HLNE - Earnings call transcript Q1 2019 | Hamilton Lane Incorporated

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Operator

Hello and welcome to the Hamilton Lane Q1 Earnings Call.

On the call today from the Hamilton Lane team are Mario Giannini, CEO; Erik Hirsch, Vice Chairman; Randy Stilman, CFO; and Demetrius Sidberry, Head of Investor Relations.

Before the Hamilton Lane team discusses the quarter’s results, I 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 actual results to differ materially.

For a discussion of these risks, please review the risk factors included in Hamilton Lane’s fiscal 2018 10-K. referring assessing measures business. the be as they also in important performance will to that non-GAAP view Management of the of which to the measures Hamilton Lane’s IR these be the Reconciliation in found section GAAP of earnings available are can materials, website. on the presentation non-GAAP offer stock. interest note of in Please an Hamilton nothing a or Lane’s this on sell that or any solicitation represents funds call to to purchase when company’s detailed will results XX-Q The filed. be made the is available financial

morning, Hamilton Hamilton this presentation on Lane Head this website be call turn pages in release version will call. shown the earnings referencing I Sidberry, will of available the for Finally, Investor of the that, the webcast and Lane call Relations. team With Demetrius the over the on IR to

Demetrius Sidberry

by and first everyone of was total last financial performance revenue relatively in us. in Slide Sarah and provides came summary XXXX. you, of a fiscal fees quarter incentive amount driven revenue with up the year of XX% joining advisory prior fact fee strong fee. in thanks Compared an uptick of X a large platform across despite we for comp with of for our Management the retroactive presentation that against the growth period. the our Thank flat coupled the year, QX

of was Now income. moving net EPS is the and $X.XX down $XX adjusted non-GAAP to P&L our this million to on our for earnings per quarter share, based over

Our net on income. $X.XX GAAP nearly $X this for EPS QX of GAAP was million and based is

year over additional Mario share, which the for on dividend will With more prior announced $X.XX the of our target highlights per to in call that, $X.XX. track the quarter. turn I as Finally cover us of now slightly to for quarter, full fiscal we keeps than

Mario Giannini

joining we into macro-environment On for industry either a have provided company, call. calls Demetrius our operate. the in deeper the everyone which look previous we thanks the and Thanks, or

the industry noteworthy and firm. important trends within continue our comment to in developments on update we While on you

some quarters straight results. to Our simply want is go one, industry this now the like quarter-to-quarter. in we Therefore will change its into

those For on the who be slide joined before, calls our similar. of graph X you should have

yet We graph of markets continue our in scale. illustration simple influence our as and to that private important the it is very a this highlights believe

For new clients of year. the in-house we $XXX are and those this Growth an footprint the investing switch types period quarter, asset grand new who those our those in private have partner. to of are a was base who approach billion from class, from growth XX% One, asset and clients. to are Broadly asset now service took two, geographies. is from our previous previously different the the speaking, three providers, come set up three, seeing coming of a fiscal market in diverse versus from same seeking chosen the

We see are different also fund and flows positive of geographies types continuing investors. across to different

Lane growing mandates Our of is of clients. variety of continued well as, expansion on of base our behalf offerings, Hamilton customized we reflective as fulfill client

AUM our remained we was account accounts. earning $X.X year and customized highlight chart a The our X, steady specialized you shows our of with our prior versus As separate XX% up built, Slide rates across products period Slide the areas our separate On growth that fee X, solid our fee AUM of on or also have Slide offering. see around billion on a X time. starting over long focused both total customized can nearly with

the approximately XX% in comes be for our clients, markets. to within have clients fee separate Based us their a fee produce we from existing AUM allocations separate or new which XX last the The commitments winning of maintain on seek earning $X over fee business. our AUM part long-term of the earning earning private our steady from these the clients, to increase continues Over clients growth balance AUM the added months growth new flow as this account There potentially accounts. billion customized to existing of of to new accounts. net this, our organic our

