Lincoln International Inc.

11/06/2026 | Press release | Distributed by Public on 11/06/2026 16:09

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A. "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" included elsewhere in this report. The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this quarterly report and our audited financial statements and notes thereto included in our final prospectus dated May 19, 2026 and filed with the SEC on May 21, 2026 (the "Prospectus"). The financial data discussed below reflects the historical results of operations and financial position of Lincoln International, LP ("LILP"), our predecessor for accounting purposes, prior to our initial public offering ("IPO") and the organizational transactions pursuant to which the Parent became a holding company and the sole general partner of LILP (the "Organizational Transactions").
Overview
We are a global independent investment banking advisory firm focused on the private capital markets. As a leader in advising private equity and private credit investors, private company business owners and other senior executives, our globally integrated platform allows us to deliver comprehensive, sector-focused advisory services to clients across key areas of the economy. Our experienced professionals provide meaningful and differentiated expertise across our firm.
We operate our business through our two business segments: Investment Banking Advisory and Valuations and Opinions. Our Investment Banking Advisory business segment provides global mergers and acquisitions advisory, capital advisory, private funds advisory services, and other services. Our Valuations and Opinions business segment provides financial valuations of illiquid securities and fairness and other transaction opinions.
We continue to grow our firm across industries, service offerings, and geographies with the goal of delivering high quality services and advice to our clients. Our acquisition of Spurrier Capital Partners in April 2022 and TCG Corporate Finance in October 2024 expanded our M&A technology franchise. In October of 2025, we expanded further into the financial services sector through our acquisition of MarshBerry Holding Company, LLC ("MarshBerry", and such acquisition, the "MarshBerry Acquisition"), a global leader in investment banking advisory services, serving the insurance brokerage and wealth and retirement sectors through all stages of growth.
On May 21, 2026, we completed our IPO of 24,207,486 shares of Class A common stock at a price of $20.00 per share. The gross proceeds to the Company were approximately $484.1 million, before deducting underwriting discounts and commissions. In connection with the IPO, we completed certain Organizational Transactions. For additional information on the Organizational Transactions and IPO refer to Note 1 and Note 2 to our condensed consolidated financial statements included elsewhere in this report.
Basis of Presentation
The historical financial information for the three and nine months ended September 30, 2025 presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations reflects our business as a privately held partnership prior to the IPO. As such, LILP U.S.-based partner compensation, including semi-monthly draws, quarterly tax advances and annual performance incentives, was recorded as a reduction of equity on the balance sheet during these periods. Additionally, as a privately held partnership, LILP was not subject to U.S. federal income tax. Instead, each partner was individually liable for taxes on his or her share of LILP's income or loss.
In connection with the IPO, on May 19, 2026, we entered into the Fourth Amended and Restated Limited Partnership Agreement of Lincoln International, LP, by and among us, LILP, and the limited partners party thereto (the "LILP Partners"), and became the sole general partner of LILP. As the sole general partner of LILP, we control its business and affairs and, therefore, consolidated its financial results with ours for the three and nine months
ended September 30, 2026. In light of the LILP Partners' collective 65.0% equity interest in LILP at September 30, 2026, we reflect their interests as a noncontrolling interest in our consolidated financial statements. As a result, our net income, after excluding that noncontrolling interest, represents 35.0% of LILP's net income for the period from May 21, 2026 to September 30, 2026. Similarly, outstanding shares of our Class A common stock represented 35.0% of the outstanding equity interests of LILP as of September 30, 2026. In connection with the IPO, we also entered into a Tax Receivable Agreement (the "TRA" or "Tax Receivable Agreement", as defined in the Prospectus) that allocates 85% of certain tax benefits of Parent to certain LILP Partners and other eligible parties named therein. Finally, our GAAP compensation expense changed for certain LILP partners following the IPO, as this cost is now recorded on our condensed consolidated statement of comprehensive income (loss) as compensation and benefits. Additionally, as a public company, we are subject to U.S. federal income taxes, which are reported in our financial statements.
Business Environment and Outlook
Our business is affected by a variety of factors, including general conditions in the financial markets as well as economic and geopolitical conditions. Changes in global economic conditions including inflation and interest rates, the imposition of trade barriers and tariffs, ongoing negotiations with major U.S. trading partners, changes in U.S. tax regulations and geopolitical events such as the military conflicts involving the Middle East and between Russia and Ukraine can materially affect our business. We believe that while these events may continue to add uncertainty to the business environment, we remain well positioned for the future due to our experienced management team and focused client coverage. See "Risk Factors" for a discussion of some of the factors that can affect our performance. Accordingly, revenue and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from quarter to quarter and year to year.
Recent Acquisition
MarshBerry
On October 31, 2025, we consummated the MarshBerry Acquisition. The purchase consideration included cash of $234.1 million subject to customary post-closing adjustments, partnership units in LILP with an estimated fair value of $15.1 million and up to $43.8 million in potential future earnout payments, a portion of which was determined to represent contingent consideration with an estimated fair value of $8.8 million. We funded the purchase price from debt financing under the Credit Agreement and cash on hand. The contingent consideration will be paid to the sellers upon achievement of specified revenue targets over a four-year earnout period.
Our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2026, include the results of operations of the MarshBerry Acquisition. As a result, our results of operations for the three and nine months ended September 30, 2026 may not be directly comparable to the three and nine months ended September 30, 2025.
Components of Results of Operations
Revenues
Revenues consist of client revenues and reimbursed expenses. Client revenues are earned by providing financial advisory services to our investment banking clients and portfolio valuations and transaction opinions to our valuations and opinions clients. Reimbursed expenses include amounts reimbursed by our clients for costs incurred in connection with client engagements.
Client Revenues
We generate client revenues primarily from advisory services provided under individually negotiated engagement letters that set forth our fee structure. Client revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers, generally when the performance obligation set forth in the engagement letter has been satisfied. The amount and timing of fees we recognize can vary based on the type of engagement. We follow specific guidelines to ensure that our revenue is recognized in accordance with ASC 606, Revenue from
Contracts with Customers. In general, client revenue is recognized when the performance obligation outlined in the engagement letter has been satisfied.
Reimbursed Expenses
In performing our services for clients in both segments, we incur transaction-related expenditures, such as travel and professional fees, that may be reimbursable under our engagement letters. We record these expenditures as incurred and record the corresponding reimbursement revenue when the performance obligation is satisfied. Client expense reimbursements are presented as a component of revenues in the condensed consolidated statements of comprehensive income (loss).
Investment Banking Advisory Revenues
Our Investment Banking Advisory segment advises public and private institutions on buy-side and sell-side M&A transactions, debt and minority equity financings, primary and secondary fundraising, and special situations and restructuring transactions.
Segment revenues consist principally of success fees, which we recognize upon completion of our performance obligation and which typically occurs at closing; milestone fees, which we recognize upon reaching a specified contractual outcome; and, for a smaller number of engagements, non-refundable initial retainer fees, which are initially deferred and recognized over the assessed average life of an engagement. See the section entitled "Critical Accounting Estimates-Revenue Recognition" included in the Prospectus for a more detailed discussion.
Valuations and Opinions Revenues
Our Valuations and Opinions segment provides valuations of companies, illiquid debt and equity securities, intellectual property and other assets and liabilities used by clients for financial reporting, tax reporting and other purposes. The segment also renders fairness opinions, solvency opinions and other financial opinions, provides expert witness testimony; and advises buyers and sellers on the resolution of post-closing purchase price adjustments and post-acquisition disputes.
Portfolio valuation fees and initial retainers related to fairness opinions are recognized when invoiced, at which point the valuation or opinion has been delivered and the related performance obligation satisfied, and no portion of the fee is deferred. Portfolio valuations are performed at intervals ranging from daily to annually depending on client needs which provide a recurring revenue base that is less correlated to a transaction. See the section entitled "Critical Accounting Estimates-Revenue Recognition" included in the Prospectus for a more detailed discussion.
Operating Expenses
Our operating expenses are broadly classified as either compensation and benefits or non-compensation expenses. Expenses are recorded on the condensed consolidated statements of comprehensive income (loss) when accrued, inclusive of expenses subsequently reimbursed by clients in accordance with ASC 606.
Compensation and Benefits
Our compensation and benefits expenses, which account for the majority of our operating expenses, consist of base salary, benefits and payroll taxes, annual incentive compensation and sign-on bonuses. Base salary, benefits and payroll tax expenses are driven by headcount and are paid ratably throughout the year. Annual incentive compensation is discretionary, is accrued monthly, and is in the form of cash bonuses awarded in the current year or within three months of the following year with respect to current year performance, and deferred cash and equity awards, which are contingent upon a required period of service and contain amounts subject to clawback. Management determines these amounts based on revenues earned, headcount and hiring plans, individual and firm performance, and the competitive nature of the prevailing investment banking labor market, including the cost of recruiting new managing directors. As a result, our compensation and benefits expenses may fluctuate materially in any particular period.
Non-compensation Expenses
Our non-compensation expenses include costs for rent and occupancy of our leased office spaces, travel and related expenses, professional services and development, technology and information services, depreciation and amortization, and other operating expenses. The majority of our non-compensation expenses fluctuate in response to changes in headcount.
Although we have previously made significant investments in our real estate footprint in all of our major offices, we expect our rental and occupancy costs to continue to grow as our business expands.
We also expect to incur additional annual expenses related to new requirements applicable to us as we transition to operating in a public company environment, including but not limited to directors' fees and insurance, transfer agent fees, SEC reporting requirements, increased auditing and legal fees and similar expenses as well as the hiring of additional functional staff, including accounting and finance, investor relations, legal and administrative teams. In addition, we anticipate higher technology-related costs, including increased AI token usage and related fees.
Other Income (Expense), Net
Other income (expense), net includes interest income earned on cash and cash equivalents and investment securities, interest expense, commitment fees, and amortization of debt issuance costs on borrowings under our Credit Facilities.
Provision for Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes ("ASC 740"). Because Parent is a holding company whose principal asset is an interest in LILP, a portion of our U.S. income before income taxes is attributable to our noncontrolling interest and not subject to U.S. federal or state income taxes at the Company level, which would generally cause the Company's effective tax rate to be less than the U.S. federal statutory income tax rate. Prior to the IPO, the Company was not subject to U.S. federal or state income tax. Rather, each of LILP's partners were individually liable for such taxes on their share of LILP's taxable income. Accordingly, the effective tax rates for pre-IPO financial reporting periods are not comparable to subsequent periods. See the section entitled "Critical Accounting Policies and Estimates" included in the Prospectus for a more detailed discussion of our accounting for income taxes.
Results of Operations
The following is a discussion of our consolidated results of operations for the three and nine months ended September 30, 2026 and 2025. For a more detailed discussion of the factors that affected the revenues and operating expenses of our Investment Banking Advisory and Valuations and Opinions segments in these periods, please see "Business Segments" below.
Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2026 2025 2026 2025
Revenues
$ 293,652 $ 186,714 $ 677,145 $ 468,580
Operating expenses:
Compensation and benefits
186,938 96,297 428,817 237,424
Non-compensation expenses
62,434 39,133 213,981 124,818
Total operating expenses
249,372 135,430 642,798 362,242
Total operating income
44,280 51,284 34,347 106,338
Other income (expense), net
775 1,924 (8,733) 5,533
Income before income taxes
45,055 53,208 25,614 111,871
Provision for income taxes
7,205 2,853 8,790 4,024
Net income
$ 37,850 $ 50,355 $ 16,824 $ 107,847
Three Months Ended September 30, 2026 versus September 30, 2025
Revenues were $293.7 million for the three months ended September 30, 2026 compared to $186.7 million for the same period in 2025, representing an increase of 57%, primarily attributable to increasing M&A activity, demand for private market valuations and the impact of our MarshBerry Acquisition in October of 2025.
Compensation and benefits expenses were $186.9 million for the three months ended September 30, 2026, compared to $96.3 million for the same period in 2025. This represented approximately 64% of total revenues for the three months ended September 30, 2026, and approximately 52% of total revenues for the same period in 2025. The period-over-period increase in compensation expenses was primarily a result of an increase in revenues, our MarshBerry Acquisition and the change in our corporate structure resulting from our IPO in May 2026.
Non-compensation expenses were $62.4 million for the three months ended September 30, 2026, compared to $39.1 million for the same period in 2025. This represented 21% of total revenues for the three months ended September 30, 2026 and 21% of total revenues for the same period in 2025. The period-over-period increase in non-compensation expenses was primarily driven by amortization of intangible assets acquired in the MarshBerry Acquisition.
Other income (expense), net was $0.8 million of income for the three months ended September 30, 2026 compared to $1.9 million of income for the same period in 2025. The decrease was due primarily to higher interest expense resulting from indebtedness incurred under the Term Loan Credit Facility and the Delayed Draw Term Loan Credit Facility as of October 2025.
The Company's provision for income taxes for the three months ended September 30, 2026 was $7.2 million, representing an effective tax rate of 16.0%. The effective tax rate was less than the U.S. federal income tax rate of 21% primarily due to a portion of the Company's U.S. income before income taxes not being subject to federal or state income taxes at the Company level as those earnings are attributable to the Company's noncontrolling interest.
For the three months ended September 30, 2025, the Company's provision for income taxes was $2.9 million, representing an effective tax rate of 5.4%. The effective tax rate was less than the U.S. federal income tax rate of 21% primarily due to the Company's U.S. income before income taxes not being subject to U.S. federal or state income tax due to the privately held partnership structure.
Nine Months Ended September 30, 2026 versus September 30, 2025
Revenues were $677.1 million for the nine months ended September 30, 2026 as compared with $468.6 million for the same period in 2025, representing an increase of 45%, primarily attributable to increasing M&A activity, demand for private market valuations and the impact of our MarshBerry Acquisition in October of 2025.
Compensation and benefits expenses were $428.8 million for the nine months ended September 30, 2026, compared to $237.4 million for the same period in 2025. This represented approximately 63% of revenues for the nine months ended September 30, 2026, and approximately 51% of total revenues for the same period in 2025. The period-over-period increase in compensation expenses was primarily a result of an increase in revenues, our MarshBerry Acquisition and the change in our corporate structure resulting from our IPO in May 2026.
Non-compensation expenses were $214.0 million for the nine months ended September 30, 2026, compared with $124.8 million for the same period in 2025. This represented 32% of total revenues for the nine months ended September 30, 2026, and 27% of total revenues for the same period in 2025. Non-compensation expenses include the expense of $28.7 million associated with the Liquidity Event Shares. This expense represents 4.2% of total revenues for the nine months ended September 30, 2026. The period-over-period increase in non-compensation expenses was primarily a result of amortization of intangible assets acquired in the MarshBerry Acquisition, the Liquidity Event Shares expense and IPO-related expenses.
Other income (expense), net was $8.7 million of expense for the nine months ended September 30, 2026 compared to $5.5 million of income for the same period in 2025. The decrease was due primarily to interest expense
resulting from indebtedness incurred under the Term Loan Credit Facility and the Delayed Draw Term Loan Credit Facility as of October 2025.
The Company's provision for income taxes for the nine months ended September 30, 2026 was $8.8 million, representing an effective tax rate of 34.3%. The effective tax rate was higher than the U.S. federal income tax rate of 21% primarily due to not recognizing any tax benefit related to a $28.7 million non-recurring charge to income before income taxes related to Liquidity Event Shares issued following the IPO. The resulting increase to the effective tax rate was partly offset by a portion of the Company's U.S. income before income taxes not being subject to federal or state income taxes at the Company level as those earnings are attributable to the Company's noncontrolling interest.
For the nine months ended September 30, 2025, the Company's provision for income taxes was $4.0 million, representing an effective tax rate of 3.6%. The effective tax rate was less than the U.S. federal income tax rate of 21% primarily due to the Company's U.S. income before income taxes not being subject to U.S. federal or state income tax due to the privately held partnership structure.
Business Segments
Investment Banking Advisory
Revenue trends in Investment Banking Advisory are generally correlated to the total volume and size of investment banking transactions completed. However, fluctuations from this trend may occur in any given year for any number of reasons, including but not limited to, changes in our market share or the ability of our clients to close transactions on which we have been engaged and are owed contingent fees. These events can cause our revenues to diverge from the level of overall volume of investment banking transactions completed.
The following table summarizes the results of operations of our Investment Banking Advisory business segment for the three and nine months ended September 30, 2026 and 2025:
Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands)
2026 2025 Variance 2026 2025 Variance
Revenues $ 239,901 $ 141,303 70 % $527,492 $349,021 51 %
Operating expenses:
Compensation and benefits 149,355 79,558 88 % 339,668 197,847 72 %
Non-compensation expenses
48,072 26,367 82 % 172,039 92,045 87 %
Total operating expenses
197,427 105,925 86 % 511,707 289,892 77 %
Segment operating income
$ 42,474 $ 35,378 20 % $ 15,785 $59,129 (73) %
Three Months Ended September 30, 2026 versus September 30, 2025
Revenues were $239.9 million for the three months ended September 30, 2026, compared with $141.3 million for the same period in 2025, representing an increase of 70%. The increase was primarily attributable to higher number of transactions completed, higher average fees, and our acquisition of MarshBerry.
Compensation and benefits expenses were $149.4 million for the three months ended September 30, 2026, compared with $79.6 million for the same period in 2025, representing an increase of 88%. The increase in compensation expenses was primarily a result of an increase in revenues, our MarshBerry Acquisition and the change in our corporate structure resulting from our IPO in May 2026.
Non-compensation expenses were $48.1 million for the three months ended September 30, 2026, compared with $26.4 million for the same period in 2025, representing an increase of 82%. The increase is primarily a result of amortization related to the intangible assets acquired as a result of the MarshBerry Acquisition (see the section entitled "Critical Accounting Estimates-Business Combinations" included in the Prospectus).
Nine Months Ended September 30, 2026 versus September 30, 2025
Revenues were $527.5 million for the nine months ended September 30, 2026, compared with $349.0 million for the same period in 2025, representing an increase of 51%. The increase in revenue was primarily driven by increasing M&A activity and additional revenues resulting from our MarshBerry Acquisition in October of 2025.
Compensation and benefits expenses were $339.7 million for the nine months ended September 30, 2026, compared with $197.8 million for the same period in 2025, representing an increase of 72%. The increase in compensation and benefits expenses was primarily a result of an increase in revenues, our MarshBerry acquisition and a change in our corporate structure resulting from our IPO in May 2026.
Non-compensation expenses were $172.0 million for the nine months ended September 30, 2026 compared to $92.0 million for the same period in 2025, representing an increase of 87%. Expenses increased primarily as a result of amortization related to the intangible assets acquired as a result of the MarshBerry acquisition (see the section entitled "Critical Accounting Estimates-Business Combinations" included in the Prospectus), an increase in consulting and professional services primarily as a result of our IPO in May 2026.
Valuations and Opinions
Revenue trends in Valuations and Opinions reflect two primary components: non-transaction-based services and transaction-based services. Non-transaction-based services are recurring portfolio valuations that are required by our valuation clients for financial reporting and regulatory purposes. The transaction-based services are primarily influenced by the overall market for U.S. announced M&A and financing transactions in a given year. Transaction based services include fairness opinions, solvency opinions, dispute advisory, and other transaction-based opinions and advisory services.
The following table summarizes the results of Valuations and Opinions for the three and nine months ended September 30, 2026 and 2025:
Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands)
2026 2025 Variance 2026 2025 Variance
Revenues $ 53,751 $ 45,411 18 % $ 149,653 $ 119,559 25 %
Operating expenses:
Compensation and benefits 37,583 16,739 125 % 89,149 39,577 125 %
Non-compensation expenses
14,362 12,766 13 % 41,942 32,773 28 %
Total operating expenses
51,945 29,505 76 % 131,091 72,350 81 %
Segment operating income
$ 1,806 $ 15,906 (89) % $ 18,562 $ 47,209 (61) %
Three Months Ended September 30, 2026 versus September 30, 2025
Revenues were $53.8 million for the three months ended September 30, 2026, compared with $45.4 million for the same period in 2025, representing an increase of 18%. The increase in revenue was driven by an increasing demand for portfolio valuations and transaction opinions.
Compensation and benefits expenses were $37.6 million for the three months ended September 30, 2026, compared to $16.7 million for the same period in 2025, representing an increase of 125%. The increase is primarily the result of revenue growth and the change in our corporate structure resulting from our IPO in May 2026.
Non-compensation expenses were $14.4 million for the three months ended September 30, 2026 compared to $12.8 million for the same period in 2025, representing an increase of 13%. Expenses increased primarily as a result of higher allocated consulting and professional expenses and higher travel and related expenses. These expenses include the impact of costs incurred by us in connection with client engagements that were subsequently reimbursed by our clients.
The segment operating income decreased, primarily due to an increase in compensation expenses driven by revenue growth and changes in our corporate structure resulting from our IPO in May 2026.
Nine Months Ended September 30, 2026 versus September 30, 2025
Revenues were $149.7 million for the nine months ended September 30, 2026, compared to $119.6 million for the same period in 2025, representing an increase of 25%. The increase in revenue was driven by increased frequency and number of portfolio companies valued and more transaction opinions delivered.
Compensation and benefits expenses were $89.1 million for the nine months ended September 30, 2026 compared to $39.6 million for the same period in 2025, representing an increase of 125%. The increase is primarily the result of revenue growth and the change in our corporate structure resulting from our IPO in May 2026.
Non-compensation expenses were $41.9 million for the nine months ended September 30, 2026 compared to $32.8 million for the same period in 2025, representing an increase of 28%. Expenses increased primarily as a result of higher allocated consulting and professional expenses and higher travel and related expenses. These expenses include the impact of costs incurred by us in connection with client engagements that were subsequently reimbursed by our clients.
The segment operating income decreased, primarily due to an increase in compensation expenses driven by revenue growth and changes in our corporate structure resulting from our IPO in May 2026.
Liquidity and Capital Resources
We regularly monitor our liquidity position, including cash and cash equivalents, working capital assets and liabilities, any commitments and other liquidity requirements in the aggregate. Our cash and cash equivalents reflect the cash generated by our operating entities.
Our current assets have historically consisted of cash and cash equivalents, and receivables related to fees earned from providing advisory and valuation services, and receivables resulting from tax advances made to state and local jurisdictions on behalf of our LILP Partners and prepaid expenses, largely related to sponsored events and annual software licenses.
Our current liabilities include accounts payable and accrued expenses, including accrued employee compensation. We pay a significant portion of annual incentive compensation in the first quarter of the following year with respect to the current year's performance. As a result, our cash balances generally decline in the first quarter of each year after incentive compensation is paid to our employees and partners. Our cash balances then increase over the remainder of the year.
We also evaluate our cash needs on a regular basis in light of current global and local economic and market conditions, and our strategic and capital investment requirements. Cash and cash equivalents include all short-term highly liquid investments that are readily convertible to cash. Our cash and cash equivalents and restricted cash balances were $367.9 million at September 30, 2026 and $324.8 million at December 31, 2025.
Our liquidity is highly dependent upon cash receipts from clients in respect of fees for our Investment Banking Advisory services and our Valuations and Opinions services. The engagement letters for our U.S.-based Investment Banking Advisory business generally provide for our clients to pay our fees concurrent with the successful completion of a transaction and do not generally result in a receivable balance. Non-U.S. based Investment Banking Advisory fees are often received after completion of the transaction. Our Valuations and Opinions business requires clients to settle our fees upon receipt of the related portfolio valuation or fairness opinion. We regularly monitor aging associated with the collection of these receivable balances, which generally occurs within 30 days of billing.
We believe that cash and cash equivalents on hand, cash flows from operations, and available borrowings under our Credit Facilities will adequately fund our ongoing working capital, investing, and financing requirements for at least the next twelve months and thereafter.
Debt
Credit Facilities
On October 31, 2025, we entered into a credit agreement, as amended pursuant to Amendment No. 1 to the Credit Agreement, dated as of April 13, 2026, among Monarch FinCo, LLC, the borrower, and the required lenders named therein (as amended, the "Credit Agreement"), which provides for (a) the Term Loan Credit Facility with an original aggregate principal amount of $250.0 million (the "Term Loan Credit Facility"), (b) the Delayed Draw Term Loan Credit Facility with original aggregate commitments of $75.0 million (the "Delayed Draw Term Loan Credit Facility"), and (c) the Revolving Credit Facility having original aggregate commitments of $5.0 million (the "Revolving Credit Facility," and together with the Term Loan Credit Facility and the Delayed Draw Term Loan Credit Facility, the "Credit Facilities"). Term loans drawn under the Delayed Draw Term Loan Credit Facility (if any) constitute loans outstanding under the Term Loan Credit Facility. On May 12, 2026, we drew an additional $25.0 million under the Delayed Draw Term Loan Credit Facility. As of September 30, 2026, we repaid $196.8 million of the outstanding loans, including $195.8 million funded with IPO proceeds to partially repay the $250.0 million borrowing under the Term Loan Credit Facility.As of September 30, 2026, we had $53.6 million of principal outstanding under the Term Loan Credit Facility and $49.6 million of principal outstanding under the Delayed Draw Term Loan Credit Facility. For a description of the terms of the Credit Facilities, including interest rates, security, maturity and covenants, see Note 13 to our condensed consolidated financial statements included elsewhere in this report.
Line of Credit
To provide for working capital and other general corporate purposes, we maintain a line of credit available for advances and letters of credit, with a pledge capacity of $50.0 million from Morgan Stanley Private Bank, National Association ("Morgan Stanley"). As of September 30, 2026, $4.3 million in cash was on deposit. Our available credit under this facility as of September 30, 2026 was $1.8 million as a result of the issuance of an aggregate amount of $2.5 million of letters of credit, which are required in connection with our lease agreements for some of our U.S.-based office leases. We incur a monthly fee calculated as the SOFR plus 1.1% per annum on the outstanding balances of issued letters of credit under our line of credit. The proceeds of the advances are available solely to provide financing for our working capital and investment purposes and to pay reimbursement obligations in connection with letters of credit.
Tax Receivable Agreement
In connection with the Organizational Transactions and as described in the Prospectus, Parent entered into the TRA with LILP, certain LILP Partners and the other eligible parties named therein (collectively, the "TRA Parties"). The TRA generally provides for Parent to pay the TRA Parties 85% of the tax benefits, if any, Parent realizes (or in certain circumstances is deemed to realize) as a result of the Basis Adjustments and Interest Deductions. Parent will retain the remaining 15% of the tax benefits. We expect, over time, Parent will make substantial payments pursuant to the TRA, with such payments being in addition to Parent's income tax payments.
We will account for the income tax and corresponding TRA impacts of future taxable purchases or redemptions of LILP common units by generally estimating and increasing both deferred tax assets and TRA liabilities based on enacted tax rates on the dates of such purchases or redemptions. When so doing, in accordance with ASC 740, we will evaluate the likelihood of realizing the benefits of the deferred tax assets. When applicable, a valuation allowance will reduce the deferred tax assets recognized and reported in the Company's financial statements to an amount management estimates will more-likely-than-not be realized. In addition, changes in the estimated TRA liability and recognized deferred tax assets may occur based on, but not limited to, changes in anticipated future taxable income, changes in applicable tax rates, or other changes in tax attributes, each of which is inherently uncertain and requires management judgment.
If certain mergers, asset sales, other forms of business combinations, or other changes of control occur, or if we elect early termination of the TRA, our obligations pursuant to the TRA would accelerate, becoming due and payable. In such circumstances, we could be required to make immediate payments equaling the present value of the
anticipated future tax benefits contemplated in the TRA, which could have a substantial negative impact on our liquidity or financial condition. While we ultimately expect to make substantial payments pursuant to the TRA, we do not anticipate making any such payments prior to the first quarter of 2028. See the section entitled "Certain Relationships and Related Party Transactions-Tax Receivable Agreement" included in the Prospectus for more information.
Cash Flows
Our operating cash flows are primarily influenced by the timing and receipt of advisory fees from clients, which are generally collected by our Investment Banking Advisory business upon completion of a transaction and by our Valuations and Opinions business generally within 30 days of billing, and the payment of operating expenses, including payments of incentive compensation to our managing directors and employees. We pay a significant portion of annual incentive compensation in the first quarter of the following calendar year with respect to the current year's performance.
A summary of our operating, investing and financing cash flows for the nine months ended September 30, 2026 and 2025 are as follows:
Nine Months Ended
September 30,
($ in thousands)
2026 2025 Change
Cash flows from operating activities:
Net Income $ 16,824 $ 107,847 N/M
Non-cash sources and uses
105,035 38,197 N/M
Other operating activities
103,452 20,076 N/M
Net cash provided by operating activities
225,311 166,120 36 %
Net cash used in investing activities
(3,734) (4,230) (12) %
Net cash used in financing activities
(177,454) (130,379) 36 %
Effect of exchange rate changes on cash and equivalents
(1,096) 5,897 N/M
Net increase in cash, cash equivalents and restricted cash
43,027 37,408 15 %
Cash, cash equivalents and restricted cash, beginning of period
324,827 228,988 42 %
Cash, cash equivalents and restricted cash, end of period
$ 367,854 $ 266,396 38 %
Nine Months Ended September 30, 2026
Cash and cash equivalents and restricted cash were $367.9 million at September 30, 2026, an increase of 38% from $266.4 million at September 30, 2025. Operating activities resulted in a net inflow of $225.3 million primarily due to favorable working-capital movements including the timing of collections of client receivable and related-party balances as part of pre-IPO activities, increase in compensation payable due to changes in our corporate structure, as well as non-cash adjustments reflected in operating cash flows, such as depreciation and amortization and Liquidity Event share awards. Investing activities resulted in a net outflow of $3.7 million primarily attributable to capital expenditures. Financing activities resulted in a net cash outflow of $177.5 million, primarily attributable to $254.5 million of distributions of IPO proceeds to partners, $196.8 million of debt repayments, $142.2 million primarily attributable to payments made to limited partners, which include semi-monthly draws, tax advances and performance bonuses, and $70.6 million of other partner distributions, partially offset by $450.3 million of net IPO proceeds and $25.0 million of borrowings.
Nine Months Ended September 30, 2025
Cash and cash equivalents and restricted cash were $266.4 million at September 30, 2025. Operating activities resulted in a net cash inflow of $166.1 million primarily due to net income of $107.8 million and non-cash charges of $38.2 million, and a decrease in other operating activities of $20.1 million. Investing activities resulted in a net outflow of $4.2 million primarily attributable to the construction of new office facilities. Financing activities resulted in a net cash outflow of $130.4 million, primarily attributable to payments made to limited partners, which include semi-monthly draws, tax advances and performance bonuses.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with GAAP which require us to make estimates and assumptions that affect reported amounts. The estimates and assumptions used are based on historical experience and on other factors that we believe to be reasonable. Actual results may differ from these estimates and assumptions. We review these estimates and assumptions on a periodic basis to ensure reasonableness. While actual results may differ from these estimates and assumptions, we believe such differences are not likely to be material.
In connection with the Organizational Transactions, Parent entered into the TRA with LILP, certain LILP Partners and the other eligible parties named therein. Amounts payable pursuant to the TRA and the related deferred tax assets are reported based on estimated tax benefits Parent expects to realize from the Basis Adjustments and Interest Deductions, which requires significant management judgment. Accordingly, the actual amounts and timing of payments made pursuant to the TRA could differ materially from our estimates. See Note 23 of the condensed consolidated financial statements for additional information.
Other than the foregoing, during the nine months ended September 30, 2026, no other material changes have been made to our critical accounting policies and estimates from those described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations- Critical Accounting Policies and Estimates" in the Prospectus and the notes to the audited consolidated financial statements appearing elsewhere in the Prospectus.
Lincoln International Inc. published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 22:09 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]