Hamilton Lane(HLNE) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Year-to-date management and advisory fee revenue grew by 12%, while fee-related earnings increased by 24% compared to the prior year period [7] - GAAP EPS for the year-to-date was $2.19 based on $80 million of GAAP net income, and non-GAAP EPS was $2.23 based on $120 million of adjusted net income [7] - Total asset footprint reached $805 billion, with AUM growing by $23 billion or 32% year-over-year [11] - AUA also saw significant growth, increasing by $235 billion or 50% year-over-year [12] - Fee-earning AUM grew by $5.4 billion or 14% year-over-year, driven by positive fund flows [18] Business Line Data and Key Metrics Changes - Fee-earning AUM from customized separate accounts stood at $27.4 billion, growing 11% over the past 12 months [19] - Specialized funds achieved positive inflows of $2.6 billion, resulting in an 18% increase in fee-earning AUM [21] - Revenue from specialized funds increased by $5.8 million or 9% compared to the prior year period [37] - Revenue from customized separate accounts increased by $2.1 million due to new accounts and re-ups from existing clients [39] Market Data and Key Metrics Changes - The evergreen platform saw over $192 million of monthly net inflows, indicating strong demand in the private wealth market [14][15] - The company welcomed its first client from Mexico, expanding its geographic footprint [20] Company Strategy and Development Direction - The company is focusing on growing its evergreen platform, which provides private wealth channels with direct exposure to private markets [13] - Wealth management and private wealth investing will continue to be strategic priorities, with a focus on expanding distribution efforts [35] - The company is actively pursuing new strategic partnerships and technology investments to enhance its offerings [31][33] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment is still non-normalized, with rising wage pressures expected to impact margins [46] - The company is optimistic about the growth opportunities in the private wealth market, particularly through its evergreen products [15][56] - Management emphasized the importance of re-ups from existing clients, which contribute positively to fee rates and margins [51] Other Important Information - The company announced a $12 million gain from the sale of Cobalt LP to FactSet, marking a successful exit from a long-term investment [30] - The launch of Novata, a public benefit corporation focused on ESG data collection, was highlighted as a significant new initiative [31] Q&A Session Summary Question: FRE margins and future expectations - Management indicated that current margins are not normalized and may be impacted by rising costs and wage pressures, but strong performance in specialized funds is helping to maintain margins [46][48] Question: Re-upping pace and client behavior - Management noted that re-upping varies by client maturity, with a general trend of positive flows in upward-moving markets [50][51] Question: Total addressable market for separate accounts - There remains a significant number of entities yet to enter the asset class, indicating growth opportunities in the market [55][56] Question: SMA client profiles and pipeline - New clients for SMAs are coming from diverse geographies and institution types, with a growing distribution network supporting this expansion [67] Question: Fee rates and margin trends - Recent fee rate changes in SMAs were attributed to specific client renegotiations, but overall trends remain stable [70][71] Question: Competitive landscape for secondaries - The growth in the secondaries market is significant, but management believes their established position will allow them to maintain market share despite increased competition [74] Question: Retail wealth management opportunities - Management is focused on expanding their presence in the retail wealth management channel, with a strategy to build relationships gradually [78][79] Question: Co-investment fund competitive advantages - The company’s strong capital base and experienced team position it well in the co-investment space, making it a preferred partner for fund managers [82][83]