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Houlihan Lokey Inc
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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Houlihan Lokey's Third Quarter Fiscal Year 2021 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today Jan 28, 2021.
I'd now turn the call over to Mr. Christopher Crain, Houlihan Lokey's General Counsel.
Thank you, operator, and hello everyone. By now, everyone should have access to our third quarter fiscal year 2021 earnings release, which can be found on the Houlihan Lokey Web site 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, 2020 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. Welcome everyone to our third quarter fiscal 2021 earnings calls.
By every measure the firm's quarterly results were very strong. We recorded $1 77 and adjusted earnings per share an increase of 84% above our previous quarterly record of $0.96. We achieved $538 million in revenues 61% above our previous quarterly record of $334 million. All three of our business segments recorded record quarterly results. Corporate Finance achieved $306 million in revenues, 52% above its previous record; financial restructuring achieved $178 million in revenues, 42% above its previous record; and financial and valuation advisory achieved $54 million in revenues, 13% above its previous record.
Year-to-date revenues were $1.025 billion up 20% versus the same period last year, notwithstanding the material impact of the COVID-19 pandemic on our first and second fiscal quarters. And all three business segments are at record highs through the first nine months of the fiscal year.
Overall, the firm benefited this quarter from a confluence of events that enabled us to achieve record results, which will be a challenge to repeat in the near term. We entered calendar 2020 with expectations of solid performance for the year. By spring, everything changed with the onset of the effects of the pandemic. Corporate finance revenues and prospects quickly deteriorated. While financial restructuring prospects rapidly increased. Similar to previous shocks to the economy, we redeployed our industry and valuation bankers towards focusing on distressed businesses and financial restructuring opportunities. And our capital market bankers pivoted to helping raise capital for companies suddenly under stress. Our differentiated resilient business model work the way it's supposed to and consistent with previous distress cycles.
By summer of 2020, the business environment most notably the capital markets took a positive turn and this trend has steadily accelerated. The downturn in corporate finance and valuation activity reversed course and turned upward.
Current activity levels in both corporate finance and financial and valuation advisory are at all time highs. However, near term prospects for new financial restructuring engagements have meaningfully slowed.
I'll now provide some specific comments for each of our business segments. Corporate finance closed a record 121 transactions this quarter, 27% higher than any previous quarter. Up to one-third of our close transactions came from pre-COVID engagements put on hold that might have closed in our first or second fiscal quarter without the impact of the pandemic. Additionally, a small portion of our closed transactions this quarter were likely accelerated as a result of concerned about potential tax law changes in calendar 2021.
Offsetting the factors that positively impacted this quarter's results was the lack of new business generated in spring and early summer, reducing the number of engagements that would likely have closed in our third fiscal quarter.
Now a few specifics about the quarter and year-to-date performance for the corporate finance business segment. We did not exhibit any unusual mega fee projects this quarter. All industry sectors are performing well. Our international revenues are growing faster than our U.S. revenues. Our capital markets business is up substantially versus last year, and has proven itself to be recession resistant through this calendar challenging year.
The number of new engagements this quarter set a record up nicely from our second quarter and up substantially from our first quarter. And finally, the number of dead deals and deals on hold this quarter are now at normal levels versus what we were experiencing early this fiscal year.
Our FEA results were driven by strength in almost all of our sub-product lines. Our portfolio valuation business, which is our largest sub-product line continues to produce record results and has proven to do so in both bull and bear markets. Also, the improvement in M&A activity has positively impacted our transaction opinion practice, which does work for both corporate and financial sponsor clients.
The resilience of our FEA segment, even during the business trough created by the pandemic has been impressive. Revenues barely declined earlier in the year and have been growing since summer. New business activity and the average size of fee events continues to improve.
Financial restructuring revenues for the quarter and year-to-date are significantly higher than any other comparable period. Our practice benefited from the distress caused by the pandemic and the historic amount of global debt.
In general our financial restructuring revenues have been strong across geographies and industries, and year-to-date revenues are slightly weighted towards debtor assignments versus creditor assignments. Financial restructuring tends to be more volatile on a quarterly basis and didn't benefit from both a large number of quarterly closings and a few mega events.
As described over the last two quarters, new business activity and restructuring has been slowing. And in our third quarter it's slowed substantially driven by one of the strongest equity and debt capital markets in recent history. The current business environment suggests restructuring revenues have likely peaked for the time being. However, the amount of worldwide leverage continued to grow during the pandemic, and an extraordinary amount of debt has been added to the balance sheets of struggling businesses. Given government support and unprecedented access to capital, there may be a short-term decline in new restructuring activity. However, the mid and long-term prospects for financial restructuring are stronger today than they were pre-COVID.
