The market expects StepStone Group Inc. (STEP) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended December 2023. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be ...

NEW YORK, Feb. 01, 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, has named 8 new partners and 18 new managing directors. Partner and CEO Scott Hart said, "We are proud to celebrate these senior leaders of our firm, each of whom exemplify StepStone's commitment to helping our clients build and manage exceptional private markets portfolios. Congratulations to all." 2024 ...

NEW YORK, Jan. 25, 2024 (GLOBE NEWSWIRE) -- StepStone Group Inc. (Nasdaq: STEP) today announced that the Company will release its results for the quarter ended December 31, 2023 after the market closes on Thursday, February 8, 2024. This represents results for the third quarter of the fiscal year ending March 31, 2024. Webcast and Earnings Conference Call Management will host a webcast and conference call on Thursday, February 8, 2024, at 5:00 pm ET to discuss the Company’s results for the third quarter of ...

NEW YORK, Jan. 25, 2024 (GLOBE NEWSWIRE) -- StepStone Group Inc. (NASDAQ:STEP) today announced that the Company will release its results for the quarter ended December 31, 2023 after the market closes on Thursday, February 8, 2024. This represents results for the third quarter of the fiscal year ending March 31, 2024. Webcast and Earnings Conference Call Management will host a webcast and conference call on Thursday, February 8, 2024, at 5:00 pm ET to discuss the Company's results for the third quarter of t ...

StepStone Group LP (NASDAQ:STEP) Q2 2024 Earnings Conference Call November 6, 2023 5:00 PM ET Company Participants Seth Weiss - Head, IR Scott Hart - CEO Mike McCabe - Head, Strategy Johnny Randel - CFO Jason Ment - President & Co-Chief Operating Officer Conference Call Participants Ben Budish - Barclays Ken Worthington - JPMorgan Adam Beatty - UBS Alex Blostein - Goldman Sachs Michael Cyprys - Morgan Stanley Operator Good day, and welcome to the StepStone Group Second Quarter Fiscal Year 2024 Earnings Conf ...

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended September 30, 2023, along with market risk disclosures and controls [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents StepStone Group Inc.'s unaudited condensed consolidated financial statements for the quarter ended September 30, 2023, including balance sheets, income statements, cash flows, and explanatory notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$3.61 billion**, driven by accrued carried interest and investments, with liabilities at **$1.91 billion** and stockholders' equity slightly up | Financial Metric | September 30, 2023 ($ thousands) | March 31, 2023 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **3,608,363** | **3,497,403** | **+3.2%** | | Cash and cash equivalents | 117,484 | 102,565 | +14.5% | | Accrued carried interest allocations | 1,331,778 | 1,227,173 | +8.5% | | **Total Liabilities** | **1,910,680** | **1,844,086** | **+3.6%** | | Accrued compensation and benefits | 110,413 | 66,614 | +65.7% | | Debt obligations | 123,586 | 98,351 | +25.6% | | **Total Stockholders' Equity** | **1,638,411** | **1,628,787** | **+0.6%** | [Condensed Consolidated Statements of Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) Net income for the quarter was **$59.3 million**, a turnaround from prior-year loss, driven by positive carried interest allocations, resulting in diluted EPS of **$0.42** | Metric ($ thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **191,422** | **(158,495)** | **369,433** | **(235,713)** | | Management and advisory fees, net | 142,123 | 119,121 | 280,238 | 235,853 | | Total carried interest allocations | 56,956 | (154,309) | 120,793 | (194,652) | | **Total Expenses** | **130,325** | **(104,151)** | **251,521** | **(172,569)** | | **Net Income (Loss)** | **59,251** | **(67,065)** | **108,697** | **(88,536)** | | **Net Income (Loss) attributable to StepStone Group Inc.** | **26,225** | **(29,221)** | **47,494** | **(40,261)** | | **Diluted EPS** | **$0.42** | **($0.48)** | **$0.75** | **($0.66)** | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities was **$128.7 million**, investing activities used **$27.4 million**, and financing activities used **$53.4 million**, a significant decrease from prior year | Cash Flow Activity ($ thousands) | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | 128,717 | 145,714 | | Net cash used in investing activities | (27,405) | (17,312) | | Net cash used in financing activities | (53,434) | (102,849) | | **Net increase in cash, cash equivalents and restricted cash** | **47,285** | **27,034** | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details significant accounting policies, covering basis of presentation, VIE consolidation, revenue recognition, fair value measurements, debt, equity, and related party transactions - The company accounts for its investments in StepStone Funds on a three-month lag, using the June 30, 2023 unaudited financial statements for the September 30, 2023 report[59](index=59&type=chunk) - Carried interest allocations are accounted for under the equity method and are not within the scope of ASC 606, with revenue recognized based on the amount due if the fund were liquidated at current fair value[87](index=87&type=chunk)[89](index=89&type=chunk) - The company consolidates certain Variable Interest Entities (VIEs) where it is the primary beneficiary, including legacy Greenspring general partner entities, whose assets are restricted to settle their own obligations[49](index=49&type=chunk)[50](index=50&type=chunk)[108](index=108&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results for the three and six months ended September 30, 2023, including business overview, key trends, operating metrics, non-GAAP measures, and liquidity [Business Overview](index=44&type=section&id=Business%20Overview) StepStone is a global private markets investment firm managing **$659 billion** in total capital, with **$146 billion AUM** and **$513 billion AUA**, across diverse strategies | Metric | Amount (as of Sep 30, 2023) | | :--- | :--- | | Total Capital Responsibility | ~$659 billion | | Assets Under Management (AUM) | $146 billion | | Assets Under Advisement (AUA) | $513 billion | - The company's primary commercial structures are Separately Managed Accounts (SMAs), focused commingled funds, and advisory services, which together comprised **$146 billion of AUM** and **$513 billion of AUA**[179](index=179&type=chunk)[183](index=183&type=chunk) [Consolidated Results of Operations](index=55&type=section&id=Consolidated%20Results%20of%20Operations) Total revenues for the quarter increased to **$191.4 million**, driven by positive carried interest and **19% growth** in management fees, with total expenses rising to **$130.3 million** - Total revenues for Q2 FY2024 increased by **$349.9 million** year-over-year, driven by positive carried interest allocations compared to a reversal in the prior year[242](index=242&type=chunk) - Net management and advisory fees grew **19% to $142.1 million** for the quarter, supported by new client activity and **10% growth in average FEAUM**[243](index=243&type=chunk) - Total expenses for the quarter increased by **$234.5 million** year-over-year, mainly due to a lower reversal of legacy Greenspring performance fee-related compensation and higher current period performance fee-related compensation[252](index=252&type=chunk) [Key Operating Metrics Analysis](index=62&type=section&id=Key%20Operating%20Metrics) AUM reached **$146 billion**, AUA grew to **$513 billion**, and FEAUM increased to **$87.3 billion**, with **$18.1 billion** in undeployed fee-earning capital | Metric | Sep 30, 2023 | Mar 31, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | :--- | | AUM | $146 billion | $138 billion | $135 billion | | AUA | $513 billion | $482 billion | $467 billion | | FEAUM | $87.3 billion | $85.4 billion | $80.1 billion | - As of September 30, 2023, the company had **$18.1 billion** of undeployed fee-earning capital, which will generate management fees once invested or activated[294](index=294&type=chunk) [Non-GAAP Financial Measures](index=64&type=section&id=Non-GAAP%20Financial%20Measures) Fee-Related Earnings (FRE) increased **12% to $43.8 million**, while Adjusted Net Income (ANI) decreased **19% to $30.2 million** (or **$0.26 per share**), due to lower realized performance fees | Non-GAAP Metric ($ thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Fee-Related Earnings (FRE) | 43,827 | 39,044 | +12% | | Adjusted Net Income (ANI) | 30,173 | 37,261 | -19% | | ANI per share | $0.26 | $0.33 | -21% | - The decrease in ANI for the quarter was primarily driven by lower net realized performance fee-related earnings, higher interest expense, and lower realized investment income[304](index=304&type=chunk) [Liquidity and Capital Resources](index=72&type=section&id=Liquidity%20and%20Capital%20Resources) The company held **$118.2 million** in cash, with **$123.6 million** outstanding on its revolving credit facility, generated **$128.7 million** from operations, and declared a **$0.21 per share** dividend - As of September 30, 2023, the company had **$118.2 million** in cash, cash equivalents, and restricted cash (excluding Consolidated Funds)[329](index=329&type=chunk) - The company had **$123.6 million** outstanding on its **$225.0 million** revolving credit facility as of September 30, 2023, with a weighted-average interest rate of **7.48%**[334](index=334&type=chunk)[336](index=336&type=chunk) - On November 6, 2023, the company declared a quarterly cash dividend of **$0.21 per share** of Class A common stock[343](index=343&type=chunk) [Qualitative and Quantitative Disclosures about Market Risk](index=77&type=section&id=Item%203.