Q1 2021 Houlihan Lokey Inc Earnings Call
Hi, all participants are they listen only mode.
<unk> answer session will follow a formal presentation. Please note that this conference call is being recorded today July 28, 2020, I would now turn the call over to Mr. Christopher Crane.
And well keep gel capsule. Thank you you may begin.
Thank you operator, and Hello, everyone.
By now everyone should have access to our first quarter fiscal year 2021 earnings release, which can be found on the houlihan Lokey website at www Dot HL dot 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 well expect anticipate short 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 FCC filings for a more detailed discussion of the risks that could impact future operating results and financial condition.
We encourage investors to review, our regulatory filings, including the form 10-Q for the quarter ended June Thirtyth 2021, it as 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 in isolation or as a substitute for our financial results prepared in accordance with gap.
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 website.
Hosting the call today, we have Scott buys or Houlihan, Lokey, Chief Executive Officer, and Lindsay Alley, Chief Financial Officer up 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 welcome everyone to our first quarter fiscal 2021 earnings call.
Last few months have been unusual times, we feel compassion for the millions of people around the world affected by covert 19 and were hopeful for successful treatment and the vaccine amongst your head.
I'd like to offer our sincere appreciation to those who are working on the front line to battle. This disease to all of you doing your part to keep yourself and others safe and healthy.
Also we are coming to understand with greater clarity.
Justices suffered by many of our fellow human beings. We are hopeful true positive change come about in America and abroad.
Everyone at our firm understands we need to be part of the solution.
We're making a concerted effort to continually improve diversity and inclusion and the quality of opportunity within our organization and we are increasing our involvement in our local communities to improve the quality of life for all.
Well now turn from the vital issues affecting our society and our fellow citizens to our business results.
The current business environment continues to exhibit very tough near term challenges, but also show signs of significant opportunities in the mid and long term.
Our first quarter fiscal 2021 revenues were 211 million down 16% persist our first quarter last year. Our adjusted earnings per share were 56 cents also down 16% compared with the same quarter last year.
Notwithstanding their performance and the first quarter and recognizing that continued short term headwinds our financial position is strong and our midterm and long term outlook remains positive.
As I mentioned on our last quarterly earnings call. Our balanced business model is working as it was design the severe and abrupt dislocation caused by the pandemic has negatively impacted revenues in our M&A business not unlike other downturns. The same time the opportunities for us and financial restructuring have expanded significant.
However, as has been the case through other periods financial change and disruption the near term impact on or M&A dismissed has occurred faster than anticipated growth in financial restructuring revenues.
We believe growth in a restructuring revenues will become more evident overtime as we work through the significant opportunities that currently exist and we'll continue to expand as the result of this pandemic.
I'll start by summarizing the challenges, we're facing and then move onto our opportunities.
By any measure M&A globally and in the U.S. large cap and mid cap strategic and financial analyzed by volume or deal count is down and down by a lot.
During our first quarter, we had a number of deals that died and even larger number that were put on hold and we experienced a much slower pace and M&A new business activity.
This quarter, we closed 43% fewer corporate finance transactions compared to the same quarter last year and new business activity levels in the quarter were down almost 50% versus the same quarter last year.
In previous recessions, we have experienced dramatic declines in M&A activity, but never one is abrupt as the one we experienced during our first quarter.
Today capital markets are strong and the stock market has held up well. However, the continued pressure to stay at home the risk of a second shutdown in an uncertain U.S. election outcome when over the M&A market.
Mitigating. These concerns is the fact that the number of deals on hold versus the number of deals that died is more favorable than in previous downturns. We believe this reflects the market's view of a temporary pause in M&A activity versus a prolonged disruption.
Notwithstanding the rather dramatic reduction in M&A activity over the past few months over the last 30 days, we began to see some green shoots to recovery in the M&A marketplace equity markets have effectively regained their lost value and our trading generally flat from calendar yearend interest rates remain at history.
Work like low levels, the debt markets, our liquid and lending for buyouts is gradually returning.
