Hamilton Lane INC (HLNE)·Q4 2025 Earnings Summary

Executive Summary

• Q4 FY25 delivered double-digit top-line growth and solid profitability: total revenues rose 12% YoY to $197.97M, driven by higher management/advisory fees and a step-up in incentive fees; Non-GAAP EPS was $1.21, and diluted GAAP EPS was $1.23 . Versus S&P Global consensus, HLNE beat on revenue ($170.69M*) and EPS ($1.17*) for Q4; it also beat both in Q3 (revenue $157.95M*, EPS $1.10*) while narrowly missing revenue in Q2 ($154.17M* vs. $150.00M actual*) .*
• Structural change creates more “recurring” performance revenue: the U.S. evergreen fund moved to a quarterly high-watermark methodology for performance fees (FRPR), triggering a $58M catch-up and inclusion of FRPR in FRE, while excluding stock-based comp from FRE going forward; management expects FRE margins in the high-40% range under the updated methodology .
• AUM/FEAUM growth and wealth momentum: AUM reached $138.3B (+11% YoY); fee-earning AUM reached $72.0B (+10% YoY). Evergreen AUM was nearly $10.7B at quarter-end with ~$1B of net inflows in calendar Q1 2025 and minimal redemptions; May flows “look very strong” per management .
• Capital return: the Board raised the dividend target by 10% to $2.16 annually ($0.54 quarterly declared; record date June 20; payable July 7) .
• Potential stock catalysts: recurring FRPR in evergreen vehicles, accelerating wealth flows, and stable high-40% FRE margins; watch distribution expense drag and SMA growth re-acceleration as exits normalize .

What Went Well and What Went Wrong

• What Went Well

  • High-watermark FRPR launched in U.S. evergreen fund; $58M of FRPR recognized for performance since inception; future evergreen launches expected to use the same structure .
  • Wealth momentum: “For calendar Q1 of 2025, we saw nearly $1 billion of net inflows across the [evergreen] platform… minimal redemptions,” and “May looks very strong… we are not seeing a change in redemptions” .
  • Pricing/mix tailwind: “Our blended fee rate continues to benefit from the shift… towards higher fee-rate specialized funds, most notably our evergreen products… over 60 basis points” (ex-retro) .

• What Went Wrong

  • Expense intensity: Q4 compensation and benefits rose 23% YoY; G&A rose 20% YoY, with distribution commissions in G&A tied to wirehouse channels .
  • YoY pretax down, equity income softness: Income before taxes fell 9% YoY to $88.3M as “Equity in income of investees” slid 75% YoY to $3.6M and other income items normalized .
  • Evergreen carry balance declined QoQ due to realization: Evergreen allocated carried interest fell from $221.7M at 12/31 to $157.5M at 3/31, reflecting recognition of FRPR; mgmt noted the U.S. evergreen unrealized carry was “removed and realized” .

Financial Results

• Margins

• Management & Advisory Fees – Mix (Three Months Ended March 31)

• Incentive Fees – Mix (Three Months Ended March 31)

• KPIs

Notes: Cells marked with an asterisk are S&P Global consensus values. Values retrieved from S&P Global.*

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “After… the shareholder vote, we were then able to recognize and receive $58 million of fee-related performance revenues based on performance from inception of the fund to March 2025. Going forward, these fees will now be called fee-related performance revenues (FRPR)… included in our incentive fees. We will also be including FRPR as part of our fee related earnings metric.”
• “Nearly one-third of [advisor] respondents plan to allocate 20% or more to the asset class… meaning that a total of nearly 60%… plan to allocate 10% or more to private market investments in 2025.”
• “May looks very strong… We are not seeing a change in redemption… [volatility] is allowing advisors to… reduce public equity exposure… and make the move to the private market.”
• “Our blended fee rate continues to benefit from the shift of fee-earning AUM towards higher fee-rate specialized funds, most notably our evergreen products… over 60 basis points.”
• “We continue to… lean in hard on the technology side. 73 Strings is the most recent example… AI-powered… streamlines middle office processes… alongside Goldman Sachs, Blackstone, Golub Capital, and Broadhaven Ventures.”

Q&A Highlights

• Margins and methodology: Management expects FRE margins in the high-40% under the updated approach (ex-SBC, includes FRPR); quarter-to-quarter variability remains, but annual stability is the focus .
• Distribution economics: Wirehouse distribution fees remain predominantly upfront (minor tails), pressuring early-year margin but tied to growth; no major change in structure .
• Separate accounts: SMA growth is most impacted by macro and slow exits; pipeline is robust and should flow faster as markets normalize; management is prioritizing evergreen build-out near term .
• Wealth flows: Minimal redemptions and strong net inflows persisted into May despite tariff headlines; advisors using volatility to reallocate into private markets .
• Institutional adoption of evergreen: Early but growing (150 institutions, >15% of capital); equal fee rates in evergreen mitigate classic fee compression concerns; seen as complementary to drawdown funds .

Estimates Context

• Q4 FY25: Revenue $197.97M vs. $170.69M consensus*; Non-GAAP/Primary EPS $1.21 vs. $1.17 consensus* — both beats .*
• Q3 FY25: Revenue $168.26M vs. $157.95M consensus*; Non-GAAP/Primary EPS $1.25 vs. $1.10 consensus* — beats .*
• Q2 FY25: Revenue $150.00M actual* vs. $154.17M consensus* — slight miss; EPS $1.07 actual* vs. $1.09 consensus* — roughly in line/slight miss.*

Implications: The new high-watermark FRPR structure increases the recurrence and visibility of incentive revenues (positive for EPS/FRE estimate trajectories), while a small reduction in U.S. evergreen fee rates slightly trims management fee yield; net, the setup supports upward revisions to out-year FRE/EPS if wealth flows remain robust and SMA deployment normalizes .

Notes: Consensus values marked with an asterisk are S&P Global data. Values retrieved from S&P Global.*

Key Takeaways for Investors

• Evergreen FRPR shift is a structural positive, creating recurring performance revenue and lifting FRE (with methodology recast) — a key multiple driver .
• Wealth channel momentum remains strong with minimal redemptions and accelerating net inflows; management sees continued product expansion (infrastructure, secondaries, venture) .
• Mix supports pricing: higher-fee specialized funds (evergreen) continue to raise the blended fee rate (>60 bps ex-retro), aiding topline growth .
• Margins: Despite wirehouse distribution expense and higher SBC, management targets stable high-40% FRE margins post-changes — supportive for estimate stability .
• Watch SMA re-acceleration as exits normalize; contracted commitments provide latent FEAUM growth .
• Balance sheet remains a strategic asset (seed capital for evergreen, tech investments such as 73 Strings) with modest leverage ($290M debt at 3/31/25) .
• Near-term trading lens: Emphasis on sustained net flows, cadence of FRPR accruals, and expense discipline vs. distribution fees; medium-term thesis centers on wealth penetration, evergreen scale, and recurring performance revenue .

Disclosures: All factual statements and figures from company filings and transcripts are cited inline. S&P Global consensus values are marked with an asterisk (*) and labeled “Values retrieved from S&P Global.”