Fiscal Year 2020 Second Quarter Results
Earnings Presentation - November 5, 2019
Today's Speakers
Mario Giannini | Erik Hirsch | Jeff Meeker |
Chief Executive Officer | Vice Chairman | Chief Client Officer |
Randy Stilman | John Oh |
Chief Financial Officer | Investor Relations Manager |
Hamilton Lane l Global Leader in the Private Markets | Page 2 |
Period Highlights
Business Performance
- Assets under management andfee-earning assets under management were approximately $66 billion and $36 billion, respectively, as of September 30, 2019, increases of 13% and 14%, respectively, compared to September 30, 2018
- Management and advisory fees increased 15% compared to the six months ended September 30, 2018
Financial Results
USD in millions except per share amounts | Q2 FY20 QTD | Q2 FY20 YTD | vs. Q2 FY19 YTD |
Management and advisory fees | $59.2 | $119.7 | 15% |
GAAP net income | $15.3 | $26.7 | 33% |
GAAP EPS | $0.56 | $0.98 | 11% |
Non-GAAP EPS1 | $0.50 | $0.94 | 2% |
Fee Related Earnings1 | $24.2 | $49.0 | 14% |
Adjusted EBITDA1 | $29.6 | $59.3 | 5% |
Dividend
- Declared a quarterly dividend of $0.275 per share of Class A common stock to record holders at the close of business on December 16, 2019
1Non-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 21 and 22 of this presentation.
Hamilton Lane l Global Leader in the Private Markets | Page 3 |
Growing Asset Footprint & Influence
~$481B
AUM & AUA
Total Assets Under Management/Advisement ($B)1
$500
Y-o-Y Growth
AUM: 13%
$59
$50
$66
$400
AUA: 5%
$40
$410 | $ 416 |
$374
$300
$35 | $292 | |||||||||||||||||
$32 | ||||||||||||||||||
$200 | $24 | $30 | $189 | $205 | ||||||||||||||
$22 | ||||||||||||||||||
$16 | $19 | $129 | $147 | $147 | ||||||||||||||
$100 | $11 | $13 | ||||||||||||||||
$7 | $95 | |||||||||||||||||
$6 | $77 | $79 | $81 | |||||||||||||||
$51 | ||||||||||||||||||
$36 | ||||||||||||||||||
$0 | ||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 09/30/19 | ||||
Total AUA | Total AUM | |||||||||||||||||
1Data as of calendar year end 12/31 unless otherwise noted. Numbers may not tie due to rounding.
Hamilton Lane l Global Leader in the Private Markets | Page 4 |
Fee-Earning AUM Driving Revenues
Fee-Earning AUM growth continues and annual fee rates are stable
Total Fee-Earning Assets Under Management ($B)
.56% | .57% | .56% | .55% | .55%1 | .57%2 | |
$40 | ||||||
$35 | $36 | |||||
$34 | ||||||
$31 | $33 | $32 | ||||
$30 | ||||||
$27 | $11 | $13 | ||||
$11 | ||||||
$24 | $10 | |||||
$25 | ||||||
$21 | $7 | $9 | ||||
$20 | ||||||
$5 | ||||||
$15 | ||||||
$10 | $21 | $22 | $21 | $23 | ||
$17 | $18 | |||||
$16 | ||||||
$5 | ||||||
$0 | ||||||
Mar-15 | Mar-16 | Mar-17 | Mar-18 | Mar-19 | Sep-18 | Sep-19 |
*Numbers may not tie due to rounding
1Reflects retroactive fees of $0.8M from latest co-investment fund
2Reflects retroactive fees of $2.8M from latest co-investment fund
Customized Separate Accounts | Specialized Funds |
Total Management Fee Revenues as a % of Average FEAUM
Y-o-Y Drivers of Growth
Customized Separate Accounts: | Specialized Funds: | ||||
• | New client wins | • | Closed 4th co-investment fund, credit-oriented (2019 | ||
• | Client re-ups | series) fund and fund-of-funds | |||
• | Fundraising 5th secondary fund, credit-oriented (2020 | ||||
series) fund and evergreen fund | |||||
Hamilton Lane l Global Leader in the Private Markets | Page 5 |
AUM & AUA Drivers
Customized
Separate Accounts
Diverse mix of existing and prospective clients seeking to further or establish relationships with Hamilton Lane
-
$2Byear-over-year increase in
FEAUM - +70% of our gross contributions during the last 12 months came from existing clients
