10-Q 1 hlne-20220630.htm 10-Q hlne-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________ to ___________________________

Commission file number 001-38021

HAMILTON LANE INCORPORATED

(Exact name of Registrant as specified in its charter)
Delaware26-2482738
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
110 Washington Street,Suite 1300
Conshohocken, PA19428
(Address of principal executive offices)(Zip Code)
(610) 934-2222
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareHLNEThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No x 
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of July 29, 2022, there were 37,295,472 shares of the registrant’s Class A common stock, par value $0.001, and 15,953,682 shares of the registrant’s Class B common stock, par value $0.001, outstanding.




Table of Contents
Page
This Quarterly Report on Form 10-Q (“Form 10-Q”) includes certain information regarding the historical performance of our specialized funds and customized separate accounts. An investment in shares of our Class A common stock is not an investment in our specialized funds or customized separate accounts. In considering the performance information relating to our specialized funds and customized separate accounts contained herein, current and prospective Class A common stockholders should bear in mind that the performance of our specialized funds and customized separate accounts is not indicative of the possible performance of shares of our Class A common stock and is also not necessarily indicative of the future results of our specialized funds or customized separate accounts, even if fund investments were in fact liquidated on the dates indicated, and there can be no assurance that our specialized funds or customized separate accounts will continue to achieve, or that future specialized funds and customized separate accounts will achieve, comparable results.
We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are owned by us or licensed by us. We also own or have the rights to copyrights that protect the content of our solutions. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this Form 10-Q are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, trade names and copyrights.
This Form 10-Q may include trademarks, service marks or trade names of other companies. Our use or display of other parties’ trademarks, service marks, trade names or products is not intended to, and does not imply a relationship with, or endorsement or sponsorship of us by, the trademark, service mark or trade name owners.
Unless otherwise indicated, information contained in this Form 10-Q concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources (including industry publications, surveys and forecasts), and



management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets that we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently verified any third-party information.
Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” the “Company,” “Hamilton Lane” and similar terms refer to Hamilton Lane Incorporated and its consolidated subsidiaries. As used in this Form 10-Q, (i) the term “HLA” refers to Hamilton Lane Advisors, L.L.C. and (ii) the terms “Hamilton Lane Incorporated” and “HLI” refer solely to Hamilton Lane Incorporated, a Delaware corporation, and not to any of its subsidiaries.
Cautionary Note Regarding Forward-Looking Information
Some of the statements in this Form 10-Q may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Words such as “will”, “expect”, “believe”, “estimate”, “continue”, “anticipate”, “intend”, “plan” and similar expressions are intended to identify these forward-looking statements. Forward-looking statements discuss management’s current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. All forward-looking statements are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different, including risks relating to: our ability to manage growth, fund performance, competition in our industry, changes in our regulatory environment and tax status; market conditions generally; our ability to access suitable investment opportunities for our clients; our ability to maintain our fee structure; our ability to attract and retain key employees; our ability to manage our obligations under our debt agreements; defaults by clients and third-party investors on their obligations to fund commitments; our ability to comply with investment guidelines set by our clients; our ability to successfully integrate acquired businesses with ours; our ability to manage risks associated with pursuing new lines of business or entering into strategic partnerships; our ability to anticipate, identify and manage risks we face; our ability to manage the effects of events outside of our control; and our ability to receive distributions from HLA to fund our payment of dividends, taxes and other expenses.
The foregoing list of factors is not exhaustive. For more information regarding these risks and uncertainties as well as additional risks that we face, you should refer to the “Risk Factors” detailed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (our “2022 Form 10-K”), and in our subsequent reports filed from time to time with the Securities and Exchange Commission (the “SEC”). The forward-looking statements included in this Form 10-Q are made only as of the date we filed this report. We undertake no obligation to update or revise any forward-looking statement as a result of new information or future events, except as otherwise required by law.