%20Qualitative%20and%20Quantitative%20Disclosures%20about%20Market%20Risk) Primary market risk relates to fund investment fair values affecting performance fees and investment income, alongside interest rate exposure on variable-rate debt and cash balances - A hypothetical **10% decline** in the market value of fund investments as of September 30, 2023, would decrease annual management fees by approximately **$4.2 million** and investment income by **$13.0 million**[357](index=357&type=chunk)[358](index=358&type=chunk) - A **100 basis point increase** in interest rates would increase annualized interest expense by an estimated **$1.3 million** and increase annualized interest income by an estimated **$1.2 million**, based on September 30, 2023 balances[361](index=361&type=chunk) - As of September 30, 2023, the maximum amount of carried interest allocations subject to contingent repayment (clawback) was estimated at **$271.9 million**, net of tax, assuming a remote scenario where the fair value of all investments dropped to zero[358](index=358&type=chunk) [Controls and Procedures](index=78&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of the end of the period, the company's disclosure controls and procedures are effective to provide reasonable assurance that required information is recorded, processed, and reported in a timely manner[365](index=365&type=chunk) - No changes occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[366](index=366&type=chunk) [PART II - OTHER INFORMATION](index=79&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides other required information, including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=79&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial statements - The company does not expect any potential liability from current legal proceedings to materially affect its condensed consolidated financial statements as of September 30, 2023[166](index=166&type=chunk)[368](index=368&type=chunk) [Risk Factors](index=79&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2023 - No material changes from the risk factors disclosed in the Form 10-K for the fiscal year ended March 31, 2023, have been reported[370](index=370&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - None reported for the period[371](index=371&type=chunk) [Other Information](index=79&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the reporting period[375](index=375&type=chunk) [Exhibits](index=80&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data - Exhibits filed include CEO and CFO certifications under Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as XBRL data files[377](index=377&type=chunk)

[PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three months ended June 30, 2023, highlighting a significant increase in total revenues and a turnaround to net income [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Condensed consolidated financial statements show **$3.53 billion** total assets, **$49.4 million** net income, and **$57.6 million** operating cash flow Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$3,530,782** | **$3,497,403** | | Cash and cash equivalents | $91,733 | $102,565 | | Accrued carried interest allocations | $1,277,783 | $1,227,173 | | Goodwill | $580,542 | $580,542 | | **Total Liabilities** | **$1,860,621** | **$1,844,086** | | Accrued carried interest-related compensation | $668,704 | $644,517 | | Debt obligations | $98,468 | $98,351 | | **Total Stockholders' Equity** | **$1,628,543** | **$1,628,787** | Condensed Consolidated Statement of Income (Loss) Highlights (in thousands) | Account | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Management and advisory fees, net | $138,115 | $116,732 | | Total carried interest allocations | $63,837 | $(40,343) | | **Total Revenues** | **$178,011** | **$(77,218)** | | Total Expenses | $121,196 | $(68,418) | | **Net Income (Loss)** | **$49,446** | **$(21,471)** | | Net Income (Loss) attributable to StepStone Group Inc. | $21,269 | $(11,040) | | **Basic EPS (Class A)** | **$0.34** | **$(0.18)** | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $57,587 | $57,482 | | Net cash used in investing activities | $(14,486) | $(7,601) | | Net cash used in financing activities | $(43,973) | $(60,718) | | **Net decrease in cash, cash equivalents and restricted cash** | **$(1,588)** | **$(10,117)** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation, debt, commitments, and subsequent events, including a declared dividend - The company accounts for its investments in StepStone Funds on a three-month lag, using March 31, 2023, unaudited financial statements for the June 30, 2023, report[57](index=57&type=chunk) Revenues by Product Offering (in thousands) | Revenue Source | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | **Management and Advisory Fees, Net** | | | | Focused commingled funds | $67,006 | $52,742 | | SMAs | $55,744 | $50,460 | | Advisory and other services | $14,101 | $12,984 | | **Total Management and Advisory Fees, Net** | **$138,115** | **$116,732** | | **Carried Interest Allocations** | **$63,837** | **$(40,343)** | - The company has a **$225.0 million** multicurrency revolving credit facility, with **$98.5 million** outstanding as of June 30, 2023, at a weighted-average interest rate of **7.23%**[131](index=131&type=chunk)[132](index=132&type=chunk) - As of June 30, 2023, the company had unfunded capital commitments of **$95.0 million**, with a maximum potential contingent repayment (clawback) for carried interest estimated at **$271.2 million**, net of tax, assuming a remote scenario where all investment fair values drop to zero[165](index=165&type=chunk)[166](index=166&type=chunk) - Subsequent to the quarter end, on August 3, 2023, the company declared a quarterly cash dividend of **$0.21** per share of Class A common stock[168](index=168&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses business overview, operating results, key metrics, and liquidity, highlighting **$640 billion** total capital and **21%** FRE growth [Business Overview and Trends](index=43&type=section&id=Business%20Overview%20and%20Trends) StepStone is a global private markets investment firm managing **$640 billion** in total capital, influenced by macroeconomic trends - As of June 30, 2023, StepStone was responsible for approximately **$640 billion** of total capital, including **$143 billion** of Assets Under Management (AUM) and **$497 billion** of Assets Under Advisement (AUA)[172](index=172&type=chunk) - The company's growth is dependent on key trends, including increasing client allocations to private markets, demand from private wealth clients, and the ability to source investments with attractive risk-adjusted returns[179](index=179&type=chunk)[182](index=182&type=chunk) - Management acknowledges that market volatility, rising interest rates, and inflation have adversely affected fundraising and capital deployment, potentially leading to delayed or decreased management and performance fees[182](index=182&type=chunk) [Consolidated Results of Operations](index=55&type=section&id=Consolidated%20Results%20of%20Operations) Total revenues increased to **$178.0 million** due to positive unrealized carried interest and **18%** management fee growth, despite **80%** decrease in realized carried interest - Total revenues increased by **$255.2 million** year-over-year, driven by positive unrealized carried interest allocations compared to negative allocations in the prior year, and an **18%** increase in net management and advisory fees[234](index=234&type=chunk) - Net management and advisory fees grew by **$21.4 million** (**18%**) to **$138.1 million**, supported by **12%** growth in average Fee-Earning AUM (FEAUM)[235](index=235&type=chunk) - Realized carried interest allocation revenues decreased by **$59.1 million** (**80%**) to **$14.5 million**, reflecting lower realization activity in private equity funds[237](index=237&type=chunk) - Cash-based compensation increased by **$10.0 million** (**17%**) to **$70.1 million**, primarily due to an **18%** increase in average full-time headcount[240](index=240&type=chunk) [Operating Metrics](index=59&type=section&id=Operating%20Metrics) Key operating metrics show growth, with AUM at **$143 billion**, AUA at **$497 billion**, and FEAUM at **$87.4 billion** Key Operating Metrics (in billions) | Metric | June 30, 2023 | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | :--- | | Assets Under Management (AUM) | $143 | $138 | $137 | | Assets Under Advisement (AUA) | $497 | $482 | $452 | | Fee-Earning AUM (FEAUM) | $87.4 | $85.4 | $78.6 | FEAUM Roll-Forward (in millions) | Description | Three Months Ended June 30, 2023 | | :--- | :--- | | Beginning balance (Mar 31, 2023) | $85,431 | | Contributions | $2,221 | | Distributions | $(681) | | Market value, FX and other | $436 | | **Ending balance (June 30, 2023)** | **$87,407** | - As of June 30, 2023, the company had **$16.9 billion** of undeployed fee-earning capital, which will generate management fees once invested or activated[266](index=266&type=chunk) [Non-GAAP Financial Measures](index=60&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures show FRE increased **21%** to **$44.4 million**, while ANI decreased **38%** to **$29.4 million** Non-GAAP Performance Summary (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Fee-Related Earnings (FRE) | $44.4 | $36.6 | +21% | | Adjusted Net Income (ANI) | $29.4 | $47.1 | -38% | | Adjusted Revenues | $152.8 | $190.3 | -20% | - The **21%** increase in Fee-Related Earnings (FRE) was primarily driven by higher net management and advisory fees[274](index=274&type=chunk) - The **38%** decrease in Adjusted Net Income (ANI) was mainly due to lower net realized performance fee-related earnings[276](index=276&type=chunk) Adjusted Net Income Per Share | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Adjusted Net Income (in thousands) | $29,388 | $47,134 | | Adjusted weighted-average shares | 114,673,696 | 114,466,962 | | **Adjusted Net Income Per Share** | **$0.26** | **$0.41** | [Liquidity and Capital Resources](index=67&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$92.4 million** cash and **$57.6 million** operating cash flow, continuing its dividend policy - As of June 30, 2023, the company had **$92.4 million** of cash, cash equivalents, and restricted cash (excluding Consolidated Funds) and **$98.5 million** in debt obligations, net of issuance costs[299](index=299&type=chunk) - Net cash provided by operating activities was **$57.6 million** for the quarter, consistent with the prior year, while financing activities used **$44.0 million**, primarily for distributions to non-controlling interests (**$25.7 million**) and dividends to common stockholders (**$28.3 million**)[302](index=302&type=chunk)[305](index=305&type=chunk) - On August 3, 2023, the company announced a quarterly dividend of **$0.21** per share of Class A common stock[312](index=312&type=chunk) [Item 3. Qualitative and Quantitative Disclosures about Market Risk](index=71&type=section&id=Item%203.