Ladies and gentlemen thank you for standing-by and welcome to today’s Hamilton Lane Incorporated Third Quarter Fiscal Year 2021 Earnings Conference Call. At this time all participants lines are in listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] I’d now like to hand the conference over to your host John Oh, Investor Relations Manager. Thank you. Please go ahead sir.

Thank you, Katrina. Good morning and welcome to the Hamilton Lane Q3 fiscal 2021 earnings call. Today, I will be joined virtually by Eric Hirsch, Vice Chairman; Andrea Kramer, CEO of Hamilton Lane Alliance Holdings 1; and Atul Varma, CFO. Before I continue, you may notice that we have a smaller number of speakers today than normal. Unfortunately, this winter storm in the Northeast has resulted in some power and phone issues. With that we hope that everyone who is currently affected by the weather is safely navigating the storm. Now before we discuss the quarter's results, we want to remind you that we will be making forward-looking statements based on our current expectations for the business. These statements are subject to risks and uncertainties that may cause the actual results to differ materially. For discussion of these risks, please review the risk factors included in the Hamilton Lane Fiscal 2020 10-K and subsequent reports we filed 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 the earnings presentation materials made available on the shareholders sections of the Hamilton Lane website. Our detailed financial results will be made available when our 10-Q is filed. Please note that nothing on this call represents an offer to sell or a solicitation to purchase interest in any of Hamilton Lane products. Beginning on Slide 3. Year-to-date, our management and advisory fee revenue grew by over 16% while our fee related earnings grew by nearly 28% versus the prior year period. This translated year-to-date GAAP EPS of $1.78 based on $58 million of GAAP net income and non-GAAP EPS of $1.78 based on $95 million of adjusted net income. We have also declared a dividend of $31.25 per share this quarter, which keeps us on track with a 13.6% increase over the last fiscal year equating to the targeted $1.25 per share for fiscal year 2021. With that, I'll now turn the call over to Erik.

Thank you, John and good morning. In many ways 2020 was a year of incredible challenges. As a country, as communities, as families and as individuals we have all seen and faced adversity in ways we simply could not have imagined a year ago. On behalf of Hamilton Lane and my partners, I'd like to offer my profound thanks to all of those helping to overcome these challenges to protect us and to make our global community stronger. Across the organization, our employees and their families have also faced challenges throughout this past year and continue to face them now. We are proud of how they have persevered despite this and how they've been unwavering in their focus on delivering their very best to our clients. That dedication has again resulted in strong performance for the company and for our shareholders. Over the past year, we have delivered strong growth, open to new offices, hired talent across a number of strategic areas and introduce new product and services offerings. This is the result of not only our high caliber employee base and their dedicated efforts, but it's also the result of a strong culture of support for each other and for those around us. And before I turn to the results for the quarter, I'd like to take a moment to speak to how that culture has once again been recognized. For the ninth consecutive year, Hamilton Lane has been selected as a best place to work in money management by Pensions & Investments magazine. We have won this distinction every year since Pensions & Investments first began publishing the ranking in 2012. And we are only one of five organizations across the entirety of the money management landscape who have earned that distinction. We are extremely proud of this…

,: Ultimately, we are seeking to partner with a reputable fund manager that owns a great company with a strong management team and is ready to begin the transition from private to public ownership. We believe our SPAC offers a compelling and elegant solution to assist in this transition. We've proven to be a great partner for fund managers and believe our SPAC will be a sought after avenue as these managers seek to monetize their public ready assets. Now, as it relates to HLA revenue, there are no management fees or carry associated with this SPAC in the traditional sense. The economics that Hamilton Lane will earn as the sponsor will generally take the form of promote shares and warrants. And over time, we will look to monetize those shares subject to certain lockup restriction. I'm excited to be leading this new initiative for Hamilton Lane and look forward to providing you with updates on our progress. With that, I'll now turn it over to Atul to discuss the financials.

