-
StepStone Group Reports First Quarter Fiscal Year 2024 Results
ソース: Nasdaq GlobeNewswire / 03 8 2023 16:05:02 America/New_York
NEW YORK, Aug. 03, 2023 (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, 2023. This represents results for the first quarter of the fiscal year ending March 31, 2024. The Board of Directors of the Company has declared a quarterly cash dividend of $0.21 per share of Class A common stock, payable on September 15, 2023, to the holders of record as of the close of business on August 31, 2023.
StepStone issued a full detailed presentation of its first quarter fiscal 2024 results, which can be accessed by visiting the Company’s website at https://shareholders.stepstonegroup.com or by clicking here.
Webcast and Earnings Conference Call
Management will host a webcast and conference call on Thursday, August 3, 2023 at 5:00 pm ET to discuss the Company’s results for the first quarter of the fiscal year ending March 31, 2024. The conference call will also 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.
The conference call can be accessed by dialing 1-888-886-7786 (United States) or 1-416-764-8658 (international).
Replay
A replay of the call will be available approximately two hours after the live event. To access the replay, dial 1-844-512-2921 (United States) or 1-412-317-6671 (international) and use the PIN 16493363. This replay option will be available through August 17, 2023. The replay can also be accessed on the Shareholders section of the Company's website at https://shareholders.stepstonegroup.com.
About StepStone
StepStone Group Inc. (Nasdaq: STEP) is a global private markets investment firm focused on providing customized investment solutions and advisory, data and administrative services to its clients. As of June 30, 2023, StepStone was responsible for approximately $640 billion of total capital, including $143 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, successful execution of business and growth strategies 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 26, 2023, 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 revenues, adjusted net income (on both a pre-tax and after-tax basis), adjusted net income per share, fee-related earnings and fee-related earnings margin. 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 MetricsThree Months Ended Percentage
Change(in thousands, except share and per share amounts and where noted) June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023vs. FQ1'23 Financial Highlights GAAP Results Management and advisory fees, net $ 116,732 $ 119,121 $ 128,753 $ 132,573 $ 138,115 18 % Total revenues (77,218 ) (158,495 ) (4,235 ) 172,374 178,011 na Net income (loss) (21,471 ) (67,065 ) (13,555 ) 56,816 49,446 na Net income (loss) per share of Class A common stock: Basic $ (0.18 ) $ (0.48 ) $ (0.11 ) $ 0.46 $ 0.34 na Diluted $ (0.18 ) $ (0.48 ) $ (0.11 ) $ 0.46 $ 0.34 na Weighted-average shares of Class A common stock: Basic 61,144,139 61,407,834 62,192,899 62,805,788 62,834,818 3 % Diluted 61,144,139 61,407,834 62,192,899 65,831,409 65,739,470 8 % Quarterly dividend per share of Class A common stock(1) $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 —% Supplemental dividend per share of Class A common stock(1) $ — $ — $ — $ — $ 0.25 na Accrued carried interest allocations 1,366,314 1,189,323 1,126,386 1,227,173 1,277,783 (6)% Non-GAAP Results(2) Management and advisory fees, net(3) $ 116,732 $ 119,121 $ 128,753 $ 132,720 $ 138,301 18 % Adjusted revenues 190,339 150,638 148,053 152,940 152,780 (20)% Fee-related earnings (“FRE”) 36,617 39,044 42,701 37,796 44,402 21 % Fee-related earnings margin(4) 31 % 33 % 33 % 28 % 32 % Gross realized performance fees 73,607 31,517 19,300 20,220 14,479 (80)% Adjusted net income (“ANI”) 47,134 37,261 31,153 27,115 29,388 (38)% Adjusted weighted-average shares 114,466,962 114,606,326 114,651,163 114,765,635 114,673,696 —% ANI per share $ 0.41 $ 0.33 $ 0.27 $ 0.24 $ 0.26 (37)% Key Business Drivers/Operating Metrics (in billions) Assets under management (“AUM”)(5) $ 136.5 $ 135.0 $ 134.0 $ 138.4 $ 142.6 4 % Assets under advisement (“AUA”)(5) 451.9 466.7 468.0 482.2 497.0 10 % Fee-earning AUM (“FEAUM”) 78.6 80.1 83.0 85.4 87.4 11 % Undeployed fee-earning capital (“UFEC”) 17.1 16.5 14.0 15.7 16.9 (1)% _______________________________
(1) Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.
