• StepStone Group Reports First Quarter Fiscal Year 2025 Results

    Source: Nasdaq GlobeNewswire / 08 Aug 2024 15:05:01   America/Chicago

    NEW YORK, Aug. 08, 2024 (GLOBE NEWSWIRE) -- StepStone Group Inc. (Nasdaq: STEP), a global private markets investment firm focused on providing customized investment solutions and advisory and data services, today reported results for the quarter ended June 30, 2024. This represents results for the first quarter of the fiscal year ending March 31, 2025. The Board of Directors of the Company has declared a quarterly cash dividend of $0.24 per share of Class A common stock, payable on September 13, 2024, to the holders of record as of the close of business on August 30, 2024.

    StepStone issued a full detailed presentation of its first quarter fiscal 2025 results, which can be accessed by visiting the Company’s website at https://shareholders.stepstonegroup.com.

    Webcast and Earnings Conference Call

    Management will host a webcast and conference call on Thursday, August 8, 2024, at 5:00 pm ET to discuss the Company’s results for the first quarter of the fiscal year ending March 31, 2025. The webcast will be made available on the Shareholders section of the Company’s website at https://shareholders.stepstonegroup.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time to register. A replay will also be available on the Shareholders section of the Company’s website approximately two hours after the conclusion of the event.

    To join as a live participant in the question and answer portion of the call, participants must register at https://register.vevent.com/register/BIa3a01bd21a304498b91619c08e074cf8. Upon registering you will receive the dial-in number and a PIN to join the call as well as an email confirmation with the details.

    About StepStone

    StepStone Group Inc. (Nasdaq: STEP) is a global private markets investment firm focused on providing customized investment solutions and advisory and data services to its clients. As of June 30, 2024, StepStone was responsible for approximately $701 billion of total capital, including $169 billion of assets under management. StepStone’s clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. StepStone partners with its clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes.

    Forward-Looking Statements

    Some of the statements in this release may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking. Words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “intend,” “may,” “plan” and “will” and similar expressions identify forward-looking statements. Forward-looking statements reflect management’s current plans, estimates and expectations and are inherently uncertain. The inclusion of any forward-looking information in this release should not be regarded as a representation that the future plans, estimates or expectations contemplated will be achieved. Forward-looking statements are subject to various risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, global and domestic market and business conditions, our successful execution of business and growth strategies, the favorability of the private markets fundraising environment, successful integration of acquired businesses and regulatory factors relevant to our business, as well as assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity and the risks and uncertainties described in greater detail under the “Risk Factors” section of our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on May 24, 2024, as such factors may be updated from time to time. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

    Non-GAAP Financial Measures

    To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we use the following non-GAAP financial measures: adjusted management and advisory fees, net, adjusted revenues, adjusted net income (on both a pre-tax and after-tax basis), adjusted net income per share, adjusted weighted-average shares, fee-related earnings, fee-related earnings margin, gross realized performance fees and net realized performance fees. We have provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release. The presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, the non-GAAP financial measures in this earnings release may not be comparable to similarly titled measures used by other companies in our industry or across different industries. For definitions of these non-GAAP measures and reconciliations to applicable GAAP measures, please see the section titled “Non-GAAP Financial Measures: Definitions and Reconciliations.”

    Financial Highlights and Key Business Drivers/Operating Metrics
     Three Months Ended Percentage Change
    (in thousands, except share and per share amounts and where noted)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024    		 vs. FQ1'24
    Financial Highlights       
    GAAP Results       
    Management and advisory fees, net$138,115 $142,123 $151,492 $153,410 $178,015  29%
    Total revenues 178,011  191,422  (14,612) 356,810  186,401  5%
    Total performance fees 39,896  49,299  (166,104) 203,400  8,386  (79)%
    Net income (loss) 49,446  59,251  (23,419) 82,542  48,045  (3)%
    Net income (loss) per share of Class A common stock:       
    Basic$0.34 $0.42 $(0.32)$0.48 $0.20  (41)%
    Diluted$0.34 $0.42 $(0.32)$0.48 $0.20  (41)%
    Weighted-average shares of Class A common stock:       
    Basic 62,834,818  62,858,468  64,068,952  64,194,859  66,187,754  5%
    Diluted 65,739,470  66,198,129  64,068,952  67,281,567  68,593,761  4%
    Quarterly dividend per share of Class A common stock(1)$0.20 $0.21 $0.21 $0.21 $0.21  20%
    Supplemental dividend per share of Class A common stock(2)$0.25 $— $— $— $0.15  (40)%
    Accrued carried interest allocations 1,277,783  1,331,778  1,203,847  1,354,051  1,328,853  4%
            
