This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read together with our historical financial statements and
related notes included elsewhere in this Form 10-K. Actual results and the
timing of events may differ significantly from those expressed or implied in any
forward-looking statements due to a number of factors, including those set forth
in the sections entitled "Risk Factors" and "Cautionary Note Regarding
Forward-Looking Statements" and elsewhere in this Form 10-K. For discussion
related to changes in financial condition and the results of operations for
fiscal year 2018-related items, refer to Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations in our
Annual Report on Form 10-K for fiscal year 2019, which was filed with the
Securities and Exchange Commission on May 25, 2019.
Executive Overview
Established in 1972, Houlihan Lokey is a leading global independent investment
bank with expertise in mergers and acquisitions, capital markets, financial
restructurings, and financial and valuation advisory. With offices the United
States, Europe, the Middle East, and the Asia-Pacific region, the Company serves
a diverse set of clients including corporations, financial sponsors and
government agencies worldwide. Houlihan Lokey's financial professionals deliver
meaningful and differentiated advice to clients on strategy and financial
decisions employing a rigorous analytical approach coupled with deep product and
industry expertise.
We operate in three segments: Corporate Finance ("CF"), Financial Restructuring
("FR") and Financial and Valuation Advisory ("FVA"). In our CF business segment,
we believe we are an established leader in M&A and capital markets advisory
services. Through our FR business segment, we advise on some of the largest and
most complex restructurings around the world. Our FVA business segment is one of
the largest and most respected valuation, financial opinion and financial
consulting practices in the United States.
As of March 31, 2020, we served our clients globally with 1,068 financial
professionals, including 198 Managing Directors. We plan to continue to grow our
firm across industry sectors, geographies and products to deliver quality advice
and innovative solutions to our clients, both organically and through
acquisitions. Acquisitions over the last several years include: Leonardo & Co.
NV in November 2015 in Germany, the Netherlands and Spain, and Leonardo's
investment banking operations in Italy in June 2019 (collectively, "Leonardo"),
which enable us to provide a much greater breadth of services and coverage to
our clients both in continental Europe and across the globe; Quayle Munro
Limited in April 2018, which expanded our capabilities in the data and analytics
sector; BearTooth Advisors in May 2018, which provided us with a private equity
fundraising advisory platform; Fidentiis Capital in November 2019, an
independent advisory business providing independent corporate finance advisory
services relating to mergers and acquisitions, capital raising, and financing;
and Freeman & Co. in December 2019, an independent advisory business providing
mergers and acquisitions advisory, capital raising, and other investment banking
advisory services for the financial services sector.
We generate revenues primarily from providing advisory services on transactions
that are subject to individually negotiated engagement letters that set forth
our fees. A significant portion of our engagements include Progress Fees (as
defined herein) consisting of both periodic and milestone-related payments. The
occurrence and timing of milestone-related payments, such as upon the closing of
a transaction, are generally not within our control. Accordingly, revenue and
net income in any period may not be indicative of full year results or the
results of any other period and may vary significantly from year to year and
quarter to quarter.
Corporate expenses represent expenses that are not allocated to individual
business segments such as office of the executives, accounting, information
technology, compliance and legal, marketing, human capital, including related
compensation expense for corporate employees.
Business Environment and Outlook
Economic and global financial conditions can materially affect our operational
and financial performance. See "Risk Factors" for a discussion of some of the
factors that can affect our performance.
Our fiscal year ends on March 31 of each year. Beginning in the fiscal year
ended March 31, 2019, the Company prospectively changed the presentation of
reimbursements of certain out-of-pocket expenses from a net presentation within
operating expenses to a gross basis in revenues. For the fiscal year ended
March 31, 2020, we earned revenues of $1,159.4 million, an increase of 7% from
the $1,084.4 million earned during the fiscal year ended March 31, 2019. For our
fiscal year ended March 31, 2019, revenues increased 13% over fiscal year
ended March 31, 2018 revenues of $963.4 million.

                                       32

--------------------------------------------------------------------------------

Table of Contents



For the fiscal years ended March 31, 2020, 2019, and 2018, we earned revenues of
$184.3 million, $205.5 million, and $133.3 million, respectively, from our
international operations.
While our team of investment banking professionals continues to be very active,
we caution that given the uncertainty and volatility in the world caused by
COVID-19, the closing of some CF transactions on which we are advising has been
delayed, which may temporarily have a negative impact on the timing of revenues.
On a global basis, in the first quarter of calendar 2020, M&A transaction
completions were down 23% versus the prior year period. At the same time,
companies across the economy are experiencing severe financial distress as a
result of the business cessation caused by COVID-19, and accordingly, our FR
activity has increased as companies, creditor groups, and other constituencies
across most sectors are seeking our advice. We believe that our FR business
will, in the longer-term, continue to contribute revenue; however, there may be
a period where M&A and capital markets transactions remain on hiatus and
restructuring completions lag, which would cause our revenues to decrease in the
short term. In addition, we believe we have a strong market presence, but we
cannot control or predict the ultimate magnitude of the pandemic, the timing and
speed of the economic recovery, and the ultimate impact that it may have on our
revenues. In this uncertain environment, we also believe we are well-positioned
to weather the COVID-19 pandemic, with a strong balance sheet with substantial
liquidity.
Key Financial Measures
Revenues
Revenues include fee revenues and reimbursements of expenses (see Note 3
included in Part II, Item 8 of this Form 10-K). Revenues reflect revenues from
our CF, FR, and FVA business segments that substantially consist of fees for
advisory services.

