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Item 7. Management’s Discussion and Analysis

2024-05-24 compared with 2023-05-26 · 257 added, 217 removed, 878 unchanged (35% of the section changed)

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The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included in Part II, Item 8 of this annual report on Form 10-K.

This annual report reflects the historical results of operations and financial position of StepStone Group LP, our predecessor for accounting purposes, prior to the Reorganization and IPO.

In this annual report, references to “we,” “us,” “our,” “StepStone” and similar terms refer to SSG and its consolidated subsidiaries, including the Partnership, following the Reorganization and IPO and to the Partnership and its consolidated subsidiaries prior to the Reorganization and IPO.

In this annual report references to “we,” “us,” “our,” “StepStone” and similar terms refer to SSG and its consolidated subsidiaries, including the Partnership.

Unless otherwise indicated, references in this annual report to fiscal 2024, fiscal 2023 and fiscal 2022 are to our fiscal years ended March 31, 2024, 2023 and 2022, respectively.

Business Overview

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

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

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

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Focused commingled funds comprised $49 billion of our AUM as of March 31, 2024.

• Advisory, data and administrative services.

• Advisory and data services.

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

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

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

and (vi) administrative services to unaffiliated investment advisors.

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

Advisory relationships comprised $521 billion of our AUA and $14 billion of our AUM as of March 31, 2024.

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We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities.

Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, Omni.

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.

Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, SPI Reporting.

SPI Reporting tracked detailed information on over $685 billion of client commitments as of March 31, 2024, 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.

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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.

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.

However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles.

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.

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Current Events

In 2022, financial markets experienced increased volatility amid rising interest rates, slowing economic growth, persistently high inflation and the ongoing Russia-Ukraine conflict.

Central banks around the world pursued monetary policy tightening in an effort to bring down inflation to target rates, stoking recession fears.

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.

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.

In 2023, signs of slowing inflation coupled with a strong labor market contributed to a rebound in financial markets despite banking system volatility as recession fears receded in anticipation that interest rates may not rise as much as previously expected.

In calendar 2023 and through the first quarter of 2024, most financial markets posted positive returns, despite inflation remaining elevated and ongoing concerns of a sustained period of higher interest rates, slowing economic growth and moderated job gains.

We are continuing to closely monitor developments related to inflation, rising interest rates, the ongoing Russia-Ukraine conflict, banking system volatility, Middle East conflicts and the geopolitical responses thereto, and to assess the impact on financial markets and on our business.

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.

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.

Further, fund managers have been unable or less able to exit existing investments profitably.

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.

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Corporate Transactions

Reorganization and Initial Public Offering

On September 18, 2020, we completed an IPO pursuant to which we issued 20,125,000 shares of Class A common stock at a price of $18.00 per share.

We received net proceeds from the offering of $337.8 million, net of underwriting discounts of $24.5 million and before offering costs of $9.7 million that were incurred by the Partnership.

We used approximately $209.8 million of the net proceeds from the offering to acquire 12,500,000 newly issued Class A units of the Partnership and approximately $128.0 million to purchase 7,625,000 Class B units from certain of the Partnership’s existing unitholders, including certain members of senior management.

In connection with the IPO, we completed certain transactions as part of the Reorganization to, among other things, provide for Class A common stock and Class B common stock;

appoint SSG as the sole managing member of StepStone Group Holdings LLC, the General Partner;

complete a series of merger transactions such that certain blocker entities in which certain pre-IPO institutional investors held their interests in the Partnership merged with and into SSG, with SSG surviving, resulting in the pre-IPO institutional investors acquiring 9,112,500 shares of newly issued Class A common stock of SSG;

and classify the Partnership’s interests acquired by SSG as Class A units and reclassify the Partnership’s interests held by the continuing partners as Class B units.

See “Organizational Structure” below.

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

Greenspring Acquisition

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

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

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

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

Purchase of Asset Class Non-Controlling Interests

On February 7, 2024, SSG and the Partnership entered into agreements (the “Transaction Agreements”) with SRA, SRE and SPD (the “Asset Class Entities”), their respective asset class heads as seller representatives, the seller parties signatory thereto, and certain other parties.

The Transaction Agreements provide a path to SSG and the Partnership owning all of the outstanding equity interests of the Asset Class Entities over a defined period of time.

The Transaction Agreements provide for, among other things and subject to the terms and conditions therein, the exchange of the sellers’ equity interests in the Asset Class Entities, as applicable, for a combination of (i) newly-created Class D equity interests in the Partnership with terms substantially similar to the Partnership’s existing Class C Units, in the case of SRE and SRA, or shares of Class A common stock, in the case of SPD, and (ii) cash (at our discretion for all exchanges except the initial exchange), in up to ten annual exchanges (or up to fifteen annual exchanges in certain circumstances in the case of the sellers of SRA equity interests).

The portion of the equity interests to be acquired in each annual exchange is set forth in an exchange schedule attached to each Transaction Agreement and is approximately 5% of each Asset Class Entity on each contemplated annual exchange date.

The amount of consideration to be delivered will be calculated using exchange ratios determined each year based on a formula establishing an assumed value of each Asset Class Entity based on its estimated adjusted net income, relative to an adjusted trading multiple for our Class A common stock relative to our estimated adjusted net income.

The Transaction Agreement specifies a minimum adjusted trading multiple for the exchange to take place, in which case if not met the exchange would be skipped and combined in a subsequent year if and when the minimum adjusted trading multiple was met.

Pursuant to each Transaction Agreement, and subject to receipt of required regulatory and other approvals, the consideration for the first exchange will be calculated using a reference date of April 1, 2024 (the “Initial Reference Date”) and the first exchange will be consummated promptly following the Initial Reference Date upon the satisfaction or waiver of the conditions set forth in such Transaction Agreement applicable to the first exchange, including publication of our audited financial statements for the fiscal year ending March 31, 2024.

