Hamilton Lane Incorporated

Good morning, ladies and gentlemen, and welcome to the Hamilton Lane Fiscal Second Quarter Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press bar zero for the operator. This call is being recorded on Wednesday, November 6, 2024. I would now like to turn the conference over to Mr. John Holtz, Head of Shareholders. Please go ahead.

Thank you, Nicole. Good morning, and welcome to the Hamilton Lane Q2 Fiscal 2025 Earnings Call. Today, I will be joined by Eric Hirsch, Co-Chief Executive Officer, and Jeff Armbruster, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. Before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance, and business. These forward-looking statements do not guarantee future events or performance and are subject to risks and uncertainties that may cause our actual results to differ materially from those projected. For a discussion of these risks, please review the cautionary statements and risk factors included in the Hamilton Lane Fiscal 2024 10-K and subsequent reports we file with the SEC. These forward-looking statements are made only as of today and, except as required, we undertake no obligation to update or revise any of them. We will be also 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 on the shareholder section of the Hamilton Lane website. Our detailed financial results will be made available when our 10-Q is filed. Please note that nothing on this call represents an offer to sell or solicitation of an offer to purchase interest in any of Hamilton Lane's products. Let's start with the highlights. Year-to-date through the second quarter of fiscal 2025, our management and advisory fee revenue grew by 21%, while our fee-related earnings also grew by 21% versus the prior year period. This translated into GAAP EPS of $2.85 based on $114 million of GAAP net income and non-GAAP EPS of $2.58 based on $140 million of adjusted net income. We have also declared a dividend of 49 cents per share this quarter, which keeps us on track for the 10% increase over last fiscal year, equating to the targeted $1.96 per share for fiscal year 2025. With that, I'll now turn the call over to Eric.

