9 unchanged sentences
These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”).
−Removed: 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”).
+Added: As of March 31, 2023, we were responsible for approximately $621 billion of total capital, including $138 billion of assets under management (“AUM”) and $482 billion of assets under advisement (“AUA”).
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.
1 unchanged sentence
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.
−Removed: Since our inception in 2007, we have invested heavily in our platforms to drive growth and expand our investment solutions capabilities and service offerings, including through opportunistic transactions that have helped accelerate the growth of our team and capabilities.
−Removed: As of March 31, 2022, we had over 790 total employees, including approximately 280 investment professionals and more than 500 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities.
+Added: Since our inception in 2007, we have invested and continue to invest heavily in our platforms to drive growth and expand our investment solutions capabilities and service offerings, including through opportunistic transactions that have helped accelerate the growth of our team and capabilities.
+Added: As of March 31, 2023, we had 956 total employees, including 322 investment professionals and 634 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities.
We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies.
19 unchanged sentences
Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, Omni.
−Removed: Omni tracked detailed information on over $805 billion of client commitments as of March 31, 2022, inclusive of our combined AUM/AUA, previously exited investments and investments of former clients.
+Added: Omni tracked detailed information on over $905 billion of client commitments as of March 31, 2023, inclusive of our total capital responsibility, previously exited investments and investments of former clients.
We generate revenues from management and advisory fees and performance fees earned pursuant to contractual arrangements with our funds and our clients.
4 unchanged sentences
Changes in global economic conditions and regulatory or other governmental policies or actions can materially affect the values of the StepStone Funds’ holdings and the ability to source attractive investments and completely utilize the capital that we have raised.
−Removed: However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles.
+Added: However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our investment performance throughout market cycles.
+Added: Furthermore, we operate at scale across all four private markets asset classes and service clients across a broad range of geography, type, and size, which contributes to our operating resilience and mitigates against concentration risk.
In addition to these macroeconomic trends and market factors, we believe our future performance will be influenced by the following factors:
19 unchanged sentences
Current Events
−Removed: In 2021, economic conditions improved from the prior year since the onset of the COVID-19 pandemic as vaccination rates increased and lockdowns eased.
−Removed: Most financial markets experienced strong returns during 2021, despite the ongoing pandemic, which caused severe disruptions in the global financial markets and economies.
−Removed: Efforts to reopen the global economy in 2021 contributed to robust economic activity that supported the global recovery.
−Removed: However, the emergence of new variants has and may continue to contribute to setbacks or slowing of recovery efforts.
−Removed: 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.
−Removed: As expected, the U.S.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: In 2022, financial markets experienced increased volatility amid rising interest rates, slowing economic growth, persistently high inflation and the ongoing Russia-Ukraine conflict.
+Added: Central banks around the world pursued monetary policy tightening in an effort to bring down inflation to target rates, stoking recession fears.
+Added: In the first calendar quarter of 2023, signs of slowing inflation coupled with a strong labor market contributed to a rebound in financial markets despite the banking system volatility as recession fears receded in anticipation that interest rates may not rise as much as previously expected.
+Added: We are continuing to closely monitor developments related to inflation, rising interest rates, the Russia-Ukraine conflict and the banking system volatility, and to assess the impact on financial markets and on our business.
+Added: Our results and the overall industry results have been and may continue to be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which have resulted in, and may continue to result in, delayed or decreased management fees.
+Added: Further, fund managers have been unable or less able to profitably exit existing investments, such conditions have resulted in, and may continue to 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.
−Removed: 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.”
−Removed: Recent Transactions
+Added: See “Risk Factors—Risks Related to Our Industry—Difficult or volatile market and political conditions can adversely affect our business by reducing the market value of the assets we manage, causing our clients to reduce their investments in private markets, reducing the number of high-quality investment managers with whom we may invest, and reducing the ability of our funds to raise or deploy capital” and “Risk Factors—Banking system volatility may adversely affect the results and financial condition of the StepStone Funds or StepStone generally.”
+Added: Corporate Transactions
Reorganization and Initial Public Offering
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The results of Greenspring’s operations have been included in the consolidated financial statements effective September 20, 2021.
−Removed: Revolving Credit Facility
−Removed: In September 2021, we entered into a credit agreement with various lenders (the “Credit Agreement”) in connection with the Greenspring acquisition.
−Removed: 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.
−Removed: As of March 31, 2022, there was $62.9 million outstanding on the Revolver, net of debt issuance costs.
+Added: Private Wealth Transaction
+Added: In November 2022, we entered into new arrangements with the SPW management team, which are intended to update the legacy SPW compensation structure to better incentivize the SPW team to grow the platform, while ensuring the platform will remain part of StepStone going forward (the “Private Wealth Transaction”).
+Added: SPW, which was formerly known as Conversus, is the platform established by us to expand access to the private markets for accredited investors.
+Added: At the establishment of the platform, the SPW management team were provided an ability to acquire the platform from us in exchange for an amount which would have provided us a return of our initial investment plus an equity return.
+Added: As part of the new arrangements, certain members of the SPW team received a profits interest in SPW and concurrently entered into an option agreement which provides that (i) we have the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027 in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC (formerly known as Conversus Holdings LLC), has the right to put the profits interest to us on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price.
+Added: The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down.
+Added: The call or put price will be payable in cash unless we elect to pay a portion of the consideration in units of the Partnership, each to be exchangeable into shares of our Class A common stock, and, in either case, rights under one or more tax receivable agreements.
Equity Transactions
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We did not receive any proceeds from the sale of shares by the selling stockholders.
−Removed: 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.
+Added: In June 2022, we issued 257,776 shares of Class A common stock to certain limited partners of the Partnership in exchange for 257,776 Class B units in accordance with 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 our Class A common stock on a one-for-one basis, subject to certain restrictions.
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.
−Removed: 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.
−Removed: 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.
−Removed: 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 2022, we issued 175,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 175,000 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement.
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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We did not receive any proceeds from the sale of shares by the selling stockholders.
In December 2022, we issued 296,756 shares of Class A common stock to certain limited partners of the Partnership in exchange for 296,756 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement.
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.
−Removed: 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.
−Removed: 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.
+Added: On the same date, we also issued 414,739 shares of Class A common stock to certain limited partners of the Partnership in exchange for 414,739 Class C units in accordance with the elective exchange notices submitted pursuant to an agreement with the Class C limited partners (the “Class C Exchange Agreement”) to allow for exchange of Class C units of the Partnership to shares of our Class A common stock on a one-for-one basis, subject to certain restrictions.
Organizational Structure
−Removed: In connection with the Reorganization and IPO, SSG became a holding company and its only business is to act as the managing member of the General Partner, and its only material assets are Class A units in the Partnership and 100% of the interests in the General Partner.
+Added: SSG is a holding company and its only business is to act as the managing member of the General Partner, and its only material assets are Class A units in the Partnership and 100% of the interests in the General Partner.
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.
29 unchanged sentences
We operate as one business, a fully-integrated private markets solutions provider.
−Removed: 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.
+Added: Our chief operating decision maker, who is our chief executive officer, utilizes a consolidated approach to assess performance and allocate resources.
As such, we operate in one business segment.
5 unchanged sentences
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.
−Removed: • Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital under management.
+Added: • Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital.
These fees will vary over the life of the contract due to changes in the fee basis or contractual rate changes or thresholds, built-in declines in applicable contractual rates, and/or changes in net invested capital balances.
2 unchanged sentences
Thereafter, management fees are typically calculated based on a contractual rate applied against net invested capital, or a stepped-down fee rate applied against the initial commitment.
−Removed: The weighted-average management fee rate from focused commingled funds was approximately 0.90% and 0.85% of average FEAUM in fiscal 2021 and 2022, respectively, and primarily reflected the timing of new funds and shifts in asset class mix.
−Removed: • 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.
+Added: The weighted-average management fee rate from focused commingled funds was approximately 0.85% and 0.82% of average FEAUM in fiscal 2022 and 2023, respectively, and primarily reflected shifts in asset class mix and the impact of the Greenspring acquisition.
+Added: • The weighted-average management fee rate across SMAs and focused commingled funds was approximately 0.52% and 0.54% of average FEAUM in fiscal 2022 and 2023, respectively, and primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds.
• Fee revenues from advisory, SPAR, SPI or administrative services are generally annual fixed fees, which vary based on the scope of services we provide.
7 unchanged sentences
incentive fees and carried interest allocations, as described below.
−Removed: Incentive fees comprise fees earned from certain client investment mandates for which we do not have a general partnership interest in a StepStone Fund.
−Removed: 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.
−Removed: In connection with the Greenspring acquisition, we did not acquire any direct economic interests in the carried interest allocations of certain legacy Greenspring funds.
−Removed: 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, 2023, we had over $63 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across approximately 180 programs.
−Removed: 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.
+Added: Incentive fees comprise fees earned from certain client investment mandates for which we do not have a general partnership interest in a StepStone Fund.
+Added: Incentive fees are generally calculated as a percentage of the profits (up to 15%) earned in respect of certain accounts, including certain permanent capital vehicles, 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.
5 unchanged sentences
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.
−Removed: Carried interest allocations include the allocation of performance-based fees to us from limited partners in the StepStone Funds in which we hold an equity interest.
+Added: Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from limited partners in the 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.
4 unchanged sentences
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.
−Removed: We account for the investments and carried interest allocations under the equity method of accounting.
−Removed: 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.
−Removed: 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.
+Added: We account for the investment balances in the legacy Greenspring funds, including carried interest allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member.
Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606.
+Added: 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 the legacy Greenspring funds.
+Added: All of the carried interest allocations in respect of such 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 .
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.
1 unchanged sentence
We record the amount of carried interest allocated to us as of each period end as accrued carried interest allocations, which is included as a component of investments in the consolidated balance sheets.
+Added: Our determination of fair value for investments in the underlying funds includes various valuation techniques.
+Added: These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted-average cost of capital, exit multiples, or terminal growth rates.
Carried interest is 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.
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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.
+Added: Beginning in the quarter ended December 31, 2022, general, administrative and other includes costs associated with the Consolidated Funds.
+Added: Expenses of the Consolidated Funds have no impact on net income or loss attributable to us to the extent such expenses are borne by third-party investors.
Other Income (Expense)
−Removed: Investment income primarily represents our share of earnings from the investments we make in our SMAs and focused commingled funds.
+Added: Investment income (loss) primarily represents our share of earnings (losses) from the investments we make in our SMAs and focused commingled funds.
We, either directly or through our subsidiaries, generally have a general partner interest in the StepStone Funds, which invest in primary funds, secondary funds and co-investment funds, or a combination thereof.
4 unchanged sentences
Investment income and legacy Greenspring investment income exclude carried interest allocations, which are presented as revenues as described above.
−Removed: 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.
+Added: Legacy Greenspring investment income (loss) represents our share of earnings (losses) 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.
1 unchanged sentence
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.
−Removed: Interest income consists of income earned on cash and cash equivalents, restricted cash, marketable securities and certificates of deposit.
+Added: Investment income (loss) of Consolidated Funds represents gains (losses) from the investments held by the Consolidated Funds.
+Added: Interest income consists of income earned on cash and cash equivalents, restricted cash and certificates of deposit.
+Added: Beginning in the quarter ended December 31, 2022, interest income includes amounts associated with the Consolidated Funds.
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.
1 unchanged sentence
Other income (loss) includes foreign currency transaction gains and losses and non-operating activities.
+Added: Beginning in the quarter ended December 31, 2022, other income (loss) includes amounts associated with the Consolidated Funds.
Income Tax Expense
2 unchanged sentences
federal and state income taxes on our share of taxable income generated by the Partnership.
−Removed: Prior to the Reorganization and IPO, we operated as a partnership for U.S.
−Removed: federal income tax purposes and therefore were generally not subject to U.S.
−Removed: federal and state income taxes.
The Partnership is treated as a pass-through entity for U.S.
5 unchanged sentences
income taxes.
−Removed: Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level.
−Removed: Accordingly, the tax liability with respect to income attributable to non-controlling interests in the Partnership is borne by the holders of such non-controlling interests.
+Added: Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level, which are reflected within income tax expense in the consolidated statements of income.
+Added: As a result, the Partnership does not record U.S.
+Added: federal and state income taxes on income in the Partnership or its subsidiaries, except for certain local and foreign income taxes discussed above.
Non-Controlling Interests
7 unchanged sentences
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.
+Added: Redeemable non-controlling interests in Consolidated Funds represent the economic interests in the Consolidated Funds which are not held by us, but are held by the third-party investors in the funds.
+Added: Redeemable non-controlling interests in Consolidated Funds are allocated a share of income or loss in the respective fund 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 and Class C unitholders of the Partnership.
11 unchanged sentences
NAV data for underlying investments is as of December 31, 2022, as reported by underlying managers up to 114 days following December 31, 2022.
−Removed: 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.
+Added: When NAV data is not available 114 days following December 31, 2022, such NAVs are adjusted for cash activity following the last available reported NAV.
Assets Under Advisement
9 unchanged sentences
NAV data for underlying investments is as of December 31, 2022, as reported by underlying managers up to 114 days following December 31, 2022.
−Removed: 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.
−Removed: 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.
−Removed: Prior period amounts have not been recast for this change because comparable historical data does not exist.
−Removed: The change resulted in an increase to AUA of approximately $70 billion for the quarter ended March 31, 2021.
+Added: When NAV data is not available 114 days following December 31, 2022, such NAVs are adjusted for cash activity following the last available reported NAV.
Fee-Earning AUM
6 unchanged sentences
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 activated.
−Removed: Non-GAAP Financial Measures
−Removed: Below is a description of our non-GAAP financial measures.
−Removed: These measures are presented on a basis other than GAAP and should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.
−Removed: Adjusted Revenues and Adjusted Net Income
−Removed: Adjusted net income (“ANI”) is a non-GAAP performance measure that we present on a pre-tax and after-tax basis used to evaluate profitability.
−Removed: ANI represents the after-tax net realized income attributable to us.
−Removed: The components of revenues used in the determination of ANI (“adjusted revenues”) comprise net management and advisory fees, incentive fees (including the deferred portion) and realized carried interest allocations.
−Removed: In addition, ANI excludes:
−Removed: (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.
−Removed: 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.
−Removed: ANI is income before taxes fully taxed at our blended statutory rate.
−Removed: We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.
−Removed: Fee-Related Earnings
−Removed: Fee-related earnings (“FRE”) is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees.
−Removed: FRE is a component of ANI and comprises net management and advisory fees, less operating expenses other than performance fee-related compensation, equity-based compensation for awards granted prior to and in connection with our IPO, amortization of intangibles and other non-core operating items.
−Removed: FRE is presented before income taxes.
−Removed: We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee revenues.
−Removed: Adjusted Net Income Per Share
−Removed: 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.
−Removed: ANI per share is calculated as ANI divided by adjusted shares outstanding.
−Removed: We believe ANI per share is useful to investors because it enables them to better evaluate per-share operating performance across reporting periods.
+Added: Consolidation of StepStone Funds
+Added: Beginning in the quarter ended December 31, 2022, we consolidated one investment fund for which we are deemed to have a controlling financial interest.
+Added: The activity of the Consolidated Funds is reflected within the consolidated financial statement line items as indicated by reference thereto.
+Added: The impact of the Consolidated Funds decrease revenues reported under GAAP to the extent these amounts are eliminated upon consolidation.
+Added: The assets and liabilities of our Consolidated Funds are held within separate legal entities and, as a result, the liabilities of our Consolidated Funds are typically non-recourse to us.
+Added: The net economic ownership interests of our Consolidated Funds held by third parties are reflected as redeemable non-controlling interests in Consolidated Funds in our consolidated financial statements.
+Added: We generally deconsolidate funds when we are no longer deemed to have a controlling financial interest in the entity.
+Added: The performance of our Consolidated Funds is not necessarily consistent with, or representative of, the combined performance trends of all of our funds.
Consolidated Results of Operations
+Added: We consolidate funds and entities where we are deemed to hold a controlling financial interest.
+Added: The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners' or investor rights, and the creation and termination of funds and entities.
The following is a discussion of our consolidated results of operations for the periods presented.
10 unchanged sentences
Legacy Greenspring carried interest allocations (1)
+Added: (452,163) 187,106 —
Total revenues (67,574) 1,365,525 787,716
7 unchanged sentences
Legacy Greenspring performance fee-related compensation (1)
+Added: (452,163) 187,106 —
Total compensation and benefits (214,236) 802,695 411,062
2 unchanged sentences
Other income (expense)
−Removed: Investment income 26,160 16,407 6,926
−Removed: Legacy Greenspring investment income (1)
+Added: Investment income (loss) (2,509) 26,160 16,407
+Added: Legacy Greenspring investment income (loss) (1)
+Added: (44,075) 32,586 —
+Added: Investment income of Consolidated Funds 9,315 — —
Interest income 1,921 337 413
2 unchanged sentences
Total other income (expense) (40,957) 60,219 9,680
−Removed: Income before income tax 512,581 337,849 148,740
+Added: Income (loss) before income tax (41,454) 512,581 337,849
Income tax expense 3,821 28,300 23,256
−Removed: Net income 484,281 314,593 144,785
+Added: Net income (loss) (45,275) 484,281 314,593
Net income attributable to non-controlling interests in subsidiaries 35,194 26,608 23,176
−Removed: Net income attributable to non-controlling interests in legacy Greenspring entities (1)
−Removed: Net income attributable to non-controlling interests in the Partnership 231,202 228,783 131,916
−Removed: Net income attributable to StepStone Group Inc.
+Added: Net income (loss) attributable to non-controlling interests in legacy Greenspring entities (1)
(44,075) 32,586 —
+Added: Net income (loss) attributable to non-controlling interests in the Partnership (19,772) 231,202 228,783
+Added: Net income attributable to redeemable non-controlling interests in Consolidated Funds 1,776 — —
+Added: Net income (loss) attributable to StepStone Group Inc.
$ (18,398) $ 193,885 $ 62,634
+Added: _______________________________
(1) Reflects amounts attributable to consolidated VIEs for which we did not acquire any direct economic interests.
1 unchanged sentence
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022
+Added: Total revenues decreased $1,433.1 million to $(67.6) million for fiscal 2023 as compared to fiscal 2022, due to negative carried interest allocations and legacy Greenspring carried interest allocations in the current period as compared to positive carried interest allocations and legacy Greenspring carried interest allocations in the prior year period and lower incentive fees, partially offset by higher net management and advisory fees, in each case, as described below.
