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| 8-K - 8-K - Hamilton Lane INC | earningsrelease8-kq22018.htm |
HAMILTON LANE INCORPORATED REPORTS SECOND QUARTER FISCAL 2018 RESULTS
BALA CYNWYD, PENN. – November 7, 2017 – Leading private markets asset management firm Hamilton Lane Incorporated (NASDAQ: HLNE) today reported its results for the second quarter of fiscal year 2018, the period ended September 30, 2017.
Hamilton Lane CEO Mario Giannini commented: “This quarter was a continuation of our strong momentum with client re-ups and new client wins resulting in our asset footprint reaching a new record high of approximately $405 billion. The macro environment remains favorable for the private markets, a trend that was reflected in the performance across each of our service and product offerings, which have all grown year-to-date versus the same period from the prior fiscal year. Our outlook for the remainder of the fiscal year remains favorable given our visibility into our existing business and our pipeline of new opportunities.”
Hamilton Lane issued a full detailed presentation of its second 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 December 15, 2017. This dividend will be paid on January 5, 2018.
Conference Call
Hamilton Lane will discuss second quarter fiscal 2018 results in a webcast and conference call today, Tuesday, November 7, 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 1-866-393-4306 inside the U.S., or 1-734-385-2616 for international callers. The conference ID is 97303674.
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 330 professionals operating in offices throughout the U.S., Europe, Asia-Pacific, Latin America and the Middle East. With approximately $405 billion in total assets under management and supervision as of September 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 Second Quarter Results
Earnings Presentation - November 7, 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
approximately $405 billion, growing 29% compared to September 30, 2016
• Assets under management and fee-earning assets under management were approximately
$48 billion and $29 billion, respectively, as of September 30, 2017, increases of 18% and
13%, respectively, compared to September 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 December 15, 2017
Business
Performance
Financial
Results
Dividend
USD in millions except per share amounts Q2 FY18 QTD Q2 FY18 YTD vs. Q2 FY17 YTD
Management and advisory fees $46.3 $98.0 16%
GAAP net income $4.7 $10.2 N/A1
GAAP EPS $0.26 $0.56 N/A1
Non-GAAP EPS2 $0.27 $0.59 N/A1
Fee Related Earnings2 $19.2 $43.0 16%
Adjusted EBITDA2 $22.6 $49.0 12%
1 Figures not available as a result of the company going public after the stated period.
2 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 22 and 28 of this presentation.
Page 4
Growing Asset Footprint & Influence
$36 $51
$77 $79 $95 $81
$129 $147 $147
$189 $205
$292
$357
$6
$7
$11 $13
$16 $19
$22
$24 $30
$32
$35
$40
$48
$0
$50
$100
$150
$200
$250
$300
$350
$400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9/30/17
Total AUA Total AUM
Total Assets Under Management/Advisement ($B)1
1 Data as of calendar year end 12/31 unless otherwise noted. Numbers may not tie due to rounding.
CAGR
: 22%
$405B
AUM & AUAQ-o-Q Growth
AUA: 14%
AUM: 4%
Page 5
Drivers of Growth:
Fee-Earning AUM Driving Revenues
...and annual fee rates are stable
* Customized Separate Accounts:
• New client wins
• Client re-ups
* Real Asset Portfolio Management:
• Closed Q2 FY18
• Added ~$400M of FEAUM (~$700M
pro-forma for a full quarter)
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Sep-16 Sep-17
Customized Separate Accounts Specialized Funds
CAGR: 1
4%
Total Fee-Earning Assets Under Management ($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
$20
$9
$29
$18
$8
$26
13%
Y-o-Y Growth
0.58% 0.55% 0.56% 0.57% 0.59%0.57%
1 Data as of fiscal year end 3/31 unless otherwise noted. Numbers may not tie due to rounding.
Total Management Fee Revenues as a % of Average FEAUM
Page 6
2016 Attendee StatsInsights Powered by HL Data
Market Overview Tour
700+
Industry-leading
GPs, LPs and
private markets
participants in
attendance
17
Senior HL
executives
presented
443
Global institutions
represented
9
Cities around
the world
Funds
General
Partners
Vintage
Years
Total Fund
Commitments
3,400+
1,200+
40
$3.7T
Page 7
• Founded in 1991, we are one of the largest allocators of capital to private markets worldwide with over $400B
of AUM / AUA
• Over 330 professionals dedicated to the private markets (substantially all are stockholders)
• 15 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
~$48B
of AUM1
~$357B
of AUA1
Buyout Growth Equity R
eal E
state
In
fr
as
tr
u
ct
ur
e
Cr
ed
it
Venture Capital Co-Investment Seco
nda
ry
N
at
. R
es
ou
rc
es
C
o
-Investm
ents
Se
co
nd
ar
y
Tr
an
sa
ct
io
n
s
Prim
ary Funds
Private Markets Funds
Private Companies
Investors/Limited
Partners (LPs)
1 As of 9/30/2017
Page 8
What We Do for Our ClientsWho We Serve
Clients and Offerings
Customized
Separate Accounts
Public/Corporate
Pensions Specialized Funds
Sovereign
Wealth Funds
Advisory ServicesTaft Hartley
Reporting,
Monitoring,
Data and Analytics
Financial Institutions HNW/Family Office Distribution Management
Endowment Funds
Page 9
Strong Market Backdrop
Total Assets and Liability Gaps in U.S. Pensions
in USD Trillions
8,187
3,818
1,515
2,855 507
1,890
1,879
4,276
2016 Fund Ratio,
2016
85%
44%
67%
66%Total
State and
Local
Federal
Private
Assets Liability Gap
Private Equity Real Assets
Source: Federal Reserve Statistical Release, December 2016Source: PWC “Alternative Asset Management 2020”
Source: PWC “Alternative Asset Management 2020”Source: Hamilton Lane
$0
$10
$20
$30
$40
$50
$60
Global Pension Fund Assets
in USD Trillions
2004 2007 2013 2020E (Base case)
21.3
29.4
37.1
56.6
11%
4%
6%
$0
$2
$4
$6
$8
$10
$12
Private Equity and Real Assets
in USD Trillions
2004 2007 2013 2020E
(Base case)
2020E
(High case)
1.0 2.5
3.6
6.5
7.4
2.9
2.5
1.4
0.80.5
30%
17%
36%
1.5 3.3
5.0
9.0
10.3
7%
10%
6%
9%
9%
9%
11%
S
harpe R
atio
A
nn
ua
liz
ed
To
ta
l R
et
ur
n
20-Year Asset Class Risk-Adjusted Performance
Annualized Total Return
11.9%
9.7%
8.6%
7.9%
7.1% 6.9%
6.3%
5.5%
4.4%
0.46
0.28 0.28
0.22
0.33
0.35
0.42
0.06
0.02
0.0
0.1
0.2
0.3
0.4
0.5
0%
2%
4%
6%
8%
10%
12%
14%
Private
Equity
REITs Infra. Domestic
Equities
High
Yield
Bonds
Hedge
Funds
High
Grade
Bonds
Emerging
Market
Equities
Intl.
