StepStone Group Inc.

Welcome to the StepStone Fiscal Second Quarter 2023 Earnings Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. I'll now turn the call over to your host, Seth Weiss, Managing Director, Corporate Investor Relations. Mr. Weiss, you may begin.

Thank you, and good afternoon. Joining me on the call today are Scott Hart, Chief Executive Officer, Jason Mett, 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 and our plans for future dividends. 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 and actual dividends declared may differ materially from those expressed or implied by these forward-looking statements due to changes in circumstances or a number of risks or other factors that are described in the risk factors section of Sebson's most recent 10-K. These forward-looking statements are made only as of today and, except as required, we undertake no obligation to update or revise any of them. In addition, today's presentation contains references to non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings release, our presentation, and our filings with the SEC. Turning to our financial results for the second quarter of fiscal 2023. We reported a gap net loss of $67.1 million for the quarter ended September 30th, 2022. The gap net loss attributable to Stepstone Group Inc. was $29.2 million. We generated fee-related earnings of $39.0 million, adjusted net income of $37.3 million, and adjusted net income per share of 33 cents. The quarter had no impact from retroactive fees. This compares to retroactive fees in the second quarter of fiscal 2022 that contributed $2.3 million to revenue and $2.1 million to fee-related earnings and pre-tax adjusted net income. I'll now turn the call over to Stepstone's Chief Executive Officer, Scott Hart.

Thank you, Seth, and good afternoon, everyone. We delivered another very strong quarter, generating our highest fee-related revenue and highest fee-related earnings ever, despite continued volatility in the capital markets. This period's results offer further evidence of the resilience of our business model across economic cycles. Turning to our results on slide five, we generated $37 million in adjusted net income for the quarter, or 33 cents per share. This is down from 40 cents in the prior year quarter, as performance fees have moderated from record levels. Looking over our trailing four quarters, we have generated $1.54 of adjusted net income per share, which is up 15% from a year ago. Included in our quarterly results are $39 million of fee-related earnings, our best period ever, up 48% from the prior year quarter, and up 31% on a per share basis. These record results come despite no retroactive fees in the quarter. As we highlighted last quarter, our fee-related revenues are extremely resilient. The vast majority of our management fees are contractually committed for multiple years. Additionally, our fees are generally tied to committed or invested capital and therefore not impacted by market fluctuations. Furthermore, our diversification across geographies, asset classes, managers, and strategies provides StepStone with a wide array of tools to help our clients navigate these challenging markets. We view our fee-related earnings as a balance that, when coupled with our performance fees, produce an earnings engine with extremely strong growth and efficient cash flow. To that end, we are excited to outline an approach to our capital management that will utilize the high predictability and visibility of our FRE to deliver a stable and growing quarterly dividend. This will be complemented by a recurring supplemental annual dividend that will generally be funded by our performance-related earnings. Mike will give more detail shortly. Moving to assets under management, we finished the quarter with $135 billion of AUM and $80 billion of fee-earning assets. Over the last year, we have grown fee-earning AUM by over $13 billion, or 20%, generating consistent and balanced growth across asset class and commercial structure. We had an active period meeting with new and long-standing clients, and these conversations have further validated the message we have delivered on recent calls. While our clients and limited partners are undoubtedly cautious and selective, they are looking to stay invested and expect to see compelling opportunities across the private markets. Manager selection and asset allocation are particularly important in today's environment, and StepStone is uniquely positioned to help investors navigate current conditions. Late last month, we hosted the StepStone 360 Conference in New York, our annual investor conference. We were thrilled to host the event live after holding it virtually the prior two years. Our clients were enthusiastic to return to our conference in person, with attendance up 30% from pre-COVID levels and with roughly half the attendees traveling from outside the U.S. Shifting to retail, making the private market accessible to the individual investor is a central strategy for StepStone's growth story, and we are excited to announce the rebranding of Converses as StepStone Private Wealth. We continue to see strong flows from the individual investor, raising approximately $180 million for the quarter into our C-prime product, which will be rebranded S-prime, and which now stands at more than $850 million of AUM, and has generated an annualized return of 33% to our investors in its first two years since inception. Monthly subscriptions have reached an average of approximately $60 million over the quarter, up from $15 million per month this time last year. As discussed on prior calls, we have a pipeline of additional retail products we intend to launch in the coming years and are excited to announce the first close of our private venture and growth fund to be rebranded Spring of $120 million after quarter end. We have also executed closes across offshore parallel funds and feeder funds into S-Prime and Spring, totaling approximately $130 million, further opening our private market strategies for individual investors globally. With this change also comes a reorganization of our relationship with the StepStone private wealth team, which Mike will outline in more detail. I'll now turn the call over to Mike McCabe to speak about our asset growth, fee-related revenue growth, and strategic initiatives in more detail.