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Houlihan Lokey Inc (HLI) Q4 2019 Earnings Call Transcript

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Houlihan Lokey Inc (NYSE: HLI)
Q4 2019 Earnings Call
May. 8, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Houlihan Lokey's Fourth Quarter Fiscal 2019 Earnings Conference Call. (Operator Instructions) Please note that this conference is are -- call is being recorded today, May 8, 2019.

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

Christopher Crain -- General Counsel

Thank you, operator, and hello, everyone. By now, everyone should have access to our fiscal year and fourth quarter 2019 earnings release, which can be found on the Houlihan Lokey website at www.hl.com in the Investor Relations section. Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward-looking statements.

These forward-looking statements, which are usually identified by use of words such as will, expect, anticipate, should or other similar phrases, are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and therefore, you should exercise caution when interpreting and relying on them. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.

We encourage investors to review our regulatory filings, including the Form 10-K for the fiscal year-ended March 31, 2019, 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.

Scott Beiser -- Chief Executive Officer

Thank you, Christopher. Hello, everyone, and welcome to our fourth quarter fiscal 2019 earnings call. We are pleased to report record revenues for fiscal 2019 of $1.084 billion and record adjusted earnings per share of $2.87. For the quarter, we achieved $291 million in revenues and $0.86 in adjusted earnings per share, both records for the fourth quarter. Our Corporate Finance and Financial Advisory businesses both reported record annual revenues in a Financial restructuring business reported its second-highest annual revenues, eclipsed only by fiscal 2010 when we were in the middle of the global recession.

Our results in fiscal 2019 and confidence in our outlook positioned our board to raise our quarterly dividend by approximately 15% from $0.27 to $0.31 per share. During fiscal 2019, we achieved several accomplishments. We added a net of 16 Managing Directors versus a net of only for Managing Directors in fiscal 2018. These new Managing Directors were added through a combination of internal promotions, lateral hires and acquisitions. We continue to invest in our corporate services group adding several new corporate officers in finance and accounting, human capital, marketing and office management.

We acquired Quayle Munro and BearTooth in early fiscal 2019. Quayle Munro added new investment banking capabilities in data and analytics, and BearTooth established a starting point for us in the private funds advisory business. We launched HL Finance, which continue to fill out our portfolio of financing advisory products offered to our clients, through our capital markets business. Our Financial Restructuring business were done a significant number of international mandates. We focused on growing our dispute resolution and transaction advisory practice in our FAS business segment and succeeded in both goals.

We increased our revenues outside of the U.S. to nearly 20% of total firm revenues. Finally, we hold our #1 position in the U.S. in M&A transactions, Financial Restructuring and fairness opinions as ranked by Thomson Reuters. I would like to turn now to current business trends we have seen across our 3 product lines. Fourth quarter fiscal 2019 so a return to a healthy stock and bond market after a very poor fiscal third quarter. The last few quarters of market volatility helped caused a double-digit decline in a number of reported global deals in the last 12 months.

Despite this decline in market activity, Houlihan Lokey once again reported an increase in the number of transactions closed, a testament to our continued success in growing market share as we build an industry-leading global, mid-cap investment banking platform. Overall, Corporate Finance reported $607 million in revenues for the fiscal year and $144 million in revenues for the fourth quarter. And despite volatile equity and debt markets over the last 12 months, our capital markets business achieved another record level of revenues. As we head into fiscal 2020, new business activity remains healthy across industry sectors and geographies.

Though a word of caution. We are seeing transactions take somewhat longer to close, and we have seen a slight uptick in transactions being put on hold or not closing. However, these mini trends have come and gone over the last few quarters, and thus, may affect individual quarter results but generally not annual results. Consistent with previous years, in fiscal 2020, we expect to continue to experience seasonality in our quarterly revenues for Corporate Finance. The second half of our fiscal year is normally much higher than the first half, and the first fiscal quarter is normally our weakest quarter.

With respect to the distressed market environment, even with global corporate default rates at their lowest levels in years, there are always pockets of opportunity for our market leading financial restructuring practice. We are seeing an expanding list of companies globally which are experiencing some level of distress. This enabled our Financial Restructuring business to generate $318 million in revenues for fiscal 2019, an 8% increase over fiscal 2018. We believe the size of our restructuring team, our worldwide reputation and sophisticated and creative advice have allowed us to achieve annual revenues of approximately $300 million consistently over the last 3 years despite low default rates.

