Houlihan Lokey Inc. Q4 2023 Earnings Call
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Good day, ladies and gentlemen, thank you for standing by welcome to Houlihan Lokey as fourth quarter and fiscal year 2023 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 nine 2023.
And 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 2023 earnings release, which can be found on the houlihan Lokey website at www Dot <unk> 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 will expect anticipate should or other similar phrases are not guarantees of future performance.
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, 2023, 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 will open the call to questions.
With that I'll turn the call over to Scott. Thank.
Thank you Christopher.
Welcome everyone to our fourth quarter and fiscal year 2023 earnings call. We ended the quarter with revenues of $445 million and adjusted earnings per share of $1 11 revenues for the quarter were down 6% from a year ago and adjusted earnings per share were down 15% from a year earlier.
During fiscal 2023, we had little volatility in our quarterly revenues and our second half results were almost identical to our first half results. This fiscal year, we did not experience a typical increase and second half results likely due to current market conditions.
However, our diversified service industry and geographic platform enabled us to achieve our second highest yearly revenues in the firm's history, notwithstanding the difficult market environment.
The uncertainty in global markets challenging financing markets and a longer time to close transactions as measured between the time, we are hired and the time, we complete a transaction.
Similar to my comments in previous quarters. This environment has resulted in strong new business activity as companies hire us in anticipation of market conditions, improving but lower current revenues as the time to close his extended and companies are cautious about the economic outlook.
Financial restructuring achieved $120 million in revenues down 1% versus the same quarter last year, but up 22% versus last quarter.
Fiscal year revenues of $396 million with the second highest in the firm's history and we enter fiscal 2024 with strong momentum in this business. Several factors are contributing to financial restructuring performance.
The period of easy government money and low interest rates no longer exists with very tight get markets leveraged companies are turning to restructuring or liability management to find solutions.
The pending that maturity walls in 2024, and 2025 are putting increasing pressure on companies to do something as the volatility in the capital markets is showing no signs of letting up.
These factors combined with breadth and depth in a restructuring business are expected to contribute positively to our financial results throughout the year.
The number of closed transactions, new quarterly engagements active engagements and potential fees associated with active engagements are at high has not seen since the initial months of the Covid pandemic.
However, as expressed previously the current environment for financial restructuring is not fueled by a crisis, but by a combination of factors that should allow this business segment to do well for an extended period of time.
Financial evaluation advisory produced $68 million of quarterly revenues down 4% versus the same quarter last year.
<unk> your revenues of $287 million, where a record for F. As they were able to grow revenue slightly this year in a challenging environment.
<unk> diversified service offerings enabled some segments to perform quite well while other segments experienced the same headwinds as our corporate finance business.
Disruption occurring and regional banking is having a short term negative impact on Sci.
But in increased banking regulatory environment, which most of US believe is likely will benefit FCA over the long term.
Finally F D. A is experiencing strong new business activity, but the time and effort to complete engagements is decreasing overall employee productivity. This will likely result in SCA have any stronger second half of the year then first half.
Looking forward, we continued to take advantage of a favourable market for adding talent by hiring eight new mdu's this quarter across the globe we've.
We would also like to congratulate our 18 newly promoted managing directors all effective as of April 1st.
The acquisition front, we continue to be selective in ensuring targets fit both culturally and strategically.
Finally, I'd like to thank our 2600 employees for an exceptional effort in a challenging year and our clients and shareholders, who continue to support us with confidence as we navigate the current market with that I'll turn the call over to Lindsey.
Thank you Scott revenues in corporate finance, where 256 million for the quarter down 8% when compared to the same quarter last year. We closed 140 transactions this quarter of high for fiscal 2023, but below the 144 transactions. We completed in the same period last year.
Our average transaction fee was lower for the quarter versus the same quarter last year.
Financial restructuring revenues were 120 million for the quarter the slight decrease versus the same period last year, we closed 38 transactions in the quarter compared to 25 in the same quarter last year on our average transaction fee unclosed deals was lower how far ended the year up slightly versus fiscal 2022.
And financial evaluation Advisory revenues were 68 million for the quarter at 4% decrease from the same period last year, we had 957 fee events during the quarter compared to 999 in the same quarter last year.
P. A ended the year up slightly versus fiscal 2022 is strong performance and a challenging business environment.
Turning to expenses are adjusted compensation expenses were $274 million for the fourth quarter versus $290 million for the same quarter last year are only adjustment was $9.4 million for deferred retention payments related to certain acquisitions are adjusted competition expense ratio for the fourth quarter in fiscal year with 60.
