StepStone Group Inc. (STEP) Earnings

Management highlights

### Core Financial & Fundraising Milestones • Delivered the highest ever quarterly fee-related earnings, highest ever platform-wide fundraising, and best ever organic private wealth net and gross subscriptions, capping the best full fiscal year of gross AUM additions at $38 billion, with nearly $14 billion in capital raised in Q4 2026 • Private wealth demand remains very strong: gross subscriptions hit a record $2.3 billion in Q4, with redemptions of only ~2% of total NAV, and March/April 2026 were the two strongest months ever for subscriptions, with over $800 million in each month and May on a similar trajectory • Institutional private credit fundraising hit $3 billion in Q4, with balanced activity across managed accounts and commingled funds, including a final close for the opportunistic lending fund, first close for the direct lending fund, and strong flows for the evergreen BDC and interval fund • Notable commingled fund closes in Q4 included a $2.2 billion first close for the private equity secondaries fund, $200 million first close for the GP-led private equity secondaries fund, $400 million final close for the SCOF II corporate opportunistic lending fund, ~$300 million close for the infrastructure secondaries fund, and $300 million close for the infrastructure co-investment fund (which already reached $1 billion in size before the end of fundraising) New Growth Initiatives • Expanded data and technology monetization partnerships: following 2025 launches of private market indices with FTSE Russell and private credit benchmarking/analytics with Kroll, StepStone announced a new partnership with PitchBook to deliver deal-level performance and operating metrics for private markets, leveraging StepStone's SPI platform and PitchBook's market data; the product will serve LPs, GPs and industry service providers, distributed via PitchBook's existing reach • Hired the first Head of Defined Contribution (DC) Solutions to pursue the 401k private markets opportunity, following the U.S. Department of Labor's March 2026 process-based safe harbor proposal that enables private market inclusion in defined contribution plans; StepStone believes it is well positioned to be a leading solutions provider for this market Capital Distribution Updates • The third tranche of non-controlling interest (NCI) buy-in for infrastructure, private debt, and real estate will be completed in Q1 2027, utilizing $11 million in cash and $166 million in equity (3.4 million new shares effective April 1, 2026), executed at an average 14% discount to StepStone's public market multiple, which is expected to be accretive to earnings with no execution risk • The Board declared a $0.55 per share supplemental dividend (tied to performance-related earnings) in addition to the $0.28 per share base quarterly dividend, bringing full year 2026 dividends to $1.67 per share, a 23% increase year-over-year • In March 2026, the Board authorized a $100 million Class A common stock repurchase program; ~$9 million of the authorization was executed in March 2026, buying back ~200,000 shares at an average price of $44.77 per share Operational Improvements and Margin Expansion • Core FRE margin expanded 280 basis points quarter-over-quarter to 40% in Q4, with full year core FRE margin at 38%, up slightly year-over-year and over 600 basis points higher than two years ago, driven by operating leverage from past investments in the business • Adjusted cash base compensation ratio was 43% in Q4, down from ~45% over the prior three quarters, with a planned seasonal step up next quarter for annual merit increases; equity-based compensation is expected to range from $6 million to $7 million per quarter in fiscal 2027

Guidance

• StepStone expects continued top-line growth and operating leverage to drive further FRE growth in fiscal 2027, with long-term room for continued margin expansion, though the growth path may not be linear • The blended statutory tax rate is expected to hold at 22.6% for fiscal 2027, matching the full year 2026 rate • The flagship private equity secondaries fund will activate within the next two quarters, and the GP-led private equity secondaries fund will also activate in the same timeframe; together these funds hold $2.5 billion of the current UFEC balance that will convert to fee-earning AUM as management fees turn on • Data and technology monetization partnerships are in early stages of product development, so near-term revenue contributions are expected to be modest; no material incremental expenses are associated with these initiatives, so any future revenue will accrue directly to FRE margin • UFEC deployment is expected to continue at a historical pace of ~$8 billion per year, consistent with the 3-5 year deployment timeline that StepStone has previously targeted

