Good morning. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hamilton Lane Incorporated Fiscal Year 2017 Earnings Conference Call. 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 Instruction]. We just ask that you limit yourself to one question and one follow-up question. Thank you. Now, I would like to turn the call over to Demetrius Sidberry, Head of Investor Relations. You may begin your conference, sir.

Thank you, Christa, and hello everyone. Welcome to the first earnings call for Hamilton Lane, which will focus on our fiscal 2017 results. Today, I am joined by our Chairman, Hartley Rogers; CEO, Mario Giannini; Vice Chairman, Erik Hirsch; and our CFO, Randy Stilman. Before we jump to the actual presentation, I want to remind you that we will be making forward-looking statements based on our current expectations for our business. These statements are subject to risk and uncertainties that may cause our actual results to differ materially. For a discussion of these risks, please review the risk factors included in our amended Form S-1 registration statement and subsequent reports we file with the SEC. 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 our earnings release, which is available on the IR section of the Hamilton Lane Web site. Please note that nothing on this call represents an offer to sell or solicitation to purchase entry in any of Hamilton Lane's funds. Finally, our detailed financial results will be made available when we file our 10-K later this month. With that, I’ll turn the call over to Hartley to touch on a few highlights from our earnings release.

Thank you, Demetrius. And thank you all for joining us today. Randy will touch on the detailed financial performance later in the presentation, but we wanted to begin with the highlights of fiscal 2017. We hit a new record level of management and advisory fee revenue of approximately $173 million. Revenue from management and advisory fees grew by approximately 10%. This was in part due to the continued growth in revenue from our separate account and advisory offerings, and was also impacted by the progress made on the fund-raise of our fourth secondary fund, where we recently announced its final close as our largest ever secondary fund. GAAP net income was $612,000 for the stub period of less than one month following the IPO. Fiscal 2017 GAAP EPS was $0.03, and fiscal 2017 non-GAAP EPS was $0.91. Our non-GAAP EPS is based on approximately $48 million of non-GAAP net income and 52.8 million adjusted shares. We also announced earlier today that we would be paying a quarterly dividend of $0.175 per share. We stated during the road show that it was our intention to share excess cash flow with our shareholders and we are committed to doing just that immediately. I think it is important to note that we intend to pay a steady dividend on a quarterly basis that will grow over time as earnings grow. Before I turn the call over to Mario, I thought I would set the stage a bit for today's call. First, given that we are still a relatively new story to the market and a new story to some of you, we thought it would be valuable to spend some time on our business and our market. While we will certainly not dedicate this much time to business review going forward, we thought it was appropriate today. The second point is that our business lends itself more to year-over-year or even multiyear metrics versus a quarterly focus. Given that the timing of separate account signings or client re-ups are often out of our control, we think operate and budget with an annual focus. That is how we have always managed our business and how we plan to measure our performance going forward. You will see that approach reflected on how we discuss our financials today. With that, I will turn the call over to our CEO, Mario Giannini.

Thanks, Hartley. At Hamilton Lane, we always say that our job is to enrich the lives and safeguard the futures of the clients. It's that focus on our clients that's allowed us to build a world class organization that has now been around for 25 years. That focus on clients in striving for excellence has also allowed us to become one of the largest allocators of capital that target markets worldwide, today managing over 340 billion. Private markets encompass numerous strategies and styles of investing, and we deal with its complexity on behalf of our clients. We actively invest across all of the private markets, including buyout, growth equity, infrastructure, credit, real estate, natural resources, and venture capital. Those investments are done through the three main types of transactional environments that exist in our market today; primary fund investing; secondary transactions; and co-investments alongside leading fund managers. Our firm strengths are our people and our client base, and those have led to our large global asset footprint and strong performance. Today, it is essentially a 300-person team operating in 12 offices around the world; that global footprint and reach allows us to better serve our clients, source investment opportunities, and be in the flow of information, something critical in dealing with private markets. Our institutional client base is also global, as you can see here on page four. They're diversified by type of institution as well as their internal level of resources and familiarity with the private markets. Our clients are also varied in their private markets’ build [ph] and objectives. We recognize this and it's the reason we are focused on delivering customized solutions, not simply those that are off the shelf. So we're not a product or a one size fits all shop. We sit across the table…