The number of financial sponsor pictures, we are participating in is nearing pre cobot levels and the prospects of higher corporate and individual tax rates in U.S. are starting to positively influence M&A activity.
Although we've experienced a decline in M&A activity, our capital markets business has been busy we closed a number of transactions across industries for companies seeking more flexible capital and for companies, who intend to use capital to be optimist opportunistic and this market environment.
Overall, the size of our average mandate and our average fee and capital markets is larger than pre cobot.
Furthermore, as expected in current conditions with less plentiful capital corporate and financial sponsors are more highly valued the role of a capital market advisor, which bodes well for the long term future of this business.
Overall, our financial and valuation advisory business is holding up well while revenues were down somewhat in the first quarter versus the same period last year you business activity has stabilized since the trough in the stock market earlier this year, our portfolio valuation transaction advisory corporate valuation advisory service lines are up year over year.
While our transaction and fund opinions service lines or lower.
Historically, our valuation business segment has experienced single digit declines in its annual revenues during a business downturn.
Our financial restructuring business has benefited substantially from current market conditions at the outset of the cobot crisis, new business activity increased immediately as many firms across multiple industries were plunged into crisis mode as government intervention in the bond market stabilize many situations our outlook for restructuring.
He has changed since our last earnings call.
90 days ago, we would have anticipated it much steeper rising bankruptcies, but over a shorter timeframe today, we expect that the overall business environment for many firms may be worse than first anticipated, but their ultimate need to restructure may take place over a longer period of time.
Currently we are working on more assignments than ever before and we have a pipeline of developing situations that we believe will translate into engagements over the relative near term as a reminder, it can take several quarters for years to complete a restructuring to Simon Consequently, while we have had record first quarter revenues and financial risk.
Rupturing and we have seen a considerable increase and the monthly fee component of restructuring assignments. We expect the majority of our current financial restructuring transaction fees to be recognized as we move towards the latter part of this fiscal year and in subsequent years.
Turning to our acquisition activity in June we announced the acquisition of MVP capital MVP provides investment banking services to telecommunication firms. Their business has remained stable during the pandemic as infrastructure investment in telecom is as important as ever.
We all sit here and as zoom connected world. It seems fairly clear that all of us are benefiting from the rollout of Fiveg technology.
The combination of our two farms better positions us to serve our collective client base. During this important technological transition.
We expect this transaction to close in August and we're excited about welcoming our new partners and the firm.
Consistent with our historically acquisitive business model strong business performance at a recent equity offering where an active dialogue with a number of companies interested in combining with our firm to date. The most promising opportunities are in the U.S. and Europe certain firms provide sector expertise, where we are under weighted.
Well other firms we are looking at would expand coverage and current industry verticals.
Generally speaking several of our most active dialogues are with firms larger than our previous acquisitions.
We don't expect to close on every transaction and we may not close on any of them, but overall, we're quite pleased with the quality of firms we are talking too.
In closing, we expect more uncertainty and the economy and our financial results in the short term until we get more clarity and the resolution of co bed and the upcoming U.S. elections. However, we are as confident as ever in our balanced business model the talent and perseverance of our employees and the advice, we are giving our clients.
Regardless of the length of this pandemic or the severity of the aftermath, we believe that has with as with previous cycles. We will come out of this a much stronger even better position from and when we went in and with that I'll turn the call over to Lenzi. Thank you Scott.
Revenues in corporate finance, where 88 million for the quarter compared to 134 million for the same quarter last year.
Lower revenues were result of 43% decline and the number up close transactions, partially offset by an uptick in our average transaction fee on closed transactions.
That's a restructuring had a record first quarter delivering 89 million in revenues to 12% increase from the same period last year.
Higher transaction volume and a higher monthly retainer fees drove the increase in financial restructuring revenues this quarter compared with the same period last year.
We closed 29 transactions compared to 25 in the same period last year.
And the increase in retainer fees as a result of the significant increase in the number of current engagements driven by the pandemic.