The Transaction Agreements also provide for up to nine subsequent annual exchanges (or up to 14 subsequent exchanges in certain circumstances in the case of SRA), in each case with a calculation reference date of April 1 and consummation promptly following satisfaction or waiver of the conditions set forth in such Transaction Agreement, including delivery of our audited financial statements.

Each Transaction Agreement provides that beginning after the fifth annual exchange, future exchanges may be accelerated into one final exchange in certain circumstances.

Greenspring Back Office Solutions Transaction

On December 31, 2023, we completed the sale of 100% of the equity interests in Greenspring Back Office Solutions, LLC (“GBOS”) in exchange for a secured promissory note in the amount of $8.4 million to be received by us over approximately six years.

GBOS was acquired by us as part of the Greenspring Acquisition and was primarily engaged in the business of providing fund administration services for a select number of third-party managed venture capital funds as well as the Company’s venture capital focused commingled funds and separately managed accounts (together, the “venture funds”).

The GBOS team comprised approximately 40 employees as of December 31, 2023.

GBOS was sold to a newly formed, independent entity owned by a number of former employees of GBOS, and renamed Viridis Fund Solutions, LLC (“Viridis”).

Viridis is expected to continue to perform fund administration services for our venture funds as well as for its current and future third-party clients.

The results of GBOS’s operations have been included in the consolidated financial statements through December 31, 2023.

Private Wealth Transaction

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”).

SPW, which was formerly known as Conversus, is the platform established by us to expand access to the private markets for accredited investors.

SPW is the platform established by us to expand access to the private markets for accredited investors.

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.

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.

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, 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.

The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down.

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.

Greenspring Acquisition

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

The acquisition of Greenspring, a venture capital platform, has expanded our private markets capabilities.

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

Equity Transactions

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.

In March 2024, we issued 1,283,584 shares of Class A common stock to certain limited partners of the Partnership in exchange for 1,283,584 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.

On the same date, we also issued 109,919 shares of Class A common stock to certain limited partners of the Partnership in exchange for 109,919 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.

A corresponding number of Class A units of the Partnership were issued to us.

In September 2023, we issued 105,598 shares of Class A common stock to certain limited partners of the Partnership in exchange for 105,598 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement.

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.

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.

On the same date, we also issued 551,954 shares of Class A common stock to certain limited partners of the Partnership in exchange for 551,954 Class C units in accordance with the elective exchange notices submitted pursuant to the Class C Exchange Agreement.

A corresponding number of Class A units of the Partnership were issued to us.

Organizational Structure

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

In connection with the first exchange related to the Transaction Agreements, it is anticipated that the Partnership’s Limited Partnership Agreement will be amended to include Class D units and such Class D units will be treated similarly to Class C units.

The diagram below illustrates our organizational structure as of March 31, 2024.

Amounts may not sum to total due to rounding.

Amounts may not sum to 100% due to rounding.

(1) The partners of the Partnership other than StepStone Group Inc.

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We use, and expect to continue to use, a combination of our equity ownership, governance rights and other contractual arrangements to control operations of these businesses.

As described above, SSG and the Partnership have entered into agreements with each of SRE, SRA and SPD, providing a path to full ownership of these subsidiaries.

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

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

Management fees include income-based incentive fees, which are predictable and recurring in nature and paid quarterly based on net investment income of certain funds that are regulated as a business development company (“BDC”).

Capital gains-based incentive fees from BDC funds are recognized as performance fees.

There have been no capital-gains based incentive fees recognized to date.

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

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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.

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.

The weighted-average management fee rate from focused commingled funds was approximately 0.82% and 0.93% of average FEAUM in fiscal 2023 and 2024, respectively, and primarily reflected the timing of new funds, and shifts in asset class mix.

• The weighted-average management fee rate across SMAs and focused commingled funds was approximately 0.54% and 0.59% of average FEAUM in fiscal 2023 and 2024, 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.

• Fee revenues from advisory, StepStone Portfolio Analytics & Reporting (“SPAR”), SPI Research or administrative services are generally annual fixed fees, which vary based on the scope of services we provide.

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

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incentive fees and carried interest allocations, as described below.

As of March 31, 2023, we had over $63 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across approximately 180 programs.

As of March 31, 2024, we had over $75 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across over 200 programs.

Incentive fees comprise fees earned from certain client investment mandates for which we do not have a general partnership interest in a StepStone Fund.

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Investment income (loss) of Consolidated Funds represents gains (losses) from the investments held by the Consolidated Funds.

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

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.

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

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

Beginning in the quarter ended December 31, 2022, other income (loss) includes amounts associated with the Consolidated Funds.

Interest income consists of income earned on cash and cash equivalents, restricted cash, and amounts associated with the Consolidated Funds.

Interest expense primarily consists of the interest expense on the Revolver, as well as the related amortization of deferred financing costs.

Other income (loss) includes foreign currency transaction gains and losses, non-operating activities, and amounts associated with the Consolidated Funds.

Income Tax Expense

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As a result, the Partnership does not record U.S.

federal and state income taxes on income in the Partnership or its subsidiaries, except for certain local and foreign income taxes discussed above.

federal and state income taxes on income generated by the Partnership or its subsidiaries, except for certain local and foreign income taxes discussed above.

Non-Controlling Interests

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

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

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.

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.

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

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

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

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.

Redeemable non-controlling interests in subsidiaries represent the redeemable economic interests in the consolidated subsidiaries of the Partnership held by third parties and employees in those entities that were established in connection with the Transaction Agreements.

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

Key Operating Metrics

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

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

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

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

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AUM as of March 31, 2024 reflects final data for the prior period (December 31, 2023), adjusted for net new client account activity through March 31, 2024.

NAV data for underlying investments is as of December 31, 2022, as reported by underlying managers up to 114 days following December 31, 2022.

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.