<unk>, 1.5%.
We entered the school 2024 with no change to our target of 61.5% for adjusted compensation expense ratio.
Or just did not competition expenses were 68 million for the quarter, an increase of 9 million over the same period last year, our fourth quarter not competition expense was lower than the last couple of quarters, primarily driven by the timing of certain expenses.
This resulted in a non competition ratio of 15.3% for the quarter.
On a per employee basis are noncompensation expense ratio was 26000 per employee this quarter versus 26004 employee for the same quarter last year.
Heading into fiscal 2024, there is continued upward pressure on rent expense is information technology expenses, which will likely result in our noncompensation expense growing faster than inflation.
For the quarter, we adjusted out of our competition expenses $3.2 million in non-cash acquisition related amortization, the vast majority of which was related to the G. C. A transaction.
Are adjusted other income and expense decreased for the quarter to income of approximately $3.9 million versus an expense of approximately $300000 in the same period last year the.
The significant growth in this category was driven by higher interest income on our cash balances across the globe we.
We adjusted out of our other income and expense a benefit of $700000 related to an earn out for one of our previous acquisitions.
Or just it effective tax rate was 28% for the quarter as compared to 27.9% for the same quarter last year, we adjusted out of our gap effective tax rate, a one time benefit of $5.9 million relating to the release of evaluation allowance and one of our foreign subsidiaries.
Finally, we made a policy adjustment in accordance with GAAP relating to the retention shares in fiscal 2022 deferred shares issued as a result of the GCN acquisition, which reduced our gap fully diluted shares by approximately $1.6 million for the quarter. This.
This reduction in gap fully diluted shares will reverse itself rapidly over the next three years.
The result, we are adjusting out this non-recurring change and are fully diluted share count as if it had not occurred and here. We are presenting adjusted fully diluted shares the same way we always have.
Turning to the balance sheet as the quarter, and we had approximately $752 million of unrestricted cash and equivalents and investment securities.
A significant portion of our cash is earmarked to cover a crude but empty bonuses for fiscal year 2023 that will be paid this month and again in November .
Shares issued as part of our fiscal 2023 compensation will burst into the fully diluted share count over a four year period from the date issued.
We did not repurchase any shares for the quarter and we continued to take a conservative approach to share repurchases as we want to because we want balance sheet flexibility to take advantage of acquisition in hiring opportunities in this market.
Finally, the board approved an increase in the quarterly dividend to 50 255 cents per share from 53.
The dividend will be paid in June with that operator, we can open the line for questions.
Thank you if you'd like to register a question. Please press the one followed by the foreign your telephone and you will hear a three ton prompt to acknowledge request. If your question has been answered and you would like to withdraw your registration with each press. The one followed by the three if you are using a speakerphone. Please lift your handset before entering your request once again, that's one four to register for a question one brief moment for the first.
Question.
We do have a question from the lineup Brendan how can with you B S. Please go ahead your lines open.
Hi, Thanks for taking my questions, how Ya doing Scott Adrian Lindsey.
Hey, Brian .
So wanted to it's obviously, a really challenging environment.
And and certainly March brought an end of the quarter that was no different if we think about either corporate finance business and if we just assumed the environment remains unchanged from what we've been C. Because we've been living in a challenging environment for awhile now is the fiscal 2023 revenue.
Base, a reasonable way to think about what corporate finance, who do if the environment does not improve.
Yeah, I think some of that in my comments earlier that in fact quarterly results really whether you're looking at the firm level or even the corporate finance level, just didn't have much variability and for the most part it does seem like for a little over a year, we've been saying the same thing that new business activity has been pretty good considering the mark.
<unk> environment, but getting things across the finish line just continues to take longer than at least what we historically seen her we'd like and so yeah I think that's a fair way too.
Assume a response to your question if the market's don't really change.
Likely having similar results in fiscal 2004 versus twenty-three and not a bad approximation sitting here today.
Okay.
That's helpful and Lindsey I believe you indicated that your expectation.
I mean fiscal year would be to grow a little faster than inflation.
But.
If for inflation rates are kind of all over the map so is.
Is it just bear to think about that line is like a mid or single digit grower in the coming fiscal year or should we calibrate it to a particular installation metric. Thanks.
No I mean, I think purposely ambiguous Bryan and it is you know.
Unclear what inflation is going to do this year.
But I think based on sort of our continued investment in real estate continued investment in information technology.
