StepStone Group Reports Fourth Quarter and Fiscal Year 2024 Results

May 23, 2024 at 4:05 PM EDT

NEW YORK, May 23, 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 March 31, 2024. This represents results for the fourth quarter and fiscal year ended 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, and a supplemental dividend of $0.15 per share of Class A common stock, both payable on June 28, 2024, to the holders of record as of the close of business on June 14, 2024.

StepStone issued a full detailed presentation of its fourth quarter and full fiscal year ended March 31, 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, May 23, 2024 at 5:00 pm ET to discuss the Company’s results for the fourth quarter and fiscal year ended 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/BId5cd8066fd0940f4a3b8e418ecac260c. 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 March 31, 2024, StepStone was responsible for approximately $678 billion of total capital, including $157 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 26, 2023, and in our annual report on Form 10-K to be filed with the SEC for the fiscal year ended March 31, 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 Year Ended March 31, Percentage Change
(in thousands, except share and per share amounts and where noted)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024  vs. FQ4'23vs. FY'23
Financial Highlights           
GAAP Results           
Management and advisory fees, net$132,573 $138,115 $142,123 $151,492 $153,410  $497,179 $585,140  16%18%
Total revenues 172,374  178,011  191,422  (14,612) 356,810   (67,574) 711,631  107%na
Total performance fees 39,801  39,896  49,299  (166,104) 203,400   (564,753) 126,491  411%na
Net income (loss) 56,816  49,446  59,251  (23,419) 82,542   (45,275) 167,820  45%na
Net income (loss) per share of Class A common stock:           
Basic$0.46 $0.34 $0.42 $(0.32)$0.48  $(0.30)$0.91  4%na
Diluted$0.46 $0.34 $0.42 $(0.32)$0.48  $(0.30)$0.91  4%na
Weighted-average shares of Class A common stock:           
Basic 62,805,788  62,834,818  62,858,468  64,068,952  64,194,859   61,884,671  63,489,135  2%3%
Diluted 65,831,409  65,739,470  66,198,129  64,068,952  67,281,567   61,884,671  66,544,038  2%8%
Quarterly dividend per share of Class A common stock(1)$0.20 $0.20 $0.21 $0.21 $0.21  $0.80 $0.83  5%4%
Supplemental dividend per share of Class A common stock(2)$ $0.25 $ $ $  $ $0.25  nana
Accrued carried interest allocations$1,227,173 $1,277,783 $1,331,778 $1,203,847 $1,354,051     10% 
            
Non-GAAP Results(3)           
Adjusted management and advisory fees, net(4)$132,720 $138,301 $142,327 $151,943 $153,808  $497,326 $586,379  16%18%
Adjusted revenues 152,940  152,780  149,800  185,123  177,357   641,970  665,060  16%4%
Fee-related earnings (“FRE”) 37,796  44,402  43,827  50,664  50,900   156,158  189,793  35%22%
FRE margin(5) 28% 32% 31% 33% 33%  31% 32%   
Gross realized performance fees 20,220  14,479  7,473  33,180  23,549   144,644  78,681  16%(46) %
Adjusted net income (“ANI”) 27,115  29,388  30,173  42,116  37,716   142,663  139,393  39%(2) %
Adjusted weighted-average shares 114,765,635  114,673,696  115,118,060  115,232,927  115,512,301   114,618,105  115,134,473    
ANI per share$0.24 $0.26 $0.26 $0.37 $0.33  $1.24 $1.21  38%(2) %
            
Key Business Drivers/Operating Metrics(in billions)           
Assets under management (“AUM”)(6)$138.4 $142.6 $145.8 $149.0 $156.6     13% 
Assets under advisement (“AUA”)(6) 482.2  497.0  512.9  510.5  521.1     8% 
Fee-earning AUM (“FEAUM”) 85.4  87.4  87.3  89.4  93.9     10% 
Undeployed fee-earning capital (“UFEC”) 15.7  16.9  18.1  21.4  22.6     44% 

_______________________________

(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 Consolidated Balance Sheets
(in thousands, except share and per share amounts)
 