Great, thank you, Andrea and good morning, everyone. Slide 8 of the presentation shows the year-to-date financial highlights for fiscal year 2021. We continue to see solid growth in our business with management and advisory fee up 16% versus the prior year period. Our specialized funds revenue increased $20.4 million or 25%, compared to the prior year period driven by $1.7 billion in fee earning AUM added from our latest secondary fund between periods. We’ve recognized $10.8 million in retro fees from the secondary fund in the current year period, compared to $2.8 million from a co-investment fund in the prior year period. As many of you are likely aware, investors that come into later closes for the fundraise for many of our products, the retroactive fees dating back to the fund first close. Therefore, you typically see a spike in management fees related to that fund for the quarter in which subsequent closings occur. Revenue from our customized separate accounts increased approximately $3.6 million compared to the prior year period due to reups from existing clients and the addition of several new accounts. Revenue from our advisory and reporting offerings increased approximately $3.4 million compared to the prior year period. The final component of our revenue is incentive fee. Incentive fee for the year-to-date period were $29.8 million. We remain a very diversified carry story with now 70 vehicles in an unrealized carry position that are ultimately backed by 1,000s of underlying companies. Moving to Slide 9, we provide some additional detail on our unrealized carry balance. Given the continued positive trend in valuations, the balance is up 22% from the prior year, even as we recognize $41 million of incentive fee during that period. And just to remind everyone, we don't control these positions and thus we don't…

[Operator Instructions] First question, we have Ken Worthington from JP Morgan. Your line is open.

Hi, good morning. And thanks for taking my questions, exciting days here. I wanted to flush out your comments on the SPAC. So a couple of questions on this. So how does the launch of the first SPAC expanded to a broader SPAC business at Hamilton Lane? And what ultimately is your vision here? And then I guess maybe along those same lines, can you speak to competitive advantage? How would your relationships in private markets investing position Hamilton Lane to be successful both in terms of the initial SPAC and then you know the outlook to further grow this business? And then are you thinking about any themes either by sector style or other characteristics for your SAPC business?

Thanks, Ken, for the question. This is Andrea speaking. On the first question, it is absolutely our intention to institutionalize this space and to build-out a line of business focused on providing these solutions to our partnership. On your second question regarding differentiation and competitive nature, the key differentiation is our tremendous data set, really layered with the SAPC which gives us a preemptive sourcing edge and long cultivated relationships. And lastly, I would say it's also the institutionalization of our platform, which will lead us to be successful for SPAC 1, and for all future SPAC. On your third question, it is a generalist approach that we are taking. And our intention is to partner with a best-in-class general partner and to work with them on a leading if not outperforming business as we take that company into a deep SPAC process.

Okay, thank you. And just to follow up on competitive advantage, if the relationship was with private market investing firms, it's not so much bankers per se, it's the private markets investing firms. So you've got data on deals, how do you translate that into a competitive advantage in terms of finding deals? And making sure you're investing in the right ones? I guess, link those two together?

Sure. It's a great question. This is Andrea. It is absolutely going to leverage our data analytics and the access to information. And we're not going to have to go to the bank to source books, we're going to preempt that process and work directly based on the relationship we have with these partners to source and engage with them on these opportunities. So we're going to circumvent what is traditionally done by SPAC which is just received [banker book].

Got it. Okay, thank you.

Next question, we have Alex Blostein from Goldman Sachs.

Hey, guys, good morning. I just wanted to dig a little bit deeper into the opportunity you see for Hamilton Lane in the U.S. retail distribution now that you have a fund approved and launched. Can you talk I guess a little bit about the channels that you're looking to distribute through the kind of opportunities that you see there any incremental investments you need to make into distribution to kind of accelerate that growth and sort of the vision for that business call that over the next year or two?

