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StepStone Group Reports Third Quarter Fiscal Year 2024 Results
ソース: Nasdaq GlobeNewswire / 08 2 2024 15:05:01 America/Chicago
NEW YORK, Feb. 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 December 31, 2023. This represents results for the third 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 March 15, 2024, to the holders of record as of the close of business on February 29, 2024.
StepStone issued a full detailed presentation of its third quarter fiscal 2024 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, February 8, 2024, at 5:00 pm ET to discuss the Company’s results for the third quarter of the fiscal year ending March 31, 2024. 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/BI72745ee211894fc188f4df9e857f9f4a. 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, data and administrative services to its clients. As of December 31, 2023, StepStone was responsible for approximately $659 billion of total capital, including $149 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 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 Nine Months Ended
December 31,Percentage Change (in thousands, except share and
per share amounts and where
noted)December
31, 2022March 31,
2023June 30,
2023September
30, 2023December
31, 20232022 2023 vs. FQ3'23 vs. FQ3'23 YTD Financial Highlights GAAP Results Management and advisory
fees, net$ 128,753 $ 132,573 $ 138,115 $ 142,123 $ 151,492 $ 364,606 $ 431,730 18% 18% Total revenues (4,235 ) 172,374 178,011 191,422 (14,612 ) (239,948 ) 354,821 245% na Total performance fees (132,988 ) 39,801 39,896 49,299 (166,104 ) (604,554 ) (76,909 ) 25% (87)% Net income (loss) (13,555 ) 56,816 49,446 59,251 (23,419 ) (102,091 ) 85,278 73% na Net income (loss) per share of Class A common stock: Basic $ (0.11 ) $ 0.46 $ 0.34 $ 0.42 $ (0.32 ) $ (0.77 ) $ 0.43 183% na Diluted $ (0.11 ) $ 0.46 $ 0.34 $ 0.42 $ (0.32 ) $ (0.77 ) $ 0.43 183% na Weighted-average shares of Class A common stock: Basic 62,192,899 62,805,788 62,834,818 62,858,468 64,068,952 61,583,215 63,255,604 3% 3% Diluted 62,192,899 65,831,409 65,739,470 66,198,129 64,068,952 61,583,215 66,299,982 3% 8% Quarterly dividend per share of Class A common stock(1) $ 0.20 $ 0.20 $ 0.20 $ 0.21 $ 0.21 $ 0.60 $ 0.62 5% 3% Supplemental dividend per share of Class A common stock(2) $ — $ — $ 0.25 $ — $ — $ — $ 0.25 na na Accrued carried interest allocations 1,126,386 1,227,173 1,277,783 1,331,778 1,203,847 7% Non-GAAP Results(3) Adjusted management and advisory fees, net(4) $ 128,753 $ 132,720 $ 138,301 $ 142,327 $ 151,943 $ 364,606 $ 432,571 18% 19% Adjusted revenues 148,053 152,940 152,780 149,800 185,123 489,030 487,703 25% —% Fee-related earnings (“FRE”) 42,701 37,796 44,402 43,827 50,664 118,362 138,893 19% 17% FRE margin(5) 33% 28% 32% 31% 33% 32% 32% Gross realized performance fees 19,300 20,220 14,479 7,473 33,180 124,424 55,132 72% (56)% Adjusted net income (“ANI”) 31,153 27,115 29,388 30,173 42,116 115,548 101,677 35% (12)% Adjusted weighted-average shares 114,651,163 114,765,635 114,673,696 115,118,060 115,232,927 114,575,210 115,009,445 1% —% ANI per share $ 0.27 $ 0.24 $ 0.26 $ 0.26 $ 0.37 $ 1.01 $ 0.88 37% (12)% Key Business
Drivers/Operating
Metrics (in billions)Assets under management
(“AUM”)(6)$ 134.0 $ 138.4 $ 142.6 $ 145.8 $ 149.0 11% Assets under advisement
