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 September 30, 2023. This represents
results for the second 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 December 15, 2023, to the holders of
record as of the close of business on November 30, 2023.
StepStone issued a full detailed
presentation of its second
quarter fiscal 2024
results, which can be accessed by visiting the Company’s
website at
https://shareholders.stepstonegroup.com or by
clicking here.
Webcast and Earnings Conference
Call
Management will host a webcast and conference
call on Monday, November 6, 2023, at 5:00 pm ET to discuss the
Company’s results for the second 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/BId605e133586b4cd284f5a7815047cfbd.
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 September 30, 2023, StepStone was
responsible for approximately $659 billion of total capital,
including $146 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 |
|
Six Months Ended September 30, |
|
Percentage Change |
(in thousands, except share and per share amounts and where
noted) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
|
vs. FQ2'23 |
vs. FQ2'23 YTD |
Financial Highlights |
|
|
|
|
|
|
|
|
|
|
|
GAAP Results |
|
|
|
|
|
|
|
|
|
|
|
Management and advisory fees, net |
$ |
119,121 |
|
$ |
128,753 |
|
$ |
132,573 |
|
$ |
138,115 |
|
$ |
142,123 |
|
|
$ |
235,853 |
|
$ |
280,238 |
|
|
19% |
19% |
Total revenues |
|
(158,495 |
) |
|
(4,235 |
) |
|
172,374 |
|
|
178,011 |
|
|
191,422 |
|
|
|
(235,713 |
) |
|
369,433 |
|
|
na |
na |
Total performance fees |
|
(277,616 |
) |
|
(132,988 |
) |
|
39,801 |
|
|
39,896 |
|
|
49,299 |
|
|
|
(471,566 |
) |
|
89,195 |
|
|
na |
na |
Net income (loss) |
|
(67,065 |
) |
|
(13,555 |
) |
|
56,816 |
|
|
49,446 |
|
|
59,251 |
|
|
|
(88,536 |
) |
|
108,697 |
|
|
na |
na |
Net income (loss) per share of Class A common stock: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.48 |
) |
$ |
(0.11 |
) |
$ |
0.46 |
|
$ |
0.34 |
|
$ |
0.42 |
|
|
$ |
(0.66 |
) |
$ |
0.76 |
|
|
na |
na |
Diluted |
$ |
(0.48 |
) |
$ |
(0.11 |
) |
$ |
0.46 |
|
$ |
0.34 |
|
$ |
0.42 |
|
|
$ |
(0.66 |
) |
$ |
0.75 |
|
|
na |
na |
Weighted-average shares of Class A common stock: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
61,407,834 |
|
|
62,192,899 |
|
|
62,805,788 |
|
|
62,834,818 |
|
|
62,858,468 |
|
|
|
61,276,707 |
|
|
62,846,708 |
|
|
2% |
3% |
Diluted |
|
61,407,834 |
|
|
62,192,899 |
|
|
65,831,409 |
|
|
65,739,470 |
|
|
66,198,129 |
|
|
|
61,276,707 |
|
|
65,970,053 |
|
|
8% |
8% |
Quarterly dividend per share of Class A common stock(1) |
$ |
0.20 |
|
$ |
0.20 |
|
$ |
0.20 |
|
$ |
0.20 |
|
$ |
0.21 |
|
|
$ |
0.40 |
|
$ |
0.41 |
|
|
5% |
3% |
Supplemental dividend per share of Class A common stock(2) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
0.25 |
|
$ |
— |
|
|
$ |
— |
|
$ |
0.25 |
|
|
na |
na |
Accrued carried interest allocations |
|
1,189,323 |
|
|
1,126,386 |
|
|
1,227,173 |
|
|
1,277,783 |
|
|
1,331,778 |
|
|
|
|
|
12% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Results(3) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted management and advisory fees, net(4) |
$ |
119,121 |
|
$ |
128,753 |
|
$ |
132,720 |
|
$ |
138,301 |
|
$ |
142,327 |
|
|
$ |
235,853 |
|
$ |
280,628 |
|
|
19% |
19% |
Adjusted revenues |
|
150,638 |
|
|
148,053 |
|
|
152,940 |
|
|
152,780 |
|
|
149,800 |
|
|
|
340,977 |
|
|
302,580 |
|
|
(1)% |
(11)% |
Fee-related earnings (“FRE”) |
|
39,044 |
|
|
42,701 |
|
|
37,796 |
|
|
44,402 |
|
|
43,827 |
|
|
|
75,661 |
|
|
88,229 |
|
|
12% |
17% |
FRE margin(5) |
|
33 |
% |
|
33 |
% |
|
28 |
% |
|
32 |
% |
|
31 |
% |
|
|
32 |
% |
|
31 |
% |
|
|
|
Gross realized performance fees |
|
31,517 |
|
|
19,300 |
|
|
20,220 |
|
|
14,479 |
|
|
7,473 |
|
|
|
105,124 |
|
|
21,952 |
|
|
(76)% |
(79)% |
Adjusted net income (“ANI”) |
|
37,261 |
|
|
31,153 |
|
|
27,115 |
|
|
29,388 |
|
|
30,173 |
|
|
|
84,395 |
|
|
59,561 |
|
|
(19)% |
(29)% |
Adjusted weighted-average shares |
|
114,606,326 |
|
|
114,651,163 |
|
|
114,765,635 |
|
|
114,673,696 |
|
|
115,118,060 |
|
|
|
114,537,025 |
|
|
114,897,093 |
|
|
—% |
—% |
