Houlihan Lokey Inc (HLI) 2019 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Houlihan Lokey Third Quarter Fiscal 2019 Earnings Conference Call. (Operator Instructions) Please note that this conference call is being recorded today, January 29, 2019.

I will now turn the call over to Mr. Christopher Crain, Houlihan Lokey's General Counsel. Please go ahead.

Thank you, operator, and hello, everyone. By now, everyone should have access to our third quarter fiscal 2019 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 December 31, 2018, 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.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 third quarter fiscal 2019 earnings call. We are pleased to report another strong quarter. We produced adjusted earnings per share for our third quarter ended December 31 of $0.77, up 12% from the same quarter last year. This was achieved on revenues of $298 million, a 15% increase over the same period last year, and our highest quarterly revenues ever. These results increased our latest 12 months revenues to over $1 billion, another successful milestone in the evolution of the firm.

Our results this quarter were achieved with strong revenue growth in Corporate Finance and solid results from our Financial Restructuring and Financial Advisory businesses. During the last quarter, the stock market exhibited an unusual amount of volatility, in large part driven by continued uncertainty associated with trade policy, Brexit, the partial government shutdown, expectations regarding future interest rates and corporate earnings. To date, this stock market volatility and business uncertainty around these macroeconomic issues has not materially impacted our Corporate Finance or our Financial Advisory businesses.

In our third fiscal quarter, both of these business units reported their highest quarterly revenues in history. Corporate Finance has experienced significant growth in this quarter and year-to-date. And I would note that one of the drivers of this growth are the 2 most recent acquisitions that we completed in early fiscal 2019. In addition, new business activity in Corporate Finance showed strong growth in the quarter as we begin building backlog for fiscal 2020.

So far, the recent stock market volatility has not translated into softness in the M&A market for our Corporate Finance or Financial Advisory businesses. CEO confidence remains positive. Access to capital remains robust. Strategic conversations to grow revenues continue and financial sponsors have plenty of dry powder.

We continue to capitalize on a relatively stable mid-cap M&A market and grow our brand. Once again, in calendar 2018, we completed more M&A deals in the U.S. under $1 billion than we did in calendar 2017. In contrast, the total number of completed U.S. deals under $1 billion declined year-over-year. Consequently, we believe our market share of U.S. mid-cap deals rose in 2018. Houlihan Lokey was recently named by Thomson Reuters as the #1 M&A adviser in 2018 based on number of U.S. transactions and for the 13th year in a row as the #1 M&A adviser based on number of U.S. transactions under $1 billion.

Some of the uncertainty associated with the macroeconomic issues that I mentioned earlier has also had a stimulating effect on the market environment for our Financial Restructuring business. During the third quarter, we experienced an acceleration of new business activity across a wide variety of industries and geographies. In fact, this was the best new business quarter for our Financial Restructuring business since the peak of the oil and gas restructuring period a few years ago.

Drilling down into our new business activity. We are encouraged by the geographical breadth we are experiencing in our mandates in the first 9 months of this fiscal year. We continue to see increased activity in markets that are still relatively new to both Houlihan Lokey and the restructuring product in general. We believe our success is a result of our size and reputation in the marketplace. In fact, in calendar 2018, we were named the #1 global financial restructuring adviser, an accolade that we are very proud to receive.

On the hiring front, we added 2 MDs this quarter in our Corporate Finance business, one in the U.S. and one in Europe. Furthermore, already in January, we've added 3 additional MDs: 1 in Corporate Finance and 2 in our Financial Sponsor Coverage Group in Europe.

On the acquisition front, we remain in active dialogue with several high-quality firms as we believe that Houlihan Lokey offers an excellent platform for smaller advisory firms that are interested in accelerating their growth.

While we are pleased with our results this year and with our current new business activity, we are experienced enough to know that stable M&A markets will not last forever. Recent stock market volatility appears to be out of sync with what we are experiencing in the areas in which we operate. One of the trends we will closely watch over the coming quarters is whether business influencers across the globe will continue to remain generally bullish, maintaining a stable business environment or will change their tune, resulting in the potential for more stock market volatility and growing negative sentiment.

I would like to remind our shareholders that we do not profess to be an expert on where the economy or the markets are heading, but we are very focused on building and running a firm that can succeed in any business environment.

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

Thank you, Scott. Revenues in Corporate Finance were $184 million for the quarter, up 43% when compared to the same quarter last year and a record quarter for our Corporate Finance business. We closed 89 transactions in the quarter compared to 54 in the same period last year, although our average transaction fee on closed deals was slightly lower this quarter versus last year.