%20Qualitative%20and%20Quantitative%20Disclosures%20about%20Market%20Risk) The company faces market risk, with a **10%** investment decline potentially reducing annual management fees by **$3.7 million** and investment income by **$12.2 million** - A hypothetical **10%** decline in the market value of investments would result in an estimated **$3.7 million** decrease in annual management fees and a **$12.2 million** decrease in investment income[325](index=325&type=chunk)[326](index=326&type=chunk) - The maximum potential clawback of carried interest subject to contingent repayment was estimated at **$271.2 million** (net of tax) as of June 30, 2023, assuming a remote scenario where all investment fair values drop to zero[326](index=326&type=chunk) - With **$100.0 million** in borrowings outstanding under the variable-rate Revolver, a **100 basis point** increase in interest rates would increase annual interest expense by an estimated **$1.0 million**[329](index=329&type=chunk) [Item 4. Controls and Procedures](index=72&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[333](index=333&type=chunk) - No changes occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[334](index=334&type=chunk) [PART II - OTHER INFORMATION](index=73&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=73&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any current legal proceedings expected to materially affect its financial statements - The company states that it does not expect any potential liability from current legal proceedings to materially affect its condensed consolidated financial statements as of June 30, 2023[160](index=160&type=chunk)[336](index=336&type=chunk) [Item 1A. Risk Factors](index=73&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Form 10-K for the fiscal year ended March 31, 2023 - No material changes from the risk factors disclosed in the Form 10-K for the fiscal year ended March 31, 2023, have been reported[338](index=338&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[339](index=339&type=chunk) [Item 5. Other Information](index=73&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the reporting period[343](index=343&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data files - The exhibits filed with this report include certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act and financial statements formatted in Inline XBRL[345](index=345&type=chunk)

Financial Data and Key Metrics Changes - The company reported GAAP net income of $49.4 million, with net income attributable to StepStone Group Inc. at $21.3 million [17] - Fee-related earnings increased by 21% year-over-year to $44.4 million, with a FRE margin of 32% [96] - Adjusted net income for the quarter was $29.4 million or $0.26 per share, down from $47.1 million or $0.41 per share in the same quarter last year [83] Business Line Data and Key Metrics Changes - Management and advisory fees reached $138 million, an 18% increase from the prior year quarter, driven by growth in fee-earning AUM [25] - Gross realized performance and incentive fees were $14 million for the quarter, down both year-over-year and sequentially [41] - The pool of performance fee-eligible capital grew to over $65 billion, with 78% of unrealized carry tied to programs of vintages of 2018 or earlier [27] Market Data and Key Metrics Changes - The company generated $15 billion of gross AUM inflows over the last 12 months, with $4 billion from commingled funds and $11 billion from managed accounts [9] - North America accounted for over half of the gross inflows this quarter, indicating strong growth in that region [21] - The company is seeing strong demand for its flagship real estate special situations secondaries strategy, which is well-positioned for the upcoming investment environment [76] Company Strategy and Development Direction - The company aims to double its fee-related earnings over the next five years, focusing on building capabilities across major private market asset classes and strategies [6] - The introduction of a daily NAV for SPRIM allows for easier access to private markets for accredited investors, enhancing distribution capabilities [37][87] - The company is positioned to capitalize on the growing secondary markets in private credit and infrastructure, leveraging its relationships and data advantage [86] Management's Comments on Operating Environment and Future Outlook - Management noted that clients remain patient in making capital commitments, but the broader market sentiment is improving, particularly in technology [19] - There are signs of improvement in the realization environment, with expectations for increased transactions leading to stronger performance fees [91] - The company is cautiously optimistic about the pickup in deal flow, which is expected to drive deployment and investment pace [136] Other Important Information - The quarterly dividend was raised from $0.20 to $0.21 per share, reflecting a shift to base dividends primarily on fee-related earnings [89] - The company has increased its undeployed fee-earning capital to approximately $17 billion, positioning itself well for attractive investment opportunities [10] Q&A Session All Questions and Answers Question: Can you elaborate on the daily NAV for SPRIM and its implications for investors? - Management indicated that the daily NAV allows accredited investors to buy into the fund without subscription documents, significantly simplifying the process for RIAs and IBDs [32][33] Question: How does the company view the current deployment environment? - Management acknowledged a slowdown in deployment but noted an uptick in activity hitting the top of the funnel, suggesting cautious optimism for future investments [136] Question: What is the current status of the wealth channel and its growth? - The company reported averaging inflows of over $70 million a month for calendar 2023, with July being the best month ever for inflows [100]

Lease right-of-use assets, net 72,134 101,130 100,531 Other assets and receivables 35,374 44,060 44,889 Intangibles, net 387,255 354,645 343,983 Goodw ill 580,542 580,542 580,542 Investments, at fair value - 30,595 39,188 $108 $107 $139 $147 $154 FQ1'23 FQ2'23 FQ3'23 FQ4'23 FQ1'24 INVESTMENTS ($M)3 NET UNREALIZED CARRY AS OF 6/30/2023 BY VINTAGE AND TYPE Private Equity 93% Infrastructure 4% Real Estate 3% 2013 & Prior 16% 2015 11% 2016 18% 2017 15% 2018 18% Post 2018 22% 78% from 2018 or prior vintages • Gr ...

PART I [Item 1. Business](index=8&type=section&id=Item%201.%20Business) StepStone Group Inc. is a global private markets investment firm offering customized investment solutions, advisory, data, and administrative services across multiple asset classes [Our Company](index=8&type=section&id=Our%20Company) The company provides customized private markets investment solutions and services to a diverse global client base, managing $138 billion AUM and advising on $482 billion AUA as of March 31, 2023 - StepStone Group Inc. is a global private markets investment firm providing customized investment solutions and advisory, data, and administrative services to a diverse client base[33](index=33&type=chunk) - As of March 31, 2023, the company managed **$138 billion** in AUM and advised on **$482 billion** in AUA, totaling **$621 billion** in capital responsibility[33](index=33&type=chunk) - The firm's success is attributed to its focus on customization, a global-and-local approach with offices in **25 cities across 15 countries**, multi-asset class expertise, proprietary data and technology platforms (SPI, Omni, Pacing), and a large, experienced team of **95 partners** and **956 total employees**[35](index=35&type=chunk)[36](index=36&type=chunk)[40](index=40&type=chunk) - In the year ended March 31, 2023, StepStone reviewed over **3,600 investment opportunities** and allocated approximately **$80 billion** in capital to private markets on behalf of clients[39](index=39&type=chunk) - Solutions are offered through Separately Managed Accounts (SMAs) (**$82 billion** AUM), Focused Commingled Funds (**$43 billion** AUM), and Advisory, Data, and Administrative Services (**$482 billion** AUA and **$13 billion** AUM)[41](index=41&type=chunk) [Our Competitive Strengths](index=10&type=section&id=Our%20Competitive%20Strengths) StepStone leverages its global scale, customized approach, proprietary technology, strong investment performance, and robust financial profile for competitive advantage - StepStone has a truly global scale with local teams, with approximately **45% of investment professionals** based outside the U.S. and nearly **two-thirds of management and advisory fees** from non-U.S. clients in FY2023[44](index=44&type=chunk)[45](index=45&type=chunk) - The firm offers a full-service, customized approach, with **36% of advisory clients** also having an AUM relationship and **34% of clients** utilizing services across multiple asset classes[47](index=47&type=chunk) FY2023 Management and Advisory Fees by Commercial Structure | Commercial Structure | Percentage of Fees | | :------------------- | :----------------- | | Focused Commingled Funds | 46% | | SMAs | 42% | | Advisory, Data & Admin Services | 11% | | Fund Reimbursement Revenues | 1% | AUM, FEAUM, and AUA by Asset Class (as of March 31, 2023) | Asset Class | AUM ($B) | FEAUM ($B) | AUA ($B) | | :------------- | :------- | :--------- | :------- | | Private Equity | 72 | 46 | 242 | | Real Estate | 13 | 6 | 172 | | Infrastructure | 27 | 19 | 51 | | Private Debt | 27 | 14 | 17 | - Proprietary data and analytics platforms, SPI and Omni, track over **82,000 companies**, **42,000 funds**, and **16,000 fund managers**, providing a significant information advantage[54](index=54&type=chunk)[55](index=55&type=chunk) - The company has a strong investment performance track record, outperforming the MSCI ACWI Index across all investment strategies on an inception-to-date basis as of December 31, 2022[56](index=56&type=chunk)[57](index=57&type=chunk) - StepStone's financial profile is supported by sustainable and recurring management and advisory fees (**29% CAGR** from FY2018-FY2023), high predictability with **$15.7 billion** of undeployed fee-earning capital, diverse revenue sources (no single client >**6% of fees**), and upside from performance fees (**$1,227 million** accrued carried interest allocations as of March 31, 2023)[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) [Strategic Priorities](index=14&type=section&id=Strategic%20Priorities) The company focuses on client growth, expanding distribution channels, enhancing operating margins, monetizing data, and pursuing accretive transactions - The company aims to continue growing with existing clients by expanding mandates and deploying **$15.7 billion** of already committed capital[65](index=65&type=chunk)[66](index=66&type=chunk) - Strategic