Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- StepStone Group Inc (STEP, Financial) achieved its highest-ever fee-related earnings of $74 million, marking a 46% increase from the prior year.
- The company reported a significant increase in fee-earning assets under management, reaching over $114 billion, up 28% from the previous year.
- StepStone Group Inc successfully closed its inaugural infrastructure co-investment fund with a total fund size of approximately $1.2 billion.
- The private wealth platform experienced its best growth quarter ever, raising over $1 billion in new subscriptions and increasing the platform to over $7 billion.
- The company reported a strong FRE margin of 39% for the quarter, indicating efficient operations and profitability.
Negative Points
- StepStone Group Inc reported a GAAP net loss of $287 million, primarily due to changes in fair value related to potential future buy-ins.
- The company's GAAP net loss attributable to StepStone Group Inc was $192 million or $2.61 per share.
- There was a notable increase in noncontrolling interests, particularly in infrastructure, real estate, and private debt asset classes, impacting the bottom line.
- The company experienced variability in GAAP results due to accounting treatment of potential future buy-ins, which may continue until the put call is exercised.
- General and administrative expenses increased to $30 million, reflecting higher costs and upcoming events like the annual venture capital conference.
Q & A Highlights
Q: What are the key accomplishments in building out the wealth management footprint this quarter, and what excites you about the opportunities in the wealth management business over the next 12 months?
A: Jason Ment, President and Co-Chief Operating Officer, highlighted the expansion of the syndicate for newer funds and the cross-selling success, with 40% of platforms selling two or more funds. They reached about 450 platforms globally. The progress with ticker-eligible funds like SPRIM US, CRDEX, and STRUX US was significant, with nearly 70% of flows coming through ticker. Looking forward, the CRDEX secondary transaction added over $600 million of NAV, making it a relevant size for more platforms, which should ease cross-selling and platform additions.
Q: Can you discuss the current market for secondaries, including activity levels and discounts applied to transactions?
A: Scott Hart, CEO, noted that 2024 was a record year for secondaries, with average market pricing ticking up slightly. In the buyout space, pricing is in the low to mid-90s as a percentage of NAV, while venture capital sees larger discounts of 70% to 80% of NAV. The secondaries market has expanded to include GP-led secondaries and separate transactions across asset classes. The significant growth in unrealized net asset value to over $8 trillion indicates a strong secondary opportunity.
Q: What drove the increase in NCI not attributable to SPW this quarter, and how should we expect this to trend in the future?
A: David Park, CFO, explained that the largest driver was retroactive fees from the real estate secondaries fund that closed this quarter. Generally, growth in other asset classes would naturally increase NCI. Scott Hart added that the venture capital business was acquired 100%, so it does not contribute to NCI.
Q: Can you provide insights into the infrastructure business and key areas of investment?
A: Scott Hart stated that the infrastructure business is well-diversified across industry categories, with significant investments in power and renewables, transportation, and communications, including data centers. The business is diversified across the entire infrastructure spectrum, similar to their real estate and venture exposure.
Q: What drove the active deployment quarter, and how does the pipeline for deployment look for the next few quarters?
A: Scott Hart mentioned that the deployment was broad-based across asset classes and strategies, with over $2 billion deployed, marking the most active quarter in two years. The deployment was diversified, and the pipeline for future deployment remains strong due to their diversified sourcing channels and relationships with various GPs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