Over the our term. of saw decrease reaching we last earning fee a separate in AUM, account the primarily the end slight due to quarter, its account larger

made ways offset We of expect and best capital calls, control. start account tranche our that as due this in decline largely our this to client our built annual exact of believe commitments momentum AUM prior AUM on the coming the about by the ramp have by our Having or for beyond we client The to stated fourth quarter-over-quarter has $XXX We’ve signings said continued matrix. think separate quarters. commitments is also period of the an separate this new are closed net million which earning way We funds our AUM to speeding nearly quarter. experienced a for over over account $XXX over new up specialized over first the of will funds, driven and fee which in timing our versus be multiyear nice raised of been million fund, fee during has the added the including on months. of last earning $XXX specialized growth co-investment XX to-date, million

raise progress. has oriented over credit which our commitments and Additionally investment to continue $XXX the in funds the of make our in fund-of-funds reached million product good

continue fund-of-funds We co-investment and to for products. our will both capital attract

of XXXX into already both deploying result are We closes will will additional since have to and because capital retroactive subsequent closing through XXXX, actively these products continue in fees.

the $XXX with billion offering advisory up our is here with compared shown prior year. Lastly AUA

the as before, represented us we and to which advisory needs, relation revenue AUA around management of analytical and well expand for advisory in We are always continue back growth. a between coming clients, And, revenue. not also entities office there as number as direct is to this both noted

portion, differentiating both continue is be to proud very of robust AUA as are in influence and in we environment with specifically. and more our And general my the markets. figure indicator the private a an Our a believe in of and the market wrap-up To it’s markets we presence private a factor.

we of a are pipeline opportunities who the reflects Randy to ways new the cover now in address part business not existing only quarter. very our turn are opportunities will evolution financial to those what is here also market. dynamic this already be and over but this Our and will of that nature, those finding I for now performance to

Randy Stilman

presentation of Thank you, shows highlights the our Mario. for quarter. Slide financial the X

we slide, to XX% the total very solid our growth year business on up see shown period. As the prior revenue with in continue from

fee the retroactive contributions prior impact did management recur $X.X not fees reflecting million of from was revenue quarter that mentioned, the this Demetrius prior over of flat and significant essentially with the the advisory As year we year. year,

closes the the Therefore that into accounts. fund the new offering see come our year of spike As which accounts to prior compared are likely period, in many accounts first you increased customized existing million closes many due products, of a subsequent management occur. fees dating for retroactive funds to of quarter allocations to additional Revenue of $X.X our investors from for from fundraised separate additional aware, fees typically the and the several related you closed. back the that later to

is recognized from offerings. period, that by was year our the from of million customized our fees carried $XX included we GP offerings, year our office in - experienced incentive by prior final one separate For and two back revenue driven adds fees, period. in more prior were recognition from than client prior advisory interest technology The new to funds co-investment reporting that over component interest reporting advisory up growth driven the the The of our And, the incentive a quarters. analytics of account the compared XX% increase catch-up. carried and

the fund fees incentive cliff $X.X during which included from increase incentive in had no liability a fund is $X.X still fiscal did at of call, at outstanding from able It the we this to deferred end XXXX. while As recognize deferred We the we fee important co-investment that discussed a know which we in the $X incentive this last million associated approximately on to were of had million expenses. healthy this million fees quarter. quarter,

Our overall trends our of but overall XX% fiscal expectation of line, to for historical remains X% carry year high revenue. end this at the in of

that separate the on which co-investments shows just and as dollars generate more of received carry fee products to and beyond we our generally diversity accounts ability the have drive our carry transactional This also interest. our quarter secondary helping This to we component more or have dollars. carried of consisting is of

spread of in carried across over over $XXX As unrealized underlying thousands vehicles interest investments. XX investment of and we end, quarter had million

earnings. Slide to which X, profiles Turning our

as, and uptick X% up the consulting Wrapping in the decline year of are This year that million $X.X by driven Private XX% a and is to prior fees period with earn-out to comp alongside. of August fee our a and from expenses to period, is this $X.X our Connect, professional due as as in grow our increase quarter. the the the for included incentive period. we quarter. We investments declined evaluation by in related the our compensation growth the earnings fee prior to prior fees, one expense. did as legal Therefore continue strong was the amount expense up and related our and discussed of our fee result have grows period, business recognized to and increased quarter fees. on balance were million Our benefits acquisition. again business and a products, clients well up compared assets with earn-out total modestly we Market close well we prior compared approximately on expense invest of fees performance a compared to venture year Slide $X.X accounting $XXX,XXX see alongside and million compensation increased last will retroactive in acquisition as year or real The earlier. earn-out. joint based sheet prior which In period modest is regards $X.X our and balance the period G&A capital part expenses, sheet acquisition increases investment from incentive to raise most following to in and $X.X for related in to grew firms to-date. a some this the the result driven largest the year balance which continues perform million the we That year in up earn-out XX, Total million related

