Executive Summary

Q3 FY2025 delivered strong growth in core fee revenues with Management and Advisory Fees up 11% year over year to $126.3M; AUM reached $134.7B (+12% YoY) and fee‑earning AUM rose to $71.0B (+13% YoY) .
GAAP EPS was $1.32 on GAAP net income of $53.0M; Non‑GAAP EPS was $1.25 and Adjusted EBITDA reached $92.7M with a 55% quarterly margin; FRE margin was stable at 43% .
Incentive fees accelerated to $41.98M in the quarter (vs. $11.62M in Q3 FY2024), supported by realizations in secondary funds and monetization activity; unrealized carry increased to ~$1.293B (+15% YoY) .
The firm declared a $0.49 quarterly dividend and reiterated a targeted FY2025 dividend of $1.96 (+10% YoY), continuing capital returns while maintaining modest leverage ($292M debt) and growing cash ($286M) .

What Went Well and What Went Wrong

What Went Well

Fee growth and margins: Management and Advisory Fees grew 11% YoY to $126.3M with FRE margin at 43%, reflecting mix shift toward higher‑fee specialized funds and evergreen products .
Secondary/incentive momentum: Quarterly incentive fees rose to $41.98M, and unrealized carry climbed to ~$1.293B (+15% YoY), indicating robust monetization potential across 3,000+ assets and 110+ funds .
Distribution and technology strategy: Evergreen AUM neared $9.5B with ~294M average monthly net inflows in Q4 CY2024; management emphasized tokenization partnerships (e.g., Republic) to enhance retail access and scalability .

Quotes:

“Our total fee‑earning AUM stood at approximately $71 billion and grew $7.9 billion or 13% relative to the prior year period… our blended fee continues to benefit from the shift… toward higher fee rate specialized funds, most notably our Evergreen products” .
“Monthly net flows remain strong as we averaged nearly $294 million for the fourth calendar quarter of 2024” .
“We intend to launch digital blockchain solutions for retail investors, featuring low investment minimums and the potential for increased liquidity” .

What Went Wrong

Expense pressure: Total expenses YTD increased 31% to $282.5M, driven by compensation (including equity‑based comp) and G&A tied to revenue‑related expenses such as third‑party commissions on U.S. evergreen distribution .
Equity‑based comp step-up: Run‑rate stock‑based comp rose to about $30M per year, with the quarterly impact starting this quarter and expected to persist for five years, creating a sustained headwind to FRE expansion near‑term .
Commission drag on near-term profitability: Management highlighted that early wirehouse inflows are “not margin accretive” in year one, tempering immediate margin leverage despite growth; margins expected to be more “stable” near term rather than expanding .

Financial Results

Metric	Q3 FY2024	Q1 FY2025	Q2 FY2025	Q3 FY2025
Management and Advisory Fees ($USD Millions)	$113.641	$140.0	$119.8	$126.282
GAAP EPS ($USD)	$0.51	$1.47	$1.37	$1.32
Non-GAAP EPS ($USD)	$0.71	$1.51	N/A	$1.25
FRE Margin (%)	40%	43%	43%	43%

Segment breakdown (Management and Advisory Fees Q3 FY2025):

Segment	Q3 FY2024 ($000s)	Q3 FY2025 ($000s)	YoY Change
Specialized Funds	$64,871	$75,764	+17%
Customized Separate Accounts	$32,943	$33,926	+3%
Advisory	$6,085	$5,681	-7%
Reporting/Monitoring/Data & Analytics	$6,479	$7,102	+10%
Distribution Management	$1,512	$1,002	-34%
Fund Reimbursement Revenue	$1,751	$2,807	+60%
Total	$113,641	$126,282	+11%

KPIs and balance sheet:

KPI	Q1 FY2025	Q2 FY2025	Q3 FY2025
AUM ($USD Billions)	$129.7	$131.4	$134.743
Fee‑Earning AUM ($USD Billions)	$67.7	$69.740	$70.994
Unrealized Carried Interest ($USD Billions)	~$1.2	$1.253	$1.293

Balance Sheet Snapshot (Dec 31, 2024)	Amount
Cash and Cash Equivalents ($USD Millions)	$285.553
Debt ($USD Millions)	$292.024

Additional earnings detail (Q3 FY2025):

Incentive fees: $41.979M vs $11.623M Q3 FY2024 .
Total revenues: $168.261M vs $125.264M Q3 FY2024 .
GAAP net income attributable to HLI: $52.972M vs $19.506M Q3 FY2024 .
Adjusted EBITDA: $92.678M, margin 55% .
Fee Related Earnings: $54.230M, margin 43% .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share (FY total)	FY2025	Target $1.96 (Q1/Q2 reaffirmation)	Target $1.96; quarterly dividend $0.49 (Q3)	Maintained
Equity‑based compensation run‑rate	FY2025–FY2029	~$30M per year (Q2 call)	~$30M per year (Q3 call)	Maintained
FRE margin outlook	Near‑term	Around 43% (operational cadence)	Stability near‑term; commission and equity comp headwinds temper expansion	Maintained qualitative

Note: No formal quarterly or annual guidance ranges provided for revenue, EPS, OpEx, OI&E, or tax rate. Dividend and expense cadence were discussed qualitatively and reaffirmed .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY25, Q2 FY25)	Current Period (Q3 FY25)	Trend
Evergreen/retail flows	Q1: 3 funds, ~$7.5B AUM, >$330M avg monthly net inflows in Q2 CY; wirehouse net inflows ~$1.2B since launch	Q3: ~$9.5B AUM; ~$294M avg monthly net inflows in Q4 CY; expectation of non‑linear growth; minor redemptions as platform matures	Up but variable
Tokenization/digital access	Q1: Daphne integration into Cobalt to streamline data ingestion	Q3: Republic partnership to launch blockchain‑based retail offerings in 1H 2025	Expanding
Fee rate/mix shift	Q1/Q2: Blended fee rate >60 bps; mix shift toward specialized funds and evergreen	Q3: Reinforced >60 bps excluding retro fees; ongoing mix benefits	Positive
Commission costs on distribution	Q2: Third‑party commissions rising with wirehouse expansion	Q3: Near‑term margin “stability” due to commissions; longer‑term dilution expected to ease with scale	Near‑term headwind
Equity‑based comp	Q2: ~$30M/year for 5 years; price targets $150/$190/$230; potential ~2% dilution if all tranches vest	Q3: Full quarterly impact started; ~$30M/year reiterated	Ongoing headwind
Regulatory/401(k) access	Q2: Discussion of retirement channel	Q3: 401(k) access requires valuation/regulatory changes; uncertain timing	Watchful

Management Commentary

Strategy and culture: “Our assets are our people… Attracting and retaining talent is essential to our business… being recognized as a Best Place to Work… helps us attract top talent” .
Mix shift and fee rates: “When we went public in 2017, our blended fee rate was 57 basis points. Today, it stands at over 60 basis points, excluding the impact from retro fees” .
Evergreen growth: “As of December 31, 2024, total AUM across our 5 existing offerings… stood at nearly $9.5 billion… averaged nearly $294 million [monthly net inflows] for the fourth calendar quarter” .
Expense discipline and technology leverage: “Tasks historically done by people… increasingly [done] faster, more efficiently by technology… examining insurance, vendor relationships… to gain cost efficiency” .

Q&A Highlights

Evergreen adoption by SMAs and pricing: Investors value secondaries/co‑investments for J‑curve mitigation; some willingness to pay higher fund fees; expect eventual fee compression in evergreen as sector matures .
Competitive landscape in wealth channels: Scale, brand, head start, and technology (tokenization) seen as key advantages amid rising competition; focus remains on net inflows .
Margin outlook: Near‑term stability due to equity‑based comp and commissions; longer‑term opportunity for expansion as business scales and commission mix normalizes .
Equity‑based comp specifics: ~$30M per year for five years; tranche price targets $150/$190/$230; first two achieved; vesting requires service period .
Northern Trust partnership: Cobalt integrated for institutional analytics/benchmarking; monetization via SaaS; potential expansion to wealth channel .

Estimates Context

S&P Global consensus for EPS/revenue was not available at the time of this analysis due to access limits. As a result, we cannot quantify beats/misses versus Wall Street estimates for Q3 FY2025 in this report (values would have been retrieved from S&P Global).

Key Takeaways for Investors

Durable fee growth with margin stability: Mix shift into specialized funds/evergreen and stable FRE margin (43%) underscores recurring profitability even as distribution commissions and equity‑based comp weigh on near‑term expansion .
Incentive fee engine strengthening: Significant quarterly incentive fees and higher unrealized carry (~$1.293B) point to continued monetization potential, especially from secondary strategies .
Retail/evergreen scaling: Net inflows and product breadth (including infrastructure Evergreen) support multi‑year AUM compounding; expect non‑linear monthly flows but strong annualized growth .
Technology leverage and partnerships: Data/analytics (Cobalt), Daphne integration, Northern Trust, and Republic partnership are strategic moats, enhancing efficiency and opening retail channels (tokenization) .
Capital returns with balance sheet flexibility: $0.49 dividend (target $1.96 FY) maintained alongside modest leverage and ample liquidity to seed new products .
Watch near‑term headwinds: Equity‑based comp run‑rate (~$30M/yr for 5 years) and third‑party commissions temper immediate margin expansion; management signals stability rather than growth in margins near‑term .
No formal revenue/EPS guidance: Trading setups hinge on continued fee growth/incentive realizations and retail flows; monitor quarterly inflow momentum and any regulatory developments impacting retirement channel access .

Hamilton Lane INC (HLNE)·Q3 2025 Earnings Summary