StepStone Group Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 129 Consolidated Balance Sheets as of March 31, 202 4 and 202 3 133 Consolidated Statements of Income (Loss) for the Years Ended March 31, 202 4 , 202 3 and 202 2 135 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended March 31, 202 4 , 202 3 and 202 2 136 Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 202 4 , 202 3 and 202 2 137 Consolidated Statements of Cash Flows for the Years Ended March 31, 202 4 , 202 3 and 202 2 139 Notes to Consolidated Financial Statements 141 128 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of StepStone Group Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of StepStone Group Inc. (the Company) as of March 31, 2024 and 2023, the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended March 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated May 24, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 129 Table of Contents Valuation of underlying investments of equity method investments Description of the Matter The Company has investments in funds of $135.0 million and accrued carried interest allocations of $1,354.1 million as of March 31, 2024. As discussed in Notes 2 and 5 to the consolidated financial statements, a significant input to the measurement of the Company’s investments in funds and accrued carried interest allocations is management’s estimate of the fair value of the underlying investments held by the StepStone Funds, specifically co-investment funds which invest in portfolio companies that are valued using significant unobservable inputs. Auditing management’s determination of the fair value of the co-investment fund investments that are valued using significant unobservable inputs involved a high degree of auditor subjectivity because these investments exhibit higher estimation uncertainty. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s investment valuation process for the co-investment fund investments. This included management’s review controls over the assessment of the valuation techniques and significant unobservable inputs used to estimate the fair value of the co-investment fund investments and management’s review of the completeness and accuracy of the data used in these estimates. Our audit procedures included, among others, evaluating, on a sample basis, the valuation techniques and significant unobservable inputs used by the Company in valuing the co-investment fund investments and testing, on a sample basis, the mathematical accuracy of the related valuation models. For example, for a sample of co-investment fund investments, we performed procedures to evaluate the significant unobservable inputs such as the selected earnings before interest, taxes, depreciation and amortization multiples or revenue multiples that were derived from comparable companies. These procedures included assessing management’s determination of the comparable companies, and, where applicable, comparing the selected multiples to market observed transactions of such companies. We searched for and evaluated information that corroborated or contradicted the significant unobservable inputs. We also evaluated subsequent events and transactions and considered whether they corroborated or contradicted the year-end valuations. In addition, we involved more senior, more experienced audit team members to perform audit procedures. /s/ Ernst & Young LLP We have served as the Company's auditor since 2009. Los Angeles, CA May 24, 2024 130 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of StepStone Group Inc. Opinion on Internal Control Over Financial Reporting We have audited StepStone Group Inc.’s internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, StepStone Group Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2024 and 2023, the related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended March 31, 2024, and the related notes and our report dated May 24, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 131 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Los Angeles, CA May 24, 2024 132 Table of Contents StepStone Group Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) As of March 31, 2024 2023 Assets Cash and cash equivalents $ 143,430 $ 102,565 Restricted cash 718 955 Fees and accounts receivable 56,769 44,450 Due from affiliates 67,531 54,322 Investments: Investments in funds 135,043 115,187 Accrued carried interest allocations 1,354,051 1,227,173 Legacy Greenspring investments in funds and accrued carried interest allocations (1) 631,197 770,652 Deferred income tax assets 184,512 44,358 Lease right-of-use assets, net 97,763 101,130 Other assets and receivables 60,611 44,060 Intangibles, net 304,873 354,645 Goodwill 580,542 580,542 Assets of Consolidated Funds: Cash and cash equivalents 38,164 25,997 Investments, at fair value 131,858 30,595 Other assets 1,745 772 Total assets $ 3,788,807 $ 3,497,403 Liabilities and stockholders’ equity Accounts payable, accrued expenses and other liabilities $ 127,417 $ 89,396 Accrued compensation and benefits 101,481 66,614 Accrued carried interest-related compensation 719,497 644,517 Legacy Greenspring accrued carried interest-related compensation (1) 484,154 617,994 Due to affiliates 212,918 205,424 Lease liabilities 119,739 121,224 Debt obligations 148,822 98,351 Liabilities of Consolidated Funds: Other liabilities 1,645 566 Total liabilities 1,915,673 1,844,086 Commitments and contingencies (Note 16) Redeemable non-controlling interests in Consolidated Funds 102,623 24,530 Redeemable non-controlling interests in subsidiaries 115,920 — Stockholders’ equity: Class A common stock, $ 0.001 par value, 650,000,000 authorized; 65,614,902 and 62,834,791 issued and outstanding as of March 31, 2024 and 2023, respectively 66 63 Class B common stock, $ 0.001 par value, 125,000,000 authorized; 45,030,959 and 46,420,141 issued and outstanding as of March 31, 2024 and 2023, respectively 45 46 Additional paid-in capital 310,293 610,567 Retained earnings 13,768 160,430 Accumulated other comprehensive income 304 461 Total StepStone Group Inc. stockholders’ equity 324,476 771,567 Non-controlling interests in subsidiaries 974,559 36,380 Non-controlling interests in legacy Greenspring entities (1) 147,042 152,658 Non-controlling interests in the Partnership 208,514 668,182 Total stockholders’ equity 1,654,591 1,628,787 Total liabilities and stockholders’ equity $ 3,788,807 $ 3,497,403 (1) Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. See notes 5 and 15 for more information. See accompanying notes to consolidated financial statements. 133 Table of Contents StepStone Group Inc. Consolidated Balance Sheets (in thousands) The following presents the portion of the consolidated balances presented above attributable to consolidated variable interest entities. As of March 31, 2024 2023 Assets Cash and cash equivalents $ 46,859 $ 25,959 Restricted cash 718 955 Fees and accounts receivable 52,566 39,996 Due from affiliates 23,986 14,061 Investments in funds 39,590 31,569 Legacy Greenspring investments in funds and accrued carried interest allocations 631,197 770,652 Deferred income tax assets 349 451 Lease right-of-use assets, net 16,665 15,084 Other assets and receivables 11,491 8,101 Assets of Consolidated Funds: Cash and cash equivalents 38,164 25,997 Investments, at fair value 131,858 30,595 Other assets 1,745 772 Total assets $ 995,188 $ 964,192 Liabilities Accounts payable, accrued expenses and other liabilities $ 27,155 $ 13,444 Accrued compensation and benefits 57,487 29,869 Legacy Greenspring accrued carried interest-related compensation 484,154 617,994 Due to affiliates 5,845 4,962 Lease liabilities 17,415 15,883 Liabilities of Consolidated Funds: Other liabilities 1,645 566 Total liabilities $ 593,701 $ 682,718 See accompanying notes to consolidated financial statements. 134 Table of Contents StepStone Group Inc. Consolidated Statements of Income (Loss) (in thousands, except share and per share amounts) Year Ended March 31, 2024 2023 2022 Revenues Management and advisory fees, net $ 585,140 $ 497,179 $ 380,257 Performance fees: Incentive fees 25,339 9,663 11,593 Carried interest allocations: Realized 49,401 131,089 200,718 Unrealized 126,908 ( 253,342 ) 585,851 Total carried interest allocations 176,309 ( 122,253 ) 786,569 Legacy Greenspring carried interest allocations (1) ( 75,157 ) ( 452,163 ) 187,106 Total performance fees 126,491 ( 564,753 ) 985,268 Total revenues 711,631 ( 67,574 ) 1,365,525 Expenses Compensation and benefits: Cash-based compensation 292,962 252,180 197,482 Equity-based compensation 42,357 24,940 13,996 Performance fee-related compensation: Realized 37,687 79,846 91,208 Unrealized 74,694 ( 119,039 ) 312,903 Total performance fee-related compensation 112,381 ( 39,193 ) 404,111 Legacy Greenspring performance fee-related compensation (1) ( 75,157 ) ( 452,163 ) 187,106 Total compensation and benefits 372,543 ( 214,236 ) 802,695 General, administrative and other 167,317 147,159 110,468 Total expenses 539,860 ( 67,077 ) 913,163 Other income (expense) Investment income (loss) 7,452 ( 2,509 ) 26,160 Legacy Greenspring investment income (loss) (1) ( 9,087 ) ( 44,075 ) 32,586 Investment income of Consolidated Funds 28,472 9,315 — Interest income 3,664 1,921 337 Interest expense ( 9,331 ) ( 4,189 ) ( 1,113 ) Other income (loss) 2,455 ( 1,420 ) 2,249 Total other income (expense) 23,625 ( 40,957 ) 60,219 Income (loss) before income tax 195,396 ( 41,454 ) 512,581 Income tax expense 27,576 3,821 28,300 Net income (loss) 167,820 ( 45,275 ) 484,281 Less: Net income attributable to non-controlling interests in subsidiaries 37,240 35,194 26,608 Less: Net income (loss) attributable to non-controlling interests in legacy Greenspring entities (1) ( 9,087 ) ( 44,075 ) 32,586 Less: Net income (loss) attributable to non-controlling interests in the Partnership 59,956 ( 19,772 ) 231,202 Less: Net income attributable to redeemable non-controlling interests in Consolidated Funds 15,838 1,776 — Less: Net income attributable to redeemable non-controlling interests in subsidiaries 5,782 — — Net income (loss) attributable to StepStone Group Inc. $ 58,091 $ ( 18,398 ) $ 193,885 Net income (loss) per share of Class A common stock: Basic $ 0.91 $ ( 0.30 ) $ 3.89 Diluted $ 0.91 $ ( 0.30 ) $ 3.84 Weighted-average shares of Class A common stock: Basic 63,489,135 61,884,671 49,833,760 Diluted 66,544,038 61,884,671 53,600,250 Dividends declared per share of Class A common stock $ 1.08 $ 0.80 $ 0.44 (1) Reflects amounts attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. See notes 3, 5 and 15 for more information. See accompanying notes to consolidated financial statements. 135 Table of Contents StepStone Group Inc. Consolidated Statements of Comprehensive Income (Loss) (in thousands) Year Ended March 31, 2024 2023 2022 Net income (loss) $ 167,820 $ ( 45,275 ) $ 484,281 Other comprehensive income (loss): Foreign currency translation adjustment ( 793 ) ( 181 ) 329 Unrealized gain (loss) on defined benefit plan, net 118 ( 506 ) 1,365 Total other comprehensive income (loss) ( 675 ) ( 687 ) 1,694 Comprehensive income (loss) before non-controlling interests 167,145 ( 45,962 ) 485,975 Less: Comprehensive income attributable to non-controlling interests in subsidiaries 36,912 34,856 27,446 Less: Comprehensive income (loss) attributable to non-controlling interests in legacy Greenspring entities ( 9,087 ) ( 44,075 ) 32,586 Less: Comprehensive income (loss) attributable to non-controlling interests in the Partnership 59,805 ( 19,925 ) 231,609 Less: Comprehensive income attributable to redeemable non-controlling interests in Consolidated Funds 15,838 1,776 — Less: Comprehensive income attributable to redeemable non-controlling interests in subsidiaries 5,782 — — Comprehensive income (loss) attributable to StepStone Group Inc. $ 57,895 $ ( 18,594 ) $ 194,334 See accompanying notes to consolidated financial statements. 136 Table of Contents StepStone Group Inc. Consolidated Statements of Stockholders’ Equity (in thousands) Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Non-Controlling Interests in Subsidiaries Non-Controlling Interests in Legacy Greenspring Entities Non-Controlling Interests in the Partnership Total Stockholders’ Equity Balance at March 31, 2021 $ 38 $ 57 $ 188,751 $ 60,407 $ 155 $ 25,885 $ — $ 384,400 $ 659,693 Net income — — — 193,885 — 26,608 32,586 231,202 484,281 Other comprehensive income — — — — 449 838 — 407 1,694 Contributed capital — — — — — — 15,078 83 15,161 Equity-based compensation — — 6,686 — — 12 — 7,298 13,996 Distributions — — — — — ( 20,692 ) ( 11,326 ) ( 86,778 ) ( 118,796 ) Purchase of non-controlling interests — — ( 657 ) — — ( 1,502 ) — ( 887 ) ( 3,046 ) Dividends declared — — — ( 24,677 ) — — — — ( 24,677 ) Vesting of RSUs 1 — ( 1 ) — — — — — — Class A common stock issued for Greenspring acquisition 13 — 267,842 — — — — 290,743 558,598 Class C Partnership units issued for Greenspring acquisition — — 64,847 — — — — 70,392 135,239 Exchange of Class B units for Class A common stock and redemption of corresponding Class B common shares 9 ( 9 ) ( 9 ) — — — — — ( 9 ) Initial consolidation of legacy Greenspring general partner entities — — — — — — 158,142 — 158,142 Deferred offering costs — — ( 357 ) — — — — ( 296 ) ( 653 ) Equity reallocation between controlling and non-controlling interests — — 115,434 — 54 914 — ( 116,402 ) — Deferred tax effect resulting from equity transactions affecting ownership in the Partnership (1) — — ( 55,293 ) — — — — — ( 55,293 ) Balance at March 31, 2022 61 48 587,243 229,615 658 32,063 194,480 780,162 1,824,330 Net income (loss) — — — ( 18,398 ) — 35,194 ( 44,075 ) ( 19,772 ) ( 47,051 ) Other comprehensive loss — — — — ( 196 ) ( 338 ) — ( 153 ) ( 687 ) Contributed capital — — — — — 142 13,387 37 13,566 Equity-based compensation — — 8,889 — — 388 — 7,112 16,389 Distributions — — — — — ( 31,070 ) ( 11,134 ) ( 78,439 ) ( 120,643 ) Dividends declared — — — ( 50,787 ) — — — — ( 50,787 ) Vesting of RSUs, net of shares withheld for employee taxes — — ( 1,524 ) — — — — ( 1,219 ) ( 2,743 ) Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares 2 ( 2 ) ( 1 ) — — — — — ( 1 ) Equity reallocation between controlling and non-controlling interests — — 19,546 — ( 1 ) 1 — ( 19,546 ) — Deferred tax effect resulting from equity transactions affecting ownership in the Partnership (1) — — ( 3,586 ) — — — — — ( 3,586 ) Balance at March 31, 2023 $ 63 $ 46 $ 610,567 $ 160,430 $ 461 $ 36,380 152,658 $ 668,182 $ 1,628,787 (1) See notes 11, 14 and 15 for more information. See accompanying notes to consolidated financial statements. 137 Table of Contents StepStone Group Inc. Consolidated Statements of Stockholders’ Equity (in thousands) Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Non-Controlling Interests in Subsidiaries Non-Controlling Interests in Legacy Greenspring Entities Non-Controlling Interests in the Partnership Total Stockholders’ Equity Balance at March 31, 2023 $ 63 $ 46 $ 610,567 $ 160,430 $ 461 $ 36,380 $ 152,658 $ 668,182 $ 1,628,787 Net income (loss) — — — 58,091 — 37,240 ( 9,087 ) 59,956 146,200 Other comprehensive loss — — — — ( 196 ) ( 328 ) — ( 151 ) ( 675 ) Contributed capital — — — — — — 12,460 43 12,503 Equity-based compensation — — 10,771 — — 674 — 8,236 19,681 Distributions — — — — — ( 39,573 ) ( 8,989 ) ( 57,768 ) ( 106,330 ) Dividends declared — — — ( 70,346 ) — — — — ( 70,346 ) Vesting of RSUs, net of shares withheld for employee taxes 1 — ( 392 ) — — — — ( 304 ) ( 695 ) Exchange of Class B and Class C units for Class A common stock and redemption of corresponding Class B common shares 2 ( 1 ) ( 2 ) — — — — — ( 1 ) Sale of non-controlling interests — — 851 — — 1,553 — 641 3,045 Equity reallocation between controlling and non-controlling interests — — 21,277 — 39 ( 2,881 ) — ( 18,435 ) — Deferred tax effect resulting from equity transactions affecting ownership in the Partnership (1) — — 132,560 — — — — — 132,560 Reclassification and adjustment of non-controlling interests in subsidiaries to redeemable equity at redemption value — — ( 465,339 ) ( 134,407 ) — ( 34,860 ) — ( 451,886 ) ( 1,086,492 ) Reclassification of non-controlling interests in subsidiaries from redeemable equity — — — — — 976,354 — — 976,354 Balance at March 31, 2024 $ 66 $ 45 $ 310,293 $ 13,768 $ 304 $ 974,559 $ 147,042 $ 208,514 $ 1,654,591 (1) See notes 11, 14 and 15 for more information. See accompanying notes to consolidated financial statements. 138 Table of Contents StepStone Group Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended March 31, 2024 2023 2022 Cash flows from operating activities Net income (loss) $ 167,820 $ ( 45,275 ) $ 484,281 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 47,588 47,443 26,977 Unrealized carried interest allocations and investment (income) loss ( 127,815 ) 261,354 ( 603,513 ) Unrealized legacy Greenspring carried interest allocations and investment (income) loss 149,293 577,484 ( 119,698 ) Unrealized performance fee-related compensation 74,694 ( 119,039 ) 312,903 Unrealized legacy Greenspring performance fee-related compensation ( 134,906 ) ( 526,837 ) 94,944 Amortization of deferred financing costs 472 472 236 Equity-based compensation 39,448 24,940 13,996 Change in deferred income taxes 9,212 ( 12,692 ) 6,216 Fair value adjustment for acquisition-related contingent consideration 16,809 9,361 9,600 Gain on remeasurement of lease liabilities ( 106 ) ( 2,709 ) — Loss on sale of subsidiary 812 — — Other non-cash activities 579 40 ( 3,034 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities of Consolidated Funds: Unrealized investment income of Consolidated Funds ( 26,147 ) ( 9,312 ) — Purchases of investments of Consolidated Funds ( 77,144 ) ( 21,287 ) — Proceeds from sale of investments of Consolidated Funds 2,028 4 — Changes in operating assets and liabilities: Fees and accounts receivable ( 12,349 ) ( 10,309 ) ( 1,774 ) Due from affiliates ( 15,484 ) ( 30,222 ) ( 11,490 ) Other assets and receivables 10,705 ( 3,212 ) 2,091 Accounts payable, accrued expenses and other liabilities 16,646 ( 1,216 ) 6,663 Accrued compensation and benefits 16,458 11,160 ( 1,445 ) Due to affiliates 815 ( 765 ) ( 2,259 ) Lease right-of-use assets, net and lease liabilities 1,988 2,006 ( 413 ) Changes in operating assets and liabilities of Consolidated Funds: Other assets and receivables ( 973 ) ( 772 ) — Other liabilities and payables 1,079 566 — Net cash provided by operating activities 161,522 151,183 214,281 Cash flows from investing activities Contributions to investments ( 23,380 ) ( 21,637 ) ( 24,571 ) Distributions received from investments 4,412 5,280 9,510 Contributions to investments in legacy Greenspring entities ( 12,460 ) ( 13,387 ) ( 15,078 ) Distributions received from investments in legacy Greenspring entities 3,688 4,563 3,495 Cash paid for Greenspring acquisition, net of cash acquired — — ( 181,529 ) Purchases of property and equipment ( 19,607 ) ( 5,627 ) ( 2,103 ) Other investing activities — 1 35 Net cash used in investing activities ( 47,347 ) ( 30,807 ) ( 210,241 ) See accompanying notes to consolidated financial statements. 139 Table of Contents StepStone Group Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended March 31, 2024 2023 2022 Cash flows from financing activities Proceeds from capital contributions from non-controlling interests $ 43 $ 179 $ 83 Proceeds from sale of non-controlling interests 3,045 $ — — Proceeds from revolving credit facility 50,000 35,000 185,000 Deferred financing costs — — ( 2,356 ) Purchase of non-controlling interests — — ( 3,046 ) Payment of deferred offering costs — — ( 1,732 ) Payments on revolving credit facility — — ( 120,000 ) Distributions to non-controlling interests ( 97,341 ) ( 109,509 ) ( 107,470 ) Proceeds from capital contributions to legacy Greenspring entities 12,460 13,387 15,078 Distributions to non-controlling interests in legacy Greenspring entities ( 8,989 ) ( 11,134 ) ( 11,326 ) Dividends paid to common stockholders ( 68,474 ) ( 49,973 ) ( 23,874 ) Payments for employee taxes related to net settlement of RSUs ( 695 ) ( 2,743 ) — Payments to related parties under Tax Receivable Agreements ( 10,281 ) ( 5,981 ) ( 787 ) Other financing activities ( 1 ) ( 1 ) ( 9 ) Cash flows from financing activities of Consolidated Funds: Contributions from redeemable non-controlling interests in Consolidated Funds 62,255 22,754 — Net cash used in financing activities ( 57,978 ) ( 108,021 ) ( 70,439 ) Effect of foreign currency exchange rate changes ( 3,402 ) ( 287 ) ( 15 ) Net increase (decrease) in cash, cash equivalents and restricted cash 52,795 12,068 ( 66,414 ) Cash, cash equivalents and restricted cash at beginning of period 129,517 117,449 183,863 Cash, cash equivalents and restricted cash at end of period $ 182,312 $ 129,517 $ 117,449 Supplemental disclosures: Interest paid $ 8,462 $ 3,551 $ 829 Taxes paid 14,289 29,487 11,688 Non-cash operating, investing, and financing activities: Accrued dividends $ 1,872 $ 814 $ 803 Deferred tax effect resulting from transactions affecting ownership in the Partnership, including net amounts payable under Tax Receivable Agreements 132,560 ( 3,586 ) ( 55,293 ) Establishment of lease liabilities in exchange for lease right-of-use assets 5,501 77,347 79,688 Remeasurement of lease liabilities — ( 18,166 ) — Issuance of note related to sale of subsidiary 8,436 — — Class A common stock issued for Greenspring acquisition — — 558,598 Class C Partnership units issued for Greenspring acquisition — — 135,239 Reclassification and adjustment of non-controlling interests in subsidiaries to redeemable equity at redemption value 1,086,492 — — Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 143,430 $ 102,565 $ 116,386 Restricted cash 718 955 1,063 Cash and cash equivalents of Consolidated Funds 38,164 25,997 — Total cash, cash equivalents and restricted cash $ 182,312 $ 129,517 $ 117,449 See accompanying notes to consolidated financial statements. 140 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) 1. Organization StepStone Group Inc. (“SSG”) was incorporated in the state of Delaware on November 20, 2019. The company was formed for the purpose of conducting the business of StepStone Group LP (the “Partnership”) as a publicly-traded entity. SSG is the sole managing member of StepStone Group Holdings LLC (the “General Partner”), the general partner of the Partnership. Unless otherwise specified, “StepStone” or the “Company” refers to SSG and its consolidated subsidiaries, including the Partnership, throughout the remainder of these notes to the consolidated financial statements. The Company is a global private markets investment firm focused on providing customized investment solutions and advisory and data services to its clients. The Company’s 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, including high-net-worth and mass affluent individuals. The Company partners with its clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”). The Company, through its subsidiaries, acts as the investment advisor and general partner or managing member to separately managed accounts (“SMAs”) and focused commingled funds (collectively, the “StepStone Funds”). SSG is holding company whose principal asset is a controlling financial interest in the Partnership through its ownership of all of the Partnership’s Class A units and 100 % of the membership interests in the General Partner of the Partnership. SSG acts as the sole managing member of the General Partner of the Partnership and, as a result, indirectly operates and controls all of the Partnership’s business and affairs. As a result, SSG consolidates the financial results of the Partnership and reports non-controlling interests related to the Class B and Class C units of the Partnership which are not owned by SSG. The assets and liabilities of the Partnership represent substantially all of SSG’s consolidated assets and liabilities, with the exception of certain deferred income taxes and payables due to affiliates pursuant to tax receivable agreements (see note 11). Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to five votes. As of March 31, 2024, SSG held approximately 58.3 % of the economic interest in the Partnership. As the Partnership’s limited partners exchange their Class B and Class C units into SSG’s Class A common stock in the future, SSG’s economic interest in the Partnership will increase relative to that of the Class B and Class C unitholders. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. All intercompany balances and transactions have been eliminated in consolidation. Certain of the StepStone Funds are investment companies that follow specialized accounting under GAAP and reflect their investments at estimated fair value. Accordingly, the carrying value of the Company’s equity method investments in such entities retains the specialized accounting. 141 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management’s estimates and assumptions are based on historical experience and other factors, and these estimates and assumptions require management to exercise judgment in the process of applying the Company’s accounting policies. Factors that may affect or influence management’s estimates and assumptions could include expectations related to future events that management has deemed reasonable under the circumstances. Assumptions and estimates related to the valuation of investments, which directly affect carried interest allocations, carried interest related compensation, and the carrying amount of the Company’s equity in affiliated companies, involve a higher degree of judgment and complexity, and these assumptions and estimates may significantly affect the consolidated financial statements. Actual results could differ from these estimates and those differences may be material. Consolidation The Company consolidates all entities that it controls through a majority voting interest or as the primary beneficiary of a variable interest entity (“VIE”). Under the VIE model, management first assesses whether the Company has a variable interest in an entity. In evaluating whether the Company holds a variable interest, fees received as a decision maker or in exchange for services (including management fees, incentive fees and carried interest allocations) that are customary and commensurate with the level of services provided, and where the Company does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, are not considered variable interests. If the Company has a variable interest in an entity, management further assesses whether that entity is a VIE, and if so, whether the Company is the primary beneficiary under the VIE model. Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model. The consolidation analysis can generally be performed qualitatively; however, in certain situations a quantitative analysis may also be performed. Investments and redemptions (either by the Company, affiliates of the Company or third parties) or amendments to the governing documents of the respective StepStone Funds that are VIEs could affect the entity’s status as a VIE or the determination of the primary beneficiary. Under the VIE model, an entity is deemed to be the primary beneficiary of a VIE if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly affect the entity’s economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. When assessing whether the Company is the primary beneficiary of a VIE, management evaluates whether the Company’s involvement, through holding interests directly or indirectly in an entity or contractually through other variable interests, would give the Company a controlling financial interest. This analysis includes an evaluation of the Company’s control rights, as well as the economic interests that the Company holds in the VIE, including indirectly through related parties. 142 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The Company provides investment advisory services to the StepStone Funds, which have third-party clients. These funds are investment companies and are typically organized as limited partnerships or limited liability companies for which the Company, through its operating subsidiaries, acts as the general partner or managing member. A limited partnership or similar entity is a VIE if the unaffiliated limited partners or members do not have substantive rights to terminate or liquidate the fund or remove the general partner or substantive rights to participate. Certain StepStone Funds are VIEs because they have not granted unaffiliated limited partners or members substantive rights to terminate the fund or remove the general partner or substantive rights to participate. The Company does not consolidate these StepStone Funds because it is not the primary beneficiary of those funds, primarily because it does not hold an interest in those funds that is considered more than insignificant and its fee arrangements are considered customary and commensurate. The Company has determined that certain of its operating subsidiaries, StepStone Group Real Assets LP (“SRA”), StepStone Group Real Estate LP (“SRE”), StepStone Private Debt AG (former ly Swiss Capital Alternative Investments AG) (“SPD”), and StepStone Group Private Wealth LLC (“SPW”) and certain StepStone Funds are VIEs, and that the Company is the primary beneficiary of each entity because it has a controlling financial interest in each entity; accordingly, the Company consolidates these entities. The assets and liabilities of the consolidated VIEs are presented gross in the consolidated balance sheets. The assets of the consolidated VIEs may only be used to settle obligations of the consolidated VIEs. See note 4 for more information on both consolidated and unconsolidated VIEs. In connection with the acquisition of Greenspring Associates Inc. and certain of its affiliates (“Greenspring”) that was completed on September 20, 2021 (“Greenspring Acquisition”), the Company, indirectly through its subsidiaries, became the sole and/or managing member of certain entities, each of which is the general partner of an investment fund (“legacy Greenspring general partner entities”). The Company did not acquire any direct economic interests attributable to the legacy Greenspring general partner entities, including legacy Greenspring investments in funds and carried interest allocations. However, certain arrangements negotiated as part of the acquisition represent variable interests that could be significant. The Company determined that the legacy Greenspring general partner entities are VIEs and it is the primary beneficiary of each such entity because it has a controlling financial interest in each entity. As a result, the Company consolidates these entities. The Company and its subsidiaries manages or controls certain entities that constitute client investment funds that have been consolidated in the accompanying consolidated financial statements (“Consolidated Funds”). Including the results of the Consolidated Funds increases the reported amounts of the assets, liabilities, expenses and cash flows in the accompanying consolidated financial statements, and amounts related to economic interests held by third-party investors are reflected as redeemable non-controlling interests in Consolidated Funds. The revenues earned by the Company as investment manager of the Consolidated Funds are eliminated in consolidation and generally have no direct effect on the net income attributable to SSG or to Stockholders' Equity. Non-Controlling Interests Non-controlling interests (“NCI”) reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by the Company. Non-controlling interests are presented as separate components of stockholders’ equity on the Company’s consolidated balance sheets to clearly distinguish between the Company’s interests and the economic interests of third parties and employees in those entities. Net income (loss) attributable to SSG, as reported in the consolidated statements of income, is presented net of the portion of net income (loss) attributable to holders of non-controlling interests. See note 14 for more information on ownership interests in the Company. 143 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Non-controlling interests in subsidiaries represent the economic interests in SRA, SRE, and SPD (the variable interest entities included in the Company’s consolidated financial statements) held by third parties and employees in those entities. Non-controlling interests in subsidiaries are allocated a share of income or loss in the respective consolidated subsidiary in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss. Non-controlling interests in legacy Greenspring entities represent the economic interests in the legacy Greenspring general partner entities. The Company did not acquire any direct economic interests in the legacy Greenspring general partner entities. 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 related to the Class B and Class C units of the Partnership which are not owned by SSG. 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 SSG, but are held by the client investors in the funds. These interests are presented as redeemable non-controlling interests in Consolidated Funds within the consolidated balance sheets, outside of permanent capital as the investors in these funds generally have the right to withdraw their capital, subject to the terms of the respective contractual agreements. 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. Redeemable non-controlling interests in subsidiaries represent the redeemable economic interests in SRA, SRE, and SPD held by third parties and employees in those entities that were established in connection with the Transaction Agreements as described in note 14. 