ANI per share |
$ |
0.33 |
|
$ |
0.27 |
|
$ |
0.24 |
|
$ |
0.26 |
|
$ |
0.26 |
|
|
$ |
0.74 |
|
$ |
0.52 |
|
|
(21)% |
(30)% |
|
|
|
|
|
|
|
|
|
|
|
|
Key Business Drivers/Operating Metrics (in
billions) |
|
|
|
|
|
|
|
|
|
|
|
Assets under management (“AUM”)(6) |
$ |
135.0 |
|
$ |
134.0 |
|
$ |
138.4 |
|
$ |
142.6 |
|
$ |
145.8 |
|
|
|
|
|
8% |
|
Assets under advisement (“AUA”)(6) |
|
466.7 |
|
|
468.0 |
|
|
482.2 |
|
|
497.0 |
|
|
512.9 |
|
|
|
|
|
10% |
|
Fee-earning AUM (“FEAUM”) |
|
80.1 |
|
|
83.0 |
|
|
85.4 |
|
|
87.4 |
|
|
87.3 |
|
|
|
|
|
9% |
|
Undeployed fee-earning capital (“UFEC”) |
|
16.5 |
|
|
14.0 |
|
|
15.7 |
|
|
16.9 |
|
|
18.1 |
|
|
|
|
|
10% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
September 30, 2023 |
|
March 31, 2023 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
117,484 |
|
$ |
102,565 |
Restricted cash |
|
679 |
|
|
955 |
Fees and accounts receivable |
|
45,237 |
|
|
44,450 |
Due from affiliates |
|
51,050 |
|
|
54,322 |
Investments: |
|
|
|
Investments in funds |
|
129,768 |
|
|
115,187 |
Accrued carried interest allocations |
|
1,331,778 |
|
|
1,227,173 |
Legacy Greenspring investments in funds and accrued carried
interest allocations(1) |
|
700,473 |
|
|
770,652 |
Deferred income tax assets |
|
36,828 |
|
|
44,358 |
Lease right-of-use assets, net |
|
99,843 |
|
|
101,130 |
Other assets and receivables |
|
52,615 |
|
|
44,060 |
Intangibles, net |
|
333,322 |
|
|
354,645 |
Goodwill |
|
580,542 |
|
|
580,542 |
Assets of Consolidated Funds: |
|
|
|
Cash and cash equivalents |
|
58,639 |
|
|
25,997 |
Investments, at fair value |
|
68,481 |
|
|
30,595 |
Other assets |
|
1,624 |
|
|
772 |
Total assets |
$ |
3,608,363 |
|
$ |
3,497,403 |
Liabilities and stockholders’ equity |
|
|
|
Accounts payable, accrued expenses and other liabilities |
$ |
91,561 |
|
$ |
89,396 |
Accrued compensation and benefits |
|
110,413 |
|
|
66,614 |
Accrued carried interest-related compensation |
|
697,377 |
|
|
644,517 |
Legacy Greenspring accrued carried interest-related
compensation(1) |
|
556,219 |
|
|
617,994 |
Due to affiliates |
|
204,503 |
|
|
205,424 |
Lease liabilities |
|
119,117 |
|
|
121,224 |
Debt obligations |
|
123,586 |
|
|
98,351 |
Liabilities of Consolidated Funds: |
|
|
|
Other liabilities |
|
7,904 |
|
|
566 |
Total liabilities |
|
1,910,680 |
|
|
1,844,086 |
Redeemable non-controlling interests in Consolidated Funds |
|
59,272 |
|
|
24,530 |
Stockholders’ equity: |
|
|
|
Class A common stock, $0.001 par value, 650,000,000 authorized;
64,068,952 and 62,834,791issued and outstanding as of
September 30, 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
September 30, 2023 and March 31, 2023, respectively |
|
46 |
|
|
46 |
Additional paid-in capital |
|
628,977 |
|
|
610,567 |
Retained earnings |
|
165,240 |
|
|
160,430 |
Accumulated other comprehensive income |
|
338 |
|
|
461 |
Total StepStone Group Inc. stockholders’ equity |
|
794,665 |
|
|
771,567 |
Non-controlling interests in subsidiaries |
|
30,394 |
|
|
36,380 |
Non-controlling interests in legacy Greenspring entities(1) |
|
144,255 |
|
|
152,658 |
Non-controlling interests in the Partnership |
|
669,097 |
|
|
668,182 |
Total stockholders’ equity |
|
1,638,411 |
|
|
1,628,787 |
Total liabilities and stockholders’ equity |
$ |
3,608,363 |
|
$ |
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 September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues |
|
|
|
|
|
|
|
Management and advisory fees, net |
$ |
142,123 |
|
|
$ |
119,121 |
|
|
$ |
280,238 |
|
|
$ |
235,853 |
|
Performance fees: |
|
|
|
|
|
|
|
Incentive fees |
|
4,946 |
|
|
|
5,365 |
|
|
|
4,952 |
|
|
|
5,365 |
|
Carried interest allocations: |
|
|
|
|
|
|
|
Realized |
|
1,585 |
|
|
|
22,469 |
|
|
|
16,058 |
|
|
|
96,076 |
|
Unrealized |
|
55,371 |
|
|
|
(176,778 |
) |
|
|
104,735 |
|
|
|
(290,728 |
) |
Total carried interest allocations |
|
56,956 |
|
|
|
(154,309 |
) |
|
|
120,793 |
|
|
|
(194,652 |
) |
Legacy Greenspring carried interest allocations(1) |
|
(12,603 |
) |
|
|
(128,672 |
) |
|
|
(36,550 |
) |
|
|
(282,279 |
) |
Total performance fees |
|
49,299 |
|
|
|
(277,616 |
