Stepstone Group Inc. · NASDAQ:STEP
Stepstone — Q3 FY2021 Earnings Presentation
38 slides from Stepstone's earnings presentation, Feb 9, 2021
Slide 1: Fiscal Year 2021 Third Quarter Earnings Presentation
Fiscal Year 2021 Third Quarter Earnings Presentation February 9, 2021
Slide 2: Today’s presenters
Today’s presenters Scott Hart Jason Ment Mike McCabe Johnny Randel Co-CEO President & Co-COO Head of Strategic Planning Chief Financial Officer STEPSTONE GROUP 2
Slide 3: 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 $ 333B $ 80B+ $ 47B $ 50B+ 563 firm focused on providing customized investment combined assets under fee-earning annual private professionals AUM/AUA1 management1 assets under marke
Slide 4: 3Q Fiscal Year 2021 overview
3Q Fiscal Year 2021 overview • Assets Under Management (“AUM”) increased by $8.5 billion (or 12%) in the quarter to $80.5 billion (+30% from prior year) • Fee-Earning AUM (“FEAUM”) increased $2.3 billion (or 5%) in the quarter to $46.6 billion (+18% from prior year) Key Business Drivers • Undeployed
Slide 5: Overview
OVERVIEW Confidential | 5
Slide 6: Robust growth profile since inception
Robust growth profile since inception TOTALS ASSETS UNDER MANAGEMENT AND ADVISEMENT ($B) $333 Assets under management $296 Assets under advisement $266 CAGR 2007–3Q FY’21: 59% $155 $130 $116 $84 $62 $64 $54 $47 $27 $5 $9 $1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 FY'17 FY'18 FY'19 FY'20 3Q
Slide 7: Strategic Priorities
Strategic Priorities 1 CONTINUE TO GROW WITH EXISTING CLIENTS 2 GROW WITH NEW CLIENTS GLOBALLY 3 CONTINUE TO EXPAND DISTRIBUTION CHANNEL FOR PRIVATE WEALTH CLIENTS 4 LEVERAGE SCALE TO ENHANCE OPERATING MARGINS 5 MONETIZE DATA AND ANALYTICS CAPABILITIES 6 PURSUE ACCRETIVE TRANSACTIONS TO COMPLEMENT O
Slide 8: AUM Growth Overview
SMA AUM $61B Commingled AUM $14B Advisory AUM $5B 27% growth from prior year 21% growth from prior year ~$2B raised in LTM AUM Growth Overview new capital: $4B+ in 3Q FY’21; ~$2B raised in LTM $9B+ in LTM • AUM grew 12% in the quarter and 30% on a year-to-year basis to $80.5 billion • In the quarter
Slide 9: Fee-earning AUM evolution
FEAUM Growth 34% SMAs +19% from prior year clients with exposure to more than Fee-earning AUM evolution Commingled +16% from prior year one asset class BY COMMERCIAL STRUCTURE ($B) BY ASSET CLASS ($B) Total AUM 40 53 67 80 Total AUM 40 53 67 80 $47 $47 $41 $41 9 11 6 $32 10 $32 12 5 11 8 $22 $22 8 4
Slide 10: Trend in management and advisory fees
Trend in management and advisory fees MANAGEMENT FEES ($M) ADVISORY FEES ($M) % of mgmt. & advisory fees1 72% 76% 80% 81% % of mgmt. & advisory fees1 28% 24% 20% 19% $221 $187 97 Focused $145 commingled funds 79 $100 59 Separately managed accounts 49 124 $48 $53 107 $40 $45 86 52 FY'18 FY'19 FY'20 L
Slide 11: Financial Update
FINANCIAL UPDATE Confidential | 11
Slide 12: Financial highlights
Financial highlights • FEAUM growth of 18% drove fee revenue increases of 6% for the quarter and 22% year-to-date • Fee-Related Earnings increased 5% for the quarter and 48% year-to-date, primarily driven by fee revenue growth and lower travel-related expenses • Adjusted Net Income per share increas
Slide 13: Adjusted revenues
Adjusted revenues MGMT. & ADVISORY FEES ($M) $300 $273 • FEAUM growth and client advisory activity drove revenue growth of 22% YTD and 23% LTM $209 $222 +23% $171 +22% • Advisory fees increased 13% and 14%, respectively, on a YTD and LTM basis $200 • YTD management fees increased 25% driven by stron
Slide 14: Profitability
