Stepstone Group Inc. · NASDAQ:STEP
Stepstone — Q3 FY2023 Earnings Presentation
38 slides from Stepstone's earnings presentation, Feb 9, 2023
Slide 1: Third Quarter Fiscal Year 2023 Earnings Presentation
Third Quarter Fiscal Year 2023 Earnings Presentation FEBRUARY 9, 2023
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 $13.6 million for the quarter and $102.1 million year-to-date. GAAP net loss attributable to StepStone Group Inc. was $6.9 million (or $0.11 per share) for the quarter and $47.2 million (or $0.77 per share) year-to-date. ($ in thousands, except p
Slide 4: Robust Growth Profile Since Inception
Robust Growth Profile Since Inception TOTAL CAPITAL RESPONSIBILITY ($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 FQ3'23 Note: Fiscal 2
Slide 5: Fiscal Q3 2023 Overview
Fiscal Q3 2023 Overview FQ3’23 FQ3’22 vs. FQ3’22 FQ2’23 vs. FQ2’23 Assets under management (“AUM”) $134.0 B $127.0 B 6% $135.0 B -1% Fee-Earning AUM (“FEAUM”) $83.0 B $71.2 B 16% $80.1 B 4% KEY BUSINESS DRIVERS Undeployed fee-earning capital $14.0 B $17.3 B -19% $16.5 B -15% Gross accrued carry $1,1
Slide 6: Overview
OVERVIEW
Slide 7: StepStone's Growth Drivers
StepStone’s Growth Drivers AUM AUA SEPARATELY MANAGED ACCOUNTS FOCUSED COMMINGLED FUNDS ADVISORY $78B $43B $468B 4% growth from prior year 2% growth from prior year • A total of $12.4B of new capital additions during the • A total of $6.0B raised in focused commingled funds • Net client activity inc
Slide 8: Fee-earning AUM Evolution
35% Fee-earning AUM Evolution clients with exposure to more than one asset class FEE-EARNING AUM BY COMMERCIAL STRUCTURE ($B) Total AUM $40 $53 $67 $86 $1341 $134 $83.0 Focused commingled funds $75.21 FEAUM + UNDEPLOYED FEE-EARNING CAPITAL ($B)1 Organic CAGR2: 28% $97.0 Separately managed accounts 2
Slide 9: Trend in Management and Advisory Fees
Trend in Management and Advisory Fees MANAGEMENT & ADVISORY FEES ($M)1 MANAGEMENT & ADVISORY FEES PER SHARE6 Advisory fees $4732 $4.16 Focused commingled funds 56 $3792 $3.55 Separately managed accounts 56 $2.91 $285 215 $234 $2.40 52 149 $190 $1.95 48 $140 97 $1.44 45 79 40 59 174 203 49 136 86 107
Slide 10: Financial Update
FINANCIAL UPDATE
Slide 11: Financial Highlights
Financial Highlights • Fee revenues increased 21% for the quarter and 36% year-to-date, driven by FEAUM growth and, for the year-to-date period, the impact of Greenspring • Fee-Related Earnings increased 16% for the quarter and 37% year-to-date, primarily driven by growth in fee revenues and, for th
Slide 12: Adjusted Revenues
Adjusted Revenues ($M, except per share amounts) MGMT. & ADVISORY FEES CAGR Per Share +24% +25% • Management fees per share increased 30% YTD and by a compound annual growth rate of $3.18 $4.16 $2.56 31% over the long-term growth period driven by strong FEAUM growth $365 $477 $268 $1.44 • Advisory f
Slide 13: Profitability
Profitability ($M, except per share amounts) FEE-RELATED EARNINGS Per Share +26% $1.03 $1.35 CAGR • Fee-related earnings per share growth driven primarily by growth in FEAUM and, for the $154 $0.82 $118 +44% long-term growth period, margin expansion $86 • FRE margins were 32% YTD as compared with 32
Slide 14: Accrued Carry and Fund Investments
Accrued Carry and Fund Investments1 ACCRUED CARRY ($M)2 NET UNREALIZED CARRY AS OF 12/31/2022 BY VINTAGE AND TYPE -16% $1,600 $1,481 2013 & Prior $1,347 $1,366 7% Private $1,400 $1,189 $1,126 Post 2017 Equity 93% $1,200 2014 38% $1,000 11% $800 2015 Infrastructure $600 13% 3% $400 $200 2016 Real Est
Slide 15: Appendix
APPENDIX
Slide 16: Consolidated Balance Sheets
Consolidated Balance Sheets ($ in thousands) D ec '2 1 Mar '2 2 D ec '2 2 Asset s Cash and cash equivalents $ 135,885 $ 116,386 $ 120,093 Restricted cash 1,031 1,063 971 Fees and accounts receivable 32,641 34,141 42,769 Due from affiliates 11,092 19,369 35,749 Investments: Investments in funds(1) 98
Slide 17: Non-GAAP Financial Results
Non-GAAP Financial Results1 ($ in thousands, unless otherwise mentioned) Qua rter Y ea r - to- da te Dec '21 Dec '22 % Fav / Unfav Dec '21 Dec '22 % Fav / Unfav Management and advisory fees, net $ 106,384 $ 128,753 21% $ 268,028 $ 364,606 36% Less: Adjusted cash-based compensation 51,665 62,108 -20%
Slide 18: FEAUM Overview
FEAUM Overview F a v / U nf a v Cha ng e ( $B, unl es s noted) F Q3' 23 F Q3' 22 $ % W a l k f rom A U M to F EA U M $B Total AUM as of 12/31/22 $ 134.0 SMA s Less: Non-Fee Earning AUM 14.7 Beginning balance $ 52.9 $ 43.2 $ 9.7 23% Less: Market appreciation included in AUM 22.3 Contributions 2.1 3.1
Slide 19: StepStone Occupies an Important Position within the GP & LP Ecosystem
We Believe StepStone Occupies an Important Position within the GP & LP Ecosystem Global Private Markets Primaries Secondaries Co-investments $80B in annual private markets capital allocations¹ Corporations Endowments/Foundations Family Offices Asset management Private Equity Private Wealth/Defined A
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 $ 134B $ 83B $ 80B 920 firm focused on providing customized investment total capital assets under fee-earning annual private professionals responsibility1 management1 assets
Slide 21: Comprehensive Private Markets Solutions
Comprehensive Private Markets Solutions We believe 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
Slide 22: Comprehensive, Full Service Model
264 36% 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
49% ($292B) Investment Expertise Across All Private Markets Asset Classes combined AUM / AUA in RE / INFRA / PD asset classes As of December 31, 2022 BY AUM1 BY AUA Private Debt Private Debt $24B / 18% Infrastructure $17B / 4% $48B / 10% Private Equity $71B / 53% Private Equity Infrastructure $239B
Slide 24: Net Realized Performance Fees
Net Realized Performance Fees QUARTERLY NET REALIZED PERFORMANCE FEES LTM NET REALIZED PERFORMANCE FEES ($m, unless otherwise mentioned) ($m, unless otherwise mentioned) $130 $130 $123 $122 $120 $120 $110 $110 $110 $107 $100 $100 $91 $90 $90 $85 $80 $80 $70 $68 $70 $60 $60 $50 $50 $43 $40 $40 $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 Dec '21 Dec '22 % Fav / Unfav Dec '21 Dec '22 % Fav / Unfav Dec '21 Dec '22 otal % Fav / Unfav Focused commingled funds $ 46,523 $ 60,680 30% $ 99,173 $ 164,975 66% $ 122,155 $ 214,527 ## 76% SMAs
Slide 26: Blue-chip, Sophisticated, Global Clientele
Blue-chip, Sophisticated, Global Clientele As of December 31, 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 Plan
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: $71B • Total AUM: $11B • Total AUM: $27B • Total AUM: $24B - SMA AUM: $35B - SMA AUM: $4B - SMA AUM: $25B - SMA AUM: $14B - FCF AUM: $36B - FCF AUM: $3B - FCF AUM: $--
Slide 28: Track Record Disclosures
Track Record Disclosures Note: Descriptions for certain terms can be found on the definitions page starting on slide 34 of this presentation. 1 Investment returns reflect NAV data for underlying investments as of September 30, 2022, as reported by underlying managers up to 100 days following Septemb
Slide 29: Notable StepStone Focused Commingled Funds
Notable StepStone Focused Commingled Funds1 Vintage Fund Size Fund Name 2 Desc ription Year ($ 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 Income (Loss) before Income Tax to ANI and FRE
Reconciliation of GAAP Income (Loss) before Income Tax 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 Dec '21 Dec '22 Dec '21 Dec '22 Mar '18 Dec '22 I n c o m e (lo ss) b efo r e in c o m e t ax $ 142,080 $ (14,287) $ 396,739 $ (108,959) $ 85,805 $
Slide 31: Reconciliation of GAAP Revenues to Adjusted Revenues and Expenses
Reconciliation of GAAP Revenues to Adjusted Revenues and GAAP Expenses to Adjusted 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 Dec '21 Dec '22 Dec '21 Dec '22 Mar '18 Dec '22 To t al r ev en u es $ 410,465 $ (4 , 2 3 5 ) $ 1,000,835 $ (2 3 9 , 9 4 8 ) $
Slide 32: Calculation and Reconciliation of Adjusted Net Income Per Share
Calculation and Reconciliation of Adjusted Net Income Per Share ($ in thousands, except share and per share amounts) Q uarter Year-to-Date Full Year Last Twelve Dec '21 Dec '22 Dec '21 Dec '22 Mar '18 Dec '22 Adjusted net income $ 48,581 $ 31,153 $ 129,229 $ 115,548 $ 35,020 $ 159,262 Weighted-avera
Slide 33: Reconciliation of GAAP Realized Performance Fees to Gross and Net
Reconciliation of GAAP Realized Performance Fees to Gross and Net Realized Performance Fees1 ($ 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 FQ3'23 Realized carried interest allocations $ 9.
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) • Fee-Related Earnings Margin is a non-GAAP performance measure which is calculated by dividing Fee-Related Earnings by Management & Advisory Fees, net. We believe Fee- Related Earnings Margin is an important measure of profitability on revenues that are largely recurring by
Slide 37: Definitions (continued)
Definitions (continued) • Total Capital Responsibility equals Assets Under Management (AUM) plus Assets Under Advisement (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 cust
Slide 38: 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