UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to ___________________________

Commission file number 001-38021

HAMILTON LANE INCORPORATED

(Exact name of Registrant as specified in its charter)

Delaware		26-2482738
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
One Presidential Blvd.,	4th Floor
Bala Cynwyd,	PA	19004
(Address of principal executive offices)		(Zip Code)

(610) 934-2222

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	HLNE	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of November 2, 2020, there were 34,910,642 shares of the registrant’s Class A common stock, par value $0.001, and 17,841,211 shares of the registrant’s Class B common stock, par value $0.001, outstanding.

Table of Contents

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020	3
Condensed Consolidated Statements of Income for the three and six months ended September 30, 2020 and 2019	4
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 2020 and 2019	5
Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended September 30, 2020 and 2019	6
Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2020 and 2019	8
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures about Market Risk	43
Item 4. Controls and Procedures	45
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	46
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6. Exhibits	47
Signatures	48

This Quarterly Report on Form 10-Q (“Form 10-Q”) includes certain information regarding the historical performance of our specialized funds and customized separate accounts. An investment in shares of our Class A common stock is not an investment in our specialized funds or customized separate accounts. In considering the performance information relating to our specialized funds and customized separate accounts contained herein, current and prospective Class A common stockholders should bear in mind that the performance of our specialized funds and customized separate accounts is not indicative of the possible performance of shares of our Class A common stock and is also not necessarily indicative of the future results of our specialized funds or customized separate accounts, even if fund investments were in fact liquidated on the dates indicated, and there can be no assurance that our specialized funds or customized separate accounts will continue to achieve, or that future specialized funds and customized separate accounts will achieve, comparable results.

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are owned by us or licensed by us. We also own or have the rights to copyrights that protect the content of our solutions. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this Form 10-Q are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, trade names and copyrights.

This Form 10-Q may include trademarks, service marks or trade names of other companies. Our use or display of other parties’ trademarks, service marks, trade names or products is not intended to, and does not imply a relationship with, or endorsement or sponsorship of us by, the trademark, service mark or trade name owners.

Unless otherwise indicated, information contained in this Form 10-Q concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources (including industry publications, surveys and forecasts), and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets that we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently verified any third-party information.

Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” the “Company,” “Hamilton Lane” and similar terms refer to Hamilton Lane Incorporated and its consolidated subsidiaries. As used in this Form 10-Q, (i) the term “HLA” refers to Hamilton Lane Advisors, L.L.C. and (ii) the terms “Hamilton Lane Incorporated” and “HLI” refer solely to Hamilton Lane Incorporated, a Delaware corporation, and not to any of its subsidiaries.

Cautionary Note Regarding Forward-Looking Information

Some of the statements in this Form 10-Q may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 fund commitments; our ability to comply with investment guidelines set by our clients; our ability to manage the effects of events outside of our control; and our ability to receive distributions from HLA 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, 2020 (our “2020 Form 10-K”) and in our subsequent reports filed from time to time with the Securities and Exchange Commission (the “SEC”). The forward-looking statements included in this Form 10-Q are made only as of the date we filed this report. 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.