The those line items are gonna grow quite a bit quite a bit better than inflation and I would say the rest of it consider inflation and whether you want to consider that 6% or 5% on our 8% based on what you think might happen. This year I'll leave up to you.
Okay, great. Thank you and then just last one I believe Scott you indicated that a.
Tougher bank regulatory environment could provide a tailwind SDA could you explain how you would expect that to manifest.
All things being equal FDA generally benefits from a more taxing society more regulated society more society that requires more transparency and just with what's happened in the I'll call. It depository institution. It would seem to me that there will probably be some more regulations, there's probably going to be some more.
Requests by investors on kind of what's in the balance sheets of a different institutions and those things generally do help over the longterm what SAA does for a living.
Okay. Thanks for taking my questions.
Thanks, Brian .
Our next question is from Brian Kinney with Morgan Stanley <unk>. Please go ahead <unk>.
Hi, good afternoon.
Hi, Ron.
Wondering if you could expand on how impactful that's either deal financing is on the M&A outlets are financing conditions impacting a few pending deals are the majority and is it enough of a headwind to take the old adage backlog.
I think.
Since we tend to do more private deals or deals or more in the mid cap space. There has been really throughout this whole I'll call. It year time period availability of capital. So it's not that there is no availability of capital costs are higher there are probably fewer participants.
Asking more questions and more complexities, but we believe the markets are open for the deals that we're working on and things that are just taking a little longer for whether that's lenders boards buyers different consultants asking incremental questions before they can get to the closing.
But we do believe that notwithstanding as we knew describe the volatility in the financing marketplace.
It's not truly a a lack of financing that's causing deals not to get done at least at this juncture.
Thanks. So that's helpful and then the the volatility related to the March bank failures have any impact until closures that we're planning to close in the fourth fiscal quarter and then that much to this quarter, where did those deals largely ended up closing on time.
I think you know if he really looked at it probably month by month January seemed to be an improvement in the industry world and things.
Perked up slightly February people got I think a little more concerned about interest rates and things take down a little and then marched should at least the last two weeks I think you know a number of deals did just get paralyzed and tell people could make an assessment of what's happening in the marketplace. And then you could argue maybe it got a little better for a couple of weeks and then we.
Had another round of our concerns and so yeah. I think there are some deals that have gotten pushed out and some of those are still not closed.
Thank you.
Our next question is from one of my one was K E. W. Please go ahead <unk>.
[noise] hi, good afternoon.
Several of your public you tried it appears has outlined in terms of describing extremely strong revenue or rather a recruiting environment currently.
<unk> appears to be relatively strong for you guys as well, obviously I understand that you guys aren't necessarily going after the same profile recruits, but kind of curious how you described recruiting environment today and the magnitude to which we should expect you guys to lean into the environment.
Assuming you agree with that characterization of.
Strong recurring backdrop.
<unk>.
And we've never internally posted targets that say, we want to hire X number of people in our way or ahead or behind that I think we're always looking for talent, where it's available we're always looking to expand the breath of our bench and whether you view that by an industry sectors sub sector or geography.
Some skill set.
And sometimes people are more available than others.
I think it's a somewhat better recruiting environment, but I think there is also still challenges in getting people to want to leave their current place.
Whether it's coming to houlihan lokey or anywhere else, we announced that we effectively added eight new md's.
Greater than probably some of the recent quarters, we've had a lot of that's timing and.
I would say we have been very tasteful and are thinking about what we hire how many we hire terms and conditions in which we hire people.
Okay, Great and then for my followup, just kind of piggy backing off the rides comments.
On the on the posts should be operating environment kind of just more curious on what you perceive to be the potential medium term implications on the commercial banking sector, what those impacts could be for your business.
Kind of down the road, whether that before you know it.
A higher proportion of high quality liquid assets, maybe help with the banks et cetera, but would love to hear those thoughts and kind of also how your views pre and post was events that may be evolved for for your business size, maybe specifically on restructuring as well.
I'll take the restructuring side first as we've said, we believe what's happening and struck by then the restructuring environment is not being driven by a unique crisis like 0809 or a COVID-19.
There's just certain fundamental reasons that we think will give it a long tail over some time here to do work and the recent issues and some of the depository.
Banking situation, probably just add a little bit of extra fuel to help that business out, but I wouldn't describe that what were exhibiting today is dramatically different because of the.
The recent that banking situations on the M&A front I think whenever you have uncertainty associated with the banking system.
Uncertainty regarding.
Who might survive not who will provide loans are not things freeze up a little.
