Hamilton Lane Incorporated · NASDAQ:HLNE
Hamilton Lane — Q3 FY2019 Earnings Presentation
29 slides from Hamilton Lane's earnings presentation, Feb 5, 2019
Slide 1: Fiscal Year 2019 Third Quarter Earnings Presentation
Fiscal Year 2019 Third Quarter Earnings Presentation - February 5, 2019
Slide 2: Today's Speakers
Today’s Speakers Hartley Rogers Erik Hirsch Randy Stilman Karen Greene Chairman Vice Chairman Chief Financial Officer Head of Investor Relations Hamilton Lane | Global Leader in the Private Markets Page 2
Slide 3: Period Highlights
Period Highlights Business Performance • Total asset footprint (assets under management/advisement) reached approximately $469 billion, growing 10% compared to December 31, 2017 • Assets under management and fee-earning assets under management were approximately $59 billion and $32 billion, respecti
Slide 4: Growing Asset Footprint & Influence
Growing Asset Footprint & Influence $469B Total Assets Under Management/Advisement ($B)1 AUM & AUA $500 Y-o-Y Growth $59 AUA: 10% $50 AUM: 17% $400 $410 $40 $374 CAGR: 20% $300 $35 $32 $292 $200 $30 $24 $205 $22 $189 $16 $19 $147 $147 $11 $13 $129 $100 $7 $79 $95 $81 $6 $77 $36 $51 $0 2005 2006 2007
Slide 5: Fee-Earning AUM Driving Revenues
Fee-Earning AUM Driving Revenues Fee-Earning AUM growth continues... Total Fee-Earning Assets Under Management ($B) ~9% YoY Growth $40 0.55% 0.56% 0.57% 0.56% 0.58%¹ 0.55%² $35 $31 $32 $30 % CAGR: 13 $27 $30 $24 $10 $11 $25 $22 $9 $9 $20 $19 $7 $6 $15 $5 $10 $21 $21 $17 $18 $20 $16 $5 $14 $0 Mar-14
Slide 6: AUM Growth
AUM Growth AUM AUA Customized Specialized Advisory Separate Accounts Funds Services Diverse mix of existing and Select funds in market: Typically larger clients with wide- prospective clients seeking to • Co-investment fund ranging mandates which include further or establish relationship with techno
Slide 7: Hamilton Lane Data
Hamilton Lane Data Hamilton Lane Fund Data Hamilton Lane Portfolio Company Data By Strategy By Sector Origination Distressed Natural Resources Consumer Discretionary Consumer Staples Energy & Utilities Infrastructure Venture Capital Growth Equity Financials Healthcare Industrials SMID Buyout Mega/La
Slide 8: Continued Outperformance
Continued Outperformance 20-Year Asset Class Risk-Adjusted Performance 10-Year Asset Class Risk-Adjusted Performance Annualized Time-Weighted Return as of 9/30/2018 Annualized Time-Weighted Return as of 9/30/2018 15% 15% 12% 12% 9% 9% 6% 6% 3% 3% 0% 0% Private Equity MSCI World Index Private Equity
Slide 9: Vintage Year Performance
Vintage Year Performance Pooled Returns by Vintage Year 40% 30% Buyout IRR vs. PME By Vintage Year 20% 10% 0% 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Buyout Pooled IRR Buyout 1 and 2 Quartile Pooled IRR st nd MSCI World PME 40% Credit IRR vs. PME 30% By Vintage Year 20% 10% 0% 1998 2000 20
Slide 10: Outperformance of U.S. Buyout Funds
Volatility Impact Russell 3000 Performance vs. Volatility U.S. Buyout Outperformance vs. Russell 3000 Volatility 1990-2018 1990-2018 40% 40% Outperformance of U.S. Buyout Funds 30% 30% Rolling 3-Year Annualized 20% 20% Annualized Return Rolling 3-Year 10% 10% 0% 0% -10% -10% -20% -20% 5% 10% 15% 20%
Slide 11: Return Premiums
Return Premiums Risk Premiums & Volatility Regimes Based on Rolling 3-Year Periods 1990–2018 Public Equity Premium Buyout Premium Above the Risk-Free Rate Above Public Equities 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% Lowest Volatility Highest Volatility Lowest Volatility Highest Volatility Quartile Quart
Slide 12: Opportunities Are Plentiful
Opportunities Are Plentiful PPMs Received by Hamilton Lane 1000 800 600 400 200 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Hamilton Lane Diligence (February 2019) Hamilton Lane | Global Leader in the Private Markets Page 12
Slide 13: Financial Highlights
Financial Highlights
Slide 14: Consolidated Revenue
Consolidated Revenue Strong revenue growth across management and advisory fees and incentive fees Management and Advisory Fees YTD Long-Term Growth Y-o-Y Growth: 9% CAGR: 12% • Represented an average of 90% of total revenues over the past five 200 $195 fiscal years USD in Millions 150 $146 $160 • Y-