Thanks Alex. It’s, Erik. So I think if you take a look at what's happening on the non-U.S. product, as we said, January was record for us month of flows with a net $60 million. I think it would be it makes us incredibly optimistic about what is sort of out there the U.S. market on the retail side is enormous. You've seen that we've structured this product to be around qualified purchasers. And so it opens up the market to a tremendous volume of participants. From a channel perspective, we're looking across all the channels to warehouses to our RIAs, other wealth management platforms. We think the acquisition of 361 really enhances our ability to distribute we have existing resources this just now nicely adds to it to the extent that we believe in the future that adding more resources will further the growth, we're certainly open minded to that. But I think the non-U.S. product is showing you a path to something that is very, very scalable in a market that we think is really clamoring for access to the private markets.

Great and of just the fee structure and may be if you sit down what kind of specific economics related to the retail product, kind of the blended fee rate, and as we think about investments, you guys need to make it into distribution. I guess how should we think about that for Hamilton Lane as a whole?

Well, from a fee structure perspective, this looks sort of similar to slightly better than what our specialized funds look like, the better part is slightly higher management fees and a deal-by-deal carry structure. So given the Evergreen nature, it doesn't lend itself to anything other than a deal-by-deal carry structure. And so we think the economics here are attractive to us. But also, I think when you look at the overall fee rates to the investor, we think it's a very, very attractive offering to the investor, relative to other products that are out there in the market. So we think that's a win-win. In terms of other resources that are needed, we feel like as I said, the 361 acquisition, we think sort of fulfills a lot of the need today. But to the extent that we find that need changing in the future, we'll address it from an investment standpoint, no resources needed. These are they one of the other appeals to the clients here is that they are doing deals that are the same deals that are being done across the entirety of the Hamilton Lane platform. So we're not carving out unique transactions for this product that is very different than anything our institutional clients are looking at.

Great. Thanks very much.

Next question, we have Chris Kotowski from Oppenheimer & Company.

Good morning and thank you. I wonder if you can take us into the economics to Hamilton Lane from the SPAC a bit more that this is going to become a line of business. I think I saw in HLAHUs registration, that there are something like 12.5 million warrants. Is the economics to Hamilton Lane entirely from those warrants and how many of those to Hamilton Lane end up receiving?

So I think this is a question that's going to be best answered on future calls, as we are literally in the process of going through all of this with our auditors and accountants to figure out treatment. As you know, there is kind of an above the line and below the line component to this. And so we are just presently working through that. We wanted to frankl, get this back before we incurred any time and expense on the auditors and accounting firms. So we now with this SPAC in hand, we've now turned our attention to that. We will figure that out over the next sort of coming weeks and months and we will be very transparent in our disclosure. To Andrea's point given that we view this as a business line going forward, we think it's going to be very important for us to clearly walk folks through the economics. So that, frankly, we're getting appropriate credit for that, as we envision raising a series of these. So I think that's going to be a topic that we will likely address in the coming call.

Okay, fair enough. And then secondly, I was a little confused by the retro fees because I know when we are going through your presentation earlier in the morning, kind of looking at the year-to-date retro fees in that slide and then backing out what we thought was in prior quarters, we came to a number of like $4.1 million for the current quarter. And I think Erik, you mentioned that there were $7.2 million in retro fees so you just square that circle.

Sure. So I think what you're seeing here is that in the script, we were -- I didn't kind of clearly tell you that given we had a closing post the quarter end, we are just showing you what the future retro fees are going to be from the Jan 31. But the retro fees are at the 7 level. And so then it's an addition to that what's coming from the January 31 retro -- closing that will result in additional retro fees.

The additional around 10 --

That's going to come in the next quarter, though. Correct and that is around $10 million.

Okay. All right. Thank you. That's it for me.

Next question, we have Rob Lee from KBW. Your line is open. Unidentified Analyst\: Hi, this is Jeff Drezner on for Rob. Question around comp expense and can give us some color how to think about that going forward?

Sure, Jeff. It's Erik. I'll take that. So I think what we've sort of said to folks is that we would really suggest that people look at kind of comp ratios and comp expenses on an annualized basis. The way we do some of our bonus accrual is not always linear. And you saw that this year. And so I think what we're sort of managing to is an overall comp ratio that is in line with what you have seen from us over the prior three years, I think this year will be no different from that. And how we actually grew quarter-to-quarter does vary a little bit, just given some of the accounting, but I think when you look at it annualized, I think you are going to see a very consistent picture.

Great, thanks. And I was wondering if we have an update on dry powder or commitments earning fees, any number on that?

Yes, it’s not a number that -- this is Erik again, not a number that we've disclosed. I mean, we've always said that it's the nature of the business. We have billions and billions of dollars of that, but not something that we have chosen to kind of delineate is a number fluctuates quarter-to-quarter. And I think, frankly, we've been a little reticent to I think be overly fixated on how quickly we're deploying capital. I think our clients trust the fact that we're sort of doing things that are in their best interest because we find the right opportunities, not because we're anxious to deploy that capital in order to start accruing fees.

Great. Thanks for taking my questions.

Next question, we have Adib Choudhury from William Blair. Your line is open.

Hey, good morning, guys. This is [indiscernible] on for Chris. Just a quick one, I apologies if you had already covered it, but could you discuss the driver for the sequential increase in non-operating income in the quarter?

Sure. It's Erik. I think really what you're seeing there is an unrealized gain on one of our strategic balance sheet investments. That's really driving the $6.2 million.

Great. Got it? And then one more just going back to the SPAC, could you -- to the extent you can discuss where you're at in the process right now in terms of developing an initial list of targets or starting to have conversations are meeting [GPs] or kind of more further along than that. Thanks.

Yes, we are building that target list and have been over the last two weeks, we are having an engaged and very in depth conversations on some of those targets. And we're progressing very effectively. Anticipate that we will be starting deal, reveal and deal structuring discussions relatively soon.

Great, thank you very much.

Last question, we have Adam Beatty from UBS. Your line is open.

Hi, morning, thank you for taking the question. Appreciate all the detail on the fees on the fund side. Last quarter, we talked a little bit about the separate account side. And tranching versus reups just wanted to get an update on how that dynamic played out in the most recent quarter and maybe the near-term outlook? Thank you.

Sure, Alex, it's Erik. So I think the dynamic is always in flux. I think what you saw in this quarter that was a little bit of an analogy. And an aberration was that you sort of saw that we had some meaningful amount of separate account capital going into specialized funds. And because we don't double dip on the fee, that was actually generating special fund revenue, not separate account revenue. So here you are sort of seeing what looked odd, which was -- you saw the assets sort of rising on the customer separate accounts, not directly in line with the revenue. And that's what's causing that discrepancy. Other than that, I would say reups dynamics continue to be strong, you sort of noted that we put in over 80% of those new flows were coming from existing investors. So we continue to see strong reup interest. And frankly, as the public markets continue to rise, think about that kind of swelling the denominator for these clients, and thus, they need to continue to allocate more into the asset class. And we're certainly seeing that dynamic at work right now.

Excellent, thank you. Also want to ask about the meaningful increase in the performance fee accrual and just get any color or detail around what might be driving that? Thanks.

Sure. It’s Erik. I will stick with that. So I think it's really twofold. I think one, it continues to be really, really good Hamilton Lane investment selection. We are building strong portfolios. I think that strong portfolios translates into strong fundraising, particularly in the product world where I think performances is more of a focus. And the second thing is we're certainly getting the benefit of rising markets. So I think those two are really what's driving it. And then what you're also seeing and you heard from Atul’s comments, we're simply adding more and more accounts that have carry components. I think the interest in LPs, of having access and exposure to things like secondary and co-investments is rising. And so that just translates into more and more and more of your separate accounts, actually have transactional components and thus have a carried interest component. And that's resulting in more vehicles.

That's excellent. Thank you very much.

I am showing no further questions at this time. I will now turn it back to Erik Hirsch. Thank you.

Great. We appreciate everyone's time. We appreciate your interest. And we wish you well stay safe. Thank you.

Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. Thank you again for participating. You may now disconnect. Have a great day.