Houlihan Lokey Inc (HLI) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Houlihan Lokey Second Quarter Fiscal 2018 Earnings Conference Call. (Operator Instructions) Please note that this conference call is being recorded today, October 24, 2017.

And I will now turn the call over to Christopher Crain, Houlihan Lokey's General Counsel.

Thank you, operator, and hello, everyone. By now, everyone should have access to our second quarter fiscal 2018 earnings release, which can be found on the Houlihan Lokey website at www.hl.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. 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-Q for the quarter ended September 30, 2017, when it is filed with the SEC.

During today's call, we will discuss non-GAAP financial measures, which we believe could 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.com website.

Hosting the call today, we have Scott Beiser, Houlihan Lokey's 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 you, Christopher. Hello, everyone, and welcome to our second quarter fiscal year 2018 earnings call. We are pleased to report strong second quarter results and a continuation of year-over-year revenue and earnings growth. Our financial performance over the last several quarters is a result of executing on various strategic initiatives we have pursued over the last few years. We reported $242 million in revenues this quarter, up 30% from last year, and our strongest second quarter in the firm's history. Once again, all 3 of our business segments had increases in quarterly revenues when compared to the same period last year.

With respect to earnings, our adjusted earnings per share for the quarter were $0.56, up 51% from the $0.37 in the same quarter last year. For the 6 months ended September 30, 2017, adjusted earnings per share were $1.05, up 46% from $0.72 for the first half of last fiscal year.

Our continued strong earnings performance was driven by record revenues, continued economies of scale for non-compensation expenses, an improvement in other income and expense and slightly lower tax rates, all as compared to the same quarter last year.

To date, the early dialogue regarding changes in the U.S. tax code has not had an impact on our deal flow activity or timing of closings. However, if progress is made on tax policy, it is unclear what impact any changes might have, either positively or negatively, on the timing of deal closings in the coming quarters and thereafter.

We've experienced a number of trends in our business in the first half of the year that emphasize the strength of our business model in our 3 product lines. We have seen our capital markets business grow significantly, driven by increased market penetration and continued collaboration and joint execution with both our Financial Restructuring business and our Corporate Finance industry groups. Also, the relationships that we developed and experience that we enhanced during the last wave of restructurings in the oil and gas sector has started to yield higher Corporate Finance revenues. We continue to promote an integrated business with cross product line and cross geographic collaboration, being a hallmark of our culture. We believe our approach gives us a unique competitive advantage that will continue to allow us to provide superior client advice and very high employee retention.

Now I'll make some specific comments about each of our 3 business segments. Corporate Finance generated revenues of $146 million for the quarter, up 46% year-over-year. Our growth for the quarter was driven largely by an increase in the average fee size as well as an increase in the number of closed transactions. We have accomplished these results in a relatively stable M&A environment but one that has continued to slightly decline in activity over the last 12 months.

We continue to believe our market share for mid-cap transactions is growing, reflecting the same trends that we have been experiencing over the last several years. We remain focused on developing and supporting our existing MDs, and we have seen revenues per MD increase by 23% in the latest 12 months. In addition, we continue to be successful in hiring talented MDs and pursuing acquisitions, which add strong banker and management teams to our Corporate Finance platform.

Financial Restructuring generated $63 million of revenues for the quarter, up 11% year-over-year. While we showed continued revenue growth in Financial Restructuring this quarter, our commentary regarding our full year performance in fiscal year 2018 has not changed. We continue to work through a variety of oil and gas-related projects that have driven our revenues over the last several quarters. While retail and other industries are seeing a pickup in restructuring activity, this is not expected to fully offset the completion of our oil and gas engagements. Consequently, our revenues for the second half of fiscal 2018 in Financial Restructuring are expected to be below our second half of fiscal 2017. However, looking ahead, we have experienced a recent increase in client inquiries, which will often lead to new engagements. We do not expect these conversations to add to near-term performances, but the intermediate and long-term prospects look more encouraging. Considering the continual buildup of high-yield bonds and leveraged loans in the marketplace and recent pitch activity and client engagements, we see opportunities that can benefit us in subsequent years.