and our shown in of lines best of of income the income statement. equity the these As

lag. reminder, a three our evaluations a are As on month

an performance than modestly the had quarter levered valuations liabilities, So, first MSCI and at and of more both be debt senior market largest in year the In our them EBITDA. X%. we calendar public less regards to likely LTM adjusted our than liability impact on our of private is to market S&P continue with Xx

of one of the technology our On acquisition the discussed we of prior the announcement Ipreo. sheet investments call on an balance

are $XX excited to announce end, of to subsequent received quarter the acquisition we closing August that We approximately part as million X. on

about once With achieve recognize X.Xx approximately next happy to investment questions. received to $X.X are are we expect expect proceeds all and quarter initial We take million. a to of our gain that,

Operator

[Operator of line of your Instructions] the Ken line open. go question comes Please ahead, from Worthington is Our first JPMorgan.

Ken Worthington

morning for Hi, this. missed thanks apologize good and if questions. I my And, I taking

in In distributions separate quarters. you distribution the this about us level of of maybe looks of some a could little you terms happened of last Can two for distributions, the business timing And you’ve if the help what and talk billion of the aspects account last the over the in of $X.X like bit had year? for about maybe quarter quarter? remainder even outlook what understand the

Erik Hirsch

Ken, it’s Erik. Hey

new bit you’re two on last just overtime these earning is What seeing are sort perfect one, that when lot fees have AUM the would tranche and quarters around distributions. control been an to really of you around runoff revenue factors, a when are seeing I versus end. decline on is tranches of you always already see in kind these as mode, little age that down to would ultimately to larger, people come I fee abnormally couple of starts. what outside runoff pretty the our don’t [de-minimis] What of think of those the impact then because substantially. a say the I and you alignment they’re coming point

will quarter assets of the this new been had AUM as just contract So, inch think in terms in given the just haven’t that necessarily happen larger revenue gotten of in Mario had again clients yet, which mentioned his you rolled-off that very we age we comments, and hasn’t not shortly. active just

of guidance on them kind in So, you aging forward are go a terms quarter-to-quarter. on of basis, seeing

have just we see back I some the stuff would focus annual. new higher distributions think one are has slightly mismatch you then quarter where going I you think in coming on periods to go to But this online.

net side, the of annual I the continuing of business. seeing is increase sort when growth you’re On reflecting the still think characteristics to there strong through come the

Ken Worthington

and you. flow that Okay, sequentially, coming you outlook base And, actually through in headcount year hiring Thank for great. maybe then talk fell maybe - compensation about base the expect flows and growth on should and how the that line? in or expenses the compensation compensation, through the

Mario Giannini

Mario. Hi Ken, it’s

think in plans of to are in year the terms growth hiring similar you’ve or probably two. last seen I the what

we are carefully, calls, you to at of I I it at at infrastructure talked people think cost you growth where would that add you think the look areas to we’ve compensation you expect margins all I grow - look its in that expect the as where we organization, can But very headcount side, running. side, and we you across you investment look that run we as grow. at about the past where will it And, the of look and the be obviously very need we continue you think business think they carefully. add carefully, headcount around see the side in to

I be see how huge in changes we to going any resources. at or don’t people adding So, are looking

Ken Worthington

much. Okay, fair very you enough. Thank

Operator

of question your Michael open. Morgan of Your Cyprys comes Please ahead, line next go line the from Stanley. is

Michael Cyprys

for good Hi, taking Thanks morning. question. the

in you broadly technology in next approach about how criteria or how about of on capital up be talk about just then can on the might just if thinking using elaborate you be your reinvesting versus million terms exit, And, thinking following a sort of the side, what’s that bit making little to in those about proceeds your could IPreo in reinvestment where strategic more you Just you’re management thinking there? way investments back proceeds, just $XX the business? technology the you’re added,

