Attached files
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| 8-K - 8-K - Hamilton Lane INC | earningsrelease8-kq12018.htm |
Exhibit 99.1
HAMILTON LANE INCORPORATED REPORTS FIRST QUARTER FISCAL 2018 RESULTS
BALA CYNWYD, PENN. – August 8, 2017 – Leading private markets asset management firm Hamilton Lane Incorporated (NASDAQ: HLNE) today reported its results for the first quarter of fiscal year 2018, the period ended June 30, 2017.
Hamilton Lane CEO Mario Giannini commented: “Our business continues to be well-positioned to serve our clients’ growing needs within the private markets, as evidenced by year-over-year growth in each of our core offerings. Our ability to add new clients, grow existing client relationships and expand our product platform led to meaningful growth in both management and advisory fees during the quarter.
Throughout our first several months as a public company, we also continued to execute on opportunities to better serve our clients and to reach new clients, through continued global expansion and strategic initiatives in growing areas within the private markets. As we look forward, we believe that the strength in our core business together with the strategic enhancements we have made position the business nicely for continued growth.”
Hamilton Lane issued a full detailed presentation of its first quarter fiscal 2018 results, which can be viewed at http://ir.hamiltonlane.com.
Dividend
Hamilton Lane has declared a quarterly dividend of $0.175 per share of Class A common stock to record holders at the close of business on September 15, 2017. This dividend will be paid on October 2, 2017.
Conference Call
Hamilton Lane will discuss first quarter fiscal 2018 results in a webcast and conference call today, Tuesday, August 8, 2017, at 11:00 a.m. Eastern Time. The call will be broadcast live via a webcast, which may be accessed on Hamilton Lane’s Investor Relations website. The call may also be accessed by dialing 1-833-231-8267 inside the U.S., or 1-647-689-4112 for international callers. The conference ID is 56087236.
A replay of the webcast will be available on Hamilton Lane’s Investor Relations website 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 Hamilton Lane Investor Relations website.
About Hamilton Lane
Hamilton Lane (NASDAQ: HLNE) is a leading alternative investment management firm providing innovative private markets solutions to sophisticated investors around the world. Dedicated to private markets investing for 26 years, the firm currently employs more than 290 professionals operating in offices throughout the U.S., Europe, Asia-Pacific, Latin America and the Middle East. With nearly $360 billion in total assets under management and supervision as of June 30, 2017, Hamilton Lane offers a full range of investment products and services that enable clients to participate in the private markets asset class on a global and customized basis. For more information, please visit www.hamiltonlane.com or follow Hamilton Lane on Twitter: @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” and similar expressions are used 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, risk, 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; our ability to consummate planned acquisitions and successfully integrate the acquired business with ours; the time, expense and effort associated with being a newly public company; 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 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, 2017 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.
Investor Contact
Demetrius Sidberry
dsidberry@hamiltonlane.com
+1 610 617 6768
Media Contact
Kate McGann
kmcgann@hamiltonlane.com
+1 610 617 5841
Fiscal Year 2018 First Quarter Results
Earnings Presentation - August 8, 2017
Page 2
Today’s Speakers
Mario Giannini
Chief Executive Officer
Randy Stilman
Chief Financial Officer
Demetrius Sidberry
Head of Investor Relations
Erik Hirsch
Vice Chairman
Page 3
Period Highlights
• Total asset footprint (assets under management/advisement) reached a record amount of
$359 billion, growing 14% compared to June 30, 2016
• Assets under management and fee-earning assets under management were $46 billion
and $28 billion, respectively, as of June 30, 2017, increases of 17% and 12%, respectively,
compared to June 30, 2016
• Declared a quarterly dividend of $0.175 per share of Class A common stock to record
holders at the close of business on September 15, 2017
Business
Performance
Financial
Results
Dividend
USD in millions except per share amounts Q1 FY18 vs. Q1 FY17 vs. Q4 FY17
Management and advisory fees $51.7 38% 11%
GAAP net income $5.5 N/A1 N/M2
GAAP EPS $0.30 N/A1 N/M2
Non-GAAP EPS3 $0.33 N/A1 32%
Fee Related Earnings3 $23.8 50% 27%
Adjusted EBITDA3 $26.5 43% 27%
1 Figures not available as a result of the company going public after the stated period.
2 Figures based on a stub period post the IPO.
3 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, see pages 21 and 27 of the appendix.