Thank you, Mario. We are proud of our diversified client base, and we think it makes for a strong business model. We’re working with long-term organizations operating in a long-term asset class. So many of the stats shown here on page seven are important, but they may not surprise you. One, the average term for our specialized funds, where we are serving as a fund manager, really mirrors that as the traditional private equity fund and has a 12-year fund life. The management fee is fully locked in and knowable for the life of the vehicle. Our separate accounts also benefit from deep long-term relationships. The average age of these relationships is approximately seven years. Now, given we continue to add new separate accounts, what that stat tells you is that we have a number of separate account relationships that date back as many as 15 years or more. And not only is the relationship long-term, it is very sticky. For the past four fiscal years, there has been no turnover in our separate account revenue clients, zero. I'm not suggesting that we will never have any client churn, but it does clearly speak to the service model, the relationships, and the importance of us to our clients as a solutions provider. And these clients speak about this relationship in a multiple capital allocation scenario, tranches in other words. As the first tranche of capital gets deployed, they then follow that with a re-up into a second tranche. The stats here are compelling. For those clients who have seen us successfully deploy that first tranche, approximately 80% of them have re-up for a second. And not only have they re-up once, but on average, that client base has re-up approximately six-times. If you think about the diversification in the business,…

Thank you, Eric, and good morning. One of the messages that we gave the markets, while on our IPO road show, was that our business model is simple. We said this because our revenue was predominantly tied to management and advisory fees, and we have a straight forward balance sheet. You will see that reflected in the presentation of our financials. Management and advisory fees continued on a strong growth trajectory with approximately 10% year-over-year growth. That trend was even stronger on a quarter-on-quarter basis as we saw an 18% growth in management and advisory fees in the fourth quarter of fiscal '17 versus the fourth quarter of fiscal '16. This increase was driven by growth in most of our services and products, including specialized funds, customized separate accounts and our advisory services. Client appetites for the private markets remain strong, which was evidenced by our ability to add several new noteworthy separate account clients and raise our largest secondary fund to-date, with that fund coming in well above target. The only area where fees were down year-over-year was distribution management, which is the smallest component of our management fee revenue at 2%. This business is directly tied to the volume of venture-backed IPOs and thus can by cyclical. Our total revenue was essentially flat year-over-year as a result of lower incentive fee revenue, also called carried interest in fiscal 2017 versus fiscal 2016. It is important to note that fiscal 2016 was our record year for carry dollars received as we cross the hurdle on one of our large secondary funds. Equally important to note, incentive fees have historically represented only a very small part of our revenue; to put a number to it, over the last five fiscal years, incentive fees have averaged only seven percent of our…

Thank you, Randy. As we wrap up the prepared remarks, I want to cover some important strategic updates. As many of you know, we became a publically traded company approximately three months ago. For us, becoming public was not only an exciting and rewarding milestone, it also help further solidify our brand as part of a sub-sector in the asset management sphere that we believe has a tremendous runway in front of it. Our goal in becoming a public company was not only to enhance our brand but also to maintain our culture and independent decision making when it comes to our clients. That was paramount and the early results of those efforts have been positive. From our perspective, the offering was very successful. We raised nearly $220 million in an offering that was meaningfully oversubscribed. We’ve floated approximately 25% of the Company, welcoming a new group of shareholders that we believe any organization would be proud to call new partners. As Randy mentioned with the proceeds, we were able to reduce our debt levels from what we view it as a modest amount of leverage to an even more modest debt to EBITDA level at around one-time. We are also happy to say that the experience for shareholders has been positive with the shares trading up since the offering. Switching gears to our team and developments on that front. We announced a couple of weeks ago that Leslie Varon and David Berkman have joined as independent Board members. They both bring to us a wealth of knowledge based on years of experience across multiple industries with various leadership roles. Prior to the retirement, in 2017, Leslie served as Chief Financial Officer at Xerox Corporation. During her nearly 40 year career at Xerox, she served in other leadership roles, including…

Thank you [Operator Instructions]. And you first question comes from the line of Ken Worthington with J. P. Morgan. Your line is now open.