(“AUA”)(6)468.0 482.2 497.0 512.9 510.5 9% Fee-earning AUM (“FEAUM”) 83.0 85.4 87.4 87.3 89.4 8% Undeployed fee-earning capital (“UFEC”) 14.0 15.7 16.9 18.1 21.4 53% (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 year 2023. (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 December 31,
2023March 31, 2023 Assets Cash and cash equivalents $ 139,970 $ 102,565 Restricted cash 751 955 Fees and accounts receivable 58,126 44,450 Due from affiliates 64,021 54,322 Investments: Investments in funds 126,813 115,187 Accrued carried interest allocations 1,203,847 1,227,173 Legacy Greenspring investments in funds and accrued carried interest allocations(1) 632,414 770,652 Deferred income tax assets 45,330 44,358 Lease right-of-use assets, net 97,404 101,130 Other assets and receivables 58,758 44,060 Intangibles, net 315,296 354,645 Goodwill 580,542 580,542 Assets of Consolidated Funds: Cash and cash equivalents 33,589 25,997 Investments, at fair value 109,822 30,595 Other assets 1,498 772 Total assets $ 3,468,181 $ 3,497,403 Liabilities and stockholders’ equity Accounts payable, accrued expenses and other liabilities $ 102,786 $ 89,396 Accrued compensation and benefits 131,735 66,614 Accrued carried interest-related compensation 635,200 644,517 Legacy Greenspring accrued carried interest-related compensation(1) 486,677 617,994 Due to affiliates 202,225 205,424 Lease liabilities 118,443 121,224 Debt obligations 123,704 98,351 Liabilities of Consolidated Funds: Other liabilities 1,563 566 Total liabilities 1,802,333 1,844,086 Redeemable non-controlling interests in Consolidated Funds 76,076 24,530 Stockholders’ equity: Class A common stock, $0.001 par value, 650,000,000 authorized; 64,068,952 and 62,834,791 issued and outstanding as of December 31, 2023 and March 31, 2023, respectively 64 63 Class B common stock, $0.001 par value, 125,000,000 authorized; 46,314,543 and 46,420,141 issued and outstanding as of December 31, 2023 and March 31, 2023, respectively 46 46 Additional paid-in capital 630,208 610,567 Retained earnings 131,338 160,430 Accumulated other comprehensive income 186 461 Total StepStone Group Inc. stockholders’ equity 761,842 771,567 Non-controlling interests in subsidiaries 36,827 36,380 Non-controlling interests in legacy Greenspring entities(1) 145,738 152,658 Non-controlling interests in the Partnership 645,365 668,182 Total stockholders’ equity 1,589,772 1,628,787 Total liabilities and stockholders’ equity $ 3,468,181 $ 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 December 31, Nine Months Ended December 31, 2023 2022 2023 2022 Revenues Management and advisory fees, net $ 151,492 $ 128,753 $ 431,730 $ 364,606 Performance fees: Incentive fees 17,891 2,980 22,843 8,345 Carried interest allocations: Realized 15,289 16,320 31,347 112,396 Unrealized (129,584 ) (63,367 ) (24,849 ) (354,095 ) Total carried interest allocations (114,295 ) (47,047 ) 6,498 (241,699 ) Legacy Greenspring carried interest allocations(1) (69,700 ) (88,921 ) (106,250 ) (371,200 ) Total performance fees (166,104 ) (132,988 ) (76,909 ) (604,554 ) Total revenues (14,612 ) (4,235 ) 354,821 (239,948 ) Expenses Compensation and benefits: Cash-based compensation 73,619 62,628 218,551 182,190 Equity-based compensation 14,032 8,108 28,420 15,605 Performance fee-related compensation: Realized 15,444 11,726 26,266 67,091 Unrealized (62,243 ) (31,875 ) (9,320 ) (172,554 ) Total performance fee-related compensation (46,799 ) (20,149 ) 16,946 (105,463 ) Legacy Greenspring performance fee-related compensation(1) (69,700 ) (88,921 ) (106,250 ) (371,200 ) Total compensation and benefits (28,848 ) (38,334 ) 157,667 (278,868 ) General, administrative and other 48,001 43,582 113,007 111,547 Total expenses 19,153 5,248 270,674 (167,321 ) Other income (expense) Investment income (loss) (2,051 ) (681 ) 4,115 (5,473 ) Legacy Greenspring investment loss(1) (2,222 ) (8,966 ) (9,054 ) (32,927 ) Investment income of Consolidated Funds 11,223 4,895 22,357 4,895 Interest income 827 701 2,235 1,068 Interest expense (2,562 ) (1,111 ) (6,682 ) (2,515 ) Other income (loss) 4,408 358 3,763 (1,380 ) Total other income (expense) 9,623 (4,804 ) 16,734 (36,332 ) Income (loss) before income tax (24,142 ) (14,287 ) 100,881 (108,959 ) Income tax expense (benefit) (723 ) (732 ) 15,603 (6,868 ) Net income (loss) (23,419 ) (13,555 ) 85,278 (102,091 ) Less: Net income attributable to non-controlling interests in subsidiaries 13,552 9,575 32,797 25,836 Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1) (2,222 ) (8,966 ) (9,054 ) (32,927 ) Less: Net income (loss) attributable to non-controlling interests in the Partnership (20,111 ) (7,617 ) 22,677 (48,192 ) Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds 5,588 391 11,590 391 Net income (loss) attributable to StepStone Group Inc. $ (20,226 ) $ (6,938 ) $ 27,268 $ (47,199 ) Net income (loss) per share of Class A common stock: Basic $ (0.32 ) $ (0.11 ) $ 0.43 $ (0.77 ) Diluted $ (0.32 ) $ (0.11 ) $ 0.43 $ (0.77 ) Weighted-average shares of Class A common stock: Basic 64,068,952 62,192,899 63,255,604 61,583,215 Diluted 64,068,952 62,192,899 66,299,982 61,583,215 (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 Nine Months Ended
December 31,(in thousands) December
31, 2022March 31,
2023June 30,
2023September
30, 2023December
31, 20232022 2023 Focused commingled funds(1)(2) $ 60,680 $ 62,093 $ 67,119 $ 70,481 $ 78,633 $ 164,975 $ 216,233 Separately managed accounts 53,515 54,033 55,744 56,431 55,838 156,154 168,013 Advisory and other services 13,926 15,546 14,101 13,740 16,069 40,698 43,910 Fund reimbursement revenues(1) 632 1,048 1,337 1,675 1,403 2,779 4,415 Adjusted management and advisory
fees, net$ 128,753 $ 132,720 $ 138,301 $ 142,327 $ 151,943 $ 364,606 $ 432,571 (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 $0.6 million for the three and nine 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, 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 Nine Months Ended
December 31,(in thousands) December
31, 2022March 31,
2023June 30,
2023September
30, 2023December
31, 20232022 2023 Total revenues $ (4,235 ) $ 172,374 $ 178,011 $ 191,422 $ (14,612 ) $ (239,948 ) $ 354,821 Unrealized carried interest allocations 63,367 (100,753 ) (49,364 ) (55,371 ) 129,584 354,095 24,849 Deferred incentive fees — 209 — 942 — 3,683 942 Legacy Greenspring carried interest allocations 88,921 80,963 23,947 12,603 69,700 371,200 106,250 Management and advisory fee revenues for the Consolidated Funds(1) — 147 186 204 451 — 841 Adjusted revenues $ 148,053 $ 152,940 $ 152,780 $ 149,800 $ 185,123 $ 489,030 $ 487,703 (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 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 Nine Months Ended