Equities
Page 10
Hamilton Lane’s Data
Hamilton Lane Portfolio Company
Data Sample
By Sector
• $3.7T total fund commitments
• 3,400+ unique partnerships from 1,200+ GPs
• 40 vintage years
• Detailed financials
• Institutional quality
• 11,000+ deals
• 750+ funds
• 190+ GPs
• 38 years of data
• Financials and performance
Source: Hamilton Lane Data (October 2017) Source: Hamilton Lane Data (September 2017)
Hamilton Lane Fund Data Sample
By Strategy
Consumer
Discretionary
Consumer Staples
Energy & Utilities
Financials
Healthcare
Industrials
IT
Materials
Telecom
Mega/Large Buyout
SMID Buyout
Venture Capital
Growth Equity
Origination
Distressed
Natural Resources
Infrastructure
Co-Investment
Fund of Funds
Secondaries
Real Estate
Page 11
Global Private Markets Fundraising
Global Private Markets Fundraising by Geography
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
%
of M
S
CI
W
orld
M
arket C
ap
U
S
D
in
B
ill
io
ns
$0
$100
$200
$300
$400
$500
$600
$700
$800
2017
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
North America
Source: Bison data via Cobalt. Fundraising data includes real estate, secondary funds, and fund-of-funds (October 2017)
% of MSCI World Market CapWestern Europe Global Asia ROW
Annualized
• Fundraising is expected to remain near peak levels in 2017 for the third consecutive year
• Despite record fundraising, private markets fundraising has averaged only 1.6% of MSCI World market
cap since 2006
Page 12
PPMs Received by Hamilton Lane
PPMs Received by Hamilton Lane
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
100
200
300
400
500
600
700
800
900
North America
Source: Hamilton Lane Data (October 2017)
Western Europe ROW
Annualized
• 2017 on track to be a record year for PPMs received, increasing the complexity of fund selection, but providing
more choice for LPs
Page 13
Risk-Adjusted Returns
10-Year Asset Class Risk Adjusted Performance - As of 6/30/2017
Asset Class Annualized Total Return Annualized Volatility Sharpe Ratio
Private Equity ex Credit and Real Assets 8.9% 14.6% 0.43
U.S. Equities 7.3% 16.9% 0.27
Hedge Funds 3.0% 7.5% 0.04
Global Equities 3.7% 18.1% 0.06
International Equities 1.0% 19.8% < 0
Emerging Market Equities 2.2% 24.0% < 0
Private Credit 7.4% 10.6% 0.45
High-Yield Bonds 7.2% 11.7% 0.39
High-Grade Bonds 6.6% 6.7% 0.59
Municipal Bonds 4.6% 4.4% 0.45
Government Bonds 3.4% 8.1% 0.10
Private Real Estate (Non-Core) 2.6% 25.6% < 0
Private Real Assets 4.3% 16.7% 0.10
REITs 6.2% 25.2% 0.14
Public Infrastructure 4.0% 17.5% 0.08
Public Energy -1.0% 23.1% < 0
Indices used: Hamilton Lane All Private Equity ex Credit and Real Assets with volatility de-smoothed; Russell 3000 Index; HFRI Composite Index; MSCI ACWI Index; MSCI World ex US Index; MSCI
Emerging Markets Index; Hamilton Lane Private Credit; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Barclays Municipal Bond Index; Barclays Global Treasuries Index; Hamilton Lane
Private Real Estate; Hamilton Lane Private Real Assets; FTSE/NAREIT Equity REIT Index; S&P Global Infrastructure Index; MSCI World Energy Sector Index. Geometric mean returns in USD. Assumes
risk free rate of 2.6%, representing the average yield of the ten year U.S. Treasury Note over the last ten years. (October 2017)
• Over long-term horizons, private equity continues to outperform other equity asset classes on an absolute and
risk-adjusted basis (even after de-smoothing volatility)
• In general, private, illiquid markets outperform their public counterparts
E
qu
ity
C
re
di
t
R
ea
l A
ss
et
s
Page 14
Opportunity Pipeline
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
• Credit-Oriented Fund
• Private Equity Fund of Funds
Typically larger clients with
wide-ranging mandates;
opportunity set continues to
be robust
Financial Highlights
Page 16
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 16%
• Growth across all management and advisory fee offerings
• 23% Y-o-Y growth in specialized funds management fees
driven by $0.5B raised in Secondary Fund IV during the six
months ended September 30, 2017
• Incentive fees derived from a highly diversified pool of
assets and funds
• Allocated carried interest of $300M as of 9/30/17 diversified
across +3,000 assets and ~40 funds
• Total revenues increased by 12%, driven by growth across
core offerings
0
50
100
150
200
FY13 FY17Q2 FY17 Q2 FY18
$113
$173
Management and Advisory Fees
Incentive Fees
Total Revenues
$84
$98
Y-o-Y Growth: 16% CAGR: 11%
0
50
100
150
200
FY13 FY17Q2 FY17 Q2 FY18
$6 $7$7 $3
Y-o-Y Growth: (48)% CAGR: 4%
0
50
100
150
200
FY13 FY17Q2 FY17 Q2 FY18
$119
$180
$91
$101
Y-o-Y Growth: 12% CAGR: 11%
Long-Term GrowthYTD
Long-Term GrowthYTD
Long-Term GrowthYTD
U
S
D
in
M
ill
io
ns
U
S
D
in
M
ill
io
ns
U
S
D
in
M
ill
io
ns
Page 17
Profitability stable and growing
Consolidated Earnings
• Y-o-Y growth of 12%
• Margins maintained Y-o-Y
• $4.7M 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 16%
• 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 28 of this presentation.
Adjusted EBITDA1
Fee Related Earnings1
U
S
D
in
M
ill
io
ns
Long-Term GrowthYTD
U
S
D
in
M
ill
io
ns
FY13 FY17Q2 FY17 Q2 FY18
$55
$83
$44 $49
Y-o-Y Growth: 12% CAGR: 11%
Net Income Attributable to HLI
U
S
D
in
M
ill
io
ns
Long-Term GrowthYTD
FY13 FY17Q1 FY17 Q2 FY18
N/A N/A
$10
$1
Long-Term GrowthYTD
FY13 FY17Q2 FY17 Q2 FY18
$47
$72
$37
$43
Y-o-Y Growth: 16% CAGR: 11%
Page 18
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 9/30/17, the total investment balance consisted of
~$110M in equity method investments in our funds and
~$17M in technology related investments
• Principal amount of debt outstanding of $85.5M
as of 9/30/17
$0
$30
$60
$90
$120
$150
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
$78
$92 $103 $103
$120
Sep-17
$127
Investments
0.0x
1.0x
2.0x
3.0x
4.0x
Sep-17
1.0x
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 principal amount of debt outstanding to trailing twelve months Adjusted EBITDA. See page 29 for additional detail on calculation of gross leverage ratio.
Fiscal Year 2018 Second Quarter Results
Earnings Presentation - November 7, 2017
Appendix
Page 21
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended September 30, Six Months Ended September 30,
(Dollars in thousands except share and per share amounts) 2016 2017 % Change 2016 2017 % Change
Revenues
Management and advisory fees $46,681 $46,298 (1)% $84,264 $97,982 16%
Incentive fees 4,563 2,411 (47)% 6,546 3,428 (48)%
Total revenues 51,244 48,709 (5)% 90,810 101,410 12%
Expenses
Compensation and benefits 20,486 20,279 (1)% 36,422 40,241 10%
General, administrative and other 7,315 8,424 15% 14,085 16,882 20%
Total expenses 27,801 28,703 3% 50,507 57,123 13%
Other income (expense)
Equity in income of investees 3,831 4,252 11% 5,797 10,171 75%
Interest expense (2,954) (3,512) 19% (5,856) (4,618) (21)%
Interest income 54 89 65% 120 405 238%
Other non-operating income (loss) 10 87 770% 10 (19) (290)%
Total other income (expense) 941 916 (3)% 71 5,939 8,265%
Income before income taxes 24,384 20,922 (14)% 40,374 50,226 24%
Income tax expense (benefit) 26 2,688 10,238% (375) 6,380 N/A
Net income 24,358 18,234 (25)% 40,749 43,846 8%
Less: Income attributable to non-controlling interests in general partnerships 415 84 (80)% 960 982 2%
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 23,943 13,462 (44)% 39,789 32,712 (18)%
Net income attributable to Hamilton Lane Incorporated $- $4,688 N/A $- $10,152 N/A
Basic earnings per share of Class A common stock1 $0.26 $0.56
Diluted earnings per share of Class A common stock1 $0.26 $0.56
Weighted-average shares of Class A common stock outstanding - basic 18,113,781 18,049,146
Weighted-average shares of Class A common stock outstanding - diluted 18,646,866 18,559,583
1 There were no shares of Class A common stock outstanding prior to March 6, 2017; therefore, no per-share information has been presented for any period prior to that date.