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Hamilton Lane Incorporated

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

	September 30,		March 31,
	2020		2020
Assets
Cash and cash equivalents	$	81,987	$	50,124
Restricted cash	3,042		3,086
Fees receivable	33,072		30,384
Prepaid expenses	5,656		6,988
Due from related parties	3,514		2,605
Furniture, fixtures and equipment, net	8,223		7,402
Lease right-of-use assets, net	9,997		9,577
Investments	224,032		207,747
Deferred income taxes	220,815		137,941
Other assets	17,751		17,675
Total assets	$	608,089	$	473,529
Liabilities and Equity
Accounts payable	$	2,303	$	1,968
Accrued compensation and benefits	36,503		10,804
Deferred incentive fee revenue	3,704		3,704
Debt	74,084		74,524
Accrued members’ distributions	4,897		5,829
Payable to related parties pursuant to tax receivable agreement	176,046		98,956
Dividends payable	10,772		8,027
Lease liabilities	10,592		10,184
Other liabilities (includes $17,703 and 13,394 at fair value)	25,993		22,132
Total liabilities	344,894		236,128
Commitments and contingencies (Note 13)
Preferred stock, $0.001 par value, 10,000,000 authorized, none issued	—		—
Class A common stock, $0.001 par value, 300,000,000 authorized; 34,910,642 and 29,842,784 issued and outstanding as of September 30, 2020 and March 31, 2020 , respectively	35		30
Class B common stock, $0.001 par value, 50,000,000 authorized; 17,841,211 and 22,049,727 issued and outstanding as of September 30, 2020 and March 31, 2020, respectively	18		22
Additional paid-in-capital	141,010		107,727
Retained earnings	51,275		47,090
Accumulated other comprehensive loss	—		(78)
Total Hamilton Lane Incorporated stockholders’ equity	192,338		154,791
Non-controlling interests in general partnerships	3,506		4,853
Non-controlling interests in Hamilton Lane Advisors, L.L.C.	67,351		77,757
Total equity	263,195		237,401
Total liabilities and equity	$	608,089	$	473,529

See accompanying notes to the condensed consolidated financial statements.

3

Hamilton Lane Incorporated

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Revenues
Management and advisory fees	$	66,367	$	59,196	$	133,634	$	119,747
Incentive fees	18,064		5,096		20,541		9,231
Total revenues	84,431		64,292		154,175		128,978
Expenses
Compensation and benefits	35,027		23,693		65,378		47,797
General, administrative and other	11,090		13,674		21,650		27,263
Total expenses	46,117		37,367		87,028		75,060
Other income (expense)
Equity in income (loss) of investees	17,979		3,664		(3,224)		9,877
Interest expense	(493)		(745)		(980)		(1,562)
Interest income	93		148		117		428
Non-operating income	875		4,957		600		4,078
Total other income (expense)	18,454		8,024		(3,487)		12,821
Income before income taxes	56,768		34,949		63,660		66,739
Income tax expense	12,169		2,676		14,093		7,013
Net income	44,599		32,273		49,567		59,726
Less: Income (loss) attributable to non-controlling interests in general partnerships	1,732		45		(278)		549
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.	21,054		16,929		24,786		32,497
Net income attributable to Hamilton Lane Incorporated	$	21,813	$	15,299	$	25,059	$	26,680
Basic earnings per share of Class A common stock	$	0.66	$	0.56	$	0.79	$	0.99
Diluted earnings per share of Class A common stock	$	0.66	$	0.56	$	0.79	$	0.98
Dividends declared per share of Class A common stock	$	0.313	$	0.275	$	0.625	$	0.55

See accompanying notes to the condensed consolidated financial statements.

4

Hamilton Lane Incorporated

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Net income	$	44,599	$	32,273	$	49,567	$	59,726
Other comprehensive income (loss), net of tax
Foreign currency translation	140		(42)		130		(29)
Total other comprehensive income (loss), net of tax	140		(42)		130		(29)
Comprehensive income	44,739		32,231		49,697		59,697
Less:
Comprehensive income (loss) attributable to non-controlling interests in general partnerships	1,732		45		(278)		549
Comprehensive income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.	21,110		16,908		24,838		32,482
Total comprehensive income attributable to Hamilton Lane Incorporated	$	21,897	$	15,278	$	25,137	$	26,666

See accompanying notes to the condensed consolidated financial statements.