AUM
Specialized
Funds
Select funds in market:
- Secondary fund
- Credit-orientedfund
- Evergreen fund
- FEAUM closed during Q2 FY20:
- Secondary fund: $399M
- Private equityfund-of-funds: $26M
AUA
Advisory
Services
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
- $22Byear-over-year increase in AUA
Hamilton Lane l Global Leader in the Private Markets | Page 6 |
Financial Highlights
Consolidated Revenue
Strong revenue growth across management and advisory fees
Management and Advisory Fees
YTD | Y-o-Y Growth: 15% | |
USD in Millions | $104 | $120 |
Q2 FY19 | Q2 FY20 |
Long-Term Growth | • |
CAGR: 11% |
$218 | • | ||
Millions | |||
• | |||
in | $130 | ||
USD | |||
FY14 | FY19 |
Represented an average of just under 90% of total revenues over the past five fiscal years
Y-o-Y increase of 15%
$2.8M in retroactive fees from our latest co- investment fund for the year compared to $0.8M in the prior year period
Incentive Fees
YTD | ||
Y-o-Y Growth: (38)% | ||
in Millions | $15 | |
$9 | ||
USD | ||
Q2 FY19 | Q2 FY20 |
Long-Term Growth | |
CAGR: 30% | |
USDin Millions | $34 |
$9 | |
FY14 | FY19 |
- Incentive fees derived from a highly diversified pool of assets and funds
- Allocated carried interest of $382M as of 9/30/19 diversified across 3,000+ assets and approximately 60 funds
Total Revenues | |||||
YTD | Long-Term Growth | ||||
Y-o-Y Growth: 8% | CAGR: 13% | • Total revenues increased by 8%, driven by | |||
$252 | |||||
Millions | $129 | Millions | recurring management and advisory fee growth | ||
$119 | |||||
across core offerings | |||||
USD in | USD in | ||||
$140 | |||||
Q2 FY19 | Q2 FY20 | FY14 | FY19 | ||
Hamilton Lane l Global Leader in the Private Markets | Page 8 | ||||
Unrealized Carried Interest
Unrealized Carried Interest | Unrealized Carry by Age |
60 | 59 | |||||||
52 | > 12 years | |||||||
$400 | 6% | |||||||
50 | ||||||||
43 | < 5 years | |||||||
8-12 years | ||||||||
40 | $300 | 30% | ||||||
inUSDMillions | 23% | |||||||
Vehicles | ||||||||
30 | $382 | $200 | ||||||
$333 | ||||||||
20 | $300 | |||||||
10 | $100 | 5-8 years | ||||||
41% | ||||||||
0 | $0 | |||||||
Sep-17 | Sep-18 | Sep-19 | ||||||
Period Ending |
Vehicles in Unrealized Carry Position | Unrealized Carried Interest |
Hamilton Lane l Global Leader in the Private Markets | Page 9 |
Consolidated Earnings
Profitability stable and growing
Net Income Attributable to HLI
YTD | Y-o-Y Growth: 33% | |
Millions | $27 | |
$20 | ||
USD in | ||
Q2 FY19 | Q2 FY20 |
Adjusted EBITDA2
YTD | Y-o-Y Growth: 5% | |
in Millions | $56 | $59 |
USD | ||
Q2 FY19 | Q2 FY20 |
Long-Term Growth
USD in Millions | |||
$34 | |||
N/A1 | |||
FY14 | FY19 |
Long-Term Growth
CAGR: 13%
Millions | $118 |
USD in | |
$64 | |
FY14 | FY19 |
- $15M in net income attributable to HLI for the quarter
- Y-o-Yincrease of 5% as growth from management and advisory fees offset the decline in incentive fees
Fee Related Earnings2 | ||||||
YTD | Y-o-Y Growth: 14% | Long-Term Growth | ||||
CAGR: 11% | • Y-o-Y growth of 14% | |||||
Millions | Millions | $90 | • Long-term double digit growth in Fee Related | |||
Earnings | ||||||
in | $43 | $49 | in | |||
USD | USD | |||||
1 | Prior to our IPO, HLI was a wholly-owned subsidiary of HLA with no | |||||
$54 | ||||||
operations or assets. | ||||||
2Adjusted EBITDA and Fee Related Earnings are non-GAAP financial | ||||||
Q2 FY19 | Q2 FY20 | FY14 | FY19 | 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 21 and 22 of this presentation. | ||||||
Hamilton Lane l Global Leader in the Private Markets | Page 10 | |||||
Other Key Items
Strong balance sheet with investments in our own products and a modest amount of
leverage...