Financial Restructuring revenues were $75 million for the quarter, a 20% decline from the same quarter last year. I want to remind everyone that the third quarter ended December 31, 2017, was an exceptionally strong quarter for Financial Restructuring. We closed 21 transactions this quarter compared to 19 transactions in the same period last year, but our average transaction fee on closed deals was lower compared with last year.

Our Financial Restructuring business often has large fee events, and a quarter's performance may be affected by the timing of those events. Our third quarter fiscal 2018 was affected by a handful of large fee events. Year-to-date, our revenues in Financial Restructuring were essentially flat versus the same period last year, which is slightly better than our expectations at the beginning of this fiscal year.

In Financial Advisory, revenues were $39 million for the quarter, a 9% increase from the same quarter last year. We completed 502 fee events in the quarter compared to 537 in the same period last year. New business activity in FAS has remained steady, and we have seen some improvements in Managing Director productivity over the last several quarters.

Turning to expenses. Our adjusted compensation expenses were $181 million for the quarter versus $164 million for the same period last year. This resulted in an adjusted compensation ratio of 60.7% for the quarter and 60.9% year-to-date, both within our targeted range of between 60.5% and 61.5%.

Our adjusted non-compensation expenses in the third quarter were $47 million, up significantly when compared with the third quarter last year. The increase in non-compensation expenses is partially due to the new accounting pronouncement that requires that expense reimbursements be included in revenues, resulting in an increase in non-compensation expenses. That number for the third quarter was $8.9 million. Also driving higher non-compensation expenses was an increase in global rent expense, an increase in headcount and investments in technology. We expect that our non-compensation expenses in the fourth quarter will be similar to what we have experienced in the last couple of quarters, which will result in a non-compensation ratio that is higher than our long-term target of between 14% and 15%.

This quarter, we adjusted out of our non-compensation expenses approximately $1.6 million of acquisition-related amortization. We will continue to adjust for this and other similar types of expenses in the quarters in which they occur.

Our adjusted other income and expense line item resulted in a gain for the quarter of approximately $700,000 versus a gain during the same period last year of $600,000. Most of our income in this line item for the quarter was a result of interest income on our cash balances throughout the quarter.

Our adjusted effective tax rate for the quarter was 28.1%, within our targeted range of between 27% and 29% for the fiscal year. We had an adjustment to our taxes of $1.3 million relating to a true-up of the toll charge that we recognized in fiscal 2018.

We have now finalized our provisional estimates made under SAB 118. And as such, we don't expect any additional material impacts to our tax rate as a result of the 2017 Tax Act.

Turning to the balance sheet and uses of cash for the quarter. As of the quarter-end, we had $297 million of unrestricted cash and equivalents and marketable securities. During the third quarter, we once again maintained our approach to return excess cash to our shareholders. We paid our quarterly dividend and returned additional capital to shareholders by repurchasing 15 million of our stock at an average price of $40.33 per share.

And with that, operator, we can open the line for questions.

(Operator Instructions) We'll take our first question from Devin Ryan with JMP Securities.

First question here. If I hear you right, I mean, the outlook almost sounds kind of perversely better following the market stress the past few months, because it sounds like M&A is still kind of chugging along and then Restructuring has kind of perked up and maybe is a better story. So I'm just curious on Restructuring, if Corporate Finance clients are still bullish about their outlook, why is the outlook for Restructuring improving? Or why is there more activity? Is it just pockets of specific stress or companies are trying to get ahead of something? Or is it really just kind of idiosyncratic dynamics in the business?

I'd describe it as still the vast majority of companies that we deal with are in good financial shape and a smaller percentage have some level of distress. And the increased volatility, whether it's coming from technology disruptors, interest rates, uncertainty in trade, et cetera, haven't been enough to harm the vast majority of, I'll call it, positively performing companies, but it's been enough to kind of tip the scales on the minority of companies. So kind of right now, the environment has been helpful to Restructuring and has not been harmful to Corporate Finance or FAS.

Okay, okay, great. And then a follow-up here, just on the financial sponsor kind of client group. I mean, financial sponsors have a record level of dry powder today and their business model is based on doing transactions, both buying and selling. And so it would seem that it would take a lot to derail momentum with that client group, which maybe is one reason why middle markets have remained so strong. So I'm just curious what you see as kind of the outlook for that group and what would drive a shift in terms of activity? Because it seems like there's some powerful secular tailwinds there. So if the markets decline, you would think that they'd still be active, maybe it would be on financing. I'm just curious what do you think could derail that, because it seems like there's a lot of things in their favor.

