HLNE - Earnings call transcript Q2 2020 | Hamilton Lane Incorporated

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Operator

My name is James, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hamilton Lane Incorporated Second Quarter Fiscal Year 2020 Earnings Conference. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

the to hand Relations Oh, to Manager. like call John over Investor I’d

your may conference. You begin

John Oh

James. morning I you, Vice Randy fiscal by Thank Stilman, Good Giannini, Chairman; XXXX Lane the Mario Client earnings QX Jeff Hamilton CFO. Meeker, call. Officer; Erik Today, CEO; will Chief joined and be Hirsch, welcome and to

the are Before the quarter’s on you to be will we statements uncertainties we cause results, based remind that statements discuss the to making current our business. risks and for actual expectations that subject differ we want These forward-looking may to materially. results

a Lane review the fiscal For SEC. we risk Hamilton and risks, XX-K the the reports subsequent in of discussion XXXX file these factors please with included

throughout we We business. will be view of shown are and the the Hamilton materials, of be in call section Reconciliation found of will which also Lane to materials our performance These the webcast. the assessing website. be in referencing also available be important referring GAAP Investor that non-GAAP measures the as Relations measures those will we earnings can public the presentation to on non-GAAP on

financial results filed. note represents available Lane’s Hamilton nothing when we’ve our Please to call sell XX-Q an in on was this or to of any made that offer solicitation detailed interest Our purchase products.

XX% Beginning on Slide to the relative fee approximately year X. and prior grew management Year-to-date, our revenue period. advisory

approximately XX%. GAAP earnings EPS based Over GAAP adjusted translated same based income on of the of million net by year-to-date $X.XX This $XX net non-GAAP of million we fee-related our of on approximately grew into income. EPS $X.XX, period, $XX and

year last share increase a which declared quarter, track us year for $X.XX equates dividend We to over and for fiscal keeps share this per the have $X.XXX XXXX. on of per XX% fiscal again

now I’ll call the that, to turn over Erik. With

Erik Hirsch

you, morning, and good Thank John, everyone.

a management: represents It sum client, increase be across and year-over-year. region client in X. our stood AUM, Slide and Growth to should at size as specialized of and under AUM the asset assets came our for our footprint This X% under separate asset the advisement. of we accounts. to geographic Total which total our define and $XXX highlights footprint approximately familiar. came from AUA, our assets Turning footprint, both funds billion type, quarter

to continue lines winning growing focus business. on We and of across both

Moving to AUA.

also geographic region. saw client and We come across growth type our

to As AUA call, revenue mentioned can in the quarter-to-quarter And last variety relative revenue we change. and in earnings saw the increase does quarter to direct of necessarily scale quarter, to this lockstep in AUA of reasons, with generation. due fluctuate the a will an between previous no not dollars correlation move dollars but AUA while the AUA associated continue with emphasize exists the that

remains on expect the needs the where focused an are the it we to our we particular over right AUA simply long-term, finding not to our for and growth match the of growing sake. client, between Although add area services

management the fees. customized we highlight of and our point-driven funds with separate earning our Fee specialized accounts On combination is Slide AUM earning X, our basis AUM. fee

most fees. advisory of stated fee past, driver as our As the XX% our we have AUM management in up is makes the earning and it business, of over significant

growth our customized and fee and accounts. with total grew or earning funds across specialized XX%, billion, both AUM Year-over-year, nearly fund $X.X solid our positive separate flows

specialized and of added AUM funds. same We $X period, accounts we to of net the our $X.X AUM billion nearly across customized over separate fee our have earning time added net fee earning have billion

our fee growing shown adding clients; specialized raising fund clients; as Also, new slide, steady. two, on have winning new to mentioned continue As four, growth our three, calls, our four by driven this we rates one, be to re-ups from we had prior key platforms; number funds. and existing continues components: and remain on this existing

who been has a those theme. consistent followed since For steadiness us this IPO, our have

accounts a growing of as customized as client. Slide from our AUM of serve, well of was $XX.X brand-new from existing the This experienced billion, geographies came by across size from combination Moving addition approximately well Fee-earning last re-ups we the relationships. the XX% X. accounts, growth all and as to separate We XX over months. as of the type

to past, we broaden to in distribution provide we’ve we where Additionally, white working set area in growth the label we platforms the This opportunity are and see partnerships front encouraged of discussed continues with us. efforts experience our attractive solutions. by our in