+Added: Net management and advisory fees increased $116.9 million, or 31%, to $497.2 million for fiscal 2023 as compared to fiscal 2022.
+Added: The increase was driven by new client activity and 28% growth in average FEAUM (or 21% excluding the impact of Greenspring) across the platform, as well as retroactive fees of $2.8 million from the final closing of StepStone Capital Partners V (“SCP V”) and additional closings on StepStone’s multi-strategy global venture capital fund.
+Added: The prior year period included $7.7 million of retroactive fees from the final closing of StepStone Tactical Growth Fund III (“STGF III”) and additional closings of SCP V.
+Added: For new investors, fees relating to periods prior to the closing date are considered retroactive.
+Added: Incentive fees decreased $1.9 million, or 17%, to $9.7 million for fiscal 2023 as compared to fiscal 2022, reflecting lower realization activity.
+Added: Realized carried interest allocation revenues decreased $69.6 million, or 35%, to $131.1 million for fiscal 2023 as compared to fiscal 2022, reflecting lower realization activity within our private equity funds.
+Added: Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues.
+Added: Excluding the reversal of $131.1 million, unrealized carried interest allocation revenues decreased $908.8 million, or 116%, to $(122.3) million for fiscal 2023 compared to fiscal 2022.
+Added: The decrease in unrealized carried interest allocations for fiscal 2023 primarily reflected a net decrease in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.
+Added: Legacy Greenspring carried interest allocation revenues decreased $639.3 million to $(452.2) million for fiscal 2023 as compared to fiscal 2022.
+Added: Fiscal 2023 reflects gross realized carried interest allocations of $74.7 million and unrealized carried interest allocations, net of the reversal of carried interest allocations, of $(526.8) million.
+Added: Fiscal 2022 reflects 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.
+Added: Year Ended March 31, 2022 Compared to Year Ended March 31, 2021
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.
−Removed: 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.
+Added: 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 STGF III and additional closings of SCP V.
The prior year period included $9.0 million of retroactive fees from the final closing of StepStone Real Estate Partners IV (“SREP IV”).
7 unchanged sentences
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022
−Removed: 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.
−Removed: Net management and advisory fees increased $50.3 million, or 21%, to $285.5 million for fiscal 2021 as compared to fiscal 2020.
−Removed: 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.
−Removed: 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.
−Removed: For new investors, fees relating to periods prior to the closing date are considered retroactive.
−Removed: Incentive fees increased $2.1 million, or 61%, to $5.5 million for fiscal 2021 as compared to fiscal 2020, reflecting higher realization activity.
−Removed: Realized carried interest allocation revenues increased $16.8 million, or 36%, to $63.0 million for fiscal 2021, reflecting higher realization activity within our private equity funds.
−Removed: Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Total expenses decreased $980.2 million to $(67.1) million for fiscal 2023 as compared to fiscal 2022, due to decreases in legacy Greenspring performance fee-related compensation and performance fee-related compensation, partially offset by increases in cash-based compensation, general, administrative and other expenses, and equity-based compensation, in each case, as described below.
+Added: Cash-based compensation increased $54.7 million, or 28%, to $252.2 million for fiscal 2023 as compared to fiscal 2022, due to increased staffing and compensation levels.
+Added: Our average full-time headcount increased 31% (or 27% excluding the impact of Greenspring) in the current year period as compared to the prior year period.
+Added: Equity-based compensation increased $10.9 million, or 78%, to $24.9 million for fiscal 2023 as compared to fiscal 2022.
+Added: The increase was primarily attributable to the inclusion of expense related to liability classified awards in the current year period and no comparable expense in the prior year period, as well as the full year impact of restricted stock units (“RSUs”) awarded to certain employees and directors in the prior year period and additional grants of RSUs granted in the current year period.
+Added: Performance fee-related compensation expense decreased $443.3 million to $(39.2) million for fiscal 2023 as compared to fiscal 2022, primarily reflecting the decrease in carried interest allocation revenue.
+Added: Realized performance fee-related compensation decreased $11.4 million, or 12%, to $79.8 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting lower realization activity.
+Added: The decrease was partially offset by an increase reflecting realized carried interest allocations recognized in the current year period from certain funds for which a higher portion is paid to employees as realized performance fee-related compensation.
+Added: Legacy Greenspring performance fee-related compensation expense decreased $639.3 million to $(452.2) million for fiscal 2023 as compared to fiscal 2022.
+Added: Fiscal 2023 reflects gross realized performance fee-related compensation expense of $74.7 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $(526.8) million.
+Added: 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.
+Added: General, administrative and other expenses increased $36.7 million, or 33%, to $147.2 million for fiscal 2023 as compared to fiscal 2022.
+Added: The overall increase primarily reflected increases of $19.0 million in amortization expense for intangibles, $10.6 million of travel and associated costs for investment evaluation and client service, $3.8 million in information and technology expenses, $3.4 million in professional fees, $3.3 million in occupancy costs, $1.6 million in conference expenses, $1.6 million in human resources and recruiting expenses, $1.5 million in accelerated depreciation for leasehold improvements due to a reduction in lease terms, $0.7 million in business taxes and other general operating expenses, partially offset by a decrease in transaction costs of $7.4 million and a gain of $2.7 million within occupancy costs related to lease remeasurement adjustments due to a reduction in lease terms.
Year Ended March 31, 2022 Compared to Year Ended March 31, 2021
−Removed: 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.
+Added: 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, in each case, as described below.
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.
1 unchanged sentence
Equity-based compensation increased $6.1 million, or 77%, to $14.0 million for fiscal 2022 as compared to fiscal 2021.
−Removed: 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.
+Added: The increase was attributable to the grant of 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.
5 unchanged sentences
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.
−Removed: 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.
−Removed: Year Ended March 31, 2021 Compared to Year Ended March 31, 2020
−Removed: 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.
−Removed: 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.
−Removed: Our average full-time headcount increased 16% in the current year period as compared to the prior year period.
−Removed: Equity-based compensation increased $6.0 million, or 312%, to $7.9 million for fiscal 2021 as compared to fiscal 2020.
−Removed: The increase was primarily attributable to RSU grants made to certain employees and directors in connection with our IPO in September 2020.
−Removed: Performance fee-related compensation expense increased $136.4 million, or 124%, to $246.0 million for fiscal 2021 as compared to fiscal 2020, primarily reflecting the increase in carried interest allocation revenue.
−Removed: Realized performance fee-related compensation increased $3.6 million, or 13%, to $30.5 million for fiscal 2021 as compared to fiscal 2020, primarily reflecting higher realization activity.
−Removed: General, administrative and other expenses decreased $3.9 million, or 7%, to $48.5 million for fiscal 2021 as compared to fiscal 2020.
−Removed: The decrease primarily reflected declines of $7.0 million in travel and associated costs for investment evaluation and client service, $2.5 million in marketing expenses, and $1.7 million in amortization expense for intangibles, and other general operating expenses, partially offset by an increase of $2.8 million in insurance costs, $2.3 million in legal and professional fees, and $2.0 million in information and technology expenses.
−Removed: 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.
Other Income (Expense)
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022
+Added: Investment income decreased $28.7 million to a loss of $2.5 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.
+Added: Legacy Greenspring investment income decreased $76.7 million to a loss of $44.1 million for fiscal 2023 as compared to fiscal 2022.
+Added: Fiscal 2023 reflects gross realized investment income of $6.6 million and unrealized investment loss, net of the reversal of realized investment income, of $50.6 million.
+Added: 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.
+Added: Investment income of Consolidated Funds of $9.3 million for fiscal 2023 primarily reflects overall changes in the valuations of the underlying investments of the Consolidated Funds.
+Added: Interest income increased $1.6 million, or 470%, to $1.9 million for fiscal 2023 as compared to fiscal 2022 primarily due to higher average interest rates earned on cash and cash equivalent balances.
+Added: Interest income attributable to Consolidated Funds was $0.2 million in the current year period as compared to zero in the prior year period.
+Added: Interest expense increased $3.1 million, or 276%, to $4.2 million for fiscal 2023 as compared to fiscal 2022.
+Added: The increase was due to a full period of interest, higher average interest rates, and higher average outstanding balances under the Revolver during the current year period, as compared with the prior year period.
+Added: Other income (loss) decreased $3.7 million to a loss of $1.4 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting a larger gain related to adjustments in connection with the Tax Receivable Agreements in the prior year period as compared with the current year period, and net foreign currency transaction losses in the current year period.
+Added: Year Ended March 31, 2022 Compared to Year Ended March 31, 2021
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.
2 unchanged sentences
Interest expense decreased $6.2 million, or 85%, to $1.1 million for fiscal 2022 as compared to fiscal 2021.
−Removed: 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.
+Added: The decrease was primarily due to the full repayment of our previously outstanding senior secured term loan 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.
−Removed: Year Ended March 31, 2021 Compared to Year Ended March 31, 2020
−Removed: Investment income increased $9.5 million, or 137%, to $16.4 million for fiscal 2021 as compared to fiscal 2020, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.
−Removed: Interest income decreased $1.0 million, or 71%, to $0.4 million for fiscal 2021 as compared to fiscal 2020.