Profitability FEE-RELATED EARNINGS ($M) FRE Margin % 27% 33% 25% 31% $100 $84 $80 +50% • FEAUM growth, client advisory activity and favorable expense environment driving FRE $68 growth and margin improvement +48% $56 $60 $46 • YTD FRE increased 48% and LTM increased 50% $40 • YTD FRE margins increas
Slide 15: Accrued carry and fund investments
Accrued carry and fund investments ACCRUED CARRY ($M) $700 $637 +66% • Gross accrued carried interest of $637 million, an increase of 66% from December 31, 2019 $600 driven by increases in the unrealized gains of the underlying portfolios (note: valuations $486 reported on a one quarter lag) $500 $4
Slide 16: Unrealized carry
Unrealized carry • Gross accrued carried interest of $637 million, net accrued carry of $316 million as of 12/31/2020 • Over $41 billion in performance fee-eligible capital as of 12/31/2020 • ~64% or ~$409 million of gross accrued carried interest allocation balance is in SMAs or commingled funds th
Slide 17: Appendix
APPENDIX Confidential | 17
Slide 18: 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 $50B in annual private markets capital allocations¹ Corporations Endowments/Foundations Family Offices Asset management Private equity Private Wealth/Defined Advisory
Slide 19: StepStone’s platform provides the most complete private markets solutions
StepStone’s platform provides the most complete private markets solutions CUSTOMIZED SOLUTIONS ACROSS ASSET CLASSES SEPARATELY MANAGED FOCUSED COMMINGLED ADVISORY AND DATA PORTFOLIO ANALYTICS ACCOUNTS FUNDS SERVICES AND REPORTING • Owned by one client and • Owned by multiple clients • Recurring supp
Slide 20: Comprehensive, full service model
~200 39% bespoke SMA accounts and of advisory clients also have an Comprehensive, full service model focused commingled funds 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
Slide 21: StepStone’s growth drivers
StepStone’s growth drivers AUM AUA SEPARATELY MANAGED ACCOUNTS FOCUSED COMMINGLED FUNDS ADVISORY $61B $14B $253B 27% growth from prior year 21% growth from prior year +14% from prior year • Over $4B of new capital additions • A total of ~$2B raised in focus • Net client activity increased AUA by dur
Slide 22: Investment expertise across all private markets asset classes
50% ($160B+) combined AUM / AUA in Investment expertise across all private markets asset classes RE / INFRA / PD asset classes As of December 31, 2020 BY AUM1 BY AUA Private debt Private debt $15B / 19% Infrastructure $11B / 4% $19B / 8% Private equity Private equity $40B / 50% $127B / 50% Infrastru
Slide 23: GAAP consolidated income statements
GAAP consolidated income statements • GAAP net income was $107.4 million for the quarter and $163.4 million year-to-date. GAAP net income attributable to StepStone Group Inc. was $25.6 million (or $0.87 per share) for the quarter and $24.8 million (or $0.84 per share) year-to-date since IPO in Septe
Slide 24: Non-GAAP financial results
Non-GAAP financial results ($ in thousands, unless otherwise mentioned) Quarter-to-Date Year-to-Date Dec '19 Dec '20 % Fav / Unfav Dec '19 Dec '20 % Fav / Unfav Management and advisory fees, net $ 66,265 $ 70,093 6% $ 171,026 $ 209,245 22% Less: Cash-based compensation 34,188 36,732 -7% 94,783 113,8
Slide 25: Consolidated balance sheets
Consolidated balance sheets ($ in thousands) Dec '19 Mar '20 Dec '20 Assets Cash and cash equivalents $ 116,114 $ 89,939 $ 185,020 Restricted cash - - 3,971 Fees and accounts receivable 26,613 25,121 27,640 Due from affiliates 15,420 9,690 5,388 Investments: Investments in funds 49,619 53,386 63,449
Slide 26: Revenues - management and advisory fees, net
