of our fiscal year.
So for this fiscal year the firm has capitalized on a number of favorable macro economic trends. The U.S. economy continues to exhibit stable growth notwithstanding an economic expansion that is now in its 11th here the stock market had an exceptional 2019, helping to support a good.
Midcap M&A market and finally access to capital remains strong in interest me rates remain low and facilitating a healthy leverage lending environment, which supports private equity M&A activity.
These macro economic factors provided a strong tailwind to fuel growth in both our corporate finance and financial and valuation advisory businesses, and we expect that tailwind to continue into our fiscal fourth quarter.
Our financial restructuring business continues to perform well despite the current low default environment and the credit markets ongoing technology Disruptors changes in consumer buying habits company mismanagement and overleveraged have all contributed to current growth in a restructuring business without the.
Difficult characteristics of the business downturn or higher interest rates.
With respect to company specific trends in corporate finance, the number of sell side by side and capital markets opportunities continues to grow as does our average transaction size throughout calendar 2019, we saw softness in our European business, but over the last couple of money.
We have started to see improving M&A and capital markets activity heading into the recent UK election.
To date in the U.S., we've not experienced any changes in the pace of companies and investors exploring M&A opportunities in anticipation of the outcome of the U.S. elections later this year.
In financial restructuring, we continue to experience balance and our business between debtor and creditor work and in fact in fiscal 2019 and fiscal 2020 year to date, our debtor revenues and our credit or revenues were pretty evenly split.
And finally, our financial and valuation advisory business continues to show improvements in productivity and increased diversification as all of its primary sub product lines are performing well year to date.
Turning to some of our specific accomplishments during the quarter.
On the acquisition front as previously announced we close to transactions, we acquired for dentist capital investment banking business in Spain, and Freeman and company and New York based investment Bank that provides advisory services to companies and the financial services industry.
We continue to monitor and pursue other acquisition opportunities as we maintain that the right acquisitions are an important part of our business model.
On the hiring front, we brought on to Mds in our third quarter, a health care banker and an oil and gas banker and we continue to see a robust market for talented managing directors interested in joining the houlihan lokey platform.
Finally, with calendar 2019 behind US Houlihan Lokey continues to be leader across all three of our business lines and corporate finance. We're the number one M&A advisor for all U.S. transactions for the last five consecutive years in financial restructuring, we're the number one global financial.
Restructuring advisor for the six consecutive year.
And in financial and valuation advisory we're the number one global M&A fairness opinion provider.
Over the past 20 years, all based on the number of transactions. According to definitive formally known as Thomson Reuters.
Well recently, there have been more factors positively impacting our business we're ever mindful of how quickly events can change the outcome of U.S. elections geopolitical events, the Corona virus trade disputes or general downturn in the economy, all factors that could crew.
Rate headwinds and the impact our business, we strive to successfully manage around or through any macro business risk in order to maintain solid financial results in any economic environment with that I'll turn the call over to Lindsay.
Thank you Scott.
Revenues in corporate finance were 201 million for the quarter.
Up 9% when compared to the same quarter last year.
We closed 95 transactions in the quarter compared to 89 in the same period last year and our average transaction fee on close deals with slightly higher this quarter, what compared to the same quarter last year.
Thats restructuring revenues were very strong this quarter at 93 million a 24% increase from the same quarter last year, driven by higher transaction volume.
We closed 28 transactions this quarter compared to 21 transactions in the same period last year.
Our average transaction fee on close deals was relatively flat when compared to the same quarter last year.
We would like to remind everyone that our financial restructuring business can be lumpy across quarters.
It is often driven by the timing of large be events. This quarter, we benefit benefited in a positive way from that Lumpiness.
Before we get into the specifics of our next business segment, we've announced a name change for our financial advisory services business or fast.
We're now referring to this business segment as financial and valuation advisory or F.B.A.
We believe this name change more accurately reflects the type of business, we're doing within this segment.
And financial and valuation advisory revenues were 40 million for the quarter, 1% increase from the same quarter last year.
We had 530 feet events during the quarter compared to 502 in the same period last year.