Page 4
• Founded in 1991, we are one of the largest allocators of capital to private markets worldwide with nearly $360B of
AUM / AUA
• Over 290 professionals dedicated to the private markets (substantially all are stockholders)
• 14 offices in key markets globally
• ~350 sophisticated clients globally (in 35 countries)
• Significant proprietary databases and suite of analytical tools
• $49B of discretionary commitments since 2000
Leading, Global Private Markets Solutions Provider
We operate at the epicenter of a large, fast-growing and highly desirable asset class, helping a wide
array of investors around the world navigate, access and succeed in the private markets
~$46B
of AUM1
~$314B
of AUA1
Buyout Growth Equity R
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V enture Capital Co-Investment Seco
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at
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ou
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-Investm
ents
Se
co
nd
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y
Tr
an
sa
ct
io
n
s
Prim
ary Funds
Private Markets Funds
Private Companies
Investors/Limited
Partners (LPs)
1 As of 6/30/2017
Page 5
Deep Bench of Talent and Award-Winning Culture
Executive Management (7)
Investment
Team
(95)
Business
Development
(20)
Product
Management
(20)
Finance
(20)
IT
(20)
Legal &
Compliance
(20)
HR / Admin
(15)
Client
Services
(80)
Key Stats
• Over 290 employees globally
• ~70% of the team is less than 40 years of age
• Women compose ~40% of the employee base and ~30% of
all senior roles
Beyond the Business
• HL in Action – Volunteerism and Matching Gifts Program
• HL Wellness Committee
• Hamilton Lane matching gifts program
• HL Women’s Exchange
• HL Diversity & Inclusion Council
Awards
Widespread employee ownership
Source: Company data. Employee figures as of 6/30/2017
Page 6
Customized
Separate Accounts
Tailored solutions through
managed investment
accounts
Specialized Funds
Primaries, secondaries,
direct/co-investments, fund-
of-funds and white-label
products
Advisory Services
Partnering with large
institutions with in-house
resources to assist across
the complex landscape
Reporting,
Monitoring,
Data and Analytics
Customized, technology-
driven reporting, monitoring
& analytics services
Distribution
Management
Active portfolio
management of private
markets distributions
Our value proposition
What We Do for Our Clients
Key Business Highlights
Page 8
Key Topics
1
Opportunity Pipeline
2
Asset Growth
3
Geographic Expansion
4
Strategic Development
Page 9
Opportunity Pipeline1
Customized Separate
Accounts
Specialized
Funds
Advisory
Services
Diverse mix of existing and
prospective clients seeking to
further or establish relationship
with Hamilton Lane
Select funds in market:
• Co-Investment Fund
• Strategic Opportunities Fund
• Private Equity Fund of Funds
Typically larger clients with
wide-ranging mandates;
