Q4 2022 Houlihan Lokey Inc Earnings Call
Good day, ladies and gentlemen, thank you for standing by welcome to the Houlihan Lokey as fourth quarter of fiscal year 2022 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today may 12 two.
'twenty two.
I will now turn the call over to Christopher Crain Houlihan Lokey as General Counsel. Please go ahead.
Thank you operator, and Hello, everyone by now everyone should have access to our fourth quarter and fiscal year 2022 earnings release, which can be found on the houlihan Lokey website at www Dot H L 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.
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 year ended March 31, 2022, 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 measures should not be considered in isolation or as a substitute for our financial results prepared 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 Dot Com website.
Hosting the call today, we have Scott Beiser, Houlihan Lokey, as Chief Executive Officer, and Lindsey Alley, Chief Financial Officer of the company. They will provide some opening remarks and then we'll open the call for questions.
That I will turn the call over to Scott.
Christopher.
Welcome everyone to our fourth quarter and full fiscal year 2022 earnings call. We are pleased to report another record year for the firm. We ended the fiscal year with 2.2 dollars 7 billion in revenues up 49% from fiscal 'twenty. One revenues of 1.53 billion. This is our 10th straight year of Ana.
Revenue growth corporate finance achieved just under $1 6 billion in revenues up nearly 100% year over year.
Financial and valuation advisory reported 284 million in revenues up just over 50% from last year in financial restructuring reported 393 million in annual revenues down 27% year over year, but the second highest annual result in its history.
Our adjusted earnings were a record $7.10 per share up 54% from an adjusted $4.62 per share last year.
In addition to strong financial results for the year. We had several notable accomplishments that are worth highlighting we remain number one in the relevant league tables for all three of our product lines. We successfully completed the acquisition of G. C. A further increasing our global scale and reach.
With the completion of G C. A and the addition of over 500 new employees. The firm now has approximately 2300 employees 295 of which are managing directors operating out of 35 offices worldwide.
We also hired 13 managing directors during fiscal year 2022, and in early April promoted 29 employees to managing directors, our largest class ever we head into fiscal year 2023, with strong activity levels in our corporate finance and SBA businesses and early signs of improving market conditions and finance.
Restructuring.
While our fiscal 2022 full year results were very strong the fourth quarter for fiscal year 2022 was weaker than we anticipated a few months ago for the quarter. We achieved 471 million in revenues down 6% from the 501 million recorded a year ago adjusted earnings per share.
We're $1 30 down from $1 51 last year.
Corporate finance revenues for the quarter were down 7% versus the same period last year and down materially from the prior quarter's extraordinary results FAA.
She knew to achieve strong results. Its revenues grew 23% for the fourth quarter compared to the same quarter last year.
Financial restructuring ended the year stronger than we anticipated, but was down relative to a very strong record fourth quarter last year, which is driven by COVID-19 related restructurings.
With respect to our corporate finance business. There were several factors that led to the relative softness in our fourth quarter first as we suggested on last quarter's call. The timing on transaction closings in our third quarter benefited that quarter to the detriment of our fourth quarter.
We started to see a slowdown in deal closings as the market reacted to the buildup and invasion of Ukraine in mid February which lasted through the end of the quarter.
Third and overlaying all of this we believe the market is still assessing the impact of higher inflation and higher interest rates and we believe on the margin. This is extending the time it takes to close transactions and maybe delaying certain closings.
F E did not experience the same softness as corporate finance in our fourth fiscal quarter and Fca's prospects remain quite strong entering fiscal year 2023.
We've experienced slow down similar to this one over the last few decades and while each trigger event is different the impact on our business trends.
Our business tends to follow similar patterns.
First the timing to close active transactions stretches out, allowing buyers and sellers to reassess the marketplace. If the negative trend stabilize like what happened in the summer of calendar 2020 with Covid. The market comes back quickly in current lower revenues are made up for in subsequent quarters.
If the negative trends persist certain deals are put on hold and May eventually go away, resulting in prolonged softness in the M&A markets as we sit here near the middle of May almost halfway through our first fiscal quarter. We are still seeing strong new deal activity in both corporate finance and FAA and good momentum going into <unk>.
Fiscal year 2023, however, we are facing headwinds that did not exist at this time last year, namely increased geopolitical risk inflation and rising interest rates. If these headwinds get worse, we may see increased pressure on revenues in our corporate finance and F E businesses in subsequent quarters and the <unk>.
Likely increased activity in our financial restructuring business.