2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Hamilton Lane Incorporated
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts)
June 30,March 31,
20222022
Assets
Cash and cash equivalents$83,052 $72,138 
Restricted cash3,996 4,023 
Fees receivable44,982 51,869 
Prepaid expenses6,575 6,858 
Due from related parties3,780 1,872 
Furniture, fixtures and equipment, net29,410 28,842 
Lease right-of-use assets, net64,270 65,636 
Investments533,263 503,789 
Deferred income taxes246,089 245,046 
Other assets26,409 28,162 
Assets of consolidated variable interest entities:
Cash and cash equivalents144 36 
Investments held in trust276,083 276,016 
Investments33,776 10,036 
Other assets475 623 
Total assets$1,352,304 $1,294,946 
Liabilities, redeemable non-controlling interests and equity
Accounts payable$3,570 $2,827 
Accrued compensation and benefits36,924 20,117 
Accrued members’ distributions10,754 27,119 
Accrued dividend14,800 12,947 
Debt220,885 171,326 
Payable to related parties pursuant to tax receivable agreement180,536 180,536 
Lease liabilities80,433 82,244 
Other liabilities (includes $12,931 and $13,818 at fair value)
26,786 47,669 
Liabilities of consolidated variable interest entities:
Other liabilities10,642 12,675 
Total liabilities585,330 557,460 
Commitments and contingencies (Note 16)
Redeemable non-controlling interests276,000 276,000 
Preferred stock, $0.001 par value, 10,000,000 authorized, none issued
  
Class A common stock, $0.001 par value, 300,000,000 authorized; 37,295,472 and 37,280,697 issued and outstanding as of June 30, 2022 and March 31, 2022, respectively
37 37
Class B common stock, $0.001 par value, 50,000,000 authorized; 15,953,682 and 16,033,359 issued and outstanding as of June 30, 2022 and March 31, 2022, respectively
16 16 
Additional paid-in-capital163,129 161,676 
Retained earnings205,325 185,149 
Total Hamilton Lane Incorporated stockholders’ equity368,507 346,878 
Non-controlling interests in general partnerships3,632 3,423 
Non-controlling interests in Hamilton Lane Advisors, L.L.C.118,835 111,185 
Total equity490,974 461,486 
Total liabilities, redeemable non-controlling interests and equity$1,352,304 $1,294,946 
See accompanying notes to the condensed consolidated financial statements.
3

Hamilton Lane Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)



Three Months Ended
June 30,
20222021
Revenues
Management and advisory fees$85,946 $73,884 
Incentive fees49,524 2,364 
Consolidated variable interest entities related:
Incentive fees39 2,747 
Total revenues135,509 78,995 
Expenses
Compensation and benefits52,194 26,732 
General, administrative and other20,513 16,154 
Consolidated variable interest entities related:
General, administrative and other277359 
Total expenses72,984 43,245 
Other income (expense)
Equity in (loss) income of investees(625)20,049 
Interest expense(1,495)(1,165)
Interest income168 423 
Non-operating income4,343 3,603 
Consolidated variable interest entities related:
Equity in income of investees732 229 
Unrealized income (loss)1,966 (2,244)
Total other income (expense)5,089 20,895 
Income before income taxes67,614 56,645 
Income tax expense11,488 11,964 
Net income56,126 44,681 
Less: Income attributable to non-controlling interests in general partnerships308 213 
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.20,168 19,296 
Less: Income (loss) attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc.2,166 (2,996)
Net income attributable to Hamilton Lane Incorporated$33,484 $28,168 
Basic earnings per share of Class A common stock$0.92 $0.78 
Diluted earnings per share of Class A common stock$0.91 $0.78 
Dividends declared per share of Class A common stock$0.40 $0.35 
See accompanying notes to the condensed consolidated financial statements.