(2) Adjusted revenues, fee-related earnings, fee-related earnings margin, adjusted net income, 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.”
(3) Excludes the impact of consolidating the Consolidated Funds. See reconciliation of GAAP measures to adjusted measures that follows.
(4) Fee-related earnings margin is calculated by dividing fee-related earnings by management and advisory fees, net.
(5) 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 100 days, or 115 days at the fiscal year-end, following the prior period end. When NAV data is not available 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, 2023 March 31, 2023 Assets Cash and cash equivalents $ 91,733 $ 102,565 Restricted cash 699 955 Fees and accounts receivable 46,091 44,450 Due from affiliates 62,365 54,322 Investments: Investments in funds 122,149 115,187 Accrued carried interest allocations 1,277,783 1,227,173 Legacy Greenspring investments in funds and accrued carried interest allocations(1) 745,586 770,652 Deferred income tax assets 38,910 44,358 Lease right-of-use assets, net 100,531 101,130 Other assets and receivables 44,889 44,060 Intangibles, net 343,983 354,645 Goodwill 580,542 580,542 Assets of Consolidated Funds: Cash and cash equivalents 35,497 25,997 Investments, at fair value 39,188 30,595 Other assets 836 772 Total assets $ 3,530,782 $ 3,497,403 Liabilities and stockholders’ equity Accounts payable, accrued expenses and other liabilities $ 91,322 $ 89,396 Accrued compensation and benefits 92,521 66,614 Accrued carried interest-related compensation 668,704 644,517 Legacy Greenspring accrued carried interest-related compensation(1) 593,670 617,994 Due to affiliates 199,407 205,424 Lease liabilities 116,175 121,224 Debt obligations 98,468 98,351 Liabilities of Consolidated Funds: Other liabilities 354 566 Total liabilities 1,860,621 1,844,086 Redeemable non-controlling interests in Consolidated Funds 41,618 24,530 Stockholders’ equity: Class A common stock, $0.001 par value, 650,000,000 authorized; 62,834,871 and 62,834,791 issued and outstanding as of June 30, 2023 and March 31, 2023, respectively 63 63 Class B common stock, $0.001 par value, 125,000,000 authorized; 46,420,141 and 46,420,141 issued and outstanding as of June 30, 2023 and March 31, 2023, respectively 46 46 Additional paid-in capital 612,799 610,567 Retained earnings 152,612 160,430 Accumulated other comprehensive income 439 461 Total StepStone Group Inc. stockholders’ equity 765,959 771,567 Non-controlling interests in subsidiaries 37,678 36,380 Non-controlling interests in legacy Greenspring entities(1) 151,916 152,658 Non-controlling interests in the Partnership 672,990 668,182 Total stockholders’ equity 1,628,543 1,628,787 Total liabilities and stockholders’ equity $ 3,530,782 $ 3,497,403 (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 (Loss) (Unaudited)
(in thousands, except share and per share amounts)Three Months Ended June 30, 2023 2022 Revenues Management and advisory fees, net $ 138,115 $ 116,732 Performance fees: Incentive fees 6 — Carried interest allocations: Realized 14,473 73,607 Unrealized 49,364 (113,950 ) Total carried interest allocations 63,837 (40,343 ) Legacy Greenspring carried interest allocations(1) (23,947 ) (153,607 ) Total revenues 178,011 (77,218 ) Expenses Compensation and benefits: Cash-based compensation 70,081 60,061 Equity-based compensation 8,472 3,714 Performance fee-related compensation: Realized 9,102 41,735 Unrealized 24,211 (54,553 ) Total performance fee-related compensation 33,313 (12,818 ) Legacy Greenspring performance fee-related compensation(1) (23,947 ) (153,607 ) Total compensation and benefits 87,919 (102,650 ) General, administrative and other 33,277 34,232 Total expenses 121,196 (68,418 ) Other income (expense) Investment income (loss) 3,086 (1,101 ) Legacy Greenspring investment loss(1) (2,866 ) (8,604 ) Investment income of Consolidated Funds 2,362 — Interest income 431 11 Interest expense (2,012 ) (587 ) Other income (loss) 227 (1,104 ) Total other income (expense) 1,228 (11,385 ) Income (loss) before income tax 58,043 (20,185 ) Income tax expense 8,597 1,286 Net income (loss) 49,446 (21,471 ) Less: Net income attributable to non-controlling interests in subsidiaries 9,630 7,571 Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1) (2,866 ) (8,604 ) Less: Net income (loss) attributable to non-controlling interests in the Partnership 19,860 (9,398 ) Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds 1,553 — Net income (loss) attributable to StepStone Group Inc. $ 21,269 $ (11,040 ) Net income (loss) per share of Class A common stock: Basic $ 0.34 $ (0.18 ) Diluted $ 0.34 $ (0.18 ) Weighted-average shares of Class A common stock: Basic 62,834,818 61,144,139 Diluted 65,739,470 61,144,139 (1) Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests.
