Hamilton Lane INC

Previous wording

•Customized Separate Accounts: We design and build customized portfolios of private markets funds and direct investments to meet our clients’ specific portfolio objectives with regard to return, risk tolerance, diversification and liquidity. We generally have discretionary investment authority over our customized separate accounts, which comprised $89.1 billion of our assets under management (“AUM”) as of December 31, 2023.

Current wording

•Customized Separate Accounts: We design and build customized portfolios of private markets funds and direct investments to meet our clients’ specific portfolio objectives with regard to return, risk tolerance, diversification and liquidity. We generally have discretionary investment authority over our customized separate accounts, which comprised $94.5 billion of our assets under management (“AUM”) as of June 30, 2024.

Previous wording

•Specialized Funds: We organize, invest and manage specialized primary, secondary and direct investment funds. Our specialized funds invest across a variety of private markets and include equity, equity-linked and credit funds offered on standard terms, as well as shorter duration, opportunistically oriented funds. We launched our first specialized fund in 1997. Since then, our product offerings have grown steadily and now include evergreen offerings that primarily invest in secondaries and direct investments in equity and credit and are available to certain high-net-worth individuals. Specialized funds comprised $30.8 billion of our AUM as of December 31, 2023.

Current wording

•Specialized Funds: We organize, invest and manage specialized primary, secondary and direct investment funds. Our specialized funds invest across a variety of private markets and include equity, equity-linked and credit funds offered on standard terms, as well as shorter duration, opportunistically oriented funds. We launched our first specialized fund in 1997. Since then, our product offerings have grown steadily and now include evergreen offerings that primarily invest in secondaries and direct investments in equity and credit and are available to certain high-net-worth individuals. Specialized funds comprised $35.2 billion of our AUM as of June 30, 2024.

Previous wording

•Advisory Services: We offer investment advisory services to assist clients in developing and implementing their private markets investment programs. Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world. We had $782.9 billion of assets under advisement (“AUA”) as of December 31, 2023.

Current wording

•Advisory Services: We offer non-discretionary investment advisory services to assist clients in developing and implementing their private markets investment programs. Our investment advisory services include asset allocation, strategic plan creation, development of investment policies and guidelines, the screening and recommending of investments, the monitoring of and reporting on investments and investment manager review and due diligence. Our advisory clients include some of the largest and most sophisticated private markets investors in the world. We had $810.4 billion of assets under advisement (“AUA”) as of June 30, 2024.

Previous wording

Revenues from specialized funds are based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value in, our specialized funds. The management fee during the investment period is often charged on capital commitments and after the investment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital or net asset value. In the case of certain funds, we charge management fees on capital commitments, with the management fee increasing during the early years of the fund’s term and declining in the later years. Management fees for certain funds are discounted based on the amount of the limited partners’ commitments, whether the limited partners commit early in the offering period or if the limited partners are investors in our other funds.

Current wording

Revenues from specialized funds are based on a percentage of limited partners’ capital commitments to, net invested capital or net asset value ("NAV") in, our specialized funds. The management fee during the investment period is often charged on capital commitments and after the investment period (or a defined anniversary of the fund’s initial closing) is typically reduced by a percentage of the management fee for the preceding year or charged on net invested capital or NAV. In the case of certain funds, we charge management fees on capital commitments, with the management fee increasing during the early years of the fund’s term and declining in the later years. Management fees for certain funds are discounted based on the amount of the limited partners’ commitments, whether the limited partners commit early in the offering period or if the limited partners are investors in our other funds.

Previous wording

Revenues from advisory and reporting services are generally annual fixed fees, which vary depending on the services we provide. In limited cases, advisory service clients are charged basis point fees annually based on the amounts they have committed to invest pursuant to their agreements with us. In other cases where our services are limited to monitoring and reporting on investment portfolios, clients are charged a fee based on the number of investments in their portfolio.

Current wording

Revenues from advisory and reporting, monitoring, data and analytics services are generally annual fixed fees, which vary depending on the services we provide, and are recognized over the service term. In limited cases, advisory service clients are charged basis point fees annually based on the amounts they have committed to invest pursuant to their agreements with us. In other cases where our services are limited to monitoring and reporting on investment portfolios, clients are charged a fee based on the number of investments in their portfolio.