−Removed: Interest expense decreased $2.9 million, or 28%, to $7.4 million for fiscal 2021 as compared to fiscal 2020.
−Removed: 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.
−Removed: 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
1 unchanged sentence
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.
−Removed: 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.
−Removed: federal and state income taxes.
Our effective income tax rate was (9.2)%, 5.5%, and 6.9% for fiscal 2023, 2022 and 2021, respectively.
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.
−Removed: Additionally, for the period prior to the Reorganization and IPO, we operated as a partnership for U.S.
+Added: During fiscal 2022, we recorded a benefit of $25.3 million related to the full release of the valuation allowance as a result of the deferred tax liability recorded in connection with the Greenspring acquisition.
+Added: 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.
1 unchanged sentence
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022
+Added: Income tax expense decreased $24.5 million, or 86%, to $3.8 million for fiscal 2023 as compared to fiscal 2022.
+Added: The decrease in tax expense was primarily driven by pre-tax net loss for fiscal 2023 compared to pre-tax net income for fiscal 2022.
+Added: 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.
−Removed: 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.
+Added: 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 a benefit of $25.3 million related to the release of a valuation allowance during fiscal 2022 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.
1 unchanged sentence
federal and state income taxes.
−Removed: Year Ended March 31, 2021 Compared to Year Ended March 31, 2020
−Removed: Income tax expense increased $19.3 million, or 488%, to $23.3 million for fiscal 2021 as compared to fiscal 2020.
−Removed: The increase was primarily related to U.S.
−Removed: federal and state income taxes recognized on our share of taxable income generated by the Partnership for fiscal 2021 and a general increase in taxes paid in non-U.S.
−Removed: subsidiaries.
−Removed: For the period prior to the Reorganization and IPO, we were not subject to U.S.
−Removed: federal and state income taxes.
Net Income Attributable to Non-Controlling Interests in Subsidiaries
3 unchanged sentences
The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.
−Removed: Net Income Attributable to Non-Controlling Interests in Legacy Greenspring Entities
−Removed: 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.
+Added: Net Income (Loss) Attributable to Non-Controlling Interests in Legacy Greenspring Entities
+Added: Net income (loss) 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.
−Removed: Net income attributable to non-controlling interests in legacy Greenspring entities was $32.6 million for fiscal 2022.
−Removed: Net Income Attributable to Non-Controlling Interests in the Partnership
−Removed: 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.
−Removed: 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.
+Added: Net income (loss) attributable to non-controlling interests in legacy Greenspring entities was $(44.1) million and $32.6 million for fiscal 2023 and 2022, respectively.
+Added: Net Income (Loss) Attributable to Non-Controlling Interests in the Partnership
+Added: Net income (loss) 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.
+Added: Net income (loss) attributable to non-controlling interests in the Partnership was $(19.8) million, $231.2 million and $228.8 million for fiscal 2023, 2022 and 2021, respectively.
Prior to the Reorganization and IPO, all of our income or loss relates to the Partnership and has been presented as non-controlling interests in the Partnership.
+Added: Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Funds
+Added: Net income attributable to redeemable non-controlling interests in Consolidated Funds was $1.8 million for fiscal 2023, which represents income of the Consolidated Funds attributable to third-party investors.
+Added: We did not consolidate any StepStone Funds prior to fiscal 2023.
Operating Metrics
4 unchanged sentences
Assets related to our advisory accounts were $340 billion as of March 31, 2021, $436 billion as of March 31, 2022 and $482 billion as of March 31, 2023.
−Removed: 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.
−Removed: This change increased AUA by approximately $70 billion for the quarter ended March 31, 2021.
−Removed: Prior period amounts have not been recast for this change because such historical data does not exist.
Fee-Earning AUM
Year Ended March 31, 2023
−Removed: 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.
−Removed: 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.
+Added: FEAUM increased $10.3 billion, or 14%, to $85.4 billion as of March 31, 2023 as compared to $75.2 billion as of March 31, 2022.
+Added: Of the increase, $5.8 billion was from SMAs and $4.5 billion was from focused commingled funds.
Year Ended March 31, 2022
−Removed: FEAUM increased $11 billion, or 26%, to approximately $52 billion as of March 31, 2021 as compared to approximately $41 billion as of March 31, 2020.
−Removed: Of the increase, approximately $9 billion was from SMAs and approximately $1 billion was from focused commingled funds.
+Added: FEAUM increased $23.2 billion, or 45%, to $75.2 billion as of March 31, 2022 as compared to $52.0 billion as of March 31, 2021.
+Added: The increase was primarily attributable to a $14.1 billion increase in focused commingled funds due to the Greenspring acquisition, which added $11.4 billion of FEAUM, and $9.0 billion from SMAs.
Year Ended March 31, 2023
5 unchanged sentences
(4,208) (1,162) (5,370)
−Removed: Acquisitions (3)
−Removed: — 11,407 11,407
Market value, FX and other (4)
7 unchanged sentences
(3,235) (1,564) (4,799)
−Removed: Market value, FX and other (4)
+Added: Acquisitions (3)
— 11,407 11,407
+Added: Market value, FX and other (4)
Ending balance $ 49,586 $ 25,587 $ 75,173
2 unchanged sentences
(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.
−Removed: (3) Includes approximately $11.4 billion of focused commingled funds added as a result of the Greenspring acquisition.
+Added: (3) Includes $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.
10 unchanged sentences
_______________________________
−Removed: (1) Balance as of March 31, 2022 includes approximately $11.4 billion of focused commingled funds added as a result of the Greenspring acquisition.
+Added: (1) Balance as of March 31, 2022 includes $11.4 billion of focused commingled funds added as a result of the Greenspring acquisition.
As of March 31,
7 unchanged sentences
(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.
−Removed: (2) The change in weighted-average fee rates primarily reflected the timing of new funds.
−Removed: (3) The change in weighted-average fee rates primarily reflected shifts in asset class mix.
+Added: (2) The change in weighted-average fee rates primarily reflected the timing of new funds and shifts in mix between SMAs and focused commingled funds.
+Added: (3) The change in weighted-average fee rates primarily reflected the timing of new funds and shifts in asset class mix.
Undeployed Fee-Earning Capital
1 unchanged sentence
Non-GAAP Financial Measures
−Removed: The following table presents the components of FRE and ANI:
−Removed: Year Ended March 31,
−Removed: (in thousands) 2022 2021 2020
−Removed: Management and advisory fees, net $ 380,257 $ 285,462 $ 235,205
−Removed: Cash-based compensation 197,482 157,123 130,730
−Removed: Equity-based compensation (1)
−Removed: General, administrative and other 110,468 48,485 52,363
−Removed: Amortization of intangibles 24,497 3,339 5,028
−Removed: Non-core items (2)
−Removed: 26,260 6,342 4,419
−Removed: Fee-related earnings 122,242 89,484 61,559
−Removed: Realized carried interest allocations 200,718 62,953 46,177
−Removed: Incentive fees 11,593 5,474 3,410
−Removed: Deferred incentive fees 1,438 4,700 799
−Removed: Realized investment income 8,499 5,341 4,053
−Removed: Interest income 337 413 1,436
−Removed: Write-off of unamortized deferred financing costs — 3,526 —
−Removed: Other income (loss) (3)
−Removed: (1,311) 220 (1,355)
−Removed: Realized performance fee-related compensation 91,208 30,532 26,958
−Removed: Interest expense 1,113 7,360 10,211
−Removed: Income attributable to non-controlling interests in subsidiaries:
−Removed: Fee-related earnings attributable to non-controlling interests in subsidiaries (4)
−Removed: 27,583 23,834 12,781
−Removed: Performance-related earnings/other income (loss) attributable to non-controlling interests in subsidiaries (5)
−Removed: 517 118 (729)
−Removed: Pre-tax adjusted net income 223,095 110,267 66,858
−Removed: Income taxes (6)
−Removed: 50,152 24,865 16,715
+Added: Below is a description of our non-GAAP financial measures.
+Added: These measures are presented on a basis other than GAAP and should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.
Adjusted Net Income
−Removed: _______________________________
−Removed: (1) Reflects equity-based compensation for awards granted subsequent to the IPO.
−Removed: (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.
−Removed: (3) Reflects other income (loss) net of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($3.6 million for fiscal 2022).
−Removed: (4) Reflects the portion of fee-related earnings of our subsidiaries attributable to non-controlling interests.
−Removed: (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).
−Removed: (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.
−Removed: 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%.
−Removed: 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%.
−Removed: As we were not subject to U.S.
−Removed: 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.
−Removed: 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.
−Removed: The decline in the blended statutory rate for fiscal 2021 compared to fiscal 2020 was due to updates in our state apportionment.
+Added: Adjusted net income (“ANI”) is a non-GAAP performance measure that we present on a pre-tax and after-tax basis used to evaluate profitability and is presented excluding the consolidation of our funds.
+Added: ANI represents the after-tax net realized income attributable to us.
+Added: The components of revenues used in the determination of ANI (“adjusted revenues”) comprise net management and advisory fees, incentive fees (including the deferred portion) and realized carried interest allocations.
+Added: In addition, ANI excludes:
+Added: (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, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction, (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.
+Added: 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.
+Added: ANI is income before taxes fully taxed at our blended statutory rate.
+Added: We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.