In the mid and long term I think it's going to be once again, probably more of a skew towards non traditional commercial lenders will be the providers of that capital for many mid market size deals and that trend has been going on for probably 15 years anyways, but it's probably going to get another little jolt upward and and you start seeing.
Some of the opportunistic funds.
Raising new capital to to fill in a hole that may be left by some of the mid sized commercial banks.
Okay, great. Thanks for taking my question.
Thanks <unk>.
The next question is from Devon, Ryan with JMP Securities. Please go ahead your lines open.
Thanks, Good evening Scott Lindsay.
So will follow up on the restructuring commentary it sounds like engagements or back to levels experienced in the pandemic and you go back and look at the firm's revenues restructuring there were well over $500 million.
In that period, and you actually had a couple of quarters in there where the annualized rate was quite a bit higher than that so you just like to think about whether you guys think just based on what you're seeing in the pipeline today. If you can get those restructuring revenues back to similar kind of $500 million plus levels and then if you were taking a step further and pencil.
An economic slowdown it may be coupled that with the maturity while coming here what does that look like for William what you've just given that we're already.
Kind of back to somebody which will be like to pandemic. Thanks.
So I think a couple of ways to frame that the total size of the global market. The total size of total leverage indebtedness. The total size of our internal team the total size.
Their maturity and skill set all tells you that we can.
Grow and potentially do better than what we've had in previous speaks having said that I think what occurred at least in the pandemic was a relatively short period of time, which was truly a crisis and so a lot of business came in to ourselves and our peers, rather quickly and it had it done on a very short term.
Basis.
Today, I think we're expecting the amount of new business coming into ourselves and our peers is going to last longer than the average time to effectuate a restructuring is going to be I'll call. It more normal versus in a crisis period. It just gets shortened so.
We tend to look at it really on what's the total duration of this cycle and we think it's probably bigger than what we've seen in the past and we're not really trying to determine whether in a particular quarter or year will achieve necessarily a new record, we just make it a bigger and better marketplace today for restructuring then.
Then maybe it's ever been.
Okay terrific.
You are just on the state.
The date of the corporate finance and M&A markets.
I just wanted to get a little bit of flavor around.
Whether buyers and sellers are getting closer in the market today.
Or kind of what the issue is more just buyers are hesitant.
Because of the uncertainty and then.
In your experience how long do you think it takes of stability for for you know buyers should get more conviction searching for it cause it sounds like the number of mandated so incredibly high. So you have seller have an asset to potentially sell but.
Obviously, we're not getting to that point of completion. So I just loved the low color on that thanks.
Yeah, I mean, historically you might find anywhere in Ah six or 18 month period is what it takes to get the buyer.
Buyers and sellers to get more line I think in this particular time period every time, they maybe get a little more line, there's a new issue out there and well maybe it got started with some overvaluation measures on the technology side and then you've got the war in Ukraine, and then it has been the rapid increase in interest rates that maybe people <unk>.
Clint initially grapple with.
Probably staring at US all next is what's going to happen.
The U S.
Whether they expand the debt limit or not or what ripple effects that has so while I think.
Buyers and sellers slowly, but surely are getting more line there always seems to be a new issue out there that causes it with a new hiccup and it still feels.
That there is enough.
Lee way for buyers or lenders to ask a few more questions wait for a little more time period.
And some of these are the issues that are causing deals to take longer to close.
Okay got it.
<unk> quick one here on capital markets business.
With capital tighter and obviously more complicated backdrop that we're in today, what what's going on with that business or other more opportunities to disintermediated or <unk>.
Help connect.
Folks that new capital with capital providers, just in an environment where.
Capital, which has become more scarce and some of the traditional cable providers are obviously tightening standards.
So I think it's probably similar comment that we've given in the last couple of quarters short term just because there is less absolute amount of deal potentials for anybody and everybody to work on and.
And lenders who are providing some amount of capital are just a little more cautious and deploying that.
Those are the headwinds into the capital markets business over the maiden longterm I think this is going to be actually a positive to that business much like what happened out of the 0809 recession. If it is more difficult to get financing and a shift away from traditional commercial bank lenders too.
More private direct the family offices sovereign wealth opportunity funds et cetera, those tend to use intermediaries to define the placement of that capital.
So I think the same thing will likely happen in our capital markets business, there's still probably some.
Potentially weeks months quarters ahead, but over the long haul what's happened in the market activity is actually going to be good for us or anyone else. That's in this business is acting as agents and assisting companies and finding that.
<unk> capital.