Jeff cover turn the specialized over our on funds. now update call to me let an that, to With

Jeff Meeker

Thanks, our With wide is to regard the coming range of demand and around strong be to investors a continues Eric. specialized globe. growth products, from

the Over positive XX% nearly resulting achieved AUM $X.X a of we fee-earning inflows in XX past billion, months, increase.

investors with offered, and already are raising Fund of Evergreen Australia, geographies, Asia Funds marked semi-liquid including active Evergreen remain and our We on worth that high-net a where such fund at Europe. entrance variety new efforts our into a targeted fronts, as market our

expect Since the very but – out to with not many similar have success in been achieved this a the follow Other demand course. space for is have similar ultimately, continued over a product, have encouraged this achieved launch, marathon, and sprint. to built we’ve be years the platforms a we that

received Since pleased as fund of inflows has of launching our more a $XX basis. in X, $XXX progress equates are net date. we of million said, May on million That approximately monthly to inflows XXXX, than November the with to which

total funds. million quick announced specialized commitments. a approximately On on multi-strategy of we other final Now September XX, the closing the $XXX XXth our with update in fund-of-funds

a While our continues shift private certain firm. exposure the structure the additive fit we investors seeking diversified or it multi-strategy and product an to seen to to the accounts continues funds, needs for in other separate specialized of customized markets be towards investor preference have

of On the in April, first $XXX call, fifth front, fund with announced held had commitments. the our secondary close prior fund in we our we on secondary million

raising XX have the first to least at we of reminder, complete our fund. months of date a the from As the close

in second million, did our Since to held additional an date $XXX for quarter, disclosing we the started fund on the billion. prior September, the on close retro close bringing this total to quarter. In fees fees generate $X.X

We with exposure we fiscal to continue growth this AUM a in remain encouraged demand markets to growth in class. our leader with asset for fee-earning the private beneficiary The this and we year-to-date. through of have grow to continues the achieved interest be continue as this

financials. With to the me that, to our Randy, over turn the let over go CFO, call

Randy Stilman

Thanks, Jeff. fiscal year. Slide shows first-half highlights financial the presentation our the our for of X of

fees to management driven versus from and We continued year $X.X compared to million results see several our advisory very up re-ups and the core strong accounts of products existing to Revenue XX% in accounts customized our addition separate across business, period, year with period, clients. from the our services. new approximately solid and prior due by growth increased the prior

$X.X latest in year We Our the specialized driven in compared in the latest the periods for co-investment from $X.X year-to-date by million fund $XX.X billion funds between prior period. raised and the our prior period, recognized current raised fund. fund, to our $XXX,XXX co-investment revenue in fiscal from year secondary increased year retro million $XXX million fees

closes quarter our the for in related close. management aware, As occur. Therefore, many typically of are to to that a subsequent likely many you see back first fees products, investors retroactive of of fees fund come the the which for later fund’s fund into that spike closes raise dating you pay in

revenue. reporting total incentive advisory approximately our The offerings or from of period. our the to million, revenue flat prior final Revenue $X.X was Incentive of fees X% was year compared were for and component the fees. period

quarter X. with to last $XX.X million Moving months. additional from on Slide We We the balance detail growth the XX% over up XX balance. unrealized of fees even prior we year, strong provide carry this incentive as some saw the recognized

slide, new see carry can this from funds, the you vehicles. generating came well adding existing as from appreciation growth As as in both

which Turning our to XX, Slide earnings. profiles

a XX% up revenue versus of earnings the fee-related earlier. Our discussed result as year-to-date prior period, year we growth the were

