1Hamilton Lane l Global Leader in the Private Markets Fiscal Year 2024 First Quarter Results Earnings Presentation - August 1, 2023
2Hamilton Lane l Global Leader in the Private Markets Today's Speakers Erik Hirsch Vice Chairman Atul Varma Chief Financial Officer John Oh Principal - Shareholder Relations Mario Giannini Chief Executive Officer
3Hamilton Lane l Global Leader in the Private Markets Period Highlights Business Performance Financial Results Dividend • Assets under management and fee-earning assets under management were $117 billion and $60 billion, respectively, as of June 30, 2023, increases of 8% and 17%, respectively, compared to June 30, 2022 • Management and advisory fees increased 23% compared to the three months ended June 30, 2022 USD in millions except per share amounts Q1 FY24 vs. Q1 FY23 vs. Q4 FY23 Management and advisory fees $105.4 23 % 10 % GAAP net income $31.0 (7) % 0 % GAAP EPS $0.81 (11) % (1) % Adjusted net income1 $50.8 3 % (1) % Non-GAAP EPS1 $0.94 2 % (2) % Fee Related Earnings1 $45.1 23 % 11 % Adjusted EBITDA1 $61.0 (8) % 10 % • Declared a quarterly dividend of $0.445 per share of Class A common stock to record holders at the close of business on September 15, 2023 1Adjusted net income, non-GAAP earnings per share, Fee Related Earnings and Adjusted EBITDA are non-GAAP financial measures. For the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures and for the reasons we believe the non-GAAP measures provide useful information, see pages 20 and 21 of this presentation.
4Hamilton Lane l Global Leader in the Private Markets Total Assets Under Management/Advisement ($B) Total AUA Total AUM 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 6/30/23 $0 $200 $400 $600 $800 $1,000 Y-o-Y Growth AUM: 8 % AUA: (3) % $818B AUM & AUA Growing Asset Footprint & Influence 1 CAGR: 18% 1Data as of calendar year end 12/31 unless otherwise noted. Numbers may not tie due to rounding. $6 $7 $11 $13 $16 $19 $22 $24 $30 $32 $35 $40 $50 $59 $66 $76 $98 $108 $36 $51 $77 $79 $95 $81 $129 $147 $147 $189 $205 $292 $374 $410 $422 $581 $753 $724 $701 $117
5Hamilton Lane l Global Leader in the Private Markets Total Fee-Earning Assets Under Management ($B) $22 $25 $26 $31 $35 $32 $36 $11 $14 $16 $18 $23 $19 $24 Customized Separate Accounts Specialized Funds Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Jun-22 Jun-23 $0 $10 $20 $30 $40 $50 $60 $70 Fee-Earning AUM growth continues and annual fee rates are stable CAGR: 14% Total Management Fee Revenues as a % of Average FEAUM Fee-Earning AUM Driving Revenues *Numbers may not tie due to rounding Y-o-Y Drivers of Growth Customized Separate Accounts: • New client wins • Client re-ups Specialized Funds: • Closed 1st infrastructure fund, 2nd impact fund, and 5th direct equity fund • Fundraising 6th secondary fund, 8th credit-oriented fund, and evergreen funds .61%.56% .60% .56% .57% $42 $51 $57 $34 $39 $49 $60 .59%
6Hamilton Lane l Global Leader in the Private Markets AUM & AUA Drivers Customized Separate Accounts Specialized Funds Advisory Services Diverse mix of existing and prospective clients seeking to further or establish relationships with Hamilton Lane Typically larger clients with wide-ranging mandates which include technology- driven reporting, monitoring and analytics services and consulting services; opportunity set continues to be robust • $4.1B year-over-year increase in FEAUM • +80% of our gross contributions during the last 12 months came from existing clients • $4.4B year-over-year increase in FEAUM • Closings during Q1 FY24: ◦ Secondary fund: $493M • $24B year-over-year decrease in AUA AUM AUA Select funds in market: • Secondary fund • Credit-oriented fund • Evergreen funds