Financial Advisory Services generated revenues of $33 million for the quarter, up 12% year-over-year. We experienced an increase in fee events but a decrease in the average revenue per fee event during the quarter. Transaction opinion work was up substantially versus the same period last year, and we experienced growth in portfolio valuation and transaction advisory services, and our new intellectual property business is off to a strong start. We have grown our MD headcount in FAS by 18% since this time last year, and we have a strong pipeline of experienced senior candidates that should allow us to continue to add talent to an already deep bench in our FAS business. We believe we are well positioned for future revenue growth as these new employees develop on our platform.

Firm-wide, we remain disciplined in our development and search for talent, either adding new capabilities or strengthening existing capabilities. This quarter, we added 8 MDs. 6 were external hires, primarily in corporate finance, and 2 came from the consolidation of our Australian joint venture. During the quarter, 6 MDs left our firm, most of which were planned departures. Overall, we believe the depth and strength of our senior employee base continues to improve.

On the acquisition front, in late July, we purchased the remaining interest in our Australian joint venture that we did not previously own. We are excited about the prospects in Australia and, in fact, added a third Managing Director focused on capital markets and financing opportunities in that office in August. We also continue to maintain dialogue with a number of attractive acquisition opportunities, both in the United States and internationally, and we continue to view acquisitions as playing an important part in the success of our business.

In closing, we are pleased with the recent quarter's financial results. Though we see no imminent signs of a change in market directions, we remain focused on building and sustaining the best business we can, one that we believe will be successful regardless of the business, political or economic environment that we are in.

With that, I'll turn the call over to Lindsey.

Thank you, Scott. In Corporate Finance, revenues were $146 million for the quarter, an increase of 46% from the prior year. This was another record second quarter of revenues for the Corporate Finance against the backdrop of a stable but declining middle-market M&A environment. We closed 64 transactions in the quarter compared to 56 in the same period last year. And our average transaction fee on closed deals was more than 26% higher than the same quarter last year. We had a very strong first half in Corporate Finance. However, it is worth highlighting that first half results include several above-average transaction fees and favorable timing around closings. While we expect the second half to continue our positive momentum, we don't expect that the second half will necessarily follow the same seasonality that has existed in our Corporate Finance business in the past.

Financial Restructuring revenues were $63 million for the quarter, an increase of 11% from the prior year. We closed 14 transactions in the quarter compared to 12 transactions in the same period last year, and our average transaction fee on closed deals was slightly higher compared with the same quarter last year. We continue to see broad-based restructuring activity across several of our industry verticals. In oil and gas, we have seen an expected decline in restructuring-related revenues year-to-date, and we expect to see continued revenue decline in that sector through the balance of the year.

In Financial Advisory Services, revenues were $33 million for the quarter, a 12% increase from the prior year. Revenue growth was driven by a more than 20% increase in fee events compared to the same quarter last year, along with revenue growth in transaction opinions, portfolio valuations and transaction advisory services. In addition, our new intellectual property business contributed to revenues for the quarter.

Turning to expenses. Our adjusted compensation expenses were $155 million for the second quarter versus $118 million for the same period last year. The increase in adjusted compensation expenses was primarily due to the increase in revenues for the quarter. For the second quarter of fiscal 2018, we had an adjustment of $6.3 million related to the vesting of grants that were issued in connection with our IPO, and we expect this adjustment to continue until our last tranche of pre-IPO grants vest in April 2020. This resulted in an adjusted awarded compensation ratio of 65.5% for the second quarter of fiscal 2018 compared with 65% for the second quarter last year. We continue to target an adjusted awarded compensation ratio of between 65% and 66%, and our GAAP compensation ratio adjusted for pre-IPO grants should be between 125 and 175 basis points lower than our adjusted awarded compensation ratio. This is consistent with the 150 basis points difference we experienced in both Q1 and Q2 of this fiscal year.

Our adjusted non-compensation expenses in the second quarter were $28 million or 11.4% of revenues versus $27 million or 14.3% of revenues in the second quarter last year. We had no adjustments to our non-compensation expenses for this quarter.

Related to our adjusted other income and expense line item, we experienced a slight gain in the quarter as a result of lower interest expense on lower debt balances and higher interest income on cash balances. As Scott mentioned, in July 2017, we acquired the remaining outstanding stake in our Australia joint venture and we now consolidate its results. As a result, we no longer account for gains and losses associated with the joint venture in the other income and expense line item. The only adjustment this quarter in other income and expense is related to the Australian transaction. We adjusted out a small onetime gain that occurred as a result of the acquisition, partially offset by losses in the Australian entity in the quarter and legal expenses associated with the transaction.

Turning to the balance sheet. As of September 30, 2017, we had $306 million of unrestricted cash and equivalents and investment securities and debt of $16 million. As a reminder, we have a significant deferred cash bonus payment in the third quarter relating to bonuses awarded for fiscal year 2017. In the second quarter, we paid our quarterly dividend and invested $9.4 million, repurchasing 262,000 shares at an average price of $35.75 per share as part of our share repurchase program.

With that, operator, we can open the line for questions.

(Operator Instructions) At this time, we'll hear from Devin Ryan with JMP Securities.

Maybe starting off here in Corporate Finance. Obviously, a strong quarter of closings. And I think I heard you mention some slowing in the middle markets. And it sounds maybe like that's a nuance, but I'm just curious what was driving that. And then if you can, any additional perspective around the pace of kind of new mandates coming in after a good kind of closing quarter. And then within that, any particular sectors that are becoming more or less active? It sounded like maybe you're seeing some momentum in energy.

Yes. The comments we still see globally across all industries is the number of M&A transactions that get announced. That's what we've seen. It's been relatively flat maybe with a slight decline, and it's been going on really for several quarters. But in spite of that, the number of transactions that we've been closing and we think, therefore, continually gaining market share, it's really coming across in all industries. I mean, we did note the comment in the oil and gas sector, which a year or 2 years ago was almost exclusively focused on working in distressed situations. Now we are also working on some turnaround or healthy situations, but really are in -- all of the industry groups were doing pretty good this quarter, this last half year. And I won't necessarily point to any particularly unique industry that is outpacing compared to last year. It's just the normal rotation, I think, we have between different industry groups and how they're performing.

And I think, Devin, it's important to note that our mention of kind of the global middle-market M&A market was really only meant as a relative comparison to Houlihan Lokey's performance relative to the global M&A market, which has been kind of flat to slightly down over the last 4 to 6 quarters.

Got it. Okay. That's helpful. And I know it's kind of a nuanced point, but I appreciate the color there. And then maybe with respect to expenses, I know we're trending right now at a pretty good level relative to that non-comp ratio guidance of 12% to 13%, and that's because we've had such a strong start of the year for revenues. But how should we think about that range just as we look into the back half of the year given that you "started on a better note?"

Yes. I think that we continue to maintain the 12% to 13% guidance kind of over the long term. I think, certainly, this year, we've seen a very good first half of the year from an efficiency standpoint. We don't expect that to meaningfully change in the second half of the year, and so I would expect to be at the end or at the low end of that range and potentially even below it with respect to this year's performance on a non-comp basis.

Okay. Great. And then maybe just last one, kind of bigger picture. Just if you can, any update around -- or anecdotes around successes in some of the -- maybe what I'd say are the growth initiatives right now like private capital advisory or maybe any anecdotes on recent progress or wins on the international expansion front?

Two of the areas I think we'd mentioned is we continue to see substantial increases in what we define as the capital markets, predominantly private financing as an agent. And it just continues to grow, not only in the United States but really across the globe, and it continues to be a added piece in working with our mid-cap companies. And on the international front, we've continued to add via some of the acquisitions we did 1 or 2 years ago, some of the new hirings we're doing. We're clearly gaining growth outside of the United States. But we have still seen probably over the last year performance on a pure statistical basis, the U.S. has continued to just be a better place in the world generally to operate than outside of the United States, but we do see, I'd say, more than kernels of improvement really coming in Europe and other parts of the globe. And that feel like they may be eventually playing catch-up with the performance in the United States.

We'll now move to Michael Needham with Bank of America Merrill Lynch.

So just first, on the Corporate Finance fees, the average fee per transaction is up this year pretty meaningfully from the first half of last year. You guys touched on it. I'm just wondering, is this a trend? I know -- I'm just comparing the half years, but I think you've indicated in the past that you wanted to advise on bigger deals.

I think a few trends. We do always seem to work on somewhat bigger deals each and every quarter, each and every year, but it's not a giant, double in upsized deals. It's just the deal size do get bigger may be point one. Point two is we do see, especially when either we are hiring or recently promoting or acquiring businesses, it does still take 1, 2, 3 years for them to ramp up on our platform. So part of that is we're just seeing the performance of the newly acquired or hired or promoted, and these are kind of catching up with the people who have been in place for a while. And I think just the brand reputation allows us to find more opportunities and work on more unique deals to provide a better advice that's allowing us to get increased deal size and increased fees.

And the only thing I would add to that is 26% is meaningfully larger than we would typically see in terms of average increases -- in terms of increases in average deal sizes. So that's kind of why I had the comments relating to the seasonality, the first half of Corporate Finance versus the second half. It was a very good first half for Corporate Finance in terms of larger deals, and that's why you see the big increase. But measured over time, I would reiterate Scott's point, we tend to see our average transaction sizes and our average fees increase year-over-year but not at 26%.

Okay. Got it. That makes sense. And on, just I guess, growth in Corporate Finance and market share gains, you guys have clearly, like, made a lot of progress. I just looked at your, like, reported MD headcount. You hired some people, but over the last year or 2, it's flattish. And I think some of the acquisitions you've done have been outside the U.S. for that business. So what are the drivers? Can you continue to take share of that growing headcount? Or are you going to be focused on hiring more people in the U.S.?

I think it's both. We are right now and we'll continue to look at hiring people where we think it makes sense, where we think we can add to the bench strength. There's always some rotation on some individuals that either get hired or acquired throughout the business. But I would say we're as much focused on how we can continue to grow the market share, and for the foreseeable future, we just don't see anything that will stop us from continually looking to either acquire businesses or hire people or continue to promote. We're just not feeling any cap to the market, and right now, it's really what can we continue to do to find the right people that will fit the culture of the firm and know how to bring in and execute on the types of transactions we work on.

Okay. And last one on restructuring. Does the $60 million revenue level, does that still feel inflated relative to new assignments coming in or not?

No. This business, the restructuring business is clearly our most volatile and seasonal and -- not so much seasonal, but it can have lumpy results depending on the size of transactions that close. So it's really hard for us to comment on a particular quarter or 2. We had 2 very strong quarters in our third and fourth fiscal '17 quarters. Our first half quarters were -- in 2018 were a little bigger than we had in the same time period in 2017. And no, I think the quarters in terms of revenues, kind of business we're getting in, like I said, not unlike on many other of recent calls, we're not seeing the volume of size on the oil and gas side, but everything else feels to be doing rather well and expanding both geographically and along different industry lines.

We'll now move to Conor Fitzgerald with Goldman Sachs.

I just want to kick it off with a bigger picture question, just about the balance sheet and how you think about potentially using leverage with your business. You're definitely more diversified than some of your peers. Your revenue tends to be less volatile. Do you think that leverage is something that your business would support or that you would consider using?

So 2 questions there. I think businesses that have more of a less volatility to it, a little bit more of a consulting advisory component, I think can afford itself some amount of leverage more than a pure contingency-only, high-volatile business. That being said, at least since we've gone public, we've chosen to really pretty much follow the marketplace, which is to not take on much of any debt. We continue to look at what should we be doing with our cash and capital. We continue to tell people we will not hold on to any more than we need. We'll use it for acquisitions or repurchases, dividends, et cetera. And we do occasionally talk about, is there an appropriate kind of balance sheet amount of leverage that a business like ours could take on might be beneficial to our shareholders. But for the foreseeable future, I'd anticipate we will be similar to the rest of the marketplace and stay relatively unlevered.

Okay. And then I just wanted to circle back to your comments around the tax reform. That hasn't really been impediment yet, but it sounds like it could be both positive -- or a recent thing it would be positive or negative going forward. Is your anticipation that as dialogue kind of heats up and they start getting into some of the nitty-gritty policy details, you could start to see an impact in terms of deal slowing?

Well, I won't use the word slowing. We would have told you, we would have thought a year ago that potential changes in tax policy would make changes to people's behavior. And kind of 12 months into it, we haven't seen it. If tomorrow we actually had a full blueprint of what the new tax policy would be, which is, of course, something none of us know, we think it could encourage some people to want to accelerate deal timing. It could encourage some people to want to stall on deal timings. It could change people's behavior that, like I said, could be both positive or negative. So I clearly would not read anything that comes out would be negative or for that matter, it would be positive. We're just saying, right now, it's not part of the vernacular of our clients or the conversations. They're not making decisions based upon tax policy, but that's because I think nobody quite knows will we have a new tax policy or what will it look like. And we just tell ourselves, tell our clients, tell our shareholders that if and eventually something comes out, it could change people's behavior, don't know what those changes could be, could be positive, could be negative, but sitting here today, that's not impacting our business or timing on the closings.

That's helpful color. And then just last one for me, kind of following up on that. If there was a tax reduction for small business pass-through, I'd just be curious for your thoughts on how that could kind of impact the broader small business community, specifically some of the sales that we've seen, the kind of private equity firms buy small businesses over that being a growing source of kind of M&A activity. Do you think if we get lower tax rates for small businesses, the way that part of the ecosystem works adapts at all?

Yes. I think it's so difficult to speculate on one slice of any of this. And you're going to have to take it all in totality. I think we've always found when there is change, that is net good for our business and would be, I think, for other peers and advisers because you'll have winners and losers and people will be making different decisions. But really don't have a view on your very specific question on what impact it might have, other than, like I said, we're not afraid of change, and net change has historically always been good for our business.

We will now move to Brennan Hawken with UBS.

I got a question on financial sponsors. So they've gotten a lot of -- there's been a ton of headlines here recently in the amount of money that they've been raising here. Have you noticed any change in activity or engagement by some of these critical partners for you all on the back of some of that fundraising?

We're driven -- we like to have a lot of participants. It's also good for us if money is raised for new reformed funds that are looking to get into in completing transactions. And probably the amount of our business that is tied to financial sponsors on a percentage basis is -- it continues to grow but been relatively constant over -- I'd say, over the last 5 years. And it's a very important part of our business. I won't say we see anything unique this quarter versus couple previous quarters. Clearly you said the amount money raised has been increasing, the number of funds out there is pretty large and it continues to go more and more global with more and more specialties and people focusing on different sectors of the economy, which just allows us to have more potential, not only would-be buyers of the business that we sell but there are also great clients when we can help them on their sales or financing, restructuring, evaluation group.

Okay. And then thinking about your -- I think you had indicated that you've seen an uptick in the Corporate Finance activity in the energy here recently. How much do you think -- it seemed like you were implying that, that was a function of a borne Houlihan-specific weight because of the resonance that you got from some of the restructuring mandates. Is the energy market, though, overall picking up just given that there's sort of less distress in that market, and therefore, you would naturally start to see more M&A activity pick up?

Yes. So on a macro level, if you would have asked that question 18 months ago, someone would have told you almost exclusively all investment banking work done in the oil and gas sector was associated with some distressed situation. Now it's much more of a mix, both distressed as well as healthy. And on the internal comment that we made, we did this with telecommunications. In a previous way, we've done this with real estate and now there are some times, we will start some of our industry expertise on the restructuring side, and then as the market improves, we will ultimately transition it to working on the healthy parts of that industry. Just the same thing in reverse might be happening in retail, we've been very active over the years on the healthy side and more and more it's starting to turn on the distressed side. It's one of the flexibilities we have in our firm where we can take an industry expertise and we might start it in distressed and it could go to healthy. It could start in healthy and go to distressed or sometimes occur for both. So I think it's a comment that, yes, you're starting to see some healthy improvements in the oil and gas, and yes, Houlihan Lokey is now also doing M&A and capital raising as the needs might be for the oil and gas industry and above and beyond just pure restructuring work that would have been kind of the hallmark 1 or 2 years ago.

Perfect. And then for me just last one, a nitty-gritty question here. But just a clarification because the footnote was a little bit unclear to me. When you guys record your comp expense, you record it in the segment where the MD or the employee works even if the revenue on a mandate they're working on happens to be accrued in a different segment. Do I have that right?

You do. You do. And you've seen that in the last 2 quarters as a result of a couple of larger transactions where there was collaboration between Restructuring and Corporate Finance. You've seen that enhanced in the last couple of quarters. But yes, you read the footnote correctly.

We'll now move to Ken Worthington with JP Morgan.

I guess maybe first, can you help us maybe better understand the strategy and build-out in Middle East? If possible, maybe frame the resources you're focusing there and if you could talk about the businesses you think have the greatest opportunity.

Sure, Ken. So it's our newest office out in Dubai. We have done work in the Middle East for many, many years but ultimately opened up an office, moved a few people primarily from our London office. We'll eventually have a few people locally also staff up that office. And historically, we have done work for various sovereign wealth funds out there who could be both buyers or providers of capital in transactions we're working on. And we've done some restructuring work for the businesses out there. Eventually, we'll also do work for local companies out there. But I would consider it no different than the other 2 dozen offices really that we have both in the United States and across the globe. It will both service local situations as well as could be local financiers who are looking to do deals with other companies or situations across the globe.

Okay. Great. Maybe following that, in terms of energy restructuring, you've been pretty clear on the call and I think in prior calls that the pipeline is slowing. I'm hoping to get a sense of the pace of the slowdown. And I think maybe one way to frame it is, could you maybe give us an indication of the ratio of the new work coming in related to the existing work being completed? Like what does that relationship look like?

Specific to oil and gas, I don't know that we will disclose the specifics around kind of new engagements versus engagements coming off. But we would expect the oil and gas-related restructuring revenues to be down double digits year-over-year. And I think that's probably the most I'd like to provide in terms of specifics. I think Scott alluded to the fact that we do expect higher revenues in oil and gas in our Corporate Finance business. It won't mitigate the decline in restructuring-related revenues. And as also Scott mentioned, we are seeing pickup in activity outside of oil and gas in restructuring as well. But we do expect double-digit decreases in oil and gas-related restructuring activity certainly second half of the year versus -- this year versus second half of the year last year.

Okay. Fair enough. And then just a follow-up there. You've mentioned a couple of times increasing inquiries elsewhere in restructuring. Can you talk about the themes -- if there's any themes or what you're seeing in terms of either subsectors or businesses that you're seeing restructuring pick up in -- I've heard a lot about retail and some others? But like what is -- where are you seeing the positives coming in restructuring?

First of all, I think it always occurs -- there's going to be -- during the best of times, the worst of times, there is always a subset of companies that have put on the wrong capital structure, may have managerial problems, may have some unusual litigations, some product faults, a whole variety of reasons that a percentage of companies run into financial difficulties. So we have that, having nothing to do with any particular unique industry. But we are seeing some issues in certain subcomponents out in health care are starting to experience some issues -- we clearly mentioned retail as others. We think shipbuilding, which is somewhat still tied into all the commodity and oil and gas issues, still has some pockets of issues. And really, just across the globe, we continue to do, I'd say, more work. What used to be almost a pure United States and Western Europe restructuring environment now is in dozens and dozens of other countries as we've effectively followed capital sources that have provided capital and deals in different industries in different countries. So I don't think there's necessarily specific trends other than we would just say there's a lot in what we'll call the technology disruptors. And whether that's the ride-sharing that's going to cause issues in the automotive sect, and if it's the housing-sharing, whether it's Airbnb or WeWork is going to cause some issues in real estate, and whether it was fracking that caused it in oil and gas and whether it's Amazon in retail. So if I would label a lot of the issues that you find is business plans that are no longer as robust as they used to be because of these different technology disruptors. And what that next new disruptor might be 3 months from now or 3 years from now, it's still evolving all the time in what that could be.

We will now move to Jeff Harte with Sandler O'Neill.

Can you update us a little bit on what you're seeing in Europe? And while any macro environmental commentary would be welcome, I'm more specifically interested in your business now that we're a couple of years out past the closing of McQueen and Leonardo.

Is your question how those businesses are performing? Or what would you see in the European economy? Or...

If you have some comments on the European economy, that would be interesting, but I'm more specifically interested in how kind of McQueen and Leonardo are performing for you guys after you acquired them. And now that you've got a couple of years of trying to do things with Houlihan way there.

Yes. I think the integration has gone well on the McQueen side. I think it's a very seamless industry group right now where both the U.S. and the European efforts are reeling out, pursuing and winning and closing deals all across the globe. And we don't really even view it as new people, old people. It's just a larger consumer, food and retail group that we have. Clearly, I think on the Leonardo side, it provided us locations and a handful of locations in Europe. And the amount of work that not only are they doing in-country but in cross-transactions, which could be with England or the United States, clearly increased. That was one of the reasons for the transaction in the first place is we could bring the skills and opportunities and efforts that we had together with what the Leonardo folks had in terms of their operations. Having said that, I always think whether you're hiring people or acquiring or even promoting, it always takes a little longer than you like. You can always pencil out why everything should perfectly work out. I think there's still things that we can continue to improve, and we'll continue to see improvements in terms of productivity and results. But I think part of the way you look at it, we've actually hired some additional people in really most of the locations that we acquired through Leonardo, so we continue to build the business, and like I said, I think things have been going well.

And one comment I will add, and you'll see this in the 10-Q, which will come out in the next week or 2, a couple of weeks, is our international revenues quarter-over-quarter is consistent or, in this quarter, slightly above what our growth profile was as a firm. So our international business, a vast majority of it is in Europe and the U.K. So we are seeing good solid growth in that business for us, and you'll see that when we disclose the financial results for our international business next quarter.

(Operator Instructions) We'll now move to Yian Dai with KBW.

I just wanted to start with something from Lindsey's prepared remarks and just clarify quickly. Lindsey, I think you had said that second half should continue on a positive momentum. And I guess I'm just wondering, was that a comment about the overall business or Corporate Finance itself? And then is that compared to first half levels or same period last year?

So the results around -- or the comments around positive momentum were specific to Corporate Finance. We expect to continue to see good strong momentum in our Corporate Finance business. Having said that, if you look back over the last several years, our Corporate Finance business has been weighted more heavily to the second half of the year versus the first half of the year. And I think my comments were to just be careful about doing that for this year because we did have a very strong first half in Corporate Finance. So if you just imply what the second half revenues might look like relative to historical results, it would be a very aggressive assumption. So that's really what my comments were geared towards in.

Okay. Appreciate the clarification. My second question was around the attrition you guys alluded to, a handful of people leaving during the quarter. And I guess, more broadly, when it comes to restructuring, we have seen also some decline in the MD count in that business over the past year. So could you address that a little bit and just give us some color on what's been going on in that business and why we've been seeing some attrition there?

Actually, we've been -- it's flat to maybe slightly up. In our restructuring business, we seldom have really any meaningful MD changes other than promotions. And just there aren't a lot -- we've not acquired something for the most part in the restructuring area. We did add some oil and gas in the MD expertise, so that would have been probably about 2-or-so years ago. And I think one of our restructuring people moved into our financial sponsor groups, and sometimes that's such a little bit of the movement from one part of the business to the other. And occasionally get a retirement here or there, but I would not read anything into -- I'm just looking where we are versus 1 year ago, down a couple of people. But I think that's -- maybe it was one departure, maybe there's one retirement and maybe it was one transferring to another unit, but it's those kinds of things. It just -- it's really small percentage changes really in all of the business units, the headcounts, other than FAS, which has probably been, on a net basis, growing, the other one has just been minor changes and clearly, on a net basis, not much has changed.

And at this time, we have no further questions in the queue. I'll turn it back to Scott Beiser for closing remarks.

I wanted to thank you all for participating in our second quarter call, and we look forward to updating everyone on our progress when we discuss our third quarter results for fiscal 2018 in the winter.

Again, that does conclude today's conference call. Thank you all for your participation.