4

Hamilton Lane Incorporated
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands)


Class A Common StockClass B Common StockAdditional Paid in CapitalRetained EarningsNon-Controlling
Interests in General Partnerships
Non-Controlling
Interests in Hamilton Lane Advisors, L.L.C.
Total Equity
Balance at March 31, 2022$37 $16 $161,676 $185,149 $3,423 $111,185 $461,486 
Net income
— — — 33,484 308 20,168 53,960 
Equity-based compensation
— — 1,307 — — 590 1,897 
Dividends declared
— — — (14,800)— — (14,800)
Capital distributions to non-controlling interests, net— — — — (99)— (99)
Member distributions
— — — — — (14,121)(14,121)
Employee Share Purchase Plan share issuance
— — 334 — — 151 485 
Adjustment of redeemable non-controlling interest to redemption value— — — 1,492 — 674 2,166 
Equity reallocation between controlling and non-controlling interests
— — (188)— — 188  
Balance at June 30, 2022$37 $16 $163,129 $205,325 $3,632 $118,835 $490,974 
Class A Common StockClass B Common StockAdditional Paid in CapitalRetained EarningsNon-Controlling
Interests in General Partnerships
Non-Controlling
Interests in Hamilton Lane Advisors, L.L.C.
Total Equity
Balance at March 31, 2021$36 $17 $150,564 $87,512 $2,211 $73,861 $314,201 
Net income (loss)— — — 28,168 213 19,296 47,677 
Equity-based compensation
— — 1,573 — — 768 2,341 
Repurchase of Class A shares for employee tax withholding
— — (46)— — (22)(68)
Dividends declared
— — — (12,600)— — (12,600)
Capital contributions from non-controlling interests, net— — — — 137 — 137 
Member distributions
— — — — — (9,665)(9,665)
Employee Share Purchase Plan share issuance
— — 267 — — 130 397 
Equity reallocation between controlling and non-controlling interests
— — (2,013)— — (983)(2,996)
Balance at June 30, 2021$36 $17 $150,345 $103,080 $2,561 $83,385 $339,424 

See accompanying notes to the condensed consolidated financial statements.

5

Hamilton Lane Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

Three Months Ended June 30,
20222021
Operating activities:
Net income$56,126 $44,681 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization1,764 1,378 
Change in deferred income taxes(1,043)7,960 
Change in payable to related parties pursuant to tax receivable agreement (539)
Equity-based compensation1,897 2,341 
Equity in loss (income) of investees625 (20,049)
Fair value adjustment of other investments(4,344)(3,455)
Proceeds received from investments3,343 3,381 
Non-cash lease expense1,374 3,522 
Other14 (849)
Changes in operating assets and liabilities:
Fees receivable6,887 155 
Prepaid expenses283 177 
Due from related parties(1,908)136 
Other assets1,128 (1,613)
Accounts payable743 976 
Accrued compensation and benefits16,807 2,189 
Lease liability(1,819)771 
Other liabilities(18,241)(10,917)
Consolidated variable interest entities related:
Change in warrant liability measured at fair value(1,966)2,244 
Equity in income of investees(732)(229)
Other assets and liabilities14 129 
Net cash provided by operating activities60,952 32,389 
Investing activities:
Purchase of furniture, fixtures and equipment(1,707)(4,535)
Purchase of other investments(20,236)(298)
Cash paid for acquisition of business(1,500)(10,096)
Distribution from investment valued under the measurement alternative 12,739 
Distributions received from investments2,227 13,281 
Contributions to investments(35,237)(15,522)
Net cash used in investing activities(56,453)(4,431)
Financing activities:
Borrowings of debt25,000  
Repayments of debt(457)(469)
Draw-down on revolver25,000  
Repayment of revolver (15,000)
Repurchase of Class A shares for employee tax withholding (68)
Proceeds received from issuance of shares under Employee Share Purchase Plan485 397 
Dividends paid(12,947)(11,201)
Members’ distributions paid(30,485)(15,809)
Other (74)
Consolidated variable interest entities related:
Contributions from non-controlling interest in general partnerships133 232 
Distributions to non-controlling interest in general partnerships(233)(95)
Net cash provided by (used in) financing activities6,496 (42,087)
Increase (decrease) in cash, cash equivalents, and restricted cash10,995 (14,129)
Cash, cash equivalents, and restricted cash at beginning of the period76,197 90,377 
Cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at end of the period$87,192 $76,248 
See accompanying notes to the condensed consolidated financial statements.