Furthermore, the combination of highly skilled restructuring bankers and highly knowledgeable industry bankers resulted in more debtor revenues versus creditor business in fiscal 2019 for the first time in recent history. For the quarter, Financial Restructuring reported $100 million in revenues. This is at the higher end of our more typical region quarterly revenues of between $50 million and $100 million. As transaction fees and Financial Restructuring can be lumpy, we anticipate continued quarterly revenue variability in Financial Restructuring for fiscal 2020.

Our Financial Advisory business continued to grow the number of fee events this fiscal year and also increase the average fee per event. Over the last several years, our FAS business has increased its capabilities adding new services and providing unique industry expertise to specific valuation tasks. These continued investment generated above average revenue growth for FAS in fiscal 2019. Financial Advisory services reported $159 million in revenues for the year and $47 million in revenues for the quarter, both records for the firm. Our FAS business continues to benefit from a healthy U.S. economy and recently resurgent stock market.

We continue to focus strategically and tactically on what we can do to enhance our business in our return to shareholders. We are cognizant of the volatility of the external markets and economies, and we believe we have built a business that can succeed in various market conditions. Over the last few years, Houlihan Lokey has experienced growth in corporate finance, growth in financial advisory and growth in financial restructuring. We believe the resilience of our diversified business model will continue to bode well for our shareholders, employees and clients.

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

Lindsey Alley -- Chief Financial Officer

Thank you, Scott. Revenues in Corporate Finance were $144 million for the quarter, up 11% when compared to the same quarter last year. We closed 64 transactions in the quarter compared to 56 in the same period last year, although our average transaction fee on closed deals was slightly lower this quarter versus last year. Financial Restructuring revenues were $100 million for the quarter, a 28% increase from the same quarter last year.

We closed 27 transactions this quarter compared to 26 transactions in the same period last year, and our average transaction fee on closed deals was significantly higher compared with the same quarter last year. Our Financial Restructuring business often has large fee events, and this quarter's strong performance was partly due to timing on a handful of those large fee events. In Financial Advisory Services, revenues were $47 million for the quarter, a 27% increase from the same quarter last year and a record quarter for FAS. We worked on 605 fee events in the quarter compared to 602 in the same period last year with several notable larger fee transactions that resulted in a very strong quarter.

Few business activities in FAS remained steady, and we have seen some improvements in Managing Director productivity in our FAS business over the last several quarters. Turning to expenses. Our adjusted compensation expenses were $177 million for the quarter versus $153 million for the same period last year. This quarter, in addition to adjusting for pre-IPO grants, we also adjusted for the from consideration related to acquisition agreements associated primarily with our last 2 2019 -- fiscal 2019 acquisitions.

This deferred consideration primarily in the form of retention payments will continue through fiscal year 2023, and it's contingent on both employment and in some cases, the performance of the operating business we acquired. As a reminder, fiscal 2020 will be the last vesting year of our pre-IPO grants. The adjusted compensation ratio was 60.8% in the quarter and 60.9% for the fiscal year both within our targeted range of between 60.5% and 61.5%. Our adjusted non-compensation expenses in the fourth quarter were $38 million, up significantly when compared with the fourth quarter last year.

The increase in non-comp expenses is partially due to the new accounting pronouncement that clarifies the expense reimbursements we included in revenues. Also driving higher non-compensation expenses were increase in global rent expense, an increase in headcount and investments in technologies. We ended fiscal 2019 with an adjusted non-compensation ratio of 15.1%, just above our targeted range of between 14% and 15%. This quarter, we adjusted out of our non-compensation expenses approximately $1.6 million of acquisition-related amortization.

We will continue to adjust for this and other similar types of expenses in the quarters in which they occur. Our adjusted other income and expense line item resulted in a gain for the quarter of approximately $1.5 million versus a gain during the same period last year of $1.1 million. Most of our income in this line item for the quarter was a result of interest income on our cash balances throughout the quarter. Our GAAP effective tax rate for the quarter was 27.5%, which resulted in an adjusted effective tax rate for the fiscal year of 28.5% toward the high end of our targeted range of between 27% and 29%.

As a reminder, a portion of the deferred stock that we issue as compensation to employees vests in May during the first quarter of our fiscal year. This is expected to have a significant effect on our GAAP effective tax rate next quarter, which we will adjust for in order to get to a normalized effective tax rate for the quarter. Turning to the balance sheet and uses of cash. As at the quarter end, we had $411 million of unrestricted cash and equivalents and marketable securities. We expect this number to decline significantly in the first quarter of fiscal 2020, as in May, we pay the majority of our cash bonuses to our financial staff.

