Hamilton Lane Incorporated

Good morning, ladies and gentlemen, and welcome to the Hamilton Lane Fiscal Fourth Quarter and Full Year 2025 Earnings 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 need assistance, please press star zero for the operator. This call is being recorded on Thursday, May 29, 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 Q4 and fiscal year end 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 a 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 filed with the SEC, including our upcoming Form 10-K for Fiscal 2025. 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 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 of an offer to purchase interest in any of Hamilton Lane's products. Let's begin with the highlights and I'll start with our total asset footprint. At fiscal year end 2025, our total asset footprint stood at $958 billion and represents a 4% increase to our footprint year over year. AUM stood at $138 billion at year end and grew $14 billion or 11% compared to the prior year. The growth came from both our specialized funds and customized separate accounts. AUA came in at $819 billion and grew over $23 billion or 3% relative to the prior year. This stemmed primarily from the result of market value growth and the addition of a variety of technology solutions and back office mandates. For fiscal year 2025, total management and advisory fees were $514 million and grew 14% year over year. Fee-related earnings came in at $276 million and grew by 34% versus the prior year. This translated into GAAP EPS of $5.41 based on $217 million of GAAP net income and non-GAAP EPS of $5.04 based on $274 million of adjusted net income. Later on, Jeff will provide additional detail on the changes we've implemented regarding fee-related earnings. Lastly, Our board has approved a 10% increase to our annual fiscal dividend to $2.16 per share or $0.54 per share per quarter. We have increased our dividend every single year since going public, and this now marks the eighth consecutive annual double-digit percentage increase since 2017. Our ability to consistently increase distributions to shareholders every year speaks to the growth and strength of our business. With that, I'll turn the call over now to Eric.

Thank you, John, and good morning, everyone. Well, we can agree on this. I'll say it certainly isn't boring out there right now. And while I will share plenty of data and results shortly, let me just say that our management team is dealing well with the market volatility and uncertainty, and in a number of cases, are actually capitalizing on opportunities being created because of it. Our results for the quarter are strong, and we remain confident in our ability to continue to deliver those results for you, shareholders, and clients. Let me share some data and perspective on the markets. We look back at prior periods of heightened volatility and compare how public equity and private equity fared. We'll use the MSCI World Index, given its global composition, as that comparison tool. From early 2000 to late 2002, during the dot-com collapse, the MSCI was down close to 50% at its lowest point and took nearly four years to fully recover, whereas private equity at its lowest was down a little over 20% but valuations recovered within two years of that point. A similar pattern emerged during the global financial crisis, where the MSCI was down nearly 50% versus 25% for private equity, but valuations recovered within two years for private equity versus four years for the MSCI. Our early assessment is that we will see a similar pattern here again. We believe private equity will fall far less, will be much less volatile, and will recover faster from any downturn. When we look broadly at the investment environment, overall exit activity remains relatively muted, while deal doing continues in a variety of sectors. 2024 deal activity witnessed a bit of a recovery from 2023 in terms of overall number of PE deals getting done and total dollars in those deals. From the LP perspective, both contributions and distributions remain below historical averages. However, 2024 distribution activity did see a bit of a pickup. Outside of full exits, GPs continue to seek out alternatives such as continuation vehicles and NAV loans in order to send capital back to LPs in a relatively depressed exit environment. This is all resulting in holding periods extending. And while overall deal doing activity remains relatively muted, the story was quite the opposite for Hamilton Lane. In calendar 2024, we saw record deal flow across secondaries and direct investing, with strength coming across each of the sub-asset classes. This is largely the result of GPs seeking out capital partners as they find themselves with relatively less capital and Hamilton Lane continuing to be positioned as a partner of choice. So what does all this mean for Hamilton Lane? Our business is predicated on delivering long-term results for our clients. During times of stress and dislocation, we look for opportunities and focus our clients on the long-term benefits that a well-diversified and strategically constructed private markets portfolio can bring. We are continuing to do just that. Moving on to fundraising and fee-earning AUM. We produced another strong year of growth, largely driven by our specialized fund platform, specifically our semi-liquid evergreen funds. where we continue to add new product lines and expand existing ones. Our total fee-earning AUM stood at $72 billion and grew $6 billion, or 10% relative to the prior year. Our blended fee rate 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. Today, it stands at over 60 basis points, excluding the impact from retro fees. At fiscal year end, customized separate accounts stood at $39 billion and grew by 1.8 billion or 5%. Flows for separate accounts primarily come from three sources. New client wins, re-ups with existing clients, and contributions from investment activity. Contributions have stabilized as investment activity holds steady and distributions are light given the slowdown in the exit market. We work with our clients to map out the construction of their portfolios and plan beyond just the current tranche of capital we are investing for them. As such, we have billions of contracted commitments from our clients to allow us to properly construct portfolios for long-term benefit. And these commitments will flow into separate account fee earning AUM as they get turned on over time. Today, our pipeline of new clients and re-ups remains robust, and we believe this will flow through at a faster rate as markets normalize. Moving on to specialized funds, we continue to generate strong momentum as we have ended fiscal 2025 with specialized fund fee earning AUM at $33 billion, having grown $4.5 billion. This represents an increase of 16%. We continue to maintain solid momentum with our traditional drawdown funds, despite a slower institutional fundraising market. We held the final close for our inaugural