NAV data for underlying investments is as of December 31, 2023, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2023.

When NAV data is not available by the business day occurring on or after 115 days following December 31, 2023, such NAVs are adjusted for cash activity following the last available reported NAV.

Assets Under Advisement

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Most of our advisory fees are fixed, and therefore, increases or decreases in AUA do not necessarily lead to proportionate changes in revenue.

We believe AUA is a useful metric for assessing the relative size of our advisory business.

Our AUA is calculated as the sum of (i) the NAV of client portfolio assets for which we do not have full discretion and (ii) the unfunded commitments of clients to the underlying investments.

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AUA as of March 31, 2024 reflects final data for the prior period (December 31, 2023), adjusted for net new client account activity through March 31, 2024.

NAV data for underlying investments is as of December 31, 2022, as reported by underlying managers up to 114 days following December 31, 2022.

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.

NAV data for underlying investments is as of December 31, 2023, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2023.

When NAV data is not available by the business day occurring on or after 115 days following December 31, 2023, such NAVs are adjusted for cash activity following the last available reported NAV.

Fee-Earning AUM

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As a result, management fees and FEAUM are not materially affected by changes in market value.

We believe FEAUM is a useful metric in order to assess assets forming the basis of our management fee revenue.

Our calculation of FEAUM may differ from the calculations of other asset managers and, as a result, may not be comparable to similar measures presented by other asset managers.

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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.

We believe undeployed fee-earning capital is a useful metric for measuring the amount of capital that we can put to work in the future and thus earn management fee revenue thereon.

Consolidation of StepStone Funds

Beginning in the quarter ended December 31, 2022, we consolidated one investment fund for which we are deemed to have a controlling financial interest.

The activity of the Consolidated Funds is reflected within the consolidated financial statement line items as indicated by reference thereto.

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(75,157) (452,163) 187,106

Total performance fees 126,491 (564,753) 985,268

Total revenues 711,631 (67,574) 1,365,525

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Net income attributable to redeemable non-controlling interests in Consolidated Funds 15,838 1,776 —

Net income attributable to redeemable non-controlling interests in subsidiaries 5,782 — —

Net income (loss) attributable to StepStone Group Inc.

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Year Ended March 31, 2024 Compared to Year Ended March 31, 2023

Total revenues increased $779.2 million to $711.6 million for fiscal 2024 as compared to fiscal 2023, due to positive carried interest allocations in the current year as compared to a reversal of carried interest allocations in the prior year period, a lower reversal of legacy Greenspring carried interest allocations in the current period as compared to the prior year, and higher management and advisory fees, net and incentive fees, in each case, as described below.

Management and advisory fees, net increased $88.0 million, or 18%, to $585.1 million for fiscal 2024 as compared to fiscal 2023.

The increase was driven by new client activity and 9% growth in average FEAUM across the platform, as well as retroactive fees of $11.6 million from the closings of StepStone’s private equity secondaries, multi-strategy global venture capital, special situation real estate secondaries, multi-strategy growth equity and infrastructure co-investment funds.

The prior year period included $2.8 million of retroactive fees from the final closing of StepStone Capital Partners V (“SCP V”) and additional closings on StepStone’s multi-strategy global venture capital fund.

Incentive fees increased $15.7 million, or 162%, to $25.3 million for fiscal 2024 as compared to fiscal 2023, reflecting positive investment performance and higher realization activity.

Realized carried interest allocation revenues decreased $81.7 million, or 62%, to $49.4 million for fiscal 2024 as compared to fiscal 2023, reflecting lower realization activity within our private equity funds.

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

Excluding the reversal of $49.4 million, unrealized carried interest allocation revenues increased $298.6 million to $176.3 million for fiscal 2024 compared to fiscal 2023.

The increase in unrealized carried interest allocations for fiscal 2024 primarily reflected a net increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

Legacy Greenspring carried interest allocation revenues increased $377.0 million, or 83% , to $(75.2) million for fiscal 2024 as compared to fiscal 2023.

Fiscal 2024 reflects gross realized carried interest allocations of $59.7 million and unrealized carried interest allocations, net of the reversal of carried interest allocations, of $(134.9) million.

Fiscal 2023 reflects gross realized carried interest allocations of $74.7 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $(526.8) million.

Year Ended March 31, 2023 Compared to Year Ended March 31, 2022

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.

Net management and advisory fees increased $116.9 million, or 31%, to $497.2 million for fiscal 2023 as compared to fiscal 2022.

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.

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.

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

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 SCP V and additional closings on StepStone’s multi-strategy global venture capital fund.

The prior year period included $7.7 million of retroactive fees from the final closing of StepStone Tactical Growth Fund III and additional closings of SCP V.

Incentive fees decreased $1.9 million, or 17%, to $9.7 million for fiscal 2023 as compared to fiscal 2022, reflecting lower realization activity.

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

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.

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 as compared to fiscal 2022.

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.

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Year Ended March 31, 2024 Compared to Year Ended March 31, 2023

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.

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”).

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

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

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

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

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

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

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

Total expenses increased $606.9 million to $539.9 million for fiscal 2024 as compared to fiscal 2023.

The overall increase resulted from a lower reversal of legacy Greenspring performance fee-related compensation and increases in performance fee-related compensation, cash-based compensation, general, administrative and other expenses and equity-based compensation, in each case, as described below.

Cash-based compensation increased $40.8 million, or 16%, to $293.0 million for fiscal 2024 as compared to fiscal 2023, due to increased staffing and compensation levels.

Our average full-time headcount increased 11% in the current year period as compared to the prior year period.

Equity-based compensation increased $17.4 million, or 70%, to $42.4 million for fiscal 2024 as compared to fiscal 2023.

The increase was primarily attributable to an increase in expenses related to liability classified awards in the current year period of $14.3 million as compared to 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 and no comparable expense for these grants in the prior year period.