First, I want to ask on the customized separate accounts. They saw both big inflows, and then what I guess, big distributions or transfers. Can you give us any color there and then maybe talk about how the positives and the negatives will flow through to the fee rate? Thank you.

I’ll address the first part and then turn over to Randy for the second part. I think when you look at the inflows in the distribution, I think both from our end would sort of be in line with expectations. Fund raising has been good and so we’ve been the beneficiary of that with a number of new separate accounts. The distribution levels have also been relatively high. Again, I think, also reflecting a good market environment where you’re seeing fund managers continuing to harvest assets at a pretty robust pace. And so, our view is that so long as the market stays at this level, we think our fundraising pipeline looks strong and compelling and so we see a good number of new separate accounts continuing to move in our direction, though we also continue to see distributions coming from the underlying fund managers. For the impact, I’ll turn over to Randy.

For the separate accounts, we expect, overtime, that the separate account revenue will approximate what it has in the past. Historically, we have increased separate account revenues by about 10% on a CAGR basis, and as we add new separate accounts, usually they start at either fees based on committed or fees based on net investment, and that will flow through directly to the income statement.

And then outlook for compensation, I think, excluding the 1.9 of IPO charges this quarter, total comp would have been round $17 million. Is that a good base of which to kind of grow, and is there any reasons for step functions up or down in the next quarter or two? Thank you.

We believe that it is a good number to base growth on. We’re looking at above 12% to 13% growth in our compensation. As I said and Hartley also mentioned, we have added additional professionals related to the IPO in the areas of SEC reporting, tax director [ph], legal, and that explain some of the increase that we’re going to see in a next year or so.

And your next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.

Just on fund raising, can you talk a little bit about comingled fund? What we can expect you to raise in the next couple of quarters there; and just any color on the separate accounts side just in terms of flows coming in; degree from new clients versus existing; some like has to re-ups pretty strong there, any additional color there? And as you kind of look out over the next couple of quarters, what's your sense in terms of separate account assets coming in from new clients versus existing and such?

Let me start on the comingled and then turn over to Mario for some color context around what's happening in the separate account market, in general. On the comingled, you saw the announcement last week, we mentioned it here secondary fund four added closing $1.9 billion, our largest secondary fund-raise-to-date, not only an increase over what we have the initial target set out but obviously a significant increase over what the prior fund was. We are close to announcing the final close of our 2017 strategic opportunity fund that will be forthcoming. That has also progressed in a similar fashion with those numbers coming in; again, higher than what the prior fund vehicle looked like. The new comingled launches for us, one is our fund-to-fund 10, that is in early stages where we’re just beginning to hit the road for that and that we’ll be working on that over the coming several months. The other comingled product that’s also coming online is we’re just again in the early days of raising, but if you’ve watched our co-investment progress, you know that we’re kind of due up for the subsequent co-investment fund four [ph]. That is also hitting the market now. And again fund raising will take sort of several months as we continue to work through that. So pipeline, I think, we’ve had good results on what we’ve been raising, and so we will continue to do that. The strategic opportunities product you know is an annual raise. So as I said, that was the 2017 number, which we’ll announce shortly and then we will again think about that product again for 2018. With that, I’ll turn over to Mario to give some color context around the separate accounts.