 As of March 31,
  2024  2023
Assets   
Cash and cash equivalents$143,430 $102,565
Restricted cash 718  955
Fees and accounts receivable 56,769  44,450
Due from affiliates 67,531  54,322
Investments:   
Investments in funds 135,043  115,187
Accrued carried interest allocations 1,354,051  1,227,173
Legacy Greenspring investments in funds and accrued carried interest allocations(1) 631,197  770,652
Deferred income tax assets 184,512  44,358
Lease right-of-use assets, net 97,763  101,130
Other assets and receivables 60,611  44,060
Intangibles, net 304,873  354,645
Goodwill 580,542  580,542
Assets of Consolidated Funds:   
Cash and cash equivalents 38,164  25,997
Investments, at fair value 131,858  30,595
Other assets 1,745  772
Total assets$3,788,807 $3,497,403
Liabilities and stockholders’ equity   
Accounts payable, accrued expenses and other liabilities$127,417 $89,396
Accrued compensation and benefits 101,481  66,614
Accrued carried interest-related compensation 719,497  644,517
Legacy Greenspring accrued carried interest-related compensation(1) 484,154  617,994
Due to affiliates 212,918  205,424
Lease liabilities 119,739  121,224
Debt obligations 148,822  98,351
Liabilities of Consolidated Funds:   
Other liabilities 1,645  566
Total liabilities 1,915,673  1,844,086
Redeemable non-controlling interests in Consolidated Funds 102,623  24,530
Redeemable non-controlling interests in subsidiaries 115,920  
Stockholders’ equity:   
Class A common stock, $0.001 par value, 650,000,000 authorized; 65,614,902 and 62,834,791 issued and outstanding as of March 31, 2024 and 2023, respectively 66  63
Class B common stock, $0.001 par value, 125,000,000 authorized; 45,030,959 and 46,420,141 issued and outstanding as of March 31, 2024 and 2023, respectively 45  46
Additional paid-in capital 310,293  610,567
Retained earnings 13,768  160,430
Accumulated other comprehensive income 304  461
Total StepStone Group Inc. stockholders’ equity 324,476  771,567
Non-controlling interests in subsidiaries 974,559  36,380
Non-controlling interests in legacy Greenspring entities(1) 147,042  152,658
Non-controlling interests in the Partnership 208,514  668,182
Total stockholders’ equity 1,654,591  1,628,787
Total liabilities and stockholders’ equity$3,788,807 $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 Consolidated Statements of Income (Loss)
(in thousands, except share and per share amounts)
 
 Three Months Ended March 31, Year Ended March 31,
  2024   2023   2024   2023 
Revenues       
Management and advisory fees, net$153,410  $132,573  $585,140  $497,179 
Performance fees:       
Incentive fees 2,496   1,318   25,339   9,663 
Carried interest allocations:       
Realized 18,054   18,693   49,401   131,089 
Unrealized 151,757   100,753   126,908   (253,342)
Total carried interest allocations 169,811   119,446   176,309   (122,253)
Legacy Greenspring carried interest allocations(1) 31,093   (80,963)  (75,157)  (452,163)
Total performance fees 203,400   39,801   126,491   (564,753)
Total revenues 356,810   172,374   711,631   (67,574)
Expenses       
Compensation and benefits:       
Cash-based compensation 74,411   69,990   292,962   252,180 
Equity-based compensation 13,937   9,335   42,357   24,940 
Performance fee-related compensation:       
Realized 11,421   12,755   37,687   79,846 
Unrealized 84,014   53,515   74,694   (119,039)
Total performance fee-related compensation 95,435   66,270   112,381   (39,193)
Legacy Greenspring performance fee-related compensation(1) 31,093   (80,963)  (75,157)  (452,163)
Total compensation and benefits 214,876   64,632   372,543   (214,236)
General, administrative and other 54,310   35,612   167,317   147,159 
Total expenses 269,186   100,244   539,860   (67,077)
Other income (expense)       
Investment income (loss) 3,337   2,964   7,452   (2,509)
Legacy Greenspring investment loss(1) (33)  (11,148)  (9,087)  (44,075)
Investment income of Consolidated Funds 6,115   4,420   28,472   9,315 
Interest income 1,429   853   3,664   1,921 
Interest expense (2,649)  (1,674)  (9,331)  (4,189)
Other income (loss) (1,308)  (40)  2,455   (1,420)
Total other income (expense) 6,891   (4,625)  23,625   (40,957)
Income (loss) before income tax 94,515   67,505   195,396   (41,454)
Income tax expense 11,973   10,689   27,576   3,821 
Net income (loss) 82,542   56,816   167,820   (45,275)
Less: Net income attributable to non-controlling interests in subsidiaries 4,443   9,358   37,240   35,194 
Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1) (33)  (11,148)  (9,087)  (44,075)
Less: Net income (loss) attributable to non-controlling interests in the Partnership 37,279   28,420   59,956   (19,772)
Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds 4,248   1,385   15,838   1,776 
Less: Net income attributable to redeemable non-controlling interests in subsidiaries 5,782      5,782    
Net income (loss) attributable to StepStone Group Inc.$30,823  $28,801  $58,091  $(18,398)
Net income (loss) per share of Class A common stock:       
Basic$0.48  $0.46  $0.91  $(0.30)
Diluted$0.48  $0.46  $0.91  $(0.30)
Weighted-average shares of Class A common stock:       
Basic 64,194,859   62,805,788   63,489,135   61,884,671 
Diluted 67,281,567   65,831,409   66,544,038   61,884,671 
                