Business activity remained solid across all of our major product lines in FDIC and we've continued to see improvement in managing director productivity throughout the year.
Turning to expenses, our adjusted compensation expenses were 209 203 million for the third quarter versus 181 million for the same period last year.
Continuing this quarter, we adjusted for pre IPO grants and for deferred payments primarily related to acquisitions.
Adjusted compensation ratio was 61% for the quarter within our targeted range of between 60 point, 561.5%.
Our adjusted non compensation expenses third quarter were 50 million versus 47 million for the same period last year.
Our adjusted non compensation expense ratio in the fiscal third quarter declined to 15% from 15.8% and the same quarter last year.
Our year to date adjusted non compensation ratio is 15.3% versus 15.8% for the same period last year.
As a reminder, our long term fiscal target.
Adjusted non compensation expense ratio is between 14 and 15%.
This quarter, we adjusted two items out of the non compensation expenses first approximately $580000, primarily legal and accounting costs.
I shared with our acquisitions for Dennis capital and Freeman and company, which closed in November and December 2019, respectively.
Second we adjusted out our non compensation expenses.
We adjusted out of our non compensation expenses, approximately $1.9 million acquisition related amortization.
We will continue to adjust for similar types of expenses in the quarters in which they occur.
Our adjusted other income and expense line item resulted in a gain for the quarter of approximately $1 million versus a gain during the same period last year of 700000, our income in this line item for the quarter was primarily result of interest income on our cash and investment balances.
Our GAAP effective tax rate was 29.2% for the quarter and there were no adjustments, we were a little higher than usual this quarter as a result of several nondeductible items related to the two acquisitions and certain costs associated with the London move.
As a reminder, our targeted range for the fiscal year is between 27 and 29%.
Turning to the balance sheet and uses of cash as of the quarter end, we had 360 million of unrestricted cash and equivalents and investment securities and the third quarter, we purchased approximately 100000 shares.
An average price of $44, an 18 cents per share as part of our share repurchase program.
The vast majority of the cash remaining on our balance sheet is accumulating in anticipation of our fiscal 2020 year end bonus payments in may.
With that operator, we can open the line for questions.
Thank you at this time, we will be conducting a question and answer session. He would like to ask a question. Please press star one on your telephone keypad.
A confirmation to on will indicate your line is in the question Q you May Press Star too if you would like to remove your question from the Q.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star.
One moment, please while we poll for questions.
Our first set of questions come from a line of Devin Ryan of JMP Securities. Please proceed with your question.
Great Good evening guys.
Hey, David.
I guess first question here on the restructuring business and.
And that you're seeing there I appreciate.
You mentioned that it can be lumpy from quarter to quarter, but it does feel like maybe that.
The overall trend is moving higher.
Potentially even breaking out of this range that we've kind of been recently kind of about 300 million dollar annual level. So I'm just curious if that's the right told me that it's accelerating and you know some of the drivers that you kind of roughly had been in place for while so I'm just kind of curious what else seems to be occurring that maybe.
Driving the uptick as we end the year and head into fiscal 2021.
I think you're dead on your comments there are a fair assessment I mean, we do see kind of the base line of business opportunities in restructuring continue to slowly grow notwithstanding as we said there has been very little macro economic fact pattern stat to help the restructuring business. It's really been all of these ancillary items.
We continue to persist and continue to grow.
Okay.
I appreciate that and then.
Just one on the compensation ratio and how to think about that especially coming into this year.
I think where we are today, it's probably better expectation then in most of US had so I'm curious.
If there's.
Any thought around the ability to true that up at all in the fourth quarter or.
Whether it's it's more.
Mechanical based on the individual businesses because it does seem like you overall revenue trajectory at the firm has been maybe better than what was viewed kind of coming in and I would suspect I was at least some implication on competition.
I think we maintain a compensation ratio I think consistent throughout the year with where we think we're going to be for the year I'm not sure I think of it in terms of treating it up in the fourth quarter.
And the business has done quite well from a revenue standpoint. This year, but we've also added a fair amount of folks and we've done a couple of acquisitions and so we continue to feel very comfortable with that compensation ratio between 60.5, and 61.5% and I think year to date is probably pretty reflective of our best guess on where the year.
