Hamilton Lane Incorporated · NASDAQ:HLNE
Hamilton Lane — Q3 FY2018 Earnings Presentation
30 slides from Hamilton Lane's earnings presentation, Feb 6, 2018
Slide 1: Fiscal Year 2018 Third Quarter Results
Fiscal Year 2018 Third Quarter Results Earnings Presentation - February 6, 2018
Slide 2: Today's Speakers
Today’s Speakers Hartley Rogers Erik Hirsch Randy Stilman Demetrius Sidberry Chairman 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 Business amount of approximately $424 billion, growing 28% compared to December 31, 2016 Performance • Assets under management and fee-earning assets under management were approximately $50 billion and $3
Slide 4: Growing Asset Footprint & Influence
Growing Asset Footprint & Influence Total Assets Under Management/Advisement ($B)1 $500 $424B Q-o-Q Growth AUM & AUA $450 AUA: 5% $400 AUM: 5% $50 $40 $350 $300 % R: 21 CAG $35 $250 $32 $374 $200 $24 $30 $292 $22 $150 $16 $19 $11 $13 $205 $189 $100 $7 $147 $147 $129 $6 $95 $81 $50 $77 $79 $36 $51 $0
Slide 5: Fee-Earning AUM Driving Revenues
Fee-Earning AUM Driving Revenues Fee-earning AUM growth continues... Total Fee-Earning Assets Under Management ($B)1 Total Management Fee Revenues as a % of Average FEAUM $40 0.58% 0.55% 0.56% 0.57% 0.56% 0.58% 13% Y-o-Y Growth $35 $30 14% $30 CAGR: $27 $26 $25 $24 $9 $22 $9 $8 $20 $19 $7 $6 $16 $5
Slide 6: Year in Review: Calendar 2017
Year in Review: Calendar 2017 Expanding Client Base and Asset Footprint • New client adds and separate account re-ups continue • Completed the raise of our latest flagship secondary fund, Hamilton Lane Secondary Fund IV, L.P., which attracted $1.9 billion in commitments--our largest specialized prod
Slide 7: It All Comes Back to Our Culture
It All Comes Back to Our Culture Keeping clients in sight People matter Award-winning culture 2017 2012 - 2017 Page 7
Slide 8: Private Markets Opportunity Set
Private Markets Opportunity Set The investable universe of private companies continues to grow Public Markets Growth Public vs. Private Company Valuations 200% $1,000 160% 120% 80% $800 $849 +46% 40% +5% 0% 2011 2016 $600 Growth in Number of Public Companies USD in Millions Growth in Listed Equities
Slide 9: FAQs
FAQs 1 2 3 AUM Growth Incentive Fee Tax Reform Impact Revenue Page 9
Slide 10: AUM Growth
1 AUM Growth AUM AUA 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 11: Incentive Fee Revenue and Carry Evolution
2 Incentive Fee Revenue Over the past five fiscal years, incentive fees represented an average of 7% of total revenue Carry Evolution FY 2013 Today 16 Carry Generating Vehicles >40 Carry Generating Vehicles $93M of allocated carry $301M of allocated carry Page 11
Slide 12: Tax Reform - Impact on the Private Markets
3 Tax Reform - Impact on the Private Markets “Private equity is very much a big winner out of the reform” - The Wall Street Journal 1/24/18 • Several items in the tax reform bill will significantly impact the profitability and cash flow of private deals. Some will result in lower tax expenses while
Slide 13: Tax Reform - Impact on HLNE
3 Tax Reform - Impact on HLNE Q2 FY18 total FY18 total FY19 total estimated statutory estimated statutory estimated statutory tax rate1 tax rate post U.S. tax tax rate3 reform2 39.7% 36.5% 26.7% Expected impact = ~20% tax impact to HLNE earnings 1 39.7% based on a federal tax statutory rate of 35.0%
Slide 14: Financial Highlights
Financial Highlights
Slide 15: 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 Y-o-Y Growth: 16% 200 CAGR: 11% • Y-o-Y growth of 16% USD in Millions 150
Slide 16: Consolidated Earnings
Consolidated Earnings Profitability stable and growing Net Income Attributable to HLI YTD Long-Term Growth USD in Millions • $(6.3)M in net income attributable to HLI for the quarter • No comparable measure in prior period as that was N/A $4 N/A $1 before the Company’s IPO Q3 FY17 Q3 FY18 FY13 FY17
Slide 17: 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 $131 $120 alongside our clients $90 $103 $103 $78 $92 • For 12/31/17, the total investment balance cons
Slide 18: Fiscal Year 2018 Third Quarter Results
Fiscal Year 2018 Third Quarter Results Earnings Presentation - February 6, 2018
Slide 19: Appendix
Appendix
Slide 20: 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) 2016 2017 % Change 2016 2017 % Change Revenues Management and advisory fees $42,009 $48,344 15% $126,273 $146,326 16% Incen
Slide 21: 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) 2016 2017 % Change 2016 2017 % Change Adjusted EBITDA Management and advisory fees $42,009 $48,344 15% $126,273 $146,326 16% Total expenses 25,579 30,7
Slide 22: Management and Advisory Fees
Management and Advisory Fees Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2016 2017 % Change 2016 2017 % Change Management and advisory fees Customized separate accounts $17,826 $19,860 11% $52,794 $58,253 10% Specialized funds 17,124 19,132 12% 53,407 63,582
Slide 23: Incentive Fees
Incentive Fees Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2016 2017 % Change 2016 2017 % Change Incentive fees Secondary Fund II $469 $1,124 140% $2,110 $2,239 6% Co-investment Fund II - 14,579 N/A - 14,579 N/A Other specialized funds 86 868 909% 4,174 862
Slide 24: Assets Under Management
Assets Under Management (Dollars in millions) December 31, 2016 September 30, 2017 December 31, 2017 YoY % Change QoQ % Change Assets under management / advisement Assets under management $40,367 $47,819 $50,295 25% 5% Assets under advisement 292,178 356,774 374,132 28% 5% Total assets under managem
Slide 25: Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands except share and per share amounts) March 31, 2017 December 31, 2017 Assets Cash and cash equivalents $32,286 $68,677 Restricted cash 1,849 1,787 Fees receivable 12,113 13,287 Prepaid expenses 2,593 1,584 Due from related partie
Slide 26: Condensed Consolidated Statements of Cash Flows (Unaudited)
Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended December 31, (Dollars in thousands) 2016 2017 Operating activities Net income $57,812 $61,679 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,440 1,396 Chan
Slide 27: Non-GAAP Reconciliation
Non-GAAP Reconciliation Reconciliation from Net Income Three Months Ended December 31, Nine Months Ended December 31, (Dollars in thousands) 2016 2017 2016 2017 Net (loss) income attributable to Hamilton Lane Incorporated1 $- $(6,309) $- $3,843 Income attributable to non-controlling interests in gen
Slide 28: Gross Leverage Ratio
Gross Leverage Ratio Twelve Months Ended, (Dollars in thousands) March 31, 2017 December 31, 2017 Principal amount of debt outstanding $86,100 $84,981 Adjusted EBITDA 83,031 105,966 Gross leverage ratio 1.0x 0.8x Page 28
Slide 29: 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 30: 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