StepStone Group Inc.

Good afternoon, ladies and gentlemen, and welcome to StepStone's Fiscal First Quarter 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Press star 1 if you would like to queue up for a question, and press star 2 to remove yourself from the queue. I would now like to turn the conference over to Seth Wise, StepStone's Head of Investor Relations. Please go ahead.

Thank you. Joining me on today's call 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, contain 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 factor section of Stepstone's periodic filings. 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 first quarter of fiscal 2024. Beginning with slide three, we reported gap net income of $49.4 million. Gap net income attributable to StepStone Group Incorporated was $21.3 million. Moving to slide four, we generated three related earnings of $44.4 million, up 21% from the prior year quarter, and we generated an FRE margin of 32%. The quarter reflected retroactive fees resulting from interim closings of our PE Secondaries Fund, our Multi-Strategy Global Venture Capital Fund, and our Infrastructure Co-Invest Fund, which in total contributed $2.8 million to revenue and fee-related earnings, 140 basis points to FRE margin, and $2.7 million to pretax adjusted net income. This compares to retroactive fees in the first quarter of fiscal 2023 that contributed $2.4 million to revenue, $2.2 million to fee-related earnings and pre-tax adjusted net income, and 130 basis points to FRE margin. Excluding the impact of retroactive fees in both this quarter and the prior year's quarter, we would have grown fee-related earnings by 21%. Finally, we earned $29.4 million in adjusted net income for the quarter, or 26 cents per share. This is down from $47.1 million, or 41 cents per share, in the first fiscal quarter of last year, driven primarily by lower net realizations and partially offset by higher fee-related earnings. I'll now hand the call over to StepStone CEO, Scott Hart.

Thank you, Seth, and good afternoon, everyone. Over the last year, we have generated a strong progression of fee-related earnings driven by consistent growth in fee-earning assets under management, despite a challenging environment for the private markets and the broader asset management industry. The strength and breadth of our platform enable StepStone to offer a comprehensive set of solutions to our clients, allowing them to proactively invest across economic cycles. Our client-first approach has resulted in strong historic growth, and we expect to continue along this path as we listen and adapt to our clients' needs across evolving market backdrops. Looking at today's environment, our clients remain patient in making capital commitments. However, the broader market appears to be strengthening, and the sentiment among our clients and partners is improving. Public equity indices are up 20 to 40 percent since the market's trough, with strength particularly in technology. Investment realizations remain modest, but we are seeing green shoots with some recent IPO activity and M&A. Increased transactions would not only lead to stronger performance fees, but would help spur fundraising as realized capital that is returned is recycled back into new investments, particularly for those LPs with more mature private markets portfolios. At our investor day in June, we set out a path to at least double our fee-related earnings over the next five years. Since our founding more than 15 years ago, we have taken deliberate steps to build leading teams and capabilities across all the major private market asset classes and strategies, establish solutions for institutional and individual investors, position ourselves in the fastest-growing geographies, and construct leading data and technology platforms that provide StepStone with distinct competitive advantages in delivering private market solutions. As such, we believe the drivers of growth are already in place, namely managed account re-ups, continued success within our commingled funds across both institutional and private wealth clients, deepening market penetration across geographies, and operating leverage. A major contributing factor in our confidence to achieving this long-term growth centers around the diversity of our offerings. Our wide scope of capabilities ensures that we have myriad solutions for different market environments and that we are not concentrated in any one area. I'd like to focus on a few of the avenues about which we are particularly excited. Beginning with secondaries, this is a strategy that we've spoken about on recent calls and warrants continued discussion given how it is resonating with investors in today's environment. Investors are attracted to the strong returns while appreciating the favorable risk and cash flow profile that comes from investing in a seasoned portfolio or asset. At the same time, supply remains strong as GPs and LPs are increasing their adoption of secondaries as a mechanism to harvest returns and generate liquidity. As a trusted partner to GPs and LPs alike, StepStone is well positioned to capitalize on this market given the breadth of our relationships and our data advantage. which comes from managing or advising on over $600 billion of assets and monitoring data on over 15,000 managers. We are currently in market with our private equity secondaries fund, our special situations real estate secondaries fund, and we are now in market with our venture capital secondaries fund, where we are working towards a first close. We also offer secondaries and managed accounts across all the asset classes and see opportunities for further product expansion. The secondary markets in private credit and infrastructure are still relatively new, but are starting to accelerate meaningfully as the primary markets in these asset classes have reached a critical mass and LP's portfolios in those asset classes are seasoning. As the largest solutions provider in infrastructure and a meaningful player in private credit, StepStone is positioned to be a leader in developing these secondary markets. Shifting to the geographic landscape, we continue to find opportunities worldwide. We have a strong global presence with offices in 16 countries, which gives us the footprint to grow internationally with deepening pools of emerging capital. We are also growing in North America, which made up over half of our gross inflows this quarter. The breadth of our offering has proven to be a competitive advantage as we closed on several managed account mandates that were multi-strategy and multi-asset class. Finally, private wealth continues to be an extremely exciting avenue for growth. We are averaging inflows of over $70 million a month for calendar 2023, which compares to a $45 million average for the first seven months of last year. In fact, July was our best month of inflows ever with over $100 million in new subscriptions. When we established our private wealth platform, we did it with the aim of increasing accessibility to the private markets. S-Prime, our core private markets evergreen fund, was designed specifically to help individual investors clear challenges associated with private market investing. For example, S Prime has relatively low investment minimums, is suitable for accredited investors, allows for 1099 tax reporting, and doesn't require capital calls. Last month, we took another significant step to reduce investor friction by publishing a daily net asset value for S Prime, making StepStone among the first platforms to introduce a daily NAV for a multi-asset class private markets fund. investors can now subscribe on a daily rather than just a monthly basis. Additionally, S-Prime is now eligible for the National Securities Clearing Corporation platform for mutual funds, enabling investment via a ticker without the need for subscription documents and simplifying the onboarding process for the investor and financial advisor. I'll now turn the call over to Mike McCabe to speak about StepStone's fundraising and Fearing Asset Growth in more detail.