Yes, I think the 2 things that come to mind that could derail that is if you had a major disconnect between buyers' and sellers' perspectives, which can come, I think, anytime you have a significant change in public as well as private price expectations. And the second thing would be is if access to capital, and specifically debt capital, meaningfully dried up.

Got it, okay. Last quick one here, just on the model. If possible, Lindsey, I hear you on the non-comp expenses, can you maybe quantify the magnitude of the higher rent expense? I know that that's more transitory but it's affecting expenses right now. So any sense of kind of what that higher rent is from Quayle Munro? And then is the expectation that will still roll off in fiscal 2020? Or when do you think that will roll off?

I think, Devin, I'd prefer to do that as we move out of the 2 facilities that we're currently occupying into the new one that we're in the process of building out, and I think I'll give you a little bit more detail around the numbers [at that time]. It is a component of our increase. I don't want to overemphasize it. There's a handful of things that have driven non-compensation expenses. We made a pretty significant investment in technology over the last 12 to 18 months. You're seeing that show up as well. But I think when we get to the point where we consolidate into a single facility, I'll provide a little bit more detail for everyone in terms of how that affects the non-comp expenses.

And then we'll move on to our next question from Michael Needham with Bank of America Merrill Lynch.

So the first one I've got is on your hiring plans and kind of the near- to intermediate-term headcount growth you would expect at the firm. If you're able to kind of follow an ideal growth path, factoring in things you're looking at, I think you mentioned there are companies that you've been in dialogue with, but for lateral hires like the key industry specialist segments that are attractive, geographies that make the most sense, it seems like being public longer and winning some of these industry awards are incremental positives for talent. But I wanted to see, as you enter the new year, what your plans are.

Don't think they're meaningfully different than they have been the last couple of quarters. We are not set on a particular number of people that we're looking to hire. And all of the senior hires do take some time. So we're constantly looking at both where we think we could add to the bench strength. And sometimes, there are opportunistically people who become available who will start talking with us that we haven't necessarily contemplated. And as I think we've described in the past, we seem to announce some new MD hire approximately probably once a month, but that's not necessarily a target. It's just we're constantly looking at our subindustries and products and geographies and trying to determine where we need some additional talent. And as we've always said, we'll either do it by promoting and deploying people internally or we will hire laterally or we will do it via acquisitions.

Okay, and any -- I don't know, any industries or areas that are particularly attractive?

We kind of look at it at -- in the Corporate Finance side, it's really almost on a subindustry sector standpoint. So while we participate in all of the major industry groups, there are always subcomponents of those industry sectors that we're looking for. And I won't necessarily point you to a particular industry or 2. And if you look at the announcements we've made probably over the last year or 2, they really have been scattered through half a dozen or a dozen different industries.

Yes, okay. All right. And then looking at the number of transactions that are getting closed, it seems like the Corporate Finance business has been on a good track for the full year. The quarter, in particular, was really high. Is there any reason that a lot of things got closed in Corporate Finance this quarter, apart from seasonality? And then the other thing I noticed in FAS, it just was tracking lower year-over-year, so just what's going on there?

Yes, I mean, I think you hit it on the head. I mean, I think Corporate Finance, the third quarter tends to be very strong relative to certainly the first 2 quarters. And so there is some seasonality in that number. I think there's also just some timing in that number. We had a very strong quarter in Corporate Finance. So I think the combination of the 2 probably is what drove the, I think it was 89 transactions. And then I think for FAS, it's a little bit apples to oranges. Because of the new revenue recognition policy, we no longer use percentage of completion for FAS. Whenever we used percentage of completion to accrue revenues for FAS, we used -- we included that as a fee event. Since we're no longer doing that, there are fewer fee events this year. So I think you'll see a better comparison next year for our FAS business relative to this year. But this year compared to last year, because of the change in accounting, you're just going to see fewer fee events in FAS. That doesn't necessarily mean there's less volume. It just means we're counting them differently because of the new accounting policy.

Got it. Yes, it seemed like the revenue trend wasn't really hurt. So that makes sense.

We'll now take our next question from Ken Worthington with JPMorgan.

So first on the Restructuring business, the pipeline that you guys talked about in the prepared remarks, based on the type of assignments you're winning here in this sort of expanded pipeline, when do these type of deals close? Like my understanding is the Restructuring business tends to be a long-duration business. So are these deals that you're winning, might they be closed in 1 year? Or are they more typical and would close maybe over the next 3 years? And does this business that you're winning, do they generally look the same? Or is there just a wide spread of business in this expanded pipeline?