Non-GAAP Financial Measures: Definitions and ReconciliationsManagement and Advisory Fees, Net
The following table presents the components of adjusted management and advisory fees, net.
Three Months Ended (in thousands) June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Focused commingled funds(1) $ 52,742 $ 51,553 $ 60,680 $ 62,093 $ 67,119 Separately managed accounts 50,460 52,179 53,515 54,033 55,744 Advisory and other services 12,984 13,788 13,926 15,546 14,101 Fund reimbursement revenues(1) 546 1,601 632 1,048 1,337 Management and advisory fees, net $ 116,732 $ 119,121 $ 128,753 $ 132,720 $ 138,301 _______________________________
(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.Adjusted Revenues
Adjusted revenues represents the components of revenues used in the determination of ANI and comprise net management and advisory fees, 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,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Total revenues $ (77,218 ) $ (158,495 ) $ (4,235 ) $ 172,374 $ 178,011 Unrealized carried interest allocations 113,950 176,778 63,367 (100,753 ) (49,364 ) Deferred incentive fees — 3,683 — 209 — Legacy Greenspring carried interest allocations 153,607 128,672 88,921 80,963 23,947 Management and advisory fee revenues for the Consolidated Funds(1) — — — 147 186 Adjusted revenues $ 190,339 $ 150,638 $ 148,053 $ 152,940 $ 152,780 _______________________________
(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.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 ANI and FRE.
Three Months Ended (in thousands) June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023GAAP management and advisory fees, net $ 116,732 $ 119,121 $ 128,753 $ 132,573 $ 138,115 Management and advisory fee revenues for the Consolidated Funds(1) — — — 147 186 Management and advisory fees, net $ 116,732 $ 119,121 $ 128,753 $ 132,720 $ 138,301 GAAP cash-based compensation $ 60,061 $ 59,501 $ 62,628 $ 69,990 $ 70,081 Adjustments(2) (691 ) (740 ) (520 ) (653 ) (531 ) Adjusted cash-based compensation $ 59,370 $ 58,761 $ 62,108 $ 69,337 $ 69,550 GAAP equity-based compensation $ 3,714 $ 3,783 $ 8,108 $ 9,335 $ 8,472 Adjustments(3) (3,071 ) (3,125 ) (7,444 ) (8,274 ) (7,171 ) Adjusted equity-based compensation $ 643 $ 658 $ 664 $ 1,061 $ 1,301 GAAP general, administrative and other $ 34,232 $ 33,733 $ 43,582 $ 35,612 $ 33,277 Adjustments(4) (14,130 ) (13,075 ) (20,302 ) (11,086 ) (10,229 ) Adjusted general, administrative and other $ 20,102 $ 20,658 $ 23,280 $ 24,526 $ 23,048 GAAP interest income $ 11 $ 356 $ 701 $ 853 $ 431 Interest income earned by the Consolidated Funds(5) — — — (195 ) (244 ) Non-GAAP interest income $ 11 $ 356 $ 701 $ 658 $ 187 GAAP other income (loss) $ (1,104 ) $ (634 ) $ 358 $ (40 ) $ 227 Adjustments(6) — — — 86 (376 ) Adjusted other income (loss) $ (1,104 ) $ (634 ) $ 358 $ 46 $ (149 ) ______________________________
(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
(2) Reflects the removal of severance and compensation paid to certain employees as part of an acquisition earn-out.
(3) 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 connection with the Private Wealth Transaction.
(4) 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.
(5) Reflects the removal of interest income earned by the Consolidated Funds.
(6) Reflects the removal of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) and the removal of the impact of consolidation of the Consolidated Funds.Adjusted Net Income
Adjusted net income, or “ANI”, is a non-GAAP performance measure that we present on a pre-tax and after-tax basis used to evaluate profitability. ANI represents the after-tax net realized income attributable to us. The components of revenues used in the determination of ANI (“adjusted revenues”) comprise net management and advisory fees, 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 or 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 connection with the Private Wealth Transaction, (d) amortization of intangibles and (e) certain other items that we believe are not indicative of our core operating performance, including charges associated with acquisitions and corporate transactions, contract terminations and employee severance. ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation and legacy Greenspring investment income as none of the economics are attributable to us. ANI is income before taxes 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 net adjusted management and advisory fees, 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 connection with the Private Wealth Transaction, (c) amortization of intangibles, and (d) certain other items that we believe are not indicative of our core operating performance, including charges associated with acquisitions and corporate transactions, contract terminations and employee severance. 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.
Fee-Related Earnings Margin
Fee-related earnings margin is a non-GAAP performance measure which is calculated by dividing fee-related earnings by management and advisory fees, net. We believe fee-related earnings margin is an important measure of profitability on revenues that are largely recurring by nature. We believe fee-related earnings 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 fee-related earnings to fee-related earnings margin.
Three Months Ended (in thousands) June 30,
2022September
30, 2022December
31, 2022March
31, 2023June 30,
2023Fee-related earnings $ 36,617 $ 39,044 $ 42,701 $ 37,796 $ 44,402 Management and advisory fees, net 116,732 119,121 128,753 132,720 138,301 Fee-related earnings margin 31 % 33 % 33 % 28 % 32 % Gross Realized Performance Fees
Gross realized performance fees represents realized carried interest allocations and incentive fees, including the deferred portion and excluding legacy Greenspring entities. 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 and excluding legacy Greenspring entities. 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 realized performance fees to gross and net realized performance fees.
Three Months Ended (in thousands) June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Realized carried interest allocations(1) $ 73,607 $ 22,469 $ 16,320 $ 18,693 $ 14,473 Incentive fees — 5,365 2,980 1,318 6 Deferred incentive fees — 3,683 — 209 — Gross realized performance fees 73,607 31,517 19,300 20,220 14,479 Realized performance fee-related compensation(1) (41,735 ) (13,630 ) (11,726 ) (12,755 ) (9,102 ) Net realized performance fees $ 31,872 $ 17,887 $ 7,574 $ 7,465 $ 5,377 _______________________________
(1) Excludes legacy Greenspring entities.The table below shows a reconciliation of income (loss) before income tax to ANI and FRE.
Three Months Ended (in thousands) June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Income (loss) before income tax $ (20,185 ) (74,487 ) $ (14,287 ) $ 67,505 $ 58,043 Net income attributable to non-controlling interests in subsidiaries(1) (8,116 ) (9,985 ) (10,802 ) (10,151 ) (10,540 ) Net loss attributable to non-controlling interests in legacy Greenspring entities 8,604 15,357 8,966 11,148 2,866 Unrealized carried interest allocations 113,950 176,778 63,367 (100,753 ) (49,364 ) Unrealized performance fee-related compensation (54,553 ) (86,126 ) (31,875 ) 53,515 24,211 Unrealized investment (income) loss 3,070 5,795 1,354 (2,207 ) (2,529 ) Impact of Consolidated Funds — — (4,895 ) (4,002 ) (2,647 ) Deferred incentive fees — 3,683 — 209 — Equity-based compensation(2) 3,071 3,125 7,444 8,274 7,171 Amortization of intangibles 10,871 10,870 10,870 10,870 10,661 Tax Receivable Agreements adjustments through earnings — — — (244 ) — Non-core items(3) 3,950 2,945 9,952 733 (50 ) Pre-tax adjusted net income 60,662 47,955 40,094 34,897 37,822 Income taxes(4) (13,528 ) (10,694 ) (8,941 ) (7,782 ) (8,434 ) Adjusted net income 47,134 37,261 31,153 27,115 29,388 Income taxes(4) 13,528 10,694 8,941 7,782 8,434 Realized carried interest allocations (73,607 ) (22,469 ) (16,320 ) (18,693 ) (14,473 ) Realized performance fee-related compensation(5) 41,735 13,630 11,726 12,755 9,102 Realized investment income (1,969 ) (2,104 ) (673 ) (757 ) (557 ) Incentive fees — (5,365 ) (2,980 ) (1,318 ) (6 ) Deferred incentive fees — (3,683 ) — (209 ) — Non-GAAP interest income(6) (11 ) (356 ) (701 ) (658 ) (187 ) Interest expense 587 817 1,111 1,674 2,012 Adjusted other (income) loss(6)(7) 1,104 634 (358 ) (46 ) 149 Net income attributable to non-controlling interests in subsidiaries(1) 8,116 9,985 10,802 10,151 10,540 Fee-related earnings $ 36,617 $ 39,044 $ 42,701 $ 37,796 $ 44,402 _______________________________
(1) Reflects the portion of pre-tax adjusted net income of our subsidiaries attributable to non-controlling interests:Three Months Ended (in thousands) June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Fee-related earnings attributable to non-controlling interests in subsidiaries $ 8,514 $ 10,149 $ 10,167 $ 9,843 $ 10,534 Non fee-related earnings (losses) attributable to non-controlling interests in subsidiaries (398 ) (164 ) 635 308 6 Net income attributable to non-controlling interests in subsidiaries $ 8,116 $ 9,985 $ 10,802 $ 10,151 $ 10,540 (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 connection with the Private Wealth Transaction.
(3) Includes (income) expense related to the following non-core operating income and expenses:Three Months Ended (in thousands) June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Transaction costs $ 3 $ — $ 6,812 $ 38 $ 37 Lease remeasurement adjustments — (2,709 ) — — — Accelerated depreciation of leasehold improvements for changes in lease terms — 210 631 631 631 Severance costs 44 134 42 73 — (Gain) loss on change in fair value for contingent consideration obligation 3,256 4,704 1,989 (588 ) (1,249 ) Compensation paid to certain employees as part of an acquisition earn-out 647 606 478 579 531 Total non-core operating income and expenses $ 3,950 $ 2,945 $ 9,952 $ 733 $ (50 ) (4) Represents corporate income taxes at a blended statutory rate applied to pre-tax adjusted net income:
Three Months Ended June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Federal statutory rate 21.0 % 21.0 % 21.0 % 21.0 % 21.0 % Combined state, local and foreign rate 1.3 % 1.3 % 1.3 % 1.3 % 1.3 % Blended statutory rate 22.3 % 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,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Realized carried interest-related compensation $ 4,397 $ 2,412 $ 2,208 $ 2,358 $ 2,189 (6) Excludes the impact of consolidating the Consolidated Funds.
(7) Excludes amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($244 thousand for the three months ended March 31, 2023).Adjusted Net Income Per Share
ANI per share measures our per-share earnings assuming all Class B units and Class C 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 shares outstanding. We believe ANI per share is useful to investors because it enables them 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 shares outstanding used in the computation of ANI per share.
Three Months Ended June 30,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023Adjusted net income $ 47,134 $ 37,261 $ 31,153 $ 27,115 $ 29,388 Weighted-average shares of Class A common stock outstanding – Basic 61,144,139 61,407,834 62,192,899 62,805,788 62,834,818 Assumed vesting of RSUs 798,326 913,479 457,818 524,576 400,034 Assumed vesting and exchange of Class B2 units 2,448,833 2,466,194 2,486,197 2,501,045 2,504,618 Exchange of Class B units in the Partnership(1) 47,146,840 46,889,995 46,662,062 46,420,141 46,420,141 Exchange of Class C units in the Partnership(2) 2,928,824 2,928,824 2,852,187 2,514,085 2,514,085 Adjusted shares 114,466,962 114,606,326 114,651,163 114,765,635 114,673,696 Adjusted net income per share $ 0.41 $ 0.33 $ 0.27 $ 0.24 $ 0.26 _______________________________
(1) Assumes the full exchange of Class B units in the Partnership for Class A common stock of SSG pursuant to the Class B Exchange Agreement.
(2) Assumes the full exchange of Class C units in the Partnership for Class A common stock of SSG pursuant to the Class C Exchange Agreement.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,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023vs. FQ1'23 Separately Managed Accounts Beginning balance $ 49,586 $ 52,198 $ 52,881 $ 53,420 $ 55,345 12 % Contributions(1) 3,371 1,760 2,149 2,378 1,425 (58)% Distributions(2) (445 ) (588 ) (2,178 ) (997 ) (429 ) (4)% Market value, FX and other(3) (314 ) (489 ) 568 544 304 na Ending balance $ 52,198 $ 52,881 $ 53,420 $ 55,345 $ 56,645 9 % Focused Commingled Funds Beginning balance $ 25,587 $ 26,352 $ 27,236 $ 29,565 $ 30,086 18 % Contributions(1) 1,160 1,139 2,497 713 796 (31)% Distributions(2) (382 ) (304 ) (168 ) (308 ) (252 ) (34)% Market value, FX and other(3) (13 ) 49 — 116 132 na Ending balance $ 26,352 $ 27,236 $ 29,565 $ 30,086 $ 30,762 17 % Total Beginning balance $ 75,173 $ 78,550 $ 80,117 $ 82,985 $ 85,431 14 % Contributions(1) 4,531 2,899 4,646 3,091 2,221 (51)% Distributions(2) (827 ) (892 ) (2,346 ) (1,305 ) (681 ) (18)% Market value, FX and other(3) (327 ) (440 ) 568 660 436 na Ending balance $ 78,550 $ 80,117 $ 82,985 $ 85,431 $ 87,407 11 % _______________________________
(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,
2022September
30, 2022December
31, 2022March 31,
2023June 30,
2023vs. FQ1'23 FEAUM Private equity $ 41,944 $ 42,781 $ 45,048 $ 45,766 $ 46,539 11 % Infrastructure 18,395 18,592 18,314 19,274 19,874 8 % Private debt 12,794 13,377 14,082 14,361 14,865 16 % Real estate 5,417 5,367 5,541 6,030 6,129 13 % Total $ 78,550 $ 80,117 $ 82,985 $ 85,431 $ 87,407 11 % Separately managed accounts $ 52,198 $ 52,881 $ 53,420 $ 55,345 $ 56,645 9 % Focused commingled funds 26,352 27,236 29,565 30,086 30,762 17 % Total $ 78,550 $ 80,117 $ 82,985 $ 85,431 $ 87,407 11 % AUM(1) Private equity $ 75,683 $ 72,169 $ 70,868 $ 71,611 $ 73,511 (3 )% Infrastructure 26,285 27,749 27,324 27,285 28,521 9 % Private debt 23,631 23,583 24,437 26,592 27,099 15 % Real estate 10,938 11,516 11,372 12,891 13,469 23 % Total $ 136,537 $ 135,017 $ 134,001 $ 138,379 $ 142,600 4 % Separately managed accounts $ 79,504 $ 78,625 $ 77,797 $ 82,243 $ 85,058 7 % Focused commingled funds 44,658 43,928 43,289 43,062 44,389 (1 )% Advisory AUM 12,375 12,464 12,915 13,074 13,153 6 % Total $ 136,537 $ 135,017 $ 134,001 $ 138,379 $ 142,600 4 % Advisory AUA Private equity $ 234,368 $ 239,640 $ 239,270 $ 242,461 $ 251,880 7 % Infrastructure 45,000 47,538 47,833 50,700 53,593 19 % Private debt 15,661 16,831 16,823 17,362 17,525 12 % Real estate 156,851 162,691 164,072 171,668 173,992 11 % Total $ 451,880 $ 466,700 $ 467,998 $ 482,191 $ 496,990 10 % Total capital responsibility(2) $ 588,417 $ 601,717 $ 601,999 $ 620,570 $ 639,590 9 % _____________________________
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. 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 100 days, or 115 days at the fiscal year-end, following the prior period end. When NAV data is not available 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).
ContactsShareholder Relations:
Seth Weiss
shareholders@stepstonegroup.com
1-212-351-6106Media:
Brian Ruby / Chris Gillick, ICR
StepStonePR@icrinc.com
1-203-682-8268Glossary
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.
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, 2023 reflects final data for the prior period (March 31, 2023), adjusted for net new client account activity through June 30, 2023. NAV data for underlying investments is as of March 31, 2023, as reported by underlying managers up to 100 days following March 31, 2023. When NAV data is not available 100 days following March 31, 2023, 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, 2023 reflects final data for the prior period (March 31, 2023), adjusted for net new client account activity through June 30, 2023. NAV data for underlying investments is as of March 31, 2023, as reported by underlying managers up to 100 days following March 31, 2023. When NAV data is not available 100 days following March 31, 2023, 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.
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.
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.
Private Wealth Transaction refers to new arrangements entered into by which certain members of the StepStone Group Private Wealth LLC (“SPW”) team received a profits interest in SPW and concurrently entered into an option agreement which provides that, (i) we have the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027, in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC (formerly known as Conversus Holdings LLC), has the right to put the profits interest to us on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price.
SSG refers solely to StepStone Group Inc., a Delaware corporation, and not to any of its subsidiaries.
StepStone Funds refer to focused commingled funds and separately managed accounts 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.
