HAMILTON LANE INCORPORATED REPORTS STRONG FOURTH FISCAL QUARTER AND FISCAL YEAR 2023 RESULTS, WITH MANAGEMENT AND ADVISORY FEES GROWING BY 18% AND ASSETS UNDER MANAGEMENT GROWING BY 5% YEAR-OVER-YEAR
CONSHOHOCKEN, PENN. – May 25, 2023 – Leading private markets asset management firm Hamilton Lane Incorporated (Nasdaq: HLNE) today reported its results for the fourth fiscal quarter and full fiscal year ended March 31, 2023.
FISCAL YEAR 2023 HIGHLIGHTS
•Assets under management – Total assets under management of $111.9 billion grew 5% year-over-year. Fee-earning assets under management increased 17% to $57.3 billion over the same period.
•Revenue – Management and advisory fees increased 18% to $371.9 million for fiscal 2023.
•Carried Interest – Unrealized carried interest balance of $1.0 billion was down 14% year-over-year.
•Earnings per share – GAAP EPS of $3.01 on $109.1 million of GAAP net income for fiscal 2023.
•Dividend – Declared a quarterly dividend of $0.445 per share of Class A common stock to record holders at the close of business on June 15, 2023 that will be paid on July 7, 2023. The target full-year dividend of $1.78 represents an 11% increase from the prior fiscal year dividend.
Hamilton Lane issued a full detailed presentation of its fourth quarter and full fiscal year 2023 results, which can be accessed by clicking here.
Hamilton Lane CEO Mario Giannini commented: “Despite a challenging market backdrop, our strong momentum and performance continues, due in large part to the dedication and devotion shown by our team around the world. We are happy to report strong growth across the entirety of our business as we close out this fiscal year, and are well positioned for continued, steady growth ahead.”
Conference Call
Hamilton Lane will discuss fourth quarter and full fiscal year 2023 results in a webcast and conference call today, Thursday, May 25, 2023, at 11:00 a.m. Eastern Time. The call will be broadcast live via a webcast, which may be accessed on the Shareholders page of Hamilton Lane’s website.
To listen to the conference call and in order to ask questions, attendees may pre-register by clicking here and using the conference ID 67939. After registration,
attendees will receive an email with dial-in details. Anyone experiencing trouble accessing the call in this manner may dial (888) 330-2028 or (437) 291-8584 for assistance.
A replay of the webcast will be available approximately two hours after the live broadcast for a period of one year and can be accessed in the same manner as the live webcast at the Shareholders page of Hamilton Lane’s website.
For access to the live event via the webcast, visit Hamilton Lane's Shareholders website by clicking here prior to the start of the call. This feature will be in listen-only mode.
About Hamilton Lane
Hamilton Lane (Nasdaq: HLNE) is one of the largest private markets investment firms globally, providing innovative solutions to institutional and private wealth investors around the world. Dedicated exclusively to private markets investing for more than 30 years, the firm currently employs approximately 600 professionals operating in offices throughout North America, Europe, Asia Pacific and the Middle East. Hamilton Lane has $856.7 billion in assets under management and supervision, composed of $111.9 billion in discretionary assets and $744.8 billion in non-discretionary assets, as of March 31, 2023. Hamilton Lane specializes in building flexible investment programs that provide clients access to the full spectrum of private markets strategies, sectors and geographies. For more information, please visit www.hamiltonlane.com or follow Hamilton Lane on LinkedIn: https://www.linkedin.com/company/hamilton-lane/.
Forward-Looking Statements
Some of the statements in this release 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, competition in our industry, 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 exposure and that of our clients and investors to the credit risks of financial institutions at which we and they hold accounts; our ability to comply with investment guidelines set by our clients; our ability to successfully integrate acquired businesses with ours; our ability to manage risks associated with introducing new types of investment structures, products or services or entering into strategic partnerships; our ability to manage redemption or repurchase rights in certain of our funds; our ability to manage, identify and anticipate risks we face; our ability to manage the effects of events
outside of our control; and our ability to receive distributions from Hamilton Lane Advisors, L.L.C. 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, 2022 and in our subsequent reports filed from time to time with the Securities and Exchange Commission. The forward-looking statements included in this release are made only as of the date hereof. 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.