I think throughout the history of Houlihan Lokey in Restructuring, somewhere between 1 and 3 years to close an assignment is normal. We did have during the calendar 2008 and '09 recession, some deals did get closed much quicker due to kind of the liquidity that occurred within the marketplace. And in terms of your question, the types of deals that we're getting and the structure and what needs to get done and probably expectation towards timing of closing, I'd say nothing highly unusual about the pipeline business that we're looking at today than what we've seen in the last couple of years.

Okay, great. And then on expenses, for the non-comp, would you say that the expenses here are elevated? Or is the last 2 quarters and the outlook for next quarter, is that really the good run rate out into the future?

I think for certainly the fourth quarter, you can assume -- maybe take the average of the last couple of quarters to give you a sense of what the last quarter might look like. I think going forward, you can still expect that our non-compensation expenses will grow. I don't think they will grow anywhere near what they did this year. I think there are some nonrecurring items in our non-compensation expenses, particularly around rent, that will not repeat. Having said that, we continue to grow our business. We -- expectations are that our non-compensation expenses will continue to grow, so.

Okay, you answered it. And then just finally, in FAS, excluding revenue recognition there, how fast did FAS grow this quarter and maybe so far this year? It's hard to sort of parse out what the true underlying growth is, but maybe you can help us out and weed through some of the accounting or reporting noise.

So I think if you remove the out-of-pocket expenses from FAS' revenues, it is essentially flat year-over-year when you just look at fee revenue versus fee revenue. I can't answer that question regarding the change in accounting. I just have not done the analysis. It's not a significant number. And how -- whether it's affected FAS in a positive or negative way, I also don't know the answer to that. But certainly from a fee revenue standpoint, the largest change in accounting has affected FAS in a significant way. And I think if you take that out, then it's relatively flat year-over-year.

Okay, okay. It begs the question -- I'm sorry to stick another one in -- why isn't that, why isn't it growing faster?

There's a couple of things. Some of the work that we do with the FAS personnel is getting booked in Corporate Finance or components of Restructuring. And we've always said the task dictates how we book it, not necessarily what the people are working on. So that's part of it.

A good example would be a fairness opinion.

And the second thing is, as Lindsey mentioned, I do think the -- going from a percentage of completion to kind of more of a completed contract has, in certain of the subproduct areas, lagged the revenue recognition. So it will be better to compare it when we go from fiscal '19 to '20. And so it's probably growing, once you adjust for all of that, in the kind of mid-single digit. It's growing, just not growing as fast as Corporate Finance. And that's kind of been the -- it's the most stable of probably all of our businesses, whenever you take -- whatever the business cycle is, it tends to grow a smaller amount than some of the other ones and it tends to shrink the least during the worst of times.

We'll take our next question from Richard Ramsden with Goldman Sachs.

Scott and Lindsey, this is James Yaro filling in for Richard. So it sounds like the market volatility near the end of the year did impact your Restructuring mandates in the quarter. How should we think about the business going forward now that spreads have come back in and end markets have largely recovered?

Yes, I'd say the pace of inquiries that Restructuring is exhibiting today, a month ago, even probably 2 or 3 months ago, have been pretty similar. So it wasn't a unique December was a highly volatile month that really helped the business and things have come down a little in January. I don't think that's the case. I think at this moment in time, there just is more uncertainty for, like I said, that subset of clientele out there which is causing them to need restructuring services, whether it's from our firm or from others, more today than it has in the last couple of quarters. So I think if that market dynamic continues to hold, we'll continue to see, more likely than not, an increase in activity over the foreseeable future.

And as a reminder, a decent amount of our Financial Restructuring business occurs overseas. And so one of our largest fee events this quarter was in Asia. And so you do have this effect. It's not just volatility in the U.S. markets. As markets mature in places like the Middle East, like China, where we have historically, and when I say historically, I mean going back 5, 10 years, never done restructuring work, we're seeing an increasing amount of restructuring activity in markets where they have their own volatility that affect on the margins those companies that come to us and say, "We need help."

Got it. And then -- so obviously, Corporate Finance is strong for you in the quarter, but did the government shutdown have any impact on the timing of M&A deal completions? In other words, will there be any sort of seasonality looking ahead?