) |
|
|
89,195 |
|
|
|
(471,566 |
) |
Total revenues |
|
191,422 |
|
|
|
(158,495 |
) |
|
|
369,433 |
|
|
|
(235,713 |
) |
Expenses |
|
|
|
|
|
|
|
Compensation and benefits: |
|
|
|
|
|
|
|
Cash-based compensation |
|
74,851 |
|
|
|
59,501 |
|
|
|
144,932 |
|
|
|
119,562 |
|
Equity-based compensation |
|
5,916 |
|
|
|
3,783 |
|
|
|
14,388 |
|
|
|
7,497 |
|
Performance fee-related compensation: |
|
|
|
|
|
|
|
Realized |
|
1,720 |
|
|
|
13,630 |
|
|
|
10,822 |
|
|
|
55,365 |
|
Unrealized |
|
28,712 |
|
|
|
(86,126 |
) |
|
|
52,923 |
|
|
|
(140,679 |
) |
Total performance fee-related compensation |
|
30,432 |
|
|
|
(72,496 |
) |
|
|
63,745 |
|
|
|
(85,314 |
) |
Legacy Greenspring performance fee-related compensation(1) |
|
(12,603 |
) |
|
|
(128,672 |
) |
|
|
(36,550 |
) |
|
|
(282,279 |
) |
Total compensation and benefits |
|
98,596 |
|
|
|
(137,884 |
) |
|
|
186,515 |
|
|
|
(240,534 |
) |
General, administrative and other |
|
31,729 |
|
|
|
33,733 |
|
|
|
65,006 |
|
|
|
67,965 |
|
Total expenses |
|
130,325 |
|
|
|
(104,151 |
) |
|
|
251,521 |
|
|
|
(172,569 |
) |
Other income (expense) |
|
|
|
|
|
|
|
Investment income (loss) |
|
3,080 |
|
|
|
(3,691 |
) |
|
|
6,166 |
|
|
|
(4,792 |
) |
Legacy Greenspring investment loss(1) |
|
(3,966 |
) |
|
|
(15,357 |
) |
|
|
(6,832 |
) |
|
|
(23,961 |
) |
Investment income of Consolidated Funds |
|
8,772 |
|
|
|
— |
|
|
|
11,134 |
|
|
|
— |
|
Interest income |
|
977 |
|
|
|
356 |
|
|
|
1,408 |
|
|
|
367 |
|
Interest expense |
|
(2,108 |
) |
|
|
(817 |
) |
|
|
(4,120 |
) |
|
|
(1,404 |
) |
Other loss |
|
(872 |
) |
|
|
(634 |
) |
|
|
(645 |
) |
|
|
(1,738 |
) |
Total other income (expense) |
|
5,883 |
|
|
|
(20,143 |
) |
|
|
7,111 |
|
|
|
(31,528 |
) |
Income (loss) before income tax |
|
66,980 |
|
|
|
(74,487 |
) |
|
|
125,023 |
|
|
|
(94,672 |
) |
Income tax expense (benefit) |
|
7,729 |
|
|
|
(7,422 |
) |
|
|
16,326 |
|
|
|
(6,136 |
) |
Net income (loss) |
|
59,251 |
|
|
|
(67,065 |
) |
|
|
108,697 |
|
|
|
(88,536 |
) |
Less: Net income attributable to non-controlling interests in
subsidiaries |
|
9,615 |
|
|
|
8,690 |
|
|
|
19,245 |
|
|
|
16,261 |
|
Less: Net loss attributable to non-controlling interests in legacy
Greenspring entities(1) |
|
(3,966 |
) |
|
|
(15,357 |
) |
|
|
(6,832 |
) |
|
|
(23,961 |
) |
Less: Net income (loss) attributable to non-controlling interests
in the Partnership |
|
22,928 |
|
|
|
(31,177 |
) |
|
|
42,788 |
|
|
|
(40,575 |
) |
Less: Net income attributable to redeemable non-controlling
interests in Consolidated Funds |
|
4,449 |
|
|
|
— |
|
|
|
6,002 |
|
|
|
— |
|
Net income (loss) attributable to StepStone Group Inc. |
$ |
26,225 |
|
|
$ |
(29,221 |
) |
|
$ |
47,494 |
|
|
$ |
(40,261 |
) |
Net income (loss) per share of Class A common stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.42 |
|
|
$ |
(0.48 |
) |
|
$ |
0.76 |
|
|
$ |
(0.66 |
) |
Diluted |
$ |
0.42 |
|
|
$ |
(0.48 |
) |
|
$ |
0.75 |
|
|
$ |
(0.66 |
) |
Weighted-average shares of Class A common stock: |
|
|
|
|
|
|
|
Basic |
|
62,858,468 |
|
|
|
61,407,834 |
|
|
|
62,846,708 |
|
|
|
61,276,707 |
|
Diluted |
|
66,198,129 |
|
|
|
61,407,834 |
|
|
|
65,970,053 |
|
|
|
61,276,707 |
|
(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 |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31,2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
2023 |
Focused commingled funds(1) |
$ |
51,553 |
$ |
60,680 |
$ |
62,093 |
$ |
67,119 |
$ |
70,481 |
|
$ |
104,295 |
$ |
137,600 |
Separately managed accounts |
|
52,179 |
|
53,515 |
|
54,033 |
|
55,744 |
|
56,431 |
|
|
102,639 |
|
112,175 |
Advisory and other services |
|
13,788 |
|
13,926 |
|
15,546 |
|
14,101 |
|
13,740 |
|
|
26,772 |
|
27,841 |
Fund reimbursement revenues(1) |
|
1,601 |
|
632 |
|
1,048 |
|
1,337 |
|
1,675 |
|
|
2,147 |
|
3,012 |
Adjusted management and advisory fees, net |
$ |
119,121 |
$ |
128,753 |
$ |
132,720 |
$ |
138,301 |
$ |
142,327 |
|
$ |
235,853 |
$ |
280,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Reflects the add-back of management and
advisory fee revenues for the Consolidated Funds, which have been
eliminated in consolidation.