Shareholder Contact
John Oh
joh@hamiltonlane.com
+1 610 617 6026
Media Contact
Kate McGann
kmcgann@hamiltonlane.com
+1 240 888 4078
1Hamilton Lane l Global Leader in the Private Markets Fiscal Year 2023 Fourth Quarter and Full Year Results Earnings Presentation - May 25, 2023
2Hamilton Lane l Global Leader in the Private Markets Today's Speakers Erik Hirsch Vice Chairman Atul Varma Chief Financial Officer John Oh Principal - Shareholder Relations Brian Gildea Managing Director - Investments
3Hamilton Lane l Global Leader in the Private Markets Period Highlights Business Performance Financial Results Dividend • Assets under management and fee-earning assets under management were approximately $112 billion and $57 billion, respectively, as of March 31, 2023, increases of 5% and 17%, respectively, compared to March 31, 2022 • Management and advisory fees increased 18% compared to fiscal 2022 USD in millions except per share amounts Q4 FY23 FY23 vs. FY22 Management and advisory fees $95.7 $371.9 18 % GAAP net income $31.1 $109.1 (25) % GAAP EPS $0.82 $3.01 (24) % Adjusted net income1 $51.6 $179.5 (24) % Non-GAAP EPS1 $0.96 $3.34 (24) % Fee Related Earnings1 $40.7 $158.8 10 % Adjusted EBITDA1 $55.3 $259.8 41 % • Declared a quarterly dividend of $0.445 per share of Class A common stock to record holders at the close of business on June 15, 2023 1Adjusted net income, non-GAAP earnings per share, Fee Related Earnings and Adjusted EBITDA are non-GAAP financial measures. For the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures and for the reasons we believe the non-GAAP measures provide useful information, see pages 20 and 21 of this presentation.
4Hamilton Lane l Global Leader in the Private Markets CAGR: 19% Total Assets Under Management/Advisement ($B) Total AUA Total AUM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 3/31/23 $0 $200 $400 $600 $800 $1,000 Y-o-Y Growth AUM: 5% AUA: (6%) $857B AUM & AUA Growing Asset Footprint & Influence 1Data as of calendar year end 12/31 unless otherwise noted. Numbers may not tie due to rounding. 1 $6 $7 $11 $13 $16 $19 $22 $24 $30 $32 $35 $40 $50 $59 $66 $76 $98 $108 $36 $51 $77 $79 $95 $81 $129 $147 $147 $189 $205 $292 $374 $410 $422 $581 $753 $724 $745 $112
5Hamilton Lane l Global Leader in the Private Markets $22 $25 $26 $31 $35 $11 $14 $16 $18 $23 Customized Separate Accounts Specialized Funds Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 $0 $10 $20 $30 $40 $50 $60 $70 Total Fee-Earning Assets Under Management ($B) Fee-Earning AUM growth continues and annual fee rates are stable CAGR: 14% Total Management Fee Revenues as a % of Average FEAUM Fee-Earning AUM Driving Revenues Y-o-Y Drivers of Growth Customized Separate Accounts: • New client wins • Client re-ups Specialized Funds: • Closed 1st infrastructure fund and 5th direct equity fund • Fundraising 6th secondary fund, 2nd impact fund, 8th credit-oriented fund and evergreen funds .56% .60% .56% .59% *Numbers may not tie due to rounding $34 $39 $42 $49 $57
6Hamilton Lane l Global Leader in the Private Markets AUM & AUA Drivers Customized Separate Accounts Specialized Funds Advisory Services Diverse mix of existing and prospective clients seeking to further or establish relationships with Hamilton Lane 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 • $3.7B year-over-year increase in FEAUM • +80% of our gross contributions during the last 12 months came from existing clients • $4.5B year-over-year increase in FEAUM • Closings during Q4 FY23: ◦ Secondary fund: $296M • $50B year-over-year decrease in AUA AUM AUA Select funds in market: • Secondary fund • Credit-oriented fund • Evergreen fund • Impact fund
7Hamilton Lane l Global Leader in the Private Markets Financial Highlights
8Hamilton Lane l Global Leader in the Private Markets US D in M ill io ns $195 $372 FY18 FY23 US D in M ill io ns $314 $372 FY22 FY23 Consolidated Revenue Strong revenue growth across management and advisory fees Management and Advisory Fees Incentive Fees Total Revenues YTD Long-Term Growth US D in M ill io ns $54 $157 FY22 FY23 US D in M ill io ns $49 $157 FY18 FY23 YTD Long-Term Growth Y-o-Y Growth: 18% CAGR: 14% US D in M ill io ns $368 $529 FY22 FY23 US D in M ill io ns $244 $529 FY18 FY23 YTD Long-Term Growth Y-o-Y Growth: 44% CAGR: 17% Y-o-Y Growth: 192% CAGR: 26% • Recurring management and advisory fees represented an average of over 80% of total revenues over the past five fiscal years • $1.8M in retroactive fees from our latest secondary fund in the quarter • Total revenues increased by 44%, driven by incentive fees • Incentive fees derived from a highly diversified pool of assets and funds • Allocated carried interest of $1,022M as of 3/31/23 diversified across 3,000+ assets and 90 funds • Timing of realizations unpredictable
9Hamilton Lane l Global Leader in the Private Markets Unrealized Carried Interest Period Ending Ve hi cl es USD in M illions Unrealized Carried Interest $649 $1,191 $1,022 78 92 90 Unrealized Carried Interest Vehicles in Unrealized Carry Position Mar-21 Mar-22 Mar-23 0 20 40 60 80 100 $0 $250 $500 $750 $1,000 $1,250 $1,500 Unrealized Carry by Age < 5 years 40% 5-8 years 37% 8-12 years 19% > 12 years 4%
10Hamilton Lane l Global Leader in the Private Markets US D in M ill io ns $144 $159 FY22 FY23 US D in M ill io ns $184 $260 FY22 FY23 Net Income Attributable to HLI US D in M ill io ns $146 $109 FY22 FY23 Adjusted EBITDA1 Consolidated Earnings Profitability stable and growing US D in M ill io ns $17 $109 FY18 FY23 YTD Long-Term Growth US D in M ill io ns $133 $260 FY18 FY23 Long-Term Growth Y-o-Y Growth: (25)% US D in M ill io ns $81 $159 FY18 FY23 Long-Term Growth CAGR: 14% CAGR: 14% • Y-o-Y increase of 41% driven by growth in both management and advisory fees and incentive fees • Y-o-Y growth of 10% • Long-term double digit growth in Fee Related Earnings • $31M in net income attributable to HLI for the quarter 1Adjusted EBITDA and Fee Related Earnings 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 20 and 21 of this presentation. YTD Y-o-Y Growth: 41% Fee Related Earnings1 YTD Y-o-Y Growth: 10%
11Hamilton Lane l Global Leader in the Private Markets Other Key Items Strong balance sheet with investments in our own products and a modest amount of leverage... US D in M ill io ns Investments $137 $154 $208 $374 $514 $588 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 $0 $100 $200 $300 $400 $500 $600 • For 3/31/23, the total investment balance consisted of: ◦ ~$398M in investments in our funds ◦ ~$190M in technology related and other investments • Modest leverage • $214M of debt as of 3/31/23 US D in M ill io ns Leverage $163 $171 $214 Mar-21 Mar-22 Mar-23 $0 $50 $100 $150 $200 $250
12Hamilton Lane l Global Leader in the Private Markets Appendix
13Hamilton Lane l Global Leader in the Private Markets Condensed Consolidated Statements of Income (Unaudited) Three Months Ended March 31, Year Ended March 31, (Dollars in thousands except share and per share amounts) 2022 2023 % Change 2022 2023 % Change Revenues Management and advisory fees $84,575 $95,692 13% $314,228 $371,874 18 % Incentive fees 13,916 17,096 23 % 48,133 149,931 211 % Consolidated variable interest entities related: Incentive fees 2,409 — (100) % 5,558 6,948 25 % Total revenues 100,900 112,788 12 % 367,919 528,753 44 % Expenses Compensation and benefits 35,137 40,177 14 % 129,165 198,412 54 % General, administrative and other 19,298 23,329 21 % 68,040 89,395 31 % Consolidated variable interest entities