StepStone (STEP) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company recorded a GAAP net loss of $287 million, with a net loss attributable to StepStone Group of $190 million or $2.61 per share [7][8] - Fee-related earnings were $74.1 million, up 46% from the prior year quarter, with an FRE margin of 39% [9][19] - Adjusted net income was $52.7 million or $0.44 per share, an increase from $42.1 million or $0.37 per share in the same quarter last year [10][40] Business Line Data and Key Metrics Changes - Fee-earning assets under management (AUM) increased by nearly $10 billion, reaching over $114 billion, a 28% increase year-over-year [11][12] - Management and advisory fees totaled $192 million, up 26% year-over-year [18][35] - The private wealth platform grew to over $6 billion, with over $1 billion in new subscriptions, marking the best growth quarter for private wealth [16][24] Market Data and Key Metrics Changes - The company generated over $27 billion in gross AUM inflows over the last twelve months, with $18 billion from separately managed accounts and over $9 billion from focused commingled funds [21][22] - The infrastructure co-investment fund closed at approximately $1.2 billion, marking a significant milestone for a first-time fund [15][22] Company Strategy and Development Direction - The company emphasizes a diversified strategy across asset classes and geographic reach, which has proven resilient during periods of fundraising pressure in the private market [14] - The focus on infrastructure and private wealth management is expected to drive future growth, with significant capital deployment opportunities identified [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth in private wealth and infrastructure, highlighting strong fundraising and deployment activities [11][12] - The company anticipates continued growth in fee-related earnings and margins, supported by a robust pipeline of investment opportunities [19][38] Other Important Information - The company noted that GAAP accounting requires presenting changes in fair value related to potential future buy-ins, which impacted the net loss reported [43] - Net accrued carry finished the quarter at $744 million, indicating potential future performance fees [44] Q&A Session Summary Question: Highlights of wealth management build-out - Management highlighted the addition of 450 platforms globally, with 40% selling multiple funds, indicating strong cross-selling capabilities [50] Question: Market for secondaries - Management noted a very active year in the secondaries market, with average market pricing slightly increasing [55] Question: Drivers of non-private wealth NCI - The largest driver was retroactive fees associated with the real estate secondaries fund, with general growth from other asset classes [64] Question: Infrastructure business focus - Key areas of investment include power and renewables, transportation, and communications, including data centers [68] Question: Deployment activity drivers - Deployment was broad-based across asset classes, with significant activity in private equity co-investments and real estate [75] Question: GreenSpring earn-out details - The GreenSpring earn-out target of $75 million is fully accrued and will be payable 100% in cash [81]