Although we have started to see an up tick in monthly retainer fees. The bulk of the revenue associated with Kobin related restructuring will not be realized until the transactions close in subsequent quarters in years.
Unfinanced warrant valuation advisory revenues were 35 million for the quarter compared to 37 million for the same period last year.
Let's see I saw mixed results across service lines as Scott mentioned with several of the product lines positively affected by the increase in volatility caused by the pandemic and a couple of the product lines negatively affected by the steep decline in M&A activity.
Turning to expenses, our adjusted compensation expenses were 132 million for the first quarter versus 153 million for the same period last year.
We had one adjustment this quarter for deferred payments related to certain acquisitions and as a reminder, we will have no more adjustments relating to our pre IPO grants as the last tranche was expensed in the fourth quarter of fiscal 2020.
Our adjusted compensation ratio was 62.5% for the quarter, we experienced upward pressure on our compensation ratio relative to last year's first quarter for two primary reasons first there is continued uncertainty around the linked to the pandemic and the severity of its aftermath, which is applying some upward pressure on our compensation ratio.
Second we are experiencing materially lower reimbursable expenses, which are component of our gross revenues.
Since our employee compensation is driven by fee revenues and not gross revenues, we are adjusting upward our compensation ratio to account for the lower Reimbursable expenses.
Offsetting this decrease in our revenues because the decline and our adjusted non compensation expenses, which ended the quarter at $30 million versus 37 million for the same period last year a decline of 20%.
This resulted in an adjusted non compensation expense ratio of 14.2% versus 14.9% and the same quarter last year.
This decline is a direct result of reduced travel meals and entertainment expenses and other operating expenses associated with recruiting and marketing events.
All related to stay at home orders implemented as a result to the pandemic.
We expect to continue to see significantly reduce non compensation expenses and these two categories at least through the balance of the calendar year.
This quarter, we adjusted two items out of our non compensation expenses 418000 costs related to our primary stock offering in may.
And 1 million in 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 decreased for the quarter to income of approximately 1.2 million versus income of approximately 1.7 million in the same period last year. This was primarily a result of lower interest earned on our cash endesa balances.
Our adjusted effective tax rate for the quarter was 25.3% compared to 28.8% during the same period last year.
As a reminder, a portion of the deferred stock do we issue as compensation to employees. That's during the first quarter of our fiscal year disgusting had a significant effect on our GAAP effective tax rate this quarter as expected, which we adjusted for in order to give a more normalized effective tax rate for the quarter.
Our adjusted effective tax rate of 25.3% is below our long term target of between 27, and 29% driven by a couple of discrete items that likely won't repeat in subsequent quarters.
But also because there are lower nondeductible expenses expected. This year as a result, though as a result of the coated crisis.
Nondeductible expenses include certain meals and entertainment.
Employee parking and certain non deductible compensation associated with our named executive.
As a result of lower nondeductible expenses, we expect our tax rate for fiscal 2021 to be closer to 27%.
Turning to the balance sheet and uses of cash as of the quarter. In we had 546 million of unrestricted cash and equivalents and investment Securities, which includes 189 million in cash from the equity offering we completed in May.
Discussed earlier comments regarding our acquisition activity. We believe we have enough capital to take advantage of attractive aquas attractive acquisition opportunities as they arise.
In addition to having adequate cash in our business, we've effectively no debt and an undrawn revolver of $100 million.
And our first quarter, we issued approximately 900000 net new shares to employees as part of their bonus compensation for fiscal 2020, and as we had in previous years, we intend to offset the dilution through share repurchases throughout fiscal 2021.
In addition at our board meeting this month, we replaced our previous share repurchase program with a new share repurchase program totaling 125 million.
Finally, we're pleased to announce that we're increasing our dividend to 33 cents per share payable on September 15th to shareholders of record as of September 2nd.
And with that operator, we can open the lines for questions.
I think I will be beginning the question answer session.
Mike.
Please press star one on your telephone keypad.
Confirmations on will indicate your line is in the question Q. You May proceed start you. If you would like to your question from the Q1 participant using speaker equipment.