Thank you, John, and good morning, everyone. Before I go into detail on the quarter's results, I want to acknowledge a milestone that occurred for Hamilton Lane during the quarter. On September 23rd, HL&E was officially added to the S&P MidCap 400 Index. Throughout our 33-year history, we've had a singular focus of delivering results for our clients, recognizing that doing that well will also benefit our shareholders and employees. This simple but effective strategy continues to serve us well, and being included in the S&P 400 marks another great achievement for our firm. Both Juan and I are extremely grateful and proud of all the dedication that each Hamilton Lane professional brings to work every day. in helping to serve our clients and to grow our business. Now let's move on to the results from the quarter and I'll start with our total asset footprint. This stood at $947 billion and represents an 11% increase to our footprint year over year. AUM stood at $131 billion at quarter end and grew $12 billion or 10% compared to the prior year period. The growth came from both our specialized funds and customized separate accounts. AUA was up $81 billion, or 11% year-over-year, primarily the result of market value growth and the addition of technology solution and back office mandates. Turning now to fee-earning AUM. The story here continues to be the same. Strong total growth, largely driven by our specialized fund platform, where we are adding new product lines and expanding existing ones. Our total fee-earning AUM stood at approximately $70 billion and grew $8.3 billion or 14% relative to the prior year period. Now taken separately, $3.1 billion of net fee earning AUM came from our customized separate accounts and over the same period, $5.2 billion came from our specialized funds. As we detailed in our shareholder day, our blended fee rate across the platform has been steadily increasing year over year. 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, where growth remains impressive. When we went public in 2017, our blended fee rate was 57 basis points. Today, it stands at over 60 basis points, excluding the impact from retro fees. Moving now to additional detail on our customized separate accounts. Fee-earning AUM here stood at $39.4 billion and grew 9% year-over-year. We continue to see the growth coming from clients across type, mandate size, and geographic location. As we noted on our last call, we continue to increasingly see separate account mandates include meaningful allocations to private market transactions, including secondaries and direct equity and credit investments. For our separate accounts, when possible, those allocations are fulfilled with commitments to our specialized funds focused on those specific transaction types. This results in the AUM and management fees being captured within those specific funds, not in the separate account category. While optically, this results in more modest dollar growth in separate account fee earning AUM, we are simply capturing those separate account dollars in higher fee rate specialized funds. Let's move now to our specialized funds, where momentum continues to be strong. At quarter end, fee-earning AUM here stood at $30.4 billion. Over the past 12 months, we achieved positive net inflows of $5.2 billion, representing an increase of 21% relative to the prior year period. This growth stemmed from additional closes for funds in market, robust investment activity, and continued expansion of our evergreen platform. Moving on to fundraising activity during the quarter, and I'll begin here with our Strategic Opportunities Fund, which is our annual direct credit fund targeting the institutional LP. As a refresher, this series of funds is effectively always in market as we raise and deploy the capital with short investment periods and charge management fees on net invested capital. After the quarter, we held additional closes that totaled $60 million, which brought the total raise for the series to nearly $210 million. Our strategic opportunities fund remains a key component of our overall private credit platform that includes our discretionary separate accounts and our evergreen platform. If you total our eight prior funds, we have raised nearly $5 billion for this program going back to 2015. Moving now to our venture product. As a reminder, we have been actively investing in the venture space since 1996, primarily through our separate account and advisory businesses. This new product combines our long-standing and successful track record with our strong access to top-performing managers in order to provide investors with a one-stop shop to the venture space, including primary, secondary, and co-investment transactions. I'm pleased to announce that through the most recent closing on November 5th, we've raised nearly $500 million of LP commitments for this first venture-focused fund, and we'll look to finalize fundraising in the first calendar quarter of 2025. We are proud of the successful fundraise and appreciate the support from investors. Let's move now to our impact product. Our impact strategy seeks to directly invest in companies with the goal of generating returns alongside a measurable environmental and or social impact. Our two prior funds in this strategy raised nearly $95 million and $370 million, respectively. On October 11th, 16th, we held the first close for our third vintage in the strategy with nearly $110 million of LP commitments. Like all of our specialized fund strategies, our goal is to grow and scale each product in a tactical and methodical manner, and we are pleased with the growth of the impact product thus far and look forward to providing you updates with this latest fundraise. Now, on to our evergreen funds. As of September 30th, total AUM across our three existing offerings stood at nearly $8.4 billion, with the platform having grown nearly 75% over the last 12 months. Monthly net inflows remained strong as we averaged over $220 million for the third calendar quarter of 2024. During our shareholder day in June, we highlighted the opportunity we believe is in front of us related to continued growth of both our existing Evergreen product offerings and our commitment to bring new products to market. On October 8th, we announced the launch of our newest infrastructure Evergreen products, which now complement our diversified private markets and credit offerings. These newly launched infrastructure Evergreen products highlight our ability to execute on our strategic vision, and we remain active in the creation of additional new offerings. Lastly, a key component to our ability to successfully launch new Evergreen products is the ability to seed these launches with balance sheet capital. Recently, we closed on a $100 million senior notes offering. The offering was well received in the market and resulted in us both diversifying our funding sources and expanding our capital markets access. We've already put some of this capital to work with our infrastructure Evergreen funds and our overall goal in Evergreen remains simple. Continue to deliver high quality products, to the market to ensure investors have access to the benefits of this asset class. Before I turn the call over to Jeff to discuss the financials, I want to take a quick moment and highlight a recent announcement regarding our newest strategic technology partnership with Northern Trust, who is a leading provider of wealth management, asset servicing, asset management, and banking services to both institutional and individual investors. Northern Trust will now offer its clients access to our private markets data, analytics, and tools, with a key component of this partnership centering around providing Northern Trust institutional clients with access to Cobalt, our proprietary private markets data and analytics software system. The combination of Cobalt and Northern Trust's suite of front office solutions results in a powerful and comprehensive front-to-back solution for their clients. This strategic agreement represents yet another example of our unique ability to partner with the world's leading financial institutions and deliver our private markets expertise, access, and capabilities in a mutually beneficial arrangement. These unique partnerships help accomplish our goal of increased brand awareness through the integration of our advanced suite of technology and data solutions to an increasingly growing population of both institutional and non-institutional private market investors. We are excited to embark on this journey with Northern Trust. And with that, I'll now pass the call to Jeff, who will cover the financials.