STEP StepStone Group Inc

StepStone Group Inc. (Nasdaq: STEP), a global private markets investment firm focused on providing customized investment solutions and advisory and data services, today reported results for the quarter ended June 30, 2024. This represents results for the first quarter of the fiscal year ending March 31, 2025. The Board of Directors of the Company has declared a quarterly cash dividend of $0.24 per share of Class A common stock, payable on September 13, 2024, to the holders of record as of the close of business on August 30, 2024.

StepStone issued a full detailed presentation of its first quarter fiscal 2025 results, which can be accessed by visiting the Company’s website at https://shareholders.stepstonegroup.com.

Webcast and Earnings Conference Call

Management will host a webcast and conference call on Thursday, August 8, 2024, at 5:00 pm ET to discuss the Company’s results for the first quarter of the fiscal year ending March 31, 2025. The webcast will be made available on the Shareholders section of the Company’s website at https://shareholders.stepstonegroup.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time to register. A replay will also be available on the Shareholders section of the Company’s website approximately two hours after the conclusion of the event.

To join as a live participant in the question and answer portion of the call, participants must register at https://register.vevent.com/register/BIa3a01bd21a304498b91619c08e074cf8. Upon registering you will receive the dial-in number and a PIN to join the call as well as an email confirmation with the details.

About StepStone

StepStone Group Inc. (Nasdaq: STEP) is a global private markets investment firm focused on providing customized investment solutions and advisory and data services to its clients. As of June 30, 2024, StepStone was responsible for approximately $701 billion of total capital, including $169 billion of assets under management. StepStone’s clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. StepStone partners with its clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes.

Forward-Looking Statements

Some of the statements in this release may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking. Words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “intend,” “may,” “plan” and “will” and similar expressions identify forward-looking statements. Forward-looking statements reflect management’s current plans, estimates and expectations and are inherently uncertain. The inclusion of any forward-looking information in this release should not be regarded as a representation that the future plans, estimates or expectations contemplated will be achieved. Forward-looking statements are subject to various risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, global and domestic market and business conditions, our successful execution of business and growth strategies, the favorability of the private markets fundraising environment, successful integration of acquired businesses and regulatory factors relevant to our business, as well as assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity and the risks and uncertainties described in greater detail under the “Risk Factors” section of our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on May 24, 2024, as such factors may be updated from time to time. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we use the following non-GAAP financial measures: adjusted management and advisory fees, net, adjusted revenues, adjusted net income (on both a pre-tax and after-tax basis), adjusted net income per share, adjusted weighted-average shares, fee-related earnings, fee-related earnings margin, gross realized performance fees and net realized performance fees. We have provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release. The presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, the non-GAAP financial measures in this earnings release may not be comparable to similarly titled measures used by other companies in our industry or across different industries. For definitions of these non-GAAP measures and reconciliations to applicable GAAP measures, please see the section titled “Non-GAAP Financial Measures: Definitions and Reconciliations.”

Financial Highlights and Key Business Drivers/Operating Metrics
	Three Months Ended																Percentage Change
(in thousands, except share and per share amounts and where noted)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024			June 30, 2024				vs. FQ1'24
Financial Highlights
GAAP Results
Management and advisory fees, net	$	138,115		$	142,123		$	151,492		$	153,410		$	178,015			29	%
Total revenues		178,011			191,422			(14,612	)		356,810			186,401			5	%
Total performance fees		39,896			49,299			(166,104	)		203,400			8,386			(79	)%
Net income (loss)		49,446			59,251			(23,419	)		82,542			48,045			(3	)%
Net income (loss) per share of Class A common stock:
Basic	$	0.34		$	0.42		$	(0.32	)	$	0.48		$	0.20			(41	)%
Diluted	$	0.34		$	0.42		$	(0.32	)	$	0.48		$	0.20			(41	)%
Weighted-average shares of Class A common stock:
Basic		62,834,818			62,858,468			64,068,952			64,194,859			66,187,754			5	%
Diluted		65,739,470			66,198,129			64,068,952			67,281,567			68,593,761			4	%
Quarterly dividend per share of Class A common stock(1)	$	0.20		$	0.21		$	0.21		$	0.21		$	0.21			20	%
Supplemental dividend per share of Class A common stock(2)	$	0.25		$	—		$	—		$	—		$	0.15			(40	)%
Accrued carried interest allocations		1,277,783			1,331,778			1,203,847			1,354,051			1,328,853			4	%
Non-GAAP Results(3)
Adjusted management and advisory fees, net(4)	$	138,301		$	142,327		$	151,943		$	153,808		$	178,514			29	%
Adjusted revenues		152,780			149,800			185,123			177,357			221,165			45	%
Fee-related earnings (“FRE”)		44,402			43,827			50,664			50,900			71,656			61	%
FRE margin(5)		32	%		31	%		33	%		33	%		40	%
Gross realized performance fees		14,479			7,473			33,180			23,549			42,651			195	%
Adjusted net income (“ANI”)		29,388			30,173			42,116			37,716			57,241			95	%
Adjusted weighted-average shares		114,673,696			115,118,060			115,232,927			115,512,301			118,510,499			3	%
ANI per share	$	0.26		$	0.26		$	0.37		$	0.33		$	0.48			85	%
Key Business Drivers/Operating Metrics (in billions)
Assets under management (“AUM”)(6)	$	142.6		$	145.8		$	149.0		$	156.6		$	169.3			19	%
Assets under advisement (“AUA”)(6)		497.0			512.9			510.5			521.1			531.4			7	%
Fee-earning AUM (“FEAUM”)		87.4			87.3			89.4			93.9			100.4			15	%
Undeployed fee-earning capital (“UFEC”)		16.9			18.1			21.4			22.6			27.6			63	%

_______________________________(1) Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.(2) The supplemental cash dividend relates to earnings in respect of our full fiscal years 2023 and 2024, respectively.(3) Adjusted management and advisory fees, net, adjusted revenues, FRE, FRE margin, gross realized performance fees, ANI, adjusted weighted-average shares and ANI per share are non-GAAP measures. See the definitions of these measures and reconciliations to the respective, most comparable GAAP measures under “Non-GAAP Financial Measures: Definitions and Reconciliations.”(4) Excludes the impact of consolidating the Consolidated Funds. See reconciliation of GAAP measures to adjusted measures that follows.(5) FRE margin is calculated by dividing FRE by adjusted management and advisory fees, net.(6) AUM/AUA reflects final data for the prior period, adjusted for net new client account activity through the period presented. Does not include post-period investment valuation or cash activity. Net asset value (“NAV”) data for underlying investments is as of the prior period, as reported by underlying managers up to the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end. When NAV data is not available by the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end, such NAVs are adjusted for cash activity following the last available reported NAV.

StepStone Group Inc.GAAP Condensed Consolidated Balance Sheets (Unaudited)(in thousands, except share and per share amounts)
	As of
	June 30, 2024			March 31, 2024
Assets
Cash and cash equivalents	$	141,633		$	143,430
Restricted cash		735			718
Fees and accounts receivable		58,334			56,769
Due from affiliates		100,277			67,531
Investments:
Investments in funds		145,519			135,043
Accrued carried interest allocations		1,328,853			1,354,051
Legacy Greenspring investments in funds and accrued carried interest allocations(1)		617,539			631,197
Deferred income tax assets		195,417			184,512
Lease right-of-use assets, net		95,374			97,763
Other assets and receivables		61,436			60,611
Intangibles, net		294,623			304,873
Goodwill		580,542			580,542
Assets of Consolidated Funds:
Cash and cash equivalents		53,802			38,164
Investments, at fair value		158,222			131,858
Other assets		2,048			1,745
Total assets	$	3,834,354		$	3,788,807
Liabilities and stockholders’ equity
Accounts payable, accrued expenses and other liabilities	$	132,380		$	127,417
Accrued compensation and benefits		124,973			101,481
Accrued carried interest-related compensation		652,123			719,497
Legacy Greenspring accrued carried interest-related compensation(1)		470,003			484,154
Due to affiliates		223,471			212,918
Lease liabilities		118,068			119,739
Debt obligations		172,118			148,822
Liabilities of Consolidated Funds:
Other liabilities		1,757			1,645
Total liabilities		1,894,893			1,915,673
Redeemable non-controlling interests in Consolidated Funds		142,547			102,623
Redeemable non-controlling interests in subsidiaries		5,931			115,920
Stockholders’ equity:
Class A common stock, $0.001 par value, 650,000,000 authorized; 67,931,869 and 65,614,902 issued and outstanding as of June 30, 2024 and March 31, 2024, respectively		68			66
Class B common stock, $0.001 par value, 125,000,000 authorized; 45,889,135 and 45,030,959 issued and outstanding as of June 30, 2024 and March 31, 2024, respectively		46			45
Additional paid-in capital		363,529			310,293
Retained earnings		2,995			13,768
Accumulated other comprehensive income		297			304
Total StepStone Group Inc. stockholders’ equity		366,935			324,476
Non-controlling interests in subsidiaries		1,027,558			974,559
Non-controlling interests in legacy Greenspring entities(1)		147,536			147,042
Non-controlling interests in the Partnership		248,954			208,514
Total stockholders’ equity		1,790,983			1,654,591
Total liabilities and stockholders’ equity	$	3,834,354		$	3,788,807

(1) Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests.

StepStone Group Inc.GAAP Condensed Consolidated Statements of Income (Unaudited)(in thousands, except share and per share amounts)
	Three Months Ended June 30,
		2024				2023
Revenues
Management and advisory fees, net	$	178,015			$	138,115
Performance fees:
Incentive fees		841				6
Carried interest allocations:
Realized		41,804				14,473
Unrealized		(25,170	)			49,364
Total carried interest allocations		16,634				63,837
Legacy Greenspring carried interest allocations(1)		(9,089	)			(23,947	)
Total performance fees		8,386				39,896
Total revenues		186,401				178,011
Expenses
Compensation and benefits:
Cash-based compensation		78,224				70,081
Equity-based compensation		19,179				8,472
Performance fee-related compensation:
Realized		20,848				9,102
Unrealized		(10,923	)			24,211
Total performance fee-related compensation		9,925				33,313
Legacy Greenspring performance fee-related compensation(1)		(9,089	)			(23,947	)
Total compensation and benefits		98,239				87,919
General, administrative and other		41,011				33,277
Total expenses		139,250				121,196
Other income (expense)
Investment income		2,595				3,086
Legacy Greenspring investment loss(1)		(1,255	)			(2,866	)
Investment income of Consolidated Funds		7,635				2,362
Interest income		2,057				431
Interest expense		(2,990	)			(2,012	)
Other income (loss)		(351	)			227
Total other income		7,691				1,228
Income before income tax		54,842				58,043
Income tax expense		6,797				8,597
Net income		48,045				49,446
Less: Net income attributable to non-controlling interests in subsidiaries		16,615				9,630
Less: Net loss attributable to non-controlling interests in legacy Greenspring entities(1)		(1,255	)			(2,866	)
Less: Net income attributable to non-controlling interests in the Partnership		13,324				19,860
Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds		5,671				1,553
Less: Net income attributable to redeemable non-controlling interests in subsidiaries		362				—
Net income attributable to StepStone Group Inc.	$	13,328			$	21,269
Net income per share of Class A common stock:
Basic	$	0.20			$	0.34
Diluted	$	0.20			$	0.34
Weighted-average shares of Class A common stock:
Basic		66,187,754				62,834,818
Diluted		68,593,761				65,739,470

(1) Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. 

Non-GAAP Financial Measures: Definitions and Reconciliations

Adjusted Management and Advisory Fees, Net

The following table presents the components of adjusted management and advisory fees, net. We believe adjusted management and advisory fees, net is useful to investors because it removes the impact of consolidating the Consolidated Funds which we are required to consolidate under GAAP.

	Three Months Ended
(in thousands)	June 30, 2023		September 30, 2023		December 31, 2023		March 31, 2024		June 30, 2024
Focused commingled funds(1)(2)	$	67,119	$	70,481	$	78,633	$	80,434	$	104,798
Separately managed accounts		55,744		56,431		55,838		55,945		57,376
Advisory and other services		14,101		13,740		16,069		16,147		14,769
Fund reimbursement revenues(1)		1,337		1,675		1,403		1,282		1,571
Adjusted management and advisory fees, net	$	138,301	$	142,327	$	151,943	$	153,808	$	178,514

_______________________________(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.(2) Includes income-based incentive fees of $1.1 million for the three months ended June 30, 2024, $0.8 million for the three months ended March 31, 2024, and $0.6 million for the three months ended December 31, 2023 from certain funds that are regulated as a business development company.

Adjusted Revenues

Adjusted revenues represents the components of revenues used in the determination of ANI and comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations. We believe adjusted revenues is useful to investors because it presents a measure of realized revenues.

The table below shows a reconciliation of revenues to adjusted revenues.

	Three Months Ended
(in thousands)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024			June 30, 2024
Total revenues	$	178,011		$	191,422		$	(14,612	)	$	356,810		$	186,401
Unrealized carried interest allocations		(49,364	)		(55,371	)		129,584			(151,757	)		25,170
Deferred incentive fees		—			942			—			1,450			6
Legacy Greenspring carried interest allocations		23,947			12,603			69,700			(31,093	)		9,089
Management and advisory fee revenues for the Consolidated Funds(1)		186			204			451			398			499
Incentive fees for the Consolidated Funds(2)		—			—			—			1,549			—
Adjusted revenues	$	152,780		$	149,800		$	185,123		$	177,357		$	221,165

_______________________________(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.(2) Reflects the add-back of incentive fees for the Consolidated Funds, which have been eliminated in consolidation.

