Stepstone Group Inc. · NASDAQ:STEP
Stepstone — Q1 FY2022 Earnings Presentation
37 slides from Stepstone's earnings presentation, Aug 10, 2021
Slide 1: First Quarter Fiscal Year 2022 Earnings Presentation
First Quarter Fiscal Year 2022 Earnings Presentation AUGUST 10, 2021
Slide 2: Today's Presenters
Today’s Presenters Scott Hart Jason Ment Mike McCabe Johnny Randel Co-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 income was $126.5 million for the quarter. GAAP net income attributable to StepStone Group Inc. was $41.7 million (or $1.06 per share) for the quarter. ($ in thousands, except per share amounts) Quarter June '20 June '21 % Fav / Unfav Revenues Management
Slide 4: Robust Growth Profile Since Inception
Robust Growth Profile Since Inception TOTALS ASSETS UNDER MANAGEMENT AND ADVISEMENT ($B) $465 Assets under management $427 Assets under advisement $296 $266 $155 $130 $116 $84 $62 $64 $47 $54 $27 $5 $9 $1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 FY'17 FY'18 FY'19 FY'20 FY’21 FQ1'22 Note: Fi
Slide 5: Fiscal 1Q 2022 Overview
Fiscal 1Q 2022 Overview FQ1’22 FQ1’21 vs. FQ1’21 FQ4’21 vs. FQ4’21 Assets under management (“AUM”) $89.8 B $66.2 B 36% $86.4 B 4% Fee-Earning AUM (“FEAUM”) 52.9 B 41.7 B 27% 52.0 B 2% KEY BUSINESS DRIVERS Undeployed fee-earning capital 13.6 B 15.2 B -11% 14.0 B -3% Gross accrued carry 1,072.7 M 328.
Slide 6: Overview
OVERVIEW
Slide 7: Overview of Greenspring Associates
Overview of Greenspring Associates • Greenspring is a dedicated venture and growth equity platform that manages assets across strategies covering all stages of the venture capital life cycle • As of March 31, 2021, Greenspring managed $17 billion of total AUM, and $9 billion of fee-earning AUM • Gre
Slide 8: StepStone's Growth Drivers
StepStone’s Growth Drivers AUM AUA SEPARATELY MANAGED ACCOUNTS FOCUSED COMMINGLED FUNDS ADVISORY $67B $15B $375B 31% growth from prior year 25% growth from prior year • A total of ~$11B of new capital • A total of ~$2B raised in focused • Net client activity increased AUA by additions during the LTM
Slide 9: Fee-earning AUM Evolution
FEAUM Growth 35% SMAs +31% from prior year Fee-earning AUM Evolution clients with exposure to more Commingled +14% from prior than one asset class year FEE-EARNING AUM BY COMMERCIAL STRUCTURE ($B) Total AUM $40 $53 $67 $86 $90 Focused commingled funds FEAUM + UNDEPLOYED FEE-EARNING CAPITAL ($B) $52.
Slide 10: Trend in Management and Advisory Fees
Trend in Management and Advisory Fees MANAGEMENT FEES ($M) ADVISORY FEES ($M) % of mgmt. & 72% 76% 80% 82% 82% % of mgmt. & 28% 24% 20% 18% 18% advisory fees1 advisory fees1 $247 $233 Focused commingled funds $187 101 Separately managed 97 accounts $145 79 $100 59 49 146 $48 $52 $53 136 $40 $45 107
Slide 11: Financial Update
FINANCIAL UPDATE
Slide 12: Financial Highlights
Financial Highlights • FEAUM growth of 27% drove fee revenue increases of 23% for the quarter • Fee-Related Earnings increased 27% for the quarter, primarily driven by fee revenue growth and FRE margin expansion • Adjusted Net Income per share increased 156% for the quarter, reflecting higher FRE an
Slide 13: Adjusted Revenues
Adjusted Revenues MGMT. & ADVISORY FEES ($M) • FEAUM growth and client advisory activity drove revenue growth of 23% for the quarter and drove a compound annual growth rate (“CAGR”) of 26% over the long-term growth period +23% $78 $300 CAGR: +26% $64 • Advisory fees increased 3% for the quarter and
Slide 14: Profitability
Profitability FEE-RELATED EARNINGS ($M) FRE 29% 30% 17% 31% Margin % $94 • FEAUM growth, client advisory activity and favorable expense environment drove FRE $23 growth and margin improvement +27% CAGR: $18 +53% • FRE increased 27% for the quarter and increased by a compound annual growth rate of 53
Slide 15: Accrued Carry and Fund Investments
Accrued Carry and Fund Investments ACCRUED CARRY ($M) $1,200 $1,073 • Gross accrued carried interest of $1,073 million, an increase of 226% from June 30, +226% 2020 driven by increases in the unrealized gains of the underlying portfolios (note: $1,000 $897 valuations reported on a one quarter lag) $
Slide 16: Unrealized Carry
Unrealized Carry NET UNREALIZED CARRY AS OF 6/30/2021 BY VINTAGE NET UNREALIZED CARRY AS OF 6/30/2021 BY TYPE 2012 & Prior Post 2016 13% Private Equity 32% 2013 95% 1% Infrastructure 2014 2% 19% Real Estate 3% 2016 17% 68% from 2016 or prior vintages 2015 18% • Gross accrued unrealized carried inter
Slide 17: Appendix
APPENDIX
Slide 18: Consolidated Balance Sheets