Adjusted Revenues
Adjusted revenues represents the components of
revenues used in the determination of ANI and comprise 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 |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31,2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
Total revenues |
$ |
(158,495 |
) |
$ |
(4,235 |
) |
$ |
172,374 |
|
$ |
178,011 |
|
$ |
191,422 |
|
|
$ |
(235,713 |
) |
$ |
369,433 |
|
Unrealized carried interest allocations |
|
176,778 |
|
|
63,367 |
|
|
(100,753 |
) |
|
(49,364 |
) |
|
(55,371 |
) |
|
|
290,728 |
|
|
(104,735 |
) |
Deferred incentive fees |
|
3,683 |
|
|
— |
|
|
209 |
|
|
— |
|
|
942 |
|
|
|
3,683 |
|
|
942 |
|
Legacy Greenspring carried interest allocations |
|
128,672 |
|
|
88,921 |
|
|
80,963 |
|
|
23,947 |
|
|
12,603 |
|
|
|
282,279 |
|
|
36,550 |
|
Management and advisory fee revenues for the Consolidated
Funds(1) |
|
— |
|
|
— |
|
|
147 |
|
|
186 |
|
|
204 |
|
|
|
— |
|
|
390 |
|
Adjusted revenues |
$ |
150,638 |
|
$ |
148,053 |
|
$ |
152,940 |
|
$ |
152,780 |
|
$ |
149,800 |
|
|
$ |
340,977 |
|
$ |
302,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. 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 |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
GAAP management and advisory fees, net |
$ |
119,121 |
|
$ |
128,753 |
|
$ |
132,573 |
|
$ |
138,115 |
|
$ |
142,123 |
|
|
$ |
235,853 |
|
$ |
280,238 |
|
Management and advisory fee revenues for the Consolidated
Funds(1) |
|
— |
|
|
— |
|
|
147 |
|
|
186 |
|
|
204 |
|
|
|
— |
|
|
390 |
|
Adjusted management and advisory fees, net |
$ |
119,121 |
|
$ |
128,753 |
|
$ |
132,720 |
|
$ |
138,301 |
|
$ |
142,327 |
|
|
$ |
235,853 |
|
$ |
280,628 |
|
|
|
|
|
|
|
|
|
|
GAAP cash-based compensation |
$ |
59,501 |
|
$ |
62,628 |
|
$ |
69,990 |
|
$ |
70,081 |
|
$ |
74,851 |
|
|
$ |
119,562 |
|
$ |
144,932 |
|
Adjustments(2) |
|
(740 |
) |
|
(520 |
) |
|
(653 |
) |
|
(531 |
) |
|
(574 |
) |
|
|
(1,431 |
) |
|
(1,105 |
) |
Adjusted cash-based compensation |
$ |
58,761 |
|
$ |
62,108 |
|
$ |
69,337 |
|
$ |
69,550 |
|
$ |
74,277 |
|
|
$ |
118,131 |
|
$ |
143,827 |
|
|
|
|
|
|
|
|
|
|
GAAP equity-based compensation |
$ |
3,783 |
|
$ |
8,108 |
|
$ |
9,335 |
|
$ |
8,472 |
|
$ |
5,916 |
|
|
$ |
7,497 |
|
$ |
14,388 |
|
Adjustments(3) |
|
(3,125 |
) |
|
(7,444 |
) |
|
(8,274 |
) |
|
(7,171 |
) |
|
(4,644 |
) |
|
|
(6,196 |
) |
|
(11,815 |
) |
Adjusted equity-based compensation |
$ |
658 |
|
$ |
664 |
|
$ |
1,061 |
|
$ |
1,301 |
|
$ |
1,272 |
|
|
$ |
1,301 |
|
$ |
2,573 |
|
|
|
|
|
|
|
|
|
|
GAAP general, administrative and other |
$ |
33,733 |
|
$ |
43,582 |
|
$ |
35,612 |
|
$ |
33,277 |
|
$ |
31,729 |
|
|
$ |
67,965 |
|
$ |
65,006 |
|
Adjustments(4) |
|
(13,075 |
) |
|
(20,302 |
) |
|
(11,086 |
) |
|
(10,229 |
) |
|
(8,778 |
) |
|
|
(27,205 |
) |
|
(19,007 |
) |
Adjusted general, administrative and other |
$ |
20,658 |
|
$ |
23,280 |
|
$ |
24,526 |
|
$ |
23,048 |
|
$ |
22,951 |
|
|
$ |
40,760 |
|
$ |
45,999 |
|
|
|
|
|
|
|
|
|
|
GAAP interest income |
$ |
356 |
|
$ |
701 |
|
$ |
853 |
|
$ |
431 |
|
$ |
977 |
|
|
$ |
367 |
|
$ |
1,408 |
|
Interest income earned by the Consolidated Funds(5) |
|
— |
|
|
— |
|
|
(195 |
) |
|
(244 |
) |
|
(249 |
) |
|
|
— |
|
|
(493 |
) |
Adjusted interest income |
$ |
356 |
|
$ |
701 |
|
$ |
658 |
|
$ |
187 |
|
$ |
728 |
|
|
$ |
367 |
|
$ |
915 |
|
|
|
|
|
|
|
|
|
|
GAAP other income (loss) |
$ |
(634 |
) |
$ |
358 |
|
$ |
(40 |
) |
$ |
227 |
|
$ |
(872 |
) |
|
$ |
(1,738 |
) |
$ |
(645 |
) |
Adjustments(6) |
|
— |
|
|
— |
|
|
86 |
|
|
(376 |
) |
|
403 |
|
|
|
— |
|
|
27 |
|
Adjusted other income (loss) |
$ |
(634 |
) |
$ |
358 |
|
$ |
46 |
|
$ |
(149 |
) |
$ |
(469 |
) |
|
$ |
(1,738 |
) |
$ |
(618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Reflects the add-back of management and
advisory fee revenues for the Consolidated Funds, which have been
eliminated in consolidation.(2) Reflects the removal of severance
and compensation paid to certain employees as part of an
acquisition earn-out.(3) Reflects the removal of equity-based
compensation for awards granted prior to and in connection with the
IPO, profits interests issued by our non-wholly owned subsidiaries,
and unrealized mark-to-market changes in the fair value of the
profits interests issued in connection with the Private Wealth
Transaction.(4) Reflects the removal of lease remeasurement
adjustments, accelerated depreciation of leasehold improvements for
changes in lease terms, amortization of intangibles,
transaction-related costs and other non-core operating income and
expenses.(5) Reflects the removal of interest income earned by the
Consolidated Funds.(6) Reflects the removal of amounts for Tax
Receivable Agreements adjustments recognized as other income (loss)
and the removal of the impact of consolidation of the Consolidated
Funds.
