What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-05-27 compared with 2020-05-28 · 291 added, 237 removed, 912 unchanged (37% of the section changed)

45 unchanged sentences

Recognition of Net Deferred Tax Asset from Equity Offering and Unit Exchange

Description of the Matter As further discussed in Note 12 to the consolidated financial statements, in connection with the Company’s equity offering and unit exchange during the current year (the “Transaction”), the Company recorded a net deferred tax asset of $37.4 million.

As further discussed in Note 2 to the consolidated financial statements, the resulting basis differences arising from the Transaction represent a temporary difference for which the Company records a deferred tax asset if it is more likely than not the deferred tax asset will be realized.

Realization of this deferred tax asset is dependent upon, among other things, the future tax deductions of tax basis step-ups related to the Transaction.

Auditing the Company’s recognition of the net deferred tax asset related to the Transaction is especially challenging, as the Company’s determination of the tax basis step-ups and related future tax deductions requires the application of complex tax laws and regulations for partnerships and the identification of historical basis differences.

Description of the Matter As further discussed in Note 11 to the consolidated financial statements, in connection with the Company’s equity offerings and unit exchanges during the current year (the “Transactions”), the Company recorded a net deferred tax asset of $121.1 million.

As further discussed in Note 2 to the consolidated financial statements, the resulting basis differences arising from the Transactions represent a temporary difference for which the Company records a deferred tax asset if it is more likely than not the deferred tax asset will be realized.

Realization of this deferred tax asset is dependent upon, among other things, the future tax deductions of tax basis step-ups related to the Transactions.

Auditing the Company’s recognition of the net deferred tax asset related to the Transactions is especially challenging, as the Company’s determination of the tax basis step-ups and related future tax deductions requires the application of complex tax laws and regulations for partnerships and the identification of historical basis differences.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s net deferred tax asset recognition process, including controls over management’s review of the determination of the tax basis step-ups and related future tax deductions and the identified historical basis differences described above.

To test the recognition of the net deferred tax asset resulting from the Transaction, we involved a specialist and performed procedures that included, among others, evaluating the technical merit of the Company’s determination of the tax basis step-ups and the related future tax deductions based on relevant tax law and regulations.

To test the recognition of the net deferred tax asset resulting from the Transactions, we involved a specialist and performed procedures that included, among others, evaluating the technical merit of the Company’s determination of the tax basis step-ups and the related future tax deductions based on relevant tax law and regulations.

We also used available tax-related information to evaluate the historical basis differences the Company used in its determination.

39 unchanged sentences

Other assets 17,821 17,675

Assets of consolidated variable interest entities:

Cash and cash equivalents 311 —

Investments held in trust 276,003 —

Investments 4,787 9,988

Other assets 1,214 —

Total assets $ 1,136,519 $ 473,529

Liabilities and Equity

Liabilities, redeemable non-controlling interests and equity

Accounts payable 2,173 1,968

Accrued compensation and benefits 29,415 10,804

Deferred incentive fee revenue 3,704 3,704

Debt 74,524 70,954

Accrued members’ distributions 16,877 5,829

Payable to related parties pursuant to tax receivable agreement 98,956 69,636

Accrued dividend 11,201 8,027

Debt 163,175 74,524

Payable to related parties pursuant to tax receivable agreement 194,764 98,956

Lease liabilities 75,281 10,184

Other liabilities (includes $ 17,381 and $ 13,394 at fair value)

36,122 22,132

Liabilities of consolidated variable interest entities:

Deferred incentive fee revenue — 3,704

Other liabilities 17,310 —

Total liabilities 546,318 236,128

Commitments and Contingencies (Note 15)

Redeemable non-controlling interests 276,000 —

Preferred stock, $ 0.001 par value, 10,000,000 authorized, none issued

4 unchanged sentences

Additional paid-in-capital 150,564 107,727

Accumulated other comprehensive (loss) income ( 78 ) 7

Accumulated other comprehensive loss — ( 78 )

Retained earnings 87,512 47,090

4 unchanged sentences

Total equity 314,201 237,401

Total liabilities and equity $ 473,529 $ 360,591

Total liabilities, redeemable non-controlling interests and equity $ 1,136,519 $ 473,529

See accompanying notes to the consolidated financial statements.

6 unchanged sentences

Incentive fees 31,134 21,437 17,658

Consolidated variable interest entities related:

Incentive fees 21,057 7,691 16,748

Total revenues 341,635 274,048 252,179

1 unchanged sentence

General, administrative and other 49,210 57,481 48,960

Consolidated variable interest entities related:

General, administrative and other 378 — —

Total expenses 185,907 157,619 147,955

4 unchanged sentences

Non-operating income 5,894 6,172 20,915

Consolidated variable interest entities related:

Equity in loss of investees ( 2,123 ) ( 481 ) ( 255 )

Unrealized gains 2,141 — —

Interest expense ( 459 ) — —

Total other income (expense) 37,474 24,315 25,333

2 unchanged sentences

Net income 168,785 126,776 98,997

Income attributable to non-controlling interests in general partnerships 85 564 2,448

(Loss) income attributable to non-controlling interests in general partnerships ( 250 ) 85 564

Income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.

69,720 65,866 64,860

Income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc.

Net income attributable to Hamilton Lane Incorporated $ 98,022 $ 60,825 $ 33,573

11 unchanged sentences

Foreign currency translation 130 ( 159 ) 15

Amounts reclassified to net income:

Realized loss on cash flow hedge — — 922

Total other comprehensive income (loss), net of tax 130 ( 159 ) 15

Comprehensive income $ 168,915 $ 126,617 $ 99,012

Comprehensive income attributable to non-controlling interests in general partnerships 85 564 2,448

Comprehensive (loss) income attributable to non-controlling interests in general partnerships ( 250 ) 85 564

Comprehensive income attributable to non-controlling interests in Hamilton Lane Advisors, L.L.C.

69,772 65,792 64,868

Comprehensive income attributable to redeemable non-controlling interests in Hamilton Lane Alliance Holdings I, Inc.

Total comprehensive income attributable to Hamilton Lane Incorporated $ 98,100 $ 60,740 $ 33,580

3 unchanged sentences

(In Thousands)

Class A Common Stock Class B Common Stock Additional Paid in Capital Retained Earnings Treasury Stock Accumulated Other

Class A Common Stock Class B Common Stock Additional Paid in Capital Retained Earnings Accumulated Other

Comprehensive

4 unchanged sentences

— — — 33,573 — 564 64,860 98,997

Cumulative-effect adjustment from adoption of accounting guidance

— — 411 20 — — 566 997

Other comprehensive income

2 unchanged sentences

— — 2,912 — — — 3,544 6,456

Retirement of treasury stock

— — ( 2,151 ) — 2,151 — — — —

Proceeds received from option exercises

— — 108 — — — — 205 313

Issuance of shares for acquisition

Issuance of shares for contingent compensation payout

1 — 200 — — — 224 425

Repurchase of Class A shares for employee tax withholding

Purchase and retirement of Class A stock for tax withholding

— — ( 2,425 ) — — — ( 2,962 ) ( 5,387 )

7 unchanged sentences

— — — — — — ( 55,893 ) ( 55,893 )

Offering adjustments

4 ( 2 ) 7,681 — — — — ( 7,685 ) ( 2 )

Equity reallocation between controlling and non-controlling interests

Offerings adjustment

4 ( 2 ) 9,589 — — — ( 9,593 ) ( 2 )

Balance at March 31, 2018 $ 22 $ 26 $ 73,829 $ 4,549 $ — $ — $ 7,266 $ 50,382 $ 136,074

Employee Share Purchase Plan share issuance

— — 127 — — — 137 264

Cumulative-effect adjustment from adoption of accounting guidance

Vesting of restricted stock

— — 324 — — — ( 324 ) 0

Other comprehensive income

Equity reallocation between controlling and non-controlling interests

— — ( 2,831 ) — — — 2,831 0

Balance at March 31, 2019 $ 27 $ 24 $ 92,482 $ 17,686 $ 7 $ 5,716 $ 53,780 $ 169,722

Net income — — — 60,825 — 85 65,866 126,776

Other comprehensive loss — — — — ( 85 ) — ( 74 ) ( 159 )

Equity-based compensation — — 3,830 — — — 3,405 7,235

— — 2,912 — — — — 3,544 6,456

Issuance of shares for contingent compensation payout — — 214 — — — 211 425

1 — 200 — — — — 224 425

Purchase and retirement of Class A stock for tax withholding — — ( 3,227 ) — — — ( 2,654 ) ( 5,881 )

— — ( 2,425 ) — — — — ( 2,962 ) ( 5,387 )

Deferred tax adjustment — — 6,526 — — — — 6,526

— — 10,346 — — — — — 10,346

Dividends declared — — — ( 31,421 ) — — — ( 31,421 )

— — — ( 20,456 ) — — — — ( 20,456 )

Capital contributions from (distributions to) non-controlling interests, net — — — — — ( 948 ) — ( 948 )

— — — — — — ( 2,114 ) — ( 2,114 )

Member distributions — — — — — — ( 36,116 ) ( 36,116 )

— — — — — — — ( 55,893 ) ( 55,893 )

Offerings adjustment

4 ( 2 ) 9,589 — — — — ( 9,593 ) ( 2 )

Offering adjustment 3 ( 2 ) 6,367 — — — ( 6,370 ) ( 2 )

Employee Share Purchase Plan share issuance — — 659 — — — 585 1,244

— — 127 — — — — 137 264

Vesting of restricted stock — — 333 — — — ( 333 ) —

— — 324 — — — — ( 324 ) —

Equity reallocation between controlling and non-controlling interests — — 543 — — — ( 543 ) —

— — ( 2,831 ) — — — — 2,831 —

Balance at March 31, 2020 $ 30 $ 22 $ 107,727 $ 47,090 $ ( 78 ) $ 4,853 $ 77,757 $ 237,401

2 unchanged sentences

(In Thousands)

Class A Common Stock Class B Common Stock Additional Paid in Capital Retained Earnings Treasury Stock Accumulated Other

Class A Common Stock Class B Common Stock Additional Paid in Capital Retained Earnings Accumulated Other

Comprehensive

4 unchanged sentences

— — — 98,022 — ( 250 ) 69,720 167,492

Other comprehensive loss

— — — — — ( 85 ) — ( 74 ) ( 159 )

Other comprehensive income — — — — 78 — 52 130

Equity-based compensation

— — 4,415 — — — 2,695 7,110

Issuance of shares for contingent compensation payout

— — 214 — — — — 211 425

Purchase and retirement of Class A stock for tax withholding

8 unchanged sentences

— — — — — — ( 45,416 ) ( 45,416 )

Offering adjustment

3 ( 2 ) 6,367 — — — — ( 6,370 ) ( 2 )

Offerings adjustment 6 ( 5 ) 21,684 — — — ( 21,690 ) ( 5 )

Employee Share Purchase Plan share issuance

— — 900 — — — 547 1,447

Vesting of restricted stock

— — 333 — — — — ( 333 ) —

Accretion of redeemable non-controlling interest — — — ( 14,750 ) — — ( 7,199 ) ( 21,949 )

Equity reallocation between controlling and non-controlling interests

13 unchanged sentences

Change in payable to related parties pursuant to tax receivable agreement 897 ( 346 ) ( 9,778 )

Write-off of deferred financing costs — — 1,657

Equity-based compensation 7,079 7,183 6,382

Equity in income of investees ( 32,389 ) ( 20,731 ) ( 7,457 )

Gain on sale of investments valued under the measurement alternative — ( 4,973 ) ( 11,133 )

Fair value adjustment to investment valued under the measurement alternative ( 6,229 ) ( 1,507 ) —

Equity in income of investees ( 20,250 ) ( 7,202 ) ( 17,102 )

Proceeds received from investments 784 12,761 14,077

Non-cash lease expense 7,376 4,643 —

Other 1,571 789 190

6 unchanged sentences

Accrued compensation and benefits 18,611 ( 987 ) 4,549

Deferred incentive fee revenue — ( 2,541 ) ( 38,921 )

Lease liability 3,105 ( 5,014 ) —

Other liabilities 10,003 556 1,328

Consolidated variable interest entities related:

Unrealized gain on warrants measured at fair value ( 2,141 ) — —

Equity in income of investees 2,123 481 255

Change in deferred incentive fee revenue ( 3,704 ) — ( 2,541 )

Other assets and liabilities ( 667 ) — —

Net cash provided by operating activities $ 188,158 $ 116,373 $ 111,622

1 unchanged sentence

Purchase of furniture, fixtures and equipment $ ( 18,637 ) $ ( 1,978 ) $ ( 5,366 )

Purchase of other investments ( 3,967 ) — —

Purchase of investments valued under the measurement alternative ( 90,500 ) ( 3,967 ) —

Distributions received from investments valued under the measurement alternative 3,072 — —

Proceeds from sales of investments valued under the measurement alternative — 6,419 22,531

Cash paid for acquisition of business — — ( 5,228 )

Cash paid for purchase of intangible assets ( 1,000 ) ( 4,172 ) —

Loan to investee — ( 157 ) ( 944 )

Distributions received from investments 7,687 10,614 16,055

Distributions received from partnerships 31,195 7,687 10,614

Contributions to investments ( 69,911 ) ( 53,732 ) ( 46,048 )

Consolidated variable interest entities related:

Purchase of investments held in trust ( 276,000 ) — —

Net cash used in investing activities $ ( 421,781 ) $ ( 49,900 ) $ ( 19,213 )

Year Ended March 31,

2021 2020 2019

Financing activities:

6 unchanged sentences

Secured financing — 15,750 —

Contributions from non-controlling interest in general partnerships 45 81 276

Distributions to non-controlling interest in general partnerships ( 993 ) ( 2,195 ) ( 5,359 )

Repurchase of Class B common stock ( 5 ) ( 2 ) ( 2 )

4 unchanged sentences

Members’ distributions paid ( 34,368 ) ( 47,368 ) ( 50,649 )

Consolidated variable interest entities related:

Contributions from non-controlling interest in general partnerships 252 45 81

Distributions to non-controlling interest in general partnerships ( 2,644 ) ( 993 ) ( 2,195 )

Proceeds from issuance of Class A units of Hamilton Lane Alliance Holdings I, Inc.

Offering costs paid for issuance of Class A units of Hamilton Lane Alliance Holdings I, Inc.

( 6,027 ) — —

Net cash used in financing activities $ 270,660 $ ( 64,709 ) $ ( 90,210 )

3 unchanged sentences

Cash, cash equivalents and restricted cash at end of year $ 90,377 $ 53,210 $ 51,590

Reconciliation of Cash and Cash Equivalents, Restricted Cash and Cash and Cash Equivalents Held at Consolidated Variable Interest Entities to the Consolidated Statements of Financial Condition:

Cash and cash equivalents $ 87,025 $ 50,124 $ 49,357

Restricted cash 3,041 3,086 2,233

Cash and cash equivalents held at consolidated variable interest entities 311 — —

Total cash and cash equivalents, restricted cash, and cash and cash equivalents held at consolidated variable interest entities $ 90,377 $ 53,210 $ 51,590

See accompanying notes to the consolidated financial statements.

22 unchanged sentences

Given the amount of uncertainty currently regarding the scope and duration of the COVID-19 pandemic, it is currently not possible to predict the precise impact it will have on the Company’s financial statements.

In line with public markets and credit indices, the Company expects its investments in Partnerships and unrecognized carried interest amounts to be adversely impacted, as those

In addition, certain impacts may not be reported in the current quarter

Hamilton Lane Incorporated

1 unchanged sentence

(In thousands, except share and per share amounts)

balances are reported on a three month lag, as discussed below in Accounting for Differing Fiscal Periods.

due to the Company’s investments in partnerships and unrealized carried interest amounts, which are reported on a three month lag, as discussed below in “Accounting for Differing Fiscal Periods” .

Use of Estimates

3 unchanged sentences

The Company performs an analysis to determine whether it is required to consolidate entities, by determining if the Company has a variable interest in each entity and whether that entity is a variable interest entity (“VIE”).

