UNITED STATES | ||||||
SECURITIES AND EXCHANGE COMMISSION | ||||||
FORM 10-Q | ||||||
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||
For the quarterly period ended June 30, 2017 | ||||||
or | ||||||
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||
For the transition period from _______________________ to ___________________________ | ||||||
Commission file number 001-38021 | ||||||
HAMILTON LANE INCORPORATED | ||||||
(Exact name of Registrant as specified in its charter) | ||||||
Delaware (State or other jurisdiction of incorporation or organization) | 26-2482738 (I.R.S. Employer Identification No.) | |||||
One Presidential Blvd., 4th Floor Bala Cynwyd, PA (Address of principal executive offices) | 19004 (Zip Code) | |||||
(610) 934-2222 (Registrant’s telephone number, including area code) |
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer x (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
Emerging growth company x |
Page | |
June 30, | March 31, | ||||||
2017 | 2017 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 46,471 | $ | 32,286 | |||
Restricted cash | 1,857 | 1,849 | |||||
Fees receivable | 19,474 | 12,113 | |||||
Prepaid expenses | 2,719 | 2,593 | |||||
Due from related parties | 2,951 | 3,313 | |||||
Furniture, fixtures and equipment, net | 4,014 | 4,063 | |||||
Investments | 124,027 | 120,147 | |||||
Deferred income taxes | 59,435 | 61,223 | |||||
Other assets | 3,595 | 3,030 | |||||
Total assets | $ | 264,543 | $ | 240,617 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 1,326 | $ | 1,366 | |||
Accrued compensation and benefits | 11,543 | 3,417 | |||||
Deferred incentive fee revenue | 45,166 | 45,166 | |||||
Senior secured term loan payable | |||||||
Principal amount | 85,450 | 86,100 | |||||
Less: unamortized discount and debt issuance costs | 1,705 | 1,790 | |||||
Senior secured term loan payable, net | 83,745 | 84,310 | |||||
Accrued members’ distributions | 4,598 | 2,385 | |||||
Accrued dividend payable | 3,167 | — | |||||
Payable to related parties pursuant to tax receivable agreement | 10,734 | 10,734 | |||||
Other liabilities | 6,670 | 6,612 | |||||
Total liabilities | 166,949 | 153,990 | |||||
Commitments and Contingencies (Note 13) | |||||||
Preferred stock, $0.001 par value, 10,000,000 authorized, none issued | — | — | |||||
Class A common stock, $0.001 par value, 300,000,000 authorized; 19,265,873 and 19,151,033 issued and 19,265,873 and 19,036,504 outstanding as of June 30, 2017 and March 31, 2017, respectively | 19 | 19 | |||||
Class B common stock, $0.001 par value, 50,000,000 authorized; 27,935,255 issued and outstanding as of June 30, 2017 and March 31, 2017 | 28 | 28 | |||||
Additional paid-in-capital | 60,220 | 61,845 | |||||
Accumulated other comprehensive loss | (299 | ) | (311 | ) | |||
Retained earnings | 2,909 | 612 | |||||
Less: Treasury stock, at cost, 114,529 shares of Class A common stock as of March 31, 2017 | — | (2,151 | ) | ||||
Total Hamilton Lane Incorporated stockholders’ equity | 62,877 | 60,042 | |||||
Non-controlling interests in general partnerships | 9,705 | 9,901 | |||||
Non-controlling interests in Hamilton Lane Advisors, L.L.C. | 25,012 | 16,684 | |||||
Total equity | 97,594 | 86,627 | |||||
Total liabilities and equity | $ | 264,543 | $ | 240,617 |
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Revenues | |||||||
Management and advisory fees | $ | 51,684 | $ | 37,583 | |||
Incentive fees | 1,017 | 1,983 | |||||
Total revenues | 52,701 | 39,566 | |||||
Expenses | |||||||
Compensation and benefits | 19,962 | 15,936 | |||||
General, administrative and other | 8,458 | 6,770 | |||||
Total expenses | 28,420 | 22,706 | |||||
Other income (expense) | |||||||
Equity in income of investees | 5,919 | 1,966 | |||||
Interest expense | (1,106 | ) | (2,902 | ) | |||
Interest income | 316 | 66 | |||||
Other non-operating income (loss) | (106 | ) | — | ||||
Total other income (expense) | 5,023 | (870 | ) | ||||
Income before income taxes | 29,304 | 15,990 | |||||
Income tax expense (benefit) | 3,692 | (401 | ) | ||||
Net income | 25,612 | 16,391 | |||||
Less: Income attributable to non-controlling interests in general partnerships | 898 | 545 | |||||
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 19,250 | 15,846 | |||||
Net income attributable to Hamilton Lane Incorporated | $ | 5,464 | $ | — | |||
Basic earnings per share of Class A common stock (1) | $ | 0.30 | — | ||||
Diluted earnings per share of Class A common stock (1) | $ | 0.30 | — | ||||
Dividends declared per share of Class A common stock (1) | $ | 0.175 | — |
(1) | There were no shares of Class A common stock outstanding prior to March 6, 2017, therefore no earnings or dividends declared per share information has been presented for any period prior to that date. |
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Net income | $ | 25,612 | $ | 16,391 | |||
Other comprehensive income (loss), net of tax: | |||||||
Unrealized loss on cash flow hedge | — | (129 | ) | ||||
Amounts reclassified to net income: | |||||||
Realized loss on cash flow hedge | 35 | — | |||||
Total other comprehensive income (loss), net of tax | 35 | (129 | ) | ||||
Comprehensive income | $ | 25,647 | $ | 16,262 | |||
Less: | |||||||
Comprehensive income attributable to non-controlling interests in general partnerships | 898 | 545 | |||||
Comprehensive income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 19,273 | 15,717 | |||||
Total comprehensive income attributable to Hamilton Lane Incorporated | $ | 5,476 | $ | — |
5 |
Class A Common Stock | Class B Common Stock | Additional Paid in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interests in general partnerships | Non- Controlling Interests in Hamilton Lane Advisors, L.L.C. | Total Equity | |||||||||||||||||||||||||||
Balance at March 31, 2017 | $ | 19 | $ | 28 | $ | 61,845 | $ | 612 | $ | (2,151 | ) | $ | (311 | ) | $ | 9,901 | $ | 16,684 | $ | 86,627 | |||||||||||||||
Net income | — | — | — | 5,464 | — | — | 898 | 19,250 | 25,612 | ||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | 12 | — | 23 | 35 | ||||||||||||||||||||||||||
Equity-based compensation | — | — | 486 | — | — | — | — | 930 | 1,416 | ||||||||||||||||||||||||||
Retirement of treasury stock | — | — | (2,151 | ) | — | 2,151 | — | — | — | — | |||||||||||||||||||||||||
Proceeds received from option exercises | — | — | 108 | — | — | — | — | 205 | 313 | ||||||||||||||||||||||||||
Purchase and retirement of Class A shares for tax withholding | — | — | (228 | ) | — | — | — | — | (435 | ) | (663 | ) | |||||||||||||||||||||||
Deferred tax adjustment | — | — | 115 | — | — | — | — | — | 115 | ||||||||||||||||||||||||||
Dividends declared | — | — | — | (3,167 | ) | — | — | — | — | (3,167 | ) | ||||||||||||||||||||||||
Capital contributions from (distributions to) non-controlling interests, net | — | — | — | — | — | — | (1,094 | ) | — | (1,094 | ) | ||||||||||||||||||||||||
Member distributions | — | — | — | — | — | — | — | (11,600 | ) | (11,600 | ) | ||||||||||||||||||||||||
Equity reallocation between controlling and non-controlling interests | — | — | 45 | — | — | — | — | (45 | ) | — | |||||||||||||||||||||||||
Balance at June 30, 2017 | $ | 19 | $ | 28 | $ | 60,220 | $ | 2,909 | $ | — | $ | (299 | ) | $ | 9,705 | $ | 25,012 | $ | 97,594 |
6 |
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Operating activities: | |||||||
Net income | $ | 25,612 | $ | 16,391 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 437 | 488 | |||||
Change in deferred income taxes | 1,903 | (410 | ) | ||||
Amortization of deferred financing costs | 85 | 214 | |||||
Equity-based compensation | 1,416 | 1,094 | |||||
Equity in income of investees | (5,919 | ) | (1,966 | ) | |||
Proceeds received from investments | 5,176 | 950 | |||||
Other | 129 | — | |||||
Changes in operating assets and liabilities: | |||||||
Fees receivable | (7,361 | ) | 548 | ||||
Prepaid expenses | (126 | ) | (510 | ) | |||
Due from related parties | 362 | 679 | |||||
Other assets | (672 | ) | (2,038 | ) | |||
Accounts payable | (40 | ) | (254 | ) | |||
Accrued compensation and benefits | 8,126 | 4,924 | |||||
Other liabilities | 58 | (2,674 | ) | ||||
Net cash provided by operating activities | $ | 29,186 | $ | 17,436 | |||
Investing activities: | |||||||
Purchase of furniture, fixtures and equipment | $ | (388 | ) | $ | (363 | ) | |
Distributions received from investments | 3,465 | 1,487 | |||||
Contributions to investments | (6,589 | ) | (8,069 | ) | |||
Net cash (used in) investing activities | $ | (3,512 | ) | $ | (6,945 | ) | |
Financing activities: | |||||||
Repayments of senior secured term loan | $ | (650 | ) | $ | (650 | ) | |
Contributions from non-controlling interest in Partnerships | 40 | 84 | |||||
Distributions to non-controlling interest in Partnerships | (1,134 | ) | — | ||||
Sale of membership interests | — | 2,434 | |||||
Purchase of Class A shares for tax withholdings | (663 | ) | — | ||||
Purchase of membership interests | — | (1,028 | ) | ||||
Proceeds received from option exercises | 313 | 217 | |||||
Members’ distributions | (9,387 | ) | (18,281 | ) | |||
Net cash (used in) financing activities | $ | (11,481 | ) | $ | (17,224 | ) | |
Increase (decrease) in cash, cash equivalents, and restricted cash | 14,193 | (6,733 | ) | ||||
Cash, cash equivalents, and restricted cash at beginning of the period | 34,135 | 70,382 | |||||
Cash, cash equivalents, and restricted cash at end of the period | $ | 48,328 | $ | 63,649 |
7 |
• | the certificate of incorporation of HLI was amended and restated to, among other things, (i) provide for Class A common stock and Class B common stock, (ii) set forth the voting rights of the Class A common stock (one vote per share) and Class B common stock (ten votes per share) and (iii) establish a classified board of directors; |
• | the limited liability company agreement of HLA was amended and restated to, among other things, (i) appoint HLI as the sole managing member of HLA and (ii) classify the interests that were acquired by HLI as Class A Units, the voting interests held by the continuing members of HLA as Class B Units, and the non-voting interests held by the continuing members of HLA as Class C Units; |
• | HLA effectuated a reverse unit split of 0.68-for-1 for each unit class. All unit-based data, including the number of units and per unit amounts in these condensed consolidated financial statements and accompanying notes have been retroactively adjusted for the reverse split; |
• | certain HLA members exchanged their HLA units for 3,899,169 shares of Class A common stock of HLI; |
• | HLI issued to the Class B unitholders of HLA one share of Class B common stock for each Class B unit that they owned, in exchange for a payment of its par value; |
• | certain Class B unitholders of HLA entered into a stockholders agreement where they agreed to vote all their shares of voting stock in accordance with the instructions of HLA Investments, LLC; and |
8 |
• | HLI entered into an exchange agreement with the direct owners of HLA pursuant to which they will be entitled to exchange HLA units for shares of HLI’s Class A common stock on a one-for-one basis. |
9 |
• | Level 1: Values are determined using quoted market prices for identical financial instruments in an active market. |
• | Level 2: Values are determined using quoted prices for similar financial instruments and valuation models whose inputs are observable. |
• | Level 3: Values are determined using pricing models that use significant inputs that are primarily unobservable, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
June 30, | March 31, | ||||||
2017 | 2017 | ||||||
Equity method investments in Partnerships | $ | 107,015 | $ | 103,141 | |||
Other equity method investments | 1,152 | 661 | |||||
Investments carried at cost | 15,860 | 16,345 | |||||
Total Investments | $ | 124,027 | $ | 120,147 |
12 |
June 30, | March 31 | ||||||
2017 | 2017 | ||||||
Investments | $ | 64,428 | $ | 60,597 | |||
Fees receivable | 7,121 | 430 | |||||
Due from related parties | 723 | 1,742 | |||||
Total VIE Assets | 72,272 | 62,769 | |||||
Deferred incentive fee revenue | 45,166 | 45,166 | |||||
Non-controlling interests | (9,705 | ) | (9,901 | ) | |||
Maximum Exposure to Loss | $ | 107,733 | $ | 98,034 |
13 |
Class A Common Stock | Class B Common Stock | ||||
March 31, 2017 | 19,036,504 | 27,935,255 | |||
Restricted stock granted | 40,427 | — | |||
Shares issued due to option exercise, net | 200,244 | — | |||
Forfeitures of restricted stock | (11,302 | ) | — | ||
June 30, 2017 | 19,265,873 | 27,935,255 |
Number of Options | Weighted- Average Exercise Price | |||||
Options outstanding at March 31, 2017 | 233,495 | $ | 1.34 | |||
Options exercised | (233,495 | ) | $ | 1.34 | ||
Options outstanding at June 30, 2017 | — | $ | — |
14 |
Total Unvested | Weighted- Average Grant-Date Fair Value of Award | |||||
March 31, 2017 | 1,138,521 | $ | 14.49 | |||
Granted | 40,427 | $ | 19.28 | |||
Vested | — | $ | — | |||
Forfeited | (11,302 | ) | $ | 15.04 | ||
June 30, 2017 | 1,167,646 | $ | 14.65 |
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Base compensation and benefits | $ | 18,292 | $ | 14,346 | |||
Incentive fee compensation | 254 | 496 | |||||
Equity-based compensation | 1,416 | 1,094 | |||||
Total compensation and benefits | $ | 19,962 | $ | 15,936 |
15 |
Three Months Ended June 30, 2017 | ||||||||||
Net income attributable to HLI | Weighted-Avg Shares | Per share amount | ||||||||
Basic EPS of Class A common stock | $ | 5,464 | 17,981,601 | $ | 0.30 | |||||
Adjustment to net income: | ||||||||||
Assumed exercise and vesting of employee awards | 83 | |||||||||
Effect of dilutive securities: | ||||||||||
Assumed exercise and vesting of employee awards | 477,814 | |||||||||
Diluted EPS of Class A common stock | $ | 5,547 | 18,459,415 | $ | 0.30 |
16 |
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Non-cash financing activities: | |||||||
Dividends declared but not paid | $ | 3,167 | $ | — | |||
Member distributions declared but not paid | $ | 4,598 | $ | 15,000 |
17 |
Three Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Customized separate accounts | $ | 18,784 | $ | 17,504 | |||
Specialized funds | 25,206 | 13,752 | |||||
Advisory and reporting | 6,650 | 5,767 | |||||
Distribution management | 1,044 | 560 | |||||
Total management and advisory fees | $ | 51,684 | $ | 37,583 |
18 |
• | Customized Separate Accounts: We design and build customized portfolios of private markets funds and direct investments to meet our clients’ specific portfolio objectives with regard to return, risk tolerance, diversification and liquidity. We generally have discretionary investment authority over our customized separate accounts, which comprised approximately $36 billion of our assets under management (“AUM”) as of June 30, 2017. |
• | Specialized Funds: We organize, invest and manage specialized primary, secondary and direct/co-investment funds. Our specialized funds invest across a variety of private markets and include equity, equity-linked and credit funds offered on standard terms as well as shorter duration, opportunistically oriented funds. We launched our first specialized fund in 1997, and our product offerings have grown steadily, comprising approximately $10 billion of our AUM as of June 30, 2017. |
• | Advisory Services: We offer investment advisory services to assist clients in developing and implementing their private markets investment programs. Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, legal negotiations, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world. We had approximately $314 billion of assets under advisement (“AUA”) as of June 30, 2017. |
• | Distribution Management: We offer distribution management services through active portfolio management to enhance the realized value of publicly traded stock they receive as distributions from private equity funds. |
• | Reporting, Monitoring, Data and Analytics: We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but occasionally on a stand-alone, fee-for-service basis. Private markets investments are unusually difficult to monitor, report on and administer, and our clients are able to benefit from our sophisticated infrastructure, which provides clients with real time access to reliable and transparent investment data, and our high-touch service approach, which allows for timely and informed responses to the multiplicity of issues that can arise. We also provide comprehensive research and analytical services as part of our investment solutions, leveraging our large, global, proprietary and high-quality database of private markets investment performance and our suite of proprietary analytical investment tools. |
• | our certificate of incorporation was amended and restated to, among other things, (i) provide for Class A common stock and Class B common stock, (ii) set forth the voting rights of the Class A common stock (one vote per share) and Class B common stock (ten votes per share), and (iii) establish a classified board of directors; |
• | the limited liability company agreement of HLA was amended and restated to, among other things, (i) appoint HLI as the sole managing member of HLA and (ii) classify the interests that were acquired by HLI as Class A Units, the voting interests held by the continuing members of HLA as Class B Units and the non-voting interests held by the continuing members of HLA as Class C Units; |
• | HLA effectuated a reverse unit split of 0.68-for-1 for each unit class; |
• | certain HLA members exchanged their HLA units for 3,899,169 shares of Class A common stock of HLI; |
• | HLI issued to the Class B unitholders of HLA one share of Class B common stock for each Class B unit that they owned, in exchange for a payment of its par value; |
• | certain Class B unitholders of HLA entered into a stockholders agreement where they agreed to vote all their shares of voting stock in accordance with the instructions of HLA Investments, LLC; and |
• | HLI entered into an exchange agreement with the direct owners of HLA pursuant to which they will be entitled to exchange HLA units for shares of our Class A common stock on a one-for-one basis. |
Three Months Ended June 30, | |||||||
($ in thousands) | 2017 | 2016 | |||||
Revenues | |||||||
Management and advisory fees | $ | 51,684 | $ | 37,583 | |||
Incentive fees | 1,017 | 1,983 | |||||
Total revenues | 52,701 | 39,566 | |||||
Expenses | |||||||
Compensation and benefits | 19,962 | 15,936 | |||||
General, administrative and other | 8,458 | 6,770 | |||||
Total expenses | 28,420 | 22,706 | |||||
Other income (expense) | |||||||
Equity in income of investees | 5,919 | 1,966 | |||||
Interest expense | (1,106 | ) | (2,902 | ) | |||
Interest income | 316 | 66 | |||||
Other non-operating income (loss) | (106 | ) | — | ||||
Total other income (expense) | 5,023 | (870 | ) | ||||
Income before income taxes | 29,304 | 15,990 | |||||
Income tax expense (benefit) | 3,692 | (401 | ) | ||||
Net income | 25,612 | 16,391 | |||||
Less: Income attributable to non-controlling interests in general partnerships | 898 | 545 | |||||
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 19,250 | 15,846 | |||||
Net income attributable to Hamilton Lane Incorporated | $ | 5,464 | $ | — |
Three Months Ended June 30, | |||||||
($ in thousands) | 2017 | 2016 | |||||
Management and advisory fees | |||||||
Customized separate accounts | $ | 18,784 | $ | 17,504 | |||
Specialized funds | 25,206 | 13,752 | |||||
Advisory and reporting | 6,650 | 5,767 | |||||
Distribution management | 1,044 | 560 | |||||
Total management and advisory fees | 51,684 | 37,583 | |||||
Incentive fees | 1,017 | 1,983 | |||||
Total revenues | $ | 52,701 | $ | 39,566 |
Three Months Ended June 30, | |||||||
($ in thousands) | 2017 | 2016 | |||||
Equity in income of investees | |||||||
Primary funds | $ | 851 | $ | 97 | |||
Direct/co-investment funds | 3,092 | 1,299 | |||||
Secondary funds | 340 | (32 | ) | ||||
Customized separate accounts | 1,758 | 602 | |||||
Other equity method investments | (122 | ) | — | ||||
Total equity in income of investees | $ | 5,919 | $ | 1,966 |
Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||||||
($ in millions) | 2017 | 2016 | |||||||||||||||||
Customized Separate Accounts | Specialized Funds | Total | Customized Separate Accounts | Specialized Funds | Total | ||||||||||||||
Balance, beginning of period | $ | 18,028 | $ | 8,793 | $ | 26,821 | $ | 16,976 | $ | 7,019 | $ | 23,995 | |||||||
Contributions (1) | 997 | 759 | 1,756 | 921 | 392 | 1,313 | |||||||||||||
Distributions (2) | (754 | ) | (113 | ) | (867 | ) | (444 | ) | (20 | ) | (464 | ) | |||||||
Foreign exchange, market value and other (3) | (85 | ) | (2 | ) | (87 | ) | (87 | ) | 7 | (80 | ) | ||||||||
Balance, end of period | $ | 18,186 | $ | 9,437 | $ | 27,623 | $ | 17,366 | $ | 7,398 | $ | 24,764 |
(1) | Contributions represent new commitments from customized separate accounts and specialized funds that earn fees on a committed capital fee base and capital contributions to underlying investments from customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base. |
(2) | Distributions represent returns of capital in customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base, reductions in fee-earning AUM from separate accounts and specialized funds that moved from a committed capital to net invested capital fee base and reductions in fee-earning AUM from customized separate accounts and specialized funds that are no longer earning fees. |
(3) | Foreign exchange, market value and other consists primarily of the impact of foreign exchange rate fluctuations for customized separate accounts and specialized funds that earn fees on non-U.S. dollar denominated commitments and market value appreciation (depreciation) from customized separate accounts that earn fees on a NAV fee base. |
Three Months Ended June 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
Net income attributable to Hamilton Lane Incorporated (1) | $ | 5,464 | $ | — | ||||
Income attributable to non-controlling interests in general partnerships | 898 | 545 | ||||||
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 19,250 | 15,846 | ||||||
Incentive fees | (1,017 | ) | (1,983 | ) | ||||
Incentive fee related compensation (2) | 499 | 974 | ||||||
Interest income | (316 | ) | (66 | ) | ||||
Interest expense | 1,106 | 2,902 | ||||||
Income tax expense (benefit) | 3,692 | (401 | ) | |||||
Equity in income of investees | (5,919 | ) | (1,966 | ) | ||||
Other non-operating (income) loss | 106 | — | ||||||
Fee Related Earnings | $ | 23,763 | $ | 15,851 | ||||
Depreciation and amortization | 437 | 487 | ||||||
Equity-based compensation | 1,416 | 1,094 | ||||||
Incentive fees | 1,017 | 1,983 | ||||||
Incentive fee related compensation (2) | (499 | ) | (974 | ) | ||||
Interest income | 316 | 66 | ||||||
Adjusted EBITDA | $ | 26,450 | $ | 18,507 | ||||
(1) | Prior to our IPO, HLI was a wholly-owned subsidiary of HLA with no operations or assets. |
(2) | Incentive fee related compensation includes incentive fee compensation expense and bonus and other revenue sharing allocated to carried interest classified as base compensation. |
Three Months Ended June 30, | |||||
2017 | |||||
(in thousands, except share and per-share amounts) | |||||
Net income attributable to Hamilton Lane Incorporated | $ | 5,464 | |||
Income attributable to non-controlling interests in general partnerships | 898 | ||||
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 19,250 | ||||
Income tax expense | 3,692 | ||||
Adjusted pre-tax net income | 29,304 | ||||
Adjusted income taxes (1) | (11,792 | ) | |||
Adjusted net income | $ | 17,512 | |||
Weighted-average shares of Class A common stock outstanding - diluted | 18,459,415 | ||||
Exchange of Class B and Class C units in HLA (2) | 34,438,669 | ||||
Adjusted shares | 52,898,084 | ||||
Non-GAAP earnings per share | $ | 0.33 |
(1) | Represents corporate income taxes at our estimated statutory tax rate of 40.24% applied to adjusted pre-tax net income. The 40.24% is based on a federal tax statutory rate of 35.00% and a combined state income tax rate net of federal benefits of 5.24%. |
(2) | Assumes the full exchange of Class B and Class C units in HLA for Class A common stock of HLI pursuant to the exchange agreement. |
• | market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future; |
• | the performance of our funds is generally calculated on the basis of net asset value (“NAV”) of the funds’ investments, including unrealized gains, which may never be realized; |
• | our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed; |
• | our newly established funds may generate lower returns during the period that they take to deploy their capital; |
• | in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in private markets alternatives and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future; and |
• | the performance of particular funds also will be affected by risks of the industries and businesses in which they invest. |
Fund | Vintage year | Fund size ($M) | Realized Capital invested ($M) | Realized Gross multiple | Realized Gross IRR (%) | Realized Gross Spread vs. S&P 500 PME | Realized Gross Spread vs. MSCI World PME |
Primaries (Diversified) | |||||||
PEF I | 1998 | 122 | 117 | 1.3 | 5.4% | 378 bps | 271 bps |
PEF IV | 2000 | 250 | 238 | 1.7 | 16.2% | 1,302 bps | 1,117 bps |
PEF V | 2003 | 135 | 122 | 1.7 | 15.8% | 1,031bps | 1,085 bps |
PEF VI | 2007 | 494 | 408 | 1.6 | 13.0% | 266 bps | 552 bps |
PEF VII | 2010 | 262 | 56 | 1.6 | 21.8% | 606 bps | 996 bps |
PEF VIII | 2012 | 427 | 1 | 1.5 | 29.1% | 2,051 bps | 2,569 bps |
PEF IX | 2015 | 517 | 2 | 1.5 | 88.1% | 7,115 bps | 7,570 bps |
Secondaries | |||||||
Pre-Fund | — | — | 363 | 1.5 | 17.2% | 1,324 bps | 1,132 bps |
Secondary Fund I | 2005 | 360 | 340 | 1.3 | 5.8% | 169 bps | 351 bps |
Secondary Fund II | 2008 | 591 | 484 | 1.6 | 23.6% | 860 bps | 1,215 bps |
Secondary Fund III | 2012 | 909 | 137 | 1.9 | 40.9% | 2,546 bps | 2,972 bps |
Secondary Fund IV | 2016 | 1,430 | — | — | — | — | — |
Co-investments | |||||||
Pre-Fund | — | — | 239 | 2.0 | 21.7% | 1,716 bps | 1,610 bps |
Co-Investment Fund | 2005 | 604 | 342 | 1.5 | 6.6% | 78 bps | 261 bps |
Co-Investment Fund II | 2008 | 1,195 | 588 | 2.4 | 23.8% | 1,159 bps | 1,495 bps |
Co-Investment Fund III | 2014 | 1,243 | 15 | 5.0 | 136.9% | 12,950 bps | 13,482 bps |
Fund | Vintage year | Fund size ($M) | Realized Capital invested ($M) | Realized Gross multiple | Realized Gross IRR (%) | Realized Gross Spread vs. CS HY II PME | Realized Gross Spread vs. ML HY II PME |
Strategic Opportunities (Tail-end secondaries and credit) | |||||||
Strat Opps 2015 | 2015 | 71 | 12 | 1.5 | 44.6% | 3,968 bps | 3,955 bps |
Strat Opps 2016 | 2016 | 214 | 14 | 1.3 | 137.9% | 11,782 bps | 11,941 bps |
Fund | Vintage year | Fund size ($M) | Capital invested ($M) | Gross multiple | Net Multiple | Gross IRR (%) | Net IRR (%) | Gross Spread vs. S&P 500 PME | Net Spread vs. S&P 500 PME | Gross Spread vs. MSCI World PME | Net Spread vs. MSCI World PME |
Primaries (Diversified) | |||||||||||
PEF I | 1998 | 122 | 117 | 1.3 | 1.2 | 5.4% | 2.5% | 378 bps | 76 bps | 271 bps | (31) bps |
PEF IV | 2000 | 250 | 238 | 1.7 | 1.5 | 16.2% | 11.2% | 1,302 bps | 828 bps | 1,117 bps | 654 bps |
PEF V | 2003 | 135 | 132 | 1.7 | 1.6 | 14.7% | 10.0% | 890 bps | 411 bps | 947 bps | 462 bps |
PEF VI | 2007 | 494 | 503 | 1.6 | 1.6 | 12.2% | 9.5% | 143 bps | (92) bps | 436 bps | 197 bps |
PEF VII | 2010 | 262 | 263 | 1.4 | 1.4 | 14.5% | 10.0% | 54 bps | (403) bps | 440 bps | (26) bps |
PEF VIII | 2012 | 427 | 269 | 1.2 | 1.1 | 12.0% | 7.5% | 38 bps | (438) bps | 388 bps | (98) bps |
PEF IX | 2015 | 517 | 174 | 1.2 | 1.1 | 17.1% | 16.2% | 153 bps | (152) bps | 411 bps | 43 bps |
Secondaries | |||||||||||
Pre-Fund | — | — | 363 | 1.5 | N/A | 17.2% | N/A | 1,324 bps | N/A | 1,132 bps | N/A |
Secondary Fund I | 2005 | 360 | 353 | 1.3 | 1.2 | 5.7% | 4.3% | 153 bps | (17) bps | 336 bps | 157 bps |
Secondary Fund II | 2008 | 591 | 569 | 1.6 | 1.5 | 20.9% | 15.0% | 562 bps | (35) bps | 922 bps | 314 bps |
Secondary Fund III | 2012 | 909 | 784 | 1.4 | 1.3 | 21.6% | 18.0% | 888 bps | 489 bps | 1,290 bps | 895 bps |
Secondary Fund IV | 2016 | 1,430 | 285 | 1.1 | 1.3 | 27.2% | 75.2% | 733 bps | 5,390 bps | 824 bps | 5,550 bps |
Co-investments | |||||||||||
Pre-Fund | — | — | 244 | 2.0 | N/A | 21.4% | N/A | 1,653 bps | N/A | 1,557 bps | N/A |
Co-Investment Fund | 2005 | 604 | 577 | 1.1 | 1.0 | 1.7% | 0.3% | (428) bps | (598) bps | (224) bps | (398) bps |
Co-Investment Fund II | 2008 | 1,195 | 1,130 | 2.0 | 1.8 | 20.3% | 16.3% | 814 bps | 400 bps | 1,155 bps | 737 bps |
Co-Investment Fund III | 2014 | 1,243 | 848 | 1.3 | 1.2 | 22.5% | 16.2% | 986 bps | 362 bps | 1,320 bps | 647 bps |
Fund | Vintage year | Fund size ($M) | Capital invested ($M) | Gross multiple | Net Multiple | Gross IRR (%) | Net IRR (%) | Gross Spread vs. CS HY II PME | Net Spread vs. CS HY II PME | Gross Spread vs. ML HY II PME | Net Spread vs. ML HY II PME |
Strategic Opportunities (Tail-end secondaries and credit) | |||||||||||
Strat Opps 2015 | 2015 | 71 | 67 | 1.2 | 1.2 | 16.7% | 13.1% | 548 bps | 192 bps | 572bps | 212 bps |
Strat Opps 2016 | 2016 | 214 | 177 | 1.1 | 1.1 | 16.3% | 15.4% | 283 bps | 187 bps | 336 bps | 223 bps |
Three Months Ended June 30, | |||||||
($ in thousands) | 2017 | 2016 | |||||
Net cash provided by operating activities | $ | 29,186 | $ | 17,436 | |||
Net cash (used in) investing activities | (3,512 | ) | (6,945 | ) | |||
Net cash (used in) financing activities | (11,481 | ) | (17,224 | ) | |||
Increase (decrease) in cash, cash equivalents and restricted cash | $ | 14,193 | $ | (6,733 | ) |
• | net income of $25.6 million and $16.4 million during the three months ended June 30, 2017 and 2016, respectively, and changes in operating assets and liabilities; and |
• | proceeds received from investments of $5.2 million and $1.0 million during the three months ended June 30, 2017 and 2016, respectively, which represent a return on investment from specialized funds and certain customized separate accounts. |
• | contributions to and distributions from investments that netted to ($3.1) million and ($6.6) million during the three months ended June 30, 2017 and 2016, respectively; |
• | purchases of furniture, fixtures and equipment consisting primarily of computers and equipment of ($0.4) million during each of the three month periods ended June 30, 2017 and 2016. |
• | debt repayments of ($0.7) million during each of the three month periods ended June 30, 2017 and 2016; |
• | distributions to non-controlling interest in general partnerships of ($1.1) million during the three months ended June 30, 2017; |
• | purchases of shares of Class A common stock for tax withholdings of ($0.7) million during the three months ended June 30, 2017 and purchases of membership interests of ($1.0) million during the three months ended June 30, 2016; |
• | sales of membership interests of $2.4 million during the three months ended June 30, 2016; and |
• | distributions to HLA members of ($9.4) million and ($18.3) million during the three months ended June 30, 2017 and 2016, respectively. |
• | Equity in income of investees changes along with the realized and unrealized gains of the underlying investments in our specialized funds and certain customized separate accounts in which we have a general partner commitment. Our general partner investments include over 3,000 unique underlying portfolio investments with no significant concentration in any industry or country outside of the United States. |
• | Management fees from our specialized funds and customized separate accounts are not significantly affected by changes in fair value as the management fees are not generally based on the value of the specialized funds or customized separate accounts, but rather on the amount of capital committed or invested in the specialized funds or customized separate accounts, as applicable. |
• | Incentive fees from our specialized funds and customized separate accounts are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the specialized fund’s or customized separate account’s assets prior to realization. We had $45.2 million of deferred incentive fee revenue on our balance sheet as of June 30, 2017. Minor decreases in underlying fair value would not affect the amount of deferred incentive fee revenue subject to clawback. In order for any amount of our deferred incentive fee revenue to have been subject to clawback, the NAV across our funds as of June 30, 2017 would have needed to decline by over 50%. |
• | We have hired a Director of Tax to oversee financial reporting for income taxes. |
• | We have implemented procedures intended to ensure that future calculations are performed correctly. |
• | We are establishing additional monitoring and oversight controls designed to ensure the accuracy and completeness of our consolidated financial statements and related disclosures. |
38 |
Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||
April 1-30, 2017 | — | $ | — | — | — | |||||
May 1-31, 2017 | 33,251 | $ | 19.97 | — | — | |||||
June 1-30, 2017 | — | $ | — | — | — | |||||
Total | 33,251 | $ | 19.97 |
HAMILTON LANE INCORPORATED | |
By: | /s/ Randy M. Stilman |
Name: Randy M. Stilman | |
Title: Chief Financial Officer and Treasurer | |
By: | /s/ Michael Donohue |
Name: Michael Donohue | |
Title: Managing Director and Controller |
Incorporated By Reference | Filed Herewith | |||||
Exhibit No. | Description of Exhibit | Form | Exhibit | Filing Date | ||
8-K | 3.1 | 3/10/17 | ||||
10-K | 3.2 | 6/27/17 | ||||
* | ||||||
* | ||||||
100.INS | XBRL Instance Document | * | ||||
101.SCH | XBRL Taxonomy Extension Schema | * | ||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | * | ||||
101.LAB | XBRL Taxonomy Extension Label Linkbase | * | ||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | * | ||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | * |
1. | I have reviewed this Quarterly Report on Form 10-Q of Hamilton Lane Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 10, 2017 |
/s/ Mario L. Giannini | |
Mario L. Giannini | |
Chief Executive Officer | |
1. | I have reviewed this Quarterly Report on Form 10-Q of Hamilton Lane Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 10, 2017 |
/s/ Randy M. Stilman | |
Randy M. Stilman | |
Chief Financial Officer | |
1. | The Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (the “Periodic Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Hamilton Lane Incorporated. |
/s/ Mario L. Giannini |
Mario L. Giannini |
Chief Executive Officer |
/s/ Randy M. Stilman |
Randy M. Stilman |
Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Aug. 07, 2017 |
|
Entity Registrant Name | Hamilton Lane INC | |
Entity Central Index Key | 0001433642 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Common Class A | ||
Entity Common Stock, Shares Outstanding | 19,265,873 | |
Common Class B | ||
Entity Common Stock, Shares Outstanding | 27,935,255 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Class of Stock [Line Items] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Treasury stock (in shares) | 114,529 | |
Common Class A | ||
Class of Stock [Line Items] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock, shares issued (in shares) | 19,265,873 | 19,151,033 |
Common stock, shares outstanding (in shares) | 19,265,873 | 19,036,504 |
Common Class B | ||
Class of Stock [Line Items] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 27,935,255 | 27,935,255 |
Common stock, shares outstanding (in shares) | 27,935,255 | 27,935,255 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Net income | $ 25,612 | $ 16,391 |
Other comprehensive income (loss), net of tax: | ||
Unrealized loss on cash flow hedge | 0 | (129) |
Realized loss on cash flow hedge | 35 | 0 |
Total other comprehensive income (loss), net of tax | 35 | (129) |
Comprehensive income | 25,647 | 16,262 |
Less: | ||
Total comprehensive income attributable to Hamilton Lane Incorporated | 5,476 | 0 |
General Partnerships | ||
Less: | ||
Comprehensive income (loss) attributable to non-controlling interests | 898 | 545 |
Hamilton Lane Advisors, L.L.C. | ||
Less: | ||
Comprehensive income (loss) attributable to non-controlling interests | $ 19,273 | $ 15,717 |
Condensed Consolidated Statement of Shareholders' Equity - 3 months ended Jun. 30, 2017 - USD ($) $ in Thousands |
Total |
Class A Common Stock |
Common Stock
Class A Common Stock
|
Common Stock
Class B Common Stock
|
Additional Paid in Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
General Partnerships
Noncontrolling Interests
|
Hamilton Lane Advisors, L.L.C.
Noncontrolling Interests
|
---|---|---|---|---|---|---|---|---|---|---|
Beginning balance at Mar. 31, 2017 | $ 86,627 | $ 19 | $ 28 | $ 61,845 | $ 612 | $ (2,151) | $ (311) | $ 9,901 | $ 16,684 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net income | 25,612 | 5,464 | 898 | 19,250 | ||||||
Other comprehensive loss | 35 | 12 | 23 | |||||||
Equity-based compensation | 1,416 | 486 | 930 | |||||||
Retirement of treasury stock | 0 | $ (2,151) | (2,151) | 2,151 | ||||||
Proceeds received from option exercises | 313 | 108 | 205 | |||||||
Purchase and retirement of Class A shares for tax withholding | (663) | $ (663) | (228) | (435) | ||||||
Deferred tax adjustment | 115 | 115 | ||||||||
Dividends declared | (3,167) | (3,167) | ||||||||
Capital contributions from (distributions to) non-controlling interests, net | (1,094) | (1,094) | ||||||||
Member distributions | (11,600) | (11,600) | ||||||||
Equity reallocation between controlling and non-controlling interests | 0 | 45 | (45) | |||||||
Ending balance at Jun. 30, 2017 | $ 97,594 | $ 19 | $ 28 | $ 60,220 | $ 2,909 | $ 0 | $ (299) | $ 9,705 | $ 25,012 |
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2017 |
Mar. 31, 2017 |
Jun. 30, 2016 |
|
Operating activities: | |||
Net income | $ 25,612 | $ 16,391 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 437 | 488 | |
Change in deferred income taxes | 1,903 | (410) | |
Amortization of deferred financing costs | 85 | 214 | |
Equity-based compensation | 1,416 | 1,094 | |
Equity in income of investees | (5,919) | $ (1,966) | (1,966) |
Proceeds received from investments | 5,176 | 950 | |
Other | 129 | 0 | |
Changes in operating assets and liabilities: | |||
Fees receivable | (7,361) | 548 | |
Prepaid expenses | (126) | (510) | |
Due from related parties | 362 | 679 | |
Other assets | (672) | (2,038) | |
Accounts payable | (40) | (254) | |
Accrued compensation and benefits | 8,126 | 4,924 | |
Other liabilities | 58 | (2,674) | |
Net cash provided by operating activities | 29,186 | 17,436 | |
Investing activities: | |||
Purchase of furniture, fixtures and equipment | (388) | (363) | |
Distributions received from investments | 3,465 | 1,487 | |
Contributions to investments | (6,589) | (8,069) | |
Net cash (used in) investing activities | (3,512) | (6,945) | |
Financing activities: | |||
Repayments of senior secured term loan | (650) | (650) | |
Contributions from non-controlling interest in Partnerships | 40 | 84 | |
Distributions to non-controlling interest in Partnerships | (1,134) | 0 | |
Sale of membership interests | 0 | 2,434 | |
Purchase of Class A shares for tax withholdings | (663) | 0 | |
Purchase of membership interests | 0 | (1,028) | |
Proceeds received from option exercises | 313 | 217 | |
Members’ distributions | (9,387) | (18,281) | |
Net cash (used in) financing activities | (11,481) | (17,224) | |
Increase (decrease) in cash, cash equivalents, and restricted cash | 14,193 | (6,733) | |
Cash, cash equivalents, and restricted cash at beginning of the period | 34,135 | 70,382 | |
Cash, cash equivalents, and restricted cash at end of the period | $ 48,328 | $ 34,135 | $ 63,649 |
Organization |
3 Months Ended | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||
Organization | Organization Hamilton Lane Incorporated (“HLI”) was incorporated in the State of Delaware on December 31, 2007. As of March 6, 2017, following the initial public offering (“IPO”) and related transactions (“Reorganization”), the Company became a publicly-traded entity, and both the holding company for and sole managing member of Hamilton Lane Advisors, L.L.C. (“HLA”). Unless otherwise specified, “the Company” refers to the consolidated group of HLI and HLA and its subsidiaries throughout the remainder of these notes. HLA is a registered investment advisor with the United States Securities and Exchange Commission (“SEC”), providing asset management and advisory services, primarily to institutional investors, to design, build and manage private markets portfolios. HLA generates revenues primarily from management fees, by managing assets on behalf of customized separate accounts, specialized fund products and distribution management accounts, and advisory fees, by providing asset supervisory and reporting services. HLA sponsors the formation, and serves as the general partner or managing member, of various limited partnerships or limited liability companies consisting of specialized funds and certain single client separate account entities (“Partnerships”) that acquire interests in third-party managed investment funds that make private equity and equity-related investments. The Partnerships may also make direct co-investments, including investments in debt, equity, and other equity-based instruments. HLA, which includes certain subsidiaries that serve as the general partner or managing member of the Partnerships, may invest its own capital in the Partnerships and generally makes all investment and operating decisions for the Partnerships. HLA operates several wholly or majority owned entities through which it conducts its foreign operations. Reorganization In connection with the IPO, the Company completed a series of transactions on March 6, 2017, which are described below:
Initial Public Offering On March 6, 2017, HLI issued 13,656,250 shares of Class A common stock in the IPO at a price of $16.00 per share. The net proceeds totaled $203,205 after deducting underwriting commissions of $15,295 and before offering costs of $5,844 that were incurred by HLA. The net proceeds were used to purchase 11,156,250 newly issued Class A units in HLA for $166,005, and 2,500,000 Class A units from existing HLA owners for $37,200. Subsequent to the IPO and Reorganization transactions, HLI is a holding company whose principal asset is a controlling equity interest in HLA. As the sole managing member of HLA, HLI operates and controls all of the business and affairs of HLA, and through HLA, conducts its business. As a result, HLI consolidates HLA’s financial results and reports a non-controlling interest related to the portion of HLA units not owned by HLI. The assets and liabilities of HLA represent substantially all of HLI’s consolidated assets and liabilities with the exception of certain deferred tax assets and liabilities and payable to related parties pursuant to a tax receivable agreement. As of June 30, 2017 and March 31, 2017, HLI held approximately 34.4% and 34.2%, respectively, of the economic interest in HLA. As future exchanges of HLA units occur, the economic interest in HLA held by HLI will increase. The Reorganization is considered a transaction between entities under common control. As a result, the condensed consolidated financial statements for periods prior to the IPO and the Reorganization are the condensed consolidated financial statements of HLA as the predecessor to HLI for accounting and reporting purpose |
Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Management believes it has made all necessary adjustments (which consisted of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. Results of operations for the three months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of March 31, 2017. Fair Value of Financial Instruments The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below:
The Company considers cash and cash equivalents, fees receivable, prepaid expenses, other assets, investments, accounts payable, accrued compensation and benefits, senior secured term loan, and other liabilities to be its financial instruments. The carrying amount reported in the Condensed Consolidated Balance Sheets for these financial instruments equals or closely approximates their fair values; except for investments carried at cost, which are discussed in Note 3, and senior secured term loan and interest rate cap, which are discussed in Note 5. Distributions and Dividends Distributions and dividends are reflected in the condensed consolidated financial statements when declared. Distributions to members represent amounts paid to the non-controlling interest holders of HLA. All distributions received by HLI from HLA are eliminated in the condensed consolidated financial statements. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards update (ASU) No. 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09). ASU 2014-09 represents a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to receive in exchange for those goods or services. The new standards will be effective for the Company on April 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method. The Company currently recognizes incentive fee revenue when required return levels are met and all contingencies have been resolved. Under the new standard, the Company will recognize incentive fee revenue when it concludes that it is probable that a significant reversal in the cumulative amount of incentive fee revenue will not occur when the uncertainty is resolved. The Company is continuing to assess the impact of adoption of the new standard on other revenue-related items as well, including evaluating the impact of certain revenue related costs, gross vs. net reporting issues, as well as the additional disclosures required by the new standard. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, and entities may early adopt. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases” (ASU 2016-02). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the consolidated balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Payments” (ASU 2016-15). ASU 2016-15 clarifies cash flow classification of several discrete cash flows issues including debt prepayment costs and distributions received from equity method investees. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows - Restricted Cash” (ASU 2016-18). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments in this update are effective for years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted the standard on October 1, 2016 and retrospectively applied the amendment. Other than the change in presentation of restricted cash within the Condensed Consolidated Statements of Cash Flows, the adoption of this standard did not have a material impact on its consolidated financial statements. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. |
Investments |
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment | Investments Investments consist of the following:
The Company’s equity method investments in Partnerships represent its ownership in certain specialized funds and customized separate accounts. The strategies and geographic location of investments within the Partnerships vary by fund. The Company generally has a 1% interest in each of the Partnerships, although the Company has interests in certain Partnerships ranging from 0-7%. The Company’s other equity method investments represent its ownership in a technology company that provides benchmarking and analytics of private equity data and its ownership in a joint venture that automates the collection of fund and underlying portfolio company data from general partners. The Company recognized equity method income related to its investments in Partnerships and other equity method investments of $5,919, and $1,966 for the three months ended June 30, 2017 and 2016, respectively. The Company evaluates each of its equity method investments to determine if any were significant pursuant to the requirements of Regulation S-X. As of June 30, 2017 and March 31, 2017, no individual equity method investment held by the Company met the significance criteria, and as a result, the Company is not required to present separate financial statements for any of its equity method investments. The Company’s investments carried at cost include other proprietary investments that are not consolidated, over which the Company does not exert significant influence and for which fair value is not readily determinable. The Company has determined in accordance with the applicable guidance that it is impracticable to estimate the fair value of the investments carried at cost due to limited information available. As of June 30, 2017 and March 31, 2017, the Company did not identify any significant events or changes in circumstances that have a significant adverse effect on the carrying value of these investments carried at cost. |
Variable Interest Entities |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | Variable Interest Entities The Company consolidates certain VIEs in which it is determined that the Company is the primary beneficiary. The consolidated VIEs are general partner entities of the Partnerships, which are not wholly owned by the Company. The total assets of the consolidated VIEs are $19,305 and $19,653 as of June 30, 2017 and March 31, 2017, respectively, and are recorded in Investments in the Condensed Consolidated Balance Sheets. The consolidated VIEs had no liabilities as of June 30, 2017 and March 31, 2017. The assets of the consolidated VIEs may only be used to settle obligations of the consolidated VIEs, if any. In addition, there is no recourse to the Company for the consolidated VIEs’ liabilities, except for certain entities in which there could be a claw back of previously distributed carried interest. The Company holds variable interests in certain Partnerships that are VIEs, which are not consolidated, as it is determined that the Company is not the primary beneficiary. Certain Partnerships are considered VIEs because limited partners lack the ability to remove the general partner or dissolve the entity without cause, by simple majority vote (i.e. do not have substantive “kick out” or “liquidation” rights). The Company’s involvement with such entities is in the form of direct equity interests in, and fee arrangements with, the Partnerships in which it also serves as the general partner or managing member. In the Company’s role as general partner or managing member, it generally considers itself the sponsor of the applicable Partnership and makes all investment and operating decisions. As of June 30, 2017, the total commitments and remaining unfunded commitments from the limited partners and general partners to the unconsolidated VIEs are $11,927,604 and $4,900,996, respectively. These commitments are the primary source of financing for the unconsolidated VIEs. The maximum exposure to loss represents the potential loss of assets recognized by the Company relating to these unconsolidated entities. The Company believes that its maximum exposure to loss is limited because it establishes separate limited partnerships or limited liability companies to serve as the general partner or managing member of the Partnerships. The carrying amount of assets and liabilities recognized in the Condensed Consolidated Balance Sheets related to the Company’s interests in these non-consolidated VIEs and the Company’s maximum exposure to loss relating to non-consolidated VIEs were as follows:
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Senior Secured Term Loan |
3 Months Ended |
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Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Senior Secured Term Loan | Senior Secured Term Loan The credit agreement for the senior secured term loan contains various restrictive covenants. It requires the Company to maintain a specified maximum total leverage ratio. In addition, the credit agreement, among other things, limits the ability of the Company to incur additional indebtedness, to make certain restricted payments, to consummate mergers, consolidations, asset sales and make certain investments, subject to certain exceptions and carve-outs. The fair value of the outstanding balance of the term loan at June 30, 2017 and March 31, 2017 approximated par value based on then current market rates for similar debt instruments and is classified as Level II within the fair value hierarchy. In July 2015, the Company purchased interest rate caps through June 30, 2020 to limit exposure to fluctuations in LIBOR above 2.5% on a portion of the Company’s senior secured term loan. In October 2016, the Company de-designated its remaining interest rate caps as cash flow hedges and discontinued hedge accounting. The amount accumulated in other comprehensive income (loss) will be amortized to interest expense over the remaining term of the respective interest rate caps, or written off if the cash flows become probable of not occurring. The changes in the fair value of these interest rate caps after the de-designation are recorded in other non-operating income in the Condensed Consolidated Statements of Income. The fair value of the interest rate caps was $87 and $194 as of June 30, 2017 and March 31, 2017, respectively, and is included in other assets in the Condensed Consolidated Balance Sheets. The fair value of the interest rate caps is determined utilizing quoted prices in active markets for the same or similar instruments and is classified as Level II within the fair value hierarchy. |
Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Equity | Equity The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2017:
During the three months ended June 30, 2017, the Company retired 114,529 shares of Class A common stock held as treasury stock at a total cost of $2,151 (that were outstanding as of March 31, 2017) and 33,251 shares of Class A common stock at a total cost of $663 that were purchased from employees to meet statutory tax withholding requirements. On June 12, 2017, the Company declared a quarterly dividend of $0.175 per share of Class A common stock to record holders at the close of business on June 26, 2017 for a total amount of $3,167 that was paid on July 10, 2017. |
Equity-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-Based Compensation | Equity-Based Compensation Summary of Option Activity A summary of option activity for the three months ended June 30, 2017 is presented below:
The intrinsic value of options exercised during the three months ended June 30, 2017 was $4,350. Restricted Stock A summary of restricted stock activity for the three months ended June 30, 2017 is presented below:
As of June 30, 2017, total unrecognized compensation expense related to restricted stock was $15,265. |
Compensation and Benefits |
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Compensation Related Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Benefits | Compensation and Benefits The Company has recorded the following amounts related to compensation and benefits:
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Income Taxes |
3 Months Ended |
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Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes As a result of the Reorganization and IPO, HLI became the sole managing member of HLA, which is organized as a limited liability company and treated as a “flow-through” entity for income tax purposes. As a “flow-through” entity, HLA is not subject to income taxes apart from foreign taxes attributable to its operations in foreign jurisdictions. Any taxable income or loss generated by HLA is passed through to and included in the taxable income or loss of its members, including HLI following the Reorganization and IPO, on a pro rata basis. As a result, the Company does not record income taxes on pre-tax income or loss attributable to the non-controlling interests in the general partnerships and HLA, except for foreign taxes discussed above. HLI is subject to U.S. federal and applicable state corporate income taxes with respect to its allocable share of any taxable income from HLA following the Reorganization and IPO. The Company’s effective tax rate used for interim periods is based on an estimated annual effective tax rate combined with the tax effect of items required to be recorded discretely in the interim period in which those items occur. The effective tax rate is dependent on many factors, including the estimated amount of income subject to income tax; therefore, the effective tax rate can vary from period to period. The Company’s effective tax rate was 12.6% and (2.5)% for the three months ended June 30, 2017 and 2016, respectively. These rates were less than the statutory rate due primarily to the portion of income allocated to the non-controlling entities. We evaluate the realizability of our deferred tax asset on a quarterly basis and adjust the valuation allowance when it is more likely than not that all or a portion of the deferred tax asset may not be realized. The Company believes all of our deferred tax assets, except the deferred tax asset relating to the basis difference in HLA, are more likely than not to be realized. As of June 30, 2017, the Company had no unrecognized tax positions. Tax Receivable Agreement HLI’s purchase of HLA Class A units concurrent with the IPO, and the subsequent and future exchanges by holders of HLA units for shares of HLI’s Class A common stock pursuant to the Exchange Agreement, are expected to result in increases in HLI’s share of the tax basis of the tangible and intangible assets of HLA. This will increase the tax depreciation and amortization deductions that otherwise would not have been available to HLI. These increases in tax basis and tax depreciation and amortization deductions are expected to reduce the amount of cash taxes that HLI would otherwise be required to pay in the future. On March 6, 2017, HLI entered into a tax receivable agreement (“TRA”) with the other members of HLA that requires HLI to pay exchanging HLA unitholders (the “TRA Recipients”) 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that HLI actually realizes (or, under certain circumstances, is deemed to realize) as a result of the increases in tax basis in connection with exchanges by the TRA Recipients described above and certain other tax benefits attributable to payments under the TRA. No amounts were paid to TRA Recipients during the three months ended June 30, 2017. |
Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share There were no shares of Class A common stock outstanding during the three months ended June 30, 2016, therefore no earnings per share information has been presented for that period. Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to HLI and therefore are not participating securities. As a result, a separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been included. Shares of the Company’s Class B common stock are, however, considered potentially dilutive to the Class A common stock because each share of Class B common stock, together with a corresponding Class B unit, is exchangeable for a share of Class A common stock on a one-for-one basis. The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:
The calculation of diluted earnings per share excludes 34,438,669 outstanding Class B and C Units of HLA, which are exchangeable into Class A common stock under the “if-converted” method, because the inclusion of such shares would be antidilutive. |
Related-Party Transactions |
3 Months Ended |
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Jun. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | Related-Party Transactions The Company has investment management agreements with various specialized funds and customized separate accounts that it manages. The Company earned management and incentive fees from Partnerships of $33,465 and $22,446 for the three months ended June 30, 2017 and 2016, respectively. Due from related parties in the Condensed Consolidated Balance Sheets consists primarily of advances made on behalf of the Partnerships for the payment of certain operating costs and expenses for which the Company is subsequently reimbursed and refundable tax distributions made to members. Fees receivable from the Partnerships were $7,969 and $918 as of June 30, 2017 and March 31, 2017, respectively, and are included in fees receivable in the Condensed Consolidated Balance Sheets. |
Supplemental Financial Information |
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Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information | Supplemental Cash Flow Information
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Commitments and Contingencies |
3 Months Ended |
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Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation From time to time, the Company is named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, the Company does not believe it is probable that any current legal proceeding or claim would individually or in the aggregate materially affect its condensed consolidated financial statements. Incentive Fees In connection with Carried Interest from the Partnerships, the Company only recognizes its allocable share of the Partnerships’ earnings to the extent that this income is not subject to continuing contingencies. Carried Interest allocated to the Company from the Partnerships that is subject to continuing contingencies is not recognized in the accompanying Condensed Consolidated Balance Sheets. The Partnerships have allocated Carried Interest still subject to contingencies in the amounts of $266,374 and $236,857 at June 30, 2017 and March 31, 2017, respectively, of which $45,166 and $45,166 at June 30, 2017 and March 31, 2017, respectively, has been received and deferred by the Company. If the Company ultimately receives the unrecognized Carried Interest, a total of $56,228 and $48,849 as of June 30, 2017 and March 31, 2017, respectively, would potentially be payable to certain employees and third parties pursuant to compensation arrangements related to the carried interest profit-sharing plans. Such amounts have not been recorded in the Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Income as this liability is not yet probable. Commitments The Company serves as the investment manager of the Partnerships. The general partner or managing member of each Partnership is generally a separate subsidiary of the Company and has agreed to invest funds on the same basis as the limited partners in most instances. The aggregate unfunded commitment of the general partners to the Partnerships was $84,654 and $76,908 as of June 30, 2017 and March 31, 2017, respectively. |
Management and Advisory Fees |
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Investment Advisory, Management and Administrative Fees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management and Advisory Fees | Management and Advisory Fees The following presents management and advisory fee revenues by product offering:
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Subsequent Event |
3 Months Ended |
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Jun. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On August 8, 2017, the Company declared a quarterly dividend of $0.175 per share of Class A common stock to record holders at the close of business on September 15, 2017. The payment date will be October 2, 2017. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Management believes it has made all necessary adjustments (which consisted of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. Results of operations for the three months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of March 31, 2017. |
Fair Value of Financial Instruments | |
Distributions and Dividends | Distributions and Dividends Distributions and dividends are reflected in the condensed consolidated financial statements when declared. Distributions to members represent amounts paid to the non-controlling interest holders of HLA. All distributions received by HLI from HLA are eliminated in the condensed consolidated financial statements. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards update (ASU) No. 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09). ASU 2014-09 represents a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to receive in exchange for those goods or services. The new standards will be effective for the Company on April 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method. The Company currently recognizes incentive fee revenue when required return levels are met and all contingencies have been resolved. Under the new standard, the Company will recognize incentive fee revenue when it concludes that it is probable that a significant reversal in the cumulative amount of incentive fee revenue will not occur when the uncertainty is resolved. The Company is continuing to assess the impact of adoption of the new standard on other revenue-related items as well, including evaluating the impact of certain revenue related costs, gross vs. net reporting issues, as well as the additional disclosures required by the new standard. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those years, and entities may early adopt. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases” (ASU 2016-02). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the consolidated balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Payments” (ASU 2016-15). ASU 2016-15 clarifies cash flow classification of several discrete cash flows issues including debt prepayment costs and distributions received from equity method investees. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that adoption will have on its consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows - Restricted Cash” (ASU 2016-18). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments in this update are effective for years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted the standard on October 1, 2016 and retrospectively applied the amendment. Other than the change in presentation of restricted cash within the Condensed Consolidated Statements of Cash Flows, the adoption of this standard did not have a material impact on its consolidated financial statements. |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. |
Investments (Tables) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investments | Investments consist of the following:
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Variable Interest Entities (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Entities | The carrying amount of assets and liabilities recognized in the Condensed Consolidated Balance Sheets related to the Company’s interests in these non-consolidated VIEs and the Company’s maximum exposure to loss relating to non-consolidated VIEs were as follows:
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Equity (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Rollforward of Common Stock | The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2017:
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Equity-Based Compensation (Tables) |
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Option Activity | A summary of option activity for the three months ended June 30, 2017 is presented below:
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Summary of Restricted Stock Activity | A summary of restricted stock activity for the three months ended June 30, 2017 is presented below:
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Compensation and Benefits (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation Related Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Compensation and Benefits | The Company has recorded the following amounts related to compensation and benefits:
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Earnings per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:
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Supplemental Financial Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Flow, Supplemental Disclosures |
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Management and Advisory Fees (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Advisory, Management and Administrative Fees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management and Advisory Fee Revenues by Product Offering | The following presents management and advisory fee revenues by product offering:
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Organization - Reorganization (Details) |
Mar. 06, 2017
vote
shares
|
---|---|
Common Class A | |
Class of Stock [Line Items] | |
Number of votes | 1 |
Shares issued in exchange for units in the Reorganization (in shares) | shares | 3,899,169 |
Common Class B | |
Class of Stock [Line Items] | |
Number of votes | 10 |
Member Units | HLA | |
Class of Stock [Line Items] | |
Stock split, conversion ratio | 0.68 |
Organization - Initial Public Offering (Details) - USD ($) $ / shares in Units, $ in Thousands |
Mar. 06, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
---|---|---|---|
Class of Stock [Line Items] | |||
Percent of economic interest held | 34.40% | 34.20% | |
Common Class A | IPO | |||
Class of Stock [Line Items] | |||
Common stock shares issued in IPO (in shares) | 13,656,250 | ||
Common stock issued (in dollars per share) | $ 16.00 | ||
Proceeds from IPO, net of underwriting discount | $ 203,205 | ||
Underwriting commissions | 15,295 | ||
Offering costs | $ 5,844 | ||
Member Units | Common Class A | |||
Class of Stock [Line Items] | |||
Purchase of interest by parent (in shares) | 11,156,250 | ||
Purchase of interest by parent | $ 166,005 | ||
Member Units | Existing HLA Owners | Common Class A | |||
Class of Stock [Line Items] | |||
Purchase of interest by parent (in shares) | 2,500,000 | ||
Purchase of interest by parent | $ 37,200 |
Investments - Schedule of Investments (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Investment [Line Items] | ||
Investments carried at cost | $ 15,860 | $ 16,345 |
Total Investments | 124,027 | 120,147 |
Partnerships | ||
Investment [Line Items] | ||
Equity method investments | 107,015 | 103,141 |
Other Equity Method Investments | ||
Investment [Line Items] | ||
Equity method investments | $ 1,152 | $ 661 |
Investments - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2017 |
Mar. 31, 2017 |
Jun. 30, 2016 |
|
Schedule of Equity Method Investments [Line Items] | |||
Equity in income of investees | $ 5,919 | $ 1,966 | $ 1,966 |
Partnerships | |||
Schedule of Equity Method Investments [Line Items] | |||
Percent interest in partnerships | 1.00% | ||
Partnerships | Minimum | |||
Schedule of Equity Method Investments [Line Items] | |||
Percent interest in partnerships | 0.00% | ||
Partnerships | Maximum | |||
Schedule of Equity Method Investments [Line Items] | |||
Percent interest in partnerships | 7.00% |
Variable Interest Entities - Consolidated VIEs (Details) - Primary Beneficiary - USD ($) |
Jun. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Total assets of consolidated VIEs | $ 19,305,000 | $ 19,653,000 |
Total liabilities of consolidated VIEs | $ 0 | $ 0 |
Variable Interest Entities - Unconsolidated VIEs (Details) - Not Primary Beneficiary - USD ($) $ in Thousands |
Jun. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Total commitments from the limited partners and general partners to the unconsolidated VIE | $ 11,927,604 | |
Remaining unfunded commitments from the limited partners and general partners to the unconsolidated VIE | 4,900,996 | |
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract] | ||
Investments | 64,428 | $ 60,597 |
Fees receivable | 7,121 | 430 |
Due from related parties | 723 | 1,742 |
Total VIE Assets | 72,272 | 62,769 |
Deferred incentive fee revenue | 45,166 | 45,166 |
Non-controlling interests | (9,705) | (9,901) |
Maximum Exposure to Loss | $ 107,733 | $ 98,034 |
Senior Secured Term Loan - Interest Rate Caps (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Mar. 31, 2017 |
Jul. 31, 2015 |
---|---|---|---|
Other Assets | Level II | Interest Rate Cap | |||
Debt Instrument [Line Items] | |||
Fair value of interest rate caps | $ 87 | $ 194 | |
Credit Agreement | Senior Secured Term Loan | London Interbank Offered Rate (LIBOR) | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 2.50% |
Equity - Shares of Common Stock Outstanding (Details) |
3 Months Ended |
---|---|
Jun. 30, 2017
shares
| |
Common Class A | |
Common Stock, Shares Outstanding [Roll Forward] | |
Outstanding, beginning of period (in shares) | 19,036,504 |
Restricted stock granted (in shares) | 40,427 |
Shares issued due to option exercise, net (in shares) | 200,244 |
Forfeitures of restricted stock (in shares) | (11,302) |
Outstanding, end of period (in shares) | 19,265,873 |
Common Class B | |
Common Stock, Shares Outstanding [Roll Forward] | |
Outstanding, beginning of period (in shares) | 27,935,255 |
Restricted stock granted (in shares) | 0 |
Shares issued due to option exercise, net (in shares) | 0 |
Forfeitures of restricted stock (in shares) | 0 |
Outstanding, end of period (in shares) | 27,935,255 |
Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Jul. 10, 2017 |
Jun. 30, 2017 |
Aug. 08, 2017 |
Jun. 12, 2017 |
|
Class of Stock [Line Items] | ||||
Retirement of treasury stock | $ 0 | |||
Purchase and retirement of Class A shares for tax withholding | 663 | |||
Dividends | $ 3,167 | |||
Common Class A | ||||
Class of Stock [Line Items] | ||||
Common stock retired (in shares) | 114,529 | |||
Retirement of treasury stock | $ 2,151 | |||
Shares paid for tax withholding (in shares) | 33,251 | |||
Purchase and retirement of Class A shares for tax withholding | $ 663 | |||
Dividends payable (in dollars per share) | $ 0.175 | |||
Subsequent Event | ||||
Class of Stock [Line Items] | ||||
Dividends | $ 3,167 | |||
Subsequent Event | Common Class A | ||||
Class of Stock [Line Items] | ||||
Dividends payable (in dollars per share) | $ 0.175 |
Equity-Based Compensation - Summary of Option Activity (Details) - 2017 Equity Incentive Plan $ / shares in Units, $ in Thousands |
3 Months Ended |
---|---|
Jun. 30, 2017
USD ($)
$ / shares
shares
| |
Number of Options | |
Outstanding at beginning of period (in shares) | shares | 233,495 |
Exercised (in shares) | shares | (233,495) |
Outstanding at end of period (in shares) | shares | 0 |
Weighted- Average Exercise Price | |
Outstanding at beginning of period (in dollars per share) | $ / shares | $ 1.34 |
Exercised (in dollars per share) | $ / shares | 1.34 |
Outstanding at end of period (in dollars per share) | $ / shares | $ 0.00 |
Intrinsic value of options exercised | $ | $ 4,350 |
Equity-Based Compensation - Summary of Restricted Stock (Details) - 2017 Equity Incentive Plan - Restricted Stock $ / shares in Units, $ in Thousands |
3 Months Ended |
---|---|
Jun. 30, 2017
USD ($)
$ / shares
shares
| |
Total Unvested | |
Unvested at beginning of period (in shares) | shares | 1,138,521 |
Granted (in shares) | shares | 40,427 |
Vested (in shares) | shares | 0 |
Forfeited (in shares) | shares | (11,302) |
Unvested at end of period (in shares) | shares | 1,167,646 |
Weighted- Average Grant-Date Fair Value of Award | |
Unvested at beginning of period (in dollars per share) | $ / shares | $ 14.49 |
Granted (in dollars per share) | $ / shares | 19.28 |
Vested (in dollars per share) | $ / shares | 0.00 |
Forfeited (in dollars per share) | $ / shares | 15.04 |
Unvested at end of period (in dollars per share) | $ / shares | $ 14.65 |
Total unrecognized compensation expense relating to restricted stock | $ | $ 15,265 |
Compensation and Benefits - Schedule of Compensation and Benefits (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Compensation Related Costs [Abstract] | ||
Base compensation and benefits | $ 18,292 | $ 14,346 |
Incentive fee compensation | 254 | 496 |
Equity-based compensation | 1,416 | 1,094 |
Total compensation and benefits | $ 19,962 | $ 15,936 |
Income Taxes - Additional Information (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Income Tax Contingency [Line Items] | ||
Effective tax rate | 12.60% | (2.50%) |
Unrecognized tax positions | $ 0 | |
TRA Recipients | Tax Receivable Agreement | ||
Income Tax Contingency [Line Items] | ||
Percentage of cash savings payable | 85.00% | |
Amounts paid to TRA recipients | $ 0 |
Earnings per Share - Schedule of Earnings Per Share - Basic and Diluted (Details) - Common Class A $ / shares in Units, $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2017
USD ($)
$ / shares
shares
| ||||
Net income attributable to HLI | ||||
Basic EPS of Class A common stock | $ | $ 5,464 | |||
Assumed exercise and vesting of employee awards | $ | 83 | |||
Diluted EPS of Class A common stock | $ | $ 5,547 | |||
Weighted-Avg Shares | ||||
Weighted-average basic EPS of Class A common stock (in shares) | shares | 17,981,601 | |||
Weighted-average assumed vesting of employee awards (in shares) | shares | 477,814 | |||
Weighted-average diluted EPS of Class A common stock (in shares) | shares | 18,459,415 | |||
Per share amount | ||||
Basic EPS of Class A common stock (in dollars per share) | $ / shares | $ 0.30 | [1] | ||
Diluted EPS of Class A common stock (in dollars per share) | $ / shares | $ 0.30 | [1] | ||
|
Earnings per Share - Additional Information (Details) - shares |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2017 |
Mar. 31, 2017 |
Mar. 05, 2017 |
|
Class of Stock [Line Items] | |||
Antidilutive securities excluded from computation of earnings per share (in shares) | 34,438,669 | ||
Common Class A | |||
Class of Stock [Line Items] | |||
Common stock, shares outstanding (in shares) | 19,265,873 | 19,036,504 | 0 |
Related-Party Transactions - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Mar. 31, 2017 |
|
Related Party Transaction [Line Items] | |||
Total management and advisory fees | $ 52,701 | $ 39,566 | |
Fees receivable | 19,474 | $ 12,113 | |
General Partnerships | |||
Related Party Transaction [Line Items] | |||
Total management and advisory fees | 33,465 | $ 22,446 | |
Fees receivable | $ 7,969 | $ 918 |
Supplemental Financial Information (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Mar. 31, 2017 |
Jun. 30, 2016 |
---|---|---|---|
Non-cash financing activities: | |||
Dividends declared but not paid | $ 3,167 | $ 0 | $ 0 |
Member distributions declared but not paid | $ 4,598 | $ 2,385 | $ 15,000 |
Commitments and Contingencies - Incentive Fees (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Loss Contingencies [Line Items] | ||
Carried Interest still subject to contingencies | $ 266,374 | $ 236,857 |
Deferred incentive fee revenue | 45,166 | 45,166 |
Incentive fees, unrecorded estimate | 56,228 | 48,849 |
Carried Interest | ||
Loss Contingencies [Line Items] | ||
Deferred incentive fee revenue | $ 45,166 | $ 45,166 |
Commitments and Contingencies - Commitments (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Mar. 31, 2017 |
---|---|---|
Aggregate Unfunded Commitment | ||
Other Commitments [Line Items] | ||
Other commitment | $ 84,654 | $ 76,908 |
Management and Advisory Fees - Management and Advisory Fee Revenues by Product Offering (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Investment Advisory, Management and Administrative Fees [Abstract] | ||
Customized separate accounts | $ 18,784 | $ 17,504 |
Specialized funds | 25,206 | 13,752 |
Advisory and reporting | 6,650 | 5,767 |
Distribution management | 1,044 | 560 |
Total management and advisory fees | $ 51,684 | $ 37,583 |
Subsequent Event - Additional Information (Details) - Common Class A - $ / shares |
Aug. 08, 2017 |
Jun. 12, 2017 |
---|---|---|
Subsequent Event [Line Items] | ||
Dividends payable (in dollars per share) | $ 0.175 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Dividends payable (in dollars per share) | $ 0.175 |
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