priorities include adding new clients globally, expanding distribution channels for private wealth clients (e.g., StepStone Private Wealth LLC), leveraging scale to enhance operating margins, monetizing data and analytics capabilities (e.g., SPI licensing), and pursuing accretive transactions[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Investment Strategies](index=15&type=section&id=Investment%20Strategies) StepStone offers customized solutions across global private markets through primary fund investments, secondary investments, and co-investments - StepStone offers customized solutions across global private markets through primary fund investments, secondary investments, and co-investments in private equity, infrastructure, private debt, and real estate[74](index=74&type=chunk) - Primaries involve investments in newly established private markets funds, typically with **8-18 year durations**, leveraging the SPI database for manager tracking and evaluation[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Secondaries involve acquiring existing interests in private markets funds, offering visibility into known assets and shorter holding periods, often sourced through proprietary and 'advantaged' deal flow[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - Co-investments involve direct investments alongside fund managers, typically structured with immediate capital deployment for more predictable cash flows and benefiting from the firm's extensive network and flexible approach[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) [Portfolio Analytics and Reporting](index=17&type=section&id=Portfolio%20Analytics%20and%20Reporting) The company provides tailored reporting packages and detailed analytics through its SPAR team and proprietary Omni web-based application - The company provides tailored reporting packages, including customized performance benchmarks, compliance, administration, and tax capabilities, through its StepStone Portfolio Analytics & Reporting (SPAR) team[86](index=86&type=chunk) - Omni, the proprietary web-based application, tracks nearly **9,000 investments** across over **85,000 underlying portfolio companies** as of March 31, 2023, providing detailed analytics and integrated access to the SPI research platform[55](index=55&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) [Investment Risk Management](index=18&type=section&id=Investment%20Risk%20Management) Investment risk management is overseen by dedicated committees, focusing on identification, measurement, mitigation, monitoring, and reporting tailored by asset class and client - Investment risk management is overseen by the Head of Research and Portfolio Management and Head of Risk, with asset-class specific Portfolio and Risk Management Committees[90](index=90&type=chunk) - The process focuses on risk identification, measurement, treatment/mitigation, monitoring, and management/reporting, with tailored assessments by asset class and client[90](index=90&type=chunk) [Responsible Investment Philosophy](index=18&type=section&id=Responsible%20Investment%20Philosophy) Responsible investment, encompassing ESG and impact investing, is a core tenet aimed at improving long-term, risk-adjusted returns, with integrated ESG due diligence - Responsible investment, encompassing ESG and impact investing, is a core tenet, aiming to improve long-term, risk-adjusted returns[92](index=92&type=chunk) - The company is a signatory to UNPRI and TCFD, a member of GRESB and SASB, and has a Responsible Investment Committee overseeing ESG due diligence in the investment process[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - ESG assessments are tailored for each asset class and strategy, including manager and asset-level reviews for co-investments and leveraging existing information for secondary transactions[95](index=95&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - The firm works with clients on impact investing programs targeting non-financial objectives like climate change and social equity[99](index=99&type=chunk) [ESG in Our Corporate Operations](index=19&type=section&id=ESG%20in%20Our%20Corporate%20Operations) StepStone integrates ESG factors into its operational decision-making, promoting diversity, equity, and inclusion, reducing its carbon footprint, and encouraging community engagement - StepStone is committed to incorporating ESG factors into its operational decision-making and internal policies[101](index=101&type=chunk) - A global Diversity, Equity & Inclusion Committee was established in 2017 to support diversity efforts, talent development, and retention, including mentorship and sponsorship programs[102](index=102&type=chunk)[104](index=104&type=chunk) - The company actively supports organizations promoting diversity in the financial industry and has launched Employee Resource Groups (ERGs)[105](index=105&type=chunk)[107](index=107&type=chunk) - Efforts to reduce carbon footprint include achieving carbon neutrality since 2019, implementing carbon reduction initiatives, and prioritizing LEED-rated office spaces[108](index=108&type=chunk) - Community engagement is encouraged through local teams, volunteer time off, and a charitable giving program[108](index=108&type=chunk) [Our Clients](index=22&type=section&id=Our%20Clients) The company serves a diverse global client base with high retention rates and successful expansion of relationships across asset management and advisory services - StepStone serves a diverse global client base, with nearly **two-thirds of management and advisory fees** from non-U.S. clients in FY2023[110](index=110&type=chunk) - The company has a high advisory client retention rate (over **90% since inception**) and successfully expands relationships, with approximately **36% of clients** using both asset management and advisory services[111](index=111&type=chunk) [Private Wealth Sector Strategy](index=22&type=section&id=Private%20Wealth%20Sector%20Strategy) StepStone expands institutional capabilities to high-net-worth and mass affluent investors through its StepStone Private Wealth LLC platform, offering diversified private markets exposure - StepStone has expanded its institutional capabilities to high-net-worth and mass affluent investors through its platform, StepStone Private Wealth LLC (SPW)[112](index=112&type=chunk) - SPW launched funds like StepStone Private Markets (SPRIM) and StepStone Private Venture and Growth (SPRING), which offer diversified private markets exposure with favorable structures (1099 tax reporting, single investment, potential liquidity)[113](index=113&type=chunk)[114](index=114&type=chunk) - As of May 1, 2023, the total retail platform assets surpassed **$1.6 billion** of AUM, with SPRIM and SPRING generating annualized returns of approximately **30%** and **20%** respectively since inception[113](index=113&type=chunk) [Fees and Other Key Contractual Terms](index=23&type=section&id=Fees%20and%20Other%20Key%20Contractual%20Terms) The company's revenue model includes management fees (based on invested capital or commitments), performance fees (carried interest or incentive fees), and fixed advisory fees - Separately Managed Accounts (SMAs) and Focused Commingled Funds are typically **8-18 years** in duration and may be extended or terminated under certain conditions[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Management fees for SMAs are generally based on net invested capital, while for focused commingled funds, they are based on capital commitments, often decreasing over the contract life[120](index=120&type=chunk) - Performance fees, structured as carried interest or incentive fees, are a fixed percentage of net profits (typically **5-15%**) subject to preferred return hurdles, and may be subject to clawback obligations[126](index=126&type=chunk)[127](index=127&type=chunk) - Advisory, data, and administrative services clients are generally charged annual fixed fees, which vary by scope and volume, and typically do not include incentive fees[128](index=128&type=chunk)[129](index=129&type=chunk) - Advisory contracts have various durations (one year to indefinite) and can typically be terminated by clients on short notice (**30-90 days**)[130](index=130&type=chunk) [Competition](index=25&type=section&id=Competition) StepStone competes with numerous financial institutions based on global access, brand, performance, service quality, data, customization, and talent retention - StepStone competes with a large number of asset management firms, commercial banks, broker-dealers, insurance companies, and other financial institutions[132](index=132&type=chunk) - Key competitive factors include global access to investment opportunities, brand recognition, investment performance, service quality, data and analytics capabilities, customization, transparent structure, cost-effectiveness, and perceived independence[133](index=133&type=chunk)[138](index=138&type=chunk) - The ability to attract and retain highly qualified investment professionals is critical for continued competitiveness[135](index=135&type=chunk) [Regulatory Environment](index=26&type=section&id=Regulatory%20Environment) The company's business is subject to extensive federal, state, and foreign regulations, including those from the SEC, ERISA, AIFMD, and new prudential regimes - The company's business is subject to extensive federal and state regulation in the U.S. (SEC, ERISA) and regulatory oversight in foreign jurisdictions (UK, EU, EEA, Switzerland, Japan, Korea, Canada, Brazil)[136](index=136&type=chunk)[137](index=137&type=chunk)[140](index=140&type=chunk)[143](index=143&type=chunk) - Registered investment advisers are subject to the Investment Advisers Act, imposing regulations on fiduciary duties, transactions, compliance, performance fees, and disclosures[137](index=137&type=chunk) - Certain U.S. private wealth funds are registered under the Investment Company Act of 1940, imposing significant requirements on capital structure, investments, and transactions[139](index=139&type=chunk) - Compliance with ERISA is required for investment vehicles holding 'plan assets,' imposing duties and prohibiting certain transactions[140](index=140&type=chunk) - Foreign regulations like AIFMD, UCITS, and MiFID II impose requirements on marketing, remuneration, reporting, and capital, with potential divergence between UK and EU frameworks post-Brexit[143](index=143&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk) - New prudential regimes (IFR, IFD) in the EU and UK introduce increased capital, remuneration, and