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01/11 04:23
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance, with significant growth in adjusted net income and fee revenues. The introduction of STPEX and expansion in institutional fundraising are positive indicators. Despite concerns about increased G&A expenses, the partnership with Aviva and international expansion present growth opportunities. The Q&A reveals some uncertainties, but overall sentiment remains positive. Given the company's market cap, the stock price is likely to experience a moderate positive movement.
GAAP Net Loss $366 million or $4.66 per share for Q2 2026. This loss was significantly larger than prior periods due to the progress of the Private Wealth platform.
Fee-Related Earnings (FRE) $79 million, up 9% year-over-year. Core FRE was $78 million, up 34% year-over-year, driven by retroactive fees and higher core fee-related earnings.
FRE Margin 36%, consistent year-over-year.
Adjusted Net Income $66.7 million or $0.54 per share, up from $53.6 million or $0.45 per share in the prior year, driven by higher performance-related and core fee-related earnings.
Private Wealth Subscriptions $2.4 billion in new subscriptions, nearly double the previous highest quarter, driven by growth in existing products, the launch of STPEX, and international expansion.
Institutional Fundraising $3.8 billion in managed account gross additions and $3.4 billion in commingled fund gross additions for the quarter, contributing to $10 billion in managed account inflows for the first half of the fiscal year.
Fee-Earning AUM Increased by $5.5 billion in the quarter to nearly $133 billion, translating to growing earnings power.
Gross AUM Additions $29 billion over the last 12 months, including $18 billion from separately managed accounts and $11 billion from commingled funds.
Fee Revenues $217 million, up 17% year-over-year. Excluding retroactive fees, fee revenues grew by 27% year-over-year.
Adjusted Cash-Based Compensation $100 million, representing a cash compensation ratio of 46%, consistent with expectations.
SPRING Fund: Generated over $800 million in new subscriptions, showcasing its growing popularity.
STPEX Fund: Launched as a private equity interval fund with daily subscription capability, achieving over $700 million in gross subscriptions within the first 30 days.
International Expansion: Opened new offices in the Netherlands, Spain, South Korea, and Saudi Arabia, strengthening presence in Europe, Asia, and the Middle East.
Partnership with Aviva: Selected as one of five specialist managers for Aviva's U.K. trust-based pension scheme, enhancing reputation in private markets for retirement savings.
Fee-earning AUM Growth: Increased by $5.5 billion in the quarter, reaching nearly $133 billion, with a 20% annual organic growth rate since fiscal 2021.
Data and Technology Enhancements: Launched Kroll StepStone Private Credit benchmarks and FTSE StepStone Global Private Market Indices, providing advanced analytics and daily index performance.
Client Retention and Growth: Achieved a re-up rate above 90%, with re-uped accounts growing nearly 30% on average in successive vintages.
Fundraising Momentum: Generated $29 billion in gross AUM additions over the last 12 months, driven by strong client relationships and customized solutions.
GAAP Net Loss: The company reported a GAAP net loss of $366 million, significantly larger than prior periods, driven by the change in fair value of the buy-in of the StepStone Private Wealth profits interest. This could impact financial stability and investor confidence.
Retroactive Fees: Retroactive fees contributed only $0.3 million to revenue this quarter, a significant drop from $14.9 million in the prior year quarter. This decline could affect revenue consistency and financial performance.
Low Distributions in Private Markets: Private market distributions have been low for three consecutive years, shifting client focus from IRR to DPI. This could lead to fundraising declines and impact client sentiment and investment inflows.
Fee Revenue Growth Moderation: Fee revenue growth was driven by fee-earning AUM, but the blended management fee rate declined slightly from 65 to 63 basis points. This moderation could affect revenue growth rates.
Advisory Fees Decline: Advisory fees dropped to $16 million from $20 million in prior quarters, reflecting a normalization that could impact near-term revenue.
Geopolitical and Market Challenges: Geopolitical and market challenges, including slower exits and fundraising declines, could impact the company's ability to maintain its growth trajectory.
Increased Operating Expenses: General and administrative expenses increased to $34 million, driven by higher travel, IT, and other operating costs. This rise in expenses could pressure margins.
Private Wealth Platform Growth: The company expects the newly launched STPEX private equity interval fund to become a significant source of private wealth inflows, despite an anticipated moderation in subscriptions after the initial surge. Additionally, the company is accelerating international expansion, with a focus on building syndicates, establishing track records for international funds, and growing the StepStone brand globally.
Institutional Fundraising: The company anticipates continued momentum in institutional fundraising, with a healthy mix of new mandates and growth in existing mandates. Over one-third of managed account inflows are expected to come from new and expanded relationships, which are projected to contribute to future growth as these clients re-up.
Fee-Earning AUM Growth: Fee-earning assets under management (AUM) are projected to continue growing, supported by strong fundraising momentum. The company reported an annualized growth rate of 18% in fee-earning AUM for the quarter and expects this trend to persist.
New Fund Launches: The company is in the market with a PE secondaries fund and a debut GP-led PE secondaries fund, with first closes expected by the end of the fiscal year. The combination of these funds is anticipated to exceed the prior vintage size of $4.8 billion.
Private Market Trends: The company expects current low distributions in private markets to be temporary, with indicators such as increased IPOs, rising investment banking activity, and narrowing bid-ask spreads pointing to better realizations ahead.
The selected topic was not discussed during the call.
The earnings call highlights strong financial performance, with significant growth in adjusted net income and fee revenues. The introduction of STPEX and expansion in institutional fundraising are positive indicators. Despite concerns about increased G&A expenses, the partnership with Aviva and international expansion present growth opportunities. The Q&A reveals some uncertainties, but overall sentiment remains positive. Given the company's market cap, the stock price is likely to experience a moderate positive movement.
The earnings call highlights record high fee-related earnings, strong dividend growth, and a robust share buyback program, indicating positive financial health and shareholder returns. Despite some operational risks and competition, the growth in AUM and positive pipeline outlook suggest optimism. The Q&A section revealed confidence in future margins and business opportunities, with no major concerns from analysts. The market cap suggests moderate sensitivity, leading to a prediction of a positive stock price movement.
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