Investments | |||||||
$175 | $174 | • For 9/30/19, the total investment balance consisted of: | |||||
$150 | $154 | ◦~$152M in equity method investments in our | |||||
Millions | |||||||
$125 | $120 | $137 | funds | ||||
$100 | $103 | ||||||
in | $103 | ||||||
$75 | ◦~$22M in technology related and other | ||||||
USD | $50 | ||||||
investments | |||||||
$25 | |||||||
$0 | |||||||
Mar-15 | Mar-16 | Mar-17 | Mar-18 | Mar-19 | Sep-19 |
Leverage | ||||
$100 | ||||
Millionsin | $80 | • $69M of debt as of 9/30/19 | ||
$73 | $71 | |||
$60 | $69 | |||
USD | $40 | |||
$20 | ||||
$0 | ||||
Sep-18 | Mar-19 | Sep-19 |
Hamilton Lane l Global Leader in the Private Markets | Page 11 |
Fiscal Year 2020 Second Quarter Results
Earnings Presentation - November 5, 2019
Appendix
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) | 2018 | 2019 | % Change | 2018 | 2019 | % Change | |||
Revenues | |||||||||
Management and advisory fees | $53,248 | $59,196 | 11% | $104,227 | $119,747 | 15 % | |||
Incentive fees | 2,585 | 5,096 | 97 % | 14,968 | 9,231 | (38)% | |||
Total Revenues | 55,833 | 64,292 | 15 % | 119,195 | 128,978 | 8 % | |||
Expenses | |||||||||
Compensation and benefits | 22,771 | 23,353 | 3 % | 49,393 | 46,999 | (5)% | |||
General, administrative and other | 11,695 | 14,014 | 20 % | 22,743 | 28,061 | 23 % | |||
Total expenses | 34,466 | 37,367 | 8 % | 72,136 | 75,060 | 4 % | |||
Other income (expense) | |||||||||
Equity in income of investees | 5,276 | 3,664 | (31)% | 5,162 | 9,877 | 91 % | |||
Interest expense | (728) | (745) | 2 % | (1,493) | (1,562) | 5 % | |||
Interest income | 43 | 148 | 244 % | 85 | 428 | 404 % | |||
Non-operating income | 12,194 | 4,957 | (59)% | 12,059 | 4,078 | (66)% | |||
Total other income (expense) | 16,785 | 8,024 | (52)% | 15,813 | 12,821 | (19)% | |||
Income before income taxes | 38,152 | 34,949 | (8)% | 62,872 | 66,739 | 6 % | |||
Income tax expense | 5,580 | 2,676 | (52)% | 7,197 | 7,013 | (3)% | |||
Net income | 32,572 | 32,273 | (1)% | 55,675 | 59,726 | 7 % | |||
Less: Income attributable to non-controlling interests in general partnerships | 514 | 45 | (91)% | 394 | 549 | 39 % | |||
Less: Income attributable to non-controlling interests in Hamilton Lane | 20,836 | 16,929 | (19)% | 35,214 | 32,497 | (8)% | |||
Advisors, L.L.C. | |||||||||
Net income attributable to Hamilton Lane Incorporated | $11,222 | $15,299 | 36 % | $20,067 | $26,680 | 33 % | |||
Basic earnings per share of Class A common stock | $0.49 | $0.56 | 14 % | $0.89 | $0.99 | 11 % | |||
Diluted earnings per share of Class A Common stock | $0.49 | $0.56 | 14 % | $0.88 | $0.98 | 11 % | |||
Weighted-average shares of Class A common stock outstanding - basic | 22,671,865 | 27,229,152 | 22,461,363 | 26,969,363 | |||||
Weighted-average shares of Class A common stock outstanding - diluted | 23,257,419 | 27,632,890 | 23,015,445 | 27,341,594 | |||||