    Non-GAAP Results(3)       
    Adjusted management and advisory fees, net(4)$138,301 $142,327 $151,943 $153,808 $178,514  29%
    Adjusted revenues 152,780  149,800  185,123  177,357  221,165  45%
    Fee-related earnings (“FRE”) 44,402  43,827  50,664  50,900  71,656  61%
    FRE margin(5) 32% 31% 33% 33% 40%  
    Gross realized performance fees 14,479  7,473  33,180  23,549  42,651  195%
    Adjusted net income (“ANI”) 29,388  30,173  42,116  37,716  57,241  95%
    Adjusted weighted-average shares 114,673,696  115,118,060  115,232,927  115,512,301  118,510,499  3%
    ANI per share$0.26 $0.26 $0.37 $0.33 $0.48  85%
            
    Key Business Drivers/Operating Metrics (in billions)       
    Assets under management (“AUM”)(6)$142.6 $145.8 $149.0 $156.6 $169.3  19%
    Assets under advisement (“AUA”)(6) 497.0  512.9  510.5  521.1  531.4  7%
    Fee-earning AUM (“FEAUM”) 87.4  87.3  89.4  93.9  100.4  15%
    Undeployed fee-earning capital (“UFEC”) 16.9  18.1  21.4  22.6  27.6  63%

    _______________________________
    (1) Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.
    (2) The supplemental cash dividend relates to earnings in respect of our full fiscal years 2023 and 2024, respectively.
    (3) Adjusted management and advisory fees, net, adjusted revenues, FRE, FRE margin, gross realized performance fees, ANI, adjusted weighted-average shares and ANI per share are non-GAAP measures. See the definitions of these measures and reconciliations to the respective, most comparable GAAP measures under “Non-GAAP Financial Measures: Definitions and Reconciliations.”
    (4) Excludes the impact of consolidating the Consolidated Funds. See reconciliation of GAAP measures to adjusted measures that follows.
    (5) FRE margin is calculated by dividing FRE by adjusted management and advisory fees, net.
    (6) AUM/AUA reflects final data for the prior period, adjusted for net new client account activity through the period presented. Does not include post-period investment valuation or cash activity. Net asset value (“NAV”) data for underlying investments is as of the prior period, as reported by underlying managers up to the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end. When NAV data is not available by the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end, such NAVs are adjusted for cash activity following the last available reported NAV.


    StepStone Group Inc.
    GAAP Condensed Consolidated Balance Sheets (Unaudited)
    (in thousands, except share and per share amounts)
     As of
     June 30,
    2024    		 March 31,
    2024
    Assets   
    Cash and cash equivalents$141,633 $143,430
    Restricted cash 735  718
    Fees and accounts receivable 58,334  56,769
    Due from affiliates 100,277  67,531
    Investments:   
    Investments in funds 145,519  135,043
    Accrued carried interest allocations 1,328,853  1,354,051
    Legacy Greenspring investments in funds and accrued carried interest allocations(1) 617,539  631,197
    Deferred income tax assets 195,417  184,512
    Lease right-of-use assets, net 95,374  97,763
    Other assets and receivables 61,436  60,611
    Intangibles, net 294,623  304,873
    Goodwill 580,542  580,542
    Assets of Consolidated Funds:   
    Cash and cash equivalents 53,802  38,164
    Investments, at fair value 158,222  131,858
    Other assets 2,048  1,745
    Total assets$3,834,354 $3,788,807
    Liabilities and stockholders’ equity   
    Accounts payable, accrued expenses and other liabilities$132,380 $127,417
    Accrued compensation and benefits 124,973  101,481
    Accrued carried interest-related compensation 652,123  719,497
    Legacy Greenspring accrued carried interest-related compensation(1) 470,003  484,154
    Due to affiliates 223,471  212,918
    Lease liabilities 118,068  119,739
    Debt obligations 172,118  148,822
    Liabilities of Consolidated Funds:   
    Other liabilities 1,757  1,645
    Total liabilities 1,894,893  1,915,673
    Redeemable non-controlling interests in Consolidated Funds 142,547  102,623
    Redeemable non-controlling interests in subsidiaries 5,931  115,920
    Stockholders’ equity:   
    Class A common stock, $0.001 par value, 650,000,000 authorized; 67,931,869 and 65,614,902 issued and outstanding as of June 30, 2024 and March 31, 2024, respectively 68  66
    Class B common stock, $0.001 par value, 125,000,000 authorized; 45,889,135 and 45,030,959 issued and outstanding as of June 30, 2024 and March 31, 2024, respectively 46  45
    Additional paid-in capital 363,529  310,293
    Retained earnings 2,995  13,768
    Accumulated other comprehensive income 297  304
    Total StepStone Group Inc. stockholders’ equity 366,935  324,476
    Non-controlling interests in subsidiaries 1,027,558  974,559
    Non-controlling interests in legacy Greenspring entities(1) 147,536  147,042
    Non-controlling interests in the Partnership 248,954  208,514
    Total stockholders’ equity 1,790,983  1,654,591
    Total liabilities and stockholders’ equity$3,834,354 $3,788,807
     

    (1) Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests.