The Company performs the variable interest analysis for all entities in which it has a potential variable interest, which primarily consist of all Partnerships where the Company serves as the general partner or managing member, and general partner entities not wholly owned by the Company.

The Company performs the variable interest analysis for all entities in which it has a potential variable interest, which primarily consist of all entities where the Company serves as the sponsor, general partner or managing member, and general partner entities not wholly owned by the Company.

If the Company has a variable interest in the entity and the entity is a VIE, it will also analyze whether the Company is the primary beneficiary of this entity and whether consolidation is required.

3 unchanged sentences

For entities determined to be VIEs, an evaluation is required to determine whether the Company is the primary beneficiary.

The Company evaluates its economic interests in the entity specifically determining if the Company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance (“the power”) and the obligation to absorb losses or right to receive benefits that could potentially be significant to the VIE (“the benefits”).

The Company evaluates its economic interests in the entity specifically determining if the Company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance (“the power”) and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE (“the benefits”).

When making the determination on whether the benefits received from an entity are significant, the Company considers the total economics of the entity, and analyzes whether the Company’s share of the economics is significant.

The Company utilizes qualitative factors, and, where applicable, quantitative factors, while performing the analysis and the Company has determined that it is not the primary beneficiary of each of the Partnerships, therefore consolidation is not required for those entities.

For the general partner entities that are not wholly owned by the Company that are determined to be VIEs, the Company has determined it is the primary beneficiary since it has the power and the benefits;

therefore, consolidation of these entities is required.

The portion of the consolidated subsidiaries owned by third parties and any related activity is eliminated through non-controlling interests in general partnerships in the Consolidated Balance Sheets and income (loss) attributable to non-controlling interests in general partnerships in the Consolidated Statements of Income.

The Company utilizes qualitative factors, and, where applicable, quantitative factors, while performing the analysis.

VIEs for which the Company is the primary beneficiary have been included in the Company’s consolidated financial statements.

The portion of the consolidated subsidiaries owned by third parties and any related activity is eliminated through non-controlling interests in the Consolidated Balance Sheets and income (loss) attributable to non-controlling interests in the Consolidated Statements of Income.

For entities that are not determined to be VIEs, the Company analyzes whether it has control through a majority voting interest to determine if consolidation is required.

Hamilton Lane Incorporated

1 unchanged sentence

(In thousands, except share and per share amounts)

For entities that are not determined to be VIEs, the Company analyzes whether it has a controlling financial interest to determine whether consolidation is required.

At each reporting date, the Company determines whether any reconsideration events have occurred that require it to revisit the primary beneficiary analysis and will consolidate or deconsolidate accordingly.

13 unchanged sentences

Translation adjustments are included in other comprehensive income (loss) within the consolidated financial statements until realized.

Foreign currency transaction gains and losses are included in general, administrative and other expenses in the Consolidated Statements of Income and were $( 103 ), $ 368 , and $( 92 ) for the years ended March 31, 2020, 2019 and 2018, respectively.

Foreign currency transaction gains(losses) are included in general, administrative and other expenses in the Consolidated Statements of Income and were $ 78 , $( 103 ), and $ 368 for the years ended March 31, 2021, 2020 and 2019, respectively.

Cash, Cash Equivalents and Restricted Cash

5 unchanged sentences

(In thousands, except share and per share amounts)

Investments Held in Trust by Consolidated Variable Interest Entities

Investments held in trust represent an actively-traded money market fund of Hamilton Lane Alliance Holdings I, Inc.

(“HLAH”), a consolidated special purpose acquisition company (“SPAC”), that is invested in U.S.

Treasury securities purchased with funds raised through the initial public offering of the consolidated entity.

Investments held in trust are classified as trading securities and are presented on the balance sheet at fair value at the end of each reporting period.

Gains and losses resulting from the change in fair value of these securities are included in unrealized gains of consolidated variable interest entities on the Consolidated Statements of Income.

The estimated fair values of investments held in the trust account are determined using quoted prices in an active market and therefore are classified in Level 1 of the fair value hierarchy, as described in “Fair Value of Financial Instruments” below.

Fees Receivable

2 unchanged sentences

accordingly, no allowance for doubtful accounts has been established as of March 31, 2021 or 2020.

If accounts become uncollectible, they will be expensed when that determination is made.

Due from Related Parties

12 unchanged sentences

The new standard establishes a right of use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the Consolidated Balance Sheets for all leases with terms longer than 12 months.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statements of Income.

Leases are classified as either finance or operating, with classification affecting the pattern of expense

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

recognition in the Consolidated Statements of Income.

The adoption did not have an impact on the Consolidated Statements of Income as all of the Company’s leases are operating leases, and will continue to be recognized as expense on a straight-line basis.

5 unchanged sentences

Lease ROU assets and lease liabilities are recognized at the commencement date of the lease and measured based on the present value of lease payments over the lease term.

Lease ROU assets include

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives.

Lease ROU assets include initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives.

Generally, the Company’s leases do not provide an implicit rate and as a result, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options.

Some leases have the option to extend for an additional term or terminate early.

Where it is reasonably certain that the Company will exercise the option, the option has been included in the lease term and reflected in the ROU asset and liability.

The Company does not recognize a lease ROU asset or lease liability for short-term leases, which have lease terms of 12 months or less.

14 unchanged sentences

The reporting unit is the reporting level for testing the impairment of goodwill.

If it is determined that it is more likely than not that a reporting unit’s fair value is less than its carrying value or when the quantitative approach is used, a two-step quantitative assessment is performed to (a) calculate the fair value of the reporting unit and compare it to its carrying value, and (b) if the carrying value exceeds its fair value, to measure an impairment loss.

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

impairment loss.

The Company performed the annual impairment assessment as of December 31, 2020 noting that no goodwill impairment existed.

4 unchanged sentences

The carrying amounts of equity method investments are reflected in investments in the Consolidated Balance Sheets.

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

Fair Value of Financial Instruments

9 unchanged sentences

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.

Revenue Recognition

On April 1, 2018, the Company adopted the new Accounting Standards Codification 606, “ Revenue from Contracts with Customers ,” using the modified retrospective method and applied the guidance only to contracts that were not completed as of that date.

As a result, prior period amounts continue to be reported under legacy GAAP.

The adoption did not change the historical pattern of recognizing revenue for management and advisory fees.

Under the new standard, the Company recognizes incentive fee revenue when it concludes that it is probable that a significant reversal in the cumulative amount of incentive fee revenue will not occur.

Additionally, certain reimbursable costs that were previously recorded on a net basis are recorded on a gross basis, which impacts the components of revenues and expenses.

Redeemable Non-Controlling Interest

Redeemable non-controlling interests represent the Class A shares issued by HLAH that are redeemable for cash by the public shareholders in the event of HLAH’s failure to complete a business combination or tender offer.

The redeemable non-controlling interests are initially recorded at their original issue price, net of issuance costs and the initial fair value of separately traded warrants.

The carrying amount was accreted to its full redemption value at March 31, 2021.

Derivative Warrant Liabilities Held by Consolidated Variable Interest Entities

The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives pursuant to ASC 480 and ASC 815-15.

The classification of derivative instruments, including whether

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

such instrument should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Both the public warrants and private placement warrants issued in connection with the initial public offering of HLAH are recognized as derivative liabilities in accordance with ASC 815-40.

Accordingly, the Company recognizes the warrant instruments as liabilities at fair value within other liabilities of consolidated variable interest entities in the Consolidated Balance Sheet.

At each reporting period, the Company adjusts the instruments to fair value with any change in fair value recognized in unrealized gains of consolidated variable interest entities in Consolidated Statement of Income.

The fair value of the public warrants have been measured based on the listed market price of such warrants, a Level 1 measurement, at March 31, 2021.

The fair value of the private placement warrants have been estimated based on the observed price for the public warrants, a Level 2 measurement, at March 31, 2021.

On April 1, 2018, the Company adopted the new Accounting Standards Codification 606, “ Revenue from Contracts with Customers ,” (“ASC 606”) using the modified retrospective method and applied the guidance only to contracts that were not completed as of that date.

The Company recorded a cumulative-effect adjustment that increased beginning additional paid-in-capital, retained earnings and non-controlling interest in Hamilton Lane Advisors, L.L.C.

by $ 411 , $ 20 and $ 566 , respectively.

The adjustment was related to commission payments that are considered a cost of obtaining a contract under the new guidance and are capitalized and amortized over the expected life of the contractual relationship.

The adjustment was related to commission payments that are considered a cost of obtaining a contract under ASC 606 and are capitalized and amortized over the expected life of the contractual relationship.

These amounts were previously expensed when incurred.

3 unchanged sentences

Specialized funds are structured as partnerships having multiple investors with a subsidiary of the Company serving as general partner or managing member.

Customized separate accounts are generally contractual arrangements

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

involving an investment management agreement between the Company and a single client.

Customized separate accounts are generally contractual arrangements involving an investment management agreement between the Company and a single client.

In some cases, a customized separate account will be structured as a partnership with a subsidiary of the Company serving as general partner or managing member.

6 unchanged sentences

For reimbursable travel, organization and syndication costs, the Company concluded it controls the services provided by its employees and other parties and therefore is a principal.

Accordingly, the Company records the reimbursement for these costs incurred on a gross basis as revenue in management and advisory fees and as expense in general, administrative and other expenses in the Consolidated Statements of Operations.

Accordingly, the Company records the reimbursement for these costs incurred on a gross basis as revenue

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

in management and advisory fees and as expense in general, administrative and other expenses in the Consolidated Statements of Operations.

The Company considers its performance obligations in its customer contracts to be one of the following based upon the services promised:

82 unchanged sentences

(1) Revenues are attributed to countries based on location of the client or investor.

The Company recognized approximately 17 % of its total revenues for the year ended March 31, 2018 from previously deferred incentive fees from one of its co-investment funds.

Dividends and Distributions

3 unchanged sentences

ASU 2016-13 replaces the incurred loss methodology in current GAAP with a methodology that reflects expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

This guidance will be adopted by the Company on April 1, 2020.

The Company has determined that adoption of the guidance will not have a material impact on the Company's consolidated financial statements.

The Company adopted ASU 2016-13 using the modified retrospective transition method on April 1, 2020.

The adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No.

4 unchanged sentences

Early adoption of any removed or modified disclosure requirements is permitted upon issuance of ASU 2018-13 and adoption of the additional disclosure requirements may be delayed until the effective date.

The Company elected to early adopt the removed or modified disclosure requirements of the standard on

The Company elected to early adopt the removed or modified disclosure requirements of the standard on October 1, 2018.

The Company adopted the remaining requirements on April 1, 2020.

The adoption did not have a material impact on the Company’s consolidated financial statements.

Hamilton Lane Incorporated

1 unchanged sentence

(In thousands, except share and per share amounts)

October 1, 2018 and expects to adopt the additional disclosure requirements on April 1, 2020.

The adoption is not expected to have a material impact on the Company’s disclosures in its consolidated financial statements.

Refer to Note 4 for disclosure related to investments carried at fair value.

Reclassifications

14 unchanged sentences

Customized separate accounts 17,893 14,757 8,719

Consolidated variable interest related:

Specialized funds 21,057 7,691 16,748

Total incentive fees $ 52,191 $ 29,128 $ 34,406

4 unchanged sentences

The contract asset related to the cost to obtain contracts was $ 964 and $ 994 as of March 31, 2021 and March 31, 2020, respectively, and is included in other assets in the Consolidated Balance Sheets.

Amortization expense related to this contract asset was $ 504 and $ 480 for the year ended March 31, 2020 and March 31, 2019, respectively, and is included in general, administrative and other in the Consolidated Statements of Income.

Amortization expense related to this contract asset was $ 526 , $ 504 and $ 480 for the years ended March 31, 2021, 2020 and 2019, respectively, and is included in general, administrative and other in the Consolidated Statements of Income.

Hamilton Lane Incorporated

7 unchanged sentences

Investments valued under the measurement alternative 109,821 17,091

Investment held in trust 276,003 —

Total Investments $ 649,626 $ 207,747

11 unchanged sentences

Total equity method investments in Partnerships $ 240,337 $ 166,106

The Company’s equity method investments in Partnerships held by consolidated VIEs consist of direct/co-investment funds.

The Company’s equity method investments in Partnerships held by consolidated VIEs consist of direct/co-investment funds and customized separate accounts.

The Company evaluates each of its equity method investments to determine if any were significant pursuant to the requirements of Regulation S-X.

17 unchanged sentences

Expenses 201,791 185,769 149,598

Net investment income (loss) 114,352 62,199 102,484

Net investment income 187,780 114,352 62,199

Net realized and unrealized gain 3,232,126 1,830,599 618,047

4 unchanged sentences

The direct credit co-investments are debt securities classified as trading securities.

The Company’s other investments are measured at fair value with unrealized holding gains and losses included in earnings.

The Company’s other investments are recorded at estimated fair value utilizing significant unobservable inputs and are, therefore, classified in Level 3 of the fair value hierarchy.

The direct equity co-investments and private equity funds are measured at fair value with unrealized holding gains and losses included in earnings.

During the year ended March 31, 2021, one of the Company’s direct equity co-investments held through a special purpose vehicle was transferred out of Level 3 and into Level 2 as the lockup restrictions from its initial public offering expired.

The special purpose vehicle now predominately attributes its fair value to a publicly traded share price and is therefore classified as Level 2 in the hierarchy.

As of March 31, 2021, the fair value of the Company’s investment in the special purpose vehicle was $ 4,083 .

The Company’s remaining other investments are recorded at estimated fair value utilizing significant unobservable inputs and are therefore classified in Level 3 of the fair value hierarchy.

Hamilton Lane Incorporated

11 unchanged sentences

Net gain (loss) 1,788 254 5,427 7,469

Transfer out of Level 3 — — ( 4,271 ) ( 4,271 )

Balance as of March 31, 2021 $ 6,254 $ 985 $ 6,059 $ 13,298

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 assets were as follows, as of March 31, 2020:

March 31, 2021

Fair Valuation Unobservable Weighted

4 unchanged sentences

Market approach Equity multiple 1.52 x

As of March 31, 2019, private equity funds were recorded at estimated fair value based upon the net asset value of the Company’s ownership interest in the underlying fund utilizing the practical expedient under ASC 820, “Fair Value Measurement.” The direct credit and equity co-investments were recorded at recent precedent transactions.

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

(2) a significant increase or decrease in the market yield would result in a significantly lower or higher fair value measurement, respectively;

and (3) a significant increase or decrease in the selected multiple would result in a significantly higher or lower fair value measurement, respectively.

During the year ended March 31, 2020, the Company transferred these investments for an agreed amount of cash of $ 15,750 to a Partnership that is a VIE of which the Company is the general partner but does not consolidate as the Company is not the primary beneficiary.

Due to continuing involvement with these assets at the Partnership, the Company accounted for this transfer as a secured financing as it has not met the criteria in ASC 860, “Transfers and Servicing”, to qualify as a sale and, therefore, has recorded a financial liability for the secured financing which is included in other liabilities in the

March 31, 2020

Fair Valuation Unobservable Weighted

Value Methodology Inputs Range Average

Private equity funds $ 5,786 Adjusted net asset value Selected market return ( 7.4 )% - ( 3 )% ( 6.2 )%

Direct credit co-investments $ 1,756 Discounted cash flow Market yield 11.5 % - 12.6 % 12.5 %

Direct equity co-investments $ 5,852 Market approach EBITDA multiple 7.25 x

Market approach Equity multiple 1.05 x

Hamilton Lane Incorporated

1 unchanged sentence

(In thousands, except share and per share amounts)

Consolidated Balance Sheets.

(2) a significant increase or decrease in the market yield would result in a significantly lower or higher fair value measurement, respectively;

and (3) a significant increase or decrease in the selected multiple would result in a significantly higher or lower fair value measurement, respectively.

In May 2019, the Company transferred these investments for an agreed amount of cash of $ 15,750 to a Partnership that is a VIE of which the Company is the general partner but does not consolidate as the Company is not the primary beneficiary.

The cash received was recorded as secured financing in financing activities in the Consolidated Statements of Cash Flows.

5 unchanged sentences

The fair value of the secured financing is estimated using Level 3 inputs with the significant input being the fair value of the other investments utilized as collateral as shown above.

The Company recognized a loss of $ 748 and a gain of $ 705 on other investments during the years ended March 31, 2020 and 2019, respectively.

The Company recognized a gain of $ 43 on the secured financing liability during the year ended March 31, 2020.

The Company recognized a gain (loss) of $ 7,281 , $( 748 ), and $ 705 on other investments during the years ended March 31, 2021, 2020, and 2019 respectively and recognized a (loss) gain of $( 7,281 ) and $ 43 on the secured financing liability during the years ended March 31, 2021 and 2020, respectively.

Gains and losses related to other investments and the secured financing liability are recorded in non-operating income in the Consolidated Statements of Income.

3 unchanged sentences

However, the guidance allows for a measurement alternative, which is to record the investments at cost, less impairment, if any, and subsequently adjust for observable price changes of identical or similar investments of the same issuer.

Fiscal 2021 Transactions

In March 2021, the Company invested approximately $ 90,000 in Russell Investments Group, Ltd., a leading outsourced CIO (OCIO) provider and global investment solutions firm.

Due to the lack of readily determinable fair values for the investment and the Company’s lack of significant influence, the Company will value the investment under the measurement alternative.

Additionally, in March 2021, the Company received a distribution of $ 3,072 from Russell Investments Group, Ltd., which was recorded as a return of capital and decreased the carrying value of the investment.

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

In December 2020, there was an observable price change for an investment held by the Company and valued under the measurement alternative.

As a result of the transaction, the Company marked that investment to fair value based upon the transaction price, which resulted in an unrealized gain of $ 6,229 that was recorded in non-operating income in the Consolidated Statements of Income for the year ended March 31, 2021.

Fiscal 2020 Transactions

During the year ended March 31, 2020, the Company made equity investments in two private companies.

1 unchanged sentence

The Company invested approximately $ 10,000 in a technology company which has developed a platform for investing in alternative assets.

Due to the lack of readily determinable fair values for these investments, for which the Company does not have significant influence, the Company will hold both of these investments under the measurement alternative at cost less impairment.

Due to the lack of readily determinable fair values for these investments, for which the Company does not have significant influence, the Company will value the investments under the measurement alternative.

On January 31, 2020, an observable price transaction occurred for one of the Company’s investments valued under the measurement alternative.

2 unchanged sentences

The Company received cash proceeds of $ 6,419 and recorded a gain of approximately $ 4,973 in connection with the transaction, which was recorded in non-operating income in the Consolidated Statements of Income for the year ended March 31, 2020.

Fiscal 2019 Transactions

The Company performs qualitative impairment assessments on its investments recorded under the measurement alternative.

1 unchanged sentence

The assessment indicated that the fair value was less than the carrying value at March 31, 2019.

Prior to the impairment recorded, the carrying

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

value of the investment was $ 2,990 .

The impairment amount was $ 701 and is included in non-operating income.

Prior to the impairment recorded, the carrying value of the investment was $ 2,990 .

The impairment amount was $ 701 and is included in non-operating income for the year ended March 31, 2019.

The fair value was determined using both a discounted cash flow approach and a market approach based on guideline public companies, and is a Level 3 fair value measurement as financial projections were utilized.

3 unchanged sentences

The Company received cash proceeds of $ 4,807 and recorded a gain of $ 4,207 in connection with the transaction, which was recorded in non-operating income for the year ended March 31, 2019.

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

Variable Interest Entities

The Company consolidates certain VIEs for which it is determined that the Company is the primary beneficiary.

The consolidated VIEs are general partner entities of certain Partnerships, which are not wholly owned by the Company.

The total assets of the consolidated VIEs are $ 9,988 and $ 11,648 as of March 31, 2020 and 2019, respectively, and are recorded in Investments in the Consolidated Balance Sheets.

The consolidated VIEs had no liabilities other than deferred incentive fee revenue of $ 3,704 as of March 31, 2020 and 2019.

The assets of the consolidated VIEs may only be used to settle obligations of the consolidated VIEs, if any.

In addition, there is no recourse to the Company for the consolidated VIEs’ liabilities, except for certain entities in which there could be a claw back of previously distributed carried interest.

The Company consolidates certain VIEs for which it is determined that the Company is the primary beneficiary as described in Note 2.

Consolidated Variable Interest Entities

The Company consolidates general partner entities of certain Partnerships, which are not wholly owned by the Company.

The total assets of the consolidated general partner entities are $ 4,787 and $ 9,988 as of March 31, 2021 and 2020.

The general partner entities had no liabilities other than deferred incentive fee revenue of $ 3,704 as of March 31, 2020.

The assets of the general partner entities may only be used to settle obligations of the general partners, if any.

In addition, there is no recourse to the Company for the general partners’ liabilities, except for certain entities in which there could be a claw back of previously distributed carried interest.

The Company sponsored and consolidates HLAH through HL Alliance Holdings Sponsor LLC, a wholly owned subsidiary of the Company.

On January 15, 2021, HLAH completed an initial public offering raising total gross proceeds of $ 276,000 which were placed in a trust and can only be utilized for funding a business combination or the redemption of Class A shares of HLAH.

In a private placement concurrent with the initial public offering, HLAH sold warrants to HL Alliance Holdings Sponsor LLC for gross proceeds of $ 7,520 which were used by HLAH to pay the offering costs and also provide working capital.

The total assets of HLAH are $ 277,528 and liabilities are $ 17,310 as of March 31, 2021.

The assets of HLAH held outside of the trust can only be used to settle obligations of HLAH and there is no recourse to the Company for HLAH’s liabilities.

All warrants and Class B common stock of HLAH held by the Company are eliminated in consolidation.

Nonconsolidated Variable Interest Entities

The Company holds variable interests in certain Partnerships that are VIEs, which are not consolidated, as it is determined that the Company is not the primary beneficiary.

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Depreciation expense was $ 2,731 , $ 2,684 and $ 2,040 for the years ended March 31, 2021, 2020 and 2019, respectively, and is included in general, administrative and other expenses in the Consolidated Statements of Income.

On August 11, 2017, HLA acquired substantially all the assets of Real Asset Portfolio Management LLC (“RAPM”) for a total aggregate purchase price of $ 5,840 , of which $ 5,228 was paid in cash with the remainder settled in 27,240 shares of Class A common stock valued at approximately $ 612 .

An additional amount of $ 8,499 was paid to the principals of RAPM in a combination of cash and shares based upon an agreed-upon multiple of earnings.

As the amount was contingent upon future employment, the amount was recognized as compensation expense over the required performance period.

The Company recorded approximately $ 2,948 of intangible assets related to the acquired investment management contracts, which assets will be amortized over 8 years, and $ 2,874 of goodwill, which are both recorded in other assets in the Consolidated Balance Sheets.

The remaining assets acquired and liabilities assumed were not material to the consolidated financial statements.

On August 23, 2017, HLA entered into a Term Loan and Security Agreement (the “Term Loan

Hamilton Lane Incorporated

1 unchanged sentence

(In thousands, except share and per share amounts)

Agreement”) and a Revolving Loan and Security Agreement (the “Revolving Loan Agreement” and, together with the Term Loan Agreement, the “Loan Agreements”) with First Republic Bank (“First Republic”) for $ 75,000 (the “Term Loan Facility”) and $ 25,000 (the “Revolving Loan Facility”), respectively.

The Company drew down $ 10,450 at closing on the Revolving Loan Facility.

After expenses, the net amount of cash received was $ 85,066 and was utilized to pay off the outstanding principal amount and accrued interest of the predecessor credit facility.

The previous unamortized deferred financing costs of $ 1,657 were written off and are included in interest expense in the Consolidated Statements of Income for the year ended March 31, 2018.

On March 24, 2020, the Company amended its Loan Agreements.

The Term Loan Agreement was amended to include an incremental term advance of approximately $ 9,339 on the closing date of the amendment (increasing the outstanding balance to $ 75,000 ), provide for additional uncommitted term advances not to exceed $ 25,000 in the aggregate for a period of 3 years from the closing date of the amendment, revise the principal amortization schedule beginning July 1, 2020 through the maturity date of July 1, 2027 and change the interest rate to a floating per annum rate equal to the prime rate minus 1.50 % subject to a floor of 2.25 %.

The Revolving Loan Agreement’s maturity date was amended to March 24, 2023 and changed the interest rate to a floating per annum rate equal to the prime rate minus 1.50 % subject to a floor of 2.25 %.

The Company evaluated the terms of the amendment and concluded that the transaction resulted in a debt modification, which resulted in the existing debt discount, existing deferred financing costs and new debt discount paid to be amortized over the extended term of the Term Loan Facility.

The Company had an outstanding balance, net of unamortized debt discount and deferred financing costs of $ 476 and $ 296 , on the Term Loan Facility of $ 74,524 and $ 70,954 as of March 31, 2020 and 2019, respectively.

The Company had no outstanding balance on the Revolving Loan Facility as of March 31, 2020 and 2019, respectively.

On March 24, 2020, the Company also entered into a Multi-Draw Term Loan and Security Agreement (the “Multi-Draw Facility”) with First Republic, which provides for a term loan in the aggregate principal amount of $ 75,000 that may be drawn any time during a period of one year following the closing date.

Borrowings accrue interest at a fixed per annum rate of 4 % and the Multi-Draw Facility matures on July 1, 2030.

The Company had no outstanding balance on the Multi-Draw Facility as of March 31, 2020.

The Company’s debt consisted of the following:

As of March 31,

Principal Outstanding Carrying Value Interest Rate Principal Outstanding Carrying Value Interest Rate

Term Loan $ 73,594 $ 73,378 2.25 % $ 75,000 $ 74,749 2.25 %

Multi-Draw Facility 75,000 74,797 3.50 % — — 4.00 %

Revolver 15,000 15,000 2.25 % — — 2.25 %

Total Debt $ 163,594 $ 163,175 $ 75,000 $ 74,749

The Company has a Term Loan Agreement, a Revolving Loan Agreement (together the “Loan Agreements”) and a Multi-Draw Term Loan Agreement with First Republic Bank.

The Term Loan Agreement has a maturity date of July 1, 2027, provides for additional uncommitted term advances not to exceed $ 25,000 in the aggregate until March 24, 2023, and the interest rate is a floating per annum rate equal to the prime rate minus 1.5 % subject to a floor of 2.25 %.

The Revolving Loan Agreement has a $ 25,000 borrowing capacity, a maturity date of March 24, 2023, and the interest rate is a floating per annum rate equal to the prime rate minus 1.5 % subject to a floor of 2.25 %.

The Multi-Draw Term Loan Agreement (the “Multi-Draw Facility”) provides for a term loan in the aggregate principal amount of $ 75,000 that may be drawn any time during a period of one year following the closing date.

Borrowings accrue interest at a fixed per annum rate of 3.5 % and matures on July 1, 2030.

The Company fully drew the Multi-Draw Facility in March 2021.

The Loan Agreements and Multi-Draw Facility 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, make distributions, engage in transactions with affiliates and take certain actions with respect to management fees.

1 unchanged sentence

The obligations under the Loan Agreements and Multi-Draw Facility are secured by substantially all of the assets of HLA.

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

The aggregate minimum principal payments on the Company’s outstanding debt are due as follows:

Fiscal year ending March 31,

2022 $ 16,875

Thereafter 114,375

The fair value of the outstanding balance of the Company’s debt instrument at March 31, 2020 and 2019 approximated par value based on current market rates for similar debt instruments and are classified as Level 2 within the fair value hierarchy.

Total $ 163,594

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

The fair value of the outstanding balance of the Company’s debt instruments at March 31, 2021 and 2020 approximated par value based on current market rates for similar debt instruments and are classified as Level 2 within the fair value hierarchy.

The Company has two classes of common stock outstanding, Class A common stock and Class B common stock.

10 unchanged sentences

Shares of Common Stock Outstanding

The following table shows a rollforward of our common stock outstanding since March 31, 2017:

Class A Common Stock Class B Common Stock

March 31, 2017 19,036,504 27,935,255

Restricted stock granted 235,219 —

Shares issued due to option exercise 233,495 —

Shares issued in connection with RAPM acquisition 27,240 —

Shares issued (repurchased) in connection with offering 3,834,686 ( 2,235,187 )

Shares repurchased for employee tax withholdings ( 186,280 ) —

Forfeitures ( 41,388 ) —

The following table shows a rollforward of our common stock outstanding:

Class A Class B

March 31, 2018 23,139,476 25,700,068

10 unchanged sentences

Shares issued in connection with ESPP 25,640 —

Shares converted from units — —

Shares repurchased for employee tax withholdings ( 100,683 ) —

2 unchanged sentences

March 31, 2020 29,842,784 22,049,727

Shares issued (repurchased) in connection with offering 6,415,760 ( 5,309,881 )

Shares issued in connection with ESPP 23,130 —

Shares repurchased for employee tax withholdings ( 69,962 ) —

Forfeitures ( 1,917 ) —

Restricted stock granted 80,388 —

March 31, 2021 36,290,183 16,739,846

Income and equity allocations to non-controlling interests are based upon the relative ownership percentage of the consolidated variable interest entity held by non-controlling owners.

The reallocation adjustment between HLI stockholders’ equity and non-controlling interests in Hamilton Lane Advisors, L.L.C.

7 unchanged sentences

(In thousands, except share and per share amounts)

September 2019 Offering

In September 2019, the Company and certain selling stockholders completed a registered offering of an aggregate of 2,680,089 shares of Class A common stock at a price of $ 60.01 per share (the “September 2019 Offering”).

March 2021 Offering

In March 2021, the Company and certain selling stockholders completed a registered offering of an aggregate of 1,453,110 shares of Class A common stock at a price of $ 87.36 per share (the “March 2021 Offering”).

The shares sold consisted of (i) 94,245 shares held by the selling stockholders and (ii) 1,358,865 shares newly issued by the Company.

2 unchanged sentences

The Company did not receive any proceeds from the sale of shares by the selling stockholders.

March 2019 Offering

In March 2019, the Company and a certain selling stockholder completed a registered offering of an aggregate of 1,449,303 shares of Class A common stock at a price of $ 45.65 per share.

September 2020 Offering

In September 2020, the Company and a certain selling stockholder completed a registered offering of an aggregate of 2,207,380 shares of Class A common stock at a price of $ 70.18 per share (the “September 2020 Offering”).

The shares sold consisted of (i) 75,000 shares held by the selling stockholder and (ii) 2,132,380 shares newly issued by the Company.

The Company received approximately $ 63,878 in proceeds from the sale of its shares, net of underwriting discounts and commissions, and used all of the proceeds to settle in cash exchanges by certain members of HLA of a total of 711,943 Class B units and 687,360 Class C units.

The Company received approximately $ 149,650 in net proceeds from the sale of its shares and used all of the proceeds to settle exchanges by certain members of HLA of a total of 1,936,880 Class B units and 195,500 Class C units.

In connection with the exchange of the Class B units, the Company also repurchased for par value and canceled a corresponding number of shares of Class B common stock.

The Company did not receive any proceeds from the sale of shares by the selling stockholder.

September 2018 Offering

In September 2018, the Company and certain selling stockholders completed a registered offering of an aggregate of 2,880,979 shares of Class A common stock at a price of $ 47.26 per share.

June 2020 Offering

In June 2020, the Company and certain selling stockholders completed a registered offering of an aggregate of 2,995,757 shares of Class A common stock at a price of $ 70.09 per share (the “June 2020 Offering”).

The shares sold consisted of (i) 71,242 shares held by the selling stockholders and (ii) 2,924,515 shares newly issued by the Company.

2 unchanged sentences

The Company did not receive any proceeds from the sale of shares by the selling stockholders.

March 2018 Offering

In March 2018, the Company and certain selling stockholders completed a registered offering of an aggregate of 4,531,001 shares of Class A common stock at a price of $ 34.25 per share.