Hamilton Lane l Global Leader in the Private Markets | Page 14 |
Non-GAAP Financial Measures
Three Months Ended September 30, | Six Months Ended September 30, | |||||||
(Dollars in thousands except share and per share amounts) | 2018 | 2019 | % Change | 2018 | 2019 | % Change | ||
Adjusted EBITDA1 | ||||||||
Management and advisory fees | $53,248 | $59,196 | 11% | $104,227 | $119,747 | 15 % | ||
Total expenses | 34,466 | 37,367 | 8% | 72,136 | 75,060 | 4 % | ||
Less: | ||||||||
Incentive fee related compensation2 | (1,243) | (2,392) | 92% | (5,970) | (4,309) | (28)% | ||
Contingent compensation related to acquisition | (2,327) | - | (100%) | (5,100) | - | (100)% | ||
Management fee related expenses | 30,896 | 34,975 | 13% | 61,066 | 70,751 | 16 % | ||
Fee Related Earnings | $22,352 | $24,221 | 8% | $43,161 | $48,996 | 14 % | ||
Incentive fees3 | 2,585 | 5,096 | 97% | 14,968 | 9,231 | (38)% | ||
Incentive fees attributable to non-controlling interests3 | (52) | (61) | 17% | (263) | (160) | (39)% | ||
Incentive fee related compensation2 | (1,243) | (2,392) | 92% | (5,970) | (4,309) | (28)% | ||
Interest income | 43 | 148 | 244% | 85 | 428 | 404 % | ||
Equity-based compensation | 1,597 | 1,756 | 10% | 3,184 | 3,483 | 9 % | ||
Depreciation and amortization | 632 | 806 | 28% | 1,141 | 1,608 | 41 % | ||
Adjusted EBITDA | $25,914 | $29,574 | 14% | $56,306 | $59,277 | 5 % | ||
Adjusted EBITDA margin | ||||||||
46% | 46% | 47% | 46% | |||||
Non-GAAP earnings per share1 | ||||||||
Net income attributable to Hamilton Lane Incorporated | $11,222 | $15,299 | 36 % | $20,067 | $26,680 | 33 % | ||
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 20,836 | 16,929 | (19%) | 35,214 | 32,497 | (8)% | ||
Income tax expense | 5,580 | 2,676 | (52%) | 7,197 | 7,013 | (3)% | ||
Contingent compensation related to acquisition | 2,327 | - | (100%) | 5,100 | - | (100)% | ||
Adjusted pre-tax net income | $39,965 | $34,904 | (13%) | $67,578 | $66,190 | (2)% | ||
Adjusted income taxes4 | (10,795) | (8,308) | (23%) | (18,253) | (15,753) | (14)% | ||
Adjusted net income | $29,170 | $26,596 | (9%) | $49,325 | $50,437 | 2 % | ||
Adjusted shares outstanding5 | 53,438,643 | 53,547,201 | 53,406,893 | 53,507,680 | ||||
Non-GAAP earnings per share | $0.55 | $0.50 | (9)% | $0.92 | $0.94 | 2 % | ||
- Adjusted EBITDA andNon-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 21.
- Incentive fee related compensation includes incentive fee compensation expense, bonus and other revenue sharing related to carried interest that is classified as base compensation. Incentive fee related compensation for the three and six months ended September 30, 2018 excludes compensation expense related to the recognition of incentive fees included in net income from one of ourco-investment funds of $2.5 million as the related incentive
fee compensation was recognized in fiscal 2016.