Necessary for you to pick up your handset for pressing the star keep.
Well, we pull for questions.
First question comes in line of Brendan.
Yes, you May proceed with your question.
Hi, guys can you hear me.
Right.
Hi.
So just wanted to clarify something.
The comments on on the comp.
Ratio, it's a little elevated versus the range that we normally think about a quarter. It sounded like there was some noise. What was the is the message that you expect that noise to sustain through the year and so we should be thinking about higher comp ratio or is it that this is you know noise that will be passing and.
And things will revert back to the normal range just wanted to maybe just put a finer points that.
Yes, so I'm very briefly I'll try to make it quick we when the accounting change occurred two years ago and May insisted that we increase our revenues to account for Reimbursable expenses last year, we had about 34 million in Reimbursable expenses in our revenue number.
And as you know there's a dollar for dollar offset in that number in our non compensation expenses and so this year, we think our reimbursable expenses, maybe as much as half of that number and we don't pay compensation expenses based on Reimbursable expenses, we only do it based on fee revenues and so we essentially law we may lie.
Who's up to 17 million of pass through revenues that we had normally tied our compensation expense ratio too. So we are adjusting upward our compensation expense ratio to.
With the expectation that we're going to see a much lower reimbursable expense number in revenues. The flip side of that is that our non compensation expenses are going to decline dollar for dollar for that lost you know.
Reimbursable expense revenue. So we may see slightly higher as a result of the accounting change compensation expense offset by lower non compensation expense.
Does that makes sense okay.
Okay.
And then is is when we think about the restructuring business.
Understood that and [laughter], sorry to start off the questions with such a.
Geeky accounting question.
Simple expenses, but.
Pulling back and thinking about the restructuring business and thinking about.
You guys touched on the level uncertainty the fact that.
You think that things might.
Take a little longer to come to fruition.
It is the understanding that there could be an extended timeframe to the cycle is the.
Has the opportunity set changed do you think that the expected [noise].
Revenue that that all of us should be considering for the upcoming year that you just kicked off she we calibrate that and be pushing off some of the revenue into subsequent years, how should we think about the potential ramp at this stage is what you're seeing now enough to adjust those views or is it still too early.
But what we said is today compared to 90 days ago, we'd probably think that our restructuring revenues in fiscal 21 will be less than maybe what we thought 90 days ago, but Conversely, we probably think our restructuring revenues in 20 to 23, maybe some additional years will be higher than what we once thought.
So we think the government intervention has slowed down.
The pace of some of the restructurings that we would've thought would have occurred 90 days ago on the other hand as this pandemic is not a short term blip and there's going to be something much longer and probably more damaging to the economy, we think theres going to be ultimately more opportunities, but over a longer period of time.
Excellent.
Very clear thank you for that Scott I appreciate it one last one from me when you think about the green shoots that you referred to in M&A.
How should we think about that as we try to adjust our models.
No normally given that you focus on in the deals that are in the middle market a lot of times you had announcements in closings that happened in the same quarter. So what how should we think about when those green shoots can actually translate to.
Real revenue opportunity for you guys.
So a couple things I think we would say the decline in the M&A marketplace over the last quarter is a severe in a singular quarters, probably anybody seen having said that.
Like I said, we're starting albeit it's only been called the last 30 days somebody's Green shoots.
We're reasonably confident they will turn into new business, whether the deals will close or Wendell close is much more uncertain. We know there is some push because the potential changes in tax policy that's going on.
We are starting to see some of the private equity firms, who said you know look we will go forward on some transactions even if at the moment, we can't actually physically meet with management or visit plan. So humans are starting to evolve.
This new order if you might and those are something's that were seen in clearly I think the equity markets and bond markets have been much more buoyant.
And strong then probably what anybody would have thought you don't 90 year seven days ago. So all of those are positive signs I said, we're clearly seeing activity, which is getting us to have more dialogue Guinea. This to probably have more new engagements and what we saw 90 days ago, but whether they will turn into closed deals or when they'll close to it.