5

Hamilton Lane Incorporated

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands)

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at June 30, 2020	$	33	$	20	$	126,585	$	40,234	$	(84)	$	2,655	$	63,168	$	232,611
Net income	—		—		—		21,813		—		1,732		21,054		44,599
Other comprehensive income	—		—		—		—		84		—		56		140
Equity-based compensation	—		—		1,118		—		—		—		695		1,813
Repurchase of Class A shares for employee tax withholding	—		—		(22)		—		—		—		(14)		(36)
Deferred tax adjustment	—		—		6,014		—		—		—		—		6,014
Dividends declared	—		—		—		(10,772)		—		—		—		(10,772)
Capital distributions to non-controlling interests, net	—		—		—		—		—		(881)		—		(881)
Member distributions	—		—		—		—		—		—		(10,659)		(10,659)
Secondary Offering	2		(2)		6,411		—		—		—		(6,413)		(2)
Employee Share Purchase Plan share issuance	—		—		227		—		—		—		141		368
Equity reallocation between controlling and non-controlling interests	—		—		677		—		—		—		(677)		—
Balance at September 30, 2020	$	35	$	18	$	141,010	$	51,275	$	—	$	3,506	$	67,351	$	263,195

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at March 31, 2020	$	30	$	22	$	107,727	$	47,090	$	(78)	$	4,853	$	77,757	$	237,401
Net income (loss)	—		—		—		25,059		—		(278)		24,786		49,567
Other comprehensive income	—		—		—		—		78		—		52		130
Equity-based compensation	—		—		2,115		—		—		—		1,456		3,571
Repurchase of Class A shares for employee tax withholding	—		—		(22)		—		—		—		(14)		(36)
Deferred tax adjustment	—		—		14,428		—		—		—		—		14,428
Dividends declared	—		—		—		(20,874)		—		—		—		(20,874)
Capital distributions to non-controlling interests, net	—		—		—		—		—		(1,069)		—		(1,069)
Member distributions	—		—		—		—		—		—		(20,626)		(20,626)
Secondary Offerings	5		(4)		15,933		—		—		—		(15,938)		(4)
Employee Share Purchase Plan share issuance	—		—		419		—		—		—		288		707
Equity reallocation between controlling and non-controlling interests	—		—		410		—		—		—		(410)		—
Balance at September 30, 2020	$	35	$	18	$	141,010	$	51,275	$	—	$	3,506	$	67,351	$	263,195

See accompanying notes to the condensed consolidated financial statements.

6

Hamilton Lane Incorporated

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands)

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at June 30, 2019	$	27	$	24	$	93,543	$	21,722	$	14	$	5,932	$	56,573	$	177,835
Net income	—		—		—		15,299		—		45		16,929		32,273
Other comprehensive income	—		—		—		—		(21)		—		(21)		(42)
Equity-based compensation	—		—		902		—		—		—		859		1,761
Repurchase of Class A shares for employee tax withholding	—		—		(14)		—		—		—		(14)		(28)
Deferred tax adjustment	—		—		6,207		—		—		—		—		6,207
Dividends declared	—		—		—		(8,023)		—		—		—		(8,023)
Capital distributions to non-controlling interests, net	—		—		—		—		—		(385)		—		(385)
Member distributions	—		—		—		—		—		—		(5,281)		(5,281)
Secondary offerings	3		(2)		6,367		—		—		—		(6,370)		(2)
Employee Share Purchase Plan share issuance	—		—		162		—		—		—		154		316
Equity reallocation between controlling and non-controlling interests	—		—		551		—		—		—		(551)		—
Balance at September 30, 2019	$	30	$	22	$	107,718	$	28,998	$	(7)	$	5,592	$	62,278	$	204,631

	Class A Common Stock		Class B Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests in General Partnerships		Non-Controlling Interests in Hamilton Lane Advisors, L.L.C.		Total Equity
Balance at March 31, 2019	$	27	$	24	$	92,482	$	17,686	$	7	$	5,716	$	53,780	$	169,722
Net income	—		—		—		26,680		—		549		32,497		59,726
Other comprehensive income	—		—		—		—		(14)		—		(15)		(29)
Equity-based compensation	—		—		1,777		—		—		—		1,725		3,502
Repurchase of Class A shares for employee tax withholding	—		—		(23)		—		—		—		(22)		(45)
Issuance of shares for contingent compensation payout	—		—		214		—		—		—		211		425
Deferred tax adjustment	—		—		6,211		—		—		—		—		6,211
Dividends declared	—		—		—		(15,368)		—		—		—		(15,368)
Capital distributions to non-controlling interests, net	—		—		—		—		—		(673)		—		(673)
Member distributions	—		—		—		—		—		—		(19,430)		(19,430)
Secondary Offering	3		(2)		6,367		—		—		—		(6,370)		(2)
Employee Share Purchase Plan share issuance	—		—		301		—		—		—		291		592
Equity reallocation between controlling and non-controlling interests	—		—		389		—		—		—		(389)		—
Balance at September 30, 2019	$	30	$	22	$	107,718	$	28,998	$	(7)	$	5,592	$	62,278	$	204,631

See accompanying notes to the condensed consolidated financial statements.

7

Hamilton Lane Incorporated

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended September 30,
	2020		2019
Operating activities:
Net income	$	49,567	$	59,726
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,977		1,608
Change in deferred income taxes	8,706		4,728
Change in payable to related parties pursuant to tax receivable agreement	(73)		150
Equity-based compensation	3,551		3,483
Equity in loss (income) of investees	3,224		(9,877)
Gain on sale of investments valued under the measurement alternative	—		(4,973)
Proceeds received from investments	23		4,178
Other	76		674
Changes in operating assets and liabilities:
Fees receivable	(2,688)		2,676
Prepaid expenses	1,332		(688)
Due from related parties	(909)		(1,570)
Other assets	(738)		360
Accounts payable	335		(656)
Accrued compensation and benefits	25,699		8,898
Other liabilities	(448)		(2,514)
Net cash provided by operating activities	89,634		66,203
Investing activities:
Purchase of furniture, fixtures and equipment	(2,148)		(1,296)
Purchase of other investments	(500)		(3,967)
Proceeds from sales of investments valued under the measurement alternative	—		6,419
Distributions received from investments	8,728		4,838
Contributions to investments	(23,431)		(16,774)
Net cash used in investing activities	(17,351)		(10,780)
Financing activities:
Proceeds from offerings	354,629		147,122
Purchase of membership interests	(354,629)		(147,122)
Repayments of debt	(469)		(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	56		29
Distributions to non-controlling interest in general partnerships	(1,125)		(702)
Repurchase of Class B common stock	(4)		(2)
Repurchase of Class A shares for employee tax withholding	(36)		(45)
Proceeds received from issuance of shares under Employee Share Purchase Plan	707		592
Payments to related parties, pursuant to tax receivable agreement	(36)		—
Dividends paid	(18,129)		(13,018)
Members’ distributions paid	(21,558)		(32,675)
Net cash used in financing activities	(40,594)		(31,945)
Effect of exchange rate changes on cash and cash equivalents	130		15
Increase in cash, cash equivalents, and restricted cash	31,819		23,493
Cash, cash equivalents, and restricted cash at beginning of the period	53,210		51,590
Cash, cash equivalents, and restricted cash at end of the period	$	85,029	$	75,083

See accompanying notes to the condensed consolidated financial statements.

8

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

1. Organization

Hamilton Lane Incorporated (“HLI”) is a holding company whose principal asset is a controlling equity interest in Hamilton Lane Advisors, L.L.C. (“HLA”). As the sole managing member of HLA, HLI operates and controls all of the business and affairs of HLA, and through HLA, conducts its business. As a result, HLI consolidates HLA’s financial results and reports a non-controlling interest related to the portion of HLA units not owned by HLI. The assets and liabilities of HLA represent substantially all of HLI’s consolidated assets and liabilities with the exception of certain cash, certain deferred tax assets and liabilities, payable to related parties pursuant to a tax receivable agreement, and dividends payable. Unless otherwise specified, “the Company” refers to the consolidated entity of HLI, HLA and subsidiaries throughout the remainder of these notes. As of September 30, 2020 and March 31, 2020, HLI held approximately 64.6% and 55.1%, respectively, of the economic interest in HLA. As future exchanges of HLA units occur pursuant to the exchange agreement in place with HLA’s members, the economic interest in HLA held by HLI will increase.

HLA is a registered investment advisor with the United States Securities and Exchange Commission (“SEC”), providing asset management and advisory services, primarily to institutional investors, to design, build and manage private markets portfolios. HLA sponsors the formation, and/or serves as the general partner or managing member, of various limited partnerships or limited liability companies consisting of specialized funds and certain single client separate account entities (“Partnerships”) that acquire interests in third-party managed investment funds that make private equity and equity-related investments. The Partnerships may also make direct co-investments, including investments in debt, equity, and other equity-based instruments. HLA, which includes certain subsidiaries that serve as the general partner or managing member of substantially all of the Partnerships, may invest its own capital in the Partnerships and generally makes all investment and operating decisions for the Partnerships. HLA operates several wholly-owned entities through which it conducts its foreign operations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Management believes it has made all necessary adjustments (which consisted of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. Results of operations for the three and six months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending March 31, 2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in HLI’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

COVID-19

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global pandemic, which has resulted in significant disruption and uncertainty in the global economic markets. Given the amount of uncertainty regarding the scope and duration of the

9

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

COVID-19 pandemic, it is currently not possible to predict the precise impact it will have on the Company’s financial statements. In addition, certain impacts may not be reported in the current quarter due to the Company’s investments in partnerships and unrealized carried interest amounts, which are reported on a three month lag, as discussed below in “Accounting for Differing Fiscal Periods”.

Accounting for Differing Fiscal Periods

The Partnerships primarily have a fiscal year end as of December 31, and the Company accounts for its investments in the Partnerships using a three-month lag due to the timing of financial information received from the investments held by the Partnerships. The Partnerships primarily invest in private equity funds, which generally require at least 90 days following the calendar year end to present audited financial statements. The Company records its share of capital contributions to and distributions from the Partnerships in investments in the Condensed Consolidated Balance Sheets during the three month lag period.

Fair Value of Financial Instruments

The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below:

•Level 1: Values are determined using quoted market prices for identical financial instruments in an active market.

•Level 2: Values are determined using quoted prices for similar financial instruments and valuation models whose inputs are observable.

•Level 3: Values are determined using pricing models that use significant inputs that are primarily unobservable, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The carrying amount of cash and cash equivalents, fees receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments.

The carrying amount of the term loan of $74,084 as of September 30, 2020 approximated fair value based on then-current market rates for similar debt instruments and is classified as Level 2 within the fair value hierarchy.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 changes the fair value measurement disclosure requirements. The amendments remove or modify certain disclosures, while others were added. Early adoption of any removed or modified disclosure requirements is permitted upon issuance of ASU 2018-13 and adoption of the additional disclosure requirements may be delayed until the effective date. The Company elected to early adopt the removed or modified disclosure requirements of the standard on October 1, 2018. The Company adopted the remaining requirements on April 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.

10

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

In June 2016, the FASB issued ASU 2016-13, “Accounting for Financial Instruments - Credit Losses (Topic 326)”. ASU 2016-13 replaces the incurred loss methodology in current GAAP with a methodology that reflects expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted ASU 2016-13 using the modified retrospective transition method on April 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

3. Revenue

The following table presents revenues disaggregated by product offering, which aligns with the identified performance obligations and the basis for calculating each amount:

	Three Months Ended September 30,				Six Months Ended September 30,
Management and advisory fees	2020		2019		2020		2019
Specialized funds	$	31,717	$	26,985	$	63,948	$	53,944
Customized separate accounts	23,800		22,466		47,315		44,429
Advisory	6,545		5,961		13,310		12,213
Reporting and other	2,584		2,092		5,420		4,255
Distribution management	737		702		2,464		2,061
Fund reimbursement revenue	984		990		1,177		2,845
Total management and advisory fees	$	66,367	$	59,196	$	133,634	$	119,747