3Incentive fees for the three and six months ended September 30, 2018 included $2.6 million and $2.8 million, respectively, of non-cash carried interest. Of the $2.6 million for the three-month period, $2.5 million is included in
net income and $0.1 million is attributable to non-controlling interests. Of the $2.8 million for the six-month period, $2.5 million is included in net income and $0.3 million is attributable to non-controlling interests.
4Represents corporate income taxes at our estimated statutory tax rate of 23.8% for the six month period ended September 30, 2019 and 27.0% for the six month period ended September 30, 2018 applied to adjusted pre-tax net income. The 23.8% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.8%. The 27.0% is based on a federal tax statutory rate of 21.0% and a combined state income
tax rate net of federal benefits of 6.0%.
5Assumes the full exchange of Class B and Class C units in HLA for Class A common stock of HLI pursuant to the exchange agreement.
Hamilton Lane l Global Leader in the Private Markets | Page 15 |
Management and Advisory Fees
Three Months Ended September 30, | Six Months Ended September 30, | ||||||
(Dollars in thousands) | 2018 | 2019 | % Change | 2018 | 2019 | % Change | |
Management and advisory fees | |||||||
Specialized funds | $22,736 | $26,985 | 19 % | $43,751 | $53,944 | 23 % | |
Customized separate accounts | 21,106 | 22,466 | 6 % | 41,493 | 44,429 | 7 % | |
Advisory, reporting and other | 8,315 | 8,053 | (3)% | 16,474 | 16,468 | 0 % | |
Distribution management | 710 | 702 | (1)% | 1,798 | 2,061 | 15 % | |
Fund reimbursement revenue | 381 | 990 | 160 % | 711 | 2,845 | 300 % | |
Total management and advisory fees | $53,248 | $59,196 | 11 % | $104,227 | $119,747 | 15 % | |
Other: 4%
Advisory and reporting: 14%
Six Months
Ended
September 30,
2019
Customized separate accounts: 37%
Specialized funds: 45%
Hamilton Lane l Global Leader in the Private Markets | Page 16 |
Incentive Fees
Three Months Ended September 30, | Six Months Ended September 30, | ||||||
(Dollars in thousands) | 2018 | 2019 | % Change | 2018 | 2019 | % Change | |
Incentive fees | |||||||
Secondary Fund II | $142 | $387 | 173 % | $583 | $553 | (5)% | |
Co-investment Fund II | 1,182 | 1,429 | 21 % | 6,340 | 3,753 | (41)% | |
Other specialized funds | 761 | 3,164 | 316 % | 886 | 3,313 | 274 % | |
Customized separate accounts | 500 | 116 | (77)% | 7,159 | 1,612 | (77)% | |
Incentive fees | $2,585 | $5,096 | 97 % | $14,968 | $9,231 | (38)% | |
As of | ||||||
September 30, 2018 | June 30, 2019 | September 30, 2019 | YoY % Change | QoQ % Change | ||
Allocated carried interest | ||||||
Secondary Fund II | $5,698 | $4,314 | $4,318 | (24)% | 0 % | |
Secondary Fund III | 38,278 | 38,430 | 35,950 | (6)% | (6)% | |
Secondary Fund IV | 24,922 | 34,770 | 38,316 | 54 % | 10 % | |
Co-investment Fund II | 66,932 | 57,505 | 56,327 | (16)% | (2)% | |
Co-investment Fund III | 45,001 | 50,314 | 49,570 | 10 % | (1)% | |
Co-investment Fund IV | - | 1,573 | 4,064 | N/A | 158 % | |
Other specialized funds | 37,392 | 50,762 | 56,668 | 52 % | 12 % | |
Customized separate accounts | 114,458 | 128,231 | 136,803 | 20 % | 7 % | |
Total allocated carried interest | $332,681 | $365,899 | $382,016 | 15 % | 4 % | |
Hamilton Lane l Global Leader in the Private Markets | Page 17 |
Assets Under Management
September 30, 2018 | June 30, 2019 | September 30, 2019 | YoY % | QoQ % | ||
(Dollars in millions) | Change | Change | ||||
Assets under management / advisement | ||||||
Assets under management | $58,092 | $64,304 | $65,680 | 13 % | 2 % | |
Assets under advisement | 394,083 | 408,957 | 415,675 | 5 % | 2 % | |
Total assets under management /advisement | $452,175 | $473,261 | $481,355 | 6 % | 2 % | |
Fee-earning assets under management | ||||||
Customized separate accounts | ||||||
Balance, beginning of period | $20,209 | $22,160 | $22,511 | 11 % | 2 % | |
