HAMILTON LANE INCORPORATED REPORTS THIRD QUARTER FISCAL 2024 RESULTS, WITH MANAGEMENT & ADVISORY FEES GROWING BY 17% AND ASSETS UNDER MANAGEMENT GROWING BY 12% YEAR-OVER-YEAR
CONSHOHOCKEN, PENN. – February 6, 2024 – Leading private markets asset management firm Hamilton Lane Incorporated (Nasdaq: HLNE) today reported its results for the third fiscal quarter ended December 31, 2023.
THIRD QUARTER FISCAL 2024 HIGHLIGHTS
•Assets under management – Total assets under management of $120.0 billion grew 12% year-over-year. Fee-earning assets under management increased 15% to $63.1 billion over the same period.
•Revenue – Management and advisory fees of $113.6 million for the quarter represent growth of 17% versus the prior year period.
•Carried Interest – Unrealized carried interest balance of approximately $1.1 billion was up 18% versus the prior year period.
•Earnings per share – GAAP EPS of $0.51 on $19.5 million of GAAP net income for the quarter.
•Dividend – Declared a quarterly dividend of $0.445 per share of Class A common stock to record holders at the close of business on March 15, 2024 that will be paid on April 4, 2024. The target full-year dividend of $1.78 represents an 11% increase from the prior fiscal year dividend.
Hamilton Lane issued a full detailed presentation of its third quarter fiscal 2024 results, which can be accessed by clicking here.
Hamilton Lane Co-CEO Erik Hirsch commented: "Our commitment to excellence, innovation, and growth in the private markets has resulted in another strong quarter for Hamilton Lane. Calendar 2023 was a tremendous year for the firm across our customized separate accounts, specialized funds and tech partnerships, and we look forward to what lies ahead for 2024.”
Conference Call
Hamilton Lane will discuss third quarter fiscal 2024 results in a webcast and conference call today, Tuesday, February 6, 2024, at 11:00 a.m. Eastern Time.
For access to the live event via the webcast, visit Hamilton Lane's Shareholders website by clicking here at least 15 minutes prior to the start of the call. This feature will be in listen-only mode.
A replay of the webcast will be available approximately two hours after the live broadcast for a period of one year and can be accessed in the same manner as the live webcast at the Shareholders page of Hamilton Lane’s website.
About Hamilton Lane
Hamilton Lane (Nasdaq: HLNE) is one of the largest private markets investment firms globally, providing innovative solutions to institutional and private wealth investors around the world. Dedicated exclusively to private markets investing for more than 30 years, the firm currently employs nearly 700 professionals operating in offices throughout North America, Europe, Asia Pacific and the Middle East. Hamilton Lane has $902.8 billion in assets under management and supervision, composed of $120.0 billion in discretionary assets and $782.9 billion in non-discretionary assets, as of December 31, 2023. Hamilton Lane specializes in building flexible investment programs that provide clients access to the full spectrum of private markets strategies, sectors and geographies. For more information, please visit www.hamiltonlane.com or follow Hamilton Lane on LinkedIn: https://www.linkedin.com/company/hamilton-lane/.
Forward-Looking Statements
Some of the statements in this release may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 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, competition in our industry, 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 fund commitments; our exposure and that of our clients and investors to the credit risks of financial institutions at which we and they hold accounts; our ability to comply with investment guidelines set by our clients; our ability to successfully integrate acquired businesses with ours; our ability to manage risks associated with introducing new types of investment structures, products or services or entering into strategic partnerships; our ability to manage redemption or repurchase rights in certain of our funds; our ability to manage, identify and anticipate risks we face; our ability to manage the effects of events outside of our control; and our ability to receive distributions from Hamilton Lane Advisors, L.L.C. 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 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, 2023 and in our subsequent reports filed from time to time with the
Securities and Exchange Commission. The forward-looking statements included in this release are made only as of the date hereof. 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.