Nothing that we would, at this juncture, think would be a material issue. I mean, we tend not to be as much dealing with companies contemplating going public. Some of the Hart-Scott filing issues, some of those things that are likely going to potentially impact folks who work on bigger deals may be more impacted. I think we're aware of it. And obviously, if there is another shutdown or if it lasts longer, it will impact our business. But so far, I think it's around the margins. It's probably slowed a few things, but not meaningfully.

We'll now hear from Brennan Hawken with UBS.

Just a quick one on Corporate Finance here. It might be too early for this to be having an impact, but I thought it was an interesting coincidence that you've recently launched HL Financing. And in the fourth quarter, we had pretty significant bond market volatility in some of these lending markets. And I just wonder -- and then that combined with your strong revenue. I wonder whether that might have been a contributing factor here this quarter. Or is it just too early and that business just hasn't gotten going yet?

Yes, more of the latter. We're happy with the success and closed a deal or 2, working on a few matters. But I would not attribute the strong quarter that we had or the strong full year to be impacted hardly at all by HL Finance. It's just too new of a business to be moving the needle at this juncture.

Okay. And then on Restructuring, we had a fairly large utility file today. Given your creditor side orientation, I'd assume that you might have been potentially approached on creditor side mandates. Could things such as that be contributing to some of the strength in the backlog that you guys see?

I think it -- look, that's probably the largest company of note that's come out from an announcement of their bankruptcy filings. But it's far more than PG&E. It's numerous companies, and as Lindsey mentioned, not only in the U.S. but really across the globe, for a variety of reasons just have been contacting us or we've been pursuing for some time. And there's just more activity and opportunities out there than there has been. And as I said, it was our biggest new business quarter in really a couple of years.

And we'll take our next question from Jeff Harte with Sandler O'Neill.

Just a couple left for me. One, on non-comp expenses, as you guys are continuing to invest in hire and acquire and do things like that, should we expect that comp ratio over time -- or excuse me, the non-comp ratio over time, to kind of trend its way back to the 14% to 15% targeted range? Or as you guys keep investing, are we maybe going to be above that range for a while?

I think we, at this point, continue to believe that the 14% to 15% is a good long-term target for us. I think it's a little hard to predict our OOPs, or our reimbursable expenses, and that obviously has an effect on it, and it's not easy to project what our reimbursables are going to be. So that does have -- unfortunately, has an impact on our non-comp expense. But I think sort of the core non-comp expenses at this stage, we're still -- over the long run, believe that 14% to 15% is the right long-term percentages.

Okay. And then we were looking at the tax rate. I mean, year-to-date, you're running close to 29%, which is kind of upper end of your prior kind of suggested guidance range. Should we think about that any differently going forward? Or is it still kind of in the range you disclosed before?

Yes, I think we're still comfortable with the 27% to 29%. I mean, this is our first year under the new tax law. I think we're likely to come out certainly in that range. And I think we'll readdress it at the end of the year once we have a full year underneath us. But I think for now, that 27% to 29% still feels good to us.

Okay. Finally, on the Restructuring business. You mentioned that in Asia, there was a big fee kind of recognized. I guess I'm wondering, as you say new markets for Houlihan Lokey and Restructuring in general, is there anything else to kind of highlight as far as what markets you're seeing kind of strength in? And then how relevant or material is the international mix portion versus the U.S. portion of Financial Restructuring revenues?

Well, on the international side, it's always been important to us, but as kind of a percentage of how much of our Restructuring business came from the U.S. versus international, this last quarter or 2, we've seen an increase statistically outside of the United States. It's not necessarily from a shrinkage in the U.S., just outside of the United States, we've seen even a larger increase in activity. And as noted in previous quarters, there really isn't a particular industry that's driving it. This is not like what we had in the oil and gas sector or maybe even what we had in telecom or real estate a few cycles ago. It's just really across the board in a multitude of industries, and there's nothing that we would point you to that's saying, "Oh, yes, this is a unique area that we're growing into."

And I think countries would be Australia, as you know, we have a reasonably new presence there, the Middle East, China, Southeast Asia, India. I think those are kind of the countries that we've been increasing our activity in restructuring and in some cases, just really in the last several years, have gotten into the market and not because we've been slow to get into the market but because the market didn't exist.

Okay. Can you guys disclose how big the U.S. portion of revenues is versus the non-U. S. portion of revenues in Restructuring?

No, we do it for total revenues but not by our sub-business segments.

We'll now move on to Jim Mitchell with Buckingham Research.