+Added: Adjusted Revenues
+Added: Adjusted revenues represents the components of revenues used in the determination of ANI and comprise net management and advisory fees, incentive fees (including the deferred portion) and realized carried interest allocations.
+Added: We believe adjusted revenues is useful to investors because it presents a measure of realized revenues.
+Added: Fee-Related Earnings
+Added: Fee-related earnings (“FRE”) is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees.
+Added: FRE is a component of ANI and comprises net management and advisory fees, less adjusted expenses which are operating expenses other than (a) performance fee-related compensation, (b) equity-based compensation for awards granted prior to and in connection with our IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction, (c) amortization of intangibles, and (d) 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.
+Added: FRE is presented before income taxes.
+Added: We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee revenues.
+Added: Adjusted Net Income Per Share
+Added: 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.
+Added: ANI per share is calculated as ANI divided by adjusted shares outstanding.
+Added: We believe ANI per share is useful to investors because it enables them to better evaluate per-share operating performance across reporting periods.
+Added: Fee-Related Earnings
+Added: Year Ended March 31, 2023 Compared to Year Ended March 31, 2022
+Added: FRE increased $33.9 million, or 28%, to $156.2 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting higher net management and advisory fees, partially offset by higher adjusted cash-based compensation, adjusted general, administrative and other expenses and adjusted equity-based compensation.
+Added: Year Ended March 31, 2022 Compared to Year Ended March 31, 2021
+Added: 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 adjusted cash-based compensation, adjusted general, administrative and other expenses and adjusted equity-based compensation.
Adjusted Revenues and Adjusted Net Income
Year Ended March 31, 2023 Compared to Year Ended March 31, 2022
−Removed: Adjusted revenues increased $235.4 million, or 66%, to $594.0 million for fiscal 2022 as compared to fiscal 2021, primarily reflecting increases in net management and advisory fees, realized carried interest allocation revenues and incentive fees (including the deferred portion).
−Removed: ANI increased $87.5 million, or 103%, to $172.9 million for fiscal 2022 as compared to fiscal 2021, primarily due to increases in FRE as discussed below, as well as higher net realized performance fee-related earnings (incentive fees, including the deferred portion, plus realized carried interest allocation revenues, less realized performance fee-related compensation).
−Removed: These increases were partially offset by a higher allocation of income to non-controlling interests.
+Added: Adjusted revenues increased $48.0 million, or 8%, to $642.0 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting increases in net management and advisory fees and incentive fees, including the deferred portion, partially offset by lower realized carried interest allocation revenues.
+Added: ANI decreased $30.3 million, or 18%, to $142.7 million for fiscal 2023 as compared to fiscal 2022, primarily due to lower net realized performance fee-related earnings (incentive fees, including the deferred portion, plus realized carried interest allocation revenues, less realized performance fee-related compensation), a higher allocation of income to non-controlling interests and higher interest expense.
+Added: The decrease was partially offset by the increase in FRE.
Year Ended March 31, 2022 Compared to Year Ended March 31, 2021
Adjusted revenues increased $235.4 million, or 66%, to $594.0 million for fiscal 2022 as compared to fiscal 2021, primarily reflecting increases in net management and advisory fees, realized carried interest allocation revenues and incentive fees (including the deferred portion).
−Removed: 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.
+Added: ANI increased $87.5 million, or 103%, to $172.9 million for fiscal 2022 as compared to fiscal 2021, primarily due to increases in FRE, 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.
1 unchanged sentence
The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted shares outstanding used in the computation of ANI per share for fiscal 2023, 2022 and 2021.
−Removed: As Class A common stock did not exist prior to the Reorganization and IPO, 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.
+Added: As Class A common stock did not exist prior to the Reorganization and IPO, the number of adjusted shares outstanding used in the computation of ANI per share for fiscal 2021 reflects the number of adjusted shares for the period from the IPO date to September 30, 2020 for comparability purposes.
Year Ended March 31,
17 unchanged sentences
(3) Class A common stock did not exist prior to the Reorganization and IPO in September 2020.
−Removed: 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.
−Removed: Fee-Related Earnings
−Removed: Year Ended March 31, 2022 Compared to Year Ended March 31, 2021
−Removed: 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.
−Removed: Year Ended March 31, 2021 Compared to Year Ended March 31, 2020
−Removed: 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.
+Added: As a result, the computation of ANI per share for fiscal 2021 assumes the same number of adjusted shares outstanding as reported for the period after the IPO through September 30, 2020.
Reconciliation of GAAP to Non-GAAP Financial Measures
6 unchanged sentences
Legacy Greenspring carried interest allocations 452,163 (187,106) —
+Added: Management and advisory fee revenues for the Consolidated Funds (1)
Adjusted revenues $ 641,970 $ 594,006 $ 358,589
−Removed: The table below shows a reconciliation of income before income tax to ANI and FRE.
+Added: ______________________________
+Added: (1) Reflects the add back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
+Added: The table below shows a reconciliation of additional GAAP measures to adjusted measures.
+Added: We use the non-GAAP measures presented below as components when calculating ANI and FRE.
Year Ended March 31,
(in thousands) 2023 2022 2021
−Removed: Income before income tax $ 512,581 $ 337,849 $ 148,740
+Added: GAAP Management and advisory fees, net $ 497,179 $ 380,257 $ 285,462
+Added: Management and advisory fee revenues for the Consolidated Funds (1)
+Added: Management and advisory fees, net $ 497,326 $ 380,257 $ 285,462
+Added: GAAP Interest income $ 1,921 $ 337 $ 413
+Added: Interest income earned by the Consolidated Funds (2)
+Added: Non-GAAP interest income $ 1,726 $ 337 $ 413
+Added: GAAP Other income (loss) $ (1,420) $ 2,249 $ 220
+Added: Adjustments (3)
+Added: Adjusted other income (loss) $ (1,334) $ (1,311) $ 220
+Added: ______________________________
+Added: (1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.
+Added: (2) Reflects the removal of interest income earned by the Consolidated Funds.
+Added: (3) Reflects the removal of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) and the removal of the impact of the consolidation of the Consolidated Funds.
+Added: The table below shows a reconciliation of income (loss) before income tax to ANI and FRE.
+Added: Year Ended March 31,
+Added: (in thousands) 2023 2022 2021
+Added: Income (loss) before income tax $ (41,454) $ 512,581 $ 337,849
Net income attributable to non-controlling interests in subsidiaries (1)
(39,054) (28,100) (23,952)
−Removed: Net income attributable to non-controlling interests in legacy Greenspring entities (32,586) — —
+Added: Net (income) loss attributable to non-controlling interests in legacy Greenspring entities 44,075 (32,586) —
Unrealized carried interest allocations 253,342 (585,851) (433,827)
Unrealized performance fee-related compensation (119,039) 312,903 215,508
−Removed: Unrealized investment income (17,661) (11,066) (2,873)
+Added: Unrealized investment (income) loss 8,012 (17,661) (11,066)
+Added: Impact of Consolidated Funds (8,897) — —
Deferred incentive fees 3,892 1,438 4,700
14 unchanged sentences
Realized performance fee-related compensation (5)
+Added: 79,846 91,208 30,532
Realized investment income (5,503) (8,499) (5,341)
1 unchanged sentence
Deferred incentive fees (3,892) (1,438) (4,700)
−Removed: Interest income (337) (413) (1,436)
+Added: Non-GAAP interest income (6)
+Added: (1,726) (337) (413)
Interest expense 4,189 1,113 7,360
−Removed: Other (income) loss (5)
+Added: Adjusted other (income) loss (6)(7)
1,334 1,311 (220)
5 unchanged sentences
(1) Reflects the portion of pre-tax adjusted net income of our subsidiaries attributable to non-controlling interests.
−Removed: (2) Reflects equity-based compensation for awards granted prior to and in connection with the IPO.
−Removed: (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.
+Added: (2) Reflects equity-based compensation for awards granted prior to and in connection with the IPO, profits interests issued by our non-wholly owned subsidiaries, and unrealized mark-to-market changes in the fair value of the profits interests issued in connection with the Private Wealth Transaction.
+Added: (3) Includes (income) expense related to transaction costs ($6.9 million in fiscal 2023, $14.2 million in fiscal 2022, and $0.4 million in fiscal 2021), lease remeasurement adjustments ($(2.7) million in fiscal 2023), accelerated depreciation of leasehold improvements for changes in lease terms ($1.5 million in fiscal 2023), severance costs ($0.3 million in fiscal 2023, $1.6 million in fiscal 2022, and $4.2 million in fiscal 2021), loss on change in fair value for contingent consideration obligation ($9.4 million in fiscal 2023, $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 ($2.3 million in fiscal 2023 and $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 22.3%, 22.5% and 22.6% applied to pre-tax adjusted net income for fiscal 2023, 2022 and 2021, respectively.
1 unchanged sentence
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%.
−Removed: As we were not subject to U.S.
−Removed: 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.
+Added: 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%.
The decline in the blended statutory rate for fiscal 2023 compared to fiscal 2022 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 2022 compared to fiscal 2021 was due to updates in our state apportionment.
−Removed: (5) Reflects other income (loss) net of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($3.6 million in fiscal 2022).