Finally, in May 2019, we intend to issue net new stock of approximately $41 million to our employees as part of their compensation for fiscal 2019. As in previous years, we intend to buy back enough shares in the open market over the next few quarters to offset the dilution associated with this new stock.

With that, operator, we can open the line for questions.

Operator -- Chief Financial Officer

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

Brian McKenna -- Ananlyst

Hi thanks. This is Brian Mckenna from Devin. I appreciate your comments on the backdrop, but I'm curious what you're seeing and hearing from financial sponsor specifically. Has there been any material change in dialogues or activity with these clients after the year in volatility followed by the significant recovery in the market to start the year?

Scott Beiser -- Chief Executive Officer

Yes. I think earlier, we see occasional acceleration of their interest level of new deals. Sometimes, it slows down, but I think over the long haul, really have seen that continue to be very active global basis across different industry sectors, and we still see quite a bit of strength in the financial sponsor marketplace, notwithstanding the decline we saw in the stock market in December and the recovery really since then.

Brian McKenna -- Ananlyst

Got it. And then just on restructuring, it was another solid year. I think revenues were up 8% in the business. I appreciate the commentary in the prepared remarks, but could you give any specifics on the backlog today, say, relative to a year ago? I'm just trying to get a sense of potential contribution from this business in the coming year.

Scott Beiser -- Chief Executive Officer

So we don't discuss specific backlog, but I would say the environment has been turning more positive for restructuring probably over the last couple of quarters, and it continues to feel like a relatively healthy environment for restructuring notwithstanding still we're in a low default rate and are not experiencing what we've seen obviously in different recessionary periods, but we've been very pleased and be able to produce some very strong financial results over the last couple of years in a relatively consistent low default environment.

Operator -- Chief Executive Officer

Next, we'll move to Michael Needham with Bank of America Merrill Lynch.

Michael Needham -- Analyst

Good afternoon. So the first one I have is the capital markets business. It seems like a really interesting area given the relationships you've got with financial sponsors. You did a pretty big transaction this quarter, I think with (inaudible) financing. Just wondering if you could talk about the steps you want to make it with that business over the next couple of years, and what do you think the markets moving more toward using advisors to source alternate financing.

Scott Beiser -- Chief Executive Officer

So we continue to be very bullish on that part of our market. I think we will continue to see it grow, and we will continue to develop incremental skills along different components of the capital structure. We'll continue to develop incremental avenues from a geographical standpoint to provide services to clients, and we'll continue to grow that business also along the sector lines from a standpoint of what we've said in the past may regards the biggest still competitor that we have is clients that don't think they need to hire a financial advisor like our firm or others. And we think we're in a very early secular days for ourselves and the industry in general, and we're -- the whole agency and, if you might, financing services can go in the foreseeable future.

Michael Needham -- Analyst

Okay. Great. And then just on the kind of a broader M&A environment. The -- it sounds like things are so reasonably healthy in terms of the part of the market that you guys are in. It did look like they -- like for the data we track and some of the peer companies, things do appear to be slowing down a little bit. I'm just curious if in kind of the U.S. middle market, are you seeing a similar slowdown or not as much of change?

Scott Beiser -- Chief Executive Officer

We're really in reading the same data that you do, and there have been statistics, both probably in the U.S. and globally in terms of number of M&A deals have been trending downward for the last couple of quarters, maybe in the last couple of years. But in terms of the volume of activity, dialogues that we have with the executives in the C suite to the financial sponsors, we continue to see that it's a healthy environment.

Michael Needham -- Analyst

OK great. That's all I've got. Thank you

Scott Beiser -- Chief Executive Officer

Thanks Michael.

Operator -- Chief Executive Officer

Next, we'll move to Ken Worthington with JPMorgan.

Ken Worthington -- Analyst

Hi good afternoon thanks for taking my questions. Maybe first, you mentioned that transactions were getting delayed somewhat and some deals were put on hold. I missed this part. I assume that it was just referring to the March quarter. And we heard from -- we've been hearing that pricing between buyers and sellers was more of a focus in the March quarter than we've seen in the past. Is that something that maybe contributed to either the delay or the slowdown in transactions that you saw? And then since it's already kind of almost mid-May, to what extent our conversations really normalizing here given the improvements in broader equity market and rate conditions?

Scott Beiser -- Chief Executive Officer

So at this point, I don't think we see any brand-new, longer-term trends in terms of percentage of deals that will close, durations that they take. And in any given time that we've seen this over the months of the last couple of quarters that for a variety of reasons in different periods, we just seem to have certain subset of deals that a little longer to close or maybe will get delayed in definitely will not close. And likewise, we see other periods where they seem to get accelerated and they closed it at a more rapid pace. So at this juncture, we don't attribute to anything that's of a longer-term nature. Eventually, that might occur.

But at this point, I think it's just kind of the ebbing and flowing of the marketplace. I think and back to the fact that we are in corporate finance focused on the mid-cap market space, whether there's just so many more potential deal transactions that we and our peers can and do work on, these are small changes that typically that you find in terms of a number of delayed deals or deals that close. It's not something, like I said, that at this juncture, we see long-term lengths to it.

Ken Worthington -- Analyst

Okay. Fair enough. And then I'll just follow up on an earlier question. The restructuring business. I think activity levels continue to impress me as well, and I'm trying to maybe better understand why the restructuring business, at least from a Houlihan revenue perspective has been resilient as it has been. You've mentioned I think in the prepared remarks, non-U.S. opportunities. Is that one of the drivers of the resiliency that you guys are seeing in your business? And then I appreciate her desire to not talk about a pipeline, but given it's a low default rate environment, anything that you can do to help us think about what the outlook might look like over the next 12 to 18 months? Because despite your comments, I'm still just sort of grasping for how to think about that.

Scott Beiser -- Chief Executive Officer

Yes. I think our comments on the restructuring marketplace today are not meaningfully different than maybe the last quarter or 2. It is being driven by a host of reasons. In no particular order, but what I would say is there is just certain number of companies that do technology disruptors that is causing problems with their business plans that ultimately gets to some level of distress, and we've been able to get hired on many of those circumstances.

In certain cases, there are just more companies globally than there ever was that has some level of high-yield debt, and we've been able to reach far and wide across, this point, dozens and dozens of countries and that's something that's probably different and where it was 10 or 20 years ago. The slight changes in interest rate, as I've mentioned in the past, have not been detrimental to our healthy M&A business but have been somewhat healthy to cost distress in companies that might already been considered highly leveraged. You always have some companies for different reasons, just maybe don't have the right management team, the right business plan, could be some litigation matters.

The whole host of reasons that there's always, as we've described, pockets of opportunities. And I guess I'd say that very similar to what we've seen by the last couple of quarters, by no means, we have robust restructuring environment, but we've been very proud and happy on what our groups have been able to succeed in this low default rate years the last couple years.

Ken Worthington -- Analyst

Okay. Great. I appreciate the color. Thank you.

Operator -- Analyst

(Operator Instructions) And we'll move next to Richard Ramsden with Goldman Sachs.

Richard Ramsden -- Analyst

Hi guys. So perhaps we could talk a little bit about the competitive environment. We've obviously had a number of the large banks that talked about growing that middle market banking efforts. Are you seeing any impact either in terms of variability to hire people? Or are you seeing any impact on the competitive environment when you've got (inaudible) of the business so far?

Scott Beiser -- Chief Executive Officer

It's still a competitive environment. I won't describe because we've seen any meaningful change coming from the commentary of both racket institution saying that they are wanting to get to the mid-cap space. The competition we still have, generally speaking, either in trying to hire people or to get hired on clients is, for the most part, the same competitive folks that we've had in the last year or 2 or 3. It's not -- there's not new players that have meaningfully changed our ability to get hired on projects or to hire key MDs.

Richard Ramsden -- Analyst

Okay. And then secondly, can you just talk a little bit about the outlook for the noncomp ratio. I think if we adjust for the accounting change, it came in at about 11% I think, which is well below your target range. Is there anything in there that's one-off in nature or should we think about it normalizing back into your 14% to 15% range over time?

Lindsey Alley -- Chief Financial Officer

Yes. I think we intend to keep the 14% to 15% at this point. There are -- there are some incremental cost to a relatively large London move that will continue into fiscal 2020. I do expect that the noncomp ratio will likely be toward the higher end of that range similar to this year. But that's, I think, given how early we are in the year, that's our best guess. There were no other onetime items that occurred in fiscal 2019 that come to mind.

We did continue to make significant investments in technology and our corporate infrastructure, and we closed 2 acquisitions early part of the year which tend to result in a higher TME for us. But I think that 2020, we'll continue to see some inflation and on non-comp expenses. And as we sit here today, I would estimate, from a modeling standpoint, that we'll be at the high end of that range.

Richard Ramsden -- Analyst

Okay. All right thanks very much.

Operator -- Analyst

We'll move next to Michael Brown with KBW.

Michael Brown -- Analyst

Hi good afternoon guys. Just wanted to touch on the FAS business. As I saw that your revenues were up 27% year-over-year, very strong results. And just want to see if you can provide some additional color to really what's driving that strength in that business. Is it kind of shift to higher fee transactions, just overall market share gain, and how should we think about the persistency of the growth in that business?

Scott Beiser -- Chief Executive Officer

That's a very big market and broadly defined business valuations. And I think our charge has always been fighting those niche areas where we can and we want to pursue. And in any given time, we are focused on a few subproducts. We've continued to try to implement and strengthen the utilization of industry expertise, still predominantly a U.S.-centric business, but I would just described, we have gotten better productivity of our employees.

We've been a little bit more successful on some higher fee projects. And most of the subproduct service areas that we've been operating in had a good year. There was nothing specific or unique that I would describe that on an extraordinary standpoint. I think just more things probably worked out in fiscal '19, and maybe in previous years, but we've also continue to do it by both hiring senior people and junior people, and it is a business to continue to grow. We will need to continue to hire and bring in key individuals over time.

Michael Brown -- Analyst

And just to hit on the hiring front there. I didn't know there was MD count tick down in that business. Is there anything to read into their, or did you just have some new hires that will be onboarded shortly? Just want to -- I need different color there will be helpful.

Scott Beiser -- Chief Executive Officer

Yes. Nothing in particular. At any given year, we'll always have a certain number of retirements. There are a certain number of departures that we continue to add through hirings there. And what you saw, most of our highly, which has been the case the last couple of years, has not been in corporate finance, and there's not been, at least on the statistical basis, generally big swings either increases or decreases in MD head count or Financial Restructuring or FAS.

Michael Brown -- Analyst

Great. And then just on corporate finance. I mean we've heard from some of your peers at the second half of the calendar year is just expected to be stronger than the first half, and part of it is just being that they kind of soft first half or expecting kind of softer first soft first half. Obviously, your the competition in the market size transaction can give you kind of differentiated results. But as you think about I guess you're fiscal second and third quarter results, would you expect to see a similar trend, and I guess is that kind of being -- what's your expectations for the fiscal first quarter?

Scott Beiser -- Chief Executive Officer

So 2 points I'd make. Some of our peers were more focused on larger deals, I think, or more benefited or harmed by a significant swings in the public stock market, which is what clearly happened in calendar 2018. It has less of an impact in our business due to the size of deals we do, the number of deals that are private versus public. So we typically won't necessarily see the same swings.

But having said that, if you go through the last couple of years, where we have published quarterly results, in almost all circumstances in the second half of our years, always better than the first half of the year. As I said, the first fiscal quarter is always the slowest. Some of that is particular unique issues and how we run and manage the business. Some of it's tax motivated when you get into the December time period. But I would expect we'll have similar types of seasonality that we've had in the past.

Michael Brown -- Analyst

Thank you for the color.

Operator -- Analyst

And we'll move next to Jim Mitchell with Buckingham Research is.

Jim Mitchell -- Analyst

Good afternoon. Maybe just can you talk a little bit about -- I know Europe has been a big focus of growth, and obviously, it's a little tough or slow to do it with MD hires versus acquisitions, which will accelerate. Just trying to get a sense of given the weakness over there. Are you seeing more opportunities for acquisitions to jump start the growth over there? Just any color there on how you're investing in that business will be great.

Scott Beiser -- Chief Executive Officer

So long term, we are still very excited about what we can achieve in Europe, but we've said it will take many, many years to get to a place that will probably feel like we really achieved our full amount of success that we've made a lot of good headwind the last couple of years. Obviously, we've made a number of acquisition to get us there. We're always, I would say, on the prowl on looking and talking to different types of companies somewhere in Europe, somewhere in the U.S., et cetera.

But short term, remember, we've added quite a bit through the acquisitions that we did in Leonardo and McQueen and Quayle Munro and BearTooth, so we're still digesting all of that. We've made, I think, great headways with those businesses. And if the right thing comes out, yes, we're still open to do future acquisitions in the areas as well as future hiring.

Jim Mitchell -- Analyst

Do you have any uses of cash. Is it still acquisitions first priority? Or are you sort of signaling that maybe you need to digest and maybe there's cash to build this year. Because it looks like cash balances were kind of flat year-over-year I assume because of the acquisitions.

Scott Beiser -- Chief Executive Officer

I'll let Lindsey talk about. Just in total cash utilization, I think in the digest comment, we've got more digesting to do in Europe, but that doesn't mean that we have the same level of digesting to do in the U.S. or other parts of our firm. So I won't necessarily think that we have changed our focus or interest or intends on doing future acquisitions. That I think the comment on digesting is really applicable to Europe where the total size of our head count there has growing quite of rapidly in the last couple of years.

Lindsey Alley -- Chief Financial Officer

Yes. I think with respect to whether or not we believe we may accumulate some excess cash this year. The hope and the goal is to spend it on acquisitions after our dividends and after our share repurchases. And we believe that, that is absolutely positively the best way to return it to shareholders is to continue to grow the business through acquisitions given our historical success. And so if we see one that we didn't come to terms with, and we think is value-add to the business and we're trying to take it, we will absolutely do another acquisition this year, if it makes sense.

Jim Mitchell -- Analyst

That's really helpful. Maybe just one last quick question on the comp ratio. Any change in the comp ratio target of 60.5% to 61.5%?

Lindsey Alley -- Chief Financial Officer

No. We continue to maintain that as our long-term target compensation ratio.

Jim Mitchell -- Analyst

Great. Thanks.

Operator -- Analyst

(Operator Instructions) We'll move next to Jeffery Harte with Sandler O'Neill.

Jeffrey Harte -- Analyst

Good afternoon guys. Hey guys. Most of the questions have been answered. Just kind of couple cleanups. As far as the tax rate for 2020, should we be thinking of it as being similar to 2019?

Lindsey Alley -- Chief Financial Officer

I mean as we sit here in mid-May, that's probably a good way to model it. And there's a reason for me to believe that will change. Obviously, we've got a long way to go for the year, but I think a decent way to model it.

Jeffrey Harte -- Analyst

Okay. And in the non-comp. The dollar amount is kind of what I'm looking at, and the increase year-over-year in the fourth quarter was not nearly as much as kind of I was expecting or what the kind of run rate increases have been during the year. Taking the comp ratio guidance and keeping that in mind, as we look to next year, I mean, is this kind of a fourth quarter starting point, a decent place to be starting that $38 million kind of quarterly run rate on a dollar basis? Or was there anything unusual to kind of made the fourth quarter, dollar-wise, maybe not quite as high as next year as going to end up being.

Lindsey Alley -- Chief Financial Officer

We do have some seasonality in our noncomp expenses. We have a fair amount of marketing in some of the industry groups that occur kind of the middle half of the year of a second and third quarters. We do have (inaudible) expenses that run through specific quarters. So we do have some lumpiness in that business. So I think you have to look at it on an annual basis. The fourth quarter noncomp here happen to be toward the lower side of non-comp expense for the year, but that, I think, is driven more by when we spend the money versus what noncomp will look like next year.

Jeffrey Harte -- Analyst

Okay. Thank you.

Operator -- Analyst

(Operator Instructions) We have no further questions in our queue at this time. I'll turn the call back over to Mr. Scott Beiser for any closing or additional remarks.

Scott Beiser -- Chief Executive Officer

Thank you. And I want to thank you all for participating in our fiscal year and fourth quarter 2019 earnings call. And we look forward to updating everybody on our progress when we discuss our first quarter results for fiscal 2020 in the summer.

Operator -- Chief Executive Officer

That does conclude our conference for today, everyone. We do thank you for your participation. You may now disconnect your line.

Questions and Answers:

Duration: 37 minutes

Call participants:

Christopher Crain -- General Counsel

Scott Beiser -- Chief Executive Officer

Lindsey Alley -- Chief Financial Officer

Brian McKenna -- JMP Securities -- Ananlyst

Michael Needham -- Bank of America Merrill Lynch -- Analyst

Ken Worthington -- JPMorgan -- Analyst

Richard Ramsden -- Goldman Sachs -- Analyst

Michael Brown -- KBW. -- Analyst

Jim Mitchell -- Buckingham Research -- Analyst

Jeffrey Harte -- Sandler O'Neill -- Analyst

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