Trends going to going to end up.
Yeah, Okay terrific last quick one around if revenues in the quarter or whether there was any pull forward in the quarter from the fiscal fourth quarter.
When you say pull forward Devin what do you mean.
Oh deals that.
Closed after the last day of the fiscal third quarter, where revenues were were.
Recognized in the third quarter.
Yes, we every quarter, we have revenues that you're defining as pull forward. We according to GAAP. When the transaction is substantially complete we recognize that revenue.
Through.
Checklist of items that we have to ensure our Matt and we've had that same structure on concept in place for more than a decade. So yeah. We in according to your definition, we did have pulled forward revenues.
Right I guess more of what I was getting it was if that was outside the bounds of what's normal Oh, no. It's pretty straightforward quarter in terms of revenues and we didnt have any significant outsize revenues that drove the quarter and we had some large fees, but nothing in particular, that's worth were worth calling out.
Okay got it. Thank you thanks for taking my questions and congratulations on the nice quarter.
Sure. Thank you.
Our next set of questions come from the line of richer ramps of Golden Goldman Sachs. Please proceed with your question.
Thanks. This is James Yarrow filling in for Richard So My first question is January 2020 completed industry M&A volumes softened significantly across.
Graffiti steel size deal types could you talk about what parts of the business or are seeing strength and giving you confidence around the corporate finance business heading into next quarter.
First of all I think you always need to make sure that you're making a difference between deal volume and deal numbers unusually steel numbers that are more relevant to what we do having said that you've been experiencing even.
Ill numbers have been shrinking to last couple of years in our business and the number of deals that we complete continue to grow and we think it's a combination of continually and deploying mentoring and improving the talent, we have hiring key individuals making acquisitions and we're just able both globally and then a sub.
Industry sector to participate in more and more transaction activity and that's what's been growing the the base of our business in the corporate finance area and and don't I don't think Theres anything in particular in the last quarter to that we would point out is uniquely different than what we've really been experienced the last couple of years. We believe we're taking market share saying at a different.
Away and I don't think Theres any one industry that is particularly strong.
Certainly from a systematic standpoint over the last couple of years I mean, some years healthcare may be stronger than others. Some years industrials, maybe stronger than others, but it's not any trend that is driving our revenue or business mix and corporate finance.
Got it.
And then obviously low financing costs of supported private equity activity, but.
Sponsor activity has been weaker than on the strategic side over the past couple of quarters could you characterize the dialogue with natural sponsors and what do you think would prompt them to start deploying some of the record levels of dry powder added more accelerated rate.
The comment you made its just not been our experience private equity activity for us has been pretty robust for as many quarters as Scott and I can think about so I don't know that I wouldnt necessarily agree with the comment that private equity is a bit slower than usual and you might look I think.
Really private equity could be maybe defined in three different groups there could be mid cap private equity and what I'd call larger mid cap private equity and then largecap private equity and I think the dynamics around or three could be different but what we're where we are playing that market of kind of under $1 billion and probably closer to.
Two under 500 million in private equity, it's very robust.
Got it sounds like the larger deals maybe skewing that alright, alright, I appreciate the time.
Thank you.
Our next set of questions coming from a line of Michael Brown of KBW. Please proceed with your question.
Hi, good evening guys.
Hi, Mike.
So first just a follow up on restructuring.
In energy, specifically, we've obviously seen some good activity in the space, but.
Oil today said on below 50, a barrel.
Unless kind of wondering if you could speak to the potential opportunity set for you from the oil and gas industry and if you could.
Maybe compare it to the last energy restructuring cycle that that may be.
Maybe helpful for us.
I think we do see a little bit of a second hiccup wave here in the oil and gas arena from a restructuring standpoint.
Doesn't feel like it's going to necessarily be as big or is lengthy as what we saw before but as we've always looked at its a combination of what kind of business plans people put together what kind of financing package. They have in what was the duration of that.
Financing package, and ultimately where oil prices are and all of those are causing some round of some additional conversations and mandates and restructuring but at this juncture don't necessarily think it's going to be at the same size. We saw a couple of years ago.