6

Hamilton Lane Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

Reconciliation of Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities to the Condensed Consolidated Balance Sheets:
As of June 30,
20222021
Cash and cash equivalents$83,052 $73,124 
Restricted cash3,996 3,048
Cash and cash equivalents held at consolidated variable interest entities144 76 
Total cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities$87,192 $76,248 
See accompanying notes to the condensed consolidated financial statements.

7

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)


1.Organization

Hamilton Lane Incorporated (“HLI”) is a holding company whose principal asset is a controlling equity interest in Hamilton Lane Advisors, L.L.C. (“HLA”). As the sole managing member of HLA, HLI operates and controls all of the business and affairs of HLA, and through HLA, conducts its business. As a result, HLI consolidates HLA’s financial results and reports a non-controlling interest related to the portion of HLA units not owned by HLI. The assets and liabilities of HLA represent substantially all of HLI’s consolidated assets and liabilities with the exception of certain cash, certain deferred tax assets and liabilities, payable to related parties pursuant to a tax receivable agreement, and dividends payable. Unless otherwise specified, “the Company” refers to the consolidated entity of HLI, HLA and subsidiaries throughout the remainder of these notes. As of June 30, 2022 and March 31, 2022, HLI held approximately 68.9% and 68.9%, respectively, of the economic interest in HLA. As future exchanges of HLA units occur pursuant to the exchange agreement in place with HLA’s members, the economic interest in HLA held by HLI will increase.

HLA is a registered investment advisor with the United States Securities and Exchange Commission (“SEC”), providing asset management and advisory services, primarily to institutional investors, to design, build and manage private markets portfolios. HLA generates revenues primarily from management fees, by managing assets on behalf of customized separate accounts, specialized fund products and distribution management accounts, and advisory fees, by providing asset supervisory and reporting services. HLA sponsors the formation, and serves as the general partner or managing member, of various limited liability partnerships consisting of specialized funds and certain single client separate account entities (“Partnerships”) that acquire interests in third-party managed investment funds that make private equity and equity-related investments. The Partnerships may also make direct investments, including investments in debt, equity, and other equity-based instruments. The Company, which includes certain subsidiaries that serve as the general partner or managing member of the Partnerships, may invest its own capital in the Partnerships and generally makes all investment and operating decisions for the Partnerships. HLA operates several wholly-owned entities through which it conducts its foreign operations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Management believes it has made all necessary adjustments (which consisted of only normal recurring items) so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing the condensed consolidated financial statements are reasonable and prudent. Results of operations for the three months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending March 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in HLI’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022.


8

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

Accounting for Differing Fiscal Periods

The Partnerships primarily have a fiscal year end as of December 31, and the Company accounts for its investments in the Partnerships using a three-month lag due to the timing of financial information received from the investments held by the Partnerships. The Partnerships primarily invest in private equity funds, which generally require at least 90 days following the calendar year end to present audited financial statements. The Company records its share of capital contributions to and distributions from the Partnerships in investments in the Condensed Consolidated Balance Sheets during the three-month lag period.

Fair Value of Financial Instruments

The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below:

Level 1: Values are determined using quoted market prices for identical financial instruments in an active market.
Level 2: Values are determined using quoted prices for similar financial instruments and valuation models whose inputs are observable.
Level 3: Values are determined using pricing models that use significant inputs that are primarily unobservable, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The carrying amount of cash and cash equivalents, fees receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments.

