StepStone (US:STEP)2022-08-04 16:00Financial Overview - As of June 30, 2022, the company oversaw approximately $588 billion in private markets allocations, including $137 billion of AUM and $452 billion of AUA[162]. - The company generated $80 billion in AUM from separately managed accounts (SMAs) and $45 billion from focused commingled funds as of June 30, 2022[164]. - Advisory relationships accounted for $452 billion of AUA and $12 billion of AUM as of June 30, 2022[168]. - The company tracked detailed information on over $835 billion of client commitments through its proprietary performance monitoring software, Omni, as of June 30, 2022[168]. - AUM as of June 30, 2022 reflects final data for the prior period, adjusted for net new client account activity[214]. - AUA consists of client assets for which the company does not have full discretion to make investment decisions but provides advisory services[215]. Acquisition and Investments - The company completed the acquisition of Greenspring for approximately $185 million in cash and stock, with an additional earn-out of up to $75 million based on future performance[173]. - The acquisition of Greenspring added $22 billion of AUM as of September 20, 2021[252]. - The total capital commitments for private debt investments amounted to $33.5 billion, with 725 investments[288]. Financial Performance - Total revenues decreased by $385.8 million to $(77.2) million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to lower carried interest allocations[230]. - Net management and advisory fees increased by $38.7 million, or 50%, to $116.7 million for the three months ended June 30, 2022, driven by new client activity and a 47% growth in average Fee-Earning AUM (FEAUM) across the platform[231]. - Realized carried interest allocation revenues increased by $23.6 million, or 47%, to $73.6 million for the three months ended June 30, 2022, reflecting higher realization activity within private equity funds[233]. - Total expenses decreased by $242.1 million to $(68.4) million for the three months ended June 30, 2022, due to decreases in performance fee-related compensation[235]. - Cash-based compensation increased by $17.4 million, or 41%, to $60.1 million for the three months ended June 30, 2022, attributed to increased staffing and compensation levels[236]. - Investment income (loss) decreased by $7.5 million to a loss of $1.1 million for the three months ended June 30, 2022, reflecting changes in the valuations of underlying investments[241]. - Income tax expense decreased by $13.1 million, or 91%, to $1.3 million for the three months ended June 30, 2022, primarily driven by a pre-tax net loss[247]. - Adjusted revenues increased by $54.1 million, or 40%, to $190.3 million for the three months ended June 30, 2022, compared to the same period in 2021[265]. - Adjusted net income (ANI) rose by $6.6 million, or 16%, to $47.1 million for the three months ended June 30, 2022[266]. - Fee-related earnings (FRE) increased by $13.5 million, or 58%, to $36.6 million for the three months ended June 30, 2022[270]. Capital and Cash Management - As of June 30, 2022, the company had $63 million outstanding on its $225 million revolving credit facility[174]. - The company had $107.3 million in cash, cash equivalents, and restricted cash as of June 30, 2022, alongside $1,474.4 million in investments in StepStone Funds[288]. - The company reported a net cash provided by operating activities of $57.5 million for the three months ended June 30, 2022, down from $75.7 million in 2021, indicating a decrease of 24%[290]. - The net cash used in financing activities was $60.7 million for the three months ended June 30, 2022, compared to $31.2 million in 2021, showing a significant increase of 94%[292]. - The company had outstanding letters of credit totaling $2.6 million as of June 30, 2022, which reduces the available capacity under the Revolver[298]. Market and Economic Factors - The company’s ability to attract new capital is influenced by clients' views on private markets relative to traditional asset classes[169]. - The company’s future performance may be affected by macroeconomic factors such as inflation, rising interest rates, and geopolitical events[171]. - A 10% decline in market values of investments held in funds would result in an approximate $1.7 million decrease in annual management fees[314]. - The company estimates that a 10% decline in fair value of investments would result in a $10.8 million decrease in investment income[315]. Employee and Ownership Structure - The company employs 840 total employees, including over 295 investment professionals[163]. - The company maintained a beneficial ownership of approximately 31.3% of Class A common stock and 56.1% of the aggregate voting power as of June 30, 2022[182]. - Approximately 50% of carried interest allocation revenue is awarded to employees as part of the long-term incentive compensation plan[198]. Performance Metrics - The company’s private equity investments achieved a net IRR of 19.3% and a net TVM of 1.7x[284]. - The real estate investment strategy yielded a net IRR of 9.4% and a net TVM of 1.6x[284]. - The infrastructure investments had a net IRR of 12.3%[284]. - As of June 30, 2022, the company had $17.1 billion of undeployed fee-earning capital[259]. - The weighted-average management fee rate from SMAs was approximately 0.40% for the twelve months ended June 30, 2021 and 2022[45]. - The weighted-average management fee rate from focused commingled funds was approximately 0.92% and 0.87% for the twelve months ended June 30, 2021 and 2022, respectively[45]. - The weighted-average fee rate for private equity increased to 0.66% as of June 30, 2022, from 0.64% as of March 31, 2022[257]. - As of June 30, 2022, the maximum amount of carried interest allocations subject to contingent repayment was estimated at $241.4 million, net of tax[315].