STEP — StepStone Group Inc.

StepStone Group Q4 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• GAAP Net Loss: $7.8 million or $0.10 per share, impacted by fair value changes in private wealth profits interest.
• Fee-Related Earnings (FRE): $105 million, up 12% year-over-year, with a FRE margin of 40%.
• Core FRE: $101 million, up 28% year-over-year, maintaining a 40% margin.
• Adjusted Net Income: $69 million or $0.57 per share, down from $81 million or $0.68 per share in Q4 FY2025, primarily due to lower performance-related earnings.
• Total Fee Revenues: $260 million, up 21% year-over-year; excluding retroactive fees, growth was 29%.
• Accrued Carry: $936 million, up 7% from the previous quarter.
• Dividends: Declared a $0.55 supplemental dividend and a $0.28 base dividend, totaling $1.67 per share for the year, a 23% increase from FY2025.

2. Strategic Updates and Business Highlights

• Record Fundraising: Nearly $14 billion in capital formation for the quarter, totaling $38 billion for the fiscal year.
• Private Wealth Subscriptions: $2.3 billion in new subscriptions, with a low reduction rate of approximately 2%.
• Investment in Technology: Launched partnerships with FTSE Russell and Kroll to monetize data and technology, enhancing private market indices and benchmarking tools.
• Defined Contribution Solutions: Hired a Head of Defined Contribution Solutions to explore private market inclusion in retirement plans, anticipating regulatory support from the Department of Labor.

3. Forward Guidance and Outlook

• Growth Expectations: Anticipate continued top-line growth and operating leverage to drive FRE growth in FY2027.
• Investment Strategy: Plans to activate several funds in the upcoming quarters, including a flagship private equity secondaries fund, which should enhance fee-earning assets.
• Market Positioning: Strong demand for private debt and credit strategies, with expectations of continued inflows into private wealth offerings.

4. Bad News, Challenges, or Points of Concern

• GAAP Loss: The net loss due to fair value accounting raises concerns about profitability.
• Performance-Related Earnings Decline: Adjusted net income decreased due to lower performance-related earnings, highlighting potential volatility in this area.
• Market Volatility: Geopolitical tensions and economic uncertainties, including AI disruption and scrutiny on private credit, pose risks to future performance.
• Redemption Risks: Concerns about liquidity in secondary vehicles, particularly if redemptions exceed 5% over an extended period.

5. Notable Q&A Insights

• Secondary Market Concerns: Management addressed concerns about day 1 markups in secondary markets, emphasizing their rigorous valuation processes and the importance of asset appreciation post-purchase.
• Defined Contribution Market: Discussions on the potential for private market investments in 401(k) plans, with a focus on education and customization for plan sponsors and record keepers.
• Spring Fund Performance: Management expressed confidence in the durability of flows and performance in their Spring venture fund, driven by strong demand for curated exposure to the innovation economy.

Overall, StepStone Group reported strong fee-related earnings and fundraising achievements, while also navigating challenges related to market volatility and performance-related earnings. The company is focused on strategic growth initiatives, particularly in private wealth and technology, while remaining cautious about external economic factors.