Revenues for all three business segments are recognized upon satisfaction of the
performance obligation and may be satisfied over time or at a point in time. The
amount and timing of the fees paid vary by the type of engagement. In general,
advisory fees are paid at the time an engagement letter is signed ("Retainer
Fees"), during the course of the engagement ("Progress Fees"), or upon the
successful completion of a transaction or engagement ("Completion Fees").

Prior to April 1, 2018, the timing of the recognition of these various fees were
generally recognized on a monthly basis, except in situations where there was
uncertainty as to the timing of collection of the amount due. Progress Fees were
recognized based on management's estimates of the relative proportion of
services provided through the financial reporting date to the total services
required to be performed. Completion Fees were recognized only upon substantial
completion of the contingencies stipulated by the engagement agreement. In some
cases, approval of our fees is required from the courts or other regulatory
authority; in these circumstances, the recognition of revenue was often deferred
until approval was granted. However, if the fee that was going to be collected
from the client was fixed and determinable, and the collectability of the fee
was reasonably assured, there were instances when revenue recognition prior to
such approval was appropriate under accounting principles generally accepted in
the United States ("GAAP"). In instances when the revenue recognized on a
specific engagement exceeded the amounts billed, unbilled work-in-process was
recorded. Billed receivables were recorded as accounts receivable in the
consolidated balance sheets.

On April 1, 2018, we adopted Accounting Standards Update (ASU) No.
2014-09, Revenue from Contracts with Customers, which requires an entity to
recognize revenue as contractual services are transferred to customers in an
amount that reflects the consideration to which the entity expects to be
entitled in exchange for those services. The Company used the modified
retrospective method that also resulted in the Company prospectively changing
the presentation of reimbursements of certain out-of-pocket expenses from a net
presentation within non-compensation expenses to a gross basis in revenues. See
Note 3 included in Part II, Item 8 of this Form 10-K for a more detailed
discussion.

CF provides general financial advisory services in addition to advice on mergers
and acquisitions and capital markets offerings. We advise public and private
institutions on a wide variety of situations, including buy-side and sell-side
transactions, as well as leveraged loans, private mezzanine debt, high-yield
debt, initial public offerings, follow-ons, convertibles, equity private
placements, private equity, and liability management transactions, and advise
financial sponsors on all types of transactions. The majority of our CF revenues
consists of Completion Fees. CF transactions can fail to be completed for many
reasons that are outside of our control. In these instances, our fees are
generally limited to Retainer Fees and in some cases Progress Fees that may have
been earned.



