Slide 1: Fiscal Year 2021 Second Quarter Earnings Presentation
Fiscal Year 2021 Second Quarter Earnings Presentation November 10, 2020
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 1
Slide 3: 2Q Fiscal Year 2021 overview
2Q Fiscal Year 2021 overview • Total Assets Under Management (“AUM”) increased by $5.9 billion (or 9%) in the quarter to $72.0 billion (+23% from prior year) • Fee-Earning AUM (“FEAUM”) increased $2.6 billion (or 6%) in the quarter to $44.3 billion (+22% from prior year) Key Business Drivers • Undep
Slide 4: Overview
OVERVIEW Confidential | 3
Slide 5: 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 $ 313B $ 72B $ 44B $ 40B+ 553 firm focused on providing customized investment combined assets under fee-earning annual private professionals AUM/AUA1 management1 assets under marke
Slide 6: Critical position within the GP & LP ecosystem
…and occupies a critical position within the GP & LP ecosystem Global private markets Primaries Secondaries Co-investments Over $40B in annual private markets capital allocations¹ Corporations Endowments/Foundations Family Offices Asset management Private equity Private Wealth/Defined Advisory and I
Slide 7: StepStone's platform provides the most complete private markets solutions
StepStone’s platform provides the most complete private markets solutions CUSTOMIZED SOLUTIONS ACROSS ASSET CLASSES SEPARATELY MANAGED FOCUSED COMMINGLED ADVISORY AND DATA PORTFOLIO ANALYTICS ACCOUNTS FUNDS SERVICES AND REPORTING • Owned by one client and • Owned by multiple clients • Recurring supp
Slide 8: Comprehensive, full service model
~200 39% bespoke SMA accounts and of advisory clients also have an Comprehensive, full service model focused commingled funds AUM relationship • Offers a comprehensive, full-service model to clients seeking a customized solution to private markets investing • Each solution is offered across each of
Slide 9: Robust growth profile since inception
Robust growth profile since inception TOTALS ASSETS UNDER MANAGEMENT AND ADVISEMENT ($B) $313 Assets under management $296 Assets under advisement $266 CAGR 2007–2Q FY’21: 60% $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 2Q
Slide 10: StepStone's growth drivers
StepStone’s growth drivers AUM AUA SEPARATELY MANAGED ACCOUNTS FOCUSED COMMINGLED FUNDS ADVISORY $55B $14B $241B >20% growth from prior year >30% growth from prior year +8% from prior year • ~$3B of new capital additions during • A total of ~$3B raised in focus • Net client activity increased AUA by
Slide 11: Investment expertise across all private markets asset classes
50%+ ($160B+) 35% combined AUM / AUA in clients with exposure to more Investment expertise across all private markets asset classes non-PE asset classes than one asset class As of September 30, 2020 BY AUM1 BY AUA Private debt Private debt $13B / 19% Infrastructure $10B / 4% $20B / 8% Private equity
Slide 12: Fee-earning AUM evolution
Fee-earning AUM evolution BY COMMERCIAL STRUCTURE ($B) BY ASSET CLASS ($B) Total AUM 40 53 67 72 Total AUM 40 53 67 72 $44 $44 $41 $41 8 11 6 $32 10 $32 5 12 11 8 $22 $22 8 4 4 4 Focused Private debt 6 3 commingled 33 5 31 Infrastructure funds 1 24 Real estate 20 Separately 20 17 16 managed Private
Slide 13: Trend in management and advisory fees
Trend in management and advisory fees MANAGEMENT FEES ($M) ADVISORY FEES ($M) % of mgmt. & advisory fees1 72% 76% 80% 80% % of mgmt. & advisory fees1 28% 24% 20% 20% $217 $187 97 Focused $145 commingled funds 79 $100 59 Separately managed accounts 49 $48 $53 119 $45 107 $40 86 52 FY'18 FY'19 FY'20 L
Slide 14: Financial Update
FINANCIAL UPDATE Confidential | 13
Slide 15: Financial highlights
Financial highlights • FEAUM growth of 22% drove fee revenue increases of 41% for the quarter and 33% year-to-date • Fee-Related Earnings increased 125% for the quarter and 89% year-to-date driven by fee revenue growth • Adjusted Net Income per share increased 59% for the quarter and 43% year-to-dat
Slide 16: Adjusted revenues
Adjusted revenues MGMT. & ADVISORY FEES ($M) $300 $270 • FEAUM growth and client advisory activity drove revenue growth of 33% YTD and 31% LTM +31% $206 • Advisory fees increased 23% and 17%, respectively, on a YTD and LTM basis $200 $139 +33% $105 • YTD management fees increased 36% driven by stron
Slide 17: Profitability
Profitability FEE-RELATED EARNINGS ($M) FRE Margin % 23% 33% 23% 31% $100 $83 $80 • FEAUM growth, SREP IV retroactive fees and favorable expense environment driving FRE +76% growth and margin improvement $60 +89% $47 $47 • YTD FRE increased 89% and LTM increased 76% $40 • YTD FRE margins increased f
