Chapter 2

The three-year record

Hamilton Lane's reported numbers do three things at once: a management-fee base that compounds in the mid-teens, a headline earnings figure inflated by lumpy incentive fees and balance-sheet investment gains, and a "recurring earnings" measure (FRE) that is itself leaning more on performance-linked revenue than the label suggests. Revenue reached $759.0M in fiscal 2026 and GAAP diluted EPS $5.92; the fee engine is real, but reported EPS is a noisier read on it than FRE.

Source: FY2026 Annual Report (Form 10-K), Consolidated Statements of Operations [1] and non-GAAP reconciliation [2].

The revenue engine and where it comes from

The income statement separates cleanly into two streams. Management and advisory fees — contractual, long-dated, and tied to fee-earning assets — rose from $451.9M in FY2024 to $584.2M in FY2026, a 13.7% two-year CAGR that never dipped [3]. Incentive fees — carried interest and performance fees that crystallize on realizations — did the opposite, falling from $199.1M in FY2025 to $174.8M in FY2026 even as the fee base grew [4]. Management and advisory fees supplied 77.0% of FY2026 revenue; incentive fees the remaining 23.0%.

Source: FY2026 Annual Report (Form 10-K), Consolidated Statements of Operations; incentive fees shown inclusive of Consolidated Funds [5] [6].

The steadiness of the top line is a feature of the model, not the year. Because fees are earned on committed and fee-earning capital that turns over slowly, revenue grew through the FY2024–FY2026 window even as the incentive-fee stream swung — the mechanics behind the Fees and De-Rating split. Total expenses grew broadly in line, from $308.0M to $434.0M, keeping GAAP net income attributable to Hamilton Lane rising from $140.9M to $249.2M [7].

From revenue to earnings — three ways to count it

Hamilton Lane reports its results three ways, and the gaps between them are where the analysis lives. GAAP diluted EPS was $5.92 in FY2026, up from $3.69 two years earlier [8]. Non-GAAP EPS — which taxes pre-tax income at a full statutory rate and assumes all Class B/C units convert to Class A — was $5.90, built from adjusted net income of $321.2M [9]. Both of those figures still carry the firm's investment income; only Fee-Related Earnings strips it out to isolate the fee business.

Source: FY2026 Annual Report (Form 10-K), FRE / Adjusted EBITDA reconciliation [10] and Non-GAAP EPS reconciliation [11].

FRE — the measure the bull case rests on because it is meant to capture "earnings from revenues that are measured and received on a recurring basis" [12] — grew from $206.7M to $344.5M, a 29.1% two-year CAGR, well ahead of the 13.7% pace of the management-fee base [13]. Part of that gap is genuine operating leverage: the FRE margin on fee-related revenue widened from 45.5% in FY2024 to 50.2% in FY2026.

Source: derived from reported financials — FRE divided by management/advisory fees plus fee-related performance revenues, FY2024–FY2026 [14].

What is inside "recurring"

The rest of the FRE gap is a composition shift worth naming. Inside the FRE build sits a line called fee-related performance revenues (FRPR) — incentive fees the company judges to be "measured and received on a recurring basis and not dependent on realization events," largely from its evergreen and perpetual funds [15]. FRPR rose from $2.4M in FY2024 to $59.6M in FY2025 to $102.5M in FY2026 [16]. Of the $137.8M by which FRE grew over two years, $100.1M — about 73% — came from that single line.

This does not undo the FRE story — evergreen performance revenue that does not need an exit is a better annuity than traditional carry — but it changes how a reader should weight it. The clean, contractual core is the management-fee line growing near 14% a year; FRE grows faster partly because it now folds in a performance stream that scales with markets. What would change the read: a market drawdown that stalls or reverses FRPR would slow FRE well below its 29% trailing pace while management fees kept compounding.

Cash conversion and a balance sheet that is hard to break

The business is asset-light and cash-generative. Capital expenditure was $5.8M in FY2026 against $424.9M of operating cash flow, and depreciation runs under $10M a year [17]. Operating cash flow is lumpy — $120.9M in FY2024, $300.8M in FY2025, $424.9M in FY2026 — because incentive-fee receipts and fund-related timing move it around, but the multi-year direction is up and comfortably covers the $87.7M of dividends paid [18].

Source: FY2026 Annual Report (Form 10-K), Consolidated Statements of Cash Flows [19].

For a reader who wants the chance of bankruptcy near zero, the balance sheet is the reassuring part of this file. At March 31, 2026 Hamilton Lane held $361.0M of cash against $278.4M of debt — a net cash position — alongside $774.4M of balance-sheet investments [20]. Debt is 0.30x equity, and there is no capital-intensive asset base to impair. The one balance-sheet claim a value investor should carry forward is the $235.4M payable to related parties under the tax receivable agreement — a real, scheduled cash obligation to pre-IPO owners that diverts cash away from Class A holders over time [21]; its size and cadence belong in the ownership and alignment discussion, not here.

Source: FY2026 Annual Report (Form 10-K), Consolidated Balance Sheets [22].

What the forward estimates say

Consensus does not model a broken business. On mean estimates, revenue grows from $759.0M in FY2026 to $904.2M in FY2027 and $1.05B in FY2028; non-GAAP EPS moves from $5.90 to $6.26 and then $7.36. The shape is worth reading closely: FY2027 revenue is modeled up about 19% but EPS up only ~6%, because FY2026 earnings were flattered by elevated incentive fees and investment gains that create a tough comparison, before EPS reaccelerates ~18% in FY2028 as the fee base scales.

Source: FY2026 actual per Form 10-K [23]; FY2027–FY2028 consensus analyst estimates (mean), as reported.

Source: FY2026 actual per Form 10-K non-GAAP reconciliation [24]; FY2027–FY2028 consensus analyst estimates (mean), as reported.

At the current $83.16, those estimates put the shares on 13.3x FY2027 and 11.3x FY2028 earnings — the valued-cheaply half of the Fees and De-Rating picture, quantified forward. The sell-side is aligned with that: seven analysts publish, six of seven rate the stock buy or better, and the mean price target of $126.86 (range $94 to $174) sits above the current price. Near-term conviction is firming while the out-year drifts — FY2027 EPS saw four upward revisions against two down over the last month, but FY2028 saw one up against three down.

Source: price and consensus analyst estimates (mean), as reported; multiples derived from consensus EPS of $6.26 (FY2027) and $7.36 (FY2028).

The forward numbers are a coherent bull case: mid-teens revenue growth, a fee base that compounds without a realization cycle, net cash, and a multiple well below the firm's own history. The discipline a value reader should keep is that consensus EPS still leans on incentive fees and investment gains that FRE deliberately excludes — so the durable growth rate is closer to the low-to-mid teens of the management-fee line than the headline EPS trajectory, and the estimate that matters most for the case is fee-earning AUM, the input that turns into next year's management fees.