Page 22
Non-GAAP Financial Measures
Three Months Ended September 30, Six Months Ended September 30,
(Dollars in thousands except share and per share amounts) 2016 2017 % Change 2016 2017 % Change
Adjusted EBITDA
Management and advisory fees $46,681 $46,298 (1)% $84,264 $97,982 16%
Total expenses 27,801 28,703 3% 50,507 57,123 13%
Less:
Incentive fee related compensation1 (2,238) (1,183) (47)% (3,212) (1,682) (48)%
Contingent compensation related to acquisition - (427) N/A - (427) N/A
Management fee related expenses 25,563 27,093 6% 47,295 55,014 16%
Fee Related Earnings $21,118 $19,205 (9)% $36,969 $42,968 16%
Incentive fees 4,563 2,411 (47)% 6,546 3,428 (48)%
Incentive fee related compensation1 (2,238) (1,183) (47)% (3,212) (1,682) (48)%
Interest income 54 89 65% 120 405 238%
Equity-based compensation 1,243 1,572 26% 2,337 2,988 28%
Depreciation and amortization 486 473 (3)% 973 910 (6)%
Adjusted EBITDA $25,226 $22,567 (11)% $43,733 $49,017 12%
Adjusted EBITDA margin 49% 46% 48% 48%
Non-GAAP earnings per share reconciliation
Net income attributable to Hamilton Lane Incorporated $4,688 $10,152
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 13,462 32,712
Income tax expense 2,688 6,380
Write-off of deferred financing costs2 2,544 2,544
Contingent compensation related to acquisition 427 427
Adjusted pre-tax net income 23,809 52,215
Adjusted income taxes3 (9,304) (20,735)
Adjusted net income $14,505 $31,480
Adjusted shares4 53,085,535 52,998,252
Non-GAAP earnings per share $0.27 $0.59
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 write-off of debt issuance costs and realized loss on interest rate caps related to the payoff of our predecessor credit facility during the period.
3 Represents corporate income taxes at assumed effective tax rate of 39.71% for the six months ended September 30, 2017 applied to adjusted pre-tax net income. The 39.71% is based on a federal tax
statutory rate of 35.00% and a combined state income tax rate net of federal benefits of 4.71%.
4 Assumes the full exchange of HLA Class B and Class C units in HLA for HLI Class A common stock.
See page 28 for additional reconciliation to GAAP financial measures
Page 23
Management and Advisory Fees
Three Months Ended September 30, Six Months Ended September 30,
(Dollars in thousands) 2016 2017 % Change 2016 2017 % Change
Management and advisory fees
Customized separate accounts $17,464 $19,609 12% $34,968 $38,393 10%
Specialized funds 22,531 19,244 (15)% 36,283 44,450 23%
Advisory and reporting 5,892 6,829 16% 11,659 13,479 16%
Distribution management 794 616 (22)% 1,354 1,660 23%
Total management and advisory fees $46,681 $46,298 (1)% $84,264 $97,982 16%
Specialized
funds
45%
Customized
separate
accounts
39%
Advisory
and reporting
14%
Distribution
management
2%
Six Months Ended September 30, 2017
Page 24
Incentive Fees
(Dollars in thousands)
Three Months Ended September 30, Six Months Ended September 30,
2016 2017 % Change 2016 2017 % Change
Incentive fees
Secondary Fund II $741 $477 (36)% $1,641 $1,115 (32)%
Other specialized funds 3,518 34 (99)% 4,087 (6) (100)%
Customized separate accounts 304 1,900 525% 818 2,319 183%
Incentive fees $4,563 $2,411 (47)% $6,546 $3,428 (48)%
As of
September 30,
2016
June 30,
2017
September 30,
2017 YoY % Change QoQ % Change
Allocated carried interest
Secondary Fund II $8,155 $7,513 $7,145 (12)% (5)%
Secondary Fund III 22,638 30,306 32,074 42% 6%
Secondary Fund IV 2,122 4,730 10,884 413% 130%
Co-investment Fund I - 1,050 - N/A (100)%
Co-investment Fund II 90,437 106,208 108,907 20% 3%
Co-investment Fund III 5,933 20,031 28,775 385% 44%
Other specialized funds 7,754 18,614 24,576 217% 32%
Customized separate accounts 55,082 77,922 87,998 60% 13%
Total allocated carried interest $192,121 $266,374 $300,359 56% 13%
Page 25
Assets Under Management
As of
(Dollars in millions) September 30, 2016 June 30, 2017 September 30, 2017 YoY % Change QoQ % Change
Assets under management / advisement
Assets under management $40,373 $45,788 $47,819 18% 4%
Assets under advisement 273,518 313,652 356,774 30% 14%
Total assets under management / advisement $313,891 $359,440 $404,593 29% 13%
Fee-earning assets under management
Customized separate accounts
Balance, beginning of period $17,366 $18,028 $18,186 5% 1%
Contributions 395 997 1,295 228% 30%
Distributions (173) (754) (229) 32% (70)%
Foreign exchange, market value and other (46) (85) 469 N/A N/A
Balance, end of period $17,542 $18,186 $19,721 12% 8%
Specialized funds
Balance, beginning of period $7,398 $8,793 $9,437 28% 7%
Contributions 917 759 97 (89)% (87)%
Distributions (6) (113) (98) 1533% (13)%
Foreign exchange, market value and other 2 (2) 3 50% N/A
Balance, end of period $8,311 $9,437 $9,439 14% 0%
Total
Balance, beginning of period $24,764 $26,821 $27,623 12% 3%
Contributions 1,312 1,756 1,392 6% (21)%
Distributions (179) (867) (327) 83% (62)%
Foreign exchange, market value and other (44) (87) 472 N/A N/A
Balance, end of period $25,853 $27,623 $29,160 13% 6%
Page 26
Condensed Consolidated Balance Sheets (Unaudited)
As of,
(Dollars in thousands except share and per share amounts) March 31, 2017 September 30, 2017
Assets
Cash and cash equivalents $32,286 $48,940
Restricted cash 1,849 1,783
Fees receivable 12,113 16,429
Prepaid expenses 2,593 2,135
Due from related parties 3,313 2,725
Furniture, fixtures and equipment, net 4,063 3,999
Investments 120,147 127,090
Deferred income taxes 61,223 58,596
Other assets 3,030 9,481
Total assets $240,617 $271,178
Liabilities and Equity
Accounts payable $1,366 $783
Accrued compensation and benefits 3,417 20,539
Deferred incentive fee revenue 45,166 45,166
Debt 84,310 85,072
Accrued members' distributions 2,385 -
Payable to related parties pursuant to tax receivable agreement 10,734 10,622
Other liabilities 6,612 5,661
Total liabilities 153,990 167,843
Preferred stock, $0.001 par value, 10,000,000 authorized, none issued - -
Class A common stock, $0.001 par value, 300,000,000 authorized; 19,285,620 and 19,151,033 issued and
19,285,620 and 19,036,504 outstanding as of September 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
September 30, 2017 and March 31, 2017 28 28
Additional paid-in-capital 61,845 61,174
Accumulated other comprehensive loss (311) -
Retained earnings 612 4,425
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 65,646
Non-controlling interests in general partnerships 9,901 8,861
Non-controlling interests in Hamilton Lane Advisors, L.L.C. 16,684 28,828
Total equity 86,627 103,335
Total liabilities and equity $240,617 $271,178
Page 27
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended September,
(Dollars in thousands) 2016 2017
Operating activities
Net income $40,749 $43,846
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 973 910
Change in deferred income taxes - 2,913
Change in payable to related parties pursuant to tax receivable agreement - (112)
Amortization of deferred financing costs 429 139
Write-off of deferred financing costs - 1,657
Equity-based compensation 2,337 2,988
Equity in income of investees (5,797) (10,171)
Proceeds received from investments 3,120 8,025
Changes in operating assets and liabilities 2,926 11,568
Other - 1,028
Net cash provided by operating activities $44,737 $62,791
Investing activities
Purchase of furniture, fixtures and equipment $(583) $(719)
Cash paid for acquisition of business - (5,414)
Distributions received from investments 5,615 7,151
Contributions to investments (14,814) (11,910)
Net cash (used in) investing activities $(9,782) $(10,892)
Financing activities
Repayments of debt $(1,300) $(86,100)
Borrowings of debt, net of deferred financing costs - 85,066
Contributions from non-controlling interest in general partnerships 453 213
Distributions to non-controlling interest in general partnerships (1,708) (2,235)
Sale of membership interests 4,668 -
Repurchase of Class A shares for employee tax witholding - (680)
Purchase of membership interests (6,059) -
Proceeds received from option exercises 879 313
Dividends paid - (6,339)
Members’ distributions (42,261) (25,549)
Net cash (used in) financing activities $(45,328) $(35,311)
Increase (decrease) in cash, cash equivalents, and restricted cash (10,373) 16,588
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 $60,009 $50,723
Page 28
Non-GAAP Reconciliation
Three Months Ended, Six Months Ended,
(Dollars in thousands) 2016 2017 2016 2017
Net income attributable to Hamilton Lane Incorporated1 $- $4,688 $- $10,152
Income attributable to non-controlling interests in general partnerships 415 84 960 982
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 23,943 13,462 39,789 32,712
Incentive fees (4,563) (2,411) (6,546) (3,428)
Incentive fee related compensation2 2,238 1,183 3,212 1,682
Interest income (54) (89) (120) (405)
Interest expense 2,954 3,512 5,856 4,618
Income tax expense (benefit) 26 2,688 (375) 6,380
Equity in income of investees (3,831) (4,252) (5,797) (10,171)
Contingent compensation related to acquisition - 427 - 427
Other non-operating (income) loss (10) (87) (10) 19
Fee Related Earnings $21,118 $19,205 $36,969 $42,968
Depreciation and amortization 486 473 973 910
Equity-based compensation 1,243 1,572 2,337 2,988
Incentive fees 4,563 2,411 6,546 3,428
Incentive fee related compensation2 (2,238) (1,183) (3,212) (1,682)
Interest income 54 89 120 405
Adjusted EBITDA $25,226 $22,567 $43,733 $49,017
Non-GAAP earnings per share reconciliation
Net income attributable to Hamilton Lane Incorporated1 $4,688 $10,152
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 13,462 32,712
Income tax expense 2,688 6,380
Write-off of deferred financing costs3 2,544 2,544
Contingent compensation related to acquisition 427 427
Adjusted pre-tax net income 23,809 52,215
Adjusted income taxes4 (9,304) (20,735)
Adjusted net income $14,505 $31,480
Weighted-average shares of Class A common stock outstanding 18,646,866 18,559,583
Exchange of Class B and Class C units in HLA5 34,438,669 34,438,669
Adjusted shares 53,085,535 52,998,252
Non-GAAP earnings per share $0.27 $0.59
1 Prior to March 6, 2017, HLI was a wholly-owned subsidiary of HLA with no operations or assets.
2 Incentive fee related compensation includes incentive fee compensation expense and bonus and other revenue sharing allocated to carried interest classified as base compensation.
3 Represents write-off of debt issuance costs and realized loss on interest rate caps related to the payoff of our predecessor credit facility during the period.
4 Represents corporate income taxes at our estimated statutory tax rate of 39.71% for the six months ended September 30, 2017 applied to adjusted pre-tax net income. The 39.71% is based on a federal
tax statutory rate of 35.00% and a combined state income tax rate net of federal benefits of 4.71%.
5 Assumes the full exchange of Class B and Class C units in HLA for HLI Class A common stock.
Reconciliation from Net Income
Page 29
Gross Leverage Ratio
Twelve Months Ended,
(Dollars in thousands) March 31, 2017 September 30, 2017
Principal amount of debt outstanding $86,100 $85,450
Adjusted EBITDA 83,031 88,314
Gross leverage ratio 1.0x 1.0x
Page 30
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 loan agreements and predecessor credit facility, (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 net income excluding (a) incentive fees and related compensation, (b)
interest income and expense, (c) income tax expense, (d) equity in income of investees and (e) other non-operating income. 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 of the Company 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.
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.
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, 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 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 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.
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 31
Disclosures
As of November 7, 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.