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StepStone Group Inc. (STEP)·Q3 2025 Earnings Summary

Executive Summary

  • Core performance was strong despite GAAP volatility: total revenues rose to $339.0M, fee-related earnings reached a record $74.1M (+46% YoY), and ANI per share was $0.44 (+19% YoY), driven by fee-earning AUM growth and retroactive fees; GAAP diluted EPS was $(2.61) due to a non-cash fair value change tied to StepStone Private Wealth profits interests .
  • Fee-earning AUM grew nearly $10B sequentially to $114.2B, as the firm activated ~$6.5B of undeployed fee-earning capital and deployed ~$2B, with UFEC moderating to $21.7B; private wealth subscriptions exceeded $1B, scaling the platform to >$6B by year-end and >$7B in January (boosted by a ~$600M CRDEX secondary) .
  • Strategic milestones included closing the inaugural Infrastructure Co‑Investment Fund at ~$1.2B and strong momentum across real estate secondaries and multi‑strategy growth equity, with final closes anticipated in coming quarters .
  • Stock reaction catalyst: management underscored that the GAAP loss was accounting-driven and not indicative of core earnings; record FRE, accelerating activation of fee capital, and rapid private wealth scaling are key narrative positives highlighted on the call .

What Went Well and What Went Wrong

  • What Went Well
    • Record fee-related earnings: “We generated fee-related earnings of $74 million, our highest level ever,” supported by 39% FRE margin (36% core ex-retro fees) and the activation of undeployed capital .
    • Private wealth scaling: subscriptions >$1B in the quarter, platform >$6B by year-end, >$7B in January aided by a ~$600M CRDEX secondary; tickers contributed nearly 70% of flows, and distribution expanded to ~450 platforms .
    • Infrastructure momentum: inaugural co-invest fund closed at ~$1.2B; focus on power/renewables, transportation, and communications (data centers), aligning with investor demand for real assets .
  • What Went Wrong
    • GAAP loss driven by accounting: diluted EPS was $(2.61) from a change in fair value related to potential future buy-in of Private Wealth profits interests, creating volatility in GAAP but not affecting adjusted results .
    • Retroactive fees moderated: $9.7M this quarter vs $14.9M in Q2 FY25, tempering reported fee revenue tailwinds .
    • Realizations still uneven: while gross realized performance fees increased to $52.1M and net realized performance fees to $26.6M, management noted realizations remain largely partial and dependent on broader M&A/capital markets normalization .

Financial Results

MetricQ1 FY2025Q2 FY2025Q3 FY2025
Total Revenues ($USD Millions)$186.4 $271.7 $339.0
GAAP Diluted EPS ($)$0.20 $0.26 $(2.61)
ANI per Share ($)$0.48 $0.45 $0.44
Management & Advisory Fees, net ($USD Millions)$178.0 $184.8 $190.8
Fee-Related Earnings (FRE) ($USD Millions)$71.7 $72.3 $74.1
FRE Margin (%)40% 39% 39%

Segment breakdown (Adjusted management and advisory fees, net):

Component ($USD Millions)Q1 FY2025Q2 FY2025Q3 FY2025
Focused Commingled Funds$104.8 $107.9 $105.7
Separately Managed Accounts$57.4 $61.4 $66.2
Advisory & Other Services$14.8 $14.9 $17.5
Fund Reimbursement Revenues$1.6 $1.3 $2.4
Adjusted Mgmt & Advisory Fees, net$178.5 $185.5 $191.8

KPIs and operating metrics:

MetricQ1 FY2025Q2 FY2025Q3 FY2025
AUM ($USD Billions)$169.3 $176.1 $179.2
AUA ($USD Billions)$531.4 $505.9 $518.7
FEAUM ($USD Billions)$100.4 $104.4 $114.2
UFEC ($USD Billions)$27.6 $29.7 $21.7
Adjusted Revenues ($USD Millions)$221.2 $208.8 $243.9
Gross Realized Performance Fees ($USD Millions)$42.7 $23.3 $52.1
Net Realized Performance Fees ($USD Millions)$21.8 $14.5 $26.6
ANI ($USD Millions)$57.2 $53.6 $52.7
Dividend per Share ($)$0.24 $0.24 $0.24

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Dividend per ShareQ3 FY2025$0.24 (Q2 declared) $0.24 (Q3 declared) Maintained
FRE Margin Trajectory (commentary)FY2025 and beyondN/AManagement expects margin to continue to grow over time; core FRE margin 36% in Q3 Positive commentary (no formal numeric guidance)

Note: The company does not provide formal revenue/EPS guidance; tax rate assumption for ANI uses blended statutory 22.3% (methodology, not forward guidance) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY2025)Previous Mentions (Q2 FY2025)Current Period (Q3 FY2025)Trend
Private Wealth growthPlatform expansion noted in quarterly materials; strong product mix (SPRIM/SPRING) Surpassed $5B platform; ~$850M subscriptions; positive mix shift to fee rates >$1B subscriptions; platform >$6B by year-end and >$7B in January; ~$600M CRDEX secondary; ~450 platforms; ~70% flows via ticker Accelerating
Retroactive feesStrong contribution to fee revenues (implied in margins) $14.9M retro fees (PE secondaries, real estate special situations, infra co‑invest) $9.7M retro fees (real estate secondaries, infra co‑invest, growth equity) Moderating
Liquidity/realizationsNet realized performance fees improving vs prior year Realizations improving but below long-term averages; partial exits common Seasonal SPRING incentive fees; net realized performance fees $26.6M; realizations still mostly partial Cautious improvement
Secondaries market/pricingContinued fund-raising across secondaries strategies Another record year expected; undercapitalized opportunity Buyout pricing low-mid 90s% of NAV; venture 70–80% of NAV; record activity across LP/GP‑led Robust, pricing modestly better
Infrastructure/data centersN/A in call materials (Q1)Fundraising momentum; infra co-invest interim closes Co‑invest fund closed at ~$1.2B; focus areas include data centers (communications), power/renewables, transportation Increasing focus
FRE margin trajectoryFRE margin 40% in Q1; operating leverage building Core FRE margin ~34% (best on record); scale driving leverage FRE margin 39%; core 36%; mgmt expects continued growth over time Positive

Management Commentary

  • “We generated fee-related earnings of $74 million, our highest level ever and increased our fee earning assets under management by nearly $10 [billion], which is the strongest quarter of organic growth in StepStone's history.” (Scott Hart) .
  • “We grew our private wealth platform to over $6 billion and raised over $1 billion of new subscriptions… As of the end of January, we have increased the private wealth platform to over $7 billion, which included a more than $600 million secondary transaction by CRDEX.” (Scott Hart) .
  • “Fee-related earnings were $74 million… FRE margin was 39%… Normalizing for retroactive fees, core FRE margins were 36%… We would expect our margin to continue to grow over time.” (David Park) .
  • “GAAP earnings were impacted by the change in fair value related to our potential future buy-in of the StepStone Private Wealth profits interest... This may continue to create variability in our GAAP results… but will not impact our adjusted net income.” (David Park) .

Q&A Highlights

  • Distribution and ticker adoption: ~450 platforms globally with ~40% selling 2+ funds; ticker-eligible funds drove nearly 70% of flows, improving advisor experience and scale (SPRIM U.S., CRDEX, STRUX U.S.) .
  • Secondaries market/pricing: Buyout secondaries pricing low–mid 90s% of NAV; venture capital at 70–80% of NAV; record activity across LP and GP‑led transactions .
  • Infrastructure focus: Key areas include power/renewables, transportation, and communications/data centers; diversified approach across asset classes .
  • UFEC and deployment: Broad-based deployment across asset classes; ~$2B deployed and ~ $6.5B activated; remaining UFEC expected to be drawn over a normal 3–5 year cycle .
  • CRDEX secondary: ~$600M transaction scaled the fund, lowered expense ratio via scale, increased diversification, and enhanced distribution relevance; opportunistic approach for future secondaries .
  • Greenspring earn-out: $75M target achieved; fully accrued and payable 100% in cash .
  • Private wealth NCI: NCI step-up was driven largely by retroactive fees in the real estate secondaries fund .
  • Retirement/401(k) channel: Target date wrappers seen as primary path; increasing public‑private convergence conversations; regulatory action not required but supportive stance would help adoption .

Estimates Context

  • S&P Global consensus estimates for Q3 FY2025 (EPS, revenue, EBITDA) were unavailable due to data access limits during this session; as a result, we cannot provide a beat/miss assessment against Wall Street estimates for the quarter (Values retrieved from S&P Global were unavailable).
  • Management does not issue formal revenue/EPS guidance; directional commentary highlights continued margin expansion and strong fee revenue visibility from activated UFEC .

Key Takeaways for Investors

  • Core earnings quality remains strong: record FRE and sustained 39% FRE margin (36% core) underscore operating leverage from fee‑earning AUM growth, despite GAAP volatility from Private Wealth profits interest fair value changes .
  • Capital activation is now a growth engine: ~$6.5B of UFEC activated and ~$2B deployed, with UFEC moderating to $21.7B; expect management fees to benefit as remaining capital is deployed/activated over a normal 3–5 year cycle .
  • Private wealth is scaling rapidly: >$1B quarterly subscriptions, >$6B year-end platform and >$7B in January (CRDEX secondary), with broader distribution and ticker adoption driving flows; a positive mix shift supports fee rates and margins .
  • Realizations are improving but still uneven: gross/net realized performance fees stepped up, though broader M&A/IPO normalization remains a key external driver; net accrued carry of $744M is mature, with >80% tied to programs >5 years old and >50% deal‑by‑deal .
  • Strategic diversification is paying off: closure of the ~$1.2B infrastructure co‑invest fund and continued momentum in real estate secondaries and growth equity broaden performance drivers across cycles .
  • Near‑term trading lens: watch for continued core margin expansion, final closes in near‑term funds, and additional private wealth platform scaling; the clarification that GAAP loss was accounting‑driven (non‑cash) is a supportive narrative point .
  • Medium‑term thesis: diversified multi‑asset platform, data/analytics, and expanding private wealth distribution create durable fee streams with operating leverage; buy‑in mechanisms (NCI/private wealth) are structured to be accretive to ANI per share over time .