Slide 18: Accrued carry and fund investments
Accrued carry and fund investments ACCRUED CARRY ($M) $600 +22% $486 • Gross accrued carried interest of $486 million, an increase of 22% from September 2019 $500 $461 driven by increases in the unrealized gains of underlying portfolios (note: valuations reported $399 $384 on a one quarter lag) $400
Slide 19: Unrealized carry
Unrealized carry • Gross accrued carried interest of $486 million as of 9/30/2020 • ~$38 billion in performance fee-eligible capital as of 9/30/2020 • ~62% or ~$300 million of gross accrued carried interest allocation balance is in SMAs or commingled funds that have American style (or deal-by- deal)
Slide 20: Appendix
APPENDIX Confidential | 19
Slide 21: GAAP consolidated income statements
GAAP consolidated income statements • GAAP net income was $108.4 million for the quarter and $56.0 million year-to-date. GAAP net income attributable to StepStone Group Inc. was a loss of $0.8 million (or $0.03 per share) for the period following the IPO, from Sep 16 to Sep 30, 2020, and was driven
Slide 22: Non-GAAP financial results
Non-GAAP financial results Quarter-to-Date Year-to-Date ($ in thousands, except per share amounts) Sep '19 Sep '20 % Fav / Unfav Sep '19 Sep '20 % Fav / Unfav Management and advisory fees, net $ 53,793 $ 75,652 41% $ 104,761 $ 139,152 33% Less: Cash-based compensation 30,927 37,473 -21% 60,595 77,12
Slide 23: Consolidated balance sheets
Consolidated balance sheets ($ in thousands) Sep '19 Mar '20 Sep '20 Assets Cash and cash equivalents $ 61,638 $ 89,939 $ 156,908 Restricted cash - - 2,919 Marketable securities 43,679 - - Fees and accounts receivable 27,765 25,121 27,486 Due from affiliates 2,419 9,690 5,252 Investments: Investment
Slide 24: Net realized performance fees
Net realized performance fees ($M, UNLESS OTHERWISE MENTIONED) QUARTERLY NET REALIZED PERFORMANCE FEES LTM NET REALIZED PERFORMANCE FEES 30.0 30.0 $29.2 $27.0 $24.2 $24.5 $24.4 $23.4 $23.0 $20.1 $20.0 20.0 20.0 $18.9 $18.4 10.0 $9.4 10.0 $7.9 $7.2 $6.7 $5.9 $6.2 $6.1 $4.6 $4.6 $2.5 $1.0 0.0 0.0 4Q F
Slide 25: FEAUM overview
FEAUM overview • For the quarter, our FEAUM increased by approximately 6% to $44.3 billion • Deployed approximately $0.8 billion of capital from our existing undeployed fee-earning capital during the quarter as well Fav / Unfav Change ($B, unless noted) 2Q FY'21 2Q FY'20 $ % Walk from AUM to FEAUM $
Slide 26: Blue-chip, sophisticated, global clientele
Blue-chip, sophisticated, global clientele As of September 30, 2020 BY TYPE BY GEOGRAPHY LTM MANAGEMENT AND ADVISORY FEES (%) LTM MANAGEMENT AND ADVISORY FEES (%) Central and Endowments/Foundations Corporations South America 4% 6% 4% Middle East Family Offices 19% North America 6% 33% Pension Funds
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: $35B • Total AUM: $8B • Total AUM: $15B • Total AUM: $13B - SMA AUM: $27B - SMA AUM: $3B - SMA AUM: $15B - SMA AUM: $10B - FCF AUM: $8B - FCF AUM: $3B - 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 31 of this presentation. 1 Approved amount included approximately $2 billion in Real Estate debt. 2 Private Equity includes 1,014 investments totaling $93.6 billion of capital commitm
Slide 29: Reconciliation of GAAP to ANI and FRE
Reconciliation of GAAP to ANI and FRE ($ in thousands) Quarter-to-Date Year-to-Date Last Twelve Months Sep '19 Sep '20 Sep '19 Sep '20 Sep '19 Sep '20 Income before income tax $ 47,411 $ 109,250 $ 79,046 $ 58,048 $ 96,218 $ 127,742 Net income attributable to non-controlling interests in subsidiaries
Slide 30: 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 Sep '19 Sep '20 Sep '19 Sep '20 Adjusted net income $ 11,487 $ 18,262 $ 23,654 $ 33,741 Weighted-average shares of Class A common stock outstanding - Diluted(1) 29,237,50
Slide 31: Reconciliation of gross and net realized performance fees
Reconciliation of gross and net realized performance fees ($ in million) 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 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 Incentive fees 0.1
Slide 32: 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 33: Definitions (continued)
Definitions (continued) • Adjusted net income, or “ANI”, is a non-GAAP performance measure that we present on a pre-tax and after-tax basis used to evaluate profitability. ANI represents the after-tax net realized income attributable to us. The components of revenues used in the determination of ANI
Slide 34: 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