    StepStone Group Inc.
    GAAP Condensed Consolidated Statements of Income (Unaudited)
    (in thousands, except share and per share amounts)
     Three Months Ended June 30,
      2024   2023 
    Revenues   
    Management and advisory fees, net$178,015  $138,115 
    Performance fees:   
    Incentive fees 841   6 
    Carried interest allocations:   
    Realized 41,804   14,473 
    Unrealized (25,170)  49,364 
    Total carried interest allocations 16,634   63,837 
    Legacy Greenspring carried interest allocations(1) (9,089)  (23,947)
    Total performance fees 8,386   39,896 
    Total revenues 186,401   178,011 
    Expenses   
    Compensation and benefits:   
    Cash-based compensation 78,224   70,081 
    Equity-based compensation 19,179   8,472 
    Performance fee-related compensation:   
    Realized 20,848   9,102 
    Unrealized (10,923)  24,211 
    Total performance fee-related compensation 9,925   33,313 
    Legacy Greenspring performance fee-related compensation(1) (9,089)  (23,947)
    Total compensation and benefits 98,239   87,919 
    General, administrative and other 41,011   33,277 
    Total expenses 139,250   121,196 
    Other income (expense)   
    Investment income 2,595   3,086 
    Legacy Greenspring investment loss(1) (1,255)  (2,866)
    Investment income of Consolidated Funds 7,635   2,362 
    Interest income 2,057   431 
    Interest expense (2,990)  (2,012)
    Other income (loss) (351)  227 
    Total other income 7,691   1,228 
    Income before income tax 54,842   58,043 
    Income tax expense 6,797   8,597 
    Net income 48,045   49,446 
    Less: Net income attributable to non-controlling interests in subsidiaries 16,615   9,630 
    Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1) (1,255)  (2,866)
    Less: Net income attributable to non-controlling interests in the Partnership 13,324   19,860 
    Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds 5,671   1,553 
    Less: Net income attributable to redeemable non-controlling interests in subsidiaries 362   — 
    Net income attributable to StepStone Group Inc.$13,328  $21,269 
    Net income per share of Class A common stock:   
    Basic$0.20  $0.34 
    Diluted$0.20  $0.34 
    Weighted-average shares of Class A common stock:   
    Basic 66,187,754   62,834,818 
    Diluted 68,593,761   65,739,470 
            

    (1) Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. 


    Non-GAAP Financial Measures: Definitions and Reconciliations
     

    Adjusted Management and Advisory Fees, Net

    The following table presents the components of adjusted management and advisory fees, net. We believe adjusted management and advisory fees, net is useful to investors because it removes the impact of consolidating the Consolidated Funds which we are required to consolidate under GAAP.

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    Focused commingled funds(1)(2)$67,119$70,481$78,633$80,434$104,798
    Separately managed accounts 55,744 56,431 55,838 55,945 57,376
    Advisory and other services 14,101 13,740 16,069 16,147 14,769
    Fund reimbursement revenues(1) 1,337 1,675 1,403 1,282 1,571
    Adjusted management and advisory fees, net$138,301$142,327$151,943$153,808$178,514

    _______________________________
    (1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
    (2) Includes income-based incentive fees of $1.1 million for the three months ended June 30, 2024, $0.8 million for the three months ended March 31, 2024, and $0.6 million for the three months ended December 31, 2023 from certain funds that are regulated as a business development company.

    Adjusted Revenues

    Adjusted revenues represents the components of revenues used in the determination of ANI and comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations. We believe adjusted revenues is useful to investors because it presents a measure of realized revenues.

    The table below shows a reconciliation of revenues to adjusted revenues.

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    Total revenues$178,011 $191,422 $(14,612)$356,810 $186,401
    Unrealized carried interest allocations (49,364) (55,371) 129,584  (151,757) 25,170
    Deferred incentive fees —  942  —  1,450  6
    Legacy Greenspring carried interest allocations 23,947  12,603  69,700  (31,093) 9,089
    Management and advisory fee revenues for the Consolidated Funds(1) 186  204  451  398  499
    Incentive fees for the Consolidated Funds(2) —  —  —  1,549  —
    Adjusted revenues$152,780 $149,800 $185,123 $177,357 $221,165

    _______________________________
    (1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
    (2) Reflects the add-back of incentive fees for the Consolidated Funds, which have been eliminated in consolidation.