Got it okay.
There thanks very much appreciate it.
Six seven.
We have a question from James Yarl with Goldman Sachs. Please go ahead your lines open.
Good afternoon, and thanks for taking my questions, maybe I can just talk.
Hey, maybe we just talk about the sponsor dialogues that are having today in the corporate finance business.
How close do you think we are to that client base, specifically reengaging and are they weighing up the need to deploy a dry.
Dry powder with the challenging macro backdrop.
Well in many regards we've had as many pictures on opportunities from Los Angeles sponsors as we've had in almost any relevant time period. So they are active they are focused on needing to eventually do transactions. Eventually returned capital V L Ts et cetera.
As a.
<unk> and Lindsay mentioned and some of our prepared remarks, a lot of still what is happening, though is they will run a process and a pitch.
Pitch to decide who they want a higher one I'll walk up the form that they think can handle this situation past, but instead of saying tomorrow can you get started it might be well, let's wait a week or a month or a quarter until some event occurs so you'll get these statistics of getting hired but not necessarily.
Get out to the market tomorrow.
So I think it is just getting closer and closer to the financial sponsor community feeling like they want to need two or maybe it's safe to go out and do deals pulling out where it was 18 months ago.
Okay, that's very clear.
And then as we think about the acquisition opportunities out there could you speak to have the opportunity set.
Versus let's say six months ago, and how are you thinking about the relative attractiveness of hiring versus buying at this point.
So let's start with the acquisitions look or the in general and environment like this the acquisition activity tends to eat.
Heat up a little bit.
Maybe become a bit more attractive whether it's.
Slightly better pricing.
Or an extended period of time, where you've got weaker markets and boutique firms say enough is enough I think it would be better under a much larger umbrella next time. This has happened. So we do tend to see increased activity Uhm I'd say on the margin. It is higher than it was maybe six months ago or a year ago.
But we remain cautious in terms of the type of acquisitions that we do we are selective.
Described it as a long dating process.
That doesn't change in an environment like this so it doesn't we don't ramp up as quickly as you might think but it is a more attractive environment.
As Scott mentioned in the hiring front there are some benefits too.
An economy like this on a hiring front there is some dislocation with berms there are some lay offs.
Talent becomes available through firms closing down going out of business whatever it is and and that does provide opportunities to us and I think one of the reasons, we've chosen to maintain our balance sheet flexibility as to take advantage of both of those and so.
We do tend to see a benefit if there is a benefit or a silver lining to these types of environments and the hiring side and then the acquisition side I don't think that's inconsistent with what some of our peers have said.
Okay, that's very clear thanks for taking my questions.
Thanks right.
Our next question is from Stephen Toback with Wolf Research. Please go ahead your lines open.
Ah Steven.
Thanks, very much for taking my questions maybe.
Maybe just starting off with one on SCA I just wanted to clarify your earlier Omar.
That weaker first half just trying to understand what the jumping off point is is that relative to the.
First half last year or how should we think about the trajectory <unk> to kick off the year relative to the second half ramp that you alluded to.
Yeah look I.
Think it is your best bet is to sort of look at this quarter and last quarter and use that as kind of a starting point, we do have some seasonality in that business. The seasonality was muted this year.
So I think our commentary is that based on sort of what we're seeing today your best starting off point, a jumping off point is to take a look at the last couple of quarters.
Fair enough and just one a clarifying question.
Maybe first Scott.
Follow up to Brian's earlier question, just about how the regulatory backdrop.
Can provide a nice tailwind to the F D a business.
Many of the regulatory changes are being introduced are very specific things like <unk> about that tougher liquidity standard securities losses, getting reflected in capital still not quite sure I understand how issues that are like very specific to the banks are likely to benefit.
The F D a business more broadly and was hoping.
Hoping you might unpack that a little bit further thanks very much.
So all of this is evolving but along those ways, we have as an institution assisted different governmental agencies as they do put in regulations. So that's.
One angle that we have we do do work with the.
Financial community in the depository institutions. When you go back to the old living Wills that the larger institutions had to put together, it's very possible that a.
Increasing group of institutions will have to do that they had times have looked at firms like ourselves and others to help them either preparing those living wills are components of it if you have any.
Different kinds of stakeholders and whether that's L. PS.
Alright, I should say really almost.
G P's, making investments in an institution and then on their behalf and on the Lp's behalf they want more.
Frequency in terms of what's actually held in what's the valuation metrics and some of these institutions.
Something we call is kind of in the portfolio valuation arena that could be a place that we could do some incremental work.