Slide 15: Consolidated Earnings
Consolidated Earnings Profitability stable and growing Net Income Attributable to HLI YTD Long-Term Growth Y-o-Y Growth: 564% USD in Millions • $5M in net income attributable to HLI for the quarter $26 $4 N/A $17 Q3 FY18 Q3 FY19 FY13 FY18 Adjusted EBITDA1 YTD Long-Term Growth Y-o-Y Growth: 2% CAGR:
Slide 16: Other Key Items
Other Key Items Strong balance sheet with investments in our own products and a modest amount of leverage... Investments $150 $147 $120 $137 • For 12/31/18, the total investment balance consisted of ~$135M in USD in Millions $120 $90 $103 $103 equity method investments in our funds and ~$12M in tech
Slide 17: Fiscal Year 2019 Third Quarter
Fiscal Year 2019 Third Quarter Earnings Presentation - February 5, 2019
Slide 18: Appendix
Appendix
Slide 19: Condensed Consolidated Statements of Income (Unaudited)
Condensed Consolidated Statements of Income (Unaudited) Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands except share and per share amounts) 2017 2018 % Change 2017 2018 % Change Revenues Management and advisory fees $48,344 $55,617 15% $146,326 $159,844 9% Incent
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands except share and per share amounts) 2017 2018 % Change 2017 2018 % Change Adjusted EBITDA Management and advisory fees $48,344 $55,617 15% $146,326 $159,844 9% Total expenses 30,710 37,75
Slide 21: Management and Advisory Fees
Management and Advisory Fees Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2017 2018 % Change 2017 2018 % Change Management and advisory fees Customized separate accounts $19,860 $21,595 9% $58,253 $63,087 8% Specialized funds 19,132 23,413 22% 63,582 67,164 6
Slide 22: Incentive Fees
Incentive Fees Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2017 2018 % Change 2017 2018 % Change Incentive fees Secondary Fund II $1,124 $741 (34)% $2,239 $1,324 (41)% Co-investment Fund II 14,579 8,618 (41)% 14,579 14,959 3% Other specialized funds 868 867
Slide 23: Assets Under Management
Assets Under Management (Dollars in millions) December 31, 2017 September 30, 2018 December 31, 2018 YoY % Change QoQ % Change Assets under management / advisement Assets under management $50,295 $58,092 $58,840 17% 1% Assets under advisement 374,132 394,083 409,924 10% 4% Total assets under managem
Slide 24: Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands except share and per share amounts) March 31, 2018 December 31, 2018 Assets Cash and cash equivalents $47,596 $78,941 Restricted cash 1,787 2,200 Fees receivable 14,924 16,963 Prepaid expenses 2,301 2,368 Due from related partie
Slide 25: Condensed Consolidated Statements of Cash Flows (Unaudited)
Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended December 31, (Dollars in thousands) 2017 2018 Operating activities Net income $61,679 $78,590 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,396 1,759 Chan
Slide 26: Non-GAAP Reconciliation
Non-GAAP Reconciliation Reconciliation from Net Income Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2017 2018 2017 2018 Net income (loss) attributable to Hamilton Lane Incorporated $(6,309) $5,458 $3,843 $25,525 Income attributable to non-controlling interest
Slide 27: Gross Leverage Ratio
Gross Leverage Ratio Twelve Months Ended (Dollars in thousands) March 31, 2018 December 31, 2018 Principal amount of debt outstanding $84,513 $72,188 Adjusted EBITDA 132,586 133,940 Gross leverage ratio 0.6x 0.5x Hamilton Lane | Global Leader in the Private Markets Page 27
Slide 28: Terms
Terms Adjusted EBITDA is used to measure our profitability including carried interest. We believe Adjusted EBITDA is useful to investors because it enables them to better evaluate the performance of our core business across reporting periods. Adjusted EBITDA represents net income excluding (a) inter
Slide 29: Disclosures
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,” “exp