Adjusted Net Income

Adjusted net income, or “ANI,” is a non-GAAP performance measure that we present before the consolidation of StepStone Funds on a pre-tax and after-tax basis used to evaluate profitability. ANI represents the after-tax net realized income attributable to us. ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation and legacy Greenspring investment income (loss) as none of the economics are attributable to us. The components of revenues used in the determination of ANI (“adjusted revenues”) comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations. In addition, ANI excludes: (a) unrealized carried interest allocation revenues and related compensation, (b) unrealized investment income (loss), (c) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary, (d) amortization of intangibles, (e) net income (loss) attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary, (f) charges associated with acquisitions and corporate transactions, and (g) certain other items that we believe are not indicative of our core operating performance (as listed in the table below). ANI is fully taxed at our blended statutory rate. We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.

Fee-Related Earnings

Fee-related earnings, or “FRE,” is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees. FRE is a component of ANI and comprises adjusted management and advisory fees, net, less adjusted expenses which are operating expenses other than (a) performance fee-related compensation, (b) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary, (c) amortization of intangibles, (d) charges associated with acquisitions and corporate transactions, and (e) certain other items that we believe are not indicative of our core operating performance (as listed in the table below). FRE is presented before income taxes. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee revenue.

The table below shows a reconciliation of GAAP measures to additional non-GAAP measures. We use the non-GAAP measures presented below as components when calculating FRE and ANI (as defined below). We believe these additional non-GAAP measures are useful to investors in evaluating both the baseline earnings from recurring management and advisory fees, which provide additional insight into the operating profitability of our business, and the after-tax net realized income attributable to us, allowing investors to evaluate the performance of our business. These additional non-GAAP measures remove the impact of Consolidated Funds that we are required to consolidate under GAAP, and certain other items that we believe are not indicative of our core operating performance.

	Three Months Ended
(in thousands)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024			June 30, 2024
GAAP management and advisory fees, net	$	138,115		$	142,123		$	151,492		$	153,410		$	178,015
Management and advisory fee revenues for the Consolidated Funds(1)		186			204			451			398			499
Adjusted management and advisory fees, net	$	138,301		$	142,327		$	151,943		$	153,808		$	178,514
GAAP incentive fees	$	6		$	4,946		$	17,891		$	2,496		$	841
Incentive fee revenues for the Consolidated Funds(2)		—			—			—			1,549			—
Adjusted incentive fees	$	6		$	4,946		$	17,891		$	4,045		$	841
GAAP cash-based compensation	$	70,081		$	74,851		$	73,619		$	74,411		$	78,224
Adjustments(3)		(531	)		(574	)		(574	)		(461	)		(428	)
Adjusted cash-based compensation	$	69,550		$	74,277		$	73,045		$	73,950		$	77,796
GAAP equity-based compensation	$	8,472		$	5,916		$	14,032		$	13,937		$	19,179
Adjustments(4)		(7,171	)		(4,644	)		(12,610	)		(12,210	)		(16,785	)
Adjusted equity-based compensation	$	1,301		$	1,272		$	1,422		$	1,727		$	2,394
GAAP general, administrative and other	$	33,277		$	31,729		$	48,001		$	54,310		$	41,011
Adjustments(5)		(10,229	)		(8,778	)		(21,189	)		(27,079	)		(14,343	)
Adjusted general, administrative and other	$	23,048		$	22,951		$	26,812		$	27,231		$	26,668
GAAP interest income	$	431		$	977		$	827		$	1,429		$	2,057
Interest income earned by the Consolidated Funds(6)		(244	)		(249	)		(540	)		(612	)		(907	)
Adjusted interest income	$	187		$	728		$	287		$	817		$	1,150
GAAP other income (loss)	$	227		$	(872	)	$	4,408		$	(1,308	)	$	(351	)
Adjustments(7)		(376	)		403			(4,301	)		395			(72	)
Adjusted other income (loss)	$	(149	)	$	(469	)	$	107		$	(913	)	$	(423	)

______________________________(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.(2) Reflects the add-back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation.(3) Reflects the removal of compensation paid to certain employees as part of an acquisition earn-out.(4) Reflects the removal of equity-based compensation for awards granted prior to and in connection with the IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary.(5) Reflects the removal of lease remeasurement adjustments, accelerated depreciation of leasehold improvements for changes in lease terms, amortization of intangibles, transaction-related costs and other non-core operating income and expenses.(6) Reflects the removal of interest income earned by the Consolidated Funds.(7) Reflects the removal of amounts for Tax Receivable Agreements adjustments recognized as other income (loss), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters, loss on sale of subsidiary and the impact of consolidation of the Consolidated Funds.

The table below shows a reconciliation of income (loss) before income tax to ANI and FRE.

