Release Date: May 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- StepStone Group Inc (STEP, Financial) reported record earnings for the quarter, with fee-related earnings reaching $94.1 million, an 85% increase from the prior year.
- The company achieved a fee-earning asset growth of over 29% in fiscal 2025, marking its best organic growth rate since becoming a public company.
- StepStone Group Inc (STEP) declared a base quarterly dividend of $0.24 and a supplemental dividend of $0.40, with the total dividend payout for the fiscal year increasing to $1.36 from $0.99 last year.
- The private wealth platform saw outstanding growth, with assets increasing from $3.4 billion to over $8 billion, driven by new products and expanded distribution.
- The company successfully closed on three comingled funds of over $3 billion each, contributing to a remarkable year for fundraising.
Negative Points
- StepStone Group Inc (STEP) reported a GAAP net loss of $18.5 million or $0.24 per share for the quarter.
- The company noted that the capital market backdrop shifted in April, creating volatility and widening spreads in the private markets.
- There is a focus on scenario planning due to the uncertain environment, which may impact future investment decisions.
- The company faces competition in the private wealth space, with many new entrants offering similar products.
- The realization and distribution pipeline may slow down due to market uncertainty and bid-spread issues.
Q & A Highlights
Q: Can you elaborate on the onetime fees in the quarter and the expected margin levels for fiscal year '26?
A: (David Park, CFO) The onetime fees were in our advisory fees, amounting to about $4 million. Excluding retroactive and onetime fees, the FRE margin would have been 37% for the quarter. This margin is a fair starting point for fiscal '26, though it may vary due to compensation increases and hirings.
Q: How does the pipeline of new business look, considering recent fundraising success and market volatility?
A: (Scott Hart, CEO) We feel positive about new opportunities, including RFPs and new capital allocations, especially outside the US. Despite a strong fundraising year, we expect a healthy re-up pipeline and are optimistic about upcoming opportunities, including commingled funds returning to market.
Q: Is there a trend towards a barbell shape in fundraising for larger flagship funds?
A: (Scott Hart, CEO) Yes, we've seen a strong first and final close with an extended fundraising period in between, as observed in our recent private equity and real estate secondaries fundraises. This approach helps create urgency and momentum among clients.
Q: How do you see the secondaries marketplace evolving, and what role can StepStone play?
A: (Scott Hart, CEO) We expect increased selling in the secondaries market due to delayed realizations and liquidity constraints. StepStone is an active participant across private markets, evaluating opportunities in real estate, private equity, venture, infrastructure, and private credit secondaries.
Q: How do you see your private wealth product platform evolving over the next five years?
A: (Jason Ment, President, Co-COO) We expect continued growth in the US and European markets, with potential specialization as private market allocations increase. Our diverse strategies across asset classes will evolve iteratively as individual investor demand grows.
Q: Can you provide details on the NCI buyout and its impact on financials?
A: (David Park, CFO) The buyout involved $10 million in cash and $161 million in equity, translating to 3.2 million shares. The NCI trajectory will plateau and eventually decline over the next four to five years, with a low single-digit impact from fiscal '25 to '26.
Q: How has competition in distribution channels for retail products evolved?
A: (Jason Ment, President, Co-COO) Our distribution remains consistent across wires, RIAs, and broker-dealers. Despite increased competition, the growing interest in private markets has led to record quarters for us, with our differentiated products continuing to attract investors.
Q: How does the ticker feature impact fundraising, given new entrants in the space?
A: (Jason Ment, President, Co-COO) We haven't seen negative impacts from new products. Our differentiated offerings, like SPRIM and SPRING, cater to specific investor needs, and the growing interest in private markets has benefited us despite increased competition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
