What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-05-31 compared with 2021-06-23 · 389 added, 192 removed, 714 unchanged (45% of the section changed)

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Business Overview

We are a global private markets investment firm focused on providing customized investment solutions and advisory and data services to our clients.

We are a global private markets investment firm focused on providing customized investment solutions and advisory, data and administrative services to our clients.

Our clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals.

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As of March 31, 2022, we oversaw approximately $570 billion of private markets allocations, including $134 billion of assets under management (“AUM”) and $436 billion of assets under advisement (“AUA”).

We are a global firm and believe that local knowledge, business relationships and presence are all critical to securing a competitive edge in the private markets.

We deploy a local staffing model, operating from 19 offices across 13 countries across five continents.

We are a global firm and believe that our multi-asset class expertise, local knowledge, business relationships, proprietary data and technology, and presence are all critical to securing a competitive edge in the private markets.

We deploy a local staffing model, operating from 23 cities across 14 countries on five continents.

Our offices are staffed by investment professionals who bring valuable regional insights and language proficiency to enhance existing client relationships and build new client relationships.

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Focused commingled funds comprised $44 billion of our AUM as of March 31, 2022.

• Advisory and data services.

• Advisory, data and administrative services.

These services include one or more of the following for our clients:

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(iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees;

and (v) licensed access to our proprietary data and technology platforms, including StepStone Private Markets Intelligence (“SPI”) and our other proprietary tools.

(v) licensed access to our proprietary data and technology platforms, including SPI and our other proprietary tools;

and (vi) administrative services to unaffiliated investment advisors.

Advisory relationships comprised $436 billion of our AUA and $12 billion of our AUM as of March 31, 2022.

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Our ability to attract new capital is partially dependent on clients’ views of private markets relative to traditional asset classes.

We believe our fundraising efforts will continue to be subject to certain fundamental asset management trends, including (1) the increasing importance and market share of private markets investment strategies to clients of all types as clients focus on lower-correlated and absolute levels of return, (2) the increasing demand for private markets from private wealth clients, (3) shifting asset allocation policies of institutional clients and (4) increasing barriers to entry and growth for potential competitors.

We believe our fundraising efforts will continue to be subject to certain fundamental asset management trends, including (1) the increasing importance and market share of private markets investment strategies to clients of all types as clients focus on lower-correlated and absolute levels of return, (2) the increasing demand for private markets investments from private wealth clients, (3) shifting asset allocation policies of institutional clients and (4) increasing barriers to entry and growth for potential competitors.

• Our ability to generate strong, stable returns.

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However, the capital deployed in any one quarter may vary significantly from period to period due to the availability of attractive opportunities and the long-term nature of our investment strategies.

Our ability to identify attractive investments is dependent on a number of factors, including the general macroeconomic environment, valuation, transaction size, and the liquidity of such investment opportunity.

A significant decrease in the quality or quantity of potential opportunities could adversely affect our ability to source investments with attractive risk-adjusted returns.

A significant decrease in the quality or quantity of potential opportunities could significantly and adversely affect our ability to source investments with attractive risk-adjusted returns.

• Increased competition and clients’ desire to work with fewer managers.

There has been an increasing desire on the part of larger clients to build deeper relationships with fewer private markets managers.

There has been an increasing desire on the part of larger institutional investors to build deeper relationships with fewer private markets managers.

At times, this has led to certain funds being oversubscribed due to the increasing flow of capital.

Our ability to invest and maintain our relationships with high-performing fund managers across private markets asset classes is critical to our clients’ success and our ability to maintain our competitive position and grow our revenue.

Impact of COVID-19

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a global pandemic.

The spread of COVID-19 throughout the world has led many countries to institute a variety of measures in an effort to contain viral spread, which has led to significant disruption and uncertainty in the global financial markets.

While some of the initial restrictions have been relaxed or lifted in an effort to generate more economic activity, the risk of future COVID-19 outbreaks remains and restrictions have been and may continue to be reimposed to mitigate risks to public health in jurisdictions where additional outbreaks have been detected.

Moreover, even where restrictions are and remain lifted, and as vaccinations become available and more accessible, certain groups of people may continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time, potentially further delaying global economic recovery.

We are closely monitoring developments related to COVID-19 and assessing any negative impacts to our business.

The COVID-19 pandemic has affected, and may further affect, our business in various ways.

In particular, it is possible that our future results may be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which could result in delayed or decreased management fees, or if fund managers are unable or less able to profitably exit existing investments, which could result in delayed or decreased performance fee revenues.

The underlying investments in the StepStone Funds reflect valuations on a three-month lag, or as of December 31, 2020, adjusted for capital contributions and distributions during the three-month lag period ended March 31, 2021.

During the year ended March 31, 2021, our investments in StepStone Funds and accrued carried interest allocations initially experienced significant declines during the first three months, primarily reflecting the unrealized depreciation in the fair value of certain underlying fund investments driven by the impact of COVID-19, and has subsequently seen significant increases, primarily reflecting the unrealized appreciation in the fair value of certain underlying fund investments driven by the general recovery in the financial markets.

As the global response and ongoing nature of COVID-19 evolves, it is currently not possible to predict the potential scale and scope of the outbreak and its ultimate effects on the financial markets, overall economy and our consolidated financial statements.

Current Events

In 2021, economic conditions improved from the prior year since the onset of the COVID-19 pandemic as vaccination rates increased and lockdowns eased.

Most financial markets experienced strong returns during 2021, despite the ongoing pandemic, which caused severe disruptions in the global financial markets and economies.

Efforts to reopen the global economy in 2021 contributed to robust economic activity that supported the global recovery.

However, the emergence of new variants has and may continue to contribute to setbacks or slowing of recovery efforts.

Leading into 2022, factors including inflation, higher interest rates, the ongoing Russia-Ukraine conflict and the impact of COVID-19 variants on economic growth led to increased volatility in the financial markets.

As expected, the U.S.

Federal Reserve raised its short-term lending rate by 25 basis points in March 2022 and an additional 50 basis points in May 2022, with further increases expected through the rest of the year.

We are continuing to closely monitor developments related to COVID-19, inflation, rising interest rates and the Russia-Ukraine conflict, and to assess the impact on financial markets and on our business.

Our future results may be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which could result in delayed or decreased management fees.

Further, if fund managers are unable or less able to profitably exit existing investments, such conditions could result in delayed or decreased performance fee revenues.

It is currently not possible to predict the ultimate effects of these events on the financial markets, overall economy and our consolidated financial statements.

See “Risk Factors—Risks Related to Our Industry—The COVID-19 pandemic has severely disrupted the global financial markets and business climate and may adversely impact our business, financial condition and results of operations.”

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See “Organizational Structure” below.

Debt Repayment

On September 18, 2020, we repaid in full the indebtedness outstanding on our senior secured term loan in the amount of $146.6 million and terminated the facility, including the senior secured revolving facility.

In connection with the repayment, we wrote-off the unamortized debt issuance costs and discount of $3.5 million, which is included in interest expense in the consolidated statements of income for the year ended March 31, 2021.

As of March 31, 2021, we had no debt obligations outstanding.

Equity Offering

See note 1 to our consolidated financial statements included elsewhere in this annual report for more information about the Reorganization and IPO.

Greenspring Acquisition

On September 20, 2021, we completed the acquisition of 100% of Greenspring in exchange for (i) cash consideration of approximately $185 million, net of an agreed upon adjustment based upon Greenspring’s net working capital balance at the closing date, (ii) 12,686,756 shares of Class A common stock and (iii) 3,071,519 newly issued Class C units of the Partnership.

The transaction agreement also included an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024.

The acquisition of Greenspring, a venture capital platform, is expected to expand our continued growth of our private markets capabilities across asset classes, geographies and sectors.

The results of Greenspring’s operations have been included in the consolidated financial statements effective September 20, 2021.

Revolving Credit Facility

In September 2021, we entered into a credit agreement with various lenders (the “Credit Agreement”) in connection with the Greenspring acquisition.

The Credit Agreement was arranged by JPMorgan Chase Bank, N.A., as administrative agent, and provides for a $225.0 million multicurrency revolving credit facility (the “Revolver”) with a five year maturity.

As of March 31, 2022, there was $62.9 million outstanding on the Revolver, net of debt issuance costs.

Equity Transactions

In March 2021, we conducted an underwritten public offering of 9,200,000 shares of Class A common stock, including 1,200,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, sold by selling stockholders at a public offering price of $29.50 per share.

In connection with the offering, we issued 9,200,000 shares of Class A common stock to the selling stockholders in exchange for 9,200,000 Class B units.

A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange.

A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

We did not receive any proceeds from the sale of shares by the selling stockholders.

In June 2021, we issued 1,898,438 shares of Class A common stock to certain limited partners of the Partnership in exchange for 1,898,438 Class B units in accordance with the elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of Class A common stock of the Company on a one-for-one basis, subject to certain restrictions.

In September 2021, we issued 12,686,756 shares of Class A common stock and 3,071,519 Class C units of the Partnership as partial consideration for the Greenspring acquisition.

In connection with the transaction, we amended the limited partnership agreement to create a new Class C limited partnership interest and admit the new limited partners that received Class C units as consideration for the Greenspring acquisition.

The Class C limited partners of the Partnership became parties to the Exchanges Tax Receivable Agreement to allow for the exchange of Class C units to shares of Class A common stock of the Company on a one for one basis, subject to certain restrictions.

In September 2021, we issued 2,087,281 shares of Class A common stock to certain limited partners of the Partnership in exchange for 2,087,281 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement.

In November 2021, we conducted an underwritten public offering of 4,500,000 shares of Class A common stock sold by selling stockholders at a public offering price of $51.83 per share.

In connection with the offering, we issued 3,958,204 shares of Class A common stock to certain selling stockholders in exchange for 3,958,204 Class B units.

We also issued 142,695 shares of Class A common stock to certain selling stockholders in exchange for 142,695 Class C units and a corresponding number of Class A units of the Partnership were issued to us.

We did not receive any proceeds from the sale of shares by the selling stockholders.

In December 2021, we issued 935,235 shares of Class A common stock to certain limited partners of the Partnership in exchange for 935,235 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement.

In March 2022, we issued 350,000 shares of Class A common stock to a limited partner of the Partnership in exchange for 350,000 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement.

Organizational Structure

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In its capacity as the sole managing member of the General Partner, SSG indirectly operates and controls all of the Partnership’s business and affairs.

Therefore, we consolidate the financial results of the Partnership and report non-controlling interests (“NCI”) related to the Class B units held by partners of the Partnership in our consolidated financial statements.

Pursuant to the StepStone Limited Partnership Agreement and an Exchange Agreement that SSG entered into with partners holding Class B units of the Partnership, each Class B unit is exchangeable for one share of SSG’s Class A common stock or, at SSG’s election, for cash, subject to certain restrictions specified in the Exchange Agreement.

When a Class B unit is surrendered for exchange, it will not be available for reissuance.

Therefore, we consolidate the financial results of the Partnership and report non-controlling interests (“NCI”) related to the Class B units and Class C units held by partners of the Partnership in our consolidated financial statements.

Pursuant to the StepStone Limited Partnership Agreement, the Class B Exchange Agreement and Class C Exchange Agreement that SSG and the Partnership entered into with partners holding Class B units and Class C units of the Partnership, respectively, each Class B unit or Class C unit is exchangeable for one share of SSG’s Class A common stock or, at SSG’s election, for cash, subject to certain restrictions specified in the relevant exchange agreement.

When a Class B unit or Class C unit is surrendered for exchange, it will not be available for reissuance.

When a Class B unit is exchanged for a share of SSG’s Class A common stock, a corresponding share of SSG’s Class B common stock will automatically be redeemed by SSG at par value and canceled.

There are no corresponding shares of common stock for the Class C units.

The diagram below illustrates our organizational structure as of March 31, 2022.

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• the General Partner, which holds a 100% general partner interest and no economic interests;

• members of management, employee owners and outside investors, all of whom own Class B units and an equivalent number of shares of Class B common stock;

• certain members of management, employee owners and outside investors, all of whom own Class B units and an equivalent number of shares of Class B common stock;

• certain members of management and employees who own Class B2 units;

• certain employee owners who own Class C units.

(2) Each share of Class A common stock is entitled to one vote and vote together with the Class B common stock as a single class, except as set forth in SSG’s amended and restated certificate of incorporation or as required by law.

(3) Each share of Class B common stock is entitled to five votes prior to a Sunset.

(3) Each share of Class B common stock is entitled to five votes prior to a Sunset (as defined below).

After a Sunset becomes effective, each share of our Class B common stock will then entitle its holder to one vote.

The economic rights of our Class B common stock are limited to the right to be redeemed at par value.

A “Sunset” is triggered upon the earliest to occur of the following:

(i) Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Johnny Randel, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees, the “Sunset Holders”) collectively cease to maintain direct or indirect beneficial ownership of at least 10% of the outstanding shares of Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock);

(ii) the Sunset Holders cease collectively to maintain direct or indirect beneficial ownership of an aggregate of at least 25% of the aggregate voting power of our outstanding Class A common stock and Class B common stock, before giving effect to a Sunset;

and (iii) September 18, 2025.

As of March 31, 2022 the Sunset Holders collectively maintained direct or indirect beneficial ownership of approximately 31.3% of the Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock) and approximately 55.9% of the aggregate voting power of our outstanding Class A common stock and Class B common stock.

Ownership of Our Businesses

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SSG consolidates all entities that it controls due to a majority voting interest or because it is the primary beneficiary of a variable interest entity.

See note 4 to our consolidated financial statements included elsewhere in this Form 10-K for information on variable interest entities.

See note 4 to our consolidated financial statements included elsewhere in this annual report for information on variable interest entities.

The diagram below summarizes the ownership structure of the Partnership’s consolidated operations on a fully diluted basis.

We operate as one business, a fully-integrated private markets solutions provider.

Our chief operating decision maker, which consists of our co-chief executive officers together, utilizes a consolidated approach to assess performance and allocate resources.

Our chief operating decision maker, which consisted of our co-chief executive officers together, through December 31, 2021, and consists of the chief executive officer beginning January 1, 2022, utilizes a consolidated approach to assess performance and allocate resources.

As such, we operate in one business segment.

Key Financial Measures

Our key financial and operating measures are discussed below.

Our key financial measures are discussed below.

Additional information regarding our significant accounting policies can be found in note 2 to our consolidated financial statements included in Part II, Item 8 of this annual report.

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Management and Advisory Fees, Net

Management and advisory fees, net, consist of fees received from managing SMAs and focused commingled funds, advisory and data services, and portfolio analytics and reporting.

Management and advisory fees, net, consist of fees received from managing SMAs and focused commingled funds, advisory, data and administrative services, and portfolio analytics and reporting.

• Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital under management.

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• The weighted-average management fee rate across SMAs and focused commingled funds was approximately 0.52% and 0.52% of average FEAUM in fiscal 2021 and 2022, respectively.

• Fee revenues from advisory, SPAR or SPI services are generally annual fixed fees, which vary based on the scope of services we provide.

• Fee revenues from advisory, SPAR, SPI or administrative services are generally annual fixed fees, which vary based on the scope of services we provide.

We also provide certain project-based or event-driven advisory services.

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Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, from limited partners in the StepStone Funds to us.

As of March 31, 2021, we had over $43 billion of performance fee-eligible capital across approximately 130 programs, of which approximately 90 were in accrued carried interest positions.

In connection with the Greenspring acquisition, we did not acquire any direct economic interests in the carried interest allocations of certain legacy Greenspring funds.

As a result, carried interest allocations in respect of such legacy Greenspring funds have been reflected as legacy Greenspring carried interest allocations in the consolidated statements of income, with a corresponding amount reflected as legacy Greenspring performance fee-related compensation as these amounts are payable to certain employees.

As of March 31, 2022, we had over $55 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across approximately 155 programs.

Incentive fees are generally calculated as a percentage of the profits (up to 10%) earned in respect of certain accounts for which we are the investment adviser, subject to the achievement of minimum return levels or performance benchmarks.

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Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax.

We recognize incentive fee revenue only when these amounts are realized and no longer subject to significant reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization).

We recognize incentive fee revenue only when these amounts are realized and no longer subject to significant risk of reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization).

However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis.

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Accordingly, carried interest allocations are not deemed to be within the scope of Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers .

Legacy Greenspring carried interest allocations include the allocation of carried interest to legacy Greenspring general partner entities from limited partners in certain legacy Greenspring funds in which the legacy Greenspring general partner entities hold an equity interest.

The legacy Greenspring general partner entities are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized.

We account for the investments and carried interest allocations under the equity method of accounting.

We do not have any direct economic interests in the legacy Greenspring general partner entities and thus are not entitled to any carried interest allocation from certain legacy Greenspring funds.

All of the carried interest allocations in respect of such legacy Greenspring funds are payable to employees who are considered affiliates of the Company and are therefore reflected as legacy Greenspring performance fee-related compensation in the consolidated statements of income.

Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606.

We recognize revenue attributable to carried interest allocations from a StepStone Fund based on the amount that would be due to us pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date.

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Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made.

Legacy Greenspring performance fee-related compensation represents the legacy Greenspring carried interest allocations which are entirely payable to certain employees.

Legacy Greenspring carried interest-related compensation is accounted for as compensation expense in conjunction with the related legacy Greenspring carried interest allocation revenue and, until paid, is recorded as a component of legacy Greenspring accrued carried interest-related compensation in the consolidated balance sheets.

Legacy Greenspring carried interest-related compensation expense may be subject to reversal to the extent that the related legacy Greenspring carried interest allocation revenue is reversed.

However, none of the legacy Greenspring carried interest allocation revenue is attributable to the Company.

General, administrative and other includes occupancy, travel and related costs, insurance, legal and other professional fees, depreciation, amortization of intangible assets, system-related costs, and other general costs associated with operating our business.

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Consequently, our general partner investments do not include any significant concentrations in a specific sector or geography outside the United States.

Investment income excludes carried interest allocations, which are presented as revenues as described above.

Interest income consists of income earned on cash, cash equivalents, marketable securities and certificates of deposit.

Interest expense primarily consisted of the interest expense on our previously outstanding debt and related amortization of deferred financing costs and amortization of original issue discount.

The year ended March 31, 2021 includes a $3.5 million charge related to the write-off of unamortized debt issuance costs and discount in connection with the full repayment of our outstanding debt balance.

Other income (loss) includes foreign currency translation gains and losses and non-operating activities.

Investment income and legacy Greenspring investment income exclude carried interest allocations, which are presented as revenues as described above.

Legacy Greenspring investment income represents our share of earnings from the investments we make in certain legacy Greenspring funds through the legacy Greenspring general partner entities.

We have no direct economic interests in the legacy Greenspring general partner entities.

As a result, all such income is reflected as non-controlling interests in legacy Greenspring entities.

Legacy Greenspring investment income will increase or decrease based on the earnings of such legacy Greenspring funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds.

Interest income consists of income earned on cash and cash equivalents, restricted cash, marketable securities and certificates of deposit.

Interest expense primarily consists of the interest expense on the Revolver and our previously outstanding term loan, as well as the related amortization of deferred financing costs and amortization of original issue discount.

The year ended March 31, 2021 includes a $3.5 million charge related to the write-off of unamortized debt issuance costs and discount in connection with the full repayment of our previously outstanding term loan in connection with the IPO in September 2020.

Other income (loss) includes foreign currency transaction gains and losses and non-operating activities.

Income Tax Expense

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Prior to the Reorganization and IPO, we operated as a partnership for U.S.

federal income tax purposes and therefore were not subject to U.S.

federal income tax purposes and therefore were generally not subject to U.S.

federal and state income taxes.

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subsidiaries generally operate as corporate entities in non-U.S.

jurisdictions, with certain of these entities subject to non-U.S.

jurisdictions, with certain of these entities subject to local or non-U.S.

income taxes.

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Non-controlling interests in subsidiaries are allocated a share of income or loss in the respective consolidated subsidiary in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Non-controlling interests in the Partnership represent the economic interests in the Partnership held by the Class B unitholders of the Partnership.

Non-controlling interests in legacy Greenspring entities represent the economic interests in the legacy Greenspring general partner entities.

We did not acquire any direct economic interests in the legacy Greenspring general partner entities.

As a result, all of the net income related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.

Non-controlling interests in the Partnership represent the economic interests in the Partnership held by the Class B and Class C unitholders of the Partnership.

Non-controlling interests in the Partnership are allocated a share of income or loss in the Partnership in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

Operating Metrics

Key Operating Metrics

We monitor certain operating metrics that are either common to the asset management industry or that we believe provide important data regarding our business.

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Although management fees are based on a variety of factors and are not linearly correlated with AUM, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business.

Our AUM is calculated as the sum of (i) the NAV of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds.

Our AUM is calculated as the sum of (i) NAV of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds.

Our AUM reflects the investment valuations in respect of the underlying investments of our funds and accounts on a three-month lag, adjusted for new client account activity through the period end.

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When NAV data is not available by 115 days following December 31, 2021, such NAVs are adjusted for cash activity following the last available reported NAV.

Beginning in the quarter ended March 31, 2021, the computation of AUA was modified to include the portion of client portfolio assets for which we do not directly provide recommendations, monitoring and/or reporting services.

Prior period amounts have not been recast for this change as such historical data does not exist.

The impact of the change was approximately $70 billion in the current period.

Beginning in the quarter ended March 31, 2021, we modified our AUA computation to include, with respect to our advisory clients, the portion of their portfolio assets for which we do not directly provide recommendations, monitoring and/or reporting services.

Prior period amounts have not been recast for this change because comparable historical data does not exist.

The change resulted in an increase to AUA of approximately $70 billion for the quarter ended March 31, 2021.

Fee-Earning AUM

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Undeployed Fee-Earning Capital

Undeployed fee-earning capital represents the amount of capital commitments to StepStone Funds that has not yet been invested or considered active but will generate management fee revenue once this capital is invested or active.

Non-GAAP Financial Measures

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(a) unrealized carried interest allocation revenues and related compensation, (b) unrealized investment income, (c) equity-based compensation for awards granted prior to and in connection with our IPO, (d) amortization of intangibles and (e) certain other items that we believe are not indicative of our core operating performance, including charges associated with acquisitions and corporate transactions, contract terminations and employee severance.

ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation and legacy Greenspring investment income as none of the economics are attributable to us.

ANI is income before taxes fully taxed at our blended statutory rate.

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Adjusted Net Income Per Share

ANI per share measures our per-share earnings assuming all Class B units in the Partnership were exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards.

ANI per share measures our per-share earnings assuming all Class B units and Class C units in the Partnership are exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards.

ANI per share is calculated as ANI divided by adjusted shares outstanding.

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Incentive fees 11,593 5,474 3,410

Carried interest allocation:

Realized allocation 62,953 46,177 36,648

Unrealized allocation 433,827 161,819 27,254

Total carried interest allocation 496,780 207,996 63,902

Carried interest allocations:

Realized 200,718 62,953 46,177

Unrealized 585,851 433,827 161,819

Total carried interest allocations 786,569 496,780 207,996

Legacy Greenspring carried interest allocations (1)

Total revenues 1,365,525 787,716 446,611

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Total performance fee-related compensation 404,111 246,040 109,659

Legacy Greenspring performance fee-related compensation (1)

Total compensation and benefits 802,695 411,062 242,304

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Investment income 26,160 16,407 6,926

Legacy Greenspring investment income (1)

Interest income 337 413 1,436

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Net income attributable to non-controlling interests in subsidiaries 26,608 23,176 12,869

Net income attributable to non-controlling interests in legacy Greenspring entities (1)

Net income attributable to non-controlling interests in the Partnership 231,202 228,783 131,916

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$ 193,885 $ 62,634 $ —

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(1) Reflects amounts attributable to consolidated VIEs for which we did not acquire any direct economic interests.

See notes 3, 5 and 15 to our consolidated financial statements included elsewhere in this annual report.

Year Ended March 31, 2022 Compared to Year Ended March 31, 2021

Total revenues increased $341.1 million, or 76%, to $787.7 million for fiscal 2021 as compared to fiscal 2020, due to higher carried interest allocation, net management and advisory fees and incentive fees.

Total revenues increased $577.8 million, or 73%, to $1,365.5 million for fiscal 2022 as compared to fiscal 2021, due to higher carried interest allocations, net management and advisory fees, incentive fees and the inclusion of legacy Greenspring carried interest allocations in the current year, in each case, as described below.

Net management and advisory fees increased $94.8 million, or 33%, to $380.3 million for fiscal 2022 as compared to fiscal 2021.

This increase was driven by new client activity and a 26% growth in FEAUM across the platform, including retroactive fees of $9.0 million from StepStone Real Estate Partners IV (“SREP IV”), which had its final close in September 2020.

The increases were partially offset by a $1.5 million decline in revenues associated with liquidating portfolios for which StepStone serves as the replacement manager.

The increase was driven by new client activity and a 39% growth in average FEAUM (or 25% excluding the impact of Greenspring) across the platform, as well as retroactive fees of $7.7 million from the final closing for StepStone Tactical Growth Fund III and additional closings of StepStone’s private equity co-investment fund.

The prior year period included $9.0 million of retroactive fees from the final closing of StepStone Real Estate Partners IV (“SREP IV”).

For new investors, fees relating to periods prior to the closing date are considered retroactive.

Incentive fees increased $2.1 million, or 61%, to $5.5 million for fiscal 2021 as compared to fiscal 2020, reflecting higher realization activity.

Incentive fees increased $6.1 million, or 112%, to $11.6 million for fiscal 2022 as compared to fiscal 2021, reflecting higher realization activity and recognition of deferred incentive fees in the current year.

Realized carried interest allocation revenues increased $137.8 million, or 219%, to $200.7 million for fiscal 2022, reflecting higher realization activity within our private equity funds.

Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues.

Excluding the reversal, unrealized carried interest allocation revenues increased $288.8 million, or 139%, to $496.8 million for fiscal 2021 compared to fiscal 2020.

The increase in unrealized carried interest allocation for fiscal 2021 was primarily attributable to a larger increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds primarily driven by the continued recovery in global financial markets despite the ongoing economic impacts of COVID-19.

For fiscal 2021, our investments in StepStone Funds and accrued carried interest allocations initially experienced a $128.5 million decline during the first three months, primarily reflecting the unrealized depreciation in the fair value of certain underlying fund investments driven by the impact of COVID-19, and have subsequently seen a significant increase of $625.3 million, primarily reflecting the unrealized appreciation in the fair value of certain underlying fund investments primarily driven by the continued recovery in global financial markets.

Excluding the reversal of $200.7 million, unrealized carried interest allocation revenues increased $289.8 million, or 58%, to $786.6 million for fiscal 2022 compared to fiscal 2021.

The increase in unrealized carried interest allocations for fiscal 2022 primarily reflected a larger increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

Legacy Greenspring carried interest allocation revenues of $187.1 million for fiscal 2022 reflect gross realized carried interest allocations of $92.2 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $94.9 million for the period from September 20, 2021 to March 31, 2022.

Year Ended March 31, 2021 Compared to Year Ended March 31, 2020

Total revenues increased $190.3 million, or 74%, to $446.6 million for fiscal 2020 as compared to fiscal 2019, due to higher net management and advisory fees, carried interest allocation and incentive fees.

Net management and advisory fees increased $50.3 million, or 21%, to $285.5 million for fiscal 2021 as compared to fiscal 2020.

The increase was driven by new client activity and a 28% growth in FEAUM across the platform, including $17.1 million from StepStone Secondary Opportunities IV, which held its final close in March 2020 and $4.2 million from SREP IV for which fees were initiated in June 2019.

These increases were offset by a $7.6 million decline in revenues associated with liquidating portfolios for which we serve as the replacement manager.

This increase was driven by new client activity and a 23% growth in average FEAUM across the platform, including retroactive fees of $9.0 million from SREP IV, which had its final close in September 2020.

The increases were partially offset by a $1.5 million decline in revenues associated with liquidating portfolios for which StepStone serves as the replacement manager.

For new investors, fees relating to periods prior to the closing date are considered retroactive.

Incentive fees increased $2.1 million, or 61%, to $5.5 million for fiscal 2021 as compared to fiscal 2020, reflecting higher realization activity.

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Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues.

Excluding the reversal, unrealized carried interest allocation revenues increased $144.1 million, or 225%, to $208.0 million for fiscal 2020 compared to fiscal 2019, primarily reflecting a larger increase in the cumulative allocation of gains associated with underlying portfolios within our private equity funds.

Excluding the reversal of $63.0 million, unrealized carried interest allocation revenues increased $288.8 million, or 139%, to $496.8 million for fiscal 2021 compared to fiscal 2020.

For fiscal 2021, our investments in StepStone Funds and accrued carried interest allocations initially experienced a $128.5 million decline during the first three months, primarily reflecting the unrealized depreciation in the fair value of certain underlying fund investments driven by the impact of COVID-19, and subsequently saw a significant increase of $625.3 million, primarily reflecting the unrealized appreciation in the fair value of certain underlying fund investments primarily driven by the continued recovery in global financial markets.

Year Ended March 31, 2022 Compared to Year Ended March 31, 2021

Total expenses increased $453.6 million, or 99%, to $913.2 million for fiscal 2022 as compared to fiscal 2021, reflecting increases in performance fee-related compensation, general, administrative and other expenses, cash-based compensation, equity-based compensation, and the inclusion of legacy Greenspring performance fee-related compensation in the current year.

Cash-based compensation increased $40.4 million, or 26%, to $197.5 million for fiscal 2022 as compared to fiscal 2021, due to increased staffing and compensation levels.

Our average full-time headcount increased 24% (or 12% excluding the impact of Greenspring) in the current year period as compared to the prior year period.

Equity-based compensation increased $6.1 million, or 77%, to $14.0 million for fiscal 2022 as compared to fiscal 2021.

The increase was attributable to the grant of restricted stock units (“RSUs”) made to certain employees and directors in connection with our IPO in September 2020.

As such grants were not outstanding for the period prior to the IPO, this resulted in lower expense in the prior year period.

The increase was also attributable to additional grants of RSUs made to certain employees and directors in the current year period.

Performance fee-related compensation expense increased $158.1 million, or 64%, to $404.1 million for fiscal 2022 as compared to fiscal 2021, primarily reflecting the increase in carried interest allocation revenue.

Realized performance fee-related compensation increased $60.7 million, or 199%, to $91.2 million for fiscal 2022 as compared to fiscal 2021, primarily reflecting higher realization activity.

Legacy Greenspring performance fee-related compensation expense of $187.1 million for fiscal 2022 reflects gross realized performance fee-related compensation expense of $92.2 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $94.9 million for the period from September 20, 2021 to March 31, 2022.

General, administrative and other expenses increased $62.0 million, or 128%, to $110.5 million for fiscal 2022 as compared to fiscal 2021.

The overall increase primarily reflected increases of $21.2 million in amortization expense for intangibles, $13.9 million in transaction costs, $8.0 million in loss on change in fair value for contingent consideration obligation, $4.8 million in professional fees, $3.6 million of travel and associated costs for investment evaluation and client service, $2.9 million in insurance costs, $2.6 million in information and technology expenses, $1.8 million in occupancy costs, $1.6 million in recruiting costs and other general operating expenses.

We anticipate travel and other expenses will continue to increase to pre-pandemic levels as the COVID-19 situation improves, and that costs associated with being a public company will continue to be reflected in our expenses going forward.

Year Ended March 31, 2021 Compared to Year Ended March 31, 2020

Total expenses increased $164.9 million, or 56%, to $459.5 million for fiscal 2021 as compared to fiscal 2020, due to increases in performance fee-related compensation, cash-based compensation and equity-based compensation, partially offset by decreases in general, administrative and other expenses.

Cash-based compensation increased $26.4 million, or 20%, to $157.1 million for fiscal 2021 as compared to fiscal 2020, due to increased staffing and compensation levels.

Our full-time headcount increased 12% from March 31, 2020 to March 31, 2021.

Our average full-time headcount increased 16% in the current year period as compared to the prior year period.

Equity-based compensation increased $6.0 million, or 312%, to $7.9 million for fiscal 2021 as compared to fiscal 2020.

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We anticipate travel and other expenses will return to prior levels as the COVID-19 situation improves, and that the full-year impact of costs associated with being a public company will be reflected in our expenses going forward.

Year Ended March 31, 2020 Compared to Year Ended March 31, 2019

Total expenses increased $104.8 million, or 55%, to $294.7 million for fiscal 2020 as compared to fiscal 2019, reflecting increases in cash-based compensation, equity-based compensation, performance fee-related compensation and general, administrative and other expenses.

Cash-based compensation increased $22.4 million, or 21%, to $130.7 million for fiscal 2020 as compared to fiscal 2019, due to increased staffing and compensation levels.

Our full-time headcount increased 24% from March 31, 2019 to March 31, 2020.

Equity-based compensation increased $0.2 million, or 11%, to $1.9 million for fiscal 2020 as compared to fiscal 2019.

Performance fee-related compensation expense increased $78.2 million, or 248%, to $109.7 million for fiscal 2020 as compared to fiscal 2019.

The increase primarily reflected the increase in carried interest allocation revenue.

Realized performance fee-related compensation increased $6.7 million, or 33%, to $27.0 million for fiscal 2020 as compared to fiscal 2019, reflecting higher realization activity.

General, administrative and other expenses increased $4.1 million, or 8%, to $52.4 million for fiscal 2020 as compared to fiscal 2019.

The increase primarily reflected $3.0 million in professional services expense, $0.5 million in depreciation expense, and other general operating expenses.

These increases were partially offset by a decrease of $1.5 million in amortization expense for intangibles.

Other Income (Expense)

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Investment income increased $9.8 million, or 59%, to $26.2 million for fiscal 2022 as compared to fiscal 2021, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.

Legacy Greenspring investment income of $32.6 million for fiscal 2022 reflects gross realized investment income of $7.8 million and unrealized investment income, net of the reversal of realized investment income, of $24.8 million for the period from September 20, 2021 to March 31, 2022.

Interest income decreased $0.1 million, or 18%, to $0.3 million for fiscal 2022 as compared to fiscal 2021.

Interest expense decreased $6.2 million, or 85%, to $1.1 million for fiscal 2022 as compared to fiscal 2021.

The decrease was primarily due to the full repayment of our previously outstanding senior secured term loan (“Term Loan B”) in connection with the IPO in September 2020, partially offset by the write-off of $3.5 million in unamortized debt issuance costs and discount with the full repayment of our Term Loan B.

Other income (loss) increased $1.6 million to income of $0.2 million for fiscal 2021 as compared to fiscal 2020, primarily reflecting favorable foreign currency translation.

The decrease was primarily due to the full repayment of our previously outstanding senior secured term loan (“Term Loan B”) in connection with the IPO in September 2020, partially offset by interest on average outstanding balances under the Revolver during the current period.

Other income (loss) increased $2.0 million, or 922%, to $2.2 million for fiscal 2022 as compared to fiscal 2021, primarily reflecting gains related to adjustments in connection with the Tax Receivable Agreements, offset by net foreign currency transaction losses and losses related to the write-off of certain property and equipment.

Year Ended March 31, 2021 Compared to Year Ended March 31, 2020

1 unchanged sentence

Interest income decreased $1.0 million, or 71%, to $0.4 million for fiscal 2021 as compared to fiscal 2020.

Interest expense decreased $0.1 million, to $10.2 million for fiscal 2020 as compared to fiscal 2019.

The decrease primarily reflected changes in interest rates on average outstanding debt balances for fiscal 2020 as compared with fiscal 2019.

Interest expense decreased $2.9 million, or 28%, to $7.4 million for fiscal 2021 as compared to fiscal 2020.

The decrease was primarily due to the full repayment of our Term Loan B in connection with the IPO in September 2020, partially offset by the write-off of $3.5 million in unamortized debt issuance costs and discount with the full repayment of our Term Loan B.

Other income (loss) increased $1.6 million to income of $0.2 million for fiscal 2021 as compared to fiscal 2020, primarily reflecting favorable foreign currency translation.

Income Tax Expense

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federal and state income taxes on our share of taxable income generated by the Partnership, as well as local and foreign income taxes of certain of the Partnership’s subsidiaries.

Prior to the Reorganization and IPO, income tax expense consisted of local income taxes and foreign income taxes for subsidiaries that have operations outside of the United States as the Partnership is treated as a flow-through entity and is not subject to federal income taxes.

Prior to the Reorganization and IPO, income tax expense consisted of local income taxes and foreign income taxes for subsidiaries that have operations outside of the United States, as the Partnership is treated as a flow-through entity and is not subject to U.S.

federal and state income taxes.

Our effective income tax rate was 5.5%, 6.9%, and 2.6% for fiscal 2022, 2021 and 2020, respectively.

Our overall effective tax rate is less than the statutory rate primarily because (a) we were not subject to U.S.

federal taxes prior to the Reorganization and IPO and (b) a portion of income is allocated to non-controlling interests, as the tax liability on such income is borne by the holders of such non-controlling interests.

Our overall effective tax rate in each of the periods described above is less than the statutory rate primarily because a portion of income is allocated to non-controlling interests, as the tax liability on such income is borne by the holders of such non-controlling interests.

Additionally, for the period prior to the Reorganization and IPO, we operated as a partnership for U.S.

federal income tax purposes and were not subject to U.S.

federal and state income taxes.

Year Ended March 31, 2022 Compared to Year Ended March 31, 2021

Income tax expense increased $5.0 million, or 22%, to $28.3 million for fiscal 2022 as compared to fiscal 2021.

The increase was primarily due to the additional U.S.

federal and state income taxes recognized on our share of taxable income generated by the Partnership as a result of our increased ownership in the Partnership, partially offset by the release of a valuation allowance during the current year as a result of the Greenspring acquisition.

Additionally, for the period prior to the Reorganization and IPO, we operated as a partnership for U.S.

federal income tax purposes and were not subject to U.S.

federal and state income taxes.

Year Ended March 31, 2021 Compared to Year Ended March 31, 2020

Income tax expense increased $19.3 million, or 488%, to $23.3 million for fiscal 2021 as compared to fiscal 2020.

The increase was primarily related to U.S.

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For the period prior to the Reorganization and IPO, we were not subject to U.S.

federal income taxes.

Year Ended March 31, 2020 Compared to Year Ended March 31, 2019

Income tax expense increased $2.3 million, or 141%, to $4.0 million for fiscal 2020 as compared to fiscal 2019.

The increase was primarily related to a general increase in taxes paid in non-U.S.

subsidiaries.

federal and state income taxes.

Net Income Attributable to Non-Controlling Interests in Subsidiaries

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The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.

Net Income Attributable to Non-Controlling Interests in Legacy Greenspring Entities

Net income attributable to non-controlling interests in legacy Greenspring entities represents the net income or loss attributable to the interests held by the legacy Greenspring general partner entities.

We did not acquire any direct economic interests in the legacy Greenspring general partner entities.

As a result, all of the net income or loss related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.

Net income attributable to non-controlling interests in legacy Greenspring entities was $32.6 million for fiscal 2022.

Net Income Attributable to Non-Controlling Interests in the Partnership

Net income attributable to non-controlling interests in the Partnership represents the portion of net income or loss attributable to the interests held by the Class B unitholders of the Partnership subsequent to the Reorganization and IPO.

Net income attributable to non-controlling interests in the Partnership represents the portion of net income or loss attributable to the interests held by the Class B and Class C unitholders of the Partnership.

Net income attributable to non-controlling interests in the Partnership was $231.2 million, $228.8 million and $131.9 million for fiscal 2022, 2021 and 2020, respectively.

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Assets Under Management

Our AUM has grown from approximately $53 billion as of March 31, 2019 to approximately $86 billion as of March 31, 2021.

AUM was $67 billion as of March 31, 2020, $86 billion as of March 31, 2021 and $134 billion as of March 31, 2022.

The acquisition of Greenspring added $22 billion of AUM as of September 20, 2021.

Assets Under Advisement

Assets related to our advisory accounts have increased from approximately $213 billion as of March 31, 2019 to approximately $340 billion as of March 31, 2021.

The increase reflects approximately $70 billion related to the inclusion of the portion of client portfolio assets for which we do not directly provide recommendations, monitoring and/or reporting services.

Prior period amounts have not been recast for this change as such historical data does not exist.

Assets related to our advisory accounts were $229 billion as of March 31, 2020, $340 billion as of March 31, 2021 and $436 billion as of March 31, 2022.

As described under “Key Operating Metrics—Assets Under Advisement,” we modified our calculation of AUA beginning in the quarter ended March 31, 2021 to include, with respect to our advisory clients, the portion of their portfolio assets for which we do not directly provide recommendations, monitoring and/or reporting services.

This change increased AUA by approximately $70 billion for the quarter ended March 31, 2021.

Prior period amounts have not been recast for this change because such historical data does not exist.

Fee-Earning AUM

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FEAUM increased $23 billion, or 45%, to approximately $75 billion as of March 31, 2022 as compared to approximately $52 billion as of March 31, 2021.

Of the increase, approximately $9 billion was from SMAs and approximately $1 billion was from focused commingled funds.

The increase was primarily attributable to a $14 billion increase in focused commingled funds due to the Greenspring acquisition, which added approximately $11 billion of FEAUM, and $9 billion from SMAs.

Year Ended March 31, 2021

8 unchanged sentences

(3,235) (1,564) (4,799)

Market value, FX and other (3)

Acquisitions (3)

— 11,407 11,407

Market value, FX and other (4)

Ending balance $ 49,586 $ 25,587 $ 75,173

11 unchanged sentences

(1) Contributions consist of new capital commitments that earn fees on committed capital and capital contributions to funds and accounts that earn fees on net invested capital or NAV.

(2) Distributions consist of returns of capital from funds and accounts that pay fees on net invested capital or NAV.

(3) Market value, FX and other primarily consist of changes in market value appreciation (depreciation) for funds that pay on NAV, the effect of foreign exchange rate changes on non-U.S.

dollar denominated commitments and reductions in fee-earning AUM from funds that moved from a committed capital to net invested capital fee basis or from funds and accounts that no longer pay fees.

(2) Distributions consist of returns of capital from funds and accounts that pay fees on net invested capital or NAV and reductions in fee-earning AUM from funds that moved from a committed capital to net invested capital fee basis or from funds and accounts that no longer pay fees.

(3) Includes approximately $11.4 billion of focused commingled funds added as a result of the Greenspring acquisition.

(4) Market value, FX and other primarily consist of changes in market value appreciation (depreciation) for funds that pay on NAV and the effect of foreign exchange rate changes on non-U.S.

dollar denominated commitments.

The following tables set forth FEAUM by asset class and selected weighted-average management fee rate data:

2 unchanged sentences

Private equity (1)

$ 40,396 $ 24,533 $ 19,929

Infrastructure 17,737 12,605 11,424

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Total $ 75,173 $ 52,008 $ 41,193

_______________________________

(1) Balance as of March 31, 2022 includes approximately $11.4 billion of focused commingled funds added as a result of the Greenspring acquisition.

As of March 31,

6 unchanged sentences

_______________________________

(1) Weighted-average fee rates reflect the applicable management fees for the last 12 months ending on each period presented.

(1) Weighted-average fee rates reflect the applicable management fees for the last 12 months ending on each period presented, and is inclusive of any retroactive fees for such period.

(2) The change in weighted-average fee rates primarily reflected the timing of new funds.

1 unchanged sentence

Undeployed Fee-Earning Capital

As of March 31, 2021, we had $14.0 billion of undeployed fee-earning capital, which will generate management fee revenue once this capital is invested or active.

As of March 31, 2022, we had $17.0 billion of undeployed fee-earning capital, which will generate management fee revenue once this capital is invested or activated.

Non-GAAP Financial Measures

6 unchanged sentences

General, administrative and other 110,468 48,485 52,363

48,485 52,363 48,304

Amortization of intangibles 24,497 3,339 5,028

2 unchanged sentences

Fee-related earnings 122,242 89,484 61,559

89,484 61,559 45,342

Realized carried interest allocations 200,718 62,953 46,177

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Income attributable to non-controlling interests in subsidiaries:

Fee-related earnings attributable to non-controlling interests in subsidiaries (4)

27,583 23,834 12,781

Performance-related earnings/other income (loss) attributable to non-controlling interests in subsidiaries (5)

517 118 (729)

Pre-tax adjusted net income 223,095 110,267 66,858

4 unchanged sentences

(1) Reflects equity-based compensation for awards granted subsequent to the IPO.

(2) Beginning in the quarter ended December 31, 2020, foreign currency translation gains and losses have been reclassified from general, administrative and other expenses to other income (loss) in our consolidated income statements.

We have revised prior periods presented to reflect this reclassification ($1.0 million and $0.9 million in fiscal 2020 and 2019, respectively).

(3) Includes compensation paid to certain equity holders as part of an acquisition earn-out ($1.4 million in fiscal 2020 and $2.9 million in fiscal 2019), transaction costs ($0.4 million in fiscal 2021, $1.2 million in fiscal 2020, and $1.8 million in fiscal 2019), severance costs ($4.2 million in fiscal 2021, $1.0 million in fiscal 2020, and $0.1 million in fiscal 2019), loss on change in fair value for contingent consideration obligation ($1.6 million in fiscal 2021) and other non-core operating income and expenses.

(4) Includes income attributable to non-controlling interests in subsidiaries, net of non-controlling interest portion of unrealized investment income (loss) ($(0.1) million in fiscal 2021, $0.8 million in fiscal 2020, and $0.1 million in fiscal 2019) and non-controlling interest portion of loss on change in fair value for contingent consideration obligation ($(0.7) million in fiscal 2021).

(5) Represents corporate income taxes at a blended statutory rate of 22.6% applied to pre-tax adjusted net income for fiscal 2021.

(2) Includes compensation paid to certain equity holders as part of an acquisition earn-out ($1.4 million in fiscal 2020), transaction costs ($14.2 million in fiscal 2022, $0.4 million in fiscal 2021, and $1.2 million in fiscal 2020), severance costs ($1.6 million in fiscal 2022, $4.2 million in fiscal 2021, and $1.0 million in fiscal 2020), loss on change in fair value for contingent consideration obligation ($9.6 million in fiscal 2022 and $1.6 million in fiscal 2021), compensation paid to certain employees as part of an acquisition earn-out ($0.8 million in fiscal 2022) and other non-core operating income and expenses.

(3) Reflects other income (loss) net of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($3.6 million for fiscal 2022).

(4) Reflects the portion of fee-related earnings of our subsidiaries attributable to non-controlling interests.

(5) Reflects components of pre-tax adjusted net income of our subsidiaries attributable to non-controlling interests other than fee-related earnings, including incentive fees and related compensation, realized investment income, net interest expense and other income (loss).

(6) Represents corporate income taxes at a blended statutory rate of 22.5%, 22.6% and 25.0% applied to pre-tax adjusted net income for fiscal 2022, 2021 and 2020, respectively.

The 22.5% rate for fiscal 2022 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.5%.

The 22.6% rate for fiscal 2021 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.6%.

As we were not subject to U.S.

federal and state income taxes prior to the Reorganization and IPO, a blended statutory rate of 25.0% has been applied to all prior periods presented for comparability purposes.

The decline in the blended statutory rate was due to updates in our state apportionment based on our most recently filed tax returns and is our best estimate of our blended statutory tax rate moving forward.

federal and state income taxes prior to the Reorganization and IPO, a blended statutory rate of 25.0% has been applied to fiscal 2020 for comparability purposes.

The decline in the blended statutory rate for fiscal 2022 compared to fiscal 2021 was due to updates in our state apportionment based on our most recently filed tax returns and is our best estimate of our blended statutory tax rate moving forward.

The decline in the blended statutory rate for fiscal 2021 compared to fiscal 2020 was due to updates in our state apportionment.

Adjusted Revenues and Adjusted Net Income

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Year Ended March 31, 2021 Compared to Year Ended March 31, 2020

Adjusted revenues increased $55.6 million, or 24%, to $285.6 million for fiscal 2020 as compared to fiscal 2019, primarily reflecting increases in net management and advisory fees and realized carried interest allocation revenues.

ANI increased $10.4 million, or 26%, to $50.1 million for fiscal 2020 as compared to fiscal 2019, largely due to increases in FRE as discussed below as well as higher net realized performance fee-related earnings.

Adjusted revenues increased $73.0 million, or 26%, to $358.6 million for fiscal 2021 as compared to fiscal 2020, primarily reflecting increases in net management and advisory fees, realized carried interest allocation revenues and incentive fees (including the deferred portion).

ANI increased $35.3 million, or 70%, to $85.4 million for fiscal 2021 as compared to fiscal 2020, primarily due to increases in FRE as discussed below, as well as higher net realized performance fee-related earnings.

These increases were partially offset by a higher allocation of income to non-controlling interests.

Adjusted Net Income Per Share

8 unchanged sentences

Assumed vesting of RSUs 1,289,809 1,151,579 745,347

1,151,579 745,347 745,347

Assumed vesting and exchange of Class B2 units 2,476,681 2,465,420 2,411,318

2,465,420 2,411,318 2,411,318

Exchange of Class B units in the Partnership (1)

52,028,095 65,158,526 65,578,831

Exchange of Class C units in the Partnership (2)

1,563,316 — —

Adjusted shares (3)

2 unchanged sentences

_______________________________

(1) Our Class A common stock did not exist prior to the Reorganization and IPO in September 2020.

As a result, the number of adjusted shares outstanding used in the computation of ANI per share for all prior year periods presented reflect the number of adjusted shares for the period from the IPO date to September 30, 2020 for comparability purposes.

(2) Assumes the full exchange of Class B units in the Partnership for Class A common stock of SSG pursuant to the exchange agreement.

(1) Assumes the full exchange of Class B units in the Partnership for Class A common stock of SSG pursuant to the Class B Exchange Agreement.

(2) Assumes the full exchange of Class C units in the Partnership for Class A common stock of SSG pursuant to the Class C Exchange Agreement.

(3) Class A common stock did not exist prior to the Reorganization and IPO in September 2020.

As a result, the computation of ANI per share for the period prior to the Reorganization and IPO assumes the same number of adjusted shares outstanding as reported for the period after the IPO through September 30, 2020.

Fee-Related Earnings

Year Ended March 31, 2022 Compared to Year Ended March 31, 2021

FRE increased $27.9 million, or 45%, to $89.5 million for fiscal 2021 as compared to fiscal 2020, primarily reflecting higher net management and advisory fees and lower general, administrative and other expenses, partially offset by higher cash-based compensation.

FRE increased $32.8 million, or 37%, to $122.2 million for fiscal 2022 as compared to fiscal 2021, primarily reflecting higher net management and advisory fees, partially offset by higher cash-based compensation, general, administrative and other expenses and equity-based compensation.

Year Ended March 31, 2021 Compared to Year Ended March 31, 2020

FRE increased $16.2 million, or 36%, to $61.6 million for fiscal 2020 as compared to fiscal 2019, primarily reflecting higher net management and advisory fees, partially offset by higher cash-based compensation and general, administrative and other expenses.

Reconciliation of GAAP to Non-GAAP Financial Measures

The table below shows a reconciliation of revenues to adjusted revenues.

4 unchanged sentences

Deferred incentive fees 1,438 4,700 799

Legacy Greenspring carried interest allocations (187,106) — —

Adjusted revenues $ 594,006 $ 358,589 $ 285,591

5 unchanged sentences

(28,100) (23,952) (12,052)

Unrealized carried interest allocation revenue (433,827) (161,819) (27,254)

Net income attributable to non-controlling interests in legacy Greenspring entities (32,586) — —

Unrealized carried interest allocations (585,851) (433,827) (161,819)

Unrealized performance fee-related compensation 312,903 215,508 82,701

5 unchanged sentences

Write-off of unamortized deferred financing costs — 3,526 —

Tax Receivable Agreements adjustments through earnings (3,560) — —

Non-core items (3)

6 unchanged sentences

50,152 24,865 16,715

Realized carried interest allocation revenue (62,953) (46,177) (36,648)

Realized carried interest allocations (200,718) (62,953) (46,177)

Realized performance fee-related compensation 91,208 30,532 26,958

11 unchanged sentences

_______________________________

(1) Includes income attributable to non-controlling interests in subsidiaries, net of non-controlling interest portion of unrealized investment income (loss) ($(0.1) million in fiscal 2021, $0.8 million in fiscal 2020, and $0.1 million in fiscal 2019) and non-controlling interest portion of loss on change in fair value for contingent consideration obligation ($(0.7) million in fiscal 2021).

(1) Reflects the portion of pre-tax adjusted net income of our subsidiaries attributable to non-controlling interests.

(2) Reflects equity-based compensation for awards granted prior to and in connection with the IPO.

(4) Represents corporate income taxes at a blended statutory rate of 22.6% applied to pre-tax adjusted net income for fiscal 2021.

(3) Includes compensation paid to certain equity holders as part of an acquisition earn-out ($1.4 million in fiscal 2020), transaction costs ($14.2 million in fiscal 2022, $0.4 million in fiscal 2021, and $1.2 million in fiscal 2020), severance costs ($1.6 million in fiscal 2022, $4.2 million in fiscal 2021, and $1.0 million in fiscal 2020), loss on change in fair value for contingent consideration obligation ($9.6 million in fiscal 2022 and $1.6 million in fiscal 2021), compensation paid to certain employees as part of an acquisition earn-out ($0.8 million in fiscal 2022) and other non-core operating income and expenses.

(4) Represents corporate income taxes at a blended statutory rate of 22.5%, 22.6% and 25.0% applied to pre-tax adjusted net income for fiscal 2022, 2021 and 2020, respectively.

The 22.5% rate for fiscal 2022 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.5%.

The 22.6% rate for fiscal 2021 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.6%.

As we were not subject to U.S.

federal and state income taxes prior to the Reorganization and IPO, a blended statutory rate of 25.0% has been applied to all prior periods presented for comparability purposes.

(5) Beginning in the quarter ended December 31, 2020, foreign currency translation gains and losses have been reclassified from general, administrative and other expenses to other income (loss) in our consolidated income statements.

We have revised prior periods presented to reflect this reclassification ($1.0 million and $0.9 million in fiscal 2020 and 2019, respectively).

federal and state income taxes prior to the Reorganization and IPO, a blended statutory rate of 25.0% has been applied to fiscal 2020 for comparability purposes.

The decline in the blended statutory rate for fiscal 2021 compared to fiscal 2020 was due to updates in our state apportionment.

(5) Reflects other income (loss) net of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($3.6 million in fiscal 2022).

Investment Performance

The following tables present information relating to the performance of all the investments that StepStone recommends and subsequently tracks across asset classes and investment strategies, except as set forth in greater detail below.

The following tables present information relating to the performance of all the investments that StepStone has recommended and subsequently tracked across asset classes and investment strategies, except as set forth in greater detail below.

The data for these investments is generally presented from the inception date of each strategy and asset class through December 31, 2021 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.

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• market conditions and investment opportunities may differ from those in the past;

• the performance of our funds is largely based on the NAV of the funds’ investments, including unrealized gains, which may never be realized;

• the performance of our funds is largely based on the NAV (as defined below) of the funds’ investments, including unrealized gains, which may never be realized;

• newly-established funds may generate lower investment returns during the period that they initially deploy their capital;

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• “Net IRR” refers to IRR net of fees and expenses charged by both the underlying fund managers and StepStone;

• “MSCI ACWI PME+” refers to the MSCI World Index, calculated on a Public Market Equivalent Plus basis, the benchmark index used for comparison below.

The MSCI World Index is a free float-adjusted market capitalization-weighted index of over 2,900 world stocks that is designed to measure the equity market performance of developed markets.

We believe the MSCI World Index is commonly used by private markets investors to evaluate performance.

The PME+ calculation methodology allows private markets investment performance to be evaluated against a public index and assumes that capital is being invested in the index on the days the capital was called by the underlying fund managers.

The distributions are rescaled by a factor lambda so that the final PME NAV is the same as the final fund NAV;

• “MSCI ACWI Direct Alpha” refers to the MSCI All Country World Index, calculated on a Public Market Equivalent Plus basis, the benchmark index used for comparison below.

The MSCI All Country World Index is a free float-adjusted market capitalization-weighted index of over 2,900 world stocks that is designed to measure the equity market performance of developed and emerging markets.

We believe the MSCI All Country World Index is commonly used by private markets investors to evaluate performance.

The Direct Alpha calculation methodology allows private markets investment performance to be evaluated against a public index by compounding capital invested, capital distributed and net asset values to a single point in time in the benchmark’s life, removing fluctuations of the public index and leaving only the non-market return above/below the index;

• “Net TVM” refers to the total value to paid-in capital or invested capital expressed as a multiple, and is calculated as distributions plus unrealized valuations divided by invested capital (including all capitalized costs).

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(1) Performance data shown in the table above is on an inception-to-date basis as of December 31, 2021.

Overall performance includes all investments StepStone recommends and subsequently tracks, including advisory co-investments and infrastructure investments made prior to January 1, 2015, as well as the performance summary of Courtland, for which the track record dates back to September 1994.

Overall performance excludes (i) client-direct investments totaling $16.3 billion of capital commitments, (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment, (iii) syndicated loan portfolio totaling $0.8 billion, and (iv) investments made by legacy private equity acquired businesses.

USD returns are calculated on a Constant Currency-Adjusted USD reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date.

Overall performance includes all investments StepStone recommends and subsequently tracks, including advisory co-investments and infrastructure investments made prior to January 1, 2015, the performance summary of Courtland, for which the track record dates back to September 1994.

Overall performance excludes (i) client-direct investments, (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment, (iii) syndicated loan portfolio totaling $0.6 billion, (iv) investments made by legacy private equity acquired businesses, and (v) Greenspring investments until data integration is completed.

USD returns for StepStone recommended investments are calculated on a Constant Currency-Adjusted USD reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date.

(2) Investments of former clients are included in performance summary past the client termination date until such time as StepStone stops receiving current investment data (quarterly valuations and cash flows) for the investment.

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StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate):

25 basis points of net invested capital for management fee, 5 basis points of capital commitments for fund expenses, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.

25 basis points of net invested capital for management fees, 5 basis points of capital commitments for fund expenses, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.

125 basis points (60 basis points for Infrastructure) on capital commitments in years 1 through 4 for management fee.

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Co-investments:

100 basis points on net committed capital for management fee, 5 basis points of capital commitments for fund expenses, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.

100 basis points on net committed capital for management fees, 5 basis points of capital commitments for fund expenses, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.

Co-investments also include 10.0% of paid and unrealized carry (15.0% of paid and unrealized carry for Real Estate), with an 8% preferred return hurdle.

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For investment returns where NAV data is not available by 115 days following December 31, 2021, such NAVs are adjusted for cash activity following the last available reported NAV.

(5) Reflects total returns for MSCI ACWI PME+ performance benchmark of 10.5%, 12.3%, 13.3% and 10.8% for primaries, secondaries, co-investments and total, respectively.

(5) Reflects outperformance of investments as compared to the MSCI ACWI Total Return using the Direct Alpha public market equivalent method.

StepStone Performance Summary by Asset Class

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_______________________________

(1) Private Equity includes 1,088 investments totaling $102.9 billion of capital commitments and excludes (i) two advisory co-investments and 115 client-directed investments, totaling $100.0 million and $10.3 billion, respectively, of capital commitments, (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

(1) Private Equity includes 1,330 investments totaling $126.1 billion of capital commitments and excludes (i) two advisory co-investments and 156 client-directed investments, totaling $100.0 million and $19.6 billion, respectively, of capital commitments, (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment, and (iii) Greenspring investments until the data integration is completed.

Investment returns are calculated on a constant currency adjusted reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date.

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StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate):

125 basis points (60 basis points for Infrastructure) on capital commitments in years 1 through 4 for management fee.

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Co-investments:

Co-investments also include 10.0% of paid and unrealized carry (15.0% of paid and unrealized carry for Real Estate), with an 8% preferred return hurdle.

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Historical performance contribution will be maintained up until the ‘liquidation’ date.

(4) Real Estate includes 383 investments totaling $57.0 billion of capital commitments and excludes (i) 32 client-directed investments, totaling $3.9 billion of capital commitments, (ii) three secondary core/core+ investments, totaling $170.2 million, and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

(4) Real Estate includes 432 investments totaling $63.5 billion of capital commitments and excludes (i) 54 client-directed investments, totaling $8.0 billion of capital commitments, (ii) eight secondary core/core+ investments, totaling $687.6 million, (iii) four advisory fund investments totaling $463.6 million, and (iv) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

Includes the discretionary track record of Courtland Partners, Ltd., which StepStone acquired on April 1, 2018 (the “Courtland acquisition”).

(5) Infrastructure includes 129 investments totaling $24.1 billion of capital commitments and excludes (i) approximately 11 infrastructure investments made by the Partnership prior to the formation of the Infrastructure subsidiary in 2013 or made prior to the Courtland acquisition, and nine client-directed investments, totaling $501.9 million and $636.6 million, respectively, of capital commitments, and (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

(5) Infrastructure includes 182 investments totaling $36.3 billion of capital commitments and excludes (i) approximately 11 infrastructure investments made by the Partnership prior to the formation of the Infrastructure subsidiary in 2013 or made prior to the Courtland acquisition, and 16 client-directed investments, totaling $501.9 million and $1.2 billion, respectively, of capital commitments, and (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

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(8) Subset performance is presented net of fees and expenses charged by the underlying fund manager only (performance results do not reflect StepStone fees and expenses).

(9) Other includes mezzanine debt, infrastructure debt, collateralized loan obligations, private performing debt, senior debt, fund of funds, leasing, regulatory capital, trade finance and intellectual property/royalty.

(9) Other includes mezzanine debt, infrastructure debt, collateralized loan obligations, private performing debt, senior/enhanced senior debt, fund of funds, leasing, regulatory capital, trade finance and intellectual property/royalty.

Liquidity and Capital Resources

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We generate cash primarily from management and advisory fees and realized carried interest allocations.

We have historically managed our liquidity and capital resource needs through (a) cash generated from our operating activities, (b) realizations from investment activities, (c) borrowings, interest payments and repayments under credit agreements and other borrowing arrangements, (d) funding capital commitments to our funds, and funding our growth initiatives, including capital expenditures and acquisitions to expand into new businesses.

As of March 31, 2021, we had $183.9 million of cash, cash equivalents and restricted cash and $970.9 million of investments in StepStone Funds, including $896.5 million of accrued carried interest allocations, against $465.6 million in accrued carried interest-related compensation payable.

On September 18, 2020, we repaid in full the indebtedness outstanding on the Term Loan B in the amount of $146.6 million.

As of March 31, 2021, we had no debt obligations outstanding.

We have historically managed our liquidity and capital resource needs through (a) cash generated from our operating activities, (b) realizations from investment activities, (c) borrowings, interest payments and repayments under credit agreements and other borrowing arrangements, and (d) funding capital commitments to our funds, and funding our growth initiatives, including capital expenditures and acquisitions to expand into new businesses.

As of March 31, 2022, we had $117.4 million of cash, cash equivalents and restricted cash and $1,587.6 million of investments in StepStone Funds, including $1,480.5 million of accrued carried interest allocations, against $62.9 million in debt obligations, net of debt issuance costs, and $770.0 million in accrued carried interest-related compensation payable.

Ongoing sources of cash include (a) management and advisory fees, which are collected monthly or quarterly, (b) carried interest allocations and incentive fees, which are volatile and largely unpredictable as to amount and timing;

and (c) distributions from our investments in the StepStone Funds.

We use cash flow from operations and distributions from our investments in the StepStone Funds to pay compensation and related expenses, general and administrative expenses, income taxes, capital expenditures, dividends to our stockholders and distributions to holders of Partnership units, and to make investments in the StepStone Funds.

We use cash flow from operations and distributions from our investments in the StepStone Funds to pay compensation and related expenses, general and administrative expenses, income taxes, debt service, capital expenditures, dividends to our stockholders and distributions to holders of Partnership units, and to make investments in the StepStone Funds.

We believe we will have sufficient cash to meet our obligations for the next 12 months.

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For fiscal 2022, 2021 and 2020, respectively, these amounts primarily consisted of the following:

• net income, after adjustments for non-cash items (including unrealized carried interest allocation, unrealized performance fee-related compensation, and unrealized investment income), of $118.4 million, $72.3 million and $53.1 million;

• net income, after adjustments for non-cash items (including unrealized carried interest allocations, unrealized performance fee-related compensation, unrealized investment income and acquisition-related contingent consideration), of $222.9 million, $120.0 million and $72.3 million;

• net change in operating assets and liabilities of $(8.6) million, $29.3 million and $(6.4) million.

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• net contributions to investments of $15.1 million, $9.9 million and $7.0 million;

• net contributions to investments in legacy Greenspring entities of $11.6 million, $0 million and $0 million;

• purchases of fixed assets of $2.1 million, $1.3 million and $0.8 million;

• net sales and maturities (purchases) of marketable securities of $0 million, $43.7 million and $(42.9) million;

• cash payments for acquisitions of $0 million, $0 million and $9.0 million.

• net sales and maturities of marketable securities of $0 million, $0 million and $43.7 million;

• cash payments for acquisitions, net of cash acquired, of $181.5 million, $0 million and $0 million.

Financing Activities

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• proceeds from IPO, net of underwriting discounts of $0 million, $337.8 million and $0 million;

• net borrowings on revolving credit facility of $65.0 million, $0 million and $0 million;

• payment of deferred financing costs of $2.4 million, $0 million and $0 million;

• purchase of non-controlling interests of $3.0 million, $131.3 million and $107.2 million;

• payment of deferred offering costs of $1.7 million, $10.1 million and $0 million;

• payments on term loan of $147.0 million, $1.5 million and $1.5 million;

• payments on prior term loan of $0 million, $147.0 million and $1.5 million;

• distributions to non-controlling interests of $107.5 million, $97.7 million and $52.9 million;

• proceeds from capital contributions to legacy Greenspring entities of $15.1 million, $0 million and $0 million;

• distributions to non-controlling interests in legacy Greenspring entities of $11.3 million, $0 million and $0 million;

• dividends paid to common stockholders of $23.9 million, $2.0 million and $0 million;

Prior Credit Agreement

In March 2018, we entered into a credit and guaranty agreement (“Credit Agreement”) with various lenders.

The Credit Agreement was arranged by JPMorgan Chase Bank, N.A.

(“JPMorgan”), as the administrative agent, and provided for the Term Loan B with an aggregate principal of $150.0 million and a senior secured revolving facility (“LOC”) with an aggregate borrowing capacity of $10.0 million.

Net proceeds from the Term Loan B were $145.7 million, net of arrangement fees and other expenses.

A portion of the proceeds were used to repay the outstanding balances on a prior credit facility.

On September 18, 2020, we repaid in full the indebtedness outstanding on the Term Loan B in the amount of $146.6 million and terminated the LOC.

As of March 31, 2021, we had no debt obligations outstanding.

• payments to related parties under the Tax Receivable Agreements of $0.8 million, $0 million and $0 million.

Revolving Credit Facility

In September 2021, we entered into the Credit Agreement in connection with the Greenspring acquisition.

The Credit Agreement was arranged by JPMorgan Chase Bank, N.A., as administrative agent, and provides for a $225.0 million multicurrency Revolver with a five-year maturity.

As of March 31, 2022, we had $62.9 million outstanding on the Revolver, net of debt issuance costs.

Borrowings under the Revolver bear interest at a variable rate per annum.

We may designate each borrowing as (i) in the case of any borrowing in U.S.

dollars, a base rate loan or a LIBOR rate loan, (ii) in the case of any borrowing denominated in Euros, a EURIBOR rate loan, (iii) in the case of any borrowing denominated in British Pounds Sterling, a Sterling Overnight Index Average (“SONIA”) loan, (iv) in the case of any borrowing denominated in Swiss Francs, a Swiss Average Rate Overnight (“SARON”) loan, and (v) in the case of any borrowing denominated in Australian dollars, an AUD rate loan.

Borrowings bear interest equal to (i) in the case of base rate loans, 1.00% plus the greatest of (a) the Prime Rate, (b) the New York Federal Reserve Bank Rate plus 0.50% and (c) the 1 month LIBOR, multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement), plus 1.00%, (ii) in the case of a LIBOR rate loan, the LIBOR rate multiplied by the Statutory Reserve Rate plus 2.00%, (iii) in the case of a EURIBOR rate loan, the EURIBOR rate multiplied by the Statutory Reserve Rate plus 2.00%, (iv) in the case of a SONIA loan, the Sterling Overnight Index Average plus 2.03%, (v) in the case of a SARON loan, the Swiss Average Rate Overnight plus 2.00%, and (vi) in the case of an AUD rate loan, the AUD Screen Rate (as defined in the Credit Agreement) multiplied by the Statutory Reserve Rate plus 2.20%.

The interest rate in effect for the Revolver as of March 31, 2022 was 2.50%.

Borrowings under the Revolver may be repaid at any time during the term of the Credit Agreement and, subject to certain terms and conditions, may be reborrowed prior to the maturity date.

Any outstanding principal amounts, together with any accrued interest thereon, shall be due and payable on the maturity date.

The maturity date for the Revolver is September 20, 2026.

The Revolver bears a fee on undrawn commitments equal to 0.25% per annum if total utilization of revolving commitments is equal to or greater than 50% and 0.35% per annum if total utilization of revolving commitments is less than 50%.

Under the terms of the Credit Agreement, certain of our assets serve as pledged collateral.

In addition, the Credit Agreement contains covenants that, among other things:

limit our ability to incur indebtedness;

create, incur or allow liens;

transfer or dispose of assets;

merge with other companies;

make certain investments;

pay dividends or make distributions;

engage in new or different lines of business;

and engage in transactions with affiliates.

The Credit Agreement also contains financial covenants requiring us to maintain a total net leverage ratio, and a minimum total of fee-earning assets under management beginning with the quarter ending December 31, 2021.

As of March 31, 2022, we were in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants.

We can use available funding capacity under the Revolver to satisfy letters of credit in amounts up to $10.0 million.

Amounts used to satisfy the letters of credit reduce the available capacity under the Revolver.

As of March 31, 2022, we had outstanding letters of credit totaling $2.9 million.

Equity Transactions

Equity Transactions in Connection with and Prior to the Reorganization and IPO

In August 2019, we completed a series of transactions resulting in the unitization of our equity and the combination of certain classes of our equity to facilitate the sale of newly issued equity interests in us to certain institutional investors (the “2019 Transaction”).

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In connection with the 2019 Transaction, the previously existing Class A1, Class B, Class C and Class D partnership units were canceled and combined with and into the existing Class A partnership interests of the Company as a single class with equal value (without substantive changes to economic rights associated therewith), with each partner participating ratably in all distributions, including carried interest.

In June 2020, one of our consolidated subsidiaries completed a transaction to repurchase partnership interests in the subsidiary from a former partner for approximately $3.3 million, and subsequently sold an equal number of partnership interests to certain employees of the subsidiary for approximately $3.3 million, resulting in no net proceeds to the subsidiary.

In connection with the consummation of the IPO, we issued new partnership interests to certain StepStone professionals in the Infrastructure subsidiary in exchange for their partnership interests in the Infrastructure subsidiary, which increased our interest in the Infrastructure subsidiary to approximately 49% and decreased the interest of the StepStone professionals in the Infrastructure subsidiary to approximately 51%.

In June 2020, StepStone Group Real Assets LP (“SRA”) completed a transaction to repurchase partnership interests in SRA from a former partner for approximately $3.3 million, and subsequently sold an equal number of partnership interests to certain employees of SRA for approximately $3.3 million, resulting in no net proceeds to SRA.

In connection with the consummation of the IPO, we issued new partnership interests to certain StepStone professionals in SRA in exchange for their partnership interests in SRA, which increased our interest in SRA to approximately 49% and decreased the interest of the StepStone professionals in SRA to approximately 51%.

Equity Transactions Subsequent to the IPO

In connection with the offering, we issued 9,200,000 shares of Class A common stock to the selling stockholders in exchange for 9,200,000 Class B units.

A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange.

We did not receive any proceeds from the sale of shares by the selling stockholders.

In June 2021, we issued 1,898,438 shares of Class A common stock to certain limited partners of the Partnership in exchange for 1,898,438 Class B units.

In September 2021, we issued 12,686,756 shares of Class A common stock and 3,071,519 Class C units of the Partnership as partial consideration for the Greenspring acquisition.

The Class C limited partners of the Partnership became parties to the Exchanges Tax Receivables Agreement to allow for the exchange of Class C units to shares of Class A common stock of the Company on a one for one basis.

In September 2021, we issued 2,087,281 shares of Class A common stock to certain limited partners of the Partnership in exchange for 2,087,281 Class B units.

In November 2021, we conducted an underwritten public offering of 4,500,000 shares of Class A common stock sold by selling stockholders at a public offering price of $51.83 per share.

In connection with the offering, we issued 3,958,204 shares of Class A common stock to certain selling stockholders in exchange for 3,958,204 Class B units.

We did not receive any proceeds from the sale of shares by the selling stockholders.

In December 2021, we issued 935,235 shares of Class A common stock to certain limited partners of the Partnership in exchange for 935,235 Class B units.

In February 2022, the Partnership completed a transaction to repurchase partnership interests in SRA from a former partner for approximately $0.3 million, and subsequently sold an equal number of partnership interests to certain employees of SRA for approximately $0.3 million, resulting in no net proceeds to the Partnership.

In March 2022, we issued 350,000 shares of Class A common stock to a limited partner of the Partnership in exchange for 350,000 Class B units.

Future Sources and Uses of Liquidity

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Dividend and Distribution Policy

On February 9, 2021, we announced a dividend of $0.07 per share of Class A common stock, which was paid on March 12, 2021 to holders of record at the close of business on February 26, 2021.

On June 15, 2021, we announced a dividend of $0.07 per share of Class A common stock, which is payable on July 15, 2021 to holders of record at the close of business on June 30, 2021.

On May 26, 2022, we announced a dividend of $0.20 per share of Class A common stock, payable on June 30, 2022 to holders of record as of the close of business on June 15, 2022.

The following table presents information regarding quarterly dividends on Class A common shares for the periods indicated:

Quarterly Fiscal Period 1

Dividend Payment Date Dividend Per Share of Class A Common Stock

First quarter N/A

Second quarter N/A

Third quarter N/A

Fourth quarter March 12, 2021 $ 0.07

Total dividends paid in FY2021 $ 0.07

First quarter July 15, 2021 $ 0.07

Second quarter September 15, 2021 0.07

Third quarter December 15, 2021 0.15

Fourth quarter March 15, 2022 0.15

Total dividends paid in FY2022 $ 0.44

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(1) Prior to the Company’s IPO on September 16, 2020, it was a wholly-owned subsidiary of the Partnership, had a single class of common stock and did not pay dividends.

As such, there is no quarterly dividend information reported for the quarter ended September 30, 2020 or any periods prior.

Dividends paid, as reported in this table, relate to the preceding quarterly period in which they were earned.

We may pay additional dividends to holders of our Class A common stock in the future.

The declaration and payment by us of any future dividends to Class A stockholders is at the sole discretion of our board of directors.

Subject to funds being legally available, we will cause the Partnership to make pro rata distributions to its limited partners, including us, in amounts sufficient to make payment of applicable income and other taxes, to make payment under the Tax Receivable Agreements, and to make payment for corporate and other general expenses.

Subject to funds being legally available, we will cause the Partnership to make pro rata distributions to its limited partners, including us, in amounts sufficient to make payment of applicable income and other taxes, to make payments under the Tax Receivable Agreements, and to make payment for corporate and other general expenses.

Because our board of directors may determine to pay or not pay dividends to our Class A stockholders, our Class A stockholders may not necessarily receive dividend distributions relating to our excess distributions, even if the Partnership makes excess distributions to us.

Tax Receivable Agreements

We have entered into an Exchanges Tax Receivable Agreement with the partners of the Partnership as of the date of the IPO and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”).

The Tax Receivable Agreements provide for payment by SSG to these continuing partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such continuing partner’s and institutional investor’s Partnership units in connection with the Reorganization and IPO and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest).

We have entered into an Exchanges Tax Receivable Agreement with the Class B limited partners and Class C limited partners, and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”).

The Tax Receivable Agreements provide for payment by SSG to these partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partner’s and institutional investor’s Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest).

SSG will retain the benefit of the remaining 15% of these net cash tax savings under both Tax Receivable Agreements.

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28,025 521 27,504 — —

Debt obligations (3)

65,000 — — 65,000 —

Interest on debt obligations (4)

7,270 1,625 3,250 2,395 —

Capital commitments (5)

68,204 68,204 — — —

Capital commitments in legacy Greenspring funds (6)

40,510 40,510 — — —

Total $ 308,389 $ 121,314 $ 56,376 $ 89,833 $ 40,866

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(1) We lease office space and certain office equipment under agreements that expire periodically through 2032.

The table only includes guaranteed minimum lease payments under these agreements and does not project other lease-related payments.

These leases are classified as operating leases for financial reporting purposes and, accordingly, are not recorded as liabilities in our consolidated financial statements.

The table only includes guaranteed minimum lease payments under these agreements, including leases signed but not yet commenced at the period end, and does not project other lease-related payments.

(2) In September 2021, we completed the acquisition of 100% of Greenspring.

The transaction agreement includes an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024.

Future cash payments represent the fair values as of March 31, 2022.

See note 6 to our consolidated financial statements included elsewhere in this annual report for more information on contingent consideration liabilities.

(3) Debt obligations presented in the table relate to the Revolver, which has a maturity date of September 20, 2026.

The balance outstanding under the Revolver as of March 31, 2022 has been presented as an obligation payable in the years 3-5 column as there are no scheduled or required principal payments on the Revolver.

(4) Interest on debt obligations consists of projected future interest payments for amounts drawn on the Revolver using interest rates in effect as of March 31, 2022 which has been calculated assuming no additional principal payments will be made and outstanding balance will be held until its final maturity date.

These projected interest payments may differ in the future based on the balance outstanding on the Revolver, as well as changes in market interest rates.

(5) Capital commitments represent our obligations to provide general partner capital funding to the StepStone Funds.

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Capital commitments are expected to be called over a period of several years.

The payments that we are required to make under the Tax Receivable Agreement are expected to be substantial and are not reflected in the contractual obligations table set forth above as they are dependent upon future taxable income.

(6) In connection with the Greenspring acquisition, we, indirectly through our subsidiaries, became the sole and/or managing member of certain entities, each of which is the general partner of an investment fund (“legacy Greenspring general partner entities”).

We did not acquire any direct economic interests attributable to the legacy Greenspring general partner entities, including legacy Greenspring investments in funds and carried interest allocations.

However, certain arrangements negotiated as part of the acquisition represent variable interests that could be significant.

We determined that the legacy Greenspring general partner entities are VIEs and it is the primary beneficiary of each such entity because it has a controlling financial interest in each entity.

As a result, we consolidate these entities.

Capital commitments in legacy Greenspring funds represent our obligations to provide general partner capital funding in legacy Greenspring funds for which we do not hold any direct economic interests.

These amounts are generally due on demand, and accordingly, have been presented as obligations payable in the less than 1 year column.

Capital commitments are expected to be called over a period of several years.

The payments that we are required to make under the Tax Receivable Agreements are expected to be substantial and are not reflected in the contractual obligations table set forth above as they are dependent upon future taxable income.

Off-Balance Sheet Arrangements

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Revenue is recognized in a manner that depicts the transfer of promised goods or services to customers and for an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

We are required to identify our contracts with customers, identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation.

The application of ASC 606 requires us to identify our contract(s) with a customer, identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation.

In determining the transaction price, variable consideration is included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.

We have elected to apply the variable consideration allocation exception for our fee arrangements with our customers.

Management and Advisory Fees, Net

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incentive fees and carried interest allocations, as described below.

Incentive fees are generally calculated as a percentage of the profits earned in respect of certain accounts for which we are the investment adviser, subject to the achievement of minimum return levels or performance benchmarks.

Incentive fees are a form of variable consideration and represent contractual fee arrangements in our contracts with our customers.

Incentive fees are typically subject to reversal until the end of a defined performance period, as these fees are affected by changes in the fair value of the assets under management or advisement over such performance period.

Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax.

Carried interest allocations refer to the allocation of performance fees (typically 5% to 15%) from limited partners in certain StepStone Funds.

We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting.

Certain funds will allocate carried interest to us, based on cumulative fund performance to date, irrespective of whether such amounts have been realized.

However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis.

Accordingly, the tax-related portion of incentive fees received in advance of crystallization is not subject to clawback and is therefore recognized as revenue immediately upon receipt.

Incentive fees received in advance of crystallization that remain subject to clawback are recorded as deferred incentive fee revenue and included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets.

Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from unaffiliated limited partners in certain StepStone Funds in which we hold an equity interest.

We are entitled to a carried interest allocation (typically 5% to 15%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized.

These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%), in accordance with the terms set forth in each respective fund’s governing documents.

We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member.

Accordingly, carried interest allocations are not deemed to be within the scope of ASC 606.

We account for the investment balances in the legacy Greenspring funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member.

We do not hold any direct economic interests in the legacy Greenspring general partner entities and thus are not entitled to any carried interest allocation from the legacy funds.

All of the carried interest allocations in respect of the legacy Greenspring funds are payable to employees who are considered affiliates to us and are therefore reflected as legacy Greenspring performance fee-related compensation in the consolidated statements of income.

Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606.

We recognize revenue attributable to carried interest allocations from a fund based on the amount that would be due to us pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date.

Accordingly, the amount recognized as carried interest allocation revenue reflects our share of the gains and losses of the associated fund’s underlying investments measured at their then-fair values, relative to the fair values as of the end of the prior period.

We record the amount of carried interest allocated to us as of each period end as accrued carried interest allocations receivable, which is included as a component of investments in the consolidated balance sheets.

Carried interest is generally realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates, as defined in the applicable governing documents.

Carried interest is generally subject to reversal to the extent that the amount received to date exceeds the amount due to us based on cumulative results.

As such, a liability is accrued for potential clawback obligations if amounts previously distributed to us would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date.

Actual repayment obligations generally do not become realized until the end of a fund’s life.

Fair Value Measurements

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Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace – including the existence and transparency of transactions between market participants.

Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and therefore a lesser degree of judgment used in measuring their fair value.

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of their fair values, as follows:

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Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the financial instrument.

The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of judgment exercised in determining fair value is greatest for financial instruments categorized in Level III.

The variability and availability of the observable inputs affected by the factors described above may result in transfers between Levels I, II, and III.

We consider our cash, cash equivalents, restricted cash, fees and accounts receivable, accounts payable, investments, revolving credit facility and contingent consideration balances to be financial instruments.

The carrying amounts of cash, cash equivalents, restricted cash, fees and accounts receivable and accounts payable equal or approximate their fair values due to their nature and/or the relatively short period over which they are held.

See notes 6 and 9 to our consolidated financial statements for additional details regarding the fair value of our contingent consideration and revolving credit facility balances, respectively.

Equity-Based Compensation

We account for grants of equity-based awards, including restricted stock units (“RSUs”), at fair value as of the grant date.

We account for grants of equity-based awards, including restricted stock units (“RSUs”), to certain employees and directors at fair value as of the grant date.

We recognize non-cash compensation expense attributable to these grants on a straight-line basis over the requisite service period, which is generally the vesting period.

Expense related to grants of equity-based awards is recognized as equity-based compensation in the consolidated statements of income.

Expense related to grants of equity-based awards is recognized as equity-based compensation expense in the consolidated statements of income.

The fair value of RSUs is determined by the closing stock price on the grant date.

Forfeitures of equity-based awards are recognized as they occur.

See note 10 to our consolidated financial statements for additional information regarding our accounting for equity-based awards.

Performance Fee-Related Compensation

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This standard establishes consistent thresholds as it relates to accounting for income taxes.

It defines the threshold for recognizing the benefits of tax return positions in the financial statements as more-likely-than-not to be sustained by the relevant taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized.

If upon performance of an assessment pursuant to this subtopic, management determines that uncertainties in tax positions exist that do not meet the minimum threshold for recognition of the related tax benefit, a liability is recorded in the consolidated financial statements.

We recognize interest and penalties, if any, related to unrecognized tax benefits as general, administrative and other expenses in the consolidated statements of income.

See note 11 to our consolidated financial statements included in Part II, Item 8 of this annual report for more information.

We recognize interest and penalties, if any, related to unrecognized tax benefits as interest expense and general, administrative and other expenses, respectively, in the consolidated statements of income.

See note 11 to our consolidated financial statements for more information.

Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.

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Tax Receivable Agreements

The Tax Receivable Agreements provide for payment by SSG to such partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partners’ and institutional investors’ Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest).

The Tax Receivable Agreements provide for payment by SSG to the Class B limited partners, Class C limited partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partners’ and institutional investors’ Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest).

SSG will retain the benefit of the remaining 15% of these net cash tax savings under both Tax Receivable Agreements.

In connection with the Greenspring acquisition, the sellers receiving Class C units of the Partnership became parties to the Exchanges Tax Receivable Agreement.

See notes 14 and 15 to our consolidated financial statements for more information.

Recent Accounting Developments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis