StepStone Group Inc.

Good afternoon, ladies and gentlemen, and welcome to StepStone's Fiscal 2022 Second Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1, followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this call will be recorded. I would now like to turn the conference over to Seth Weiss. Stepstone's Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Joining me on the call today are Scott Hart, Co-Chief Executive Officer, Jason Ment, President and Co-Chief Operating Officer, Mike McCabe, Head of Strategy, and Johnny Randall, Chief Financial Officer. During our prepared remarks, we will be referring to a presentation which is available on our Investor Relations website, at shareholders.stepstonegroup.com. Before we begin, I'd like to remind everyone that this conference call, as well as the presentation, contains certain forward-looking statements regarding the company's expected operating and financial performance for future periods. Forward-looking statements reflect management's current plans, estimates, and expectations and are inherently uncertain and are subject to various risks, uncertainties, and assumptions. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are described in the risk factors section of StepStone's most recent 10-K. Turning to our financial results on slide 3 for the second quarter of fiscal 2022, we reported gap net income of $127.9 million for the quarter ended September 30, 2021. Gap net income attributable to StepStone Group Incorporated was $62.1 million. We generated fee-related earnings of $26.4 million, adjusted net income of $40.1 million, and adjusted net income per share of 40 cents. The quarter reflected retroactive fees resulting from additional closes of StepStone's Growth Equity Fund that contributed $2.3 million to revenues and $2.1 million to fee-related earnings and pre-tax adjusted net income. For comparison, the prior year's quarter benefited from retroactive fees related to the final closing of Stepstone Real Estate Partners IV, which contributed $9.0 million to revenue, $8.5 million to fee-related earnings, and $4.4 million to pre-tax adjusted net income. I'd now like to turn the call over to Stepstone's Co-Chief Executive Officer, Scott Hart.

Thank you, Seth, and good afternoon, everyone. We took positive strides this quarter in both our organic growth and strategic advancement. We generated a strong flow of assets, significantly increased the pipeline of future expected fee-earning AUMs, produced robust earnings, and closed on the acquisition of Greenspring Associates ahead of schedule. I'll begin with the Greenspring acquisition, which we closed on September 20th. The standalone Greenspring business continued its exceptional performance through closing, driven by the strength of the platform, the trusted LP relationships that have been developed over time, and continued LP interest in venture capital. Despite closing well ahead of schedule, the integration is progressing well. We are beginning to operate as one team and already see evidence that our expanded capabilities in venture capital and growth equity are a clear differentiator. Our combined size, network of relationships, and access to data is already yielding differentiated investment opportunities and due diligence insights. We've also received positive feedback from our clients and observed early indications that cross-selling opportunities will exist given the limited overlap in our client base. Looking at the firm more broadly, as shown on slide four, we now manage or advise on over half a trillion dollars of assets across the private market. Our increased global scale widens our moat and creates a significant competitive advantage as it yields unparalleled data, insights, and deal flow, while our broad scope across private equity, real estate, infrastructure, and private debt makes us a one-stop destination to solve our clients' private market needs. Shifting to our results on slide five, we generated $40.1 million in adjusted net income for the quarter, or 40 cents per share, up 111% from the prior fiscal year's second quarter. We generated fee-related earnings of $26.4 million, down 5% from the prior year quarter. As Seth mentioned, the prior year period included a significant retroactive fee of $9 million, which impacts the year-over-year comparison. This quarter included relatively smaller retroactive fees and 10 days of green spring results. Excluding these items, fee-related earnings would have been up by 20%. We finished the quarter with $121 billion of assets under management, and $67 billion of fee-earning AUM, which includes $11 billion of fee-earning assets from Greenspring. Excluding the acquired assets, we have organically grown fee-earning AUM by 25% over the last 12 months. We've been operating largely in a virtual environment for most of the last year, but encouraging trends on declining COVID cases and a growing number of administered vaccinations have enabled us to resume in-person activities. I am pleased to report that we have reopened the vast majority of our offices globally allowing our teams to reunite after nearly two years, and in some instances, meeting face-to-face for the first time. We have grown dramatically over the last couple of years, and over that time, we have leveraged technology to onboard new employees and collaborate across teams. Ultimately, there is no substitute for in-person connections, and I am excited about what these interactions mean for innovating on our client solutions, the development of talent, and the strengthening of our firm culture. Shifting to shareholder distributions, I am pleased to announce that we have increased the quarterly dividend to 15 cents per share, a more than doubling of our prior dividend. The increase is a result of our recent earnings growth and our confidence in the sustainability of our run rate. It is also reflective of our capital-efficient business model, which enables us to fuel a robust level of organic growth while still paying out a healthy portion of earnings to shareholders. In September, we celebrated one year as a public company. Our public listing enabled us to broaden our equity ownership among our employees, provides a means to attract and retain talent, elevates our brand globally, and serves as a valuable currency to help grow our business, as we demonstrated with the acquisition of Greenspring. We are proud that since our IPO, our stock has delivered returns to our shareholders well above the market's return, and I want to thank the entire StepStone team for their hard work and dedication. Finally, before I hand the call over to Mike, I'd like to take a moment to acknowledge the announcement that we issued earlier today, that our co-founder and co-CEO, Monty Brehm, will be transitioning to executive chairman as of January 1st, a remaining chairman of our board of directors, and I will become sole CEO. This transition is the natural next step in a succession plan that has been carefully planned and communicated over the last several years. Nevertheless, it does provide an opportunity to look back and reflect on the successful firm that we've built over time. Monty clearly laid the foundation for our success with his vision to build a global private markets investment firm and establish a collaborative and entrepreneurial culture. We couldn't be more excited about the opportunity to build off that foundation while continuing to benefit from Monty's vision and mentorship as executive chairman. With that, I will turn it over to Mike McCabe.