opportunity set continues to
be robust
Page 10
Growing Asset Footprint & Influence
$36 $51
$77 $79 $95 $81
$129 $147 $147
$189 $205
$292
$314
$6
$7
$11 $13
$16 $19
$22
$24 $30
$32
$35
$40
$46
$0
$50
$100
$150
$200
$250
$300
$350
$400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 6/30/17
Total AUA Total AUM
Total Assets Under Management/Advisement ($B)1
1 Data as of calendar year end 12/31 unless noted otherwise. Numbers may not tie due to rounding.
CAGR
: 21%
$359B
AUM & AUA
2
Q-o-Q Growth
AUA: 4%
AUM: 10%
Page 11
Fee-Earning AUM Driving Revenues
...and annual fee rates are stable
2
Drivers of Growth:
* Customized Separate Accounts:
• New client wins
• Client re-ups
Specialized Funds:
* Final Closes:
• Secondary Fund IV
• Strategic Opportunities 2017
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Jun-16 Jun-17
Customized Separate Accounts Specialized Funds
CAGR: 1
4%
Total Fee-Earning Assets Under Management ($B)1
$0
$5
$10
$15
$20
$25
$30
$35
$40
$11
$5
$16
$14
$5
$19
$16
$6
$22
$17
$7
$24
$18
$9
$27
$18
$9
$28
$17
$7
$25
12%
Y-o-Y Growth
0.58% 0.55% 0.56% 0.57% 0.65%20.51%
1 Data as of fiscal year end 3/31; unless otherwise noted
2 Reflects retroactive fees of $5.8M
Total Management Fee Revenues as a % of Average FEAUM
Page 12
Geographic Expansion3
Australia
Sydney
Munich
Germany Oregon
Portland
International United States
Page 13
On June 20, 2017, Hamilton Lane announced the acquisition of Real Asset Portfolio
Management LLC (“RAPM”)
Strategic Development - RAPM
Overview
• RAPM is an investment advisory firm focused exclusively on real assets
• Established in 2011 and headquartered in Portland, OR, RAPM manages and advises on approximately $4 billion
of real asset investments for institutional clients
• RAPM serves as a fiduciary to clients on investments related to fund manager selection, co-investment and
secondary transactions
• Services include portfolio construction, investment due diligence and other services
Strategic Rationale
• Adds to Hamilton Lane’s ability to address increasing client demand for extensive real assets capabilities, a
growing vertical within alternatives
• Expands Hamilton Lane’s real assets team by adding a highly regarded team in the real assets space that is a
strong cultural fit
• Adds to Hamilton Lane’s blue chip client roster
• Allows RAPM to leverage Hamilton Lane’s back-office capabilities and sales efforts
4
Financial Highlights
Page 15
Revenues continue to be driven primarily by management and advisory fees
Consolidated Revenues
• Represented an average of 93% of total revenues over the
past five fiscal years
• Y-o-Y growth of 38%; Q-o-Q growth of 11%
• Growth across all management and advisory fee offerings
• 83% Y-o-Y growth in specialized funds management fees
driven by $0.5B raised in Secondary Fund IV during the
three months ended June 30, 2017; final close resulted in
retroactive fees of $5.8M during the quarter
• Incentive fees derived from a highly diversified pool of
assets and funds
• Off balance sheet allocated carried interest of $266M as of
6/30/17 diversified across +3,000 assets and
~40 funds
• Total revenues increased by 33%, driven by growth across
core offerings
0
50
100
150
200
FY13 FY17Q1 FY17 Q1 FY18
$113
$173
Management and Advisory Fees
Incentive Fees
Total Revenues
$38 $52
Y-o-Y Growth: 38% CAGR: 11%
0
50
100
150
200
FY13 FY17Q1 FY17 Q1 FY18
$6 $7$2 $1
Y-o-Y Growth: (49%) CAGR: 4%
0
50
100
150
200
FY13 FY17Q1 FY17 Q1 FY18
$119
$180
$40 $53
Y-o-Y Growth: 33% CAGR: 11%
Long-Term GrowthQuarter
Long-Term GrowthQuarter
Long-Term GrowthQuarter
U
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in
M
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io
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U
S
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Page 16
Profitability stable and growing
Consolidated Earnings
• Y-o-Y growth of 43%; Q-o-Q growth of 27%
• Incremental margin gained during the quarter due to
retro fees
• $5M in net income attributable to HLI for the quarter
• No comparable measure in prior period as that was
before the Company’s IPO
• Y-o-Y growth of 50%; Q-o-Q growth of 27%
• Long-term double digit growth in Fee Related Earnings
1 Adjusted EBITDA and Fee Related Earnings are non-GAAP financial measures. For a reconciliation from GAAP financial measures to non-GAAP financial measures, see page 27 in Appendix
Adjusted EBITDA1
Fee Related Earnings1
U
S
D
in
M
ill
io
ns
Long-Term GrowthQuarter
U
S
D
in
M
ill
io
ns
FY13 FY17Q1 FY17 Q1 FY18
$55
$83
$19 $26
Y-o-Y Growth: 43% CAGR: 11%
Net Income Attributable to HLI
U
S
D
in
M
ill
io
ns
Long-Term GrowthQuarter
FY13 FY17Q1 FY17 Q1 FY18
N/A N/A$5 $1
Long-Term GrowthQuarter
FY13 FY17Q1 FY17 Q1 FY18
$47
$72
$16
$24
Y-o-Y Growth: 50% CAGR: 11%
Page 17
Strong balance sheet with investments in our own products and a modest amount
of leverage...