Adjusted Net Income
Adjusted net income, or “ANI”, is a non-GAAP
performance measure that we present 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 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 connection with the
Private Wealth Transaction, (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. 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 connection with the Private Wealth Transaction,
(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. 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 |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
Income (loss) before income tax |
$ |
(74,487 |
) |
|
(14,287 |
) |
$ |
67,505 |
|
$ |
58,043 |
|
$ |
66,980 |
|
|
$ |
(94,672 |
) |
$ |
125,023 |
|
Net income attributable to non-controlling interests in
subsidiaries(1) |
|
(9,985 |
) |
|
(10,802 |
) |
|
(10,151 |
) |
|
(10,540 |
) |
|
(10,321 |
) |
|
|
(18,101 |
) |
|
(20,861 |
) |
Net loss attributable to non-controlling interests in legacy
Greenspring entities |
|
15,357 |
|
|
8,966 |
|
|
11,148 |
|
|
2,866 |
|
|
3,966 |
|
|
|
23,961 |
|
|
6,832 |
|
Unrealized carried interest allocations |
|
176,778 |
|
|
63,367 |
|
|
(100,753 |
) |
|
(49,364 |
) |
|
(55,371 |
) |
|
|
290,728 |
|
|
(104,735 |
) |
Unrealized performance fee-related compensation |
|
(86,126 |
) |
|
(31,875 |
) |
|
53,515 |
|
|
24,211 |
|
|
28,712 |
|
|
|
(140,679 |
) |
|
52,923 |
|
Unrealized investment (income) loss |
|
5,795 |
|
|
1,354 |
|
|
(2,207 |
) |
|
(2,529 |
) |
|
(1,657 |
) |
|
|
8,865 |
|
|
(4,186 |
) |
Impact of Consolidated Funds |
|
— |
|
|
(4,895 |
) |
|
(4,002 |
) |
|
(2,647 |
) |
|
(8,223 |
) |
|
|
— |
|
|
(10,870 |
) |
Deferred incentive fees |
|
3,683 |
|
|
— |
|
|
209 |
|
|
— |
|
|
942 |
|
|
|
3,683 |
|
|
942 |
|
Equity-based compensation(2) |
|
3,125 |
|
|
7,444 |
|
|
8,274 |
|
|
7,171 |
|
|
4,644 |
|
|
|
6,196 |
|
|
11,815 |
|
Amortization of intangibles |
|
10,870 |
|
|
10,870 |
|
|
10,870 |
|
|
10,661 |
|
|
10,661 |
|
|
|
21,741 |
|
|
21,322 |
|
Tax Receivable Agreements adjustments through earnings |
|
— |
|
|
— |
|
|
(244 |
) |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
Non-core items(3) |
|
2,945 |
|
|
9,952 |
|
|
733 |
|
|
(50 |
) |
|
(1,500 |
) |
|
|
6,895 |
|
|
(1,550 |
) |
Pre-tax ANI |
|
47,955 |
|
|
40,094 |
|
|
34,897 |
|
|
37,822 |
|
|
38,833 |
|
|
|
108,617 |
|
|
76,655 |
|
Income taxes(4) |
|
(10,694 |
) |
|
(8,941 |
) |
|
(7,782 |
) |
|
(8,434 |
) |
|
(8,660 |
) |
|
|
(24,222 |
) |
|
(17,094 |
) |
ANI |
|
37,261 |
|
|
31,153 |
|
|
27,115 |
|
|
29,388 |
|
|
30,173 |
|
|
|
84,395 |
|
|
59,561 |
|
Income taxes(4) |
|
10,694 |
|
|
8,941 |
|
|
7,782 |
|
|
8,434 |
|
|
8,660 |
|
|
|
24,222 |
|
|
17,094 |
|
Realized carried interest allocations |
|
(22,469 |
) |
|
(16,320 |
) |
|
(18,693 |
) |
|
(14,473 |
) |
|
(1,585 |
) |
|
|
(96,076 |
) |
|
(16,058 |
) |
Realized performance fee-related compensation(5) |
|
13,630 |
|
|
11,726 |
|
|
12,755 |
|
|
9,102 |
|
|
1,720 |
|
|
|
55,365 |
|
|
10,822 |
|
Realized investment income |
|
(2,104 |
) |
|
(673 |
) |
|
(757 |
) |
|
(557 |
) |
|
(1,423 |
) |
|
|
(4,073 |
) |
|
(1,980 |
) |
Incentive fees |
|
(5,365 |
) |
|
(2,980 |
) |
|
(1,318 |
) |
|
(6 |
) |
|
(4,946 |
) |
|
|
(5,365 |
) |
|
(4,952 |
) |
Deferred incentive fees |
|
(3,683 |
) |
|
— |
|
|
(209 |
) |
|
— |
|
|
(942 |
) |
|
|
(3,683 |
) |
|
(942 |
) |
Adjusted interest income(6) |
|
(356 |
) |
|
(701 |
) |
|
(658 |
) |
|
(187 |
) |
|
(728 |
) |
|
|
(367 |
) |
|
(915 |
) |
Interest expense |
|
817 |
|
|
1,111 |
|
|
1,674 |
|
|
2,012 |
|
|
2,108 |
|
|
|
1,404 |
|
|
4,120 |
|
Adjusted other (income) loss(6)(7) |
|
634 |
|
|
(358 |
) |
|
(46 |
) |
|
149 |
|
|
469 |
|
|
|
1,738 |
|
|
618 |
|
Net income attributable to non-controlling interests in
subsidiaries(1) |
|
9,985 |
|
|
10,802 |
|
|
10,151 |
|
|
10,540 |
|
|
10,321 |
|
|
|
18,101 |
|
|
20,861 |
|
FRE |
$ |
39,044 |
|
$ |
42,701 |
|
$ |
37,796 |
|
$ |
44,402 |
|
$ |
43,827 |
|
|
$ |
75,661 |
|
$ |
88,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Reflects the portion of pre-tax ANI of our
subsidiaries attributable to non-controlling interests:
|
Three Months Ended |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
FRE attributable to non-controlling interests in subsidiaries |
$ |
10,149 |
|
$ |
10,167 |
$ |
9,843 |
$ |
10,534 |
$ |
9,463 |
|
$ |
18,663 |
|
$ |
19,997 |
Non fee-related earnings (losses) attributable to non-controlling
interests in subsidiaries |
|
(164 |
) |
|
635 |
|
308 |
|
6 |
|
858 |
|
|
(562 |
) |
|
864 |
Net income attributable to non-controlling interests in
subsidiaries |
$ |
9,985 |
|
$ |
10,802 |
$ |
10,151 |
$ |
10,540 |
$ |
10,321 |
|
$ |
18,101 |
|
$ |
20,861 |
(2) Reflects equity-based compensation for awards
granted prior to and in connection with the IPO, profits interests
issued by our non-wholly owned subsidiaries, and unrealized
mark-to-market changes in the fair value of the profits interests
issued in connection with the Private Wealth Transaction.(3)
Includes (income) expense related to the following non-core
operating income and expenses:
|
Three Months Ended |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
Transaction costs |
$ |
— |
|
$ |
6,812 |
$ |
38 |
|
$ |
37 |
|
$ |
163 |
|
|
$ |
3 |
|
$ |
200 |
|
Lease remeasurement adjustments |
|
(2,709 |
) |
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
(2,709 |
) |
|
— |
|
Accelerated depreciation of leasehold improvements for changes in
lease terms |
|
210 |
|
|
631 |
|
631 |
|
|
631 |
|
|
631 |
|
|
|
210 |
|
|
1,262 |
|
Severance costs |
|
134 |
|
|
42 |
|
73 |
|
|
— |
|
|
— |
|
|
|
178 |
|
|
— |
|
(Gain) loss on change in fair value for contingent consideration
obligation |
|
4,704 |
|
|
1,989 |
|
(588 |
) |
|
(1,249 |
) |
|
(2,868 |
) |
|
|
7,960 |
|
|
(4,117 |
) |
Compensation paid to certain employees as part of an acquisition
earn-out |
|
606 |
|
|
478 |
|
579 |
|
|
531 |
|
|
574 |
|
|
|
1,253 |
|
|
1,105 |
|
Total non-core operating income and expenses |
$ |
2,945 |
|
$ |
9,952 |
$ |
733 |
|
$ |
(50 |
) |
$ |
(1,500 |
) |
|
$ |
6,895 |
|
$ |
(1,550 |
) |
(4) Represents corporate income taxes at a blended
statutory rate applied to pre-tax ANI:
|
Three Months Ended |
|
Six Months Ended September 30, |
|
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 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 |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
2023 |
Realized carried interest-related compensation |
$ |
2,412 |
$ |
2,208 |
$ |
2,358 |
$ |
2,189 |
$ |
— |
|
$ |
6,809 |
$ |
2,189 |
(6) Excludes the impact of consolidating the
Consolidated Funds.(7) Excludes amounts for Tax Receivable
Agreements adjustments recognized as other income (loss) ($244
thousand for the three months ended March 31, 2023).
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 |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
FRE |
$ |
39,044 |
|
$ |
42,701 |
|
$ |
37,796 |
|
$ |
44,402 |
|
$ |
43,827 |
|
|
$ |
75,661 |
|
$ |
88,229 |
|
Adjusted management and advisory fees, net |
|
119,121 |
|
|
128,753 |
|
|
132,720 |
|
|
138,301 |
|
|
142,327 |
|
|
|
235,853 |
|
|
280,628 |
|
FRE margin |
|
33 |
% |
|
33 |
% |
|
28 |
% |
|
32 |
% |
|
31 |
% |
|
|
32 |
% |
|
31 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Realized Performance
Fees
Gross realized performance fees represents realized
carried interest allocations and incentive fees, including the
deferred portion and excluding legacy Greenspring entities. We
believe gross realized performance fees is useful to investors
because it presents the total performance fees realized by us.
Net Realized Performance Fees
Net realized performance fees represents gross
realized performance fees, less realized performance fee-related
compensation and excluding legacy Greenspring entities. We believe
net realized performance fees is useful to investors because it
presents the performance fees attributable to us, net of amounts
paid to employees as performance fee-related compensation.
The table below shows a reconciliation of total
performance fees to gross and net realized performance fees.
|
Three Months Ended |
|
Six Months Ended September 30, |
(in thousands) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
Incentive fees |
$ |
5,365 |
|
$ |
2,980 |
|
$ |
1,318 |
|
$ |
6 |
|
$ |
4,946 |
|
|
$ |
5,365 |
|
$ |
4,952 |
|
Realized carried interest allocations |
|
22,469 |
|
|
16,320 |
|
|
18,693 |
|
|
14,473 |
|
|
1,585 |
|
|
|
96,076 |
|
|
16,058 |
|
Unrealized carried interest allocations |
|
(176,778 |
) |
|
(63,367 |
) |
|
100,753 |
|
|
49,364 |
|
|
55,371 |
|
|
|
(290,728 |
) |
|
104,735 |
|
Legacy Greenspring carried interest allocations |
|
(128,672 |
) |
|
(88,921 |
) |
|
(80,963 |
) |
|
(23,947 |
) |
|
(12,603 |
) |
|
|
(282,279 |
) |
|
(36,550 |
) |
Total
performance fees |
|
(277,616 |
) |
|
(132,988 |
) |
|
39,801 |
|
|
39,896 |
|
|
49,299 |
|
|
|
(471,566 |
) |
|
89,195 |
|
Unrealized carried interest allocations |
|
176,778 |
|
|
63,367 |
|
|
(100,753 |
) |
|
(49,364 |
) |
|
(55,371 |
) |
|
|
290,728 |
|
|
(104,735 |
) |
Legacy Greenspring carried interest allocations |
|
128,672 |
|
|
88,921 |
|
|
80,963 |
|
|
23,947 |
|
|
12,603 |
|
|
|
282,279 |
|
|
36,550 |
|
Deferred incentive fees |
|
3,683 |
|
|
— |
|
|
209 |
|
|
— |
|
|
942 |
|
|
|
3,683 |
|
|
942 |
|
Gross realized performance fees |
|
31,517 |
|
|
19,300 |
|
|
20,220 |
|
|
14,479 |
|
|
7,473 |
|
|
|
105,124 |
|
|
21,952 |
|
Realized performance fee-related compensation(1) |
|
(13,630 |
) |
|
(11,726 |
) |
|
(12,755 |
) |
|
(9,102 |
) |
|
(1,720 |
) |
|
|
(55,365 |
) |
|
(10,822 |
) |
Net realized
performance fees |
$ |
17,887 |
|
$ |
7,574 |
|
$ |
7,465 |
|
$ |
5,377 |
|
$ |
5,753 |
|
|
$ |
49,759 |
|
$ |
11,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Six Months Ended September 30, |
|
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
2023 |
ANI |
$ |
37,261 |
$ |
31,153 |
$ |
27,115 |
$ |
29,388 |
$ |
30,173 |
|
$ |
84,395 |
$ |
59,561 |
|
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding –
Basic |
|
61,407,834 |
|
62,192,899 |
|
62,805,788 |
|
62,834,818 |
|
62,858,468 |
|
|
61,276,707 |
|
62,846,708 |
Assumed vesting of RSUs |
|
913,479 |
|
457,818 |
|
524,576 |
|
400,034 |
|
801,014 |
|
|
856,217 |
|
601,620 |
Assumed vesting and exchange of Class B2 units |
|
2,466,194 |
|
2,486,197 |
|
2,501,045 |
|
2,504,618 |
|
2,538,647 |
|
|
2,457,561 |
|
2,521,725 |
Exchange of Class B units in the Partnership(1) |
|
46,889,995 |
|
46,662,062 |
|
46,420,141 |
|
46,420,141 |
|
46,417,845 |
|
|
47,017,716 |
|
46,418,987 |
Exchange of Class C units in the Partnership(2) |
|
2,928,824 |
|
2,852,187 |
|
2,514,085 |
|
2,514,085 |
|
2,502,086 |
|
|
2,928,824 |
|
2,508,053 |
Adjusted weighted-average shares |
|
114,606,326 |
|
114,651,163 |
|
114,765,635 |
|
114,673,696 |
|
115,118,060 |
|
|
114,537,025 |
|
114,897,093 |
|
|
|
|
|
|
|
|
|
ANI per share |
$ |
0.33 |
$ |
0.27 |
$ |
0.24 |
$ |
0.26 |
$ |
0.26 |
|
$ |
0.74 |
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
Six Months Ended September 30, |
|
Percentage Change |
(in millions) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
|
2022 |
|
|
2023 |
|
|
vs. FQ2'23 |
Separately Managed Accounts |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
52,198 |
|
$ |
52,881 |
|
$ |
53,420 |
|
$ |
55,345 |
|
$ |
56,645 |
|
|
$ |
49,586 |
|
$ |
55,345 |
|
|
9% |
Contributions(1) |
|
1,760 |
|
|
2,149 |
|
|
2,378 |
|
|
1,425 |
|
|
1,036 |
|
|
|
5,131 |
|
|
2,461 |
|
|
(41)% |
Distributions(2) |
|
(588 |
) |
|
(2,178 |
) |
|
(997 |
) |
|
(429 |
) |
|
(1,459 |
) |
|
|
(1,033 |
) |
|
(1,888 |
) |
|
148% |
Market value, FX and other(3) |
|
(489 |
) |
|
568 |
|
|
544 |
|
|
304 |
|
|
158 |
|
|
|
(803 |
) |
|
462 |
|
|
na |
Ending balance |
$ |
52,881 |
|
$ |
53,420 |
|
$ |
55,345 |
|
$ |
56,645 |
|
$ |
56,380 |
|
|
$ |
52,881 |
|
$ |
56,380 |
|
|
7% |
|
|
|
|
|
|
|
|
|
|
|
Focused Commingled Funds |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
26,352 |
|
$ |
27,236 |
|
$ |
29,565 |
|
$ |
30,086 |
|
$ |
30,762 |
|
|
$ |
25,587 |
|
$ |
30,086 |
|
|
17% |
Contributions(1) |
|
1,139 |
|
|
2,497 |
|
|
713 |
|
|
796 |
|
|
992 |
|
|
|
2,299 |
|
|
1,788 |
|
|
(13)% |
Distributions(2) |
|
(304 |
) |
|
(168 |
) |
|
(308 |
) |
|
(252 |
) |
|
(988 |
) |
|
|
(686 |
) |
|
(1,240 |
) |
|
225% |
Market value, FX and other(3) |
|
49 |
|
|
— |
|
|
116 |
|
|
132 |
|
|
139 |
|
|
|
36 |
|
|
271 |
|
|
184% |
Ending balance |
$ |
27,236 |
|
$ |
29,565 |
|
$ |
30,086 |
|
$ |
30,762 |
|
$ |
30,905 |
|
|
$ |
27,236 |
|
$ |
30,905 |
|
|
13% |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
78,550 |
|
$ |
80,117 |
|
$ |
82,985 |
|
$ |
85,431 |
|
$ |
87,407 |
|
|
$ |
75,173 |
|
$ |
85,431 |
|
|
11% |
Contributions(1) |
|
2,899 |
|
|
4,646 |
|
|
3,091 |
|
|
2,221 |
|
|
2,028 |
|
|
|
7,430 |
|
|
4,249 |
|
|
(30)% |
Distributions(2) |
|
(892 |
) |
|
(2,346 |
) |
|
(1,305 |
) |
|
(681 |
) |
|
(2,447 |
) |
|
|
(1,719 |
) |
|
(3,128 |
) |
|
174% |
Market value, FX and other(3) |
|
(440 |
) |
|
568 |
|
|
660 |
|
|
436 |
|
|
297 |
|
|
|
(767 |
) |
|
733 |
|
|
na |
Ending balance |
$ |
80,117 |
|
$ |
82,985 |
|
$ |
85,431 |
|
$ |
87,407 |
|
$ |
87,285 |
|
|
$ |
80,117 |
|
$ |
87,285 |
|
|
9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) |
September 30, 2022 |
December 31, 2022 |
March 31, 2023 |
June 30, 2023 |
September 30, 2023 |
|
vs. FQ2'23 |
FEAUM |
|
|
|
|
|
|
|
Private equity |
$ |
42,781 |
$ |
45,048 |
$ |
45,766 |
$ |
46,539 |
$ |
46,464 |
|
9 |
% |
Infrastructure |
|
18,592 |
|
18,314 |
|
19,274 |
|
19,874 |
|
20,122 |
|
8 |
% |
Private debt |
|
13,377 |
|
14,082 |
|
14,361 |
|
14,865 |
|
15,122 |
|
13 |
% |
Real estate |
|
5,367 |
|
5,541 |
|
6,030 |
|
6,129 |
|
5,577 |
|
4 |
% |
Total |
$ |
80,117 |
$ |
82,985 |
$ |
85,431 |
$ |
87,407 |
$ |
87,285 |
|
9 |
% |
|
|
|
|
|
|
|
|
Separately managed accounts |
$ |
52,881 |
$ |
53,420 |
$ |
55,345 |
$ |
56,645 |
$ |
56,380 |
|
7 |
% |
Focused commingled funds |
|
27,236 |
|
29,565 |
|
30,086 |
|
30,762 |
|
30,905 |
|
13 |
% |
Total |
$ |
80,117 |
$ |
82,985 |
$ |
85,431 |
$ |