September 2019 Offering

The shares sold consisted of (i) 228,456 shares held by the selling stockholders and (ii) 2,451,633 shares newly issued by the Company.

The Company received approximately $ 125,200 in proceeds from the sale of its shares, net of underwriting discounts and commissions, and used all of the net proceeds to settle in cash exchanges by certain members of HLA of a total of 2,235,187 Class B units and 1,599,499 Class C units.

The Company received approximately $ 147,122 in proceeds from the sale of its shares, net of underwriting discounts and commissions, and used all of the proceeds to settle in cash exchanges by certain members of HLA of a total of 1,466,712 Class B units and 984,921 Class C units.

In connection with the exchange of the Class B units, the Company also repurchased for par value and canceled a corresponding number of shares of Class B common stock.

3 unchanged sentences

(In thousands, except share and per share amounts)

March 2019 Offering

In March 2019, the Company and a certain selling stockholder completed a registered offering of an aggregate of 1,449,303 shares of Class A common stock at a price of $ 45.65 per share (the “March 2019 Offering”).

The shares sold consisted of (i) 50,000 shares held by the selling stockholder and (ii) 1,399,303 shares newly issued by the Company.

The Company received approximately $ 63,878 in proceeds from the sale of its shares, net of underwriting discounts and commissions, and used all of the net proceeds to settle in cash exchanges by certain members of HLA of a total of 711,943 Class B units and 687,360 Class C units.

In connection with the exchange of the Class B units, the Company also repurchased for par value and canceled a corresponding number of shares of Class B common stock.

The Company did not receive any proceeds from the sale of shares by the selling stockholder.

Equity-Based Compensation

4 unchanged sentences

Pursuant to the terms of the Plan, awards may not be granted after February 28, 2027.

Summary of Option Activity

A summary of option activity under the Plan for the three years ended March 31, 2020 is presented below:

Year Ended March 31,

2020 2019 2018

Options Weighted-

Price Number of

Options Weighted-

Price Number of

Options Weighted-

Options outstanding at beginning of year — — — — 233,495 $ 1.34

Options exercised — — — — ( 233,495 ) 1.34

Options outstanding at end of year — — — — — —

Options exercisable at end of year — — — — — —

The intrinsic value of options exercised was $ 4,350 for the year ended March 31, 2018.

Restricted Stock

21 unchanged sentences

Employee Share Purchase Plan

On September 6, 2018, the Company’s stockholders approved the Hamilton Lane Incorporated Employee Share Purchase Plan (the “ESPP”).

On September 6, 2018, the Company’s stockholders approved the Hamilton Lane Incorporated Employee Share Purchase Plan (as amended, the “ESPP”).

The ESPP provides for a purchase price equal to 85 % of the closing price of the Company’s Class A common stock on the last trading day of each offering period, which begins the first day of each fiscal quarter and ends on the last day of that fiscal quarter.

10 unchanged sentences

Equity-based compensation 7,079 7,183 6,382

Contingent compensation related to acquisition (Note 7) — 5,100 3,399

Contingent compensation related to acquisition — — 5,100

Total compensation and benefits $ 136,319 $ 100,138 $ 98,995

27 unchanged sentences

$ 24,417 $ 13,968 $ 30,560

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

A reconciliation of the U.S.

5 unchanged sentences

Non-controlling interest ( 7.6 ) % ( 9.8 ) % ( 10.8 ) %

Foreign income taxes — % — % ( 0.4 ) %

Valuation allowance ( 1.0 ) % ( 0.9 ) % 1.9 %

Tax reform impact — % — % 13.7 %

Deferred tax asset state apportionment changes — % — % 10.3 %

1 unchanged sentence

Effective tax rate 12.6 % 9.9 % 23.6 %

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

The significant components of deferred tax assets and liabilities are as follows:

9 unchanged sentences

$ 251,949 $ 137,941

As of March 31, 2020 and 2019, the Company had net operating loss carryforwards of $ 6,902 and $ 7,999 that were generated from certain foreign subsidiaries.

As of March 31, 2021 and 2020, the Company had net operating loss carryforwards of $ 5,045 and $ 6,902 .

These net operating losses can be carried forward indefinitely.

As of March 31, 2021 and 2020, it is more likely than not that the tax benefits from certain of these net operating loss carryforwards will not be realized, therefore, a valuation allowance of $ 176 and $ 768 has been established, respectively.

In connection with the September 2019 Offering and unit exchange, the Company recorded a deferred tax asset in the amount of $ 37,394 , which is net of a valuation allowance of $ 3,736 related to the portion of tax benefits that it is more likely than not will not be realized.

Additionally, in connection with the September 2019 Offering and unit exchange and recording of the deferred tax asset, the Company recorded a payable to related parties pursuant to the tax receivable agreement of $ 31,481 .

In connection with the offering activity in fiscal 2021 and related unit exchanges, the Company recorded a deferred tax asset in the amount of $ 121,065 , which is net of a valuation allowance of $ 9,591 related to the portion of tax benefits that it is more likely than not will not be realized.

Additionally, in connection with recording the deferred tax asset for the fiscal 2021 offerings and related unit exchanges, the Company recorded a payable to related parties pursuant to the tax receivable agreement of $ 102,052 .

The Company believes it is more likely than not that the deferred tax assets (except those identified above) will be realized based on the Company’s historic earnings, forecasted income, and the reversal of temporary differences.

1 unchanged sentence

As of March 31, 2021 , 2020, and 2019, the Company had no unrecognized tax positions.

The Company does not expect any material increase or decrease in its gross unrecognized tax positions during

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

the next twelve months.

The Company does not expect any material increase or decrease in its gross unrecognized tax positions during the next twelve months.

If and when the Company does record unrecognized tax positions in the future, any interest and penalties related to unrecognized tax positions will be recorded in the income tax expense line in the Consolidated Statements of Income.

4 unchanged sentences

The Company has recorded a liability related to the TRA of $ 194,764 and $ 98,956 as of March 31, 2021 and 2020.

A payment of $ 1,952 was made during the year ended March 31, 2020.

A payment of $ 6,894 and $ 1,952 was made during the year ended March 31, 2021 and 2020.

In the event that the valuation allowance related to tax benefits associated with the tax receivable agreement is released in a future period, an additional estimated payable will be due to the TRA Recipients of $ 13,679 .

Hamilton Lane Incorporated

Notes to Consolidated Financial Statements

(In thousands, except share and per share amounts)

Earnings per Share

5 unchanged sentences

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:

Year Ended March 31, 2020 Year Ended March 31, 2019

Net income attributable to HLI Weighted-Average Shares Per share amount Net income attributable to HLI Weighted-Average Shares Per share amount

Basic EPS of Class A common stock $ 60,825 28,088,578 $ 2.17 $ 33,573 23,836,401 $ 1.41

Adjustment to net income:

Assumed exercise and vesting of employee awards

Effect of dilutive securities:

Assumed exercise and vesting of employee awards

Year Ended March 31,

2021 2020 2019

Diluted EPS of Class A common stock $ 61,177 28,438,772 $ 2.15 $ 33,928 24,298,795 $ 1.40

Basic net income per share:

Net income attributable to HLI $ 98,022 $ 60,825 $ 33,573

Deemed dividend for the accretion of redeemable non-controlling interest ( 4,637 ) — —

Net income attributable to Class A common stockholders - basic $ 93,385 $ 60,825 $ 33,573

Weighted-average shares of Class A common stock outstanding - basic 33,152,318 28,088,578 23,836,401

Basic earnings per share $ 2.82 $ 2.17 $ 1.41

Diluted earnings per share:

Net income attributable to Class A common stockholders - basic $ 93,385 $ 60,825 $ 33,573

Adjustment to net income:

Assumed vesting of employee awards 229 352 355

Net income attributable to Class A common stockholders - diluted $ 93,614 $ 61,177 $ 33,928

Weighted-average shares of Class A common stock outstanding - basic 33,152,318 28,088,578 23,836,401

Weighted-average effect of dilutive securities:

Assumed vesting of employee awards 210,047 350,194 462,394

Weighted-average shares of Class A common stock outstanding - diluted 33,362,365 28,438,772 24,298,795

Diluted earnings per share $ 2.81 $ 2.15 $ 1.40

The calculations of diluted earnings per share exclude 17,553,234 , 23,968,994 , and 26,420,627 outstanding Class B and C units of HLA for the years ended March 31, 2021, 2020 and 2019, respectively, which are exchangeable into Class A common stock under the “if-converted” method, because the inclusion of such shares would be antidilutive.