    Adjusted Net Income

    Adjusted net income, or “ANI,” is a non-GAAP performance measure that we present before the consolidation of StepStone Funds on a pre-tax and after-tax basis used to evaluate profitability. ANI represents the after-tax net realized income attributable to us. ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation and legacy Greenspring investment income (loss) as none of the economics are attributable to us. The components of revenues used in the determination of ANI (“adjusted revenues”) comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations. In addition, ANI excludes: (a) unrealized carried interest allocation revenues and related compensation, (b) unrealized investment income (loss), (c) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary, (d) amortization of intangibles, (e) net income (loss) attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary, (f) charges associated with acquisitions and corporate transactions, and (g) certain other items that we believe are not indicative of our core operating performance (as listed in the table below). ANI is fully taxed at our blended statutory rate. We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.

    Fee-Related Earnings

    Fee-related earnings, or “FRE,” is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees. FRE is a component of ANI and comprises adjusted management and advisory fees, net, less adjusted expenses which are operating expenses other than (a) performance fee-related compensation, (b) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary, (c) amortization of intangibles, (d) charges associated with acquisitions and corporate transactions, and (e) certain other items that we believe are not indicative of our core operating performance (as listed in the table below). FRE is presented before income taxes. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee revenue.

    The table below shows a reconciliation of GAAP measures to additional non-GAAP measures. We use the non-GAAP measures presented below as components when calculating FRE and ANI (as defined below). We believe these additional non-GAAP measures are useful to investors in evaluating both the baseline earnings from recurring management and advisory fees, which provide additional insight into the operating profitability of our business, and the after-tax net realized income attributable to us, allowing investors to evaluate the performance of our business. These additional non-GAAP measures remove the impact of Consolidated Funds that we are required to consolidate under GAAP, and certain other items that we believe are not indicative of our core operating performance.

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    GAAP management and advisory fees, net$138,115 $142,123 $151,492 $153,410 $178,015 
    Management and advisory fee revenues for the Consolidated Funds(1) 186  204  451  398  499 
    Adjusted management and advisory fees, net$138,301 $142,327 $151,943 $153,808 $178,514 
          
    GAAP incentive fees$6 $4,946 $17,891 $2,496 $841 
    Incentive fee revenues for the Consolidated Funds(2) —  —  —  1,549  — 
    Adjusted incentive fees$6 $4,946 $17,891 $4,045 $841 
          
    GAAP cash-based compensation$70,081 $74,851 $73,619 $74,411 $78,224 
    Adjustments(3) (531) (574) (574) (461) (428)
    Adjusted cash-based compensation$69,550 $74,277 $73,045 $73,950 $77,796 
          
    GAAP equity-based compensation$8,472 $5,916 $14,032 $13,937 $19,179 
    Adjustments(4) (7,171) (4,644) (12,610) (12,210) (16,785)
    Adjusted equity-based compensation$1,301 $1,272 $1,422 $1,727 $2,394 
          
    GAAP general, administrative and other$33,277 $31,729 $48,001 $54,310 $41,011 
    Adjustments(5) (10,229) (8,778) (21,189) (27,079) (14,343)
    Adjusted general, administrative and other$23,048 $22,951 $26,812 $27,231 $26,668 
          
    GAAP interest income$431 $977 $827 $1,429 $2,057 
    Interest income earned by the Consolidated Funds(6) (244) (249) (540) (612) (907)
    Adjusted interest income$187 $728 $287 $817 $1,150 
          
    GAAP other income (loss)$227 $(872)$4,408 $(1,308)$(351)
    Adjustments(7) (376) 403  (4,301) 395  (72)
    Adjusted other income (loss)$(149)$(469)$107 $(913)$(423)

    ______________________________
    (1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
    (2) Reflects the add-back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
    (3) Reflects the removal of compensation paid to certain employees as part of an acquisition earn-out.
    (4) Reflects the removal of equity-based compensation for awards granted prior to and in connection with the IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary.
    (5) Reflects the removal of lease remeasurement adjustments, accelerated depreciation of leasehold improvements for changes in lease terms, amortization of intangibles, transaction-related costs and other non-core operating income and expenses.
    (6) Reflects the removal of interest income earned by the Consolidated Funds.
    (7) Reflects the removal of amounts for Tax Receivable Agreements adjustments recognized as other income (loss), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters, loss on sale of subsidiary and the impact of consolidation of the Consolidated Funds.