7Hamilton Lane l Global Leader in the Private Markets Financial Highlights
8Hamilton Lane l Global Leader in the Private Markets US D in M ill io ns $136 $125 Q1 FY23 Q1 FY24 US D in M ill io ns $50 $20 Q1 FY23 Q1 FY24 US D in M ill io ns $86 $105 Q1 FY23 Q1 FY24 Consolidated Revenue Strong growth across management and advisory fees Management and Advisory Fees Incentive Fees Total Revenues YTD YTD Y-o-Y Growth: 23% YTD Y-o-Y Growth: (8)% Y-o-Y Growth: (60)% • Recurring management and advisory fees represented an average of 85% of total revenues over the past five fiscal years • Y-o-Y increase of 23% • $3.9 million in retroactive fees from our latest secondary fund in the quarter • Incentive fees derived from a highly diversified pool of assets and funds • Unrealized carried interest of $1,101 million as of 6/30/23 diversified across 3,000+ assets and over 90 funds • Timing of realizations unpredictable • Total revenues decreased by 8%, driven by incentive fees, while management and advisory fees increased 23% US D in M ill io ns $195 $372 FY18 FY23 Long-Term Growth US D in M ill io ns $49 $157 FY18 FY23 Long-Term Growth CAGR: 14% US D in M ill io ns $244 $529 FY18 FY23 Long-Term Growth CAGR: 17% CAGR: 26%
9Hamilton Lane l Global Leader in the Private Markets Unrealized Carried Interest Period Ending Ve hi cl es USD in M illions Unrealized Carried Interest $809 $1,102 $1,101 83 90 96 Unrealized Carried Interest Vehicles in Unrealized Carry Position Jun-21 Jun-22 Jun-23 0 20 40 60 80 100 $0 $250 $500 $750 $1,000 $1,250 $1,500 Unrealized Carry by Age < 5 years 42% 5-8 years 36% 8-12 years 19% > 12 years 3%
10Hamilton Lane l Global Leader in the Private Markets US D in M ill io ns $67 $61 Q1 FY23 Q1 FY24 US D in M ill io ns $37 $45 Q1 FY23 Q1 FY24 Net Income Attributable to HLI US D in M ill io ns $33 $31 Q1 FY23 Q1 FY24 Adjusted EBITDA1 Consolidated Earnings Stable long-term growth YTD Y-o-Y Growth: (7)% • Y-o-Y decrease of 8% driven by lower incentive fees • Y-o-Y growth of 23% • Long-term double digit growth in Fee Related Earnings • $31M in net income attributable to HLI for the quarter 1Adjusted EBITDA and Fee Related Earnings are non-GAAP financial measures. For the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures and for the reasons we believe the non- GAAP measures provide useful information, see pages 20 and 21 of this presentation. YTD Y-o-Y Growth: (8)% Fee Related Earnings1 YTD Y-o-Y Growth: 23% US D in M ill io ns $17 $109 FY18 FY23 Long-Term Growth US D in M ill io ns $133 $260 FY18 FY23 Long-Term Growth US D in M ill io ns $81 $159 FY18 FY23 Long-Term Growth CAGR: 14% CAGR: 14%
11Hamilton Lane l Global Leader in the Private Markets Other Key Items Strong balance sheet with investments in our own products and a modest amount of leverage... US D in M ill io ns Investments $154 $208 $374 $514 $588 $634 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Jun-23 $0 $100 $200 $300 $400 $500 $600 $700 • For 6/30/23, the total investment balance consisted primarily of: ◦ ~$385M in investments in our funds ◦ ~$205M in technology related and other investments • Modest leverage • $198M of debt as of 6/30/23 US D in M ill io ns Leverage $221 $214 198 Jun-22 Mar-23 Jun-23 $0 $50 $100 $150 $200 $250
12Hamilton Lane l Global Leader in the Private Markets Appendix