Rounding out other firm news for the quarter, we added Pamay Bassey and Cyrus Walker as Independent Board Members. Pamay and Cyrus bring a wealth of knowledge and experience, and we fully expect them to be great additions to our Board. On the acquisition front, the renewed bullish environment has benefited sellers of financial services businesses and slowed our progress. But we remain more active with potential acquisitions than pre-COVID levels and currently have two situations that look promising.
With respect to league table rankings, which come out every year in January, Houlihan Lokey was recognized for the sixth year in a row as the number one firm in the U.S. in M&A based on the number of completed M&A transactions. And for the seventh year in a row, we were recognized as the number one restructuring firm globally, based upon the number of completed restructuring transactions. We're very proud of these accomplishments, and congratulate all of our employees for achieving these rankings.
In closing, I want to thank our employees who have continued to show incredible energy and perseverance despite these unusual times. I wanted to thank our clients who continue to entrust us with their important strategic business decisions and also their difficult business challenges. And I wanted to thank our shareholders who have continued to have faith in our business model and who have supported us throughout a turbulent year.
We are very pleased with our results this quarter and feel we're well positioned for calendar 2021 and beyond. With that, I'll turn the call over to Lindsey.
Thank you, Scott.
Corporate finance closed 121 transactions this quarter compared to 95 in the same period last year. And our average transaction fee on closed deals increased significantly this quarter when compared to the same period last year. Also, as Scott stated, we closed a number of transactions that were put on hold earlier this year due to COVID-19, contributing to a strong increase in revenues for the quarter.
Taking a step back and comparing year-to-date performance, corporate finances up 2% for the first nine months of fiscal 2021 when compared to the same period last year. This is a significant improvement from last quarter, when corporate finance was down 32% year-to-date through September as a result of the pandemic. As we enter our fourth fiscal quarter, we are seeing a return to more normalized operating metrics for this business segment.
Financial restructuring closed 44 transactions this quarter compared to 28 in the same period last year and our average transaction fee on closed deals was significantly higher this quarter, when compared to the same quarter last year. However, as Scott suggested, as the economy continues to recover from the pandemic and access to both debt and equity capital remains robust, the current activity level of new mandates is now around pre-COVID levels. We still expect to see COVID impacted transactions close in our fourth quarter. But at this time, we expect those transactions to make a meaningfully reduced contribution to financial restructurings results in fiscal 2022.
We remain committed to our belief that global leverage levels and acceleration and the adoption of technology resulting in secular changes across many industries and other long-term impacts of the pandemic make for an attractive financial restructuring market over the medium and long-term. However, current trends in government stimulus and strong capital markets are a short-term headwind to our restructuring business.
In financial and valuation advisory, we had 639 fee events during the quarter compared to 530 in the same period last year. Overall, FEA saw improving results across most of its sub-product lines, and we have continued to see growth in productivity throughout the year. FEA is experiencing the same benefits that corporate finance is experiencing as the M&A markets continue to make up for lost time.
Before we get to expenses, I would like to make a few comments about our pre-tax margin performance year-to-date. We have benefited this year from an unusually low non-compensation expense ratio as a result of the pandemic. Offsetting that we have seen slightly higher compensation ratio driven in large part by lower reimbursable expenses also a result of the pandemic. This dynamic has produced adjusted pre-tax margins of 28% year-to-date, versus 24% for the same period last year.
As we sit here today, it is too early to determine how COVID-19 is going to affect our long-term targets for any of our expense categories. But given our business model 28% pre-tax margins are abnormally high.
Turning to expenses, our adjusted compensation expenses were 335 million for the quarter, versus 203 million for the same period last year. We had one adjustment this quarter for retention payments related to certain acquisitions.
Our adjusted compensation expense ratio was 62.3% for the quarter, which is above our current long-term target for the adjusted compensation expense ratio of between 60.5% and 61.5%. We reduced our compensation expense ratio slightly from last quarter as a result of an increase in reimbursable expenses as compared to last quarter.
As I've discussed on previous calls, our compensation ratio is slightly higher than our long-term target primarily as a result of lower than expected reimbursable expenses for fiscal 2021 due to the impact from the pandemic.
Our adjusted non-compensation expenses were $39 million for the quarter versus $50 million for the same period last year, a decline of about 23%. This resulted in an adjusted non-compensation expense ratio of 7.2% for the quarter, versus 15% in the same quarter last year.
Our non-compensation expense ratio year-to-date is running well below our current long-term target as a result of the pandemic. This decline is a direct result of lower travel meals and entertainment expenses, as well as lower marketing, office-related and other operating expenses all due to the firm's response to the stay at home orders imposed because of the pandemic.
We expect to continue to see significantly reduced non-compensation expenses in these categories at least through the first half of this calendar year. This quarter, we adjusted only one item out of our non-compensation expenses relating to acquisition related amortization.
Other income and expense decreased for the quarter to income of approximately $200,000 versus income of approximately $1 million in the same period last year. This was primarily a result of lower interest earned on our cash and investment balances.
Our adjusted effective tax rates for the quarter was 25.3%, compared to 29.2%, during the same period last year. The adjusted effective tax rate is running below our current long-term target, driven by a significant decline in non-tax deductible items, such as meals and entertainment and certain other expenses. As a result, we expect our adjusted tax rate for fiscal 2021 to be closer to 26%.
Turning to the balance sheet and uses of cash, as of the quarter end, we have $868 million of unrestricted cash and equivalents and investment securities. As a reminder, a significant portion of this cash is earmarked to cover accrued unpaid bonuses for fiscal 2021. Also, in this past quarter, we repurchased approximately 283,000 shares at an average price of $65.69 per share as part of our share repurchase program.
In our earnings release, we announced we increased our share repurchase program to $200 million and for fiscal 2022, we expect to increase share repurchases above our stated goal of offsetting the dilution associated with shares issued as part of our compensation program.
And finally, we are pleased to announce that we are paying a dividend of $0.33 cents per share payable on March 15 to shareholders of record as of March 2.
With that operator, we can open the line for questions.
Thank you. [Operator Instructions] Your first question comes from the line of Ken Worthington with JPMorgan.
Appreciate all your comments in terms of restructuring, where would you say you are right now in terms of working through your COVID driven restructuring backlog? Where would you say you are I guess in terms of completions versus retainers, like any information you can give us about how that's working through the pipeline? Thanks.
Yes. I think Ken, it's a good question. But prefer not to give specifics; I think it just kind of leads to fourth quarter performance. But, I will tell you that it is our expectation that we will see some COVID related transactions closing in our fourth quarter that will have a positive impact on our restructuring results that quarter. But prefer not to comment on the specifics in terms of how much we've worked through.
Okay. Maybe trying a more vague approach, as we think about where you stand versus the current calendar year, or maybe even skip the next quarter, but maybe the following four quarters. Is there any color you can give us maybe looking out further into the future in terms of what needs to be worked through? Or is that repackage of the same question again. I'm sorry, if I did.
Ken in terms of what we've seen, we saw a very large amount of new business come in, in our first and second fiscal quarter, it started to slow down in the third quarter and suspected it will still maybe continued to slow down in the fourth quarter. There's still as I'll call it, normal work having nothing to do with COVID issues. And that's what we talked about a year ago. And whether it's technology, disruptors, whether just generally overleveraged, businesses, et cetera, et cetera. And there's still business that we have not completely worked through from the COVID standpoint.
I think in our comments, we've clearly described when we look at the world in totality, in terms of the amount of still leverage out there with companies and the number of companies that are still struggling and may not totally resolve their business plan issues, we still feel very optimistic about, the mid and long-term, short-term. Capital markets are very wide open and the government intervention has slowed down probably what we all would have thought would have been restructuring potential short-term. But conversely, that's what's helped our corporate finance business. And we literally seen probably a flip in the last two months from where business activity was coming in today versus six months ago.
Okay, thank you. And then, just the average fee rate was higher per deal in M&A. Can you talk about the mix change that continuing to help that fee rate like this term we have been seeing, but anyway more color on mix and what you're seeing driving that that higher fee per deal?
When you say mix, can you -- are you talking about our restructuring business and the debtor and creditor mix or…
No, no. I'm sorry, it was M&A and sort of middle market M&A, the corporate finance business. Like you'd mentioned more non-US based transactions, I believe, this quarter, is that contributing to the higher fee per deals? Is it just size -- is size related to market?
I don't think it has anything to do with international versus U.S. And I'd say maybe there is a SKU because of the benefits we've had in our capital markets business increasing those fees slightly. But I think it's really just for the quarter, we saw, generally speaking larger transactions than we had in previous quarters and it had an impact on the average fee size,
Okay. But nothing we should read forward from what we saw this quarter. No, there's no theme there and that does generally fluctuate a little quarter-by-quarter, just depending on what engagements close and things along those lines.
Your next question comes from the line of Devin Ryan with JMP Securities.
So a couple here on corporate finance, it clearly really a special quarter. And it seems like the pace of completion sped up and maybe you touched on a couple of reasons. People squeezing in deals for taxes potentially change, or just some deals that were in the backlog prior to the pandemic. But I'm curious if the pace of completions, does feel like it's sped off. So can that continue? And then, maybe in a related question of the 121 corporate finance completions, how many were tied to capital markets and I'm assuming those deals probably come together and close faster as well. So just trying to think about that, just given how quick it seems like the completions change, maybe relative to what we were thinking a few months ago.
Taking them in isolation, I mean, M&A transactions typically take longer to close than capital market transactions. But if you were to dissect them individually, I would say the normal time period to close, any of those two types of transactions hasn't really changed this quarter versus last quarter versus a year ago, et cetera. What we did have is a smaller percentage of deals, maybe were driven by purposely wanting to get accomplished by December 31. But it wasn't an overwhelming in fact pattern, which drove the quarter.
And as we mentioned, yes, there were some deals that were maybe already partially completed put on hold in spring. And so therefore, part of the timeframe had already been eaten up and therefore you could close those deals quicker. But conversely, as we mentioned, the normal amount of new deals that we probably would have brought in, in March, April, May, et cetera were much lighter than normal because of the pandemic. So, there's some balancing there. But your overall comment regarding the timeline, to closed deals, I don't think is meaningfully change in today's world versus where we were pre-pandemic.
Okay, thanks. That's helpful. And then, maybe just a follow up here. If you can just elaborate a little bit on the thought process for the $200 million repurchase. Is that really kind of return the capital was raised last May without kind of a large scale M&A occurring, given kind of a similar size? Or should we read this more as just being flexible and opportunistic; obviously, the business is creating a lot of excess cash. So potentially, to the extent that continues that you may continue to look to lean in on buybacks. You try to think about this announcement and whether this is a potentially kind of a more of one-off situation, or to the extent the business continues to perform well, we may see you kind of reload and continue to do the same thing,
I think several factors, the Board continues to talk about what we can and should be doing with our cash to continue to maximize shareholder value. We have looked at obviously; the total market value of our company stock continues to grow. We've I think two or three other times have raised the total size of the repurchase authority we had. So I think somewhat, it's consistent with the business profitability has grown, the size of the business and the market cap of the business has grown, clearly feel we have some additional financial flexibility to continue to repurchase. And, as Lindsey mentioned, we've historically always focused on at least doing repurchases, approximately the amount of shares that we've issued, goal, at least heading into fiscal '22 is, in fact to do something more than that. I wouldn't read anything more other than we've looked at the size; we recognized the financial condition of the company and thought that was a prudent thing to do in terms of returning some of our cash to shareholders.
Your next question comes from the line of Manan Gosalia with Morgan Stanley.
Maybe going back to your comments on the non-comp expense line. And maybe just thinking about it more not so much near term, but maybe more as we get into fiscal '22, and maybe even '23. You've managed to keep it really low, even in a record quarter. And your [non-comp operations] [ph] half of where it was pre-COVID. I know there's also some operating leverage in there. But, clearly people are willing to do more things virtually. So is there a reason why the non-GAAP expense ratio should ever go back to that 15% number you had a year ago?
It's a good question. And honestly, we don't know the answer to that question. I think it is, we're anticipating that we will see some real kind of efficiency benefits out of what's happened over the last nine months with the pandemic and that we will see that efficiency primarily in TM&E expense, which is one of our largest expense items. So we're hoping the answer is no, we don't expect it to go back to those normal -- to those levels. But until we come out of the pandemic, until we start to see how people travel again and how they react to whatever the new normal looks like, it's hard to answer that question. But as we sit here today will be a shame if we don't see some efficiencies coming out of this. And not just with respect to TM&E. But over kind of the medium and long-term, even with respect to our rent payments and the need for everyone to have an extra separate cube and everyone to have their own office. The world has likely changed in that regard. But we're at least a few quarters away from really getting a glimpse of what that might look like.
Got it. And then, maybe on the M&A side, you spoke about how the international business is doing well. Can you talk a little bit about the investments you've made there? And curious about how much of this strength is sort of a ramp up in activity internationally overall, versus how much you think you're getting some share here?
I think it's both, I mean over the last half dozen years, we've meaningfully invested internationally added in terms of acquisitions, hiring individuals. Our London office is now our second largest office was much, much smaller literally 5, 10 years ago. So part of it is our presence, our brand, our position is much greater outside of the United States today than it was even a half a dozen years ago. And then, partly the international business, I think has lagged the U.S. for many years. And while there's been some stops and starts in it over the last year or two, at least for us, it does feel like it is picking up from where it's been. Maybe it's finally due to some resolution of Brexit. Maybe it's because they're coming off of a lower base. And as you mentioned before, clearly and good just because we also have a greater presence. I think all of that is causing our business profile and results to be growing rather nicely at the moment, internationally.
Your next question comes from line of Richard Ramsden with Goldman Sachs.
Thanks. This is James Yaro filling in for Richard. So obviously this is a fantastic quarter and so congratulations on that. Perhaps I'll start with the capital markets advisory business, which is obviously been a bright spot across both your results and those of your peers over say the last 12 months. Maybe you could update us on the growth in HIL finance, how it's performed versus your expectations? And whether your views on the long-term growth potential of this business are higher or unchanged versus maybe a year ago?
So we're still very optimistic about what I'll define is our overall financing capabilities. Remember, we tend to do much more on the private marketplace than the public marketplace much more focused on debt, capital raising and equity capital raising. And we continue to see that there's been ongoing interest by our client base, both in corporates and financial sponsors to U.S. advisors, Houlihan Lokey and others. We really do not participate anything meaningful to what some of our other peers have done on the equity side, we're not that classical IPO or equity shop. So we haven't benefited from that. But everything that we see on the financing side, just as optimistic about where it can go over the next 5, 10 years today as we were a year ago or two years ago.
Got it. That makes sense. And then, maybe you could talk about the dialogue with sponsors and how that's developed over the past few months. And so far, perhaps in 2021 and how you think that could change over the next year.
The number of sponsors and the number of sponsors we cover and their interest and the ability to do deals, while they were probably a bit in sleeping mode in spring and summer. They're in full force mode, both by side, sell side, refinancing side, restructuring side and very active and affected certain points. I think they've been too active to even look at certain things.
So part of it, they play catch up. And part of it is just where the capital markets are, they're able to go borrow money again. And I think, most people believe that there is eventually light at the end of the tunnel here in the pandemic, we may argue over exactly what the time period is, but kind of with the vaccine out, people are feeling a little better about what things might look like in the world's economies in the next year or two. And all of that is driving I think deal activity by sponsors and corporates.
Okay. And then, last quarter, you did talk about focus on continuing to grow inorganically, but that the dialogue with potential targets had slowed down a little bit, maybe you could characterize the environment today, and how that's changed. And what the timeline is, for potentially returning the cash that you raised over the past year, if you don't see any acquisitions and if this has changed at all,
We always felt when we raised the money back in May of 2020, is probably a two year-ish type timeline in terms of finding, acquiring and closing on transactions. So we're still only maybe a third or so in that time period. Having said that, what we said last quarter, and we repeat it again this quarter is due to the improved marketplace out there, some of the sellers, who were maybe sellers six months ago are kind of feeling like they want to stay independent. Some have gotten their expectations from a price perspective that maybe we think is not quite in line.
Having said that, we are still talking to numerous companies as I mentioned, there's two of them that we feel really good about, at this juncture. They're still not close to the closing line but all of these do always take some time and months. So we're still optimistic about opportunities out there, in terms of the number of situations, and maybe sometimes the size of those situations, or the timeline to close some of these situations, we think have gotten a little more elongated and a little more difficult than where we were six months ago and just due to the improvement in the marketplace.
Your next question comes from line of Michael Brown with KBW.
So, I appreciate all the comments here on the corporate finance business. But I wanted to take a little bit of a different tack there. So, clearly we've kind of got the wall of worry behind us, right with the election gone and obviously vaccinations rolling out. So a lot of the major concerns out there seem to have dissipated. What I'm curious now is what are some of the concerns that the C suites are raising in kind of conversations with your bankers? And what are the potential risks here that, we may not be contemplating now that they're a lot less obvious and is it just more of a focus on how valuations relative to where they were, like pre-COVID? Or I'm sure the virus is still kind of top of mind, but just curious how those discussions have evolved recently.
I think no matter what timeframe buyers are always going to be concerned about the certain things, I mean, a few that I'd say we still hear in no particular order. But one is potential changes in the corporate tax code, both in the U.S. and other parts of the globe could impact people's views on what they can and shouldn't do. Increase regulatory issues coming from the current administration could have some impact on transactions, probably more likely on larger size deals that we tend not to work on. Third thing, out there just general business valuations, anything you look at clearly suggests that the valuation multiples of companies are at the upper quartile versus the lower quartile. And then, we still don't know for many, many companies, what does a normal post pandemic world look like? And so, when people are typically putting together their three or five year business plans, I think there's still generally more uncertainty. And you can have disagreements between the way sellers see the world and buyers see the world. And you know it may take a full year post-pandemic, before people can say; yeah, now I know exactly how you'll be able to operate the post-pandemic.
And then, so I think those are some of the handful of issues out there. And at any given time, I think there's always concerns and issues that both buyers and sellers should have, but those be some of them that we're hearing from the C suite today.
Okay, great. That's helpful. So, the operating margin pushing over 30% was certainly great to see and something I really hadn't expected to see and be able to do, of course, little to no travel certainly helps. When I see a revenue result like this quarter, though, I suppose I would have expected that the comp ratio could have maybe come down just given the operating leverage that kind of inherent in this business model. So you understand the dynamics of the reimbursable expenses. But I just wanted to hear a little bit about how you are thinking about that. And if that's something that you're contemplating, perhaps with a full year comp ratio, as you think about the fiscal fourth quarter result.
I think we've always focused primarily on compensation for the full year, we try not to vary too much quarter-to-quarter, but there is going to be some variability. So that's part of it. Second, I think we've always told ourselves and told analysts and investors, we're typically going to have less movement and volatility in our compensation payout ratio, whether you are viewing the good years or bad years. So you will typically just not see our pre tax margins shrinking much, or at all in more difficult times. And likewise, it necessarily doesn't meaningfully increase during good times. This was an abnormal quarter, just because our revenues are so much higher than we've ever seen before. And the non-comp is usually a little bit more on the fixed side than on a percentage side.
So, we did lower the compensation payout ratio a bit this quarter, based upon some of the comments that you've mentioned. But we've always said, look, we've generally stayed within -- it seems like 100%, level from where we started in the beginning of the year, the end of the year, this year had some twists to it, mostly due to the significant decline in reimbursables, which in our minds are not necessarily classical revenues, because you're obviously not earning a profit off of it. And it's the way we run our business. And I think, not too different today than what we would have told you three years ago or the eve of us going public or even pre-public.
[Operator Instructions] Your next question comes from the line of Jeff Harte with Piper Sandler. Please proceed with your question.
Can you help me or us to think about the order of magnitude of the benefits to corporate finance revenues from things like, deals on hold closing and year-end kind of pre-administration change acceleration. I'm just trying to kind of get a feel for how to think about going forward after a quarter where revenues just were so much stronger than any of the visible pipeline, stuff, we can kind of see from the outside.
So I take a step backwards and maybe start with looking at nine months worth of results versus just one quarter. We clearly mentioned there are certain things that have the pandemic not occurred, we would have had a better first and second quarter, and then arguably, we would have had a worse third quarter.
Having said that the momentum that exists today is maybe as great as we've ever seen. So, at least as the market presents it, we're very optimistic about what corporate finance can continue to do for the next couple of quarters. But don't think you can look at this last quarter and say that's some normalized level for us. That's probably the best way to look at it. I mean, I think there was a smaller amount of deals that maybe ultimately closed third fiscal quarter instead of fourth fiscal quarter, for tax reasons, I think a lot of it was just, as we mentioned a confluence of events, things that should have closed, first and second quarter, some of those ended up closing in the third quarter and some are still closed in the fourth quarter and beyond. But offsetting that is, we weren't playing with a full deck heading into the quarter because we didn't bring in the amount of new business.
So if we sit here today and try to analyze the business and what do we think about it, kind of going forward for the next half year, year, two years, however you want to look at it, we feel better about it now than we did pre-pandemic, before we knew what was going to happen with the pandemic. So we all got hit, we've seemed to have recovered and we're back in growth mode.
Okay. And as we think about non-comp expenses, and maybe at least in the near-term, do you have a kind of a feel for what you're expecting kind of dollar wise? I mean, we're kind of running 30 million a quarter when the pandemic was hot. Now, it's 39 million it used to run 45. I mean, do you have any feel for at least the near-term trajectory and what we might see there?
Some of the increase is really driven by reimbursable expenses, which are hard to predict. So I think the better we do from a revenue standpoint, frankly, the higher our non-comp expenses, just because of the accounting for it. So, look, I think that it's hard to tell you what the fourth quarter is going to look like a proxy for that might be an average of the last three quarters. But that's a guess, given that so much of it is driven by revenue growth in Q4. And usually when you grow revenues, you have reimbursable expenses from clients attached to it and that will drive non-GAAP expense. And so a little harder to answer that question than it used to be free accounting change.
And, Jeff, if you look back historically, there's a couple of seasonal reasons and why this occurs. But historically, our fiscal third quarter on an absolute dollar amount just is our highest non-comp. And then, our fiscal fourth quarters tended to come in lower. So if the similar fact patterns occur, that's not an unreasonable assumption, but as Lindsey mentioned thing that we can't predict is the amount of reimbursables, some of its tied to revenue, some of its timing. And then, there's certain things used to be because it's when you ran conferences, or when you had certain costs and training, certain things have absolutely nothing to do with seasonality. But there has been some seasonality quarter-by-quarter to the absolute amount of our non-comp.
Okay. And then, finally, should we think of something as being kind of a minimum targeted cash to hold on the balance sheet? I mean, there's so much cash there in an absolute dollar basis, but also as kind of a percent of total assets. So kind of a targeted range, you guys like to keep it up?
It's a complicated answer. I think, we have accrued and unpaid bonuses as a liability on our balance sheet. Those do have to be paid. So you are going to have to keep enough cash for those payments. And those payments remind you occur in May and November. The other thing is, there is a certain amount of money that is overseas and there is some expense even with the new loss to bring that home. And so that, that capital is not necessarily easily distributable from us.
And then, there's regulatory cash and operating cash that needs to be kept in the balance sheet, not only in the U.S., but overseas. And so, I think it is a hard one to answer. We don't think of it in terms of an absolute minimum dollar number. We do believe we're sitting here with excess cash today. And as Scott suggested we at the Board level or having conversations about what to do with that excess cash. You're seeing a little bit of movement on the share repurchase that was mentioned earlier and probably more to come over the over the coming quarters.
Your next question comes from the line of Steven Chubak with Wolfe Research.
So I wanted to start off with a question on restructuring. When thinking about the pace of new restructuring mandates, getting back to pre-COVID levels, it was reasonable for us to infer that restructuring fees at least over the medium-term should be running at the pre-COVID run rate of roughly 90 million a quarter. Just recognizing, highly leveraged corporates may not face their day of reckoning so quickly simply given the existence of the Fed backstop, low rates, tighter credit spreads, what have you.
I think it's a little early to tell what restructuring is going to look like in the short-term. You're going to continue to see some benefits from COVID-related transactions in our Q4. You'll see some periods next year as well. Activity levels for restructuring are tough, because the typical restructuring mandate can take years to complete. So what does that mean for Q3 of fiscal 2022 is hard to tell. But you are going to see a return to normality. Whether that's in one quarter, two quarter, three quarters is hard to answer. But, and whether that normality is kind of that 300 million to 350 million level that we experienced for those sort of two or three years prior to COVID. We hope it's at that level; it's just too early to tell.
Steven, I'd add, as Lindsey mentioned, the last four fiscal years, fiscal '17 to '20, our restructuring revenues generally range from 300 to 350. A couple positive and negative factors, kind of ignoring the pandemics for the moment, obviously, lower interest rates, and a very healthy capital markets, tends to slow things down.
And the restructuring world, on the other hand, the ever increasing impact of technology, which kind of disrupts businesses, the total absolute dollar amount of leverage across the system, the number of companies that still today or have been and may never completely come out of the pandemic, as healthy as they once were, all of those kind of lead you to getting yourself to be more optimistic.
So the total size of the market, I would start with a just has continued to grow year-by-year, having nothing to do with -- for the moment a blip and the pandemic. The complexities of restructuring continue to get more difficult. I think we maintained a leadership position in this business.
And then, one other thing, while we obviously did very well, this quarter, and so far in these first nine months and there, I would say there's been a number of mega size deals we've worked on. There really hasn't been the super mega size deals that we saw in the great global financial crisis of a decade or so ago. There's not been that Lehman Brothers or CIT or some of these other ones.
And so in fact, the business is probably healthier, when you really analyze it from a standpoint of number of transactions, we're working on kind of the typical size, not getting skewed by any super mega deals, the size of our staff and the experience of our staff, in many regards, pretty much the same staff we had a decade ago, they're just basically more skilled, more mature, et cetera leads us to all those comments that we said, we're feeling very good about where restructuring can go over the medium and long-term, there's going to be some bumps in the road where it may continue to see some good results from some of the COVID work that still isn't done. On the other hand, until things kind of stabilize in other areas we have been witnessing to the last several months slowdown in new business activity.
Now, thank you both, they were really helpful color. And just for my follow-up, on the subject or the topic of normality, but focused more on the corporate finance side. You alluded to some expectation for obviously not at least the decline versus the most recent quarter. I mean, I think that's to be expected. If I look at the productivity levels, this quarter, it was north of 10 million per banker. You alluded to the fact that about a third of the transactions that closed probably should have closed in the two earlier quarters. As I tried to square what in a very healthy M&A environment, what's a reasonable productivity per banker expectation that you guys are comfortable underwriting? Now, recognizing it was 6 million pre-COVID activity seems to be healthier now not quite a 10 million per -- obviously, you can drive a truck through that range. What do you think is a reasonable expectation as we look out for the next year or two years in terms of what that productivity trajectory might look like?
Here's the good news. The good news is, we've proven that productivity can increase from 6 million to 10 million overnight. And so there is capacity for us to continue to drive productivity of our M&A bankers. And there is a number of things that keep the productivity levels below 10. I think one of them is we hire constantly new people then productivity levels will lower. Our overseas expansion is also a headwind on productivity levels because of the fee structure overseas relative to the U.S. But, there is capacity in the system. And I think the M&A bankers or corporate finance bankers worked extraordinarily hard in this last quarter that is not sustainable. But we have proven that there is capacity there. And we will continue to look for ways to drive productivity quarter-by-quarter. And we've seen it not only in our corporate finance business over the last few years, but we've seen continued improvements in productivity in our FEA business. And we believe that will be a theme for us over the next three to five years.
Your next question comes from line of Brennan Hawken with UBS.
You referenced in your prepared remarks that the year-end and potentially anticipation of tax law change drove some acceleration in activity in your corporate finance business? I just would -- is it possible to try to understand or size that impact so that we can know the right base of revenue in which we'd be wanting to build off of when we're looking forward and kind of bringing, thinking about squaring up our forecasts into next year?
Yes. I don't. Brennan, there isn't a number we can give you that says, oh, yes, that was 5 or 10, or 20 projects of our 121. What were really common is, when we talk to our bankers out in the field, a number of them would say yes, there were transactions where the client very much wanted to close by December 31, some of them achieve that and some didn't, minimum had expectations to be able to close. But if we got hired in late summer, early fall, while there were probably some people who are optimistic that you could get closed by December 31, just isn't practical, at least on the M&A landscape.
So I think it was more of a small rounding amount that actually was pushed into this quarter. Because of people trying to accelerate a deal and don't really have an easy way of being able to analyze all 121 projects and said, which ones were -- how to close by December 31, otherwise, we won't have gotten hired or the project won't have closed. Like I said, it was a commentary that several people had for different reasons. I don't think it was an overwhelming reason that caused our revenues in this quarter to be strong. I'd say it warranted a footnote commentary, not a major statistical adjustment to analyze our business.
Okay. Thanks for that, Scott. And then thinking about the quarter from a different way and just trying to understand, I want to say that you'd said that this is involved some business that kind of was deals that were reinvigorated, reanimated, what have you from when everybody -- when the kind of world shut down? And then, there were some that were brought on with new business?
Given that, is it when we think about the cadence of the quarters this year, which is clearly going to look really funky. Are we better off just focusing on like, your full year fiscal number, when they want to think about fiscal year 2021? And rather than trying to think about what a quarterly jumping off period is, since it seems like there was some business that had been in the ground for a while, that just got quickly brought to the finish line this quarter and some regular way stuff. So it might be a bit misleading.
I think Scott mentioned in earlier, Brennan, if you look at the year-to-date numbers, our corporate finance business is up slightly year-over-year. There's no reason not to take a look at Q4 of last year and have that as a jumping off point and realizing that there's going to be some benefit in Q4 of this year from transactions that might have closed earlier had not the pandemic occurred. But if you look at the year-to-date numbers and you kind of go through what my comments are, which is a lot of the metrics we're seeing in corporate finance are normalized then I think we're probably back to quarter-on-quarter comparisons, potentially with a little bit upside for the next quarter or two relative to pandemic related things, if that makes sense.
It does.
Ladies and gentlemen, we have reached the end of the question-and-answer session and I would like to turn the call back to Mr. Scott Beiser for closing remarks.
I want to thank you all for participating in our third quarter fiscal 2021 earnings call and we look forward to updating everybody on our progress when we discuss our fourth quarter results for fiscal 2021 this coming spring.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.