    The table below shows a reconciliation of income (loss) before income tax to ANI and FRE.

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    Income (loss) before income tax$58,043  66,980 $(24,142)$94,515 $54,842 
    Net income attributable to non-controlling interests in subsidiaries(1) (10,540) (10,321) (15,537) (12,822) (18,951)
    Net loss attributable to non-controlling interests in legacy Greenspring entities 2,866  3,966  2,222  33  1,255 
    Unrealized carried interest allocations (49,364) (55,371) 129,584  (151,757) 25,170 
    Unrealized performance fee-related compensation 24,211  28,712  (62,243) 84,014  (10,923)
    Unrealized investment (income) loss (2,529) (1,657) 5,559  (2,280) (1,180)
    Impact of Consolidated Funds (2,647) (8,223) (11,068) (4,138) (7,731)
    Deferred incentive fees —  942  —  1,450  6 
    Equity-based compensation(2) 7,171  4,644  12,610  12,210  16,785 
    Amortization of intangibles 10,661  10,661  10,661  10,423  10,250 
    Tax Receivable Agreements adjustments through earnings —  —  222  90  — 
    Non-core items(3) (50) (1,500) 6,335  16,780  4,137 
    Pre-tax ANI 37,822  38,833  54,203  48,518  73,660 
    Income taxes(4) (8,434) (8,660) (12,087) (10,802) (16,419)
    ANI 29,388  30,173  42,116  37,716  57,241 
    Income taxes(4) 8,434  8,660  12,087  10,802  16,419 
    Realized carried interest allocations (14,473) (1,585) (15,289) (18,054) (41,804)
    Realized performance fee-related compensation(5) 9,102  1,720  15,444  11,421  20,848 
    Realized investment income (557) (1,423) (3,508) (1,057) (1,415)
    Adjusted incentive fees(6) (6) (4,946) (17,891) (4,045) (841)
    Deferred incentive fees —  (942) —  (1,450) (6)
    Adjusted interest income(6) (187) (728) (287) (817) (1,150)
    Interest expense 2,012  2,108  2,562  2,649  2,990 
    Adjusted other (income) loss(6)(7) 149  469  (107) 913  423 
    Net income attributable to non-controlling interests in subsidiaries(1) 10,540  10,321  15,537  12,822  18,951 
    FRE$44,402 $43,827 $50,664 $50,900 $71,656 

    _______________________________
    (1) Reflects the portion of pre-tax ANI attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary:

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    FRE attributable to non-controlling interests in subsidiaries and profits interests$10,534$9,463$10,518$11,559$13,308
    Non fee-related earnings attributable to non-controlling interests in subsidiaries and profits interests 6 858 5,019 1,263 5,643
    Net income attributable to non-controlling interests in subsidiaries$10,540$10,321$15,537$12,822$18,951
     

    (2) Reflects equity-based compensation for awards granted prior to and in connection with the IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary.
    (3) Includes (income) expense related to the following non-core operating income and expenses:

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    Transaction costs$37 $163 $670 $3,985$672
    Lease remeasurement adjustments —  —  (106) — —
    Accelerated depreciation of leasehold improvements for changes in lease terms 631  631  631  — —
    (Gain) loss on change in fair value for contingent consideration obligation (1,249) (2,868) 9,054  12,280 2,953
    Compensation paid to certain employees as part of an acquisition earn-out 531  574  574  515 482
    Gain from negotiation of certain corporate matters —  —  (5,300) — —
    Loss on sale of subsidiary —  —  812  — —
    Other non-core items —  —  —  — 30
    Total non-core operating income and expenses$(50)$(1,500)$6,335 $16,780$4,137
     

    (4) Represents corporate income taxes at a blended statutory rate applied to pre-tax ANI:

     Three Months Ended
     June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    Federal statutory rate21.0%21.0%21.0%21.0%21.0%
    Combined state, local and foreign rate1.3%1.3%1.3%1.3%1.3%
    Blended statutory rate22.3%22.3%22.3%22.3%22.3%
     

    (5) Includes carried interest-related compensation expense related to the portion of net carried interest allocation revenue attributable to equity holders of the Company’s consolidated subsidiaries that are not 100% owned:

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    Realized carried interest-related compensation$2,189$—$660$910$—
     

    (6) Excludes the impact of consolidating the Consolidated Funds.
    (7) Excludes amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(0.1) million for the three months ended March 31, 2024 and $(0.2) million for the three months ended December 31, 2023), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters ($5.3 million for the three months ended December 31, 2023), and loss on sale of subsidiary ($0.8 million for the three months ended December 31, 2023).

