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Houlihan Lokey Inc
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Good day, ladies and gentlemen and thank you for standing by. Welcome to Houlihan Lokey’s Third Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, 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 in 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 the 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 two 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 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 number one M&A advisor in 2018 based on a number of U.S. transactions and for the 13th year in a row as the number one M&A advisor 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 nine 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 number one Global Financial Restructuring Advisor, an accolade that we are very proud to receive.
On the hiring front, we added two MDs this quarter in our Corporate Finance business, one in the U.S. and one in Europe. Furthermore, already in January, we’ve added three additional MDs, one in Corporate Finance and two 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 the results of 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 close 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 the quarter’s performance may be affected by the timing of those events. Our third quarter fiscal 2018 was affected by handful of large fee events. Our year-to-date 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 Services, 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 61.9% 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 investment 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 quarter 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 balance 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 recognize in fiscal 2018. We have now finalized 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.
Thank you. [Operator Instructions] We’ll take our first question from Devin Ryan with JMP Securities. Please go ahead.
Great. Good afternoon, Scott, Lindsey. How are you guys?
Hey, Devin.
First question here, if I hear you right, I mean the outlook almost sounds kind of perversely better if following the market stress the past few months, because it sounds like M&A is still kind of chugging along and then restructuring is kind of perked up and maybe is a better story. So I’m just curious on restructuring, if your Corporate Finance clients are still bullish about their outlook. Why is the outlook for restructuring improving wiser more activity? Is it just your 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, it’s 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 and 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, great. And then a follow up here just on the financial sponsor kind of client group. I mean, your 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 your 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 are some powerful secular tailwinds there. So if the market’s 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 two 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, hear you on the non-comp expenses. Can you maybe quantify the magnitude of the higher rent expense, because I know that, that’s more transitory, but it was affecting expenses right now? So any sense of kind of what that higher rent is from Quayle Munro, and then the expectation that’ll still roll off in fiscal 2020 or when do you think that’ll roll off?
I think – Devin, I’d prefer to do that as we move out of the two 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 number probably this 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, and we made a pretty significant investment in technology over the last 12 to 18 months you’re seeing that show up as well. So 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.
Got it, okay. I’ll leave it there. Thank you.
Thank you. And then move on to our next question from Michael Needham with Bank of America Merrill Lynch.
Hey. Good evening. So the first one I’ve got is on your hiring plans and kind of the near to intermediate term headcount growth you’d expect at the firm. If you were 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 to make the most sense. It seems like being public longer and winning some of these industry awards are incremental positives for talent, but I want to see you as you enter the New Year what your plans are?
I don’t think they are meaningfully different than they have been the last couple quarters. We’re not set on a particular number of people that we’re looking to hire. And all of these senior hires due take some time. So we’re constantly looking at both where we think we could add to the bench strength and sometimes they’re opportunistically people who become available will start talking with us that we hadn’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 sub-industries 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’ll 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 sub-industry sector standpoint. So while we participate in all of the major industry groups, there are always sub components of those industry sectors that we’re looking for. And I wouldn’t necessarily point you to a particular industry or two, and if you look at the announcements we’ve made probably over the last year or two, 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 enclosed, it seems like 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 notice in FAS, it just – it’s tracking lower year-over-year, so just what’s going on there? Thanks.
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 two quarters. And so there is some seasonality in that number. I think there’s also just some timing in that number and we had a very strong quarter in Corporate Finance.
So I think the combination of the two probably is what drove the – I think it was 89 transactions. And then I think for FAS, there’s – 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. Yeah. It seemed like the revenue trends wasn’t really hurt. So that makes sense. Thank you.
We’ll now take our next question from Ken Worthington with JPMorgan.
Hi, good afternoon. And thank you for taking my questions. 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 and this sort of expanded pipeline, when did these type of deals closed? Like my understanding is the restructuring business tends to be a long duration business, so are these deals that you’re winning might they enclose in one year? Or they more typical and would close maybe over the next three 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 one and three years to close an assignment is normal. We did have during the calendar 2008 and 2009 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 assignment of closing, I’d say nothing highly unusual above the pipeline business that we’re looking at today than what we’ve seen in the last couple of years.