+Added: (5) Includes carried interest-related compensation expense related to the portion of net carried interest allocation revenue attributable to equity holders of the Company’s consolidated subsidiaries that are not 100% owned ($11.3 million in fiscal 2023, $1.8 million in fiscal 2022, and $1.3 million in fiscal 2021).
+Added: (6) Excludes the impact of consolidating the Consolidated Funds.
+Added: (7) Excludes amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($0.2 million in fiscal 2023 and $3.6 million in fiscal 2022).
Investment Performance
12 unchanged sentences
• “NAV” refers to the estimated fair value of unrealized investments plus any net assets or liabilities associated with the investment as of December 31, 2022;
−Removed: • “Multiple of Invested Capital” refers to (a) the sum of Realized Distributions from underlying investments to the fund plus the fund’s NAV, divided by (b) Cumulative Invested Capital.
−Removed: Multiple of Invested Capital is presented net of management fees, carried interest and expenses charged by underlying fund managers, but gross of StepStone’s management fees, performance fees and expenses;
+Added: • “Net Multiple of Invested Capital” refers to (a) the sum of Realized Distributions from underlying investments to the fund plus the fund’s NAV, divided by (b) Cumulative Invested Capital.
+Added: Multiple of Invested Capital is presented net of management fees, carried interest and expenses charged by underlying fund managers, as well as StepStone’s management fees, performance fees and expenses;
• “IRR” refers to the annualized internal rate of return for all investments within the relevant investment strategy on an inception-to-date basis as of December 31, 2022 (except as noted otherwise below), based on contributions, distributions and unrealized value;
1 unchanged sentence
• “Net IRR” refers to IRR net of fees and expenses charged by both the underlying fund managers and StepStone;
−Removed: • “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.
−Removed: 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.
+Added: • “MSCI ACWI Direct Alpha” refers to the MSCI All Country World Index, the benchmark index used for comparison below.
+Added: The MSCI All Country World Index is a free float-adjusted market capitalization-weighted index of nearly 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.
3 unchanged sentences
(in billions except percentages and multiples)
−Removed: Committed Capital Cumulative Invested Capital Realized Distributions NAV Total Multiple of Invested Capital Gross IRR Net IRR (4)
−Removed: Gross IRR versus Benchmark (5)
+Added: Committed Capital Cumulative Invested Capital Realized Distributions NAV Total Gross IRR (4)
+Added: Net Multiple of Invested Capital (4)
+Added: Net IRR versus Benchmark (5)
Primaries $ 273.8 $ 192.0 $ 122.9 $ 153.7 $ 276.6 12.8 % 12.5 % 1.4x 4.7 %
5 unchanged sentences
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.
−Removed: 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.
+Added: Overall performance excludes (i) all 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 $0.4 billion, and (iv) investments made by legacy private equity acquired businesses.
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.
+Added: Primaries include open-end investments, and co-investments include venture capital and growth equity direct investments for private equity, and asset management investments for infrastructure direct asset management investments.
(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.
−Removed: At that point, StepStone will then ‘liquidate’ the fund by entering a distribution amount equal to the last reported NAV, thus ending its contribution to the track record as of that date.
−Removed: Historical performance contribution will be maintained up until the ‘liquidation’ date.
+Added: At that point, StepStone will then ‘liquidate’ the fund’s contribution to the track record by entering a distribution amount equal to the last reported NAV.
+Added: Historical performance contribution is maintained up until the ‘liquidation’ date.
(3) Inception date reflects date of the first investment:
−Removed: September 1994 for primaries, May 2009 for secondaries and April 2008 for co-investments.
−Removed: (4) Net IRRs are presented solely for illustrative purposes and do not represent actual returns received by any investor in any of the StepStone Funds represented above.
+Added: September 1994 for primaries, January 2005 for secondaries and June 2001 for co-investments.
+Added: (4) Returns are net of fees and expenses charged by both the underlying investment and hypothetical StepStone fees.
+Added: Investments shown herein include investments across different funds and accounts.
+Added: The aggregate returns are not indicative of the returns an individual investor would receive from these investments.
+Added: No individual investor received the aggregate returns described herein as the investments were made across multiple mandates over multiple years.
+Added: Fees are available upon request.
StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate):
−Removed: 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.
−Removed: 125 basis points (60 basis points for Infrastructure) on capital commitments in years 1 through 4 for management fee.
+Added: 25 basis points of net invested capital for management fees, charged quarterly.
+Added: 125 basis points (60 basis points for infrastructure) of capital commitments in years 1 through 4 for management fees, charged quarterly.
In year 5, management fees step down to 90% of the previous year’s fee.
−Removed: Secondaries also include 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.
−Removed: Secondaries also include 12.5% of paid and unrealized carry (15.0% of paid and unrealized carry for Real Estate), with an 8% preferred return hurdle.
Co-investments:
−Removed: 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.
−Removed: 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.
−Removed: Investment returns reflect NAV data for underlying investments as of December 31, 2021, as reported by underlying managers up to 115 days following December 31, 2021.
−Removed: 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.
+Added: 100 basis points (85 and 50 basis points for infrastructure co-investments and direct asset management investments, respectively) on net committed capital for management fees, charged quarterly.
+Added: Additionally, all investment types assess 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.
+Added: Secondaries and co-investments include 12.5% and 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle.
+Added: Real Estate secondaries and co-investments include 15.0% of paid and unrealized carry, with an 8.0% preferred return hurdle.
(5) Reflects outperformance of investments as compared to the MSCI ACWI Total Return using the Direct Alpha public market equivalent method.
5 unchanged sentences
INVESTMENT STRATEGY (1,4,8)
−Removed: Primaries 19.7% 1.7x Core/Core+ fund investments 9.0% 1.5x Primaries 11.6% Direct lending (Gross) (8)
−Removed: Secondaries 21.5% 1.6x Value-add/opportunistic fund investments 10.4% 1.4x Secondaries 14.1% Distressed debt (Gross) (8)
−Removed: Co-investments 25.1% 1.9x Real estate debt fund investments 6.4% 1.2x Co-investments (6)
−Removed: 8.8% Other (Gross) (8,9)
−Removed: Value-add/opportunistic secondaries & co-investments 16.9% 1.3x Private debt gross track record (8)
−Removed: Private debt net track record 7.9%
+Added: Primaries 17.4% 1.6x Core/Core+ fund investments 8.8% 1.6x Primaries 10.7% Direct lending 6.5%
+Added: Secondaries 18.0% 1.5x Value-add/opportunistic fund investments 10.1% 1.4x Secondaries 10.5% Distressed debt 9.3%
+Added: Co-investments (7)
+Added: 20.7% 1.7x Real estate debt fund investments 5.9% 1.2x Co-investments (7)
+Added: 9.3% Other (9)
+Added: Value-add/opportunistic secondaries & co-investments 13.8% 1.3x
_______________________________
−Removed: (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.
+Added: (1) Investment returns reflect NAV data for underlying investments as of December 31, 2022, as reported by underlying managers up to 114 days following December 31, 2022.
+Added: For investment returns where NAV data is not available 114 days following December 31, 2022, such NAVs are adjusted for cash activity following the last available reported NAV.
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.
−Removed: (2) Net IRR and Net TVM are presented solely for illustrative purposes and do not represent actual returns received by any investor in any of the StepStone Funds represented above.
−Removed: StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate):
−Removed: 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.
−Removed: 125 basis points (60 basis points for Infrastructure) on capital commitments in years 1 through 4 for management fee.
+Added: (2) Private equity includes 2,384 investments totaling $168.8 billion of capital commitments and excludes (i) two advisory co-investments, totaling $100.0 million of capital commitments, (ii) all client-directed private equity investments (245 investments totaling $27.5 billion of capital commitments), and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment..
+Added: (3) Net IRR and Net TVM are presented solely for illustrative purposes and do not represent actual returns received by any investor in any of the StepStone Funds represented above and are net of fees and expenses charged by both the underlying investment and hypothetical StepStone fees.
+Added: The aggregate returns are not indicative of the returns an individual investor would receive from these investments.
+Added: No individual investor received the aggregate returns described herein as the investments were made across multiple mandates over multiple years.
+Added: StepStone fees and expenses are based on the following assumptions (management fees and expenses represent an annual rate):
+Added: 25 basis points of net invested capital for management fees (and on NAV for private debt), charged quarterly.
+Added: 125 basis points (60 basis points for infrastructure) of capital commitments in years 1 through 4 for management fees, charged quarterly.
In year 5, management fees step down to 90% of the previous year’s fee;
−Removed: Secondaries also include 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.
−Removed: Secondaries also include 12.5% of paid and unrealized carry (15.0% of paid and unrealized carry for Real Estate), with an 8% preferred return hurdle.
+Added: 65 basis points for private debt, assessed quarterly on the net asset value.
Co-investments:
−Removed: 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.
−Removed: 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.
+Added: 100 basis points (85 and 50 basis points for infrastructure co-investments and direct asset management investments, respectively) on net committed capital for management fees, charged quarterly;
+Added: 65 basis points for private debt, assessed quarterly on net asset value.
+Added: All investment types assess 5 basis points of capital commitments for fund expenses, charged quarterly, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.
+Added: Private equity and infrastructure secondaries and co-investments include 12.5% and 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle.
+Added: Real estate secondaries and co-investments include 15.0% of paid and unrealized carry, with an 8.0% preferred return hurdle.