Other Key Items
• Vast majority of our investments are those made
alongside our clients
• For 6/30/17, the total investment balance consisted of
~$107M in equity method investments in our funds and
~$17M in technology related investments
• Senior secured term loan payable of $85.5M as of 6/30/17
$0
$30
$60
$90
$120
$150
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
$78
$92 $103 $103
$120
Jun-17
$124
Investments
0.0x
1.0x
2.0x
3.0x
4.0x
Jun-17
0.9x
Mar-17
1.0x
Gross Leverage Profile1
U
S
D
in
M
ill
io
ns
X T
T
M
A
dj
us
te
d
E
B
IT
D
A
1 Ratio of senior secured term loan payable to trailing twelve months Adjusted EBITDA. See page 28 for additional detail on calculation of gross leverage ratio.
Fiscal Year 2018 First Quarter Results
Earnings Presentation - August 8, 2017
Appendix
Page 20
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended,
(Dollars in thousands except share and per share amounts) June 30, 2016 March 31, 2017 June 30, 2017 YoY % Change QoQ % Change
Revenues
Management and advisory fees $37,583 $46,401 $51,684 38% 11%
Incentive fees 1,983 278 1,017 (49)% 266%
Total revenues 39,566 46,679 52,701 33% 13%
Expenses
Compensation and benefits 15,936 18,955 19,962 25% 5%
General, administrative and other 6,770 8,664 8,458 25% (2)%
Total expenses 22,706 27,619 28,420 25% 3%
Other income (expense)
Equity in income of investees 1,966 3,919 5,919 201% 51%
Interest expense (2,902) (5,785) (1,106) (62)% (81)%
Interest income 66 161 316 379% 96%
Other non-operating income (loss) - (149) (106) N/A (29)%
Total other income (expense) (870) (1,854) 5,023 N/A N/A
Income before income taxes 15,990 17,206 29,304 83% 70%
Income tax expense (benefit) (401) 580 3,692 N/A 537%
Net income 16,391 16,626 25,612 56% 54%
Less: Income attributable to non-controlling interests in general partnerships 545 168 898 65% 435%
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 15,846 15,846 19,250 21% 21%
Net income attributable to Hamilton Lane Incorporated $- $612 $5,464 N/A 793%
Basic earnings per share of Class A common stock1 $0.03 $0.30
Diluted earnings per share of Class A common stock1 $0.03 $0.30
Weighted-average shares of Class A common stock outstanding - basic 17,788,363 17,981,601
Weighted-average shares of Class A common stock outstanding - diluted 18,341,079 18,459,415
1 There were no shares of Class A common stock outstanding prior to March 6, 2017; therefore, no earnings per share information has been presented for any period prior to that date. The earnings per
share for the three months ended March 31, 2017 is for the period from March 6, 2017 through March 31, 2017, the period following our initial public offering.