venture and growth focus specialized fund. and raised over $606 million from a diverse group of institutional investors around the world. While this is a new product for Hamilton Lane, we've been long-standing active investors in the venture and growth space for nearly three decades. The fund is focused on concentrating capital into what we believe to be best-in-class, high-growth companies through fund investments with venture and growth managers, direct investments, and solution-oriented secondaries. Moving to our second infrastructure fund. To date, we've raised nearly $735 million of investor commitments in and alongside the fund, with closes having come in subsequent to quarter end. As a 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. We will remain in market with this fund through the second half of calendar 2025 and are pleased with our momentum here. Our annual strategic opportunities fund continues to take in additional capital, and to date, we've raised nearly $340 million for this current series. And as a reminder, this product is effectively perpetually fundraising, as when we close a sleeve, we immediately open another. Moving now to our sixth direct equity opportunities fund. At quarter end, we held an additional close for this fund that totaled $181 million of LP commitments, which brings the total commitments raised to nearly $1.3 billion. This close will be reflected in fiscal Q1 of 2026, and of the $181 million, $51 million came in on committed capital management fee basis, while $130 million came in on net invested capital. It brings the total raise split to 30% on committed and 70% on net invested, and we plan to remain in market with this fund into calendar 2026. Turning now to our evergreen platform. Demand here continues to be strong across strategy and geography. The volatility in the public markets appear to be an additional catalyst for monies moving into the sector. Like others, we too are seeing record-level fund flows and minimal redemptions. At last year's Shareholder Day, we shared our vision on how we planned on growing and scaling this part of the business. The game plan was relatively simple. Continue to grow our existing funds and remain active in bringing new evergreen funds to market. We have executed well on both of those fronts. Our strategy is shaped by listening to the market. Our annual survey of advisors continues to show that the move into this space is here and is growing. Nearly one-third of survey respondents report that they plan to allocate 20% or more to the asset class, with another third planning to allocate 10% or more, meaning that a total of nearly 60% of the financial professionals surveyed plan to allocate 10% or more to private market investments in 2025. This represents a 15% increase from our 2024 survey. Again, we'll reiterate that most individual investors have little to no exposure to private markets today. Their journey is just beginning, and we believe we are bringing product to market that helps them achieve those goals. On the new product front, Since calendar Q4 of 2024, we've launched Evergreen Infrastructure Funds for U.S. and non-U.S. investors. This product line, as of quarter end, sits at nearly $400 million of AUM. More recently, we launched a dedicated secondaries product for U.S. investors and a multi-manager, multi-strategy European Long-Term Investment Fund, or LTIF, and lastly, a dedicated venture and growth product for U.S. investors. We will be launching more products in the months to come as we continue to build out this business line. Overall, the platform continues to scale with total AUM at quarter end at nearly $10.7 billion. Net flows remain robust. For Q1 of 2025, we saw nearly $1 billion of net inflows across the platform. And for our three seasoned offerings, we took in $835 million of net inflows with March being the second highest individual month in our history for those funds combined. April, despite or maybe as a result of these public market gyrations, was strong with net flows of over $330 million. Before I move on, I want to touch on a trend we are seeing with these products that we believe will continue to grow. While conceptually the technology and structure of Evergreen vehicles were designed with the individual investor in mind, our experience has shown that institutional investors are moving allocations to these vehicles for many of the same reasons that these products resonate so well with the individual investor. Namely, the fully invested nature of the portfolio and the automatic reinvestment of capital with compounding returns. These two components have a stark impact when it comes to comparing the return experiences in both structures. To achieve the same level of multiple of invested capital, closed-end structures typically require higher IRRs compared to annualized evergreen returns. To put numbers around this, over the course of an eight-year hold period, to achieve an approximate 2x multiple, an evergreen structure would need to produce an annualized return of 10% versus a 16% IRR and a closed-end structure. Further, our analysis shows that evergreen funds have outperformed traditional drawdown funds from the late 2019 to the end of 2024. Now, while the difference between the two structures is not overly large, evergreens have outperformed nonetheless, and both have outperformed the MSCI World Index during that same timeframe. And now that we have more than five years of our own data to look through, what does our evergreen investor composition look like? Throughout the entirety of our evergreen platform today, there are nearly 150 unique institutional investors that have committed to our evergreen funds, and these institutions represent over 15% of the capital that has been raised. These institutions range in size from large pension funds to smaller endowments, foundations, and family offices. Historically, smaller institutions and their consultants who had an allocation to private markets would generally look to fill that with a commitment to a multi-strategy fund to funds. Today, that allocation is moving to evergreen funds, and we've seen that within our own client base. They are able to achieve the same goals of exposure to the asset class in a more efficient way. I'll wrap up with our latest strategic technology investment on our balance sheets which is called 73strings. 73strings is an innovative technology providing comprehensive data extraction, monitoring, and valuation solutions for the private markets. This AI-powered platform streamlines middle office processes for alternative investments, enabling data structuring and standardization, monitoring, and fair value estimation. 73strings allows asset managers to scale the critical middle office and valuation functions that are essential to growth and product innovation. We are proud to support 73 Strings in the Series B round, alongside Goldman Sachs, Blackstone, Golub, and Broadhaven Ventures. And with that, I'll now pass the call to Jeff, who will cover the financials.