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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 December 31, 2023
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)

| Delaware |  |  |  |  | 26-2482738 |
| (State or other jurisdiction of incorporation or organization) |  |  |  |  | (I.R.S. Employer Identification No.) |
| 110 Washington Street, | Suite 1300 |  |  |  |  |  |
| Conshohocken, | PA |  |  |  |  | 19428 |
| (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 class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share |  | HLNE |  | The 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 filer | x | 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 February 2, 2024, there were 38,596,292 shares of the registrant’s Class A common stock, par value $0.001, and 15,409,507 shares of the registrant’s Class B common stock, par value $0.001, outstanding.

Table of Contents

| Page
PART I - FINANCIAL INFORMATION |
Item 1. Financial Statements | 3
Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023 | 3
Condensed Consolidated Statements of Income for the three and nine months ended December 31, 2023 and 2022 | 4
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended December 31, 2023 and 2022 | 5
Condensed Consolidated Statements of Cash Flows for the nine m onths ended December 31, 2023 and 2022 | 7
Notes to Condensed Consolidated Financial Statements | 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 46
Item 4. Controls and Procedures | 47
PART II - OTHER INFORMATION |
Item 1. Legal Proceedings | 48
Item 1A. Risk Factors | 48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 48
Item 5. Other Information | 48
Item 6. Exhibits | 49
Signatures | 50

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. Please note that nothing in this Form 10-Q represents an offer to sell, or a solicitation of an offer to purchase, interests in any of Hamilton Lane’s products.

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 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 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 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 (our “2023 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)

| December 31, |  | March 31,
| 2023 |  | 2023
Assets |  |  |
Cash and cash equivalents | $ | 164,450 |  |  | $ | 99,686 |
Restricted cash | 4,985 |  |  | 4,804 |
Fees receivable | 67,751 |  |  | 47,140 |
Prepaid expenses | 9,418 |  |  | 9,817 |
Due from related parties | 9,969 |  |  | 7,186 |
Furniture, fixtures and equipment, net | 33,389 |  |  | 28,425 |
Lease right-of-use assets, net | 63,432 |  |  | 62,327 |
Investments | 587,771 |  |  | 530,921 |
Deferred income taxes | 225,922 |  |  | 233,912 |
Other assets | 25,830 |  |  | 46,784 |
Assets of consolidated variable interest entities: |  |  |
Cash and cash equivalents | — |  |  | 12,062 |
Investments | 15,855 |  |  | 57,044 |
Other assets | 52 |  |  | 435 |
Total assets | $ | 1,208,824 |  |  | $ | 1,140,543 |
Liabilities and equity |  |  |
Accounts payable | $ | 3,313 |  |  | $ | 4,559 |
Accrued compensation and benefits | 58,048 |  |  | 24,190 |
Accrued members’ distributions | 21,216 |  |  | 15,723 |
Accrued dividend | 16,793 |  |  | 15,049 |
Debt | 196,752 |  |  | 213,533 |
Payable to related parties pursuant to tax receivable agreement | 173,818 |  |  | 174,702 |
Lease liabilities | 80,373 |  |  | 78,817 |
Other liabilities (includes $13,123 and $14,228 at fair value) | 34,403 |  |  | 32,856 |
Liabilities of consolidated variable interest entities: |  |  |
Other liabilities | 2 |  |  | 6,922 |
Total liabilities | 584,718 |  |  | 566,351 |
Commitments and contingencies (Note 15) |  |  |
Preferred stock, $0.001 par value, 10,000,000 authorized, none issued | — |  |  | — |
Class A common stock, $0.001 par value, 300,000,000 authorized; 38,604,787 and 38,611,919 issued and outstanding as of December 31, 2023 and March 31, 2023, respectively | 39 |  |  | 39
Class B common stock, $0.001 par value, 50,000,000 authorized; 15,409,507 issued and outstanding as of each of December 31, 2023 and March 31, 2023 | 15 |  |  | 15 |
Additional paid-in-capital | 181,929 |  |  | 171,567 |
Retained earnings | 285,964 |  |  | 243,823 |
Total Hamilton Lane Incorporated stockholders’ equity | 467,947 |  |  | 415,444 |
Non-controlling interests in general partnerships | 4,772 |  |  | 3,877 |
Non-controlling interests in Hamilton Lane Advisors, L.L.C. | 151,387 |  |  | 135,702 |
Non-controlling interests in consolidated funds | — |  |  | 19,169 |
Total equity | 624,106 |  |  | 574,192 |
Total liabilities and equity | $ | 1,208,824 |  |  | $ | 1,140,543 |

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 December 31, |  | Nine Months Ended December 31, |
| 2023 |  | 2022 |  | 2023 |  | 2022 |
Revenues |  |  |  |  |  |  |  |
Management and advisory fees | $ | 113,641 |  |  | $ | 97,355 |  |  | $ | 328,232 |  |  | $ | 276,182 |  |
Incentive fees | 11,623 |  |  | 24,075 |  |  | 48,945 |  |  | 132,835 |  |
Consolidated variable interest entities related: |  |  |  |  |  |  |  |
Incentive fees | — |  |  | 5,644 |  |  | — |  |  | 6,948 |
Total revenues | 125,264 |  |  | 127,074 |  |  | 377,177 |  |  | 415,965 |  |
Expenses |  |  |  |  |  |  |  |
Compensation and benefits | 49,706 |  |  | 45,676 |  |  | 139,738 |  |  | 158,235 |  |
General, administrative and other | 24,152 |  |  | 22,717 |  |  | 74,908 |  |  | 66,066 |  |
Consolidated variable interest entities related: |  |  |  |  |  |  |  |
General, administrative and other | 12 |  | 309 |  | 600 |  |  | 941 |  |
Total expenses | 73,870 |  |  | 68,702 |  |  | 215,246 |  |  | 225,242 |  |
Other income (expense) |  |  |  |  |  |  |  |
Equity in (loss) income of investees | (46) |  |  | 650 |  |  | 20,071 |  |  | (7,493) |  |
Interest expense | (2,748) |  |  | (2,419) |  |  | (8,381) |  |  | (6,027) |  |
Interest income | 1,500 |  |  | 442 |  |  | 3,536 |  |  | 839 |  |
Non-operating loss | (8) |  |  | (27,960) |  |  | (989) |  |  | (11,878) |  |
Consolidated variable interest entities related: |  |  |  |  |  |  |  |
Equity in income of investees | 240 |  |  | 389 |  |  | 660 |  |  | 1,030 |  |
Unrealized gain | — |  |  | 2,087 |  |  | 3,034 |  |  | 4,333 |  |
Interest expense | — |  |  | — |  |  | (6) |  |  | — |  |
Interest income | — |  | 2,111 |  |  | 4,581 |  |  | 2,989 |  |
Total other income (expense) | (1,062) |  |  | (24,700) |  |  | 22,506 |  |  | (16,207) |  |
Income before income taxes | 50,332 |  |  | 33,672 |  |  | 184,437 |  |  | 174,516 |  |
Income tax expense | 15,800 |  |  | 11,788 |  |  | 34,055 |  |  | 38,766 |  |
Net income | 34,532 |  |  | 21,884 |  |  | 150,382 |  |  | 135,750 |  |
Less: Income attributable to non-controlling interests in general partnerships | 82 |  |  | 422 |  |  | 171 |  |  | 773 |  |
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 14,944 |  |  | 9,146 |  |  | 52,733 |  |  | 51,326 |  |
Less: Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. | — |  |  | 2,647 |  |  | — |  |  | 5,617 |  |
Less: Income attributable to non-controlling interests in consolidated funds | — |  |  | — |  |  | 4,980 |  |  | — |  |
Net income attributable to Hamilton Lane Incorporated | $ | 19,506 |  |  | $ | 9,669 |  |  | $ | 92,498 |  |  | $ | 78,034 |  |
Basic earnings per share of Class A common stock | $ | 0.52 |  |  | $ | 0.32 |  |  | $ | 2.45 |  |  | $ | 2.21 |  |
Diluted earnings per share of Class A common stock | $ | 0.51 |  |  | $ | 0.31 |  |  | $ | 2.43 |  |  | $ | 2.19 |  |
Dividends declared per share of Class A common stock | $ | 0.45 |  |  | $ | 0.40 |  |  | $ | 1.34 |  |  | $ | 1.20 |  |

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 Stock |  | Class B Common Stock |  | Additional Paid in Capital |  | Retained Earnings |  | Non-Controlling Interests in General Partnerships |  | Non-Controlling Interests in Hamilton Lane Advisors, L.L.C. |  | Non-Controlling Interests in Consolidated Funds |  | Total Equity
Balance at March 31, 2023 | $ | 39 |  |  | $ | 15 |  |  | $ | 171,567 |  |  | $ | 243,823 |  |  | $ | 3,877 |  |  | $ | 135,702 |  |  | $ | 19,169 |  |  | $ | 574,192 |
Net income | — |  |  | — |  |  | — |  |  | 92,498 |  |  | 171 |  |  | 52,733 |  |  | 4,980 |  |  | 150,382 |
Equity-based compensation | — |  |  | — |  |  | 6,468 |  |  | — |  |  | — |  |  | 2,759 |  |  | — |  |  | 9,227 |
Repurchase of Class A shares for employee tax withholding | — |  |  | — |  |  | (189) |  |  | — |  |  | — |  |  | (80) |  |  | — |  |  | (269) |
Dividends declared | — |  |  | — |  |  | — |  |  | (50,357) |  |  | — |  |  | — |  |  | — |  |  | (50,357) |
Capital contributions from non-controlling interests, net | — |  |  | — |  |  | — |  |  | — |  |  | 724 |  |  | — |  |  | 142,924 |  |  | 143,648 |
Member distributions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (37,310) |  |  | — |  |  | (37,310) |
Employee Share Purchase Plan share issuance | — |  |  | — |  |  | 1,167 |  |  | — |  |  | — |  |  | 499 |  |  | — |  |  | 1,666 |
Deconsolidation of consolidated fund | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (167,073) |  |  | (167,073) |
Equity reallocation between controlling and non-controlling interests | — |  |  | — |  |  | 2,916 |  |  | — |  |  | — |  |  | (2,916) |  |  | — |  |  | — |
Balance at December 31, 2023 | $ | 39 |  |  | $ | 15 |  |  | $ | 181,929 |  |  | $ | 285,964 |  |  | $ | 4,772 |  |  | $ | 151,387 |  |  | $ | — |  |  | $ | 624,106 |

| Class A Common Stock |  | Class B Common Stock |  | Additional Paid in Capital |  | Retained Earnings |  | Non-Controlling Interests in General Partnerships |  | Non-Controlling Interests in Hamilton Lane Advisors, L.L.C. |  | Non-Controlling Interests in Consolidated Funds |  | Total Equity
Balance at March 31, 2022 | $ | 37 |  |  | $ | 16 |  |  | $ | 161,676 |  |  | $ | 185,149 |  |  | $ | 3,423 |  |  | $ | 111,185 |  |  | $ | — |  |  | $ | 461,486 |
Net income | — |  |  | — |  |  | — |  |  | 78,034 |  |  | 773 |  |  | 51,326 |  |  | — |  |  | 130,133 |
Equity-based compensation | — |  |  | — |  |  | 4,702 |  |  | — |  |  | — |  |  | 2,114 |  |  | — |  |  | 6,816 |
Repurchase of Class A shares for employee tax withholding | — |  |  | — |  |  | (112) |  |  | — |  |  | — |  |  | (50) |  |  | — |  |  | (162) |
Dividends declared | — |  |  | — |  |  | — |  |  | (44,413) |  |  | — |  |  | — |  |  | — |  |  | (44,413) |
Capital distributions to non-controlling interests, net | — |  |  | — |  |  | — |  |  | — |  |  | (543) |  |  | — |  |  | — |  |  | (543) |
Member distributions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (37,871) |  |  | — |  |  | (37,871) |
Employee Share Purchase Plan share issuance | 1 |  |  | — |  |  | 993 |  |  | — |  |  | — |  |  | 447 |  |  | — |  |  | 1,441 |
Adjustment of redeemable non-controlling interest to redemption value | — |  |  | — |  |  | — |  |  | 9,016 |  |  | — |  |  | 4,055 |  |  | — |  |  | 13,071 |
Equity reallocation between controlling and non-controlling interests | — |  |  | — |  |  | (438) |  |  | — |  |  | — |  |  | 438 |  |  | — |  |  | — |
Balance at December 31, 2022 | $ | 38 |  |  | $ | 16 |  |  | $ | 166,821 |  |  | $ | 227,786 |  |  | $ | 3,653 |  |  | $ | 131,644 |  |  | $ | — |  |  | $ | 529,958 |

See accompanying notes to the condensed consolidated financial statements.
5

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

| Class A Common Stock |  | Class B Common Stock |  | Additional Paid in Capital |  | Retained Earnings |  | Non-Controlling Interests in General Partnerships |  | Non-Controlling Interests in Hamilton Lane Advisors, L.L.C. |  | Non-Controlling Interests in Consolidated Funds |  | Total Equity
Balance at September 30, 2023 | $ | 39 |  |  | $ | 15 |  |  | $ | 179,215 |  |  | $ | 283,251 |  |  | $ | 4,408 |  |  | $ | 147,567 |  |  | $ | 167,073 |  |  | $ | 781,568 |
Net income | — |  |  | — |  |  | — |  |  | 19,506 |  |  | 82 |  |  | 14,944 |  |  | — |  |  | 34,532 |
Equity-based compensation | — |  |  | — |  |  | 2,287 |  |  | — |  |  | — |  |  | 977 |  |  | — |  |  | 3,264 |
Repurchase of Class A shares for employee tax withholding | — |  |  | — |  |  | (113) |  |  | — |  |  | — |  |  | (48) |  |  | — |  |  | (161) |
Dividends declared | — |  |  | — |  |  | — |  |  | (16,793) |  |  | — |  |  | — |  |  | — |  |  | (16,793) |
Capital contributions to non-controlling interests, net | — |  |  | — |  |  | — |  |  | — |  |  | 282 |  |  | — |  |  | — |  |  | 282 |
Member distributions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (12,098) |  |  | — |  |  | (12,098) |
Employee Share Purchase Plan share issuance | — |  |  | — |  |  | 410 |  |  | — |  |  | — |  |  | 175 |  |  | — |  |  | 585 |
Deconsolidation of consolidated fund | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (167,073) |  |  | (167,073) |
Equity reallocation between controlling and non-controlling interests | — |  |  | — |  |  | 130 |  |  | — |  |  | — |  |  | (130) |  |  | — |  |  | — |
Balance at December 31, 2023 | $ | 39 |  |  | $ | 15 |  |  | $ | 181,929 |  |  | $ | 285,964 |  |  | $ | 4,772 |  |  | $ | 151,387 |  |  | $ | — |  |  | $ | 624,106 |

| Class A Common Stock |  | Class B Common Stock |  | Additional Paid in Capital |  | Retained Earnings |  | Non-Controlling Interests in General Partnerships |  | Non-Controlling Interests in Hamilton Lane Advisors, L.L.C. |  | Non-Controlling Interests in Consolidated Funds |  | Total Equity
Balance at September 30, 2022 | $ | 38 |  |  | $ | 16 |  |  | $ | 164,763 |  |  | $ | 225,957 |  |  | $ | 3,820 |  |  | $ | 130,384 |  |  | $ | — |  |  | $ | 524,978 |
Net income | — |  |  | — |  |  | — |  |  | 9,669 |  |  | 422 |  |  | 9,146 |  |  | — |  |  | 19,237 |
Equity-based compensation | — |  |  | — |  |  | 1,956 |  |  | — |  |  | — |  |  | 879 |  |  | — |  |  | 2,835 |
Repurchase of Class A shares for employee tax withholding | — |  |  | — |  |  | (48) |  |  | — |  |  | — |  |  | (22) |  |  | — |  |  | (70) |
Dividends declared | — |  |  | — |  |  | — |  |  | (14,810) |  |  | — |  |  | — |  |  | — |  |  | (14,810) |
Capital distribution to non-controlling interests, net | — |  |  | — |  |  | — |  |  | — |  |  | (589) |  |  | — |  |  | — |  |  | (589) |
Member distributions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (12,164) |  |  | — |  |  | (12,164) |
Employee Share Purchase Plan share issuance | — |  |  | — |  |  | 303 |  |  | — |  |  | — |  |  | 136 |  |  | — |  |  | 439 |
Equity reallocation between controlling and non-controlling interests | — |  |  | — |  |  | (153) |  |  | — |  |  | — |  |  | 153 |  |  | — |  |  | — |
Adjustment of redeemable non-controlling interest to redemption value | — |  |  | — |  |  | — |  |  | 6,970 |  |  | — |  |  | 3,132 |  |  | — |  |  | 10,102 |
Balance at December 31, 2022 | $ | 38 |  |  | $ | 16 |  |  | $ | 166,821 |  |  | $ | 227,786 |  |  | $ | 3,653 |  |  | $ | 131,644 |  |  | $ | — |  |  | $ | 529,958 |

See accompanying notes to the condensed consolidated financial statements.
6

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

| Nine Months Ended December 31,
| 2023 |  | 2022
Operating activities: |  |  |
Net income | $ | 150,382 |  |  | $ | 135,750 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Depreciation and amortization | 5,774 |  |  | 5,600 |
Change in deferred income taxes | 7,990 |  |  | 14,892 |
Change in payable to related parties pursuant to tax receivable agreement | (884) |  |  | (1,105) |
Equity-based compensation | 9,227 |  |  | 6,816 |
Equity in (income) loss of investees | (20,071) |  |  | 7,493 |
Net realized loss (gain) on sale of investments | 288 |  |  | (9,783) |
Fair value adjustment of other investments | 45 |  |  | (18,578) |
Proceeds received from partnerships | 22,160 |  |  | 11,877 |
Non-cash lease expense | 6,796 |  |  | 5,370 |
Gain on sale of intangible asset | — |  |  | 2,771 |
Impairment of other investment | — |  |  | 43,289 |
Other | 511 |  |  | (2,864) |
Changes in operating assets and liabilities: |  |  |
Fees receivable | (20,611) |  |  | (205) |
Prepaid expenses | 399 |  |  | (220) |
Due from related parties | (2,346) |  |  | (5,911) |
Other assets | 17,114 |  |  | (5,309) |
Accounts payable | (1,246) |  |  | (782) |
Accrued compensation and benefits | 33,858 |  |  | 45,644 |
Lease liability | (6,345) |  |  | (5,581) |
Other liabilities | 319 |  |  | (11,548) |
Consolidated variable interest entities related: |  |  |
Change in warrant liability measured at fair value | — |  |  | (2,883) |
Cash relinquished with deconsolidation of fund | (101,712) |  |  | — |
Net unrealized gain on investment | (1,406) |  |  | — |
Equity in income of investees | (660) |  |  | (1,030) |
Other assets and liabilities | (442) |  |  | (332) |
Net cash provided by operating activities | 99,140 |  |  | 213,371 |
Investing activities: |  |  |
Purchase of furniture, fixtures and equipment | (9,463) |  |  | (3,261) |
Cash paid for acquisition of business | — |  |  | (1,500) |
Loans to investees | — |  |  | (2,535) |
Purchase of investments | (6,352) |  |  | (34,125) |
Proceeds from sale of investments | 1,343 |  |  | 10,000 |
Distributions from investments | — |  |  | 1,406 |
Proceeds from sale of intangible assets | 2,562 |  |  | — |
Distributions received from Partnerships | 10,730 |  |  | 15,990 |
Contributions to Partnerships | (34,985) |  |  | (63,364) |
Consolidated variable interest entities related: |  |  |
(Purchase) Sale of investments | (57,832) |  |  | 278,954 |
Net cash (used in) provided by investing activities | (93,997) |  |  | 201,565 |

7

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

| Nine Months Ended December 31,
| 2023 |  | 2022
Financing activities: |  |  |
Borrowings of debt | — |  |  | 31,682 |
Repayments of debt | (1,875) |  |  | (3,873) |
Draw-down on revolver | 10,000 |  |  | 25,000 |
Repayment of revolver | (25,000) |  |  | (25,000) |
Repurchase of Class A shares for employee tax withholding | (269) |  |  | (162) |
Proceeds received from issuance of shares under Employee Share Purchase Plan | 1,666 |  |  | 1,441 |
Dividends paid | (48,613) |  |  | (42,550) |
Members’ distributions paid | (31,817) |  |  | (45,828) |
Consolidated variable interest entities related: |  |  |
Contributions from non-controlling interests in general partnerships | 769 |  |  | 687 |
Distributions to non-controlling interests in general partnerships | (45) |  |  | (1,230) |
Redemption of Class A common shares of Hamilton Lane Alliance Holdings I, Inc. | — |  |  | (278,205) |
Contributions from non-controlling interests in consolidated funds | 142,924 |  |  | — |
Net cash provided by (used in) financing activities | 47,740 |  |  | (338,038) |
Increase in cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities | 52,883 |  |  | 76,898 |
Cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at beginning of the period | 116,552 |  |  | 76,197 |
Cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities at end of the period | $ | 169,435 |  |  | $ | 153,095 |

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 December 31,
| 2023 |  | 2022
Cash and cash equivalents | $ | 164,450 |  |  | $ | 146,070 |
Restricted cash | 4,985 |  |  | 3,116
Cash and cash equivalents held at consolidated variable interest entities | — |  |  | 3,909 |
Total cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities | $ | 169,435 |  |  | $ | 153,095 |

See accompanying notes to the condensed consolidated financial statements.
8

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
1. Organization
Hamilton Lane Incorporated (“HLI”) was incorporated in the State of Delaware on December 31, 2007 and, following its 2017 initial public offering, 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, payables 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 December 31, 2023 and March 31, 2023, HLI held approximately 70.1% 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 and 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 and nine months ended December 31, 2023 are not necessarily indicative of the results that may be expected for the year ending March 31, 2024. 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, 2023.
9

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 October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06 - Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this ASU incorporate 14 of the 27 disclosure requirements published in SEC Release No. 33-10532 - Disclosure Update and Simplification into various topics within the Accounting Standards Codification (“ASC”). The amendments represent clarifications to, or technical corrections of, current requirements. For SEC registrants, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. Early adoption is prohibited. The amendments will be applied retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact of the new requirements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. This ASU enhances segment disclosures primarily around significant segment expenses for both interim and annual periods. The amendments in this ASU are to be applied retrospectively and are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years after December 15, 2024. Early adoption is permitted. The Company is currently assessing the impact of the new requirements.
10

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on a prospective basis, with early adoption permitted. The Company is evaluating the impact of adopting this ASU.
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:

| Three Months Ended December 31, |  | Nine Months Ended December 31,
Management and advisory fees | 2023 |  | 2022 |  | 2023 |  | 2022
Specialized funds | $ | 64,871 |  |  | $ | 53,299 |  |  | $ | 184,972 |  |  | $ | 144,099 |
Customized separate accounts | 32,943 |  |  | 29,571 |  |  | 96,702 |  |  | 87,329 |
Advisory | 6,085 |  |  | 6,613 |  |  | 18,392 |  |  | 19,073 |
Reporting and other | 6,479 |  |  | 6,720 |  |  | 18,298 |  |  | 19,170 |
Distribution management | 1,512 |  |  | 596 |  |  | 3,979 |  |  | 1,863 |
Fund reimbursement revenue | 1,751 |  |  | 556 |  |  | 5,889 |  |  | 4,648 |
Total management and advisory fees | $ | 113,641 |  |  | $ | 97,355 |  |  | $ | 328,232 |  |  | $ | 276,182 |

| Three Months Ended December 31, |  | Nine Months Ended December 31,
Incentive fees | 2023 |  | 2022 |  | 2023 |  | 2022
Specialized funds | $ | 10,542 |  |  | $ | 8,679 |  |  | $ | 43,204 |  |  | $ | 102,815 |
Customized separate accounts | 1,081 |  |  | 15,396 |  |  | 5,741 |  |  | 30,020 |
Consolidated variable interest entities related: |  |  |  |  |  |  |
Specialized funds | — |  |  | 5,644 |  |  | — |  |  | 6,948 |
Total incentive fees | $ | 11,623 |  |  | $ | 29,719 |  |  | $ | 48,945 |  |  | $ | 139,783 |

4. Investments
Investments consist of the following:

| December 31, |  | March 31,
| 2023 |  | 2023
Equity method investments in Partnerships | $ | 391,884 |  |  | $ | 340,603 |
Other equity method investments | 1,795 |  |  | — |
Fair value investments | 18,570 |  |  | 21,586
Investments valued under the measurement alternative | 175,522 |  |  | 168,732
Total Investments | $ | 587,771 |  |  | $ | 530,921 |

11

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
Investments of consolidated variable interest entities (“VIEs”) consist of the following:

| December 31, |  | March 31,
| 2023 |  | 2023
Equity method investments in Partnerships | $ | 15,855 |  |  | $ | 12,292 |
Fair value investments | — |  |  | 44,752 |
Total Investments of Consolidated VIEs | $ | 15,855 |  |  | $ | 57,044 |

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, representing a general partner interest. The Company’s other equity method investments represent its ownership in a technology company to develop an AI-powered investment assistant for private markets.
Fair value investments
The Company’s fair value investments represent a publicly traded security and investments in private equity funds, 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 amortized cost of the assets held as collateral was $6,430 and $7,429 as of December 31, 2023 and March 31, 2023, respectively. The direct credit investments were debt securities classified as trading securities. Fair value investments are measured at fair value with unrealized gains and losses recorded in non-operating loss in the Condensed Consolidated Statements 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 fair value 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 gain of $637 and a loss of $230 on fair value investments held as collateral during the three and nine months ended December 31, 2023, respectively, and a gain of $821 and $915 during the three and nine months ended December 31, 2022, respectively, that are recorded in non-operating (loss) income. The Company recognized a gain of $637 and a loss of $230 on the secured financing liability during the three and nine months ended December 31, 2023, respectively, and a loss of $821 and $915 during the three and nine months ended December 31, 2022, respectively, that are recorded in non-operating (loss) income in the Condensed Consolidated Statements of Income.

| 12 |

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
Investments valued under the measurement alternative

| Three Months Ended December 31, |  | Nine Months Ended December 31,
| 2023 |  | 2022 |  | 2023 |  | 2022
Carrying amount beginning of the period | $ | 175,522 |  |  | $ | 190,023 |  |  | $ | 168,732 |  |  | $ | 156,100 |
Adjustments related to equity investments: |  |  |  |  |  |  |
Purchases | — |  |  | 7,440 |  |  | 6,312 |  |  | 34,676 |
Sales / return of capital | — |  |  | — |  |  | (177) |  |  | — |
Net unrealized gain (loss)1 | — |  |  | (31,631) |  |  | 1,177 |  |  | (24,944) |
Net realized loss | — |  |  | — |  |  | (522) |  |  | — |
Carrying amount, end of period | $ | 175,522 |  |  | $ | 165,832 |  |  | $ | 175,522 |  |  | $ | 165,832 |