	Three Months Ended
(in thousands)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024			June 30, 2024
Income (loss) before income tax	$	58,043			66,980		$	(24,142	)	$	94,515		$	54,842
Net income attributable to non-controlling interests in subsidiaries(1)		(10,540	)		(10,321	)		(15,537	)		(12,822	)		(18,951	)
Net loss attributable to non-controlling interests in legacy Greenspring entities		2,866			3,966			2,222			33			1,255
Unrealized carried interest allocations		(49,364	)		(55,371	)		129,584			(151,757	)		25,170
Unrealized performance fee-related compensation		24,211			28,712			(62,243	)		84,014			(10,923	)
Unrealized investment (income) loss		(2,529	)		(1,657	)		5,559			(2,280	)		(1,180	)
Impact of Consolidated Funds		(2,647	)		(8,223	)		(11,068	)		(4,138	)		(7,731	)
Deferred incentive fees		—			942			—			1,450			6
Equity-based compensation(2)		7,171			4,644			12,610			12,210			16,785
Amortization of intangibles		10,661			10,661			10,661			10,423			10,250
Tax Receivable Agreements adjustments through earnings		—			—			222			90			—
Non-core items(3)		(50	)		(1,500	)		6,335			16,780			4,137
Pre-tax ANI		37,822			38,833			54,203			48,518			73,660
Income taxes(4)		(8,434	)		(8,660	)		(12,087	)		(10,802	)		(16,419	)
ANI		29,388			30,173			42,116			37,716			57,241
Income taxes(4)		8,434			8,660			12,087			10,802			16,419
Realized carried interest allocations		(14,473	)		(1,585	)		(15,289	)		(18,054	)		(41,804	)
Realized performance fee-related compensation(5)		9,102			1,720			15,444			11,421			20,848
Realized investment income		(557	)		(1,423	)		(3,508	)		(1,057	)		(1,415	)
Adjusted incentive fees(6)		(6	)		(4,946	)		(17,891	)		(4,045	)		(841	)
Deferred incentive fees		—			(942	)		—			(1,450	)		(6	)
Adjusted interest income(6)		(187	)		(728	)		(287	)		(817	)		(1,150	)
Interest expense		2,012			2,108			2,562			2,649			2,990
Adjusted other (income) loss(6)(7)		149			469			(107	)		913			423
Net income attributable to non-controlling interests in subsidiaries(1)		10,540			10,321			15,537			12,822			18,951
FRE	$	44,402		$	43,827		$	50,664		$	50,900		$	71,656

_______________________________(1) Reflects the portion of pre-tax ANI attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary:

	Three Months Ended
(in thousands)	June 30, 2023		September 30, 2023		December 31, 2023		March 31, 2024		June 30, 2024
FRE attributable to non-controlling interests in subsidiaries and profits interests	$	10,534	$	9,463	$	10,518	$	11,559	$	13,308
Non fee-related earnings attributable to non-controlling interests in subsidiaries and profits interests		6		858		5,019		1,263		5,643
Net income attributable to non-controlling interests in subsidiaries	$	10,540	$	10,321	$	15,537	$	12,822	$	18,951

(2) Reflects equity-based compensation for awards granted prior to and in connection with the IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in the private wealth subsidiary.(3) Includes (income) expense related to the following non-core operating income and expenses:

	Three Months Ended
(in thousands)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024		June 30, 2024
Transaction costs	$	37		$	163		$	670		$	3,985	$	672
Lease remeasurement adjustments		—			—			(106	)		—		—
Accelerated depreciation of leasehold improvements for changes in lease terms		631			631			631			—		—
(Gain) loss on change in fair value for contingent consideration obligation		(1,249	)		(2,868	)		9,054			12,280		2,953
Compensation paid to certain employees as part of an acquisition earn-out		531			574			574			515		482
Gain from negotiation of certain corporate matters		—			—			(5,300	)		—		—
Loss on sale of subsidiary		—			—			812			—		—
Other non-core items		—			—			—			—		30
Total non-core operating income and expenses	$	(50	)	$	(1,500	)	$	6,335		$	16,780	$	4,137

(4) Represents corporate income taxes at a blended statutory rate applied to pre-tax ANI:

	Three Months Ended
	June 30, 2023		September 30, 2023		December 31, 2023		March 31, 2024		June 30, 2024
Federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Combined state, local and foreign rate	1.3	%	1.3	%	1.3	%	1.3	%	1.3	%
Blended statutory rate	22.3	%	22.3	%	22.3	%	22.3	%	22.3	%

(5) Includes carried interest-related compensation expense related to the portion of net carried interest allocation revenue attributable to equity holders of the Company’s consolidated subsidiaries that are not 100% owned:

	Three Months Ended
(in thousands)	June 30, 2023		September 30, 2023		December 31, 2023		March 31, 2024		June 30, 2024
Realized carried interest-related compensation	$	2,189	$	—	$	660	$	910	$	—

(6) Excludes the impact of consolidating the Consolidated Funds.(7) Excludes amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(0.1) million for the three months ended March 31, 2024 and $(0.2) million for the three months ended December 31, 2023), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters ($5.3 million for the three months ended December 31, 2023), and loss on sale of subsidiary ($0.8 million for the three months ended December 31, 2023).