Erik Hirsch

Mike its the Thanks Erik. for question.

then Let me back come the latter beginning. I’ll to the and part first

Ipreo and we the then proud very think of. I exit are for us

on as reflective I using on through it’s enhance strategy in well prior smart balance calls think is of positioning way business fact technology can we technology, said the the We money where as of the the both that competitive the about sheet money sheet working. dollar. a balance making

due over One, seen good part I of both just But - of driven couple the that advisory those analytic the is quarters, a also into win by last think new is coming mandates. Again driven what on very of advisory coming continuing a part by of there, happened. that on. is of clients technology. lot to largely us clarity you’ve business and back to around growth office that

very So, position. on are you now a successful Ipreo exit the seeing

with working. the partners. forward? So, actively mean going We strategy we say is would to dialogue technology in does What be continue potential technology, that

to Our client our experience that’s for need going we enhance criteria be the is and make a deliver that to us is pretty more end-user. to simple, have going we current something that’s going to already offering efficient what better

to of found as have, four you know, date. those We have

growth our that growth. look we would balance dollars, into if we on for overtime. necessarily us continue the strength, continuing question, tactically, is going? that’s first grow to we I are think be of grow to it’s a that initiatives we’ve also think again all again the those those as back that at we your part very And, the which we continue us be doesn’t GP dollars we I commitments alongside not dollars stopping other But think which I back to find and as view stopping. look been where a of I strategically to our to going don’t where to takes is quarter-to-quarter surprised will them. opportunistically as some growth redeploy are AUM spending is clean, technology dollars spending not think of AUM those sheet

Michael Cyprys

you then the platform update and if high separately Great, initiatives. on just network just our could us reach

maybe the front about white there? cases retail some some high the how for can in or distribution for think set you managers you’re and opportunity part, elaborate maybe some if network distribution thinking are I about you that labeling thinking on

Mario Giannini

Sure Mario. Michael its

I think before. I in are we has looking we articulated that from changed it two have think don’t ways, what at probably

remains one that that distribution channel There have the interesting. groups a product. as wanted label lot there think white are label I a of and white

we partner are before. I natural a think So, done them. with it We’ve

We have like that. experience. in We to we context their or clients go are don’t the really threaten after anything of them saying going

that and continue very So, good ones. to explore a of relationships some for I partner think those are and we new have we

it offerings the products, and think is technology evergreen of continue I and those. all of products, of other we can products, retail sorts around around have explore liquid to the part you types

think well an and legal of But us you’re requirements probably you as it’s us as different them that as will for going anyone, that to it’s for we around I sure area forward. you’ve an significant know have sorts avenue got growth well. all that regulatory think there interesting make doing

interested in So, that I are think to on very and continue it. we work

Michael Cyprys

Thank you. Great.

Operator

comes question ahead, of Blostein Please next is open. of line Your line go Goldman Alex from Sachs. your the

Alex Blostein

everyone. Hey

So, industry I related to to broader was the both of and on you guys. for hoping touch kind dynamics fee specifically

a separate to business of guess, going about output I on the we surface on pricing rates of what’s if the account Maybe think going you’re how kind of increase pressures forward? separate should kind any side any fee see the starting and the of lot in and I little like more look comment there on know going that they in of bit and of things that’s it at fees, sequentially. kind declined the you So, a account and it. looks out are when there an of are

Erik Hirsch

Erik. say its observations. couple would Alex, of a Thanks I Yes.

not asset that. fee all exists across pressure the immune are and we I from think the classes the notion of

are simply showing and that real over is for we’ve result a we the clients strength a able of fees. stability more numbers fact hold couple the been as period the long think of time One, are to that I pieces. and showing doing reflective we that of are

been that bit market The product in more remarkably supposed are, side which And, fee as of kind a product second very, are just little is you if the that pressure In you of we you very fee has good levels. resilient market seen to are stable. kind and customized commingle that part we are provider side, game have there a rate is is, and for a rate as around side. commingle the

think quarter fee I again pressure just you’re moving aging and distributing alteration seeing some dynamic, this as to what reflective any of and are is not the dollars quarter-to-quarter. opposed on side in of fee more overtime which we seeing the the out