Maybe just a question on just sort of your thoughts on buybacks. You did buy back $15 million. I think you announced a new $100 million program in July. Any thoughts, given what kind of flexibility, how should we think about your -- what you'd like to have as a minimum cash level and what you think is kind of dry powder for when the stock sells off? Just trying to get some thoughts on how you think about that opportunity set.

So I think I understand your question. From a minimum cash standpoint, it's a very small number. So we just don't require a lot of minimum cash. There are some regulatory minimums, but it's not a significant number. Most of the cash that you see on the balance sheet is we are accumulating in anticipation of paying bonuses, which we pay in May. So you'll see most of that cash go to employees as we pay out our bonuses. We do have excess cash on the balance sheet that we tend to keep a little bit of excess cash in the balance sheet in anticipation of acquisitions if we make them. And also, we keep some in anticipation of share repurchases. I think as you suggested, we did buy about $15 million worth of shares this quarter. We did so on an opportunistic basis. We have, for the year, already purchased enough shares to cover the dilution associated with the additional stock that we granted in May of last year as part of the compensation. We were opportunistic this quarter. And I think the board and the executives retain the flexibility to be opportunistic if they believe the share price undervalues the fundamental of the company. But I think from a cash standpoint, and I think what I'd like to leave shareholders with, is our intent is to return all excess cash to shareholders that is not used for share repurchases or for acquisitions.

Okay, so but it seems like it's...

And obviously, the dividend, yes.

Right. But it seems like it's still kind of holding dry powder for potential acquisitions as opposed to a material reduction in the share count?

That's correct.

Okay. And then just maybe one follow-up in Restructuring. It sounds -- it seems like there's been quite a bit of a pickup in China in bankruptcies. Is that an area that -- you've mentioned it briefly, is that something where you have seen a pickup in the pipeline? Is that something that could be pretty sizable longer term? Just how do we think about -- or is there still difficulties as a non-Chinese company to do a significant amount of business there?

At least from an American standpoint, it's always difficult to do work in these multitude of countries. But as those countries' rules of law, creditor rights, different people who are investing in them kind of mature, we've continued to follow and find more work. Once again, I would not point you to any particular country or any particular industry sector or any particular project. It really is kind of across the board with no specific trend, like I said, by geography or industry that's driving the activity at this point. And it's kind of been that way for the last several quarters.

(Operator Instructions) We'll hear now from Michael Brown with KBW.

So the outlook for Corporate Finance, it sounds like it's still optimistic. And then as noted earlier, during the quarter, we really saw that dramatic move in credit spreads and that have come back since. But can you kind of speak to how that move in spreads may have impacted any dialogues during the quarter? Or is that really just kind of too brief of a move to have any measurable impact on dialogues?

Probably more of the latter. Like I said, we did not see -- so what we saw, we saw a tough stock market and bond market in October, recovered in November, got worse in December, kind of recovered in January. So we've been, I would describe it much more volatility than a definitive trend exactly where we're going. And it's not been long enough and deep enough to disturb, I'll call it, the fundamentals of the Corporate Finance business. And when access to capital or spreads widen, it takes a little longer, and conversations seem to take a little longer before a deal can get completed. So I think you always get a little bit of stretching out of deals. But sitting here today, we just haven't noticed enough that would say, "Yes, there's a brand-new trend and here's what we're going to see and expect for the next several quarters," at least on the Corporate Finance side of the business.

Okay. In the press release, you noted that the average transaction fee in the quarter was lower in both Corporate Finance and Restructuring year-over-year. So what drove that decrease? Is it just the general mix of the deals that were closing? Or was there some competitive pressure that you're seeing? Can you just expand on that a little more?

It's really just the general mix. I mean, I think if you look back over 10, 15 years, we have continued to increase our average transaction fee in Corporate Finance. That is certainly a long-term trend and we expect that to continue. Restructuring is a little different because it's cyclical based on where we are in the cycle. But no, this was just -- I mean, there are some quarters that our average transaction fees in Corporate Finance are lower and there are quarters that they're higher. But the general trend is more higher quarters than lower quarters.

Okay. Just last one for me. With ORIX' ownership now down below 10%, have you guys given any thought to collapsing the share classes down into just one share class? Is that something that would eventually be under consideration longer term?

Yes, that's not anything that at this juncture we've discussed.

And it appears there are no further questions in the queue at this time. I'd like to turn the conference back over to Mr. Beiser for any additional or closing remarks.

Well, I want to thank you all for participating in our third quarter earnings call. And we look forward to updating everybody on our progress when we discuss our fourth quarter results and fiscal 2019 in the spring. Thank you.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.