13Hamilton Lane l Global Leader in the Private Markets Condensed Consolidated Statements of Income (Unaudited) Three Months Ended (Dollars in thousands except share and per share amounts) June 30, 2022 March 31, 2023 June 30, 2023 YoY % Change QoQ % Change Management and advisory fees $85,946 $95,692 $105,407 23 % 10 % Incentive fees 49,524 17,096 19,630 (60) % 15 % Consolidated variable interest entities related: Incentive fees 39 — — (100) % N/A Total revenues 135,509 112,788 125,037 (8) % 11 % Compensation and benefits 52,194 40,177 44,103 (16) % 10 % General, administrative and other 20,513 23,329 25,761 26 % 10 % Consolidated variable interest entities related: General, administrative and other 277 (35) 234 (16) % N/A Total expenses 72,984 63,471 70,098 (4) % 10 % Equity in (loss) income of investees (625) 12,581 11,866 N/A (6) % Interest expense (1,495) (2,590) (2,890) 93 % 12 % Interest income 168 950 937 458 % (1) % Non-operating income 4,343 6,635 232 (95) % (96) % Consolidated variable interest entities related: Equity in income of investees 732 425 132 (82) % (69) % Unrealized income 1,966 440 794 (60) % 80 % Interest expense — — (6) N/A N/A Interest income — 336 1,740 N/A 418 % Total other income (expense) 5,089 18,777 12,805 152 % (32) % Income before income taxes 67,614 68,094 67,744 0 % (1) % Income tax expense 11,488 16,659 16,400 43 % (2) % Net income 56,126 51,435 51,344 (9) % 0 % Less: Income attributable to non-controlling interests in general partnerships 308 213 1 (100) % (99) % Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 20,168 19,701 19,133 (5) % (3) % Less: Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. 2,166 — — (100) % N/A Less: Income attributable to non-controlling interests in consolidated funds — 435 1,212 N/A 179 % Net income attributable to Hamilton Lane Incorporated $33,484 $31,086 $30,998 (7) % 0 % Basic earnings per share of Class A common stock $0.92 $0.84 $0.82 (11) % (2) % Diluted earnings per share of Class A Common stock $0.91 $0.82 $0.81 (11) % (1) % Weighted-average shares of Class A common stock outstanding - basic 36,999,561 37,206,876 37,707,809 Weighted-average shares of Class A common stock outstanding - diluted 53,706,941 53,785,158 53,855,751
14Hamilton Lane l Global Leader in the Private Markets 1 Adjusted EBITDA and Non-GAAP earnings per share are non-GAAP financial measures. For the reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures, see page 20. 2 Incentive fee related compensation includes incentive fee compensation expense and bonus related to carried interest that is classified as base compensation. 3 Represents corporate income taxes at our estimated statutory tax rate of 23.6% and 23.9% for the three month periods ended June 30, 2023 and 2022, respectively, applied to adjusted pre-tax net income. The 23.6% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.6%. The 23.9% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.9%. Non-GAAP Financial Measures Three Months Ended (Dollars in thousands except share and per share amounts) June 30, 2022 March 31, 2023 June 30, 2023 YoY % Change QoQ % Change Adjusted EBITDA1 Management and advisory fees $85,946 $95,692 $105,407 23 % 10 % Revenue related to consolidated funds — 61 147 N/A 141 % Total expenses 72,984 63,471 70,098 (4) % 10 % Less: Incentive fee related compensation2 (23,541) (8,120) (9,324) (60) % 15 % Consolidated VIE related general, administrative and other expenses (276) — (233) (16) % N/A Non-operating income related compensation — (313) (59) N/A (81) % Management fee related expenses 49,167 55,038 60,482 23 % 10 % Fee Related Earnings $36,779 $40,715 $45,072 23 % 11 % Fee Related Earnings Margin 43 % 43 % 43 % Incentive fees 49,563 17,096 19,630 (60) % 15 % Incentive fees attributable to non-controlling interests (3) — — N/A N/A Incentive fee related compensation2 (23,541) (8,120) (9,324) (60) % 15 % Non-operating income related compensation — (313) (59) N/A (81) % Interest income 168 950 937 458 % (1) % Equity-based compensation 1,897 3,134 2,846 50 % (9) % Depreciation and amortization 1,764 1,842 1,873 6 % 2 % Adjusted EBITDA $66,627 $55,304 $60,975 (8) % 10 % Adjusted EBITDA Margin 49 % 49 % 49 % Non-GAAP earnings per share1 Net income attributable to Hamilton Lane Incorporated $33,484 $31,086 $30,998 (7) % 0 % Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 20,168 19,701 19,133 (5) % (3) % Income tax expense 11,488 16,659 16,400 43 % (2) % Adjusted pre-tax net income 65,140 67,446 66,531 2 % (1) % Adjusted income taxes3 (15,568) (15,884) (15,701) 1 % (1) % Adjusted net income $49,572 $51,562 $50,830 3 % (1) % Adjusted shares outstanding 53,706,941 53,785,158 53,855,751 Non-GAAP earnings per share $0.92 $0.96 $0.94 2 % (2) %
15Hamilton Lane l Global Leader in the Private Markets Management and Advisory Fees Three Months Ended, (Dollars in thousands) June 30, 2022 March 31, 2023 June 30, 2023 YoY % Change QoQ % Change Management and advisory fees Specialized funds $43,649 $52,169 $57,716 32 % 11 % Customized separate accounts 28,375 30,434 31,719 12 % 4 % Advisory 6,248 5,712 6,293 1 % 10 % Reporting and other 6,318 5,622 5,557 (12) % (1) % Distribution management 496 697 1,213 145 % 74 % Fund reimbursement revenue 860 1,058 2,909 238 % 175 % Total management and advisory fees $85,946 $95,692 $105,407 23 % 10 % Reporting and other: 9% Customized separate accounts: 30% Specialized funds: 55% Advisory: 6% Three Months Ended June 30, 2023
16Hamilton Lane l Global Leader in the Private Markets Incentive Fees Three Months Ended (Dollars in thousands) June 30, 2022 March 31, 2023 June 30, 2023 YoY % Change QoQ % Change Incentive fees Direct equity funds $24,851 $2,368 $2,331 (91) % (2) % Secondary funds 11,959 8,933 8,077 (32) % (10) % Direct credit funds 2,125 1,497 4,767 124 % 218 % Evergreen funds 955 1,172 1,215 27 % 4 % Other specialized funds 2,358 1,427 1,996 (15) % 40 % Customized separate accounts 7,315 1,699 1,244 (83) % (27) % Incentive fees $49,563 $17,096 $19,630 (60) % 15 % As of June 30, 2022 March 31, 2023 June 30, 2023 YoY % Change QoQ % Change Allocated carried interest Secondary Fund II $367 $359 $320 (13) % (11) % Secondary Fund III 33,568 30,084 29,212 (13) % (3) % Secondary Fund IV 144,479 121,750 122,416 (15) % 1 % Secondary Fund V 154,187 144,739 145,126 (6) % 0 % Secondary Fund VI — 5,209 13,439 N/A 158 % Co-investment Fund II 19,865 17,047 16,363 (18) % (4) % Co-investment Fund III 85,416 51,139 50,810 (41) % (1) % Co-investment Fund IV 134,730 111,318 127,496 (5) % 15 % Equity Opportunities Fund V 7,040 11,252 20,624 193 % 83 % Evergreen funds 52,256 95,477 115,135 120 % 21 % Other specialized funds 133,302 113,627 116,776 (12) % 3 % Customized separate accounts 337,004 320,249 342,874 2 % 7 % Total allocated carried interest $1,102,214 $1,022,250 $1,100,591 0 % 8 %