Performance fee-related compensation expense increased $151.6 million to $112.4 million for fiscal 2024 as compared to fiscal 2023, primarily reflecting the increase in carried interest allocation revenue.

Realized performance fee-related compensation decreased $42.2 million, or 53%, to $37.7 million for fiscal 2024 as compared to fiscal 2023, primarily reflecting lower realization activity.

Legacy Greenspring performance fee-related compensation expense increased $377.0 million, or 83%, to $(75.2) million for fiscal 2024 as compared to fiscal 2023.

Fiscal 2024 reflects gross realized performance fee-related compensation expense of $59.7 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $(134.9) million.

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.

General, administrative and other expenses increased $20.2 million, or 14%, to $167.3 million for fiscal 2024 as compared to fiscal 2023.

The overall increase primarily reflected increases of $7.9 million due to a higher loss on change in fair value for contingent consideration obligation, $4.0 million in professional fees, $2.9 million in information and technology expenses, $2.9 million of travel and associated costs for investment evaluation and client service, $2.6 million due to a prior year gain within occupancy costs related to lease remeasurement adjustments due to a reduction in lease terms and $1.5 million in occupancy costs, partially offset by a decreases of $2.0 million in transaction costs and other general operating expenses.

Year Ended March 31, 2023 Compared to Year Ended March 31, 2022

3 unchanged sentences

Equity-based compensation increased $10.9 million, or 78%, to $24.9 million for fiscal 2023 as compared to fiscal 2022.

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.

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 RSUs awarded to certain employees and directors in the prior year period and additional grants of RSUs granted in the current year period.

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.

6 unchanged sentences

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

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.

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

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

The increase was attributable to the grant of RSUs made to certain employees and directors in connection with our IPO in September 2020.

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

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

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

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

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

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

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

Other Income (Expense)

Year Ended March 31, 2024 Compared to Year Ended March 31, 2023

Investment income (loss) increased $10.0 million to income of $7.5 million for fiscal 2024 as compared to fiscal 2023, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.

Legacy Greenspring investment loss increased $35.0 million, or 79%, to $9.1 million for fiscal 2024 as compared to fiscal 2023.

Fiscal 2024 reflects gross realized investment income of $5.3 million and unrealized investment loss, net of the reversal of realized investment income, of $14.4 million.

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.

Investment income of Consolidated Funds increased $19.2 million, or 206%, to $28.5 million for fiscal 2024 as compared to fiscal 2023, primarily reflecting overall changes in the valuations of the underlying investments of the Consolidated Funds.

Interest income increased $1.7 million, or 91%, to $3.7 million for fiscal 2024 as compared to fiscal 2023 primarily due to higher average interest rates earned on cash and cash equivalent balances.

Interest income attributable to Consolidated Funds was $1.6 million in the current year period as compared to $0.2 million in the prior year period.

Interest expense increased $5.1 million, or 123%, to $9.3 million for fiscal 2024 as compared to fiscal 2023.

The increase was due to higher average interest rates and higher average outstanding balances under the Revolver during the current year period, as compared with the prior year period.

Other income (loss) increased $3.9 million to income of $2.5 million for fiscal 2024 as compared to fiscal 2023, primarily reflecting a gain of $5.3 million in the current year period for amounts received as part of negotiations with a third party related to certain corporate matters, partially offset by a loss of $0.8 million associated with the sale of a subsidiary.

Year Ended March 31, 2023 Compared to Year Ended March 31, 2022

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.

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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.

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.

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

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

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

The decrease was primarily due to the full repayment of our previously outstanding senior secured term loan 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.

Income Tax Expense

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Our effective income tax rate was 14.1%, (9.2)%, and 5.5% for fiscal 2024, 2023 and 2022, 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.

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.

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

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

federal and state income taxes.

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

Additionally, 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.

The Organization for Economic Co-operation and Development (“OECD”) implemented Pillar Two, which establishes a global minimum corporate tax rate of 15% on large multinational enterprises across their worldwide operations.

Generally, legislation pertaining to these rules is either in effect or underway in several of the jurisdictions where we operate, while ongoing uncertainty surrounds the adoption of the minimum tax directive by the U.S.

There is no impact to our tax provision for the year ended March 31, 2024.

We will continue to evaluate both U.S.

and global legislative developments concerning Pillar Two for future reporting periods.

Year Ended March 31, 2024 Compared to Year Ended March 31, 2023

Income tax expense increased $23.8 million, or 622%, to $27.6 million for fiscal 2024 as compared to fiscal 2023.

The increase in tax expense was primarily driven by pre-tax net income for fiscal 2024 compared to pre-tax net loss for fiscal 2023.

Year Ended March 31, 2023 Compared to Year Ended March 31, 2022

Income tax expense decreased $24.5 million, or 86%, to $3.8 million for fiscal 2023 as compared to fiscal 2022.

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.

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

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

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

federal and state income taxes recognized on our share of taxable income generated by the Partnership as a result of our increased ownership in the Partnership, partially offset by 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.

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

federal and state income taxes.

Net Income Attributable to Non-Controlling Interests in Subsidiaries

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

Net income (loss) attributable to non-controlling interests in legacy Greenspring entities was $(44.1) million and $32.6 million for fiscal 2023 and 2022, respectively.

Net income (loss) attributable to non-controlling interests in legacy Greenspring entities was $(9.1) million, $(44.1) million, and $32.6 million for fiscal 2024, 2023 and 2022, respectively.

Net Income (Loss) Attributable to Non-Controlling Interests in the Partnership

1 unchanged sentence

Net income (loss) attributable to non-controlling interests in the Partnership was $60.0 million, $(19.8) million and $231.2 million for fiscal 2024, 2023 and 2022, 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.

Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Funds

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.

Net income attributable to redeemable non-controlling interests in Consolidated Funds was $15.8 million and $1.8 million for fiscal 2024 and 2023, respectively, which represents income of the Consolidated Funds attributable to third-party investors.