To tell.
Okay. Thanks for all the color.
Thanks, Brent Thanks, Brian.
Our next question comes from the line, David Fine with JMP Securities.
But your question.
Thank you at seven for the record.
But how are you guys doing are doing everything [noise].
Maybe a follow up to up the last question for bread and.
Finer point on.
The M&A backdrop, and the ability to do deals when.
People still really aren't traveling much at least in the U.S. and how critical is that to getting back to something that maybe not a gray market, but just even a reasonable market you can.
Where people have an appetite to buy an asset.
Without actually seeing it in person are sitting down with the management team are talking to employees is that happening is this come an evolution of the ability to do and M&A transaction people more comfortable with technology I'm just kind of curious if if if if one if it's possible but to.
Are there kind of lasting maybe some benefits where people become more comfortable doing some things that historically or parts of the process that they weren't comfortable doing remotely where that may actually become a lasting.
Effect of the pandemic.
I think there were six questions there but.
[laughter] clearly I think you know technology is evolving in the human behavior is evolving I mean as several things we would point to.
Clearly, we're seeing our workforce and other professional service organizations workforce, there working remotely we're seeing audits by the accounting firms getting done all remotely without having to go in the offices.
We're seeing people actually thinking about how you know you you buy a house or how you purchase things people are willing to do things remotely without actually physically going in seen it which was not common place you know a couple of years ago, a couple of quarters ago I still think the general view to buy a 100% businesses ultimately buyers want to visit.
We meet with management in physically go visit the factory, but we're also doing videos of the factory. So that you can minimize the amount of travel that needs to get done or when they need to do it and the longer. This you know stay at home lack of travel exist I think people will continue to be willing to do deals without.
Have a normal procedure that you once did.
So we did something that would be great. If traveling could occur immediately tomorrow, but I think now that were four months ended this process. We're clearly seeing buyers sellers lenders borrowers are more willing to do a certain number of things remotely that they would have never contemplated doing even a year ago.
Got it interesting okay. Thank you.
Just a follow up here on some of the commentary on acquisitions, obviously issued 3 million shares in the quarter raising nearly $200 million you announced the MVP deal, which appears kind of more regular size compared to what you've done in the past.
Maybe an element reasonably small.
It sounds like you're still when you mentioned this last quarter, you're having conversations with some larger firms that now it sounds like firms versus it sounds like maybe there's something that was more specific last quarter.
To the extent.
You've you've raised this capital do you do you think that this kind of is sufficient for several deals that are larger or how.
Should we think about that or funding kinda to the extent you actually would be one execute on more than one of the larger deals that sounds like you're.
You're talking about this moment, just trying to get a little flavor for that since it sounds like a slight nuance from last quarter.
Yes, it sounded like we said we're talking a numerous firms as you pointed out yes several of our larger maybe a much larger than what we've talked to in the past not necessarily because we've raised the money. It's just where the opportunities are and due to the general size of our from today versus three or five et cetera years ago makes it a little don't different from a cultural.
Standpoint, having said that I think either with the capital that we have on our balance sheet right now through the lending capabilities. When we're still doing acquisitions, it's always been a combination of cash stock earnouts et cetera.
There's nothing that that tells us for the foreseeable future if we needed to and wanted to close on a couple deals.
Yes, we've got enough capital and tools to be able to do that so if your question was do we have enough money to actually close on a few deals and especially if there are more sizable deals I think that answer is yes.
Okay terrific well. Thank you guys for taking my questions I will leave it there.
Okay.
Our next question comes from the line.
Eponymous research. Please proceed with your question.
Hey, Hey, guys. Thanks for taking my question Okay. So.
Hi, guys a clean up question based on your restructuring commentary before is it fair to say that hey relative to 90 days ago that you believe that total addressable market for your restructuring team and they cycle is now larger.
Yes.
<unk>.
A simple enough.
That's all I got [laughter] that.