In increase the expenses our in commissions professional G&A prior compared fund $X.X period. regard million in expenses, fees due fund and reimbursement and the to year increased an closings increases increase expenses. current year-to-date $X.X year to consulting from increased in in period, an million total with

decreased expense period. to acquisition $X.X primarily year compensation million to compared due prior earn-out prior period, benefits our the in Asset year Total Real the from and the

our on XX. to sheet balance Slide Moving

balance The growth is funds. Our and investments largest period which of our reflects our on alongside our asset clients separate XX% this specialized accounts sheet compared the of asset, business. increased prior in customized year our growth the to

we In our liability, continue to senior debt regard largest levered. and be modestly liabilities, to our our is

And with it open up and for we questions. that, joining are call happy the for to thank you

Operator

[Operator Worthington with first question Ken the from line Instructions] And Go please. ahead JPMorgan. comes our of

open. is line Your

Ken Worthington

said you biggest smaller we’ve first see a Maybe presence I prior acknowledged, I think, that as from this the for were benefits a in fair direct you I Hi, having funds. you really product opportunity. is But on $XXX a think, phrased, fund-of-fund in thought the received the thank question. than you fund-of-funds not of bigger you ancillary million. you number area. there just where bit taking seen what And That’s my

remind of presence those the funds, for And think your there million, implications guess benefits et actually million-plus provides? I some So benefits co-investment range cetera. here the the weigh is that $XXX start us – to your ancillary shrinking maybe $XXX from the does on what size to does of one, below ancillary I are? those

Jeff Meeker

question. the Sure, Ken. Thanks is for This Jeff.

second So question, in of part your the right. exactly you’re

ancillary In dollars the come like having commit get things significant from the we primary that of we terms benefits, marketplace. around co-investment in

we generate to so that opportunities. yes, And co-investment like standpoint, to continue need secondary and dollars from primary things

compared a our business our of to is co-mingled that small business, separate the overall. portion Remember fund-of-funds account fairly

our and get we while side. those to business continue from from account the co-mingled separate advantages So,

mentioned I and towards bit seen investor – mentioned On think, in of before, we’ve the have customized a fund-of-fund a shift investing. we I preference it specifically, we’ve

I of The advantage is well-positioned take natural fund-of-funds a of business. that. our think, we’re to extension

things us heard white label the like about past products. in talk You’ve

is as be overall. fund-of-fund continues growth that well and build funds co-mingled or like where good in business we area overall, see that worth to for platforms. the So net offerings continue high We’ve specific to additive fund-of-funds

Ken Worthington

should coming don’t timing, then product that more you. can it Thank has more the fees, we about how the what in generating a – on performance the especially II. performance I broadly see already know That’s think you crystallization performance lot talk it exact like And but but fees, maybe fees, seems of like about quarters and come. you how Great. crystallization don’t specifically? in But you to maybe know, Co-Invest is

Erik Hirsch

Sure. question. Ken, it’s for Erik. Thanks the

sellers potential years is a you’re few lot economy that occurred us what at it it think, of that liquidity not overall and at buyers. simply a perhaps I think, One, market broader right several factors. I occurring that the is and volatility seeing has and driven the now with ago, the both rate by in

here I sitting think, to pause just to now sell ahead on and asset. the best day that is go a take waiting and

assets I they secondly, an what people expecting. those some prices, sometime you’re takes think, returns where certainly in seeing at it high relatively to environment that continue is, are to generate we and purchase

money So to from our perspective, continues the flow.

we the carried that is we crystallization not on are control, feel continue Randy our can pointed which is control, like which, and what that And all good dollar, of there Co-Investment biggest Fund think the about II to but Our on very, is prospects. as nicely. we of and the the interest very assets totality in obviously that growing focus overall I out,

Ken Worthington

very Great. Thank much. you

Operator

the Morgan next comes Cyprys Michael Your of Stanley. line question with ahead Go from please.