(1) Net unrealized gain (loss) consists of fair value adjustments for observable price changes of identical or similar investments.
The following table summarizes the cumulative gross unrealized gains and cumulative gross unrealized losses related to the Company’s investments under the measurement alternative:

| December 31, |  | March 31,
| 2023 |  | 2023
Cumulative gross unrealized gains | $ | 70,235 |  |  | $ | 69,058 |
Cumulative gross unrealized losses | $ | (43,289) |  |  | $ | (43,289) |

5. Fair Value Measurements
The following tables summarize the Company’s financial assets and financial liabilities recorded at fair value by fair value hierarchy level:

| As of December 31, 2023
| Level 1 |  | Level 2 |  | Level 3 |  | NAV(2) |  | Total
Financial assets: |  |  |  |  |  |  |  |  |
Fair value investments | $ | 5,447 |  |  | $ | — |  |  | $ | 13,123 |  |  | $ | — |  |  | $ | 18,570 |
Total financial assets | $ | 5,447 |  |  | $ | — |  |  | $ | 13,123 |  |  | $ | — |  |  | $ | 18,570 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Secured financing(1) | $ | — |  |  | $ | — |  |  | $ | 13,123 |  |  | $ | — |  |  | $ | 13,123 |
Total financial liabilities | $ | — |  |  | $ | — |  |  | $ | 13,123 |  |  | $ | — |  |  | $ | 13,123 |

| 13 |

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

| As of March 31, 2023
| Level 1 |  | Level 2 |  | Level 3 |  | NAV(2) |  | Total
Financial assets: |  |  |  |  |  |  |  |  |
Fair value investments | $ | 7,358 |  |  | $ | — |  |  | $ | 14,228 |  |  | $ | — |  |  | $ | 21,586 |
Consolidated VIEs |  |  |  |  |  |  |  |  |
Fair value investments | — |  |  | — |  |  | 21,163 |  |  | 23,589 |  |  | 44,752 |
Total financial assets | $ | 7,358 |  |  | $ | — |  |  | $ | 35,391 |  |  | $ | 23,589 |  |  | $ | 66,338 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Secured financing(1) | $ | — |  |  | $ | — |  |  | $ | 14,228 |  |  | $ | — |  |  | $ | 14,228 |
Total financial liabilities | $ | — |  |  | $ | — |  |  | $ | 14,228 |  |  | $ | — |  |  | $ | 14,228 |

(1) Secured financing is recorded within other liabilities in the Condensed Consolidated Balance Sheets.
(2) Investments are recorded at estimated fair value based upon the net asset value of the fund utilizing the practical expedient under ASC 820, “Fair Value Measurement.” The fair value amounts presented in this column are intended to permit reconciliation of the fair value hierarchy to the amounts presented in Note 4.
The following is a reconciliation of other investments for which significant unobservable inputs (Level 3) were used in determining fair value:

| Private equity funds |  | Direct credit investments |  | Direct equity investments |  |  |  | Total other investments
Balance as of September 30, 2023 | $ | 5,739 |  |  | $ | — |  |  | $ | 6,634 |  |  |  |  | $ | 12,373 |
Contributions | 152 |  |  | — |  |  | — |  |  |  |  | 152 |
Distributions | (39) |  |  | — |  |  | — |  |  |  |  | (39) |
Net (loss) gain | (11) |  |  | — |  |  | 648 |  |  |  |  | 637 |
Balance as of December 31, 2023 | $ | 5,841 |  |  | $ | — |  |  | $ | 7,282 |  |  |  |  | $ | 13,123 |
Balance as of March 31, 2023 | $ | 6,664 |  |  | $ | 790 |  |  | $ | 6,774 |  |  |  |  | $ | 14,228 |
Contributions | 152 |  |  | — |  |  | — |  |  |  |  | 152 |
Distributions | (229) |  |  | (798) |  |  | — |  |  |  |  | (1,027) |
Net (loss) gain | (746) |  |  | 8 |  |  | 508 |  |  |  |  | (230) |
Balance as of December 31, 2023 | $ | 5,841 |  |  | $ | — |  |  | $ | 7,282 |  |  |  |  | $ | 13,123 |

| Private equity funds |  | Direct credit investments |  | Direct equity investments |  | Total other investments
Balance as of September 30, 2022 | $ | 6,252 |  |  | $ | 768 |  |  | $ | 6,060 |  |  | $ | 13,080 |
Contributions | 91 |  |  | — |  |  | — |  |  | 91 |
Distributions | (38) |  |  | — |  |  | — |  |  | (38) |
Net gain | 417 |  |  | 18 |  |  | 386 |  |  | 821 |
Balance as of December 31, 2022 | $ | 6,722 |  |  | $ | 786 |  |  | $ | 6,446 |  |  | $ | 13,954 |

| 14 |

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

| Private equity funds |  | Direct credit investments |  | Direct equity investments |  | Total other investments
Balance as of March 31, 2022 | $ | 7,024 |  |  | $ | 774 |  |  | $ | 6,020 |  |  | $ | 13,818 |
Contributions | 114 |  |  | — |  |  | — |  |  | 114 |
Distributions | (893) |  |  | — |  |  | — |  |  | (893) |
Net gain | 477 |  |  | 12 |  |  | 426 |  |  | 915 |
Balance as of December 31, 2022 | $ | 6,722 |  |  | $ | 786 |  |  | $ | 6,446 |  |  | $ | 13,954 |

The following is a reconciliation of investments held by our consolidated VIEs for which significant
unobservable inputs (Level 3) were used in determining value:

| Direct credit investments
Balance as of September 30, 2023 | $ | 69,381 |
Contributions | — |
Distributions | — |
Net income | — |
Transfer in | — |
Transfer out due to deconsolidation | (69,381) |
Balance as of December 31, 2023 | $ | — |

| Direct credit investments
Balance as of March 31, 2023 | $ | 21,163 |
Contributions | 24,787 |
Distributions | (180) |
Net income | 494 |
Transfer in | 23,117 |
Transfer out due to deconsolidation | (69,381) |
Balance as of December 31, 2023 | $ | — |

| 15 |

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 December 31, 2023:

|  |  |  |  | Significant |  |  |  |  |  |
| Fair |  | Valuation |  | Unobservable |  |  |  |  |  | Weighted
| Value |  | Methodology |  | Inputs |  | Range |  | Average
Other investments: |  |  |  |  |  |  |  |  |  |  |
Private equity funds | $ | 5,841 |  |  | Adjusted net asset value |  | Selected market return |  | 6.7% | - | 7.2% |  | 7.1%
Direct equity investments | $ | 7,282 |  |  | Market approach |  | EBITDA multiple |  | 7.50x | - | 15.50x |  | 12.05x

For the significant unobservable inputs listed in the tables above: (1) a significant increase or decrease in the selected market return would result in a significantly higher or lower fair value measurement, respectively; and (2) a significant increase or decrease in the selected multiple would result in a significantly higher or lower fair value measurement, respectively.
6. Variable Interest Entities
The Company holds variable interests in entities that are considered variable interest entities (“VIEs”) because limited partners lack the ability to remove the general partner or dissolve the entity without cause by simple majority vote (i.e., limited partners do not have substantive “kick out” or “liquidation” rights). The Company’s variable interest in such entities is in the form of direct equity interests in, and/or 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. The Company consolidates 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 that are not wholly-owned by the Company. The assets of the consolidated general partner VIEs represent equity method-investments in direct investment funds and customized separate accounts. The assets may only be used to settle obligations of the respective 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 previously consolidated a Partnership in which it was the primary beneficiary. On October 1, 2023, the Company no longer qualified as the primary beneficiary and deconsolidated all the assets and liabilities of the non-controlling interest in the Partnership from the condensed consolidated financial statements. No gain or loss was recognized as part of the deconsolidation for the three and nine months ended December 31, 2023. Subsequent to the deconsolidation of the Partnership, the Company records its interest in the Partnership using the equity method, within investments in the Condensed Consolidated Balance Sheets.

| 16 |

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
Nonconsolidated Variable Interest Entities
Certain Partnerships that are VIEs are not consolidated because the Company has determined it is not the primary beneficiary based upon the Company’s equity interest percentage in each of the applicable VIEs. As of December 31, 2023, the total remaining unfunded commitments from the Company’s general partner entities to the nonconsolidated VIEs was $157,092. Investor commitments are the primary source of financing for the nonconsolidated VIEs.
The maximum exposure to loss represents the potential loss of assets recognized by the Company relating to these nonconsolidated VIEs. 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.
The carrying value of assets and liabilities recognized in the Condensed Consolidated Balance Sheets related to the Company’s interests in these nonconsolidated VIEs and the Company’s maximum exposure to loss relating to non-consolidated VIEs were as follows:

| December 31, |  | March 31,
| 2023 |  | 2023
Investments | $ | 199,101 |  |  | $ | 199,858 |
Fees receivable | 27,614 |  |  | 15,829 |
Due from related parties | 3,043 |  |  | 1,960 |
Total VIE Assets | 229,758 |  |  | 217,647 |
Less: Non-controlling interests | (1,647) |  |  | (1,665) |
Maximum exposure to loss | $ | 228,111 |  |  | $ | 215,982 |

7. Debt
The Company’s debt consisted of the following:

| As of December 31, 2023 |  | As of March 31, 2023
| Principal Outstanding |  | Carrying Value |  | Interest Rate |  | Principal Outstanding |  | Carrying Value |  | Interest Rate
Term Loan | $ | 97,500 |  |  | $ | 97,140 |  |  | 7.25 | % |  | $ | 99,375 |  |  | $ | 98,969 |  |  | 6.75 | %
2020 Multi-Draw Facility | 100,000 |  |  | 99,612 |  |  | 3.50 | % |  | 100,000 |  |  | 99,564 |  |  | 3.50 | %
Revolver | — |  |  | — |  |  |  |  | 15,000 |  |  | 15,000 |  |  | 6.50 | %
Total Debt | $ | 197,500 |  |  | $ | 196,752 |  |  |  |  | $ | 214,375 |  |  | $ | 213,533 |  |  |

The carrying value of the Company’s outstanding debt as of December 31, 2023 and March 31, 2023 approximated fair value except for the 2020 multi-draw facility, which had an estimated fair value of $88,588 and $88,136 as of December 31, 2023 and March 31, 2023, respectively. 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.

| 17 |

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
8. Equity
The following table shows a rollforward of the Company’s common stock outstanding since March 31, 2023:

| Class A Common Stock |  | Class B Common Stock
March 31, 2023 | 38,611,919 |  |  | 15,409,507 |
Forfeitures | (40,490) |  |  | — |
Shares repurchased for employee tax withholdings | (3,610) |  |  | — |
Awards granted | 15,890 |  |  | — |
Shares issued pursuant to Employee Share Purchase Plan | 21,078 |  |  | — |
December 31, 2023 | 38,604,787 |  |  | 15,409,507 |

9. Equity Based Compensation
Restricted Stock Awards
A summary of restricted stock activity for the nine months ended December 31, 2023 is presented below:

| Total Unvested |  | Weighted- Average Grant-Date Fair Value of Award
March 31, 2023 | 377,668 |  |  | $ | 65.70 |
Granted | 15,890 |  |  | $ | 88.19 |
Vested | (19,119) |  |  | $ | 69.79 |
Forfeited | (14,402) |  |  | $ | 66.77 |
December 31, 2023 | 360,037 |  |  | $ | 66.44 |

As of December 31, 2023, total unrecognized compensation expense related to restricted stock was $17,531.

| 18 |

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
Performance Awards
A summary of performance award activity for the nine months ended December 31, 2023 is presented below:

| Total Unvested |  | Weighted- Average Grant-Date Fair Value of Award
March 31, 2023 | 528,282 |  |  | $ | 29.79 |
Granted | — |  |  | $ | — |
Vested | — |  |  | $ | — |
Forfeited | (26,088) |  |  | $ | 29.79 |
December 31, 2023 | 502,194 |  |  | $ | 29.79 |

As of December 31, 2023, total estimated unrecognized expense related to the unvested performance awards was $11,092 and none of the performance awards have met their market price-based vesting condition.
10. Compensation and Benefits
The Company has recorded the following amounts related to compensation and benefits:

| Three Months Ended December 31, |  | Nine Months Ended December 31,
| 2023 |  | 2022 |  | 2023 |  | 2022
Base compensation and benefits | $ | 43,536 |  |  | $ | 35,473 |  |  | $ | 118,275 |  |  | $ | 116,549 |
Incentive fee compensation | 2,906 |  |  | 7,368 |  |  | 12,236 |  |  | 34,870 |
Equity-based compensation | 3,264 |  |  | 2,835 |  |  | 9,227 |  |  | 6,816 |
Total compensation and benefits | $ | 49,706 |  |  | $ | 45,676 |  |  | $ | 139,738 |  |  | $ | 158,235 |

11. Income Tax
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 31.4% and 18.5% for the three and nine months ended December 31, 2023, respectively, and 35.0% and 22.2% for the three and nine months ended December 31, 2022, 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 to true-up prior fiscal year estimated investment taxable income to actual investment taxable income reported to the Company after the prior fiscal year end.