                                       33

--------------------------------------------------------------------------------

Table of Contents



FR provides advice to debtors, creditors and other parties-in-interest in
connection with recapitalization/deleveraging transactions implemented both
through bankruptcy proceedings and though out-of-court exchanges, consent
solicitations or other mechanisms, as well as in distressed mergers and
acquisitions and capital markets activities. As part of these engagements, our
FR business segment offers a wide range of advisory services to our clients,
including: the structuring, negotiation, and confirmation of plans of
reorganization; structuring and analysis of exchange offers; corporate viability
assessment; dispute resolution and expert testimony; and procuring
debtor-in-possession financing. Although atypical, a FR transaction can fail to
be completed for many reasons that are outside of our control. In these
instances, our fees are generally limited to the Retainer Fees and/or Progress
Fees.
FVA primarily provides valuations of various assets, including: companies;
illiquid debt and equity securities; and intellectual property (among other
assets and liabilities). These valuations are used for financial reporting, tax
reporting, and other purposes. In addition, our FVA business segment renders
fairness opinions in connection with mergers and acquisitions and other
transactions, and solvency opinions in connection with corporate spin-offs and
dividend recapitalizations, and other types of financial opinions in connection
with other transactions. Also, our FVA business segment provides dispute
resolution services to clients where fees are usually based on the hourly rates
of our financial professionals. Unlike our CF or FR segments, the fees generated
in our FVA segment are generally not contingent on the successful completion of
a transaction.
Operating Expenses
Our operating expenses are classified as employee compensation and benefits
expense and non-compensation expense; revenue and headcount are the primary
drivers of our operating expenses. Subsequent to the April 1, 2018 adoption of
ASU No. 2014-09, Revenue from Contracts with Customers, the Company
prospectively changed the presentation of reimbursements of certain
out-of-pocket deal expenses from a net presentation within non-compensation
expenses to a gross basis in Revenues. Therefore, for the years ended March 31,
2020 and 2019, reimbursements of certain out-of-pocket deal expenses are
included in both Revenues and Operating expenses on the Consolidated Statements
of Comprehensive Income.
Employee Compensation and Benefits Expense. Our employee compensation and
benefits expense, which accounts for the majority of our operating expenses, is
determined by management based on revenues earned, headcount, the
competitiveness of the prevailing labor market, and anticipated compensation
expectations of our employees. These factors may fluctuate, and as a result, our
employee compensation and benefits expense may fluctuate materially in any
particular period. Accordingly, the amount of employee compensation and benefits
expense recognized in any particular period may not be consistent with prior
periods or indicative of future periods.
Our employee compensation and benefits expense consists of base salary, payroll
taxes, benefits, annual incentive compensation payable as cash bonus awards,
deferred cash bonus awards, and the amortization of equity-based bonus awards.
Base salary and benefits are paid ratably throughout the year. Our annual
equity-based bonus awards include fixed share compensation awards and fixed
dollar awards as a component of the annual bonus awards for certain employees.
These equity awards are generally subject to annual vesting requirements over a
four-year period beginning at the date of grant, which occurs in the first
quarter of each fiscal year; accordingly, expenses are amortized over the stated
vesting period. In most circumstances, the unvested portion of these awards is
subject to forfeiture should the employee depart from the Company. Cash bonuses,
which are accrued monthly, are discretionary and dependent upon a number of
factors including the Company's performance and are generally paid in the first
fiscal quarter of each year with respect to prior year performance. Generally, a
portion of the cash bonus is deferred and paid in the third quarter of the
fiscal year in which the bonus is awarded. The ratio of employee compensation
and benefits to revenues is referred to as the "Compensation Ratio."
Non-Compensation Expense. The balance of our operating expenses includes costs
for travel, meals and entertainment, rent, depreciation and amortization,
information technology and communications, professional fees, and other
operating expenses. We refer to all of these expenses as non-compensation
expenses. A portion of our non-compensation expenses fluctuates in response to
changes in headcount.

                                       34

--------------------------------------------------------------------------------

Table of Contents

Other (Income)/Expense, net



Other (income)/expense, net includes (i) interest income earned on
non-marketable and investment securities, Cash and cash equivalents, loans
receivable from affiliates, employee loans, and commercial paper, (ii) interest
expense and fees on our 2015 Line of Credit or 2019 Line of Credit (each defined
herein), (iii) interest expense on the loan payable to affiliate, Loans payable
to former shareholders, and the Loan payable to non-affiliates, (iv) equity
income and/or gains or losses from funds and partnership interests where we have
more than a minor ownership interest or more than minor influence over
operations, but do not have a controlling interest and are not the primary
beneficiary, and (v) gains and/or losses associated with the reduction/increase
of earnout liabilities.
Results of Consolidated Operations
The following is a discussion of our results of operations for the years ended
March 31, 2020 and 2019. For a more detailed discussion of the factors that
affected the revenues and the operating expenses of our CF, FR, and FVA business
segments in these periods, see "Business Segments" below.
                                         Year Ended March 31,                         Change
($ in thousands)                 2020            2019            2018         '19-'20        '18-'19
Revenues                     $ 1,159,368     $ 1,084,385     $  963,364            7  %         13  %
Operating expenses:
Employee compensation and
benefits                         737,762         692,073        636,631            7  %          9  %
Non-compensation expenses        192,005         173,215        112,320           11  %         54  %
Total operating expenses         929,767         865,288        748,951            7  %         16  %
Operating income                 229,601         219,097        214,413            5  %          2  %
Other (income)/expense, net       (6,046 )        (5,223 )       (3,423 )         16  %         53  %
Income before provision for
income taxes                     235,647         224,320        217,836            5  %          3  %
Provision for income taxes        51,854          65,214         45,553          (20 )%         43  %
Net income attributable to
Houlihan Lokey, Inc.             183,793         159,106        172,283           16  %         (8 )%