Contributions | 999 | 829 | 695 | (30)% | (16)% | |
Distributions | (267) | (499) | (343) | 28 % | (31)% | |
Foreign exchange, market value and other | (109) | 21 | 14 | N/A | (33)% | |
Balance, end of period | $20,832 | $22,511 | $22,877 | 10 % | 2 % | |
Specialized funds | ||||||
Balance, beginning of period | $10,333 | $11,434 | $12,285 | 19 % | 7 % | |
Contributions | 547 | 968 | 1,100 | 101 % | 14 % | |
Distributions | (101) | (117) | (251) | 149 % | 115 % | |
Foreign exchange, market value and other | (6) | - | - | N/A | N/A | |
Balance, end of period | $10,773 | $12,285 | $13,134 | 22 % | 7 % | |
Total | ||||||
Balance, beginning of period | $30,542 | $33,594 | $34,796 | 14 % | 4 % | |
Contributions | 1,546 | 1,797 | 1,795 | 16 % | 0 % | |
Distributions | (368) | (616) | (594) | 61 % | (4)% | |
Foreign exchange, market value and other | (115) | 21 | 14 | N/A | (33)% | |
Balance, end of period | $31,605 | $34,796 | $36,011 | 14 % | 3 % | |
Hamilton Lane l Global Leader in the Private Markets | Page 18 |
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands except share and per share amounts) | March 31, 2019 | September 30, 2019 | ||
Assets | ||||
Cash and cash equivalents | $49,357 | $71,899 | ||
Restricted cash | 2,233 | 3,184 | ||
Fees receivable | 20,320 | 17,628 | ||
Prepaid expenses | 4,714 | 5,401 | ||
Due from related parties | 2,628 | 4,198 | ||
Furniture, fixtures and equipment, net | 8,108 | 8,026 | ||
Lease right-of-use assets, net | - | 9,689 | ||
Investments | 154,491 | 174,134 | ||
Deferred income taxes | 107,726 | 140,745 | ||
Other assets | 11,014 | 10,478 | ||
Total assets | $360,591 | $445,382 | ||
Liabilities and Equity | ||||
Accounts payable | $2,619 | $1,964 | ||
Accrued compensation and benefits | 12,216 | 20,689 | ||
Deferred incentive fee revenue | 3,704 | 3,704 | ||
Debt | 70,954 | 69,107 | ||
Accrued members' distributions | 17,081 | 3,836 | ||
Payable to related parties pursuant to tax receivable agreement | 69,636 | 101,322 | ||
Dividends payable | 5,673 | 8,023 | ||
Lease liabilities | - | 10,471 | ||
Other liabilities (includes $0 and $15,913 at fair value) | 8,986 | 21,635 | ||
Total liabilities | 190,869 | 240,751 | ||
Class A common stock, $0.001 par value, 300,000,000 authorized; 27,367,477 and 29,824,686 issued and outstanding as of March | ||||
31, 2019 and September 30, 2019, respectively | 27 | 30 | ||
Class B common stock, $0.001 par value, 50,000,000 authorized; 23,516,439 and 22,049,727 issued and outstanding as of March | ||||
31, 2019 and September 30, 2019, respectively | 24 | 22 | ||
Additional paid-in capital | 92,482 | 107,718 | ||
Retained earnings | 17,686 | 28,998 | ||
Accumulated other comprehensive income (loss) | 7 | (7) | ||
Total Hamilton Lane Incorporated stockholders' equity | 110,226 | 136,761 | ||
Non-controlling interests in general partnerships | 5,716 | 5,592 | ||
Non-controlling interests in Hamilton Lane Advisors, L.L.C. | 53,780 | 62,278 | ||
Total equity | 169,722 | 204,631 | ||
Total liabilities and equity | $360,591 | $445,382 | ||
Hamilton Lane l Global Leader in the Private Markets | Page 19 |
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended September 30, | |||||
(Dollars in thousands) | 2018 | 2019 | |||
Operating activities | |||||
Net income | $55,675 | $59,726 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 1,141 | 1,608 | |||
Change in deferred income taxes | 2,866 | 4,728 | |||
Change in payable to related parties pursuant to tax receivable agreement | (839) | 150 | |||
Equity-based compensation | 3,182 | 3,483 | |||
Equity in income of investees | (5,162) | (9,877) | |||
Gain on sale of investments valued under the measurement alternative | (11,133) | (4,973) | |||
Proceeds received from investments | 7,525 | 4,178 | |||
Other | 93 | 674 | |||
Changes in operating assets and liabilities | 19,708 | 6,506 | |||
Net cash provided by operating activities | 73,056 | 66,203 | |||
