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)

Financial Data and Key Metrics Changes - The company reported GAAP net income of $56.8 million, with net income attributable to StepStone Group Incorporated at $28.8 million [4] - Fee related earnings for the quarter were $37.8 million, adjusted net income was $27.1 million, and adjusted net income per share was $0.24, down from $44 million or $0.38 per share in the fourth quarter of the previous year [6][4] - The FRE margin for the quarter was 28%, with a full year margin of 31%, which is in line with expectations [6][17] Business Line Data and Key Metrics Changes - Fee related assets under management (AUM) grew by 14% year-over-year, with gross AUM additions of over $5 billion in the recent quarter [6] - The company generated $16 billion of gross AUM inflows over the last 12 months, with $6 billion from commingled funds and $10 billion from managed accounts [13] - The private wealth platform's fee earning AUM exceeded $1.5 billion at the end of the quarter, with strong investment performance from SPRIM and SPRING funds [13] Market Data and Key Metrics Changes - The company noted that venture capital activities, which account for 15% of fee earning AUM, were minimally impacted by the failure of Silicon Valley Bank [7] - The demand for liquidity in the venture ecosystem is increasing, particularly for secondary sales, driven by regional banking turmoil [8] - The company’s global office exposure in commercial real estate is only 10% of total real estate AUM, indicating a cautious approach to this sector [9] Company Strategy and Development Direction - The company aims to capitalize on structural tailwinds in private markets and specific growth drivers within its asset classes [7] - Strategies such as venture secondaries and growth equity are highlighted as particularly well-suited for the current market environment [8] - The company is focused on expanding its retail franchise and developing new products for institutional investors [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects of venture capital and growth equity despite near-term macro headwinds [7] - The company anticipates continued pressure on private real estate valuations but believes its high-quality exposure will create opportunities [10] - Management emphasized the importance of consistent investment and an experienced team to navigate market challenges [8] Other Important Information - The company declared a supplemental dividend of $0.25 per share, in addition to the normal quarterly dividend of $0.20 per share [14] - The net accrued performance fees stand at nearly $600 million, serving as a backlog for future distributions [14] Q&A Session Summary Question: Distribution build-out and international platforms - Management noted that distribution flows have been consistent, with a growing syndicate approved on over 150 platforms globally, and emphasized the ongoing build-out of dedicated European coverage [22][23] Question: Fund closes and expectations for June - The multi-strategy global venture capital fund and real estate secondaries fund had interim closings, with the latter currently at over $900 million in commitments [24] Question: Fiscal '24 investment priorities - Management highlighted the focus on supporting growth and profitability, expanding the retail franchise, and developing new products for institutional investors [25] Question: SMA contributions and trends - The company is seeing a combination of re-ups and new separate accounts driving AUM inflows, with continued activity expected in the year ahead [26] Question: LP attitudes towards venture capital - Management indicated that while existing portfolios face markdowns, there is growing excitement about new investment opportunities, particularly in secondaries and growth equity [31] Question: Secondary market opportunities - There is over a trillion dollars of unrealized net asset value in venture portfolios, leading to increased willingness to sell, particularly in the LP secondary market [33]

Financial Performance - Adjusted revenues for the quarter were $148.1 million, a decrease of 14% compared to $173.0 million in the same quarter of the previous year[48] - Management and advisory fees, net, increased by 21% to $128.8 million for the quarter and 36% to $364.6 million year-to-date[48, 44] - Fee-related earnings (FRE) increased by 16% to $42.7 million for the quarter and 37% to $118.4 million year-to-date[48] - Adjusted net income (ANI) decreased by 36% to $31.2 million for the quarter and 18% to $115.5 million year-to-date[48] - ANI per share decreased by 36% to $0.27 for the quarter and 18% to $1.01 year-to-date[48] Assets Under Management (AUM) and Advisement (AUA) - Total AUM reached $134.0 billion, a 6% increase compared to $127.0 billion in the same quarter of the previous year[48] - Fee-earning AUM (FEAUM) increased by 16% to $83.0 billion compared to $71.2 billion in the same quarter of the previous year[48] - Total capital responsibility, which includes AUM and AUA, reached $602 billion[110] - Advisory AUA was $468 billion[51] Capital Activity - The company raised $12.4 billion of new SMA capital over the last twelve months (LTM)[48] - $6.0 billion was raised for commingled funds over the LTM[48] - Undeployed fee-earning capital was $14.0 billion, a decrease of 19% compared to $17.3 billion in the same quarter of the previous year[48] Performance Fees - Gross realized performance fees decreased by 71% to $19.3 million for the quarter and 31% to $124.4 million year-to-date[74] - Net realized performance fees for the last twelve months were approximately $122 million to $123 million[135]

Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $13.6 million, with a net loss attributable to StepStone Group, Inc. of $6.9 million [32] - Fee-related earnings were $39.0 million, and adjusted net income was $31.2 million, translating to adjusted net income per share of $0.27, down from $0.42 per share in the same quarter last year [33][68] - The blended management fee rate increased to 54 basis points, attributed to a shift towards comingled funds [7] Business Line Data and Key Metrics Changes - Fee-earning assets grew by $3 billion for the quarter, driven by healthy deployment across several SMAs and activations of the PE secondaries fund [6] - The company generated over $4 per share in management and advisory fees over the last 12 months, representing an annual growth rate of 25% since 2018 [7] - The venture capital secondaries market is becoming more active, with over $1 trillion of unrealized venture assets anticipated to spur deal flow [70] Market Data and Key Metrics Changes - Industry-wide deal activity in secondaries topped $100 billion in 2022, trailing only the record volumes from 2021 [3] - The company has seen a significant interest in secondaries across various asset classes, with a notable shift in allocations among LPs [25][34] - The company finished the quarter with $134 billion of assets under management and $83 billion of fee-earning assets [68] Company Strategy and Development Direction - The company is focusing on expanding its private wealth platform and has launched offshore parallel and feeder funds in Europe and Australia [79] - There is an emphasis on the secondaries market as a critical area for growth, particularly in infrastructure and real estate [78] - The company aims to maintain a disciplined approach to capital distribution, aligning it with its business model [80] Management's Comments on Operating Environment and Future Outlook - Management noted that the current environment presents opportunities for selective investments, particularly in down markets [111] - There is a recognition of the need for LPs to rebalance their portfolios, leading to increased utilization of the secondary market [34] - Management expressed optimism about the venture capital sector, highlighting its resilience and potential for growth despite current market volatility [35] Other Important Information - The company anticipates a step-up in G&A expenses next quarter due to increased headcount and incentive payments [8] - Gross accrued carry finished the quarter at approximately $1.1 billion, reflecting a decrease due to reduced underlying valuations [9] - The company has declared an aggregate of $0.60 per share in dividends for the first three quarters of fiscal 2023, representing nearly 100% of fee-related earnings available to common shareholders [80] Q&A Session Summary Question: What is driving the elevated distributions this quarter? - Management indicated that elevated distributions were primarily due to normal activities across various drivers, with a notable exception being the expiration of an account in the infrastructure business [84] Question: How do you see investors altering their asset allocation? - Management noted that sentiment among clients is balanced, with some decreasing allocations while others maintain or slightly increase them, emphasizing the importance of not missing out on vintage years [85] Question: What are the expectations for expanding the retail platform in Europe and Australia? - Management highlighted that the markets are structured differently, with a smaller number of players in Europe and Australia compared to the U.S., which may require a different approach [102]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ___________________________ Commission file number 001-39510 STEPSTONE GROUP INC. (Exact name of Registrant as specified in its charter) (S ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ___________________________ Commission file number 001-39510 STEPSTONE GROUP INC. (Exact name of Registrant as specified in its charter) ( ...

Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $67.1 million for Q2 2023, with a net loss attributable to StepStone Group of $29.2 million [7] - Fee-related earnings reached $39 million, marking a 48% increase year-over-year, while adjusted net income was $37.3 million, down from $0.40 per share in the prior year quarter to $0.33 [11][12] - The company finished the quarter with $135 billion in assets under management (AUM) and $80 billion in fee-earning assets, reflecting a 20% growth in fee-earning AUM over the past year [14] Business Line Data and Key Metrics Changes - The retail segment saw strong inflows, raising approximately $180 million for the quarter into the SeaPrime product, which now has over $850 million in AUM and an annualized return of 33% [17] - The company activated several funds post-quarter, including a PE secondaries fund and a multi-strategy global venture capital fund, which are expected to contribute approximately $2 billion to fee-earning assets in the next quarter [22] Market Data and Key Metrics Changes - The company experienced a $500 million drag on fee-earning assets due to currency movements, primarily from the strengthening of the U.S. dollar [23] - The company reported $19 billion in gross AUM inflows over the last 12 months, with over $7 billion from commingled funds and over $11 billion from separately managed accounts [21] Company Strategy and Development Direction - The company aims to make private markets accessible to individual investors, rebranding Conversus as StepStone Private Wealth and expanding its retail product offerings [17][26] - The management emphasized the importance of manager selection and asset allocation in the current market environment, positioning StepStone to help clients navigate these challenges [15] Management's Comments on Operating Environment and Future Outlook - Management noted that while clients are cautious, they are still looking for compelling opportunities in private markets, indicating a resilient demand despite market volatility [15] - The company expects to grow its quarterly dividend in line with fee-related earnings and plans to introduce a supplemental annual dividend funded by performance-related earnings [34][35] Other Important Information - The company reported a FRE margin of 33% for the quarter, up approximately 100 basis points year-over-year, indicating strong profitability [37] - The gross accrued carry finished the quarter at approximately $1.2 billion, reflecting a decrease due to reduced underlying valuations [42] Q&A Session Summary Question: Update on FRE margin expectations - Management indicated that the FRE margin is tracking ahead of expectations, maintaining a medium-term outlook in the mid-30s range [46] Question: Retail flows and investor hesitancy - Management noted that retail flows have increased due to expanded distribution and strong product reception, despite market volatility [48] Question: Fundraising and LP capacity - Management acknowledged that many LPs have spent their 2022 budgets early, but they expect commitments to increase in early 2023 as budgets free up [53][55] Question: Competitive environment for retail products - Management highlighted the differentiated nature of their retail products, emphasizing their multi-asset class approach and accredited eligibility [56][58] Question: Impact of Conversus transition on adjusted income - Management clarified that the distribution business has not been profitable yet, but they expect to provide updates on flows and AUM as they progress [69] Question: Liquidity solutions and secondary market activity - Management noted an increase in LP interest in the secondary market as a solution to over-allocations, with a growing pipeline of LP-led secondary transactions [95] Question: Re-up rates and new customer activity - Management reported strong re-up rates, particularly on separate accounts, and noted good progress with new clients despite some delays in closing [102][104]

StepStone Group Inc. (NASDAQ:STEP) Q1 2023 Earnings Conference Call August 4, 2022 5:00 PM ET Company Participants Seth Weiss - Head, Investor Relations Scott Hart - Chief Executive Officer Mike McCabe - Head, Strategy Johnny Randel - Chief Financial Officer Conference Call Participants Michael Cyprys - Morgan Stanley Ken Worthington - JPMorgan Alex Blostein - Goldman Sachs Adam Beatty - UBS Operator Welcome to the StepStone Fiscal First Quarter 2023 Earnings Call. At this time, all participants will be in ...