87,407 |
$ |
87,285 |
|
9 |
% |
|
|
|
|
|
|
|
|
AUM(1) |
|
|
|
|
|
|
|
Private equity |
$ |
72,169 |
$ |
70,868 |
$ |
71,611 |
$ |
73,511 |
$ |
76,031 |
|
5 |
% |
Infrastructure |
|
27,749 |
|
27,324 |
|
27,285 |
|
28,521 |
|
28,678 |
|
3 |
% |
Private debt |
|
23,583 |
|
24,437 |
|
26,592 |
|
27,099 |
|
27,520 |
|
17 |
% |
Real estate |
|
11,516 |
|
11,372 |
|
12,891 |
|
13,469 |
|
13,612 |
|
18 |
% |
Total |
$ |
135,017 |
$ |
134,001 |
$ |
138,379 |
$ |
142,600 |
$ |
145,841 |
|
8 |
% |
|
|
|
|
|
|
|
|
Separately managed accounts |
$ |
78,625 |
$ |
77,797 |
$ |
82,243 |
$ |
85,058 |
$ |
85,387 |
|
9 |
% |
Focused commingled funds |
|
43,928 |
|
43,289 |
|
43,062 |
|
44,389 |
|
46,266 |
|
5 |
% |
Advisory AUM |
|
12,464 |
|
12,915 |
|
13,074 |
|
13,153 |
|
14,188 |
|
14 |
% |
Total |
$ |
135,017 |
$ |
134,001 |
$ |
138,379 |
$ |
142,600 |
$ |
145,841 |
|
8 |
% |
|
|
|
|
|
|
|
|
AUA |
|
|
|
|
|
|
|
Private equity |
$ |
239,640 |
$ |
239,270 |
$ |
242,461 |
$ |
251,880 |
$ |
264,327 |
|
10 |
% |
Infrastructure |
|
47,538 |
|
47,833 |
|
50,700 |
|
53,593 |
|
55,146 |
|
16 |
% |
Private debt |
|
16,831 |
|
16,823 |
|
17,362 |
|
17,525 |
|
18,026 |
|
7 |
% |
Real estate |
|
162,691 |
|
164,072 |
|
171,668 |
|
173,992 |
|
175,369 |
|
8 |
% |
Total |
$ |
466,700 |
$ |
467,998 |
$ |
482,191 |
$ |
496,990 |
$ |
512,868 |
|
10 |
% |
|
|
|
|
|
|
|
|
Total capital
responsibility(2) |
$ |
601,717 |
$ |
601,999 |
$ |
620,570 |
$ |
639,590 |
$ |
658,709 |
|
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
Weissshareholders@stepstonegroup.com1-212-351-6106
Media:Brian Ruby / Chris Gillick /
Matt Lettiero, ICRStepStonePR@icrinc.com1-203-682-8268
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 September 30, 2023
reflects final data for the prior period (June 30, 2023),
adjusted for net new client account activity through
September 30, 2023. NAV data for underlying investments is as
of June 30, 2023, as reported by underlying managers up to the
business day occurring on or after 100 days following June 30,
2023. When NAV data is not available by the business day occurring
on or after 100 days following June 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 September 30, 2023 reflects final data for the prior period
(June 30, 2023), adjusted for net new client account activity
through September 30, 2023. NAV data for underlying
investments is as of June 30, 2023, as reported by underlying
managers up to the business day occurring on or after 100 days
following June 30, 2023. When NAV data is not available by the
business day occurring on or after 100 days following June 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.
Private Wealth Transaction refers to new
arrangements entered into by which certain members of the StepStone
Group Private Wealth LLC (“SPW”) team received a profits interest
in SPW and concurrently entered into an option agreement which
provides that, (i) we have the right to acquire the profits
interest at the end of any fiscal quarter after June 30, 2027, in
exchange for payment of a call price and (ii) the SPW management
team, through an entity named CH Equity Partners, LLC, has the
right to put the profits interest to us on June 30, 2026 or at the
end of any fiscal quarter thereafter, in exchange for payment of a
put price.
SSG refers solely to StepStone Group Inc., a
Delaware corporation, and not to any of its subsidiaries.
StepStone Funds refer to SMAs and focused
commingled funds of the Company, including acquired Greenspring
funds, for which the Partnership or one of its subsidiaries acts as
both investment adviser and general partner or managing member.
The Partnership refers solely to StepStone Group
LP, a Delaware limited partnership, and not to any of its
subsidiaries.
Total capital responsibility equals AUM plus AUA.
AUM includes any accounts for which StepStone Group has full
discretion over the investment decisions, has responsibility to
arrange or effectuate transactions, or has custody of assets. AUA
refers to accounts for which StepStone Group provides advice or
consultation but for which the firm does not have discretionary
authority, responsibility to arrange or effectuate transactions, or
custody of assets.
Undeployed fee-earning capital represents the
amount of capital commitments to StepStone Funds that has not yet
been invested or considered active but will generate management fee
revenue once this capital is invested or activated. We believe
undeployed fee-earning capital is a useful metric for measuring the
amount of capital that we can put to work in the future and thus
earn management fee revenue thereon.
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