Revenues - management and advisory fees, net ($ in thousands) Quarter-to-Date Year-to-Date Last Twelve Months Dec '19 Dec '20 % Fav / Unfav Dec '19 Dec '20 % Fav / Unfav Dec '19 Dec '20 % Fav / Unfav Focused commingled funds $ 24,311 $ 23,567 -3% $ 56,917 $ 74,241 30% $ 71,229 $ 96,726 36% SMAs 28,1
Slide 27: Net realized performance fees
Net realized performance fees ($M, UNLESS OTHERWISE MENTIONED) QUARTERLY NET REALIZED PERFORMANCE FEES LTM NET REALIZED PERFORMANCE FEES $40.0 $40.0 $31.1 $30.0 $30.0 $29.2 $27.0 $24.2 $24.5 $24.4 $23.0 $23.4 $20.1 $20.0 $20.0 $20.0 $18.9 $18.4 $16.1 $9.4 $10.0 $10.0 $7.9 $7.2 $6.7 $5.9 $6.2 $6.1 $4
Slide 28: FEAUM overview
FEAUM overview • For the quarter, our FEAUM increased by approximately 5% to $46.6 billion • Deployed approximately $2.0 billion of capital from our existing undeployed fee-earning capital during the quarter as well Fav / Unfav Change ($B, unless noted) 3Q FY'21 3Q FY'20 $ % Walk from AUM to FEAUM $
Slide 29: Blue-chip, sophisticated, global clientele
Blue-chip, sophisticated, global clientele As of December 31, 2020 BY TYPE BY GEOGRAPHY LTM MANAGEMENT AND ADVISORY FEES (%) LTM MANAGEMENT AND ADVISORY FEES (%) Central and Endowments/Foundations Family Offices South America 4% 5% 4% Europe Corporations 19% North America 6% 31% Pension Funds Sovere
Slide 30: 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: $40B • Total AUM: $9B • Total AUM: $16B • Total AUM: $15B - SMA AUM: $31B - SMA AUM: $3B - SMA AUM: $16B - SMA AUM: $10B - FCF AUM: $9B - FCF AUM: $3B - FCF AUM: -- -
Slide 31: Track record disclosures
Track record disclosures Note: Descriptions for certain terms can be found on the definitions page starting on slide 35 of this presentation. 1 Investment returns reflect NAV data for underlying investments as of September 30, 2020, as reported by underlying managers up to 100 days following Septemb
Slide 32: Reconciliation of GAAP to ANI and FRE
Reconciliation of GAAP to ANI and FRE ($ in thousands) Quarter-to-Date Year-to-Date Last Twelve Months Dec '19 Dec '20 Dec '19 Dec '20 Dec '19 Dec '20 Income before income tax $ 18,231 $ 116,935 $ 97,277 $ 174,983 $ 99,524 $ 226,446 Net income attributable to non-controlling interests in subsidiarie
Slide 33: Reconciliation of adjusted net income per share
Reconciliation of adjusted net income per share ($ in thousands, except share and per share amounts) Quarter-to-Date Year-to-Date Dec '19 Dec '20 Dec '19 Dec '20 Adjusted net income $ 18,013 $ 27,035 $ 41,667 $ 60,776 Weighted-average shares of Class A common stock outstanding - Basic(1) 29,237,500
Slide 34: Reconciliation of gross and net realized performance fees
Reconciliation of gross and net realized performance fees ($ in millions) Quarter-to-Date 4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY19 1Q FY20 2Q FY20 3Q FY20 4Q FY20 1Q FY21 2Q FY21 3Q FY21 Realized carried interest revenue $ 9.9 $ 11.3 $ 10.1 $ 5.4 $ 9.9 $ 12.9 $ 11.1 $ 19.6 $ 2.6 $ 3.6 $ 8.6 $ 26.1 In
Slide 35: Definitions
Definitions • StepStone Group Inc. or “SSG” refers solely to StepStone Group Inc., a Delaware corporation, and not to any of its subsidiaries. • Partnership refers solely to StepStone Group LP, a Delaware limited partnership, and not to any of its subsidiaries. • Reorganization refers to the series
Slide 36: 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 37: Definitions (continued)
Definitions (continued) • Invested Capital refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital calls. • “IRR”, refers to the annualized internal rate of return for all investments within the relevant investment strategy on a
Slide 38: Disclosure
Disclosure 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 statem