Previous wording

Equity in income (loss) of investees primarily represents our share of earnings from our investments in our specialized funds and certain customized separate accounts in which we have a general partner commitment. Equity income primarily comprises our share of the net realized and unrealized gains (losses) and investment income partially offset by the expenses from these investments.

Current wording

Equity in income of investees primarily represents our share of earnings from our investments in our specialized funds and certain customized separate accounts in which we have a general partner commitment. Equity income primarily comprises our share of the net realized and unrealized gains (losses) and investment income partially offset by the expenses from these investments.

Previous wording

Non-operating loss consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.

Current wording

Non-operating gain consists primarily of gains and losses on certain investments, changes in liability under the tax receivable agreement and other non-recurring or non-cash items.

Previous wording

Other income (expense) of consolidated variable interest entities (“VIEs”)consists primarily of the share of earnings of investments of consolidated general partner entities, which are not wholly-owned by us, in our specialized funds and certain customized separate accounts in which they have a general partner commitment, interest income on our previously consolidated funds and interest income on investments held in trust, and changes in fair value of liabilities of our previously-sponsored special purpose acquisition company (“SPAC”).

Current wording

Other income (expense) of consolidated variable interest entities (“VIEs”)consists primarily of the share of earnings of investments of consolidated general partner entities, which are not wholly-owned by us, in our specialized funds and certain customized separate accounts in which they have a general partner commitment, interest income on our previously consolidated fund and unrealized gains and interest income on consolidated funds.

Previous wording

NCI reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by us. NCI are presented as separate components in our consolidated statements of income to clearly distinguish between our interests and the economic interests of third parties and employees in those entities.

Current wording

Non-controlling interests reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by us. NCI are presented as separate components in our Condensed Consolidated Statements of Income to clearly distinguish between our interests and the economic interests of third parties and employees in those entities.

Previous wording

Fee-earning AUM is a metric we use to measure the assets from which we earn management fees. Our fee-earning AUM comprise assets in our customized separate accounts and specialized funds from which we derive management fees that are generally derived from applying a certain percentage to the appropriate fee base. We classify customized separate account revenue as management fees if the client is charged an asset-based fee, which includes the majority of our discretionary AUM accounts but also includes certain non-discretionary AUA accounts. Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and net asset value (“NAV”) of our customized separate accounts and specialized funds depending on the fee terms. The vast majority of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation. Therefore, revenues and fee-earning AUM are not significantly affected by changes in market value.

Current wording

Fee-earning AUM is a metric we use to measure the assets from which we earn management fees. Our fee-earning AUM comprise assets in our customized separate accounts and specialized funds from which we derive management fees that are generally derived from applying a certain percentage to the appropriate fee base. We classify customized separate account revenue as management fees if the client is charged an asset-based fee, which includes the majority of our discretionary AUM accounts but also includes certain non-discretionary AUA accounts. Our fee-earning AUM is equal to the amount of capital commitments, net invested capital and NAV of our customized separate accounts and specialized funds depending on the fee terms. The vast majority of our customized separate accounts and specialized funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation. Therefore, revenues and fee-earning AUM are not significantly affected by changes in market value.

Previous wording

The following is a discussion of our consolidated results of operations for the three and nine months ended December 31, 2023 and 2022. This information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

Current wording

The following is a discussion of our consolidated results of operations for the three months ended June 30, 2024 and 2023. This information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

Previous wording

Management and advisory fees increased $16.3 million to $113.6 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. Specialized funds revenue increased $11.6 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to an $8.1 million increase in revenue from our latest secondary fund and a $7.0 million increase in revenue from our evergreen funds, which added $1.9 billion and $2.2 billion, respectively, in fee-earning AUM between periods. Revenue from our latest secondary fund included $6.1 million in retroactive fees for the three months ended December 31, 2023 compared to $3.8 million in retroactive fees from our latest secondary and direct equity funds for the three months ended December 31, 2022. Retroactive fees are management fees earned in the current period from investors that commit to a specialized fund towards the end of the fundraising period and are required to pay a catch-up management fee as if they had committed to the fund at the first closing in a prior period. Customized separate accounts revenue increased $3.4 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 due to the addition of several new accounts, additional allocations from existing accounts, and continued investment activity. Fund reimbursement revenue increased by $1.2 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to the recognition of fund reimbursements from our latest strategic opportunities fund in the current year period.