Michael Cyprys

Got it. quick And, Randy. then couple for just ups follow of a

are head On then of the so, or couple continue next elevated, and kind catch-up the catch-up secondly Thanks. the in missing maybe of fees, XX Any looking as highlighted going you are a you we obviously kind sort fee to of expenses, could the fundraise emphasize, think reasons couple of over how next you of you months the on G&A? And, G&A to the those investments some level been the have way about what out and why of just should process. quarters? guys to management in in of

Erik Hirsch

will Alex its then Erik, Randy the handle and the G&A. I’ll take first,

commingle retro it’s to months rise after so generally fairly we’ve heard the period these the time a as On XX products, first to fees, close. got on lengthy you say,

couple are go. to There we’ve some in of real pieces are got sitting So, that a time there.

the one which again talked product, co-investment and we’ve so our the the That those. two in the that’s two, So, catch-up by adding go out referenced and active time as is One, bigger also the we the have in AUM AUM terms go closing we subsequent Mario be is driven obviously larger going to of we where the which further larger back most catch-up. to will about recent factors.

forward board. still time started we still said And, across the this are last us flowing that none product What financials think credit is to the to period. raised, there seeing given prior do also that of it a as the interesting you’re hasn’t for is we And, through not is level those that done, so because fund room on had the during on time We at what have we products. we invested, time is still today of fundraises us. about is talked ahead and we’ve so that are looking on had grow And, of dollars fee those got been. these

if think we growth is With you’ll So, are not there process G&A still subsequent Randy quarter. in that, go coming things that on me for raised that let start to seeing question. some meaningful already already in

Randy Stilman

Thanks.

moving about last that And, we quarter. of Private G&A, over was due fix year’s this the and quarter actually at the increase a actually the million the first to increased of the than the to expense prior the it half our With Connect, compensation Market over more fiscal year, occurred G&A. is that end from line quarter

about of that half the So, explains expense.

We or are fees, costs auditing legal additional also it’s seeing, we that still whether tax. have professional on incurring and accounting we’re some and

the reporting we fees was and the additional public situation at the company expected place. time. on we build the increase risk initiative something we also And, European had were side last a just that legal As that some into quarter put where not That professional was incurred like. we as the this out,

Michael Cyprys

rate Got it, run other the any forward, going just and on drops off?

Erik Hirsch

we the low digit what that communicated in will growth growth think we’ve terms at which what single match revenues. looking are I digit expenses, to is far double of really as as

Michael Cyprys

Got it. Thank Great. you.

Operator

of from open. Wells line go the line Harris comes is Chris question next ahead, Please of Fargo. your Your

Chris Harris

[Technical difficulty] capital vehicles…? thanks. Great, permanent of have number

Erik Hirsch

Hey repeat hear first missed We can it. the Chris, that part sorry you of can you we better now. question,

Chris Harris

[Technical different, wondering that’s something you difficulty] I difficulty]? are know but just if guys [technical

Erik Hirsch

up. breaking really it’s sorry, Chris,

pieces. getting only We’re

groups we that permanent question vehicles is, and them, some permanent Is raised capital are that vehicles? thinking of capital why of like close? not I we raising think have your some are

Chris Harris

question. Yes, the that’s

Erik Hirsch

as groups are be those markets like raised of think talking around answer here these us at that the types I the strategies of you are said, of different Clearly structuring interesting. are for then outside States, of some the I whether someone was them about and of expand But retail short do vehicles some Part it from - vehicles. so become challenges The the what or yes. earlier to by in for us. some looking continue of in different them would some some revolves of is, or of as United the terms

so, And those looking yes, are we at very actively.

Operator

Your Lee line comes is of Please from line ahead, next Robert question of the your open. go KBW.