Shareholder Contact
John Oh
joh@hamiltonlane.com
+1 610 617 6026
Media Contact
Kate McGann
kmcgann@hamiltonlane.com
+1 240 888 4078
Fiscal Year 2024 Third Quarter Results February 6, 2024
2Hamilton Lane | Global Leader in the Private Markets Juan Delgado-Moreira Co-CEO Today's Speakers Erik Hirsch Co-CEO Jeff Armbrister Chief Financial Officer John Oh Head of Shareholder Relations
3Hamilton Lane | Global Leader in the Private Markets Business Performance Financial Results Dividend • Assets under management and fee-earning assets under management were $120 billion and $63 billion, respectively, as of December 31, 2023, increases of 12% and 15%, respectively, compared to December 31, 2022 • Management and advisory fees increased 19% compared to the nine months ended December 31, 2022 USD in millions except per share amounts Q3 FY24 QTD Q3 FY24 YTD vs. Q3 FY23 YTD Management and advisory fees $113.6 $328.2 19 % GAAP net income $19.5 $92.5 19 % GAAP EPS $0.51 $2.43 11 % Adjusted net income1 $38.4 $137.0 7 % Non-GAAP EPS1 $0.71 $2.54 7 % Fee Related Earnings1 $45.3 $137.3 16 % Adjusted EBITDA1 $58.2 $181.4 (11) % • Declared a quarterly dividend of $0.445 per share of Class A common stock to record holders at the close of business on March 15, 2024 1Adjusted net income, non-GAAP earnings per share, Fee Related Earnings and Adjusted EBITDA are non-GAAP financial measures. For the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures and for the reasons we believe the non-GAAP measures provide useful information, see pages 20 and 21 of this presentation. Period Highlights
4Hamilton Lane | Global Leader in the Private Markets Total Assets Under Management/Advisement ($B) Total AUA Total AUM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $0 $200 $400 $600 $800 $1,000 Y-o-Y Growth AUM: 12 % AUA: 8 % $903B AUM & AUA 1 CAGR: 19% $6 $7 $11 $13 $16 $19 $22 $24 $30 $32 $35 $40 $50 $59 $66 $76 $98 $108 $36 $51 $77 $79 $95 $81 $129 $147 $147 $189 $205 $292 $374 $410 $422 $581 $753 $724 $783 $120 Growing Asset Footprint & Influence 1Data as of calendar year end 12/31 unless otherwise noted. Numbers may not tie due to rounding.
5Hamilton Lane | Global Leader in the Private Markets Y-o-Y Drivers of Growth Total Fee-Earning Assets Under Management ($B) $22 $25 $26 $31 $35 $33 $37 $11 $14 $16 $18 $23 $22 $26 Customized Separate Accounts Specialized Funds Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Dec-22 Dec-23 $0 $10 $20 $30 $40 $50 $60 $70 Fee-Earning AUM growth continues and annual fee rates are stable CAGR: 14% Total Management Fee Revenues as a % of Average FEAUM *Numbers may not tie due to rounding Customized Separate Accounts: • New client wins • Client re-ups Specialized Funds: • Closed 2nd impact fund and 5th direct equity fund • Fundraising 6th secondary fund, 8th credit-oriented fund, 2nd infrastructure fund, and evergreen funds .56% $42 $55 $57 $34 $39 $49 $63 Fee-Earning AUM Driving Revenues .60% .56% .59% .59% .62%
6Hamilton Lane | Global Leader in the Private Markets Customized Separate Accounts Specialized Funds Advisory Services Diverse mix of existing and prospective clients seeking to further or establish relationships with Hamilton Lane • $3.8B year-over-year increase in FEAUM • +80% of our gross contributions during the last 12 months came from existing clients AUM AUM & AUA Drivers AUA Select funds in market: • Secondary fund • Credit-oriented fund • Infrastructure fund • Evergreen funds • $4.4B year-over-year increase in FEAUM • Closings during Q3 FY24: ◦ Secondary fund: $486M Typically larger clients with wide-ranging mandates which include technology-driven reporting, monitoring and analytics services and consulting services; opportunity set continues to be robust • $59B year-over-year increase in AUA
Financial Highlights
8Hamilton Lane | Global Leader in the Private Markets U S D in M ill io ns $416 $377 Q3 FY23 Q3 FY24 U S D in M ill io ns $140 $49 Q3 FY23 Q3 FY24 U S D in M ill io ns $276 $328 Q3 FY23 Q3 FY24 Management and Advisory Fees Incentive Fees Total Revenues YTD YTD Y-o-Y Change: 19% YTD Y-o-Y Change: (9)% Y-o-Y Change: (65)% • Recurring management and advisory fees represented an average of 85% of total revenues over the past five fiscal years • Y-o-Y increase of 19% • $6.1 million in retroactive fees from our latest secondary fund in the quarter • Incentive fees derived from a highly diversified pool of assets and funds • Unrealized carried interest of $1.1 billion as of 12/31/23 diversified across 3,000+ assets and over 90 funds • Timing of realizations unpredictable • Total revenues decreased by 9%, driven by incentive fees, while management and advisory fees increased 19% U S D in M ill io ns $195 $372 FY18 FY23 Long-Term Growth U S D in M ill io ns $49 $157 FY18 FY23 Long-Term Growth CAGR: 14% U S D in M ill io ns $244 $529 FY18 FY23 Long-Term Growth CAGR: 17% CAGR: 26% Consolidated Revenue Strong growth across management and advisory fees
9Hamilton Lane | Global Leader in the Private Markets Period Ending V eh ic le s U S D in M illions Unrealized Carried Interest $1,064 $952 $1,126 88 91 99 Unrealized Carried Interest Vehicles in Unrealized Carry Position Dec-21 Dec-22 Dec-23 0 20 40 60 80 100 $0 $250 $500 $750 $1,000 $1,250 $1,500 Unrealized Carry by Age < 5 years 42% 5-8 years 37% 8-12 years 17% > 12 years 4% Unrealized Carried Interest
10Hamilton Lane | Global Leader in the Private Markets U S D in M ill io ns $17 $109 FY18 FY23 Net Income Attributable to HLI Adjusted EBITDA1 Fee Related Earnings1 U S D in M ill io ns $205 $181 Q3 FY23 Q3 FY24 U S D in M ill io ns $78 $92 Q3 FY23 Q3 FY24 U S D in M ill io ns $133 $260 FY18 FY23 U S D in M ill io ns $118 $137 Q3 FY23 Q3 FY24 U S D in M ill io ns $81 $159 FY18 FY23 Y-o-Y Change: 19% 1Adjusted EBITDA and Fee Related Earnings are non-GAAP financial measures. For the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures and for the reasons we believe the non-GAAP measures provide useful information, see pages 20 and 21 of this presentation. Y-o-Y Change: (11)% Y-o-Y Change: 16% CAGR: 14% CAGR: 14% Consolidated Earnings Stable long-term growth YTD YTD YTD Long-Term Growth Long-Term Growth Long-Term Growth • $20M in net income attributable to HLI for the quarter • Y-o-Y decrease of 11% driven by lower incentive fees • Y-o-Y growth of 16% • Long-term double digit growth in Fee Related Earnings
11Hamilton Lane | Global Leader in the Private Markets U S D in M ill io ns Investments $154 $208 $374 $514 $588 $604 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Dec-23 $0 $100 $200 $300 $400 $500 $600 $700 • For 12/31/23, the total investment balance consisted primarily of: ◦ ~$392M in investments in our funds ◦ ~$212M in technology related and other investments • Modest leverage • $197M of debt as of 12/31/23 U S D in M ill io ns Leverage $199 $214 $197 Dec-22 Mar-23 Dec-23 $0 $50 $100 $150 $200 $250 Other Key Items Strong balance sheet with investments in our own products and a modest amount of leverage...