Current wording

Management and advisory fees increased $34.6 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Specialized funds revenue increased $32.1 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due primarily to an increase of $23.4 million in revenue from our latest secondary fund and an increase of $11.2 million in revenue from our evergreen funds, which added $3.1 billion and $3.3 billion, respectively, in fee-earning AUM between periods. Revenue from our latest secondary fund included $20.7 million in retroactive fees for the three months ended June 30, 2024 compared to $3.9 million in retroactive fees for the three months ended June 30, 2023. Retroactive fees are management fees earned in the current period from investors that commit to a specialized fund towards the end of the fundraising period and are required to pay a catch-up management fee as if they had committed to the fund at the first closing in a prior period. Customized separate accounts revenue increased $1.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to the addition of several new accounts, additional allocations from existing accounts, and continued investment activity. Reporting, monitoring, data and analytics revenue increased by $1.4 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due to increased subscriptions of our technology solutions.

Previous wording

Total expenses increased $5.2 million, or 8%, to $73.9 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to increases in both compensation and benefits expenses and general, administrative and other expenses.

Current wording

Total expenses increased $36.9 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due to increases in both compensation and benefits expenses and general, administrative and other expenses.

Previous wording

Compensation and benefits expenses increased $4.0 million to $49.7 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to an increase in base compensation and benefits, partially offset by a decrease in incentive fee compensation. Base compensation and benefits increased $8.1 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to an increase in salary expense from additional headcount in the current year period compared to the prior year period. Incentive fee compensation decreased $4.5 million for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due to the decrease in incentive fee revenue.

Current wording

Compensation and benefits expenses increased $34.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due primarily to an increase in base compensation and benefits and an increase in incentive fee compensation. Base compensation and benefits increased $24.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due primarily to increases in our annual bonus plan accrual related to stronger operating performance and increased incentive fees compared to the prior year period. Incentive fee compensation increased $9.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due to the increase in incentive fee revenue.

Previous wording

General, administrative and other expenses including our variable interest entities increased $8.5 million to $75.5 million for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022. This change consisted primarily of a $4.4 million increase in third-party commission primarily attributed to the increase in gross subscriptions to our evergreen funds, a $1.8 million increase in fund reimbursement expense attributed to the timing of newly created funds, a $1.4 million increase in technology-related expenses, and a $0.7 million increase in travel expense.

Current wording

General, administrative and other expenses increased $2.6 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This change consisted primarily of an increase of $0.8 million in third-party commissions attributed primarily to the increase in gross subscriptions to our evergreen funds, an increase of $0.7 million in consulting and professional fees and an increase of $0.7 million in conferences and marketing expenses.

Previous wording

Other income (expense) increased $23.5 million, to $1.1 million of expense for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to a decrease in non-operating loss.

Current wording

Other income (expense) increased $4.9 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due primarily to an increase in non-operating gain, partially offset by a decrease in equity in income of investees.

Previous wording

Equity in income (loss) of investees decreased $0.8 million to $0.2 million of income for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. This was due primarily to the decreases in public market valuations during the period.

Current wording

Equity in income of investees decreased $4.5 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This was due primarily to smaller increases in investment valuations during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Previous wording

Our effective tax rate was 31.4% and 35.0% for the three months ended December 31, 2023 and 2022, respectively, and 18.5% and 22.2% for the nine months ended December 31, 2023 and 2022, respectively. The effective tax rates for the three months ended December 31, 2023 and 2022 were different from the statutory tax rate due to the valuation allowance recorded against deferred tax assets. The effective tax rates for the nine months ended December 31, 2023 and 2022 were different from the statutory tax rate due to the portion of income allocated to non-controlling interests, valuation allowance recorded against deferred tax assets and discrete tax adjustments to true-up prior fiscal year estimated investment taxable income to actual investment taxable income reported to the Company after the prior fiscal year end. The effective tax rate for the three and nine months ended December 31, 2023 was lower than the effective tax rate for the three and nine months ended December 31, 2022 primarily due to changes in the valuation allowance against deferred tax assets and discrete tax adjustments.