related: General, administrative and other 198 (35) (118) % 1,150 906 (21) % Total expenses 54,633 63,471 16 % 198,355 288,713 46 % Other income (expense) Equity in income of investees 18,632 12,581 (32) % 78,813 5,088 (94) % Interest expense (1,146) (2,590) 126 % (4,634) (8,617) 86 % Interest income 12 950 7,813 % 500 1,789 258 % Non-operating (loss) income (1,031) 6,635 N/A 64,469 (5,243) (108) % Consolidated variable interest entities related: Equity in income of investees 313 425 36 % 483 1,455 201 % Unrealized gain 3,418 440 (87) % 4,485 4,773 6 % Interest expense — — N/A (4) — N/A Interest income — 336 N/A — 3,325 N/A Total other income (expense) 20,198 18,777 (7) % 144,112 2,570 (98) % Income before income taxes 66,465 68,094 2 % 313,676 242,610 (23) % Income tax expense 28,908 16,659 (42) % 66,423 55,425 (17) % Net income 37,557 51,435 37 % 247,253 187,185 (24) % Less: Income attributable to non-controlling interests in general partnerships 209 213 2 % 376 986 162 % Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 19,699 19,701 0 % 96,548 71,027 (26) % Less: Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. 3,824 — (100) % 4,343 5,617 29 % Less: Income attributable to non-controlling interests in consolidated funds — 435 N/A — 435 N/A Net income attributable to Hamilton Lane Incorporated $13,825 $31,086 125 % $145,986 $109,120 (25) % Basic earnings per share of Class A common stock $0.39 $0.84 115 % $4.02 $3.05 (24) % Diluted earnings per share of Class A Common stock $0.39 $0.82 110 % $3.98 $3.01 (24) % Weighted-average shares of Class A common stock outstanding - basic 36,926,014 37,206,876 36,511,507 37,059,654 Weighted-average shares of Class A common stock outstanding - diluted 37,035,108 53,785,158 53,674,293 53,698,681
14Hamilton Lane l Global Leader in the Private Markets 1 Adjusted EBITDA and non-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 20. 2 Incentive fee related compensation includes incentive fee compensation expense, bonus and other revenue sharing related to carried interest that is classified as base compensation. 3For the years ended March 31, 2022 and 2023, represents corporate income taxes at our estimated statutory tax rate of 23.8% 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%. Non-GAAP Financial Measures Three Months Ended March 31, Year Ended March 31, (Dollars in thousands except share and per share amounts) 2022 2023 % Change 2022 2023 % Change Adjusted EBITDA1 Management and advisory fees $84,575 $95,692 13 % $314,228 $371,874 18 % Revenue related to consolidated funds — 61 N/A — 61 N/A Total expenses 54,633 63,471 16 % 198,355 288,713 46 % Less: Incentive fee related compensation2 (7,710) (8,120) 5 % (25,395) (74,374) 193 % SPAC related general, administrative and other expenses (308) — N/A (1,176) (846) (28) % Non-operating income related compensation (20) (313) 1,465 % (1,810) (367) (80) % Management fee related expenses 46,595 55,038 18 % 169,974 213,126 25 % Fee Related Earnings $37,980 $40,715 7 % $144,254 $158,809 10 % Fee Related Earnings Margin 45 % 43 % 46 % 43 % Incentive fees 16,325 17,096 5 % 53,691 156,879 192 % Incentive fees attributable to non-controlling interests (94) — N/A (228) (302) 32 % Incentive fee related compensation2 (7,710) (8,120) 5 % (25,395) (74,374) 193 % Non-operating income related compensation (20) (313) 1,465 % (1,810) (367) (80) % Interest income 12 950 7,817 % 500 1,789 258 % Equity-based compensation 1,698 3,134 85 % 7,404 9,950 34 % Depreciation and amortization 1,751 1,842 5 % 5,495 7,442 35 % Adjusted EBITDA $49,942 $55,304 11 % $183,911 $259,826 41 % Adjusted EBITDA margin 49 % 49 % 50 % 49 % Non-GAAP earnings per share1 Net income attributable to Hamilton Lane Incorporated $13,825 $31,086 125 % $145,986 $109,120 (25) % Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 19,699 19,701 0% 96,548 71,027 (26) % Income tax expense 28,908 16,659 (42%) 66,423 55,425 (17) % Adjusted pre-tax net income 62,432 67,446 8% 308,957 235,572 (24) % Adjusted income taxes3 (14,859) (15,884) 7% (73,532) (56,066) (24) % Adjusted net income $47,573 $51,562 8% $235,425 $179,506 (24) % Adjusted shares outstanding 53,710,942 53,785,158 53,674,293 53,698,681 Non-GAAP earnings per share $0.89 $0.96 8 % $4.39 $3.34 (24) %