Investing activities | |||||
Purchase of furniture, fixtures and equipment | (3,225) | (1,296) | |||
Purchase of other investments | - | (3,967) | |||
Proceeds from sales of investments valued under the measurement alternative | 22,532 | 6,419 | |||
Distributions received from investments | 4,105 | 4,838 | |||
Contributions to investments | (14,832) | (16,774) | |||
Net cash provided by (used in) investing activities | 8,580 | (10,780) | |||
Financing activities | |||||
Proceeds from offering | 129,626 | 147,122 | |||
Purchase of membership interests | (129,626) | (147,122) | |||
Repayments of debt | (11,387) | (1,874) | |||
Draw-down on revolver | - | 15,000 | |||
Repayment of revolver | - | (15,000) | |||
Secured financing | - | 15,750 | |||
Contributions from non-controlling interest in general partnerships | 17 | 29 | |||
Distributions to non-controlling interest in general partnerships | (804) | (702) | |||
Repurchase of Class B common stock | (2) | (2) | |||
Repurchase of Class A shares for employee tax withholding | (174) | (45) | |||
Proceeds received from issuance of shares under Employee Share Purchase Plan | - | 592 | |||
Dividends paid | (8,622) | (13,018) | |||
Members' distributions paid | (32,690) | (32,675) | |||
Net cash used in financing activities | (53,662) | (31,945) | |||
Effect of exchange rate changes on cash and cash equivalents | - | 15 | |||
Increase in cash, cash equivalents, and restricted cash | 27,974 | 23,493 | |||
Cash, cash equivalents, and restricted cash at beginning of the period | 49,383 | 51,590 | |||
Cash, cash equivalents, and restricted cash at end of the period | $77,357 | $75,083 | |||
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Non-GAAP Reconciliation
Reconciliation from Net Income | Year Ended March 31, | Three Months Ended | Six Months Ended | ||||
September 30, | September 30, | ||||||
(Dollars in thousands) | 2014 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Net income attributable to Hamilton Lane Incorporated | $0 | $33,573 | $11,222 | $15,299 | $20,067 | $26,680 | |
Income attributable to non-controlling interests in general partnerships | 4,565 | 564 | 514 | 45 | 394 | 549 | |
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 62,462 | 64,860 | 20,836 | 16,929 | 35,214 | 32,497 | |
Incentive fees1 | (9,309) | (34,406) | (2,585) | (5,096) | (14,968) | (9,231) | |
Incentive fee related compensation2 | 4,511 | 14,983 | 1,243 | 2,392 | 5,970 | 4,309 | |
Interest income | (142) | (255) | (43) | (148) | (85) | (428) | |
Interest expense | 8,503 | 3,039 | 728 | 745 | 1,493 | 1,562 | |
Income tax (benefit) expense | (128) | 30,560 | 5,580 | 2,676 | 7,197 | 7,013 | |
Equity in income of investees | (16,905) | (7,202) | (5,276) | (3,664) | (5,162) | (9,877) | |
Contingent compensation related to acquisition | - | 5,100 | 2,327 | - | 5,100 | - | |
Non-operating loss (income) | 699 | (20,915) | (12,194) | (4,957) | (12,059) | (4,078) | |
Fee Related Earnings | $54,256 | $89,901 | $22,352 | $24,221 | $43,161 | $48,996 | |
Depreciation and amortization | |||||||
1,853 | 2,500 | 632 | 806 | 1,141 | 1,608 | ||
Equity-based compensation | 3,070 | 6,382 | 1,597 | 1,756 | 3,184 | 3,483 | |
Incentive fees | 9,309 | 34,406 | 2,585 | 5,096 | 14,968 | 9,231 | |
Incentive fees attributable to non-controlling interests1 | - | (725) | (52) | (61) | (263) | (160) | |
Incentive fee related compensation2 | (4,511) | (14,983) | (1,243) | (2,392) | (5,970) | (4,309) | |
Interest income | 142 | 255 | 43 | 148 | 85 | 428 | |
Adjusted EBITDA | $64,119 | $117,736 | $25,914 | $29,574 | $56,306 | $59,277 | |
Non-GAAP earnings per share reconciliation | |||||||
Net income attributable to Hamilton Lane Incorporated | $11,222 | $15,299 | $20,067 | $26,680 | |||
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 20,836 | 16,929 | 35,214 | 32,497 | |||
Income tax expense | 5,580 | 2,676 | 7,197 | 7,013 | |||