Current wording

Our effective tax rate was 18.5% and 24.2% for the three months ended June 30, 2024 and 2023, respectively. These rates were different from the statutory tax rates due to the portion of income allocated to NCI, a valuation allowance recorded against deferred tax assets and discrete tax adjustments. The effective tax rate for the three months ended June 30, 2024 was lower than the effective tax rate for the three months ended June 30, 2023 due primarily to a lower valuation allowance against deferred tax assets not expected to be realized at June 30, 2024.

Previous wording

Fee-earning AUM increased $1.7 billion to $63.1 billion during the three months ended December 31, 2023, due primarily to contributions from customized separate accounts and specialized funds.

Current wording

Fee-earning AUM increased $2.0 billion during the three months ended June 30, 2024, due primarily to contributions from customized separate accounts and specialized funds.

Previous wording

Customized separate accounts fee-earning AUM increased $0.7 billion, or 2%, to $36.9 billion for the three months ended December 31, 2023. Customized separate accounts contributions were $1.7 billion for the three months ended December 31, 2023, due primarily to new allocations from existing clients and the addition of new clients. Distributions were $1.0 billion for the three months ended December 31, 2023, due primarily to $0.6 billion from accounts moving from a committed to net invested capital fee base and $0.4 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base.

Current wording

Customized separate accounts fee-earning AUM increased $0.6 billion during the three months ended June 30, 2024. Customized separate accounts contributions were $1.6 billion for the three months ended June 30, 2024, due primarily to new allocations from existing clients and the addition of new clients. Distributions were $1.0 billion for the three months ended June 30, 2024 due primarily to $0.4 billion from accounts moving from a committed to net invested capital fee base, $0.3 billion from returns of capital in accounts earning fees on a net invested capital or NAV fee base, and $0.2 billion from accounts reaching the end of their fund term.

Previous wording

Specialized funds fee-earning AUM increased $1.0 billion, or 4%, to $26.2 billion for the three months ended December 31, 2023. Specialized fund contributions were $1.3 billion for the three months ended December 31, 2023, due primarily to $0.5 billion from our latest secondary fund and $0.6 billion from our evergreen funds. Distributions were $0.4 billion for the three months ended December 31, 2023, due primarily to returns of capital in funds earning fees on a net invested capital or NAV fee base.

Current wording

Specialized funds fee-earning AUM increased $1.3 billion, during the three months ended June 30, 2024. Specialized fund contributions were $2.6 billion for the three months ended June 30, 2024, due primarily to $1.2 billion from our latest secondary fund and $1.1 billion from our evergreen funds. Distributions were $1.3 billion for the three months ended June 30, 2024, due primarily to $0.9 billion from accounts reaching the end of their fund term and $0.3 billion from returns of capital in funds earning fees on a net invested capital or NAV fee base.

Previous wording

Fee Related Earnings (“FRE”) is used to highlight earnings from recurring management fees. FRE represents net income excluding (a) incentive fees and related compensation, (b) interest income and expense, (c) income tax expense, (d) equity in income of investees, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business. FRE is presented before income taxes.

Current wording

Fee Related Earnings (“FRE”) is used to highlight earnings from recurring management fees. FRE represents net income excluding (a) incentive fees and related compensation, (b) interest income and expense, (c) income tax expense, (d) equity in income of investees, (e) non-operating gain and (f) certain other significant items that we believe are not indicative of our core performance. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business. FRE is presented before income taxes.

Previous wording

Adjusted EBITDA is an internal measure of profitability. We believe Adjusted EBITDA is useful to investors because it enables them to better evaluate the performance of our core business across reporting periods. Adjusted EBITDA represents net income excluding (a) interest expense on our outstanding debt, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based compensation expense, (e) other non-operating income and (f) certain other significant items that we believe are not indicative of our core performance.

Current wording

Adjusted EBITDA is an internal measure of profitability. We believe Adjusted EBITDA is useful to investors because it enables them to better evaluate the performance of our core business across reporting periods. Adjusted EBITDA represents net income excluding (a) interest expense on our outstanding debt, (b) income tax expense, (c) depreciation and amortization expense, (d) equity-based compensation expense, (e) non-operating gain and (f) certain other significant items that we believe are not indicative of our core performance.