On the separate accounts, I’d break your question into two parts. We’ve talked before that a significant growth in our separate account business is just from existing clients. And we continue to see that, as Erik had discussed in his conversation. The clients continue to want to put more money to work, and as distributions come in, they need more capital committed in order to reach their allocation targets. So we would say that continues sort of the historical rates we have seen. In terms of new clients, it's across the Board. It is clients that have traditionally used fund-to-funds in order to gain access to private markets that are now converting to separate accounts, and it's new entrants across the world really that are looking at private markets and saying I am going to use the separate account to access that in order to tailor those specific risk awards, tailor the geography, the currency they’re interested in. So I would say there is no single driver on the new separate account business, but it's just a continued interest around both existing investors moving to a separate accounts structure and new investors using that as their entrée into the private markets

And just to follow-up a separate topic on deployment, given that you're one of the largest allocators of private market capital in the world. Could you share with us just broadly how you're thinking about deploying that capital at this point in the cycle? Any color in terms of geographies, or particular subsets within the private market that you're finding more attractive today?

So if you look back on the slide-deck, on page 15, we had covered that the income and we think about this as a funnel type of orientation. And so the questions for us are really twofold, one is, how big is that funnel at the top? And the answer is, we continue to see increasing amounts of opportunity across primary, secondaries and co-investments. I think that's really the result of two things, one I think the market is still in an expansion mode. We showed the picture earlier of just, there's just simply more participants at the fund manager level, covering more strategy and more geographies. The second driver of that increase in deal flow is us, as we add new clients, as we open up new offices, as we add more resources internally; all of that results in us being able to see, generate, track down and identify more investment opportunities. What do you see across the bottom of page 15 is our hit rate. And that continues to be actually very stable. So we are still investing in a very, very small portion; again, measured in many cases as single percentage items of the total. And again in the client basis, that's even smaller. So that dynamic for us feels very good. I go back to what I said earlier, see a lot do a little. In terms of going to your next point on what are we seeing as more or less interesting, North America for us has continued to be a bit of an overweight. It’s again the result of the market here is bigger, but it's also influenced by our view of relative attractiveness. And so that has still been and has accounted for the material majority of our capital, again, as we show it on page 16. I would say pockets of interest for us, the credit area, mostly around performing credit not non-performing credit, has certainly seen a rise of allocation. And we're starting to see a bit more of a resurgence around real assets, natural resources and infrastructure, all of that again attracting a bit more money. For us at the size level, again, back on 16, the majority of our money has always flowed and I suspect will continue to flow, to the small and midsized fund manager. That is a key value proposition for our client, finding and identifying those much harder to find and access fund managers.

And your next question comes from the line of Alex Blostein with Goldman Sachs. Your line is now open.

Good morning. This is Daniel Jacoby filling in for Alex. On the recently announced joint venture with Ipreo, can you guys help us think about the revenue opportunity there and perhaps timing as well.

Alex, it's Eric, so let me start on that one. It's obviously early days for us there. So we just made the announcement. I think what you're seeing for us is really a two-pronged attack on this. One is, we certainly see a need across the industry to better gather and process data, and the joint venture is really designed to do that; bring our personal expertise and domain market expertise and combine that with the technology expertise from the Ipreo side. What you see out of the gate is really a bit of a shifting of expense as we are moving some of our current employees off of Hamilton Lane and into PMC and with that also comes some additional expenses as we're kind in grow mode. What we believe will happen, going forward and again this is only to be determined as we see how the market response to this new entity is that, we believe that PMC will begin adding to its business line. The result of that really from our end should be what we think of initially as more of a reduction of cost as opposed to brand new revenue opportunity. But again, early days here, I think, this will certainly be a topic that we’ll be talking about more going forward.

And then just another one on -- you’ve you touched on some of the new asset classes or other asset classes beside traditional buyout that you guys are getting into. Can you provide us with an update on expansion into real estate and infrastructure, which is currently been pretty topical?