reporting requirements for investment firms[146](index=146&type=chunk)[148](index=148&type=chunk) [Human Capital](index=29&type=section&id=Human%20Capital) StepStone employs 956 professionals globally, focusing on talent acquisition, retention, professional development, and diversity, equity, and inclusion initiatives - As of March 31, 2023, StepStone had **956 employees** globally, including **322 investment professionals**, with a focus on integrity, transparency, collaboration, and entrepreneurialism[150](index=150&type=chunk)[151](index=151&type=chunk) - The company's talent acquisition and retention strategy includes data-driven assessment tools, diverse candidate pipelines, ongoing professional development, and mentorship/sponsorship programs[152](index=152&type=chunk)[156](index=156&type=chunk) - Total rewards include performance-based cash compensation, competitive health and wellness benefits, parental benefits, volunteer time off, 401(k) contributions, and equity grants (LTIP, carried interest allocations)[154](index=154&type=chunk)[160](index=160&type=chunk) - Diversity, Equity & Inclusion initiatives are promoted through a dedicated committee, network, mentorship programs, and partnerships with external organizations[107](index=107&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) [Available Information](index=31&type=section&id=Available%20Information) The company's SEC filings, including 10-K, 10-Q, and 8-K reports, are publicly available on its website and the SEC's website - The company's SEC filings, including 10-K, 10-Q, and 8-K reports, are available free of charge on its website (www.stepstonegroup.com) and the SEC's website (www.sec.gov)[159](index=159&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company faces a broad range of business, industry, and organizational structure risks, including investment performance, competition, client termination, regulatory changes, and financial structure - Business risks include dependence on identifying suitable investment opportunities, potential poor investment performance, intense competition for investments and talent, client termination rights, and the ability to retain senior leadership[26](index=26&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk) - Conflicts of interest may arise due to the company's fiduciary duties to clients and the economic interests of senior management through other entities[26](index=26&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - Financial risks include adverse effects from increases in interest rates or decreases in credit availability, potential client defaults on capital calls, subjective valuation methodologies for illiquid assets, and the need to pay 'clawback' obligations[26](index=26&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk)[181](index=181&type=chunk)[184](index=184&type=chunk)[188](index=188&type=chunk) - Operational risks include reliance on proprietary data and technology platforms, cybersecurity threats, employee misconduct, and potential damage to professional reputation[26](index=26&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[212](index=212&type=chunk)[214](index=214&type=chunk) - Non-U.S. operations and investments in certain jurisdictions carry heightened risks, including currency fluctuations, regulatory changes, political instability, and tax consequences[26](index=26&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Investments in real estate and infrastructure assets are subject to inherent risks of ownership, operation, construction, and regulatory control[26](index=26&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - Industry risks include intense competition, difficult or volatile market and political conditions (e.g., rising interest rates, inflation, geopolitical conflicts), and operating in a heavily regulated environment with evolving laws and tax policies[27](index=27&type=chunk)[237](index=237&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk)[246](index=246&type=chunk)[253](index=253&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) - Increasing scrutiny from institutional clients regarding ESG costs of investments may constrain opportunities and affect capital raising[27](index=27&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk) - Organizational structure risks include being a 'controlled company' (relying on governance exemptions), dependence on Partnership distributions for SSG's expenses and dividends, potential IRS challenges to tax benefits, and the possibility of accelerated payments under Tax Receivable Agreements exceeding actual tax benefits[28](index=28&type=chunk)[275](index=275&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) - The dual-class common stock structure (Class B having superior voting rights) may adversely affect the trading market for Class A common stock and limit stockholder influence[28](index=28&type=chunk)[297](index=297&type=chunk)[299](index=299&type=chunk) [Item 1B. Unresolved Staff Comments](index=70&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report [Item 2. Properties](index=70&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters in New York and other offices globally, owning no real property, and believes its facilities are adequate - StepStone Group Inc. leases its corporate headquarters at 450 Lexington Avenue, New York, NY[310](index=310&type=chunk) - The company leases office space in **24 other cities across 15 countries**, including Baltimore, London, Tokyo, and Zurich[310](index=310&type=chunk) - The company does not own any real property[310](index=310&type=chunk) [Item 3. Legal Proceedings](index=70&type=section&id=Item%203.%20Legal%20Proceedings) The company may be subject to various legal, judicial, and administrative proceedings in the normal course of business, with further details in Note 16 - The company may be subject to various legal, judicial, and administrative proceedings in the normal course of business[311](index=311&type=chunk) - Further information on legal proceedings is available in Note 16 to the consolidated financial statements[311](index=311&type=chunk) [Item 4. Mine Safety Disclosures](index=70&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=71&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) StepStone Group Inc.'s Class A common stock trades on Nasdaq, while Class B has no public market, with dividends declared at the board's discretion - Class A common stock is traded on the Nasdaq Global Select Market under the symbol 'STEP'; Class B common stock has no public trading market[314](index=314&type=chunk) Common Stock Outstanding (as of May 23, 2023) | Class of Stock | Shares Outstanding | | :------------- | :----------------- | | Class A Common Stock | 62,834,791 | | Class B Common Stock | 46,420,141 | - As of May 23, 2023, there was one stockholder of record for Class A common stock and **61** for Class B common stock[315](index=315&type=chunk) - On May 24, 2023, a quarterly cash dividend of **$0.20 per share** and a supplemental cash dividend of **$0.25 per share** of Class A common stock were announced, payable on June 30, 2023[316](index=316&type=chunk)[529](index=529&type=chunk) Quarterly Dividends Per Share of Class A Common Stock | Fiscal Period | FY2021 | FY2022 | FY2023 | | :------------ | :----- | :----- | :----- | | First quarter | N/A | $0.07 | $0.20 | | Second quarter| N/A | $0.07 | $0.20 | | Third quarter | N/A | $0.15 | $0.20 | | Fourth quarter| $0.07 | $0.15 | $0.20 | | **Total** | **$0.07**| **$0.44**| **$0.80**| - The declaration and payment of dividends are at the sole discretion of the board of directors and depend on economic conditions, financial performance, cash needs, capital requirements, and legal/tax restrictions[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - The company's Class A common stock performance from September 16, 2020, to March 31, 2023, showed a return of **1.29%**, compared to **26.20%** for the S&P 500 Index and **38.32%** for the Dow Jones US Asset Managers Index[328](index=328&type=chunk) [Item 6. [Reserved]](index=74&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=75&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and results for fiscal years 2023, 2022, and 2021, covering business overview, key trends, and financial measures [Business Overview](index=75&type=section&id=Business%20Overview) StepStone is a global private markets investment firm with $621 billion in total capital responsibility as of March 31, 2023, generating revenue from management, advisory, and performance fees - StepStone is a global private markets investment firm offering customized solutions and services across private equity, infrastructure, private debt, and real estate[332](index=332&type=chunk) - As of March 31, 2023, the company was responsible for **$621 billion** of total capital, including **$138 billion** of AUM and **$482 billion** of AUA[332](index=332&type=chunk) - The firm operates globally from **25 cities across 15 countries** with **956 employees**, including **322 investment professionals**[333](index=333&type=chunk) - Revenue streams include management and advisory fees, performance fees (incentive fees and carried interest), and investment income from proprietary capital in StepStone Funds[336](index=336&type=chunk) [Trends Affecting Our Business](index=76&type=section&id=Trends%20Affecting%20Our%20Business) Future performance is influenced by client demand for private markets, investment returns, data advantage, attractive risk-adjusted returns, competition, and macroeconomic factors - Future performance is influenced by client favorability towards private markets, the company's ability to generate strong returns, maintenance of its data advantage, sourcing attractive risk-adjusted returns, and managing increased competition[340](index=340&type=chunk) - Macroeconomic trends and market factors, such as global economic conditions and regulatory policies, can affect investment values and capital deployment[338](index=338&type=chunk) [Current Events](index=77&type=section&id=Current%20Events) Financial markets experienced volatility in 2022-2023 due to rising interest rates, inflation, and geopolitical conflicts, impacting fundraising and fee generation - Financial markets experienced increased volatility in 2022 due to rising interest rates, high inflation, slowing economic growth, and geopolitical conflicts (Russia-Ukraine)[343](index=343&type=chunk) - The banking system volatility in Q1 2023, despite signs of slowing inflation, continues to be monitored for its impact on financial markets