    Fee-Related Earnings Margin

    FRE margin is a non-GAAP performance measure which is calculated by dividing FRE by adjusted management and advisory fees, net. We believe FRE margin is an important measure of profitability on revenues that are largely recurring by nature. We believe FRE margin is useful to investors because it enables them to better evaluate the operating profitability of our business across periods.

    The table below shows a reconciliation of FRE to FRE margin.

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    FRE$44,402 $43,827 $50,664 $50,900 $71,656 
    Adjusted management and advisory fees, net 138,301  142,327  151,943  153,808  178,514 
    FRE margin 32% 31% 33% 33% 40%
     

    Gross Realized Performance Fees

    Gross realized performance fees represents realized carried interest allocations and adjusted incentive fees, including the deferred portion. We believe gross realized performance fees is useful to investors because it presents the total performance fees realized by us.

    Net Realized Performance Fees

    Net realized performance fees represents gross realized performance fees, less realized performance fee-related compensation. We believe net realized performance fees is useful to investors because it presents the performance fees attributable to us, net of amounts paid to employees as performance fee-related compensation.

    The table below shows a reconciliation of total performance fees to gross and net realized performance fees.

     Three Months Ended
    (in thousands)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    Incentive fees$6 $4,946 $17,891 $2,496 $841 
    Realized carried interest allocations 14,473  1,585  15,289  18,054  41,804 
    Unrealized carried interest allocations 49,364  55,371  (129,584) 151,757  (25,170)
    Legacy Greenspring carried interest allocations (23,947) (12,603) (69,700) 31,093  (9,089)
    Total performance fees 39,896  49,299  (166,104) 203,400  8,386 
    Unrealized carried interest allocations (49,364) (55,371) 129,584  (151,757) 25,170 
    Legacy Greenspring carried interest allocations 23,947  12,603  69,700  (31,093) 9,089 
    Incentive fee revenues for the Consolidated Funds(1) —  —  —  1,549  — 
    Deferred incentive fees —  942  —  1,450  6 
    Gross realized performance fees 14,479  7,473  33,180  23,549  42,651 
    Realized performance fee-related compensation (9,102) (1,720) (15,444) (11,421) (20,848)
    Net realized performance fees$5,377 $5,753 $17,736 $12,128 $21,803 

    ______________________________
    (1) Reflects the add-back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

    Adjusted Weighted-Average Shares and Adjusted Net Income Per Share

    ANI per share measures our per-share earnings assuming all Class B units, Class C units and Class D units in the Partnership were exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards. ANI per share is calculated as ANI divided by adjusted weighted-average shares outstanding. We believe adjusted weighted-average shares and ANI per share are useful to investors because they enable investors to better evaluate per-share operating performance across reporting periods.

    The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted weighted-average shares outstanding used in the computation of ANI per share.

     Three Months Ended
     June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024
    ANI$29,388$30,173$42,116$37,716$57,241
          
    Weighted-average shares of Class A common stock outstanding – Basic 62,834,818 62,858,468 64,068,952 64,194,859 66,187,754
    Assumed vesting of RSUs 400,034 801,014 333,402 512,946 673,854
    Assumed vesting and exchange of Class B2 units 2,504,618 2,538,647 2,553,899 2,573,762 1,732,153
    Exchange of Class B units in the Partnership(1) 46,420,141 46,417,845 46,314,543 46,272,227 45,827,707
    Exchange of Class C units in the Partnership(1) 2,514,085 2,502,086 1,962,131 1,958,507 1,849,846
    Exchange of Class D units in the Partnership(1) — — — — 2,239,185
    Adjusted weighted-average shares 114,673,696 115,118,060 115,232,927 115,512,301 118,510,499
          
    ANI per share$0.26$0.26$0.37$0.33$0.48

    _______________________________
    (1) Assumes the full exchange of Class B units, Class C units or Class D units in the Partnership for Class A common stock of SSG pursuant to the Class B Exchange Agreement, Class C Exchange Agreement or Class D Exchange Agreement, respectively.

    Key Operating Metrics

    We monitor certain operating metrics that are either common to the asset management industry or that we believe provide important data regarding our business. Refer to the Glossary below for a definition of each of these metrics.