Contingent compensation related to acquisition | 2,327 | - | 5,100 | - | |||
Adjusted pre-tax net income | 39,965 | 34,904 | 67,578 | 66,190 | |||
Adjusted income taxes3 | (10,795) | (8,308) | (18,253) | (15,753) | |||
Adjusted net income | $29,170 | $26,596 | $49,325 | $50,437 | |||
Weighted-average shares of Class A common stock outstanding - diluted
Exchange of Class B and Class C units in HLA4
Adjusted shares outstanding
Non-GAAP earnings per share
23,257,419 | 27,632,890 | 23,015,445 | 27,341,594 |
30,181,224 | 25,914,311 | 30,391,448 | 26,166,086 |
53,438,643 | 53,547,201 | 53,406,893 | 53,507,680 |
$0.55 | $0.50 | $0.92 | $0.94 |
- Incentive fees for the three and six months ended September 30, 2018 included $2.6 million and $2.8 million, respectively, ofnon-cash carried interest. Of the $2.6 million for the three-month period, $2.5 million is included in net income and $0.1
million is attributable to non-controlling interests. Of the $2.8 million for the six-month period, $2.5 million is included in net income and $0.3 million is attributable to non-controlling interests.
2Incentive fee related compensation includes incentive fee compensation expense, bonus and other revenue sharing related to carried interest that is classified as base compensation. Incentive fee related compensation for the three and six months ended September 30, 2018 excludes compensation expense related to the recognition of incentive fees included in net income from one of our co-investment funds of $2.5 million as the related incentive fee compensation was recognized in fiscal
2016.
3Represents corporate income taxes at our estimated statutory tax rate of 23.8% for the six month period ended September 30, 2019 and 27.0% for the six month period ended September 30, 2018 applied to adjusted pre-tax net income. The 23.8% is
based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.8%. The 27.0% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 6.0%. 4Assumes the full exchange of Class B and Class C units in HLA for Class A common stock of HLI pursuant to the exchange agreement.
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Terms
Adjusted EBITDAis 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 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 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-GAAPearnings per sharemeasures 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 incomeis 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:
- the net asset value of our clients' and funds' underlying investments;
- the unfunded commitments to our clients' and funds' underlying investments, and;
- 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-earningassets 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. 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"), a Delaware corporation, 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.
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Disclosures
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, changes in our regulatory environment and tax status; market conditions generally; our ability to access suitable investment opportunities for our clients; our ability to maintain our fee structure; our ability to attract and retain key employees; our ability to manage our obligations under our debt agreements; defaults by clients and third-party investors on their obligations to us; our ability to comply with investment guidelines set by our clients; and our ability to receive distributions from Hamilton Lane Advisors, L.L.C. to fund our payment of dividends, taxes and other expenses.
The forgoing 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, 2019, 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.
As of November 5, 2019
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Hamilton Lane Inc. published this content on 05 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 November 2019 15:09:02 UTC