And I think our comments are is almost any time we've ever seen.
Increased regulation and increased desire by stakeholders and transparency that does work to the benefit of the financial and valuation advisory firms.
Really interesting color Scott. Thanks, so much for taking my questions. Okay.
Okay. Thank you.
And we have a question from Jim Mitchell with Sea Port Global. Please go ahead lines over.
Alright, great. Good afternoon, maybe <unk> you mentioned I think Hey, Lindsey I think you mentioned Europe being pretty strong for you guys is that simply a function of pay off on a lot of investments you've been making or is there something about that market in the middle Mark.
Right, that's maybe a little bit better than the U S. Just Wanna make sure I understand the commentary around Europe .
Yes comments.
Comments were not really whether Europe is stronger than the U S versus Asia Pacific et cetera, I think it was more of a comment of where are.
Historical and growing brand recognition is in through the investments we've made it through acquisitions or hirings.
Training et cetera is our reputation is greatly enhanced in Europe today versus where it was a couple of years ago. So the quality of deals that we get hired on the reputation we have the importance of our firm and the financial sponsor community out there that's really was or comment that just the I'll call. It the.
<unk> of types of assignments engagements were getting in Europe or meaningfully better than they were a handful of years ago more due to changes at our firm that necessarily what the marketplace is doing.
Right, so you're gaining traction alright, how would how do you feel you are in terms of I don't know if we can put it in an innings or however, you would like to think about that the build out their relative to your U S is it <unk>.
Essentially a doubling from here how do we think about the size opportunity in Europe .
Scott and I'm, having a debate while we listened to your question.
I would put it in the fourth inning I mean, we have just started building out the industry verticals in Europe . There are several areas that we have an extraordinary room to grow.
And so we're in the early stages, where we're past what we think was the really tough part in the first few innings and I think we're really starting to see the payoff in terms of reputation and and we're just getting started so I think we're both very optimistic about our growth in Europe over the next decade.
Okay. That's that's helpful and maybe just one on expenses.
Certainly appreciate the greater revenue stability of the model, but you are leaning into hiring you're investing in tech real estate, you've got inflation. So <unk>. You know is there. Some is there some ability to flex expenses, if things don't go as planned and revenues do fall off a bit quite a bit more than expected.
How do we think about your ability to flex and you're sort of commitment to the comp ratio.
So like I mean, as you know on the comp ratio, we have unlimited ability to flex. It if we want to I think we have we.
We have maintained.
A tight compensation ratio for as long as I've been at the firm and we've been through several cycles since I've been here. So it is the way our business is structured there's some structural elements to it with respect to how much stock we provide to employees.
With respect to the terms of which we hire employees.
And so we think we have some some flexibility there that not everyone has and so.
We don't have.
A model that we live by it we need to flex the compensation ratio and it's in a significant situation I mean, we have that flexibility to do it. We just haven't had to do it over the years and so we still feel comfortable that in an environment. Like this we can maintain our comp ratio and a very tight range because because we've done it before.
Yep Nope, that's understood. Thanks.
And then I have a question from Ken Worthington with J P. Morgan. Please go ahead lines open.
Hi, Good afternoon. This is Madeleine Mccann thanks for taking my question.
Just had a quick one on lower fees prozac across most of your business. If this quarter is that indicative of any pricing dislocations are having with clients are just a function of smaller deal size like any color that would be appreciated and as long as expectations does he got like two and I'm breathing environment. Thanks.
So it's not it's not a trend I think we see this on a quarterly basis or average fees per transaction, primarily in our corporate financing or restructuring business tends to be the result of the nature of the transactions closing.
So no short term trends I will say over the long run.
Corporate finance average transaction size and average fee has steadily increased but we don't have that dynamic and restructuring, but we do in corporate finance and restructuring will we tend to see is when you're in periods of dislocation in the <unk> in the economy, you tend to see average transaction sizes increase.
Versus when you have a weaker restructuring market average transaction sizes and average fees might decrease.
But no no trends to read in on a quarterly basis simply because it's too short a time to measure.
Understood. Thanks for the clarification.
And there are no further questions at this time I'll turn the call back to Scott pleasure. Please go ahead.
Thank you I want to thank you all for participating in our fourth quarter in fiscal year 2023 earnings call. We look forward to updating everyone on our progress when we discuss our first quarter results for fiscal 2024 this coming summer.
<unk> call for today well. Thank you for your participation. That's like please disconnect your lines.
[noise] [music].