is open. line Your

Michael Cyprys

question. the taking for Thanks morning. good Hey,

the to, or a curious on world. here to the where relative and months the in ago XX interest U.S. lower Just in front the six lot fundraising rate broader say, around backdrop, expectations

of you that So clients you is impact compared the first say, for and what is just of could of on you just kind a what curious seeing investors with having that I’m If time? having pace see out that a there? sort of to conversations new year you’re How you’re us ago? to, flavor hearing coming give Do guys sort changing? out

Mario Giannini

get bit a and clients it if equity I okay, to is interest get assets – do terms going little in returns think, increases discussions that assets rates income where hunt the whether Mike. have probably or is the It’s no to Mario. rise surprise lower, I with don’t return? for then and heightened I I expect of, have, semi-fixed rates Sure, higher-returning interest prospects we the component real not around credit or and with With

that And more higher see we continued rates you lower a portfolios. but of new entrants, again, assets in for much in conversation. also and see we interest know as set infer, So investors the existing relevant makes their returning that interest

net a a markets. to into positive markets from rates the interest say lower would I So perspective, private interest are and private inflows

Michael Cyprys

are more a different follow-up, the able are And just guys more capital across Great. dollars, you it’s velocity, guys to just as about bringing you’re faster talk clients, maybe how deploy assets, asset can platform be you in building you building more maybe out client in verticals raising classes? and to a whether out? as How that at

Mario Giannini

as it’s think, growth seen what growth just of the think, people, you’ve I Well, number the the I in geographies, said. in you’ve from

across verticals needs the ways. the monitoring to order we is, the it to of of the out build to the different and volume. build number a have team the all resources back-office You The made. reporting have, investments One in grow have the you and within take you’ve to

terms the process order you flow have mentioned this in clients firm and aspect moving, prior get to keeping deal our about you is it technology all to efficient around of So of as and way And a do the in a of we’ve and the make that information done. in the and in all you number conversations, there as then, keeping of to just to. that information infrastructure a in that want you lot a way moving deal the is flow allowing growth, to things sure needed things are timely, the of think more

Michael Cyprys

thanks. Great,

Operator

line comes And ahead question your of the Sachs. Blostein with from Goldman please. next Alex Go

Your line is open.

Daniel Jacoby

morning. in Thanks Jacoby taking is Alex. This our for Hi, Dan good actually filling questions. for

help growth. about think as for of us XX help us let’s then kind look months, what you over, You contribution opportunity to white strategies size, AUM in like? just touched to guys the think that? say, about on helper just had fee-earning AUM Can like that the the fundraising could going label last forward, a And something

Erik Hirsch

the Sure, Thanks question. Erik. Dan. It’s for

this you’ve as are is times, area of us heard that a sort think, excited few we I an note about.

well larger a the big market We we’re move looking reflects a affluent. positioned. individuals provider into net asset as solutions, well think this having we class as of high is think, which worth coming I is as very of both a capital very, see portion that part from, customized for, what of mass

as a labeled, the vehicles responsible portfolios vehicles, clients. And Hamilton then wealth servicing, our what again, platform. Lane where customized white a often we’re which and is is deliver these for, So distribution both management the reminder, performance is we the for – just to the responsible with those platform partnered for and do, assembling

so, early see this as And days. we area

One, And We existing relationships; a beginning grow. of from of have started sort think, handful of those coming and that. relationships. to I the adding new growth is components two, really us two relationships

As on the want want these of their see start see what They see. And see pretty most small. to happens, that we’re exactly you platform. People things and established imagine, to start success. can you as uptick that’s to to grow starting brand getting off

publicly out broken haven’t of We of magnitude sort that. the

start some more to on over the in I you’ll future. time, those think, to as us more see color more important become business and our those provide

Daniel Jacoby

run growth color. then growth you. we as rate color are just in bit could outlook, maybe on same relative the sort kind guys run think this Thanks. of And the helpful base compensation, about and how of we G&A, expense just of of if little a where of quarter versus line That’s provide Thank rate? kind follow-up, thing kind should where and you a the on that then And outlook it. Got levels? to was the expense

Erik Hirsch

Erik. Yes. on one. it’s stay that Dan, I’ll

think, the you’re is said past. seeing in we I what what

occurring mode. the expect this ourself the growing view we versus what nothing business. quarter sort That and because do resources, there add in a I is of I said, see to continue think, abnormal think sort prior to sort high-growth of We in we’re of we future.

Daniel Jacoby

Thank it. Got you.

Operator

Go [Operator Instructions] from ahead question of KBW. And comes Robert line your the next please. Lee with

line Your open. is

Robert Lee

a a impact maybe fees And and Thanks bit there? of Great. type business. on business? you taking kind for this the it think of talk any little – step of just if marketplace. of just morning. on there, fee the down bit a how of that’s does I mix. there bit know look you’re competitive Maybe average different it environment that accounts update account down. look of Good dynamics and if But – I questions. for having us my a can that does about rates kind come separate I’m mean how you little maybe more target But on depending come it’s moving or like maybe kind into up little it’s talk some about the the competitors seeing

Mario Giannini

know Mario. don’t I I Rob, more say, it’s Hey, competitors. if are there would

a others competitive for. are have what in. drifted depending particular the come away, environment clients It’s looking Some have on

usually competing you So of on that kinds and the for is can can any you depends results are a it kinds investment handful offer. of there services offer, really mandate people of particular the

the looking I it noted, some primaries in marginal. places, more some geographies, for. want or are mean, they more you secondaries As versus whatever if some in fee people in pressure more is we see

I the pressure back and size, it’s then services can depending on say, but So you come would what does to it mixed fee on offer. obviously

As is roughly most we’ve on of number employees noted our different are a of client of third competitors. Lane the side, from Hamilton which very a times,

view very to account services, And separate and able strong point offering of is so, provide from that being the a a feature. customized customized of solutions

that results. So it’s want a do at prices you to we in financial see market, win and the business like but continue it we to win the feel competitive we the

Robert Lee

kind And quarter, catch-up fees, of the year-to-date, was The that just question. million maybe not maybe $X.X correct? in quick great. a Okay, modeling more

Erik Hirsch

Erik. it’s That’s correct. year-to-date. that’s Yes, Rob,

Robert Lee

Okay.

Just wanted taking to Thanks double for you. check. questions. my Thank

Operator

Oppenheimer ahead from Kotowski Chris & of please. line the from comes Co. question next Your Go

open. is line Your

Christopher Kotowski

kind Senator I country. I certainly don’t private it, as I seems of directly. proposed comment to last a to – of on read Good the in Since expect legislation, with your And political to do Yes. equity to mean, I proposals guess, to I you football become again, expect morning. don’t Warren’s has call, limited want liability to it but you this concept her And, companies. on away comment

economy of that portrayed to view the being I’m common is common is equity look as is an through have, of in evil aberrant a States, opposed the But kind is axis that all this thing you for it that wondering, kind a geographies capital United view all private – as of the source a or growth? in the of as you this

Mario Giannini

Mario. It’s

one. Let shot me that at a take

varies. few was a I equity locusts. the industry I think, Remember, was think ago, years it the it Germany in of private plague called

varies. it So

You that which have are deals then bad, high go very profile.

so And becomes come and it to seem but them, things go. pick to on politically easy these

You legislation impact it. can have that some

didn’t I of part years think is an it successful. now the markets that and of sort bad and it of markets. being the was and ago, of capital years, very it attention capital XX has the very good been gets because now, part is that get news a XX grown it the industry small a important

suspect think the is the I other it and don’t as I matured. States in and of will or continue. countries, deal places is with dealt I grown with something mentioned will and we and so, away in having other that it something I that reality industry go this think whether of United the part have have And will to

Christopher Kotowski

Okay. from All Thank you. righty. That’s me. it

Operator

this I’d the back are to our time, further presenters. at questions over queue call turn no to in like there And

John Oh

We us thank today. everyone you. want to Thank for joining

Operator

call. conference today’s This concludes

now disconnect. You may

Hamilton Lane (HLNE) 9 Nov 192020 Q2 Earnings call transcript