Okay.
And then just before the earnings call. We saw some headlines from the FHLB say.
In the past you guys have advised deal we and the Treasury Department can you just speak to kind of houlihan's unique capabilities have allowed you to kind of weigh on these these government mandates and then as we think about some of these transactions is government transactions how are the fees structure for something like that and are they.
Typically success fee driven.
Yeah first of all I think we've been at the leading financial restructuring from on the street for many years and that just another example of kind of a marquee assignment for the farm.
We don't really ever given the specifics about any of the exact task or fees and in particular project.
You can read what's publicly disclosed out there, but I think we've continued to build a stellar organization and the restructuring area. We continue to get some of those high profile mandates.
Whether these are at the corporate level government levels municipality levels.
We've been doing this for years in fact decades.
Okay appreciate the color.
Hi, Thanks Bye.
Our next set of questions come from the line of Brennan Hawken of UBI. Please proceed with your question.
Thank you and good afternoon. This is Adam Beatty sitting in for Brian today.
You mentioned, the U.S. or the upcoming years selections among the potential risk factors and we just wanted to get a little more of your thinking around you know it seems like in this cycle, it's maybe a little bit too early to see any real effect from that but just around past cycles, particularly where theres been kind of a buying.
A reset of alternatives around tax policy, what effect that has on midmarket M&A whether folks.
Try and push deals through quicker or just hold off until the results of video action in terms of policy or more clear already any nuances that you've found noteworthy in the past. Thank you.
Yeah, I think our major points really regarding U.S. elections have more to do with what could be potential changes in tax policy, which does drive corporate executives to make that different kinds of decisions as I said early in my remarks, so far to date, we've not really seeing any.
New evidence.
Key investors or business owners, making decisions to start transactions in advance of elections, so they're either not concerned about it at this point are there still waiting.
Typically when people do expect to see significant changes in tax policy, you will get different folks who will start.
Going forward on different kinds and transactions and different time periods, but at this point I'd say we're.
We're focused on it could be aware of it but we've not seen any impact in terms of kind of the volume of new business coming in.
Okay. That's all we had much appreciated.
All right. Thank you Adam.
Our next set of questions come from the line of mine in the South of Morgan Stanley. Please proceed with your question.
Hi, good afternoon.
Oh, you mentioned on the calls that Corona virus could impact the M&A environment.
Is that mainly like a potential indirect impact on markets in sand demand or is there are more direct impact there.
Yes, basically I was trying to get to as the markets hold up in the U.S. would you expect the M&A environment to remain elevated.
So first of all like we all need to be somewhat careful on where any of this could go it's only been a week or two that really this has become a more of a world news and what happens in the ensuing days weeks months will tell us.
Short term it can have some impact on business directly with China.
Albeit we don't do a lot of transactional work with Counterparties in China.
But otherwise if the virus continues to go forward to could obviously have some ongoing negative impact as you mentioned and investor sentiment and it can also impact everybody who is getting supplies are materials or not necessarily from a transaction standpoint, but just impact on businesses themselves early early days here and we've obviously seen.
In the stock market the whipsawed over the last week or two because of these events yeah and in theory.
He affects that the virus has on the M&A transactions as a result of fiber supply chain disruption in theory should be.
Temporary but it could have a temporary effect and as Scott said too early to tell but it's worth calling out I mean I think it's.
Faster than anyone's expectations, and we're keeping an eye on it in terms of how it might have an impact on the next six months.
Got it.
And then separately just on the on the non comp side yard non comp expense ratio came in at the higher end of your engine I know you reiterated that no you reiterated your outlook for the 14% to 15% range. Yeah. I was wondering is there anything special youre doing on the I'd cost side right now because you you called that out for a couple of quarters now and.
Should we think about that non comp expense ratio coming in at the higher end of your range for a few quarters as you continue that investment spend.
Yes, I think there are a handful and I've called this out in previous quarters of IP related expenditures that are affecting our PML I'm. One of the larger ones is we are rolling out a new ERP system and that as as having its impact on the IP related costs, having said that I think if you look at our year to date in.