Appendix
13Hamilton Lane | Global Leader in the Private Markets Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands except share and per share amounts) 2022 2023 % Change 2022 2023 % Change Management and advisory fees $97,355 $113,641 17 % $276,182 $328,232 19 % Incentive fees 24,075 11,623 (52) % 132,835 48,945 (63) % Consolidated variable interest entities related: Incentive fees 5,644 — (100) % 6,948 — (100) % Total revenues 127,074 125,264 (1) % 415,965 377,177 (9) % Compensation and benefits 45,676 49,706 9 % 158,235 139,738 (12) % General, administrative and other 22,717 24,152 6 % 66,066 74,908 13 % Consolidated variable interest entities related: General, administrative and other 309 12 (96) % 941 600 (36) % Total expenses 68,702 73,870 8 % 225,242 215,246 (4) % Equity in income (loss) of investees 650 (46) (107) % (7,493) 20,071 N/A Interest expense (2,419) (2,748) 14 % (6,027) (8,381) 39 % Interest income 442 1,500 239 % 839 3,536 321 % Non-operating loss (27,960) (8) (100) % (11,878) (989) (92) % Consolidated variable interest entities related: Equity in income of investees 389 240 (38) % 1,030 660 (36) % Unrealized gain 2,087 — (100) % 4,333 3,034 (30) % Interest expense — — N/A — (6) N/A Interest income 2,111 — (100) % 2,989 4,581 53 % Total other income (expense) (24,700) (1,062) (96) % (16,207) 22,506 (239) % Income before income taxes 33,672 50,332 49 % 174,516 184,437 6 % Income tax expense 11,788 15,800 34 % 38,766 34,055 (12) % Net income 21,884 34,532 58 % 135,750 150,382 11 % Less: Income attributable to non-controlling interests in general partnerships 422 82 (81) % 773 171 (78) % Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 9,146 14,944 63 % 51,326 52,733 3 % Less: Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. 2,647 — (100) % 5,617 — (100) % Less: Income attributable to non-controlling interests in consolidated funds — — N/A — 4,980 N/A Net income attributable to Hamilton Lane Incorporated $9,669 $19,506 102 % $78,034 $92,498 19 % Basic earnings per share of Class A common stock $0.32 $0.52 63 % $2.21 $2.45 11 % Diluted earnings per share of Class A Common stock $0.31 $0.51 65 % $2.19 $2.43 11 % Weighted-average shares of Class A common stock outstanding - basic 37,025,416 37,736,012 37,004,657 37,720,724 Weighted-average shares of Class A common stock outstanding - diluted 53,769,379 53,987,555 53,733,521 53,932,804 Condensed Consolidated Statements of Income (Unaudited)
14Hamilton Lane | Global Leader in the Private Markets 1 Adjusted EBITDA and Non-GAAP earnings per share are non-GAAP financial measures. For the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures, see page 20. 2 Incentive fee related compensation includes incentive fee compensation expense and bonus related to carried interest that is classified as base compensation. 3 Represents corporate income taxes at our estimated statutory tax rate of 23.6% and 23.9% for the three and nine month periods ended December 31, 2023 and 2022, respectively, applied to adjusted pre-tax net income. The 23.6% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.6%. The 23.9% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.9%. Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands except share and per share amounts) 2022 2023 % Change 2022 2023 % Change Adjusted EBITDA1 Management and advisory fees $97,355 $113,641 17 % $276,182 $328,232 19 % Revenue related to consolidated funds — — N/A — 394 N/A Total expenses 68,702 73,870 8 % 225,242 215,246 (4) % Less: Incentive fee related compensation2 (14,001) (5,521) (61) % (66,254) (23,249) (65) % Consolidated VIE related general, administrative and other expenses (278) — N/A (846) (566) (33) % Non-operating income related compensation 1,413 — (100) % (54) (59) 9 % Management fee related expenses 55,836 68,349 22 % 158,088 191,372 21 % Fee Related Earnings $41,519 $45,292 9 % $118,094 $137,254 16 % Fee Related Earnings Margin 43 % 40 % 43 % 42 % Incentive fees 29,719 11,623 (61) % 139,783 48,945 (65) % Incentive fees attributable to non-controlling interests (243) — N/A (302) — N/A Incentive fee related compensation2 (14,001) (5,521) (61) % (66,254) (23,249) (65) % Non-operating income related compensation 1,413 — (100) % (54) (59) 9 % Interest income 442 1,500 239 % 839 3,536 321 % Equity-based compensation 2,834 3,264 15 % 6,816 9,227 35 % Depreciation and amortization 2,022 2,037 1 % 5,600 5,774 3 % Adjusted EBITDA $63,705 $58,195 (9) % $204,522 $181,428 (11) % Adjusted EBITDA Margin 50 % 46 % 49 % 48 % Non-GAAP earnings per share1 Net income attributable to Hamilton Lane Incorporated $9,669 $19,506 102 % $78,034 $92,498 19 % Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 9,146 14,944 63 % 51,326 52,733 3 % Income tax expense 11,788 15,800 34 % 38,766 34,055 (12) % Adjusted pre-tax net income 30,603 50,250 64 % 168,126 179,286 7 % Adjusted income taxes3 (7,314) (11,859) 62 % (40,182) (42,312) 5 % Adjusted net income $23,289 $38,391 65 % $127,944 $136,974 7 % Adjusted shares outstanding 53,769,379 53,987,555 53,733,521 53,932,804 Non-GAAP earnings per share $0.43 $0.71 65 % $2.38 $2.54 7 % Non-GAAP Financial Measures
15Hamilton Lane | Global Leader in the Private Markets Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2022 2023 % Change 2022 2023 % Change Management and advisory fees Specialized funds $53,299 $64,871 22 % $144,099 $184,972 28 % Customized separate accounts 29,571 32,943 11 % 87,329 96,702 11 % Advisory 6,613 6,085 (8) % 19,073 18,392 (4) % Reporting and other 6,720 6,479 (4) % 19,170 18,298 (5) % Distribution management 596 1,512 154 % 1,863 3,979 114 % Fund reimbursement revenue 556 1,751 215 % 4,648 5,889 27 % Total management and advisory fees $97,355 $113,641 17 % $276,182 $328,232 19 % Reporting and other: 9% Customized separate accounts: 29% Specialized funds: 56% Advisory: 6% Nine Months Ended December 31, 2023 Management and Advisory Fees
16Hamilton Lane | Global Leader in the Private Markets Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2022 2023 % Change 2022 2023 % Change Incentive fees Direct equity funds $5,644 $— (100) % $58,104 $3,444 (94) % Secondary funds 447 — (100) % 27,393 12,046 (56) % Direct credit funds 6 — (100) % 7,638 4,725 (38) % Evergreen funds 3,072 6,869 124 % 4,069 9,874 143 % Other specialized funds 5,154 3,673 (29) % 12,559 13,115 4 % Customized separate accounts 15,396 1,081 (93) % 30,020 5,741 (81) % Incentive fees $29,719 $11,623 (61) % $139,783 $48,945 (65) % As of December 31, 2022 September 30, 2023 December 31, 2023 YoY % Change QoQ % Change Allocated carried interest Secondary Fund II $385 $199 $130 (66) % (35) % Secondary Fund III 31,285 28,369 28,370 (9) % 0 % Secondary Fund IV 126,943 121,113 117,690 (7) % (3) % Secondary Fund V 142,538 153,399 147,372 3 % (4) % Secondary Fund VI 1,730 14,855 27,436 1,486 % 85 % Co-investment Fund II 15,436 16,679 17,143 11 % 3 % Co-investment Fund III 54,964 49,930 40,241 (27) % (19) % Co-investment Fund IV 103,252 131,502 132,875 29 % 1 % Equity Opportunities Fund V 4,678 28,270 24,779 430 % (12) % Evergreen funds 66,030 128,946 120,290 82 % (7) % Other specialized funds 109,042 117,390 117,504 8 % 0 % Customized separate accounts 295,905 360,099 351,848 19 % (2) % Total allocated carried interest $952,188 $1,150,751 $1,125,678 18 % (2) % Incentive Fees
17Hamilton Lane | Global Leader in the Private Markets (Dollars in millions) December 31, 2022 September 30, 2023 December 31, 2023 YoY % Change QoQ % Change Assets under management / advisement Assets under management $107,530 $119,182 $119,953 12 % 1 % Assets under advisement 724,364 734,804 782,892 8 % 7 % Total assets under management /advisement $831,894 $853,986 $902,845 9 % 6 % Fee-earning assets under management Customized separate accounts Balance, beginning of period $32,333 $35,850 $36,234 12 % 1 % Contributions 1,432 1,258 1,743 22 % 39 % Distributions (576) (921) (1,000) 74 % 9 % Foreign exchange, market value and other (100) 47 (53) (47) % (213) % Balance, end of period $33,089 $36,234 $36,924 12 % 2 % Specialized funds Balance, beginning of period $20,354 $23,815 $25,187 24 % 6 % Contributions 1,472 1,614 1,273 (14) % (21) % Distributions (213) (297) (370) 74 % 25 % Foreign exchange, market value and other 163 55 85 (48) % 55 % Balance, end of period $21,776 $25,187 $26,175 20 % 4 % Total Balance, beginning of period $52,687 $59,665 $61,421 17 % 3 % Contributions 2,904 2,872 3,016 4 % 5 % Distributions (789) (1,218) (1,370) 74 % 12 % Foreign exchange, market value and other 63 102 32 (49) % (69) % Balance, end of period $54,865 $61,421 $63,099 15 % 3 % Assets Under Management
18Hamilton Lane | Global Leader in the Private Markets (Dollars in thousands) March 31, 2023 December 31, 2023 Assets Cash and cash equivalents $99,686 $164,450 Restricted cash 4,804 4,985 Fees receivable 47,140 67,751 Prepaid expenses 9,817 9,418 Due from related parties 7,186 9,969 Furniture, fixtures and equipment, net 28,425 33,389 Lease right-of-use assets, net 62,327 63,432 Investments 530,921 587,771 Deferred income taxes 233,912 225,922 Other assets 46,784 25,830 Assets of consolidated variable interest entities: Cash and cash equivalents 12,062 — Investments 57,044 15,855 Other assets 435 52 Total assets $1,140,543 $1,208,824 Liabilities and equity Accounts payable $4,559 $3,313 Accrued compensation and benefits 24,190 58,048 Accrued members' distributions 15,723 21,216 Accrued dividend 15,049 16,793 Debt 213,533 196,752 Payable to related parties pursuant to tax receivable agreement 174,702 173,818 Lease liabilities 78,817 80,373 Other liabilities (includes $14,228 and $13,123 at fair value) 32,856 34,403 Liabilities of consolidated variable interest entities: Other liabilities 6,922 2 Total liabilities 566,351 584,718 Total equity 574,192 624,106 Total liabilities and equity $1,140,543 $1,208,824 Condensed Consolidated Balance Sheets (Unaudited)
19Hamilton Lane | Global Leader in the Private Markets Nine Months Ended December 31, (Dollars in thousands) 2022 2023 Operating activities Net income $135,750 $150,382 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,600 5,774 Change in deferred income taxes 14,892 7,990 Change in payable to related parties pursuant to tax receivable agreement (1,105) (884) Equity-based compensation 6,816 9,227 Equity in loss (income) of investees 7,493 (20,071) Net realized (gain) loss on sale of investments (9,783) 288 Fair value adjustment of other investments (18,578) 45 Proceeds received from partnerships 11,877 22,160 Non-cash lease expense 5,370 6,796 Gain on sale of intangible asset 2,771 — Impairment of other investment 43,289 — Other (2,864) 511 Changes in operating assets and liabilities 16,088 21,142 Consolidated variable interest entities related (4,245) (104,220) Net cash provided by operating activities $213,371 $99,140 Investing activities Purchase of furniture, fixtures and equipment $(3,261) $(9,463) Cash paid for acquisition of business (1,500) — Loans to investees (2,535) — Purchase of investments (34,125) (6,352) Proceeds from sale of investments 10,000 1,343 Distributions from investments 1,406 — Proceeds from sale of intangible assets — 2,562 Distributions received from Partnerships 15,990 10,730 Contributions to Partnerships (63,364) (34,985) Consolidated variable interest entities related 278,954 (57,832) Net cash provided by (used in) investing activities $201,565 $(93,997) Financing activities Borrowings of debt $31,682 $— Repayments of debt (3,873) (1,875) Draw-down on revolver 25,000 10,000 Repayment of revolver (25,000) (25,000) Repurchase of Class A shares for employee tax withholding (162) (269) Proceeds received from issuance of shares under Employee Share Purchase Plan 1,441 1,666 Dividends paid (42,550) (48,613) Members' distributions paid (45,828) (31,817) Consolidated variable interest entities related (278,748) 143,648 Net cash (used in) provided by financing activities $(338,038) $47,740 Increase in cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities 76,898 52,883 Cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at beginning of the period 76,197 116,552 Cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at end of the period $153,095 $169,435 Condensed Consolidated Statements of Cash Flows (Unaudited)
20Hamilton Lane | Global Leader in the Private Markets Reconciliation from Net Income Year Ended March 31, Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands except share and per share amounts) 2018 2023 2022 2023 2022 2023 Net income attributable to Hamilton Lane Incorporated $17,341 $109,120 $9,669 $19,506 $78,034 $92,498 Income attributable to non-controlling interests in general partnerships 2,448 986 422 82 773 171 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 86,508 71,027 9,146 14,944 51,326 52,733 Income attributable to non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. — 5,617 2,647 — 5,617 — Income attributable to non-controlling interests in consolidated funds — 435 — — — 4,980 Incentive fees (49,003) (156,879) (29,719) (11,623) (139,783) (48,945) Incentive fee related compensation1 3,874 74,374 14,001 5,521 66,254 23,249 Consolidated VIE related general, administrative and other expenses — 846 278 — 846 566 Revenue related to consolidated funds — 61 — — — 394 Non-operating income related compensation — 367 (1,413) — 54 59 Interest income (528) (5,114) (2,553) (1,500) (3,829) (8,117) Interest expense 5,989 8,617 2,419 2,748 6,027 8,387 Income tax expense 33,333 55,425 11,788 15,800 38,766 34,055 Equity in (income) loss of investees (17,102) (6,543) (1,039) (194) 6,463 (20,731) Contingent compensation related to acquisition 3,399 — — — — — Non-operating (income) loss (5,036) 470 25,873 8 7,546 (2,045) Fee Related Earnings $81,223 $158,809 $41,519 $45,292 $118,094 $137,254 Depreciation and amortization 1,891 7,442 2,022 2,037 5,600 5,774 Equity-based compensation 5,544 9,950 2,834 3,264 6,816 9,227 Incentive fees 49,003 156,879 29,719 11,623 139,783 48,945 Incentive fees attributable to non-controlling interests (1,729) (302) (243) — (302) — Incentive fee related compensation1 (3,874) (74,374) (14,001) (5,521) (66,254) (23,249) Non-operating income related compensation — (367) 1,413 — (54) (59) Interest income 528 1,789 442 1,500 839 3,536 Adjusted EBITDA $132,586 $259,826 $63,705 $58,195 $204,522 $181,428 Non-GAAP earnings per share reconciliation Net income attributable to Hamilton Lane Incorporated $9,669 $19,506 $78,034 $92,498 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 9,146 14,944 51,326 52,733 Income tax expense 11,788 15,800 38,766 34,055 Adjusted pre-tax net income 30,603 50,250 168,126 179,286 Adjusted income taxes2 (7,314) (11,859) (40,182) (42,312) Adjusted net income $23,289 $38,391 $127,944 $136,974 Adjusted shares outstanding 53,769,379 53,987,555 53,733,521 53,932,804 Non-GAAP earnings per share $0.43 $0.71 $2.38 $2.54 1 Incentive fee related compensation includes incentive fee compensation expense and bonus related to carried interest that is classified as base compensation. 2 Represents corporate income taxes at our estimated statutory tax rate of 23.6% and 23.9% for the three and nine month periods ended December 31, 2023 and 2022, respectively, applied to adjusted pre- tax net income. The 23.6% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.6%. The 23.9% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.9%. Non-GAAP Reconciliation
21Hamilton Lane | Global Leader in the Private Markets Adjusted EBITDA is an internal measure of profitability. 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. Fee Related Earnings ("FRE") is used to highlight 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. 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 and excludes any impact of changes in carrying amount of our redeemable non-controlling interest. Adjusted shares outstanding for the three and nine months ended December 31, 2022 and 2023 and March 31, 2023 are equal to weighted-average shares of Class A common stock outstanding - diluted. We believe adjusted net income and non-GAAP earnings per share are useful to investors because they enable them to better evaluate total and per-share operating performance across reporting periods. Our assets under management ("AUM"), as presented in these materials, comprise the assets associated with our customized separate accounts and specialized funds. AUM does not include the assets associated with our distribution management services. We classify assets as AUM if we have full discretion over the investment decisions in an account. We calculate our AUM as the sum of: (1) the net asset value of our clients' and funds' underlying investments; (2) the unfunded commitments to our clients' and funds' underlying investments; and (3) the amounts authorized for us to invest on behalf of our clients and fund investors but not committed to an underlying investment. Management fee revenue is based on a variety of factors and is not linearly correlated with AUM. However, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business. Our assets under advisement ("AUA") comprise assets from clients for which we do not have full discretion to make investments in their account. We generally earn revenue on a fixed fee basis on our AUA client accounts for services including asset allocation, strategic planning, development of investment policies and guidelines, screening and recommending investments, monitoring and reporting on investments and investment manager review and due diligence. Advisory fees vary by client based on the amount of annual commitments, services provided and other factors. Since we earn annual fixed fees from the majority of our AUA clients, the growth in AUA from existing accounts does not have a material impact on our revenues. However, we view AUA growth as a meaningful benefit in terms of the amount of data we are able to collect and the degree of influence we have with fund managers. Fee-earning assets under management (Fee-earning "AUM" or "FEAUM") is a metric we use 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 that are generally derived from applying a certain percentage to the appropriate fee base. 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 of our customized separate accounts and specialized funds depending on the fee terms. The vast majority 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. Hamilton Lane Incorporated (or "HLI"), a Delaware corporation, was formed for the purpose of completing an initial public offering ("IPO") and related transactions in order to carry on the business of Hamilton Lane Advisors, L.L.C. ("HLA") as a publicly-traded entity. As of the closing of our IPO on March 6, 2017, HLI became the sole managing member of HLA. Terms
22Hamilton Lane | Global Leader in the Private Markets Some of the statements in this presentation may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 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, competition in our industry, 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 fund commitments; our exposure and that of our clients and investors to the credit risks of financial institutions at which we and they hold accounts; our ability to comply with investment guidelines set by our clients; our ability to successfully integrate acquired businesses with ours; our ability to manage risks associated with introducing new types of investment structures, products or services or entering into strategic partnerships; our ability to manage redemption or repurchase rights in certain of our funds; our ability to manage, identify and anticipate risks we face; our ability to manage the effects of events outside of our control; and our ability to receive distributions from Hamilton Lane Advisors, L.L.C. 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 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, 2023 and in our subsequent reports filed from time to time with the Securities and Exchange Commission. The forward-looking statements included in this presentation are made only as of the date presented. 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. Values appearing in this presentation that are whole numbers are rounded approximations. As of February 6, 2024 Disclosures