December 31,(in thousands) December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 2022 2023 GAAP management and advisory fees, net $ 128,753 $ 132,573 $ 138,115 $ 142,123 $ 151,492 $ 364,606 $ 431,730 Management and advisory fee revenues for the Consolidated Funds(1) — 147 186 204 451 — 841 Adjusted management and advisory fees, net $ 128,753 $ 132,720 $ 138,301 $ 142,327 $ 151,943 $ 364,606 $ 432,571 GAAP cash-based compensation $ 62,628 $ 69,990 $ 70,081 $ 74,851 $ 73,619 $ 182,190 $ 218,551 Adjustments(2) (520 ) (653 ) (531 ) (574 ) (574 ) (1,951 ) (1,679 ) Adjusted cash-based compensation $ 62,108 $ 69,337 $ 69,550 $ 74,277 $ 73,045 $ 180,239 $ 216,872 GAAP equity-based compensation $ 8,108 $ 9,335 $ 8,472 $ 5,916 $ 14,032 $ 15,605 $ 28,420 Adjustments(3) (7,444 ) (8,274 ) (7,171 ) (4,644 ) (12,610 ) (13,640 ) (24,425 ) Adjusted equity-based compensation $ 664 $ 1,061 $ 1,301 $ 1,272 $ 1,422 $ 1,965 $ 3,995 GAAP general, administrative and other $ 43,582 $ 35,612 $ 33,277 $ 31,729 $ 48,001 $ 111,547 $ 113,007 Adjustments(4) (20,302 ) (11,086 ) (10,229 ) (8,778 ) (21,189 ) (47,507 ) (40,196 ) Adjusted general, administrative and other $ 23,280 $ 24,526 $ 23,048 $ 22,951 $ 26,812 $ 64,040 $ 72,811 GAAP interest income $ 701 $ 853 $ 431 $ 977 $ 827 $ 1,068 $ 2,235 Interest income earned by the Consolidated Funds(5) — (195 ) (244 ) (249 ) (540 ) — (1,033 ) Adjusted interest income $ 701 $ 658 $ 187 $ 728 $ 287 $ 1,068 $ 1,202 GAAP other income (loss) $ 358 $ (40 ) $ 227 $ (872 ) $ 4,408 $ (1,380 ) $ 3,763 Adjustments(6) — 86 (376 ) 403 (4,301 ) — (4,274 ) Adjusted other income (loss) $ 358 $ 46 $ (149 ) $ (469 ) $ 107 $ (1,380 ) $ (511 ) (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 the private wealth subsidiary. (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), 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. 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, 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 subsidiaries, (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 income (loss) before income tax to ANI and FRE.
Three Months Ended Nine Months Ended
December 31,(in thousands) December
31, 2022March 31,
2023June 30,
2023September
30, 2023December
31, 20232022 2023 Income (loss) before income tax $ (14,287 ) 67,505 $ 58,043 $ 66,980 $ (24,142 ) $ (108,959 ) $ 100,881 Net income attributable to non-controlling interests in subsidiaries(1) (10,802 ) (10,151 ) (10,540 ) (10,321 ) (15,537 ) (28,903 ) (36,398 ) Net loss attributable to non-controlling interests in legacy Greenspring entities 8,966 11,148 2,866 3,966 2,222 32,927 9,054 Unrealized carried interest allocations 63,367 (100,753 ) (49,364 ) (55,371 ) 129,584 354,095 24,849 Unrealized performance fee-related compensation (31,875 ) 53,515 24,211 28,712 (62,243 ) (172,554 ) (9,320 ) Unrealized investment (income) loss 1,354 (2,207 ) (2,529 ) (1,657 ) 5,559 10,219 1,373 Impact of Consolidated Funds (4,895 ) (4,002 ) (2,647 ) (8,223 ) (11,068 ) (4,895 ) (21,938 ) Deferred incentive fees — 209 — 942 — 3,683 942 Equity-based compensation(2) 7,444 8,274 7,171 4,644 12,610 13,640 24,425 Amortization of intangibles 10,870 10,870 10,661 10,661 10,661 32,611 31,983 Tax Receivable Agreements adjustments through earnings — (244 ) — — 222 — 222 Non-core items(3) 9,952 733 (50 ) (1,500 ) 6,335 16,847 4,785 Pre-tax ANI 40,094 34,897 37,822 38,833 54,203 148,711 130,858 Income taxes(4) (8,941 ) (7,782 ) (8,434 ) (8,660 ) (12,087 ) (33,163 ) (29,181 ) ANI 31,153 27,115 29,388 30,173 42,116 115,548 101,677 Income taxes(4) 8,941 7,782 8,434 8,660 12,087 33,163 29,181 Realized carried interest allocations (16,320 ) (18,693 ) (14,473 ) (1,585 ) (15,289 ) (112,396 ) (31,347 ) Realized performance fee-related compensation(5) 11,726 12,755 9,102 1,720 15,444 67,091 26,266 Realized investment income (673 ) (757 ) (557 ) (1,423 ) (3,508 ) (4,746 ) (5,488 ) Incentive fees (2,980 ) (1,318 ) (6 ) (4,946 ) (17,891 ) (8,345 ) (22,843 ) Deferred incentive fees — (209 ) — (942 ) — (3,683 ) (942 ) Adjusted interest income(6) (701 ) (658 ) (187 ) (728 ) (287 ) (1,068 ) (1,202 ) Interest expense 1,111 1,674 2,012 2,108 2,562 2,515 6,682 Adjusted other (income) loss(6)(7) (358 ) (46 ) 149 469 (107 ) 1,380 511 Net income attributable to non-controlling interests in subsidiaries(1) 10,802 10,151 10,540 10,321 15,537 28,903 36,398 FRE $ 42,701 $ 37,796 $ 44,402 $ 43,827 $ 50,664 $ 118,362 $ 138,893 (1) Reflects the portion of pre-tax ANI of our subsidiaries attributable to non-controlling interests and the profits interest issued in the private wealth subsidiary: Three Months Ended Nine Months Ended
December 31,(in thousands) December
31, 2022March 31,
2023June 30,
2023September
30, 2023December 31,
20232022 2023 FRE attributable to non-controlling interests in subsidiaries $ 10,167 $ 9,843 $ 10,534 $ 9,463 $ 10,518 $ 28,830 $ 30,515 Non fee-related earnings attributable to non-controlling interests in subsidiaries and profits interests 635 308 6 858 5,019 73 5,883 Net income attributable to non-controlling interests in subsidiaries $ 10,802 $ 10,151 $ 10,540 $ 10,321 $ 15,537 $ 28,903 $ 36,398 (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 Nine Months Ended December 31, (in thousands) December
31, 2022March 31,
2023June 30,
2023September
30, 2023December
31, 20232022 2023 Transaction costs $ 6,812 $ 38 $ 37 $ 163 $ 670 $ 6,815 $ 870 Lease remeasurement adjustments — — — — (106 ) (2,709 ) (106 ) Accelerated depreciation of leasehold improvements for changes in lease terms 631 631 631 631 631 841 1,893 Severance costs 42 73 — — — 220 — (Gain) loss on change in fair value for contingent consideration obligation 1,989 (588 ) (1,249 ) (2,868 ) 9,054 9,949 4,937 Compensation paid to certain employees as part of an acquisition earn-out 478 579 531 574 574 1,731 1,679 Gain from negotiation of certain corporate matters — — — — (5,300 ) — (5,300 ) Loss on sale of subsidiary — — — — 812 — 812 Total non-core operating income and expenses $ 9,952 $ 733 $ (50 ) $ (1,500 ) $ 6,335 $ 16,847 $ 4,785 (4) Represents corporate income taxes at a blended statutory rate applied to pre-tax ANI: Three Months Ended Nine Months Ended
December 31,December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 2022 2023 Federal statutory rate 21.0 % 21.0 % 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 % 1.3 % 1.3 % Blended statutory rate 22.3 % 22.3 % 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 Nine Months Ended
December 31,(in thousands) December
31, 2022March 31,
2023June 30,
2023September
30, 2023December 31,
20232022 2023 Realized carried interest-related compensation $ 2,208 $ 2,358 $ 2,189 $ — $ 660 $ 9,017 $ 2,849 (6) Excludes the impact of consolidating the Consolidated Funds. (7) Excludes amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(222) thousand for the three and nine months ended December 31, 2023 and $244 thousand for the three months ended March 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 and nine months ended December 31, 2023), and loss on sale of subsidiary ($0.8 million for the three and nine 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 Nine Months Ended
December 31,(in thousands) December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 2022 2023 FRE $ 42,701 $ 37,796 $ 44,402 $ 43,827 $ 50,664 $ 118,362 $ 138,893 Adjusted management and advisory fees, net 128,753 132,720 138,301 142,327 151,943 364,606 432,571 FRE margin 33 % 28 % 32 % 31 % 33 % 32 % 32 % Gross Realized Performance Fees
Gross realized performance fees represents realized carried interest allocations and 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 Nine Months Ended
December 31,(in thousands) December
31, 2022March 31,
2023June 30,
2023September
30, 2023December 31,
20232022 2023 Incentive fees $ 2,980 $ 1,318 $ 6 $ 4,946 $ 17,891 $ 8,345 $ 22,843 Realized carried interest allocations 16,320 18,693 14,473 1,585 15,289 112,396 31,347 Unrealized carried interest allocations (63,367 ) 100,753 49,364 55,371 (129,584 ) (354,095 ) (24,849 ) Legacy Greenspring carried interest allocations (88,921 ) (80,963 ) (23,947 ) (12,603 ) (69,700 ) (371,200 ) (106,250 ) Total performance fees (132,988 ) 39,801 39,896 49,299 (166,104 ) (604,554 ) (76,909 ) Unrealized carried interest allocations 63,367 (100,753 ) (49,364 ) (55,371 ) 129,584 354,095 24,849 Legacy Greenspring carried interest allocations 88,921 80,963 23,947 12,603 69,700 371,200 106,250 Deferred incentive fees — 209 — 942 — 3,683 942 Gross realized performance fees 19,300 20,220 14,479 7,473 33,180 124,424 55,132 Realized performance fee-related compensation (11,726 ) (12,755 ) (9,102 ) (1,720 ) (15,444 ) (67,091 ) (26,266 ) Net realized performance fees $ 7,574 $ 7,465 $ 5,377 $ 5,753 $ 17,736 $ 57,333 $ 28,866 Adjusted Weighted-Average Shares and 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 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 Nine Months Ended
December 31,December
31, 2022March 31,
2023June 30,
2023September
30, 2023December
31, 20232022 2023 ANI $ 31,153 $ 27,115 $ 29,388 $ 30,173 $ 42,116 $ 115,548 $ 101,677 Weighted-average shares of Class A common stock outstanding – Basic 62,192,899 62,805,788 62,834,818 62,858,468 64,068,952 61,583,215 63,255,604 Assumed vesting of RSUs 457,818 524,576 400,034 801,014 333,402 722,935 511,889 Assumed vesting and exchange of Class B2 units 2,486,197 2,501,045 2,504,618 2,538,647 2,553,899 2,467,141 2,532,489 Exchange of Class B units in the Partnership(1) 46,662,062 46,420,141 46,420,141 46,417,845 46,314,543 46,898,733 46,384,046 Exchange of Class C units in the Partnership(2) 2,852,187 2,514,085 2,514,085 2,502,086 1,962,131 2,903,186 2,325,417 Adjusted weighted-average shares 114,651,163 114,765,635 114,673,696 115,118,060 115,232,927 114,575,210 115,009,445 ANI per share $ 0.27 $ 0.24 $ 0.26 $ 0.26 $ 0.37 $ 1.01 $ 0.88 (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 Nine Months Ended December 31, Percentage Change (in millions) December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 2022 2023 vs. FQ3'23 Separately Managed Accounts Beginning balance $ 52,881 $ 53,420 $ 55,345 $ 56,645 $ 56,380 $ 49,586 $ 55,345 7% Contributions(1) 2,149 2,378 1,425 1,036 1,109 7,280 3,570 (48)% Distributions(2) (2,178 ) (997 ) (429 ) (1,459 ) (1,397 ) (3,211 ) (3,285 ) (36)% Market value, FX and other(3) 568 544 304 158 568 (235 ) 1,030 — Ending balance $ 53,420 $ 55,345 $ 56,645 $ 56,380 $ 56,660 $ 53,420 $ 56,660 6% Focused Commingled Funds Beginning balance $ 27,236 $ 29,565 $ 30,086 $ 30,762 $ 30,905 $ 25,587 $ 30,086 13% Contributions(1) 2,497 713 796 992 1,898 4,796 3,686 (24)% Distributions(2) (168 ) (308 ) (252 ) (988 ) (274 ) (854 ) (1,514 ) 63% Market value, FX and other(3) — 116 132 139 243 36 514 na Ending balance $ 29,565 $ 30,086 $ 30,762 $ 30,905 $ 32,772 $ 29,565 $ 32,772 11% Total Beginning balance $ 80,117 $ 82,985 $ 85,431 $ 87,407 $ 87,285 $ 75,173 $ 85,431 9% Contributions(1) 4,646 3,091 2,221 2,028 3,007 12,076 7,256 (35)% Distributions(2) (2,346 ) (1,305 ) (681 ) (2,447 ) (1,671 ) (4,065 ) (4,799 ) (29)% Market value, FX and other(3) 568 660 436 297 811 (199 ) 1,544 43% Ending balance $ 82,985 $ 85,431 $ 87,407 $ 87,285 $ 89,432 $ 82,985 $ 89,432 8% (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) December
31, 2022March 31,
2023June 30,
2023September 30,
2023December
31, 2023vs. FQ3'23 FEAUM Private equity $ 45,048 $ 45,766 $ 46,539 $ 46,464 $ 48,258 7% Infrastructure 18,314 19,274 19,874 20,122 19,789 8% Private debt 14,082 14,361 14,865 15,122 15,460 10% Real estate 5,541 6,030 6,129 5,577 5,925 7% Total $ 82,985 $ 85,431 $ 87,407 $ 87,285 $ 89,432 8% Separately managed accounts $ 53,420 $ 55,345 $ 56,645 $ 56,380 $ 56,660 6% Focused commingled funds 29,565 30,086 30,762 30,905 32,772 11% Total $ 82,985 $ 85,431 $ 87,407 $ 87,285 $ 89,432 8% AUM(1) Private equity $ 70,868 $ 71,611 $ 73,511 $ 76,031 $ 78,221 10% Infrastructure 27,324 27,285 28,521 28,678 28,307 4% Private debt 24,437 26,592 27,099 27,520 27,782 14% Real estate 11,372 12,891 13,469 13,612 14,646 29% Total $ 134,001 $ 138,379 $ 142,600 $ 145,841 $ 148,956 11% Separately managed accounts $ 77,797 $ 82,243 $ 85,058 $ 85,387 $ 88,890 14% Focused commingled funds 43,289 43,062 44,389 46,266 45,508 5% Advisory AUM 12,915 13,074 13,153 14,188 14,558 13% Total $ 134,001 $ 138,379 $ 142,600 $ 145,841 $ 148,956 11% AUA Private equity $ 239,270 $ 242,461 $ 251,880 $ 264,327 $ 266,246 11% Infrastructure 47,833 50,700 53,593 55,146 57,528 20% Private debt 16,823 17,362 17,525 18,026 17,916 6% Real estate 164,072 171,668 173,992 175,369 168,802 3% Total $ 467,998 $ 482,191 $ 496,990 $ 512,868 $ 510,492 9% Total capital responsibility(2) $ 601,999 $ 620,570 $ 639,590 $ 658,709 $ 659,448 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
1-212-351-6106Media:
Brian Ruby / Chris Gillick / Matt Lettiero, 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. 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 December 31, 2023 reflects final data for the prior period (September 30, 2023), adjusted for net new client account activity through December 31, 2023. NAV data for underlying investments is as of September 30, 2023, as reported by underlying managers up to the business day occurring on or after 100 days following September 30, 2023. When NAV data is not available by the business day occurring on or after 100 days following September 30, 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 December 31, 2023 reflects final data for the prior period (September 30, 2023), adjusted for net new client account activity through December 31, 2023. NAV data for underlying investments is as of September 30, 2023, as reported by underlying managers up to the business day occurring on or after 100 days following September 30, 2023. When NAV data is not available by the business day occurring on or after 100 days following September 30, 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. 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.