(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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024
Focused commingled funds(1)(2)$62,093 $67,119 $70,481 $78,633 $80,434  $227,068 $296,667
Separately managed accounts 54,033  55,744  56,431  55,838  55,945   210,187  223,958
Advisory and other services 15,546  14,101  13,740  16,069  16,147   56,244  60,057
Fund reimbursement revenues(1) 1,048  1,337  1,675  1,403  1,282   3,827  5,697
Adjusted management and advisory fees, net$132,720 $138,301 $142,327 $151,943 $153,808  $497,326 $586,379
                      

_______________________________

(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 $0.8 million for the three months ended March 31, 2024, $0.6 million for the three months ended December 31, 2023, and $1.4 million in fiscal 2024 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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September 30,
2023
December
31, 2023
March 31,
2024
  2023  2024 
Total revenues$172,374 $178,011 $191,422 $(14,612)$356,810  $(67,574)$711,631 
Unrealized carried interest allocations (100,753) (49,364) (55,371) 129,584  (151,757)  253,342  (126,908)
Deferred incentive fees 209    942    1,450   3,892  2,392 
Legacy Greenspring carried interest allocations 80,963  23,947  12,603  69,700  (31,093)  452,163  75,157 
Management and advisory fee revenues for the Consolidated Funds(1) 147  186  204  451  398   147  1,239 
Incentive fees for the Consolidated Funds(2)         1,549     1,549 
Adjusted revenues$152,940 $152,780 $149,800 $185,123 $177,357  $641,970 $665,060 
                       

_______________________________

(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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024 
GAAP management and advisory fees, net$132,573 $138,115 $142,123 $151,492 $153,410  $497,179 $585,140 
Management and advisory fee revenues for the Consolidated Funds(1) 147  186  204  451  398   147  1,239 
Adjusted management and advisory fees, net$132,720 $138,301 $142,327 $151,943 $153,808  $497,326 $586,379 
         
GAAP incentive fees$1,318 $6 $4,946 $17,891 $2,496  $9,663 $25,339 
Incentive fee revenues for the Consolidated Funds(2)         1,549     1,549 
Adjusted incentive fees$1,318 $6 $4,946 $17,891 $4,045  $9,663 $26,888 
         
GAAP cash-based compensation$69,990 $70,081 $74,851 $73,619 $74,411  $252,180 $292,962 
Adjustments(3) (653) (531) (574) (574) (461)  (2,604) (2,140)
Adjusted cash-based compensation$69,337 $69,550 $74,277 $73,045 $73,950  $249,576 $290,822 
         
GAAP equity-based compensation$9,335 $8,472 $5,916 $14,032 $13,937  $24,940 $42,357 
Adjustments(4) (8,274) (7,171) (4,644) (12,610) (12,210)  (21,914) (36,635)
Adjusted equity-based compensation$1,061 $1,301 $1,272 $1,422 $1,727  $3,026 $5,722 
         
