StepStone Group Inc. 10-Q Summary: Quarter Ended June 30, 2025
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2025 (Q1 of Fiscal Year 2026). StepStone Group Inc. (SSG) is a global private markets investment firm providing customized investment solutions, advisory services, and data analytics. The company operates as a single segment, managing assets across private equity, infrastructure, private debt, and real estate. As of June 30, 2025, SSG was responsible for approximately $723 billion of total capital, comprising $199 billion in Assets Under Management (AUM) and $524 billion in Assets Under Advisement (AUA).
Key Financial Metrics
| Metric | Q1 2026 (Three Months Ended June 30, 2025) | Q1 2025 (Three Months Ended June 30, 2024) |
|---|---|---|
| Total Revenues | $364.3 million | $186.4 million |
| Net Income (Loss) | $(12.0) million | $48.0 million |
| Net Income (Loss) Attributable to SSG | $(38.4) million | $13.3 million |
| Diluted EPS (Class A) | $(0.49) | $0.20 |
| Operating Cash Flow | $46.3 million | $50.2 million |
| Total Debt Obligations (Net) | $269.6 million | $269.3 million |
| Cash and Cash Equivalents | $191.5 million | $141.6 million |
Note: Financial results include significant non-cash items related to unrealized carried interest and equity-based compensation.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 95% to $364.3 million, driven primarily by a surge in carried interest allocations ($113.3 million vs. $16.6 million) and higher management fees ($211.2 million vs. $178.0 million). Legacy Greenspring carried interest allocations turned positive ($39.6 million) compared to a reversal in the prior year.
- Expense Surge: Total expenses increased 204% to $423.3 million. This was largely due to a $169.5 million increase in equity-based compensation, primarily driven by mark-to-market adjustments on liability-classified awards related to the StepStone Group Private Wealth (SPW) subsidiary.
- Profitability: Despite revenue growth, the company reported a net loss attributable to SSG of $38.4 million, compared to net income of $13.3 million in the prior year. This shift was caused by the significant increase in non-cash equity compensation expenses and higher allocations to non-controlling interests.
- Fee-Earning AUM: Fee-Earning AUM (FEAUM) grew to $127.2 billion, an increase of $5.8 billion from the prior quarter, reflecting new client activity and contributions.
Guidance, Outlook, and Risks
- Market Conditions: Management notes significant volatility in 2025 due to U.S. trade policy, tariffs, and geopolitical tensions. While the U.S. economy has expanded, fundraising activity and capital deployment have slowed, potentially delaying management and performance fees.
- Tax Legislation: The "One Big Beautiful Bill Act" (OBBBA) was enacted on July 4, 2025, introducing significant tax reforms. The company is assessing the impact on deferred tax positions and future cash obligations, but these effects are not reflected in the current quarter's results.
- Equity Transactions: The company completed the second annual exchange under its Transaction Agreements, acquiring approximately 5% of equity interests in its asset class entities (SRA, SRE, SPD). This increased the Partnership's ownership in these entities to approximately 60%.
- Dividends: A quarterly cash dividend of $0.28 per share was declared on August 7, 2025, payable September 15, 2025. In the current quarter, a regular dividend of $0.24 and a supplemental dividend of $0.40 were paid.
- Risks: Key risks include the potential reversal of unrealized carried interest, volatility in private market valuations, and the impact of the OBBBA tax legislation. The company also faces contingent repayment obligations on carried interest estimated at $367.1 million (net of tax) if all investments were valued at zero.
Investor Verification Checklist
- Equity Compensation Volatility: Verify the sustainability of the $188.7 million equity-based compensation expense, specifically the $170.5 million increase related to SPW liability awards, and its impact on future earnings.
- Unrealized Carried Interest: Assess the quality of the $88.9 million in unrealized carried interest revenue and the associated $44.4 million in unrealized compensation expense, noting these are non-cash and subject to reversal.
- Non-GAAP Measures: Review the reconciliation of GAAP Net Loss to Adjusted Net Income (ANI) of $48.5 million to understand core operating profitability excluding non-cash items.
- Tax Impact: Monitor future filings for the quantified impact of the OBBBA tax reform enacted in July 2025.
- Liquidity: Confirm the company's ability to meet the $315.9 million liability under Tax Receivable Agreements (TRA) as partnership units are exchanged for stock.