StepStone Group Inc.

Good day and thank you for standing by. Welcome to the StepStone second quarter of fiscal year 2025 conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 11 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to our first speaker today, Seth Weiss. Please go ahead.

Thank you, and good evening. 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 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. 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 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. Today's presentation contains references to non-GAAP financial measures. Reconciliations for 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 2025. Beginning with slide three, we reported GAAP net income of $53.1 million. GAAP net income attributable to StepStone Group Incorporated was $17.6 million, or 26 cents per share. Moving to slide five, we generated fee-related earnings of $72.3 million, up 65% from the prior year quarter, and we generated an FRE margin of 39%. 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 $14.9 million to revenue, which compares to retroactive fees of $3.7 million in the second quarter of fiscal 2024. Finally, we earned $53.6 million in adjusted net income for the quarter, or 45 cents per share. This is up from $30.2 million, or 26 cents per share, in the second quarter of last fiscal year, driven by both higher fee-related earnings and higher net realized performance fees. I'll now hand the call over to Scott.

Thank you Seth, and good evening everyone. After posting record results last quarter, we generated even higher fee-related earnings in our fiscal Q2, driven by continued growth in our fee-earning assets. We achieved several fundraising milestones this quarter. We closed the fifth vintage of our private equity secondaries fund at a total fund size of $4.8 billion, our largest commingled fund to date. We generated nearly $850 million in private wealth subscriptions and surpassed $5 billion in net asset value in our private wealth platform. We are benefiting from multiple evergreen funds in market, a strong distribution network, growing brand recognition, and strong investment performance. In the four years since the launch of S-Prime, our first retail-focused evergreen fund, Stepstone Private Wealth has evolved into a meaningful contributor to AUM and earnings growth. While we continue to invest in the platform, private wealth revenue growth is meaningfully outpacing our incremental investments, which is helping to drive operating leverage for the entire firm. Firm-wide, we grew Fearing AUM by $4 billion and produced another strong quarter of gross AUM inflows of nearly $6 billion across the StepStone platform. Turning to our financial results, we generated $185 million in management and advisory fees and $72 million in fee-related earnings, which are up 30% and 65% year-over-year, respectively. This is our strongest fee-related revenue and fee-related earnings on record, even as retroactive fees moderated slightly from last quarter's record level. Excluding the impact of retroactive fees, our fee-related revenue and fee-related earnings increased 23% and 44% year-on-year, respectively. driven by robust growth in our fearing AUM, particularly in our commingled funds and our evergreen private wealth funds. Our FRE margin was 39% for the quarter. If you were to exclude the impact of retroactive fees, our FRE margin was 34% for both the quarter and the trailing 12 months, our best quarterly and 12-month core margin levels on record. We are reaping the benefits of operating leverage, even as we continue to invest for long-term growth. Shifting gears, in September, we hosted the StepStone 360 Conference, our annual event for private markets, clients, and investors. The sentiment from our clients at this year's conference was undoubtedly more positive than in its prior two years, and demand for our offerings and solutions remains very high. Global financial market performance has been strong in the last 12 months, but private market investors still face distinct challenges. While pressure from the denominator effect has abated, constraints on liquidity remain a challenge due to the extended period of subdued market activity and corresponding realizations. Appropriately, liquidity was a prevalent theme at our conference. I would like to share some insights from our SPI database on transaction volumes and asset valuations. When we look at the private markets over the last 25 years, annual realizations have averaged just over 20% of the prior year's net asset value. Over the last three years, this pace of monetization has been cut in half to the lowest levels we have seen since the dot-com bubble burst of the early 2000s and the global financial crisis of 2008 and 2009. While the muted pace of realizations is similar to those periods, the duration of this slowdown has been more protracted compared to the decelerations of the dot-com era and the financial crisis. However, today's private markets are fundamentally different from those of 2002 and 2009. The slowdowns and modernizations in the 2000s were accompanied by significant price declines, but private market asset values today are broadly higher than they were a couple years ago. There are pockets of weakness in parts of the real estate and venture capital markets, but the corrections in those areas have been more modest than the bear markets of the past. Some of the drivers of today's mutualizations, such as shifting interest rates and wide bid-ask spreads, have started to ease and are expected to continue easing in the coming periods. Other drivers, such as the emergence of longer-duration investments in infrastructure and venture capital, or the trend of general partners holding on to high-performing assets for longer periods of time, are more structural. Over the last two and a half years, the median age of investments in the ground has steadily risen. Among mature US PE buyout funds, the number of unrealized investments that have been held for at least five years is now greater than 50%, which is the first time the median hold period has crossed the five-year threshold since we have tracked this data. While this is reflective of slower activity the last three years, it also represents an opportunity for the coming years, as those assets are ripe for harvest. Encouragingly, we are starting to see liquidity pick up within StepStone funds. Realizations have slowly improved over the last year since hitting a low in the first half of fiscal 2024. We have not yet seen a widespread resumption of full asset sales, but sponsors are leveraging alternative means of harvesting investments, including partial asset sales, dividend recapitalizations, and the use of continuation vehicles. We expect liquidity to continue to trend up in the coming period as full-scale M&A and IPOs come back into the market, but the path may not be linear. In this environment of shifting liquidity, we are continuously seeing clients approach StepStone for our solutions. This is particularly true as LPs and GPs have more options to manage liquidity with the continued development of the secondaries market. Our experience, data, and modeling capabilities provide increasingly valuable insights for our clients to model the likelihood of various outcomes and plan for their capital and cash needs. And I'll turn the call over to Mike to talk about fundraising and progression of fee-earning AUM in more detail. Thanks, Scott.