17Hamilton Lane l Global Leader in the Private Markets Assets Under Management (Dollars in millions) June 30, 2022 March 31, 2023 June 30, 2023 YoY % Change QoQ % Change Assets under management / advisement Assets under management $108,034 $111,901 $117,064 8 % 5 % Assets under advisement 724,160 744,770 700,651 (3) % (6) % Total assets under management /advisement $832,194 $856,671 $817,715 (2) % (5) % Fee-earning assets under management Customized separate accounts Balance, beginning of period $30,938 $33,089 $34,684 12 % 5 % Contributions 1,902 3,204 1,792 (6) % (44) % Distributions (1,142) (1,725) (636) (44) % (63) % Foreign exchange, market value and other 51 116 10 (80) % (91) % Balance, end of period $31,749 $34,684 $35,850 13 % 3 % Specialized funds Balance, beginning of period $18,193 $21,776 $22,662 25 % 4 % Contributions 1,435 961 1,258 (12) % 31 % Distributions (179) (233) (172) (4) % (26) % Foreign exchange, market value and other (77) 158 67 N/A (58) % Balance, end of period $19,372 $22,662 $23,815 23 % 5 % Total Balance, beginning of period $49,131 $54,865 $57,346 17 % 5 % Contributions 3,337 4,165 3,050 (9) % (27) % Distributions (1,321) (1,958) (808) (39) % (59) % Foreign exchange, market value and other (26) 274 77 N/A (72) % Balance, end of period $51,121 $57,346 $59,665 17 % 4 %
18Hamilton Lane l Global Leader in the Private Markets Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) March 31, 2023 June 30, 2023 Assets Cash and cash equivalents $99,686 $100,255 Restricted cash 4,804 4,805 Fees receivable 47,140 65,864 Prepaid expenses 9,817 8,007 Due from related parties 7,186 7,963 Furniture, fixtures and equipment, net 28,425 30,360 Lease right-of-use assets, net 62,327 64,396 Investments 530,921 546,080 Deferred income taxes 233,912 229,259 Other assets 46,784 28,092 Assets of consolidated variable interest entities: Cash and cash equivalents 12,062 24,909 Investments 57,044 88,260 Other assets 435 1,844 Total assets $1,140,543 $1,200,094 Liabilities and equity Accounts payable $4,559 $5,574 Accrued compensation and benefits 24,190 32,525 Accrued members' distributions 15,723 11,464 Accrued dividend 15,049 16,780 Debt 213,533 197,939 Payable to related parties pursuant to tax receivable agreement 174,702 173,818 Lease liabilities 78,817 80,994 Other liabilities (includes $14,228 and $14,149 at fair value) 32,856 33,376 Liabilities of consolidated variable interest entities: Other liabilities 6,922 5,924 Total liabilities 566,351 558,394 Total equity 574,192 641,700 Total liabilities and equity $1,140,543 $1,200,094
19Hamilton Lane l Global Leader in the Private Markets Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended June 30, (Dollars in thousands) 2022 2023 Operating activities Net income $56,126 $51,344 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,764 1,873 Change in deferred income taxes (1,043) 4,654 Change in payable to related parties pursuant to tax receivable agreement — (883) Equity-based compensation 1,897 2,846 Equity in loss (income) of investees 625 (11,866) Net realized loss on sale of investments — 288 Fair value adjustment of investments (4,344) (757) Proceeds received from partnerships 3,343 6,060 Non-cash lease expense 1,374 2,062 Other 14 36 Changes in operating assets and liabilities 3,880 5,691 Consolidated variable interest entities related (2,684) (3,375) Net cash provided by operating activities $60,952 $57,973 Investing activities Purchase of furniture, fixtures and equipment $(1,707) $(3,385) Cash paid for acquisition of business (1,500) — Purchase of investments (20,236) (1,177) Proceeds from sale of investments — 1,343 Proceeds from sale of intangible assets — 876 Distributions received from partnerships 2,227 1,676 Contributions to partnerships (35,237) (22,686) Purchase of investments — (16,369) Net cash used in investing activities $(56,453) $(39,722) Financing activities Borrowings of debt $25,000 $— Repayments of debt (457) (625) Draw-down on revolver 25,000 10,000 Repayment