Okay. Great. Thank you. And then on expenses. For the non-comp, would you see that the expenses here are elevated? Or is the last two 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 non-recurring 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. Thank you. 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’s 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. I mean, how – whether its 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. That’s [ph] 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 at 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 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 some product areas lagged the revenue recognition. So it will be better to compare it when we’d go from fiscal 2019 to 2020. 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 a look – 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 times.
Awesome. Thank you very much.
Okay, Ken.
Thank you. We take our next question from Richard Ramsden with Goldman Sachs.
Hey, Scott, 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 two or three months ago, has 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 of restructuring services whether it’s from our firm or for 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 five, 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 during 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 maybe more impacted. I think we’re aware of it. And obviously, if there is another shutdown or if it last 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.
Got it. Thanks.
Thank you. And now will hear from Brennan Hawken with UBS.
Hey. Good afternoon, guys. Thanks for taking my questions. 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 would might have been a contributing factor here this quarter, what – is it just too early in that, that business just hasn’t got [ph] going it?
Yes. More the latter, we’re happy with the success and closed a deal or to 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, thanks. And then on restructuring, we had a fairly large utility file today. Given your creditors 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 have seen?
I think 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.
Terrific. Just those clean up for me. Thanks.
Okay. Thanks, Brennan.
Thank you. And I’ll take our next question from Jeff Harte with Sandler O’Neill.
Hey. Good afternoon guys. 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 should be the non-comp ratio over time to kind of turn its way back to the 14% to 15 % targeted range or as you guys keep investing, 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 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, were still over the long run, believe that 14% to 15% the, the right – the right long-term percentages.
Okay, thanks. And then we were looking at the tax rate. I mean, year-to-date, you’re running close to 29%, which is kind of the 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 of schools before?
Yes, I think we’re still comfortable with the 27% to 29%, I mean this is our first year under the new tax – 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 that Asia, there was a big feat 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 see and kind of strengthen, 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 a restructuring business came from the U.S. versus international this last quarter or two, we’ve seen an Increase statistically outside of the United States, not necessarily from a shrinkage in the U.S. just outside of the United States we’ve seen even in a larger increase in activity and as noted previous quarters, it 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 saying, oh yes, this is the unique area that we’re growing into.
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.
Can you guys just disclose how big the U.S. portion of revenues is versus the non-U.S. portion of revenues on restructuring?
No. We do it for total revenues, but not by our sub-business segments.
Okay. Thank you.
Thanks, Jeff.
Thank you. And then move on to Jim Mitchell with Buckingham Research.
Hey. Good afternoon, guys. Maybe just a question on – just sort of your thoughts on buybacks you did buyback $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 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. 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 did – we were opportunistic this quarter and I think the board and the executives retained 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. But it seems like, it’s…
And obviously the dividend, yes…
Right. So, 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 has 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?
It’s – 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 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 that’s kind of been that way for the last several quarters.
Okay. Thanks.
[Operator Instructions]. We’ll hear now from Michael Brown with KBW.
Hi. Good afternoon, guys.
Hey, Michael.
Hey, Michael.
So yes, the outlook for Corporate Finance, it sounds like it’s still optimistic. And then as noted earlier, during the quarter, you really saw that dramatic move in credit spreads and that 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 it really just kind of too brief of a move to have any measurable impact on dialogues?
Probably more the latter like I said, we did not see – I mean so, what do 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 in 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 we’d 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 we’re closing or was there some competitive pressure that you’re seeing, could 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 this 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 one last one for me with ORIX’s ownership now down below 10%. Have you guys given any thought to collapsing the share classes down into just one share class that’s something that would eventually be under consideration in a longer-term?
Yes. That’s not anything that this juncture we’ve discussed.
Okay. Thanks. That’s it for now.
Okay. Thanks, Michael.
And it appears there are no further questions in the queue at this time. I’d like to turn the conference over to – 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 in fiscal 2019 in the spring. Thank you.
That does conclude today’s conference. Thank you all for your participation. You may now disconnect.