Stepstone Group Inc. · NASDAQ:STEP
Stepstone — Q2 FY2023 Earnings Presentation
37 slides from Stepstone's earnings presentation, Nov 3, 2022
Slide 1: Second Quarter Fiscal Year 2023 Earnings Presentation
Second Quarter Fiscal Year 2023 Earnings Presentation NOVEMBER 3, 2022
Slide 2: Today's Presenters
Today’s Presenters Scott Hart Jason Ment Mike McCabe Johnny Randel CEO President & Co-COO Head of Strategy Chief Financial Officer STEPSTONE GROUP 2
Slide 3: GAAP Consolidated Income Statements
GAAP Consolidated Income Statements GAAP net loss was $67.1 million for the quarter and $88.5 million year-to-date. GAAP net loss attributable to StepStone Group Inc. was $29.2 million (or $0.48 per share) for the quarter and $40.3 million (or $0.66 per share) year-to-date. ($ in thousands, except p
Slide 4: Robust Growth Profile Since Inception
Robust Growth Profile Since Inception TOTALS ASSETS UNDER MANAGEMENT AND ADVISEMENT ($B) $602 $570 Assets under management Assets under advisement $427 $296 $266 $155 $130 $116 $84 $62 $64 $47 $54 $27 $1 $5 $9 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 FY'17 FY'18 FY'19 FY'20 FY’21 FY'22 FQ2'
Slide 5: Fiscal Q2 2023 Overview
Fiscal Q2 2023 Overview FQ2’23 FQ2’22 vs. FQ2’22 FQ1’23 vs. FQ1’23 Assets under management (“AUM”) $135.0 B $121.3 B 11% $136.5 B -1% Fee-Earning AUM (“FEAUM”) $80.1 B $66.7 B 20% $78.6 B 2% KEY BUSINESS DRIVERS Undeployed fee-earning capital $16.5 B $17.8 B -7% $17.1 B -4% Gross accrued carry $1,18
Slide 6: Overview
OVERVIEW
Slide 7: StepStone's Growth Drivers
StepStone’s Growth Drivers AUM AUA SEPARATELY MANAGED ACCOUNTS FOCUSED COMMINGLED FUNDS ADVISORY $79B $44B $467B 7% growth from prior year 13% growth from prior year • A total of ~$11B of new capital additions • A total of ~$7B raised in focused commingled • Net client activity increased AUA by $70B
Slide 8: Fee-earning AUM Evolution
FEAUM Growth 35% Fee-earning AUM Evolution SMAs +23% from prior year clients with exposure to more Commingled +16% from prior year than one asset class FEE-EARNING AUM BY COMMERCIAL STRUCTURE ($B) Total AUM $40 $53 $67 $86 $1341 $135 $80.1 FEAUM + UNDEPLOYED FEE-EARNING CAPITAL ($B)1 Focused comming
Slide 9: Trend in Management and Advisory Fees
Trend in Management and Advisory Fees MANAGEMENT & ADVISORY FEES ($M)1 MANAGEMENT & ADVISORY FEES PER SHARE6 Advisory fees $4512 $3.96 Focused commingled funds $3.55 $3792 57 Separately managed $2.91 accounts 56 $285 $2.40 $234 200 52 149 $1.95 $190 48 $1.44 $140 97 45 79 40 59 174 194 49 136 86 107
Slide 10: Financial Update
FINANCIAL UPDATE
Slide 11: Financial Highlights
Financial Highlights • Fee revenues increased 43% for the quarter and 46% year-to-date, driven by FEAUM growth and the impact of the Greenspring acquisition • ANI per share decreased 18% for the quarter and 9% year-to-date, reflecting lower net realized performance fees partially offset by higher FR
Slide 12: Adjusted Revenues
Adjusted Revenues ($M, except per share amounts) MGMT. & ADVISORY FEES CAGR Per Share +25% • Management fees per share increased 33% YTD driven by strong FEAUM growth +27% $2.06 $3.96 $1.62 $454 • Management fees per share increased by a compound annual growth rate of 31% over the $236 $1.44 $162 lo
Slide 13: Profitability
Profitability ($M, except per share amounts) FEE-RELATED EARNINGS Per Share $1.29 CAGR • Fee-related earnings per share growth driven primarily by growth in FEAUM and margin +32% $0.66 $148 +45% expansion for both the YTD and long-term growth periods $76 $0.50 • FRE margins were 32% YTD as compared
Slide 14: Accrued Carry and Fund Investments
Accrued Carry and Fund Investments1 ACCRUED CARRY ($M)2 NET UNREALIZED CARRY AS OF 9/30/2022 BY VINTAGE AND TYPE -2% $1,600 $1,481 2013 & Prior Private $1,347 $1,366 8% $1,400 Equity 93% $1,216 $1,189 Post 2017 $1,200 36% 2014 $1,000 11% Infrastructure $800 3% 2015 $600 13% $400 Real Estate $200 201
Slide 15: Appendix
APPENDIX
Slide 16: Consolidated Balance Sheets
Consolidated Balance Sheets ($ in thousands) S ep '2 1 Mar '2 2 S ep '2 2 Asset s Cash and cash equivalents $ 175,015 $ 116,386 $ 143,562 Restricted cash 1,016 1,063 921 Fees and accounts receivable 34,264 34,141 34,344 Due from affiliates 10,236 19,369 13,516 Investments: Investments in funds 90,32
Slide 17: Non-GAAP Financial Results
Non-GAAP Financial Results1 ($ in thousands, unless otherwise mentioned) Qua rter Y ea r - to- da te Sep '21 Sep '22 % Fav / Unfav Sep '21 Sep '22 % Fav / Unfav Management and advisory fees, net $ 83,583 $ 119,121 43% $ 161,644 $ 235,853 46% Less: Adjusted cash-based compensation 43,881 58,761 -34%
Slide 18: FEAUM Overview
FEAUM Overview F a v / U nf a v Cha ng e ( $B, unl es s noted) F Q2' 23 F Q2' 22 $ % Walk from AUM to FEAUM $B SMA s Total AUM as of 9/30/22 $ 135.0 Beginning balance $ 52.2 $ 41.4 $ 10.8 26% Less: Non-Fee Earning AUM 14.2 Contributions 1.8 2.2 (0.5) -21% Less: Market appreciation included in AUM 24
Slide 19: StepStone Occupies a Critical Position within the GP & LP Ecosystem
StepStone Occupies a Critical Position within the GP & LP Ecosystem Global Private Markets Primaries Secondaries Co-investments Over $75B in annual private markets capital allocations¹ Corporations Endowments/Foundations Family Offices Asset management Private Equity Private Wealth/Defined Advisory
Slide 20: StepStone is a Global Private Markets Solutions and Services Provider
StepStone is a Global Private Markets Solutions and Services Provider StepStone is a global private markets investment $ 602B $ 135B $ 80B $ 75B+ 886 firm focused on providing customized investment combined assets under fee-earning annual private professionals AUM/AUA1 management1 assets under marke
Slide 21: Comprehensive Private Markets Solutions
Comprehensive Private Markets Solutions StepStone’s flexible business model helps clients access opportunities across all asset classes: ASSET MANAGEMENT ADVISORY RESEARCH SEPARATELY MANAGED ADVISORY & PORTFOLIO ANALYTICS & FOCUSED COMMINGLED FUNDS ACCOUNTS DATA SERVICES REPORTING • Owned by one cli
Slide 22: Comprehensive, Full Service Model
253 35% Comprehensive, Full Service Model bespoke SMA accounts and focused commingled funds of advisory clients also have an AUM relationship • Offers a comprehensive, full-service model to clients seeking a customized solution to private markets investing • Each solution is offered across each of t
Slide 23: Investment Expertise Across All Private Markets Asset Classes
48% ($290B) Investment Expertise Across All Private Markets Asset Classes combined AUM / AUA in RE / INFRA / PD asset classes As of September 30, 2022 BY AUM1 BY AUA Private Debt Private Debt $24B / 17% Infrastructure $17B / 4% $48B / 10% Private Equity $72B / 53% Private Equity Infrastructure $240B
Slide 24: Net Realized Performance Fees
Net Realized Performance Fees QUARTERLY NET REALIZED PERFORMANCE FEES LTM NET REALIZED PERFORMANCE FEES ($m, unless otherwise mentioned) ($m, unless otherwise mentioned) $130 $130 $123 $122 $120 $120 $110 $110 $110 $107 $100 $100 $91 $90 $90 $80 $80 $70 $68 $70 $60 $60 $50 $50 $43 $40 $40 $33 $33 $3
Slide 25: Revenues - Management and Advisory Fees, Net
Revenues - Management and Advisory Fees, Net ($ in thousands) Q uarter Year-To -Date Last Twelve Months Sep '21 Sep '22 % Fav / Unfav Sep '21 Sep '22 % Fav / Unfav Sep '21 Sep '22 otal % Fav / Unfav Focused commingled funds $ 28,500 $ 51,553 81% $ 52,650 $ 104,295 98% $ 99,199 $ 200,370 ## 102% SMAs
Slide 26: Blue-chip, Sophisticated, Global Clientele
Blue-chip, Sophisticated, Global Clientele As of September 30, 2022 BY TYPE BY GEOGRAPHY LTM management and advisory fees (%) LTM management and advisory fees (%) Pension Funds 3% 2% North America 6% Insurance Companies Asia/Australia 6% 17% 9% Private Wealth/ 34% Europe 38% Defined Contribution Pla
Slide 27: StepStone's Diversified Platform Spans Private Markets Solutions
StepStone’s Diversified Platform Spans Private Markets Solutions PRIVATE EQUITY REAL ESTATE INFRASTRUCTURE PRIVATE DEBT • Total AUM: $72B • Total AUM: $12B • Total AUM: $28B • Total AUM: $24B - SMA AUM: $36B - SMA AUM: $4B - SMA AUM: $26B - SMA AUM: $13B - FCF AUM: $37B - FCF AUM: $4B - FCF AUM: $--
Slide 28: Track Record Disclosures
Track Record Disclosures Note: Descriptions for certain terms can be found on the definitions page starting on slide 34 of this presentation. 1 Investment returns reflect NAV data for underlying investments as of June 30, 2022, as reported by underlying managers up to 100 days following June 30, 202
Slide 29: Notable StepStone Focused Commingled Funds
Notable StepStone Focused Commingled Funds1 Vintage Fund Size Fund Name 2 Desc ription Year ($ M) PRIV A T E EQU IT Y StepStone Secondary Opportunities Fund IV Private Equity Secondaries 2019 $ 2,097 StepStone VC Global Partners X Multi-Strategy Global Venture Capital 2020 1,480 StepStone Tactical G
Slide 30: Reconciliation of GAAP to ANI and FRE
Reconciliation of GAAP to ANI and FRE ($ in thousands) Qu ar t er Year -To -D at e Fu ll Year L ast Tw elv e Mo n t h s Sep '21 Sep '22 Sep '21 Sep '22 Mar '18 Sep '22 I n c o m e (lo ss) b efo r e in c o m e t ax $ 113,717 $ (74,487) $ 254,659 $ (94,672) $ 85,805 $ 163,250 Net income attributable t
Slide 31: Reconciliation of Adjusted Revenues and Expenses
Reconciliation of Adjusted Revenues and Expenses ($ in thousands) Qu ar t er Year -To -D at e Fu ll Year L ast Tw elv e Mo n t h s Sep '21 Sep '22 Sep '21 Sep '22 Mar '18 Sep '22 To t al r ev en u es $ 281,765 $ (1 5 8 , 4 9 5 ) $ 590,370 $ (2 3 5 , 7 1 3 ) $ 264,275 $ 539,442 Unrealized carried int
Slide 32: Reconciliation of Adjusted Net Income Per Share
Reconciliation of Adjusted Net Income Per Share ($ in thousands, except share and per share amounts) Q uarter Year-to-Date Full Year Last Twelve Months Sep '21 Sep '22 Sep '21 Sep '22 Mar '18 Sep '22 Adjusted net income $ 40,115 $ 37,261 $ 80,648 $ 84,395 $ 35,020 $ 176,690 Weighted-average shares o
Slide 33: Reconciliation of Gross and Net Realized Performance Fees
Reconciliation of Gross and Net Realized Performance Fees(1) ($ in millions) Q uarter FQ4'18 FQ1'19 FQ2'19 FQ3'19 FQ4'19 FQ1'20 FQ2'20 FQ3'20 FQ4'20 FQ1'21 FQ2'21 FQ3'21 FQ4'21 FQ1'22 FQ2'22 FQ3'22 FQ4'22 FQ1'23 FQ2'23 Realized carried interest allocations $ 9.9 $ 11.3 $ 10.1 $ 5.4 $ 9.9 $ 12.9 $ 11
Slide 34: Definitions
Definitions • Company refers to SSG and its consolidated subsidiaries, including the Partnership, following the Reorganization and IPO and to the Partnership and its consolidated subsidiaries prior to the Reorganization and IPO. • StepStone Group Inc. or “SSG” refers solely to StepStone Group Inc.,
Slide 35: Definitions (continued)
Definitions (continued) • 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 mana
Slide 36: Definitions (continued)
Definitions (continued) • Net Realized Performance Fees represents gross realized performance fees, less realized performance fee-related compensation. Excludes legacy Greenspring entities. • Invested Capital refers to the total amount of all investments made by a fund, including commitment-reducing
Slide 37: Disclosure
Disclosure Some of the statements in this presentation 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 s