Recent Accounting Pronouncements

In June 2022, the FASB issued Accounting Standard Updated ("ASU") 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this update clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual sale restrictions and introduce new disclosure requirements related to such equity securities. The amendments are effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

3. Revenue
The following table presents revenues disaggregated by product offering, which aligns with the identified performance obligations and the basis for calculating each amount:

9

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

Three Months Ended June 30,
Management and advisory fees20222021
Specialized funds$43,649 $33,388 
Customized separate accounts28,375 24,500 
Advisory6,248 6,366 
Reporting and other6,318 5,282 
Distribution management496 4,121 
Fund reimbursement revenue860 227 
Total management and advisory fees$85,946 $73,884 
Three Months Ended June 30,
Incentive fees20222021
Specialized funds$42,209 $1,659 
Customized separate accounts7,315 705 
Consolidated variable interest related:
Specialized funds39 2,747 
Total incentive fees$49,563 $5,111 

4. Investments

Investments consist of the following:
June 30,March 31,
20222022
Equity method investments in Partnerships$331,988 $326,296 
Other equity method investments1,661 1,573
Other investments16,591 19,820
Investments valued under the measurement alternative183,023 156,100
Total Investments$533,263 $503,789 

Equity method investments

The Company’s equity method investments in Partnerships represent its ownership in certain specialized funds and customized separate accounts. The strategies and geographic location of investments within the Partnerships vary by fund. The Company has a 1% interest in substantially all of the Partnerships. The Company’s other equity method investment represents its ownership in a joint venture that automates the collection of fund and underlying portfolio company data from general partners.

Other investments

The Company’s other investments represent a publicly traded security and investments in private equity funds and direct credit and equity investments that are held as collateral on the Company’s secured financing. The private equity fund investments can only be redeemed through distributions received from the liquidation of underlying investments of the fund, and the timing of distributions is currently indeterminable. The direct credit investments are debt securities classified as trading securities. Other
10


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

investments are measured at fair value with unrealized holding gains and losses recorded in non-operating income in the Condensed Consolidated Statement of Income.

The Company accounts for its secured financing at fair value under the fair value option. The primary reason for electing the fair value option is to mitigate volatility in earnings from using different measurement attributes. The significant input to the fair value of the secured financing is the fair value of the other investments delivered as collateral which are estimated using Level 3 inputs with the significant inputs as shown in Note 5 below.

The Company recognized a loss on other investments held as collateral of $723 during the three months ended June 30, 2022 and a gain of $814 during the three months ended June 30, 2021, that are recorded in non-operating income. The Company recognized a gain on the secured financing liability of $723 during the three months ended June 30, 2022 and a loss of $814 during the three months ended June 30, 2021, that are recorded in non-operating income in the Condensed Consolidated Statement of Income.

Investments valued under the measurement alternative

During the quarter ended June 30, 2022, the Company made investments in two private companies. The Company invested $3,000 in a technology driven platform that provides a digitized token for investors that improves the efficiency of capital raises. Additionally, the Company invested $12,000 in an online financial services platform. Due to the lack of readily determinable fair values for these investments, over which the Company does not have significant influence, the Company will value the investments under the measurement alternative.

During the quarter ended June 30, 2022, the Company made an additional investment of $5,236 in a company that maintains a platform of solutions designed to aid individual investors and various wealth management platforms with their wealth management needs. As a result of the transaction, the Company marked its original investment to fair value based upon the transaction price, which resulted in total unrealized gain of $6,687 during the three months ended June 30, 2022, that is recorded in non-operating income in the Condensed Consolidated Statement of Income. Due to the lack of readily determinable fair value for this investment, over which the Company does not have significant influence, the Company will continue to value the investment under the measurement alternative.

5. Fair Value Measurement

The following tables summarize the Company’s financial assets and financial liabilities recorded at fair value by fair value hierarchy level:
As of June 30, 2022
Level 1Level 2Level 3TotalAmortized Cost
Financial assets:
Other investments
$3,660 $ $12,931 $16,591 $11,361 
Investments held in trust
276,083   276,083 276,000 
Total financial assets$279,743 $ $12,931 $292,674 $287,361 
Financial liabilities:
Warrant liability(1)
$790 $127 $ $917 
Secured financing(2)
  12,931 12,931 
Total financial liabilities$790 $127 $12,931 $13,848 
11


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

As of March 31, 2022
Level 1Level 2Level 3TotalAmortized Cost
Financial assets:
Other investments
$6,002 $ $13,818 $19,820 $10,853 
Investments held in trust
276,016   276,016 276,000 
Total financial assets$282,018 $ $13,818 $295,836 $286,853 
Financial liabilities:
Warrant liability(1)
$2,484 $399 $ $2,883 
Secured financing(2)
  13,818 13,818 
Total financial liabilities$2,484 $399 $13,818 $16,701 
(1) Warrant liability is recorded within other liabilities of consolidated variable interests in the Condensed Consolidated Balance Sheet.
(2) Secured financing is recorded within other liabilities in the Condensed Consolidated Balance Sheet.

The following is a reconciliation of other investments for which significant unobservable inputs (Level 3) were used in determining fair value:
Private equity fundsDirect credit investmentsDirect equity investmentsTotal other investments
Balance as of March 31, 2022$7,024 $774 $6,020 $13,818 
Contributions    
Distributions(164)  (164)
Net loss(456)(1)(266)(723)
Balance as of June 30, 2022$6,404 $773 $5,754 $12,931 

Private equity fundsDirect credit investmentsDirect equity investmentsPublicly traded equity securityTotal other investments
Balance as of March 31, 2021$6,254 $985 $6,059 $ $13,298 
Contributions30  28  58 
Distributions(95)(202)  (297)
Net gain577 12 225  814 
Transfer in   6,455 6,455 
Balance as of June 30, 2021$6,766 $795 $6,312 $6,455 $20,328 

12


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

The valuation methodologies, significant unobservable inputs, range of inputs and the weighted average input determined based upon relative fair value of the investments used in recurring Level 3 fair value measurements of financial assets were as follows, as of June 30, 2022:

Significant
FairValuationUnobservableWeighted
ValueMethodologyInputsRangeAverage
Other investments:
Private equity funds
$6,404 Adjusted net asset valueSelected market return(6.3)%-(9.2)%(8.6)%
Direct credit investments
$773 Discounted cash flowMarket yield12.5%-12.5%12.5%
Direct equity investments
$5,754 Market approachEBITDA multiple
8.00x
-
13.50x
10.59x
Market approachEquity multiple
1.58x
1.58x

For the significant unobservable inputs listed in the table above: (1) a significant increase or decrease in the selected market return would result in a significantly higher or lower fair value measurement, respectively; (2) a significant increase or decrease in the market yield would result in a significantly lower or higher fair value measurement, respectively; and (3) a significant increase or decrease in the selected multiple would result in a significantly higher or lower fair value measurement, respectively.

6. Acquisitions

On April 1, 2021, the Company acquired substantially all the assets of 361 Capital, LLC for a total aggregate cash amount of $13,096, of which $10,096 was paid on the closing date of the acquisition. The remaining $3,000 will be paid in two equal installments on the first and second anniversaries of the closing. On April 1, 2022, the Company paid the first of the two equal installments. The purchase price based upon the fair value of consideration transferred at the date of acquisition is $12,946. The Company recorded $7,145 of definite lived intangible assets related primarily to the acquired investment management contracts, which will be amortized over seven years, and $5,623 of goodwill, which are both recorded in other assets in the Condensed Consolidated Balance Sheets. The remaining assets acquired and liabilities assumed are not material to the condensed consolidated financial statements. Revenue and net income attributable to the acquisition of 361 Capital, LLC were not material for the three months ended June 30, 2022 and 2021, and therefore, pro forma information related to this acquisition is not presented.

7. Variable Interest Entities

The Company consolidates certain variable interest entities ("VIEs") in which it is determined that the Company is the primary beneficiary.

Consolidated Variable Interest Entities

The Company consolidates general partner entities of certain Partnerships and a Partnership in which it is currently the primary beneficiary, which are not wholly-owned by the Company. The total assets of these consolidated VIEs are $33,776 and $10,036 as of June 30, 2022 and March 31, 2022, respectively, and are recorded in investments of consolidated variable interest entities in the Condensed Consolidated Balance Sheets. The consolidated VIEs had no liabilities as of June 30, 2022 and March 31, 2022. The
13


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

assets of the consolidated VIEs represent equity method-investments in direct investment funds and customized separate accounts and may only be used to settle obligations of the consolidated VIEs, if any. In addition, there is no recourse to the Company for the consolidated VIEs’ liabilities, except for certain entities in which there could be a clawback of previously distributed carried interest.