Segment performance

Overall Q4 2026 financial performance: GAAP net loss attributable to StepStone Group was $7.8 million (10 cents per share), driven by GAAP fair value accounting requirements for private wealth profits interests buy-ins. Total fee revenues were $260 million, up 21% year-over-year; excluding retroactive fees, fee revenues grew 29% year-over-year. Fee-related earnings (FRE) were $105 million, up 12% year-over-year, with a 40% FRE margin. Core FRE (excluding retroactive fees) was $101 million, up 28% year-over-year, also with a 40% core FRE margin. Adjusted net income was $69 million (57 cents per share), down from $81 million (68 cents per share) in the year-ago quarter, primarily due to lower performance-related earnings partially offset by higher fee-related earnings. Gross realized performance fees were $46 million, with $18 million net of compensation expense, lower than recent quarters due to slow capital market exit activity. Realized investment income from StepStone's own portfolio was $14 million, including $11 million in seed investment gains. Net accrued carry grew 7% quarter-over-quarter to $936 million, with ~60% tied to programs older than five years that are ready to harvest. The private wealth segment (which carries a higher average fee rate) generated $2.3 billion in new subscriptions in Q4, with $300 million in total redemptions (~2% of total NAV), growing the private wealth evergreen platform to nearly $18 billion in assets. The private credit segment raised ~$3 billion in new institutional capital in the quarter, with balanced flows between managed accounts and commingled funds, and the non-traded BDC S-CRED grew to over $2 billion in net assets. Fee-earning AUM increased by nearly $5.5 billion in the quarter, and undeveloped fee-earning capital (UFEC) grew by $7 billion to a record $40 billion. Total combined fee-earning AUM plus UFEC grew to over $184 billion, up $12 billion sequentially and $38 billion year-over-year, representing 21% annual organic growth since fiscal 2021. The 12-month blended management fee rate was 64 basis points, down 1 basis point from fiscal 2025 due to lower retroactive fees, partially offset by a favorable mix shift from growth in higher-fee evergreen funds.

Risks & headwinds

• Actual future results may differ materially from forward-looking statements due to inherent uncertainty, geopolitical shocks, interest rate volatility, and other external risks that impact exit activity and market conditions • Exit activity and performance fee realization depend on M&A and IPO market conditions, which StepStone does not control; current interest rate volatility and geopolitical events add uncertainty to the pace of exit realizations • External public scrutiny of private credit markets and private secondary market valuation practices has created client and investor questions that require additional outreach and explanation • A potential unexpected change in GAAP valuation rules for secondary investments could create accounting disruption for the industry and StepStone's evergreen private wealth funds • Redemption requests larger than historical levels in private wealth evergreen funds could create liquidity pressure, though StepStone has mitigants in place to address this • Higher than expected compensation expenses or incremental occupancy costs from expanding office space could pressure margins in the near term

Analyst Q&A

• Q: A competitor claimed day one markups on secondary fund investments cause mispricing that makes the strategy inappropriate for semi-liquid private wealth evergreen funds. How does StepStone address valuation and what portion of returns comes from day one markups versus underlying asset performance? /

  A: A secondary buyer typically marks acquired positions at the sponsor's latest reported fair value. If bought at a discount to reported fair value, GAAP rules require carrying the asset at that fair value, which creates an immediate mark-up. This is a difference between transaction price (influenced by seller liquidity and market dynamics) and GAAP fair value, not improper accounting. StepStone applies independent valuation discipline to corroborate all manager-reported values, and the vast majority of StepStone's secondary returns come from post-purchase asset appreciation, not day-one markups. For example, S-Prime delivered 11% net returns last year, 9 points of which came from post-purchase appreciation, and Spring delivered 37% net returns, 33 points of which came from post-purchase appreciation.

• Q: What is your view on potential changes to industry accounting practices for day one markups, and how do you manage liquidity in secondary private wealth evergreen vehicles if redemptions rise above 5% for an extended period? /

  A: Current GAAP valuation practices have been consistent since the early 2000s, and it is unlikely they will change. It would not make sense to alter GAAP to reflect varying transaction prices for the same underlying portfolio across different secondary sales. For liquidity management, StepStone's secondary evergreen funds hold extremely diversified portfolios of assets across varying vintage years, which generates predictable annual cash flow from realizations (typically double-digit percentages of portfolio value annually) that can cover most redemption requests. Funds also maintain dedicated credit facilities to cover additional redemptions, allowing them to meet the maximum 5% quarterly redemption requirement for up to 18 months without forced asset sales.

• Q: How should investors expect near to medium-term revenue from the new data and index partnerships with FTSE Russell, Kroll, and PitchBook to develop? /

  A: The partnerships are only 12 months old, and all are still in early product development stages, so near-term revenue will be modest. The key advantage is that there are no material incremental expenses associated with these initiatives, so as revenue grows it will directly add to FRE margin, creating incremental upside over time. Longer-term, StepStone sees a path to investable indexed products and customized index licensing, which would expand the revenue opportunity significantly.

• Q: Why have StepStone's private credit flows remained strong while the broader industry faces headwinds, and how durable are Spring venture fund flows once high-profile pre-IPO holdings exit via IPO? /

  A: Strong credit flows are driven by StepStone's diversified multi-manager model, which targets position sizes under 1% and avoids over-reliance on broadly syndicated public loan markets. This model has delivered stronger relative performance than standalone direct lending BDCs, leading to accelerating asset rotation into StepStone's CredEx product, with over $125 million in subscriptions in the first month after quarter end. Spring's strong flows are driven by broad, sustained demand from individual investors for curated exposure to the innovation economy and AI, not just a handful of high-profile pre-IPO companies. Spring's portfolio is concentrated in the top venture-backed companies that drive most venture value creation, with 75% of the portfolio exposed to AI tailwinds across multiple sectors, creating long-term durable demand for the product.