Hamilton Lane Incorporated

Good morning, ladies and gentlemen, and welcome to the Hamilton Lane Fiscal Third Quarter 2025 Earnings Call. At this time, our lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 4th, 2025. I would now like to turn the conference over to John Oh, Head of Shareholder Relations. Please go ahead.

Thank you, Joanna. Good morning and welcome to the Hamilton Lane Q3 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 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 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 on the shareholders 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 third quarter of fiscal 2025, our management and advisory fee revenue grew by 18%, while our fee-related earnings grew by 21% versus the prior year period. This translated into GAAP EPS of $4.15 based on $167 million of GAAP net income and non-GAAP EPS of $3.82 based on $208 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. Another very strong quarter for us, but before I cover the results, I'm going to spend a moment on culture. At Hamilton Lane, we talk a lot about culture. Why? Because we believe having a culture is essential to creating a successful firm. I find firms that never talk about culture either don't have one or have one that isn't worth talking about. To be clear, we don't believe culture to be singular or nor do we believe there is a set recipe for success. But we do believe that creating a culture and maintaining it takes real work and focus at every level of the firm. So, it is affirming when that culture is honored. I am pleased to share that, once again, Hamilton Lane has been recognized as a best place to work in money management by Pension and Investments for the 13th consecutive year. The firm has been recognized every year since the award's creation in 2012, notably only one of five firms to receive this special honor, and the only firm in all of private markets to achieve this distinction. So you ask, as a shareholder, why do I care? Two reasons. One, our clients care. They want to associate with an organization they can be proud to call their partner and to work with people who love what they do. Two, our assets are our people. Attracting and retaining talent is essential to our business. Our culture and awards like this help us attract top talent and continue to expand our geographic footprint around the globe. Juan and I are extremely proud and thankful for all the Hamilton laners who come to work every day serving our clients and continuing to build a tremendous firm. Let's move on now to the results from the quarter and I'll start with our total asset footprint. This stood at $956 billion and represents a 6% increase to our footprint year over year. AUM stood at $135 billion at quarter end and grew $15 billion or 12% compared to prior year period. The growth came from both our specialized funds and customized separate accounts. AUA was up 38 billion or 5% year over year. primarily the result of market value growth and the addition of a variety of technology solutions and back office mandates. Turning now to fee-earning AUM, we produced another strong quarter of 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 $71 billion and grew $7.9 billion, or 13%, relative to the prior year period. Taken separately, $2.9 billion of net free-earning AUM came from our customized separate accounts, and over the same period, $5 billion came from our specialized funds. Our blended fee continues to benefit from the shift of 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. Considering the size of the install base, we believe this movement to be very significant. Turning to customized separate accounts. Fee earning AUM here stood at $39.8 billion and grew 8% year over year. We continue to see growth coming from clients across type, mandate, size, and geographic location. And as we mentioned last quarter, our clients are increasingly including transaction exposure, namely secondaries and co-investments, in their separate accounts. But that exposure in several instances is obtained via our specialized funds, and therefore the AUM is captured there. For example, in our most recent secondary fund, 17% of the LPs were separate account clients, and those clients represented 29% of the capital raised. Again, with all of that capital captured within specialized funds, not within SMAs. Let's move now to our specialized funds where momentum continues to be strong. At quarter end, fee earning AUM here stood at $31.2 billion. Over the past 12 months, we achieved positive net inflows of $5 billion, representing an increase of 19% relative to the prior year period. This growth stemmed from additional closes for funds and market, robust investment activity, and continued expansion of our evergreen platform. Starting with our institutional fundraising activity during the quarter and post-quarter end, and I'll begin with our sixth equity opportunities fund, which is our closed-end fund that co-invest alongside fund managers in equity transactions. As a quick reminder, our fifth equity opportunities fund closed in December of 2022 at approximately $2.1 billion. Since our last update, we've held additional closes for this sixth fund that have totaled nearly $578 million of LP commitments which brought the total raise for this fund to over $1.1 billion, which is already half the amount raised in the prior fund. And again, in less than one year of being in market. Similar to its prior fund, this fund has two economic arrangements for investors where management fees are based on either committed capital with a lower carried interest rate of 10% or net invested capital with a higher carried interest rate of 12.5%. From an overall fee standpoint, the difference in management fee paid is more than offset from the higher carried interest we expect to generate over the life of the fund, assuming a similar track record for this strategy. For more context, the prior funds mixed resulted in 49% of the dollars raised based on committed capital and 51% on net invested capital. Of the $578 million raised since the first close, 13% came in on committed capital and 87% on net invested. This brings the total $1.1 billion raised to date at approximately 30% on committed and 70% on net invested. Given that it is still relatively early days for this fund, we expect that management fees from this fund will increase as we continue to invest the fund. We've closed on a few deals so far. and the pipeline of opportunities is robust. Moving now to our second infrastructure product. Quick refresher, the strategy for this product centers around direct equity and secondaries in the real assets and infrastructure space and generates management fees on a net invested basis. Our inaugural fund raised nearly $575 million of investor commitments in and alongside the fund. Through January 2025, we've now raised nearly $480 million in and alongside the fund to date, and we will look to wrap up fundraising in calendar year 2025. Pivoting now to our retail evergreen funds. As of December 31st, 2024, total AUM across our five existing offerings, including our newest infrastructure offerings, stood at nearly $9.5 billion, with the platform having grown nearly 66% in calendar 2024. Monthly net flows remain strong as we averaged nearly $294 million for the fourth quarter, for the fourth calendar quarter of 2024. For calendar year 2024, when you exclude the impact from the infrastructure products, we achieved nearly $264 million of monthly net inflows versus nearly $161 million of monthly net inflows for calendar 2023. This represents nearly 65% growth in average monthly net flows for our existing three products in market and demonstrates our ability to continue growing these platforms through strong performance and continued expansion of our distribution efforts. As this platform and the overall sector continues to mature, I think we should all expect that this won't be a simple linear growth model. Market forces, calendar seasonality, portfolio rebalancing are all in play here, causing growth to be varied month to month. This is no different than our institutional business, where you've heard us say over and over that management focuses on year over year growth and pays little attention to monthly or quarterly variability. For retail, While management is clearly watching net flows each month, our focus remains on creating a platform that is capable of creating substantial annualized growth. And that is exactly what we are doing. Again, from 2022 to 2023, total evergreen AUM grew 76%. From 2023 to 2024, despite a substantially larger base, we grew 66%, all stemming from the combination of net new flows and performance. Now, a quick update on our technology partnerships. We continue to seek out partnerships with leading technology companies who are aligned with our mission of providing individual investors with greater access to private markets. On January 14th this year, we announced a new partnership with Republic, a leading global investment platform for private market assets. Through the partnership, we intend to launch digital blockchain solutions for retail investors featuring low investment minimums and the potential for increased liquidity compared to traditional private market funds. Republic's leading digital solution and expertise in serving this market will enable us to offer individual investors the opportunity to tap into Hamilton Lane's longstanding private markets expertise, scale, and platform. And the first offering is expected sometime in the first half of this year. And with that, I'll now pass the call to Jeff, who will cover the financials.