| 19 |

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
As of December 31, 2023, the Company had no unrecognized tax positions and believes there will be no changes to uncertain tax positions within the next 12 months.
12. 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 December 31, 2023 |  | Three Months Ended December 31, 2022
| Net income attributable to Class A Stockholders |  | Weighted-Average Shares |  | Per share amount |  | Net income attributable to Class A Stockholders |  | Weighted-Average Shares |  | Per share amount
Net income attributable to HLI | $ | 19,506 |  |  |  |  |  |  | $ | 9,669 |  |  |  |  |
Impact of changes in carrying amount of redeemable NCI | — |  |  |  |  |  | 2,095 |  |  |  |  |
Basic EPS of Class A common stock | $ | 19,506 |  |  | 37,736,012 |  |  | $ | 0.52 |  |  | $ | 11,764 |  |  | 37,025,416 |  |  | $ | 0.32 |
Adjustment to net income: |  |  |  |  |  |  |  |  |  |  |
Assumed vesting of employee awards | 25 |  |  |  |  |  |  | 5 |  |  |  |  |
Assumed conversion of Class B and Class C Units | 8,232 |  |  |  |  |  |  | 5,058 |  |  |  |  |
Effect of dilutive securities: |  |  |  |  |  |  |  |  |  |
Assumed vesting of employee awards |  |  | 162,446 |  |  |  |  |  |  | 68,129 |  |  |
Assumed conversion of Class B and Class C Units |  |  | 16,089,097 |  |  |  |  |  | 16,675,834 |  |  |
Diluted EPS of Class A common stock | $ | 27,763 |  |  | 53,987,555 |  |  | $ | 0.51 |  |  | $ | 16,827 |  |  | 53,769,379 |  |  | $ | 0.31 |

| 20 |

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

| Nine Months Ended December 31, 2023 |  | Nine Months Ended December 31, 2022
| Net income attributable to Class A Stockholders |  | Weighted-Average Shares |  | Per share amount |  | Net income attributable to Class A Stockholders |  | Weighted-Average Shares |  | Per share amount
Net income attributable to HLI | $ | 92,498 |  |  |  |  |  |  | $ | 78,034 |  |  |  |  |
Impact of changes in carrying amount of redeemable NCI | — |  |  |  |  |  |  | 3,809 |  |  |  |  |
Basic EPS of Class A common stock | $ | 92,498 |  |  | 37,720,724 |  |  | $ | 2.45 |  |  | $ | 81,843 |  |  | 37,004,657 |  |  | $ | 2.21 |
Adjustment to net income: |  |  |  |  |  |  |  |  |  |  |
Assumed vesting of employee awards | 88 |  |  |  |  |  |  | 34 |  |  |  |  |
Assumed conversion of Class B and Class C Units | 38,456 |  |  |  |  |  |  | 35,968 |  |  |  |  |
Effect of dilutive securities: |  |  |  |  |  |  |  |  |  |  |
Assumed vesting of employee awards |  |  | 122,983 |  |  |  |  |  |  | 53,030 |  |  |
Assumed conversion of Class B and Class C Units |  |  | 16,089,097 |  |  |  |  |  |  | 16,675,834 |  |  |
Diluted EPS of Class A common stock | $ | 131,042 |  |  | 53,932,804 |  |  | $ | 2.43 |  |  | $ | 117,845 |  |  | 53,733,521 |  |  | $ | 2.19 |

The adjustments to net income for dilutive securities are 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. 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.
The calculation of diluted earnings per share excludes 502,336 and 509,641 weighted-average shares underlying performance awards for the three and nine months ended December 31, 2023, respectively, as the market condition was not achieved as of December 31, 2023.
13. Related Party Transactions
The Company considers its employees, directors, and equity method investments to be related parties.
Revenue and Receivables
The Company has investment management agreements with various specialized funds and customized separate accounts that it manages. The Company earned management and advisory fees from Partnerships of $87,482 and $251,502 for the three and nine months ended December 31, 2023, respectively, and $70,929 and $198,973 for the three and nine months ended December 31, 2022, respectively. The Company earned incentive fees from Partnerships of $11,432 and $46,659 for the three and nine months ended December 31, 2023, respectively, and $28,652 and $137,545 for the three and nine months ended December 31, 2022, respectively.
Fees receivable from the Partnerships were $51,760 and $31,684 as of December 31, 2023 and March 31, 2023, respectively, and are included in fees receivable in the Condensed Consolidated Balance Sheets.

| 21 |

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

| Nine Months Ended December 31,
| 2023 |  | 2022
Establishment of lease liability in exchange for right of use asset | $ | 5,455 |  |  | $ | 5,401 |
Deconsolidation of net liabilities held by deconsolidated fund | $ | 6,095 |  |  | $ | — |
Non-cash investing activities: |  |  |
Deconsolidation of investments held by deconsolidated fund | $ | 103,990 |  |  | $ | — |
Transfer of equity method investment in Partnerships from deconsolidated fund | $ | 32,018 |  |  | $ | — |
Establishment of receivable for intangible assets sold | $ | — |  |  | $ | 6,776 |
Non-cash purchase of other equity method investment | $ | 2,000 |  |  | $ | — |
Non-cash financing activities: |  |  |
Dividends declared but not paid | $ | 16,793 |  |  | $ | 14,810 |
Member distributions declared but not paid | $ | 21,216 |  |  | $ | 19,161 |

15. Commitments and Contingencies
Litigation
In the ordinary course of business, the Company may be subject to various legal, regulatory, and/or administrative proceedings from time to time. Although there can be no assurance of the outcome of such proceedings, in the opinion of management, the Company does not believe it is probable that any pending or, to its knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect its condensed consolidated financial statements.
Incentive Fees
The Partnerships have allocated carried interest still subject to contingencies that did not meet the Company’s criteria for revenue recognition in the amounts of $1,125,678 and $1,022,250, net of amounts attributable to non-controlling interests, at December 31, 2023 and March 31, 2023, respectively.
If the Company ultimately receives the unrecognized carried interest, a total of $281,419 and $255,562 as of December 31, 2023 and March 31, 2023, respectively, would potentially be payable to certain employees and third parties pursuant to compensation arrangements related to carried interest profit-sharing plans. Such amounts have not been recorded in the Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Income as the payment is not yet probable.
Commitments
The Company serves as the investment manager of the Partnerships. The general partner or managing member of each Partnership is generally a separate subsidiary of the Company and has agreed to invest funds on the same basis as the limited partners in most instances. The Company’s aggregate unfunded commitment to the Partnerships was $232,227 and $211,556 as of December 31, 2023 and March 31, 2023, respectively.

| 22 |

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
The Company has an unrealized net gain on its investments valued under the measurement alternative and a fair value investment of $30,429 as of December 31, 2023, of which up to 15% may be paid as a discretionary bonus as those gains are realized.
The Company offers an Employee Investment Program (“EIP”) through which certain employees are able to invest directly into certain Company managed funds as individual limited partners (“LPs”). The employees also have an option to enter into a loan agreement with the Company or a third-party lender to fund committed capital. The loan is collateralized by the underlying LP interest in the fund and return of capital distributions are utilized to pay the outstanding loan balance. The Company entered into a separate agreement with the third-party lender to backstop the employee’s performance under the loan with a commitment to purchase the LP interest from the lender at the greater of fair value or the outstanding balance of the loan in the event of a default by the employee. As of December 31, 2023, the total amount of outstanding loans at the third-party lender under the EIP was $736, and the Company believes the risk of default by an employee to be remote.
Leases
The Company’s leases consist primarily of operating leases for office space and office equipment in various locations around the world. Some leases have the option to extend for an additional term or terminate early. Short-term lease costs are not material.
The following table shows lease costs and other supplemental information related to the Company’s operating leases:

| Three Months Ended December 31, |  | Nine Months Ended December 31,
| 2023 |  | 2022 |  | 2023 |  | 2022
Operating lease costs | $ | 2,468 |  |  | $ | 2,095 |  |  | $ | 6,938 |  | $ | 6,199
Variable lease costs | $ | 381 |  |  | $ | 395 |  |  | $ | 1,039 |  | $ | 1,067
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 2,325 |  |  | $ | 1,997 |  |  | $ | 6,657 |  | $ | 5,858
Weighted average remaining lease term (in years) |  | 12.8 |  | 14.8
Weighted average discount rate |  | 3.5 | % |  | 3.3 | %

| 23 |

Hamilton Lane Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share amounts)
As of December 31, 2023, the maturities of operating lease liabilities were as follows:

Remainder of FY2024 | $ | 2,245 |
FY2025 | 8,790 |
FY2026 | 8,231 |
FY2027 | 7,847 |
FY2028 | 7,305 |
Thereafter | 65,456 |
Total lease payments | 99,874 |
Less: imputed interest | (19,501) |
Total operating lease liabilities | $ | 80,373 |

16. Subsequent Events
On February 6, 2024, the Company announced a quarterly dividend of $0.445 per share of Class A common stock to record holders at the close of business on March 15, 2024. The payment date will be April 4, 2024.

| 24 |

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q, and our audited financial statements, notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Form 10-K for a more complete understanding of our financial position and results of operations.
The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Investors should review the “Cautionary Note Regarding Forward-Looking Information” above and the “Risk Factors” detailed in Part I, Item 1A of our 2023 Form 10-K for a discussion of those risks and uncertainties that have the potential to cause actual results to be materially different. Our results of operations for interim periods are not necessarily indicative of results to be expected for the full year or for any other period. Unless otherwise indicated, references in this Form 10-Q to fiscal 2023 and fiscal 2022 are to our fiscal years ended March 31, 2023, and 2022, respectively.
Business Overview
We are a global private markets investment solutions provider and operate our business in a single segment. We offer a variety of investment solutions to address our clients’ needs across a range of private markets, including private equity, private credit, real estate, infrastructure, natural resources, growth equity, venture capital and impact. These solutions are constructed from a range of investment types, including primary investments in funds managed by third-party managers, direct investments alongside such funds and acquisitions of secondary stakes in such funds, with a number of our clients utilizing multiple investment types. These solutions are offered in a variety of formats covering some or all phases of private markets investment programs:
•Customized Separate Accounts: We design and build customized portfolios of private markets funds and direct investments to meet our clients’ specific portfolio objectives with regard to return, risk tolerance, diversification and liquidity. We generally have discretionary investment authority over our customized separate accounts, which comprised $89.1 billion of our assets under management (“AUM”) as of December 31, 2023.
•Specialized Funds: We organize, invest and manage specialized primary, secondary and direct investment funds. Our specialized funds invest across a variety of private markets and include equity, equity-linked and credit funds offered on standard terms, as well as shorter duration, opportunistically oriented funds. We launched our first specialized fund in 1997. Since then, our product offerings have grown steadily and now include evergreen offerings that primarily invest in secondaries and direct investments in equity and credit and are available to certain high-net-worth individuals. Specialized funds comprised $30.8 billion of our AUM as of December 31, 2023.
•Advisory Services: We offer investment advisory services to assist clients in developing and implementing their private markets investment programs. Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world. We had $782.9 billion of assets under advisement (“AUA”) as of December 31, 2023.
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•Distribution Management: We offer distribution management services to our clients through active portfolio management to enhance the realized value of publicly traded stock they receive as distributions in-kind from private equity funds.
•Reporting, Monitoring, Data and Analytics: We provide our clients with comprehensive reporting and investment monitoring services, usually bundled into our broader investment solutions offerings, but also on a stand-alone, fee-for-service basis. We also provide comprehensive research and analytical services as part of our investment solutions, leveraging our large, global, proprietary and high-quality database for transparency and powerful analytics. Our data, as well as our benchmarking and forecasting models, are accessible through our proprietary technology solution, Cobalt LP, on a stand-alone, subscription basis.
Our client and investor base is broadly diversified by type, size and geography. Our client base primarily comprises institutional investors that range from those seeking to make an initial investment in alternative assets to some of the world’s largest and most sophisticated private markets investors. As we offer a highly customized, flexible service, we are equipped to provide investment services to institutional clients of all sizes and with different needs, internal resources and investment objectives. Our clients include prominent institutional investors in the United States, Canada, Europe, the Middle East, Asia, Australia and Latin America. We provide private markets solutions and services to some of the largest global pension, sovereign wealth and U.S. state pension funds. In addition, we believe we are a leading provider of private markets solutions for U.S. labor union pension plans, and we serve numerous smaller public and corporate pension plans, sovereign wealth funds, financial institutions and insurance companies, endowments and foundations, as well as family offices and high-net-worth individuals.
Key Financial and Operating Measures
Our key financial measures are discussed below.
Revenues
We generate revenues primarily from management and advisory fees, and to a lesser extent, incentive fees.
Management and advisory fees comprise specialized fund and customized separate account management fees, advisory and reporting fees and distribution management fees.
Revenues from customized separate accounts are generally based on a contractual rate applied to committed capital or net invested capital under management. These fees often decrease over the life of the contract due to built-in declines in contractual rates and/or as a result of lower net invested capital balances as capital is returned to clients. In certain cases, we also provide advisory and/or reporting services, and, therefore, we also receive fees for services such as monitoring and reporting on a client’s existing private markets investments. In addition, we may provide for investments in our specialized funds as part of our customized separate accounts. In these cases, we generally reduce the asset-based and/or incentive fees or carried interest on customized separate accounts to the extent that assets in the accounts are invested in our specialized funds so that our clients do not pay duplicate fees.
Revenues from specialized funds are based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value in, our specialized funds. The management fee during the investment period is often charged on capital commitments and after the investment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital or net asset value. In the case of certain funds, we charge management fees on capital commitments, with the management fee increasing during the early
26

