StepStone Group Inc.

Good day and thank you for standing by. Welcome to the first fiscal quarter 2025 StepStone Group, Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Seth Rice, Vice President of Investor Relations. Please go ahead.

Thank you and good afternoon. Joining me on today's call are Scott Hart, Chief Executive Officer, Jason Ment, President and Co-Chief Operating Officer, Mike McCabe, Head of Strategy, and David Park, Chief Financial Officer. During our prepared remarks, we will be referring to a presentation which is available on our Investor Relations website site at shareholders.stepzonegroup.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. 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 changes in circumstances or a number of risks or other factors that are described in the risk factor section of Step Zone'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. Today's presentation contained 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 FCC. Turning to our financial results for the first quarter of fiscal 2025. Beginning with slide three, we reported GAAP net income of $48.0 million. GAAP net income attributable to StepStone Group Incorporated was $13.3 million, or 20 cents per share. Moving to slide five, we generated fee-related earnings of $71.7 million, up 61% from the prior year quarter, and we generated an FRA margin of 40%. The quarter reflected retroactive fees primarily from our private equity secondaries fund, special situation real estate secondaries fund, and infrastructure co-investment fund. Retroactive fees contributed $19.1 million to revenue, which compares to retroactive fees of $2.8 million in the first quarter of fiscal 2024. Finally, we earned $57.2 million in adjusted net income for the quarter, or $0.48 per share. This is up from $29.4 million, or $0.26 per share, in the first fiscal quarter of last year, driven by both higher fee-related earnings and higher realized performance fees. I'll now hand the call over to Scott.

Thanks, Seth. We carried over the momentum from last year as we enter our new fiscal period with very strong operating and financial performance. Our first quarter was a record period on several key fronts. It was our strongest period ever for fundraising, our strongest period ever for net contribution to fee-earning assets, which surpassed $100 billion, and our strongest period ever for net additions to undeployed fee-earning capital, which reached our highest level ever of $27.6 billion. This set a stepstone up for a strong fiscal 2025 and for sustained growth beyond this year. Our diverse array of offerings, supportive client base, and in-demand strategies and asset classes all contributed to our results. In the quarter, we generated a record $12.6 billion of gross AUM additions. Fundraising was strong across commercial structures, with commingled funds raising over $3 billion and separately managed accounts raising over $9 billion. Over the last 12 months, we have raised nearly $28 billion, our strongest 12-month period ever, as we have successfully closed on several managed account re-ups and new mandates, executed on several successful commingled fundraisers, particularly in venture capital secondaries and private equity secondaries, and continue to ramp our private wealth offerings. Our success in raising capital is a result of years of building relationships, capabilities, and track records. The last 12 months in particular are emblematic of the fruits of those efforts, While the pacing of fundraising can be episodic at times, the corresponding growth in fear-earning AUM and the build in undeployed fear-earning capital provides a runway for consistent top-line growth. Included in this quarter's fundraising is over $800 million of private wealth subscriptions, which is our strongest private wealth quarter ever. We have four evergreen private wealth funds in market. S Prime, our all-private markets fund, Spring, our venture and growth equity fund, Strux, our infrastructure fund, and Credex, our private credit fund, for which we accepted our first subscriptions in June. I am also pleased to announce that Spring was recently added to a second wire house. We are now distributing StepStone Evergreen funds with nearly 400 partners, with S-Prime and Spring each on two wire houses. We are thrilled with the development and uptake of our private wealth suite of offerings and continue to see a strong runway for growth. Pivoting to our financial results, we generated $179 million in management and advisory fees and $72 million in fee-related earnings, which are up 29% and 61% year-over-year, respectively. We generated an FRE margin of 40%, which benefited from strong retroactive fees. Excluding the impact from retro fees, our fee-related revenue and fee-related earnings would have increased 18% and 35% year-on-year, respectively, driven by strong growth in our fee-earning AUMs. The combination of robust fundraising over the past 12 months, along with recent commingled fund activations, has set Stepstone up to deliver strong financial performance in fiscal 2025 and positions us well to achieve the five-year growth target of doubling fee-related earnings, which we established last year at our investor day. Lastly, realized performance fees of $43 million were the highest level in the last two years. As you are aware, performance fees are largely dependent on a healthy realization environment, so we anticipate some volatility quarter to quarter. While capital market activity is still relatively muted, and the last week has clearly been an eventful one for the public markets, with major stock indices entering correction territory and volatility measures more than doubling, we expect realizations of performance fees to continue to trend up off the low levels of last year. To sum up, this was a very strong quarter, with all key operating and financial metrics clicking. While we do not expect this pace of retroactive fees to persist, The growth of fee-earning assets and undeployed fee-earning capital creates a higher base for sustainable sources of earnings. We feel excellent about the accomplishments of recent periods and even more excited about the progress we are making towards our longer-term goals. With that, I'll pass the call to Mike.