Fee-Related Earnings Margin

FRE margin is a non-GAAP performance measure which is calculated by dividing FRE by adjusted management and advisory fees, net. We believe FRE margin is an important measure of profitability on revenues that are largely recurring by nature. We believe FRE margin is useful to investors because it enables them to better evaluate the operating profitability of our business across periods.

The table below shows a reconciliation of FRE to FRE margin.

	Three Months Ended
(in thousands)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024			June 30, 2024
FRE	$	44,402		$	43,827		$	50,664		$	50,900		$	71,656
Adjusted management and advisory fees, net		138,301			142,327			151,943			153,808			178,514
FRE margin		32	%		31	%		33	%		33	%		40	%

Gross Realized Performance Fees

Gross realized performance fees represents realized carried interest allocations and adjusted incentive fees, including the deferred portion. We believe gross realized performance fees is useful to investors because it presents the total performance fees realized by us.

Net Realized Performance Fees

Net realized performance fees represents gross realized performance fees, less realized performance fee-related compensation. We believe net realized performance fees is useful to investors because it presents the performance fees attributable to us, net of amounts paid to employees as performance fee-related compensation.

The table below shows a reconciliation of total performance fees to gross and net realized performance fees.

	Three Months Ended
(in thousands)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024			June 30, 2024
Incentive fees	$	6		$	4,946		$	17,891		$	2,496		$	841
Realized carried interest allocations		14,473			1,585			15,289			18,054			41,804
Unrealized carried interest allocations		49,364			55,371			(129,584	)		151,757			(25,170	)
Legacy Greenspring carried interest allocations		(23,947	)		(12,603	)		(69,700	)		31,093			(9,089	)
Total performance fees		39,896			49,299			(166,104	)		203,400			8,386
Unrealized carried interest allocations		(49,364	)		(55,371	)		129,584			(151,757	)		25,170
Legacy Greenspring carried interest allocations		23,947			12,603			69,700			(31,093	)		9,089
Incentive fee revenues for the Consolidated Funds(1)		—			—			—			1,549			—
Deferred incentive fees		—			942			—			1,450			6
Gross realized performance fees		14,479			7,473			33,180			23,549			42,651
Realized performance fee-related compensation		(9,102	)		(1,720	)		(15,444	)		(11,421	)		(20,848	)
Net realized performance fees	$	5,377		$	5,753		$	17,736		$	12,128		$	21,803

______________________________(1) Reflects the add-back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

Adjusted Weighted-Average Shares and Adjusted Net Income Per Share

ANI per share measures our per-share earnings assuming all Class B units, Class C units and Class D units in the Partnership were exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards. ANI per share is calculated as ANI divided by adjusted weighted-average shares outstanding. We believe adjusted weighted-average shares and ANI per share are useful to investors because they enable investors to better evaluate per-share operating performance across reporting periods.

The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted weighted-average shares outstanding used in the computation of ANI per share.

	Three Months Ended
	June 30, 2023		September 30, 2023		December 31, 2023		March 31, 2024		June 30, 2024
ANI	$	29,388	$	30,173	$	42,116	$	37,716	$	57,241
Weighted-average shares of Class A common stock outstanding – Basic		62,834,818		62,858,468		64,068,952		64,194,859		66,187,754
Assumed vesting of RSUs		400,034		801,014		333,402		512,946		673,854
Assumed vesting and exchange of Class B2 units		2,504,618		2,538,647		2,553,899		2,573,762		1,732,153
Exchange of Class B units in the Partnership(1)		46,420,141		46,417,845		46,314,543		46,272,227		45,827,707
Exchange of Class C units in the Partnership(1)		2,514,085		2,502,086		1,962,131		1,958,507		1,849,846
Exchange of Class D units in the Partnership(1)		—		—		—		—		2,239,185
Adjusted weighted-average shares		114,673,696		115,118,060		115,232,927		115,512,301		118,510,499
ANI per share	$	0.26	$	0.26	$	0.37	$	0.33	$	0.48

_______________________________(1) Assumes the full exchange of Class B units, Class C units or Class D units in the Partnership for Class A common stock of SSG pursuant to the Class B Exchange Agreement, Class C Exchange Agreement or Class D Exchange Agreement, respectively.

Key Operating Metrics

We monitor certain operating metrics that are either common to the asset management industry or that we believe provide important data regarding our business. Refer to the Glossary below for a definition of each of these metrics.

Fee-Earning AUM

	Three Months Ended																Percentage Change
(in millions)	June 30, 2023			September 30, 2023			December 31, 2023			March 31, 2024			June 30, 2024				vs. FQ1'24
Separately Managed Accounts
Beginning balance	$	55,345		$	56,645		$	56,380		$	56,660		$	58,897			6	%
Contributions(1)		1,425			1,036			1,109			2,757			2,085			46	%
Distributions(2)		(429	)		(1,459	)		(1,397	)		(795	)		(830	)		93	%
Market value, FX and other(3)		304			158			568			275			120			(61	)%
Ending balance	$	56,645		$	56,380		$	56,660		$	58,897		$	60,272			6	%
Focused Commingled Funds
Beginning balance	$	30,086		$	30,762		$	30,905		$	32,772		$	34,961			16	%
Contributions(1)		796			992			1,898			2,429			5,653			610	%
Distributions(2)		(252	)		(988	)		(274	)		(327	)		(661	)		162	%
Market value, FX and other(3)		132			139			243			87			131			(1	)%
Ending balance	$	30,762		$	30,905		$	32,772		$	34,961		$	40,084			30	%
Total
Beginning balance	$	85,431		$	87,407		$	87,285		$	89,432		$	93,858			10	%
Contributions(1)		2,221			2,028			3,007			5,186			7,738			248	%
Distributions(2)		(681	)		(2,447	)		(1,671	)		(1,122	)		(1,491	)		119	%
Market value, FX and other(3)		436			297			811			362			251			(42	)%
Ending balance	$	87,407		$	87,285		$	89,432		$	93,858		$	100,356			15	%

_______________________________(1) Contributions consist of new capital commitments that earn fees on committed capital and capital contributions to funds and accounts that earn fees on net invested capital or NAV.(2) Distributions consist of returns of capital from funds and accounts that pay fees on net invested capital or NAV and reductions in fee-earning AUM from funds that moved from a committed capital to net invested capital fee basis or from funds and accounts that no longer pay fees.(3) Market value, FX and other primarily consist of changes in market value appreciation (depreciation) for funds that pay on NAV and the effect of foreign exchange rate changes on non-U.S. dollar denominated commitments.

Asset Class Summary

	Three Months Ended											Percentage Change
(in millions)	June 30, 2023		September 30, 2023		December 31, 2023		March 31, 2024		June 30, 2024			vs. FQ1'24
FEAUM
Private equity	$	46,539	$	46,464	$	48,258	$	49,869	$	54,855		18	%
Infrastructure		19,874		20,122		19,789		20,114		20,377		3	%
Private debt		14,865		15,122		15,460		15,477		16,161		9	%
Real estate		6,129		5,577		5,925		8,398		8,963		46	%
Total	$	87,407	$	87,285	$	89,432	$	93,858	$	100,356		15	%
Separately managed accounts	$	56,645	$	56,380	$	56,660	$	58,897	$	60,272		6	%
Focused commingled funds		30,762		30,905		32,772		34,961		40,084		30	%
Total	$	87,407	$	87,285	$	89,432	$	93,858	$	100,356		15	%
AUM(1)
Private equity	$	73,511	$	76,031	$	78,221	$	81,942	$	89,329		22	%
Infrastructure		28,521		28,678		28,307		30,003		32,756		15	%
Private debt		27,099		27,520		27,782		28,491		30,336		12	%
Real estate		13,469		13,612		14,646		16,201		16,912		26	%
Total	$	142,600	$	145,841	$	148,956	$	156,637	$	169,333		19	%
Separately managed accounts	$	85,058	$	85,387	$	88,890	$	93,938	$	103,003		21	%
Focused commingled funds		44,389		46,266		45,508		48,545		51,682		16	%
Advisory AUM		13,153		14,188		14,558		14,154		14,648		11	%
Total	$	142,600	$	145,841	$	148,956	$	156,637	$	169,333		19	%
AUA
Private equity	$	251,880	$	264,327	$	266,246	$	270,350	$	279,909		11	%
Infrastructure		53,593		55,146		57,528		60,339		62,599		17	%
Private debt		17,525		18,026		17,916		21,976		22,280		27	%
Real estate		173,992		175,369		168,802		168,455		166,659		(4	)%
Total	$	496,990	$	512,868	$	510,492	$	521,120	$	531,447		7	%
Total capital responsibility(2)	$	639,590	$	658,709	$	659,448	$	677,757	$	700,780		10	%

_____________________________Note: Amounts may not sum to total due to rounding. AUM/AUA reflects final data for the prior period, adjusted for net new client account activity through the period presented, and does not include post-period investment valuation or cash activity. Net asset value (“NAV”) data for underlying investments is as of the prior period, as reported by underlying managers up to the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end. When NAV data is not available by the business day occurring on or after 100 days, or 115 days at the fiscal year-end, following the prior period end, such NAVs are adjusted for cash activity following the last available reported NAV.(1) Allocation of AUM by asset class is presented by underlying investment asset classification.(2) Total capital responsibility equals assets under management (AUM) plus assets under advisement (AUA).

Contacts

Shareholder Relations:Seth Weissshareholders@stepstonegroup.com1-212-351-6106

Media:Brian Ruby / Chris Gillick / Matt Lettiero, ICRStepStonePR@icrinc.com1-203-682-8268

Glossary

Assets under advisement, or “AUA,” consists of client assets for which we do not have full discretion to make investment decisions but play a role in advising the client or monitoring their investments. We generally earn revenue for advisory-related services on a contractual fixed fee basis. Advisory-related services include asset allocation, strategic planning, development of investment policies and guidelines, screening and recommending investments, legal negotiations, monitoring and reporting on investments, and investment manager review and due diligence. Advisory fees vary by client based on the scope of services, investment activity and other factors. Most of our advisory fees are fixed, and therefore, increases or decreases in AUA do not necessarily lead to proportionate changes in revenue. We believe AUA is a useful metric for assessing the relative size of our advisory business.

Our AUA is calculated as the sum of (i) the NAV of client portfolio assets for which we do not have full discretion and (ii) the unfunded commitments of clients to the underlying investments. Our AUA reflects the investment valuations in respect of the underlying investments of our client accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUA does not include post-period investment valuation or cash activity. AUA as of June 30, 2024 reflects final data for the prior period (March 31, 2024), adjusted for net new client account activity through June 30, 2024. NAV data for underlying investments is as of March 31, 2024, as reported by underlying managers up to the business day occurring on or after 100 days following March 31, 2024. When NAV data is not available by the business day occurring on or after 100 days following March 31, 2024, such NAVs are adjusted for cash activity following the last available reported NAV.

Assets under management, or “AUM,” primarily reflects the assets associated with our separately managed accounts (“SMAs”) and focused commingled funds. We classify assets as AUM if we have full discretion over the investment decisions in an account or have responsibility or custody of assets. Although management fees are based on a variety of factors and are not linearly correlated with AUM, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business.

Our AUM is calculated as the sum of (i) the net asset value (“NAV”) of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds. Our AUM reflects the investment valuations in respect of the underlying investments of our funds and accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUM does not include post-period investment valuation or cash activity. AUM as of June 30, 2024 reflects final data for the prior period (March 31, 2024), adjusted for net new client account activity through June 30, 2024. NAV data for underlying investments is as of March 31, 2024, as reported by underlying managers up to the business day occurring on or after 100 days following March 31, 2024. When NAV data is not available by the business day occurring on or after 100 days following March 31, 2024, such NAVs are adjusted for cash activity following the last available reported NAV.

Consolidated Funds refer to the StepStone Funds that we are required to consolidate as of the applicable reporting period. We consolidate funds and other entities in which we hold a controlling financial interest.

Consolidated VIEs refer to the variable interest entities that we are required to consolidate as of the applicable reporting period. We consolidate VIEs in which we hold a controlling financial interest.

Fee-earning AUM, or “FEAUM,” reflects the assets from which we earn management fee revenue (i.e., fee basis) and includes assets in our SMAs, focused commingled funds and assets held directly by our clients for which we have fiduciary oversight and are paid fees as the manager of the assets. Our SMAs and focused commingled funds typically pay management fees based on capital commitments, net invested capital and, in certain cases, NAV, depending on the fee terms. Management fees are only marginally affected by market appreciation or depreciation because substantially all of the StepStone Funds pay management fees based on capital commitments or net invested capital. As a result, management fees and FEAUM are not materially affected by changes in market value. We believe FEAUM is a useful metric in order to assess assets forming the basis of our management fee revenue.

Legacy Greenspring entities refers to certain entities for which the Company, indirectly through its subsidiaries, became the sole and/or managing member in connection with the Greenspring acquisition.

SSG refers solely to StepStone Group Inc., a Delaware corporation, and not to any of its subsidiaries.

StepStone Funds refer to SMAs and focused commingled funds of the Company, including acquired Greenspring funds, for which the Partnership or one of its subsidiaries acts as both investment adviser and general partner or managing member.

The Partnership refers solely to StepStone Group LP, a Delaware limited partnership, and not to any of its subsidiaries.

Total capital responsibility equals AUM plus AUA. AUM includes any accounts for which StepStone Group has full discretion over the investment decisions, has responsibility to arrange or effectuate transactions, or has custody of assets. AUA refers to accounts for which StepStone Group provides advice or consultation but for which the firm does not have discretionary authority, responsibility to arrange or effectuate transactions, or custody of assets.

Undeployed fee-earning capital represents the amount of capital commitments to StepStone Funds that has not yet been invested or considered active but will generate management fee revenue once this capital is invested or activated. We believe undeployed fee-earning capital is a useful metric for measuring the amount of capital that we can put to work in the future and thus earn management fee revenue thereon.