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. Accounting for Differing Fiscal Periods The StepStone Funds primarily have a fiscal year end as of December 31. The Company accounts for its investments in the StepStone Funds on a three-month lag due to the timing of receipt of financial information from the investments held by the StepStone Funds. The StepStone Funds primarily invest in private markets funds that generally require at least 90 days following the calendar year end to provide audited financial statements. As a result, the Company uses the December 31 audited financial statements of the StepStone Funds, which reflect the underlying private markets funds as of December 31, to record its investments (including any carried interest allocated by those investments) for its fiscal year-end consolidated financial statements as of March 31. The Company further adjusts the reported carrying values of its investments in the StepStone Funds for its share of capital contributions to and distributions from the StepStone Funds during the three-month lag period. The Company does not account for management and advisory fees or incentive fees on a three-month lag. To the extent that management becomes aware of any material events that affect the StepStone Funds during the three-month lag period, the effect of the events would be disclosed in the notes to the consolidated financial statements. 144 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Current Events 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. The Company is 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 assess the impact on financial markets and the Company’s business. The Company’s 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 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 the Company’s consolidated financial statements. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash held in banks, money market funds and highly-liquid investments with original maturities of three months or less at the time of purchase. Restricted cash consists of cash that the Company is contractually obligated to maintain to secure its letters of credit used primarily related to its office facilities and other obligations. Cash and Cash Equivalents of Consolidated Funds Cash and cash equivalents held at the Consolidated Funds consist of cash and cash equivalents held by the Consolidated Funds, which, although not legally restricted, is not available to fund the general liquidity needs of the Company. Fees and Accounts Receivable Fees and accounts receivable represent contractual amounts due to the Company for management, advisory and incentive fees, net of allowances as applicable. The Company considers fees and accounts receivable to be fully collectible. Accordingly, no allowance for doubtful accounts has been established as of March 31, 2024 and 2023. If any accounts or portion thereof are deemed uncollectible, such amounts are expensed when that determination is made. Due from Affiliates Due from affiliates primarily relates to fees and accounts receivable from the StepStone Funds, advances made on behalf of the StepStone Funds for the payment of certain organization and operating costs and expenses for which the Company is subsequently reimbursed, amounts due from employees and loans due from affiliated entities. See note 13 for further disclosure of related party transactions. 145 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Fair Value Measurements GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace – including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and therefore a lesser degree of judgment is used in measuring their fair value. Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of their fair values, as follows: • Level I – Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. • Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value is determined through the use of models or other valuation methodologies. The types of financial instruments classified in this category include less liquid securities traded in active markets and securities traded in other than active markets. • Level III – Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the financial instrument. The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors including, for example, the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, and current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for financial instruments categorized in Level III. The variability and availability of the observable inputs affected by the factors described above may result in transfers between Levels I, II, and III. The Company considers its cash, cash equivalents, restricted cash, fees and accounts receivable, accounts payable, investments, revolving credit facility and contingent consideration obligation 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 for additional details regarding the fair value of the Company’s contingent consideration obligation balance and see note 9 for additional details regarding the fair value of the Company’s revolving credit facility balance. 146 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Investments Investments primarily include the Company’s ownership interests in the StepStone Funds, as general partner or managing member of such funds. The Company accounts for all investments in which it has or is otherwise presumed to have significant influence, but not control, including the StepStone Funds, using the equity method of accounting. The carrying value of these equity method investments is determined based on amounts invested by the Company, adjusted for the Company’s share in the earnings or losses of each investee, after consideration of contractual arrangements that govern allocations of income or loss (including carried interest allocations), less distributions received. Investments include the Company’s cumulative accrued carried interest allocations from the StepStone Funds, which primarily represent performance-based capital allocations, assuming the StepStone Funds were liquidated as of each reporting date in accordance with the funds’ governing documents. Legacy Greenspring investments in funds and accrued carried interest allocations represent the economic interests held by the legacy Greenspring general partner entities in certain funds for which the Company does not have any direct economic interests. All of the economics in respect of such interests are payable to employees and are therefore reflected as non-controlling interests in legacy Greenspring entities and legacy Greenspring performance fee-related compensation. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. Management's determination of fair value for investments in the underlying funds includes various valuation techniques. These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted average cost of capital, exit multiples, or terminal growth rates. Investments of Consolidated Funds The Company’s Consolidated Funds are investment companies under GAAP and reflect their investments at estimated fair value. The Company has retained the specialized investment company accounting for the Consolidated Funds under GAAP. Investments of the Consolidated Funds are recorded at fair value and the unrealized appreciation (depreciation) in fair value is recognized in the consolidated statements of income. In addition, the Consolidated Funds do not consolidate their majority-owned and controlled investments in underlying portfolio companies. Leases The Company determines whether an arrangement contains a lease at inception of the arrangement. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, the Company determines the classification as either an operating or finance lease. The Company’s identified leases primarily consist of operating lease agreements for office space and certain equipment, as the lessee. Operating leases are included in lease right-of-use-assets, net and lease liabilities in the consolidated balance sheets. Certain leases include lease and non-lease components, which the Company accounts for as a single lease component. Lease right-of-use (“ROU”) assets and lease liabilities are measured based on the present value of future minimum lease payments over the lease term at the commencement date. Lease ROU assets include initial direct costs incurred by the Company and are presented net of deferred rent and lease incentives. The Company uses its incremental borrowing rate in determining the present value of future minimum lease payments. The Company’s lease terms may include options to extend or terminate the lease, which are included in the measurement of ROU assets and lease liabilities when it is reasonably certain that the Company will exercise those options. Operating lease expense associated with minimum lease payments is recognized on a straight-line basis over the lease term in general, administrative and other expenses in the consolidated statements of income. Minimum lease payments for leases with an initial term of twelve months or less are not recorded in the consolidated balance sheets. See note 16 for more information. 147 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Property and Equipment Property and equipment primarily consist of leasehold improvements, furniture, equipment, computer hardware and software and are stated at cost, less accumulated depreciation and amortization, with the net carrying amount included in other assets and receivables in the consolidated balance sheets. Property and equipment are depreciated over their estimated useful lives using the straight-line method, and the corresponding depreciation expense is included in general, administrative and other expenses in the consolidated statements of income. Property and equipment are depreciated over a period of five to seven years . Leasehold improvements are amortized over the shorter of their useful lives or remaining lease terms. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company did not recognize any impairment charges related to property and equipment during each of the fiscal years ended March 31, 2024, 2023 and 2022. Foreign Currency The Company consolidates certain entities that have a non-U.S. dollar functional currency. Non-U.S. dollar denominated assets and liabilities are translated using the exchange rates prevailing at the end of each reporting period and income and expenses are translated using the weighted-average exchange rate for each reporting period. Cumulative translation adjustments arising from the translation of non-U.S. dollar denominated entities are included in other comprehensive income (loss) within the consolidated financial statements until realized. Gains and losses resulting from foreign-currency transactions denominated in a currency other than an entity’s functional currency are reported in other income (loss) in the consolidated statements of income. These transaction gains (losses) totaled $( 1.4 ) million, $( 1.6 ) million and $( 1.1 ) million for the years ended March 31, 2024, 2023 and 2022, respectively. Business Combinations The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of an acquisition is allocated to the assets acquired and liabilities assumed based on their fair values, as determined by management at the acquisition date. Contingent consideration obligations that are elements of consideration transferred are recognized at the acquisition date as part of the fair value transferred in exchange for the acquired business. Contingent consideration arrangements are revalued to fair value each reporting period. Examples of critical estimates in valuing certain of the intangible assets acquired include, but are not limited to, future expected cash inflows and outflows, future fundraising assumptions, expected useful life, discount rates and income tax rates. Acquisition-related costs incurred in connection with a business combination are expensed as incurred and are included in general, administrative and other expenses in the consolidated statements of income. Intangibles and Goodwill The Company’s finite-lived intangible assets consist of acquired contractual rights to earn future management and advisory fee income and client relationships. Finite-lived intangible assets are amortized over their estimated useful lives, which range from 8 to 10 years. The Company did not have any intangible assets that were deemed to have an indefinite life as of March 31, 2024. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. There were no impairment charges related to the Company’s finite-lived intangible assets during the years ended March 31, 2024, 2023 and 2022. 148 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Goodwill represents the excess amount of consideration transferred in a business combination above the fair value of the identifiable net assets. Goodwill is assessed for impairment at least annually using a qualitative and, if necessary, a quantitative approach. The Company performs its annual goodwill impairment test as of January 1, or more frequently, if events and circumstances indicate that an impairment may exist. Goodwill is tested for impairment at the reporting unit level. The initial assessment for impairment under the qualitative approach is to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, a quantitative assessment is performed to measure the amount of impairment loss, if any. The quantitative assessment includes comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the lesser of (a) the difference between the carrying amount of the reporting unit and its fair value and (b) the total carrying amount of the reporting unit’s goodwill. The Company performed annual goodwill impairment assessments as of January 1, 2024 and 2023 and determined that there was no impairment of goodwill as of either date. Revenues The Company recognizes revenue in accordance with Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers . Revenue is recognized in a manner that depicts the transfer of promised goods or services to customers and for an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The application of ASC 606 requires an entity to identify its contract(s) with a customer, identify the performance obligations in a contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In determining the transaction price, variable consideration is included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. The Company has elected to apply the variable consideration allocation exception for its fee arrangements with its customers. Management and Advisory Fees, Net The Company earns management fees for services provided to its SMAs and focused commingled funds. The Company earns advisory fees for services provided to advisory clients where the Company does not have discretion over investment decisions. The Company considers its performance obligations in its customer contracts from which it earns management and advisory fees to be one or more of the following, based on the services promised: asset management services, advisory services and/or the arrangement of administrative services. 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. There have been no capital-gains based incentive fees recognized to date. The Company recognizes revenues from asset management services and advisory services when control of the promised services is transferred to customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. SMAs are generally contractual arrangements involving an investment management agreement between the Company and a single client, and are typically structured as a partnership or limited liability company for which a subsidiary of SSG serves as the general partner or managing member. Focused commingled funds are structured as limited partnerships or limited liability companies with multiple clients, for which a subsidiary of the Company serves as the general partner or managing member. The Company determined that the individual client or single limited partner or member is the customer with respect to SMAs and advisory clients. Based on certain facts and circumstances specific to each individual fund structure, the Company has determined that for accounting purposes, either the StepStone Fund or the individual investors in the fund may be considered to be the customer for arrangements with focused commingled funds. 149 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) When asset management services and the arrangement of administrative services are the performance obligations promised in a contract, the Company satisfies these performance obligations over time because the customer simultaneously receives and consumes the benefits of the services as they are performed. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised services to the customer. Management fees earned from these contracts where the Company has discretion over investment decisions are generally calculated based on a percentage of unaffiliated committed capital or net invested capital, and these amounts are typically billed quarterly. For certain investment funds, management fees are initially based on committed capital during the investment period and on net invested capital through the remainder of the fund’s term. In addition, the management fee rate charged may also be reduced for certain investment funds depending on the contractual arrangement. The management fee basis is subject to factors outside of the Company’s control. Therefore, estimates of future period management fees are not included in the transaction price because those estimates would be considered constrained. Advisory fees from contracts where the Company does not have discretion over investment decisions are generally based on fixed amounts and typically billed quarterly. Management fees generally exclude reimbursements for expenses paid by the Company on behalf of its customers, including amounts related to certain professional fees and other fund administrative expenses pursuant to the fund’s governing documents. For professional and administrative services that the Company arranges to be performed by third parties on behalf of investment funds, management has concluded that the nature of its promise is to arrange for the services to be provided and, accordingly, the Company does not control the services provided by the third parties before they are transferred to the customer. Therefore, the Company is acting as an agent, and the reimbursements for these professional fees paid on behalf of the investment funds are generally presented on a net basis. The Company and certain investment funds that it manages have distribution and service agreements with third-party financial institutions, whereby the Company pays a portion of the fees it receives to such institutions for ongoing distribution and servicing of customer accounts. Management has concluded that the Company does not act as principal for the third-party services, as the Company does not control the services provided by the third parties before they are transferred to the customer. Therefore, the Company is acting as an agent, and the management fees are recorded net of these service fees. The Company may incur certain costs in connection with satisfying its performance obligations for investment management services – primarily employee travel costs – for which it receives reimbursements from its customers. For reimbursable employee travel costs, the Company concluded it controls the services provided by its employees and, therefore, is acting as principal. Accordingly, the Company records the reimbursement for these costs incurred on a gross basis – that is, as revenue in management and advisory fees, net and expense in general, administrative and other expenses in the consolidated statements of income. For reimbursable costs incurred in connection with satisfying its performance obligations for administration services, the Company concluded it does not control the services provided by other third parties and, therefore, is acting as agent. Accordingly, the Company records the reimbursement for these costs incurred on a net basis. Performance Fees The Company earns two types of performance fee revenues: incentive fees and carried interest allocations, as described below. 150 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Incentive fees are generally calculated as a percentage of the profits (up to 15 %) earned in respect of certain accounts, including certain permanent capital vehicles, for which the Company is the investment adviser, subject to the achievement of minimum return levels or performance benchmarks. Incentive fees are a form of variable consideration and represent contractual fee arrangements in the Company’s contracts with its customers. Incentive fees are typically subject to reversal until the end of a defined performance period, as these fees are affected by changes in the fair value of the assets under management or advisement over such performance period. Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax. The Company recognizes incentive fee revenue only when these amounts are realized and no longer subject to significant risk of reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization). However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis. Accordingly, the tax-related portion of incentive fees received in advance of crystallization is not subject to clawback and is therefore recognized as revenue immediately upon receipt. Incentive fees received in advance of crystallization that remain subject to clawback are recorded as deferred incentive fee revenue and included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, to the Company from unaffiliated limited partners in the StepStone Funds in which the Company holds an equity interest. The Company is entitled to a carried interest allocation (typically 5 % to 20 %) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5 % to 10 %) in accordance with the terms set forth in each respective fund’s governing documents. The Company accounts for its investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of ASC 606. Legacy Greenspring carried interest allocations reflect the allocation of carried interest to legacy Greenspring general partner entities from limited partners in certain legacy Greenspring funds in which the legacy Greenspring general partner entities hold an equity interest. The legacy Greenspring general partner entities are entitled to a carried interest allocation (typically 5 % to 20 %) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. The Company accounts for the investment balances in the legacy Greenspring funds, including carried interest allocations, under the equity method of accounting because it is presumed to have significant influence as the general partner or managing member. Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606. The Company does not hold any direct economic interests in the legacy Greenspring general partner entities and thus is not entitled to any carried interest allocation from the legacy funds. All of the carried interest allocations in respect of the legacy Greenspring funds are payable to employees who are considered affiliates of the Company and are therefore reflected as legacy Greenspring performance fee-related compensation in the consolidated statements of income. 151 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The Company recognizes revenue attributable to carried interest allocations from a fund based on the amount that would be due to the Company pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date. Accordingly, the amount recognized as carried interest allocation revenue reflects the Company’s share of the gains and losses of the associated fund’s underlying investments measured at their then-fair values, relative to the fair values as of the end of the prior period. The Company records the amount of carried interest allocated to the Company as of each period end as accrued carried interest allocations receivable, which is included as a component of investments in the consolidated balance sheets. Management's determination of fair value for investments in the underlying funds includes various valuation techniques. These techniques may include a market approach, recent transaction price, net asset value approach, or discounted cash flows, and may use one or more significant unobservable inputs such as EBITDA, revenue multiples, discount rates, weighted average cost of capital, exit multiples, or terminal growth rates. Carried interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates, as defined in the applicable governing documents. Carried interest is subject to reversal to the extent that the amount received to date exceeds the amount due to the Company based on cumulative results. As such, a liability is accrued for potential clawback obligations if amounts previously distributed to the Company would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life. As of March 31, 2024 and 2023, no material amounts for potential clawback obligations had been accrued. Compensation and Benefits Cash-based compensation expense primarily includes salaries, bonuses, employee benefits and employer-related payroll taxes. Bonuses are accrued over the service period in which they are earned. Equity-based compensation represents grants of equity-based awards or arrangements to certain employees and directors. The Company accounts for grants of equity-based awards, including restricted stock units (“RSUs”), to certain employees and directors at fair value as of the grant date. The Company recognizes non-cash compensation expense attributable to these grants on a straight-line basis over the requisite service period, which is generally the vesting period. Expense related to grants of equity-based awards is recognized as equity-based compensation expense in the consolidated statements of income. The fair value of RSUs is determined by the closing stock price on the grant date. Forfeitures of equity-based awards are recognized as they occur. Awards classified as liabilities are remeasured at the end of each reporting period until settlement. See note 10 for additional information regarding the Company’s accounting for equity-based awards. 152 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Performance fee-related compensation represents the portion of carried interest allocation revenue and incentive fees that have been awarded to employees as a form of long-term incentive compensation. Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds. Approximately 50 % of carried interest allocation revenue is awarded to employees as part of the Company’s long-term incentive compensation plan. Carried interest-related compensation is accounted for as compensation expense in conjunction with the related carried interest allocation revenue and, until paid, is recorded as a component of accrued carried interest-related compensation in the consolidated balance sheets. Carried interest-related compensation expense also includes the portion of net carried interest allocation revenue attributable to equity holders of the Company’s consolidated subsidiaries that are not 100% owned. Amounts presented as realized indicate the amounts paid or payable to employees based on the receipt of carried interest allocation revenue from realized investment activity. Carried interest-related compensation expense may be subject to reversal to the extent that the related carried interest allocation revenue is reversed. Carried interest-related compensation paid to employees may be subject to clawback on an after-tax basis under certain scenarios. To date, no material amounts of realized carried interest-related compensation have been reversed. Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made in accordance with the applicable governing agreement. Legacy Greenspring performance fee-related compensation represents the legacy Greenspring carried interest allocations, which are entirely payable to certain employees. Legacy Greenspring carried interest-related compensation is accounted for as compensation expense in conjunction with the related legacy Greenspring carried interest allocation revenue and, until paid, is recorded as a component of legacy Greenspring accrued carried interest-related compensation in the consolidated balance sheets. Legacy Greenspring carried interest-related compensation expense may be subject to reversal to the extent that the related legacy Greenspring carried interest allocation revenue is reversed. However, none of the legacy Greenspring carried interest allocation revenue is attributable to the Company. General, Administrative and Other General, administrative and other includes occupancy, travel and related costs, insurance, legal and other professional fees, depreciation, amortization of intangible assets, system-related costs, and other general costs associated with operating the Company’s business. Beginning in the quarter ended December 31, 2022, general, administrative and other includes costs associated with the Consolidated Funds. Expenses of the Consolidated Funds have no impact on net income or loss attributable to the Company to the extent such expenses are borne by third-party investors. Other Income (Expense) Investment income (loss) primarily represents the share of earnings (losses) from the investments the Company makes in its SMAs and focused commingled funds. The Company, either directly or through its subsidiaries, generally has a general partner interest in the StepStone Funds, which invest in primary funds, secondary funds and co-investment funds, or a combination thereof. Investment income will increase or decrease based on the earnings of the StepStone Funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds. The Company’s co-investment funds invest in underlying portfolio companies and therefore their valuation changes from period to period are more influenced by individual companies than the Company’s primary and secondary funds, which have exposures across multiple portfolio companies in underlying private markets funds. The Company’s SMAs and focused commingled funds invest across various industries, strategies and geographies. Consequently, the Company’s general partner investments do not include any significant concentrations in a specific sector or geography outside the United States. Investment income excludes carried interest allocations, which are presented as revenues as described above. 153 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Legacy Greenspring investment income (loss) represents the share of earnings (losses) from the investments the Company makes in certain legacy Greenspring funds through the legacy Greenspring general partner entities. The Company has no direct economic interests in the legacy Greenspring general partner entities. As a result, all such income is reflected as non-controlling interests in legacy Greenspring entities. Legacy Greenspring investment income will increase or decrease based on the earnings of such legacy Greenspring funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds. 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, 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 Taxes SSG is a corporation for U.S. federal income tax purposes and therefore is subject to U.S. federal and state income taxes on its share of taxable income generated by the Partnership. The Partnership is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by the Partnership flows through to its limited partners, including SSG, and is generally not subject to U.S. federal or state income tax at the Partnership level. The Partnership’s non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to non-U.S. income taxes. Additionally, certain subsidiaries are subject to local jurisdiction taxes at the entity level, which are reflected within income tax expense in the consolidated statements of income. 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. Taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases, using tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the change is enacted. Deferred tax liabilities are included within accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. The principal items giving rise to temporary differences are certain basis differences resulting from exchanges of Partnership units. See Tax Receivable Agreements below. Deferred tax assets are reduced by a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent on the amount, timing and character of the Company’s future taxable income. When evaluating the realizability of deferred tax assets, all evidence – both positive and negative – is considered. This evidence includes, but is not limited to, expectations regarding future earnings, future reversals of existing temporary tax differences and tax planning strategies. 154 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The Company is subject to the provisions of ASC Subtopic 740-10, Accounting for Uncertainty in Income Taxes . This standard establishes consistent thresholds as it relates to accounting for income taxes. It defines the threshold for recognizing the benefits of tax return positions in the financial statements as more-likely-than-not to be sustained by the relevant taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50% likely to be realized. If upon performance of an assessment pursuant to this subtopic, management determines that uncertainties in tax positions exist that do not meet the minimum threshold for recognition of the related tax benefit, a liability is recorded in the consolidated financial statements. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as interest expense and general, administrative and other expenses, respectively, in the consolidated statements of income. See note 11 for more information. The Company has elected to account for global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries in the period the tax is incurred. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. The Company reviews its tax positions quarterly and adjusts its tax balances as new information becomes available. Tax Receivable Agreements SSG has entered into an Exchanges Tax Receivable Agreement (the “Exchanges Tax Receivable Agreement”) with the Class B limited partners and Class C limited partners, and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”). The Tax Receivable Agreements provide for payment by SSG to such partners and pre-IPO institutional investors of the Partnership of 85 % of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such partners’ and institutional investors’ Partnership units and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest). SSG will retain the benefit of the remaining 15 % of these net cash tax savings under both Tax Receivable Agreements. See notes 14 and 15 for more information. Accumulated Other Comprehensive Income The Company’s accumulated other comprehensive income consists of foreign currency translation adjustments and unrealized gains and losses on the defined benefit plan sponsored by one of its subsidiaries. The components of accumulated other comprehensive income were as follows: As of March 31, 2024 2023 Foreign currency translation adjustments $ 77 $ 280 Unrealized gain on defined benefit plan, net 227 181 Accumulated other comprehensive income $ 304 $ 461 Segments The Company operates as one business, a fully-integrated private markets solution provider. The Company’s chief operating decision maker (“CODM”), who is the Company’s chief executive officer, utilizes a consolidated approach to assess the performance of and allocate resources to the business. Accordingly, management has concluded that the Company consists of a single operating segment and single reportable segment for accounting and financial reporting purposes. 155 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Concentrations of Risk Financial instruments that potentially subject the Company to concentrations of credit risk or other risks consist principally of cash, cash equivalents, restricted cash, investments and fees receivable. The majority of the Company’s cash, cash equivalents and restricted cash is held in large, high credit quality financial institutions. Substantially all cash amounts on deposit with these large financial institutions exceeded federally insured limits at March 31, 2024 and 2023. The Company actively monitors its banking relationships and periodically performs an assessment of the financial condition and the reputations of these financial institutions. Based on these results, management believes that the Company’s exposure to credit risk is remote. The concentration of credit risk related to fees receivable is generally reduced by the relatively short payment terms extended to the Company’s clients. Amounts due to the Company in the form of carried interest allocations, which are reported as a component of investments in the consolidated balance sheets, remain subject to investment performance risk. In certain cases, carried interest allocations that have been distributed to the Company may remain subject to clawback, pursuant to the terms of the governing documents of the related funds. Refer to the discussion of carried interest above in this note 2 for additional details regarding the investment performance and clawback risk associated with carried interest allocations that have been recognized in income by the Company and/or recorded as accrued carried interest allocations in the consolidated balance sheets. Recent Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). ASUs issued during the current period not listed below were assessed and determined to either be not applicable to the Company, or not expected to have a material impact on the consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which amends current guidance to provide optional practical expedients and exceptions, if certain criteria are met, for applying GAAP to contracts, hedging relationships and other transactions that are affected by the reference rate reform. The expedients and exceptions in this update apply only to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Initially the update did not apply to contract modifications or hedging relationships entered into after December 31, 2022, but in December 2022, the FASB issued ASU 2022-06, which defers the sunset date for applying reference rate reform relief in ASC 848 to December 31, 2024. This guidance is effective for adoption anytime after March 12, 2020, but must be adopted prior to December 31, 2024. The Company is currently evaluating the impact on the consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which amends current guidance for reportable segment disclosure requirements. The updated disclosure requirements include: (1) reporting of segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, (2) reporting of an amount for other segment items by reportable segment and a description of its composition, (3) reporting in interim periods of all annual disclosures about a reportable segment’s profit or loss and assets as currently required by Topic 280, (4) reporting of one or more additional measures of segment profit or loss if used by the CODM in assessing segment performance and determining allocation of resources, (5) reporting of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss, and (6) the requirement for single reportable segment entities to provide all required disclosures in Topic 280 for annual and interim periods. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact to its financial statements and related disclosures. 156 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) In November 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amends current guidance to provide expanded disclosure for the rate reconciliation with information about specific categories and reconciling items that meet a specific threshold, and to provide additional information about income taxes paid disaggregated by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact to its financial statements and related disclosures. 3. Revenues The following presents revenues disaggregated by product offering, which aligns with the Company’s performance obligations and the basis for calculating each amount: Year Ended March 31, Management and Advisory Fees, Net 2024 2023 2022 Focused commingled funds (1) $ 295,927 $ 227,003 $ 148,725 SMAs 223,958 210,187 174,318 Advisory and other services 60,057 56,244 55,523 Fund reimbursement revenues 5,198 3,745 1,691 Total management and advisory fees, net $ 585,140 $ 497,179 $ 380,257 _______________________________ (1) Includes BDC income-based incentive fees of $ 1.4 million, $ 0 million and $ 0 million for the years ended March 31, 2024, 2023 and 2022, respectively. Year Ended March 31, Incentive Fees 2024 2023 2022 SMAs $ 16,294 $ 6,606 $ 11,441 Focused commingled funds 9,045 3,057 152 Total incentive fees $ 25,339 $ 9,663 $ 11,593 Year Ended March 31, Carried Interest Allocations 2024 2023 2022 SMAs $ 142,411 $ ( 110,020 ) $ 555,449 Focused commingled funds 33,898 ( 12,233 ) 231,120 Total carried interest allocations $ 176,309 $ ( 122,253 ) $ 786,569 Year Ended March 31, Legacy Greenspring Carried Interest Allocations 2024 2023 2022 SMAs $ 1,029 $ — $ — Focused commingled funds ( 76,186 ) ( 452,163 ) 187,106 Total legacy Greenspring carried interest allocations (1) $ ( 75,157 ) $ ( 452,163 ) $ 187,106 _______________________________ (1) The years ended March 31, 2024, 2023, and 2022 reflect the net effect of gross realized carried interest allocations of $ 59.7 million, $ 74.7 million, and $ 92.2 million, respectively, and the reversal of such amounts in unrealized carried interest allocations for such periods. 157 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The increase in carried interest allocations for the year ended March 31, 2024 as compared to the year ended March 31, 2023 was primarily attributable to net unrealized appreciation in the fair value of certain underlying fund investments in the Company’s private equity funds. The increase in legacy Greenspring carried interest allocations for the year ended March 31, 2024 as compared to the year ended March 31, 2023 was primarily attributable to net unrealized appreciation in the fair value of certain underlying fund investments. The decrease in carried interest allocations and legacy Greenspring carried interest allocations for the year ended March 31, 2023 as compared to the year ended March 31, 2022 was primarily attributable to net unrealized depreciation in the fair value of certain underlying fund investments. See note 2 for a discussion of the Company’s accounting policy for investments on a three-month lag. The Company derives revenues from clients located in both the United States and other countries. The table below presents the Company’s revenues by geographic location: Year Ended March 31, Revenues (1) 2024 2023 2022 United States $ 191,373 $ ( 238,441 ) $ 428,282 Non-U.S. countries 520,258 170,867 937,243 _______________________________ (1) Revenues are attributed to countries based on client location for SMAs and advisory and other services, or location of investment vehicle for focused commingled funds. For the years ended March 31, 2024, 2023 and 2022, no individual client represented 10% or more of the Company’s net management and advisory fees. For the year ended March 31, 2024, the Company had revenues attributable to the United States and Cayman Islands that represented 10% or more of the Company’s net management and advisory fees. For the years ended March 31, 2023 and 2022, the Company had revenues attributable to the United States that represented 10% or more of the Company’s net management and advisory fees. As of March 31, 2024 and 2023, the Company had $ 31.0 million and $ 21.6 million, respectively, of deferred revenues, which is included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. During the year ended March 31, 2024, the Company had recognized $ 3.6 million as revenue from amounts included in the deferred revenue balance as of March 31, 2023. 4. Variable Interest Entities Consolidated VIEs The Company consolidates certain VIEs for which it is the primary beneficiary. Such VIEs consist of certain operating entities not wholly-owned by the Company (e.g., SPD, SRA and SRE), SPW, legacy Greenspring general partner entities and certain StepStone Funds. See note 2 for more information on the Company’s accounting policies related to the consolidation of VIEs. The assets of the consolidated VIEs totaled $ 995.2 million and $ 964.2 million as of March 31, 2024 and 2023, respectively. The liabilities of the consolidated VIEs totaled $ 593.7 million and $ 682.7 million as of March 31, 2024 and 2023, respectively. The assets of the consolidated VIEs may only be used to settle obligations of the same VIE. In addition, there is no recourse to the Company for the consolidated VIEs’ liabilities, except for certain entities in which there could be a clawback of previously distributed carried interest. As of March 31, 2024 and 2023, no material amounts previously distributed have been accrued for clawback liabilities. 158 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Unconsolidated VIEs The Company holds variable interests in the form of direct equity interests in certain VIEs that are not consolidated because the Company is not the primary beneficiary. The Company’s maximum exposure to loss is limited to the potential loss of assets recognized by the Company relating to these unconsolidated entities. The carrying value of the assets and liabilities recognized in the consolidated balance sheets with respect to the Company’s interests in VIEs that were not consolidated is set forth below: As of March 31, 2024 2023 Investments in funds $ 135,043 $ 115,187 Legacy Greenspring investments in funds 147,042 152,658 Due from affiliates, net 34,744 29,017 Less: Amounts attributable to non-controlling interests in subsidiaries 25,362 19,432 Less: Amounts attributable to non-controlling interests in legacy Greenspring entities 147,042 152,658 Maximum exposure to loss $ 144,425 $ 124,772 5. Investments The Company’s investments consist of equity method investments primarily related to (i) investments in the StepStone Funds for which it serves as general partner or managing member but does not have a controlling financial interest and (ii) investments of Consolidated Funds. The Company’s equity interest in its equity method investments in the StepStone Funds typically does not exceed 1 % in each fund. The Company’s share of the underlying net income or loss attributable to its equity interest in the funds is recorded in investment income in the consolidated statements of income. Investment income attributable to the Consolidated Funds is recorded in investment income of Consolidated Funds. Investment income attributable to investments in certain legacy Greenspring funds for which the Company has no direct economic interests is recorded in legacy Greenspring investment income in the consolidated statements of income. Equity Method Investments The Company’s equity method investments consist of the following: As of March 31, 2024 2023 Investments in funds (1) 135,043 115,187 Accrued carried interest allocations 1,354,051 1,227,173 Legacy Greenspring investments in funds and accrued carried interest allocations (2) 631,197 770,652 Total equity method investments 2,120,291 2,113,012 _______________________________ (1) The Company’s investments in funds were $ 204.8 million and $ 147.5 million as of March 31, 2024 and 2023, respectively. The consolidation of the Consolidated Funds results in the elimination of the Company’s investments in such funds. (2) Reflects investments in funds of $ 147.0 million and $ 152.7 million and carried interest allocations of $ 484.2 million and $ 618.0 million as of March 31, 2024 and 2023, respectively. 159 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The Company recognized equity method income (loss) of the following: Year Ended March 31, 2024 2023 2022 Carried interest allocations $ 176,309 $ ( 122,253 ) $ 786,569 Investment income (loss) 7,452 ( 2,509 ) 26,160 Legacy Greenspring carried interest allocations ( 75,157 ) ( 452,163 ) 187,106 Legacy Greenspring investment income (loss) ( 9,087 ) ( 44,075 ) 32,586 Total equity method income (loss) $ 99,517 $ ( 621,000 ) $ 1,032,421 The increase in carried interest allocations for the year ended March 31, 2024 as compared to the prior year period was primarily attributable to unrealized appreciation in the fair value of the underlying investments in the Company’s private equity funds. See note 2 for a discussion of the Company’s accounting policy for investments on a three-month lag. The decrease in carried interest allocations for the year ended March 31, 2023 as compared to the prior year period was primarily attributable to unrealized depreciation in the fair value of the underlying investments in the Company’s private equity funds. See note 2 for a discussion of the Company’s accounting policy for investments on a three-month lag. As of March 31, 2024 and 2023, the Company’s investments in two SMAs each individually represented 10% or more of the total accrued carried interest allocations balance, and in the aggregate represented approximately 26 % and 24 %, respectively, of the total accrued carried interest allocations balance as of those dates. As of March 31, 2024 and 2023, the Company’s investments in three and two, respectively, commingled funds each individually represented 10% or more of the total legacy Greenspring accrued carried interest allocations balance, and in the aggregate represented approximately 36 % and 24 %, respectively, of the total legacy Greenspring accrued carried interest allocations balances as of those dates. Of the total accrued carried interest allocations balance as of March 31, 2024 and 2023, $ 719.5 million and $ 644.5 million, respectively, were payable to affiliates and are included in accrued carried interest-related compensation in the consolidated balance sheets. Of the total legacy Greenspring investments in funds and accrued carried interest allocations balance as of March 31, 2024 and 2023, $ 484.2 million and $ 618.0 million, respectively, were payable to employees who are considered affiliates of the Company and is included in legacy Greenspring accrued carried interest-related compensation in the consolidated balance sheets and $ 147.0 million and $ 152.7 million, respectively, are reflected as non-controlling interests in legacy Greenspring entities in the consolidated balance sheets. The Company evaluates each of its equity method investments to determine if any are considered significant as defined by the SEC. As of March 31, 2024 and 2023 and for the years ended March 31, 2024, 2023 and 2022, no individual equity method investment held by the Company met the significance criteria. As a result, the Company is not required to provide separate financial statements for any of its equity method investments. 160 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Summarized financial information for the Company’s equity method investments reflected below represents the financial position as of March 31, 2024 and 2023, and the results of operations for the years ended March 31, 2024, 2023 and 2022, which are reported on a three-month lag. Assets are primarily composed of the investments held by the StepStone Funds. As of March 31, 2024 2023 Assets $ 73,311,149 $ 65,536,494 Liabilities 2,083,509 1,806,252 Equity $ 71,227,640 $ 63,730,242 Year Ended March 31, 2024 2023 2022 Investment income $ 131,521 $ 115,092 $ 84,279 Expenses ( 631,707 ) ( 446,413 ) ( 382,704 ) Net realized and unrealized gain (loss) on investments 3,121,627 ( 4,966,901 ) 16,868,454 Income tax expense ( 28,979 ) ( 12,261 ) ( 10,875 ) Net income (loss) $ 2,592,462 $ ( 5,310,483 ) $ 16,559,154 Investments of Consolidated Funds The Company consolidates funds and entities when it is deemed to hold a controlling financial interest. The activity of the Consolidated Funds is reflected within the consolidated financial statements. Investments held by the Consolidated Funds are summarized below: Fair Value as of March 31, Percentage of Total Investments as of March 31, 2024 2023 2024 2023 Investments of Consolidated Funds: Equity securities (cost of $ 15.6 million and $ — million as of March 31, 2024 and 2023, respectively) $ 17,028 $ — 13 % — % Partnership and LLC interests (cost of $ 76.0 million and $ 21.3 million as of March 31, 2024 and 2023, respectively) 114,830 30,595 87 % 100 % Total investments of Consolidated Funds $ 131,858 $ 30,595 100 % 100 % As of March 31, 2024 and 2023, no individual investment had a fair value greater than 5% of the Company’s total assets. The following table summarizes the net realized and unrealized gains (losses) from investment activities of the Consolidated Funds: Year Ended March 31, 2024 2023 2022 Investments of Consolidated Funds: Net realized gains on investments $ 2,325 $ 3 $ — Net unrealized gains on investments 26,147 9,312 — 161 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) 6. Fair Value Measurements The Company measures certain assets and liabilities at fair value on a recurring basis. The following tables provide details regarding the classification of these assets and liabilities within the fair value hierarchy as of the dates presented: Financial Instruments of the Company As of March 31, 2024 Level I Level II Level III Total Liabilities Contingent consideration obligations $ — $ — $ 53,449 $ 53,449 Total liabilities $ — $ — $ 53,449 $ 53,449 As of March 31, 2023 Level I Level II Level III Total Liabilities Contingent consideration obligations $ — $ — $ 36,745 $ 36,745 Total liabilities $ — $ — $ 36,745 $ 36,745 For the financial instruments presented in the tables above, there were no changes in fair value hierarchy levels during the years ended March 31, 2024 and 2023. A reconciliation from the beginning balance to the closing balance of Level III financial instruments of the Company are set forth below: Year Ended March 31, Contingent consideration obligations 2024 2023 Balance, beginning of year: $ 36,745 $ 28,025 Additions 41 — Change in fair value 16,809 9,361 Settlements ( 146 ) ( 641 ) Balance, end of year: $ 53,449 $ 36,745 Changes in unrealized losses included in earnings related to financial liabilities still held at the reporting date $ 16,809 $ 9,361 Contingent Consideration The fair value of the contingent consideration obligations is based on a discounted cash flow analysis using a probability-weighted average estimate of certain performance targets, including revenue levels. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the contingent consideration obligations may differ materially from the current estimate. The significant unobservable inputs required to value the contingent consideration obligations primarily relate to the future expected revenues and the discount rate applied to the expected future revenues and payments of obligations, which was 7 % as of March 31, 2024. The contingent consideration obligations are included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. Changes in the fair value of the liabilities are included in general, administrative and other expenses in the consolidated statements of income. 162 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Financial Instruments of Consolidated Funds As of March 31, 2024 Level I Level II Level III Total Assets Equity securities $ — $ — $ 12,421 $ 12,421 Partnership and LLC interests — — 1,273 1,273 Total assets $ — $ — $ 13,694 $ 13,694 As of March 31, 2023 Level I Level II Level III Total Assets Equity securities $ — $ — $ — $ — Partnership and LLC interests — — 6,901 6,901 Total assets $ — $ — $ 6,901 $ 6,901 For the financial instruments presented in the tables above, there were no changes in fair value hierarchy levels during the years ended March 31, 2024 and 2023. The Company generally values its investment funds, which are generally organized as partnership and LLC interests, using the NAV per share equivalent calculated by the investment manager as a practical expedient in determining an independent fair value. The Company does not categorize within the fair value hierarchy investments where fair value is measured using the net asset value per share practical expedient. As of March 31, 2024 and 2023, investments with a combined fair value of $ 118.2 million and $ 23.7 million, respectively, are excluded from presentation in the fair value hierarchy as the fair value of these investments were measured at net asset value. As of March 31, 2024 and 2023, investments with a combined fair value of $ 13.7 million and $ 6.9 million , respectively, were classified as Level III investments. The significant unobservable input used to value these investments classified as Level III are the discounts to recent transaction prices. A reconciliation from the beginning balance to the closing balance of Level III financial instruments of Consolidated Funds are set forth below: As of March 31, 2024 2023 Partnership and LLC interests Balance, beginning of period: $ 6,901 $ — Transfers into Level III 1,593 — Transfers out of Level III ( 5,067 ) — Purchases 8,813 6,901 Change in fair value 1,454 — Balance, end of period: $ 13,694 $ 6,901 Changes in unrealized gains included in earnings related to financial assets still held at the reporting date $ 1,454 $ — 163 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) 7. Property and Equipment Property and equipment is included in other assets and receivables in the consolidated balance sheets and consists of the following: As of March 31, Property and equipment: 2024 2023 Office furniture $ 8,049 $ 7,053 Computer equipment and software 3,642 4,418 Leasehold improvements 27,570 17,246 Property and equipment, gross 39,261 28,717 Less: Accumulated depreciation ( 9,703 ) ( 12,876 ) Property and equipment, net $ 29,558 $ 15,841 Depreciation expense related to property and equipment totaled $ 5.2 million, $ 4.0 million and $ 2.5 million for the years ended March 31, 2024, 2023 and 2022, respectively, and is included in general, administrative and other expenses in the consolidated statements of income. 8. Intangibles and Goodwill Intangible assets consist of management contracts providing economic rights to management and advisory fees and client relationships related to future fundraising, as obtained through the Company’s acquisitions of other businesses. Intangible assets, net consists of the following: As of March 31, 2024 2023 Management contracts $ 352,002 $ 352,002 Client relationships 96,650 96,650 Service agreements — 9,537 Less: Accumulated amortization ( 143,779 ) ( 103,544 ) Intangible assets, net $ 304,873 $ 354,645 Amortization expense related to intangible assets was $ 42.4 million, $ 43.5 million and $ 24.5 million for the years ended March 31, 2024, 2023 and 2022, respectively. These amounts are included in general, administrative and other expenses in the consolidated statements of income. 164 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) On December 31, 2023, the Company 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 the Company over approximately six years . GBOS was acquired by the Company 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 42 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 the Company’s venture funds as well as for its own current and future third-party clients. The results of GBOS’s operations have been included in the consolidated financial statements through December 31, 2023. In the year ended March 31, 2024, the Company recorded a net charge in the amount of $ 0.8 million related to the sale of GBOS, including service agreements intangibles related to GBOS of $ 7.4 million, which is included in other income (loss) in the consolidated statements of income. At March 31, 2024, the expected future amortization of finite-lived intangible assets is as follows: Fiscal year ending March 31, 2025 $ 41,001 2026 40,810 2027 40,776 2028 40,759 2029 40,759 Thereafter 100,768 Total $ 304,873 The carrying value of goodwill was $ 580.5 million as of March 31, 2024 and 2023. The Company determined there was no indication of goodwill impairment as of March 31, 2024 and 2023. 9. Debt Obligations The Company is 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 the administrative agent, and provides for a $ 225.0 million multicurrency revolving credit facility (the “Revolver”) with a five-year maturity. As of March 31, 2024, the Company had $ 148.8 million outstanding on the Revolver, net of debt issuance costs. The Company’s debt obligations consist of the following: As of March 31, 2024 2023 Revolver $ 150,000 $ 100,000 Less: Debt issuance costs ( 1,178 ) ( 1,649 ) Total debt obligations $ 148,822 $ 98,351 165 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Borrowings under the Revolver bear interest at a variable rate per annum. The Company may designate each borrowing as (i) in the case of any borrowing in U.S. 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 %. Borrowings under the Revolver may be repaid at any time during the term of the Credit Agreement and, subject to certain terms and conditions, may be reborrowed prior to the maturity date. Any outstanding principal amounts, together with any accrued interest thereon, shall be due and payable on the maturity date. The maturity date for the Revolver is September 20, 2026. The Revolver bears a fee on undrawn commitments equal to 0.25 % per annum if total utilization of revolving commitments is equal to or greater than 50% and 0.35 % per annum if total utilization of revolving commitments is less than 50%. The carrying value of the Revolver approximates fair value, as the loan is subject to variable interest rates that adjust with changes in market rates and market conditions and the current interest rate approximates that which would be available under similar financial arrangements. Under the terms of the Credit Agreement, certain of the Company’s assets serve as pledged collateral. In addition, the Credit Agreement contains covenants that, among other things: limit the Company’s ability to incur indebtedness; create, incur or allow liens; transfer or dispose of assets; merge with other companies; make certain investments; pay dividends or make distributions; engage in new or different lines of business; and engage in transactions with affiliates. The Credit Agreement also contains financial covenants requiring the Company to maintain a total net leverage ratio and a minimum total of fee-earning assets under management. As of March 31, 2024, the Company was in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants. The Company can use available funding capacity under the Revolver to satisfy letters of credit in amounts up to $ 10.0 million. Amounts used to satisfy the letters of credit reduce the available capacity under the Revolver. As of March 31, 2024, the Company had outstanding letters of credit totaling $ 6.5 million. 10. Equity-Based Compensation 2020 Long-Term Incentive Plan The Company has adopted its 2020 Long-Term Incentive Plan (“LTIP”), which allows for the granting of stock options, stock appreciation rights, restricted stock awards, RSUs and performance stock awards to employees, directors and consultants. As of March 31, 2024, there were 22,787,636 shares of Class A common stock available to grant under the LTIP. 166 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) Restricted Stock Units RSUs represent the right to receive payment on the date of vesting in the form of one share of Class A common stock for each RSU. Holders of unvested RSUs do not have the right to vote with the underlying shares of Class A common stock, but are entitled to accrue dividend equivalents which are generally paid in cash when such RSUs vest. The RSUs granted generally vest over four years in equal annual installments. Upon vesting, the Company will typically withhold or cause the participant to sell the number of shares to satisfy the statutory withholding tax obligation and deliver the net number of resulting shares vested. The change in unvested RSUs is as follows: Number of RSUs Weighted-Average Grant-Date Fair Value Per RSU Balance as of March 31, 2023 1,775,732 $ 22.46 Granted 448,559 $ 35.07 Vested ( 750,790 ) $ ( 21.03 ) Forfeited ( 50,843 ) $ ( 24.36 ) Balance as of March 31, 2024 1,422,658 $ 27.12 The weighted-average grant-date fair value of RSUs granted during the years ended March 31, 2024, 2023, and 2022 was $ 35.07 , $ 28.97 , and $ 35.18 , respectively. The total fair value as of the respective vesting dates of RSUs vested during the years ended March 31, 2024, 2023 and 2022 was $ 24.3 million, $ 16.5 million and $ 27.5 million, respectively. In November 2022, one the Company’s non-wholly owned subsidiaries issued new partnership interests to certain employees with a grant date fair value of $ 6.1 million, vesting over six years . The issuance did not impact the Company’s fully diluted interest in the subsidiary. Unvested Partnership Units In June 2018, the Company issued an aggregate of 5.2 % of profits interests (the “Class B2 Interests”) in the Company to certain key employees. These Class B2 Interests provide the recipients with an opportunity to participate in the profits of the Company and proceeds of certain capital events. The Class B2 Interests vest over a period of six years from the grant date, subject to an employee’s continuous service with the Company through the applicable vesting date. Under the terms of the Fifth Amended and Restated Limited Partnership Agreement dated March 8, 2018, the vesting of the awards will occur as follows: (i) 0 % during the first three years from the date of issuance, (ii) 30.0 % on the third anniversary of the date of issuance, and (iii) 5.8 % for each fiscal quarter after the third anniversary of the date of issuance (fully vested on the sixth anniversary of the date of issuance, or June 2024). Upon the final vesting date, all of the Class B2 units will automatically convert into Class B units and unitholders will be entitled to purchase from the Company one share of Class B common stock for each Class B unit at its par value. Prior to vesting, holders of Class B2 units do not have the right to receive any distributions from the Partnership, other than tax-related distributions. The Class B2 Interests are classified as equity-based awards, and the associated equity-based compensation expense is recognized on a straight-line basis over the vesting period, with a corresponding increase to stockholders’ equity in the Company’s consolidated balance sheets. As of March 31, 2024, there were 2,566,566 Class B2 units outstanding. During the year ended March 31, 2024, none of the outstanding Class B2 units were forfeited. As of March 31, 2024, 149,717 Class B2 units were unvested and 2,416,849 Class B2 units were vested. 