    Fee-Earning AUM

     Three Months Ended Percentage Change
    (in millions)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024    		 vs. FQ1'24
    Separately Managed Accounts       
    Beginning balance$55,345 $56,645 $56,380 $56,660 $58,897  6%
    Contributions(1) 1,425  1,036  1,109  2,757  2,085  46%
    Distributions(2) (429) (1,459) (1,397) (795) (830) 93%
    Market value, FX and other(3) 304  158  568  275  120  (61)%
    Ending balance$56,645 $56,380 $56,660 $58,897 $60,272  6%
            
    Focused Commingled Funds       
    Beginning balance$30,086 $30,762 $30,905 $32,772 $34,961  16%
    Contributions(1) 796  992  1,898  2,429  5,653  610%
    Distributions(2) (252) (988) (274) (327) (661) 162%
    Market value, FX and other(3) 132  139  243  87  131  (1)%
    Ending balance$30,762 $30,905 $32,772 $34,961 $40,084  30%
            
    Total       
    Beginning balance$85,431 $87,407 $87,285 $89,432 $93,858  10%
    Contributions(1) 2,221  2,028  3,007  5,186  7,738  248%
    Distributions(2) (681) (2,447) (1,671) (1,122) (1,491) 119%
    Market value, FX and other(3) 436  297  811  362  251  (42)%
    Ending balance$87,407 $87,285 $89,432 $93,858 $100,356  15%

    _______________________________
    (1) Contributions consist of new capital commitments that earn fees on committed capital and capital contributions to funds and accounts that earn fees on net invested capital or NAV.
    (2) Distributions consist of returns of capital from funds and accounts that pay fees on net invested capital or NAV and reductions in fee-earning AUM from funds that moved from a committed capital to net invested capital fee basis or from funds and accounts that no longer pay fees.
    (3) Market value, FX and other primarily consist of changes in market value appreciation (depreciation) for funds that pay on NAV and the effect of foreign exchange rate changes on non-U.S. dollar denominated commitments.

    Asset Class Summary

     Three Months Ended Percentage Change
    (in millions)June 30,
    2023    		September 30,
    2023    		December 31,
    2023    		March 31,
    2024    		June 30,
    2024    		 vs. FQ1'24
    FEAUM       
    Private equity$46,539$46,464$48,258$49,869$54,855 18%
    Infrastructure 19,874 20,122 19,789 20,114 20,377 3%
    Private debt 14,865 15,122 15,460 15,477 16,161 9%
    Real estate 6,129 5,577 5,925 8,398 8,963 46%
    Total$87,407$87,285$89,432$93,858$100,356 15%
            
    Separately managed accounts$56,645$56,380$56,660$58,897$60,272 6%
    Focused commingled funds 30,762 30,905 32,772 34,961 40,084 30%
    Total$87,407$87,285$89,432$93,858$100,356 15%
            
    AUM(1)       
    Private equity$73,511$76,031$78,221$81,942$89,329 22%
    Infrastructure 28,521 28,678 28,307 30,003 32,756 15%
    Private debt 27,099 27,520 27,782 28,491 30,336 12%
    Real estate 13,469 13,612 14,646 16,201 16,912 26%
    Total$142,600$145,841$148,956$156,637$169,333 19%
            
    Separately managed accounts$85,058$85,387$88,890$93,938$103,003 21%
    Focused commingled funds 44,389 46,266 45,508 48,545 51,682 16%
    Advisory AUM 13,153 14,188 14,558 14,154 14,648 11%
    Total$142,600$145,841$148,956$156,637$169,333 19%
            
    AUA       
    Private equity$251,880$264,327$266,246$270,350$279,909 11%
    Infrastructure 53,593 55,146 57,528 60,339 62,599 17%
    Private debt 17,525 18,026 17,916 21,976 22,280 27%
    Real estate 173,992 175,369 168,802 168,455 166,659 (4)%
    Total$496,990$512,868$510,492$521,120$531,447 7%
            
    Total capital responsibility(2)$639,590$658,709$659,448$677,757$700,780 10%

    _____________________________
    Note: Amounts may not sum to total due to rounding. AUM/AUA reflects final data for the prior period, adjusted for net new client account activity through the period presented, and does not include post-period investment valuation or cash activity. Net asset value (“NAV”) data for underlying investments is as of the prior period, as reported by underlying managers up to the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end. When NAV data is not available by the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end, such NAVs are adjusted for cash activity following the last available reported NAV.
    (1) Allocation of AUM by asset class is presented by underlying investment asset classification.
    (2) Total capital responsibility equals assets under management (AUM) plus assets under advisement (AUA).