Previous wording

The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to FRE and Adjusted EBITDA for the three and nine months ended December 31, 2023 and 2022:

Current wording

The following table shows a reconciliation of net income attributable to Hamilton Lane Incorporated to FRE and Adjusted EBITDA for the three months ended June 30, 2024 and 2023:

Previous wording

Non-GAAP earnings per share measures our per-share earnings excluding certain significant items that we believe are not indicative of our core performance and assuming all Class B and Class C units in HLA were exchanged for Class A common stock in HLI. Non-GAAP earnings per share is calculated as adjusted net income divided by adjusted shares outstanding. Adjusted net income is income before taxes fully taxed at our estimated statutory tax rate and excludes any impact of changes in carrying amount of our redeemable non-controlling interest. Adjusted shares outstanding for the nine months ended December 31, 2023 and 2022 are equal to weighted-average shares of Class A common stock outstanding - diluted. We believe adjusted net income and non-GAAP earnings per share are useful to investors because they enable them to better evaluate total and per-share operating performance across reporting periods.

Current wording

Non-GAAP earnings per share measures our per-share earnings excluding certain significant items that we believe are not indicative of our core performance and assuming all Class B and Class C units in HLA were exchanged for Class A common stock in HLI. Non-GAAP earnings per share is calculated as adjusted net income divided by adjusted shares outstanding. Adjusted net income is income before taxes fully taxed at our estimated statutory tax rate and excludes any impact of changes in carrying amount of our redeemable NCI. Adjusted shares outstanding for the three months ended June 30, 2024 and 2023 are equal to weighted-average shares of Class A common stock outstanding - diluted. We believe adjusted net income and non-GAAP earnings per share are useful to investors because they enable them to better evaluate total and per-share operating performance across reporting periods.

Previous wording

The following table shows a reconciliation of adjusted net income to net income attributable to Hamilton Lane Incorporated for the three and nine months ended December 31, 2023 and 2022:

Current wording

The following table shows a reconciliation of adjusted net income to net income attributable to Hamilton Lane Incorporated for the three months ended June 30, 2024 and 2023:

Previous wording

(1) Represents corporate income taxes at our estimated statutory tax rate of 23.6% and 23.9% for the three and nine months ended December 31, 2023 and 2022, respectively, applied to adjusted pre-tax net income. The 23.6% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.6%. The 23.9% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.9%.

Current wording

(1) Represents corporate income taxes at our estimated statutory tax rate of 23.4% and 23.6% for the three months ended June 30, 2024 and 2023, respectively, applied to adjusted pre-tax net income. The 23.4% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.4%. The 23.6% is based on a federal tax statutory rate of 21.0% and a combined state income tax rate net of federal benefits of 2.6%.

Previous wording

The indices presented for comparison are the S&P 500, MSCI World, Credit Suisse High Yield II (“CS HY II”) and Credit Suisse Leverage Loan (“CS LL”), calculated on a public market equivalent (“PME”) basis. We believe these indices are commonly used by private markets and credit investors to evaluate performance. The PME calculation methodology allows private markets investment performance to be evaluated against a public index and assumes that capital is being invested in, or withdrawn from, the index on the days the capital was called and distributed from the underlying fund managers. The S&P 500 Index is a total return capitalization-weighted index that measures the performance of 500 U.S. large cap stocks. The MSCI World Index is a free float-adjusted market capitalization-weighted index of over 1,600 world stocks that is designed to measure the equity market performance of developed markets. The CS HY II Index, formerly known as the DLJ High Yield Index, is designed to mirror the investable universe of the U.S. dollar denominated high yield debt market. Prices for the CS HY II Index are available on a weekly basis. The CS LL Index is an index designed to mirror the investable universe of the U.S. dollar denominated leveraged loan market. Loans must be rated 5B or lower and the index frequency is monthly.

