Hamilton Lane Incorporated

Good morning, afternoon, or evening. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hamilton Lane Fiscal Fourth Quarter and Full Year 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. A supplemental slide presentation to accompany the prepared remarks can be found on the company's website. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. Thank you. At this time, I would like to turn the call over to John Oh, head of shareholder relations. Mr. Oh, you may begin your conference.

Thank you, JL. Good morning and welcome to the Hamilton Lane Q4 and fiscal year end 2023 earnings call. Today, I will be joined by Eric Hirsch, vice chairman, Brian Gilday, Managing Director, Investment, and Atul Varma, CFO. Before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements based on our 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 the Hamilton Lane fiscal 2022 10-K and subsequent reports we file with the SEC. We will also be referring to non-GAAP measures that we view as important in assessing the performance of our business. Reconciliation of those non-GAAP measures to GAAP can be found in the earnings presentation materials made available in the shareholder section of the Hamilton Lane website. Our detailed financial results will be made available when our 10-K is filed. Please note that nothing on this call represents an offer to sell or solicitation to purchase interest in any of Hamilton Lane's products. Beginning with the financial highlights. For fiscal 2023, our management and advisory fee revenue grew by 18%, while our fee-related earnings grew by 10% versus the prior year. This translated into full-year GAAP EPS of $3.01 based on $109 million of GAAP net income and non-GAAP EPS of $3.34 based on $180 million of adjusted net income. Our board has approved an 11% increase to our annual fiscal dividend to $1.78 per share, or 44.5 cents per share per quarter. This marks the sixth consecutive annual double-digit percentage increase to our dividends since going public in 2017. Our ability to consistently increase distributions to shareholders every year speaks to the growth and strength of our business. With that, I'll now turn the call over to Eric.

Thank you, John, and good morning. Despite a challenging market backdrop, our strong momentum and performance continues. This is mainly due to the dedication and devotion shown by our team around the world. We are working hard to deliver for our clients. It is then nice when that hard work is recognized, and so I begin here by acknowledging a number of notable awards that the firm has recently won. For the third consecutive year, Hamilton Lane was named to Korea's Economic Daily's Best of the Best Asset Managers, and the only firm to have won this distinction every year since it began. In addition to that, we were awarded with the Secondary Deal of the Year in Asia by Private Equity International and also named in the inaugural Forbes 50 Financial All-Stars list as selected by sector specialists at KBW. These awards exemplify our commitment to our clients and highlight our global leadership within the SASA class. We've also continued our growth and reinvestment in the business by announcing our most recent office opening. We now welcome Shanghai to the Hamilton Lane family. Shanghai marks our 22nd office globally and sixth in the Asia-Pacific region. Lastly, and before we move to the results for the year, I want to briefly highlight a major annual event for us, the release of the Hamilton Lane Market Overview. This overview brings together the best of our firm, data, analytics, industry expertise, insights, and a little humor. The market overview experience has grown considerably over the years to now include various multimedia aspects alongside the written narrative. Attendance to the broadcast has also continued to expand with over 1,400 attendees joining us live this year, up 35% from last year, and over 3,500 enjoying it on demand. For those who have not had an opportunity to experience the market overview, I would encourage you to visit our website for more information. Let's shift gears now and move to some results for the year. Our total asset footprint, which we define as the sum of our AUM and AUA, stood at $857 billion and represents a 5% decrease to our footprint year over year. AUM growth year over year, which was over $6 billion, or 5%, came from both our specialized funds and customized effort accounts. AUA was net down $50 billion, or negative 6% year-over-year, the result of the expiration of a small revenue reporting mandate offset by mark-to-market movements. As a reminder, AUA can fluctuate for a variety of reasons, but the revenue associated with AUA does not necessarily move in lockstep with those changes. This was true for this period, whereby despite a reduction in AUA, revenue actually increased. Turning now to AUM. For fiscal 2023, total fee earning AUM stood at $57.3 billion and grew $8.2 billion, or 17%, relative to the prior year, stemming from positive fund flows across both our specialized funds and our customized separate accounts. Taken separately, $3.7 billion of net fee earning AUM came from our customized separate accounts and, over the same time period, $4.5 billion came from our specialized funds. Our blended fee rate across both customized separate accounts and specialized funds has recently been increasing over the past few quarters. This stems from the continuing shift in the mix of our fee-earning AUM towards higher fee rate specialized funds, most notably our Evergreen products. Moving to customized separate account flows. De-earning AUM here stood at $34.7 billion, growing 12% over the past 12 months. We continue to see the growth coming across type, size, and geographic location of the clients. Over the last 12 months, more than 80% of the gross inflows into customized separate accounts came from our existing client base, which continues to be a steady source of growth for our separate account business. But again, Despite a very large installed client base, the remainder of new inflows continue to be driven by new relationships, something of which we are very proud. Let me now turn over to Brian to cover our specialized fund flows.