Greetings, ladies and gentlemen. Thank you for standing by. Welcome to Houlihan Lokey's second quarter fiscal year 2022 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, October 28, 2021. I will now turn the call over to Christopher Crain, Houlihan Lokey's General Counsel. Thank you. Sir, you may begin.
Thank you, operator, and hello, everyone. By now, everyone should have access to our second quarter fiscal year 2022 earnings release, which can be found on the Houlihan Lokey website at www.hl.com in the investor relations section. Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward-looking statements. These forward-looking statements, which are usually identified by use of words such as will, expect, anticipate, should, or other similar phrases, are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and therefore you should exercise caution when interpreting and relying on them. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.
We encourage investors to review our regulatory filings, including the Form 10-Q for the quarter ended September 30, 2021, 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 second quarter fiscal year 2022 earnings call. We are pleased to report another very strong quarter. We achieved $537 million in second quarter revenues, up 95% from a year ago. This significant increase was driven by the ongoing robust business environment that we have experienced since the summer of 2020, and the comparison to a relatively weak second quarter last year as a result of the pandemic. All three of our business segments performed very well. Corporate Finance and Financial and Valuation Advisory produced record quarterly results, and Financial Restructuring delivered solid results during a very challenging restructuring market environment.
On the expense side, although we are starting to see some increases in travel and marketing costs consistent with increased business activity, we are maintaining an adjusted pre-tax margin of approximately 30%, which is well above pre-pandemic margins. For the second fiscal quarter of 2022, we reported $1.71 in adjusted earnings per share, up 128% from the same quarter last year. Our Corporate Finance business continues to operate at a record pace, with trailing twelve-month revenues over $1.2 billion. Activity levels remain strong with both corporate and sponsor clients, and all industry sectors are showing growth over previous years. All metrics regarding active number of engagements, estimated fees, and pipeline visibility remain at record levels. Our non-U.S. business is performing quite well as we have seen the European M&A market stabilize and grow over the last few quarters.
Finally, our capital markets business continues to be one of the fastest-growing components within our Corporate Finance business. Although the momentum we have in our Corporate Finance business sees no signs of letting up, we recognize that the economy, stock market, and global M&A activity has been in an upward cycle for nearly 12 years now. That said, we constantly look for ways to further improve our business profile through diversification of clients, industry, product, geography, and banker. Our FVA business reached a record $66 million in quarterly revenues and delivered the fifth consecutive quarter of revenue growth. FVA has a trailing 12-month revenue run rate of nearly $250 million, with every major sub-product area contributing to our growth.
Although FVA is our least volatile business segment, given the nature of the work, it has produced compound annual revenue growth in excess of 10% over the last five years, an impressive statistic for this business segment. The FVA business has benefited from a healthy market environment, exceptional execution, several new senior hires, and additional revenues from SPAC activity. Currently, we have a record number of MDs, active projects, and new business activity continues to grow. Our Financial Restructuring business continues to perform as expected in this bullish market environment. Accrued revenues and new business activity are off significantly from the peak levels of last year.
However, as we have said in previous quarters, business activity is similar to pre-pandemic levels, and we believe that we continue to hold onto our leading market share through this challenging restructuring cycle. We don't normally discuss single transactions during our earnings call, but in this latest quarter, we were hired on a restructuring assignment in China that highlights the strength and reputation of our global restructuring practice. In September, it was announced that we were hired by Evergrande to advise on one of the largest restructurings in the world. We have been doing business in China for years and have invested a lot of time and resources in that part of the world, as many of the Asian economies work to bring Western law and maturity to their capital markets.
We continue to believe that one of the most exciting growth prospects for our restructuring business is the expansion of the restructuring product into these economies over the coming decades. The Evergrande engagement convinces us that we are well-positioned for this growth. On the acquisition front, we are excited that we successfully closed the first step of the tender offer for GCA right after our quarter close on October 4th, and as of today, we own 90% of GCA shares. We expect to complete the acquisition of the remaining 10% during the month of November. Lindsey will highlight some of the financial metrics associated with the transaction. On the integration front, we have had several welcome events across the globe to mutually introduce our firms. We are already pitching business together, identifying opportunities for new business and executing mandates on a collaborative basis.
Although Lindsey and I refer to GCA for ease of discussion, we will be operating as a single firm, and we are very pleased with the integration efforts thus far. As previously reported by GCA, they continue to experience very strong results and are projecting a record calendar 2021. Our historical experience with prior acquisitions suggest it typically takes one-two years to get through integration and to begin to see measurable revenue synergies. To date, nothing suggests this transaction won't experience the same timeline. Bringing our two companies together enhances the profile of Houlihan Lokey, and I'm pleased to summarize some of the highlights. On a combined pro forma basis, we operate in 17 countries, significantly increasing our global diversification. We have over 2,200 employees with nearly 300 client-facing Managing Directors. We serve well over 2,000 clients annually.
On a pro forma basis, we have trailing 12-month revenues of approximately $2.3 billion and adjusted pre-tax income of approximately $600 million. Most importantly, we maintain a shared set of values and goals, and we believe cultural consistency is one of the hallmarks of our firm. In addition to the GCA transaction, during the second quarter, we hired or acquired four Managing Directors, one in Corporate Finance, one in Financial Restructuring, and two in Financial and Valuation Advisory. Overall, we are very pleased with our financial results, and we look forward to continuing our recent strong performance with our new colleagues from GCA. With that, I'll turn the call over to Lindsey.
Thank you, Scott. Today, I will do a quick review of HL's second quarter, followed by comments about GCA and what to expect in the coming quarters. Revenues in Corporate Finance were $388 million for the quarter, up 259% when compared to the same quarter last year. We closed 134 transactions this quarter, compared to 53 in the same period last year, and our average transaction fee on closed deals increased. Financial Restructuring revenues were $83 million for the quarter, a 34% decrease from the same quarter last year. We closed 20 transactions this quarter, compared to 30 in the same period last year, and our average transaction fee on closed deals was relatively flat. In Financial and Valuation Advisory, revenues were $66 million for the quarter, a 55% increase from the same period last year.
We had 806 fee events during the quarter, compared to 539 in the same period last year. Turning to expenses, our adjusted compensation expenses were $330 million for the second quarter versus $175 million for the same period last year. Our only adjustment was for deferred retention payments related to certain acquisitions. Our adjusted compensation expense ratio was 61.5% for the quarter. Our adjusted non-compensation expenses were $43 million for the quarter versus $29 million for the same quarter last year, an increase of 51%. This resulted in an adjusted non-compensation expense ratio of 8.1% for the quarter versus 10.4% in the same period last year.
For this quarter, we adjusted out of our non-compensation expenses $1.6 million in acquisition-related amortization and $1.6 million in acquisition-related transaction costs attributable to both the Baylor client acquisition, which closed in July, and the GCA acquisition. We expect the bulk of the transaction costs for the GCA acquisition to be included in our third quarter results. As we did this quarter, we will adjust those costs out of our non-compensation expense next quarter as well. Given the pandemic, we have been operating at a historically low non-compensation expense ratio. Unfortunately, it is too early to tell what our post-pandemic non-compensation expense ratio target is going to be.
We expect that our new target will fall well below our pre-pandemic range of 14%-15% as a result of the economies of scale that have occurred in our business over the last several quarters. Our adjusted other income and expense decreased for the quarter to an expense of approximately $853,000 versus income of approximately $196,000 in the same period last year. This was primarily a result of lower interest earned on our cash and investment balances, as well as unrealized losses on our investment securities. Our adjusted effective tax rate for the quarter was 27.9% compared to 27.3% during the same quarter last year, in line with our long-term target of between 27%-29%. Turning to the balance sheet and uses of cash.
As of the quarter end, we had approximately $963 million of unrestricted cash and equivalents and investment securities. As a reminder, we paid approximately $540 million in October to settle the first step of the acquisition of GCA, and we currently own 90% of the company. We expect to pay an additional $60 million in the second step of the transaction to complete the acquisition and acquire the remaining 10%. The second step is expected to occur on November 5th. In addition, during November, we will be paying our deferred cash bonuses for fiscal 2021. Finally, in this past quarter, we repurchased approximately 499,000 shares at an average price of $82.89 per share as part of our share repurchase program.
Regarding GCA, we want to share some of the specifics around the acquisition to aid in your thinking over the next several quarters. Similar to other transactions, we will put in place a retention pool for the benefit of GCA employees that aggregates to no more than $133 million. We anticipate that the retention pool will be put in place in or around February and vest over a four-year period with the first vesting date May 2023. We expect the retention pool will be paid out primarily in stock. Similar to other retention pools, we will be adjusting the corresponding expense out of our GAAP earnings as we view retention as a component of acquisition cost. Essentially, we are treating the GCA retention pool similarly to the way we treated our HL pre-IPO grants.
As a reminder, once this retention pool is put in place, our share count will go up by the full amount of stock granted. In addition, we expect there will be a modest amount of integration costs associated with combining our businesses that will occur at least over the next four quarters. Any significant and non-recurring integration costs will be adjusted out of our GAAP earnings in order to provide shareholders with the recurring run rate of the combined companies. Having said that, when we acquired GCA, there was excess cash on the balance sheet. That excess cash is not only expected to cover any integration costs, but also a portion of the retention pool. Finally, as with all of our transactions, we expect there to be non-cash amortization associated with the intangible assets that we acquired.
For GCA, this amortization will be significant and will be adjusted out of our GAAP earnings, similar to what we have done in the past. Regarding how the GCA transaction will affect HL's long-term targets, we expect that we will maintain our compensation ratio consistent with our historical practice and our long-term target throughout the remainder of this fiscal year and beyond. One additional comment about GCA's compensation costs. GCA currently is a calendar year company, and we will pay bonuses in our fourth fiscal quarter based on their performances through December 2021. Historically, GCA paid their bonuses 100% in cash. For this calendar year, we intend to pay GCA bonuses consistent with HL's deferred stock bonus structure.
This will result in HL issuing stock in lieu of a portion of the cash bonus paid to GCA employees in our fourth fiscal quarter as part of their bonus cycle. We will provide further details of what we plan to grant on our next earnings call. After this calendar year-end, going forward, GCA employees will operate on the same bonus schedule and structure that all HL employees do. Regarding the incremental non-compensation costs associated with the GCA acquisition, we do not expect to see synergies relating to non-compensation costs in the next few quarters as we integrate the two businesses. In fact, it is best to take a look at GCA's publicly released non-compensation costs for the first six months of calendar year 2021 and assume that there will be some organic growth to those costs over the next several quarters.
We fully expect that over time, the combined company will be able to operate at a non-compensation expense ratio consistent with where HL has operated in the past on a standalone basis. We will update you over the coming quarters as we make progress on our integration, including certain milestones and the costs of the integration. With respect to taxes, for now, you can assume that the consolidated taxes will be a weighted blend of our two separate effective tax rates. One final comment. As a reminder, we will be consolidating GCA's results for Q3, but we will be backing out approximately 4% of their profit through a minority interest investment, as we will not own 100% of the company for the entire quarter. For our entire fourth quarter, we expect to own 100% of GCA.
With that, operator, we can open the line for questions.
Our first question comes from the line of Devin Ryan with JMP Securities. Please proceed with your question.
Great. Good afternoon, everyone. Obviously, terrific quarter here and your Corporate Finance, you know, stands out, just the strength there. I'd love to just dig in a little bit around the velocity of deals kind of moving through the system, how that's changing, if at all. Are you seeing an acceleration? I know you don't like to give too much specifics on the pipeline, but are you replacing the pipeline after, you know, what was, you know, obviously a great quarter? Just if there's any other context you can give us just around how, you know, the pipeline is progressing today relative to maybe heading into last quarter or even the beginning of the year.
Hey, Devin. You know, pipeline is still very solid. We're still seeing growth in almost all the metrics in terms of new business coming in, kind of size of deals that we're working on, potential for closings. I think it's been a continuation of growth in that particular product line that we've really seen for probably four or five rolling quarters at this point. While we had a very strong quarter, we're still, you know, sitting with a large amount of activity to continue to work on.
I think with respect to velocity, I'm not sure there's been any notable change in how quickly deals are moving through the system. I think there are, I mean, just assume that velocity's been consistent since sort of the pandemic changed.
Okay. Terrific. Just kind of moving over to the restructuring business and great to see the big win in China as you referenced. Are you seeing spillover from that? Like, is there direct new opportunities coming from that? I know you're excited about the kind of longer term positioning, and obviously this will be a marquee event to be involved in. Is there actual kind of activity maybe that is being driven as a result coming off the heels of this, that there could actually be a meaningful kind of uptick in activity in that region in the kind of intermediate term here?
I think, you know, taking a step back, we've been out in the region for, you know, close to probably two decades now, and we've had other very sizable mandates in that area. This isn't like the first one that we've ever had. It's probably the most sizable and notable one just in today's current marketplace, which I think continues to help with the brand and reputation. I think we, you know, we believe that there's quite a bit of increased opportunity in the Asia Pacific area, and we've been a dominant player out there in restructuring and obviously getting engaged on a project like that just continues to help us continue to hopefully build market share out there.
Great. If I could just squeeze one more quick one in here. Just on the GCA commentary, Lindsay, thanks for the update. I mean, if I take kind of components of comp ratio over time and then non-comps, you know, it sounds like it's gonna take a bit of time, but effectively you're saying that you think you can get GCA's margins up toward Houlihan Lokey's margins, which would be, it's a meaningful kind of margin improvement for them. Is that? I just wanna make sure I caught that. Is there a timeframe on the non-comps where you feel like you can kind of push that forward?
Yeah, I mean, I think I can't answer your question on the non-comp. I mean, we wanna make sure that the integration is done very deliberately and so that it is as non-disruptive as it can be to the bank or to GCA. I think we're gonna take as long as we need to make that happen effectively. I think with respect to compensation, I think you heard me correctly. You know, our expectations are that from a compensation ratio standpoint, we'll be able to bring them to our kind of traditional ranges and kind of how we traditionally have operated fairly quickly, as early as next quarter. The non-compensation will take a while and no specifics yet as to how long that will take.
Yep. Understood. Okay. Great. Thanks for taking my questions.
Thanks, Devin.
Thank you. Our next question comes from the line of Ken Worthington with JP Morgan. Please proceed with your question.
Hi, good afternoon. Just following up on GCA, is it possible to give us a sense of the revenue and the margins for GCA in the September quarter? If it is, how does GCA's relative backlog sort of look compared to what you would see as Houlihan Lokey's, you know, Corporate Finance business backlog? Does it seem to be at all comparable? Is it better? Is it worse? How do we sort of compare the outlooks for those two businesses in the near term?
Ken, we have decided not to disclose specifics around GCA for the September quarter. With respect to backlog, I think we're gonna stay away from, you know, the two separate firms' backlogs. I will only tell you that GCA momentum in their business is very significant, similar to the Houlihan Lokey momentum in our business. In terms of, you know, pipelines, I think Scott's comments you can think about on a consolidated basis.
Okay. As you think about integrating GCA, I hear your comments, it takes one-two years, what do you see as sort of the most critical synergies to the deal's success? If you can give us sort of how you think of moving forward to put the, I don't know, I'm gonna call it the infrastructure in place so that you can deliver on those, you know, sort of critical synergies.
Yep. From a banker perspective, what we're really looking to do as people both in their organization or sometimes view themselves along industry sectors, sometimes along products, sometimes along geography, is to get them to meet the relevant people in our organization and vice versa. That's why we've had numerous get together welcome events, retreats, whatever you wanna call it. We're already kind of assembled along combined industry sectors, combined geographies, combined products, so that everybody can get introduced to the capabilities that on a pro forma basis exist. That will enable us to pursue, we believe, more pieces of business, be able to put collectively better people on projects to get hired and execute with better results.
All of that dictated from a timing standpoint is how quickly can you get people to get to know the capabilities of everyone else. The classical integration costs are much more back office oriented, you know, when you deal with different platforms, whether that's a you know a CRM or an ERP system or obviously people have different kinds of policies and procedures. Really it's trying to get people on the banker side to, as quickly as possible, get to understand and know their colleagues and know where via an email, via a call, via Zoom, how can they get to the right person. I think we're on target in our minds on how this happens, but it doesn't happen overnight.
That's what we say can take, you know, a couple quarters, a year or two to really get everybody up to what we'll call a mature level.
Ken, just one thing I'll add that's different about this transaction. You know, historically, and you've heard us say this, you know, we have acquired much smaller companies, and the premise is that we can drive productivity of the bankers that we acquire, by having a larger platform and being able to, you know, aim higher in terms of average transaction size and fee. I think here it actually works both ways. GCA is, I think, well established in technology, and we fully expect there to be productivity improvements at the HL level, particularly around bankers that are tangential to the technology space.
Not only do we think a larger platform can help with respect to GCA, but we think GCA's size and their depth of expertise, particularly around the technology space, is gonna be beneficial to quite a number of our bankers that kind of work in and around technology, but have never had that, you know, size of the core technology practice that GCA has.
Is language a barrier here to success? If language is, how do you sort of bridge that communication between, you know, both sides? Are you using technology to do that? What's the sort of answer there?
Well, the vast majority or overwhelmingly all of the bankers do speak either English as their first language or good enough English that it doesn't become a significant barrier. There are tools, you know, through Zoom and other things that you can also use there. You know, we've operated in most of these countries anyways. GCA, in and of itself, you know, was a very geographically spread out organization with a major presence in Europe, North America and Asia. I don't think this is a brand new issue for either the historical Houlihan Lokey folks or the historical GCA folks.
Great. Thank you.
Thank you. Our next question comes from the line of James Yaro with Goldman Sachs. Please proceed with your question.
Good afternoon. You have one of the best sponsor franchises out there, and that's clearly one of the best performing areas of both the M&A market as well as for FVA. Could you help us understand how much of the business this quarter was driven by sponsors? I think it could be very informative if you could just touch on how your relationships with sponsors drives sticky repeat business.
We've always said approximately about 50% or so of our businesses are touched by sponsors. When we mean sponsors, we mean private equity, hedge funds, family offices, sovereign wealth funds. It's a broad definition in our mind of sponsors. Sometimes they are the controlling influential parties, and sometimes they're a much more minority party. It happens in all of our product lines. They're big sellers of businesses, buyers of our businesses. They sit on creditors committees and part of the restructuring franchise. They provide a lot of opportunities, and we'll do a variety of valuation work for them. Our goal is to cover as many of those sponsors as we think are relevant and we can be helpful to.
We're always looking to increase the number of sponsors that we cover and to look to increase the incremental amount of services that we can provide to the sponsor community. As has been noted by, you know, many organizations like yours and others, the sponsor community has been very active in deal-making and transactional-oriented issues, especially over the last year. We've continued to, I think, you know, expand our presence with them, which has clearly helped our financial results as well over the last couple quarters and, you know, arguably really the last decade or two.
Okay. FVA obviously saw record results again. I guess the question is whether this is a run rate you expect to be able to continue and perhaps accelerate from, or whether there was some seasonality in the results, and you know, sort of the outlook going forward.
I think we've always felt, at least on a consolidated basis, we do have some level of seasonality. You typically have seen our fiscal third and fourth quarter generally better than our fiscal first and second quarter. To some degree, FVA also has some of that seasonality. What has been very positive in our minds, and I mentioned it in my comments, literally it's been over the last, I think, five quarters that every single quarter, ignoring seasonality, have continued to grow and do better. I think they've got a great business profile at this point. I won't tell you that they'll never hit some seasonality issues here, but the business feels like it's got a lot of momentum that it can continue to grow from where it's at today.
Okay. Thank you.
Thank you. Our next question comes from the line of Manan Gosalia with Morgan Stanley. Please proceed with your question.
Hi. Good afternoon. Appreciate all the detail on GCA. That's all, you know, very helpful. Are there any synergies on the restructuring or the valuation side? For instance, can you use the GCA relationships in Corporate Finance on the valuation side or, maybe their geographic reach for restructuring?
Yeah. We think the addition of the GCA bankers, while primarily we think of them on the Corporate Finance side, but they're also gonna be helpful on the Restructuring and the FVA side. On one hand, we clearly have far more presence than we ever did in Asia, which they weren't really historically at all focused in Restructuring. They now have some connectivity, relationships, and we can bring the skill sets. Same thing will happen in parts of Europe that we don't cover. They additionally have relationships they've never focused at the same level we have on valuations. They'll do a little bit of valuation work, but not to the same breadth that we have.
We think kind of the added number of bankers in areas of new geographies as well as in deeper strengths on the different industry sectors that they participate in is going to drive some revenue synergies to those two other businesses I mentioned as well.
Great. Thank you. Maybe if you could comment on, you know, how do you see the supply chain issues and inflation impacting deal activity? You know, is it perhaps driving some companies to pause and see how things turn out? Are more companies looking at vertical integration to ensure that they're better prepared for the future? Is it perhaps maybe also impacting conversations on the restructuring side?
I'll take the restructuring side first. I think the supply chain issues, which are more, critically and negatively impacting business, is starting to increase dialogue on the restructuring side. Whether these supply chain issues will last long enough that may tip some companies into true distress, too early to tell. On the otherwise core M&A practice, you know, there's always something. Whether it's, concerns about interest rate, changes in taxes, supply chain, the pandemic, political change, there's always things out there that become topical to either the C-suite or those financial sponsors. Sometimes it causes them to accelerate a transaction. Sometimes it causes them to delay.
Right now I'd say it's clearly a topic, but it's not overwhelmingly driving, at least our client base, to need to wanna do something quicker or conversely that it's meaningfully slowing down the prospects of completing a deal. It's a topic out there, but at this point, I wouldn't tell you that it's hugely financially impacting, positive or negative, our client base.
Great. Thanks for taking my questions.
Thanks, Manan.
Thank you. Our next question comes from the line of Michael Brown with KBW. Please proceed with your question.
Great. Thank you. Hey, Scott, it's Mike.
Hey, Mike.
Hey, Mike.
Hey, I was hoping to ask a little bit about the restructuring market in China. You know, when I think about M&A, I think Asia typically has the lowest fee rates. Is restructuring kind of immune to those trends, just given the bespoke nature of the advice there? Do they kind of have similar fee rates as the U.S. market? Do the mandates there have a similar fee structure in terms of the timing, in terms of it being mainly a success fee?
The answer to both is there are far fewer transactions in China in restructuring than in any other market. It's hard to take the handful of restructuring mandates that have occurred in China and say that there is a trend or even a market. Having said that, the answer to your second question is what we've experienced is it's similar. It's monthly retainers, and the vast majority of it is in success, depending on how long the transaction goes on for. I think it's hard to comment on whether the fees are lower on average than Europe or the U.S. simply because we don't have enough data points.
You know, look, our restructuring bankers are disciplined in their fee approach, and we're gonna take on transactions that we think are profitable. It's certainly not one of these situations where you can get, you know, we're willing to drop significantly with respect to our fees just to win a deal. I don't think our restructuring bankers are gonna do that.
Okay. Great. That all makes sense. Yeah, I appreciate all the commentary on GCA. Maybe just one more from me there. Historically, you've managed to keep your share count flat to down at least, you know, prior to the capital raise last year. Once GCA is fully integrated, including the retention and this year's compensation, is that still the right way to think about your share count longer term? Of course, obviously pending any other potential acquisitions that could impact it?
I think it's going to depend on what the cash flow generation looks like for us and the opportunities for acquisitions in the future. I think that, you know, this is a large acquisition. It may take a while to integrate, but we still have a pipeline of transactions we're looking at. Part of it's gonna depend on, you know, when we do the next acquisition, because historically, acquisitions have been a nice way for us to maintain a relatively small amount of excess cash, because we think we can deploy it very profitably to our shareholders. If we have a long pause around integration, then you will likely see the result being increased share buybacks.
You know, you might see a trend back down to kind of a flattening or flat-flattish to where we were when we went public. Having said that, if there's some wonderful acquisition opportunities out there over the next two-three years, we'd rather put money towards those acquisitions if we think they're strategically smart acquisitions and they're accretive to our shareholders versus doing share buybacks. Part of it's gonna depend on opportunities over the next two-three years in terms of where we deploy cash.
That makes sense. All right. Thank you, Lindsey. I'll leave it there.
Thank you. Our next question comes from the line of Steven Chubak with Wolfe Research. Please proceed with your question.
Hey, guys. To start, I was hoping,
Steven, we're having a hard time hearing you. Can you maybe get closer to your mic or speak a little louder?
Sorry. Apologies.
Got it. Much better.
Sorry, guys. The past couple quarters, you've seen a pretty substantial increase in the fee per deal. I was hoping you could unpack a bit what has driven that uptick. Is it reflective of an effort to move up in terms of deal size, or is it impacted by the elevated level of demand for advisory services across the industry? Just trying to get a sense for how sustainable the current level is moving forward.
This has been going on for at least the last decade or two in our organization, and I don't think this is a, you know, one quarter or one year phenomenon. Almost every single year, the average size of the company we're doing work for increases. The fees that we're getting that are somewhat tied to the size increase. Of recent note, the close rate has been increasing. Allows you to have increased productivity. I think the talent of the banker pool that we have, considering the long maturity of many of our bankers, they're more talented today as a group than they were three years ago, five years ago, et cetera. Clearly, yes, we're in a positive M&A marketplace that helps. Asset prices are rising, et cetera.
It's a combination of all of those pieces I mentioned, and even if they're small percentage increases by themselves, once you start multiplying them together, you do get increased productivity. This is something we have been constantly working on, like I said, for the last decade or two. I believe we have certain processes to continue to make that grow. Some of it's clearly helped by the market, and a lot of it is, I think, the tactical decisions on how we go about procuring and executing business.
That's great color. Thanks. I guess for my follow-up, I know you mentioned in the prepared remarks that restructuring activity is running at similar levels to pre-pandemic. In prior quarters, you've sort of guided to sort of a range of between, call it, 2017 and 2020 levels in 2022. I was just wondering how your thinking around the potential floor for revenues has evolved given activity in the U.S. has remained fairly depressed while we've obviously also seen an acceleration in activity in China. Just trying to think of how we should think about the run rate-ish level heading into next year.
Two ways to think about it. Under our definition of pre-pandemic, and you can look at our historical results, and I'm rounding, but we've been somewhere probably between $300 million and $350 million of historical annual restructuring revenues. The next comment I would make is in every single cycle we've ever seen, going back probably three plus decades, each trough is higher than the previous trough, and each peak has been higher than the previous peak. I'm not sure we sit there with a crystal ball and therefore tell you, "Here's exactly where, you know, the new trough will be." It can always be skewed by a quarter or two, maybe in a year or two. The market's growing.
The number of companies that have significant amount of leverage debt is much greater today than it was several years ago, spread across the globe. We are clearly at historically low default rates, so whatever will eventually increase that default rate, there's just more business out there for ourselves and our peers eventually to do incremental restructuring work. None of us are per se in control of our exact timing destiny here, but I would walk away from my comments that the market is bigger. It's just going to probably still take some time before that, you know, creates incremental revenue streams for us.
Great. Thanks for taking my questions.
Okay. Thanks.
Thank you. Our next question comes from the line of Jeff Harte with Piper Sandler. Please proceed with your question.
Good afternoon, guys.
Yeah.
Well, a lot of the questions have been hit, but what I'm still looking at, when we look at MD productivity at GCA versus Houlihan Lokey, I mean, at least from what we can calculate, it looks to be quite a bit lower there than it is for you guys. How does this compare to your experience with previous acquisitions? I mean, should we think of GCA's kind of MD productivity moving toward yours? If that's the case, what's really the key to driving that?
First of all, I think we've always looked at whether we're hiring or acquiring small or big is can we buy a business that will produce profitable results? You know, you're effectively looking at the flexibility of what you pay everybody versus what they produce. We tend not to get as hung up as others on pure revenues per employee, revenues per MD or whatever metrics that everybody uses, that's our first comment. The second comment is, we have historically seen in almost every single transaction that we've done over a reasonably short period of time, but I'd call that a couple years, the productivity of bankers that we acquire clearly increases so that it becomes, I'll call it, almost blended from what historically Houlihan Lokey has done.
That's a combination of an enhanced platform for which everybody to sell off of. We add financial sponsor activity and skills and connections they didn't have before. We may add incremental geographies. We add multiple product lines availability and depth into incremental industries. All of that does produce higher, you know, revenues per whatever metric you wanna use. While your comment and question upfront is accurate, historically, they've had lower revenues per head. They're in some slightly different businesses and some slightly different geographies, and we clearly expect it will continue to grow and improve like we've seen with other transactions.
Okay, thanks. I guess finally, looking at kind of cash levels, and I guess I'm also going to try and get at the potential for buybacks with GCA, you know, cash being spent there. The increase in the authorization, $250 million. I mean, should we be just thinking of that as a reloading so you can use it over time? Or is that maybe messaging something? 'Cause when I'm looking at the cash you have on the balance sheet now versus what you're paying out, it seems like the cash position's looking, you know, stronger than at least we thought it was going to be looking, you know, after you pay out for GCA.
I think I would just take it as a reloading. We'd ended up doing it last quarter. Well, it happened during our board meeting last quarter, which occurred this quarter. It was kinda in the ordinary course we took a look at it relative to our year-end, and we just reloaded.
Okay, thank you.
Thank you. Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor back to management for closing comments.
I wanna thank you all for participating in our second quarter fiscal year 2022 earnings call. We look forward to updating everyone on our progress when we discuss our third quarter results for fiscal 2022, this coming winter.
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.