Current wording

The indices presented for comparison are the S&P 500, MSCI World, Credit Suisse High Yield II (“CS HY II”) and Credit Suisse Leverage Loan (“CS LL”), calculated on a public market equivalent (“PME”) basis. We believe these indices are commonly used by private markets and credit investors to evaluate performance. The PME calculation methodology allows private markets investment performance to be evaluated against a public index and assumes that capital is being invested in, or withdrawn from, the index on the days the capital was called and distributed from the underlying fund managers. The S&P 500 Index is a total return capitalization-weighted index that measures the performance of 500 U.S. large cap stocks. The MSCI World Index is a free float-adjusted market capitalization-weighted index of over 1,600 world stocks that is designed to measure the equity market performance of developed markets. The

Previous wording

We have managed our historical liquidity and capital requirements primarily through the receipt of management and advisory fee revenues. Our primary cash flow activities involve: (1) generating cash flow from operations, which largely includes management and advisory fees; (2) realizations generated from our investment activities; (3) funding capital commitments that we have made to certain of our specialized funds and customized separate accounts; (4) making dividend payments to our stockholders and distributions to holders of HLA units; and (5) borrowings, interest payments and repayments under our outstanding debt. As of December 31, 2023 and March 31, 2023, our cash and cash equivalents were $164.5 million and $99.7 million, respectively.

Current wording

We have managed our historical liquidity and capital requirements primarily through the receipt of management and advisory fee revenues. Our primary cash flow activities involve: (1) generating cash flow from operations, which largely includes management and advisory fees; (2) realizations generated from our investment activities; (3) funding capital commitments that we have made to certain of our specialized funds and customized separate accounts; (4) making dividend payments to our stockholders and distributions to holders of HLA units; and (5) borrowings, interest payments and repayments under our outstanding debt. As of June 30, 2024 and March 31, 2024, our cash and cash equivalents were $151.7 million and $114.6 million, respectively.

Previous wording

The Term Loan Agreement has a maturity date of January 1, 2030 and the interest rate is a floating per annum rate equal to the prime rate minus 1.25% subject to a floor of 3.00%. As of December 31, 2023, we had an outstanding balance of $98 million under the Term Loan Agreement. We were entitled to request additional uncommitted term advances not to exceed $25 million in the aggregate, subject to the Cap, through December 31, 2023.

Current wording

The Term Loan Agreement has a maturity date of January 1, 2030 and the interest rate is a floating per annum rate equal to the prime rate minus 1.25% subject to a floor of 3.00%. As of June 30, 2024, we had an outstanding balance of $96 million under the Term Loan Agreement. We were entitled to request additional uncommitted term advances not to exceed $25 million in the aggregate, subject to the Cap, through December 31, 2023.

Previous wording

The Loan Agreements contain covenants that, among other things, limit HLA’s ability to incur indebtedness, transfer or dispose of assets, merge with other companies, create, incur or allow liens, make investments, pay dividends or make distributions, engage in transactions with affiliates and take certain actions with respect to management fees. The Loan Agreements also require HLA to maintain, among other requirements, (i) a specified amount of management fees, (ii) a specified amount of adjusted EBITDA, as defined in the Loan Agreements, and (iii) a specified minimum tangible net worth, during the term of each of the Loan Agreements. The obligations under the Loan Agreements are secured by substantially all the assets of HLA. As of December 31, 2023 and March 31, 2023, the principal amount of debt outstanding equaled $198 million and $214 million, respectively. We had $128 million in availability under the Loan Agreements as of December 31, 2023.

Current wording

The Loan Agreements contain covenants that, among other things, limit HLA’s ability to incur indebtedness, transfer or dispose of assets, merge with other companies, create, incur or allow liens, make investments, pay dividends or make distributions, engage in transactions with affiliates and take certain actions with respect to management fees. The Loan Agreements also require HLA to maintain, among other requirements, (i) a specified amount of management fees, (ii) a specified amount of adjusted EBITDA, as defined in the Loan Agreements, and (iii) a specified minimum tangible net worth, during the term of each of the Loan Agreements. The obligations under the Loan Agreements are secured by substantially all the assets of HLA. As of June 30, 2024 and March 31, 2024, the principal amount of debt outstanding equaled $196.3 million and $196.9 million, respectively. We had $128.8 million in availability under the Loan Agreements as of June 30, 2024.

Previous wording

We believe we will also continue to evaluate opportunities, based on market conditions, to access the capital markets and use proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement. The timing or size of any potential transactions will depend on a number of factors, including market opportunities and our views regarding our capital and liquidity positions and potential future needs. There can be no assurance that any such transactions will be completed on favorable terms, or at all.