of revolver — (25,000) Repurchase of Class A shares for employee tax withholding — (108) Proceeds received from issuance of shares under Employee Share Purchase Plan 485 551 Dividends paid (12,947) (15,049) Members' distributions paid (30,485) (18,423) Consolidated variable interest entities related (100) 43,820 Net cash provided by (used in) financing activities $6,496 $(4,834) Increase in cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities 10,995 13,417 Cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at beginning of the period 76,197 116,552 Cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at end of the period $87,192 $129,969
20Hamilton Lane l Global Leader in the Private Markets Non-GAAP Reconciliation Reconciliation from Net Income Year Ended March 31, Three Months Ended (Dollars in thousands except share and per share amounts) 2018 2023 June 30 2022 March 31, 2023 June 30, 2023 Net income attributable to Hamilton Lane Incorporated $17,341 $109,120 $33,484 $31,086 $30,998 Income attributable to non-controlling interests in general partnerships 2,448 986 308 213 1 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 86,508 71,027 20,168 19,701 19,133 Income attributable to non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. — 5,617 2,166 — — Income attributable to non-controlling interests in consolidated funds — 435 — 435 1,212 Incentive fees (49,003) (156,879) (49,563) (17,096) (19,630) Incentive fee related compensation1 3,874 74,374 23,541 8,120 9,324 Consolidated VIE related general, administrative and other expenses — 846 276 — 233 Revenue related to consolidated funds — 61 — 61 147 Non-operating income related compensation — 367 — 313 59 Interest income (528) (5,114) (168) (1,285) (2,677) Interest expense 5,989 8,617 1,495 2,590 2,896 Income tax expense 33,333 55,425 11,488 16,659 16,400 Equity in income of investees (17,102) (6,543) (107) (13,006) (11,998) Contingent compensation related to acquisition 3,399 — — — — Non-operating (income) expense (5,036) 470 (6,309) (7,076) (1,026) Fee Related Earnings $81,223 $158,809 $36,779 $40,715 $45,072 Depreciation and amortization 1,891 7,442 1,764 1,842 1,873 Equity-based compensation 5,544 9,950 1,897 3,134 2,846 Incentive fees 49,003 156,879 49,563 17,096 19,630 Incentive fees attributable to non-controlling interests (1,729) (302) (3) — — Incentive fee related compensation1 (3,874) (74,374) (23,541) (8,120) (9,324) Non-operating income related compensation — (367) — (313) (59) Interest income 528 1,789 168 950 937 Adjusted EBITDA $132,586 $259,826 $66,627 $55,304 $60,975 Non-GAAP earnings per share reconciliation Net income attributable to Hamilton Lane Incorporated $33,484 $31,086 $30,998 Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. 20,168 19,701 19,133 Income tax expense 11,488 16,659 16,400 Adjusted pre-tax net income 65,140 67,446 66,531 Adjusted income taxes2 (15,568) (15,884) (15,701) Adjusted net income $49,572 $51,562 $50,830 Adjusted shares outstanding 53,706,941 53,785,158 53,855,751 Non-GAAP earnings per share $0.92 $0.96 $0.94 1 Incentive fee related compensation includes incentive fee compensation expense and bonus related to carried interest that is classified as base compensation. 2 Represents corporate income taxes at our estimated statutory tax rate of 23.6% and 23.9% for the three month periods ended June 30, 2023 and 2022, respectively, applied to adjusted pre-tax net income. The 23.6% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.6%. The 23.9% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.9%.
21Hamilton Lane l Global Leader in the Private Markets Terms Adjusted EBITDA is an internal measure of profitability. We believe Adjusted EBITDA is useful to investors because it enables them to better evaluate the performance of our core business across reporting periods. Adjusted EBITDA represents net income excluding (a) interest expense on our outstanding debt, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based compensation expense, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance. Fee Related Earnings ("FRE") is used to highlight earnings from recurring management fees. FRE represents net income excluding (a) incentive fees and related compensation, (b) interest income and expense, (c) income tax expense, (d) equity in income of investees, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business. FRE is presented before income taxes. Non-GAAP earnings per share measures our per-share earnings excluding certain significant items that we believe are not indicative of our core performance and assuming all Class B and Class C units in HLA were exchanged for Class A common stock in HLI. Non-GAAP earnings per share is calculated as adjusted net income divided by adjusted shares outstanding. Adjusted net income is income before taxes fully taxed at our estimated statutory tax rate and excludes any impact of changes in carrying amount of our redeemable non-controlling interest. Adjusted shares outstanding for the three months ended June 30, 2022 and 2023 and March 31, 2023 are equal to weighted-average shares of Class A common stock outstanding - diluted. We believe adjusted net income and non-GAAP earnings per share are useful to investors because they enable them to better evaluate total and per-share operating performance across reporting periods. Our assets under management ("AUM"), as presented in these materials, comprise the assets associated with our customized separate accounts and specialized funds. AUM does not include the assets associated with our distribution management services. We classify assets as AUM if we have full discretion over the investment decisions in an account. We calculate our AUM as the sum of: (1) the net asset value of our clients' and funds' underlying investments; (2) the unfunded commitments to our clients' and funds' underlying investments; and (3) the amounts authorized for us to invest on behalf of our clients and fund investors but not committed to an underlying investment. Management fee revenue is based on a variety of factors and is not linearly correlated with AUM. However, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business. Our assets under advisement ("AUA") comprise assets from clients for which we do not have full discretion to make investments in their account. We generally earn revenue on a fixed fee basis on our AUA client accounts for services including asset allocation, strategic planning, development of investment policies and guidelines, screening and recommending investments, monitoring and reporting on investments and investment manager review and due diligence. Advisory fees vary by client based on the amount of annual commitments, services provided and other factors. Since we earn annual fixed fees from the majority of our AUA clients, the growth in AUA from existing accounts does not have a material impact on our revenues. However, we view AUA growth as a meaningful benefit in terms of the amount of data we are able to collect and the degree of influence we have with fund managers. Fee-earning assets under management (Fee-earning "AUM" or "FEAUM") is a metric we use to measure the assets from which we earn management fees. Our fee-earning AUM comprise assets in our customized separate accounts and specialized funds from which we derive management fees that are generally derived from applying a certain percentage to the appropriate fee base. We classify customized separate account revenue as management fees if the client is charged an asset-based fee, which includes the majority of our discretionary AUM accounts but also includes certain non-discretionary AUA accounts. Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and net asset value of our customized separate accounts and specialized funds depending on the fee terms. The vast majority of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation. Therefore, revenues and fee-earning AUM are not significantly affected by changes in market value. Our calculations of fee-earning AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers. Our definition of fee-earning AUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage. Hamilton Lane Incorporated (or "HLI"), a Delaware corporation, was formed for the purpose of completing an initial public offering ("IPO") and related transactions in order to carry on the business of Hamilton Lane Advisors, L.L.C. ("HLA") as a publicly-traded entity. As of the closing of our IPO on March 6, 2017, HLI became the sole managing member of HLA.
22Hamilton Lane l Global Leader in the Private Markets Disclosures Some of the statements in this presentation may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 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 exposure and that of our clients and investors to the credit risks of financial institutions at which we and they hold accounts; 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 introducing new types of investment structures, products or services or entering into strategic partnerships; our ability to manage redemption or repurchase rights in certain of our funds; our ability to manage, identify and anticipate risks we face; our ability to manage the effects of events outside of our control; and our ability to receive distributions from Hamilton Lane Advisors, L.L.C. 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 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, 2023 and in our subsequent reports filed from time to time with the Securities and Exchange Commission. The forward-looking statements included in this presentation are made only as of the date presented. 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. Values appearing in this presentation that are whole numbers are rounded approximations. As of August 1, 2023