We did not consolidate any StepStone Funds prior to fiscal 2023.

Net Income Attributable to Redeemable Non-Controlling Interests in Subsidiaries

Net income attributable to redeemable non-controlling interests in subsidiaries was $5.8 million for fiscal 2024.

There were no redeemable non-controlling interests in subsidiaries prior to fiscal 2024.

Operating Metrics

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AUM was $134 billion as of March 31, 2022, $138 billion as of March 31, 2023 and $157 billion as of March 31, 2024.

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

Assets Under Advisement

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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.

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.

Of the increase, $5.8 billion was from SMAs and $4.5 billion was from focused commingled funds.

Year Ended March 31, 2024

6 unchanged sentences

Market value, FX and other (3)

1,305 601 1,906

Ending balance $ 58,897 $ 34,961 $ 93,858

6 unchanged sentences

(4,208) (1,162) (5,370)

Acquisitions (3)

— 11,407 11,407

Market value, FX and other (3)

3 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.

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

(3) 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.

4 unchanged sentences

Private equity $ 49,869 $ 45,766 $ 40,396

$ 45,766 $ 40,396 $ 24,533

Infrastructure 20,114 19,274 17,737

2 unchanged sentences

Total $ 93,858 $ 85,431 $ 75,173

_______________________________

(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,

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Adjusted Net Income

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.

Adjusted net income (“ANI”) is a non-GAAP performance measure that we present before the consolidation of StepStone Funds on a pre-tax and after-tax basis used to evaluate profitability.

ANI represents the after-tax net realized income attributable to us.

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.

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

The components of revenues used in the determination of ANI (“adjusted revenues”) comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations.

In addition, ANI excludes:

(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.

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

(a) unrealized carried interest allocation revenues and related compensation, (b) unrealized investment income (loss), (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 the private wealth subsidiary, (d) amortization of intangibles, (e) net income (loss) attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary, (f) charges associated with acquisitions and corporate transactions, and (g) certain other items that we believe are not indicative of our core operating performance (as listed in the below table).

ANI is fully taxed at our blended statutory rate.

We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.

Adjusted Revenues

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.

Adjusted revenues represents the components of revenues used in the determination of ANI and comprise adjusted management and advisory fees, net, adjusted incentive fees (including the deferred portion) and realized carried interest allocations.

We believe adjusted revenues is useful to investors because it presents a measure of realized revenues.

1 unchanged sentence

Fee-related earnings (“FRE”) is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees.

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.

FRE is a component of ANI and comprises adjusted management and advisory fees, net, 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 the private wealth subsidiary, (c) amortization of intangibles, (d) charges associated with acquisitions and corporate transactions, and (e) certain other items that we believe are not indicative of our core operating performance (as listed in the below table).

FRE is presented before income taxes.

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.

Adjusted Net Income Per Share

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

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

We believe ANI per share is useful to investors because it enables them to better evaluate per-share operating performance across reporting periods.

Adjusted Weighted-Average Shares and Adjusted Net Income Per Share

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

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

We believe adjusted weighted-average shares and ANI per share are useful to investors because they enable investors to better evaluate per-share operating performance across reporting periods.

Fee-Related Earnings

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Year Ended March 31, 2024 Compared to Year Ended March 31, 2023

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.

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.

Adjusted revenues increased $23.1 million, or 4%, to $665.1 million for fiscal 2024 as compared to fiscal 2023, primarily reflecting increases in adjusted management and advisory fees, net and adjusted incentive fees, including the deferred portion, partially offset by lower realized carried interest allocation revenues.

ANI decreased $3.3 million, or 2%, to $139.4 million for fiscal 2024 as compared to fiscal 2023, primarily due to lower net realized performance fee-related earnings (adjusted 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.

The decrease was partially offset by the increase in FRE.

Year Ended March 31, 2023 Compared to Year Ended March 31, 2022

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).

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.

Adjusted Net Income Per Share

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.

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.

Adjusted revenues increased $48.0 million, or 8%, to $642.0 million for fiscal 2023 as compared to fiscal 2022, primarily reflecting increases in adjusted management and advisory fees, net, and adjusted incentive fees, including the deferred portion, partially offset by lower realized carried interest allocation revenues.

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, a higher allocation of income to non-controlling interests and higher interest expense.

The decrease was partially offset by the increase in FRE.

Adjusted Weighted-Average Shares and Adjusted Net Income Per Share

The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted weighted-average shares outstanding used in the computation of ANI per share for fiscal 2024, 2023 and 2022.

Year Ended March 31,

1 unchanged sentence

(in thousands, except share and per share amounts)

Adjusted net income $ 142,663 $ 172,943 $ 85,402

ANI $ 139,393 $ 142,663 $ 172,943

Weighted-average shares of Class A common stock outstanding – Basic (1)

6 unchanged sentences

2,234,191 2,807,243 1,563,316

Adjusted shares (3)

114,618,105 107,191,661 98,433,330

Adjusted net income per share $ 1.24 $ 1.61 $ 0.87

Adjusted weighted-average shares 115,134,473 114,618,105 107,191,661

ANI per share $ 1.21 $ 1.24 $ 1.61

_______________________________

1 unchanged sentence

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

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

As a result, the computation of ANI per share for 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

7 unchanged sentences

Management and advisory fee revenues for the Consolidated Funds (1)

Incentive fees for the Consolidated Funds (2)

Adjusted revenues $ 665,060 $ 641,970 $ 594,006

1 unchanged sentence

(1) Reflects the add back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

The table below shows a reconciliation of additional GAAP measures to adjusted measures.

We use the non-GAAP measures presented below as components when calculating ANI and FRE.

(2) Reflects the add back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

The table below shows a reconciliation of GAAP measures to additional non-GAAP measures.

We use the non-GAAP measures presented below as components when calculating FRE and ANI.

We believe these additional non-GAAP measures are useful to investors in evaluating both the baseline earnings from recurring management and advisory fees, which provide additional insight into the operating profitability of our business, and the after-tax net realized income attributable to us, allowing investors to evaluate the performance of our business.

These additional non-GAAP measures remove the impact of Consolidated Funds that we are required to consolidate under GAAP, and certain other items that we believe are not indicative of our core operating performance.

Year Ended March 31,

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Management and advisory fee revenues for the Consolidated Funds (1)

Management and advisory fees, net $ 497,326 $ 380,257 $ 285,462

Adjusted management and advisory fees, net $ 586,379 $ 497,326 $ 380,257

GAAP incentive fees $ 25,339 $ 9,663 $ 11,593

Incentive fee revenues for the Consolidated Funds (2)

Adjusted incentive fees $ 26,888 $ 9,663 $ 11,593

GAAP interest income $ 3,664 $ 1,921 $ 337

Interest income earned by the Consolidated Funds (3)

Non-GAAP interest income $ 1,726 $ 337 $ 413

(1,645) (195) —

Adjusted interest income $ 2,019 $ 1,726 $ 337

GAAP other income (loss) $ 2,455 $ (1,420) $ 2,249

Adjustments (4)

Adjusted other income (loss) $ (1,334) $ (1,311) $ 220

(3,879) 86 (3,560)

Adjusted other loss $ (1,424) $ (1,334) $ (1,311)

______________________________

(1) Reflects the add-back of management and advisory fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

(2) Reflects the add back of incentive fee revenues for the Consolidated Funds, which have been eliminated in consolidation.

(3) Reflects the removal of interest income earned by the Consolidated Funds.

(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.

(4) Reflects the removal of amounts for Tax Receivable Agreements adjustments recognized as other income (loss), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters, loss on sale of subsidiary and the removal of the impact of the consolidation of the Consolidated Funds.

The table below shows a reconciliation of income (loss) before income tax to ANI and FRE.

13 unchanged sentences

Amortization of intangibles 42,406 43,481 24,497

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

Tax Receivable Agreements adjustments through earnings 312 (244) (3,560)

1 unchanged sentence

21,565 17,580 26,260

Pre-tax adjusted net income 183,608 223,095 110,267

Pre-tax ANI 179,376 183,608 223,095

Income taxes (4)

(39,983) (40,945) (50,152)

Adjusted net income 142,663 172,943 85,402

ANI 139,393 142,663 172,943

Income taxes (4)

4 unchanged sentences

Realized investment income (6,545) (5,503) (8,499)

Incentive fees (9,663) (11,593) (5,474)

Adjusted incentive fees (6)

(26,888) (9,663) (11,593)

Deferred incentive fees (2,392) (3,892) (1,438)

Non-GAAP interest income (6)

Adjusted interest income (6)

(2,019) (1,726) (337)

Interest expense 9,331 4,189 1,113

Adjusted other (income) loss (6)(7)

Adjusted other loss (6)(7)

1,424 1,334 1,311

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

Net income attributable to non-controlling interests in subsidiaries (1)

49,220 39,054 28,100

Fee-related earnings $ 156,158 $ 122,242 $ 89,484

FRE $ 189,793 $ 156,158 $ 122,242

_______________________________

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

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

(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.

The 22.3% rate for fiscal 2023 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.3%.

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%.

(1) Reflects the portion of pre-tax ANI attributable to non-controlling interests in our subsidiaries and realized gains attributable to the profits interests issued in the private wealth subsidiary.

(3) Includes (income) expense related to transaction costs ($4.9 million in fiscal 2024, $6.9 million in fiscal 2023, and $14.2 million in fiscal 2022), lease remeasurement adjustments ($(0.1) million in fiscal 2024 and $(2.7) million in fiscal 2023), accelerated depreciation of leasehold improvements for changes in lease terms ($1.9 million in fiscal 2024 and $1.5 million in fiscal 2023), severance costs ($0.3 million in fiscal 2023 and $1.6 million in fiscal 2022), loss on change in fair value for contingent consideration obligation ($17.2 million in fiscal 2024, $9.4 million in fiscal 2023, and $9.6 million in fiscal 2022), compensation paid to certain employees as part of an acquisition earn-out ($2.2 million in fiscal 2024, $2.3 million in fiscal 2023, and $0.8 million in fiscal 2022), gain associated with amounts received as part of negotiations with a third party related to certain corporate matters ($5.3 million in fiscal 2024), loss on sale of subsidiary ($0.8 million in fiscal 2024) and other non-core operating income and expenses.

(4) Represents corporate income taxes at a blended statutory rate of 22.3%, 22.3% and 22.5% applied to pre-tax ANI for fiscal 2024, 2023 and 2022, respectively.

The 22.3% rate for fiscal 2024 and fiscal 2023 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.3%.

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

The 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 2023 compared to fiscal 2022 was due to updates in our state apportionment.

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(6) Excludes the impact of consolidating the Consolidated Funds.

(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).

(7) Excludes amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(0.3) million in fiscal 2024, $0.2 million in fiscal 2023, and $3.6 million in fiscal 2022) gain associated with amounts received as part of negotiations with a third party related to certain corporate matters ($5.3 million in fiscal 2024), and loss on sale of subsidiary ($0.8 million in fiscal 2024).

Investment Performance

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

The data for these investments is generally presented from the inception date of each strategy and asset class through December 31, 2022 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.

The data for these investments are generally presented from the inception date of each strategy and asset class through December 31, 2023 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.

The historical results of our investments are not indicative of future results to be expected of existing or new investment funds, and are not a proxy for the performance of our Class A common stock, including because:

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(3) Inception date reflects date of the first investment:

September 1994 for primaries, January 2005 for secondaries and June 2001 for co-investments.

