Stepstone Group, Inc. ((STEP)) has held its Q2 earnings call. Read on for the main highlights of the call.
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StepStone Group, Inc. recently held its earnings call, revealing a mixed sentiment. The company showcased robust growth in private wealth subscriptions and institutional fundraising, alongside strategic international expansion and partnerships. However, these positive strides were overshadowed by a notable GAAP net loss, increased expenses, and a decline in retroactive fees.
Record Private Wealth Subscriptions
StepStone Group reported a remarkable achievement in its Private Wealth platform, generating $2.4 billion in new subscriptions. This figure nearly doubles the company’s previous highest quarter, driven by the growth of existing products and the launch of the STPEX fund. This milestone underscores the company’s strong position in the private wealth sector.
Strong Institutional Fundraising
The company continued its momentum in institutional fundraising, raising $3.8 billion in managed account gross additions during the quarter and over $10 billion for the first half of the fiscal year. This performance follows a record-setting fundraising year, highlighting StepStone’s ability to attract significant institutional investments.
Fee-Earning AUM Growth
StepStone’s fee-earning assets under management (AUM) increased by more than $5.5 billion in the quarter, reaching nearly $133 billion. This growth translates into enhanced earnings power, with $78 million in core fee-related earnings, representing a 34% year-over-year growth.
Strategic Partnerships and International Expansion
The company announced a new partnership with Aviva and expanded its global footprint by opening offices in the Netherlands, Spain, South Korea, and Saudi Arabia. These moves highlight StepStone’s commitment to international growth and strengthening client partnerships.
Significant GAAP Net Loss
Despite the positive developments, StepStone reported a GAAP net loss of $366 million, or $4.66 per share. This significant loss was primarily attributed to the progress of the Private Wealth platform, marking a challenging financial period for the company.
G&A Expenses Increase
General and administrative expenses rose to $34 million, a $2 million increase from the previous quarter. This rise was driven by higher travel, IT, and other general operating expenses, reflecting the company’s ongoing investments in its operations.
Retroactive Fees Decline
Retroactive fees saw a sharp decline, contributing only $0.3 million to revenue this quarter compared to $14.9 million in the same quarter of the previous fiscal year. This decrease impacted the company’s fee-related earnings.
Forward-Looking Guidance
Looking ahead, StepStone Group remains optimistic despite the reported GAAP net loss. The company achieved $79 million in fee-related earnings, a 9% increase from the prior year, with a core FRE margin of 36%. Adjusted net income also rose to $66.7 million, or $0.54 per share, up from the previous year’s $53.6 million, or $0.45 per share. The launch of new indices with FTSE Russell signals future opportunities for index tracking investment products.
In summary, StepStone Group’s earnings call presented a mixed picture. While the company demonstrated strong growth in private wealth subscriptions and institutional fundraising, these achievements were dampened by a significant GAAP net loss and increased expenses. Nevertheless, the company’s strategic partnerships and international expansion offer promising prospects for future growth.