Current wording

We believe we will also continue to evaluate opportunities, based on market conditions, to access the capital markets for working capital or to use proceeds from sales of our Class A common stock to settle in cash exchanges of HLA membership interests by direct and indirect owners of HLA pursuant to our exchange agreement. The timing or size of any potential transactions will depend on a number of factors, including market opportunities and our views regarding our capital and liquidity positions and potential future needs. There can be no assurance that any such transactions will be completed on favorable terms, or at all.

Previous wording

We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries and our broker-dealer subsidiary. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of December 31, 2023 and March 31, 2023, we were required to maintain $5.0 million and $4.8 million, respectively, in liquid net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We are in compliance with these regulatory requirements.

Current wording

We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries and our broker-dealer subsidiary. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of June 30, 2024 and March 31, 2024, we were required to maintain approximately $4.8 million and approximately $5.0 million, respectively, in liquid net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We are in compliance with these regulatory requirements.

Previous wording

Total revenues decreased $1.8 million, or 1%, to $125.3 million, for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, due primarily to a decrease in incentive fees, partially offset by an increase in management and advisory fees.

Current wording

Three Months Ended June 30, 2024 and 2023

Previous wording

Cash flows from our operating activities generally reflect our earnings in the respective periods after adjusting for significant non-cash activity, including equity in income (loss) of investees, equity-based compensation, lease expense and depreciation and amortization, all of which are included in earnings. For the nine months ended December 31, 2023 and 2022, our net cash provided by operating activities was driven primarily by receipts of management fees and incentive fees, partially offset by payment of operating expenses, which includes compensation and benefits and general, administrative and other expenses. Additionally, the nine months ended December 31, 2023 included the deconsolidation of a previously consolidated fund.

Current wording

Operating activities generally reflect our earnings in the respective periods after adjusting for significant non-cash activity, including equity in income of investees, equity-based compensation, lease expense and depreciation and amortization, all of which are included in earnings. For the three months ended June 30, 2024 and 2023, our net cash provided by operating activities was driven primarily by receipts of management fees and incentive fees, partially offset by payment of operating expenses, which includes compensation and benefits and general, administrative and other expenses.

Previous wording

Cash flows from our investing activities generally reflect cash used for acquisitions, fixed asset purchases and contributions to and distributions from our funds. For the nine months ended December 31, 2023 and 2022, our net cash (used in) provided by investing activities was driven primarily by purchases of furniture, fixtures and equipment, net contributions to our funds and purchases of non-fund investments. Additionally, the nine months ended December 31, 2023 included purchases of investments by our previously consolidated fund, and the nine months ended December 31, 2022 included the sale of investments held in trust by our consolidated SPAC due to its liquidation and redemption of its Class A common stock from its holders.

Current wording

Investing activities generally reflect cash used for acquisitions, fixed asset purchases and contributions to and distributions from our funds. For the three months ended June 30, 2024 and 2023, our net cash provided by (used in) investing activities was driven primarily by purchases of furniture, fixtures and equipment, net contributions to our funds, cash from consolidating funds and purchases of non-fund investments.

Previous wording

Cash flows from our financing activities generally reflect cash received from debt and equity financings, payments to owners in the form of dividends, distributions and repurchases of shares and scheduled repayments of our outstanding debt. For the nine months ended December 31, 2023 and 2022, our net cash provided by (used in) financing activities was driven primarily by dividends paid to stockholders, distributions to HLA members, and repayment of borrowings under our Revolving Loan Agreement. Additionally, the nine months ended December 31, 2023 included contributions from non-controlling interest in our previously consolidated fund, and the nine months ended December 31, 2022 included borrowings under our Term Loan Agreement and the redemption by our consolidated SPAC of its Class A common stock from its holders.

Current wording

Financing activities generally reflect cash received from debt and equity financings, payments to owners in the form of dividends, distributions and repurchases of shares and scheduled repayments of our outstanding debt. For the three months ended June 30, 2024 and 2023, our net cash used in financing activities was driven primarily by dividends paid to stockholders and distributions to HLA members. Additionally, the three months ended June 30, 2023 included draw-downs and repayment of borrowings under our Revolving Loan Agreement and contributions from NCI interest in our previously consolidated fund.