It has been topical, I mean, we certainly seen some headlines around infrastructure. And what we're seeing, I mean, we already have a robust real estate business, real assets and we’ll continue to build that out. We expect we’ll continue to find people to help us in that area and grow our team. Largely because, as you know on the client base, as they look to build their private markets portfolios across all of the different areas, whether its equity, whether its debt, whether it's real assets. The attraction of infrastructure, particularly if it's combined with any government action around making that an even more attractive area to invest, I think, will only grow. So as we look at those areas, we have more client interest. And we expect with the development of some of these discussions and conversations that you see in the press around infrastructure dollars being committed and being allocated that that will only increase.

And your next question comes from the line of Robert Lee with KBW. Your line is now open.

And maybe talk a little bit about incentives, I mean, you have a fairly substantial amount of accrued carry. And understanding that you use your proxies, I guess, predominantly European waterfall. But can you maybe give us some insight or color as to what are expectations be for more meaningful amounts of that accrual to start flowing through to earnings? Is that -- right kind of expectations of coming quarters? I know it's hard to time, but how should we think of that?

I think you heard Randy allude to it in his comments. I think what we're seeing is an increase -- one, is the growing amount of unrealized carry, which we think is good; two, we think it's also attractive because it's growing in its inherent diversification. So we gave the statistic today. There is over 40 carry generative vehicles, the larger of those obviously are the comingled co-investment secondary, but there is an increasing number of separate accounts that have transactional components that are also feeding into that. The other thing that we think is attractive is the number of underlying companies that underpin that sort of $200 plus million of unrealized carry, and that’s now over 3000 individual companies. As you know, our ability to control the timing of any of this ranges from not at all to extremely limited. And so given that I think we remain hesitant to try to provide guidance around this on a quarterly basis, because of the timing is not within our control. What we do is we try to apply some of our industry models and looking at the ageing of those assets and apply that to what we see as our unrealized carrying number. What that tells us is that we expect to see more material flows of that as we mentioned during the road show to begin more in earnest in kind of 2019, 2020. But overtime, it’s our hope and expectation that again given the diversified nature of the carry that this, while it's a small part of our overall revenue, will become much more of a recurring part of that revenue and our belief is again given that diversification it becomes a little bit less episodic.

And maybe going back to the customized separate accounts, I mean to understand you don’t want to nor should you get into the forecasting game of here is what’s going to happen next quarter or what that. As we think about the what -- it's like a better of saying to say the pipeline, okay. I mean, is there any way to kind of put some type of or quantifying some way there is X dollars of signed commitments, you don’t know when they’ll fund or you know that we should be thinking about or when you come. I guess, when you talk about high level client engagement and demand, it’s also maybe there is any kind of, I don’t know, client metrics, 500 separate accounts I mean wherever maybe that. Just kind of help us get us maybe a little bit more quantitative feel for how the pipeline is developing, because I guess overall, given your base, your fee paying assets are customized separate assets, you more or less have to do about $1.5 billion to $2 billion a year to kind of keep the 10% rate going.

Almost impossible to quantify, I mean, the numbers you talk about in terms of even saying the amount of AUM you need to do that, because as Randy pointed out, the fee depends on commitments, NAV. I think it’s just very hard to have a set of metrics that quantify it that way. What makes the separate account business, both very appealing but very hard to quantify in that way, is that it is so customized and you have prospects and existing clients coming in with very different demands and needs and objectives around their private markets. You’re now seeing, for example, a trend where the private market separate account has a debt component you didn’t really see that five years ago; so how does that change some of the way you think about that. So I’d love to give you an answer -- I’d love to have any answer. But it's just very hard to quantify it other than to say that the pipeline is robust. And you look at, as I said, before the different range of types of clients, the kinds of things that they want to do. And it feels very good in terms of that pipeline. But I think it’s just -- I can’t give you much guidance. I’m saying there is 100 prospects in the pipeline therefore that translate to X, even the timing around them. We could have a prospect come in the door today and it could get finished in three months or it could get finished in a year. It really varies in terms of the discussions you have and what they’re looking for.

And maybe just a quick follow-up, so with secondary funds for the $1.9 billion well above your target; so if we think ahead to the next fiscal quarter I guess its fiscal Q1 '18, I guess, the current quarter. Is there any catch up fees that we’re going to be seeing in this quarter related to that? And if I remember correctly, this pays on commitments not tore down. If I have that wrong, please correct me. So we’ll most of that and maybe any catch up flow through in this quarter?

Yes, due to the close that we just had, which was approximately $400 million of commitments in the first quarter of fiscal '18, which ends June 30, you will see a catch up component of approximately $4 million to $4.5 million.

And yes, Rob, it's Erik. That is paid on committed capital, not invested capital.

And I appreciate your patients with all my questions, one last one on the secondaries, really just kind of more of a industry question; meaning that, you had a big capital raise here, feels like there has been a lot of -- lot of your peers raising secondary funds. How do you think of that in terms of the impact on return? Have your clients’ return expectations for the current vintage fund or your expectations maybe diminish somewhat versus some older vintage funds just as where we are in the cycle, and there is more competition for that. Obviously, this hasn’t diminished demand. So any sense of if you’ve seen the change in the return expectations for that asset class?

I would say just in general return expectations have been trending down over the last few years. I don’t think this year is any -- I don’t think anyone has said, oh, this year return expectations have to come down because of any of those factors you sighted; just a general feeling that in a lower rate environment, returns are likely to come down. People still find the returns very attractive on the private markets in general and secondaries, specifically. I think with respect to the secondary market, which I think is part of your question. There is a tremendous amount of capital out there. And interestingly, there is a tremendous amount of supply, if you will, because the market becomes a little more efficient as sellers realize that there is a good market to sell your assets into. So I would say, while that market is expensive, there are still areas of opportunity. I think for us the platform provides, as we talked about before, many of those opportunities. So we feel these in a good position around that. I’d also say like with any other manager like us, you want dry powder as the market turns. And so part of the attraction of raising the capital is if you think market is headed down in the next year or two, then it's important to have that dry powder to take advantage of it. So it's a mix. We certainly see opportunities today. But if the market went down then I think, we talked about before, is kind of ghoulish. But you’d be a little more excited and say maybe we can buy assets cheaper.

Your next question comes from the line of Chris Harris with Wells Fargo. Your line is now open.

What are the economics like on some of these newly closed funds versus some of the legacy funds you guys have? And I guess what I'm trying to ask here, if there is material differences between the new funds you guys are raising versus funds that maybe raised five-six-seven years ago.

No, there is no material difference. In fact, in one of them in the secondary fund, the rates are little bit higher, but marginally. So as we look at the fees on those, I would say almost across the board, they’re basically the same on the comingled and specialized funds.

And then on your dividend policy, you guys are just below 70% payout ratio in the quarter. I know the policy is that a stable dividend and hopefully a growing dividend. But if we think about the dividend in terms of payout, is 70% a fairly reasonable target to be thinking about? I know, excluding incentive fees, which can be lumpy. Or could the payout ratio also increase over time from here?

I think what we said on our road-show and have said so far that our target payout ratio is really something north of 50%. As you've heard we continue to make investments in our business. We have a lot of exciting new initiatives. We have a lot of areas in which we can grow. And we want to make sure that we are keeping enough cash around to be able to fund those. We do intent to have a smooth progression, that's our goal over time. And so of course we spend a lot of time talking about the possible for incentive fees coming in over the next several years and that obviously is something that could cause the dividend to increase as well. But I'm not comfortable attaching a particular percentage to it other than to say that we anticipate it'll be north of 50%.

[Operator Instructions] And we have no further questions, at this time. I'll turn the call back over to the presenters.

Thank you, Christa and thanks everyone for joining us today. Please feel free to reach out to me if you have any other questions. Have a great day.

And this concludes today's conference call. You may now disconnect.