Hamilton Lane Incorporated

Hello and welcome to the Hamilton Lane Q1 Fiscal 2020 Earnings Call. Today the call will be hosted by Mario Giannini, CEO, Erik Hirsch, Vice Chairman, and Randy Stillman, CFO. Before the Hamilton Lane team discusses the quarter's results, we want to remind you that they will be making forward-looking statements based on their current expectations for the business. These statements are subject to risks and uncertainties that may cause the actual results to differ materially. For a discussion of these risks, Please review the risk factors included in Hamilton Lane's fiscal 2019 10K and subsequent reports the company files with the SEC. Management will also be referring to non-GAAP measures that they view as important in assessing the performance of the business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials, which are available on the IR section of the Hamilton Lane website. Please note that nothing on this call represents an offer to sell or a solicitation to purchase interest in any of Hamilton Lane's products. The company's detailed financial results will be made available when the 10Q is filed. Finally, for the call this morning, we will be referencing pages in the earnings release presentation available on the Hamilton Lane IR website and shown on the webcast version of this call. With that, let me turn the call over to Erik Hirsch.

Thank you, Julianne. Beginning on slide three, it was another strong quarter for us. Let me go through some quick highlights and then we'll provide some additional detail and color. For the first fiscal quarter, our revenue from management and advisory fees grew 19% versus the prior year fiscal first quarter. This resulted in non-GAAP EPS of 45 cents based on approximately $24 million of adjusted net income. Our GAAP net income was over $11 million, which translated into GAAP EPS of 42 cents. In our previous earnings call, we announced that our board approved a 29% increase in our dividend. This increase reflects both management's and the board's view that the business is growing strong and remains well positioned. In keeping with this, we have declared a dividend of 27.5 cents this quarter, which keeps us on track for the $1.10 for fiscal year 2020. Also, on April 16th, we officially announced our expanded presence in North America by opening an office in Toronto, Canada. The Toronto office represents our 16th location worldwide and positions us well to further expand into a large and growing market. Turning to slide four, you have heard us state in prior earnings calls that growth continues to come from a wide range of sources and this quarter was no different. Our growth remains diversified by geography, type of investor, and size of investor. Our total asset footprint of approximately $473 billion remain significant and, as we stated before, our scale is a competitive advantage in this asset class and we believe our clients continue to benefit from our growing footprint. AUA for the quarter decreased slightly by $6 billion or 1% compared to the prior year period. However, our advisory and reporting revenue categories were up 3% compared to the prior year period. We will continue to caution that AUA and AUA related revenue are not directly linked. On slide five, we highlight our fee earning AUM. This is a combination of our customized separate accounts and our specialized funds. Our total fee earning AUM was up 4.3 billion or 14% versus the prior year period with solid growth across both our specialized funds and our customized separate accounts. As we have stated in the past, fee-earning AUM is the most significant driver of our business as it makes up over 80% of our management and advisory fees. And, as we've also stated, we remain most focused on annualized growth given that managing growth around a particular quarter is challenging due to the long-term nature of our business. We're asking clients to enter into lengthy contracts. When they ultimately approve and sign those contracts is outside of our control. Our growth continues to come from four consistent channels. One, re-ups from existing clients. Two, adding brand new client relationships. Three, raising new specialized funds. And four, growing existing funds. In the past 12 months, we have added net fee earning AUM of $2.3 billion to our customized separate accounts. And over the same time period, we have added nearly $2 billion of net fee earning AUM across our specialized funds. Lastly, our fee rates across our fee-earning AUM continue to remain steady. And with that, let me turn it over to Mario for an update on our specialized funds.

Thanks, Erik, and good morning. Before providing an update on our existing specialized funds, I wanted to take a moment and announce a new product that we're very excited about, a semi-liquid evergreen fund. This fund introduces a new structure into our lineup of specialized products and represents our entrance into the evergreen fund market. With this product, we are offering an innovative alternative for investors, providing access to the private markets outside of traditional closed-end fund structures. This fund represents a globally diversified pool of assets and is primarily targeting the high net worth individual space and geographies where evergreen funds are already offered and have an established market presence, such as Australia and throughout Europe. While an evergreen fund structure is a new foray for Hamilton Lane, This type of product and structure have been in existence for some time, and a select number of firms, such as Partners Group in Switzerland, manage somewhat similar offerings. We believe that we are well positioned to successfully deliver on this strategy for clients, and while very early days, we see the potential for strong demand across the target audience. You've heard us speak in the past regarding strategically addressing and capitalizing on opportunities where we see a path to growth and scale, and this Evergreen product is a great example of that. Let me quickly touch upon some key differentiating features of our Evergreen Fund for the benefit of those less familiar with open-end structures. Unlike our products that generally follow a defined raise and deploy strategy, our Evergreen product is effectively always open, taking in capital from investors on a monthly basis. Similarly, the Fund also provides a monthly liquidity option for investors. We expect to see the majority of the capital coming from individuals and coming via wealth management platforms with whom we already have or are developing relationships. With regard to economics, the structure is similar to what you already know about our other products with both management and performance fees at rates similar to our other funds. However, unlike our other funds that are based on committed or net invested capital, due to the evergreen nature of this vehicle, Management fees will be tied to net asset value, which we view as a positive both for us and our investors. Again, we are very early in the launch, and this is a product that we expect to grow and build for years to come. That said, in our first few months of marketing, we have already seen inflows totaling $91 million as of August 5, 2019. Now, a quick update on the other specialized funds. As a reminder, on June 24th, we announced the final closing on our fourth co-investment fund with $1.7 billion in total commitments, putting us above the stated target for the fundraise. As of August 5th, we have invested or committed 61% of that fund's capital. We also held our first closing in April on our fifth secondary fund with $700 million in commitments. As a reminder, we have at least 18 months from the date of the first close, that being April 2019, to complete fundraising and so expect several additional closings to come. We are pleased with the initial support and interest so far. This fund is also actively investing capital and as a result, subsequent closing will result in retro management fees. Lastly, the 2019 series of our credit-oriented vehicle closed recently on more than $760 million in commitments. Recall that this product is essentially an annual fundraise in which we raise and invest capital throughout the year based on the available opportunity set. As such, we are already actively raising capital for the 2020 series and will continue to do so well into the next calendar year. Product pipeline is strong, and we are very excited with the new launch of our Evergreen product. With that, let me turn it back to Erik.