Station expense ratio we are.
Performing quite a bit better than we were at this time last year last year, we ended up at roughly 15.1% from a non comp standpoint.
And our expectation is on hope is that we end up slightly better than that and so to answer your question, Yes, I'd probably.
I assume towards the higher end of that range, but we have seen improvement year over year and expect to continue to see that.
Certainly over the long run.
Got it thank you.
Our next set of questions come from the line of Ken Worthington of JP Morgan. Please proceed with your question.
Hi, this is well cuddy filling in for Ken.
Well.
Hi.
So Scott you highlighted the UK and your prepared remarks could you elaborate on how the evolution of Brexit at the impacting your European business.
Well I think it my comments really probably little broader even to Brexit I think we've all seen that the European economies have not grown at the pace at the U.S. has over the last couple of years.
As the Brexit uncertainty continue to roll out during calendar 2019, we think that did have some probably.
Negative issues, especially in the UK may be a lesser extent in the continent.
And we found that calendar 2019 was slower in Europe than we probably would have thought a year ago, but we have seen in the last couple of months pick up and whether it's because people are adjusting to a new expectation of growth rates out in Europe or because they felt that there was finally going to be a resolution.
And Brexit, but we've seen and I think some of our peers have seen somewhat of an improvement in the European marketplace. In the last couple of months that didn't necessarily exist in the first debt calendar half of the year.
Okay got it thank you.
And then following up on an earlier question on private equity and Lindsay I. Appreciate your comments segmenting the space. If we're going to think about those segments could you maybe share even seen more entrants come into private equity in a different segmentation is that the contributing you that continued strong growth.
Pool and in those businesses.
Well I think we continue to over the last couple of years see new formations of private equity firms, whether they're completely grass roots theres spinouts personnel from existing funds et cetera, but the number of private equity firms continue to grow and usually most of the newer formation ones tend to focus more on the size deals.
What we're doing especially in the their early years it formation.
Got it I'll sneak one more and on the Lumpiness of the restructuring could you just maybe elaborate a little bit more on what drove that lumpiness. Please.
I'd say this quarter I have called out in the past, where we've had one or two transactions that have had a meaningful impact in the quarter I would say this quarter was not there are no single transactions. We just had a very strong restructuring quarter I think my comments are more that.
It it doesn't follow the same growth projectile that our corporate finance, our our fee business does so annualizing that number or assuming growth quarter over quarter and that number can be dangerous and restructuring. So no specific call outs on very large transaction fees that affected the quarter. We just had a very.
The strong the timing was good this this quarter for restructuring.
Got it thank you for taking my questions.
Of course.
Our next set of questions come from the line of Chris Walsh of Wolfe Research. Please proceed with your questions.
Hey, Scott Hey, Lindsay.
Chris I.
Hey, so in the past you guys have called out the capital markets Advisory team. That's one of the fastest if not the fastest areas of growth across the whole franchise and now the that team has a couple of years old can you kind of help size.
The revenue contribution to corporate finance revenues over the last 12 months.
Yes, we don't call up at specific.
Percentage that it represents a corporate finance so just taleo, we think it's one of the most important pieces we have.
It's growing rather rapidly over the last couple of years.
And we believe for a lot of secular reasons that we've talked about we think the whole capital markets are effectively.
Being the aging of the especially private financing in the early days and we think it can continue to grow for quite some time, regardless of where the markets are going it's just we're seeing more and more either company is or private equity firms are hiring firms like ourselves in our peers to actually assist in the raising the bad debt.
Capital.
Okay. That's helpful and then just on the acquisition front.
Good deals being a key part of your revenue and earnings growth Playbook, just hoping you could share how the two most recently announced deals in the fourth quarter fit into your overall growth strategy.
Like most of our deals you know these are kind of smaller average size tuck ins. So none of them usually have any significant financial impact right out of the box.
But there is clearly this and then this transaction clearly increases our size and substance out in Spain, and the frequent acquisition just builds to a an already strong fig business that we have and this just adds to the the bench strength of all of our FICC capabilities.
Okay cool thank you very much.
Thanks, Chris.