15Hamilton Lane l Global Leader in the Private Markets Management and Advisory Fees Three Months Ended March 31, Year Ended March 31, (Dollars in thousands) 2022 2023 % Change 2022 2023 % Change Management and advisory fees Specialized funds $42,144 $52,169 24 % $150,079 $196,268 31 % Customized separate accounts 27,813 30,434 9 % 103,229 117,763 14 % Advisory 6,191 5,712 (8) % 24,972 24,785 (1) % Reporting and other 6,344 5,622 (11) % 23,327 24,792 6 % Distribution management 1,153 697 (40) % 10,466 2,560 (76) % Fund reimbursement revenue 930 1,058 14 % 2,155 5,706 165 % Total management and advisory fees $84,575 $95,692 13 % $314,228 $371,874 18 % Reporting and other: 8% Customized separate accounts: 32% Specialized funds: 53% Advisory: 7% Year Ended March 31, 2023
16Hamilton Lane l Global Leader in the Private Markets Incentive Fees Three Months Ended March 31, Year Ended March 31, (Dollars in thousands) 2022 2023 % Change 2022 2023 % Change Incentive fees Direct equity funds $2,410 $2,368 (2) % $5,558 $60,472 988 % Secondary funds — 8,933 N/A 5,574 36,326 552 % Direct credit funds 19 1,497 7,780 % 5,496 9,135 66 % Evergreen funds 826 1,172 42 % 2,438 5,241 115 % Other specialized funds 5,583 1,427 (74) % 16,824 13,986 (17) % Customized separate accounts 7,487 1,699 (77) % 17,801 31,719 78 % Incentive fees $16,325 $17,096 5 % $53,691 $156,879 192 % As of March 31, 2022 December 31, 2022 March 31, 2023 YoY % Change QoQ % Change Unrecognized carried interest Secondary Fund II $470 $385 $359 (24) % (7) % Secondary Fund III 33,514 31,285 30,084 (10) % (4) % Secondary Fund IV 156,123 126,943 121,750 (22) % (4) % Secondary Fund V 151,362 142,538 144,739 (4) % 2 % Secondary Fund VI — 1,730 5,209 N/A 201 % Co-investment Fund II 16,754 15,436 17,047 2 % 10 % Co-investment Fund III 114,057 54,964 51,139 (55) % (7) % Co-investment Fund IV 149,615 103,252 111,318 (26) % 8 % Equity Opportunities Fund V 4,658 4,678 11,252 142 % 141 % Evergreen funds 52,277 66,030 95,477 83 % 45 % Other specialized funds 146,437 109,042 113,627 (22) % 4 % Customized separate accounts 365,798 295,905 320,249 (12) % 8 % Total unrecognized carried interest $1,191,065 $952,188 $1,022,250 (14) % 7 %
17Hamilton Lane l Global Leader in the Private Markets Assets Under Management (Dollars in millions) March 31, 2022 December 31, 2022 March 31, 2023 YoY % Change QoQ % Change Assets under management / advisement Assets under management $106,382 $107,530 $111,901 5 % 4 % Assets under advisement 794,732 724,364 744,770 (6) % 3 % Total assets under management /advisement $901,114 $831,894 $856,671 (5) % 3 % Fee-earning assets under management Customized separate accounts Balance, beginning of period $28,364 $32,333 $33,089 17 % 2 % Contributions 3,995 1,432 3,204 (20) % 124 % Distributions (1,441) (576) (1,725) 20 % 199 % Foreign exchange, market value and other 20 (100) 116 480 % (216) % Balance, end of period $30,938 $33,089 $34,684 12 % 5 % Specialized funds Balance, beginning of period $17,705 $20,354 $21,776 23 % 7 % Contributions 1,452 1,472 961 (34) % (35) % Distributions (989) (213) (233) (76) % 9 % Foreign exchange, market value and other 25 163 158 532 % (3) % Balance, end of period $18,193 $21,776 $22,662 25 % 4 % Total Balance, beginning of period $46,069 $52,687 $54,865 19 % 4 % Contributions 5,447 2,904 4,165 (24) % 43 % Distributions (2,430) (789) (1,958) (19) % 148 % Foreign exchange, market value and other 45 63 274 509 % 335 % Balance, end of period $49,131 $54,865 $57,346 17 % 5 %
18Hamilton Lane l Global Leader in the Private Markets Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) March 31, 2022 March 31, 2023 Assets Cash and cash equivalents $72,138 $99,686 Restricted cash 4,023 4,804 Fees receivable 51,869 47,140 Prepaid expenses 6,858 9,817 Due from related parties 1,872 7,186 Furniture, fixtures and equipment, net 28,842 28,425 Lease right-of-use assets, net 65,636 62,327 Investments 503,789 530,921 Deferred income taxes 245,046 233,912 Other assets 28,162 46,784 Assets of consolidated variable interest entities: Cash and cash equivalents 36 12,062 Investments held in trust 276,016 — Investments 10,036 57,044 Other assets 623 435 Total assets $1,294,946 $1,140,543 Liabilities, redeemable non-controlling interests and equity Accounts payable $2,827 $4,559 Accrued compensation and benefits 20,117 24,190 Accrued members' distributions 27,119 15,723 Accrued dividend 12,947 15,049 Debt 171,326 213,533 Payable to related parties pursuant to tax receivable agreement 180,536 174,702 Lease liabilities 82,244 78,817 Other liabilities (includes $13,818 and $14,228 at fair value) 47,669 32,856 Liabilities of consolidated variable interest entities: Other liabilities 12,675 6,922 Total liabilities $557,460 $566,351 Redeemable non-controlling interests 276,000 — Total equity 461,486 574,192 Total liabilities, redeemable non-controlling interests and equity $1,294,946 $1,140,543
19Hamilton Lane l Global Leader in the Private Markets Condensed Consolidated Statements of Cash Flows (Unaudited) Year Ended March 31, (Dollars in thousands) 2021 2022 2023 Operating activities Net income $168,785 $247,253 $187,185 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,134 5,495 7,443 Change in deferred income taxes 7,027 23,944 20,433 Change in payable to related parties pursuant to tax receivable agreement 897 (5,332) (3,251) Equity-based compensation 7,079 7,404 9,950 Equity in income of investees (32,389) (78,813) (5,088) Gain on sale of investment — (11,936) (12,230) Fair value adjustment of other investments (6,229) (47,487) (20,730) Proceeds received from partnerships 784 46,817 15,981 Non-cash lease expense 7,376 9,890 7,460 Gain on sale of intangible asset — — 2,771 Impairment of other investment — — 43,289 Other 1,571 (815) (2,813) Changes in operating assets and liabilities 33,512 (22,370) (25,252) Consolidated variable interest entities related (4,389) (4,527) 1,441 Net cash provided by operating activities $188,158 $169,523 $226,589 Investing activities Purchase of furniture, fixtures and equipment $(18,637) $(8,526) $(4,747) Cash paid for acquisition of business — (10,096) (1,500) Loans to investees — — (2,535) Purchase of investments (90,500) (18,997) (37,025) Proceeds from sales of investments — 12,623 13,478 Distributions received from investments 3,072 12,739 1,406 Distributions received from Partnerships 31,195 15,010 14,438 Contributions to Partnerships (69,911) (73,240) (84,557) Purchase of intangible assets (1,000) — — Consolidated variable interest entities related: (Purchase) sale of investments held in trust (276,000) — 278,954 Net cash (used in) provided by investing activities $(421,781) $(70,487) $177,912 Financing activities Proceeds from offering $473,339 $73,833 $43,686 Purchase of membership interests (473,339) (73,833) (43,686) Borrowings of debt, net of deferred financing costs 75,000 24,925 31,682 Repayments of long term debt (1,406) (1,840) (4,496) Drawdown of revolver 15,000 — 40,000 Repayment of revolver — (15,000) (25,000) Repurchase of Class B common stock (5) (1) — Repurchase of Class A common stock for employee tax withholding (6,019) (3,485) (2,325) Proceeds received from issuance of shares under Employee Share Purchase Plan 1,447 1,860 1,937 Payments to related parties pursuant to the tax receivable agreement (6,894) (23,170) (10,345) Dividends paid (39,676) (49,630) (72,409) Members' distributions paid (34,368) (47,711) (63,444) Consolidated variable interest entities related 267,581 836 (259,746) Net cash provided by (used in) financing activities $270,660 $(113,216) $(364,146) Effect of exchange rate changes on cash and cash equivalents 130 — — Increase (decrease) in cash, cash equivalents, and restricted cash 37,167 (14,180) 40,355 Cash, cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at beginning of year 53,210 90,377 76,197 Cash, cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at end of year $90,377 $76,197 $116,552
20Hamilton Lane l Global Leader in the Private Markets Non-GAAP Reconciliation Reconciliation from Net Income Year Ended March 31, Three Months Ended March 31, Year Ended March 31, (Dollars in thousands) 2018 2023 2022 2023 2022 2023 Net income attributable to Hamilton Lane Incorporated $17,341 $109,120 $13,825 $31,086 $145,986 $109,120 Income attributable to non-controlling interests in general partnerships 2,448 986 209 213 376 986 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 86,508 71,027 19,699 19,701 96,548 71,027 Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. — 5,617 3,824 — 4,343 5,617 Income attributable to non-controlling interests in consolidated funds — 435 — 435 — 435 Incentive fees (49,003) (156,879) (16,325) (17,096) (53,691) (156,879) Incentive fee related compensation1 3,874 74,374 7,710 8,120 25,395 74,374 SPAC related general, administrative and other expenses — 846 308 — 1,176 846 Revenue related to consolidated funds — 61 — 61 — 61 Non-operating income related compensation — 367 20 313 1,810 367 Interest income (528) (5,114) (12) (1,285) (500) (5,114) Interest expense 5,989 8,617 1,146 2,590 4,638 8,617 Income tax expense 33,333 55,425 28,908 16,659 66,423 55,425 Equity in income of investees (17,102) (6,543) (18,945) (13,006) (79,296) (6,543) Contingent compensation related to acquisition 3,399 — — — — — Non-operating income (5,036) 470 (2,387) (7,076) (68,954) 470 Fee Related Earnings $81,223 $158,809 $37,980 $40,715 $144,254 $158,809 Depreciation and amortization 1,891 7,442 1,751 1,842 5,495 7,442 Equity-based compensation 5,544 9,950 1,698 3,134 7,404 9,950 Incentive fees 49,003 156,879 16,325 17,096 53,691 156,879 Incentive fees attributable to non-controlling interests (1,729) (302) (94) — (228) (302) Incentive fee related compensation1 (3,874) (74,374) (7,710) (8,120) (25,395) (74,374) SPAC related compensation — — — — — — Non-operating income related compensation — (367) (20) (313) (1,810) (367) Interest income 528 1,789 12 950 500 1,789 Adjusted EBITDA $132,586 $259,826 $49,942 $55,304 $183,911 $259,826 Non-GAAP earnings per share reconciliation Net income attributable to Hamilton Lane Incorporated $13,825 $31,086 $145,986 $109,120 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 19,699 19,701 96,548 71,027 Income tax expense 28,908 16,659 66,423 55,425 Adjusted pre-tax net income 62,432 67,446 308,957 235,572 Adjusted income taxes2 (14,859) (15,884) (73,532) (56,066) Adjusted net income $47,573 $51,562 $235,425 $179,506 Weighted-average shares of Class A common stock outstanding - diluted 37,035,108 53,785,158 53,674,293 53,698,681 Exchange of Class B and Class C units in HLA3 16,675,834 — — — Adjusted shares outstanding 53,710,942 53,785,158 53,674,293 53,698,681 Non-GAAP earnings per share $0.89 $0.96 $4.39 $3.34 1 Incentive fee related compensation includes incentive fee compensation expense, bonus and other revenue sharing related to carried interest that is classified as base compensation. 2 For the years ended March 31, 2022 and 2023, represents corporate income taxes at our estimated statutory tax rate of 23.8% 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%. 3 Assumes the full exchange of Class B and Class C units in HLA for Class A common stock of HLI pursuant to the exchange agreement. For the years ended March 31, 2022 and 2023, the full exchange of Class B and Class C units is already included within the GAAP Weighted-average shares of Class A common stock outstanding - diluted.
21Hamilton Lane l Global Leader in the Private Markets Terms Adjusted EBITDA is an 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 our 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-GAAP earnings per share measures 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 income is income before taxes fully taxed at our estimated statutory tax rate and excludes any impact of changes in carrying amount of our redeemable non-controlling interest. Adjusted shares outstanding for the years ended March 31, 2022 and 2023 are equal to weighted-average shares of Class A common stock outstanding - diluted. We believe adjusted net income and non-GAAP earnings per share are useful to investors because they enable them to better evaluate total and per-share operating performance across reporting periods. Our assets under management ("AUM"), as presented in these materials, comprise the assets associated with our customized separate accounts and specialized funds. AUM does not include the assets associated with our distribution management services. 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: (1) the net asset value of our clients' and funds' underlying investments; (2) the unfunded commitments to our clients' and funds' underlying investments; and (3) 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, 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-earning assets 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 that are generally derived from applying a certain percentage to the appropriate fee base. 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. The vast majority 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 in order to carry on the business of Hamilton Lane Advisors, L.L.C. ("HLA") as a publicly-traded entity. As of the closing of our IPO on March 6, 2017, HLI became the sole managing member of HLA.
22Hamilton Lane l Global Leader in the Private Markets 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, competition in our industry, 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 exposure and that of our clients and investors to the credit risks of financial institutions at which we and they hold accounts; our ability to comply with investment guidelines set by our clients; our ability to successfully integrate acquired businesses with ours; our ability to manage risks associated with introducing new types of investment structures, products or services or entering into strategic partnerships; our ability to manage redemption or repurchase rights in certain of our funds; our ability to manage, identify and anticipate risks we face; our ability to manage the effects of events outside of our control; and our ability to receive distributions from Hamilton Lane Advisors, L.L.C. 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 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, 2022 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. Values appearing in this presentation that are whole numbers are rounded approximations. As of May 25, 2023