Hamilton Lane Incorporated

1 unchanged sentence

(In thousands, except share and per share amounts)

Year Ended March 31, 2018

Net income attributable to HLI Weighted-Average Shares Per share amount

Basic EPS of Class A common stock 17,341 18,414,715 $ 0.94

Adjustment to net income:

Assumed exercise and vesting of employee awards

Effect of dilutive securities:

Assumed exercise and vesting of employee awards

Diluted EPS of Class A common stock $ 17,697 18,990,369 $ 0.93

The calculations of diluted earnings per share exclude 23,968,994 , 26,420,627 , and 30,603,983 outstanding Class B and C units of HLA for the years ended March 31, 2020, 2019 and 2018, respectively, which are exchangeable into Class A common stock under the “if-converted” method, because the inclusion of such shares would be antidilutive.

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.

2 unchanged sentences

Fees receivable from the Partnerships were $ 14,814 and $ 16,970 as of March 31, 2021 and 2020, respectively, and are included in fees receivable in the Consolidated Balance Sheets.

Expenses and Payables

The Company entered into a service agreement on June 1, 2017 with a joint venture pursuant to which it incurred expenses of $ 3,978 , $ 5,289 and $ 5,058 for the years ended March 31, 2021, 2020, and 2019 respectively, which amounts are included in general, administrative and other expenses in the Consolidated Statements of Income.

The Company also has a payable to the joint venture of $ 325 and $ 428 as of March 31, 2021 and 2020, respectively, which is included in other liabilities in the Consolidated Balance Sheets.

Other Transactions

On January 31, 2020, the convertible promissory note (the “Note”) held by the Company issued by one of its equity method investments was settled by converting the outstanding principal and accrued interest into shares of the investee per the terms of the Note.

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On January 31, 2020, the Company entered into an asset purchase agreement with one of its equity method investments for the code and an exclusive license to distribute the Cobalt LP software.

The cost of the asset acquisition was $ 6,373 , which consisted of an upfront cash payment of $ 4,000 , contribution of equity shares of the investee valued at $ 2,201 and $ 172 in direct transaction fees.

Additionally, a deferred

The cost of the asset acquisition was $ 6,373 , which consisted of an upfront cash payment of $ 4,000 , a previously deferred cash payment of $ 1,000 made during the fiscal year ended March 31, 2021, contribution of equity shares of the investee valued at $ 2,201 and direct transaction fees of $ 172 .

The assets purchased were recorded as intangible assets in other assets in the Consolidated Balance Sheets and will be amortized over 7 years.

Hamilton Lane Incorporated

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(In thousands, except share and per share amounts)

cash payment of $ 1,000 will be made upon completion of agreed upon activities in order to finalize the purchase.

The deferred cash payment will be included in the cost of the asset acquisition when paid.

The assets purchased were recorded as intangible assets in other assets in the Consolidated Balance Sheets and will be amortized over 7 years.

Supplemental Cash Flow Information

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$ — $ 425 $ 425

Establishment of lease liability in exchange for ROU asset $ 61,725 $ 14,776 $ —

Non-cash investing activities:

Shares issued for acquisition of business $ — $ — $ 612

Conversion of note receivable $ — $ 902 $ —

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Establishment of net deferred tax assets related to tax receivable agreement $ 121,065 $ 37,394 $ 56,010

Deferred underwriter fees related to consolidated entity $ 9,660 $ — $ —

Dividends declared but not paid $ 11,201 $ 8,027 $ 5,673

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Incentive Fees

The Partnerships have allocated carried interest, which has not yet been received or recognized, in the amounts of $ 441,150 and $ 326,466 at March 31, 2020 and 2019, respectively, of which $ 3,704 and $ 3,704 at March 31, 2020 and 2019, respectively, has been received and deferred by the Company.

The Partnerships have allocated carried interest, which has not yet been received or recognized, in the amounts of $ 648,772 and $ 441,150 at March 31, 2021 and 2020, respectively, of which $ 3,704 at March 31, 2020 was received and deferred by the Company.

If the Company ultimately receives the unrecognized carried interest, a total of $ 162,193 and $ 110,288 as of March 31, 2021 and 2020, respectively, would be potentially payable to certain employees and third parties pursuant to compensation arrangements related to the carried interest profit-sharing plans.

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(In thousands, except share and per share amounts)

The Company’s leases consist primarily of operating leases for office space and office equipment in various locations around the world.

These leases have remaining lease terms of one year to five years , some of which have the option to extend for an additional five years or have the option to terminate within one year .

Total operating lease costs were $ 4,838 for the year ended March 31, 2020.

Total variable lease costs were $ 557 for the year ended March 31, 2020.

Short-term lease costs were not material for the year ended March 31, 2020.

March 31, 2020

The Company’s leases consist primarily of operating leases for office space and office equipment in various locations around the world, which have remaining lease terms of one year to 17 years.

Some leases have the option to extend for an additional term or terminate early.

Short-term lease costs are not material.

The Company entered into a 17 year lease agreement for its new headquarters in a newly constructed building.

The Company was granted access to the space in October 2020 to begin building various leasehold improvements and expects to move into the property in June 2021.

The following table shows lease costs and other supplemental information related to the Company’s operating leases:

Year Ended March 31,

Operating lease costs $ 5,216 $ 4,838

Variable lease costs $ 863 $ 557

Cash paid for amounts included in the measurement of operating lease liabilities $ 7,352 $ 5,108

Noncash ROU assets obtained in exchange for new operating lease liabilities $ 2,102

Weighted average remaining lease term (in years) 15.4 2.9

Weighted average discount rate 3.4 % 5.2 %

Total lease expense was $ 5,851 and $ 5,286 for the years ended March 31, 2019 and 2018, respectively, and was recorded on the straight-line basis and included in general, administrative and other expenses in the Consolidated Statements of Income.

Total lease expense was $ 5,851 for the year ended March 31, 2019 and was recorded on the straight-line basis and included in general, administrative and other expenses in the Consolidated Statements of Income.

As of March 31, 2021, the maturities of operating lease liabilities were as follows:

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Total operating lease liabilities $ 75,281

In October 2019, the Company executed an agreement to lease office space for its new headquarters in suburban Philadelphia.

The lessor is currently building the office space.

The Company expects to gain access to the space to build various leasehold improvements in late fiscal 2021.

At that time, the Company will establish an ROU asset and a lease liability for the new lease.

Upon lease commencement, total future lease payments are expected to be $ 92,320 over 17 years.

The Company serves as the investment manager of the Partnerships.

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Subsequent Events

On April 1, 2021, the Company acquired substantially all the assets of 361 Capital, LLC for a total aggregate cash amount of $ 13,000 , of which $ 10,000 was paid on the closing date of the acquisition.

The the remaining $ 3,000 will be paid in two equal installments on the first and second anniversaries of the closing.

The preliminary purchase price based upon the fair value of consideration transferred at the date of acquisition is $ 12,850 .

The Company expects to record approximately $ 7,145 of intangible assets related primarily to the acquired investment management contracts, which will be amortized over seven years , and $ 5,623 of goodwill.

The remaining assets acquired and liabilities assumed are not expected to be material to the consolidated financial statements.

The purchase price and allocation are still preliminary and subject to change as the valuation is finalized.

On April 22, 2021, the Company amended its Term Loan Agreement to provide an additional $ 25,000 of committed borrowing capacity and amended its Multi-Draw Facility to increase the maximum commitment amount from $ 75,000 to $ 100,000 as well as extend the period to request an advance under the facility until March 31, 2022.

On May 27, 2021, the Company declared a quarterly dividend of $ 0.35 per share of Class A common stock to record holders at the close of business on June 15, 2021.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data