Hamilton Lane Incorporated · NASDAQ:HLNE
Hamilton Lane — Q2 FY2018 Earnings Presentation
31 slides from Hamilton Lane's earnings presentation, Nov 7, 2017
Slide 1: Fiscal Year 2018 Second Quarter Results
Fiscal Year 2018 Second Quarter Results Earnings Presentation - November 7, 2017
Slide 2: Today's Speakers
Today’s Speakers Mario Giannini Erik Hirsch Randy Stilman Demetrius Sidberry Chief Executive Officer Vice Chairman Chief Financial Officer Head of Investor Relations Page 2
Slide 3: Period Highlights
Period Highlights • Total asset footprint (assets under management/advisement) reached a record amount of Business approximately $405 billion, growing 29% compared to September 30, 2016 Performance • Assets under management and fee-earning assets under management were approximately $48 billion and $
Slide 4: Growing Asset Footprint & Influence
Growing Asset Footprint & Influence Total Assets Under Management/Advisement ($B)1 $400 $405B AUM & AUA Q-o-Q Growth $350 AUA: 14% $48 AUM: 4% $40 $300 $250 2% R: 2 CAG $35 $200 $32 $357 $24 $30 $150 $292 $22 $16 $19 $100 $11 $13 $205 $189 $7 $147 $147 $129 $50 $6 $95 $81 $77 $79 $36 $51 $0 2005 200
Slide 5: Fee-Earning AUM Driving Revenues
Fee-Earning AUM Driving Revenues Total Fee-Earning Assets Under Management ($B)1 40 Total Management Fee Revenues as a % of Average FEAUM 13% Y-o-Y Growth 35 0.58% 0.55% 0.56% 0.57% 0.57% 0.59% 30 $29 $27 14% $26 CAGR: 25 $24 $9 $22 $9 $8 20 $19 $7 $6 $16 $5 15 $5 $18 $18 $20 10 $17 $16 $14 5 $11 0
Slide 6: Market Overview Tour
Market Overview Tour Insights Powered by HL Data 2016 Attendee Stats 3,400+ Funds 700+ 17 Industry-leading Senior HL GPs, LPs and executives 1,200+ General Partners private markets participants in presented attendance 40 Vintage Years $3.7T Total Fund Commitments 443 9 Global institutions Cities aro
Slide 7: Leading, Global Private Markets Solutions Provider
Leading, Global Private Markets Solutions Provider B u yo u t Gr ow it th d E re Pr i m a r y Fu n d s qu C it y ~$48B ure Rea Infra st r uc t Private Markets Funds l E st ate Investors/Limited of AUM1 Partners (LPs) t i on s ~$357B Private Companies Co- Inv sac Ven e st s r an of AUA1 rc e me t yT
Slide 8: Clients and Offerings
Clients and Offerings Who We Serve What We Do for Our Clients Public/Corporate Sovereign Customized Specialized Funds Pensions Wealth Funds Separate Accounts Reporting, Endowment Funds Taft Hartley Advisory Services Monitoring, Data and Analytics Distribution Financial Institutions HNW/Family Office
Slide 9: Strong Market Backdrop
Strong Market Backdrop Global Pension Fund Assets Total Assets and Liability Gaps in U.S. Pensions in USD Trillions in USD Trillions $60 6% 56.6 Total 66% $50 8,187 4,276 $40 4% State and Local 67% 11% 37.1 3,818 1,879 $30 29.4 Federal 44% $20 21.3 1,515 1,890 $10 Private 85% 2,855 507 $0 2004 2007
Slide 10: Hamilton Lane's Data
Hamilton Lane’s Data Hamilton Lane Fund Data Sample Hamilton Lane Portfolio Company By Strategy Data Sample By Sector Mega/Large Buyout SMID Buyout Consumer Venture Capital Discretionary Growth Equity Consumer Staples Origination Energy & Utilities Distressed Financials Natural Resources Healthcare
Slide 11: Global Private Markets Fundraising
Global Private Markets Fundraising Global Private Markets Fundraising by Geography $800 2.5% Annualized $700 2.0% % of MSCI World Market Cap $600 USD in Billions $500 1.5% $400 1.0% $300 $200 0.5% $100 $0 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Slide 12: PPMs Received by Hamilton Lane
PPMs Received by Hamilton Lane PPMs Received by Hamilton Lane 900 Annualized 800 700 600 500 400 300 200 100 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 North America Western Europe ROW Source: Hamilton Lane Data (October 2017) • 2017 on track to be a record yea
Slide 13: Risk-Adjusted Returns
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 Equity Global Equities 3.7% 1
Slide 14: Opportunity Pipeline
Opportunity Pipeline Customized Separate Specialized Advisory Accounts Funds Services Diverse mix of existing and Select funds in market: Typically larger clients with prospective clients seeking to • Co-Investment Fund wide-ranging mandates; further or establish relationship opportunity set continu
Slide 15: Financial Highlights
Financial Highlights
Slide 16: Consolidated Revenues
Consolidated Revenues Revenues continue to be driven primarily by management and advisory fees Management and Advisory Fees • Represented an average of 93% of total revenues over the YTD Long-Term Growth past five fiscal years 200 • Y-o-Y growth of 16% Y-o-Y Growth: 16% CAGR: 11% USD in Millions 150
Slide 17: Consolidated Earnings
Consolidated Earnings Profitability stable and growing Net Income Attributable to HLI YTD Long-Term Growth • $4.7M in net income attributable to HLI for the quarter USD in Millions • No comparable measure in prior period as that was before the Company’s IPO $10 N/A N/A $1 Q1 FY17 Q2 FY18 FY13 FY17 A
Slide 18: Other Key Items
Other Key Items Strong balance sheet with investments in our own products and a modest amount of leverage... Investments $150 • Vast majority of our investments are those made USD in Millions $120 $120 $127 alongside our clients $90 $103 $103 $78 $92 • For 9/30/17, the total investment balance consi
Slide 19: Fiscal Year 2018 Second Quarter Results
Fiscal Year 2018 Second Quarter Results Earnings Presentation - November 7, 2017
Slide 20: Appendix
Appendix
Slide 21: Condensed Consolidated Statements of Income (Unaudited)
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% Incen
Slide 22: Non-GAAP Financial Measures
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 28,7
Slide 23: Management and Advisory Fees
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,
Slide 24: Incentive Fees
Incentive Fees Three Months Ended September 30, Six Months Ended September 30, (Dollars in thousands) 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,
Slide 25: Assets Under Management
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 man
Slide 26: Condensed Consolidated Balance Sheets (Unaudited)
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 relate
Slide 27: Condensed Consolidated Statements of Cash Flows (Unaudited)
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 d
Slide 28: Non-GAAP Reconciliation
Non-GAAP Reconciliation Reconciliation from Net Income 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
Slide 29: Gross Leverage Ratio
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 29
Slide 30: Terms
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
Slide 31: 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