The Company sponsors and consolidates Hamilton Lane Alliance Holdings I, Inc. (“HLAH”) through HL Alliance Holdings Sponsor LLC, an indirect wholly-owned subsidiary of the Company. On January 15, 2021, HLAH completed an IPO raising total gross proceeds of $276,000 which were placed in a trust and can only be utilized for funding a business combination or the redemption of Class A shares of HLAH. In a private placement concurrent with the IPO, HLAH sold warrants to HL Alliance Holdings Sponsor LLC for gross proceeds of $7,520 which were used by HLAH to pay the offering costs and also to provide working capital. The total assets of HLAH were $276,700 and $276,675 as of June 30, 2022 and March 31, 2022, respectively. The total liabilities of HLAH were $10,642 and $12,675 as of June 30, 2022 and March 31, 2022, respectively. The assets of HLAH held outside of the trust can only be used to settle obligations of HLAH, and there is no recourse to the Company for HLAH’s liabilities. All warrants and Class B common stock of HLAH held by the Company are eliminated in consolidation.

Nonconsolidated Variable Interest Entities

The Company holds variable interests in certain Partnerships that are VIEs, which are not consolidated, as it is determined that the Company is not the primary beneficiary based upon the Company’s equity interest percentage in each of the VIEs. Certain Partnerships are considered VIEs because limited partners lack the ability to remove the general partner or dissolve the entity without cause, by simple majority vote (i.e. do not have substantive “kick out” or “liquidation” rights). The Company’s involvement with such entities is in the form of direct equity interests in, and fee arrangements with, the Partnerships in which it also serves as the general partner or managing member. In the Company’s role as general partner or managing member, it generally considers itself the sponsor of the applicable Partnership and makes all investment and operating decisions. As of June 30, 2022, the total remaining unfunded commitments from the Company’s general partner entities to the unconsolidated VIEs was $116,530. Investor commitments are the primary source of financing for the unconsolidated VIEs.

The maximum exposure to loss represents the potential loss of assets recognized by the Company relating to these unconsolidated entities. The Company believes that its maximum exposure to loss is limited because it establishes separate limited partnerships or limited liability companies to serve as the general partner or managing member of the Partnerships.

14


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

The carrying value of assets and liabilities recognized in the Condensed Consolidated Balance Sheet related to the Company’s interests in these non-consolidated VIEs and the Company’s maximum exposure to loss relating to non-consolidated VIEs were as follows:
June 30,March 31,
20222022
Investments$194,872 $191,378 
Fees receivable21,116 9,754 
Due from related parties1,115 778 
Total VIE Assets217,103 201,910 
Less: Non-controlling interests(1,940)(1,873)
Maximum exposure to loss$215,163 $200,037 

8. Debt

The Company’s debt consisted of the following:
As of June 30, 2022
As of March 31, 2022
Principal OutstandingCarrying ValueInterest RatePrincipal OutstandingCarrying ValueInterest Rate
Term Loan$96,297 $96,125 3.25 %$71,754 $71,574 2.25 %
Multi-Draw Facility100,000 99,760 3.50 %100,000 99,752 3.50 %
Revolver25,000 25,000 3.25 %  2.25 %
Total Debt$221,297 $220,885 $171,754 $171,326 

The carrying value of the Company’s outstanding debt as of June 30, 2022 and March 31, 2022 approximated fair value except for the multi-draw facility which had an estimated fair value of $90,270 as of June 30, 2022. The estimated fair value of debt is based on then-current market rates for similar debt instruments and is classified as Level 2 within the fair value hierarchy.