GAAP general, administrative and other$35,612 $33,277 $31,729 $48,001 $54,310  $147,159 $167,317 
Adjustments(5) (11,086) (10,229) (8,778) (21,189) (27,079)  (58,593) (67,275)
Adjusted general, administrative and other$24,526 $23,048 $22,951 $26,812 $27,231  $88,566 $100,042 
         
GAAP interest income$853 $431 $977 $827 $1,429  $1,921 $3,664 
Interest income earned by the Consolidated Funds(6) (195) (244) (249) (540) (612)  (195) (1,645)
Adjusted interest income$658 $187 $728 $287 $817  $1,726 $2,019 
         
GAAP other income (loss)$(40)$227 $(872)$4,408 $(1,308) $(1,420)$2,455 
Adjustments(7) 86  (376) 403  (4,301) 395   86  (3,879)
Adjusted other income (loss)$46 $(149)$(469)$107 $(913) $(1,334)$(1,424)
                       

______________________________

(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 severance and 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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024 
Income (loss) before income tax$67,505  58,043 $66,980 $(24,142)$94,515  $(41,454)$195,396 
Net income attributable to non-controlling interests in subsidiaries(1) (10,151) (10,540) (10,321) (15,537) (12,822)  (39,054) (49,220)
Net loss attributable to non-controlling interests in legacy Greenspring entities 11,148  2,866  3,966  2,222  33   44,075  9,087 
Unrealized carried interest allocations (100,753) (49,364) (55,371) 129,584  (151,757)  253,342  (126,908)
Unrealized performance fee-related compensation 53,515  24,211  28,712  (62,243) 84,014   (119,039) 74,694 
Unrealized investment (income) loss (2,207) (2,529) (1,657) 5,559  (2,280)  8,012  (907)
Impact of Consolidated Funds (4,002) (2,647) (8,223) (11,068) (4,138)  (8,897) (26,076)
Deferred incentive fees 209    942    1,450   3,892  2,392 
Equity-based compensation(2) 8,274  7,171  4,644  12,610  12,210   21,914  36,635 
Amortization of intangibles 10,870  10,661  10,661  10,661  10,423   43,481  42,406 
Tax Receivable Agreements adjustments through earnings (244)     222  90   (244) 312 
Non-core items(3) 733  (50) (1,500) 6,335  16,780   17,580  21,565 
Pre-tax ANI 34,897  37,822  38,833  54,203  48,518   183,608  179,376 
Income taxes(4) (7,782) (8,434) (8,660) (12,087) (10,802)  (40,945) (39,983)
ANI 27,115  29,388  30,173  42,116  37,716   142,663  139,393 
Income taxes(4) 7,782  8,434  8,660  12,087  10,802   40,945  39,983 
Realized carried interest allocations (18,693) (14,473) (1,585) (15,289) (18,054)  (131,089) (49,401)
Realized performance fee-related compensation(5) 12,755  9,102  1,720  15,444  11,421   79,846  37,687 
Realized investment income (757) (557) (1,423) (3,508) (1,057)  (5,503) (6,545)
Adjusted incentive fees(6) (1,318) (6) (4,946) (17,891) (4,045)  (9,663) (26,888)
Deferred incentive fees (209)   (942)   (1,450)  (3,892) (2,392)
Adjusted interest income(6) (658) (187) (728) (287) (817)  (1,726) (2,019)
Interest expense 1,674  2,012  2,108  2,562  2,649   4,189  9,331 
Adjusted other (income) loss(6)(7) (46) 149  469  (107) 913   1,334  1,424 
Net income attributable to non-controlling interests in subsidiaries(1) 10,151  10,540  10,321  15,537  12,822   39,054  49,220 
FRE$37,796 $44,402 $43,827 $50,664 $50,900  $156,158 $189,793 
                       

_______________________________
(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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024
FRE attributable to non-controlling interests in subsidiaries$9,843 $10,534 $9,463 $10,518 $11,559  $38,673 $42,074
Non fee-related earnings attributable to non-controlling interests in subsidiaries and profits interests 308  6  858  5,019  1,263   381  7,146
Net income attributable to non-controlling interests in subsidiaries$10,151 $10,540 $10,321 $15,537 $12,822  $39,054 $49,220
                      

(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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024 
Transaction costs$38 $37 $163 $670 $3,985 $6,853 $4,855 
Lease remeasurement adjustments       (106)   (2,709) (106)
Accelerated depreciation of leasehold improvements for changes in lease terms 631  631  631  631    1,472  1,893 
Severance costs 73          293   
(Gain) loss on change in fair value for contingent consideration obligation (588) (1,249) (2,868) 9,054  12,280  9,361  17,217 
Compensation paid to certain employees as part of an acquisition earn-out 579  531  574  574  515  2,310  2,194 
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$733 $(50)$(1,500)$6,335 $16,780 $17,580 $21,565 
                      

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

 Three Months Ended Year Ended March 31,
 March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
 2023 2024 
Federal statutory rate21.0%21.0%21.0%21.0%21.0% 21.0%21.0%
Combined state, local and foreign rate1.3%1.3%1.3%1.3%1.3% 1.3%1.3%
Blended statutory rate22.3%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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023 2024
Realized carried interest-related compensation$2,358$2,189$$660$910 $11,375$3,759
                

(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, $(0.2) million for the three months ended December 31, 2023 and $0.2 million for the three months ended March 31, 2023, and $(0.3) million and $0.2 million in fiscal 2024 and fiscal 2023, respectively), 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 in fiscal 2024), and loss on sale of subsidiary ($0.8 million for the three months ended December 31, 2023 and in fiscal 2024).

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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024 
FRE$37,796 $44,402 $43,827 $50,664 $50,900  $156,158 $189,793 
Adjusted management and advisory fees, net 132,720  138,301  142,327  151,943  153,808   497,326  586,379 
FRE margin 28% 32% 31% 33% 33%  31% 32%
                       

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 Year Ended March 31,
(in thousands)March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024 
Incentive fees$1,318 $6 $4,946 $17,891 $2,496  $9,663 $25,339 
Realized carried interest allocations 18,693  14,473  1,585  15,289  18,054   131,089  49,401 
Unrealized carried interest allocations 100,753  49,364  55,371  (129,584) 151,757   (253,342) 126,908 
Legacy Greenspring carried interest allocations (80,963) (23,947) (12,603) (69,700) 31,093   (452,163) (75,157)
Total performance fees 39,801  39,896  49,299  (166,104) 203,400   (564,753) 126,491 
Unrealized carried interest allocations (100,753) (49,364) (55,371) 129,584  (151,757)  253,342  (126,908)
Legacy Greenspring carried interest allocations 80,963  23,947  12,603  69,700  (31,093)  452,163  75,157 
Incentive fee revenues for the Consolidated Funds(1)         1,549     1,549 
Deferred incentive fees 209    942    1,450   3,892  2,392 
Gross realized performance fees 20,220  14,479  7,473  33,180  23,549   144,644  78,681 
Realized performance fee-related compensation (12,755) (9,102) (1,720) (15,444) (11,421)  (79,846) (37,687)
Net realized performance fees$7,465 $5,377 $5,753 $17,736 $12,128  $64,798 $40,994 
                       

_______________________________
(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 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 Year Ended March 31,
 March 31,
2023
June 30,
2023
September
30, 2023
December
31, 2023
March 31,
2024
  2023  2024
ANI$27,115 $29,388 $30,173 $42,116 $37,716  $142,663 $139,393
         
Weighted-average shares of Class A common stock outstanding – Basic 62,805,788  62,834,818  62,858,468  64,068,952  64,194,859   61,884,671  63,489,135
Assumed vesting of RSUs 524,576  400,034  801,014  333,402  512,946   669,966  512,152
Assumed vesting and exchange of Class B2 units 2,501,045  2,504,618  2,538,647  2,553,899  2,573,762   2,475,501  2,542,751
Exchange of Class B units in the Partnership(1) 46,420,141  46,420,141  46,417,845  46,314,543  46,272,227   46,780,724  46,356,244
Exchange of Class C units in the Partnership(2) 2,514,085  2,514,085  2,502,086  1,962,131  1,958,507   2,807,243  2,234,191
Adjusted weighted-average shares 114,765,635  114,673,696  115,118,060  115,232,927  115,512,301   114,618,105  115,134,473
         
ANI per share$0.24 $0.26 $0.26 $0.37 $0.33  $1.24 $1.21
                      

_______________________________

(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 Year Ended March 31, Percentage Change
(in millions)March 31, 2023June 30, 2023September 30, 2023December 31, 2023March 31, 2024  2023  2024  vs. FQ4'23
Separately Managed Accounts          
Beginning balance$53,420 $55,345 $56,645 $56,380 $56,660  $49,586 $55,345  6%
Contributions(1) 2,378  1,425  1,036  1,109  2,757   9,658  6,327  16%
Distributions(2) (997) (429) (1,459) (1,397) (795)  (4,208) (4,080) (20) %
Market value, FX and other(4) 544  304  158  568  275   309  1,305  (49) %
Ending balance$55,345 $56,645 $56,380 $56,660 $58,897  $55,345 $58,897  6%
           
Focused Commingled Funds          
Beginning balance$29,565 $30,086 $30,762 $30,905 $32,772  $25,587 $30,086  11%
Contributions(1) 713  796  992  1,898  2,429   5,509  6,115  241%
Distributions(2) (308) (252) (988) (274) (327)  (1,162) (1,841) 6%
Market value, FX and other(3) 116  132  139  243  87   152  601  (25) %
Ending balance$30,086 $30,762 $30,905 $32,772 $34,961  $30,086 $34,961  16%
           
Total          
Beginning balance$82,985 $85,431 $87,407 $87,285 $89,432  $75,173 $85,431  8%
Contributions(1) 3,091  2,221  2,028  3,007  5,186   15,167  12,442  68%
Distributions(2) (1,305) (681) (2,447) (1,671) (1,122)  (5,370) (5,921) (14) %
Market value, FX and other(3) 660  436  297  811  362   461  1,906  (45) %
Ending balance$85,431 $87,407 $87,285 $89,432 $93,858  $85,431 $93,858  10%
                          

_______________________________

(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)March 31, 2023June 30, 2023September 30, 2023December 31, 2023March 31, 2024 vs. FQ4'23
FEAUM       
Private equity$45,766 $46,539 $46,464 $48,258 $49,869  9%
Infrastructure 19,274  19,874  20,122  19,789  20,114  4%
Private debt 14,361  14,865  15,122  15,460  15,477  8%
Real estate 6,030  6,129  5,577  5,925  8,398  39%
Total$85,431 $87,407 $87,285 $89,432 $93,858  10%
        
Separately managed accounts$55,345 $56,645 $56,380 $56,660 $58,897  6%
Focused commingled funds 30,086  30,762  30,905  32,772  34,961  16%
Total$85,431 $87,407 $87,285 $89,432 $93,858  10%
        
AUM(1)       
Private equity$71,611 $73,511 $76,031 $78,221 $81,942  14%
Infrastructure 27,285  28,521  28,678  28,307  30,003  10%
Private debt 26,592  27,099  27,520  27,782  28,491  7%
Real estate 12,891  13,469  13,612  14,646  16,201  26%
Total$138,379 $142,600 $145,841 $148,956 $156,637  13%
        
Separately managed accounts$82,243 $85,058 $85,387 $88,890 $93,938  14%
Focused commingled funds 43,062  44,389  46,266  45,508  48,545  13%
Advisory AUM 13,074  13,153  14,188  14,558  14,154  8%
Total$138,379 $142,600 $145,841 $148,956 $156,637  13%
        
Advisory AUA       
Private equity$242,461 $251,880 $264,327 $266,246 $270,350  12%
Infrastructure 50,700  53,593  55,146  57,528  60,339  19%
Private debt 17,362  17,525  18,026  17,916  21,976  27%
Real estate 171,668  173,992  175,369  168,802  168,455  (2)%
Total$482,191 $496,990 $512,868 $510,492 $521,120  8%
        
Total capital responsibility(2)$620,570 $639,590 $658,709 $659,448 $677,757  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, 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 March 31, 2024 reflects final data for the prior period (December 31, 2023), adjusted for net new client account activity through March 31, 2024. NAV data for underlying investments is as of December 31, 2023, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2023. When NAV data is not available by the business day occurring on or after 115 days following December 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 March 31, 2024 reflects final data for the prior period (December 31, 2023), adjusted for net new client account activity through March 31, 2024. NAV data for underlying investments is as of December 31, 2023, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2023. When NAV data is not available by the business day occurring on or after 115 days following December 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.

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.