    Contacts

    Shareholder Relations:
    Seth Weiss
    shareholders@stepstonegroup.com
    1-212-351-6106

    Media:
    Brian Ruby / Chris Gillick / Matt Lettiero, ICR
    StepStonePR@icrinc.com
    1-203-682-8268

    Glossary
     

    Assets under advisement, or “AUA,” consists of client assets for which we do not have full discretion to make investment decisions but play a role in advising the client or monitoring their investments. We generally earn revenue for advisory-related services on a contractual fixed fee basis. Advisory-related services include asset allocation, strategic planning, development of investment policies and guidelines, screening and recommending investments, legal negotiations, monitoring and reporting on investments, and investment manager review and due diligence. Advisory fees vary by client based on the scope of services, investment activity and other factors. Most of our advisory fees are fixed, and therefore, increases or decreases in AUA do not necessarily lead to proportionate changes in revenue. We believe AUA is a useful metric for assessing the relative size of our advisory business.

    Our AUA is calculated as the sum of (i) the NAV of client portfolio assets for which we do not have full discretion and (ii) the unfunded commitments of clients to the underlying investments. Our AUA reflects the investment valuations in respect of the underlying investments of our client accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUA does not include post-period investment valuation or cash activity. AUA as of June 30, 2024 reflects final data for the prior period (March 31, 2024), adjusted for net new client account activity through June 30, 2024. NAV data for underlying investments is as of March 31, 2024, as reported by underlying managers up to the business day occurring on or after 100 days following March 31, 2024. When NAV data is not available by the business day occurring on or after 100 days following March 31, 2024, such NAVs are adjusted for cash activity following the last available reported NAV.

    Assets under management, or “AUM,” primarily reflects the assets associated with our separately managed accounts (“SMAs”) and focused commingled funds. We classify assets as AUM if we have full discretion over the investment decisions in an account or have responsibility or custody of assets. Although management fees are based on a variety of factors and are not linearly correlated with AUM, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business.

    Our AUM is calculated as the sum of (i) the net asset value (“NAV”) of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds. Our AUM reflects the investment valuations in respect of the underlying investments of our funds and accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUM does not include post-period investment valuation or cash activity. AUM as of June 30, 2024 reflects final data for the prior period (March 31, 2024), adjusted for net new client account activity through June 30, 2024. NAV data for underlying investments is as of March 31, 2024, as reported by underlying managers up to the business day occurring on or after 100 days following March 31, 2024. When NAV data is not available by the business day occurring on or after 100 days following March 31, 2024, such NAVs are adjusted for cash activity following the last available reported NAV.

    Consolidated Funds refer to the StepStone Funds that we are required to consolidate as of the applicable reporting period. We consolidate funds and other entities in which we hold a controlling financial interest.

    Consolidated VIEs refer to the variable interest entities that we are required to consolidate as of the applicable reporting period. We consolidate VIEs in which we hold a controlling financial interest.

    Fee-earning AUM, or “FEAUM,” reflects the assets from which we earn management fee revenue (i.e., fee basis) and includes assets in our SMAs, focused commingled funds and assets held directly by our clients for which we have fiduciary oversight and are paid fees as the manager of the assets. Our SMAs and focused commingled funds typically pay management fees based on capital commitments, net invested capital and, in certain cases, NAV, depending on the fee terms. Management fees are only marginally affected by market appreciation or depreciation because substantially all of the StepStone Funds pay management fees based on capital commitments or net invested capital. As a result, management fees and FEAUM are not materially affected by changes in market value. We believe FEAUM is a useful metric in order to assess assets forming the basis of our management fee revenue.

    Legacy Greenspring entities refers to certain entities for which the Company, indirectly through its subsidiaries, became the sole and/or managing member in connection with the Greenspring acquisition.

    SSG refers solely to StepStone Group Inc., a Delaware corporation, and not to any of its subsidiaries.

    StepStone Funds refer to SMAs and focused commingled funds of the Company, including acquired Greenspring funds, for which the Partnership or one of its subsidiaries acts as both investment adviser and general partner or managing member.

    The Partnership refers solely to StepStone Group LP, a Delaware limited partnership, and not to any of its subsidiaries.

    Total capital responsibility equals AUM plus AUA. AUM includes any accounts for which StepStone Group has full discretion over the investment decisions, has responsibility to arrange or effectuate transactions, or has custody of assets. AUA refers to accounts for which StepStone Group provides advice or consultation but for which the firm does not have discretionary authority, responsibility to arrange or effectuate transactions, or custody of assets.

    Undeployed fee-earning capital represents the amount of capital commitments to StepStone Funds that has not yet been invested or considered active but will generate management fee revenue once this capital is invested or activated. We believe undeployed fee-earning capital is a useful metric for measuring the amount of capital that we can put to work in the future and thus earn management fee revenue thereon.


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