Given where we are in the year any new restructuring activity is likely to more meaningfully impact fiscal year 2024 revenues given the typical length of a restructuring.
Whenever we complete a year, we reflect on our strategy going forward for over a decade, our general business strategy has not changed stay true to our knitting focused on growth and build a firm that is highly diversified across industry geography banker product and economic climate.
In fiscal year 2022, we significantly increased our presence in technology diversifying into arguably one of the most important drivers of growth and the world economies over the next several years in fiscal year 2022, we increased our non U S business to represent 26% of total revenues upfront.
22% a year ago.
Our non M&A business remains at approximately 50% of revenues as we have seen continued strong growth in FBA capital markets private funds placement and continued strength in our core financial restructuring business in.
In fiscal year 2022, we added almost 100, new managing directors to the firm.
And in fiscal year 2022, no single client those single banker and no single transaction represented more than 2% of our revenues for the fiscal year, we remain.
Committed to this business strategy I believe fiscal year 2022 was one of our most successful to date.
Finally, given our success this year and the strength of the platform heading into the new fiscal year.
<unk> Q1 of fiscal year 2023, we are raising our quarterly dividend, 23% to 53 per share up from 43 per share for the previous quarter. The board has also authorized $500 million to repurchase shares in the open marketplace and with that I'll turn the call over to Lindsay.
Thank you Scott.
Revenues in corporate finance were $279 million for the quarter down 7% when compared to the same quarter last year. We closed a 144 transactions this quarter compared to 151 in the same period last year and our average transaction fee unclosed deals stayed relatively flat.
For fiscal year 2022, corporate finance revenues were up 98% when compared to fiscal year 2021, primarily due to a robust M&A market. The acquisition of GTA and continued increases in both transaction count and average transaction fee for.
For fiscal year 2022, we saw significant growth in our capital markets business, our private funds placement business and our non U S. Corporate finance business, all three strategic strategic objectives of the firm.
Financial restructuring revenues were $122 million for the quarter.
15% decrease from the same period last year.
Closed 25 transactions this quarter compared to 35 in the same quarter last year, while our average transaction fee on closed deals increased.
This quarter ended up better than we expected as we had a few transactions that closed in Q4 fiscal year 2022 as opposed to their expected close date of Q1 fiscal year 2023.
In financial and valuation advisory revenues were $71 million for the quarter, a 23% increase from the same period last year, we had 999 fee events during the quarter compared to 765% in the same period last year.
<unk> continues to see growth across all major product lines and is experiencing good momentum as we head into fiscal year 2023.
For fiscal year, 2022, FBA had a record year with revenues of 284 million, 51% higher than last year growth of that amount in this product line is unprecedented and represents exceptional execution and purposeful diversification and a strong M&A market in fiscal year 2022.
Turning to expenses, our adjusted compensation expenses were $290 million for the fourth fiscal quarter versus $312 million for the same period last year are only adjustment was for deferred retention payments related to certain acquisitions.
Beginning in Q1 fiscal year 2023, we expect this adjustment to increase materially as we will be including the 133 million four year retention pool that was put in place for <unk> in March.
Compensation expense ratio was 61, 5% for both the quarter and for fiscal year 2022.
Our adjusted non compensation expenses were $59 million for the quarter versus $42 million for the same quarter last year, an increase of 40%.
This increase was a result of including <unk> non compensation expenses this quarter, which were not in last year's quarter and we also saw increases in all categories of non compensation as a result of increased investment and in some cases inflation. This.
This resulted in an adjusted non compensation expense ratio of 12, 6% for the quarter versus eight 4% in the same quarter last year.
We ended fiscal year 2022, with an adjusted non compensation expense ratio of eight 5% versus nine 1% in fiscal 2021.
We expect that our adjusted non compensation expense ratio will begin to return to a more normalized level in fiscal year 2023, as we were largely returned to work in office, we are holding an increasing number of face to face marketing events. We continue to invest in technology to give us a competitive advantage and we're experiencing increases in our art.
You can see costs as we move or consolidate offices across the globe.
For the quarter, we adjusted out of our non compensation expenses $15 8 million in noncash acquisition related amortization, the vast majority of which was amortization related to the GCI transaction.
We expect significantly elevated levels of amortization relating to this acquisition through fiscal year 2023.
In addition, we adjusted out of our non compensation expenses $3 8 million in acquisition and integration costs related to the GCI acquisition.
Our adjusted other income and expense increase for the quarter to an expense of approximately <unk> 3 million versus an expense of approximately <unk> 5 million in the same period last year.
We adjusted out of our other income and expense $7 $6 million of expense related to the earn out for one of our acquisitions, we treat all acquisition related earn outs as purchase price and adjust out of our P&L any significant changes in the value of these earn outs.
Our adjusted effective tax rate for the quarter was 27, 9% compared to 29% during the same quarter last year and for the fiscal year. Our adjusted effective tax rate was 28, 6% compared to 26, 9% for the prior fiscal year.
We maintain our long term range for our effective tax rate of between 27% from 29%.
Turning to the balance sheet and uses of cash as you may have noticed we did not include a balance sheet and our earnings release. This quarter. As we are required as we are as we require a bit more time to finalize the balance sheet given the complexity of the GTA acquisition.
<unk> balance sheet for the quarter will be provided in our 10-K when filed.
As of quarter end, we had approximately $943 million of unrestricted cash and equivalents and investment securities.
<unk> 1 billion at the same time last year.
And our fourth quarter, we paid cash bonuses to GCI employees, who joined us in the merger and we issued approximately 900000 shares to them as part of their year end compensation. We also issued $1 2 million shares to GCI employees as part of the retention pool previously discussed.
A significant portion of our cash is earmarked to cover accrued but unpaid bonuses for fiscal year 2022 that will be paid this month and again in November in addition to our cash bonuses. We expect to issue in May approximately two 3 million shares to employees as part of their compensation for fiscal year 2022.
Similar to previous years, we intend to offset new shares associated with compensation with share repurchases throughout fiscal year 2023 and.
And finally in this past quarter, we repurchased approximately one 2 million shares at an average price of $100 93 per share as part of our share repurchase program.
Operator, we can open the line for questions. Thank.
Thank you, ladies and gentlemen, if you'd like to ask a question you may do so by pressing star one on your telephone keypad using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Star one for questions, we'll pause a moment to assemble the queue.
We will take our first question from Brennan Hawken with UBS. Please go ahead.
Good afternoon, Thanks for taking my question.
I wanted to.
Unpack a little bit some of the comments Scott around the environment.
It seems as though the uncertainty is.
Sending some timeframe as you flagged, but it'd be helpful to kind of understand maybe how the quarter progressed, it's my understanding that velocity of transactions in closing slowed as the quarter went on and so number one is that right and then number two is the quarter to date here so far more similar to the end of last.
Quarter and.
And therefore, we should continue to expect that to sustain for at least for now or have things changed since March.
Yes, so I'd say the month and a half in the quarter, we're in right now.
Is experiencing similar fact pattern so maybe the final month and a half in the previous quarter and by that I mean, a couple of things one we're seeing things once again, just take a little longer to close but closings are still occurring.
Just the time period or taking a little longer we're seeing very few deals at this juncture being put on hold as we would describe them or just feel that they should be completely taken off.
Stack in terms of anything that we expect to close in the near term and new business still continues to come in so at this point, we would continue to point to what delays from what we'd seen six months or a year ago, but new business is still relatively strong and as we try to point out.
Whether this current market conditions, we're in last another month or two we probably end up with one conclusion on where we'll all be in if it lasts for a couple of more quarters or a year.
We're going to see.
Further drag on prospects for the time being.
Yes.
Okay. Okay got it thank you.
Restructuring.
That picked up nicely quarter over quarter.
And you guys you guys finished at a higher.
Ranged in that pre pandemic range of the 300 to 350, that's been referred to previously so.
Is this a is.
Is this year's result sort of the level that we should be thinking about for now and we're hearing about leading indicators of restructuring picking up inbounds to other restructuring firms.
Are you all seeing similar developments and how should we think about that playing through the restructuring line as we refine our models for the coming coming quarters and years.
So probably two key points.
The current market conditions, and what we gave you some cautionary notes on kind of where M&A activity is the reverse is happening restructuring. There is there's more dialogue where activity and getting hired more companies running into some issues. The size of the indebtedness is definitely been growing for years and interest rates.
There obviously are creeping up all of that sets out a net positive fact pattern for restructuring. The second point, we would make is remember all restructurings do take some time and much like we talked probably half of the March quarter in 2020, there's that handoff timing. So while we are starting to build once again new business coming.
In.
Some of it's just going to obviously take some time to close and as we said probably most of what we think we're bringing in now and might bring in the next couple of quarters is going to have more of a financial impact on fiscal 'twenty four than it will in fiscal 'twenty three.
Okay, but.
Some of the like.
With restructuring sometimes there are some revenues that can come in not purely at the conclusion right. So is it reasonable to at least think that that we'll see some pick up in the restructuring versus where we had been running or is that is it was this quarter not really indicative of strength. It was.
More idiosyncratic.
So you are correct in the restructuring business you do get some decent amount of monthly or quarterly retainer fees, which have nothing to do with the client are.
Closing date.
On the other hand, I think we did try to point out that our fourth fiscal quarter happened to have a few probably beneficial projects that ended up closing in that fourth quarter that otherwise, we probably would've thought would've closed in the first or second quarter. So we got some acceleration of closings, which maybe makes our fourth quarter.
Restructuring a little stronger than otherwise we would've thought.
Got it okay. Thanks for clarifying.
Alright, Thanks Brennan.
We will take our next question from Devin Ryan with JMP Securities. Please go ahead.
Hi, Scott Hi, Lindsey how are you.
David.
Maybe to come back to Brian's first question, just on kind of the environment, particularly on the M&A side. So I appreciate.
That wouldn't be.
Market conditions change.
There is often new conversations that come together as a result of that I'm curious if.
Can you just give us a little more detail around what's driving some of the newer conversations it sounds like youre still quite active and despite this volatility people are at least engaging in interested in doing things from a transactional perspective, and then I'm also curious if the deals that are maybe being discussed today the newer ones.
There is a probability higher.
Those types of deals will move forward.
Get the completion versus obviously something that maybe started before borrowing conditions of the world changed.
I would suspect.
Or.
To push forward now that everything has changed.
So I'm just curious a little more background all of that thank you.
Sure.
And I think what we're seeing in terms of the business environment today, just compared it to call. It spring of 2020 and spring of 2020, when the pandemic was really starting I think there was much greater concern.
Where all of this was going to go and probably people thought it was going to be much deeper negative impact to the economy deal business et cetera to date, clearly theres a lot of negative headwinds out there but.
But I don't think people are nearly as concerns nervous about <unk>.
Transactions transaction closings et cetera that they probably were two years ago. That's at least what we would say today.
I think a couple of things are still driving new business and no particular order, but some people are motivated to want to try to get something done sooner because they just think interest rates are going to continue to rise and if you want to do a deal we might as well do it. We can do is you know do more work probably with private companies and public companies and I think price volatility is usually great.
Or in the public marketplace in the private marketplace and then if you further dissect.
Different components of the industry I think some of the.
Higher perspective growth more questionable business plan.
Companies, which rose quite a bit in the stock market or the VC market. Those are the ones who have come down the most and while we do work in that area that isn't necessarily the biggest component of what we do so I think theres certain insulated areas that we're seeing that's still driving the business and you're still coal they have the private equity community sitting on lots of lots of <unk>.
And still in the business of needing to do deals. So I think that's what we're seeing and why deals are still occurring deals.
Flow is still coming in just buyers sellers lenders borrowers have taken a little longer to ultimately close.
Yep, Okay great.
And then just a follow up here what are digging a little bit more on what youre seeing in the capital markets business and the outlook. That's obviously been a.
A really nice story for Houlihan and a good gross growth story and conditions over the last year <unk> also been pretty favorable, but I'm curious like the opportunities over the intermediate term there because on one hand.
You have kind of a.
More difficult market backdrop, but on the other hand.
Companies still need capital for different reasons.
Even beyond just M&A Ed.
In a choppy market it would seem that there could be a lot of value in <unk>.
Being an intermediary.
Introductory introducing kind of companies to capital buyers or vice versa. So I'm just curious if that's an area that could still be quite resilient in this type of backdrop.
So the quick answer is yes, and I think what you find is probably the total amount of deployed capital.
Could finance different kinds of businesses for different reasons is probably less today than it was a quarter or so ago, but on the other hand, what we've always said in the agent team of financing, which we do our biggest competition is really the CFO or the private equity shop themselves, saying, we don't need to hire an advisor we can do it ourselves so when thing.
You'll get a little more difficult a little more turbulent a little more volatility that we've seen out there the number of situations where people are choosing to hire an advisor versus do it themselves has been growing.
As we've always said depending upon the magnitude of the negativity out in the marketplace actually some turbulence is net good for our capital markets business and so far like I said, maybe total amount of deal activity might be shrinking there, but the percentage of <unk>.
Situations that people are hiring firms like ourselves or our competitors is actually growing.
Yep, Okay, great to hear I'll leave it there thanks Scott.
Thanks, Kevin Kevin.
We will take our next question from Union cause failure.
With Morgan Stanley . Please go ahead.
Hi, good afternoon.
For me the FAA business held up nicely in a tough environment and you know I think.
You said that there is good momentum going into the next fiscal year.
Can you talk about how we should think about these revenues in the current environment and I know part of these revenues are cyclical thought of them or not.
You've clearly gained share in that business and have grown our relationships as well so.
How should we think of this business.
The market environment stays.
The way it is.
So I think on one hand, the market environment is probably net neutral to negative to FCA compared to where it was six months or a year ago, but on the other hand.
It's clearly net positive in terms of what we and who we have hired what we have built some of the new service lines were into I think our capabilities our bench strength our opportunity set is just much greater because of the internal call. It tactical and strategic decisions, we've made and that's what's really driving the business.
And we've always said, we cannot and do not control the external marketplace, let us focus on it as much as what we can do on the internal side and right now I think the internal moves we've made are offsetting any weakness that's out in the marketplace and thats whats continuing to drive really quarter over quarter growth in this business and another way to think about it.
Is there are a couple of product lines in that business that are enormous and we are a fraction of the market share.
And so there is just this is a market share gain story and FBA and it will be for the foreseeable future. So even if you've got a flat two weaker market.
Where we are now.
Youre, just likely going to see continued momentum as we pick up market share in a handful of product lines, where we've made investments.
Great.
And then just separately I wanted to get your thoughts on how you're thinking about your excess cash and capital.
The increase in the buyback authorization, but you know I think one of the things you've done consistently or at least consistently look to do when markets have gone does.
And integrate smaller boutique firms. So is the increased buyback authorization just sounds like you have in your back pocket, if those opportunities don't come through or.
You may be saying that you have your hands full right now what did you see acquisition.
And buybacks are a way of signaling that you are unlikely to do anything in the near term.
No I think the increase in buybacks is really just consistent with the increase in the size of the firm the increase the amount of stock the ratios to employees. So I think that's probably what's driving the continued increase I mean I think if you go back the last five or six years, you will have seen a continued.
Increase of this just like you've seen a continued increases the dip of the dividend since we've grown so I wouldn't read into it any any more than just just.
The size of the firm and the number of shares we issue as part of compensation.
But yes, I think to address the acquisition comment we have found in in weaker markets. I don't think we're prepared to say this is a weak M&A market right now.
It's not what we're seeing but in weaker M&A markets, if we ever get there.
We have seen opportunities to make acquisitions that.
Our are much more attractive than they are in super strong M&A markets and so we are that strategy for us hasnt changed based on the GCI transaction.
Great. Thanks very much.
We will take our next question from Steven <unk> with Wolfe Research. Please go ahead.
Yes.
Good evening guys. This is Brendan O'brien filling in for Steven Chu back.
So for my first question.
On years of consecutive revenue growth is quite impressive. However, as you noted in your prepared remarks significant headwinds to M&A activity that werent present at this time last year and any pickup in restructuring will not meaningfully hit the bottom line until 2020 for fiscal year 'twenty four I understand that the outlook is very uncertain.
At the moment, there's a lot of moving pieces, but as things stand today, how confident are you in your ability to deliver that revenue growth this coming year in light of these headwinds.
So let me take you back to March of 2020.
When we said at the beginning of our conversations entering that year that we were very concerned about the market conditions, given what was happening with COVID-19 and I would have bet anything that the market that our revenues would have been materially affected by what was happening with COVID-19 and that lasted about six months or even less and then turned itself around.
So I think you're flipping a coin in terms of what the macroeconomic conditions are going to do and how theyre going to affect either us or any of our peers. In this space just can't but I will tell you that the activity levels are strong and the macroeconomic factors are present.
And what happens over the next three months to six months is.
Is anyone's guess.
I appreciate it.
Definitely a very uncertain time, so for my follow up.
On sponsor activity, while there is a lot of optimism entering the year on your outlook for sponsor M&A activity has been relatively more subdued when compared to last year's elevated level with many of your peers, citing the challenging price discovery backdrop as a key driver of the slowdown however, as you mentioned <unk>.
Those are in the business of deploying capital and we saw during Covid that sponsors return to the market fairly quickly and aggressively. So just wanted to get your thoughts on how long you believe sponsors can really stay on the sidelines here before they need to start deploying capital more aggressively.
Historically, we've seen a handful of downturns really over the decades and.
You've got to go back even beyond the Covid, one and usually it's a relatively short period of time.