You didn't ask the time period, we put out yeah, I mean over the I'll call for the next couple of years I think we think the addressable market has bigger today than it was like I said a quarter ago, but it's just going to take a longer period of time for all of that potential business to come our way at our competitors way.
Awesome. Thanks, guys. Thanks, Bob.
Our next question comes on line a richer.
Goldman Sachs. You May proceed with your question.
Hey, this is that James filling in for Richard Thanks for taking my questions, perhaps we could dig in a little bit on some of the trends and the the corporate finance business you saw.
A reduction in the number of empties here they were down by six this quarter and obviously the number of completed transactions were down given the weaker environment. So maybe we could just.
Dig in on how.
The fact that the Mds fall and could have any impact on the corporate finance business going forward if any.
I think you typically there is some seasonality.
To our hiring departures part of it you've got one promotions come in part of it is since we are a March 31 company and are doing our reviews with our employees.
In April and May you'll start to see some turnover of both voluntary and involuntary. So that's a typical time period, you get and kind of looking at a quarter over quarter, even year over year kind of the total mds by all of our product lines not materially different so I would not look at the potential for us to get.
Business or close business is been impacted at all by the handful of departures that you've alluded to.
Okay got it and then two quick bigger picture ones. So I guess, maybe if you could just comment on your.
On the opportunity for there to be in fiscal year, 2021, sorry calendar year, 2021, and perhaps into 2022 for there to be both simultaneously strong restructuring environment as well as the strong M&A outlook or do you think one of the other is going to slow down like in prior cycles.
Well you know each downturn in each cycle has its own unique story twit. All I would tell you is the last couple downturns that we've experienced that the I'll call. It number of quarters that our restructuring business grows is more than the number of quarters that our corporate finance business.
Srecs.
Whether that will repeat itself and whats the magnitude of each of those don't know, but typically due to the duration of restructuring projects and the more quickly either putting on hold dine or re gearing back up in corporate finance as quicker you do tend to typically get at the early stages of the downturn like I said the restructuring business.
Does not exceed the growth in restructuring does not exceed the shrinkage in corporate finance.
Yes, we've seen in the past there is that potential for the restructuring business to ultimately start playing catch up.
Okay got it and then the last one as you know appreciate your comment on how you will see lower non comp ratio in the near term, but perhaps you could talk about how the faster adoption of technology over the course this pandemic as people have been forced to work from home could have a more permanent impact on under noncomp costs over the longer term if any.
Yes, and we've talked about this quite a bit internally, you you're going to likely see some incremental costs.
For all of all of the firms in our business on information technology and if we manage this.
Actively you will see reduce costs and items like real estate, you'll see reduce costs and items like TMT over the long term as people realize you don't have to jump on a plane and apply six hours to to New Yorker, Los Angeles for to our meeting anymore. So we hope honest.
Really that we're going to see structural changes in our non comp expense that that are attractive to investors over the next five to 10 years. It will take a while real estate. Unfortunately, we signed long leases.
So that will take time, but we expect that to happen as a result of whats the.
The changes that are occurring in the way, we all do business.
Okay. Thanks, a lot.
Our next question comes from Jeff.
Hi.
Proceed with your question.
Good evening guys.
Hey, Jeff Yes.
A couple from me one on the commentary about maybe looking at larger acquisitions done before should we think of that is kind of relative to the average could you just strictly that a lot of small transactions or even relative to some of your historically larger transactions like Leonardo.
You know I think what we're looking at is like I said, some I'll call. It normal size acquisitions for Houlihan Lokey and some acquisitions if completed would be larger than deals we've done in the past, but theres still.
You know more kind of tuck in right size right. We are nothing that we're looking at is so big that I think you know puts and change or at risk kind of the cultural the organization.
So it's it's a combination of like I said I'll call. It normal size deals and deals that would be yes equal to or even bigger than the Leonardo one that you mentioned.
Okay and on top of me 30 million for the quarters is really low we typically see kind of a seasonal step up and into the second quarter.