and the company's business[343](index=343&type=chunk)[344](index=344&type=chunk) - Slowdowns in fundraising and capital deployment have led to delayed or decreased management and performance fees[344](index=344&type=chunk) [Corporate Transactions](index=78&type=section&id=Corporate%20Transactions) Key corporate transactions include the 2020 IPO, the 2021 Greenspring acquisition, and 2022 arrangements to incentivize private wealth platform growth - The company completed its IPO on September 18, 2020, issuing **20,125,000 shares** of Class A common stock at **$18.00 per share**, generating **$337.8 million** in net proceeds[346](index=346&type=chunk) - The Greenspring acquisition was completed on September 20, 2021, for approximately **$185 million cash**, **12,686,756 Class A common shares**, and **3,071,519 Class C units**, expanding venture capital capabilities[349](index=349&type=chunk) - In November 2022, new arrangements were made with the SPW management team, including a profits interest and option agreement, to incentivize platform growth[351](index=351&type=chunk)[352](index=352&type=chunk) - Equity transactions in FY2023 included issuing **257,776**, **175,000**, and **296,756 Class A shares** in exchange for Class B units, and **414,739 Class A shares** for Class C units[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk) [Organizational Structure](index=80&type=section&id=Organizational%20Structure) SSG is a holding company and the sole managing member of StepStone Group Holdings LLC, consolidating the Partnership's financial results, with exchangeable Class B and C units - SSG is a holding company and the sole managing member of StepStone Group Holdings LLC, the General Partner of StepStone Group LP, consolidating the Partnership's financial results[357](index=357&type=chunk) - Class B and Class C units of the Partnership are exchangeable for Class A common stock on a one-for-one basis[358](index=358&type=chunk) - As of March 31, 2023, SSG held approximately **56.2%** of the aggregate voting power and **30.9%** of the economic interest in the Partnership (assuming full exchange of Class B units)[363](index=363&type=chunk) [Ownership of Our Businesses](index=81&type=section&id=Ownership%20of%20Our%20Businesses) Certain consolidated subsidiaries are not wholly-owned, with other owners being StepStone professionals, aligning interests through equity and contractual arrangements - Certain consolidated subsidiaries are not wholly-owned, with other owners being current StepStone professionals, aligning interests[365](index=365&type=chunk) - The company uses equity ownership, governance rights, and contractual arrangements to control these businesses[365](index=365&type=chunk) [Segments](index=82&type=section&id=Segments) StepStone operates as a single, fully-integrated private markets solutions provider, with performance assessed and resources allocated on a consolidated basis - StepStone operates as a single, fully-integrated private markets solutions provider, with its chief executive officer assessing performance and allocating resources on a consolidated basis[369](index=369&type=chunk) [Key Financial Measures](index=82&type=section&id=Key%20Financial%20Measures) Revenues are primarily from management, advisory, incentive, and carried interest fees, while expenses include various compensation types and general administrative costs - Revenues are primarily from management and advisory fees, incentive fees, and carried interest allocations[372](index=372&type=chunk) - Management and advisory fees are net of third-party professional/administrative services and distribution fees, reflecting the company's agent role[373](index=373&type=chunk) Weighted-Average Management Fee Rates on FEAUM | Metric | FY2023 | FY2022 | | :-------------------------------- | :----- | :----- | | SMAs | 0.40% | 0.40% | | Focused Commingled Funds | 0.82% | 0.85% | | SMAs and Focused Commingled Funds | 0.54% | 0.52% | - Incentive fees are variable, recognized when realized and no longer subject to significant reversal, typically at the end of a performance period[376](index=376&type=chunk)[377](index=377&type=chunk) - Carried interest allocations (**5-15%**) are recognized based on cumulative fund performance and fair value of underlying investments, accounted for under the equity method[378](index=378&type=chunk)[380](index=380&type=chunk) - Legacy Greenspring carried interest allocations are entirely payable to employees and reflected as compensation, not attributable to the company's direct economic interests[379](index=379&type=chunk) - Expenses include cash-based compensation, equity-based compensation, performance fee-related compensation (tied to carried interest and incentive fees), and general, administrative, and other costs[382](index=382&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk) - Investment income (loss) reflects the company's share of earnings from StepStone Funds, driven by realized and unrealized gains/losses on underlying investments[387](index=387&type=chunk) - Income tax expense reflects U.S. federal and state taxes on SSG's share of Partnership taxable income, plus local and foreign taxes[393](index=393&type=chunk) - Non-controlling interests (NCI) reflect economic interests of third-party equity holders and employees in consolidated subsidiaries and the Partnership[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk) - Key operating metrics include Assets Under Management (AUM), Assets Under Advisement (AUA), Fee-Earning AUM (FEAUM), and Undeployed Fee-Earning Capital[400](index=400&type=chunk)[401](index=401&type=chunk)[403](index=403&type=chunk)[405](index=405&type=chunk)[407](index=407&type=chunk) [Consolidation of StepStone Funds](index=88&type=section&id=Consolidation%20of%20StepStone%20Funds) The company began consolidating one investment fund in Q4 FY2022 where it holds a controlling financial interest, impacting reported financials but with non-recourse liabilities - Beginning in Q4 FY2022, the company consolidated one investment fund where it has a controlling financial interest[409](index=409&type=chunk) - Consolidation impacts reported assets, liabilities, expenses, and cash flows, but liabilities of Consolidated Funds are typically non-recourse to the company[409](index=409&type=chunk) [Consolidated Results of Operations](index=89&type=section&id=Consolidated%20Results%20of%20Operations) Total revenues decreased significantly in FY2023 due to negative carried interest allocations, while net management and advisory fees continued to grow Total Revenues (in thousands) | Year Ended March 31, | Total Revenues | | :------------------- | :------------- | | 2023 | $(67,574) | | 2022 | $1,365,525 | | 2021 | $787,716 | - Total revenues decreased by **$1,433.1 million** in FY2023 compared to FY2022, primarily due to negative carried interest allocations and legacy Greenspring carried interest allocations[414](index=414&type=chunk) - Net management and advisory fees increased by **$116.9 million (31%)** to **$497.2 million** in FY2023, driven by new client activity and **28% growth** in average FEAUM[415](index=415&type=chunk) - Realized carried interest allocation revenues decreased by **$69.6 million (35%)** to **$131.1 million** in FY2023, reflecting lower realization activity[417](index=417&type=chunk) - Legacy Greenspring carried interest allocation revenues decreased by **$639.3 million** to **$(452.2) million** in FY2023[418](index=418&type=chunk) Total Expenses (in thousands) | Year Ended March 31, | Total Expenses | | :------------------- | :------------- | | 2023 | $(67,077) | | 2022 | $913,163 | | 2021 | $459,547 | - Total expenses decreased by **$980.2 million** in FY2023, mainly due to decreases in legacy Greenspring performance fee-related compensation and performance fee-related compensation[424](index=424&type=chunk) - Cash-based compensation increased by **$54.7 million (28%)** to **$252.2 million** in FY2023 due to increased staffing (**31% headcount increase**) and compensation levels[425](index=425&type=chunk) - Investment income decreased by **$28.7 million** to a loss of **$2.5 million** in FY2023, reflecting changes in underlying investment valuations[436](index=436&type=chunk) - Income tax expense decreased by **$24.5 million (86%)** to **$3.8 million** in FY2023, driven by a pre-tax net loss[448](index=448&type=chunk) Net Income (Loss) Attributable to StepStone Group Inc. (in thousands) | Year Ended March 31, | Net Income (Loss) Attributable to StepStone Group Inc. | | :------------------- | :----------------------------------------------------- | | 2023 | $(18,398) | | 2022 | $193,885 | | 2021 | $62,634 | [Operating Metrics](index=95&type=section&id=Operating%20Metrics) Key operating metrics include Assets Under Management (AUM), Assets Under Advisement (AUA), Fee-Earning AUM (FEAUM), and Undeployed Fee-Earning Capital Assets Under Management (AUM) (in billions) | As of March 31, | AUM | | :-------------- | :-- | | 2023 | $138| | 2022 | $134| | 2021 | $86 | Assets Under Advisement (AUA) (in billions) | As of March 31, | AUA | | :-------------- | :-- | | 2023 | $482| | 2022 | $436| | 2021 | $340| - Fee-Earning AUM (FEAUM) increased by **$10.3 billion (14%)** to **$85.4 billion** as of March 31, 2023, with **$5.8 billion** from SMAs and **$4.5 billion** from focused commingled funds[458](index=458&type=chunk) FEAUM by Asset Class (in millions) | Asset Class | March 31, 2023 | March 31, 2022 | March 31, 2021 | | :------------- | :------------- | :------------- | :------------- | | Private equity | $45,766 | $40,396 | $24,533 | | Infrastructure | $19,274 | $17,737 | $12,605 | | Private debt | $14,361 | $12,216 | $10,483 | | Real estate | $6,030 | $4,824 | $4,387 | | **Total** | **$85,431** | **$75,173** | **$52,008** | Weighted-Average Fee Rates | Asset Class | March 31, 2023 | March 31, 2022 | | :------------------------------- | :------------- | :------------- | | Private equity | 0.66% | 0.64% | | Real estate, infrastructure, and private debt | 0.41% | 0.40% | | **Total** | **0.54%** | **0.52%** | - Undeployed fee-earning capital was **$15.7 billion** as of March 31, 2023, expected to generate management fees upon investment or activation[467](index=467&type=chunk) [Non-GAAP Financial Measures](index=97&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures like Adjusted Net Income (ANI) and Fee-Related Earnings (FRE) are used to evaluate profitability, excluding certain non-cash and non-recurring items - Adjusted Net Income (ANI) is a non-GAAP measure used to evaluate profitability, excluding