	Three Months Ended September 30,				Six Months Ended September 30,
Incentive fees	2020		2019		2020		2019
Specialized funds	$	17,720	$	4,980	$	19,938	$	7,619
Customized separate accounts	344		116		603		1,612
Total incentive fees	$	18,064	$	5,096	$	20,541	$	9,231

Cost to obtain contracts

The Company incurs incremental costs related to sales commissions paid to certain employees directly related to customized separate account contracts. These incremental costs are capitalized and amortized over the expected contract length proportionately to the management fee revenue expected to be recognized in each year as a percentage of the total expected revenue for the contract. The contract asset related to the cost to obtain contracts was $1,010 and $994 as of September 30, 2020 and March 31, 2020, respectively, and is included in other assets in the Condensed Consolidated Balance Sheets. Amortization expense related to this contract asset was $126 and $254 for the three and six months ended September 30, 2020, respectively, and $124 and $246 for the three and six months ended September 30, 2019, respectively, and is included in compensation and benefits in the Condensed Consolidated Statements of Income.

11

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

4. Investments

Investments consist of the following:

	September 30,		March 31,
	2020		2020
Equity method investments in Partnerships	$	180,375	$	166,106
Equity method investments in Partnerships held by consolidated VIEs	7,249		9,988
Other equity method investments	1,597		1,168
Other investments	17,703		13,394
Investments valued under the measurement alternative	17,108		17,091
Total Investments	$	224,032	$	207,747

Equity method investments

The Company’s equity method investments in Partnerships represent its ownership in certain specialized funds and customized separate accounts. The strategies and geographic location of investments within the Partnerships vary by fund. The Company has a 1% interest in substantially all of the Partnerships. The Company’s other equity method investments represent its ownership in a technology company that provides benchmarking and analytics of private equity data and its ownership in a joint venture that automates the collection of fund and underlying portfolio company data from general partners. The Company recognized an equity method income (loss) related to its investments in Partnerships and other equity method investments of $17,979 and $(3,224) for the three and six months ended September 30, 2020, respectively, and $3,664 and $9,877 for the three and six months ended September 30, 2019, respectively.

Other investments

The Company’s other investments represent investments in private equity funds and direct credit and equity co-investments. The private equity fund investments can only be redeemed through distributions received from the liquidation of underlying investments of the fund, and the timing of distributions is currently indeterminable. The direct credit co-investments are debt securities classified as trading securities. The direct equity co-investments and private equity funds are measured at fair value with unrealized holding gains and losses included in earnings. The Company’s other investments are recorded at estimated fair value utilizing significant unobservable inputs and are therefore classified in Level 3 of the fair value hierarchy.

12

Hamilton Lane Incorporated

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share and per share amounts)

The following is a reconciliation of other investments for which significant unobservable inputs (Level 3) were used in determining value:

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of June 30, 2020	$	6,564	$	1,808	$	8,413	$	16,785
Contributions	—		—		—		—
Distributions	(120)		(32)		—		(152)
Net (loss) gain	(236)		113		1,193		1,070
Balance as of September 30, 2020	$	6,208	$	1,889	$	9,606	$	17,703

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of March 31, 2020	$	5,786	$	1,756	$	5,852	$	13,394
Contributions	28		—		—		28
Distributions	(368)		(74)		—		(442)
Net gain	762		207		3,754		4,723
Balance as of September 30, 2020	$	6,208	$	1,889	$	9,606	$	17,703

	Private equity funds		Direct credit co-investments		Direct equity co-investments		Total other investments
Balance as of June 30, 2019	$	5,911	$	4,013	$	6,689	$	16,613
Contributions	—		—		—		—
Distributions	—		(973)		—		(973)
Net (loss) gain	(75)		53		295		273
Balance as of September 30, 2019	$