+Added: Private debt secondaries and co-investments include 10.0% of paid and unrealized carry, with an 5.0% preferred return hurdle.
Net IRR and Net TVM for certain investments may have been impacted by StepStone’s or the underlying fund manager’s use of subscription backed credit facilities by such vehicles.
Reinvested/recycled amounts increase contributed capital.
−Removed: Investment returns reflect NAV data for underlying investments as of December 31, 2021, as reported by underlying managers up to 115 days following December 31, 2021.
−Removed: 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.
(4) 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.
1 unchanged sentence
Historical performance contribution will be maintained up until the ‘liquidation’ date.
−Removed: (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.
−Removed: 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.
+Added: (5) Real estate includes 466 investments totaling $73.4 billion of capital commitments and excludes (i) all client-directed real estate investments (78 investments totaling $11.7 billion of capital commitments), (ii) nine secondary/co-investment core/core+ or credit investments, totaling $537.0 million of capital commitments, (iii) four advisory fund investments totaling $463.6 million of capital commitments, 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”).
−Removed: (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.
−Removed: 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.
−Removed: (6) Includes asset management investments.
−Removed: (7) Private Debt includes 686 investments totaling $31.9 billion of capital commitments and excludes (i) 30 client-directed investments, totaling $2.4 billion of capital commitments, and (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.
−Removed: 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.
−Removed: IRR is presented solely for illustrative purposes and does not represent actual returns received by any investor in any of the StepStone Funds represented above.
−Removed: StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate):
−Removed: Private Debt fund investments include 65 basis points on the quarterly NAV for management fee.
−Removed: Net IRR for certain investments may have been impacted by StepStone’s or the underlying fund manager’s use of subscription backed credit facilities by such vehicles.
−Removed: Reinvested/recycled amounts increase contributed capital.
−Removed: Investment returns reflect NAV data for underlying investments as of December 31, 2021, as reported by underlying managers up to 115 days following December 31, 2021.
−Removed: 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.
−Removed: (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).
−Removed: (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.
+Added: (6) Infrastructure includes 224 investments totaling $46.3 billion of capital commitments and excludes (i) 11 infrastructure investments made by the Partnership prior to the formation of the Infrastructure subsidiary in 2013 or made prior to the Courtland acquisition totaling $501.9 million of capital commitments, (ii) all client-directed infrastructure investments (27 investments totaling $4.1 billion of capital commitments), and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.
+Added: (7) Co-investments includes venture capital and growth equity direct investments for Private Equity, and asset management investments for Infrastructure.
+Added: (8) Private debt includes 766 investments totaling $43.5 billion of capital commitments and excludes (i) all client-directed debt investments (40 investments, totaling $2.9 billion of capital commitments), (ii) real estate credit investments that were recommended by Courtland Partners, Ltd.
+Added: prior to the Courtland acquisition (54 investments totaling $5.2 billion of capital commitments), and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.
+Added: (9) Other includes mezzanine debt, collateralized loan obligations, leasing, regulatory capital, trade finance, intellectual property/royalty, real estate debt and infrastructure debt.
Liquidity and Capital Resources
1 unchanged sentence
We generate cash primarily from management and advisory fees and realized carried interest allocations.
−Removed: 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.
−Removed: 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.
+Added: 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 (e) funding our growth initiatives, including capital expenditures and acquisitions to expand into new businesses.
+Added: As of March 31, 2023, we had $103.5 million of cash, cash equivalents and restricted cash ($129.5 million including Consolidated Funds) and $1,342.4 million of investments in StepStone Funds, including $1,227.2 million of accrued carried interest allocations, against $98.4 million in debt obligations, net of debt issuance costs, and $644.5 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;
2 unchanged sentences
We believe we will have sufficient cash to meet our obligations for the next 12 months.
+Added: The accompanying consolidated cash flows include the Consolidated Funds, which activities primarily consist of raising capital from third-party investors, purchasing investments, making payment for the operating costs of the fund, generating cash flows from realized income allocations of investments and sales of investments, and making distributions to investors.
+Added: The Consolidated Funds are accounted for as investment companies and therefore the cash flows from investing activities are included in cash flows from operations.
The following table summarizes our cash flows attributable to operating, investing and financing activities:
2 unchanged sentences
Net cash provided by operating activities $ 151,183 $ 214,281 $ 149,299
−Removed: Net cash provided by (used in) investing activities (210,241) (11,166) 35,809
+Added: Net cash used in investing activities (30,807) (210,241) (11,166)
Net cash used in financing activities (108,021) (70,439) (45,306)
6 unchanged sentences
• net change in operating assets and liabilities of $(32.6) million, $(8.6) million and $29.3 million;
+Added: • adjustments for unrealized investment income from Consolidated Funds of $(9.3) million, $0 million and $0 million;
+Added: • net purchases of investments of Consolidated Funds of $21.3 million, $0 million and $0 million;
+Added: • net change in operating assets and liabilities of Consolidated Funds of $(0.2) million, $0 million and $0 million.
Investing Activities
−Removed: Investing activities provided (used) $(210.2) million, $(11.2) million and $35.8 million of cash for fiscal 2022, 2021 and 2020, respectively, and primarily consisted of the following amounts:
+Added: Investing activities used $30.8 million, $210.2 million and $11.2 million of cash for fiscal 2023, 2022 and 2021, respectively, and primarily consisted of the following amounts:
• net contributions to investments of $16.4 million, $15.1 million and $9.9 million;
1 unchanged sentence
• purchases of fixed assets of $5.6 million, $2.1 million and $1.3 million;
−Removed: • 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 $0 million, $181.5 million and $0 million.
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• proceeds from IPO, net of underwriting discounts of $0 million, $0 million and $337.8 million;
−Removed: • net borrowings on revolving credit facility of $65.0 million, $0 million and $0 million;
−Removed: • payment of deferred financing costs of $2.4 million, $0 million and $0 million;
+Added: • net borrowings on revolving credit facility (including payment of deferred financing costs) of $35.0 million, $62.6 million and $0 million;
• purchase of non-controlling interests of $0 million, $3.0 million and $131.3 million;
5 unchanged sentences
• dividends paid to common stockholders of $50.0 million, $23.9 million and $2.0 million;
+Added: • payments for employee taxes related to the net settlement of RSUs of $2.7 million, $0 million and $0 million;
• payments to related parties under the Tax Receivable Agreements of $6.0 million, $0.8 million and $0 million;
+Added: • contributions from redeemable non-controlling interests in Consolidated Funds of $22.8 million, $0 million and $0 million.
Revolving Credit Facility
−Removed: In September 2021, we entered into the Credit Agreement in connection with the Greenspring acquisition.
−Removed: 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.
+Added: We are party to the Credit Agreement that 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, 2023, we had $98.4 million outstanding on the Revolver, net of debt issuance costs.
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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%.
−Removed: The interest rate in effect for the Revolver as of March 31, 2022 was 2.50%.
+Added: The weighted-average interest rate in effect for the Revolver as of March 31, 2023 was 6.86%.
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.
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and engage in transactions with affiliates.
−Removed: 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.
+Added: 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.
As of March 31, 2023, we were in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants.
2 unchanged sentences
As of March 31, 2023, we had outstanding letters of credit totaling $7.8 million.
+Added: In April 2023, we amended the Credit Agreement such that any request for borrowing of, continuation of, or conversion to a Eurocurrency Loan, as applicable, shall be deemed to be a request for borrowing of, continuation of, or conversion to, as applicable, a loan bearing interest at the adjusted term Secured Overnight Financing Rate (“SOFR”).
+Added: All Eurocurrency Loans outstanding as of March 31, 2023 shall continue to bear interest at the adjusted LIBOR Rate (as defined in the Credit Agreement) and remain outstanding as Eurocurrency Loans until the expiration of the current interest period (as defined in the Credit Agreement).
Equity Transactions
−Removed: Equity Transactions in Connection with and Prior to the Reorganization and IPO
−Removed: 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”).
−Removed: We received approximately $110.8 million in net proceeds from the sale of equity to institutional investors and used all of the proceeds to repurchase an equal number of equity interests from certain of our existing equity holders.
−Removed: In addition, we repurchased additional Class D partnership interests from a former employee for $2.3 million, which will be paid to the former employee at such time as carried interest allocations are realized by us.
−Removed: 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.
−Removed: 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.
−Removed: 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%.
−Removed: Equity Transactions Subsequent to the IPO
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We did not receive any proceeds from the sale of shares by the selling stockholders.
In June 2022, we issued 257,776 shares of Class A common stock to certain limited partners of the Partnership in exchange for 257,776 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 and a corresponding number of Class A units of the Partnership were issued to us.
−Removed: 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.
−Removed: 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.
−Removed: 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 2022, we issued 175,000 shares of Class A common stock to certain limited partners of the Partnership in exchange for 175,000 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 and a corresponding number of Class A units of the Partnership were issued to us.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We did not receive any proceeds from the sale of shares by the selling stockholders.
In December 2022, we issued 296,756 shares of Class A common stock to certain limited partners of the Partnership in exchange for 296,756 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 and a corresponding number of Class A units of the Partnership were issued to us.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: On the same date, we also issued 414,739 shares of Class A common stock to certain limited partners of the Partnership in exchange for 414,739 Class C units.
Future Sources and Uses of Liquidity
2 unchanged sentences
Dividend and Distribution Policy
−Removed: 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.
−Removed: The following table presents information regarding quarterly dividends on Class A common shares for the periods indicated:
+Added: On May 24, 2023, we announced a quarterly cash dividend of $0.20 per share of Class A common stock and a supplemental cash dividend of $0.25 per share of Class A common stock, both payable on June 30, 2023 to holders of record as of the close of business on June 15, 2023.
+Added: The quarterly cash dividend and supplemental cash dividend relate to earnings in respect of our fourth fiscal quarter and full fiscal year 2023, respectively.
+Added: The declaration of this supplemental dividend does not guarantee that we will declare supplemental dividends in the future and our board of directors may, in its discretion, decrease the level of dividends or discontinue the payment of dividends entirely.
+Added: See “Risk Factors—Risks Related to Our Organizational Structure— We currently pay dividends to our stockholders, but our ability to do so is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law.”
+Added: The following table presents information regarding quarterly cash dividends on Class A common shares for the periods indicated:
Quarterly Fiscal Period 1
10 unchanged sentences
Total dividends paid in FY2022 $ 0.44
+Added: First quarter June 30, 2022 $ 0.20
+Added: Second quarter September 15, 2022 0.20
+Added: Third quarter December 15, 2022 0.20
+Added: Fourth quarter March 15, 2023 0.20
+Added: Total dividends paid in FY2023 $ 0.80
_______________________________
37 unchanged sentences
(2) In September 2021, we completed the acquisition of 100% of Greenspring.
−Removed: 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.
+Added: The transaction agreement provides for the payment of 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, 2023.
1 unchanged sentence
(3) Debt obligations presented in the table relate to the Revolver, which has a maturity date of September 20, 2026.
−Removed: 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.
−Removed: (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.
+Added: The balance outstanding under the Revolver as of March 31, 2023 has been presented as an obligation payable in the years
+Added: 3-5 column as there are no scheduled or required principal payments on the Revolver until the maturity date on September 20, 2026.
+Added: (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, 2023, which has been calculated assuming no additional principal payments will be made and the 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.
4 unchanged sentences
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.
−Removed: However, certain arrangements negotiated as part of the acquisition represent variable interests that could be significant.
−Removed: 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.
+Added: We determined that the legacy Greenspring general partner entities are VIEs and that we are the primary beneficiary of each such entity because we have a controlling financial interest in each entity.
As a result, we consolidate these entities.
22 unchanged sentences
We hold variable interests in certain operating subsidiaries not wholly-owned by us and in the StepStone Funds in which we serve as the general partner or managing member.
−Removed: We also assess whether the fees charged to the StepStone Funds are customary and commensurate with the level of effort required to provide the services.
+Added: We also assess whether the fees received from the StepStone Funds as a decision maker or in exchange for services (including management fees, incentive fees and carried interest allocations) are customary and commensurate with the level of effort required to provide the services.
We consider all economic interests, including indirect interests, to determine if a fee is considered a variable interest.
1 unchanged sentence
If we have a variable interest in an entity, we further assess whether the entity is a VIE and, if so, whether we are the primary beneficiary.
+Added: Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model.
The assessment of whether an entity is a VIE requires an evaluation of qualitative factors and, where applicable, quantitative factors.
7 unchanged sentences
Certain StepStone Funds are VIEs because they have not granted the third-party investors substantive rights to terminate or remove the general partner or participating rights.
−Removed: We do not consolidate these StepStone Funds because we are not the primary beneficiary of those funds, primarily because our fee arrangements are considered customary and commensurate and thus not deemed to be variable interests, and we do not hold any other interests in those funds that are considered more than insignificant.
+Added: We do not consolidate most of the StepStone Funds that are VIEs because we are not the primary beneficiary of those funds, primarily because our fee arrangements are considered customary and commensurate and thus not deemed to be variable interests, and we do not hold any other interests in those funds that are considered more than insignificant.
We consolidate certain of our operating subsidiaries that are VIEs because we are the primary beneficiary.
+Added: The Consolidated Funds comprise certain entities that constitute client investment funds that we manage or control and have been consolidated in the accompanying consolidated financial statements.
+Added: Including the results of the Consolidated Funds increases the reported amounts of the assets, liabilities, expenses and cash flows in the accompanying consolidated financial statements, and amounts related to economic interests held by third-party investors are reflected as redeemable non-controlling interests in Consolidated Funds.
+Added: The revenues earned by us as investment manager of the Consolidated Funds are eliminated in consolidation and generally have no direct effect on the net income attributable to SSG or to Stockholders' Equity.
We recognize revenue in accordance with ASC 606.
6 unchanged sentences
For asset management services and the arrangement of administrative services, we satisfy these performance obligations over time because the customer simultaneously receives and consumes the benefits of the services as they are performed.
−Removed: Advisory fees from contracts under which we do not have discretion over investment decisions are generally based on fixed amounts and typically billed quarterly.
+Added: Advisory fees from contracts where we do not have discretion over investment decisions are generally based on fixed amounts and typically billed quarterly.
Management fees are reflected net of certain professional and administrative services and distribution and servicing fees paid to third parties for which we are acting as an agent.
2 unchanged sentences
incentive fees and carried interest allocations, as described below.
−Removed: 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.
+Added: Incentive fees are generally calculated as a percentage of the profits (up to 15%) earned in respect of certain accounts, including certain permanent capital vehicles, 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.
5 unchanged sentences
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.
−Removed: 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.
+Added: Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to us from unaffiliated limited partners in the 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.
5 unchanged sentences
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.
+Added: Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606.
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.
−Removed: 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.
1 unchanged sentence
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.
+Added: Our determination of fair value for investments in the underlying funds includes various valuation techniques.
+Added: These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted-average cost of capital, exit multiples, or terminal growth rates.
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.
19 unchanged sentences
The variability and availability of the observable inputs affected by the factors described above may result in transfers between Levels I, II, and III.
−Removed: 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.
+Added: We consider our cash, cash equivalents, restricted cash, fees and accounts receivable, accounts payable, investments, revolving credit facility, contingent consideration and liability classified award 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.
−Removed: 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.
+Added: See note 6 to our consolidated financial statements for additional details regarding the fair value of our contingent consideration and liability classified award balances and note 9 for additional details regarding the fair value of our revolving credit facility balance.
Equity-Based Compensation
−Removed: 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.
+Added: We account for grants of equity-based awards, including 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.
2 unchanged sentences
Forfeitures of equity-based awards are recognized as they occur.
+Added: Awards classified as liabilities are remeasured at the end of each reporting period until settlement.
See note 10 to our consolidated financial statements for additional information regarding our accounting for equity-based awards.
Performance Fee-Related Compensation
−Removed: A portion of the carried interest allocations we earn is awarded to employees and other carry participants in the form of award letters (“carry awards”).
−Removed: Carry awards to employees and other participants are accounted for as a component of compensation and benefits expense contemporaneously with our recognition of the related realized and unrealized carried interest allocation revenue and, until paid, is included in accrued carried interest-related compensation in the consolidated balance sheets.
−Removed: Carried interest-related compensation expense also includes the portion of net carried interest allocation revenue attributable to equity holders of our consolidated subsidiaries that are not 100% owned by us.
+Added: A portion of the carried interest allocation revenue and incentive fees we earn is awarded to employees and other carry participants in the form of award letters (“carry awards”) as a form of long-term incentive compensation.
+Added: Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds.
+Added: Approximately 50% of carried interest allocation revenue is awarded to employees and other participants as part of our long-term incentive compensation plan, fostering alignment of interest with our clients and investors, and retaining key investment professionals.
+Added: Carry awards to employees and other participants are accounted for as a component of compensation and benefits expense in conjunction with our recognition of the related realized and unrealized carried interest allocation revenue and, until paid, is recorded as accrued carried interest-related compensation in the consolidated balance sheets.
+Added: Performance fee-related compensation also includes the portion of carried interest-related compensation expense attributable to equity holders of our consolidated subsidiaries that are not 100% owned by us.
Upon a reversal of carried interest allocation revenue, the related compensation expense, if any, is also reversed.
−Removed: Liabilities recognized for carried interest amounts due to affiliates are not paid until the related carried interest allocation revenue is realized.
−Removed: We record incentive fee compensation when it is probable that a liability has been incurred and the amount is reasonably estimable.
−Removed: The incentive fee compensation accrual is based on a number of factors, including the cumulative activity for the period and the distribution of the net proceeds in accordance with the applicable governing agreement.
+Added: Liabilities recognized for carried interest-related compensation amounts due to affiliates are not paid until the related carried interest allocation revenue is realized.
+Added: Incentive fee-related compensation is accrued as performance fee-related compensation expense when it is probable and estimable that payment will be made.
+Added: The incentive fee-related compensation accrual is based on a number of factors, including the cumulative activity for the period and the distribution of the net proceeds in accordance with the applicable governing agreement.
SSG is a corporation for U.S.
15 unchanged sentences
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted.
+Added: Deferred tax liabilities are included within accounts payable, accrued expenses and other liabilities in the consolidated balance sheets.
The principal items giving rise to temporary differences are certain basis differences resulting from exchanges of Partnership units.
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See note 11 to our consolidated financial statements for more information.
+Added: The Company has elected to account for global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries in the period the tax is incurred.
Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.
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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.