Page 21
Non-GAAP Financial Measures
Three Months Ended,
(Dollars in thousands except share and per share amounts) June 30, 2016 March 31, 2017 June 30, 2017 YoY % Change QoQ % Change
Adjusted EBITDA
Management and advisory fees $37,583 $46,401 $51,684 38% 11%
Total expenses 22,706 27,619 28,420 25% 3%
Less:
Incentive fee related compensation1 (974) 88 (499) (49)% (667)%
Management fee related expenses 21,732 27,707 27,921 28% 1%
Fee Related Earnings $15,851 $18,694 $23,763 50% 27%
Incentive fees 1,983 278 1,017 (49)% 266%
Incentive fee related compensation1 (974) 88 (499) (49)% (667)%
Interest income 66 161 316 379% 96%
Equity-based compensation 1,094 1,175 1,416 29% 21%
Depreciation and amortization 487 475 437 (10)% (8)%
Adjusted EBITDA $18,507 $20,871 $26,450 43% 27%
Adjusted EBITDA margin 47% 45% 50%
Non-GAAP earnings per share
Net income attributable to Hamilton Lane Incorporated $612 $5,464
Income attributable to non-controlling interests in general partnerships 168 898
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 15,846 19,250
Income tax expense 580 3,692
IPO related expenses2 1,935 -
Write-off of deferred financing costs3 3,359 -
Adjusted pre-tax net income 22,500 29,304
Adjusted income taxes4 (9,054) (11,792)
Adjusted net income $13,446 $17,512
Adjusted shares5 52,779,748 52,898,084
Non-GAAP earnings per share $0.25 $0.33
1 Incentive fee related compensation includes incentive fee compensation expense as well as bonus and other revenue sharing allocated to carried interest classified as base compensation.
2 Represents accrual of one-time payments to induce members of HLA to exchange their HLA units for HLI Class A common stock in the reorganization in connection with the IPO.
3 Represents write-down of unamortized discount and debt issuance costs due to the $160 million paydown of outstanding indebtedness under the Term Loan with proceeds from the IPO.
4 Represents corporate income taxes at assumed effective tax rate of 40.24% applied to adjusted pre-tax net income. The 40.24% is based on a federal tax statutory rate of 35.00% and a combined state
income tax rate net of federal benefits of 5.24%.
5 Assumes the full exchange of HLA Class B and Class C units in HLA for HLI Class A common stock.
See page 27 for additional reconciliation to GAAP financial measures
Page 22
Management and Advisory Fees
Three Months Ended,
(Dollars in thousands) June 30, 2016 March 31, 2017 June 30, 2017 YoY % Change QoQ % Change
Management and advisory fees
Customized separate accounts $17,504 $18,467 $18,784 7% 2%
Specialized funds 13,752 21,268 25,206 83% 19%
Advisory and reporting 5,767 6,118 6,650 15% 9%
Distribution management 560 548 1,044 86% 91%
Total management and advisory fees $37,583 $46,401 $51,684 38% 11%
Specialized
funds
49%
Customized
separate
accounts
36%
Advisory
and reporting
13%
Distribution
management
2%
Three Months Ended June 30, 2017
Page 23
Incentive Fees
(Dollars in thousands)
Three Months Ended,
June 30, 2016 March 31, 2017 June 30, 2017 YoY % Change QoQ % Change
Incentive fees
Secondary Fund II $900 $183 $638 (29)% 249%
Other specialized funds 569 28 (40) (107)% (243)%
Customized separate accounts 514 67 419 (18)% 525%
Incentive fees $1,983 $278 $1,017 (49)% 266%
As of
June 30, 2016 March 31, 2017 June 30, 2017 YoY % Change QoQ % Change
Allocated carried interest
Secondary Fund II $9,004 $8,476 $7,513 (17)% (11)%
Secondary Fund III 21,357 29,844 30,306 42% 2%
Secondary Fund IV 578 3,041 4,730 718% 56%
Co-investment Fund I 1,703 715 1,050 (38)% 47%
Co-investment Fund II 88,804 97,313 106,208 20% 9%
Co-investment Fund III - 14,070 20,031 N/A 42%
Other specialized funds 9,516 14,632 18,614 96% 27%
Customized separate accounts 50,105 68,766 77,922 56% 13%
Total allocated carried interest $181,067 $236,857 $266,374 47% 12%
Page 24
Assets Under Management
Three Months Ended,
(Dollars in millions) June 30, 2016 March 31, 2017 June 30, 2017 YoY % Change QoQ % Change
Assets under management / advisement
Assets under management $39,032 $41,794 $45,788 17% 10%
Assets under advisement 276,682 300,426 313,652 13% 4%
Total assets under management / advisement $315,714 $342,220 $359,440 14% 5%
Fee-earning assets under management
Customized separate accounts