Fiscal year I, just given what's going on covert why should we expect to see a step up like that again quarter over quarter.
Yes.
It's a little hard to tell because we're kind of midway through but I, but I think the way we're thinking about our next sort of couple three quarters is that you'll be in that 30 to 35 million range for all quarters, so year over year, a pretty significant decline in non comp expense.
Okay, and finally, maybe I'm trying to be overly optimistic, but looking at the corporate finance business and kind of the declines in revenues you guys saw year over year [noise], putting it in in the perspective of in the middle markets tend to have a lot of same same day signings on closing just kind of unique.
Dynamic.
To what extent is kind of the pain or the bulk of the pain of the slow down kind of already felt are you guys because compared to peers that don't have that that middle market kind of changed it seems like their revenues have held up better and the twoq. So I'm trying to get asked whether do you know you felt most of the pain already or potentially more to come.
But it's hard to tell whether weve felt most of the pan already because we don't see the end in sight, yet, but as I've said to others. Jeff. We are the first into the recession in the middle market, because we have such small windows between signing and closing and will be the first ones out.
So yeah, we were affected in March we had a significant number revenues go away for us in March and we had almost nothing sort of we had very little kind of.
Closing in Q1 that that were baked by the end of.
By the end of February I'm, having said that.
This was to an earlier question if the market comes back in September October and we go to market on a number of transactions. It is possible those transactions close for us by the end of March and you see them in fiscal year 21 revenues and so it's just it's a because we don't have to go through the.
Shareholder vote that most public companies do for the vast majority of our transactions. We just have a much slower much faster assigned to close.
And I'd add Jeff in the early months of this health crisis, we saw as we mentioned a number of deals go on hold a number deals die.
That pace of acceleration of deals going on Holden died is clearly slowed down the real question I think that we have to answer your question.
Are there more down quarters or not I think is at what pace will those number of projects on hold will they stay on hold will they slip into the dead category or in fact will they hit the let's go to the marketplace category. So there's there's a lot out there that is not dead, but it's not you know yet then given the go ahead.
Side, and that's the big probably bucket, that's a little harder to predict from a timing standpoint.
Okay. Thank you.
Thanks, Sir.
Our next question comes from the line.
At Morgan Stanley You May proceed with your question.
Hi, good afternoon.
I was wondering do you have a timeframe in mind within which you would deploy the capital you raised in May and if you don't see any major opportunity as well you know when you would decide or it turned out to shallow does.
You also increased you had a nice increasing your dividend this quarter I was wondering if that is a reflection of jobs.
At the upcoming strength, you're seeing your restructuring revenues are up and Matt that.
Your opportunity to deploy capital was somewhat diminished.
Yes, I'll take the this is one of the I'll take the second one first I think we along with all the rest of.
The company's that we're reporting in the middle of.
May we're in shock on what was happening and I think we didn't think it was prudent to increase our dividend, which was our normal cadence switches are right after our fiscal year.
We have I think for lack of better word figured out the environment that we're in it is a heck of a lot more stable than it was back in may and so we felt more comfortable increasing our dividend hasn't really nothing to do with.
The fact that we.
Raise the equity and didn't have any where to spend it.
Regarding your question one I think that it's really hard to answer it we on we do not rush our acquisitions. It is.
It is like a very long dating process before we decide to get married.
And for a lot of these companies that were in conversations with we've been dating them for a while.
But it really is kind of it the stars need to align before we make the decision to come together and we that can be measured in quarters. It can be measured in years.
At the time, we did the equity offering we weren't sure how long the pandemic was going to last or what the aftermath look like we wanted to make sure. We had enough capital certainly for the next couple of years to do acquisitions as they came about and whether we can spend that in one year or three years I don't think we're thinking about it that way. We just believe that there are enough opportunities out there that we wanted the flexibility.
Fair enough.
And then.
Yeah I was just curious how much is T. I appreciate it as a lot of uncertainty in the environment right now, but I was wondering how much of the election factoring into your conversations with clients Tiotwo, otherwise, maybe managing well. So this environment, how they citing policy uncertainty as one of the reasons for holding back and you know maybe you could see an uptick after the.
