StepStone (US:STEP)2023-08-04 22:20Financial 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]