Balance, beginning of period $16,976 $17,737 $18,028 6% 2%
Contributions 921 1,410 997 8% (29)%
Distributions (444) (1,142) (754) 70% (34)%
Foreign exchange, market value and other (87) 23 (85) (2)% (470)%
Balance, end of period $17,366 $18,028 $18,186 5% 1%
Specialized funds
Balance, beginning of period $7,019 $8,487 $8,793 25% 4%
Contributions 392 418 759 94% 82%
Distributions (20) (115) (113) 465% (2)%
Foreign exchange, market value and other 7 3 (2) (129)% (167)%
Balance, end of period $7,398 $8,793 $9,437 28% 7%
Total
Balance, beginning of period $23,995 $26,224 $26,821 12% 2%
Contributions 1,313 1,828 1,756 34% (4)%
Distributions (464) (1,257) (867) 87% (31)%
Foreign exchange, market value and other (80) 26 (87) 9% (435)%
Balance, end of period $24,764 $26,821 $27,623 12% 3%
Page 25
Condensed Consolidated Balance Sheets (Unaudited)
As of,
(Dollars in thousands except share and per share amounts) March 31, 2017 June 30, 2017
Assets
Cash and cash equivalents $32,286 $46,471
Restricted cash 1,849 1,857
Fees receivable 12,113 19,474
Prepaid expenses 2,593 2,719
Due from related parties 3,313 2,951
Furniture, fixtures and equipment, net 4,063 4,014
Investments 120,147 124,027
Deferred income taxes 61,223 59,435
Other assets 3,030 3,595
Total assets $240,617 $264,543
Liabilities and Equity
Accounts payable $1,366 $1,326
Accrued compensation and benefits 3,417 11,543
Deferred incentive fee revenue 45,166 45,166
Senior secured term loan payable
Principal amount 86,100 85,450
Less: unamortized discount and debt issuance costs 1,790 1,705
Senior secured term loan payable, net 84,310 83,745
Accrued members' distributions 2,385 4,598
Accrued dividend payable - 3,167
Payable to related parties pursuant to tax receivable agreement 10,734 10,734
Other liabilities 6,612 6,670
Total liabilities 153,990 166,949
Preferred stock, $0.001 par value, 10,000,000 authorized, none issued - -
Class A common stock, $0.001 par value, 300,000,000 authorized; 19,256,873 and 19,151,033 issued and
19,265,873 and 19,036,504 outstanding as of June 30, 2017 and March 31, 2017, respectively 19 19
Class B common stock, $0.001 par value, 50,000,000 authorized; 27,935,255 issued and outstanding as of June
30, 2017 and March 31, 2017 28 28
Additional paid-in-capital 61,845 60,220
Accumulated other comprehensive loss (311) (299)
Retained earnings 612 2,909
Less: Treasury stock, at cost, 114,529 shares of class A common stock as of March 31, 2017 (2,151) -
Total Hamilton Lane Incorporated stockholders’ equity 60,042 62,877
Non-controlling interests in general partnerships 9,901 9,705
Non-controlling interests in Hamilton Lane Advisors, L.L.C. 16,684 25,012
Total equity 86,627 97,594
Total liabilities and equity $240,617 $264,543
Page 26
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended,
(Dollars in thousands) June 30, 2016 June 30, 2017
Operating activities
Net income $16,391 $25,612
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 488 437
Change in deferred income taxes (410) 1,903
Amortization of deferred financing costs 214 85
Equity-based compensation 1,094 1,416
Equity in income of investees (1,966) (5,919)
Proceeds received from investments 950 5,176
Changes in operating assets and liabilities 675 347
Other - 129
Net cash provided by operating activities $17,436 $29,186
Investing activities
Purchase of furniture, fixtures and equipment (363) (388)
Distributions received from investments 1,487 3,465
Contributions to investments (8,069) (6,589)
Net cash (used in) investing activities $(6,945) $(3,512)
Financing activities
Repayments of senior secured term loan (650) (650)
Contributions from non-controlling interest in Partnerships 84 40
Distributions to non-controlling interest in Partnerships - (1,134)
Sale of membership interests 2,434 -
Purchase of Class A shares for tax withholdings - (663)
Purchase of membership interests (1,028) -
Proceeds received from option exercises 217 313
Members’ distributions (18,281) (9,387)
Net cash (used in) financing activities $(17,224) $(11,481)
Increase (decrease) in cash, cash equivalents, and restricted cash (6,733) 14,193
Cash, cash equivalents, and restricted cash at beginning of the period 70,382 34,135
