StepStone Group Inc. Q4 FY2025 earnings call

• Record earnings this quarter, with fee-related earnings, FRE margin, and adjusted net income per share at all-time highs for quarterly and annual results.
• Full year raised over $31 billion AUM and $27.5 billion growth in fee-earning AUM, best organic growth rate since public company status.
• Managed account re-up rate above 90% with re-up accounts growing ~30%, and over $8.5 billion SME inflows in fiscal 2025.
• Commingled funds grew with three funds over $3 billion, including a $1 billion infrastructure co-investment fund and a $3.75 billion real estate secondary fund.
• Private wealth platform grew to over $8 billion, with $1.2 billion evergreen subscriptions in the quarter, expanding distribution partners to nearly 500.
• Scenario planning to assess impact by asset class, strategy, region, and sector due to market uncertainty.
• Progress on Investor Day goals from 2023, with fee-related earnings doubling in two years and FRE margin expanding to over 40%.
• Plan to conduct second tranche of non-controlling interest buy-in in Q1 2026, and declared a $0.40 per share supplemental dividend on top of $0.24 base dividend.

For the fourth quarter of fiscal 2025, StepStone Group Inc. reported a GAAP net loss of $18.5 million or $0.24 per share. Fee-related earnings were $94.1 million, up 85% from the prior year quarter with an FRE margin of 44%. Full year, the firm raised over $31 billion of assets under management and generated $27.5 billion of growth in fee-earning AUM, representing a 29% fee-earning asset growth. Managed account re-up rate was above 90% with re-up accounts growing at ~30%. Commingled funds saw growth with three funds over $3 billion, and the private wealth platform expanded from $3.4 billion to over $8 billion.

• Expect to conduct the second tranche of non-controlling interest buy-in in Q1 2026, using $10 million cash and $161 million equity.
• Board declared a $0.40 per share supplemental dividend tied to performance-related earnings, with full year dividends at $1.36 per share, up 37% from prior year.
• Expect to remain active in fiscal 2026 with various funds in market, including private equity co-investment, multi-strategy global venture capital, and infrastructure secondaries funds.

• Macro-economic downturns pose risks.
• Market volatility, such as rapidly evolving global trade policy causing volatility in public markets and widening bid-ask spreads in private markets.

Q: What were the one-time fees in the quarter and what is the expected margin level going forward?

A: One-time fees in advisory fees were about $4 million. Excluding retroactive fees and one-time fees, margins were 37%, and 37% is a fair starting point with quarterly variability expected due to factors like merit increases and hirings.

Q: How does the pipeline of new business look given recent market volatility and seasonality?

A: Feeling positive about pipeline with RFPs being responded to, new capital pools allocating to private markets, strong re-up pipeline on separate accounts, and healthy commingled fund pipeline including potential earlier closes of certain funds.

Q: How does StepStone see the secondaries marketplace playing out and role in it?

A: Expect increased selling in secondaries market, and StepStone is an active buyer/participant across private markets. Real estate secondary fund is GP-led and well-suited for current environment, but LP secondary activity in real estate is low, limiting scaling of real estate secondary funds like private equity ones.

Q: How is the private wealth product platform evolving and distribution?

A: US market strong, European market has white space with sales force and syndicate partners being built. Strategies have 12 boxes across asset classes, and product differentiation based on feedback with S Prime, Spring, Instruqt, CredX as distinct offerings. Distribution partners at ~500, with allocation consistent across wires, RIAs, broker-dealers, etc.

Q: Details on NCI buyout and dividend modeling?

A: Second tranche of NCI buy-in in Q1 2026 with $10M cash and $161M equity (3.2 million shares), executed at >15% discount to public PE multiple. Dividends have $1.36 per share for full year, with NCI buy-in affecting NCI trajectory which is expected to be low single digits incrementally.