9. Equity

The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2022:
Class A Common StockClass B Common Stock
March 31, 202237,280,697 16,033,359 
Forfeitures(931)(79,677)
Shares repurchased for employee tax withholdings(27) 
Restricted stock granted7,248  
Shares issued pursuant to Employee Share Purchase Plan8,485  
June 30, 202237,295,472 15,953,682 

15


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

10. Equity-Based Compensation

A summary of restricted stock activity for the three months ended June 30, 2022 is presented below:
Total
Unvested
Weighted-
Average
Grant-Date
Fair Value of
Award
March 31, 2022281,307 $67.50 
Granted 7,248 $69.12 
Vested(289)$82.72 
Forfeited(931)$82.22 
June 30, 2022287,335 $67.48 

As of June 30, 2022, total unrecognized compensation expense related to restricted stock was $16,952.

11. Compensation and Benefits

The Company has recorded the following amounts related to compensation and benefits:
Three Months Ended June 30,
20222021
Base compensation and benefits$37,907 $23,137 
Incentive fee compensation12,390 1,254 
Equity-based compensation1,897 2,341 
Total compensation and benefits$52,194 $26,732 

12. Income Taxes

The Company’s effective tax rate used for interim periods is based on an estimated annual effective tax rate including the tax effect of items required to be recorded discretely in the interim period in which those items occur. The effective tax rate is dependent on many factors, including the estimated amount of income subject to income tax; therefore, the effective tax rate can vary from period to period. The Company evaluates the realizability of its deferred tax asset on a quarterly basis and adjusts the valuation allowance when it is more likely than not that all or a portion of the deferred tax asset may not be realized.

The Company’s effective tax rate was 17.0% and 21.1% for the three months ended June 30, 2022 and 2021, respectively. The effective tax rates were different from the statutory tax rates due to the portion of income allocated to non-controlling interests, valuation allowance recorded against deferred tax assets and discrete tax adjustments recorded in the periods.

As of June 30, 2022, the Company had no unrecognized tax positions and believes there will be no changes to uncertain tax positions within the next 12 months.

16


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

13. Earnings per Share

Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to HLI, and, therefore, are not participating securities. As a result, a separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been included. Shares of the Company’s Class B common stock are, however, considered potentially dilutive to the Class A common stock because the Class B units to which the Class B common stock corresponds are exchangeable for shares of Class A common stock on a one-for-one basis, at which time the share of Class B common stock is surrendered in exchange for a payment of its par value.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:
Three Months Ended
June 30, 2022
Net income attributable to Class A StockholdersWeighted-Average SharesPer share amount
Net income attributable to HLI$33,484 
Impact of changes in carrying amount of redeemable NCI
380 
Basic EPS of Class A common stock33,864 36,999,561 $0.92 
Adjustment to net income:
Assumed vesting of employee awards
9 
Assumed conversion of Class B and Class C Units 15,179 
 Effect of dilutive securities:
Assumed vesting of employee awards
31,546 
Assumed conversion of Class B and Class C Units16,675,834 
Diluted EPS of Class A common stock$49,052 53,706,941 $0.91 
Three Months Ended
June 30, 2021
Net income attributable to Class A StockholdersWeighted-Average SharesPer share amount
Net income attributable to HLI$28,168 
Impact of changes in carrying amount of redeemable NCI
 
Basic EPS of Class A common stock28,168 36,003,089 $0.78 
Adjustment to net income:
Assumed vesting of employee awards
34 
Effect of dilutive securities:
Assumed vesting of employee awards
125,905 
Diluted EPS of Class A common stock$28,202 36,128,994 $0.78 
The adjustments to net income for dilutive securities is based upon the additional income that would be allocated to HLI for the change in its ownership percentage due to the dilutive securities and adjusted for the incremental income tax expense related to the additional allocated income.

17


Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)

The calculation of diluted earnings per share exclude 17,553,234 outstanding Class B and Class C units of HLA for the three months ended June 30, 2021, which are exchangeable into Class A common stock under the “if-converted” method, because the inclusion of such shares would be antidilutive. Net income (loss) recorded by HLI on a standalone basis will determine if the Class B and Class C units are dilutive or antidilutive in each respective period.

14. Related-Party Transactions