Our next set of questions come from a lot of makeover Autonomous research. Please proceed with your question [noise].
Hey, good evening guys. Thanks for taking my question.
So just taking a step back.
As we attempt to level set that next downturn against the last one on the implication for Houlihan I'm curious if you could provide your take on how the rise of private credit vehicles as well as their improvement of international bankruptcy law will impact default rates fee rates and the addressable market.
No I think what we would say is that we do know the absolute size of the leverage debt tie yield that marketplace et cetera is substantially larger than it was at the last peak in 2007.
We also know that default rates are still very low compared to historical time periods. When we've entered into some restructuring environment and if and when we do get a downturn. We would expect the restructuring business would you know substantially grow from the levels. We would see and then likewise, we would expect some slowing down or slowness.
In the corporate finance business and EFI a business that we have so I don't necessarily expect a different set of fact patterns than we've seen in previous downturns other than each recession.
What causes it and what impact in exactly the timing.
No one can completely predict and we'll have a different point of view.
Than what we've seen in the past and what we continue to stress is we are not experts and exactly when a recession will occur what will happen with interest rates stock market et cetera. We just continue to try to build the best business, we can and all of our segments down hopefully operate financially successfully as best they can and whatever the market's my desk.
In Hawaii.
[noise] great guys. Thanks.
Hi, Matt.
Our final questions come from the line of Jim Mitchell with Buckingham Research. Please proceed with your question.
Hey, good afternoon guys.
Just maybe a longer term question on China.
You know I know you started to see some activity there from restructuring there you know with the phase one deal looks like there might be more opening up more more us companies are foreign companies investing and taking over 100% Stakes in investment companies. How do you think about the long term opportunity and restructuring there and are you.
Making any changes our investment strategies now to try to capture that in the future.
No short term changes and we've operated in dozens and dozens of countries now and doing restructurings China being.
One of the many areas outside the United States in Western Europe that we've done restructurings and we continue to be a global player. There we tend to follow where capital is going where they'll make investments along and there's some form a rule of law creditors rights et cetera. We believe we can continue to operate and be a success.
A couple of financial restructuring player, but short term don't see any differences in what we think we'll come out of the marketplace in China for from a restructuring standpoint, and I think Jeff.
And we've talked about this in the past is.
As a.
Countries' economies mature as the rule of law mature matures and allows for a financial restructuring product.
We are very aggressive in making sure were present in those countries, whether it be China or India. So I think as you think through modeling China 10 years from now if the can answer if the restructuring climb in an environment in China doubles triples quadrupled over the next 10 years, you could expect us to be a significant player in there.
As markets and it's really going to be driven probably less by our presence in those markets and more by how quickly the governments in those.
Second World countries are willing to accept the rule of law that allows for a restructuring product that were used to here in the west.
Right no. It makes sense that's helpful and maybe lynsey on on the balance sheet you guys did a couple of acquisitions, but cash is still up.
24% year over year, obviously as your business grows cash flow grows is how do we think about capital return or is it still were.
Could do bigger acquisition, so you're just it's because you're going to hold onto it or do you start to think about special dividends or more aggressive buybacks.
I think that with respect to holding on to cash in anticipation of acquisitions, we don't really approach it that way, we put a revolver in place. So we don't have to do that.
So we will tend to use our cash and kind of the three primary buckets, one for dividends one for share repurchases and our two for share repurchases in three for acquisitions I think since we went public we have made enough acquisition. So that we havent held a lot of excess cash and we are generating some excess cash if we don't do an acquisition.
For a while we'll have to think as a board what the best use that cash is but our and we don't anticipate holding anything back in anticipation of acquisitions and if it gets to be a big enough number we would consider any anything that makes sense.
Relative to holding onto it.
Alright, Thank you very much.
We have reached the end of the question answer session I will now turn the call back over to Scott Bizer for any closing remarks.
I wanted to thank you all for participating in our third quarter 2020 earnings call and we look forward to updating everyone on our progress when we discuss our fourth quarter results for fiscal 2020, this coming spring.
Thank you everyone.
This concludes todays conference you may disconnect your lines at this time. Thank you for your participation.