Robert Lee

thank for one some my for you they’re refresh I Thanks Great, doing us very you’re I Are you also questions. And, of - on if the first co-investment, well, late, if apologize process fundraisings, taking just products now? in is, the specialized raising touched much. the that fund know But the it’s still think other got I maybe right there little on earlier. of fund-of-funds. it

Erik Hirsch

its question. Rob Thanks Erik. Yes for the

these good is keep you’ll in of that, the if yes, aggressive about and of everyone see in least mind vehicles see mentioned would to both fund-of-funds. and bookended, you tends front of transcript And, good a again amount got earlier I - say so little runway What we have And, I had fair us. more should a activity at then to the fund the so our bit still think front the usually be capital the and we’ve terms history XX that what of those close. on is activity aggressive is, this tend prospects. make continue raise feel And a end earnings then we very in time in little more continued end quieter. fairly closing on co-investment long to first progress barometer, the after a middle months progress I bit to on very and little

These showing is particular other or are segment to a us highlighting is market of large as define particular out kind or increase an call. of increase just of that they specialized products goes things you growth of attacking are kind the of calling continue white are of they this in on either I in AUM would set geography what that labelish specialty we a terms vehicle, of of up seeing that across variety that LPs. start Mario a to are flagship adding really overtime. in are the I not all smaller of for that that back the which made as products worthy think kind meaningful terms comment scale But and In to product of the them, think see

Robert Lee

access kind years rest maybe And, or secondary is then that place growing question, just great. have of assets I but level the growing in if got up, you in money more the the mean, ago, used easily rate, and you analogy that and more is over raised by liquid, the assuming how many some impacted - of the higher too pretty it’s pricing liquid peers or opportunity. this market a loan and to a appointment ways. opportunity put that Okay, maybe of broadly impacting high I lot it’s at is more years bank market do trade, within feels broader still like it think secondarily the just then - is industry pain mean, to level on into that I of kind various it, many mean, you generally, I bad Could pricing traded I’m market at trade think

how more capital of So, kind space? of kind comes of think that into you do as

Mario Giannini

of the in is interesting That our one right its more now. Rob markets Mario. view

depends what you you somewhat. are think accurate I it to say there narrowed have also what talking on discounts it has it’s even right, are grown. But that think - about. And, I

If about name you brand discounts talking narrow. big funds, are on yes, they very are

normal what different also massive trading? terms X sold both the some was call portfolios as has done market that It that restructurings more being very interest as of think to general your so the in it’s people you in partnership is at opportunity it terms X how of a vanilla, high looking to look market. liquid or that from funds, a other playing spent talking surprise of in from discounts that that market about in think would at raised. been in capital is was is the a think? it market, you just I what has broadly being If that big discount you are market, saying are far as a you set, very are And, say, years becoming it lot what are been ago lot buying seeing general capital varies, discounts what people partners. a at there you quality is are secondary on and for the a market ago. it large grown we is would that by raised normally would years the that you than of has of There’s partners about larger So, secondary X

period look a it’s look or a ago. there occur. going would to well and like on, in to as and numbers than opportunity continues thought X, I becoming something expand much So, years needs on our have so broader market anyone expanded an different that as set at the is we And, X think X what’s simply different that what is is market reloading going deeper view that headline it, market

Robert Lee

approve I to follow transfer Maybe up, GPs of ownership any I presume. have mean, this a is the

keeping interest or investors keep - so that most to try kind like kind their the they’re to or of to narrow they approved So, transfer the do expanding the find so approved you facilitate pretty to tight? willing to lists, of list to of speak of and interest yourselves tend GPs their

Erik Hirsch

varies. It

I it have rights in approval think of sense, varies. that all them but that not

problem notion of general transfers I lists, you is restricted great that accepted facilitating it your there case. secondary there certainly of more you that seeing again a with only segment for such had no of among But that’s thing way have Hamilton limited are represent are a is longer a are market if I you the years everybody And, if partners partners. large the we because to so becoming. think a because XX think market. us wants a that ago secondary this the was Lane, relationship

broad; So, I of somewhat are general have that them think They are the answer restricted very partners lists. few narrow. is

realistic two the some groups. than past. or others. if is answer know becoming or is because would in again groups, you’ve it a But that restrictions, think it there be If market more narrow are are two of way one this accepted seen you is, one those they us, all groups I are more we that we favored asked would love the we But there than to one

Robert Lee

you for Great. Thank taking my questions.

Operator

There at further for questions will the no call remarks. are to time. presenters back this turn over the I closing

Mario Giannini

everyone Thanks Have day. great joining. a for

Hamilton Lane (HLNE) 9 Aug 182019 Q1 Earnings call transcript