fund consolidation, unrealized carried interest, unrealized investment income, certain equity-based compensation, amortization of intangibles, and acquisition-related charges[470](index=470&type=chunk) - Adjusted Revenues comprise net management and advisory fees, incentive fees (including deferred portion), and realized carried interest allocations[471](index=471&type=chunk) - Fee-Related Earnings (FRE) monitors baseline earnings from recurring management and advisory fees, excluding performance fee-related compensation, certain equity-based compensation, amortization of intangibles, and non-core items[472](index=472&type=chunk) - ANI per share measures per-share earnings assuming full exchange of Class B and Class C units for Class A common stock[473](index=473&type=chunk) - FRE increased by **$33.9 million (28%)** to **$156.2 million** in FY2023, driven by higher net management and advisory fees[474](index=474&type=chunk) - Adjusted revenues increased by **$48.0 million (8%)** to **$642.0 million** in FY2023, while ANI decreased by **$30.3 million (18%)** to **$142.7 million**[476](index=476&type=chunk)[477](index=477&type=chunk) Adjusted Net Income (in thousands) | Year Ended March 31, | Adjusted Net Income | | :------------------- | :------------------ | | 2023 | $142,663 | | 2022 | $172,943 | | 2021 | $85,402 | Adjusted Net Income Per Share | Year Ended March 31, | Adjusted Net Income Per Share | | :------------------- | :---------------------------- | | 2023 | $1.24 | | 2022 | $1.61 | | 2021 | $0.87 | [Investment Performance](index=102&type=section&id=Investment%20Performance) Investment performance data is presented from inception-to-date through December 31, 2022, for all recommended and tracked investments, noting historical results are not indicative of future performance - Investment performance data is presented from inception-to-date through December 31, 2022, for all recommended and tracked investments[496](index=496&type=chunk) - Historical results are not indicative of future performance due to varying market conditions, unrealized gains, new fund deployment, regulatory changes, and competition[497](index=497&type=chunk)[499](index=499&type=chunk) StepStone Performance Summary by Investment Strategy (Inception-to-Date as of Dec 31, 2022) | Strategy | Committed Capital ($B) | Invested Capital ($B) | Realized Distributions ($B) | NAV ($B) | Total ($B) | Gross IRR (%) | Net IRR (%) | Net Multiple of Invested Capital (x) | Net IRR versus Benchmark (%) | | :------------ | :--------------------- | :-------------------- | :-------------------------- | :------- | :--------- | :------------ | :---------- | :----------------------------------- | :--------------------------- | | Primaries | 273.8 | 192.0 | 122.9 | 153.7 | 276.6 | 12.8 | 12.5 | 1.4 | 4.7 | | Secondaries | 17.0 | 14.2 | 9.0 | 12.3 | 21.3 | 21.1 | 17.2 | 1.4 | 9.3 | | Co-investments| 40.5 | 38.1 | 19.2 | 42.1 | 61.3 | 19.2 | 16.7 | 1.5 | 9.1 | | **Total** | **331.3** | **244.3** | **151.1** | **208.1**| **359.2** | **13.8** | **13.2** | **1.4** | **5.4** | StepStone Performance Summary by Asset Class (Net IRR and Net TVM as of Dec 31, 2022) | Private Equity Strategy | Net IRR | Net TVM | Real Estate Strategy | Net IRR | Net TVM | Infrastructure Strategy | Net IRR | Private Debt Strategy | Net IRR | | :---------------------- | :------ | :------ | :------------------- | :------ | :------ | :---------------------- | :------ | :-------------------- | :------ | | Primaries | 17.4% | 1.6x | Core/Core+ fund investments | 8.8% | 1.6x | Primaries | 10.7% | Direct lending | 6.5% | | Secondaries | 18.0% | 1.5x | Value-add/opportunistic fund investments | 10.1% | 1.4x | Secondaries | 10.5% | Distressed debt | 9.3% | | Co-investments | 20.7% | 1.7x | Real estate debt fund investments | 5.9% | 1.2x | Co-investments | 9.3% | Other | 6.0% | | | | | Value-add/opportunistic secondaries & co investments | 13.8% | 1.3x | | | | | [Liquidity and Capital Resources](index=107&type=section&id=Liquidity%20and%20Capital%20Resources) Cash is generated from fees and carried interest, used for expenses, taxes, debt service, and dividends, with a $225.0 million Revolver and Tax Receivable Agreements - Cash is generated from management/advisory fees and realized carried interest, used for compensation, expenses, taxes, debt service, capital expenditures, dividends, and fund investments[511](index=511&type=chunk)[513](index=513&type=chunk) Cash, Cash Equivalents, Restricted Cash, Investments, and Debt (in millions, as of March 31, 2023) | Metric | Amount | | :----------------------------------------- | :----- | | Cash, cash equivalents and restricted cash | $103.5 | | Investments in StepStone Funds | $1,342.4| | Accrued carried interest allocations | $1,227.2| | Debt obligations, net | $98.4 | | Accrued carried interest-related compensation payable | $644.5 | Cash Flows (in thousands) | Activity | FY2023 | FY2022 | FY2021 | | :-------------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $151,183 | $214,281 | $149,299 | | Net cash used in investing activities | $(30,807) | $(210,241) | $(11,166) | | Net cash used in financing activities | $(108,021) | $(70,439) | $(45,306) | | Net increase (decrease) in cash | $12,068 | $(66,414) | $93,924 | - The company has a **$225.0 million** multicurrency Revolver with **$98.4 million** outstanding as of March 31, 2023, bearing variable interest rates (weighted-average **6.86%**)[518](index=518&type=chunk)[519](index=519&type=chunk) - The Revolver has a maturity date of September 20, 2026, and includes covenants requiring maintenance of a total net leverage ratio and minimum fee-earning assets under management[520](index=520&type=chunk)[522](index=522&type=chunk) - The company is subject to Tax Receivable Agreements, requiring payments of **85%** of net cash tax savings from tax basis increases to certain partners and pre-IPO institutional investors[534](index=534&type=chunk) - Minimum net capital balances are required for regulatory purposes in various jurisdictions, met by retaining cash and cash equivalents[535](index=535&type=chunk) Contractual Obligations and Commitments (in thousands, as of March 31, 2023) | Type of Obligation | Total | Less than 1 year | Years 1-3 | Years 3-5 | Thereafter | | :----------------------------- | :-------- | :--------------- | :-------- | :-------- | :--------- | | Operating lease obligations | $164,918 | $12,337 | $29,241 | $26,836 | $96,504 | | Contingent earn-out payments | $36,745 | $105 | $36,640 | — | — | | Debt obligations | $100,000 | — | — | $100,000 | — | | Interest on debt obligations | $23,841 | $6,863 | $13,725 | $3,253 | — | | Capital commitments | $84,334 | $84,334 | — | — | — | | Capital commitments in legacy Greenspring funds | $50,558 | $50,558 | — | — | — | | **Total** | **$460,396**| **$154,197** | **$79,606** | **$130,089**| **$96,504**| [Critical Accounting Policies](index=114&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies involve significant assumptions and judgments, particularly for investment valuation, consolidation, revenue recognition, and income taxes - Critical accounting policies involve significant assumptions, estimates, and judgments, particularly for investment valuation, which directly impacts carried interest allocations and equity in affiliated companies[543](index=543&type=chunk)[649](index=649&type=chunk) - The company consolidates entities it controls via majority voting interest or as the primary beneficiary of a Variable Interest Entity (VIE), including certain operating subsidiaries and StepStone Funds[544](index=544&type=chunk)[545](index=545&type=chunk)[547](index=547&type=chunk)[548](index=548&type=chunk)[549](index=549&type=chunk)[652](index=652&type=chunk)[653](index=653&type=chunk)[654](index=654&type=chunk)[655](index=655&type=chunk)[656](index=656&type=chunk)[657](index=657&type=chunk) - Revenue recognition follows ASC 606, depicting the transfer of promised goods/services for expected consideration, with variable consideration included only when significant reversal is improbable[551](index=551&type=chunk)[687](index=687&type=chunk) - Management and advisory fees are recognized over time as services are performed, net of certain third-party services where the company acts as an agent[552](index=552&type=chunk)[688](index=688&type=chunk)[690](index=690&type=chunk)[691](index=691&type=chunk)[692](index=692&type=chunk)[693](index=693&type=chunk) - Incentive fees are recognized upon crystallization (realization and no significant reversal risk), while carried interest allocations are recognized based on cumulative fund performance and fair value of underlying investments, accounted for under the equity method[554](index=554&type=chunk)[555](index=555&type=chunk)[556](index=556&type=chunk)[557](index=557&type=chunk)[558](index=558&type=chunk)[559](index=559&type=chunk)[695](index=695&type=chunk)[696](index=696&type=chunk)[697](index=697&type=chunk)[698](index=698&type=chunk)[699](index=699&type=chunk)[700](index=700&type=chunk) - Equity-based compensation for RSUs is recognized on a straight-line basis over the vesting period, with awards classified as liabilities remeasured at each reporting period[565](index=565&type=chunk)[702](index=702&type=chunk) - Performance fee-related compensation, tied to carried interest and incentive fees, is accrued as compensation expense in conjunction with related revenue recognition[566](index=566&type=chunk)[703](index=703&type=chunk)[704](index=704&type=chunk) - Income taxes are accounted for using the asset and liability method, recognizing deferred tax assets and liabilities for temporary differences, with a valuation allowance if realization is not probable[567](index=567&type=chunk)[568](index=568&type=chunk)[569](index=569&type=chunk)[570](index=570&type=chunk)[711](index=711&type=chunk)[712](index=712&type=chunk)[713](index=713&type=chunk)[714](index=714&type=chunk) - Tax Receivable Agreements provide for payments to partners and pre-IPO investors for **85%** of net cash tax savings from tax basis increases[573](index=573&type=chunk)[716](index=716&type=chunk) [Recent Accounting Developments](index=120&type=section&id=Recent%20Accounting%20Developments) The company is evaluating ASU 2020-04 (Reference Rate Reform) and adopted ASU 2020-06, 2021-05, and 2021-08 with no material financial statement effects - The company is evaluating ASU 2020-04 (Reference Rate Reform) which provides optional practical expedients for contracts affected by LIBOR reform, with a deferred sunset date to December 31, 2024[572](index=572&type=chunk) - ASU 