Would be 0.1, and the second point is I think the more mid size or smaller p/e shops needed to deploy capital probably more.
With some sense of necessity, because theyre, just not big enough to survive off of just management fees that some of the large behemoths might be able to and so we've tended to see that also increases the velocity of the deal transactions even during market downturns.
That's great color thanks for taking my questions.
Thank you.
Hey, Brian .
We'll take our next question from Michael Brown with <unk>. Please go ahead.
Yeah.
Okay, great good afternoon guys.
Michael So on the on restructuring.
A strong result, this quarter, if I heard you correctly it sounds like that was due to a resolution of the Covid era transaction.
Just wanted to check in and is there anything really left in that that pipeline.
Did you say that that's mostly been kind of burn through at this point.
As you look forward.
Mike I think the reference and maybe this is just miss communicated was that quarter over quarter.
Even though we had a strong quarter, we were down because last year's same quarter had COVID-19 related restructurings in them and on a comparable basis, we just couldnt compare to that so I don't think that there may be a little bit of COVID-19 related restructurings left but it's insignificant.
What drove the.
Quarter was there were a handful of transactions that ended up closing in this quarter that we had expected to close in the first half of this year and it kind of drove revenues higher than expectations for the quarter.
And it turned out to be a very strong quarter theyre not necessarily COVID-19 related transactions.
Okay. Thanks for thanks for the clarification.
Clearly strong.
Strong productivity this quarter.
And then just as a follow up on the restructuring business.
Our Q2 earnings you guys spent some time talking about the global strength and reputation of the business and you highlighted the <unk> mandate.
To the extent you can and any update on the status of the restructuring activity related to the Chinese real estate market.
And then just any any.
Any comments on where else in the world are you seeing some pockets of activity or where you were all screens that certainly, whereas some things flare up outside of the U S and Europe .
We won't comment specifically on any unique transaction, but we are clearly seeing.
Probably more opportunities and more growth in various areas of the world not called the United States. We're doing a lot of work right now in the Asia Pacific area, Europe is actually probably heating up more rapidly than the U S. In terms of restructuring and there's pockets of opportunity in the middle.
<unk> in Latin America, So I wouldn't point to a particular place other than I'd say at this juncture, probably the U S. In terms of new opportunities or the growth of new opportunities is lagging a bit behind other parts of the world.
Part of that to a dollar exchange rate part of it is what happens when interest rates go up it tends to impact.
Emerging markets are quicker than the domestic market places so.
It's really kind of worldwide, we're starting to see things pick up and maybe even pick up a little faster outside the United States at this juncture.
Just a quick one how many of the of the Andes and restructuring are based outside of the U S.
Okay.
Don't really know off hand, but we're going to probably say probably about a third.
Okay great.
Great. Thanks, Scott.
Thanks, Mike.
We will take our next question from Ken Worthington with Jpmorgan. Please go ahead.
Hi, good afternoon.
You mentioned in the prepared remarks that <unk> did not experience the same slowdown as houlihan. So how should we think about the impact of the macro environment on GCI over the next few quarters is it something that you know do you see a just happen to be working through a previously built pipeline this quarter.
And that maybe activity will slow in coming quarters as they kind of make their way through the pipeline or maybe there's something different about DCA business, which leaves them less susceptible to the macro factors. So help us think about GCI.
So I think.
Again, maybe this is just miss communicated we didnt make comment regarding gcs performance versus Hff's performance in the quarter.
I think we.
We believe that both firms from an M&A standpoint were affected by the same macroeconomic factors that occurred during the quarter.
No differentiation between the two.
And the other thing is just.
Over the future quarters, the hole, there isn't really a distinction between GCE and houlihan lokey anymore.
<unk> offices consolidated personnel, we put people on different industry groups capital markets et cetera, and the only reason, we're really ever trying to mentioning about GCE is just until we get a full year's run rate you do have some issues I think mostly what we've talked about it is the reason our non comp expenses went up is.
Because we now had for six months <unk> results and we haven't had it for a full year. So but at this point like I said going forward, while they've added a lot of head count and revenues and helped in our diversification. It really is just one firm operating collectively in what we do.
Okay. Okay, great. Thank you.
Thanks Kurt.
And ladies and gentlemen, this will conclude today's question and answer session. At this time I'd like to turn the conference back to your presenters for any additional or closing remarks.
Well I want to thank you all for participating in our fourth quarter and fiscal year 2020 earnings call and we look forward to updating everyone on our progress when we discuss our first quarter results for fiscal 2023 this coming summer.
Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.
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