167 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) As of March 31, 2024, $ 40.9 million of unrecognized non-cash compensation expense in respect of equity-based awards remained to be recognized over a weighted-average period of approximately 4.3 years. The Company recognized tax benefits related to equity-based awards of $ 4.5 million, $ 1.8 million and $ 7.4 million for the years ended March 31, 2024, 2023 and 2022, respectively. Liability Classified Awards In November 2022, the Company issued a profits interest in SPW to certain employees of the SPW team and concurrently entered into an option agreement which provides that, (i) StepStone has 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 StepStone 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 the Company elects to pay a portion of the consideration in units of the Partnership, each to be exchangeable into shares of the Company’s Class A common stock, and, in either case, rights under one or more tax receivable agreements. The Company accounted for the profits interest and option agreement as a single unit of account as a liability classified equity-based award. There are no vesting provisions or service requirements related to the award. For the years ended March 31, 2024 and 2023, the Company recognized $ 19.8 million and $ 8.6 million, respectively, of expense related to the fair value of the liability classified awards within equity-based compensation expense in the consolidated statements of income. For the year ended March 31, 2024, the Company paid $ 3.1 million related to settlement for liability classified awards. For the years ended March 31, 2023 and 2022, no amounts were paid related to settlement for liability classified awards. 11. Income Taxes The Company’s income (loss) before income tax consisted of the following: Year Ended March 31, 2024 2023 2022 Domestic income (loss) before income tax $ 127,311 $ ( 102,560 ) $ 471,247 Foreign income before income tax 68,085 61,106 41,334 Total income (loss) before income tax $ 195,396 $ ( 41,454 ) $ 512,581 168 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The following table presents the components of the Company’s provision for income taxes: Year Ended March 31, 2024 2023 2022 Current: Federal $ 7,395 $ 6,933 $ 13,340 State and local 1,650 1,726 2,714 Foreign 9,349 7,653 6,383 Total current income tax expense 18,394 16,312 22,437 Deferred: Federal 8,815 ( 10,570 ) 4,897 State and local 295 ( 1,921 ) 966 Foreign 72 — — Total deferred income tax expense (benefit) 9,182 ( 12,491 ) 5,863 Total income tax expense $ 27,576 $ 3,821 $ 28,300 A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows: Year Ended March 31, 2024 2023 2022 Federal tax at statutory rate 21.0 % 21.0 % 21.0 % State and local income tax 1.1 0.8 0.8 Income passed through to limited partners ( 11.8 ) ( 13.6 ) ( 11.9 ) Foreign income tax 4.8 ( 18.5 ) 1.2 Valuation allowance ( 0.3 ) 4.7 ( 5.3 ) Return to provision ( 0.3 ) ( 3.7 ) ( 0.1 ) Other ( 0.4 ) 0.1 ( 0.2 ) Effective tax rate 14.1 % ( 9.2 ) % 5.5 % The Company’s effective tax rate is dependent on many factors, including the estimated amount of income subject to tax. Consequently, the effective tax rate can vary from period to period. The Company’s overall effective tax rate in each of the periods 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. 169 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The following table presents the components of the Company’s deferred income tax assets and liabilities: As of March 31, 2024 2023 Deferred tax assets: Investment in the Partnership $ 195,426 $ 54,941 Other 2,682 1,769 Total deferred tax assets before valuation allowance 198,108 56,710 Valuation allowance ( 13,596 ) ( 12,352 ) Total net deferred tax assets 184,512 44,358 Deferred tax liabilities: Total deferred tax liabilities 158 353 Net deferred tax assets $ 184,354 $ 44,005 In accordance with the Transaction Agreements outlined in note 14, the Company remeasured non-controlling interests in subsidiaries to the redemption value. This adjustment had a significant impact on the Company’s share of the Partnership’s book equity, resulting in an increase in deferred tax assets of $ 133.7 million, recorded through equity for the year ended March 31, 2024. Each contemplated exchange is expected have a corresponding decrease in deferred tax assets, recorded through equity. Additionally, there was an increase in deferred tax assets due to exchanges of Class B and Class C units that occurred during the year ended March 31, 2024, detailed further below. In connection with the exchanges of Class B units and Class C units of the Partnership for Class A common stock by certain limited partners of the Partnership during fiscal 2024, the Company recorded an overall increase to deferred tax assets as of March 31, 2024 of $ 15.2 million, and a net increase in the valuation allowance of $ 1.3 million. Additionally, in connection with the exchange transactions, the Company recorded a corresponding Tax Receivable Agreements liability of $ 17.4 million, representing 85 % of the incremental net cash tax savings for the Company due to the exchanging limited partners. The Company made payments of $ 10.3 million, $ 6.0 million and $ 0.8 million during the years ended March 31, 2024, 2023 and 2022 , respectively, under the Tax Receivable Agreements. As of March 31, 2024, the Company’s total Tax Receivable Agreements liability was $ 206.8 million. See notes 13 and 14 for more information. The Company evaluates the realizability of its deferred tax assets on a quarterly basis and adjusts the valuation allowance when it is more-likely-than-not that all or a portion of the deferred tax assets may not be realized. The total ending valuation allowance for the year ended March 31, 2024 was $ 13.6 million. Apart from the valuation allowance, the Company believes that the remaining deferred tax assets will be realized in full. 170 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) A summary of the change in valuation allowance by year is as follows: Valuation Allowance Balance at March 31, 2022 $ 13,422 Income tax decrease ( 1,975 ) Equity increase 905 Balance at March 31, 2023 12,352 Income tax decrease ( 1,210 ) Equity decrease — Equity increase 2,454 Balance at March 31, 2024 $ 13,596 As of March 31, 2024, the Company has not recorded any unrecognized tax benefits and does not expect there to be any material changes to uncertain tax positions within the next 12 months. The Company files income tax returns as required by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company may be subject to examination by U.S. federal and certain state and local tax authorities. Management has analyzed the Company’s tax positions taken with respect to all applicable income tax issues, for all open tax years, and for all jurisdictions in which the Company is required to file tax returns and has concluded that no provision for income taxes related to uncertain tax positions is required in the Company’s consolidated financial statements for the years ended March 31, 2024, 2023 and 2022. The Company files U.S. federal, state, local and foreign tax returns on a calendar-year basis. With limited exception, returns filed prior to 2019 are no longer subject to examination by the applicable taxing authorities. There are currently no material examinations being conducted of the Company by tax authorities. 171 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) 12. Earnings Per Share Basic and diluted earnings per share of Class A common stock are presented for the years ended March 31, 2024, 2023 and 2022. The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock: Year Ended March 31, 2024 2023 2022 (in thousands, except share and per share amounts) Numerator: Net income (loss) attributable to StepStone Group Inc. – Basic $ 58,091 $ ( 18,398 ) $ 193,885 Incremental income from assumed vesting of RSUs 451 — 4,043 Incremental income from assumed vesting and exchange of Class B2 units 2,202 — 7,689 Net income (loss) attributable to StepStone Group Inc. – Diluted $ 60,744 $ ( 18,398 ) $ 205,617 Denominator: Weighted-average shares of Class A common stock outstanding – Basic 63,489,135 61,884,671 49,833,760 Assumed vesting of RSUs 512,152 — 1,289,809 Assumed vesting and exchange of Class B2 units 2,542,751 — 2,476,681 Weighted-average shares of Class A common stock outstanding – Diluted 66,544,038 61,884,671 53,600,250 Net income (loss) per share of Class A common stock: Basic $ 0.91 $ ( 0.30 ) $ 3.89 Diluted $ 0.91 $ ( 0.30 ) $ 3.84 Diluted earnings per share of Class A common stock is computed by dividing net income (loss) attributable to SSG, giving consideration to the reallocation of net income between holders of Class A common stock and non-controlling interests, by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities, if any. Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to SSG and therefore are not participating securities. As a result, a separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been included. The calculation of diluted earnings per share excludes 45,030,959 Class B units and 1,852,212 Class C units of the Partnership outstanding as of March 31, 2024, 46,420,141 Class B units and 2,514,085 Class C units of the Partnership outstanding as of March 31, 2023, and 47,149,673 Class B units and 2,928,824 Class C units of the Partnership outstanding as of March 31, 2022, which are exchangeable into Class A common stock under the if-converted method, as the inclusion of such shares would be anti-dilutive. 172 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) As the Company was in a net loss position for the year ended March 31, 2023, the calculation of diluted earnings per share excludes potential shares of Class A common stock for 1,775,732 outstanding RSUs, 2,566,566 Class B2 units and 23,418 Class B units issuable pursuant to anti-dilution rights in connection with the vesting of Class B2 units that are convertible into Class A common stock under the if-converted method, as the inclusion of such shares would be anti-dilutive. 13. Related Party Transactions The Company considers its senior executives, employees and equity method investments to be related parties. A substantial portion of the Company’s management and advisory fees and carried interest allocations is earned from various StepStone Funds that are considered equity method investments. The Company earned net management and advisory fees from the StepStone Funds of $ 390.5 million, $ 335.6 million and $ 241.0 million for the years ended March 31, 2024, 2023 and 2022, respectively. Carried intere st allocation revenues earned from the StepStone Funds totaled $ 176.3 million, $( 122.3 ) million and $ 786.6 million for the years ended March 31, 2024, 2023 and 2022, respectively. Legacy Greenspring carried intere st allocation revenues earned from certain legacy Greenspring funds for which the Company has no direct economic interests totaled $( 75.2 ) million, $( 452.2 ) million, and $ 187.1 million for the years ended March 31, 2024, 2023 and 2022, respectively. Due from affiliates in the consolidated balance sheets consists primarily of fees and accounts receivable from the StepStone Funds, advances made on behalf of the StepStone Funds for the payment of certain organization and operating costs and expenses for which the Company is subsequently reimbursed, amounts due from employees and loans due from affiliated entities, as set forth below. As of March 31, 2024 2023 Amounts receivable from StepStone Funds $ 40,588 $ 33,813 Amounts receivable from employees 13,450 7,016 Amounts receivable from loans 13,493 13,493 Total due from affiliates $ 67,531 $ 54,322 Due to affiliates in the consolidated balance sheets consists primarily of amounts payable to certain non-controlling interest holders in connection with the Tax Receivable Agreements, amounts payable to the StepStone Funds and distributions payable to certain employee equity holders of consolidated subsidiaries, as set forth below. As of March 31, 2024 2023 Amounts payable to non-controlling interest holders in connection with Tax Receivable Agreements $ 206,841 $ 199,307 Amounts payable to StepStone Funds 5,844 4,796 Distributions payable to certain employee equity holders of consolidated subsidiaries 233 1,321 Total due to affiliates $ 212,918 $ 205,424 The Company made payments of $ 10.3 million, $ 6.0 million, and $ 0.8 million during the years ended March 31, 2024, 2023 and 2022, respectively, under the Tax Receivable Agreements. 173 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) 14. Stockholders’ Equity and Redeemable Interests Stockholders’ Equity The Company has two classes of common stock outstanding, Class A common stock and Class B common stock. Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the Company’s stockholders for their vote or approval. Holders of Class A common stock are entitled to receive dividends when and if declared by the board of directors. Holders of the Class B common stock are not entitled to dividends in respect of their shares of Class B common stock. In connection with the Greenspring Acquisition, the limited partnership agreement of the Partnership was amended to create new Class C limited partnership interests and to admit the new limited partners that received Class C units as consideration for the Greenspring acquisition. The Class C limited partnership interests of the Partnership have substantially the same rights and obligations as are applicable to the existing holders of Class B units of the Partnership. The Company has no ownership interest in the Class C units, which are held by certain employees of the Company. The Company also entered into an agreement with the Class C limited partners of the Partnership (the “Class C Exchange Agreement”) to allow for the exchange of Class C units to shares of Class A common stock of the Company on a one -for-one basis, subject to certain restrictions. The following table shows a rollforward of the Company’s shares of common stock outstanding since March 31, 2023: Class A Common Stock Class B Common Stock March 31, 2023 62,834,791 46,420,141 Class A common stock issued in exchange for Class B Partnership units 1,389,182 ( 1,389,182 ) Class A common stock issued in exchange for Class C Partnership units 661,873 — Class A common stock issued for vesting of RSUs, net of shares withheld for employee taxes 729,056 — March 31, 2024 65,614,902 45,030,959 The Company has 25,000,000 authorized shares of preferred stock, par value of $ 0.001 per share, and as of March 31, 2024, no shares of preferred stock were issued or outstanding. The Company records a reallocation adjustment between SSG stockholders’ equity, non-controlling interests in the Partnership and non-controlling interests in subsidiaries to reflect the impact of changes in economic ownership percentages during the period and adjust previously recorded equity transactions to the economic ownership percentage as of the end of each reporting period. In March 2024, the Company 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 the elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of Class A common stock of the Company on a one-for-one basis, subject to certain restrictions. 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 the Company. On the same date, the Company 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 the Class C Exchange Agreement and a corresponding number of Class A units of the Partnership were issued to the Company. 174 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) In September 2023, the Company 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 the elective exchange notices submitted pursuant to the Class B Exchange Agreement. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to the Company. On the same date, the Company 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 and a corresponding number of Class A units of the Partnership were issued to the Company. On February 7, 2024, SSG (or its subsidiary, in the case of the agreement with SPD) entered into agreements (the “Transaction Agreements”) with SRA, SRE and SPD (the “Asset Class Entities”), their respective asset class heads as seller representatives, and the seller parties signatory thereto. The Transaction Agreements provide a path to the Company 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 the Company’s Class A common stock, in the case of SPD and (ii) cash (at the discretion of the Company for all exchanges except the initial exchange), in up to ten annual exchanges (increased to up to fifteen annual exchanges in certain circumstances in case of the sellers of SRA equity interests). The Transaction Agreements allow for issuance of up to 75 million shares as consideration for settlement of the transaction. 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 the Company’s Class A common stock relative to the Company’s 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. Therefore, the non-controlling interests subject to the Transaction Agreements are not mandatorily redeemable as of March 31, 2024. 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 the Company’s 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 audited financial statements of the Company. Each Transaction Agreement provides that beginning after the fifth annual exchange, future exchanges may be accelerated into one final exchange in certain circumstances. 