Hamilton Lane INC Q2 FY2025 earnings call

• Milestone: HLNE added to S&P MidCap 400 Index on September 23. - Total asset footprint: $947 billion, 11% y-o-y increase; AUM $131 billion, $12 billion (10%) growth; AUA $81 billion, 11% y-o-y growth. - Fee-earning AUM: ~$70 billion, $8.3 billion (14%) growth y-o-y; customized separate accounts $3.1 billion, specialized funds $5.2 billion. - Specialized funds: Fee-earning AUM $30.4 billion, $5.2 billion net inflows past 12 months; Strategic Opportunities fund ~$210 million raised; venture product ~$500 million LP commitments, finalize fundraising Q1 2025; Impact product $110 million LP commitments first close. - Evergreen funds: Total AUM ~$8.4 billion, 75% growth past 12 months; launched infrastructure Evergreen products; $100 million senior notes offering. - Partnership: Strategic technology partnership with Northern Trust, offering private markets data, analytics, tools via Cobalt.

Total asset footprint stood at $947 billion, an 11% year-over-year increase. AUM was $131 billion at quarter end, growing $12 billion (10%) vs prior year. AUA rose $81 billion (11%) y-o-y. Fee-earning AUM totaled ~$70 billion, growing $8.3 billion (14%) y-o-y. Customized separate accounts contributed $3.1 billion net fee-earning AUM growth, while specialized funds saw $5.2 billion net fee-earning AUM growth. Management and advisory fee revenue grew 21% year-to-date through Q2 Fiscal 2025, fee-related earnings also grew 21% y-t-d. GAAP EPS was $2.85 based on $114 million GAAP net income, non-GAAP EPS $2.58 based on $140 million adjusted net income. Dividend of $0.49 per share declared, on track for 10% increase to $1.96 per share for fiscal 2025.

• Dividend: On track for 10% increase to $1.96 per share for fiscal 2025. - Equity-based comp: ~$30 million per year, structured as a 5-year award.

• Forward-looking statements subject to risks and uncertainties detailed in SEC filings. - Retro fees impact on specialized funds revenue growth comparison. - Regulatory changes affecting access to retirement accounts for private markets pose potential hurdles.

Q: There's a number of brokers that are looking to offer alternative products to their clients for the first time. Can you talk about the opportunities ahead for you in these new distribution channels? And can you sort of size what you see relative to the distribution you brought on, say, over the last 12 months or so?

A: Erik Hirsch said the vast majority of mass affluent individuals don't have exposure to private markets, and a change is occurring where individual investors' portfolios may mirror institutional ones. The amount of wealth in individuals' hands globally is massive, and moving a small percentage into private markets could transform the industry over time.

Q: Maybe as a follow-up, is more being asked of you from these new platforms as they come online versus, say, the wirehouses or the RIAs that have come online already? Or is what Hamilton Lane is being asked of essentially the same? Like are you being asked to do more on the client servicing and client management in the future versus what you've done in the past?

A: Erik Hirsch said the needs are consistent regardless of platforms; people want education, transparency, and accessible products. The firm's client service DNA and data/tech help stand out.

Q: You guys have had lots of success on the specialized funds over the last couple of quarters with the secondary business obviously coming in strongly last quarter, but maybe help us with kind of anything on the comp as you look at the lineup of specialist funds outside of the kind of Evergreen retail-oriented vehicles, call it, over the next 12 to 18 months in terms of what's coming up?

A: Erik Hirsch said there are various products in market, including direct equity poised to be large, Impact growing, venture product launched with ~$500 million LP commitments, and more closings across products ahead.

Q: I heard your comments around equity awards. Can you just refresh us on what the total equity-based comp number is going to look like from here and just the trajectory of stock-based compensation, I guess, beyond this fiscal year?

A: Jeff Armbrister said they're looking at ~$30 million per year, structured as a 5-year award.

Q: Maybe just given the change in administration here in D.C. and then the election here. Just curious if you see that impacting potentially helping private markets unlock access to retirement accounts. Maybe just remind us what hurdles do you see? How might those be overcome potentially with the change in administration here? And how is Hamilton Lane positioning to access the retirement space?

A: Erik Hirsch said it's a digesting period; hurdles include valuation and liquidity rules for private markets in retirement accounts. Positioned to participate if regulations alter, as they have good brand, access, performance, and product knowledge.

Q: I wanted to dive into the partnership with Northern Trust. Can you just expand a little more on that, Erik? How will Northern's clients utilize Cobalt. Can you maybe provide some examples there? And how do you kind of monetize that partnership? And then maybe just a follow-on there. How -- are there -- is there an opportunity to continue to expand with other financial institutions? And then is there an opportunity to actually expand into the wealth side at Northern Trust as well?

A: Erik Hirsch said Northern's institutional clients can use Cobalt for data/analytics, benchmarking, etc. Monetization through revenue generation, goal to expand partnerships, and potentially into individual investors and other financial institutions.

Q: Maybe just a follow-up on the Evergreen products platform. I know it's still early days and a lot of potential growth. But I was wondering if you could kind of talk to the uptake you're seeing in the channel with clients investing in multiple products. Maybe a part of that, are you seeing more competition with products that are maybe more diversified across different asset classes. I know you -- part of the value add to your offering is the diversity across different managers. But it would be great to just hear if you're seeing any change in appetite as it relates to single asset class products versus multi-asset class products?

A: Erik Hirsch said visibility on clients using other providers' products is limited, but diversified flagship funds are an anchor, allowing financial advisers to add overweight in specific areas; competition exists but firm is well-positioned.