September 1994 for primaries, December 2004 for secondaries and June 2001 for co-investments.

(4) Returns are net of fees and expenses charged by both the underlying investment and hypothetical StepStone fees.

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

25 basis points of net invested capital for management fees, charged quarterly.

125 basis points (60 basis points for infrastructure) of capital commitments in years 1 through 4 for management fees, charged quarterly.

Primaries management fee:

25 basis points of net invested capital for private equity, real estate and infrastructure;

25 basis points of net asset value for private debt;

75 basis points of committed capital for the StepStone VC Platform.

Secondaries management fee:

125 basis points, 125 basis points and 95 basis points for private equity, real estate and infrastructure, respectively, 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;

Co-investments:

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.

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.

Secondaries and co-investments include 12.5% and 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle.

65 basis points of net asset value for private debt;

75 basis points of committed capital for the StepStone VC Platform.

Co-investments management fee:

100 basis points of net committed capital for private equity and real estate;

85 and 50 basis points for infrastructure co-investments and direct asset management investments, respectively, of net committed capital;

65 basis points of net asset value for private debt;

200 basis points of net invested capital for the StepStone VC Platform.

All investments 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.

Private equity secondaries and co-investments include 12.5% and 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle;

infrastructure secondaries and co-investments include 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle;

real estate secondaries and co-investments include 15.0% of paid and unrealized carry, with an 8.0% preferred return hurdle;

private debt secondaries and co-investments include 10.0% of paid and unrealized carry, with a 5.0% preferred return hurdle;

and the StepStone VC Platform primaries, secondaries and co-investments/directs include 5.0%, 5.0% and 20.0%, respectively, of paid and unrealized carry with no preferred return hurdle.

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

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INVESTMENT STRATEGY (1,4,8)

Primaries 17.4% 1.6x Core/Core+ fund investments 8.8% 1.6x Primaries 10.7% Direct lending 6.5%

Secondaries 18.0% 1.5x Value-add/opportunistic fund investments 10.1% 1.4x Secondaries 10.5% Distressed debt 9.3%

Primaries 15.5% 1.6x Core/Core+ fund investments 5.5% 1.3x Core/debt 7.3% Direct lending 7.3%

Secondaries 16.5% 1.5x Value-add/opportunistic fund investments 8.9% 1.3x Core+/value-add - primary fund investments 10.8% Distressed debt 8.6%

Co-investments (7)

20.7% 1.7x Real estate debt fund investments 5.9% 1.2x Co-investments (7)

9.3% Other (9)

Value-add/opportunistic secondaries & co-investments 13.8% 1.3x

16.6% 1.6x Real estate debt fund investments 5.5% 1.2x Core+/value-add - secondary fund investments 14.9% Other (9)

Value-add/opportunistic secondaries & co-investments 12.2% 1.2x Core+/value-add - co-investments 13.7%

_______________________________

(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.

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.

(1) Investment returns reflect NAV data for underlying investments as of December 31, 2023, as reported by underlying managers up to the business day occurring on or after 115 days following December 31, 2023.

For investment returns where NAV data is not available by the business day occurring on or after 115 days following December 31, 2023, 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.

(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..

(2) Private equity includes 2,591 investments totaling $185.2 billion of capital commitments and excludes (i) two advisory co-investments, totaling $100.0 million of capital commitments, (ii) 265 client-directed private equity investments, totaling $30.8 billion of capital commitments, and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

Private equity includes buyout, venture capital, growth equity, fund-of-funds, and energy focused strategies.

StepStone’s venture capital and growth equity strategy is composed of a) venture capital and growth equity focused commingled funds and separately managed accounts (the “StepStone VC Platform”) and b) underlying venture capital and growth equity investments within StepStone’s broader private equity funds.

(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.

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No individual investor received the aggregate returns described herein as the investments were made across multiple mandates over multiple years.

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

25 basis points of net invested capital for management fees (and on NAV for private debt), charged quarterly.

125 basis points (60 basis points for infrastructure) of capital commitments in years 1 through 4 for management fees, charged quarterly.

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

Primaries management fee:

25 basis points of net invested capital for private equity, real estate and infrastructure;

25 basis points of net asset value for private debt;

75 basis points of committed capital for the StepStone VC Platform.

Secondaries management fee:

In year 5, management fees step down to 90% of the previous year’s fee;

65 basis points for private debt, assessed quarterly on the net asset value.

Co-investments:

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;

65 basis points for private debt, assessed quarterly on net asset value.

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.

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.

65 basis points of net asset value for private debt;

75 basis points of committed capital for the StepStone VC Platform.

Co-investments management fee:

100 basis points of net committed capital for private equity and real estate;

85 and 50 basis points for infrastructure co-investments and direct asset management investments, respectively, of net committed capital;

65 basis points of net asset value for private debt;

200 basis points of net invested capital for the StepStone VC Platform.

Private equity secondaries and co-investments include 12.5% and 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle;

infrastructure secondaries and co-investments include 10.0% of paid and unrealized carry, respectively, with an 8.0% preferred return hurdle;

real estate secondaries and co-investments include 15.0% of paid and unrealized carry, with an 8.0% preferred return hurdle;

Private debt secondaries and co-investments include 10.0% of paid and unrealized carry, with an 5.0% preferred return hurdle.

private debt secondaries and co-investments include 10.0% of paid and unrealized carry, with a 5.0% preferred return hurdle;

and the StepStone VC Platform primaries, secondaries and co-investments/directs include 5.0%, 5.0% and 20.0%, respectively, of paid and unrealized carry with no 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.

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

(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”).

(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.

(7) Co-investments includes venture capital and growth equity direct investments for Private Equity, and asset management investments for Infrastructure.

(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.

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.

(5) Real estate includes 481 investments totaling $78.2 billion of capital commitments and excludes (i) 87 client-directed real estate investments, totaling $13.7 billion of capital commitments, (ii) 12 secondary/co-investment core/core+ or credit investments, totaling $720.0 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.