Year Ended March 31, 2020 versus March 31, 2019



Revenues were $1,159.4 million for the year ended March 31, 2020, compared with
$1,084.4 million for the year ended March 31, 2019, representing an increase of
7%. For the year ended March 31, 2020, CF revenues increased 6%, FR revenues
increased 11%, and FVA revenues remained relatively flat, compared with the year
ended March 31, 2019.
Operating expenses were $929.8 million for the year ended March 31, 2020,
compared with $865.3 million for the year ended March 31, 2019, an increase of
7%. Employee compensation and benefits expense, as a component of operating
expenses, was $737.8 million for the year ended March 31, 2020, compared with
$692.1 million for the year ended March 31, 2019, an increase of 7%. The
increase in employee compensation and benefits expense was primarily due to the
increase in revenues for the fiscal year. The Compensation Ratio was 64% for
both the years ended March 31, 2020 and 2019. Non-compensation expenses, as a
component of operating expenses, were $192.0 million for the year ended
March 31, 2020, compared with $173.2 million for the year ended March 31, 2019,
an increase of 11%. The increase in non-compensation expenses was primarily a
result of higher general operating expenses (including technology expenses)
associated with the growth of the Company.
Other (income)/expense, net was $(6.0) million for the year ended March 31,
2020, compared with $(5.2) million for the year ended March 31, 2019. The
increase in other (income)/expense, net was primarily a result of higher
interest (income) generated by our investment securities and a gain recognized
from the reduction in the fair value of earnout liabilities associated with two
of our acquisitions. These were partially offset by an equity method investment
loss for the year ended March 31, 2020, compared to a gain for the year ended
March 31, 2019.
The provision for income taxes for the year ended March 31, 2020 was $51.9
million, which reflected an effective tax rate of 22%. The provision for income
taxes for the year ended March 31, 2019 was $65.2 million, which reflected an
effective tax rate of 29%. The decrease in the Company's tax rate during the
year ended March 31, 2020 relative to the year ended March 31, 2019 was
primarily a result of the vesting of stock that occurred in April and May 2019,
as well as decreased state tax expense.

                                       35

--------------------------------------------------------------------------------

Table of Contents



Business Segments
The following table presents revenues, expenses, and contributions from our
continuing operations by business segment. The revenues by segment represents
each segment's revenues, and the profit by segment represents profit for each
segment before corporate expenses, Other (income)/expense, net, and income
taxes.
                                         Year Ended March 31,                          Change
($ in thousands)                 2020            2019            2018          '19-'20         '18-'19

Revenues by segment
Corporate Finance            $   646,788     $   607,333     $  528,643            6  %           15  %
Financial Restructuring          352,517         317,774        294,142           11  %            8  %
Financial and Valuation
Advisory                         160,063         159,278        140,579            -  %           13  %
Revenues                     $ 1,159,368     $ 1,084,385     $  963,364            7  %           13  %
Segment profit (1)
Corporate Finance            $   179,660     $   193,603     $  177,575           (7 )%            9  %
Financial Restructuring          107,714          83,607         73,691           29  %           13  %
Financial and Valuation
Advisory                          35,172          28,776         26,334           22  %            9  %
Total segment profit             322,546         305,986        277,600            5  %           10  %
Corporate expenses (2)            92,945          86,889         63,187            7  %           38  %

Other (income)/expense, net (6,046 ) (5,223 ) (3,423 ) 

       16  %           53  %
Income before provision for
income taxes                 $   235,647     $   224,320     $  217,836            5  %            3  %

Segment Metrics:
Number of Managing Directors
Corporate Finance                    123             108             92           14  %           17  %
Financial Restructuring               45              44             42            2  %            5  %
Financial and Valuation
Advisory                              30              33             35           (9 )%           (6 )%
Number of closed
transactions/Fee Events (3)
Corporate Finance                    309             284            226            9  %           26  %
Financial Restructuring               99              81             76           22  %            7  %
Financial and Valuation
Advisory                           1,385           1,377          1,339            1  %            3  %

(1) We adjust the compensation expense for a business segment in situations

where an employee residing in one business segment is performing work in

another business segment where the revenues are accrued. Segment profit


       may vary significantly between periods depending on the levels of
       collaboration among the different segments.

(2) Corporate expenses represent expenses that are not allocated to individual

business segments such as office of the executives, accounting,

information technology, compliance, legal, marketing, and human capital.

(3) Fee Events applicable to FVA only; a Fee Event includes any engagement

that involves revenue activity during the measurement period with a

revenue minimum of $1,000. References to closed transactions should be

understood to be the same as transactions that are "effectively closed" as

described in Note 2 of our Consolidated Financial Statements.




Corporate Finance
Year Ended March 31, 2020 versus March 31, 2019
Revenues for CF were $646.8 million for the year ended March 31, 2020, compared
with $607.3 million for the year ended March 31, 2019, representing an increase
of 6%. The increase in revenues was primarily a result of an increase in the
number of transactions that closed for the year ended March 31, 2020, compared
with the year ended March 31, 2019. Notwithstanding the annual increase in CF
revenues, toward the end of the fiscal 2020, CF experienced a reduction of
transaction closings due to the COVID-19 pandemic, and we expect this slowdown
to continue for some time.
Segment profit for CF was $179.7 million for the year ended March 31, 2020,
compared with $193.6 million for the year ended March 31, 2019, representing a
decrease of (7)%. The decrease in segment profit was a result of higher
compensation and non-compensation expenses as a percentage of revenues for
the year ended March 31, 2020, compared with the year ended March 31, 2019.

                                       36

--------------------------------------------------------------------------------

Table of Contents

Financial Restructuring



Year Ended March 31, 2020 versus March 31, 2019
Revenues for FR were $352.5 million for the year ended March 31, 2020, compared
with $317.8 million for the year ended March 31, 2019, representing an increase
of 11%. The increase in revenues was primarily driven by higher average
transaction fees and an increase in the number of closed transactions for
the year ended March 31, 2020, compared with the year ended March 31, 2019.
Beginning in March 2020, FR experienced a significant level of new business
opportunities, principally as a result of the COVID-19 pandemic, as well as the
global collapse of oil and gas prices.
Segment profit for FR was $107.7 million for the year ended March 31, 2020,
compared with $83.6 million for the year ended March 31, 2019, an increase of
29%. The increase in segment profit was a result of the increase in revenues and
lower compensation and non-compensation expenses as a percentage of revenues for
the year ended March 31, 2020, compared with the year ended March 31, 2019.
Financial and Valuation Advisory
Year Ended March 31, 2020 versus March 31, 2019
Revenues for FVA remained relatively flat year over year, with $160.1 million
for the year ended March 31, 2020, compared with $159.3 million for the year
ended March 31, 2019. This was due to an increase in Fee Events, partially
offset by a decrease in the average fee per Fee Event for the year
ended March 31, 2020, compared with the year ended March 31, 2019. Toward the
end of fiscal 2020, FVA experienced a reduction of transaction closings due to
the COVID-19 pandemic, and we expect this slowdown to continue for some time.
Segment profit for FVA was $35.2 million for the year ended March 31, 2020,
compared with $28.8 million for the year ended March 31, 2019, representing an
increase of 22%. The increase in segment profit was a result of the increase in
revenues and lower compensation and non-compensation expenses as a percentage of
revenues for the year ended March 31, 2020, compared with the year ended March
31, 2019.
Corporate Expenses
Year Ended March 31, 2020 versus March 31, 2019
Corporate expenses were $92.9 million for the year ended March 31, 2020,
compared with $86.9 million for the year ended March 31, 2019, representing an
increase of 7%. This 7% increase was driven by increased non-compensation
expenses for the year ended March 31, 2020, compared with the year ended March
31, 2019.
Liquidity and Capital Resources
Our current assets comprise cash and cash equivalents, investment securities,
receivables from affiliates, accounts receivable, and unbilled work in process
related to fees earned from providing advisory services. Our current liabilities
include deferred income, accounts payable and accrued expenses, accrued salaries
and bonuses, income taxes payable, and current portion of loan obligations.
Our cash and cash equivalents include cash held at banks. We maintain moderate
levels of cash on hand in support of regulatory requirements for our registered
broker-dealer. As of March 31, 2020 and 2019, we had $173.7 million and $168.4
million of cash in foreign subsidiaries, respectively. Our excess cash may be
invested from time to time in short term investments, including treasury
securities, commercial paper, certificates of deposit, and investment grade
corporate debt securities. Please refer to Note 6 for further detail.
On November 16, 2015, we issued the loan payable to non-affiliates in connection
with the Leonardo transaction, which is a EUR 14.0 million note bearing interest
at an annual rate of 1.50% and is payable on November 16, 2040. Under certain
circumstances, the note may be paid in part or in whole over a five-year period
in equal annual installments. In each of January 2017, December 2017, December
2018, and December 2019, we paid a portion of this loan in the amount of EUR 2.9
million. The remaining principal balance of the loan as of March 31, 2020 was
$3.3 million, which included foreign currency translation adjustments and unpaid
interest. See Note 1 and Note 10 for additional information.

                                       37

--------------------------------------------------------------------------------

Table of Contents



As of March 31, 2020 and 2019, our Cash and cash equivalents, Investment
securities, and Restricted cash were as follows:
(In thousands)                                             March 31, 2020       March 31, 2019
Cash and cash equivalents                                $        380,373     $        285,746
Investment securities                                             135,389              125,258

Total unrestricted cash and cash equivalents, including investment securities

                                             515,762              411,004
Restricted cash (1)                                                   373                  369

Total cash, cash equivalents, and restricted cash, including investment securities

$        516,135     $        411,373


(1)    Represents a deposit in support of a letter of credit issued for our
       Frankfurt office.



Our liquidity is highly dependent upon cash receipts from clients which in turn
are generally dependent upon the successful completion of transactions as well
as the timing of receivables collections, which typically occur within 60 days
of billing. As of March 31, 2020 and 2019, we had $80.9 million and $70.8
million of Accounts receivable, net of doubtful accounts, respectively. As
of March 31, 2020 and 2019, we had $39.8 million and $71.9 million of Unbilled
work in process, net of doubtful accounts, respectively.

Subsequent to the end of fiscal 2020, our Board of Directors declared a quarterly cash dividend of $0.31 per share of common stock, payable on June 15, 2020 to shareholders of record as of the close of business on June 5, 2020.



On August 23, 2019, the Company entered into a syndicated revolving line of
credit with Bank of America, N.A. and certain other financial institutions party
thereto, which allows for borrowings of up to $100.0 million (and, subject to
certain conditions, provides the Company with an expansion option, which, if
exercised in full, would provide for a total credit facility of $200 million)
and matures on August 23, 2022 (the "2019 Line of Credit"). As of March 31,
2020, no principal was outstanding under the 2019 Line of Credit. The agreement
governing this facility provides that borrowings bear interest at an annual rate
of LIBOR plus 1.00%, commitment fees apply to unused amounts, and contains debt
covenants which require that the Company maintain certain financial ratios. The
loan agreement requires compliance with certain financial covenants including
but not limited to the maintenance of minimum consolidated earnings before
interest, taxes, depreciation and amortization of no less than $150.0 million as
of the end of any quarterly 12-month period and certain leverage ratios
including a consolidated leverage ratio of less than 2.00 to 1.00. As of March
31, 2020, we were, and expect to continue to be, in compliance with such
covenants.

                                       38

--------------------------------------------------------------------------------

Table of Contents



Cash Flows
Our operating cash flows are primarily influenced by the amount and timing of
receipt of advisory fees and the payment of operating expenses, including
payments of incentive compensation to our employees. We pay a significant
portion of our incentive compensation during the first and third quarters of
each fiscal year. A summary of our operating, investing, and financing cash
flows is as follows:
                                                           Year Ended March 31,
(In thousands)                                      2020           2019           2018
Operating activities:
Net income                                      $  183,793     $  159,106     $  172,283
Non-cash charges                                   100,214         60,918         48,894
Other operating activities                           3,662          4,250         29,470

Net cash provided by operating activities 287,669 224,274

250,647


Net cash (used in)/provided by investing
activities                                         (33,144 )        6,459       (218,584 )
Net cash (used in) financing activities           (152,139 )     (236,138 )     (225,311 )
Effects of exchange rate changes on cash, cash
equivalents, and restricted cash                    (7,755 )       (8,703 )

785


Net increase/(decrease) in cash, cash
equivalents, and restricted cash                    94,631        (14,108 )     (192,463 )
Cash, cash equivalents, and restricted
cash-beginning of year                             286,115        300,223

492,686


Cash, cash equivalents, and restricted cash-end
of year                                         $  380,746     $  286,115     $  300,223



Year Ended March 31, 2020
Operating activities resulted in a net inflow of $287.7 million for fiscal 2020,
which was greater than the prior year due primarily to higher net income for the
year and a reduction in unbilled work in process. Investing activities resulted
in a net outflow of $33.1 million primarily due to purchases of new investment
securities, partially offset by an increase in the sale or maturity of existing
investment securities and acquisitions of property and equipment. Financing
activities resulted in a net outflow of $152.1 million primarily related to (i)
dividend distributions, (ii) payments to settle employee tax obligations on
share-based awards, and (iii) share repurchases.

Year Ended March 31, 2019
Operating activities resulted in a net inflow of $224.3 million for fiscal 2019,
which was lower than the prior year due primarily to lower net income for the
year. Investing activities resulted in a net outflow of $6.5 million primarily
attributable to sale or maturities of investment securities. Financing
activities resulted in a net outflow of $236.1 million primarily related to (i)
dividend distributions, (ii) settlement of forward purchase contracts, and (iii)
share repurchases.
Contractual Obligations
The following table summarizes our payment obligations and commitments as of
March 31, 2020.
                                                        Payment Due by Period
                            Total        Less than 1       1 to 3 Years       3 to 5 Years      More than 5
(In thousands)                               Year                                                  Years
Operating Leases         $  184,830     $     28,887     $       46,987     $       33,162     $     75,794
Loans payable to former
shareholders                  1,393              575                480                 31              307
Loan payable to
non-affiliate (1)             3,283                -                  -                  -            3,283
Other liabilities            32,024            4,779             17,866                  -            9,379

(1) Under certain circumstances, the note may be paid in part or in whole over


       a five year period in equal annual installments.




                                       39

--------------------------------------------------------------------------------

Table of Contents



In connection with certain acquisitions, certain employees may be entitled to
deferred consideration, primarily in the form of retention payments, should
certain service and/or performance conditions be met in the future. As a result
of these conditions, such deferred consideration would be expensed as
compensation in current and future periods and has been accrued as liabilities
on the Consolidated Balance Sheets as of March 31, 2020 and 2019.
The following table shows the expected future deferred consideration payable
under these agreements assuming the applicable service and/or performance
conditions are met:
                                                           Year Ended March 31,
(In thousands)                          2021       2022       2023      2024      2025       Total
Service condition only (1)            $ 6,675    $ 4,542    $ 4,542    $

- $ - $ 15,759 Performance and service condition (2) 3,038 2,958 14,539 4,386 5,100 30,021

(1) Assumes full payment of service condition deferred consideration. Payment

to any individual is not required if they are not an employee on a certain


       measurement date in each fiscal year.


(2)    Assumes full payment or accrual of performance and service condition
       deferred consideration. In certain cases, payment to an individual is

contingent on the receipt of cash associated with certain assignments that

were completed prior to the acquisition, and that individual being

employed on the performance measurement date. In certain cases, payment to

an individual is contingent on the performance of the acquired company

operating within Houlihan Lokey, Inc., and that individual being employed

on the performance measurement date.




Off-Balance Sheet Arrangements
We do not invest in any off-balance sheet vehicles that provide liquidity,
capital resources, market or credit risk support, or engage in any activities
that expose us to any liability that is not reflected in our consolidated
financial statements except for certain stand-by letters of credit and bank
guarantees in support of various office leases totaling approximately $0.6
million.
Critical Accounting Policies and Estimates
We believe that the critical accounting policies and practices included below
are both most important to the portrayal of the Company's financial condition
and results, and require management's most difficult, subjective, or complex
judgments, often as a result of the need to make estimates about the effects of
matters that are inherently uncertain. For a discussion of these and other
significant accounting policies and their impact on our consolidated financial
statements, see Note 2 included in part II, Item 8 of this Form 10-K.
The preparation of consolidated financial statements and related disclosures in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates. Estimates and assumptions are
reviewed periodically, and the effects of revisions are reflected in the period
for which they are determined to be necessary.
Recognition of Revenue
The Company adopted ASU 2014-09, Revenue from Contracts with Customers, on April
1, 2018, which requires an entity to recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those
goods or services. The Company used the modified retrospective method that
resulted in the Company prospectively changing the presentation of
reimbursements of certain out-of-pocket expenses from a net presentation within
non-compensation expenses to a gross basis in revenues.

                                       40

--------------------------------------------------------------------------------

Table of Contents



Revenues from CF engagements primarily consist of fees generated in connection
with advisory services related to corporate finance, mergers and acquisitions,
and capital markets offerings. Completion Fees from these engagements are
recognized at a point in time when the related transaction has been effectively
closed. At that time, the Company has transferred control of the promised
service and the customer obtains control. CF contracts generally contain a
variety of promised services that may be capable of being distinct, but they are
not distinct within the context of the contract as the various services are
inputs to the combined output of successfully brokering a specific transaction.
Effective April 1, 2018, fees received prior to the completion of the
transaction, including Retainer Fees and Progress Fees, are deferred within
deferred income in the consolidated balance sheets and not recognized until the
performance obligation is satisfied, or when the transaction is deemed by
management to be terminated. Management's judgment is required in determining
when a transaction is considered to be terminated. Prior to April 1, 2018, these
various fees were generally recognized on a monthly basis, except in situations
where there was uncertainty as to the timing of collection of the amount due.
Progress Fees were recognized based on management's estimates of the relative
proportion of services provided through the financial reporting date to the
total services required to be performed.
Revenues from FR engagements primarily consist of fees generated in connection
with advisory services to debtors, creditors and other parties-in-interest
involving recapitalization or deleveraging transactions implemented both through
bankruptcy proceedings and through out-of-court exchanges, consent solicitations
or other mechanisms, as well as in distressed mergers and acquisitions and
capital markets activities. Retainer Fees and Progress Fees from restructuring
engagements are recognized over time using a time elapsed measure of progress as
our clients simultaneously receive and consume the benefits of those services as
they are provided. Completion Fees from these engagements are considered
variable and constrained until the related transaction has been effectively
closed as they are contingent upon a future event which includes factors outside
of our control (e.g., completion of a transaction or third party emergence from
bankruptcy or approval by the court).

Revenues from FVA engagements primarily consist of fees generated in connection
with valuation and diligence services and rendering fairness, solvency and other
financial opinions. Revenues are recognized at a point in time as these
engagements include a singular objective that does not transfer any notable
value to the Company's clients until the opinions have been rendered and
delivered to the client. However, certain engagements consist of advisory
services where fees are usually based on the hourly rates of our financial
professionals. Such revenues are recognized over time as the benefits of these
advisory services are transferred to the Company's clients throughout the course
of the engagement, and, as a practical expedient, the Company has elected to use
the 'as-invoiced' approach to recognize revenue.

See Note 2 and Note 3 included in Part II, Item 8 of this Form 10-K for
additional information.
Operating Expenses
The majority of the Company's operating expenses are related to compensation for
employees, which includes the amortization of the relevant portion of our
share-based incentive awards. We account for share-based payments in accordance
with Financial Accounting Standards Board ASC 718, "Compensation-Stock
Compensation". We grant employees awards that vest subject to continued
employment in good standing. Employee compensation and benefits expense is
accrued if it is probable that the condition will be achieved and is not accrued
if it is not probable that the condition will be achieved. The fair value of
awards that vest from one to five years are amortized over the vesting period or
requisite substantive service period, as required by ASC 718.
See Note 14 included in Part II, Item 8 of this Form 10-K for additional
information.
Other types of operating expenses include: Travel, meals, and entertainment;
Rent; Depreciation and amortization; Information technology and communications;
Professional fees; and Other operating expenses.
Allowance for Doubtful Accounts
The allowance for doubtful accounts on accounts receivables reflects
management's best estimate of probable inherent losses determined principally on
the basis of historical experience and review of uncollected revenues and is
recorded through a provision for bad debts in the accompanying consolidated
statements of comprehensive income. Amounts deemed to be uncollectible are
written off against the allowance for doubtful accounts.

                                       41

--------------------------------------------------------------------------------

Table of Contents



See Note 7 included in Part II, Item 8 of this Form 10-K for additional
information.
Provision for Income Taxes
The Company files a consolidated federal income tax return, as well as
consolidated and separate returns in state and local jurisdictions, and the
Company reports income tax expense on this basis.
See Note 12 included in Part II, Item 8 of this Form 10-K for additional
information.
Goodwill and Intangible Assets
Goodwill represents an acquired company's acquisition cost over the fair value
of acquired net tangible and intangible assets. Goodwill is the net asset
representing the future economic benefits arising from other assets acquired in
a business combination that are not individually identified and separately
recognized. Intangible assets identified and accounted for include trade names
and marks, backlog, developed technologies, and customer relationships. Those
intangible assets with finite lives, including backlog and customer
relationships, are amortized over their estimated useful lives. We have a
deferred tax liability related to trade names of $49.2 million and $51.7 million
as of March 31, 2020 and 2019, respectively.
During fiscal 2020, 2019, and 2018, goodwill was reviewed for impairment in
accordance with ASU No. 2011-08, Testing Goodwill for Impairment, which permits
us to make a qualitative assessment of whether it is more likely than not that
one of our reporting unit's fair value is less than its carrying amount before
applying the two-step goodwill impairment test. If we conclude that it is not
more likely than not that the fair value of the reporting unit is less than its
carrying amount, then we would not be required to perform the two-step
impairment test for that reporting unit. If the assessment indicates that it is
more likely than not that the reporting unit's fair value is less than its
carrying value, we must test further for impairment utilizing a two-step
process. Step 1 compares the estimated fair value of the reporting unit with its
carrying value, including goodwill. If the carrying value of the reporting unit
exceeds the estimated fair value, an impairment exists and is measured in Step 2
as the excess of the recorded amount of goodwill over the implied fair value of
goodwill resulting from the valuation of the reporting unit. Impairment testing
of goodwill requires a significant amount of judgment in assessing qualitative
factors and estimating the fair value of the reporting unit, if necessary. The
fair value is determined using an estimated market value approach, which
considers estimates of future after-tax cash flows, including a terminal value
based on market earnings multiples, discounted at an appropriate market rate.
During the annual impairment reviews, management concluded that it is not more
likely than not that our fair value is less than its carrying amount and no
further impairment testing was considered necessary.
During fiscal 2020, 2019, and 2018, indefinite-lived intangible assets were
reviewed for impairment in accordance with ASU 2012-02, Testing Indefinite-lived
Intangible Assets for Impairment, which provides us the option to perform a
qualitative assessment. If it is more likely than not that the asset is
impaired, the amount that the carrying value exceeds the fair value is recorded
as an impairment expense. During the annual impairment review of
indefinite-lived intangible assets, we determined that it is not more likely
than not that the fair values were less than the carrying values.
Intangible assets subject to amortization are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If circumstances require a long-lived asset or asset
group (inclusive of other long-lived assets) be tested for possible impairment,
we first compare undiscounted cash flows expected to be generated by that asset
or asset group to its carrying amount. If the carrying amount of the long-lived
asset or asset group is not recoverable on an undiscounted cash flow basis, an
impairment is recognized to the extent that the carrying amount exceeds its fair
value. Fair value is determined through various valuation techniques including
discounted cash flow models, quoted market values and third-party independent
appraisals, as considered necessary. To date, no events or changes in
circumstances were identified that indicated that the carrying amount of the
finite-lived intangible assets were not recoverable.
Recent Accounting Developments
For additional information on recently issued accounting developments and their
impact or potential impact on our consolidated financial statements, see Note 2
included in Part II, Item 8 of this Form 10-K.

                                       42

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses