☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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Houlihan Lokey, Inc. ("Houlihan Lokey" or "HL, Inc.," also referred to as the "Company," "we," "our," or "us") is a Delaware corporation that controls the following primary subsidiaries:

•	Houlihan Lokey Capital, Inc., a California corporation ("HL Capital, Inc."), is a wholly owned direct subsidiary of HL, Inc. HL Capital, Inc. is registered as a broker-dealer under Section 15(b) of the Securities Exchange Act of 1934 and a member of Financial Industry Regulatory Authority, Inc.

•	Houlihan Lokey Financial Advisors, Inc., a California corporation ("HL FA, Inc."), is a wholly owned direct subsidiary of HL, Inc.

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HL Finance, LLC ("HL Finance"), a syndicated leveraged finance platform established to arrange senior secured leveraged loans for financial sponsor-backed, privately-held, and public corporate entities. HL Finance acts as an arranger on syndicated loan transactions and has entered into an agreement with an unaffiliated third party investor that may provide commitments with respect to certain syndicated loans arranged by HL Finance.

•	Houlihan Lokey EMEA, LLP, a limited liability partnership registered in England ("HL EMEA, LLP"), is an indirect subsidiary of HL, Inc. HL EMEA, LLP is regulated by the Financial Conduct Authority in the United Kingdom ("U.K.").

On August 18, 2015, the Company successfully completed an initial public offering ("IPO") of its Class A common stock. Expenses related to the corporate reorganization and IPO recorded in the Consolidated Statements of Comprehensive Income include the following:

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$3,684 and $3,629 of compensation expenses associated with the amortization of restricted stock granted in connection with the IPO during the three months ended December 31, 2019 and 2018, respectively, and $10,735 and $10,500 during the nine months ended December 31, 2019 and 2018, respectively; amortization expense of restricted stock granted in connection with the IPO is being recognized over a four and one-half year vesting period; and

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$2,509 and $2,510 of compensation expenses associated with the accrual of certain deferred cash payments granted in connection with the IPO during the three months ended December 31, 2019 and 2018, respectively, and $7,534 and $7,916 during the nine months ended December 31, 2019 and 2018, respectively; accrual expense of deferred cash payments granted in connection with the IPO is being recognized over a four and one-half year vesting period.

Prior to a corporate reorganization that was consummated immediately prior to the closing of the IPO, the Company was incorporated in California as Houlihan Lokey, Inc., a California corporation ("HL CA"), and was a wholly owned indirect subsidiary of Fram Holdings, Inc., a Delaware corporation ("Fram"), which, in turn, was a majority owned subsidiary of ORIX Corporation USA (formerly ORIX USA Corporation), a Delaware corporation ("ORIX USA"), with the remaining minority interest being held by Company employees ("HL Holders"). ORIX USA and the HL Holders held their interests in HL CA indirectly through their ownership of Fram. On July 24, 2015, HL CA merged with and into HL, Inc., with HL, Inc. as the surviving entity. In connection with the IPO, the HL Holders deposited their shares of HL, Inc. Class B common stock into a voting trust (the "HL Voting Trust") and own such common stock through the HL Voting Trust.

In April 2018, the Company completed the acquisition of Quayle Munro Limited, an independent advisory firm that provides corporate finance advisory services to companies underpinned by data & analytics, content, software, and services. 

In May 2018, the Company completed the acquisition of BearTooth Advisors, an independent advisory business providing strategic advisory and placement agency services to alternative investment managers.

In June 2019, the Company exercised its option to acquire the remaining 51% of the shares of Lara (Italy Holdco) Limited ("Lara"). Lara's only operating subsidiary, Houlihan Lokey S.p.A., is an Italian-based company that provides corporate finance advisory services.

In November 2019, the Company completed the acquisition of Fidentiis Capital, an independent advisory business providing independent corporate finance advisory services relating to mergers and acquisitions, capital raising, and financing.

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In December 2019, the Company completed the acquisition of Freeman & Co., an independent advisory business providing mergers and acquisitions advisory, capital raising, and other investment banking advisory services for the financial services sector.

The Company offers financial services and financial advice to a broad clientele located throughout the United States of America ("U.S."), Europe, and the Middle East and Asia-Pacific regions. The Company has U.S. offices in Los Angeles, San Francisco, Chicago, New York City, Minneapolis, McLean (Virginia), Dallas, Houston, Miami, and Atlanta, as well as foreign offices in London, Paris, Frankfurt, Madrid, Amsterdam, Dubai, Sydney, Tokyo, Hong Kong, Beijing and Singapore. Together, the Company and its subsidiaries form an organization that provides financial services to meet a wide variety of client needs. The Company concentrates its efforts toward the earning of professional fees with focused services across the following three business segments:

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Corporate Finance ("CF") provides general financial advisory services in addition to advice on mergers and acquisitions and capital markets offerings. We advise public and private institutions on a wide variety of situations, including buy-side and sell-side transactions, as well as leveraged loans, private mezzanine debt, high-yield debt, initial public offerings, follow-ons, convertibles, equity private placements, private equity, and liability management transactions, and advise financial sponsors on all types of transactions. The majority of our CF revenues consists of fees paid upon the successful completion of the transaction or engagement ("Completion Fees"). A CF transaction can fail to be completed for many reasons that are outside of our control. In these instances, our fees are generally limited to the fees paid at the time an engagement letter is signed ("Retainer Fees") and in some cases fees paid during the course of the engagement ("Progress Fees") that may have been received.

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Financial Restructuring ("FR") provides advice to debtors, creditors and other parties-in-interest in connection with recapitalization/deleveraging transactions implemented both through bankruptcy proceedings and through out-of-court exchanges, consent solicitations or other mechanisms, as well as in distressed mergers and acquisitions and capital markets activities. As part of these engagements, our FR business segment offers a wide range of advisory services to our clients, including: the structuring, negotiation, and confirmation of plans of reorganization; structuring and analysis of exchange offers; corporate viability assessment; dispute resolution and expert testimony; and procuring debtor-in-possession financing. Although atypical, FR transactions can fail to be completed for many reasons that are outside of our control. In these instances, our fees are generally limited to the Retainer Fees and/or Progress Fees.

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Financial and Valuation Advisory ("FVA"), formerly known as Financial Advisory Services, primarily provides valuations of various assets, including: companies; illiquid debt and equity securities; and intellectual property (among other assets and liabilities). These valuations are used for financial reporting, tax reporting, and other purposes. In addition, our FVA business segment renders fairness opinions in connection with mergers and acquisitions and other transactions, and solvency opinions in connection with corporate spin-offs and dividend recapitalizations, and other types of financial opinions in connection with other transactions. Also, our FVA business segment provides dispute resolution services to clients where fees are usually based on the hourly rates of our financial professionals. Unlike our CF or FR segments, the fees generated in our FVA segment are generally not contingent on the successful completion of a transaction.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP"), pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"), and include all information and footnotes required for consolidated financial statement presentation. The results of operations for the nine months ended December 31, 2019 are not necessarily indicative of the results of operations to be expected for the fiscal year ending March 31, 2020. The unaudited interim consolidated financial statements and notes to consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019 (the "2019 Annual Report").

Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. These reclassifications had no impact on net income, shareholders' equity or cash flows as previously reported.

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Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries where it has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

The Company carries its investments in unconsolidated entities over which it has significant influence but does not control using the equity method, and includes its ownership share of the income and losses in Other (income)/expense, net in the Consolidated Statements of Comprehensive Income.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements. Management estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period, and disclosure of contingent assets and liabilities at the reporting date. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Items subject to such estimates and assumptions include, but are not limited to: the allowance for doubtful accounts; the valuation of deferred tax assets, goodwill, accrued expenses, and share based compensation; the allocation of goodwill and other assets across the reporting units (segments); and reserves for income tax uncertainties and other contingencies.

Revenues

Revenues consist of fee revenues from advisory services and reimbursed costs incurred in fulfilling the contract. Revenues reflect fees generated from our CF, FR, and FVA business segments. See Note 3 for additional information.

Operating Expenses

The majority of the Company’s operating expenses are related to compensation for employees, which includes the amortization of the relevant portion of the Company’s share-based incentive plans (Note 14). Other types of operating expenses include: Travel, meals, and entertainment; Rent; Depreciation and amortization; Information technology and communications; Professional fees; and Other operating expenses.

Translation of Foreign Currency Transactions

The reporting currency for the consolidated financial statements of the Company is the U.S. dollar. The assets and liabilities of subsidiaries whose functional currency is other than the U.S. dollar are included in the consolidation by translating the assets and liabilities at the reporting period-end exchange rates; however, revenues and expenses are translated using the applicable exchange rates determined on a monthly basis throughout the fiscal year. Resulting translation adjustments are reported as a separate component of accumulated other comprehensive loss, net of applicable taxes.

From time to time, we enter into transactions to hedge our exposure to certain foreign currency fluctuations through the use of derivative instruments or other methods. As of December 31, 2019, we had two foreign currency forward contracts outstanding, one between the pound sterling and the U.S. dollar with a notional value of $5.0 million and one between the pound sterling and the euro with a notional value of €1.0 million. The fair value of these contracts represented a net gain included in Other operating expenses of $30 during the three months ended December 31, 2019. We had no foreign currency forward contracts outstanding as of December 31, 2018.

    

Cash and Cash Equivalents, and Restricted Cash

Cash and cash equivalents include cash held at banks and highly liquid investments with original maturities of three months or less. As of December 31, 2019 and March 31, 2019, the Company had cash balances with banks in excess of insured limits. The Company believes it is not exposed to any significant credit risk with respect to Cash and cash equivalents.

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The following table provides a reconciliation of Cash and cash equivalents, and Restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows.     

	December 31, 2019				March 31, 2019
Cash and cash equivalents	$	276,735			$	285,746
Restricted cash (1)	373				369
Total cash, cash equivalents, and restricted cash	$	277,108			$	286,115

(1)	Restricted cash as of December 31, 2019 and March 31, 2019 consisted of a cash secured letter of credit issued for our Frankfurt office.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification (“ASC”).

On April 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), and all related amendments. See Note 16 for additional information.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting. The amended guidance states an entity should account for the effects of a modification unless certain criteria are met, which include that the modified award has the same fair value, vesting conditions and classification as the original award. The Company adopted guidance effective April 1, 2019 and its application did not have a material impact on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses - Measurement of Credit Losses on Financial Instruments. The amended guidance involves several aspects of the accounting for credit losses related to certain financial assets that are not accounted for at fair value through net income and includes trade receivables and net investments in leases. The new guidance and subsequent updates, broadens the information that an entity must consider in developing its estimated credit losses expected to occur over the remaining life of assets measured either collectively or individually to include historical experience, current conditions and reasonable and supportable forecasts, replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses (“CECL”) model.  The new guidance expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating credit losses and requires new disclosures of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. This new guidance is first effective for our fiscal year beginning on April 1, 2020 and will be adopted under a modified retrospective approach. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations, which will depend on, among other things, the current and expected macroeconomic conditions and the nature and characteristics of financial assets held by us on the date of adoption.

In 2019, ASU 2019-01, Leases - Topic 842: Codification Improvements became effective, but there was no quantitative or qualitative effect on our financial statements.

The Company generates revenues from contractual advisory services and reimbursed costs incurred in fulfilling those contracts. Revenues for all three business segments (CF, FR, and FVA) are recognized upon satisfaction of the performance obligation, which may be satisfied over time or at a point in time. The amount and timing of the fees paid vary by the type of engagement.

The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those promised services (i.e., the “transaction price”). In determining the transaction price, we consider multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, we consider the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as market volatility or the judgment and actions of third parties. The substantial majority of the Company’s advisory fees (i.e., Completion Fees) are considered variable and constrained as they are contingent upon future events, which include factors outside of our control (e.g., completion of a transaction or third party emergence from bankruptcy or approval by the court).

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Revenues from CF engagements primarily consist of fees generated in connection with advisory services related to corporate finance, mergers and acquisitions, and capital markets offerings. Completion Fees from these engagements are recognized at a point in time when the related transaction has been effectively closed. At that time, the Company has transferred control of the promised service and the customer obtains control. CF contracts generally contain a variety of promised services that may be capable of being distinct, but they are not distinct within the context of the contract as the various services are inputs to the combined output of successfully brokering a specific transaction.

Revenues from FR engagements primarily consist of fees generated in connection with advisory services to debtors, creditors and other parties-in-interest involving recapitalization or deleveraging transactions implemented both through bankruptcy proceedings and through out-of-court exchanges, consent solicitations or other mechanisms, as well as in distressed mergers and acquisitions and capital markets activities. Retainer Fees and Progress Fees from restructuring engagements are recognized over time using a time elapsed measure of progress as our clients simultaneously receive and consume the benefits of those services as they are provided. Completion Fees from these engagements are recognized at a point in time when the related transaction has been effectively closed. At that time, the Company has transferred control of the promised service and the customer obtains control.

Revenues from FVA engagements primarily consist of fees generated in connection with valuation and diligence services and rendering fairness, solvency and other financial opinions. Revenues are recognized at a point in time as these engagements include a singular objective that does not transfer any notable value to the Company’s clients until the opinions have been rendered and delivered to the client. However, certain engagements consist of advisory services where fees are usually based on the hourly rates of our financial professionals. Such revenues are recognized over time as the benefits of these advisory services are transferred to the Company’s clients throughout the course of the engagement, and, as a practical expedient, the Company has elected to use the ‘as-invoiced’ approach to recognize revenue.

Taxes, including value added taxes, collected from customers and remitted to governmental authorities are accounted for on a net basis, and therefore, are excluded from revenue in the Consolidated Statements of Comprehensive Income.

Disaggregation of Revenues

The Company has disclosed disaggregated revenues based on its business segment and geographical area, which provides a reasonable representation of how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. See Note 18 for additional information.

Contract Balances

The timing of revenue recognition may differ from the timing of payment by customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred income (contract liability) until the performance obligations are satisfied.

Costs incurred in fulfilling advisory contracts with point-in-time revenue recognition are recorded as a contract asset when the costs (i) relate directly to a contract, (ii) generate or enhance resources of the Company that will be used in satisfying performance obligations, and (iii) are expected to be recovered. The Company amortizes the contract asset costs related to fulfilling a contract based on recognition of fee revenues for the corresponding contract. As the Company changed the presentation of costs incurred in fulfilling advisory contracts from a net presentation within non-compensation expenses to a gross basis in revenues, the Company records a contract liability for the reimbursable costs incurred until the fee revenue is recognized.

Costs incurred in fulfilling an advisory contract with over-time revenue recognition are expensed as incurred.

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The change in the Company’s contract assets and liabilities during the period primarily reflects the timing difference between the Company’s performance and the customer’s payment. The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers:

	April 1, 2019				Increase/(Decrease)				December 31, 2019
Receivables (1)	$	64,797			$	(9,327	)		$	55,470
Unbilled work in process, net of allowance for doubtful accounts	71,891				(3,934		)		67,957
Contract Assets (1)	6,033				909				6,942
Contract Liabilities (2)	27,812				84				27,896

(1)	Included within Accounts receivable, net of allowance for doubtful accounts in the December 31, 2019 Consolidated Balance Sheet.

(2)	Included within Deferred income in the December 31, 2019 Consolidated Balance Sheet.

During the three and nine months ended December 31, 2019, $3.4 million and $17.8 million of revenues, respectively, were recognized that were included in the Deferred income balance at the beginning of the period.

As a practical expedient, the Company does not disclose information about remaining performance obligations pertaining to (i) contracts that have an original expected duration of one year or less, and/or (ii) contracts where the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that is or forms part of a single performance obligation. The transaction price allocated to remaining unsatisfied or partially unsatisfied performance obligations with an original expected duration exceeding one year was not material at December 31, 2019.

The Company provides financial advisory services to ORIX USA and its affiliates and certain other related parties, and received fees for these services totaling approximately $0 and $197 during the three months ended December 31, 2019 and 2018, respectively, and $698 and $8,692 for the nine months ended December 31, 2019 and 2018, respectively.

The Company provided certain management and administrative services for the Company's unconsolidated entities and received fees for these services. As a result, the Company received net fees of $0 and $51 during the three months ended December 31, 2019 and 2018, respectively, and $126 and $275 during the nine months ended December 31, 2019 and 2018, respectively.

On March 12, 2018, pursuant to a registered underwritten public offering, we issued and sold 2,000,000 shares of our Class A common stock and certain of our former and current employees and members of our management sold 2,000,000 shares of our Class A common stock, in each case, at a price to the public of $0.04725 per share (the “March 2018 Follow-on Offering”). In connection with, and prior to, the March 2018 Follow-on Offering, on January 26, 2018, we entered into a Forward Share Purchase Agreement (the "January 2018 Forward Share Purchase Agreement"), with an indirect wholly owned subsidiary of ORIX USA pursuant to which we agreed to purchase from ORIX USA on April 5, 2018 the number of shares of our Class B common stock equal to the number of shares of our Class A common stock sold by us in the March 2018 Follow-on Offering for a purchase price per share equal to the public offering price in the March 2018 Follow-on Offering less underwriting discounts and commissions. On April 5, 2018, the Company settled the transaction provided for in the January 2018 Forward Share Purchase Agreement and acquired 2,000,000 shares of Class B common stock from ORIX USA using the net proceeds we received from the March 2018 Follow-on Offering and the shares were retired.  In accordance with the terms of the January 2018 Forward Share Purchase Agreement, the purchase price per share under the January 2018 Forward Share Purchase Agreement was reduced by the per share amount of the dividend paid to ORIX USA on the shares of our Class B common stock subject to the January 2018 Forward Share Purchase Agreement prior to the settlement of the transaction.

On June 4, 2018, pursuant to a registered underwritten public offering, ORIX USA sold 1,985,983 shares of our Class A common stock and certain of our former and current employees and members of our management sold 1,014,017 shares, in each case, at a price to the public of $49.15 per share (the "June 2018 Follow-on Offering"). Concurrently with the closing of the offering, the Company repurchased from ORIX USA 697,000 shares of Class A common stock at a price per share of $49.11.

On May 30, 2019, pursuant to a registered underwritten public offering, ORIX USA sold 3,000,000 shares of our Class A common stock to the public at a price of $45.80.

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On August 1, 2019, pursuant to a registered underwritten public offering, ORIX USA sold its remaining ownership of 3,377,935 shares of our Class A common stock to the public for net proceeds of approximately $154.1 million before expenses.

In the accompanying Consolidated Balance Sheets, the Company carried accounts receivable and unbilled work in progress from related parties totaling approximately $0 and $3 as of December 31, 2019 and March 31, 2019, respectively. The Company also deferred income from related parties for service fees totaling $0 and $34 as of December 31, 2019 and March 31, 2019, respectively.

Other assets in the accompanying Consolidated Balance Sheets includes loans receivable from certain employees of $15,693 and $15,228 as of December 31, 2019, and March 31, 2019, respectively.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels in accordance with ASC Topic 820, Fair Value Measurement:

•	Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

•	Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•	Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

For Level 3 investments in which pricing inputs are unobservable and limited market activity exists, management's determination of fair value is based upon the best information available and may incorporate management's own assumptions or involve a significant degree of judgment.

The following methods and assumptions were used by the Company in estimating fair value disclosures:

•	Corporate debt securities: All fair value measurements are obtained from a third-party pricing service and are not adjusted by management.

•	U.S. treasury securities: Fair values for U.S. treasury securities are based on quoted prices from recent trading activity of identical or similar securities. All fair value measurements are obtained from a third-party pricing service and are not adjusted by management.

The following table presents information about the Company's financial assets, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair values:

	December 31, 2019
	Level 1				Level 2				Level 3				Total
Corporate debt securities	$	—			$	36,973			$	—			$	36,973
U.S. treasury securities	—				54,222				—				54,222
Total asset measured at fair value	$	—			$	91,195			$	—			$	91,195

	March 31, 2019
	Level 1				Level 2				Level 3				Total
Corporate debt securities	$	—			$	116,577			$	—			$	116,577
U.S. treasury securities	—				8,681				—				8,681
Total asset measured at fair value	$	—			$	125,258			$	—			$	125,258

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In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the instrument.

The Company had no transfers between fair value levels during the nine months ended December 31, 2019.

The fair values of the financial instruments represent the amounts that would be received to sell assets or that would be paid to transfer liabilities in an orderly transaction between market participants as of a specified date. Fair value measurements maximize the use of observable inputs; however, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, as well as available observable and unobservable inputs.

The carrying value of Cash and cash equivalents, Restricted cash, Accounts receivable, Unbilled work in process, Receivables from affiliates, Accounts payable and accrued expenses, and Deferred income approximates fair value due to the short maturity of these instruments.

The carrying value of the loans to employees included in Other assets, Loans payable to former shareholders and an unsecured loan which is included in Loan payable to non-affiliate, approximates fair value due to the variable interest rate borne by those instruments.

Investment securities consist of corporate debt and U.S. Treasury securities with original maturities over 90 days. The Company classifies its investment securities as trading and measures them at fair value in the Consolidated Balance Sheets. Unrealized holding gains and losses for trading securities are included in Other operating expenses in the accompanying Consolidated Statements of Comprehensive Income.     

The amortized cost, gross unrealized gains (losses), and fair value of investment securities were as follows:

	December 31, 2019
	Amortized Cost				Gross Unrealized Gains				Gross Unrealized (Losses)				Fair Value
Corporate debt securities	$	36,624			$	352			$	(3	)		$	36,973
U.S. treasury securities	53,959				264				(1		)		54,222
Total securities with unrealized gains	$	90,583			$	616			$	(4	)		$	91,195

	March 31, 2019
	Amortized Cost				Gross Unrealized Gains				Gross Unrealized (Losses)				Fair Value
Corporate debt securities	$	116,220			$	372			$	(15	)		$	116,577
U.S. treasury securities	8,608				73				—				8,681
Total securities with unrealized gains	$	124,828			$	445			$	(15	)		$	125,258

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Scheduled maturities of the debt securities held by the Company within the investment securities portfolio were as follows:

	December 31, 2019								March 31, 2019
	Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
Due within one year	$	63,760			$	63,840			$	96,109			$	96,175
Due within years two through five	26,823				27,355				28,719				29,083
Total debt within the investment securities portfolio	$	90,583			$	91,195			$	124,828			$	125,258

The allowance for doubtful accounts on receivables reflects management’s best estimate of probable inherent losses determined principally on the basis of historical experience and review of uncollected revenues and is recorded through provision for bad debts which is included in Other operating expenses in the accompanying Consolidated Statements of Comprehensive Income. Amounts deemed to be uncollectible are written off against the allowance for doubtful accounts.

	Three Months Ended December 31,								Nine Months Ended December 31,
	2019				2018				2019				2018
Beginning balance	$	5,375			$	11,501			$	5,596			$	11,391
Provision for bad debts	2,215				370				2,087				983
Recovery or write-off of uncollectible accounts	(2,020		)		(5,232		)		(2,113		)		(5,735		)
Ending balance	$	5,570			$	6,639			$	5,570			$	6,639

Property and equipment are stated at cost. Repair and maintenance charges are expensed as incurred and costs of renewals or improvements are capitalized at cost. Depreciation on furniture and office equipment is recognized on a straight-line basis over the estimated useful lives of the respective assets. Leasehold improvements are recorded as prepaid assets and included within fixed lease payments. See Note 16 for additional information.

Property and equipment, net of accumulated depreciation consist of the following:

	December 31, 2019				March 31, 2019
Equipment	$	8,838			$	7,916
Furniture and fixtures	21,953				19,445
Leasehold improvements	42,577				34,370
Computers and software	17,552				11,499
Other	1,117				1,117
Total cost	92,037				74,347
Less: accumulated depreciation	(50,481		)		(43,313		)
Total net book value	$	41,556			$	31,034

Additions to property and equipment during the nine months ended December 31, 2019 were primarily related to leasehold improvement costs incurred and computer and software purchases.

Depreciation expense of approximately $2,423 and $2,084 was recognized during the three months ended December 31, 2019 and 2018, respectively, and $7,101 and $6,348 was recognized during the nine months ended December 31, 2019 and 2018, respectively.

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Goodwill represents an acquired company’s acquisition cost over the fair value of acquired net tangible and intangible assets. Goodwill is the net asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Intangible assets identified and accounted for include tradenames and marks, backlog, developed technologies, and customer relationships. Those intangible assets with finite lives, including backlog and customer relationships, are amortized over their estimated useful lives.

Goodwill is reviewed annually for impairment and more frequently if potential impairment indicators exist. Goodwill is reviewed for impairment in accordance with Accounting Standards Update ("ASU") No. 2011-08, Testing Goodwill for Impairment, which permits management to make a qualitative assessment of whether it is more likely than not that one of its reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If management concludes that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then management would not be required to perform the two-step impairment test for that reporting unit. If the assessment indicates that it is more likely than not that the reporting unit’s fair value is less than its carrying value, management must test further for impairment utilizing a two-step process. Step 1 compares the estimated fair value of the reporting unit with its carrying value, including goodwill. If the carrying value of the reporting unit exceeds the estimated fair value, an impairment exists and is measured in Step 2 as the excess of the recorded amount of goodwill over the implied fair value of goodwill resulting from the valuation of the reporting unit. Impairment testing of goodwill requires a significant amount of judgment in assessing qualitative factors and estimating the fair value of the reporting unit, if necessary. The fair value is determined using an estimated market value approach, which considers estimates of future after tax cash flows, including a terminal value based on market earnings multiples, discounted at an appropriate market rate. As of December 31, 2019, management concluded that it was not more likely than not that the Company’s reporting units’ fair value was less than their carrying amount and no further impairment testing had been considered necessary.

Indefinite-lived intangible assets are reviewed annually for impairment in accordance with ASU 2012-02, Testing Indefinite-lived Intangible Assets for Impairment, which provides management the option to perform a qualitative assessment. If it is more likely than not that the asset is impaired, the amount that the carrying value exceeds the fair value is recorded as an impairment expense. As of December 31, 2019, management concluded that it was not more likely than not that the fair values were less than the carrying values.

Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group (inclusive of other long-lived assets) be tested for possible impairment, management first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. As of December 31, 2019, no events or changes in circumstances were identified that indicated that the carrying amount of the finite-lived intangible assets were not recoverable.

The following table provides a reconciliation of Goodwill and other intangibles, net reported on the Consolidated Balance Sheets.

	Useful Lives		December 31, 2019				March 31, 2019
Goodwill (1)	Indefinite		$	626,519			$	594,812
Tradename-Houlihan Lokey (1)	Indefinite		192,210				192,210
Other intangible assets	Varies		18,217				18,614
Total cost			836,946				805,636
Less: accumulated amortization			(14,214		)		(11,032		)
Goodwill and other intangibles, net			$	822,732			$	794,604
Deferred tax liability (1)			(51,676		)		(51,676		)
Total net book value, after taxes			$	771,056			$	742,928

(1)

When HL CA was acquired by Fram in January 2006, approximately $392,600 of goodwill and $192,210 of indefinite-lived intangible assets were generated and recognized. In accordance with ASC Topic 805, Business Combinations, since HL CA was wholly owned by Fram, this goodwill and all other purchase accounting-related adjustments were pushed down to the Company’s reporting level. Through both foreign and domestic acquisitions made directly by HL CA and the Company since 2006, additional goodwill of approximately $233,919, inclusive of foreign currency translations, has been recognized.

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Amortization expense of approximately $1,913 and $1,551 was recognized for the three months ended December 31, 2019 and 2018, respectively, and $5,179 and $4,461 was recognized for the nine months ended December 31, 2019 and 2018, respectively.

The estimated future amortization for amortizable intangible assets for each of the next five years are as follows:

	Year Ended March 31,
Remainder of 2020	$	2,007
2021	1,419
2022	157
2023	7
2024	7

In August 2015, the Company entered into a revolving line of credit with Bank of America, N.A. (the "2015 Line of Credit"), which allowed for borrowings of up to $75.0 million and originally matured in August 2017. On July 28, 2017, the Company extended the maturity date of the 2015 Line of Credit to August 18, 2019, and, on August 15, 2019, the parties further extended the maturity date of the 2015 Line of Credit to September 18, 2019 (or if such date is not a business day, the immediately preceding business day). On August 23, 2019, the Company refinanced the 2015 Line of Credit by entering into a new syndicated revolving line of credit with Bank of America, N.A. and certain other financial institutions party thereto (the "2019 Line of Credit"), which allows for borrowings of up to $100.0 million (and, subject to certain conditions, provides the Company with an expansion option, which, if exercised in full, would provide for a total credit facility of $200.0 million) and matures on August 23, 2022 (or if such date is not a business day, the immediately preceding business day). The agreement governing the 2019 Line of Credit provides that borrowings bear interest at an annual rate of LIBOR plus 1.00%, commitment fees apply to unused amounts, and contains debt covenants which require that the Company maintain certain financial ratios. As of December 31, 2019, no principal was outstanding under the 2019 Line of Credit.

Prior to the IPO, Fram maintained certain loans payable to former shareholders consisting of unsecured notes payable which were transferred to the Company in conjunction with the IPO. The average interest rate on the individual notes was 3.10% and 3.69% as of December 31, 2019 and 2018, respectively, and the maturity dates range from 2020 to 2027. The Company incurred interest expense on these notes of $15 and $24 during the three months ended December 31, 2019 and 2018, respectively, and $52 and $74 during the nine months ended December 31, 2019 and 2018, respectively.

In November 2015, the Company acquired the investment banking operations of Leonardo & Co. NV ("Leonardo") in Germany, the Netherlands, and Spain, and made a 49% investment in Leonardo's operations in Italy. Total consideration included an unsecured loan of EUR 14 million payable on November 16, 2040, the remaining balance of which is included in Loan payable to non-affiliates on our Consolidated Balance Sheets. The loan bears interest at an annual rate of 1.50%. In each of January 2017, December 2017, December 2018, and December 2019, we paid a portion of this loan in the amount of EUR 2.9 million. The company incurred interest expense on this loan of $17 and $32 during the three months ended December 31, 2019 and 2018, respectively, and $64 and $106 for the nine months ended December 31, 2019 and 2018, respectively.

As described in Note 1, the Company acquired the remaining 51% of Lara, which is the holding company for Leonardo's operations in Italy, in June 2019. During the quarter ended September 30, 2019, the Company completed the redemption of the loans that were assumed upon the acquisition of the remaining 51% of Lara and that had been included in the Loan payable to non-affiliates on our Consolidated Balance Sheets.

An acquisition made in January 2017 included non-contingent consideration with a carrying value of $1,983 and $1,983 as of December 31, 2019 and March 31, 2019, respectively, which is included in Other liabilities in the accompanying Consolidated Balance Sheets.

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In April 2018, the Company acquired Quayle Munro Limited. Total consideration included non-interest bearing unsecured convertible loans totaling GBP 10.5 million payable on May 31, 2022, which is included in Other liabilities in the accompanying Consolidated Balance Sheets. Under certain circumstances, the notes may be exchanged for Company stock over a three year period in equal annual installments starting on May 31, 2020. The Company incurred imputed interest expense on these notes of $99 and $98 for the three months ended December 31, 2019 and 2018, respectively, and $228 and $299 for the nine months ended December 31, 2019 and 2018, respectively.

In May 2018, the Company acquired BearTooth Advisors. Total consideration included an unsecured note of $2.8 million bearing interest at an annual rate of 2.88% and payable on May 21, 2048. The Company incurred interest expense on this note of $26 for the three months ended December 31, 2019 and 2018, and $79 and $61 during the nine months ended December 31, 2019 and 2018, respectively.

In December 2019, the Company acquired Freeman & Co. Total consideration included an unsecured note of $4.0 million bearing interest at an annual rate of 2.75% and payable on December 16, 2049. The Company incurred interest expense on this notes of $5 for the three months ended December 31, 2019.

The scheduled aggregate repayments of our Loans payable to former shareholders, Other liabilities, and the Loan payable to non-affiliates in the accompanying Consolidated Balance Sheets on a fiscal year-end basis as of December 31, 2019 are as follows:

Remaining 2020	$	1,123
2021	6,219
2022	1,760
2023	17,816
2024	338
2025 and thereafter	13,639
Total	$	40,895

Accumulated other comprehensive (loss) is comprised of Foreign currency translation adjustments of $14,388 and $(2,760) for the three months ended December 31, 2019 and 2018, respectively, and $977 and $(19,038) for the nine months ended December 31, 2019 and 2018, respectively. The change in foreign currency translation was impacted by the vote in the U.K. to withdraw from the European Union. We are currently in a period in which the terms of withdrawal are being negotiated and there may be impacts on our European business that are unknown at this time. We believe the change in foreign currency translation will become more volatile, but we do not expect this to have a material impact on our operating results and financial position.

Accumulated other comprehensive (loss) at December 31, 2019 was comprised of the following:

Balance, April 1, 2019	$	(30,294	)
Foreign currency translation adjustment	977
Balance, December 31, 2019	$	(29,317	)

Prior to the IPO, ORIX USA and its subsidiaries, including the Company, filed consolidated federal income tax returns and separate returns in state and local jurisdictions and did so for fiscal year 2016 through the date of the IPO. The Company reported income tax expense as if it filed separate returns in all jurisdictions. Following the IPO, the Company files a consolidated federal income tax return separate from ORIX USA, as well as consolidated and separate returns in state and local jurisdictions, and the Company reports income tax expense on this basis.

We account for income taxes in accordance with ASC Topic 740, Income Taxes, which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax basis of our assets and liabilities. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The measurement of the deferred items is based on enacted tax laws and applicable tax rates. A valuation allowance related to a deferred tax asset is recorded if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

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The Company utilized a comprehensive model to recognize, measure, present, and disclose in its financial statements any uncertain tax positions that have been taken or are expected to be taken on a tax return. The impact of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained. Interest expense and penalties related to income taxes are included in the provision for income taxes in the accompanying Consolidated Statements of Comprehensive Income.

The Global Intangible Low-Taxed Income tax (“GILTI inclusion”) can be recognized in the financial statements through an accounting policy election by either recording a period cost (permanent item) or providing deferred income taxes stemming from certain basis differences that are expected to result in GILTI inclusion. The Company has elected to account for the tax impacts of the GILTI inclusion as a period cost.

The Company’s provision for income taxes was $20,161 and $18,974 for the three months ended December 31, 2019 and 2018, respectively, and $39,954 and $48,089 for the nine months ended December 31, 2019 and 2018, respectively. This represents effective tax rates of 29.2% and 30.2% for the three months ended December 31, 2019 and 2018, respectively, and 24.3% and 29.7% and for the nine months ended December 31, 2019 and 2018, respectively.

The calculations of basic and diluted earnings per share attributable to holders of shares of common stock are presented below.

	Three Months Ended December 31,								Nine Months Ended December 31,
	2019				2018				2019				2018
Numerator:
Net income attributable to holders of shares of common stock—basic	$	48,894			$	43,957			$	124,779			$	113,758
Net income attributable to holders of shares of common stock—diluted	$	48,894			$	43,957			$	124,779			$	113,758
Denominator:
Weighted average shares of common stock outstanding—basic	62,014,564				61,972,027				62,199,716				62,399,221
Weighted average number of incremental shares issuable from unvested restricted stock and restricted stock units, as calculated using the treasury stock method	3,593,462				3,786,652				3,570,340				3,586,439
Weighted average shares of common stock outstanding—diluted	65,608,026				65,758,679				65,770,056				65,985,660
Basic earnings per share	$	0.79			$	0.71			$	2.01			$	1.82
Diluted earnings per share	$	0.75			$	0.67			$	1.90			$	1.72

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Defined Contribution Plans

The Company sponsors a 401(k) defined contribution savings plan for its domestic employees and defined contribution retirement plans for its international employees. The Company contributed approximately $1,815 and $1,528 during the three months ended December 31, 2019 and 2018, respectively, and $3,524 and $2,837 during the nine months ended December 31, 2019 and 2018, respectively, to these defined contribution plans.

Share-Based Incentive Plans

Following the IPO, additional awards of restricted shares have been and will be made under the Amended and Restated Houlihan Lokey, Inc. 2016 Incentive Award Plan (the "2016 Incentive Plan"), which became effective in August 2015 and was amended in October 2017. Under the 2016 Incentive Plan, it is anticipated that the Company will continue to grant cash and equity-based incentive awards to eligible service providers in order to attract, motivate and retain the talent necessary to operate the Company's business. Equity-based incentive awards issued under the 2016 Incentive Plan generally vest over a four-year period. An aggregate of 37,847 restricted shares of Class A common stock were granted under the 2016 Incentive Plan to (i) two independent directors in August 2015 at $21 per share, (ii) two independent directors in the first quarter of fiscal 2017 at $25.21 per share, (iii) one independent director in the first quarter of fiscal 2017 at $23.93 per share, (iv) three independent directors in the first quarters of fiscal 2018 and 2019 at $33.54 and $44.50 per share, respectively, (v) one independent director in the third quarter of fiscal 2019 at $42.41 per share, (vi) four independent directors in the first quarter of fiscal 2020 at $47.22 per share, and (vii) one independent director in the third quarter of fiscal 2020 at $47.21 per share.

No excess tax benefit was recognized during the three months ended December 31, 2019 or 2018 and an excess tax benefit of $7,605 was recognized during the nine months ended December 31, 2019 as a component of the provision for income taxes and an operating activity on the Consolidated Statements of Cash Flows, with no such benefit for the nine months ended December 31, 2018. The excess tax benefit recognized in the first quarter of fiscal 2020 was related to shares vested in April and May 2019. For the comparable fiscal 2019 period, vesting of shares scheduled to vest in April and May 2018 was accelerated on October 21, 2017 and the corresponding excess tax benefit was recognized in the fiscal year ended March 31, 2018. The Company recorded cash outflows of $(31,469) and $(1,947) related to the settlement of share-based awards in satisfaction of withholding tax requirements in financing activities on the Consolidated Statements of Cash Flows for the nine months ended December 31, 2019 and 2018, respectively.

The share awards are classified as equity awards at the time of grant unless the number of shares granted is unknown. Awards that are settleable in shares based upon a future determinable stock price are classified as liabilities until the price is established and the resulting number of shares is known, at which time they are re-classified from liabilities to equity awards. Activity in equity classified share awards which relate to the Company's 2006 Incentive Award Plan (the "2006 Incentive Plan") and the 2016 Incentive Plan during the nine months ended December 31, 2019 and 2018 is as follows:

Unvested Share Awards		Shares			Weighted Average Grant Date Fair Value
Balance, April 1, 2019		3,763,984			$	32.29
Granted		1,368,079			47.02
Vested		(1,496,315	)		29.30
Forfeited/Repurchased		(81,008	)		38.56
Balance, December 31, 2019		3,554,740			$	39.13
Balance, April 1, 2018		2,854,893			$	26.39
Granted		1,059,616			49.35
Vested		(76,702	)		48.78
Forfeited/Repurchased		(57,797	)		33.16
Balance, December 31, 2018		3,780,010			$	32.28

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Activity in liability classified share awards during the nine months ended December 31, 2019 and 2018 is as follows:

Awards Settleable in Shares		Fair Value
Balance, April 1, 2019		$	21,676
Offer to grant		6,410
Share price determined-converted to cash payments		(52		)
Share price determined-transferred to equity grants		(6,457		)
Forfeited		(274		)
Balance, December 31, 2019		$	21,303
Balance at April 1, 2018		$	15,493
Offer to grant		11,407
Share price determined-converted to cash payments		(300		)
Share price determined-transferred to equity grants		(4,655		)
Forfeited		(476		)
Balance, December 31, 2018		$	21,469

Compensation expenses for the Company associated with both equity and liability classified awards totaled $16,682 and $13,781 for the three months ended December 31, 2019 and 2018, respectively, and $47,791 and $44,540 for the nine months ended December 31, 2019 and 2018, respectively.

As of December 31, 2019, there was $139,061 of total unrecognized compensation cost related to unvested share awards granted under both the 2006 Incentive Plan and 2016 Incentive Plan. That cost is expected to be recognized over a weighted average period of 1.19 years.

On October 19, 2017, our board of directors approved an amendment (the “Amendment”) to the 2016 Incentive Plan reducing the number of shares of common stock available for issuance under the 2016 Incentive Plan by approximately 12.2 million shares. Under the Amendment, the aggregate number of shares of common stock that are available for issuance under awards granted pursuant to the 2016 Incentive Plan is equal to the sum of (i) 8.0 million and (ii) any shares of our Class B common stock that are subject to awards under our 2006 Incentive Plan that terminate, expire or lapse for any reason after October 19, 2017.

The number of shares available for issuance will be increased annually beginning on April 1, 2018 and ending on April 1, 2025, by an amount equal to the lowest of:

•	6,540,659 shares of our Class A common stock and Class B common stock;

•	Six percent of the shares of Class A common stock and Class B common stock outstanding on the final day of the immediately preceding fiscal year; and

•	such smaller number of shares as determined by our board of directors.

There are two classes of authorized HL, Inc. common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote per share, and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock may be converted into one share of Class A common stock at the option of its holder and will be automatically converted into one share of Class A common stock upon transfer thereof, subject to certain exceptions.

As described in Note 4 above, in the March 2018 Follow-on Offering we issued and sold 2,000,000 shares of our Class A common stock and certain of our former and current employees and members of our management sold 2,000,000 shares of our Class A common stock, in each case, at a price to the public of $47.25 per share.

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In connection with, and prior to, the March 2018 Follow-on Offering, on January 26, 2018, we entered into the January 2018 Forward Share Purchase Agreement, pursuant to which we agreed to purchase from ORIX USA on April 5, 2018 the number of shares of our Class B common stock equal to the number of shares of our Class A common stock sold by us in the March 2018 Follow-on Offering for a purchase price per share equal to the public offering price in the March 2018 Follow-on Offering less underwriting discounts and commissions. The cash proceeds from the March 2018 Follow-on Offering that were used to consummate the purchase pursuant to the January 2018 Forward Share Purchase Agreement were held in an escrow account as of March 31, 2018 and presented as restricted cash as discussed in Note 2. On April 5, 2018, we settled the transaction provided for in the January 2018 Forward Share Purchase Agreement and acquired 2,000,000 shares of Class B common stock from ORIX USA using the net proceeds we received from the March 2018 Follow-on Offering. As the January 2018 Forward Share Purchase Agreement required physical settlement by purchase of a fixed number of shares in exchange for cash, the 2,000,000 shares that were purchased were excluded from the Company's calculation of basic and diluted earnings per share in the Company's financial statements for the year ended March 31, 2018. In addition, as the agreement provided for the refund of any dividends paid during the term on the underlying Class A common stock, such shares were not classified as participating securities and the Company did not apply the two-class method for calculating its earnings per share.

As described in Note 4 above, in the June 2018 Follow-on Offering, ORIX USA sold 1,985,983 shares of our Class A common stock and certain of our former and current employees and members of our management sold 1,014,017 shares, in each case, at a price to the public of $49.15 per share. Concurrently with the closing of the offering, the Company repurchased from ORIX USA 697,000 shares of Class A common stock at a price per share of $49.11.

On May 30, 2019, pursuant to a registered underwritten public offering, ORIX USA sold 3,000,000 shares of our Class A common stock to the public at a price of $45.80.

On August 1, 2019, pursuant to a registered underwritten public offering, ORIX USA sold its remaining ownership of 3,377,935 shares of our Class A common stock to the public at a price of $45.62.

Class A common stock

During the nine months ended December 31, 2019, 9,145 shares were issued to non-employee directors, and 5,992,399 shares were converted from Class B to Class A. During the nine months ended December 31, 2018, 6,570 shares were issued to non-employee directors, and 2,020,474 shares were converted from Class B to Class A. As of December 31, 2019, there were 43,533,269 Class A shares held by the public and 36,724 Class A shares held by non-employee directors.

Class B common stock

Each share of Class B common stock may be converted into one share of Class A common stock at the option of its holder and will be automatically converted into one share of Class A common stock upon transfer thereof, subject to certain exceptions. As of December 31, 2019, there were 21,998,937 Class B shares held by the HL Voting Trust.

Dividends

Previously declared dividends related to unvested shares of $7,719 and $7,034 were unpaid as of December 31, 2019 and 2018, respectively.

Stock subscriptions receivable

Employees of the Company periodically issued notes receivable to the Company documenting loans made by the Company to such employees for the purchase of restricted shares of the Company.

Share repurchases

In February 2017, the board of directors authorized the repurchase of up to $50.0 million of the Company's Class A common stock. In May 2017, the Company entered into a stock buyback program with a third-party financial institution to purchase shares of common stock. In July 2018, the board of directors authorized the repurchase of up to an additional $100 million of the Company's common stock.

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During the three months ended December 31, 2019 and 2018, the Company repurchased 1,350 and 53 shares, respectively, of Class B common stock, to satisfy $65 and $2 of required withholding taxes in connection with the vesting of restricted awards, respectively. During the three months ended December 31, 2019 and 2018, the Company repurchased an additional 97,956 and 370,728 shares of its outstanding common stock, respectively, at a weighted average price of $44.12 and $40.33 per share, excluding commissions, for an aggregate purchase price of $4,322 and $14,952, respectively.

During the nine months ended December 31, 2019 and 2018, the Company repurchased 610,943 and 133 shares, respectively, of Class B common stock, to satisfy $29,349 and $6 of required withholding taxes in connection with the vesting of restricted awards, respectively. During the nine months ended December 31, 2019 and 2018, the Company repurchased an additional 632,353 and 1,480,869 shares of its outstanding common stock, respectively, at a weighted average price of $43.98 and $46.71 per share, excluding commissions, for an aggregate purchase price of $27,809 and $69,169, respectively.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). We adopted the standard effective April 1, 2019, using the modified retrospective approach applied as of the beginning of the period of adoption. The Company elected to utilize transition guidance within the new standard that permits us to (i) continue to report under ASC 840 guidance for comparative periods consistent with previously issued financial statements; and (ii) carryforward our prior conclusions about lease identification, classification, and initial direct costs. The most significant impact of this adoption relates to the recognition of right-of-use ("ROU") assets and liabilities for all leases classified operating leases when the Company is the lessee in the arrangement. Currently, the Company does not have any lessor arrangements; therefore, adoption of the standard did not impact our accounting.

We assess whether an arrangement is or contains a lease at the inception of the agreement. ROU assets represent our right to use underlying assets for the lease term and lease liabilities represent our obligation to make lease payments arising from leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of future lease payments over the lease terms utilizing the discount rate implicit in the leases. If the discount rate implicit in the leases is not readily determinable, the present value of future lease payments is calculated utilizing the Company’s incremental borrowing rate, which approximates the interest that the Company would have to pay on a secured loan. The Company elected to utilize a portfolio approach and applies the rates to a portfolio of leases with similar terms and economic environments. The terms of our leases used to determine the ROU asset and lease liability account for options to extend when it is reasonably certain that we will exercise those options, if applicable. ROU assets and lease liabilities are subject to adjustment in the event of modification to lease terms, changes in probability that an option to extend or terminate a lease would be exercised and other factors. In addition, ROU assets are periodically reviewed for impairment.

Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.

The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.

On adoption, the Company recognized the present value of its existing minimum lease payments as a $136.9 million ROU asset and a $152.3 million lease liability. The difference between the ROU asset and the lease liability on adoption primarily arises from previously recorded deferred rent, which was effectively reclassified to the ROU asset on adoption. As a result, there was no impact to retained earnings in the Consolidated Balance Sheets.

Lessee Arrangements

Operating Leases

We lease real estate and equipment used in operations from third parties. As of December 31, 2019, the remaining term of our operating leases ranged from 1 to 17 years with various automatic extensions.

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The following table outlines the maturity of our existing operating lease liabilities on a fiscal year-end basis as of December 31, 2019.

		Operating Leases
Remaining 2020		$	7,928
2021		27,990
2022		23,595
2023		19,587
2024		14,787
Thereafter		87,024
Total		180,911
Less: present value discount		(30,754		)
Operating lease liabilities		$	150,157

As of December 31, 2019, the Company entered into three additional office space operating leases that have not yet commenced, for approximately $32.0 million. These operating leases will commence before fiscal year 2021 with lease terms of 6 to 16 years.

Lease costs

		Three Months Ended December 31, 2019				Nine Months Ended December 31, 2019
Operating lease expense		$	6,466			$	21,729
Variable lease expense (1)		2,999				12,675
Short-term lease expense		114				195
Less: Sublease income		(48		)		(145		)
Total lease costs		$	9,531			$	34,454

(1)	Primarily consists of payments for property taxes, common area maintenance and usage based operating costs.

Weighted-average details

		December 31, 2019
Weighted-average remaining lease term (years)		9
Weighted-average discount rate		4.1	%

Supplemental cash flow information related to leases:

		Nine Months Ended December 31, 2019
Operating cash flows:
Cash paid for amounts included in the measurement of Operating lease liabilities		$	17,970
Non-cash activity:
Change in operating right-of-use assets due to remeasurement		$	5,883

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The Company has been named in various legal actions arising in the normal course of business. In the opinion of the Company, in consultation with legal counsel, the final resolutions of these matters are not expected to have a material adverse effect on the Company’s financial condition, operations and cash flows.

The Company also provides routine indemnifications relating to certain real estate (office) lease agreements under which it may be required to indemnify property owners for claims and other liabilities arising from the Company’s use of the applicable premises. In addition, the Company guarantees the performance of its subsidiaries under certain office lease agreements. The terms of these obligations vary, and because a maximum obligation is not explicitly stated, the Company has determined that it is not possible to make an estimate of the maximum amount that it could be obligated to pay under such contracts. Based on historical experience and evaluation of specific indemnities, management believes that judgments, if any, against the Company related to such matters are not likely to have a material effect on the consolidated financial statements. Accordingly, the Company has not recorded any liability for these obligations as of December 31, 2019 or March 31, 2019.

There have been no material changes outside of the ordinary course of business to our known contractual obligations, which are set forth in the table included in Item 7 in our 2019 Annual Report.

The Company’s reportable segments are described in Note 1 and each are individually managed and provide separate services which require specialized expertise for the provision of those services. Revenues by segment represent fees earned on the various services offered within each segment. Segment profit consists of segment revenues, less (1) direct expenses including compensation, travel, meals and entertainment, professional fees, and bad debt and (2) expenses allocated by headcount such as communications, rent, depreciation and amortization, and office expense. The corporate expense category includes costs not allocated to individual segments, including charges related to incentive compensation and share-based payments to corporate employees, as well as expenses of senior management and corporate departmental functions managed on a worldwide basis, including office of the executives, accounting, human capital, marketing, information technology, and compliance and legal. The following tables present information about revenues, profit and assets by segment and geography.    

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	Three Months Ended December 31,								Nine Months Ended December 31,
	2019				2018				2019				2018
Revenues by segment
Corporate Finance	$	201,137			$	183,965			$	490,707			$	462,893
Financial Restructuring	92,808				75,013				249,438				218,173
Financial and Valuation Advisory	39,570				39,035				116,529				111,941
Revenues	$	333,515			$	298,013			$	856,674			$	793,007
Segment profit (1)
Corporate Finance	$	58,495			$	62,388			$	138,611			$	146,287
Financial Restructuring	28,391				11,129				75,956				52,932
Financial and Valuation Advisory	7,163				6,302				24,384				20,386
Total segment profit	94,049				79,819				238,951				219,605
Corporate expenses (2)	26,033				17,576				78,005				61,059
Other (income)/expense, net	(1,039		)		(688		)		(3,787		)		(3,301		)
Income before provision for income taxes	$	69,055			$	62,931			$	164,733			$	161,847

(1)	We adjust the compensation expense for a business segment in situations where an employee residing in one business segment is performing work in another business segment where the revenues are accrued. Segment profit may vary significantly between periods depending on the levels of collaboration among the different segments.

(2)	Corporate expenses represent expenses that are not allocated to individual business segments such as office of the executives, accounting, information technology, compliance, legal, marketing, and human capital.

	December 31, 2019				March 31, 2019
Assets by segment
Corporate Finance	$	433,663			$	403,928
Financial Restructuring	167,357				184,364
Financial and Valuation Advisory	127,246				127,744
Total segment assets	728,266				716,036
Corporate assets	810,364				709,876
Total assets	$	1,538,630			$	1,425,912

	Three Months Ended December 31,								Nine Months Ended December 31,
	2019				2018				2019				2018
Revenues by geography
United States	$	294,083			$	228,825			$	740,520			$	643,111
International	39,432				69,188				116,154				149,896
Total revenues	$	333,515			$	298,013			$	856,674			$	793,007

	December 31, 2019				March 31, 2019
Assets by geography
United States	$	1,052,168			$	1,021,975
International	486,462				403,937
Total assets	$	1,538,630			$	1,425,912

On January 23, 2020, the Company's board of directors declared a quarterly cash dividend of $0.31 per share of Class A and Class B common stock, payable on March 16, 2020, to shareholders of record on March 5, 2020.

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(1)	We adjust the compensation expense for a business segment in situations where an employee residing in one business segment is performing work in another business segment where the revenues are accrued. Segment Profit may vary significantly between periods depending on the levels of collaboration among the different segments.

(2)	Corporate expenses represent expenses that are not allocated to individual business segments such as office of the executives, accounting, information technology, compliance, legal, marketing, and human capital.

(3)	Fee Events applicable to FVA only; a Fee Event includes any engagement that involves revenue activity during the measurement period with a revenue minimum of $1,000. References to closed transactions should be understood to be the same as transactions that are “effectively closed” as described in Note 3 of our Consolidated Financial Statements.

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(1)	Represents a deposit in support of a letter of credit issued for our Frankfurt office.

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(1)	In July 2018, the board of directors authorized the repurchase of up to an additional $100 million of the Company's common stock (incremental to the $50 million repurchase program that was approved by our board in February 2017). The shares of Class A common stock repurchased through this program have been retired.

(2)	Includes 302 unvested shares of Class B common stock at an average price per share of $48.57, which were withheld from employees to satisfy tax withholding obligations resulting from the vesting of certain restricted stock awards.

(3)	Includes 1,048 unvested shares of Class B common stock at an average price per share of $48.20, which were withheld from employees to satisfy tax withholding obligations resulting from the vesting of certain restricted stock awards.

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