Cash, cash equivalents, and restricted cash at end of the period $63,649 $48,328
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Non-GAAP Reconciliation
Three Months Ended,
(Dollars in thousands) June 30, 2016 March 31, 2017 June 30, 2017
Net income attributable to Hamilton Lane Incorporated $- $612 $5,464
Income attributable to non-controlling interests in general partnerships 545 168 898
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 15,846 15,846 19,250
Incentive fees (1,983) (278) (1,017)
Incentive fee related compensation1 974 (88) 499
Interest income (66) (161) (316)
Interest expense 2,902 5,785 1,106
Income tax expense (benefit) (401) 580 3,692
Equity in income of investees (1,966) (3,919) (5,919)
Other non-operating (income) loss - 149 106
Fee Related Earnings $15,851 $18,694 $23,763
Depreciation and amortization 487 475 437
Equity-based compensation 1,094 1,175 1,416
Incentive fees 1,983 278 1,017
Incentive fee related compensation1 (974) 88 (499)
Interest income 66 161 316
Adjusted EBITDA $18,507 $20,871 $26,450
1 Incentive fee related compensation includes incentive fee compensation expense as well as bonus and other revenue sharing allocated to carried interest classified as base compensation.
Reconciliation from Net Income
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Gross Leverage Ratio
Twelve Months Ended,
(Dollars in thousands) March 31, 2017 June 30, 2017
Senior secured term loan payable - principal amount $86,100 $85,450
Adjusted EBITDA 83,031 90,975
Gross leverage ratio 1.0x 0.9x
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Terms
Adjusted EBITDA is our primary 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 Term Loan, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based
compensation expense, (e) non-operating income (loss) 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 of the company from recurring management fees. FRE represents (a) management and advisory fees less (b) total expenses (excluding
incentive fee related expenses). FRE is presented before income taxes. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business.
Non-GAAP earnings per share measures the per share earnings of the company excluding expenses related to our IPO 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. We believe Non-GAAP earnings per share is useful to investors
because it enables them to better evaluate per-interest operating performance across reporting periods.
Our assets under management (“AUM”) comprise primarily the assets associated with our customized separate accounts and specialized funds. 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.
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, legal negotiations,
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, or fee-earning AUM, 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 on 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 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 impacted by market appreciation or depreciation. Therefore, revenues and fee-earning AUM are not significantly impacted 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”) was incorporated in the State of Delaware on December 31, 2007. The Company was formed for the purpose of completing an initial public offering (“IPO”) and
related transactions (“Reorganization”) in order to carry on the business of Hamilton Lane Advisors, L.L.C. (“HLA”) as a publicly-traded entity. As of March 6, 2017, HLI became the sole managing
member of HLA.
Page 30
Disclosures
As of August 8, 2017
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” and similar expressions are used 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, risk, 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 consummate planned acquisitions and successfully integrate the acquired business with ours; 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; the time, expense and
effort associated with being a newly public company; 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 that we face, you should refer to the “Risk Factors” detailed in Part
I, Item 1A of our Annual Report on Form 10K for the fiscal year ended March 31, 2017, 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.