2020-06 (Accounting for Convertible Instruments and Contracts in an Entity's Own Equity) was adopted on April 1, 2022, with no material effect on financial statements[573](index=573&type=chunk) - ASU 2021-05 (Lessors—Certain Leases with Variable Lease Payments) was adopted on April 1, 2022, with no material effect[574](index=574&type=chunk) - ASU 2021-08 (Accounting for Contract Assets and Contract Liabilities from Contracts with Customers) was adopted on April 1, 2022, applied prospectively to business combinations, with no effect[575](index=575&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=119&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to price, interest-rate, and foreign exchange-rate risks, primarily affecting performance fees and investment income, with sensitivity analysis provided - The company is exposed to market risk primarily through its role as general partner or investment manager for its focused commingled funds and SMAs, affecting performance fee revenues and investment income[577](index=577&type=chunk) - Management and advisory fee revenue is only marginally affected by changes in investment values, as fees are generally based on commitments or net invested capital[578](index=578&type=chunk) - A **10% decline** in market values of fund investments as of March 31, 2023, is estimated to decrease annual management fees by **$3.4 million** and investment income by **$11.5 million**[578](index=578&type=chunk)[579](index=579&type=chunk) - Incentive fees are not materially affected by unrealized investment value changes, as they are based on realized gains and performance criteria[579](index=579&type=chunk) - Carried interest allocations are affected by market factors, but the impact varies by fund performance criteria and is mitigated by compensation payments to employees[579](index=579&type=chunk) - The maximum amount of carried interest allocations subject to contingent repayment (clawback), net of tax, was an estimated **$264.1 million** as of March 31, 2023[579](index=579&type=chunk) - Foreign currency exchange rate movements are not expected to materially affect consolidated financial statements due to limited exposure from foreign offices and general partner interests[580](index=580&type=chunk)[581](index=581&type=chunk) - Interest rate risk from the variable-rate Revolver (**$100.0 million** outstanding as of March 31, 2023) could increase interest expense by **$1.0 million** for a **100 basis point** rate increase[582](index=582&type=chunk) - Credit risk arises from counterparties in financial services and transactions, which the company mitigates by limiting engagement to reputable financial institutions[583](index=583&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=122&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements of StepStone Group Inc. for the fiscal years ended March 31, 2023, 2022, and 2021, along with accompanying notes - The section includes audited consolidated financial statements: Balance Sheets, Statements of Income (Loss), Comprehensive Income (Loss), Stockholders' Equity, and Cash Flows for fiscal years ended March 31, 2023, 2022, and 2021[585](index=585&type=chunk) - The financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP)[588](index=588&type=chunk) - Ernst & Young LLP, the independent registered public accounting firm, expressed an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting[588](index=588&type=chunk)[589](index=589&type=chunk)[603](index=603&type=chunk)[604](index=604&type=chunk) - A critical audit matter identified was the valuation of underlying investments of equity method investments, particularly co-investment funds, due to high auditor subjectivity and estimation uncertainty[592](index=592&type=chunk)[594](index=594&type=chunk)[595](index=595&type=chunk) Consolidated Balance Sheets (in thousands) | Asset/Liability (as of March 31) | 2023 | 2022 | | :------------------------------- | :------------ | :------------ | | **Assets** | | | | Cash and cash equivalents | $102,565 | $116,386 | | Investments | $2,113,012 | $2,922,141 | | Goodwill | $580,542 | $580,542 | | Total assets | **$3,497,403**| **$4,188,125**| | **Liabilities** | | | | Total liabilities | $1,844,086 | $2,363,795 | | **Stockholders' Equity** | | | | Total stockholders' equity | $1,628,787 | $1,824,330 | Consolidated Statements of Income (Loss) (in thousands) | Metric (Year Ended March 31) | 2023 | 2022 | 2021 | | :--------------------------- | :------------ | :------------ | :------------ | | Total revenues | $(67,574) | $1,365,525 | $787,716 | | Total expenses | $(67,077) | $913,163 | $459,547 | | Net income (loss) | $(45,275) | $484,281 | $314,593 | | Net income (loss) attributable to StepStone Group Inc. | $(18,398) | $193,885 | $62,634 | Consolidated Statements of Cash Flows (in thousands) | Activity (Year Ended March 31) | 2023 | 2022 | 2021 | | :----------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $151,183 | $214,281 | $149,299 | | Net cash used in investing activities | $(30,807) | $(210,241) | $(11,166) | | Net cash used in financing activities | $(108,021) | $(70,439) | $(45,306) | | Net increase (decrease) in cash | $12,068 | $(66,414) | $93,924 | | Cash, cash equivalents and restricted cash at end of period | $129,517 | $117,449 | $183,863 | - The company's effective income tax rate was **(9.2%)** in FY2023, **5.5%** in FY2022, and **6.9%** in FY2021, lower than the statutory rate due to income allocated to non-controlling interests[447](index=447&type=chunk)[778](index=778&type=chunk) - As of March 31, 2023, the company had **$98.4 million** outstanding on its Revolver, net of debt issuance costs, with a weighted-average interest rate of **6.86%**[758](index=758&type=chunk)[759](index=759&type=chunk) - Unfunded capital commitments totaled **$88.7 million** as of March 31, 2023, excluding legacy Greenspring funds[822](index=822&type=chunk) - The maximum potential clawback obligation for carried interest allocations (excluding legacy Greenspring) was estimated at **$264.1 million**, net of tax, as of March 31, 2023, assuming zero fair value of investments[824](index=824&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=176&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure [Item 9A. Controls and Procedures](index=177&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2023, with no material changes - Disclosure controls and procedures were evaluated as effective as of March 31, 2023, ensuring timely and accurate reporting[831](index=831&type=chunk) - Management concluded that internal control over financial reporting was effective as of March 31, 2023, based on the COSO criteria[836](index=836&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent quarter ended March 31, 2023[837](index=837&type=chunk) [Item 9B. Other Information](index=178&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=178&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=179&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company has a Code of Conduct and Ethics, with further governance information incorporated by reference from the 2023 Proxy Statement - The company has a Code of Conduct and Ethics for all directors, officers, and employees, available on its website[843](index=843&type=chunk) - Further information is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[844](index=844&type=chunk) [Item 11. Executive Compensation](index=179&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Executive compensation details are incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[845](index=845&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=179&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership details are incorporated by reference from the 2023 Proxy Statement, with 1,775,732 RSUs outstanding and 17,644,444 shares available for future issuance - Security ownership information is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[846](index=846&type=chunk) Securities Authorized for Issuance under Equity Compensation Plans (as of March 31, 2023) | Metric | Number of securities | | :----------------------------------------- | :------------------- | | Securities to be issued upon exercise of outstanding options, warrants and rights | 1,775,732 | | Securities remaining available for future issuance | 17,644,444 | - The aggregate number of shares available for future issuance under the LTIP automatically increases annually by **5%** of outstanding stock until January 1, 2030, unless otherwise determined by the Board[848](index=848&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=179&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Details on related party transactions and director independence are incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[849](index=849&type=chunk) [Item 14. Principal Accountant Fees and Services](index=180&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees and services is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on principal accountant fees and services is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement[850](index=850&type=chunk) PART IV [Item 15. Exhibit and Financial Statement Schedules](index=181&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and a comprehensive exhibit index, with schedules omitted if not applicable or included elsewhere - The section includes the Consolidated Financial Statements: Balance Sheets, Statements of Income (Loss), Comprehensive Income (Loss), Stockholders' Equity, and Cash Flows, and their accompanying notes[852](index=852&type=chunk) - All financial statement schedules are omitted as they are not applicable, not required, or the information is included in the consolidated financial statements or notes[852](index=852&type=chunk) - A comprehensive list of exhibits, including transaction agreements, organizational documents, tax receivable agreements, and incentive plans, is provided[853](index=853&type=chunk)[854](index=854&type=chunk) [Item 16. Form 10-K Summary](index=183&type=section&id=Item%2016.%20Form%2010-K%20Summary) There is no Form 10-K Summary provided [Signatures](index=183&type=section&id=Signatures) The report is duly signed by the Chief Financial Officer and other principal officers and directors on May 26, 2023 - The report is signed by Johnny D. Randel, Chief Financial Officer, as the Principal Financial Officer and Authorized Signatory[860](index=860&type=chunk) - Additional signatures include the Chief Executive Officer, Chief Accounting Officer, Chairman of the Board, and other Directors[862](index=862&type=chunk)