175 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) On the effective date of the Transaction Agreements, the Company reclassified the carrying value of the non-controlling interests in the Asset Class Entities from permanent equity to redeemable equity and remeasured the non-controlling interests at their redemption value as potential cash settlement could not be attributable to any individual non-controlling interest unit and the Company determined that redemption of the equity instruments was probable. After the notification period 10-days prior to the Initial Reference Date, the individual units subject to the first exchange became irrevocable and the Company separated the carrying value for all of the equity instruments related to the subsequent exchanges to occur after the initial exchange and reclassified these interests into permanent equity at their then carrying value given that settlement of subsequent exchanges is within the Company’s control. The Company accounts for adjustments to the redemption value of a redeemable equity instrument that is currently redeemable by adjusting the carrying value of the equity instrument to the maximum redemption value at each reporting period based on conditions that exist as of the reporting date. If the redeemable equity instrument is probable of becoming redeemable in the near future, the carrying value of a redeemable equity instrument is adjusted to the redemption value immediately as changes occur based on conditions that exist at that date or at each reporting date. For redeemable equity instruments either not redeemable or probable of becoming redeemable in the near future, no adjustment to the carrying value is made until it is probable that the equity instrument will become redeemable. The Company recognizes adjustments to the carrying value of redeemable equity instruments with charges against retained earnings, or to additional paid-in-capital in the absence of retained earnings. As of March 31, 2024, the Company determined that redemption of the redeemable non-controlling interests in subsidiaries was probable and presented the carrying value at the redemption amount based on the conditions that existed as of that date of $ 115.9 million in the consolidated balance sheets within redeemable non-controlling interests in subsidiaries Dividends and Distributions Dividends and distributions are reflected in the consolidated statements of stockholders’ equity when declared by the board of directors. Dividends are made to Class A common stockholders and distributions are made to limited partners of the Partnership and holders of non-controlling interests in subsidiaries. 176 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The following table presents information regarding quarterly dividends on Class A common shares for the periods indicated: Quarterly Fiscal Period 1 Dividend Payment Date Dividend Per Share of Class A Common Stock First quarter 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 June 30, 2022 $ 0.20 Second quarter September 15, 2022 0.20 Third quarter December 15, 2022 0.20 Fourth quarter March 15, 2023 0.20 Total dividends paid in FY2023 $ 0.80 First quarter June 30, 2023 $ 0.20 Supplemental 2 June 30, 2023 0.25 Second quarter September 15, 2023 0.21 Third quarter December 15, 2023 0.21 Fourth quarter March 15, 2024 0.21 Total dividends paid in FY2024 $ 1.08 _______________________________ (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. Redeemable Non-Controlling Interests The following table summarizes the activities associated with the redeemable non-controlling interests in Consolidated Funds: Year Ended March 31, 2024 2023 Beginning balance $ 24,530 $ — Contributions 62,255 22,754 Net income 15,838 1,776 Ending balance $ 102,623 $ 24,530 177 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The following table summarizes the activities associated with the redeemable non-controlling interests in subsidiaries: Year Ended March 31, 2024 2023 Beginning balance $ — $ — Reclassification from permanent equity at redemption value 1,086,492 — Net income 5,782 — Reclassification to permanent equity ( 976,354 ) — Ending balance $ 115,920 $ — 15. Business Combinations Greenspring Acquisition On September 20, 2021, the Company completed the acquisition of 100 % of the equity of Greenspring Associates, Inc. and certain of its affiliates (collectively, “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 “Greenspring acquisition”). The transaction agreement also provides for the payment of an earn-out of up to $ 75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024. The results of Greenspring’s operations have been included in the consolidated financial statements effective September 20, 2021. The acquisition of Greenspring expanded the Company’s leadership in private markets solutions, providing added scale in venture capital and growth equity, and offering clients expanded access to the global innovation economy. 178 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The aggregate purchase price for the acquisition of Greenspring and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date were as follows: Acquisition date fair value of consideration transferred: Cash consideration $ 186,577 Class A common stock 558,598 Class C units of the Partnership 135,239 Contingent consideration 17,769 Total purchase price $ 898,183 Estimated fair value of assets acquired and liabilities assumed: Cash and short-term receivables $ 5,725 Legacy Greenspring investments in funds and accrued carried interest allocations (1) 1,203,299 Lease right-of-use assets, net 2,585 Other assets and receivables 2,146 Finite-lived intangible assets—contractual rights: management contracts 310,944 Finite-lived intangible assets—client relationships 96,650 Finite-lived intangible assets—contractual rights: service agreements 9,537 Goodwill 573,750 Deferred income taxes ( 95,884 ) Accrued expenses and other liabilities ( 4,685 ) Legacy Greenspring accrued carried interest-related compensation (1) ( 1,045,157 ) Lease liabilities ( 2,585 ) Non-controlling interests in legacy Greenspring entities (1) ( 158,142 ) Total $ 898,183 _______________________________ (1) Represents investments in funds and carried interest allocations attributable to consolidated VIEs for which the Company did not acquire any direct economic interests. Such amounts are attributable to employees and therefore have been reflected as non-controlling interests in legacy Greenspring entities and legacy Greenspring accrued carried interest-related compensation, respectively. For the year ended March 31, 2022, the Company incurred $ 13.8 million of acquisition-related costs that were expensed as incurred and included in general, administrative and other expenses in the consolidated statements of income. The Company allocated $ 320.5 million and $ 96.7 million of the purchase price to the fair value of contractual rights and client relationships, respectively, which is being amortized over a weighted-average amortization period of 10.0 years. The $ 573.8 million of goodwill primarily related to Greenspring’s assembled workforce and business synergies expected to be realized from the transaction. This goodwill is not deductible for tax purposes. The amount of revenues and net income of Greenspring (including amounts attributable to legacy Greenspring entities) from the acquisition date of September 20, 2021 to March 31, 2022 were approximately $ 230 million and $ 54 million, respectively. 179 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) The following supplemental unaudited pro forma information assumes the Greenspring acquisition, as well as the Reorganization and IPO, had been consummated as of April 1, 2020: Year Ended March 31, 2022 Revenues $ 1,866,986 Net income attributable to StepStone Group Inc. 168,653 The Company’s fiscal year ends on March 31, and prior to the transaction, Greenspring’s fiscal year ended on December 31. To comply with SEC rules and regulations for companies with different fiscal year ends, the pro forma combined financial information has been prepared utilizing periods that differ by less than 93 days. The unaudited pro forma information for the year ended March 31, 2022 combines the Company’s historical audited consolidated statement of income for the year ended March 31, 2022 and Greenspring’s historical unaudited combined statement of income for the 12 months ended March 31, 2022. The supplemental unaudited pro forma information is based on estimates and assumptions believed reasonable and are not necessarily indicative of the Company’s consolidated results in future periods or the results that actually would have been realized had the Greenspring acquisition been completed to create a combined entity during the periods presented. The pro forma amounts have been calculated after reflecting the following adjustments that were directly attributable to the Reorganization, IPO, Greenspring acquisition and the related debt issuance used to fund a portion of the cash consideration, as if the transactions were consummated on April 1, 2020: Reorganization and IPO • adjustments to include compensation expense associated with the 2.5 million RSUs issued in connection with the IPO; • adjustments on interest expense to reflect the repayment of outstanding debt using a portion of the IPO proceeds; • adjustments to include federal and state income taxes for the Company’s share of taxable income generated by the Partnership; and • adjustments to reflect the pro-rata economic ownership attributable to the Company. Debt Financing • adjustments to include interest expense related to the Revolver used to fund a portion of the cash consideration. Greenspring Acquisition • adjustments to include the impact of additional amortization of acquired intangible assets that would have been charged; • adjustments to include the issuance of Class A common stock of the Company and Class C units of the Partnership as consideration for the transaction; • adjustments to reflect the pro-rata economic ownership attributable to the Company; 180 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) • adjustments to reflect the tax effects of the Greenspring acquisition and including Greenspring in the Company’s results; and • adjustments to include acquisition-related transaction costs in earnings for the year ended March 31, 2021. 16. Commitments and Contingencies Litigation In the ordinary course of business, and from time to time, the Company may be subject to various legal, regulatory and/or administrative proceedings. The Company accrues a liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Although there can be no assurance of the outcome of such proceedings, based on information known by management, the Company does not expect a potential liability related to any current legal proceedings or claims that would individually or in the aggregate materially affect its consolidated financial statements as of March 31, 2024. Lease Commitments The Company leases offices in 27 cities in North America, South America, Europe, Asia and Australia, and certain equipment subject to operating lease agreements expiring through 2039, some of which may include options to extend or terminate the lease. As of March 31, 2024, there were no finance leases outstanding. The components of lease expense included in general, administrative and other expenses in the consolidated statements of income were as follows: Year Ended March 31, 2024 2023 2022 Operating lease cost (1)(2) $ 15,578 $ 10,983 $ 11,098 Variable lease cost 459 1,375 957 Sublease income ( 1,851 ) ( 1,778 ) ( 1,679 ) Total lease cost $ 14,186 $ 10,580 $ 10,376 _______________________________ (1) Operating lease cost includes an immaterial amount of short-term leases. (2) Includes a gain of $ 0.1 million and $ 2.7 million for the years ended March 31, 2024 and 2023, respectively, related to lease remeasurement adjustments due to a reduction in lease terms. Supplemental cash flow information related to leases was as follows: Year Ended March 31, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases $ 12,650 $ 10,613 $ 10,319 Weighted-average remaining lease term for operating leases (in years) 11.4 12.1 7.7 Weighted-average discount rate for operating leases 4.7 % 4.6 % 2.7 % 181 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) As of March 31, 2024, maturities of operating lease liabilities were as follows: FY2025 $ 15,371 FY2026 16,504 FY2027 15,192 FY2028 13,106 FY2029 15,073 Thereafter 84,534 Total lease liabilities 159,780 Less: Imputed interest ( 40,041 ) Total operating lease liabilities $ 119,739 Unfunded Capital Commitments As of March 31, 2024 and 2023, the Company, generally in its capacity as general partner or managing member of the StepStone Funds, had unfunded commitments totaling $ 115.7 million and $ 88.7 million, respectively. The $ 115.7 million and $ 88.7 million of unfunded commitments as of March 31, 2024 and 2023, respectively, exclude $ 67.8 million and $ 50.6 million, respectively, related to commitments held by general partner entities for certain funds in which the Company does not hold any direct economic interests, including the legacy Greenspring funds. Carried Interest Allocations Carried interest allocations are subject to reversal in the event of future losses, to the extent of the cumulative revenues recognized by the Company in income to date. Additionally, if the Company has received net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the Company may be obligated to repay previously distributed carried interest that exceeds the amounts to which the Company is ultimately entitled. In these situations, a liability is accrued for the potential clawback obligation if amounts previously distributed to the Company would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life. As of March 31, 2024 and 2023, no material amounts for potential clawback obligations had been accrued. This contingent obligation is normally reduced by income taxes that the Company has paid related to the carried interest allocations. As of March 31, 2024, the maximum amount of carried interest allocations (excluding legacy Greenspring carried interest allocations) attributable to the Company subject to contingent repayment was an estimated $ 287.5 million, net of tax, assuming the fair value of all investments was zero, a possibility that the Company views as remote. Indemnification Arrangements In the normal course of business and consistent with standard business practices, the Company has provided general indemnifications to its limited partners, officers and directors when they act in good faith in the performance of their duties for the Company. The terms of these indemnities vary from contract to contract. The Company’s maximum exposure under these arrangements cannot be determined as these indemnities relate to future claims that may be made against the Company or related parties, but which have not yet occurred. No liability related to these indemnities has been recorded in the consolidated balance sheets as of March 31, 2024 and 2023. Based on past experience, management believes that the risk of loss related to these indemnities is remote. 182 Table of Contents StepStone Group Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share amounts and where noted) 17. Employee Benefits The Company provides defined contribution plans covering employees subject to minimum age and service guidelines. Eligible employees may contribute a percentage of their annual compensation subject to statutory guidelines. The Company makes non-discretionary contributions to the plans, which amounted to $ 6.0 million, $ 4.6 million and $ 4.3 million for the years ended March 31, 2024, 2023 and 2022, respectively, and are included in cash-based compensation in the consolidated statements of income. One of the Company’s subsidiaries with non-U.S. operations maintains a defined benefit pension plan (the “Plan”). The Plan covers certain non-U.S. employees and provides benefits to such employees upon retirement, disability and/or death. As of March 31, 2024 and 2023, the Plan’s assets totaled $ 32.4 million and $ 27.4 million, respectively. As of March 31, 2024 and 2023, the underfunded pension obligation, based on the latest actuarial determination, was $ 2.6 million and $ 2.8 million, respectively, and is included in accrued compensation and benefits in the consolidated balance sheets. Net period benefit cost recognized was $ 1.0 million, $ 0.5 million and $ 1.1 million for the years ended March 31, 2024, 2023 and 2022, respectively, which is included in cash-based compensation in the consolidated statements of income. 18. Subsequent Events On May 16, 2024, the Partnership (the “Borrower”), a subsidiary of the Company, 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 the Company, 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. On May 23, 2024, the Company announced a quarterly cash dividend of $ 0.21 per share of Class A common stock and a supplemental cash dividend of $ 0.15 per share of Class A common stock, both payable on June 28, 2024 to holders of record as of the close of business on June 14, 2024. 183 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.