10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2019

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		26-2482738
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One Presidential Blvd.,	4th Floor
Bala Cynwyd,	PA	19004
(Address of principal executive offices)		(Zip Code)

(610) 934-2222

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	HLNE	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of February 3, 2020, there were 29,834,709 shares of the registrant’s Class A common stock, par value $0.001, and 22,049,727 shares of the registrant’s Class B common stock, par value $0.001, outstanding.

Table of Contents

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets as of December 31, 2019 and March 31, 2019	3
Condensed Consolidated Statements of Income for the three and nine months ended December 31, 2019 and 2018	4
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended December 31, 2019 and 2018	5
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended December 31, 2019 and 2018	6
Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2019 and 2018	8
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures about Market Risk	43
Item 4. Controls and Procedures	44
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	46
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 5. Other Information	46
Item 6. Exhibits	47
Signatures	48

This Quarterly Report on Form 10-Q (“Form 10-Q”) includes certain information regarding the historical performance of our specialized funds and customized separate accounts. An investment in shares of our Class A common stock is not an investment in our specialized funds or customized separate accounts. In considering the performance information relating to our specialized funds and customized separate accounts contained herein, current and prospective Class A common stockholders should bear in mind that the performance of our specialized funds and customized separate accounts is not indicative of the possible performance of shares of our Class A common stock and is also not necessarily indicative of the future results of our specialized funds or customized separate accounts, even if fund investments were in fact liquidated on the dates indicated, and there can be no assurance that our specialized funds or customized separate accounts will continue to achieve, or that future specialized funds and customized separate accounts will achieve, comparable results.

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are owned by us or licensed by us. We also own or have the rights to copyrights that protect the content of our solutions. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this Form 10-Q are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, trade names and copyrights.

This Form 10-Q may include trademarks, service marks or trade names of other companies. Our use or display of other parties’ trademarks, service marks, trade names or products is not intended to, and does not imply a relationship with, or endorsement or sponsorship of us by, the trademark, service mark or trade name owners.

Unless otherwise indicated, information contained in this Form 10-Q concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources (including industry publications, surveys and forecasts), and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets that we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently verified any third-party information.

Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” the “Company,” “Hamilton Lane” and similar terms refer to Hamilton Lane Incorporated and its consolidated subsidiaries. As used in this Form 10-Q, (i) the term “HLA” refers to Hamilton Lane Advisors, L.L.C. and (ii) the terms “Hamilton Lane Incorporated” and “HLI” refer solely to Hamilton Lane Incorporated, a Delaware corporation, and not to any of its subsidiaries.

Cautionary Note Regarding Forward-Looking Information

Some of the statements in this Form 10-Q may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Words such as “will,” “expect,” “believe,” “estimate,” “continue,” “anticipate,” “intend,” “plan” and similar expressions are intended to identify these forward-looking statements. Forward-looking statements discuss management’s current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. All forward-looking statements are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different, including risks relating to: our ability to manage growth, fund performance, changes in our regulatory environment and tax status; market conditions generally; our ability to access suitable investment opportunities for our clients; our ability to maintain our fee structure; our ability to attract and retain key employees; our ability to manage our obligations under our debt agreements; defaults by clients and third-party investors on their obligations to us; our ability to comply with investment guidelines set by our clients; and our ability to receive distributions from HLA to fund our payment of dividends, taxes and other expenses.

The foregoing list of factors is not exhaustive. For more information regarding these risks and uncertainties as well as additional risks that we face, you should refer to the “Risk Factors” detailed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 (our “2019 Form 10-K”) and in our subsequent reports filed from time to time with the Securities and Exchange Commission (the “SEC”). The forward-looking statements included in this Form 10-Q are made only as of the date we filed this report. We undertake no obligation to update or revise any forward-looking statement as a result of new information or future events, except as otherwise required by law.

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Hamilton Lane Incorporated

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

	December 31,		March 31,
	2019		2019
Assets
Cash and cash equivalents	$	81,599	$	49,357
Restricted cash	3,095		2,233
Fees receivable	19,456		20,320
Prepaid expenses	4,587		4,714
Due from related parties	2,667		2,628
Furniture, fixtures and equipment, net	7,280		8,108
Lease right-of-use assets, net	8,596		—
Investments	193,168		154,491
Deferred income taxes	138,378		107,726
Other assets	10,553		11,014
Total assets	$	469,379	$	360,591
Liabilities and Equity
Accounts payable	$	2,511	$	2,619
Accrued compensation and benefits	26,301		12,216
Deferred incentive fee revenue	3,704		3,704
Debt	67,245		70,954
Accrued members’ distributions	10,505		17,081
Payable to related parties pursuant to tax receivable agreement	101,404		69,636
Dividends payable	8,026		5,673
Lease liabilities	9,397		—
Other liabilities (includes $16,395 and $0 at fair value)	23,936		8,986
Total liabilities	253,029		190,869
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; 29,835,713 and 27,367,477 issued and outstanding as of December 31, 2019 and March 31, 2019, respectively	30		27
Class B common stock, $0.001 par value, 50,000,000 authorized; 22,049,727 and 23,516,439 issued and outstanding as of December 31, 2019 and March 31, 2019, respectively	22		24
Additional paid-in-capital	109,050		92,482
Retained earnings	34,469		17,686
Accumulated other comprehensive income	2		7
Total Hamilton Lane Incorporated stockholders’ equity	143,573		110,226
Non-controlling interests in general partnerships	5,441		5,716
Non-controlling interests in Hamilton Lane Advisors, L.L.C.	67,336		53,780
Total equity	216,350		169,722
Total liabilities and equity	$	469,379	$	360,591

See accompanying notes to the condensed consolidated financial statements.

3

Hamilton Lane Incorporated

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Revenues
Management and advisory fees	$	59,837	$	55,617	$	179,584	$	159,844
Incentive fees	8,301		10,379		17,532		25,347
Total revenues	68,138		65,996		197,116		185,191
Expenses
Compensation and benefits	23,369		23,843		70,368		73,236
General, administrative and other	15,877		13,916		43,938		36,659
Total expenses	39,246		37,759		114,306		109,895
Other income (expense)
Equity in income of investees	4,454		4,934		14,331		10,096
Interest expense	(651)		(767)		(2,213)		(2,260)
Interest income	196		82		624		167
Non-operating income	97		8,892		4,175		20,951
Total other income (expense)	4,096		13,141		16,917		28,954
Income before income taxes	32,988		41,378		99,727		104,250
Income tax expense	4,551		18,463		11,564		25,660
Net income	28,437		22,915		88,163		78,590
Less: Income attributable to non-controlling interests in general partnerships	44		681		593		1,075
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.	14,896		16,776		47,393		51,990
Net income attributable to Hamilton Lane Incorporated	$	13,497	$	5,458	$	40,177	$	25,525
Basic earnings per share of Class A common stock	$	0.46	$	0.22	$	1.45	$	1.09
Diluted earnings per share of Class A common stock	$	0.46	$	0.22	$	1.44	$	1.08
Dividends declared per share of Class A common stock	$	0.275	$	0.2125	$	0.825	$	0.6375

See accompanying notes to the condensed consolidated financial statements.

4

Hamilton Lane Incorporated

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Net income	$	28,437	$	22,915	$	88,163	$	78,590
Other comprehensive income (loss), net of tax
Foreign currency translation	16		23		(13)		23
Total other comprehensive income (loss), net of tax	16		23		(13)		23
Comprehensive income	28,453		22,938		88,150		78,613
Less:
Comprehensive income attributable to non-controlling interests in general partnerships	44		681		593		1,075
Comprehensive income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.	14,903		16,788		47,385		52,002
Total comprehensive income attributable to Hamilton Lane Incorporated	$	13,506	$	5,469	$	40,172	$	25,536

See accompanying notes to the condensed consolidated financial statements.

5

Hamilton Lane Incorporated

Condensed Consolidated Statement of Stockholders' Equity

(Unaudited)

(In thousands)

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at September 30, 2019	$	30	$	22	$	107,718	$	28,998	$	(7)	$	5,592	$	62,278	$	204,631
Net income	—		—		—		13,497		—		44		14,896		28,437
Other comprehensive loss	—		—		—		—		9		—		7		16
Equity-based compensation	—		—		981		—		—		—		800		1,781
Deferred tax adjustment	—		—		20		—		—		—		—		20
Dividends declared	—		—		—		(8,026)		—		—		—		(8,026)
Capital contributions from (distributions to) non-controlling interests, net	—		—		—		—		—		(195)		—		(195)
Member distributions	—		—		—		—		—		—		(10,607)		(10,607)
Secondary offering	—		—		—		—		—		—		—		—
Employee Share Purchase Plan share issuance	—		—		161		—		—		—		132		293
Equity reallocation between controlling and non-controlling interests	—		—		170		—		—		—		(170)		—
Balance at December 31, 2019	$	30	$	22	$	109,050	$	34,469	$	2	$	5,441	$	67,336	$	216,350

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at March 31, 2019	$	27	$	24	$	92,482	$	17,686	$	7	$	5,716	$	53,780	$	169,722
Net income	—		—		—		40,177		—		593		47,393		88,163
Other comprehensive loss	—		—		—		—		(5)		—		(8)		(13)
Equity-based compensation	—		—		2,758		—		—		—		2,525		5,283
Issuance of shares for contingent compensation payout	—		—		214		—		—		—		211		425
Repurchase of Class A shares for employee tax withholding	—		—		(23)		—		—		—		(22)		(45)
Deferred tax adjustment	—		—		6,231		—		—		—		—		6,231
Dividends declared	—		—		—		(23,394)		—		—		—		(23,394)
Capital contributions from (distributions to) non-controlling interests, net	—		—		—		—		—		(868)		—		(868)
Member distributions	—		—		—		—		—		—		(30,037)		(30,037)
Secondary Offering	3		(2)		6,367		—		—		—		(6,370)		(2)
Employee Share Purchase Plan share issuance	—		—		462		—		—		—		423		885
Equity reallocation between controlling and non-controlling interests	—		—		559		—		—		—		(559)		—
Balance at December 31, 2019	$	30	$	22	$	109,050	$	34,469	$	2	$	5,441	$	67,336	$	216,350

See accompanying notes to the condensed consolidated financial statements.

6

Hamilton Lane Incorporated

Condensed Consolidated Statement of Stockholders' Equity

(Unaudited)

(In thousands)

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at September 30, 2018	$	25	$	24	$	86,089	$	15,178	$	—	$	6,873	$	53,958	$	162,147
Net income	—		—		—		5,458		—		681		16,776		22,915
Other comprehensive income	—		—		—		—		11		—		12		23
Equity-based compensation	—		—		760		—		—		—		844		1,604
Issuance of shares for contingent compensation payout	1		—		200		—		—		—		224		425
Deferred tax adjustment	—		—		1,021		—		—		—		—		1,021
Dividends declared	—		—		—		(5,325)		—		—		—		(5,325)
Capital contributions from (distributions to) non-controlling interests, net	—		—		—		—		—		(1,000)		—		(1,000)
Member distributions	—		—		—		—		—		—		(8,679)		(8,679)
Secondary offering	—		—		—		—		—		—		—		—
Equity reallocation between controlling and non-controlling interests	—		—		164		—		—		—		(164)		—
Balance at December 31, 2018	$	26	$	24	$	88,234	$	15,311	$	11	$	6,554	$	62,971	$	173,131

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at March 31, 2018	$	22	$	26	$	73,829	$	4,549	$	—	$	7,266	$	50,382	$	136,074
Cumulative-effect adjustment from adoption of accounting guidance	—		—		411		20		—		—		566		997
Net income	—		—		—		25,525		—		1,075		51,990		78,590
Other comprehensive income	—		—		—		—		11		—		12		23
Equity-based compensation	—		—		2,129		—		—		—		2,695		4,824
Repurchase of Class A shares for employee tax withholding	—		—		(73)		—		—		—		(101)		(174)
Issuance of shares for contingent compensation payout	1		—		200		—		—		—		224		425
Deferred tax adjustment	—		—		7,191		—		—		—		—		7,191
Dividends declared	—		—		—		(14,783)		—		—		—		(14,783)
Capital contributions from (distributions to) non-controlling interests, net	—		—		—		—		—		(1,787)		—		(1,787)
Member distributions	—		—		—		—		—		—		(38,247)		(38,247)
Secondary offering	3		(2)		5,891		—		—		—		(5,894)		(2)
Equity reallocation between controlling and non-controlling interests	—		—		(1,344)		—		—		—		1,344		—
Balance at December 31, 2018	$	26	$	24	$	88,234	$	15,311	$	11	$	6,554	$	62,971	$	173,131

See accompanying notes to the condensed consolidated financial statements.

7

Hamilton Lane Incorporated

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Nine Months Ended December 31,
	2019		2018
Operating activities:
Net income	$	88,163	$	78,590
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,379		1,759
Change in deferred income taxes	7,197		18,945
Change in payable to related parties pursuant to tax receivable agreement	150		(9,134)
Equity-based compensation	5,244		4,777
Equity in income of investees	(14,331)		(10,096)
Gain on sale of investments valued under the measurement alternative	(4,973)		(11,133)
Proceeds received from investments	8,475		11,652
Other	598		(482)
Changes in operating assets and liabilities:
Fees receivable	856		(2,029)
Prepaid expenses	126		(66)
Due from related parties	(39)		728
Other assets	329		(262)
Accounts payable	(108)		744
Accrued compensation and benefits	14,510		25,130
Deferred incentive fees	—		(2,541)
Other liabilities	(521)		327
Net cash provided by operating activities	108,055		106,909
Investing activities:
Purchase of furniture, fixtures and equipment	(1,207)		(4,758)
Purchase of other investments	(3,967)		—
Proceeds from sales of investments valued under the measurement alternative	6,419		22,531
Loan to investee	(157)		(944)
Distributions received from investments	6,878		8,166
Contributions to investments	(37,196)		(30,642)
Net cash used in investing activities	(29,230)		(5,647)
Financing activities:
Proceeds from offering	147,122		129,626
Purchase of membership interests	(147,122)		(129,626)
Repayments of debt	(3,750)		(1,875)
Draw-down on revolver	15,000		—
Repayment of revolver	(15,000)		(10,450)
Secured financing	15,750		—
Contributions from non-controlling interest in general partnerships	30		30
Distributions to non-controlling interest in general partnerships	(898)		(1,817)
Repurchase of Class B common stock	(2)		(2)
Repurchase of Class A shares for employee tax withholding	(45)		(174)
Proceeds received from issuance of shares under Employee Share Purchase Plan	885		—
Dividends paid	(21,041)		(13,351)
Members’ distributions paid	(36,613)		(41,878)
Net cash used in financing activities	(45,684)		(69,517)
Effect of exchange rate changes on cash and cash equivalents	(37)		13
Increase in cash, cash equivalents, and restricted cash	33,104		31,758
Cash, cash equivalents, and restricted cash at beginning of the period	51,590		49,383
Cash, cash equivalents, and restricted cash at end of the period	$	84,694	$	81,141

See accompanying notes to the condensed consolidated financial statements.

8

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

1. Organization

Hamilton Lane Incorporated (“HLI”) was incorporated in the State of Delaware on December 31, 2007. As of March 6, 2017, following its initial public offering (“IPO”) and related transactions, HLI became a publicly-traded entity, and is a holding company whose principal asset is a controlling equity interest in Hamilton Lane Advisors, L.L.C. (“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, payable to related parties pursuant to a tax receivable agreement, and dividends payable. Unless otherwise specified, “the Company” refers to the consolidated entity of HLI, HLA and subsidiaries throughout the remainder of these notes. As of December 31, 2019 and March 31, 2019, HLI held approximately 54.9% and 50.3%, respectively, of the economic interest in HLA. As future exchanges of HLA units occur pursuant to the exchange agreement in place with HLA’s members, the economic interest in HLA held by HLI will increase.

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 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-owned entities through which it conducts its foreign operations.

2. 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 nine months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the year ending March 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in HLI’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

9

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

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:

•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.

The carrying amount of cash and cash equivalents, fees receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments.

The carrying amount of the term loan of $67,245 as of December 31, 2019 approximated fair value based on then-current market rates for similar debt instruments and is classified as Level 2 within the fair value hierarchy.

Leases

On April 1, 2019, the Company adopted ASU 2016-02, “Leases”, (ASC 842) on a prospective basis and as a result, prior period amounts were not adjusted to reflect the impacts of the new standard. In addition, as permitted under the transition guidance within the new standard, prior scoping, classification, and accounting for initial direct costs were carried forward for leases existing as of the adoption date. 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 Condensed Consolidated Balance Sheets for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Condensed Consolidated Statements of Income. The adoption did not have an impact on the Condensed Consolidated Statements of Income as all of the Company’s leases are operating leases, and will continue to be recognized as expense on a straight-line basis. The adoption, however, resulted in a gross-up in total assets and total liabilities on the Condensed Consolidated Balance Sheets.

The Company determines whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, the Company determines whether it should be classified as an operating or finance lease. The Company accounts for lease components and non-lease components as a single lease component. Lease ROU assets and lease liabilities are recognized at the commencement date of the lease and measured based on the present value of lease payments over the lease term. Lease ROU assets include initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives. Generally, the Company’s leases do not provide an implicit rate and as a result, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company does not recognize a lease ROU asset or lease liability for short-term leases, which have lease

10

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

terms of 12 months or less. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 changes the fair value measurement disclosure requirements. The amendments remove or modify certain disclosures, while others were added. Early adoption of any removed or modified disclosure requirements is permitted upon issuance of ASU 2018-13 and adoption of the additional disclosure requirements may be delayed until the effective date. The Company elected to early adopt the removed or modified disclosure requirements of the standard on October 1, 2018 and expects to adopt the additional disclosure requirements on April 1, 2020. The adoption of the removed or modified disclosure requirements did not have a material impact on the Company’s disclosures in its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Accounting for Financial Instruments - Credit Losses (Topic 326)”. ASU 2016-13 replaces the incurred loss methodology in current GAAP with a methodology that reflects expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is effective for the Company on April 1, 2020 and early adoption is permitted. The Company has identified all of its material financial assets and does not expect that implementing the guidance will have a material impact on the Company's consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

11

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

3. Revenue

The following table presents revenues disaggregated by product offering, which aligns with the identified performance obligations and the basis for calculating each amount:

	Three Months Ended December 31,				Nine Months Ended December 31,
Management and advisory fees	2019		2018		2019		2018
Specialized funds	$	27,789	$	23,413	$	81,733	$	67,164
Customized separate accounts	22,618		21,594		67,047		63,087
Advisory	5,878		5,926		18,091		18,287
Reporting and other	2,237		2,260		6,492		6,373
Distribution management	1,108		1,975		3,169		3,773
Fund reimbursement revenue	207		449		3,052		1,160
Total management and advisory fees	$	59,837	$	55,617	$	179,584	$	159,844

	Three Months Ended December 31,				Nine Months Ended December 31,
Incentive fees	2019		2018		2019		2018
Specialized funds	$	3,638	$	10,227	$	11,257	$	18,036
Customized separate accounts	4,663		152		6,275		7,311
Total incentive fees	$	8,301	$	10,379	$	17,532	$	25,347

The Company recognized $2,541 of incentive fees during the nine months ended December 31, 2018 that were previously received and deferred.

Cost to obtain contracts

The Company incurs incremental costs related to sales commissions paid to certain employees directly related to customized separate account contracts. These incremental costs are capitalized and amortized over the expected contract length proportionately to the management fee revenue expected to be recognized in each year as a percentage of the total expected revenue for the contract. The contract asset related to the cost to obtain contracts was $973 and $968 as of December 31, 2019 and March 31, 2019, respectively, and is included in other assets in the Condensed Consolidated Balance Sheets. Amortization expense related to this contract asset was $120 and $363 for the three and nine months ended December 31, 2019, respectively, and $111 and $347 for the three and nine months ended December 31, 2018, respectively, and is included in general, administrative and other in the Condensed Consolidated Statements of Income.

12

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

4. Investments

Investments consist of the following:

	December 31,		March 31,
	2019		2019
Equity method investments in Partnerships	$	159,984	$	122,505
Equity method investments in Partnerships held by consolidated VIEs	11,183		11,648
Other equity method investments	1,069		1,086
Other investments	16,395		12,488
Investments valued under the measurement alternative	4,537		6,764
Total Investments	$	193,168	$	154,491

Equity method investments

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 has a 1% interest in substantially all of the Partnerships. 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 $4,454 and $14,331 for the three and nine months ended December 31, 2019, respectively, and $4,934 and $10,096 for the three and nine months ended December 31, 2018, respectively.

Other investments

The Company’s other investments represent investments in private equity funds and direct credit and equity co-investments. The private equity fund investments can only be redeemed through distributions received from the liquidation of underlying investments of the fund, and the timing of distributions is currently indeterminable. The direct credit co-investments are debt securities classified as trading securities. The direct equity co-investments and private equity funds are measured at fair value with unrealized holding gains and losses included in earnings. The Company’s other investments are recorded at estimated fair value utilizing significant unobservable inputs and are therefore classified in Level 3 of the fair value hierarchy.

The following is a reconciliation of other investments for which significant unobservable inputs (Level 3) were used in determining value:

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of September 30, 2019	$	5,836	$	3,093	$	6,984	$	15,913
Contributions	392		—		—		392
Distributions	(748)		—		—		(748)
Net gain	457		36		345		838
Balance as of December 31, 2019	$	5,937	$	3,129	$	7,329	$	16,395

13

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of March 31, 2019	$	3,734	$	3,940	$	4,814	$	12,488
Contributions	2,484		—		1,875		4,359
Distributions	(748)		(973)		—		(1,721)
Net gain	467		162		640		1,269
Balance as of December 31, 2019	$	5,937	$	3,129	$	7,329	$	16,395

The valuation methodologies, significant unobservable inputs, range of inputs and the weighted average input determined based upon relative fair value of the investments used in recurring Level 3 fair value measurements of assets were as follows, as of December 31, 2019:

				Significant
	Fair		Valuation	Unobservable				Weighted
	Value		Methodology	Inputs	Range			Average
Private equity funds	$	5,937	Adjusted net asset value	Selected market return	4.7%	-	4.7%	4.7%
Direct credit co-investments	$	3,129	Recent precedent transactions
			Discounted cash flow	Market yield	9.7%	-	10.1%	9.86%
Direct equity co-investments	$	7,329	Market approach	EBITDA multiple	8.0x	-	13.25x	10.87x
			Market approach	Equity multiple	1.25x			1.25x

For the significant unobservable inputs listed in the table above, (1) a significant increase or decrease in the selected market return would result in a significantly higher or lower fair value measurement, respectively; (2) a significant increase or decrease in the market yield would result in a significantly lower or higher fair value measurement, respectively; and (3) a significant increase or decrease in the selected multiple would result in a significantly higher or lower fair value measurement, respectively.

During the nine months ended December 31, 2019, the Company transferred these investments for an agreed amount of cash of $15,750 to a Partnership that is a Variable Interest Entity (“VIE”) of which the Company is the general partner but does not consolidate as the Company is not the primary beneficiary. Due to continuing involvement with these assets at the Partnership, the Company accounted for this transfer as a secured financing as it has not met the criteria in ASC 860, “Transfers and Servicing”, to qualify as a sale and therefore has recorded a financial liability for the secured financing which is included in other liabilities in the Condensed Consolidated Balance Sheets. The cash received was recorded as secured financing in financing activities in the Condensed Consolidated Statements of Cash Flows. As of December 31, 2019, all other investments were pledged as collateral on the Company’s secured financing.

14

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

The Company accounts for this financial liability at fair value under the fair value option. The primary reason for electing the fair value option is to mitigate volatility in earnings from using different measurement attributes. The significant input to the fair value of the secured financing is the fair value of the other investments delivered as collateral. As of December 31, 2019, the secured financing had a fair value of $16,395 and an amortized cost of $14,186. The fair value of the secured financing is estimated using Level 3 inputs with the significant input being the fair value of the other investments utilized as collateral as shown above.

The Company recognized a gain of $838 and $1,269 on other investments during the three and nine months ended December 31, 2019, respectively, and a loss of $838 and $1,973 on the secured financing liability during the three and nine months ended December 31, 2019, respectively, that are recorded in other non-operating loss.

Investments valued under the measurement alternative

On July 1, 2019, the previously announced sale of an entity in which the Company held an investment closed. The Company received gross proceeds of $6,419 and recorded a gain of approximately $4,973 in connection with the transaction during the nine months ended December 31, 2019.

5. 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 $11,183 and $11,648 as of December 31, 2019 and March 31, 2019, respectively, and are recorded in investments in the Condensed Consolidated Balance Sheets. The consolidated VIEs had no liabilities as of December 31, 2019 and March 31, 2019 other than deferred incentive fee revenue of $3,704 as of both December 31, 2019 and March 31, 2019. 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 clawback 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 based upon the Company’s equity interest percentage in each of the VIEs. 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 December 31, 2019, the total commitments and remaining unfunded commitments from the limited partners and general partners to the unconsolidated VIEs are $18,320,381 and $6,623,566, 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.

15

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

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:

	December 31,		March 31,
	2019		2019
Investments	$	116,636	$	87,001
Fees receivable	1,535		5,896
Due from related parties	1,001		1,332
Total VIE Assets	119,172		94,229
Deferred incentive fee revenue	3,704		3,704
Non-controlling interests	(5,441)		(5,716)
Maximum exposure to loss	$	117,435	$	92,217

6. Equity

The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2019:

	Class A Common Stock	Class B Common Stock
March 31, 2019	27,367,477	23,516,439
Shares issued (repurchased) in connection with registered offering	2,451,633	(1,466,712)
Shares issued in connection with contingent compensation payment	7,692	—
Forfeitures	(14,649)	—
Shares repurchased for employee tax withholdings	(509)	—
Restricted stock granted	6,070	—
Shares issued pursuant to Employee Share Purchase Plan	17,999	—
December 31, 2019	29,835,713	22,049,727

September 2019 Offering

In September 2019, the Company and certain selling stockholders completed a registered offering of an aggregate of 2,680,089 shares of Class A common stock at a price of $60.01 per share (the “September 2019 Offering”). The shares sold consisted of (i) 228,456 shares held by the selling stockholders and (ii) 2,451,633 shares newly issued by the Company. The Company received approximately $147,122 in net proceeds from the sale of its shares and used all of the proceeds to settle exchanges by certain members of HLA of a total of 1,466,712 Class B units and 984,921 Class C units. In connection with the exchange of the Class B units, the Company also repurchased for par value and canceled a corresponding number of shares of Class B common stock. The Company did not receive any proceeds from the sale of shares by the selling stockholders.

16

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

7. Equity-Based Compensation

A summary of restricted stock activity for the nine months ended December 31, 2019 is presented below:

	Total Unvested	Weighted- Average Grant-Date Fair Value of Award
March 31, 2019	662,076	$	26.58
Granted	6,070	$	53.47
Vested	(8,556)	$	29.70
Forfeited	(14,649)	$	27.24
December 31, 2019	644,941	$	26.78

As of December 31, 2019, total unrecognized compensation expense related to restricted stock was $11,974.

8. Compensation and Benefits

The Company has recorded the following amounts related to compensation and benefits:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Base compensation and benefits	$	19,562	$	19,749	$	60,810	$	57,819
Incentive fee compensation	2,046		2,498		4,314		5,539
Equity-based compensation	1,761		1,596		5,244		4,778
Contingent compensation related to acquisition	—		—		—		5,100
Total compensation and benefits	$	23,369	$	23,843	$	70,368	$	73,236

9. Income Taxes

The Company’s effective tax rate used for interim periods is based on an estimated annual effective tax rate including 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 evaluates the realizability of its deferred tax asset on a quarterly basis and adjusts 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’s effective tax rate was 13.8% and 44.6% for the three months ended December 31, 2019 and 2018, respectively, and 11.6% and 24.6% for the nine months ended December 31, 2019 and 2018, respectively. The effective tax rates were different from the statutory tax rate due to the portion of income allocated to non-controlling interests and discrete tax adjustments recorded in the periods.  The effective tax rates for the three and nine months ended December 31, 2018 included provision to return adjustments related to the state income tax apportionment impact on estimated deferred tax assets as of December 31, 2018.

17

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

In connection with the September 2019 Offering, the Company recorded a deferred tax asset in the amount of $41,130. It is more likely than not that a portion of these tax benefits will not be realized, so a valuation allowance of $3,736 was established as of September 30, 2019. Additionally, in connection with the September 2019 Offering and recording of the deferred tax asset, the Company recorded a payable to related parties pursuant to the tax receivable agreement of $31,481.

As of December 31, 2019, the Company had no unrecognized tax positions and believes there will be no changes to uncertain tax positions within the next 12 months.

10. Earnings per Share

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 the Class B units to which the Class B common stock corresponds are exchangeable for shares of Class A common stock on a one-for-one basis, at which time the share of Class B common stock is surrendered in exchange for a payment of its par value.

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:

	Three Months Ended December 31, 2019					Three Months Ended December 31, 2018
	Net income attributable to HLI		Weighted-Average Shares	Per share amount		Net income attributable to HLI		Weighted-Average Shares	Per share amount
Basic EPS of Class A common stock	$	13,497	29,185,039	$	0.46	$	5,458	25,051,094	$	0.22
Adjustment to net income:
Assumed vesting of employee awards	88					59
Effect of dilutive securities:
Assumed vesting of employee awards			423,167					523,724
Diluted EPS of Class A common stock	$	13,585	29,608,206	$	0.46	$	5,517	25,574,818	$	0.22

18

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

	Nine Months Ended December 31, 2019					Nine Months Ended December 31, 2018
	Net income attributable to HLI		Weighted-Average Shares	Per share amount		Net income attributable to HLI		Weighted-Average Shares	Per share amount
Basic EPS of Class A common stock	$	40,177	27,710,607	$	1.45	$	25,525	23,329,134	$	1.09
Adjustment to net income:
Assumed vesting of employee awards	267					327
Effect of dilutive securities:
Assumed vesting of employee awards			386,988					541,483
Diluted EPS of Class A common stock	$	40,444	28,097,595	$	1.44	$	25,852	23,870,617	$	1.08

The calculations of diluted earnings per share exclude 23,968,994 outstanding Class B and Class C units of HLA for the three and nine months ended December 31, 2019 and 27,819,930 outstanding Class B and Class C units of HLA for the three and nine months ended December 31, 2018, which are exchangeable into Class A common stock under the “if-converted” method, because the inclusion of such shares would be antidilutive.

11. 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 advisory fees from Partnerships of $39,141 and $117,941 for the three and nine months ended December 31, 2019, respectively, and $33,724 and $97,168 for the three and nine months ended December 31, 2018, respectively. The Company earned incentive fees from Partnerships of $5,731 and $14,850 for the three and nine months ended December 31, 2019, respectively, and $10,267 and $24,857 for the three and nine months ended December 31, 2018, respectively.

The Company entered into a service agreement on June 1, 2017 with its joint venture pursuant to which it had expenses of $1,261 and $4,006 for the three and nine months ended December 31, 2019, respectively, and $1,277 and $3,725 for the three and nine months ended December 31, 2018, respectively, that are included in general, administrative and other expenses in the Condensed Consolidated Statements of Income. The Company also has a payable to the joint venture of $423 and $450 as of December 31, 2019 and March 31, 2019, respectively, which is included in other liabilities in the Condensed Consolidated Balance Sheets.

The Company holds a convertible promissory note (the “Note”) issued by one of the Company’s equity method investees. The Note contains an option for the outstanding principal and any accrued interest to be converted to shares of the issuer under certain conditions. The carrying value of the Note was $877 and $678 as of December 31, 2019 and March 31, 2019, respectively, and is recorded in other assets in the Condensed Consolidated Balance Sheets.

19

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

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 $3,668 and $8,927 as of December 31, 2019 and March 31, 2019, respectively, and are included in fees receivable in the Condensed Consolidated Balance Sheets.

In connection with HLA’s acquisition of Real Asset Portfolio Management LLC (“RAPM”) in 2017, the Company paid the remaining 50% of contingent compensation due to the former principals of RAPM, who are employees of the Company, during the nine months ended December 31, 2019. Such compensation was paid $3,824 in cash and $425 by issuing Class A common stock.

12. Supplemental Cash Flow Information

	Nine Months Ended December 31,
	2019		2018
Cumulative-effect adjustment from adoption of accounting guidance	$	—	$	997
Shares issued for contingent compensation payment	$	425	$	425
Non-cash financing activities:
Dividends declared but not paid	$	8,026	$	5,325
Member distributions declared but not paid	$	10,505	$	8,206
Establishment of net deferred tax assets related to offerings	$	37,394	$	37,924

13. Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may be subject to various legal, regulatory, and/or administrative proceedings from time to time. Although there can be no assurance of the outcome of such proceedings, in the opinion of management, the Company does not believe it is probable that any pending or, to its knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect its condensed consolidated financial statements.

Incentive Fees

The Partnerships have allocated carried interest still subject to contingencies and that did not meet the Company’s criteria for recognition in the amounts of $408,928 and $326,466, net of amounts attributable to non-controlling interests, at December 31, 2019 and March 31, 2019, respectively, and $3,704 at both December 31, 2019 and March 31, 2019 that has been received and deferred by the Company.

If the Company ultimately receives the unrecognized carried interest, a total of $102,232 and $81,616 as of December 31, 2019 and March 31, 2019, respectively, would potentially be payable to certain employees and third parties pursuant to compensation arrangements related to carried interest profit-sharing plans. Such amounts have not been recorded in the Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Income as the payment is not yet probable.

20

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

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 Company’s aggregate unfunded commitment to the Partnerships was $132,899 and $123,637 as of December 31, 2019 and March 31, 2019, respectively.

Leases

The Company’s leases consist primarily of operating leases for office space and office equipment in various locations around the world. These leases have remaining lease terms of one year to six years, some of which have the option to extend for an additional five years or have the option to terminate within one year. In October 2019, the Company executed an agreement to lease office space for its new headquarters in suburban Philadelphia. The lessor is currently building the office space. The Company expects to gain access to the space to build various leasehold improvements in late fiscal 2021. At that time, the Company will then establish an ROU asset and a lease liability for the new lease.

Total operating lease costs were $1,239 and $3,649 for the three and nine months ended December 31, 2019, respectively. Total variable lease costs were $134 and $395 for the three and nine months ended December 31, 2019, respectively. Short-term lease costs were not material for the three and nine months ended December 31, 2019.

The following table shows other supplemental information related to the Company’s operating leases:

	Three Months Ended December 31, 2019		Nine Months Ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,323	$	3,898
Weighted average remaining lease term (in years)			2.5
Weighted average discount rate			5.5		%

As of December 31, 2019, the maturities of operating lease liabilities were as follows:

Remainder of FY2020	$	1,290
FY2021	4,531
FY2022	2,868
FY2023	752
FY2024	389
Thereafter	244
Total lease payments	10,074
Less: imputed interest	(677)
Total operating lease liabilities	$	9,397

21

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

14. Subsequent Events

On January 31, 2020, the Company entered into an asset purchase agreement for certain software from one of its equity method investees for cash of $5,000 and retirement of an agreed upon number of shares of that investee.

On February 4, 2020, the Company declared a quarterly dividend of $0.275 per share of Class A common stock to record holders at the close of business on March 16, 2020. The payment date will be April 6, 2020.

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q, and our audited financial statements, notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2019 Form 10-K for a more complete understanding of our financial position and results of operations.

The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Investors should review the “Cautionary Note Regarding Forward-Looking Information” above and the “Risk Factors” detailed in Part I, Item 1A of our 2019 Form 10-K for a discussion of those risks and uncertainties that have the potential to cause actual results to be materially different. Our results of operations for interim periods are not necessarily indicative of results to be expected for the full year or for any other period. Unless otherwise indicated, references in this Form 10-Q to fiscal 2019 and fiscal 2018 are to our fiscal years ended March 31, 2019, and 2018, respectively.

Business Overview

We are a global private markets investment solutions provider. We offer a variety of investment solutions to address our clients’ needs across a range of private markets, including private equity, private credit, real estate, infrastructure, natural resources, growth equity and venture capital. These solutions are constructed from a range of investment types, including primary investments in funds managed by third-party managers, direct/co-investments alongside such funds and acquisitions of secondary stakes in such funds, with a number of our clients utilizing multiple investment types. These solutions are offered in a variety of formats covering some or all phases of private markets investment programs:

•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 $52 billion of our assets under management (“AUM”) as of December 31, 2019.

•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 $14 billion of our AUM as of December 31, 2019.

•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 $422 billion of assets under advisement (“AUA”) as of December 31, 2019.

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•Distribution Management: We offer distribution management services through active portfolio management to enhance the realized value of publicly traded stock our clients 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 client base primarily comprises institutional investors that range from those seeking to make an initial investment in alternative assets to some of the world’s largest and most sophisticated private markets investors. As a highly customized, flexible outsourcing partner, we are equipped to provide investment services to institutional clients of all sizes and with different needs, internal resources and investment objectives. Our clients include prominent institutional investors in the United States, Europe, the Middle East, Asia, Australia and Latin America. We believe we are a leading provider of private markets solutions for U.S. labor union pension plans, and we serve numerous public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and selected high-net-worth individuals.

Operating Segments

We operate our business in a single segment, which is how our chief operating decision maker (who is our chief executive officer) reviews financial performance and allocates resources.

Key Financial and Operating Measures

Our key financial measures are discussed below.

Revenues

We generate revenues primarily from management and advisory fees, and to a lesser extent from incentive fees.

Management and advisory fees comprise specialized fund and customized separate account management fees, advisory and reporting fees and distribution management fees.

Revenues from customized separate accounts are generally based on a contractual rate applied to committed capital or net invested capital under management. These fees often decrease over the life of the contract due to built-in declines in contractual rates and/or as a result of lower net invested capital balances as capital is returned to clients. In certain cases, we also provide advisory and/or reporting services, and we therefore also receive fees for services such as monitoring and reporting on a client’s existing private markets investments. In addition, we may provide for investments in our specialized funds as part of our customized separate accounts. In these cases, we reduce the management fees on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees.

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Revenues from specialized funds are based on a percentage of limited partners’ capital commitments to, or net invested capital in, our specialized funds. The management fee during the commitment period is generally charged on capital commitments. After the commitment period (or a defined anniversary of the fund’s initial closing), such fee is reduced by a percentage of the management fee charged for the preceding year, or the management fee is charged on net invested capital. In the case of certain funds, we charge management fees on capital commitments, with the management fee increasing during the early years of the fund’s term and declining in the later years. Management fees for certain funds are discounted based on the amount of the limited partners’ commitments or if the limited partners are investors in our other funds.

Revenues from advisory and reporting services are generally annual fixed fees, which vary depending on the services we provide. In limited cases, advisory service clients are charged basis point fees annually based on the amounts they have committed to invest pursuant to their agreements with us. In other cases where our services are limited to monitoring and reporting on investment portfolios, clients are charged a fee based on the number of investments in their portfolio.

Distribution management fees are generally earned by applying a percentage to AUM or proceeds received. Certain active management clients may elect a fee structure under which they are charged an asset-based fee plus a performance fee based on net realized and unrealized gains and income net of realized and unrealized losses.

Incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment, and performance fees earned on certain other customized separate accounts.

For each of our secondary funds, direct/co-investment funds and credit funds, we earn carried interest equal to a fixed percentage of net profits, usually 10.0% to 12.5%, subject to a compounded annual preferred return that is generally 6.0% to 8.0%.  To the extent that our primary funds also directly make secondary investments and direct/co-investments, they generally earn carried interest on a similar basis. Furthermore, certain of our primary funds earn carried interest on their investments in other private markets funds on a primary basis that is generally 5.0% of net profits, subject to the fund’s compounded annual preferred return.

We recognize carried interest when it is probable that a significant reversal will not occur. In the event that a payment is made before it can be recognized as revenue, this amount would be included as deferred incentive fee revenue on our consolidated balance sheet and recognized as income in accordance with our revenue recognition policy. The primary contingency regarding incentive fees is the “clawback,” or the obligation to return distributions in excess of the amount prescribed by the applicable fund or separate account documents.

Performance fees, which are a component of incentive fees, are based on the aggregate amount of realized gains earned by the applicable customized separate account, subject to the achievement of defined minimum returns to the clients. Performance fees range from 5.0% to 12.5% of net profits, subject to a compounded annual preferred return that varies by account but is generally 6.0% to 8.0%. Performance fees are recognized when the risk of clawback or reversal is not probable.

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Expenses

Compensation and benefits is our largest expense and consists of (a) base compensation comprising salary, bonuses and benefits for employees, (b) equity-based compensation associated with the grants of restricted stock awards and (c) incentive fee compensation which consists of carried interest and performance fee allocations. We expect to continue to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels as we expand geographically and create new products and services.

Our compensation arrangements with our employees contain a significant bonus component driven by the results of our operations. Therefore, as our revenues, profitability and the amount of incentive fees earned by our customized separate accounts and specialized funds increase, our compensation costs rise.

Certain current and former employees participate in a carried interest plan whereby approximately 25% of incentive fees from certain of our specialized funds and customized separate accounts are awarded to plan participants. We record compensation expense payable to plan participants as the incentive fees become estimable and collection is probable.

General, administrative and other includes travel, accounting, legal and other professional fees, commissions, placement fees, office expenses, depreciation and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations.

Other Income (Expense)

Equity in income (loss) of investees primarily represents our share of earnings from our investments in our specialized funds and certain customized separate accounts in which we have a general partner commitment. Equity income primarily comprises our share of the net realized and unrealized gains (losses) and investment income, partially offset by the expenses from these investments.

We have general partner commitments in our specialized funds and certain customized separate accounts that invest solely in primary funds, secondary funds and direct/co-investments, as well as those that invest across investment types. Equity in income (loss) of investees will increase or decrease as the change in underlying fund investment valuations increases or decreases. Since our direct/co-investment funds invest in underlying portfolio companies, their quarterly and annual valuation changes are more affected by individual company movements than our primary and secondary funds that have exposures across multiple portfolio companies in underlying private markets funds. Our specialized funds and customized separate accounts invest across industries, strategies and geographies, and therefore our general partner investments do not include any significant concentrations in a specific sector or area outside the United States.

Interest expense includes interest paid and accrued on our outstanding debt, along with the amortization of deferred financing costs, amortization of original issue discount and the write-off of deferred financing costs due to the repayment of previously outstanding debt.

Interest income is income earned on cash and cash equivalents.

Other non-operating income (loss) consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.

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Fee-Earning AUM

We view fee-earning AUM as a metric to measure the assets from which we earn management fees. Our fee-earning AUM comprise assets in our customized separate accounts and specialized funds from which we derive management fees. We classify customized separate account revenue as management fees if the client is charged an asset-based fee, which includes the majority of our discretionary AUM accounts but also includes certain non-discretionary AUA accounts. Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and net asset value (“NAV”) of our customized separate accounts and specialized funds depending on the fee terms. Substantially all of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation. Therefore, revenues and fee-earning AUM are not significantly affected by changes in market value.

Our calculations of fee-earning AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers. Our definition of fee-earning AUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage.

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Consolidated Results of Operations

The following is a discussion of our consolidated results of operations for the three and nine months ended December 31, 2019 and 2018. This information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

	Three Months Ended December 31,				Nine Months Ended December 31,
($ in thousands)	2019		2018		2019		2018
Revenues
Management and advisory fees	$	59,837	$	55,617	$	179,584	$	159,844
Incentive fees	8,301		10,379		17,532		25,347
Total revenues	68,138		65,996		197,116		185,191
Expenses
Compensation and benefits	23,369		23,843		70,368		73,236
General, administrative and other	15,877		13,916		43,938		36,659
Total expenses	39,246		37,759		114,306		109,895
Other income (expense)
Equity in income of investees	4,454		4,934		14,331		10,096
Interest expense	(651)		(767)		(2,213)		(2,260)
Interest income	196		82		624		167
Non-operating income	97		8,892		4,175		20,951
Total other income (expense)	4,096		13,141		16,917		28,954
Income before income taxes	32,988		41,378		99,727		104,250
Income tax expense	4,551		18,463		11,564		25,660
Net income	28,437		22,915		88,163		78,590
Less: Income attributable to non-controlling interests in general partnerships	44		681		593		1,075
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.	14,896		16,776		47,393		51,990
Net income attributable to Hamilton Lane Incorporated	$	13,497	$	5,458	$	40,177	$	25,525

Revenues

	Three Months Ended December 31,				Nine Months Ended December 31,
($ in thousands)	2019		2018		2019		2018
Management and advisory fees
Specialized funds	$	27,789	$	23,413	$	81,733	$	67,164
Customized separate accounts	22,618		21,594		67,047		63,087
Advisory	5,878		5,926		18,091		18,287
Reporting and other	2,237		2,260		6,492		6,373
Distribution management	1,108		1,975		3,169		3,773
Fund reimbursement revenue	207		449		3,052		1,160
Total management and advisory fees	59,837		55,617		179,584		159,844
Incentive fees	8,301		10,379		17,532		25,347
Total revenues	$	68,138	$	65,996	$	197,116	$	185,191

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Three months ended December 31, 2019 compared to three months ended December 31, 2018

Total revenues increased $2.1 million, or 3%, to $68.1 million, for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due to an increase in management and advisory fees, partially offset by a decrease in incentive fees.

Management and advisory fees increased $4.2 million, or 8%, to $59.8 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018. Specialized funds revenue increased $4.4 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due primarily to a $3.8 million increase in revenue from our latest secondary fund, which added $1.4 billion in fee-earning AUM between periods, and a $0.6 million increase from our semi-liquid product, which added $0.2 billion in fee-earning AUM between periods. Management fees for our latest secondary fund included $1.1 million in retroactive fees for the three months ended December 31, 2019 compared to $0.9 million for our latest co-investment fund for the three months ended December 31, 2018. Retroactive fees are management fees earned in the current period from investors that commit to a specialized fund towards the end of the fundraising period and are required to pay a catch-up management fee as if they had committed to the fund at the first closing in a prior period. Customized separate accounts revenue increased $1.0 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018 due to the addition of several new accounts and additional allocations from existing accounts as compared to the prior year period. Distribution management revenue decreased $0.9 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due primarily to lower performance fees.

Incentive fees decreased $2.1 million to $8.3 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due primarily to a $6.1 million decrease in incentive fees from one of our specialized funds, partially offset by $5.3 million in incentive fees from new accounts moving into a realized incentive fee position.

Nine months ended December 31, 2019 compared to nine months ended December 31, 2018

Total revenues increased $11.9 million, or 6%, to $197.1 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due to an increase in management and advisory fees, partially offset by a decrease in incentive fees.

Management and advisory fees increased $19.7 million, or 12%, to $179.6 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018. Specialized funds revenue increased $14.6 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due primarily to an $8.0 million increase from our latest secondary fund, which added $1.4 billion in fee-earning AUM between periods and a $5.3 million increase in revenue from our latest co-investment fund, which added $0.5 billion in fee-earning AUM between periods. Management fees for our latest co-investment fund included $2.8 million in retroactive fees for the nine months ended December 31, 2019 compared to $1.1 million for the nine months ended December 31, 2018. Customized separate accounts revenue increased $4.0 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018 due to the addition of several new accounts and additional allocations from existing accounts as compared to the prior year period. Fund reimbursement revenue increased $1.9 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due primarily to the recognition of fund reimbursements from our latest secondary fund. Distribution management revenue decreased $0.6 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due primarily to lower performance fees.

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Incentive fees decreased $7.8 million to $17.5 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due primarily to an $8.7 million decrease in incentive fees from one of our specialized funds.

Expenses

Three months ended December 31, 2019 compared to three months ended December 31, 2018

Total expenses increased $1.5 million, or 4%, to $39.2 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018 due to an increase in general, administrative and other expenses, partially offset by a decrease in compensation and benefits expenses.

Compensation and benefits expenses decreased $0.5 million, or 2%, to $23.4 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due primarily to a decrease in incentive fee compensation. Base compensation and benefits decreased $0.2 million, or 1%, for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due primarily to a decrease in incentive fee related bonus expense compared to the prior year period. Incentive fee compensation decreased $0.5 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due to the decrease in incentive fee revenue.

General, administrative and other expenses increased $2.0 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018. This change consisted primarily of a $1.0 million increase in legal related expenses and a $1.0 million increase in technology and office related expenses.

Nine months ended December 31, 2019 compared to nine months ended December 31, 2018

Total expenses increased $4.4 million, or 4%, to $114.3 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018 due to an increase in general, administrative and other expenses, partially offset by a decrease in compensation and benefits expenses.

Compensation and benefits expenses decreased $2.9 million, or 4%, to $70.4 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due to a non-recurring contingent compensation payment in 2018 related to the RAPM acquisition, partially offset by an increase in base compensation and benefits. Base compensation and benefits increased $3.0 million, or 5%, for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due primarily to increased salary expense from additional headcount in the current year period compared to the prior year period. Incentive fee compensation decreased $1.2 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due to the decrease in incentive fee revenue. Contingent compensation related to the RAPM acquisition decreased $5.1 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due to the earnout period ending in 2018.

General, administrative and other expenses increased $7.3 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018. This change consisted primarily of a $2.0 million increase in technology and office related expenses, a $1.9 million increase in commissions from fund closings in the current year period, a $1.3 million increase in consulting and professional fees, and a $1.2 million increase in legal-related expenses.

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Other Income (Expense)

The following table shows the equity in income of investees included in other income (expense):

	Three Months Ended December 31,				Nine Months Ended December 31,
($ in thousands)	2019		2018		2019		2018
Equity in income of investees
Primary funds	$	235	$	635	$	1,691	$	1,577
Direct/co-investment funds	2,947		2,253		7,512		4,356
Secondary funds	367		614		1,302		1,545
Customized separate accounts	875		1,334		4,002		2,599
Other equity method investments	30		98		(176)		19
Total equity in income of investees	$	4,454	$	4,934	$	14,331	$	10,096

Three months ended December 31, 2019 compared to three months ended December 31, 2018

Other income decreased $9.0 million to $4.1 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due primarily to a decrease in non-operating income.

Equity in income of investees decreased $0.5 million to $4.5 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018. This was due primarily to a $0.5 million decrease in gains from our customized separate accounts and a $0.4 million decrease in gains from our primary funds, partially offset by a $0.7 million increase in gains from our direct/co-investment funds.

Non-operating income decreased $8.8 million for the three months ended December 31, 2019 compared to the three months ended December 31, 2018, due primarily to an $8.3 million decrease to the tax receivable agreement liability for the three months ended December 31, 2018 related to changes in state tax rate estimates.

Nine months ended December 31, 2019 compared to nine months ended December 31, 2018

Other income decreased $12.0 million to $16.9 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due primarily to a decrease in non-operating income, partially offset by an increase in equity in income of investees.

Equity in income of investees increased $4.2 million to $14.3 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018. This was due primarily to a $3.2 million increase in gains from our direct/co-investment funds and a $1.4 million increase in gains from our customized separate accounts for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018.

Non-operating income decreased $16.8 million for the nine months ended December 31, 2019 compared to the nine months ended December 31, 2018, due primarily to a $6.1 million decrease in gains from the sale of technology investments and a $9.1 million decrease to the tax receivable agreement liability for the nine months ended December 31, 2018 related to changes in state tax rate estimates.

Income Tax Expense

The Company’s effective tax rate was 13.8% and 44.6% for the three months ended December 31,

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2019 and 2018, respectively, and 11.6% and 24.6% for the nine months ended December 31, 2019 and 2018, respectively. These rates were less than the statutory rate due primarily to the portion of income allocated to the non-controlling entities, valuation allowance recorded against deferred tax assets and discrete tax adjustments. The effective tax rates for the three and nine months ended December 31, 2018 included provision to return adjustments related to the state income tax apportionment impact on estimated deferred tax assets as of December 31, 2018.

Fee-Earning AUM

The following table provides the period to period rollforward of our fee-earning AUM.

	Three Months Ended December 31,						Nine Months Ended December 31,
($ in millions)	2019						2019
	Customized Separate Accounts		Specialized Funds		Total		Customized Separate Accounts		Specialized Funds		Total
Balance, beginning of period	$	22,877	$	13,134	$	36,011	$	22,160	$	11,434	$	33,594
Contributions (1)	1,030		639		1,669		2,554		2,707		5,261
Distributions (2)	(547)		(256)		(803)		(1,389)		(624)		(2,013)
Foreign exchange, market value and other (3)	(73)		1		(72)		(38)		1		(37)
Balance, end of period	$	23,287	$	13,518	$	36,805	$	23,287	$	13,518	$	36,805

(1)Contributions represent (i) new commitments from customized separate accounts and specialized funds that earn fees on a committed capital fee base and (ii) 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 (i) returns of capital in customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base, (ii) reductions in fee-earning AUM from separate accounts and specialized funds that moved from a committed capital to net invested capital fee base and (iii) 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 (i) 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 (ii) market value appreciation (depreciation) from customized separate accounts that earn fees on a NAV fee base.

Three months ended December 31, 2019

Fee-earning AUM increased $0.8 billion to $36.8 billion during the three months ended December 31, 2019, due to contributions from customized separate accounts and specialized funds.

Customized separate accounts fee-earning AUM increased $0.4 billion, or 2%, to $23.3 billion for the three months ended December 31, 2019. Customized separate accounts contributions were $1.0 billion for the three months ended December 31, 2019, due primarily to new allocations from existing clients. Distributions were $0.5 billion for the three months ended December 31, 2019 due to $0.2 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base and $0.2 billion from accounts reaching the end of their term.

Specialized funds fee-earning AUM increased $0.4 billion, or 3%, to $13.5 billion for the three months ended December 31, 2019. Specialized fund contributions were $0.6 billion for the three months ended December 31, 2019, due primarily to $0.3 billion from new commitments to our secondary fund in market during the period and $0.3 billion in contributions from funds earning fees on a net invested capital fee base. Distributions were $0.3 billion for the three months ended December 31, 2019, due to

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$0.2 billion from returns of capital in funds earning fees on a net invested capital fee base and $0.1 billion from accounts moving from a committed capital to a net invested fee base as their investment period expired.

Nine months ended December 31, 2019

Fee-earning AUM increased $3.2 billion to $36.8 billion during the nine months ended December 31, 2019, due to contributions from customized separate accounts and specialized funds.

Customized separate accounts fee-earning AUM increased $1.1 billion, or 5%, to $23.3 billion for the nine months ended December 31, 2019. Customized separate accounts contributions were $2.6 billion for the nine months ended December 31, 2019, due primarily to new allocations from existing clients. Distributions were $1.4 billion for the nine months ended December 31, 2019 due to $0.6 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base, $0.6 billion from accounts reaching the end of their term, and $0.2 billion from accounts moving from a committed capital to a net invested fee base as their investment period expired.

Specialized funds fee-earning AUM increased $2.1 billion, or 18%, to $13.5 billion for the nine months ended December 31, 2019. Specialized fund contributions were $2.7 billion for the nine months ended December 31, 2019, due primarily to $1.4 billion from new commitments to our secondary fund in market during the period and $0.2 billion from new commitments to our co-investment fund in market during the period. Distributions were $0.6 billion for the nine months ended December 31, 2019, due to $0.3 billion from accounts moving from a committed capital to a net invested fee base as their investment period expired and $0.3 billion from returns of capital in funds earning fees on a net invested capital fee base.

Non-GAAP Financial Measures

Below is a description of our unaudited non-GAAP financial measures. These are not measures of financial performance under GAAP and should not be considered a substitute for the most directly comparable GAAP measures, which are reconciled below. These measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these measures in isolation or as a substitute for GAAP measures. Other companies may calculate these measures differently than we do, limiting their usefulness as a comparative measure.

Fee Related Earnings

Fee Related Earnings (“FRE”) is used to highlight our earnings from recurring management fees. FRE represents net income excluding (a) incentive fees and related compensation, (b) interest income and expense, (c) income tax expense, (d) equity in income of investees, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business. FRE is presented before income taxes.

Adjusted EBITDA

Adjusted EBITDA is used to measure our profitability including carried interest. We believe Adjusted EBITDA is useful to investors because it enables them to better evaluate the performance of our core business across reporting periods. Adjusted EBITDA represents net income excluding (a) interest expense on our outstanding debt, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based compensation expense, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance.

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The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to Fee Related Earnings and Adjusted EBITDA for the three and nine months ended December 31, 2019 and 2018:

	Three Months Ended December 31,				Nine Months Ended December 31,
($ in thousands)	2019		2018		2019		2018
Net income attributable to Hamilton Lane Incorporated	$	13,497	$	5,458	$	40,177	$	25,525
Income attributable to non-controlling interests in general partnerships	44		681		593		1,075
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.	14,896		16,776		47,393		51,990
Incentive fees (1)	(8,301)		(10,379)		(17,532)		(25,347)
Incentive fee related compensation (2)	3,895		4,746		8,204		10,716
Interest income	(196)		(82)		(624)		(167)
Interest expense	651		767		2,213		2,260
Income tax expense	4,551		18,463		11,564		25,660
Equity in income of investees	(4,454)		(4,934)		(14,331)		(10,096)
Contingent compensation related to acquisition	—		—		—		5,100
Non-operating income	(97)		(8,892)		(4,175)		(20,951)
Fee Related Earnings	$	24,486	$	22,604	$	73,482	$	65,765
Depreciation and amortization	771		619		2,379		1,759
Equity-based compensation	1,761		1,594		5,244		4,778
Incentive fees (1)	8,301		10,379		17,532		25,347
Incentive fees attributable to non-controlling interests (1)	(102)		(387)		(262)		(651)
Incentive fee related compensation (2)	(3,895)		(4,746)		(8,204)		(10,716)
Interest income	196		82		624		167
Adjusted EBITDA	$	31,518	$	30,145	$	90,795	$	86,449

(1) Incentive fees for the nine months ended December 31, 2018 includes $3.2 million of non-cash carried interest. Of the $3.2 million, $2.5 million is included in net income and $0.7 million is attributable to non-controlling interests.

(2) Incentive fee related compensation includes incentive fee compensation expense, bonus and other revenue sharing related to carried interest that is classified as base compensation. Incentive fee related compensation for the nine months ended December 31, 2018 excludes compensation expense related to the recognition of incentive fees included in net income from one of our co-investment funds of $2.5 million as the related incentive fee compensation was recognized in fiscal 2016.

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Non-GAAP Earnings Per Share

Non-GAAP earnings per share measures our per-share earnings excluding certain significant items that we believe are not indicative of our core performance and assuming all Class B and Class C units in HLA were exchanged for Class A common stock in HLI. Non-GAAP earnings per share is calculated as adjusted net income divided by adjusted shares outstanding. Adjusted net income is income before taxes fully taxed at our estimated statutory tax rate. We believe non-GAAP earnings per share is useful to investors because it enables them to better evaluate per-share operating performance across reporting periods.

The following table shows a reconciliation of adjusted net income to net income attributable to Hamilton Lane Incorporated and adjusted shares outstanding to weighted-average shares of Class A common stock outstanding for the three and nine months ended December 31, 2019 and 2018:

	Three Months Ended December 31,				Nine Months Ended December 31,
(in thousands, except share and per-share amounts)	2019		2018		2019		2018
Net income attributable to Hamilton Lane Incorporated	$	13,497	$	5,458	$	40,177	$	25,525
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.	14,896		16,776		47,393		51,990
Income tax expense	4,551		18,463		11,564		25,660
Contingent compensation related to acquisition	—		—		—		5,100
Adjusted pre-tax net income	32,944		40,697		99,134		108,275
Adjusted income taxes (1)	(7,841)		(7,408)		(23,594)		(25,661)
Adjusted net income	$	25,103	$	33,289	$	75,540	$	82,614
Weighted-average shares of Class A common stock outstanding - diluted	29,608,206		25,574,818		28,097,595		23,870,617
Exchange of Class B and Class C units in HLA (2)	23,968,994		27,819,930		25,431,059		29,531,158
Adjusted shares outstanding	53,577,200		53,394,748		53,528,654		53,401,775
Non-GAAP earnings per share	$	0.47	$	0.62	$	1.41	$	1.55

(1) Represents corporate income taxes at our estimated statutory tax rate of 23.8% for the nine month period ended December 31, 2019 and 23.7% for the nine month period ended December 31, 2018 applied to adjusted pre-tax net income. The 23.8% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.8%. The 23.7% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.7%.

(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.

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Investment Performance

The following tables present information relating to the historical performance of our discretionary investment accounts. The data for these investments is presented from the date indicated through September 30, 2019 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.

When considering the data presented below, you should note that the historical results of our discretionary investments are not indicative of the future results you should expect from such investments, from any future investment funds we may raise or from an investment in our Class A common stock, in part because:

•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 the 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.

The historical and potential future returns of the investment funds we manage are not directly linked to returns on our Class A common stock. Therefore, you should not conclude that continued positive performance of the investment funds we manage will necessarily result in positive returns on an investment in our Class A common stock. As used in this discussion, internal rate of return (“IRR”) is calculated on a pooled basis using daily cash flows. See “Performance Methodology” below for more information on how our returns are calculated.

Specialized Fund Performance

We organize, invest and manage primary, secondary and direct/co-investment funds. Our 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. Below is performance information across our various specialized funds. Many of these funds are globally focused, and they are grouped by the investment strategy utilized.

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Gross Returns — Realized

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	322 bps
PEF IV	2000	250	238	1.7	16.2%	1,302 bps	1,170 bps
PEF V	2003	135	133	1.7	14.3%	853 bps	965 bps
PEF VI	2007	494	478	1.7	12.4%	170 bps	509 bps
PEF VII	2010	262	202	1.6	16.1%	202 bps	620 bps
PEF VIII	2012	427	27	1.4	15.9%	440 bps	786 bps
PEF IX	2015	517	30	1.8	36.6%	2,203 bps	2,512 bps
PEF X	2018	278	N/A	N/A	N/A	N/A	N/A
Secondaries
Pre-Fund	-	-	362	1.5	17.1%	1,330 bps	1,173 bps
Secondary Fund I	2005	360	353	1.2	5.2%	111 bps	339 bps
Secondary Fund II	2008	591	558	1.6	21.8%	669 bps	1,082 bps
Secondary Fund III	2012	909	405	1.6	23.3%	1,014 bps	1,440 bps
Secondary Fund IV	2016	1,916	119	1.6	31.3%	1,678 bps	1,954 bps
Secondary Fund V	2019	1,376	N/A	N/A	N/A	N/A	N/A
Co-investments
Pre-Fund	-	-	244	1.9	21.3%	1,653 bps	1,600 bps
Co-Investment Fund	2005	604	450	1.2	3.3%	(268) bps	(17) bps
Co-Investment Fund II	2008	1,195	803	2.7	22.8%	1,050 bps	1,429 bps
Co-Investment Fund III	2014	1,243	188	2.7	60.7%	4,778 bps	5,158 bps
Co-Investment Fund IV	2018	1,698	N/A	N/A	N/A	N/A	N/A
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. CS LL PME
Strategic Opportunities (Tail-end secondaries and credit)
Strat Opps 2015	2015	71	50	1.3	17.9%	814 bps	1,182 bps
Strat Opps 2016	2016	214	109	1.2	22.2%	1,407 bps	1,637 bps
Strat Opps 2017	2017	435	141	1.2	22.9%	1,923 bps	1,872 bps
Strat Opps 2018	2018	889	62	1.1	18.2%	1,260 bps	1,595 bps

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Gross Returns — Realized and Unrealized

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	322 bps	16 bps
PEF IV	2000	250	238	1.7	1.5	16.2%	11.2%	1,302 bps	828 bps	1,170 bps	708 bps
PEF V	2003	135	133	1.7	1.6	14.3%	9.7%	853 bps	378 bps	965 bps	485 bps
PEF VI	2007	494	511	1.6	1.6	12.0%	9.2%	110 bps	(128) bps	451 bps	206 bps
PEF VII	2010	262	283	1.5	1.5	13.4%	9.4%	(18) bps	(417) bps	392 bps	(16) bps
PEF VIII	2012	427	384	1.3	1.3	11.0%	8.0%	(74) bps	(390) bps	280 bps	(42) bps
PEF IX	2015	517	388	1.4	1.3	18.2%	16.0%	574 bps	390 bps	906 bps	725 bps
PEF X	2018	278	55	1.1	1.0	16.9%	3.0%	619 bps	(853) bps	984 bps	(583) bps
Secondaries
Pre-Fund	-	-	362	1.5	N/A	17.1%	N/A	1,330 bps	N/A	1,173 bps	N/A
Secondary Fund I	2005	360	353	1.2	1.2	5.2%	3.8%	111 bps	(62) bps	339 bps	158 bps
Secondary Fund II	2008	591	595	1.5	1.5	20.3%	14.0%	501 bps	(131) bps	920 bps	275 bps
Secondary Fund III	2012	909	827	1.4	1.4	16.5%	13.1%	384 bps	14 bps	782 bps	417 bps
Secondary Fund IV	2016	1,916	1,670	1.3	1.2	21.7%	22.4%	903 bps	1,234 bps	1,261 bps	1,598 bps
Secondary Fund V	2019	1,376	70	1.1	N/A	36.9%	N/A	3,512 bps	N/A	3,589 bps	N/A
Co-investments
Pre-Fund	-	-	244	1.9	N/A	21.3%	N/A	1,653 bps	N/A	1,600 bps	N/A
Co-Investment Fund	2005	604	577	1.0	0.9	0.4%	(1.0)%	(548) bps	(721) bps	(296) bps	(474) bps
Co-Investment Fund II	2008	1,195	1,137	2.2	1.9	19.3%	15.6%	712 bps	328 bps	1,096 bps	708 bps
Co-Investment Fund III	2014	1,243	1,248	1.5	1.4	17.4%	13.7%	527 bps	169 bps	872 bps	506 bps
Co-Investment Fund IV	2018	1,698	951	1.2	1.1	24.2%	22.3%	1,455 bps	1,290 bps	1,799 bps	1,581 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. CS LL PME	Net Spread vs. CS LL PME
Strategic Opportunities (Tail-end secondaries and credit)
Strat Opps 2015	2015	71	67	1.3	1.2	14.2%	10.9%	539 bps	215 bps	859 bps	530 bps
Strat Opps 2016	2016	214	214	1.2	1.2	12.3%	9.9%	535 bps	318 bps	716 bps	496 bps
Strat Opps 2017	2017	435	442	1.2	1.1	12.1%	9.6%	738 bps	475 bps	795 bps	554 bps
Strat Opps 2018	2018	889	779	1.1	1.1	11.2%	10.2%	408 bps	180 bps	733 bps	535 bps

Performance Methodology

The indices presented for comparison are the S&P 500, MSCI World, Credit Suisse High Yield II (“CS HY II”) and Credit Suisse Leverage Loan (“CS LL”), calculated on a public market equivalent (“PME”) basis. We believe these indices are commonly used by private markets and credit investors to evaluate performance. The PME calculation methodology allows private markets investment performance to be evaluated against a public index and assumes that capital is being invested in, or withdrawn from, the index on the days the capital was called and distributed from the underlying fund managers. The S&P 500 Index is a total return capitalization-weighted index that measures the performance of 500 U.S. large cap stocks. The MSCI World Index is a free float-adjusted market capitalization-weighted index of over 1,600 world stocks that is designed to measure the equity market performance of developed markets. The CS HY II Index, formerly known as the DLJ High Yield Index, is designed to mirror the investable universe of the U.S. dollar denominated high yield debt market. Prices for the CS HY II Index are available on a weekly basis. The CS LL Index is an index designed to mirror the investable universe of the U.S. dollar denominated leveraged loan market. Loans must be rated 5B or lower and the index frequency is monthly.

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Our IRR represents the pooled IRR for all discretionary investments for the period from inception to September 30, 2019. Gross IRR is presented net of management fees, carried interest and expenses charged by the general partners of the underlying investments, but does not include our management fees, carried interest or expenses. Our gross IRR would decrease with the inclusion of our management fees, carried interest and expenses. Net IRR is net of all management fees, carried interest and expenses charged by the general partners of the underlying investments as well as by us. Net IRR figures for our funds do not include cash flows attributable to the general partner. Note that secondary portfolio IRRs can be initially impacted by purchase discounts (or premiums) paid at the closing of a transaction, the impact of which will diminish over time.

The “Realized IRR” represents the pooled IRR for those discretionary investments that we consider realized for purposes of our track record, which are investments where the underlying investment fund has been fully liquidated, has generated a distributions to paid-in capital ratio (“DPI”) greater than or equal to 1.0 or is older than six years and has a residual value to paid-in capital ratio (“RVPI”) less than or equal to 0.2. Hamilton Lane Secondary Realized includes investments that have been fully liquidated, have a DPI greater than or equal to 1.0 or a RVPI less than or equal to 0.2. Hamilton Lane Realized Co-Investment and Hamilton Lane Realized Strategic Opportunities include investments that have been fully liquidated or have a DPI greater than or equal to 1.0. “Unrealized” includes all investments that do not meet the aforementioned criteria. DPI represents total distributions divided by total invested capital. RVPI represents the remaining market value divided by total invested capital. “Capital Invested” refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital calls. “Multiple” represents total distributions from underlying investments to the fund plus the fund’s market value divided by total contributed capital. “Gross Multiple” is presented net of management fees, carried interest and expenses charged by the fund managers of the underlying investments.

Specialized fund and pre-fund performance does not include ten funds-of-funds that have investor-specific investment guidelines.

Certain of our specialized funds utilize revolving credit facilities, which provide capital that is available to fund investments or pay partnership expenses and management fees. Borrowings may be paid down from time to time with investor capital contributions or distributions from investments. The use of a credit facility affects the fund’s return and magnifies the performance on the upside or on the downside.

Liquidity and Capital Resources

Historical Liquidity and Capital Resources

We have managed our historical liquidity and capital requirements primarily through the receipt of management and advisory fee revenues. Our primary cash flow activities involve: (1) generating cash flow from operations, which largely includes management and advisory fees; (2) realizations generated from our investment activities; (3) funding capital commitments that we have made to certain of our specialized funds and customized separate accounts; (4) making dividend payments to our stockholders and distributions to holders of HLA units; and (5) borrowings, interest payments and repayments under our outstanding debt. As of December 31, 2019 and March 31, 2019, our cash and cash equivalents, including investments in money market funds, were $81.6 million and $49.4 million, respectively.

Our material sources of cash from our operations include: (1) management and advisory fees, which are collected monthly or quarterly; (2) incentive fees, which are volatile and largely unpredictable as to amount and timing; and (3) fund distributions related to investments in our specialized funds and certain customized separate accounts that we manage. We use cash flow from operations primarily to pay

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compensation and related expenses, general, administrative and other expenses, debt service, capital expenditures and distributions to our owners and to fund commitments to certain of our specialized funds and customized separate accounts. If cash flow from operations were insufficient to fund distributions to our owners, we expect that we would suspend paying such distributions.

We have also accessed the capital markets and used proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement.

Term Loan and Revolving Credit Facility

In August 2017, we entered into a Term Loan and Security Agreement (the “Term Loan Agreement”) and a Revolving Loan and Security Agreement (the “Revolving Loan Agreement” and, together with the Term Loan Agreement, the “Loan Agreements”). Proceeds from the Loan Agreements were utilized to pay off the outstanding principal amount and accrued interest of the predecessor credit facility.

The Term Loan Agreement provides for a term loan facility in an aggregate principal amount of $75.0 million and also contains an accordion feature that allows HLA to increase the commitment under the facility by up to $25.0 million under certain conditions (the “Term Loan Facility”). Borrowings under the Term Loan Facility accrue interest at a floating per annum rate equal to the greater of (i) the prime rate minus 1.25% and (ii) 2.75%. The Term Loan Facility matures on November 1, 2024.

The Revolving Loan Agreement provides for a revolving credit facility up to an aggregate principal amount of $25.0 million (the “Revolving Loan Facility”). The Revolving Loan Facility is for working capital and general corporate purposes. Borrowings under the Revolving Loan Facility accrue interest at a floating per annum rate equal to the greater of (i) the prime rate minus 1.50% and (ii) 2.50%. The Revolving Loan Facility matures on August 21, 2020 and requires compliance with conditions precedent that must be satisfied prior to any borrowing.

As of December 31, 2019 and March 31, 2019, the principal amount of debt outstanding equaled $67.5 million and $71.3 million, respectively. The Loan Agreements contain covenants that, among other things, limit HLA’s ability to incur indebtedness, transfer or dispose of assets, merge with other companies, create, incur or allow liens, make investments, pay dividends or make distributions, engage in transactions with affiliates and take certain actions with respect to management fees. The Loan Agreements also require HLA to maintain (i) a specified amount of management fees in each fiscal year during the term of each of the Loan Agreements, (ii) adjusted EBITDA less dividend distributions on a trailing six-month basis of $12.5 million or greater, tested semi-annually, and (iii) a specified tangible net worth during each fiscal year during the term of each of the Loan Agreements. The obligations under the Loan Agreements are secured by substantially all the assets of HLA.

Future Sources and Uses of Liquidity

We generate significant cash flows from operating activities. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents and our ability to obtain future external financing.

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We believe we will also continue to evaluate opportunities, based on market conditions, to access the capital markets and use proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement. The timing or size of any potential transactions will depend on a number of factors, including market opportunities and our views regarding our capital and liquidity positions and potential future needs. There can be no assurance that any such transactions will be completed on favorable terms, or at all.

In November 2018, we authorized a program to repurchase up to 6% of the outstanding shares of our Class A common stock, not to exceed $50 million (the “Stock Repurchase Program”). The Stock Repurchase Program does not include specific price targets or timetables and may be suspended or terminated by us at any time. We intend to finance the purchases using available working capital and/or external financing. The Stock Repurchase Program expires twelve months after the date of the first acquisition under the authorization. We have not repurchased any of our Class A common stock under the Stock Repurchase Program, and therefore the full purchase authority remains available.

We expect that our primary current and long-term liquidity needs will comprise cash to (1) provide capital to facilitate the growth of our business, (2) fund commitments to our investments, (3) pay operating expenses, including cash compensation to our employees, (4) make payments under the tax receivable agreement, (5) fund capital expenditures, (6) pay interest and principal due on our outstanding debt, (7) pay income taxes, (8) make dividend payments to our stockholders and distributions to holders of HLA units in accordance with our distribution policy, (9) settle exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement from time to time and (10) fund purchases of our Class A common stock pursuant to the Stock Repurchase Program.

We are required to maintain minimum net capital balances for regulatory purposes for our Hong Kong, United Kingdom and broker-dealer subsidiaries. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of December 31, 2019 and March 31, 2019, we were required to maintain approximately $3.1 million and $2.2 million, respectively, in liquid net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We are in compliance with these regulatory requirements.

Cash Flows

Nine Months Ended December 31, 2019 and 2018

	Nine Months Ended December 31,
($ in thousands)	2019		2018
Net cash provided by operating activities	$	108,055	$	106,909
Net cash used in investing activities	(29,230)		(5,647)
Net cash used in financing activities	(45,684)		(69,517)

Operating Activities

Our net cash flow provided by operating activities was $108.1 million and $106.9 million during the nine months ended December 31, 2019 and 2018, respectively. These operating cash flows were driven primarily by:

•net income of $88.2 million and $78.6 million during the nine months ended December 31, 2019 and 2018, respectively;

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•proceeds received from investments of $8.5 million and $11.7 million during the nine months ended December 31, 2019 and 2018, respectively, which represent a return on investment from specialized funds and certain customized separate accounts; and

•net change in operating assets and liabilities of $15.2 million and $22.0 million during the nine months ended December 31, 2019 and 2018, respectively, primarily for the accruals related to our annual bonus program that is paid in March.

Investing Activities

Our net cash flow used in investing activities was $29.2 million and $5.6 million during the nine months ended December 31, 2019 and 2018, respectively. These amounts were driven primarily by:

•net contributions to investments of $30.3 million and $22.5 million during the nine months ended December 31, 2019 and 2018, respectively;

•proceeds from the sales of technology investments of $6.4 million and $22.5 million during the nine months ended December 31, 2019 and 2018, respectively; and

•purchases of other investments of $4.0 million during the nine months ended December 31, 2019.

Financing Activities

Our net cash flow used in financing activities was $45.7 million and $69.5 million during the nine months ended December 31, 2019 and 2018, respectively. Cash used in financing activities was attributable primarily to:

•secured financing proceeds received of $15.8 million during the nine months ended December 31, 2019;

•dividends paid of $21.0 million and $13.4 million during the nine months ended December 31, 2019 and 2018, respectively; and

•distributions to HLA members of $36.6 million and $41.9 million during the nine months ended December 31, 2019 and 2018, respectively.

Off-Balance Sheet Arrangements

There have been no material changes in our off-balance sheet arrangements discussed in our 2019 Form 10-K.

Contractual Obligations, Commitments and Contingencies 

There have been no material changes outside of the ordinary course of business in our contractual obligations, commitments and contingencies from those specified in our 2019 Form 10-K.

Critical Accounting Policies

The preparation of our condensed consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent liabilities. We base our judgments on our historical experience and on various other

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assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a more complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our condensed consolidated financial statements, please refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Form 10-K.

Recent Accounting Pronouncements

Information regarding recent accounting developments and their impact on our results can be found in Note 2, “Summary of Significant Accounting Policies” in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we are exposed to a broad range of risks inherent in the financial markets in which we participate, including price risk, interest-rate risk, access to and cost of financing risk, liquidity risk, counterparty risk and foreign exchange-rate risk. Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies, fundraising practices or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit or financial market dislocations.

Our predominant exposure to market risk is related to our role as general partner or investment manager for our specialized funds and customized separate accounts and the sensitivities to movements in the fair value of their investments, which may adversely affect our equity in income of investees. Since our management fees are generally based on commitments or net invested capital, our management fee and advisory fee revenue is not significantly impacted by changes in investment values.

Fair value of the financial assets and liabilities of our specialized funds and customized separate accounts may fluctuate in response to changes in the value of securities, foreign currency exchange rates, commodity prices and interest rates. The impact of investment risk is as follows:

•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 thousands of 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 net 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 $3.7 million of deferred incentive fee revenue on our balance sheet as of December 31, 2019. Minor

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decreases in underlying fair value would not affect the amount of deferred incentive fee revenue subject to clawback.

Exchange Rate Risk

Several of our specialized funds and customized separate accounts hold investments denominated in non-U.S. dollar currencies that may be affected by movements in the rate of exchange between the U.S. dollar and foreign currency, which could impact investment performance. The currency exposure related to investments in foreign currency assets is limited to our general partner interest, which is typically one percent of total capital commitments. We do not possess significant assets in foreign countries in which we operate or engage in material transactions in currencies other than the U.S. dollar. Therefore, changes in exchange rates are not expected to materially impact our financial statements.

Interest Rate Risk

 As of December 31, 2019, we had $67.5 million in borrowings outstanding under our Loan Agreements. The annual interest rate on the Term Loan Agreement, which is at the prime rate minus 1.25%, subject to a floor of 2.75%, was 3.75% as of December 31, 2019.

Based on the floating rate component of our Loan Agreements payable as of December 31, 2019, we estimate that a 100 basis point increase in interest rates would result in increased interest expense related to the loan of $0.7 million over the next 12 months.

Credit Risk

We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In such agreements, we depend on the respective counterparty to make payment or otherwise perform. We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2019. Our disclosure controls and procedures are intended to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective at December 31, 2019 due to the existence of a previously reported material weakness in our internal control over financial reporting. This material weakness related to insufficient information technology general controls for one information technology system that supports the Company’s financial reporting process. The material weakness was identified and discussed in Part II, Item 9A of our 2019 Form 10-K. The material weakness did not result in any identified misstatements to the audited consolidated financial statements or disclosures in our 2019 Form 10-K, or any restatements of our audited and unaudited consolidated financial statements or disclosures for any previously reported periods.

Notwithstanding the identified material weakness, management, including our Chief Executive Officer and Chief Financial Officer, believes the condensed consolidated financial statements included in this Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented in accordance with GAAP.

Changes in Internal Control over Financial Reporting

We have commenced our remediation efforts in connection with the identification of the material weakness discussed above and have taken the following steps during the quarter ended December 31, 2019:

•We are implementing procedures intended to ensure that data entry is performed correctly and a compensating control of independent reconciliations and verifications is in place to verify the system’s output.

•We are establishing additional monitoring and oversight controls to ensure the accuracy and completeness of our consolidated financial statements and related disclosures.

While we have taken considerable action to remediate the material weakness, there has not yet been a sufficient passage of time to evidence that such remediation efforts have been successful. Accordingly, we continue to test our controls implemented in the first quarter of fiscal 2020 to assess whether our controls are operating effectively. While there can be no assurance, we believe our material weakness will be remediated during the course of fiscal 2020.

Other than the changes discussed above, there have been no changes to our internal control over financial reporting during the quarter ended December 31, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

45

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may be subject to various legal, regulatory and/or administrative proceedings from time to time. Although there can be no assurance of the outcome of such proceedings, in the opinion of management, we do not believe it is probable that any pending or, to our knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect our condensed consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our 2019 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about our share repurchase activity for the quarter ended December 31, 2019:

Period	Total Number of Shares Purchased	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(1)
October 1-31, 2019	—	$	—	—	$	50,000,000
November 1-30, 2019	—	$	—	—	$	50,000,000
December 1-31, 2019	—	$	—	—	$	50,000,000
Total	—	$	—

(1) On November 6, 2018, we announced that our board of directors authorized a program to repurchase, in the aggregate, up to 6% of the outstanding shares of our Class A common stock as of the date of the authorization, not to exceed $50 million (the “Stock Repurchase Program”). The authorization provides us the flexibility to repurchase shares in the open market or in privately negotiated transactions from time to time, based on market conditions and other factors. We have not repurchased any of our Class A common stock under the Stock Repurchase Program, so the full purchase authority remains available under this program, which expires 12 months after the date of the first acquisition under the authorization.

Item 5. Other Information

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On February 4, 2020, in connection with Randy M. Stilman’s previously announced retirement from Hamilton Lane, and in consideration of his contributions and dedicated service to Hamilton Lane, the Compensation Committee of HLI’s Board of Directors approved a modification to Mr. Stilman’s outstanding restricted stock awards under HLI’s 2017 Equity Incentive Plan, as amended (the “Plan”), to accelerate the vesting on a total of 6,400 shares of Class A common stock to March 14, 2020. An additional 5,703 shares of restricted Class A common stock held by Mr. Stilman will also vest on that date pursuant to the previously disclosed terms of the Plan.

46

Item 6. Exhibits

		Incorporated By Reference				Filed Herewith
Exhibit No.	Description of Exhibit	Form	Exhibit	Filing Date	File No.
3.1	Amended and Restated Certificate of Incorporation of Hamilton Lane Incorporated	8-K	3.1	3/10/17	001-38021
3.2	Amended and Restated Bylaws of Hamilton Lane Incorporated	10-K	3.2	6/27/17	001-38021
10.1	Offer Letter between the Company and Atul Varma, dated November 25, 2019	8-K	10.1	1/2/20	001-38021
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32‡	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.					X
101.SCH	Inline XBRL Taxonomy Extension Schema					X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase					X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase					X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase					X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase					X
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)					X

‡ Furnished herewith.

47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 6th day of February, 2020.

HAMILTON LANE INCORPORATED
By:	/s/ Atul Varma
	Name: Atul Varma
	Title: Chief Financial Officer and Treasurer
By:	/s/ Michael Donohue
	Name: Michael Donohue
	Title: Managing Director and Controller

EX-31.1

EXHIBIT 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mario L. Giannini, certify that:

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.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

d.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:	February 6, 2020
/s/ Mario L. Giannini
Mario L. Giannini
Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Atul Varma, certify that:

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.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

d.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:	February 6, 2020
/s/ Atul Varma
Atul Varma
Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mario L. Giannini, Chief Executive Officer, and I, Atul Varma, Chief Financial Officer, of Hamilton Lane Incorporated, hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Quarterly Report on Form 10-Q for the quarter ended December 31, 2019 (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.

Date: February 6, 2020

/s/ Mario L. Giannini

Mario L. Giannini

Chief Executive Officer

Date: February 6, 2020

/s/ Atul Varma

Atul Varma

Chief Financial Officer

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Variable Interest Entities (Tables)

9 Months Ended

Dec. 31, 2019

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:

	December 31,		March 31,
	2019		2019
Investments	$	116,636	$	87,001
Fees receivable	1,535		5,896
Due from related parties	1,001		1,332
Total VIE Assets	119,172		94,229
Deferred incentive fee revenue	3,704		3,704
Non-controlling interests	(5,441)		(5,716)
Maximum exposure to loss	$	117,435	$	92,217

XML

Subsequent Events

9 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On January 31, 2020, the Company entered into an asset purchase agreement for certain software from one of its equity method investees for cash of $5,000 and retirement of an agreed upon number of shares of that investee.

On February 4, 2020, the Company declared a quarterly dividend of $0.275 per share of Class A common stock to record holders at the close of business on March 16, 2020. The payment date will be April 6, 2020.

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Earnings per Share (Tables)

9 Months Ended

Dec. 31, 2019

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:

	Three Months Ended December 31, 2019					Three Months Ended December 31, 2018
	Net income attributable to HLI		Weighted-Average Shares	Per share amount		Net income attributable to HLI		Weighted-Average Shares	Per share amount
Basic EPS of Class A common stock	$	13,497	29,185,039	$	0.46	$	5,458	25,051,094	$	0.22
Adjustment to net income:
Assumed vesting of employee awards	88					59
Effect of dilutive securities:
Assumed vesting of employee awards			423,167					523,724
Diluted EPS of Class A common stock	$	13,585	29,608,206	$	0.46	$	5,517	25,574,818	$	0.22

	Nine Months Ended December 31, 2019					Nine Months Ended December 31, 2018
	Net income attributable to HLI		Weighted-Average Shares	Per share amount		Net income attributable to HLI		Weighted-Average Shares	Per share amount
Basic EPS of Class A common stock	$	40,177	27,710,607	$	1.45	$	25,525	23,329,134	$	1.09
Adjustment to net income:
Assumed vesting of employee awards	267					327
Effect of dilutive securities:
Assumed vesting of employee awards			386,988					541,483
Diluted EPS of Class A common stock	$	40,444	28,097,595	$	1.44	$	25,852	23,870,617	$	1.08

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Organization

9 Months Ended

Dec. 31, 2019

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 its initial public offering (“IPO”) and related transactions, HLI became a publicly-traded entity, and is a holding company whose principal asset is a controlling equity interest in Hamilton Lane Advisors, L.L.C. (“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, payable to related parties pursuant to a tax receivable agreement, and dividends payable. Unless otherwise specified, “the Company” refers to the consolidated entity of HLI, HLA and subsidiaries throughout the remainder of these notes. As of December 31, 2019 and March 31, 2019, HLI held approximately 54.9% and 50.3%, respectively, of the economic interest in HLA. As future exchanges of HLA units occur pursuant to the exchange agreement in place with HLA’s members, the economic interest in HLA held by HLI will increase.

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 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-owned entities through which it conducts its foreign operations.

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Earnings per Share - Narrative (Details) - shares	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Class B and Class C Units of Hamilton Lane Advisors, L.L.C.
Class of Stock [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	23,968,994	27,819,930	23,968,994	27,819,930

XML

Variable Interest Entities - Consolidated VIEs (Details) - USD ($)	Dec. 31, 2019	Mar. 31, 2019
Variable Interest Entity [Line Items]
Total assets of consolidated VIEs	$ 469,379,000	$ 360,591,000
Total liabilities of consolidated VIEs	253,029,000	190,869,000
Deferred incentive fee revenue	3,704,000	3,704,000
Primary Beneficiary
Variable Interest Entity [Line Items]
Total assets of consolidated VIEs	11,183,000	11,648,000
Total liabilities of consolidated VIEs	0	0
Deferred incentive fee revenue	$ 3,704,000	$ 3,704,000

XML

Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenues
Total revenues	$ 68,138	$ 65,996	$ 197,116	$ 185,191
Expenses
Compensation and benefits	23,369	23,843	70,368	73,236
General, administrative and other	15,877	13,916	43,938	36,659
Total expenses	39,246	37,759	114,306	109,895
Other income (expense)
Equity in income of investees	4,454	4,934	14,331	10,096
Interest expense	(651)	(767)	(2,213)	(2,260)
Interest income	196	82	624	167
Non-operating income	97	8,892	4,175	20,951
Total other income (expense)	4,096	13,141	16,917	28,954
Income before income taxes	32,988	41,378	99,727	104,250
Income tax expense	4,551	18,463	11,564	25,660
Net income	28,437	22,915	88,163	78,590
Net income attributable to Hamilton Lane Incorporated	$ 13,497	$ 5,458	$ 40,177	$ 25,525
Common Class A
Other income (expense)
Basic earnings per share of Class A common stock (in dollars per share)	$ 0.46	$ 0.22	$ 1.45	$ 1.09
Diluted earnings per share of Class A common stock (in dollars per share)	0.46	0.22	1.44	1.08
Dividends declared per share of Class A common stock (in dollars per share)	$ 0.275	$ 0.2125	$ 0.825	$ 0.6375
General Partnerships
Other income (expense)
Less: (Loss) income attributable to non-controlling interests	$ 44	$ 681	$ 593	$ 1,075
Hamilton Lane Advisors, L.L.C.
Other income (expense)
Less: (Loss) income attributable to non-controlling interests	14,896	16,776	47,393	51,990
Management and advisory fees
Revenues
Total revenues	59,837	55,617	179,584	159,844
Incentive fees
Revenues
Total revenues	$ 8,301	$ 10,379	$ 17,532	$ 25,347

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Equity-Based Compensation - Summary of Restricted Stock (Details) - 2017 Equity Incentive Plan - Restricted Stock $ / shares in Units, $ in Thousands	9 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares
Total Unvested
Unvested at beginning of period (in shares) | shares	662,076
Granted (in shares) | shares	6,070
Vested (in shares) | shares	(8,556)
Forfeited (in shares) | shares	(14,649)
Unvested at end of period (in shares) | shares	644,941
Weighted- Average Grant-Date Fair Value of Award
Unvested at beginning of period (in dollars per share) | $ / shares	$ 26.58
Granted (in dollars per share) | $ / shares	53.47
Vested (in dollars per share) | $ / shares	29.70
Forfeited (in dollars per share) | $ / shares	27.24
Unvested at end of period (in dollars per share) | $ / shares	$ 26.78
Total unrecognized compensation expense relating to restricted stock | $	$ 11,974

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Subsequent Events - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions			3 Months Ended		9 Months Ended
	Feb. 04, 2020	Jan. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Subsequent Event
Subsequent Event [Line Items]
Payment to acquire assets in purchase agreement		$ 5
Common Class A
Subsequent Event [Line Items]
Dividends declared per share of Class A common stock (in dollars per share)			$ 0.275	$ 0.2125	$ 0.825	$ 0.6375
Common Class A | Subsequent Event
Subsequent Event [Line Items]
Dividends declared per share of Class A common stock (in dollars per share)	$ 0.275

XML

Commitments and Contingencies - Incentive Fees (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Carried Interest still subject to contingencies	$ 408,928	$ 326,466
Deferred incentive fee revenue	3,704	3,704
Incentive fees, unrecorded estimate	$ 102,232	$ 81,616

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Earnings per Share

9 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

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 the Class B units to which the Class B common stock corresponds are exchangeable for shares of Class A common stock on a one-for-one basis, at which time the share of Class B common stock is surrendered in exchange for a payment of its par value.

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:

	Three Months Ended December 31, 2019					Three Months Ended December 31, 2018
	Net income attributable to HLI		Weighted-Average Shares	Per share amount		Net income attributable to HLI		Weighted-Average Shares	Per share amount
Basic EPS of Class A common stock	$	13,497	29,185,039	$	0.46	$	5,458	25,051,094	$	0.22
Adjustment to net income:
Assumed vesting of employee awards	88					59
Effect of dilutive securities:
Assumed vesting of employee awards			423,167					523,724
Diluted EPS of Class A common stock	$	13,585	29,608,206	$	0.46	$	5,517	25,574,818	$	0.22

	Nine Months Ended December 31, 2019					Nine Months Ended December 31, 2018
	Net income attributable to HLI		Weighted-Average Shares	Per share amount		Net income attributable to HLI		Weighted-Average Shares	Per share amount
Basic EPS of Class A common stock	$	40,177	27,710,607	$	1.45	$	25,525	23,329,134	$	1.09
Adjustment to net income:
Assumed vesting of employee awards	267					327
Effect of dilutive securities:
Assumed vesting of employee awards			386,988					541,483
Diluted EPS of Class A common stock	$	40,444	28,097,595	$	1.44	$	25,852	23,870,617	$	1.08

The calculations of diluted earnings per share exclude 23,968,994 outstanding Class B and Class C units of HLA for the three and nine months ended December 31, 2019 and 27,819,930 outstanding Class B and Class C units of HLA for the three and nine months ended December 31, 2018, which are exchangeable into Class A common stock under the “if-converted” method, because the inclusion of such shares would be antidilutive.

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Equity

9 Months Ended

Dec. 31, 2019

Equity [Abstract]

Equity

Equity

The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2019:

	Class A Common Stock	Class B Common Stock
March 31, 2019	27,367,477	23,516,439
Shares issued (repurchased) in connection with registered offering	2,451,633	(1,466,712)
Shares issued in connection with contingent compensation payment	7,692	—
Forfeitures	(14,649)	—
Shares repurchased for employee tax withholdings	(509)	—
Restricted stock granted	6,070	—
Shares issued pursuant to Employee Share Purchase Plan	17,999	—
December 31, 2019	29,835,713	22,049,727

September 2019 Offering

In September 2019, the Company and certain selling stockholders completed a registered offering of an aggregate of 2,680,089 shares of Class A common stock at a price of $60.01 per share (the “September 2019 Offering”). The shares sold consisted of (i) 228,456 shares held by the selling stockholders and (ii) 2,451,633 shares newly issued by the Company. The Company received approximately $147,122 in net proceeds from the sale of its shares and used all of the proceeds to settle exchanges by certain members of HLA of a total of 1,466,712 Class B units and 984,921 Class C units. In connection with the exchange of the Class B units, the Company also repurchased for par value and canceled a corresponding number of shares of Class B common stock. The Company did not receive any proceeds from the sale of shares by the selling stockholders.

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Investments - Reconciliation of Other Investments (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2019
Reconciliation Of Other Investments [Roll Forward]
Other investments, beginning balance	$ 15,913	$ 12,488
Contributions	392	4,359
Distributions	(748)	(1,721)
Net gain	838	1,269
Other investments, ending balance	16,395	16,395
Private equity funds
Reconciliation Of Other Investments [Roll Forward]
Other investments, beginning balance	5,836	3,734
Contributions	392	2,484
Distributions	(748)	(748)
Net gain	457	467
Other investments, ending balance	5,937	5,937
Direct credit co-investments
Reconciliation Of Other Investments [Roll Forward]
Other investments, beginning balance	3,093	3,940
Contributions	0	0
Distributions	0	(973)
Net gain	36	162
Other investments, ending balance	3,129	3,129
Direct equity co-investments
Reconciliation Of Other Investments [Roll Forward]
Other investments, beginning balance	6,984	4,814
Contributions	0	1,875
Distributions	0	0
Net gain	345	640
Other investments, ending balance	$ 7,329	$ 7,329

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Information [Abstract]

Schedule of Supplemental Cash Flow Disclosures

	Nine Months Ended December 31,
	2019		2018
Cumulative-effect adjustment from adoption of accounting guidance	$	—	$	997
Shares issued for contingent compensation payment	$	425	$	425
Non-cash financing activities:
Dividends declared but not paid	$	8,026	$	5,325
Member distributions declared but not paid	$	10,505	$	8,206
Establishment of net deferred tax assets related to offerings	$	37,394	$	37,924

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Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Revenues	$ 68,138	$ 65,996	$ 197,116	$ 185,191
Management and advisory fees
Disaggregation of Revenue [Line Items]
Revenues	59,837	55,617	179,584	159,844
Specialized funds
Disaggregation of Revenue [Line Items]
Revenues	27,789	23,413	81,733	67,164
Customized separate accounts
Disaggregation of Revenue [Line Items]
Revenues	22,618	21,594	67,047	63,087
Advisory
Disaggregation of Revenue [Line Items]
Revenues	5,878	5,926	18,091	18,287
Reporting and other
Disaggregation of Revenue [Line Items]
Revenues	2,237	2,260	6,492	6,373
Distribution management
Disaggregation of Revenue [Line Items]
Revenues	1,108	1,975	3,169	3,773
Fund reimbursement revenue
Disaggregation of Revenue [Line Items]
Revenues	207	449	3,052	1,160
Incentive fees
Disaggregation of Revenue [Line Items]
Revenues	8,301	10,379	17,532	25,347
Specialized funds
Disaggregation of Revenue [Line Items]
Revenues	3,638	10,227	11,257	18,036
Customized separate accounts
Disaggregation of Revenue [Line Items]
Revenues	$ 4,663	$ 152	$ 6,275	$ 7,311

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Commitments and Contingencies - Operating Lease Maturities (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Remainder of FY2020	$ 1,290
FY2021	4,531
FY2022	2,868
FY2023	752
FY2024	389
Thereafter	244
Total lease payments	10,074
Less: imputed interest	(677)
Total operating lease liabilities	$ 9,397

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Label	Element	Value
Additional Paid-in Capital [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 411,000
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	20,000
Subsidiaries [Member] | Noncontrolling Interest [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 566,000

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019	Apr. 01, 2018
Supplemental Cash Flow Information [Abstract]
Cumulative-effect adjustment from adoption of accounting guidance	$ 997	$ 0	$ 997		$ 997
Shares issued for contingent compensation payment	425	425	425
Non-cash financing activities:
Dividends declared but not paid	5,325	8,026	5,325	$ 5,673
Member distributions declared but not paid	$ 8,206	10,505	8,206	$ 17,081
Establishment of net deferred tax assets related to offerings		$ 37,394	$ 37,924

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Income Taxes

9 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s effective tax rate used for interim periods is based on an estimated annual effective tax rate including 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 evaluates the realizability of its deferred tax asset on a quarterly basis and adjusts 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’s effective tax rate was 13.8% and 44.6% for the three months ended December 31, 2019 and 2018, respectively, and 11.6% and 24.6% for the nine months ended December 31, 2019 and 2018, respectively. The effective tax rates were different from the statutory tax rate due to the portion of income allocated to non-controlling interests and discrete tax adjustments recorded in the periods.  The effective tax rates for the three and nine months ended December 31, 2018 included provision to return adjustments related to the state income tax apportionment impact on estimated deferred tax assets as of December 31, 2018.

In connection with the September 2019 Offering, the Company recorded a deferred tax asset in the amount of $41,130. It is more likely than not that a portion of these tax benefits will not be realized, so a valuation allowance of $3,736 was established as of September 30, 2019. Additionally, in connection with the September 2019 Offering and recording of the deferred tax asset, the Company recorded a payable to related parties pursuant to the tax receivable agreement of $31,481.

As of December 31, 2019, the Company had no unrecognized tax positions and believes there will be no changes to uncertain tax positions within the next 12 months.

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Variable Interest Entities

9 Months Ended

Dec. 31, 2019

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 $11,183 and $11,648 as of December 31, 2019 and March 31, 2019, respectively, and are recorded in investments in the Condensed Consolidated Balance Sheets. The consolidated VIEs had no liabilities as of December 31, 2019 and March 31, 2019 other than deferred incentive fee revenue of $3,704 as of both December 31, 2019 and March 31, 2019. 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 clawback 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 based upon the Company’s equity interest percentage in each of the VIEs. 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 December 31, 2019, the total commitments and remaining unfunded commitments from the limited partners and general partners to the unconsolidated VIEs are $18,320,381 and $6,623,566, 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:

	December 31,		March 31,
	2019		2019
Investments	$	116,636	$	87,001
Fees receivable	1,535		5,896
Due from related parties	1,001		1,332
Total VIE Assets	119,172		94,229
Deferred incentive fee revenue	3,704		3,704
Non-controlling interests	(5,441)		(5,716)
Maximum exposure to loss	$	117,435	$	92,217

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Commitments and Contingencies (Tables)

9 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Lease Cost, Cash Flows, and Other Supplemental Cash Flow Information Regarding Leases

The following table shows other supplemental information related to the Company’s operating leases:

	Three Months Ended December 31, 2019		Nine Months Ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,323	$	3,898
Weighted average remaining lease term (in years)			2.5
Weighted average discount rate			5.5		%

Maturity of Operating Lease Liabilities

As of December 31, 2019, the maturities of operating lease liabilities were as follows:

Remainder of FY2020	$	1,290
FY2021	4,531
FY2022	2,868
FY2023	752
FY2024	389
Thereafter	244
Total lease payments	10,074
Less: imputed interest	(677)
Total operating lease liabilities	$	9,397

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Revenue - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Revenue from Contract with Customer [Abstract]
Previously deferred incentive fees recognized during the period				$ 2,541
Contract asset related to the cost to obtain contracts	$ 973		$ 973		$ 968
Contract asset amortization expense	$ 120	$ 111	$ 363	$ 347

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Investments - Valuation Methodologies (Details) $ in Thousands	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)
Investment [Line Items]
Other investments	$ 16,395	$ 15,913	$ 12,488
Private equity funds
Investment [Line Items]
Other investments	5,937	5,836	3,734
Direct credit co-investments
Investment [Line Items]
Other investments	3,129	3,093	3,940
Direct equity co-investments
Investment [Line Items]
Other investments	$ 7,329	$ 6,984	$ 4,814
Adjusted net asset value | Minimum | Private equity funds
Investment [Line Items]
Range of and weighted-average inputs	0.047
Adjusted net asset value | Maximum | Private equity funds
Investment [Line Items]
Range of and weighted-average inputs	0.047
Selected market return | Adjusted net asset value | Weighted Average | Private equity funds
Investment [Line Items]
Range of and weighted-average inputs	0.047
Market yield | Discounted cash flow | Minimum | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	0.097
Market yield | Discounted cash flow | Maximum | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	0.101
Market yield | Discounted cash flow | Weighted Average | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	0.0986
EBITDA multiple | Market approach | Minimum | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	8.0
EBITDA multiple | Market approach | Maximum | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	13.25
EBITDA multiple | Market approach | Weighted Average | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	10.87
Equity multiple | Market approach | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	1.25
Equity multiple | Market approach | Weighted Average | Direct credit co-investments
Investment [Line Items]
Range of and weighted-average inputs	1.25

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Compensation and Benefits (Tables)

9 Months Ended

Dec. 31, 2019

Compensation Related Costs [Abstract]

Schedule of Compensation and Benefits

The Company has recorded the following amounts related to compensation and benefits:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Base compensation and benefits	$	19,562	$	19,749	$	60,810	$	57,819
Incentive fee compensation	2,046		2,498		4,314		5,539
Equity-based compensation	1,761		1,596		5,244		4,778
Contingent compensation related to acquisition	—		—		—		5,100
Total compensation and benefits	$	23,369	$	23,843	$	70,368	$	73,236

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Investments (Tables)

9 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Investments

Investments consist of the following:

	December 31,		March 31,
	2019		2019
Equity method investments in Partnerships	$	159,984	$	122,505
Equity method investments in Partnerships held by consolidated VIEs	11,183		11,648
Other equity method investments	1,069		1,086
Other investments	16,395		12,488
Investments valued under the measurement alternative	4,537		6,764
Total Investments	$	193,168	$	154,491

Reconciliation of Other Investments

The following is a reconciliation of other investments for which significant unobservable inputs (Level 3) were used in determining value:

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of September 30, 2019	$	5,836	$	3,093	$	6,984	$	15,913
Contributions	392		—		—		392
Distributions	(748)		—		—		(748)
Net gain	457		36		345		838
Balance as of December 31, 2019	$	5,937	$	3,129	$	7,329	$	16,395

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of March 31, 2019	$	3,734	$	3,940	$	4,814	$	12,488
Contributions	2,484		—		1,875		4,359
Distributions	(748)		(973)		—		(1,721)
Net gain	467		162		640		1,269
Balance as of December 31, 2019	$	5,937	$	3,129	$	7,329	$	16,395

Schedule of Assumptions Used

The valuation methodologies, significant unobservable inputs, range of inputs and the weighted average input determined based upon relative fair value of the investments used in recurring Level 3 fair value measurements of assets were as follows, as of December 31, 2019:

				Significant
	Fair		Valuation	Unobservable				Weighted
	Value		Methodology	Inputs	Range			Average
Private equity funds	$	5,937	Adjusted net asset value	Selected market return	4.7%	-	4.7%	4.7%
Direct credit co-investments	$	3,129	Recent precedent transactions
			Discounted cash flow	Market yield	9.7%	-	10.1%	9.86%
Direct equity co-investments	$	7,329	Market approach	EBITDA multiple	8.0x	-	13.25x	10.87x
			Market approach	Equity multiple	1.25x			1.25x

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Commitments and Contingencies

9 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may be subject to various legal, regulatory, and/or administrative proceedings from time to time. Although there can be no assurance of the outcome of such proceedings, in the opinion of management, the Company does not believe it is probable that any pending or, to its knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect its condensed consolidated financial statements.

Incentive Fees

The Partnerships have allocated carried interest still subject to contingencies and that did not meet the Company’s criteria for recognition in the amounts of $408,928 and $326,466, net of amounts attributable to non-controlling interests, at December 31, 2019 and March 31, 2019, respectively, and $3,704 at both December 31, 2019 and March 31, 2019 that has been received and deferred by the Company.

If the Company ultimately receives the unrecognized carried interest, a total of $102,232 and $81,616 as of December 31, 2019 and March 31, 2019, respectively, would potentially be payable to certain employees and third parties pursuant to compensation arrangements related to carried interest profit-sharing plans. Such amounts have not been recorded in the Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Income as the payment 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 Company’s aggregate unfunded commitment to the Partnerships was $132,899 and $123,637 as of December 31, 2019 and March 31, 2019, respectively.

Leases

The Company’s leases consist primarily of operating leases for office space and office equipment in various locations around the world. These leases have remaining lease terms of one year to six years, some of which have the option to extend for an additional five years or have the option to terminate within one year. In October 2019, the Company executed an agreement to lease office space for its new headquarters in suburban Philadelphia. The lessor is currently building the office space. The Company expects to gain access to the space to build various leasehold improvements in late fiscal 2021. At that time, the Company will then establish an ROU asset and a lease liability for the new lease.

Total operating lease costs were $1,239 and $3,649 for the three and nine months ended December 31, 2019, respectively. Total variable lease costs were $134 and $395 for the three and nine months ended December 31, 2019, respectively. Short-term lease costs were not material for the three and nine months ended December 31, 2019.

The following table shows other supplemental information related to the Company’s operating leases:

	Three Months Ended December 31, 2019		Nine Months Ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,323	$	3,898
Weighted average remaining lease term (in years)			2.5
Weighted average discount rate			5.5		%

As of December 31, 2019, the maturities of operating lease liabilities were as follows:

Remainder of FY2020	$	1,290
FY2021	4,531
FY2022	2,868
FY2023	752
FY2024	389
Thereafter	244
Total lease payments	10,074
Less: imputed interest	(677)
Total operating lease liabilities	$	9,397

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Variable Interest Entities - Unconsolidated VIEs (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Variable Interest Entity [Line Items]
Total commitments from the limited partners and general partners to the unconsolidated VIE	$ 18,320,381
Remaining unfunded commitments from the limited partners and general partners to the unconsolidated VIE	6,623,566
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]
Deferred incentive fee revenue	3,704	$ 3,704
Not Primary Beneficiary
Variable Interest Entity, Nonconsolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]
Investments	116,636	87,001
Fees receivable	1,535	5,896
Due from related parties	1,001	1,332
Total VIE Assets	119,172	94,229
Deferred incentive fee revenue	3,704	3,704
Non-controlling interests	(5,441)	(5,716)
Maximum exposure to loss	$ 117,435	$ 92,217

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Net income	$ 28,437	$ 22,915	$ 88,163	$ 78,590
Other comprehensive income (loss), net of tax
Foreign currency translation	16	23	(13)	23
Total other comprehensive income (loss), net of tax	16	23	(13)	23
Comprehensive income	28,453	22,938	88,150	78,613
Less:
Total comprehensive income attributable to Hamilton Lane Incorporated	13,506	5,469	40,172	25,536
General Partnerships
Less:
Comprehensive income (loss) attributable to non-controlling interests	44	681	593	1,075
Hamilton Lane Advisors, L.L.C.
Less:
Comprehensive income (loss) attributable to non-controlling interests	$ 14,903	$ 16,788	$ 47,385	$ 52,002

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Cover Page - shares	9 Months Ended
	Dec. 31, 2019	Feb. 03, 2020
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	001-38021
Entity Registrant Name	HAMILTON LANE INC
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-2482738
Entity Address, Address Line One	One Presidential Blvd.,
Entity Address, Address Line Two	4th Floor
Entity Address, City or Town	Bala Cynwyd,
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19004
City Area Code	610
Local Phone Number	934-2222
Title of 12(b) Security	Class A Common Stock, $0.001 par value per share
Trading Symbol	HLNE
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Shell Company	false
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001433642
Current Fiscal Year End Date	--03-31
Common Class A
Entity Common Stock, Shares Outstanding		29,834,709
Common Class B
Entity Common Stock, Shares Outstanding		22,049,727

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Compensation and Benefits - Schedule of Compensation and Benefits (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Compensation Related Costs [Abstract]
Base compensation and benefits	$ 19,562	$ 19,749	$ 60,810	$ 57,819
Incentive fee compensation	2,046	2,498	4,314	5,539
Equity-based compensation	1,761	1,596	5,244	4,778
Contingent compensation related to acquisition	0	0	0	5,100
Total compensation and benefits	$ 23,369	$ 23,843	$ 70,368	$ 73,236

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Summary of Significant Accounting Policies

9 Months Ended

Dec. 31, 2019

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 nine months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the year ending March 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in HLI’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

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:

•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.

The carrying amount of cash and cash equivalents, fees receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments.

The carrying amount of the term loan of $67,245 as of December 31, 2019 approximated fair value based on then-current market rates for similar debt instruments and is classified as Level 2 within the fair value hierarchy.

Leases

On April 1, 2019, the Company adopted ASU 2016-02, “Leases”, (ASC 842) on a prospective basis and as a result, prior period amounts were not adjusted to reflect the impacts of the new standard. In addition, as permitted under the transition guidance within the new standard, prior scoping, classification, and accounting for initial direct costs were carried forward for leases existing as of the adoption date. 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 Condensed Consolidated Balance Sheets for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Condensed Consolidated Statements of Income. The adoption did not have an impact on the Condensed Consolidated Statements of Income as all of the Company’s leases are operating leases, and will continue to be recognized as expense on a straight-line basis. The adoption, however, resulted in a gross-up in total assets and total liabilities on the Condensed Consolidated Balance Sheets.

The Company determines whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, the Company determines whether it should be classified as an operating or finance lease. The Company accounts for lease components and non-lease components as a single lease component. Lease ROU assets and lease liabilities are recognized at the commencement date of the lease and measured based on the present value of lease payments over the lease term. Lease ROU assets include initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives. Generally, the Company’s leases do not provide an implicit rate and as a result, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company does not recognize a lease ROU asset or lease liability for short-term leases, which have lease

terms of 12 months or less. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 changes the fair value measurement disclosure requirements. The amendments remove or modify certain disclosures, while others were added. Early adoption of any removed or modified disclosure requirements is permitted upon issuance of ASU 2018-13 and adoption of the additional disclosure requirements may be delayed until the effective date. The Company elected to early adopt the removed or modified disclosure requirements of the standard on October 1, 2018 and expects to adopt the additional disclosure requirements on April 1, 2020. The adoption of the removed or modified disclosure requirements did not have a material impact on the Company’s disclosures in its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Accounting for Financial Instruments - Credit Losses (Topic 326)”. ASU 2016-13 replaces the incurred loss methodology in current GAAP with a methodology that reflects expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is effective for the Company on April 1, 2020 and early adoption is permitted. The Company has identified all of its material financial assets and does not expect that implementing the guidance will have a material impact on the Company's consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

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Related-Party Transactions - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Related Party Transaction [Line Items]
Revenues	$ 68,138	$ 65,996	$ 197,116	$ 185,191
Payable to related parties pursuant to tax receivable agreement	101,404		101,404		$ 69,636
Long-term Debt	877		877		678
Fees receivable	19,456		19,456		20,320
General Partnerships
Related Party Transaction [Line Items]
Fees receivable	3,668		3,668		8,927
Joint Venture
Related Party Transaction [Line Items]
Payable to related parties pursuant to tax receivable agreement	423		423		$ 450
Service Agreement Fees Paid | Joint Venture
Related Party Transaction [Line Items]
Fees paid to joint venture	1,261	1,277	4,006	3,725
Management and advisory fees
Related Party Transaction [Line Items]
Revenues	59,837	55,617	179,584	159,844
Management and advisory fees | General Partnerships
Related Party Transaction [Line Items]
Revenues	39,141	33,724	117,941	97,168
Incentive fees
Related Party Transaction [Line Items]
Revenues	8,301	10,379	17,532	25,347
Incentive fees | General Partnerships
Related Party Transaction [Line Items]
Revenues	$ 5,731	$ 10,267	$ 14,850	$ 24,857
RAPM
Related Party Transaction [Line Items]
Percent of total payment to principals of RAPM	50.00%		50.00%
RAPM | Former principals of RAPM, current employees of Company
Related Party Transaction [Line Items]
Portion of asset acquisition paid in cash			$ 3,824
Common Class A | RAPM | Former principals of RAPM, current employees of Company
Related Party Transaction [Line Items]
Portion of acquisition paid by issuing common stock			$ 425

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Commitments and Contingencies - Commitments (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Other commitment	$ 132,899	$ 123,637

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Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Debt Instrument [Line Items]
Debt	$ 67,245	$ 70,954
Term Loan
Debt Instrument [Line Items]
Debt	$ 67,245

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Investments - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Schedule of Equity Method Investments [Line Items]
Equity in income of investees	$ 4,454	$ 4,934	$ 14,331	$ 10,096
Cash received on transfer of other investments			15,750	0
Secured financing	16,395		16,395		$ 0
Amortized cost	14,186		14,186
Net gain	838		1,269
Unrealized loss on secured borrowings, fair value adjustment	$ 838		1,973
Proceeds from sales of investments valued under the measurement alternative			6,419	22,531
Gain on sale of investment			$ 4,973	$ 11,133
Equity method investments in Partnerships
Schedule of Equity Method Investments [Line Items]
Percent interest in partnerships	1.00%		1.00%

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Equity-Based Compensation

9 Months Ended

Dec. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity-Based Compensation

Equity-Based Compensation

A summary of restricted stock activity for the nine months ended December 31, 2019 is presented below:

	Total Unvested	Weighted- Average Grant-Date Fair Value of Award
March 31, 2019	662,076	$	26.58
Granted	6,070	$	53.47
Vested	(8,556)	$	29.70
Forfeited	(14,649)	$	27.24
December 31, 2019	644,941	$	26.78

As of December 31, 2019, total unrecognized compensation expense related to restricted stock was $11,974.

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Revenue

9 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

The following table presents revenues disaggregated by product offering, which aligns with the identified performance obligations and the basis for calculating each amount:

	Three Months Ended December 31,				Nine Months Ended December 31,
Management and advisory fees	2019		2018		2019		2018
Specialized funds	$	27,789	$	23,413	$	81,733	$	67,164
Customized separate accounts	22,618		21,594		67,047		63,087
Advisory	5,878		5,926		18,091		18,287
Reporting and other	2,237		2,260		6,492		6,373
Distribution management	1,108		1,975		3,169		3,773
Fund reimbursement revenue	207		449		3,052		1,160
Total management and advisory fees	$	59,837	$	55,617	$	179,584	$	159,844

	Three Months Ended December 31,				Nine Months Ended December 31,
Incentive fees	2019		2018		2019		2018
Specialized funds	$	3,638	$	10,227	$	11,257	$	18,036
Customized separate accounts	4,663		152		6,275		7,311
Total incentive fees	$	8,301	$	10,379	$	17,532	$	25,347

The Company recognized $2,541 of incentive fees during the nine months ended December 31, 2018 that were previously received and deferred.

Cost to obtain contracts

The Company incurs incremental costs related to sales commissions paid to certain employees directly related to customized separate account contracts. These incremental costs are capitalized and amortized over the expected contract length proportionately to the management fee revenue expected to be recognized in each year as a percentage of the total expected revenue for the contract. The contract asset related to the cost to obtain contracts was $973 and $968 as of December 31, 2019 and March 31, 2019, respectively, and is included in other assets in the Condensed Consolidated Balance Sheets. Amortization expense related to this contract asset was $120 and $363 for the three and nine months ended December 31, 2019, respectively, and $111 and $347 for the three and nine months ended December 31, 2018, respectively, and is included in general, administrative and other in the Condensed Consolidated Statements of Income.

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Related-Party Transactions

9 Months Ended

Dec. 31, 2019

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 advisory fees from Partnerships of $39,141 and $117,941 for the three and nine months ended December 31, 2019, respectively, and $33,724 and $97,168 for the three and nine months ended December 31, 2018, respectively. The Company earned incentive fees from Partnerships of $5,731 and $14,850 for the three and nine months ended December 31, 2019, respectively, and $10,267 and $24,857 for the three and nine months ended December 31, 2018, respectively.

The Company entered into a service agreement on June 1, 2017 with its joint venture pursuant to which it had expenses of $1,261 and $4,006 for the three and nine months ended December 31, 2019, respectively, and $1,277 and $3,725 for the three and nine months ended December 31, 2018, respectively, that are included in general, administrative and other expenses in the Condensed Consolidated Statements of Income. The Company also has a payable to the joint venture of $423 and $450 as of December 31, 2019 and March 31, 2019, respectively, which is included in other liabilities in the Condensed Consolidated Balance Sheets.

The Company holds a convertible promissory note (the “Note”) issued by one of the Company’s equity method investees. The Note contains an option for the outstanding principal and any accrued interest to be converted to shares of the issuer under certain conditions. The carrying value of the Note was $877 and $678 as of December 31, 2019 and March 31, 2019, respectively, and is recorded in other assets in the Condensed Consolidated Balance Sheets.

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 $3,668 and $8,927 as of December 31, 2019 and March 31, 2019, respectively, and are included in fees receivable in the Condensed Consolidated Balance Sheets.

In connection with HLA’s acquisition of Real Asset Portfolio Management LLC (“RAPM”) in 2017, the Company paid the remaining 50% of contingent compensation due to the former principals of RAPM, who are employees of the Company, during the nine months ended December 31, 2019. Such compensation was paid $3,824 in cash and $425 by issuing Class A common stock.

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Equity (Tables)

9 Months Ended

Dec. 31, 2019

Equity [Abstract]

Rollforward of Common Stock

The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2019:

	Class A Common Stock	Class B Common Stock
March 31, 2019	27,367,477	23,516,439
Shares issued (repurchased) in connection with registered offering	2,451,633	(1,466,712)
Shares issued in connection with contingent compensation payment	7,692	—
Forfeitures	(14,649)	—
Shares repurchased for employee tax withholdings	(509)	—
Restricted stock granted	6,070	—
Shares issued pursuant to Employee Share Purchase Plan	17,999	—
December 31, 2019	29,835,713	22,049,727

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of PresentationThe 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 nine months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the year ending March 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in HLI’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

Fair Value of Financial Instruments

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:

•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.

The carrying amount of cash and cash equivalents, fees receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments.

Leases

Leases

On April 1, 2019, the Company adopted ASU 2016-02, “Leases”, (ASC 842) on a prospective basis and as a result, prior period amounts were not adjusted to reflect the impacts of the new standard. In addition, as permitted under the transition guidance within the new standard, prior scoping, classification, and accounting for initial direct costs were carried forward for leases existing as of the adoption date. 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 Condensed Consolidated Balance Sheets for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Condensed Consolidated Statements of Income. The adoption did not have an impact on the Condensed Consolidated Statements of Income as all of the Company’s leases are operating leases, and will continue to be recognized as expense on a straight-line basis. The adoption, however, resulted in a gross-up in total assets and total liabilities on the Condensed Consolidated Balance Sheets.

The Company determines whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, the Company determines whether it should be classified as an operating or finance lease. The Company accounts for lease components and non-lease components as a single lease component. Lease ROU assets and lease liabilities are recognized at the commencement date of the lease and measured based on the present value of lease payments over the lease term. Lease ROU assets include initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives. Generally, the Company’s leases do not provide an implicit rate and as a result, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company does not recognize a lease ROU asset or lease liability for short-term leases, which have lease

terms of 12 months or less. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 changes the fair value measurement disclosure requirements. The amendments remove or modify certain disclosures, while others were added. Early adoption of any removed or modified disclosure requirements is permitted upon issuance of ASU 2018-13 and adoption of the additional disclosure requirements may be delayed until the effective date. The Company elected to early adopt the removed or modified disclosure requirements of the standard on October 1, 2018 and expects to adopt the additional disclosure requirements on April 1, 2020. The adoption of the removed or modified disclosure requirements did not have a material impact on the Company’s disclosures in its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Accounting for Financial Instruments - Credit Losses (Topic 326)”. ASU 2016-13 replaces the incurred loss methodology in current GAAP with a methodology that reflects expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is effective for the Company on April 1, 2020 and early adoption is permitted. The Company has identified all of its material financial assets and does not expect that implementing the guidance will have a material impact on the Company's consolidated financial statements.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

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Equity - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Proceeds from offering		$ 147,122	$ 129,626
Common Class A
Class of Stock [Line Items]
Stock sold in connection with secondary public offering (in shares)		2,451,633
September 2019 Offering | Common Class A
Class of Stock [Line Items]
Stock sold in connection with secondary public offering (in shares)	2,680,089
Shares sold in connection with secondary offering (in dollars per share)		$ 60.01
Proceeds from offering	$ 147,122
September 2019 Offering, Current Stockholder Issuance | Common Class A
Class of Stock [Line Items]
Stock sold in connection with secondary public offering (in shares)	228,456
September 2019 Offering, New Issuance | Common Class A
Class of Stock [Line Items]
Stock sold in connection with secondary public offering (in shares)	2,451,633
Members’ Equity (Deficit) | Common Class B
Class of Stock [Line Items]
Purchase of interest by parent (in shares)	1,466,712
Members’ Equity (Deficit) | Common Class C
Class of Stock [Line Items]
Purchase of interest by parent (in shares)	984,921

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Operating activities:
Net income	$ 88,163	$ 78,590
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,379	1,759
Change in deferred income taxes	7,197	18,945
Change in payable to related parties pursuant to tax receivable agreement	150	(9,134)
Equity-based compensation	5,244	4,777
Equity in income of investees	(14,331)	(10,096)
Gain on sale of investments valued under the measurement alternative	(4,973)	(11,133)
Proceeds received from investments	8,475	11,652
Other	598	(482)
Changes in operating assets and liabilities:
Fees receivable	856	(2,029)
Prepaid expenses	126	(66)
Due from related parties	(39)	728
Other assets	329	(262)
Accounts payable	(108)	744
Accrued compensation and benefits	14,510	25,130
Deferred incentive fees	0	(2,541)
Other liabilities	(521)	327
Net cash provided by operating activities	108,055	106,909
Investing activities:
Purchase of furniture, fixtures and equipment	(1,207)	(4,758)
Purchase of other investments	(3,967)	0
Proceeds from sales of investments valued under the measurement alternative	6,419	22,531
Loan to investee	(157)	(944)
Distributions received from investments	6,878	8,166
Contributions to investments	(37,196)	(30,642)
Net cash used in investing activities	(29,230)	(5,647)
Financing activities:
Proceeds from offering	147,122	129,626
Purchase of membership interests	(147,122)	(129,626)
Repayments of debt	(3,750)	(1,875)
Draw-down on revolver	15,000	0
Repayment of revolver	(15,000)	(10,450)
Secured financing	15,750	0
Contributions from non-controlling interest in general partnerships	30	30
Distributions to non-controlling interest in general partnerships	(898)	(1,817)
Repurchase of Class B common stock	(2)	(2)
Repurchase of Class A shares for employee tax withholding	(45)	(174)
Proceeds received from issuance of shares under Employee Share Purchase Plan	885	0
Dividends paid	(21,041)	(13,351)
Members’ distributions paid	(36,613)	(41,878)
Net cash used in financing activities	(45,684)	(69,517)
Effect of exchange rate changes on cash and cash equivalents	(37)	13
Increase in cash, cash equivalents, and restricted cash	33,104	31,758
Cash, cash equivalents, and restricted cash at beginning of the period	51,590	49,383
Cash, cash equivalents, and restricted cash at end of the period	$ 84,694	$ 81,141

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Class of Stock [Line Items]
Preferred stock, par value (in USD 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
Secured financing	$ 16,395	$ 0
Common Class A
Class of Stock [Line Items]
Common stock, par value (in USD per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	29,835,713	27,367,477
Common stock, shares outstanding (in shares)	29,835,713	27,367,477
Common Class B
Class of Stock [Line Items]
Common stock, par value (in USD per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	22,049,727	23,516,439
Common stock, shares outstanding (in shares)	22,049,727	23,516,439

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Earnings per Share - Schedule of Earnings Per Share - Basic and Diluted (Details) - Common Class A - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Net income attributable to HLI
Basic EPS of Class A common stock	$ 13,497	$ 5,458		$ 25,525
Assumed vesting of employee awards	88	59	$ 267	327
Diluted EPS of Class A common stock	$ 13,585	$ 5,517	$ 40,444	$ 25,852
Weighted-Average Shares
Weighted-average basic EPS of Class A common stock (in shares)	29,185,039	25,051,094	27,710,607	23,329,134
Weighted-average assumed vesting of employee awards (in shares)	423,167	523,724	386,988	541,483
Weighted-average diluted EPS of Class A common stock (in shares)	29,608,206	25,574,818	28,097,595	23,870,617
Per share amount
Basic EPS of Class A common stock (in dollars per share)	$ 0.46	$ 0.22	$ 1.45	$ 1.09
Diluted EPS of Class A common stock (in dollars per share)	$ 0.46	$ 0.22	$ 1.44	$ 1.08

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Equity-Based Compensation (Tables)

9 Months Ended

Dec. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Restricted Stock Activity

A summary of restricted stock activity for the nine months ended December 31, 2019 is presented below:

	Total Unvested	Weighted- Average Grant-Date Fair Value of Award
March 31, 2019	662,076	$	26.58
Granted	6,070	$	53.47
Vested	(8,556)	$	29.70
Forfeited	(14,649)	$	27.24
December 31, 2019	644,941	$	26.78

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Revenue (Tables)

9 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table presents revenues disaggregated by product offering, which aligns with the identified performance obligations and the basis for calculating each amount:

	Three Months Ended December 31,				Nine Months Ended December 31,
Management and advisory fees	2019		2018		2019		2018
Specialized funds	$	27,789	$	23,413	$	81,733	$	67,164
Customized separate accounts	22,618		21,594		67,047		63,087
Advisory	5,878		5,926		18,091		18,287
Reporting and other	2,237		2,260		6,492		6,373
Distribution management	1,108		1,975		3,169		3,773
Fund reimbursement revenue	207		449		3,052		1,160
Total management and advisory fees	$	59,837	$	55,617	$	179,584	$	159,844

	Three Months Ended December 31,				Nine Months Ended December 31,
Incentive fees	2019		2018		2019		2018
Specialized funds	$	3,638	$	10,227	$	11,257	$	18,036
Customized separate accounts	4,663		152		6,275		7,311
Total incentive fees	$	8,301	$	10,379	$	17,532	$	25,347

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Equity - Shares of Common Stock Outstanding (Details)	9 Months Ended
	Dec. 31, 2019 shares
Common Class A
Common Stock, Shares Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	27,367,477
Shares issued in connection with registered offering (in shares)	2,451,633
Shares issued in connection with contingent compensation payment (in shares)	7,692
Forfeitures (in shares)	(14,649)
Shares repurchased for employee tax withholdings (in shares)	(509)
Restricted stock granted (in shares)	6,070
Shares issued in connection with ESPP (in shares)	17,999
Outstanding, end of period (in shares)	29,835,713
Common Class B
Common Stock, Shares Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	23,516,439
Stock repurchased in connection with registered offering (in shares)	(1,466,712)
Shares issued in connection with contingent compensation payment (in shares)	0
Forfeitures (in shares)	0
Shares repurchased for employee tax withholdings (in shares)	0
Restricted stock granted (in shares)	0
Outstanding, end of period (in shares)	22,049,727

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Condensed Consolidated Statement of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock Class A Common Stock	Common Stock Class B Common Stock	Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Income	General Partnerships Noncontrolling Interests	Hamilton Lane Advisors, L.L.C. Noncontrolling Interests
Beginning balance at Mar. 31, 2018	$ 136,074	$ 22	$ 26	$ 73,829	$ 4,549	$ 0	$ 7,266	$ 50,382
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	78,590				25,525		1,075	51,990
Other comprehensive loss	23					11		12
Equity-based compensation	4,824			2,129				2,695
Issuance of shares for contingent compensation payout	425	1		200				224
Repurchase of Class A shares for employee tax withholding	(174)			(73)				(101)
Deferred tax adjustment	7,191			7,191
Dividends declared	(14,783)				(14,783)
Capital contributions from (distributions to) non-controlling interests, net	(1,787)						(1,787)
Member distributions	(38,247)							(38,247)
Secondary offering	(2)	3	(2)	5,891				(5,894)
Equity reallocation between controlling and non-controlling interests	0			(1,344)				1,344
Ending balance at Dec. 31, 2018	173,131	26	24	88,234	15,311	11	6,554	62,971
Beginning balance at Sep. 30, 2018	162,147	25	24	86,089	15,178	0	6,873	53,958
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	22,915				5,458		681	16,776
Other comprehensive loss	23					11		12
Equity-based compensation	1,604			760				844
Issuance of shares for contingent compensation payout	425	1		200				224
Deferred tax adjustment	1,021			1,021
Dividends declared	(5,325)				(5,325)
Capital contributions from (distributions to) non-controlling interests, net	(1,000)						(1,000)
Member distributions	(8,679)							(8,679)
Secondary offering	0
Equity reallocation between controlling and non-controlling interests	0			164				(164)
Ending balance at Dec. 31, 2018	173,131	26	24	88,234	15,311	11	6,554	62,971
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative-effect adjustment from adoption of accounting guidance	997
Beginning balance at Mar. 31, 2019	169,722	27	24	92,482	17,686	7	5,716	53,780
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	88,163				40,177		593	47,393
Other comprehensive loss	(13)					(5)		(8)
Equity-based compensation	5,283			2,758				2,525
Issuance of shares for contingent compensation payout	425			214				211
Repurchase of Class A shares for employee tax withholding	(45)			(23)				(22)
Deferred tax adjustment	6,231			6,231
Dividends declared	(23,394)				(23,394)
Capital contributions from (distributions to) non-controlling interests, net	(868)						(868)
Member distributions	(30,037)							(30,037)
Secondary offering	(2)	3	(2)	6,367				(6,370)
Employee Share Purchase Plan share issuance	885			462				423
Equity reallocation between controlling and non-controlling interests	0			559				(559)
Ending balance at Dec. 31, 2019	216,350	30	22	109,050	34,469	2	5,441	67,336
Beginning balance at Sep. 30, 2019	204,631	30	22	107,718	28,998	(7)	5,592	62,278
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	28,437				13,497		44	14,896
Other comprehensive loss	16					9		7
Equity-based compensation	1,781			981				800
Deferred tax adjustment	20			20
Dividends declared	(8,026)				(8,026)
Capital contributions from (distributions to) non-controlling interests, net	(195)						(195)
Member distributions	(10,607)							(10,607)
Secondary offering	0			0				0
Employee Share Purchase Plan share issuance	293			161				132
Equity reallocation between controlling and non-controlling interests	0			170				(170)
Ending balance at Dec. 31, 2019	216,350	$ 30	$ 22	$ 109,050	$ 34,469	$ 2	$ 5,441	$ 67,336
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative-effect adjustment from adoption of accounting guidance	$ 0

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Assets
Cash and cash equivalents	$ 81,599	$ 49,357
Restricted cash	3,095	2,233
Fees receivable	19,456	20,320
Prepaid expenses	4,587	4,714
Due from related parties	2,667	2,628
Furniture, fixtures and equipment, net	7,280	8,108
Lease right-of-use assets, net	8,596
Investments	193,168	154,491
Deferred income taxes	138,378	107,726
Other assets	10,553	11,014
Total assets	469,379	360,591
Liabilities and Equity
Accounts payable	2,511	2,619
Accrued compensation and benefits	26,301	12,216
Deferred incentive fee revenue	3,704	3,704
Debt	67,245	70,954
Accrued members’ distributions	10,505	17,081
Payable to related parties pursuant to tax receivable agreement	101,404	69,636
Dividends payable	8,026	5,673
Lease liabilities	9,397
Other liabilities (includes $16,395 and $0 at fair value)	23,936	8,986
Total liabilities	253,029	190,869
Commitments and Contingencies
Preferred stock, $0.001 par value, 10,000,000 authorized, none issued	0	0
Additional paid-in-capital	109,050	92,482
Accumulated other comprehensive income	2	7
Total Hamilton Lane Incorporated stockholders’ equity	143,573	110,226
Total equity	216,350	169,722
Total liabilities and equity	469,379	360,591
Common Class A
Liabilities and Equity
Common stock	30	27
Common Class B
Liabilities and Equity
Common stock	22	24
General Partnerships
Liabilities and Equity
Stockholders' equity attributable to noncontrolling interest	5,441	5,716
Hamilton Lane Advisors, L.L.C.
Liabilities and Equity
Retained earnings	34,469	17,686
Stockholders' equity attributable to noncontrolling interest	$ 67,336	$ 53,780

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Income Taxes - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Related Party Transaction [Line Items]
Effective tax rate	13.80%	44.60%	11.60%	24.60%
Payable to related parties pursuant to tax receivable agreement	$ 101,404,000		$ 101,404,000		$ 69,636,000
Unrecognized tax positions	0		0
Tax Receivable Agreement
Related Party Transaction [Line Items]
Payable to related parties pursuant to tax receivable agreement	31,481,000		31,481,000
September 2019 Offering
Related Party Transaction [Line Items]
Deferred tax asset	41,130,000		41,130,000
Valuation allowance	$ 3,736,000		$ 3,736,000

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Commitments and Contingencies - Lease Cost (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Lessee, Lease, Description [Line Items]
Operating lease cost	$ 1,239	$ 3,649
Variable lease cost	134	395
Cash paid for amounts included in the measurement of operating lease liabilities	$ 1,323	$ 3,898
Weighted average remaining lease term (in years)	2 years 6 months	2 years 6 months
Weighted average discount rate	5.50%	5.50%
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term		1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term		6 years

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Organization - Narrative (Details)	Dec. 31, 2019	Mar. 31, 2019
HLA
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Percent of economic interest held	54.90%	50.30%

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Investments - Schedule of Investments (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Sep. 30, 2019	Mar. 31, 2019
Investment [Line Items]
Other investments	$ 16,395	$ 15,913	$ 12,488
Investments valued under the measurement alternative	4,537		6,764
Total Investments	193,168		154,491
Equity method investments in Partnerships
Investment [Line Items]
Equity method investments	159,984		122,505
Equity method investments in Partnerships held by consolidated VIEs
Investment [Line Items]
Equity method investments	11,183		11,648
Other equity method investments
Investment [Line Items]
Equity method investments	$ 1,069		$ 1,086

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Supplemental Cash Flow Information

9 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

	Nine Months Ended December 31,
	2019		2018
Cumulative-effect adjustment from adoption of accounting guidance	$	—	$	997
Shares issued for contingent compensation payment	$	425	$	425
Non-cash financing activities:
Dividends declared but not paid	$	8,026	$	5,325
Member distributions declared but not paid	$	10,505	$	8,206
Establishment of net deferred tax assets related to offerings	$	37,394	$	37,924

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Compensation and Benefits

9 Months Ended

Dec. 31, 2019

Compensation Related Costs [Abstract]

Compensation and Benefits

Compensation and Benefits

The Company has recorded the following amounts related to compensation and benefits:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Base compensation and benefits	$	19,562	$	19,749	$	60,810	$	57,819
Incentive fee compensation	2,046		2,498		4,314		5,539
Equity-based compensation	1,761		1,596		5,244		4,778
Contingent compensation related to acquisition	—		—		—		5,100
Total compensation and benefits	$	23,369	$	23,843	$	70,368	$	73,236

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Investments

9 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investments

Investments

Investments consist of the following:

	December 31,		March 31,
	2019		2019
Equity method investments in Partnerships	$	159,984	$	122,505
Equity method investments in Partnerships held by consolidated VIEs	11,183		11,648
Other equity method investments	1,069		1,086
Other investments	16,395		12,488
Investments valued under the measurement alternative	4,537		6,764
Total Investments	$	193,168	$	154,491

Equity method investments

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 has a 1% interest in substantially all of the Partnerships. 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 $4,454 and $14,331 for the three and nine months ended December 31, 2019, respectively, and $4,934 and $10,096 for the three and nine months ended December 31, 2018, respectively.

Other investments

The Company’s other investments represent investments in private equity funds and direct credit and equity co-investments. The private equity fund investments can only be redeemed through distributions received from the liquidation of underlying investments of the fund, and the timing of distributions is currently indeterminable. The direct credit co-investments are debt securities classified as trading securities. The direct equity co-investments and private equity funds are measured at fair value with unrealized holding gains and losses included in earnings. The Company’s other investments are recorded at estimated fair value utilizing significant unobservable inputs and are therefore classified in Level 3 of the fair value hierarchy.

The following is a reconciliation of other investments for which significant unobservable inputs (Level 3) were used in determining value:

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of September 30, 2019	$	5,836	$	3,093	$	6,984	$	15,913
Contributions	392		—		—		392
Distributions	(748)		—		—		(748)
Net gain	457		36		345		838
Balance as of December 31, 2019	$	5,937	$	3,129	$	7,329	$	16,395

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of March 31, 2019	$	3,734	$	3,940	$	4,814	$	12,488
Contributions	2,484		—		1,875		4,359
Distributions	(748)		(973)		—		(1,721)
Net gain	467		162		640		1,269
Balance as of December 31, 2019	$	5,937	$	3,129	$	7,329	$	16,395

The valuation methodologies, significant unobservable inputs, range of inputs and the weighted average input determined based upon relative fair value of the investments used in recurring Level 3 fair value measurements of assets were as follows, as of December 31, 2019:

				Significant
	Fair		Valuation	Unobservable				Weighted
	Value		Methodology	Inputs	Range			Average
Private equity funds	$	5,937	Adjusted net asset value	Selected market return	4.7%	-	4.7%	4.7%
Direct credit co-investments	$	3,129	Recent precedent transactions
			Discounted cash flow	Market yield	9.7%	-	10.1%	9.86%
Direct equity co-investments	$	7,329	Market approach	EBITDA multiple	8.0x	-	13.25x	10.87x
			Market approach	Equity multiple	1.25x			1.25x

For the significant unobservable inputs listed in the table above, (1) a significant increase or decrease in the selected market return would result in a significantly higher or lower fair value measurement, respectively; (2) a significant increase or decrease in the market yield would result in a significantly lower or higher fair value measurement, respectively; and (3) a significant increase or decrease in the selected multiple would result in a significantly higher or lower fair value measurement, respectively.

During the nine months ended December 31, 2019, the Company transferred these investments for an agreed amount of cash of $15,750 to a Partnership that is a Variable Interest Entity (“VIE”) of which the Company is the general partner but does not consolidate as the Company is not the primary beneficiary. Due to continuing involvement with these assets at the Partnership, the Company accounted for this transfer as a secured financing as it has not met the criteria in ASC 860, “Transfers and Servicing”, to qualify as a sale and therefore has recorded a financial liability for the secured financing which is included in other liabilities in the Condensed Consolidated Balance Sheets. The cash received was recorded as secured financing in financing activities in the Condensed Consolidated Statements of Cash Flows. As of December 31, 2019, all other investments were pledged as collateral on the Company’s secured financing.

The Company accounts for this financial liability at fair value under the fair value option. The primary reason for electing the fair value option is to mitigate volatility in earnings from using different measurement attributes. The significant input to the fair value of the secured financing is the fair value of the other investments delivered as collateral. As of December 31, 2019, the secured financing had a fair value of $16,395 and an amortized cost of $14,186. The fair value of the secured financing is estimated using Level 3 inputs with the significant input being the fair value of the other investments utilized as collateral as shown above.

The Company recognized a gain of $838 and $1,269 on other investments during the three and nine months ended December 31, 2019, respectively, and a loss of $838 and $1,973 on the secured financing liability during the three and nine months ended December 31, 2019, respectively, that are recorded in other non-operating loss.

Investments valued under the measurement alternative

On July 1, 2019, the previously announced sale of an entity in which the Company held an investment closed. The Company received gross proceeds of $6,419 and recorded a gain of approximately $4,973 in connection with the transaction during the nine months ended December 31, 2019.