Section.
Okay.
I think it's mixed in the larger probably the company is and the more they're worried about antitrust issues in changes on what one administration will look at some industries or another they are probably more holding back to wait and see the more it is a family held business are privately held business and there is a.
Capital gains tax consideration I'm, probably going the other direction, which is let's give ourselves the optionality to be able to potentially actually close prior to the outcome of the elections or outcome of the change in tax policy. So it varies I think on probably the size of the company public versus.
Private.
Got it and maybe get given your skewed to the smaller and mid size spectrum that would that would be like side. The positive for the cohort that youre looking at.
Yeah, Matt mentioned in our in my remarks, we probably think its net a positive to our client base at least as we sit here today.
Got it thank you.
And Whats question comes from the line of Michael KBW and they proceed with your question.
Thank you operator.
Yes, I just wanted to start with restructuring so as we think about restructuring you you've been very clear that it does take time for those revenues as well success fees to come through.
Could you just share with us some insight into how those trends could play out as you think about which industries will see deals kind of close first store, which I guess, which industries or regions or types of transactions types of roles that could be kinda.
First deals that we see [noise] come through and deliver those success fees that way. We can you have a better understanding as to how this plays out and what we're looking at as we as we look at things in the public Roe.
Yeah, I don't I can say easy.
Question to answer I mean, the realities, we probably all which industries have been hurt the most so far.
In this downturn, but even if you.
Pick on those industries, and whether its oil and gas retail travel entertainment related et cetera, then you'd have to go into the actual structure of the company in the capital structure and what the dynamics are so you could have a really bad industry fact pattern, but the balance sheet says that it's okay. If it takes two years to solve and you could have something much different which is.
You know somewhat troubled industry, but not maybe a devastated industry, but the capital structure and the stake holders situations as it relates just get solved. The next couple months. So it is not a you can't answer it did so it's so unique on each and every unique transaction and assignment.
Okay and just it.
One quick clarification on the on the expenses.
Hi, I appreciate all the background color on the impact of the comp ratio was that meant to be a change in the kind of a full year guidance or is that just just trying to an explanation as to what happened this quarter and maybe it's a and then back next quarter, but is that.
That's the right way to think about it or is it truly that you do think it's going to be kind of a box. The historical range. This year, yes, yes, given to stay at home orders and what we think are going to be a significant that impact to our reimbursable expenses, we expect that it's going to be a change that is in play.
Okay. So long as we had stayed home orders, which as you know anyone's guess, but likely certainly through the calendar year, and and and probably through the entire year.
Okay. Thank you that's it.
As a reminder, she would like to ask a question. Please press star one.
One moment please poll for questions.
Our next question comes from the line of Ken Worthington JP Morgan You May proceed with your question.
Hi, good evening.
And I'm not sure you disclose but I'll ask anyway in terms of restructuring this quarter can you give us a sense of the revenue mix between retainers and success fees and maybe how this quarter compares to other quarters in the past either a year ago or last quarter.
Average I've just to get a sense of how this pipeline is building.
But we don't disclose the mix between retainers and transaction closings, but I think as we both alluded to in our comments, you're just going to have as a percentage of overall revenues and restructuring a higher percentage of retainer fees in this quarter relative to transaction fees compared to other quarters.
And so you are starting to exactly intuitively.
The restructuring is acting the way you'd intuitively believe it would which is we're starting to see a real buildup in our retainer fees, that's going to take place through the through the balance of our fiscal year and until those transaction fees start occurring those incremental ones related to co bid, you're just going to see a heavier weight in retainer fee.
These relative to overall fees than you certainly than you did last year.
Great. Thank you very much.
Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call backs and that's just stopped.
Okay.
I want to thank you all for participating in our first quarter fiscal 2021 earnings call and we look forward to updating everyone on our progress when we discuss our second quarter results for fiscal 2021, this coming fall.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a great.
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Mhm.
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