Consolidated Balance Sheets ($ in thousands) June '2 0 Mar '2 1 June '2 1 Assets Cash and cash equivalents $ 90,711 $ 179,886 $ 218,580 Restricted cash - 3,977 4,011 Fees and accounts receivable 34,445 32,096 42,004 Due from affiliates 6,116 7,474 6,819 Investments: Investments in funds 50,448 74,37
Slide 19: Non-GAAP Financial Results
Non-GAAP Financial Results ($ in thousands, unless otherwise mentioned) Quarter June '20 June '21 % Fav / Unfav Management and advisory fees, net $ 63,500 $ 78,061 23% Less: Cash-based compensation 39,653 42,671 -8% (1) Equity-based compensation - 108 na (2) General, administrative and other 10,507
Slide 20: FEAUM Overview
FEAUM Overview Fav / Unfav Change ($B, unless noted) FQ1'22 FQ1'21 $ % Walk from AU M to FEAU M $B Total AUM as of 6/30/21 $ 89.8 SMAs Less: Non-Fee Earning AUM (9.9) Beginning balance $ 40.6 $ 31.1 $ 9.5 30% Less: Market appreciation included in AUM (13.4) Contributions 1.3 1.2 0.1 10% Less: Undepl
Slide 21: 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 22: 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 $ 465B $ 90B $ 53B $ 50B+ 586 firm focused on providing customized investment combined assets under fee-earning annual private professionals AUM/AUA1 management1 assets under market
Slide 23: 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 24: Comprehensive, Full Service Model
210+ 38% 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
Slide 25: Investment Expertise Across All Private Markets Asset Classes
49% ($229B) Investment Expertise Across All Private Markets Asset Classes combined AUM / AUA in RE / INFRA / PD asset classes As of June 30, 2021 BY AUM1 BY AUA Private Debt Private Debt $14B / 4% $19B / 21% Infrastructure $34B / 9% Private Equity $45B / 50% Private Equity $193B / 51% Infrastructure
Slide 26: Net Realized Performance Fees
Net Realized Performance Fees QUARTERLY NET REALIZED PERFORMANCE FEES LTM NET REALIZED PERFORMANCE FEES ($m, unless otherwise mentioned) ($m, unless otherwise mentioned) $70 $70 $68 $60 $60 $50 $50 $43 $40 $40 $33 $31 $29 $30 $30 $27 $24 $25 $24 $23 $23 $20 $20 $20 $20 $19 $18 $16 $13 $9 $10 $7 $8 $
Slide 27: Revenues - Management and Advisory Fees, Net
Revenues - Management and Advisory Fees, Net ($ in thousands) Quarter June '20 June '21 % o % Fav / Unfav Focused commingled funds $ 19,853 # $ 24,150 # 22% SMAs 30,722 # 40,605 # 32% Advisory and other services 12,863 # 13,255 # 3% Fund reimbursement revenues 62 # 51 # -18% Total management and adv
Slide 28: Blue-chip, Sophisticated, Global Clientele
Blue-chip, Sophisticated, Global Clientele As of June 30, 2021 BY TYPE BY GEOGRAPHY LTM management and advisory fees (%) LTM management and advisory fees (%) 3% Pension Funds 3% 6% Insurance Companies North America 6% 20% 28% Private Wealth/ 11% 41% Defined Contribution Plans Asia/Australia Sovereig
Slide 29: 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: $45B • Total AUM: $9B • Total AUM: $18B • Total AUM: $19B - SMA AUM: $35B - SMA AUM: $3B - SMA AUM: $18B - SMA AUM: $11B - FCF AUM: $10B - FCF AUM: $3B - FCF AUM: -- -
Slide 30: Track Record Disclosures
Track Record Disclosures Note: Descriptions for certain terms can be found on the definitions page starting on slide 34 of this presentation. 1 Investment returns reflect NAV data for underlying investments as of March 31, 2021, as reported by underlying managers up to 115 days following March 31, 2
Slide 31: Reconciliation of GAAP to ANI and FRE
Reconciliation of GAAP to ANI and FRE ($ in thousands) Quarter Full Year Last Twelve Months June '20 Mar '21 June '21 Mar '18 June '21 Income (loss) before income tax $ (51,202) $ 162,866 $ 140,942 $ 85,805 $ 529,993 Net income attributable to non-controlling interests in subsidiaries(1) (4,686) (4,
Slide 32: Reconciliation of Adjusted Net Income Per Share
Reconciliation of Adjusted Net Income Per Share ($ in thousands, except share and per share amounts) Quarter June '20 Mar '21 June '21 Adjusted net income $ 15,479 $ 24,626 $ 40,533 Weighted-average shares of Class A common stock outstanding – Basic(1) 29,237,500 30,157,500 39,042,497 Assumed vestin
Slide 33: Reconciliation of Gross and Net Realized Performance Fees
Reconciliation of Gross and Net Realized Performance Fees ($ in millions) Quarter 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 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 $ 24.7 $
Slide 34: 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 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. • Invested Capital refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital c
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