years of the fund’s term and declining in the later years. Management fees for certain funds are discounted based on the amount of the limited partners’ commitments, whether the limited partners commit early in the offering period or if the limited partners are investors in our other funds.
Revenues from advisory and reporting services are generally annual fixed fees, which vary depending on the services we provide. In limited cases, advisory service clients are charged basis point fees annually based on the amounts they have committed to invest pursuant to their agreements with us. In other cases where our services are limited to monitoring and reporting on investment portfolios, clients are charged a fee based on the number of investments in their portfolio.
Distribution management fees are generally earned by applying a percentage to AUM or proceeds received. Certain active management clients may elect a fee structure under which they are charged an asset-based fee plus a fee based on net realized and unrealized gains and income net of realized and unrealized losses.
Incentive fees comprise carried interest earned from our specialized funds and certain customized separate accounts structured as single-client funds in which we have a general partner commitment, and performance fees earned on certain other specialized funds and customized separate accounts.
For each of our secondary funds, direct investment funds, strategic opportunity funds and evergreen funds, we generally earn carried interest equal to a fixed percentage of net profits, usually 10.0% to 12.5%, subject to a compounded annual preferred return that is generally 6.0% to 8.0%. To the extent that our primary funds also directly make secondary investments and direct investments, they generally earn carried interest on a similar basis. Furthermore, certain of our primary funds earn carried interest on their investments in other private markets funds on a primary basis that is generally 5.0% of net profits, subject to the fund’s compounded annual preferred return.
We recognize carried interest when it is probable that a significant reversal will not occur. The primary contingency regarding incentive fees is the “clawback,” or the obligation to return distributions in excess of the amount prescribed by the applicable fund or separate account documents. Incentive fees are typically only required to be returned on a net of tax basis due to a clawback. As such, the tax-related portion of incentive fees is typically not subject to clawback and is therefore recognized as revenue immediately upon receipt. In the event that a payment is made before it can be recognized as revenue, this amount would be included as deferred incentive fee revenue on our Condensed Consolidated Balance Sheets and recognized as income in accordance with our revenue recognition policy.
Performance fees, which are a component of incentive fees, are based on the aggregate amount of realized gains earned by the applicable specialized fund or customized separate account, subject to the achievement of defined minimum returns to the clients. Performance fees range from 5.0% to 12.5% of net profits, subject to a compounded annual preferred return that varies by account but is generally 6.0% to 8.0%. Performance fees are recognized when the risk of clawback or reversal is not probable.
Expenses
Compensation and benefits is our largest expense and consists of (a) base compensation comprising salary, bonuses and benefits paid and payable to employees, (b) equity-based compensation associated with the grants of restricted stock and performance awards and (c) incentive fee compensation, which consists of carried interest and performance fee allocations. We expect to continue to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels as we expand geographically and create new products and services.
27

Our compensation arrangements with our employees contain a significant bonus component driven by the results of our operations. Therefore, as our revenues, profitability and the amount of incentive fees earned by our customized separate accounts and specialized funds increase, our compensation costs rise.
Certain current and former employees participate in a carried interest program whereby approximately 25% of incentive fees from certain of our specialized funds and customized separate accounts are awarded to plan participants. We record compensation expense payable to plan participants as the incentive fees become estimable and collection is probable.
General, administrative and other includes travel, accounting, legal and other professional fees, commissions, placement fees, office expenses, depreciation and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations.
Other Income (Expense)
Equity in income (loss) of investees primarily represents our share of earnings from our investments in our specialized funds and certain customized separate accounts in which we have a general partner commitment. Equity income primarily comprises our share of the net realized and unrealized gains (losses) and investment income partially offset by the expenses from these investments.
We have general partner commitments in our specialized funds and certain customized separate accounts that invest solely in primary funds, secondary funds and direct investments, as well as those that invest across investment types. Equity in income (loss) of investees will increase or decrease as the change in underlying fund investment valuations increases or decreases. Since our direct investment funds invest in underlying portfolio companies, their quarterly and annual valuation changes are more affected by individual company movements than our primary and secondary funds that have exposures across multiple portfolio companies in underlying private markets funds. Our specialized funds and customized separate accounts invest across industries, strategies and geographies, and therefore our general partner investments do not include any significant concentrations in a specific sector or area outside the United States.
Interest expense includes interest paid and accrued on our outstanding debt, along with the amortization of deferred financing costs, amortization of original issue discount and the write-off of deferred financing costs due to the repayment of previously outstanding debt.
Interest income is income earned on cash and cash equivalents.
Non-operating loss consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.
Other income (expense) of consolidated variable interest entities (“VIEs”) consists primarily of the share of earnings of investments of consolidated general partner entities, which are not wholly-owned by us, in our specialized funds and certain customized separate accounts in which they have a general partner commitment, interest income on our previously consolidated funds and interest income on investments held in trust, and changes in fair value of liabilities of our previously-sponsored special purpose acquisition company (“SPAC”).
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Income Tax Expense
We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by HLA. HLA is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by HLA flows through to its limited partners, including us, and is generally not subject to U.S. federal or state income tax at the partnership level. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level. Accordingly, the tax liability with respect to income attributable to non-controlling interests (“NCI”) in HLA is borne by the holders of such NCI.
Non-controlling interests
NCI reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by us. NCI are presented as separate components in our consolidated statements of income to clearly distinguish between our interests and the economic interests of third parties and employees in those entities.
Fee-Earning AUM
Fee-earning AUM 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 (“NAV”) 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.
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Consolidated Results of Operations
The following is a discussion of our consolidated results of operations for the three and nine months ended December 31, 2023 and 2022. This information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

|  |  |  |  | Three Months Ended December 31, |  | Nine Months Ended December 31, |
($ in thousands) |  |  |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Revenues |  |  |  |  |  |  |  |  |  |  |  |
Management and advisory fees |  |  |  |  | $ | 113,641 |  |  | $ | 97,355 |  |  | $ | 328,232 |  |  | $ | 276,182 |  |
Incentive fees |  |  |  |  | 11,623 |  |  | 24,075 |  |  | 48,945 |  |  | 132,835 |  |
Consolidated variable interest entities related: |  |  |  |  |  |  |  |  |  |  |  |
Incentive fees |  |  |  |  | — |  |  | 5,644 |  |  | — |  |  | 6,948 |  |
Total revenues |  |  |  |  | 125,264 |  |  | 127,074 |  |  | 377,177 |  |  | 415,965 |  |
Expenses |  |  |  |  |  |  |  |  |  |  |  |
Compensation and benefits |  |  |  |  | 49,706 |  |  | 45,676 |  |  | 139,738 |  |  | 158,235 |  |
General, administrative and other |  |  |  |  | 24,152 |  |  | 22,717 |  |  | 74,908 |  |  | 66,066 |  |
Consolidated variable interest entities related: |  |  |  |  |  |  |  |  |  |  |  |
General, administrative and other |  |  |  |  | 12 |  |  | 309 |  |  | 600 |  |  | 941 |  |
Total expenses |  |  |  |  | 73,870 |  |  | 68,702 |  |  | 215,246 |  |  | 225,242 |  |
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |
Equity in (loss) income of investees |  |  |  |  | (46) |  |  | 650 |  |  | 20,071 |  |  | (7,493) |  |
Interest expense |  |  |  |  | (2,748) |  |  | (2,419) |  |  | (8,381) |  |  | (6,027) |  |
Interest income |  |  |  |  | 1,500 |  |  | 442 |  |  | 3,536 |  |  | 839 |  |
Non-operating loss |  |  |  |  | (8) |  |  | (27,960) |  |  | (989) |  |  | (11,878) |  |
Consolidated variable interest entities related: |  |  |  |  |  |  |  |  |  |  |  |
Equity in income of investees |  |  |  |  | 240 |  |  | 389 |  |  | 660 |  |  | 1,030 |  |
Unrealized gain |  |  |  |  | — |  |  | 2,087 |  |  | 3,034 |  |  | 4,333 |  |
Interest expense |  |  |  |  | — |  |  | — |  |  | (6) |  |  | — |  |
Interest income |  |  |  |  | — |  |  | 2,111 |  |  | 4,581 |  |  | 2,989 |  |
Total other income (expense) |  |  |  |  | (1,062) |  |  | (24,700) |  |  | 22,506 |  |  | (16,207) |  |
Income before income taxes |  |  |  |  | 50,332 |  |  | 33,672 |  |  | 184,437 |  |  | 174,516 |  |
Income tax expense |  |  |  |  | 15,800 |  |  | 11,788 |  |  | 34,055 |  |  | 38,766 |  |
Net income |  |  |  |  | 34,532 |  |  | 21,884 |  |  | 150,382 |  |  | 135,750 |  |
Less: Income attributable to non-controlling interests in general partnerships |  |  |  |  | 82 |  |  | 422 |  |  | 171 |  |  | 773 |  |
Less: Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. |  |  |  |  | 14,944 |  |  | 9,146 |  |  | 52,733 |  |  | 51,326 |  |
Less: Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. |  |  |  |  | — |  |  | 2,647 |  |  | — |  |  | 5,617 |  |
Less: Income attributable to non-controlling interests in consolidated funds |  |  |  |  | — |  |  | — |  |  | 4,980 |  |  | — |  |
Net income attributable to Hamilton Lane Incorporated |  |  |  |  | $ | 19,506 |  |  | $ | 9,669 |  |  | $ | 92,498 |  |  | $ | 78,034 |  |

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Revenues
The following table shows total revenues of the Company and its consolidated VIEs:

| Three Months Ended December 31, |  | Nine Months Ended December 31,
($ in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Management and advisory fees |  |  |  |  |  |  |
Specialized funds | $ | 64,871 |  |  | $ | 53,299 |  |  | $ | 184,972 |  |  | $ | 144,099 |
Customized separate accounts | 32,943 |  |  | 29,571 |  |  | 96,702 |  |  | 87,329 |
Advisory | 6,085 |  |  | 6,613 |  |  | 18,392 |  |  | 19,073 |
Reporting and other | 6,479 |  |  | 6,720 |  |  | 18,298 |  |  | 19,170 |
Distribution management | 1,512 |  |  | 596 |  |  | 3,979 |  |  | 1,863 |
Fund reimbursement revenue | 1,751 |  |  | 556 |  |  | 5,889 |  |  | 4,648 |
Total management and advisory fees | 113,641 |  |  | 97,355 |  |  | 328,232 |  |  | 276,182 |
Incentive fees | 11,623 |  |  | 29,719 |  |  | 48,945 |  |  | 139,783 |
Total revenues | $ | 125,264 |  |  | $ | 127,074 |  |  | $ | 377,177 |  |  | $ | 415,965 |

Three months ended December 31, 2023 compared to three months ended December 31, 2022
Total revenues decreased $1.8 million, or 1%, to $125.3 million, for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to a decrease in incentive fees, partially offset by an increase in management and advisory fees.
Management and advisory fees increased $16.3 million to $113.6 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. Specialized funds revenue increased $11.6 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to an $8.1 million increase in revenue from our latest secondary fund and a $7.0 million increase in revenue from our evergreen funds, which added $1.9 billion and $2.2 billion, respectively, in fee-earning AUM between periods. Revenue from our latest secondary fund included $6.1 million in retroactive fees for the three months ended December 31, 2023 compared to $3.8 million in retroactive fees from our latest secondary and direct equity funds for the three months ended December 31, 2022. Retroactive fees are management fees earned in the current period from investors that commit to a specialized fund towards the end of the fundraising period and are required to pay a catch-up management fee as if they had committed to the fund at the first closing in a prior period. Customized separate accounts revenue increased $3.4 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 due to the addition of several new accounts, additional allocations from existing accounts, and continued investment activity. Fund reimbursement revenue increased by $1.2 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to the recognition of fund reimbursements from our latest strategic opportunities fund in the current year period.
Incentive fees decreased $18.1 million to $11.6 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to a decrease in incentive fees from several funds having been in the general partner catch-up period in the prior year period. The catch-up period allocates distributions to the general partner to the agreed-upon carried interest once the investors’ total invested capital is returned and the preferred return is achieved.
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Nine Months Ended December 31, 2023 compared to nine months ended December 31, 2022
Total revenues decreased $38.8 million, or 9%, to $377.2 million, for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to a decrease in incentive fees, partially offset by an increase in management and advisory fees.
Management and advisory fees increased $52.0 million to $328.2 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022. Specialized funds revenue increased $40.9 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to a $25.6 million increase in revenue from our latest secondary fund and a $16.6 million increase in revenue from our evergreen funds, which added $1.9 billion and $2.2 billion, respectively, in fee-earning AUM between periods. Revenue from our latest secondary fund included $12.8 million in retroactive fees for the nine months ended December 31, 2023 compared to $2.4 million in retroactive fees from our latest direct equity fund for the nine months ended December 31, 2022. Customized separate accounts revenue increased $9.4 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022 due to the addition of several new accounts, additional allocations from existing accounts, and continued investment activity.
Incentive fees decreased $90.8 million to $48.9 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to a decrease in incentive fees from several funds having been in the general partner catch-up period in the prior year period.
Expenses
Three months ended December 31, 2023 compared to three months ended December 31, 2022
Total expenses increased $5.2 million, or 8%, to $73.9 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to increases in both compensation and benefits expenses and general, administrative and other expenses.
Compensation and benefits expenses increased $4.0 million to $49.7 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to an increase in base compensation and benefits, partially offset by a decrease in incentive fee compensation. Base compensation and benefits increased $8.1 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to an increase in salary expense from additional headcount in the current year period compared to the prior year period. Incentive fee compensation decreased $4.5 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to the decrease in incentive fee revenue.
General, administrative and other expenses including our variable interest entities increased $1.1 million to $24.2 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. This change consisted primarily of a $0.8 million increase in fund reimbursement expense attributed to the timing of newly created funds and a $0.8 million increase in technology related expense, partially offset by a $0.5 million decrease in consulting and professional fees.
Nine Months Ended December 31, 2023 compared to nine months ended December 31, 2022
Total expenses decreased $10.0 million, or 4%, to $215.2 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to a decrease in compensation and benefits expenses, partially offset by an increase in general, administrative and other expenses.
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Compensation and benefits expenses decreased $18.5 million to $139.7 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to a decrease in incentive fee compensation, partially offset by an increase in base compensation and benefits and equity-based compensation. Incentive fee compensation decreased $22.6 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due to the decrease in incentive fee revenue. Base compensation and benefits increased $1.7 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022 due to an increase in salary expense from additional headcount in the current year period. Equity-based compensation increased $2.4 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, driven primarily by performance awards issued in the prior year period.
General, administrative and other expenses including our variable interest entities increased $8.5 million to $75.5 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022. This change consisted primarily of a $4.4 million increase in third-party commission primarily attributed to the increase in gross subscriptions to our evergreen funds, a $1.8 million increase in fund reimbursement expense attributed to the timing of newly created funds, a $1.4 million increase in technology-related expenses, and a $0.7 million increase in travel expense.
Other Income (Expense)
The following table shows the equity in income (loss) of investees of the Company and its consolidated VIEs included in other income (expense):

| Three Months Ended December 31, |  | Nine Months Ended December 31,
($ in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022
Equity in income (loss) of investees |  |  |  |  |  |  |
Primary funds | $ | (340) |  |  | $ | (537) |  |  | $ | 1,034 |  |  | $ | (210) |
Direct investment funds | (706) |  |  | (305) |  |  | 5,252 |  |  | (5,496) |
Secondary funds | 363 |  |  | 234 |  |  | 2,980 |  |  | (546) |
Customized separate accounts | (146) |  |  | (1,350) |  |  | 5,782 |  |  | (3,502) |
Other equity method investments | 1,023 |  |  | 2,997 |  |  | 5,683 |  |  | 3,291 |
Total equity in income (loss) of investees | $ | 194 |  |  | $ | 1,039 |  |  | $ | 20,731 |  |  | $ | (6,463) |

Three months ended December 31, 2023 compared to three months ended December 31, 2022
Other income (expense) increased $23.5 million, to $1.1 million of expense for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to a decrease in non-operating loss.
Equity in income (loss) of investees decreased $0.8 million to $0.2 million of income for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. This was due primarily to the decreases in public market valuations during the period.
Interest income increased $1.1 million to $1.5 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, primarily attributed to increased rates on interest bearing accounts.
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Non-operating loss decreased $28.0 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to the recognition of a $43.3 million impairment of an investment, partially offset by $13.2 million in fair value adjustments on several other investments in the three months ended December 31, 2022.
Other consolidated VIE related amounts decreased $4.3 million to $0.2 million of income for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to $2.1 million of interest income and $2.1 million of unrealized gains related to our previously sponsored SPAC during the three months ended December 31, 2022.
Nine Months Ended December 31, 2023 compared to nine months ended December 31, 2022
Other income (expense) increased $38.7 million, to $22.5 million of income for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to an increase in equity in income of investees, other income related to our consolidated VIEs and a decrease in non-operating loss.
Equity in income (loss) of investees increased $27.2 million to $20.7 million of income for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022. This was due primarily to the gains from increases in public market valuations during the period.
Interest expense increased $2.4 million to $8.4 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to increased interest rates on our variable-rate Term Loan.
Interest income increased $2.7 million to $3.5 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, primarily attributed to increased rates on interest bearing accounts.
Non-operating loss decreased $10.9 million to $1.0 million of loss for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022, due primarily to the recognition of a $43.3 million impairment on an investment offset by $31.0 million in fair value adjustments on several other investments in the nine months ended December 31, 2022.
Income Tax Expense
Our effective tax rate was 31.4% and 35.0% for the three months ended December 31, 2023 and 2022, respectively, and 18.5% and 22.2% for the nine months ended December 31, 2023 and 2022, respectively. The effective tax rates for the three months ended December 31, 2023 and 2022 were different from the statutory tax rate due to the valuation allowance recorded against deferred tax assets. The effective tax rates for the nine months ended December 31, 2023 and 2022 were different from the statutory tax rate due to the portion of income allocated to non-controlling interests, valuation allowance recorded against deferred tax assets and discrete tax adjustments to true-up prior fiscal year estimated investment taxable income to actual investment taxable income reported to the Company after the prior fiscal year end. The effective tax rate for the three and nine months ended December 31, 2023 was lower than the effective tax rate for the three and nine months ended December 31, 2022 primarily due to changes in the valuation allowance against deferred tax assets and discrete tax adjustments.
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Fee-Earning AUM
The following table provides the period to period rollforward of our fee-earning AUM.

| Three Months Ended December 31, |  |  |  | Nine Months Ended December 31,
($ in millions) | 2023 |  |  |  | 2023
| Customized Separate Accounts | Specialized Funds | Total |  |  |  |  |  | Customized Separate Accounts | Specialized Funds | Total
Balance, beginning of period | $ | 36,234 |  | $ | 25,187 |  | $ | 61,421 |  |  |  |  |  |  | $ | 34,684 |  | $ | 22,662 |  | $ | 57,346 |
Contributions (1) | 1,743 |  | 1,273 |  | 3,016 |  |  |  |  |  |  | 4,793 |  | 4,145 |  | 8,938 |
Distributions (2) | (1,000) |  | (370) |  | (1,370) |  |  |  |  |  |  | (2,557) |  | (839) |  | (3,396) |
Foreign exchange, market value and other (3) | (53) |  | 85 |  | 32 |  |  |  |  |  |  | 4 |  | 207 |  | 211 |
Balance, end of period | $ | 36,924 |  | $ | 26,175 |  | $ | 63,099 |  |  |  |  |  |  | $ | 36,924 |  | $ | 26,175 |  | $ | 63,099 |

(1)Contributions represent (i) new commitments from customized separate accounts and specialized funds that earn fees on a committed capital fee base and (ii) capital contributions to underlying investments from customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base.
(2)Distributions represent (i) returns of capital in customized separate accounts and specialized funds that earn fees on a net invested capital or NAV fee base, (ii) reductions in fee-earning AUM from separate accounts and specialized funds that moved from a committed capital to net invested capital fee base and (iii) reductions in fee-earning AUM from customized separate accounts and specialized funds that are no longer earning fees.
(3)Foreign exchange, market value and other consists primarily of (i) the impact of foreign exchange rate fluctuations for customized separate accounts and specialized funds that earn fees on non-U.S. dollar denominated commitments and (ii) market value appreciation (depreciation) from customized separate accounts and specialized funds that earn fees on a NAV fee base.
Three months ended December 31, 2023
Fee-earning AUM increased $1.7 billion to $63.1 billion during the three months ended December 31, 2023, due primarily to contributions from customized separate accounts and specialized funds.
Customized separate accounts fee-earning AUM increased $0.7 billion, or 2%, to $36.9 billion for the three months ended December 31, 2023. Customized separate accounts contributions were $1.7 billion for the three months ended December 31, 2023, due primarily to new allocations from existing clients and the addition of new clients. Distributions were $1.0 billion for the three months ended December 31, 2023, due primarily to $0.6 billion from accounts moving from a committed to net invested capital fee base and $0.4 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base.
Specialized funds fee-earning AUM increased $1.0 billion, or 4%, to $26.2 billion for the three months ended December 31, 2023. Specialized fund contributions were $1.3 billion for the three months ended December 31, 2023, due primarily to $0.5 billion from our latest secondary fund and $0.6 billion from our evergreen funds. Distributions were $0.4 billion for the three months ended December 31, 2023, due primarily to returns of capital in funds earning fees on a net invested capital or NAV fee base.
Nine Months Ended December 31, 2023
Fee-earning AUM increased $5.8 billion to $63.1 billion during the nine months ended December 31, 2023, due primarily to contributions from customized separate accounts and specialized funds.
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Customized separate accounts fee-earning AUM increased $2.2 billion, or 6%, to $36.9 billion for the nine months ended December 31, 2023. Customized separate accounts contributions were $4.8 billion for the nine months ended December 31, 2023, due primarily to new allocations from existing clients and the addition of new clients. Distributions were $2.6 billion for the nine months ended December 31, 2023, due primarily to $1.4 billion from accounts moving from a committed to net invested capital fee base, $0.8 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base, and $0.4 billion from accounts reaching the end of their fund term.
Specialized funds fee-earning AUM increased $3.5 billion, or 16%, to $26.2 billion for the nine months ended December 31, 2023. Specialized fund contributions were $4.1 billion for the nine months ended December 31, 2023, due primarily to $1.8 billion from our evergreen funds and $1.6 billion from our latest secondary fund. Distributions were $0.8 billion for the nine months ended December 31, 2023 due to $0.5 billion from returns of capital in funds earning fees on a net invested capital or NAV fee base and $0.1 billion from accounts moving from a committed to net invested capital fee base.
Non-GAAP Financial Measures
Below is a description of our unaudited non-GAAP financial measures. These are not measures of financial performance under GAAP and should not be considered a substitute for the most directly comparable GAAP measures, which are reconciled below. These measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these measures in isolation or as a substitute for GAAP measures. Other companies may calculate these measures differently than we do, limiting their usefulness as a comparative measure.
Fee Related Earnings
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.
Adjusted EBITDA
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.
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The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to FRE and Adjusted EBITDA for the three and nine months ended December 31, 2023 and 2022:

| Three Months Ended December 31, |  | Nine Months Ended December 31, |
($ in thousands) | 2023 |  | 2022 |  | 2023 |  | 2022 |
Net income attributable to Hamilton Lane Incorporated | $ | 19,506 |  |  | $ | 9,669 |  |  | $ | 92,498 |  |  | $ | 78,034 |  |
Income attributable to non-controlling interests in general partnerships | 82 |  |  | 422 |  |  | 171 |  |  | 773 |  |
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. | 14,944 |  |  | 9,146 |  |  | 52,733 |  |  | 51,326 |  |
Income attributable to non-controlling interests in Hamilton Lane Alliance Holdings I, Inc. | — |  |  | 2,647 |  |  | — |  |  | 5,617 |  |
Income attributable to non-controlling interests in consolidated funds | — |  |  | — |  |  | 4,980 |  |  | — |  |
Incentive fees | (11,623) |  |  | (29,719) |  |  | (48,945) |  |  | (139,783) |  |
Incentive fee related compensation (1) | 5,521 |  |  | 14,001 |  |  | 23,249 |  |  | 66,254 |  |
Consolidated VIE related general, administrative and other expenses | — |  |  | 278 |  |  | 566 |  |  | 846 |  |
Revenue related to consolidated funds | — |  |  | — |  |  | 394 |  |  | — |  |
Non-operating income related compensation | — |  |  | (1,413) |  |  | 59 |  |  | 54 |  |
Interest income | (1,500) |  |  | (2,553) |  |  | (8,117) |  |  | (3,829) |  |
Interest expense | 2,748 |  |  | 2,419 |  |  | 8,387 |  |  | 6,027 |  |
Income tax expense | 15,800 |  |  | 11,788 |  |  | 34,055 |  |  | 38,766 |  |
Equity in (income) loss of investees | (194) |  |  | (1,039) |  |  | (20,731) |  |  | 6,463 |  |
Non-operating income (loss) | 8 |  |  | 25,873 |  |  | (2,045) |  |  | 7,546 |  |
Fee Related Earnings | $ | 45,292 |  |  | $ | 41,519 |  |  | $ | 137,254 |  |  | $ | 118,094 |  |
Depreciation and amortization | 2,037 |  |  | 2,022 |  |  | 5,774 |  |  | 5,600 |  |
Equity-based compensation | 3,264 |  |  | 2,834 |  |  | 9,227 |  |  | 6,816 |  |
Incentive fees | 11,623 |  |  | 29,719 |  |  | 48,945 |  |  | 139,783 |  |
Incentive fees attributable to non-controlling interests | — |  |  | (243) |  |  | — |  |  | (302) |  |
Incentive fee related compensation (1) | (5,521) |  |  | (14,001) |  |  | (23,249) |  |  | (66,254) |  |
Non-operating income related compensation | — |  |  | 1,413 |  |  | (59) |  |  | (54) |  |
Interest income | 1,500 |  |  | 442 |  |  | 3,536 |  |  | 839 |  |
Adjusted EBITDA | $ | 58,195 |  |  | $ | 63,705 |  |  | $ | 181,428 |  |  | $ | 204,522 |  |

(1) Incentive fee related compensation includes incentive fee compensation expense and bonus related to carried interest that is classified as base compensation.
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Non-GAAP Earnings Per Share
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 nine months ended December 31, 2023 and 2022 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.
The following table shows a reconciliation of adjusted net income to net income attributable to Hamilton Lane Incorporated for the three and nine months ended December 31, 2023 and 2022:

|  |  |  |  |  | Three Months Ended December 31, |  | Nine Months Ended December 31, |
(in thousands, except share and per-share amounts) |  |  |  |  |  |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Net income attributable to Hamilton Lane Incorporated |  |  |  |  |  |  |  | $ | 19,506 |  |  | $ | 9,669 |  |  | $ | 92,498 |  |  | $ | 78,034 |  |
Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C. |  |  |  |  |  |  |  | 14,944 |  |  | 9,146 |  |  | 52,733 |  |  | 51,326 |  |
Income tax expense |  |  |  |  |  |  |  | 15,800 |  |  | 11,788 |  |  | 34,055 |  |  | 38,766 |  |
Adjusted pre-tax net income |  |  |  |  |  |  |  | 50,250 |  |  | 30,603 |  |  | 179,286 |  |  | 168,126 |  |
Adjusted income taxes (1) |  |  |  |  |  |  |  | (11,859) |  |  | (7,314) |  |  | (42,312) |  |  | (40,182) |  |
Adjusted net income |  |  |  |  |  |  |  | $ | 38,391 |  |  | $ | 23,289 |  |  | $ | 136,974 |  |  | $ | 127,944 |  |
Adjusted shares outstanding |  |  |  |  |  |  |  | 53,987,555 |  |  | 53,769,379 |  |  | 53,932,804 |  |  | 53,733,521 |  |
Non-GAAP earnings per share |  |  |  |  |  |  |  | $ | 0.71 |  |  | $ | 0.43 |  |  | $ | 2.54 |  |  | $ | 2.38 |  |

(1) Represents corporate income taxes at our estimated statutory tax rate of 23.6% and 23.9% for the three and nine months ended December 31, 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%.
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Investment Performance
The following tables present information relating to the historical performance of our specialized funds with fund families having at least two distinct vintages and most recent fund sizes of greater than $500 million per fund. The data are presented from the date indicated through September 30, 2023 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.
When considering the data presented below, note that the historical results of our specialized funds are not indicative of the future results you should expect from such investments, from any future investment funds we may raise or from an investment in our Class A common stock, in part because:
•market conditions and investment opportunities during previous periods may have been significantly more favorable for generating positive performance than those we may experience in the future;
•the performance of our funds is generally calculated on the basis of the NAV of the funds’ investments, including unrealized gains, which may never be realized;
•our historical returns derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed;
•our newly-established funds may generate lower returns during the period that they initially deploy their capital;
•in recent years, there has been increased competition for investment opportunities resulting from the increased amount of capital invested in private markets alternatives and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future;
•the performance of particular funds also will be affected by risks of the industries and businesses in which they invest; and
•we may create new funds that reflect a different asset mix and new investment strategies, as well as a varied geographic and industry exposure, compared to our historical funds, and any such new funds could have different returns than our previous funds.
The historical and potential future returns of the investment funds we manage are not directly linked to returns on our Class A common stock. Therefore, you should not conclude that continued positive performance of the investment funds we manage will necessarily result in positive returns on an investment in our Class A common stock. As used in this discussion, internal rate of return (“IRR”) is calculated on a pooled basis using daily cash flows. See “Performance Methodology” below for more information on how our returns are calculated.
Specialized Fund Performance
We organize, invest and manage specialized primary, secondary and direct investment funds. Our specialized funds invest across a variety of private markets and include equity, equity-linked and credit funds offered on standard terms, as well as shorter duration, opportunistically oriented funds. Below is performance information across our various specialized funds. Substantially all of these funds are globally focused, and they are grouped by the investment strategy utilized.
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Fund | Vintage year | Fund size ($M) | Capital invested ($M) | Gross multiple | Net Multiple | Gross IRR (%) | Net IRR (%) | Gross Spread vs. S&P 500 PME | Net Spread vs. S&P 500 PME | Gross Spread vs. MSCI World PME | Net Spread vs. MSCI World PME
Primaries (Diversified) |  |  |  |  |  |  |  |  |  |  |
PEF I | 1998 | 122 | 117 | 1.3 | 1.2 | 5.4% | 2.5% | 378 bps | 76 bps | 322 bps | 16 bps
PEF IV | 2000 | 250 | 238 | 1.7 | 1.5 | 16.2% | 11.2% | 1,302 bps | 828 bps | 1,170 bps | 708 bps
PEF V | 2003 | 135 | 133 | 1.7 | 1.6 | 14.2% | 9.6% | 841 bps | 363 bps | 950 bps | 466 bps
PEF VI | 2007 | 494 | 513 | 1.7 | 1.6 | 11.7% | 8.9% | 72 bps | (168 bps) | 408 bps | 163 bps
PEF VII | 2010 | 262 | 289 | 1.6 | 1.6 | 12.4% | 8.4% | (133 bps) | (504 bps) | 262 bps | (113 bps)
PEF VIII | 2012 | 427 | 427 | 1.5 | 1.5 | 9.6% | 7.2% | (277 bps) | (510 bps) | 52 bps | (185 bps)
PEF IX | 2015 | 517 | 516 | 1.9 | 1.9 | 19.2% | 17.0% | 610 bps | 413 bps | 926 bps | 723 bps
PEF X | 2018 | 278 | 244 | 1.5 | 1.4 | 17.9% | 14.8% | 784 bps | 414 bps | 1,057 bps | 680 bps
Secondaries |  |  |  |  |  |  |  |  |  |  |
Pre-Fund | — | — | 362 | 1.5 | N/A | 17.1% | N/A | 1,330 bps | N/A | 1,172 bps | N/A
Secondary Fund I | 2005 | 360 | 353 | 1.2 | 1.2 | 5.2% | 3.8% | 113 bps | (63 bps) | 341 bps | 157 bps
Secondary Fund II | 2008 | 591 | 603 | 1.5 | 1.4 | 19.9% | 13.5% | 452 bps | (194 bps) | 870 bps | 212 bps
Secondary Fund III | 2012 | 909 | 839 | 1.4 | 1.4 | 13.4% | 11.0% | 12 bps | (255 bps) | 397 bps | 135 bps
Secondary Fund IV | 2016 | 1,917 | 2,065 | 1.7 | 1.6 | 17.3% | 18.0% | 416 bps | 431 bps | 736 bps | 759 bps
Secondary Fund V | 2019 | 3,929 | 3,715 | 1.5 | 1.4 | 22.6% | 21.4% | 1,678 bps | 1,598 bps | 1,922 bps | 1,845 bps
Secondary Fund VI | 2022 | 3,081 | 635 | 1.5 | 1.6 | >100% | >100% | 10,636 bps | 20,744 bps | 10,928 bps | 20,900 bps
Direct/Co-investments |  |  |  |  |  |  |  |  |  |  |
Pre-Fund | — | — | 244 | 1.9 | N/A | 21.3% | N/A | 1,655 bps | N/A | 1,600 bps | N/A
Co-Investment Fund | 2005 | 604 | 577 | 1.0 | 0.9 | 0.2% | (1.3)% | (569 bps) | (746 bps) | (319 bps) | (501 bps)
Co-Investment Fund II | 2008 | 1,195 | 1,157 | 2.1 | 1.8 | 17.9% | 14.2% | 569 bps | 185 bps | 950 bps | 561 bps
Co-Investment Fund III | 2014 | 1,243 | 1,292 | 1.8 | 1.6 | 15.0% | 12.0% | 111 bps | (189 bps) | 446 bps | 141 bps
Co-Investment Fund IV | 2018 | 1,698 | 1,489 | 2.2 | 2.0 | 25.3% | 23.4% | 1,270 bps | 1,073 bps | 1,556 bps | 1,352 bps
Equity Opportunities Fund V | 2021 | 2,069 | 1,513 | 1.2 | 1.1 | 11.9% | 9.7% | 986 bps | 886 bps | 1,149 bps | 1,049 bps
Fund | Vintage year | Fund size ($M) | Capital invested ($M) | Gross multiple | Net Multiple | Gross IRR (%) | Net IRR (%) | Gross Spread vs. CS HY II PME | Net Spread vs. CS HY II PME | Gross Spread vs. CS LL PME | Net Spread vs. CS LL PME
Strategic Opportunities (Tail-end secondaries and credit) |  |  |  |  |  |  |
Strat Opps 2015 | 2015 | 71 | 68 | 1.3 | 1.2 | 14.1% | 10.6% | 561 bps | 215 bps | 862 bps | 513 bps
Strat Opps 2016 | 2016 | 214 | 216 | 1.3 | 1.2 | 10.4% | 8.0% | 461 bps | 223 bps | 567 bps | 331 bps
Strat Opps 2017 | 2017 | 435 | 448 | 1.3 | 1.3 | 11.9% | 9.5% | 806 bps | 550 bps | 776 bps | 536 bps
Strat Opps IV (Series 2018) | 2018 | 889 | 865 | 1.3 | 1.2 | 9.6% | 7.6% | 625 bps | 401 bps | 611 bps | 376 bps
Strat Opps V (Series 2019) | 2019 | 762 | 711 | 1.2 | 1.2 | 11.8% | 9.4% | 952 bps | 631 bps | 666 bps | 335 bps
Strat Opps VI (Series 2020) | 2021 | 898 | 841 | 1.1 | 1.1 | 6.2% | 5.3% | 723 bps | 540 bps | 132 bps | (7 bps)
Strat Opps VII | 2022 | 953 | 636 | 1.1 | 1.1 | 12.9% | 11.9% | 782 bps | 686 bps | 193 bps | 20 bps

Performance Methodology
The indices presented for comparison are the S&P 500, MSCI World, Credit Suisse High Yield II (“CS HY II”) and Credit Suisse Leverage Loan (“CS LL”), calculated on a public market equivalent (“PME”) basis. We believe these indices are commonly used by private markets and credit investors to evaluate performance. The PME calculation methodology allows private markets investment performance to be evaluated against a public index and assumes that capital is being invested in, or withdrawn from, the index on the days the capital was called and distributed from the underlying fund managers. The S&P 500 Index is a total return capitalization-weighted index that measures the performance of 500 U.S. large cap stocks. The MSCI World Index is a free float-adjusted market capitalization-weighted index of over 1,600 world stocks that is designed to measure the equity market performance of developed markets. The CS HY II Index, formerly known as the DLJ High Yield Index, is designed to mirror the investable
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universe of the U.S. dollar denominated high yield debt market. Prices for the CS HY II Index are available on a weekly basis. The CS LL Index is an index designed to mirror the investable universe of the U.S. dollar denominated leveraged loan market. Loans must be rated 5B or lower and the index frequency is monthly.
Our IRR represents the pooled IRR for all discretionary investments for the period from inception to September 30, 2023. Gross IRR is presented net of management fees, carried interest and expenses charged by the general partners of the underlying investments, but does not include our management fees, carried interest or expenses. Our gross IRR would decrease with the inclusion of our management fees, carried interest and expenses. Net IRR is net of all management fees, carried interest and expenses charged by the general partners of the underlying investments, as well as by us. Net IRR figures for our funds do not include cash flows attributable to the general partner. Note that secondary portfolio IRRs can be initially impacted by purchase discounts (or premiums) paid at the closing of a transaction, the impact of which will diminish over time.
“Capital Invested” refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital calls. “Multiple” represents total distributions from underlying investments to the fund plus the fund’s market value divided by total contributed capital. “Gross Multiple” is presented net of management fees, carried interest and expenses charged by the fund managers of the underlying investments.
Specialized fund and pre-fund performance does not include ten funds-of-funds that have investor-specific investment guidelines.
Many of our specialized funds utilize revolving credit facilities, which provide capital that is available to fund investments or pay partnership expenses and management fees. Borrowings may be paid down from time to time with investor capital contributions or distributions from investments. The use of a credit facility affects the fund’s return and magnifies the performance on the upside or on the downside.
Liquidity and Capital Resources
Historical Liquidity and Capital Resources
We have managed our historical liquidity and capital requirements primarily through the receipt of management and advisory fee revenues. Our primary cash flow activities involve: (1) generating cash flow from operations, which largely includes management and advisory fees; (2) realizations generated from our investment activities; (3) funding capital commitments that we have made to certain of our specialized funds and customized separate accounts; (4) making dividend payments to our stockholders and distributions to holders of HLA units; and (5) borrowings, interest payments and repayments under our outstanding debt. As of December 31, 2023 and March 31, 2023, our cash and cash equivalents were $164.5 million and $99.7 million, respectively.
Our material sources of cash from our operations include: (1) management and advisory fees, which are collected monthly or quarterly; (2) incentive fees, which are volatile and largely unpredictable as to amount and timing; and (3) fund distributions related to investments in our specialized funds and certain customized separate accounts that we manage. We use cash flow from operations primarily to pay compensation and related expenses, general, administrative and other expenses, debt service, capital expenditures and distributions to our owners and to fund commitments to certain of our specialized funds and customized separate accounts. If cash flows from operations were insufficient to fund distributions to our owners, we expect that we would suspend paying such distributions.
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We have also accessed the capital markets and used proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement.
Finally, we have used available cash and borrowings from our Loan Agreements (defined below) to make strategic investments in companies that seek to offer technology-driven private markets data and wealth management solutions.
Loan Agreements
We maintain a Term Loan and Security Agreement (as amended, the “Term Loan Agreement”), Revolving Loan and Security Agreement (as amended, the “Revolving Loan Agreement”), a 2020 Multi-Draw Term Loan and Security Agreement (as amended, the “2020 Multi-Draw Term Loan Agreement”) and a 2022 Multi-Draw Term Loan and Security Agreement (the “2022 Multi-Draw Term Loan Agreement” and, together with the Term Loan Agreement, Revolving Loan Agreement and 2020 Multi-Draw Term Loan Agreement, the “Loan Agreements”) with JPMorgan Chase & Co. (“JPMorgan”), as successor to First Republic Bank. In early May 2023, JPMorgan announced its purchase of First Republic Bank after that bank’s failure. The purchase included the Loan Agreements. The Loan Agreements are cross-collateralized and cross-defaulted and the aggregate principal amount of loans that may be outstanding under all of the Loan Agreements is subject to an aggregate cap of $325 million (the “Cap”).
The 2022 Multi-Draw Term Loan Agreement has a maturity date of October 1, 2029 and the interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 3.00%. As of December 31, 2023, we did not have an outstanding balance under the 2022 Multi-Draw Term Loan Agreement. We are entitled to request term loans not to exceed $75 million in the aggregate, subject to the Cap, through September 30, 2025.
The Term Loan Agreement has a maturity date of January 1, 2030 and the interest rate is a floating per annum rate equal to the prime rate minus 1.25% subject to a floor of 3.00%. As of December 31, 2023, we had an outstanding balance of $98 million under the Term Loan Agreement. We were entitled to request additional uncommitted term advances not to exceed $25 million in the aggregate, subject to the Cap, through December 31, 2023.
The Revolving Loan Agreement provides that the aggregate outstanding balance will not exceed $50 million, subject to the Cap, and has a maturity date of March 24, 2025. The interest rate is a floating per annum rate equal to the prime rate minus 1.50% subject to a floor of 2.25%. As of December 31, 2023, we did not have an outstanding balance under the Revolving Loan Agreement.
The 2020 Multi-Draw Term Loan Agreement provides for a term loan in the aggregate principal amount of $100 million with a maturity date of July 1, 2030. The interest rate is a fixed per annum rate of 3.50%. As of December 31, 2023, we had an outstanding balance of $100 million under the 2020 Multi-Draw Term Loan Agreement.
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The Loan Agreements contain covenants that, among other things, limit HLA’s ability to incur indebtedness, transfer or dispose of assets, merge with other companies, create, incur or allow liens, make investments, pay dividends or make distributions, engage in transactions with affiliates and take certain actions with respect to management fees. The Loan Agreements also require HLA to maintain, among other requirements, (i) a specified amount of management fees, (ii) a specified amount of adjusted EBITDA, as defined in the Loan Agreements, and (iii) a specified minimum tangible net worth, during the term of each of the Loan Agreements. The obligations under the Loan Agreements are secured by substantially all the assets of HLA. As of December 31, 2023 and March 31, 2023, the principal amount of debt outstanding equaled $198 million and $214 million, respectively. We had $128 million in availability under the Loan Agreements as of December 31, 2023.
Future Sources and Uses of Liquidity
We generate significant cash flows from operating activities. We believe that we will be able to continue to meet our short-term and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents and our ability to obtain future external financing. However, the availability of capital from the Loan Agreements and our cash balances are exposed to the credit risks of the financial institutions at which they are held. If events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about any such events, occur, our ability to access existing cash, cash equivalents and investments, or to access existing or enter into new banking arrangements or facilities to pay operational and other costs, may be threatened or lost.
We believe we will also continue to evaluate opportunities, based on market conditions, to access the capital markets and use proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement. The timing or size of any potential transactions will depend on a number of factors, including market opportunities and our views regarding our capital and liquidity positions and potential future needs. There can be no assurance that any such transactions will be completed on favorable terms, or at all.
We will also continue to evaluate opportunities to make strategic investments in companies that seek to offer technology-driven private markets data and wealth management solutions.
In November 2018, we authorized a program to repurchase up to 6% of the outstanding shares of our Class A common stock, not to exceed $50 million (the “Stock Repurchase Program”). The Stock Repurchase Program does not include specific price targets or timetables and may be suspended or terminated by us at any time. We intend to finance the purchases using available working capital and/or external financing. The Stock Repurchase Program expires 12 months after the date of the first acquisition under the authorization. We have not repurchased any shares of our Class A common stock under the Stock Repurchase Program, and therefore the full purchase authority remains available. Our board of directors periodically reviews the Stock Repurchase Program and most recently re-approved it in December 2023.
We expect that our primary short-term and long-term liquidity needs will comprise cash to: (1) provide capital to facilitate the growth of our business; (2) fund commitments to our investments; (3) pay operating expenses, including cash compensation to our employees; (4) make payments and/or exercise early termination buyout rights under the tax receivable agreement; (5) fund capital expenditures and make strategic investments; (6) pay interest and principal due on our outstanding debt; (7) pay income taxes; (8) make dividend payments to our stockholders and distributions to holders of HLA units in accordance with our distribution policy; (9) settle exchanges of HLA membership interests by direct
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and indirect owners of HLA pursuant to our exchange agreement from time to time; and (10) fund purchases of our Class A common stock pursuant to the Stock Repurchase Program.
We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries and our broker-dealer subsidiary. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of December 31, 2023 and March 31, 2023, we were required to maintain $5.0 million and $4.8 million, respectively, in liquid net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We are in compliance with these regulatory requirements.
Dividend Policy
The declaration and payment by us of any future dividends to holders of our Class A common stock is at the sole discretion of our board of directors. We intend to continue to pay a cash dividend on a quarterly basis. Subject to funds being legally available, we will cause HLA to make pro rata distributions to its members, including us, in an amount at least sufficient to allow us to pay all applicable taxes, to make payments under the tax receivable agreement, and to pay our corporate and other overhead expenses.
Tax Receivable Agreement
We expect that periodic exchanges of membership units of HLA by members of HLA will result in increases in the tax basis in our share of the assets of HLA that otherwise would not have been available. These increases in tax basis are expected to increase our depreciation and amortization deductions and create other tax benefits and therefore may reduce the amount of tax that we would otherwise be required to pay in the future. The tax receivable agreement will require us to pay 85% of the amount of these and certain other tax benefits, if any, that we realize (or are deemed to realize in the case of an early termination payment, a change in control or a material breach by us of our obligations under the tax receivable agreement) to the pre-IPO members of HLA.
Cash Flows
Nine Months Ended December 31, 2023 and 2022

| Nine Months Ended December 31,
($ in thousands) | 2023 |  | 2022
Net cash provided by operating activities | $ | 99,140 |  |  | $ | 213,371 |
Net cash (used in) provided by investing activities | $ | (93,997) |  |  | $ | 201,565 |
Net cash provided by (used in) financing activities | $ | 47,740 |  |  | $ | (338,038) |

Operating Activities
Cash flows from our operating activities generally reflect our earnings in the respective periods after adjusting for significant non-cash activity, including equity in income (loss) of investees, equity-based compensation, lease expense and depreciation and amortization, all of which are included in earnings. For the nine months ended December 31, 2023 and 2022, our net cash provided by operating activities was driven primarily by receipts of management fees and incentive fees, partially offset by payment of operating expenses, which includes compensation and benefits and general, administrative and other expenses. Additionally, the nine months ended December 31, 2023 included the deconsolidation of a previously consolidated fund.
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Investing Activities
Cash flows from our investing activities generally reflect cash used for acquisitions, fixed asset purchases and contributions to and distributions from our funds. For the nine months ended December 31, 2023 and 2022, our net cash (used in) provided by investing activities was driven primarily by purchases of furniture, fixtures and equipment, net contributions to our funds and purchases of non-fund investments. Additionally, the nine months ended December 31, 2023 included purchases of investments by our previously consolidated fund, and the nine months ended December 31, 2022 included the sale of investments held in trust by our consolidated SPAC due to its liquidation and redemption of its Class A common stock from its holders.
Financing Activities
Cash flows from our financing activities generally reflect cash received from debt and equity financings, payments to owners in the form of dividends, distributions and repurchases of shares and scheduled repayments of our outstanding debt. For the nine months ended December 31, 2023 and 2022, our net cash provided by (used in) financing activities was driven primarily by dividends paid to stockholders, distributions to HLA members, and repayment of borrowings under our Revolving Loan Agreement. Additionally, the nine months ended December 31, 2023 included contributions from non-controlling interest in our previously consolidated fund, and the nine months ended December 31, 2022 included borrowings under our Term Loan Agreement and the redemption by our consolidated SPAC of its Class A common stock from its holders.
Off-Balance Sheet Arrangements
There have been no material changes in our off-balance sheet arrangements discussed in our 2023 Form 10-K.
Contractual Obligations, Commitments and Contingencies
There have been no material changes outside of the ordinary course of business in our contractual obligations, commitments and contingencies from those specified in our 2023 Form 10-K.
Critical Accounting Policies
The preparation of our condensed consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a more complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our condensed consolidated financial statements, please refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K.
Recent Accounting Pronouncements
Information regarding recent accounting developments and their impact on our results can be found in Note 2, “Summary of Significant Accounting Policies” in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
In the normal course of business, we are exposed to a broad range of risks inherent in the financial markets in which we participate, including price risk, interest-rate risk, access to and cost of financing risk, liquidity risk, counterparty risk and foreign exchange-rate risk. Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies, fundraising practices or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit or financial market dislocations.
Our predominant exposure to market risk is related to our role as general partner or investment manager for our specialized funds and customized separate accounts and the sensitivities to movements in the fair value of their investments, which may adversely affect our equity in income of investees. Since our management fees are generally based on commitments or net invested capital, our management fee and advisory fee revenue is not significantly impacted by changes in investment values.
Fair value of the financial assets and liabilities of our specialized funds and customized separate accounts may fluctuate in response to changes in the value of securities, foreign currency exchange rates, commodity prices and interest rates. The impact of investment risk is as follows:
•Equity in income of investees changes along with the realized and unrealized gains of the underlying investments in our specialized funds and certain customized separate accounts in which we have a general partner commitment. Our general partner investments include thousands of unique underlying portfolio investments with no significant concentration in any industry or country outside of the United States.
•Management fees from our specialized funds and customized separate accounts are not significantly affected by changes in fair value as the management fees are not generally based on the value of the specialized funds or customized separate accounts, but rather on the amount of capital committed or invested in the specialized funds or customized separate accounts, as applicable.
•Incentive fees from our specialized funds and customized separate accounts are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the specialized fund’s or customized separate account’s assets prior to realization. Minor decreases in underlying fair value would not affect the amount of deferred incentive fee revenue subject to clawback.
Exchange Rate Risk
Several of our specialized funds and customized separate accounts hold investments denominated in non-U.S. dollar currencies that may be affected by movements in the rate of exchange between the U.S. dollar and foreign currency, which could impact investment performance. The currency exposure related to investments in foreign currency assets is limited to our general partner interest, which is typically one percent of total capital commitments. We do not possess significant assets in foreign countries in which we operate or engage in material transactions in currencies other than the U.S. dollar. Therefore, changes in exchange rates are not expected to materially impact our financial statements.
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Interest Rate Risk
As of December 31, 2023, we had $197.5 million in borrowings outstanding under our Loan Agreements. The annual interest rate on the Term Loan Agreement, which is at the prime rate minus 1.25%, subject to a floor of 3.00%, was 7.25% as of December 31, 2023.
Based on the floating rate component of our Loan Agreements payable as of December 31, 2023, we estimate that a 100 basis point increase in interest rates would result in increased interest expense of approximately $1.0 million over the next 12 months.
Credit Risk
We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In such agreements, we depend on the respective counterparty to make payment or otherwise perform. We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Our management, including our Co-Chief Executive Officers and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023. Our disclosure controls and procedures are intended to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Co-Chief Executive Officers and Chief Financial Officer, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures were effective at December 31, 2023.
Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting during the quarter ended December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, we may be subject to various legal, regulatory and/or administrative proceedings from time to time. Although there can be no assurance of the outcome of such proceedings, in the opinion of management, we do not believe it is probable that any pending or, to our knowledge, threatened legal proceeding or claim would individually or in the aggregate materially affect our condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table provides information about our repurchase activity with respect to shares of our Class A common stock for the quarter ended December 31, 2023:

Period |  | Total Number of Shares Purchased(1) |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
October 1–31, 2023 |  | — |  |  | $ | — |  |  | — |  |  | $ | 50,000,000 |
November 1–30, 2023 |  | 505 |  |  | $ | 90.30 |  |  | — |  |  | $ | 50,000,000 |
December 1–31, 2023 |  | — |  |  | $ | — |  |  | — |  |  | $ | 50,000,000 |
Total |  | 505 |  |  | $ | 90.30 |  |  | — |  |  | $ | 50,000,000 |

(1) Represents shares of Class A common stock tendered by employees as payment of taxes withheld on the vesting of restricted stock granted under HLI’s Amended and Restated 2017 Equity Incentive Plan.
(2) On November 6, 2018, we announced that our board of directors authorized the Stock Repurchase Program to repurchase, in the aggregate, up to 6% of the outstanding shares of our Class A common stock as of the date of the authorization, not to exceed $50 million. The authorization provides us the flexibility to repurchase shares in the open market or in privately negotiated transactions from time to time, based on market conditions and other factors. We have not repurchased any of our Class A common stock under the Stock Repurchase Program, so the full purchase authority remains available under this program, which expires 12 months after the date of the first acquisition under the authorization. Our board of directors most recently re-approved the Stock Repurchase Program in December 2023.
Item 5. Other Information
Trading Arrangements
During the three months ended December 31, 2023, none of the Company’s directors or officers adopted, terminated or modified any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K).
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Item 6. Exhibits

|  |  | Incorporated By Reference | Filed Herewith
Exhibit No. |  | Description of Exhibit | Form | Exhibit | Filing Date | File No.
3.1 |  | Amended and Restated Certificate of Incorporation of Hamilton Lane Incorporated | 8-K | 3.1 | 9/12/23 | 001-38021 |
3.2 |  | Amended and Restated Bylaws of Hamilton Lane Incorporated | 8-K | 3.2 | 9/12/23 | 001-38021 |
31.1 |  | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  | X
31.2 |  | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  | X
31.3 |  | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  | X
32‡ |  | Certifications of Principal Executive Officers and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |
101 |  | The following financial information from our Quarterly Report on Form 10-Q for the quarter ended December 31, 2023 formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income; (iii) the Condensed Consolidated Statements of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; (v) Notes to Condensed Consolidated Financial Statements; and (vi) certain information under Part II, Item 5, “Other Information.” |  |  |  |  | X
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL document) |  |  |  |  | X

‡ Furnished herewith.

| 49 |

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 6th day of February 2024.

HAMILTON LANE INCORPORATED
By: | /s/ Jeffrey Armbrister
| Name: Jeffrey Armbrister
| Title: Chief Financial Officer and Treasurer (Principal Financial Officer and Authorized Signatory)