(6) Infrastructure includes 271 investments totaling $54.1 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 StepStone’s acquisition of Courtland Partners, Ltd.

on April 1, 2018 (the “Courtland acquisition”), totaling $501.9 million of capital commitments, (ii) 34 client-directed infrastructure investments, totaling $5.9 billion of capital commitments, and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

(7) Co-investments include venture capital and growth equity direct investments for private equity.

(8) Private debt includes 893 investments totaling $46.3 billion of capital commitments and excludes (i) 41 client-directed debt investments, totaling $2.9 billion of capital commitments, (ii) 53 real estate credit investments that were recommended by Courtland Partners, Ltd.

prior to the Courtland acquisition, totaling $5.1 billion of capital commitments), and (iii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment.

(9) Other includes mezzanine debt, collateralized loan obligations, leasing, regulatory capital, trade finance, intellectual property/royalty, real estate debt and infrastructure debt.

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Sources and Uses of Liquidity

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

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

We generate cash primarily from management and advisory fees and performance fees.

As of March 31, 2024, we had $144.1 million of cash, cash equivalents and restricted cash ($182.3 million including Consolidated Funds) and $1,489.1 million of investments in StepStone Funds, including $1,354.1 million of accrued carried interest allocations, against $148.8 million in debt obligations, net of debt issuance costs, and $719.5 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;

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

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

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• proceeds from capital contributions from non-controlling interests $0 million, $0.2 million and $0.1 million;

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

• net borrowings on revolving credit facility (including payment of deferred financing costs) of $50.0 million, $35.0 million and $62.6 million;

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

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

• distributions to non-controlling interests of $97.3 million, $109.5 million and $107.5 million;

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Revolving Credit Facility

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.

We are party to a credit agreement, as amended in April 2023, with various lenders (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, 2024, we had $148.8 million outstanding on the Revolver, net of debt issuance costs.

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

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

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

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

Borrowings bear interest equal to (i) in the case of base rate loans, 1.00% plus the greatest of (a) the Prime Rate, (b) the New York Federal Reserve Bank Rate plus 0.50% and (c) the 1 month Term SOFR, plus 1.10%, (ii) in the case of a Term SOFR rate loan, the Term SOFR rate plus 2.10%, (iii) in the case of a EURIBOR rate loan, the EURIBOR rate multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement) 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%, in certain cases subject to applicable interest rate floors.

The weighted-average interest rate in effect for the Revolver as of March 31, 2024 was 7.42%.

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As of March 31, 2024, we had outstanding letters of credit totaling $6.5 million.

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”).

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).

On May 16, 2024, the Partnership (the “Borrower”), our subsidiary, entered into an amended and restated credit agreement, among the Borrower, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and certain other lenders party thereto (the “A&R Credit Agreement”).

The A&R Credit Agreement amends and restates the certain Credit Agreement, dated as of September 20, 2021, by and among us, as initial borrower, the Borrower, as subsequent borrower, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and certain other lenders party thereto, as amended by Amendment No.

1 to the credit agreement, dated as of April 17, 2023.

The A&R Credit Agreement provides for certain modifications to the Credit Agreement, including increasing the aggregate principal amount of the commitments thereunder to $300 million (as such amount may be later increased from time to time in accordance with the terms of the A&R Credit Agreement), extending the maturity date of the revolving facility to 2029, and certain other changes as set forth therein.

Equity Transactions

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 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 September 2023, we issued 105,598 shares of Class A common stock to certain limited partners of the Partnership in exchange for 105,598 Class B units pursuant to the Class B Exchange Agreement.

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.

On the same date, we also issued 551,954 shares of Class A common stock to certain limited partners of the Partnership in exchange for 551,954 Class C units pursuant to the Class C Exchange Agreement and a corresponding number of Class A units of the Partnership were issued to us.

In March 2024, we issued 1,283,584 shares of Class A common stock to certain limited partners of the Partnership in exchange for 1,283,584 Class B units pursuant to the Class B Exchange Agreement.

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.

On the same date, we also issued 109,919 shares of Class A common stock to certain limited partners of the Partnership in exchange for 109,919 Class C units pursuant to the Class C Exchange Agreement and a corresponding number of Class A units of the Partnership were issued to us.

Future Sources and Uses of Liquidity

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Dividend Payment Date Dividend Per Share of Class A Common Stock

First quarter N/A

Second quarter N/A

Third quarter N/A

First quarter July 15, 2021 $ 0.07

Second quarter September 15, 2021 0.07

Third quarter December 15, 2021 0.15

Fourth quarter March 15, 2022 0.15

Total dividends paid in FY2022 $ 0.44

First quarter July 15, 2021 $ 0.07

First quarter June 30, 2022 $ 0.20

Second quarter September 15, 2022 0.20

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First quarter June 30, 2023 $ 0.20

Supplemental 2

June 30, 2023 0.25

Second quarter September 15, 2023 0.21

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_______________________________

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

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

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

(2) The supplemental cash dividend relates to earnings in respect of our full fiscal year 2023.

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

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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.

Management fees include income-based incentive fees, which are based on net investment income of certain funds that are regulated as a business development company (“BDC”).

Capital gains-based incentive fees from BDC funds are recognized as performance fees.

Performance Fees

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

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

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

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

See 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.

See note 6 to our consolidated financial statements for additional details regarding the fair value of our contingent consideration balance and note 9 for additional details regarding the fair value of our revolving credit facility balance.

Equity-Based Compensation

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

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

In connection with the Greenspring acquisition, the sellers receiving Class C units of the Partnership became parties to the Exchanges Tax Receivable Agreement and in connection with the closings under the Transaction Agreements for SRE and SRA, the sellers receiving Class D units of the Partnership will become parties to the Exchanges Tax Receivable Agreement.

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis