# StepStone Group Inc.: Form 10-Q for the period ended Dec 31, 2021

- Company: [StepStone Group Inc.](/companies/step.md) (CIK 1796022)
- Form: 10-Q
- Filed: 2022-02-10
- Accepted by EDGAR: Feb 10, 2022, 16:16 ET
- Period: 2021-12-31
- Accession: 0001796022-22-000006
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1796022/000179602222000006/step-20211231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1796022/000179602222000006/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-10-01 to 2021-12-31 | $410.5m | us-gaap:Revenues |
| Revenue | 9 months, 2021-04-01 to 2021-12-31 | $1.00bn | us-gaap:Revenues |
| Interest expense | 3 months, 2021-10-01 to 2021-12-31 | $543.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2021-04-01 to 2021-12-31 | $637.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2021-10-01 to 2021-12-31 | $15.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-04-01 to 2021-12-31 | $16.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-10-01 to 2021-12-31 | $48.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-04-01 to 2021-12-31 | $152.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-10-01 to 2021-12-31 | $0.83 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2021-04-01 to 2021-12-31 | $3.22 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-10-01 to 2021-12-31 | $0.84 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2021-04-01 to 2021-12-31 | $3.29 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-10-01 to 2021-12-31 | 61,483,233 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2021-04-01 to 2021-12-31 | 50,118,482 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2021-04-01 to 2021-12-31 | $182.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-04-01 to 2021-12-31 | $1.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2021-04-01 to 2021-12-31 | $14.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2021-12-31 | $135.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2021-12-31 | $4.04bn | us-gaap:Assets |
| Total liabilities | at 2021-12-31 | $2.22bn | us-gaap:Liabilities |
| Long-term debt | at 2021-12-31 | $62.8m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2021-12-31 | $775.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 118,101 characters.

*The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes included within this quarterly report on Form 10-Q and our audited financial statements, the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the fiscal year ended March 31, 2021 filed with the SEC. This quarterly report reflects the historical results of operations and financial position of StepStone Group LP, our predecessor for accounting purposes, prior to the Reorganization and IPO. In this quarterly report, references to “we,” “us,” “our,” “StepStone” and similar terms refer to SSG and its consolidated subsidiaries, including the Partnership, following the Reorganization and IPO and to the Partnership and its consolidated subsidiaries prior to the Reorganization and IPO.*

### Business Overview

We are a global private markets investment firm focused on providing customized investment solutions and advisory and data services to our clients. Our clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. We partner with our clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds (“primaries”), acquiring stakes in existing funds on the secondary market (“secondaries”) and investing directly into companies (“co-investments”). As of December 31, 2021, we oversaw approximately $548 billion of private markets allocations, including $127 billion of AUM and $421 billion of AUA.

We are a global firm and believe that our multi-asset class expertise, local knowledge, business relationships, proprietary data and technology, and presence are all critical to securing a competitive edge in the private markets. We deploy a local staffing model, operating from 21 cities across 12 countries on five continents. Our offices are staffed by investment professionals who bring valuable regional insights and language proficiency to enhance existing client relationships and build new client relationships. Since our inception in 2007, we have invested heavily in our platforms to drive growth and expand our investment solutions capabilities and service offerings, including through opportunistic transactions that have helped accelerate the growth of our team and capabilities. As of December 31, 2021, we had 758 total employees, including 265 investment professionals and over 490 employees across our operating team and implementation teams dedicated to sourcing, executing, analyzing and monitoring private markets opportunities. Approximately 130 of our employees joined us as part of the Greenspring acquisition.

We have a flexible business model whereby many of our clients engage us for solutions across multiple asset classes and investment strategies. Our solutions are typically offered in the following commercial structures:

- *Separately managed accounts (“SMAs”)*. Owned by one client and managed according to their specific preferences, SMAs integrate a combination of primaries, secondaries and co-investments across one or more asset classes. SMAs are meant to address clients’ specific portfolio objectives with respect to return, risk tolerance, diversification and liquidity. SMAs, including directly managed assets, comprised $75 billion of our AUM as of December 31, 2021.
- *Focused commingled funds.* Owned by multiple clients, our focused commingled funds deploy capital in specific asset classes with defined investment strategies. Focused commingled funds comprised $42 billion of our AUM as of December 31, 2021.
- *Advisory, data and administrative services.* These services include one or more of the following for our clients: (i) recurring support of portfolio construction and design; (ii) discrete or project-based due diligence, advice and investment recommendations; (iii) detailed review of existing private markets investments, including portfolio-level repositioning recommendations where appropriate; (iv) consulting on investment pacing, policies, strategic plans, and asset allocation to investment boards and committees; (v) licensed access to our proprietary data and technology platforms, including StepStone Private Markets Intelligence (“SPI”) and our other proprietary tools, and (vi) administrative services to unaffiliated investment advisors. Advisory relationships comprised $421 billion of our AUA and $10 billion of our AUM as of December 31, 2021.
- *Portfolio analytics and reporting.* We provide clients with tailored reporting packages, including customized performance benchmarks as well as associated compliance, administrative and tax capabilities. Mandates for portfolio analytics and reporting services typically include licensed access to our proprietary performance monitoring software, Omni. Omni tracked detailed information on over $780 billion of client commitments as of December 31, 2021, inclusive of our combined AUM/AUA, previously exited investments and investments of former clients.

We generate revenues from management and advisory fees and performance fees earned pursuant to contractual arrangements with our funds and our clients. We also invest our own capital in the StepStone Funds we manage to align our interests with those of our clients. Through these investments, we earn a pro-rata share of the results of such funds and may also be entitled to an allocation of performance-based fees from the limited partners in the StepStone Funds, commonly referred to as carried interest.

### Trends Affecting Our Business

Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions. Changes in global economic conditions and regulatory or other governmental policies or actions can materially affect the values of the StepStone Funds’ holdings and the ability to source attractive investments and completely utilize the capital that we have raised. However, we believe our disciplined investment philosophy across our diversified investment strategies has historically contributed to the stability of our performance throughout market cycles.

In addition to these macroeconomic trends and market factors, we believe our future performance will be influenced by the following factors:

- *The extent to which clients favor private markets investments.* Our ability to attract new capital is partially dependent on clients’ views of private markets relative to traditional asset classes. We believe our fundraising efforts will continue to be subject to certain fundamental asset management trends, including (1) the increasing importance and market share of private markets investment strategies to clients of all types as clients focus on lower-correlated and absolute levels of return, (2) the increasing demand for private markets investments from private wealth clients, (3) shifting asset allocation policies of institutional clients and (4) increasing barriers to entry and growth for potential competitors.
- *Our ability to generate strong, stable returns.* Our ability to raise and retain capital is partially dependent on the investment returns we are able to generate for our clients and drives growth in our fee-earning AUM (“FEAUM”) and management fees. Although our FEAUM and management fees have grown significantly since our inception, adverse market conditions or an outflow of capital in the private markets management industry in general could affect our future growth rate. In addition, market dislocations, contractions or volatility could put pressure on our returns in the future which could in turn affect our fundraising abilities.
- *Our ability to maintain our data advantage relative to competitors.* Our proprietary data and technology platforms, analytical tools and deep industry knowledge allow us to provide our clients with customized investment solutions, including asset management services and tailored reporting packages, such as customized performance benchmarks as well as compliance, administration and tax capabilities. Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information and our ability to grow our relationships with fund managers and clients of all types.
- *Our ability to source investments with attractive risk-adjusted returns.* The continued growth in our revenues is dependent on our ability to identify attractive investments and deploy the capital that we have raised. However, the capital deployed in any one quarter may vary significantly from period to period due to the availability of attractive opportunities and the long-term nature of our investment strategies. Our ability to identify attractive investments is dependent on a number of factors, including the general macroeconomic environment, valuation, transaction size, and the liquidity of an investment opportunity. A significant decrease in the quality or quantity of potential opportunities could adversely affect our ability to source investments with attractive risk-adjusted returns.
- *Increased competition and clients’ desire to work with fewer managers.* There has been an increasing desire on the part of larger institutional investors to build deeper relationships with fewer private markets managers. At times, this has led to certain funds being oversubscribed due to the increasing flow of capital. Our ability to invest and maintain our relationships with high-performing fund managers across private markets asset classes is critical to our clients’ success and our ability to maintain our competitive position and grow our revenue.

### Continuing Impact of COVID-19

The COVID-19 pandemic has continued to impact the global economy and financial markets. With the spread of the Omicron variant, restrictions have been and may continue to be reimposed to mitigate risks to public health in jurisdictions where additional outbreaks have been detected. Moreover, even where restrictions are and remain lifted, and as vaccinations have become available and more accessible, certain groups of people may continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time, potentially further delaying global economic recovery.

We are continuing to closely monitor developments related to COVID-19 and assessing any negative impacts to our business. The COVID-19 pandemic has affected, and may further affect, our business in various ways. In particular, it is possible that our future results may be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which could result in delayed or decreased management fees. Further, if fund managers are unable or less able to profitably exit existing investments, such conditions could result in delayed or decreased performance fee revenues. As the global response and ongoing nature of COVID-19 evolves, it is currently not possible to predict the potential scale and scope of the outbreak and its ultimate effects on the financial markets, overall economy and our condensed consolidated financial statements.

### Recent Transactions

### Reorganization and Initial Public Offering

On September 18, 2020, we completed an IPO pursuant to which we issued 20,125,000 shares of Class A common stock at a price of $18.00 per share. We received net proceeds from the offering of $337.8 million, net of underwriting discounts of $24.5 million and before offering costs of $9.7 million that were incurred by the Partnership. We used approximately $209.8 million of the net proceeds from the offering to acquire 12,500,000 newly issued Class A units of the Partnership and approximately $128.0 million to purchase 7,625,000 Class B units from certain of the Partnership’s existing unitholders, including certain members of senior management.

In connection with the IPO, we completed certain transactions as part of the Reorganization to, among other things, provide for Class A common stock and Class B common stock; appoint SSG as the sole managing member of StepStone Group Holdings LLC, the General Partner; complete a series of merger transactions such that certain blocker entities in which certain pre-IPO institutional investors held their interests in the Partnership merged with and into SSG, with SSG surviving, resulting in the pre-IPO institutional investors acquiring 9,112,500 shares of newly issued Class A common stock of SSG; and classify the Partnership’s interests acquired by SSG as Class A units and reclassify the Partnership’s interests held by the continuing partners as Class B units.

See note 1 to our condensed consolidated financial statements included elsewhere in this quarterly report for more information about the Reorganization and IPO.

### Greenspring Acquisition

On September 20, 2021, we completed the acquisition of 100% of Greenspring Associates, Inc. and certain of its affiliates (collectively, “Greenspring”) in exchange for (i) cash consideration of approximately $185 million, net of an agreed upon adjustment based upon Greenspring’s net working capital balance at the closing date, (ii) 12,686,756 shares of Class A common stock and (iii) 3,071,519 newly issued Class C units of the Partnership. The transaction agreement also included an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024. The acquisition of Greenspring, a leading venture and growth equity platform, is expected to expand our continued growth of our private markets capabilities across asset classes, geographies and sectors. The results of Greenspring’s operations have been included in the condensed consolidated financial statements effective September 20, 2021.

### Revolving Credit Facility

In September 2021, we entered into a credit agreement with various lenders (the “Credit Agreement”) in connection with the Greenspring acquisition. The Credit Agreement was arranged by JPMorgan Chase Bank, N.A., as administrative agent, and provides for a $225.0 million multicurrency revolving credit facility (the “Revolver”) with a five year maturity. As of December 31, 2021, there was $62.8 million outstanding on the Revolver, net of debt issuance costs.

### Equity Transactions

In March 2021, we conducted an underwritten public offering of 9,200,000 shares of Class A common stock, including 1,200,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, sold by selling stockholders at a public offering price of $29.50 per share. In connection with the offering, we issued 9,200,000 shares of Class A common stock to the selling stockholders in exchange for 9,200,000 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. We did not receive any proceeds from the sale of shares by the selling stockholders.

In June 2021, we issued 1,898,438 shares of Class A common stock to certain limited partners of the Partnership in exchange for 1,898,438 Class B units in accordance with the elective exchange notices submitted pursuant to an agreement with the Class B limited partners (the “Class B Exchange Agreement”) to allow for exchange of Class B units of the Partnership to shares of Class A common stock of the Company on a one-for-one basis, subject to certain restrictions. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

In September 2021, we issued 12,686,756 shares of Class A common stock and 3,071,519 Class C units of the Partnership as partial consideration for the Greenspring acquisition. In connection with the transaction, we amended the limited partnership agreement to create a new Class C limited partnership interest and admit the new limited partners that received Class C units as consideration for the Greenspring acquisition. We also entered into an agreement with the Class C limited partners (the “Class C Exchange Agreement”) to allow for exchange of Class C units of the Partnership to shares of Class A common stock of the Company on a one for one basis, subject to certain restrictions. The Class C limited partners became parties to the Exchanges Tax Receivable Agreement as a result of the transaction.

In September 2021, we issued 2,087,281 shares of Class A common stock to certain limited partners of the Partnership in exchange for 2,087,281 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

In November 2021, we conducted an underwritten public offering of 4,500,000 shares of Class A common stock sold by selling stockholders at a public offering price of $51.83 per share. In connection with the offering, we issued 3,958,204 shares of Class A common stock to certain selling stockholders in exchange for 3,958,204 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. We also issued 142,695 shares of Class A common stock to certain selling stockholders in exchange for 142,695 Class C units and a corresponding number of Class A units of the Partnership were issued to us. We did not receive any proceeds from the sale of shares by the selling stockholders.

In December 2021, we issued 935,235 shares of Class A common stock to certain limited partners of the Partnership in exchange for 935,235 Class B units in accordance with elective exchange notices submitted pursuant to the Class B Exchange Agreement. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

### Organizational Structure

In connection with the Reorganization and IPO, SSG became a holding company and its only business is to act as the managing member of the General Partner, and its only material assets are Class A units in the Partnership and 100% of the interests in the General Partner. In its capacity as the sole managing member of the General Partner, SSG indirectly operates and controls all of the Partnership’s business and affairs. Therefore, we consolidate the financial results of the Partnership and report non-controlling interests related to the Class B units and Class C units held by partners of the Partnership in our consolidated financial statements.

Pursuant to the StepStone Limited Partnership Agreement, the Class B Exchange Agreement and Class C Exchange Agreement that SSG and the Partnership entered into with partners holding Class B units and Class C units of the Partnership, respectively, each Class B unit or Class C unit is exchangeable for one share of SSG’s Class A common stock or, at SSG’s election, for cash, subject to certain restrictions specified in the relevant exchange agreement. When a Class B unit or Class C unit is surrendered for exchange, it will not be available for reissuance. When a Class B unit is exchanged for a share of SSG’s Class A common stock, a corresponding share of SSG’s Class B common stock will automatically be redeemed by SSG at par value and canceled. There are no corresponding shares of common stock for the Class C units.

The diagram below illustrates our organizational structure as of December 31, 2021.

Amounts may not sum to total due to rounding.

(1) The partners of the Partnership other than StepStone Group Inc. are:

- the General Partner, which holds a 100% general partner interest and no economic interests;
- certain members of management, employee owners and outside investors, all of whom own Class B units and an equivalent number of shares of Class B common stock; and
- certain members of management and employees who own Class B2 units; and
- certain employee owners who own Class C units.

(2) Each share of Class A common stock is entitled to one vote and vote together with the Class B common stock as a single class, except as set forth in SSG’s amended and restated certificate of incorporation or as required by law.

(3) Each share of Class B common stock is entitled to five votes prior to a Sunset (as defined below). After a Sunset becomes effective, each share of our Class B common stock will then entitle its holder to one vote. The economic rights of our Class B common stock are limited to the right to be redeemed at par value.

A “Sunset” is triggered upon the earliest to occur of the following: (i) Monte Brem, Scott Hart, Jason Ment, Jose Fernandez, Johnny Randel, Michael McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman (including their respective family trusts and any other permitted transferees, the “Sunset Holders”) collectively cease to maintain direct or indirect beneficial ownership of at least 10% of the outstanding shares of Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock); (ii) the Sunset Holders cease collectively to maintain direct or indirect beneficial ownership of an aggregate of at least 25% of the aggregate voting power of our outstanding Class A common stock and Class B common stock, before giving effect to a Sunset; and (iii) September 18, 2025. As of December 31, 2021 the Sunset Holders collectively maintained direct or indirect beneficial ownership of approximately 31.3% of the Class A common stock (determined assuming all outstanding Class B units have been exchanged for Class A common stock) and approximately 55.6% of the aggregate voting power of our outstanding Class A common stock and Class B common stock.

### Key Financial Measures

Our key financial measures are discussed below. Additional information regarding our significant accounting policies can be found in note 2 to our condensed consolidated financial statements included elsewhere in this quarterly report.

### Revenues

We generate revenues primarily from management and advisory fees, incentive fees and allocations of carried interest.

#### Management and Advisory Fees, Net

Management and advisory fees, net, consist of fees received from managing SMAs and focused commingled funds, advisory and data services, and portfolio analytics and reporting.

- Management fees from SMAs are generally based on a contractual rate applied to committed capital or net invested capital under management. These fees will vary over the life of the contract due to changes in the fee basis or contractual rate changes or thresholds, built-in declines in applicable contractual rates, and/or changes in net invested capital balances. The weighted-average management fee rate from SMAs was approximately 0.38% and 0.41% of average FEAUM for the twelve months ended December 31, 2020 and 2021, respectively.
- Management fees from focused commingled funds are generally based on a specified fee rate applied against client capital commitments during a defined investment or commitment period. Thereafter, management fees are typically calculated based on a contractual rate applied against net invested capital, or a stepped-down fee rate applied against the initial commitment. The weighted-average management fee rate from focused commingled funds was approximately 0.93% and 0.84% of average FEAUM for the twelve months ended December 31, 2020 and 2021, respectively, and primarily reflected the timing of new funds, and shifts in asset class mix.
- The weighted-average management fee rate across SMAs and focused commingled funds was approximately 0.52% and 0.52% of average FEAUM for the twelve months ended December 31, 2020 and 2021.
- Fee revenues from advisory, StepStone Portfolio Analytics & Reporting (“SPAR”), SPI or administrative services are generally annual fixed fees, which vary based on the scope of services we provide. We also provide certain project-based or event-driven advisory services. The fees for these services are negotiated and typically paid upon successful delivery of services or on the execution of the event-driven service. Because advisory fees are negotiated and typically paid upon successful delivery of services or on the execution of the event-driven service, advisory fees do not necessarily correlate with the total size of our AUA.
- Management fees are reflected net of (i) certain professional and administrative services that we arrange to be performed by third parties on behalf of investment funds and (ii) certain distribution and servicing fees paid to third-party financial institutions. In both situations, we are acting as an agent because we do not control the services provided by the third parties before they are transferred to the customer.

#### Performance Fees

We earn two types of performance fee revenues: incentive fees and carried interest allocations, as described below. Incentive fees comprise fees earned from certain client investment mandates for which we do not have a general partnership interest in a StepStone Fund. Carried interest allocations include the allocation of performance-based fees, commonly referred to as carried interest, from limited partners in the StepStone Funds to us. In connection with the Greenspring acquisition, we did not acquire any direct economic interests in the carried interest allocations of certain legacy Greenspring funds. As a result, carried interest allocations in respect of such legacy Greenspring funds have been reflected as legacy Greenspring carried interest allocations in the condensed consolidated statements of income, with a corresponding amount reflected as legacy Greenspring performance fee-related compensation as these amounts are payable to certain employees. As of December 31, 2021, we had over $51 billion of performance fee-eligible capital (excluding certain legacy Greenspring funds) across approximately 150 programs.

*Incentive fees* are generally calculated as a percentage of the profits (up to 10%) earned in respect of certain accounts for which we are the investment adviser, subject to the achievement of minimum return levels or performance benchmarks. Incentive fees are a form of variable consideration and represent contractual fee arrangements in our contracts with our customers. Incentive fees are typically subject to reversal until the end of a defined performance period, as these fees are affected by changes in the fair value of the assets under management or advisement over such performance period. Moreover, incentive fees that are received prior to the end of the defined performance period are typically subject to clawback, net of tax.

We recognize incentive fee revenue only when these amounts are realized and no longer subject to significant reversal, which is typically at the end of a defined performance period and/or upon expiration of the associated clawback period (i.e., crystallization). However, clawback terms for incentive fees received prior to crystallization only require the return of amounts on a net of tax basis. Accordingly, the tax-related portion of incentive fees received in advance of crystallization is not subject to clawback and is therefore recognized as revenue immediately upon receipt. Incentive fees received in advance of crystallization that remain subject to clawback are recorded as deferred incentive fee revenue and included in accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets.

*Carried interest allocations* include the allocation of performance-based fees to us from limited partners in the StepStone Funds in which we hold an equity interest. We are entitled to a carried interest allocation (typically 5% to 15%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These carried interest allocations are subject to the achievement of minimum return levels (typically 5% to 10%) in accordance with the terms set forth in the respective fund’s governing documents. We account for our investment balances in the StepStone Funds, including carried interest allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member. Accordingly, carried interest allocations are not deemed to be within the scope of Accounting Standards Codification Topic 606 (“ASC 606”), *Revenue from Contracts with Customers.*

*Legacy Greenspring carried interest allocations* reflects the allocation of carried interest to legacy Greenspring general partner entities from limited partners in certain legacy Greenspring funds in which the legacy Greenspring general partner entities hold an equity interest. The legacy Greenspring general partner entities are entitled to a carried interest allocation (typically 5% to 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. We account for the investments and carried interest allocations under the equity method of accounting. We do not have any direct economic interests in the legacy Greenspring general partner entities and thus are not entitled to any carried interest allocation from certain legacy Greenspring funds. All of the carried interest allocations in respect of such legacy Greenspring funds are payable to employees who are considered affiliates of the Company and are therefore reflected as legacy Greenspring performance fee-related compensation in the condensed consolidated statements of income. Accordingly, legacy Greenspring carried interest allocations are not deemed to be within the scope of ASC 606.

We recognize revenue attributable to carried interest allocations from a StepStone Fund based on the amount that would be due to us pursuant to the fund’s governing documents, assuming the fund was liquidated based on the current fair value of its underlying investments as of that date. Accordingly, the amount recognized as carried interest allocation revenue reflects our share of the gains and losses of the associated fund’s underlying investments measured at their then-fair values, relative to the fair values as of the end of the prior period. We record the amount of carried interest allocated to us as of each period end as accrued carried interest allocations, which is included as a component of investments in the condensed consolidated balance sheets.

Carried interest is realized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of the specific hurdle rates, as defined in the applicable governing documents. Carried interest is subject to reversal to the extent that the amount received to date exceeds the amount due to us based on cumulative results. As such, a liability is accrued for the potential clawback obligations if amounts previously distributed to us would require repayment to a fund if such fund were to be liquidated based on the current fair value of their underlying investments as of the reporting date. Actual repayment obligations generally do not become realized until the end of a fund’s life. As of December 31, 2021 and March 31, 2021, no material amounts for potential clawback obligations had been accrued.

### Expenses

*Cash-based compensation* primarily includes salaries, bonuses, employee benefits and employer-related payroll taxes.

*Equity-based compensation* represents grants of equity related awards or arrangements to certain employees and directors.

*Performance fee-related compensation* represents the portion of carried interest allocation revenue and incentive fees that have been awarded to employees as a form of long-term incentive compensation. Performance fee-related compensation is generally tied to the investment performance of the StepStone Funds. Approximately 50% of carried interest allocation revenue is awarded to employees as part of our long-term incentive compensation plan, fostering alignment of interest with our clients and investors, and retaining key investment professionals. Carried interest-related compensation is accounted for as compensation expense in conjunction with the related carried interest allocation revenue and, until paid, is recorded as a component of accrued carried interest-related compensation in the condensed consolidated balance sheets. Carried interest-related compensation expense also includes the portion of net carried interest allocation revenue attributable to equity holders of our consolidated subsidiaries that are not 100% owned by us. Amounts presented as realized indicate the amounts paid or payable to employees based on the receipt of carried interest allocation revenue from realized investment activity. Carried interest-related compensation expense may be subject to reversal to the extent that the related carried interest allocation revenue is reversed. Carried interest-related compensation paid to employees may be subject to clawback on an after-tax basis under certain scenarios. To date, no material amounts of realized carried interest-related compensation have been reversed. Incentive fee-related compensation is accrued as compensation expense when it is probable and estimable that payment will be made.

*Legacy Greenspring performance fee-related compensation* represents the legacy Greenspring carried interest allocations which is entirely payable to certain employees. Legacy Greenspring carried interest-related compensation is accounted for as compensation expense in conjunction with the related legacy Greenspring carried interest allocation revenue and, until paid, is recorded as a component of legacy Greenspring accrued carried interest-related compensation in the condensed consolidated balance sheets. Legacy Greenspring carried interest-related compensation expense may be subject to reversal to the extent that the related legacy Greenspring carried interest allocation revenue is reversed. However, none of the legacy Greenspring carried interest allocation revenue is attributable to the Company.

*General, administrative and other* includes occupancy, travel and related costs, insurance, legal and other professional fees, depreciation, amortization of intangible assets, system-related costs, and other general costs associated with operating our business.

### Other Income (Expense)

*Investment income* primarily represents our share of earnings from the investments we make in our SMAs and focused commingled funds. We, either directly or through our subsidiaries, generally have a general partner interest in the StepStone Funds, which invest in primary funds, secondary funds and co-investment funds, or a combination thereof. Investment income will increase or decrease based on the earnings of the StepStone Funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds. Our co-investment funds invest in underlying portfolio companies and therefore their valuation changes from period to period are more influenced by individual companies than our primary and secondary funds, which have exposures across multiple portfolio companies in underlying private markets funds. Our SMAs and focused commingled funds invest across various industries, strategies and geographies.

Consequently, our general partner investments do not include any significant concentrations in a specific sector or geography outside the United States. Investment income and legacy Greenspring investment income exclude carried interest allocations, which are presented as revenues as described above.

*Legacy Greenspring investment income* represents our share of earnings from the investments we make in certain legacy Greenspring funds through the legacy Greenspring general partner entities. We have no direct economic interests in the legacy Greenspring general partner entities. As a result, all such income is reflected as non-controlling interests in legacy Greenspring entities. Legacy Greenspring investment income will increase or decrease based on the earnings of such legacy Greenspring funds, which are primarily driven by net realized and unrealized gains (losses) on the underlying investments held by the funds.

*Interest income* consists of income earned on cash and cash equivalents, restricted cash and certificates of deposit.

*Interest expense* primarily consists of the interest expense on the Revolver and our previously outstanding term loan, as well as the related amortization of deferred financing costs and amortization of original issue discount. The nine months ended December 31, 2020 includes a $3.5 million charge related to the write-off of unamortized debt issuance costs and discount in connection with the full repayment of our previously outstanding term loan in connection with the IPO in September 2020.

*Other income (loss)* includes foreign currency transaction gains and losses and non-operating activities.

### Income Tax Expense

We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by the Partnership. Prior to the Reorganization and IPO, we operated as a partnership for U.S. federal income tax purposes and therefore were generally not subject to U.S. federal and state income taxes. The Partnership is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by the Partnership flows through to its limited partners, including us, and is generally not subject to U.S. federal or state income tax at the Partnership level. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to local or non-U.S. income taxes. Additionally, certain of our subsidiaries are subject to local jurisdiction income taxes at the entity level. Accordingly, the tax liability with respect to income attributable to non-controlling interests in the Partnership is borne by the holders of such non-controlling interests.

### Non-Controlling Interests

Non-controlling interests (“NCI”) reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by us. Non-controlling interests are presented as separate components in our condensed consolidated statements of income to clearly distinguish between our interests and the economic interests of third parties and employees in those entities. Net income (loss) attributable to SSG, as reported in the condensed consolidated statements of income, is presented net of the portion of net income (loss) attributable to holders of non-controlling interests.

*Non-controlling interests in subsidiaries* represent the economic interests in the consolidated subsidiaries of the Partnership held by third parties and employees in those entities. Non-controlling interests in subsidiaries are allocated a share of income or loss in the respective consolidated subsidiary in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

*Non-controlling interests in legacy Greenspring entities* represent the economic interests in the legacy Greenspring general partner entities. We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities.

*Non-controlling interests in the Partnership* represent the economic interests in the Partnership held by the Class B and Class C unitholders of the Partnership. Non-controlling interests in the Partnership are allocated a share of income or loss in the Partnership in proportion to their relative ownership interests, after consideration of contractual arrangements that govern allocations of income or loss.

### Key Operating Metrics

We monitor certain operating metrics that are either common to the asset management industry or that we believe provide important data regarding our business.

### Assets Under Management

AUM primarily reflects the assets associated with our SMAs and focused commingled funds. We classify assets as AUM if we have full discretion over the investment decisions in an account or have responsibility or custody of assets. Although management fees are based on a variety of factors and are not linearly correlated with AUM, we believe AUM is a useful metric for assessing the relative size and scope of our asset management business.

Our AUM is calculated as the sum of (i) the net asset value (“NAV”) of client portfolio assets, including the StepStone Funds and (ii) the unfunded commitments of clients to the underlying investments and the StepStone Funds. Our AUM reflects the investment valuations in respect of the underlying investments of our funds and accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUM does not include post-period investment valuation or cash activity. AUM as of December 31, 2021 reflects final data for the prior period (September 30, 2021), adjusted for net new client account activity through December 31, 2021. NAV data for underlying investments is as of September 30, 2021, as reported by underlying managers up to 100 days following September 30, 2021. When NAV data is not available by 100 days following September 30, 2021, such NAVs are adjusted for cash activity following the last available reported NAV.

### Assets Under Advisement

AUA consists of client assets for which we do not have full discretion to make investment decisions but play a role in advising the client or monitoring their investments. We generally earn revenue for advisory-related services on a contractual fixed fee basis. Advisory-related services include asset allocation, strategic planning, development of investment policies and guidelines, screening and recommending investments, legal negotiations, monitoring and reporting on investments, and investment manager review and due diligence. Advisory fees vary by client based on the scope of services, investment activity and other factors. Most of our advisory fees are fixed, and therefore, increases or decreases in AUA do not necessarily lead to proportionate changes in revenue.

Our AUA is calculated as the sum of (i) the NAV of client portfolio assets for which we do not have full discretion and (ii) the unfunded commitments of clients to the underlying investments. Our AUA reflects the investment valuations in respect of the underlying investments of our client accounts on a three-month lag, adjusted for new client account activity through the period end. Our AUA does not include post-period investment valuation or cash activity. AUA as of December 31, 2021 reflects final data for the prior period (September 30, 2021), adjusted for net new client account activity through December 31, 2021. NAV data for underlying investments is as of September 30, 2021, as reported by underlying managers up to 100 days following September 30, 2021. When NAV data is not available by 100 days following September 30, 2021, such NAVs are adjusted for cash activity following the last available reported NAV.

Beginning in the quarter ended March 31, 2021, we modified our AUA computation to include, with respect to our advisory clients, the portion of their portfolio assets for which we do not directly provide recommendations, monitoring and/or reporting services. Prior period amounts have not been recast for this change because comparable historical data does not exist. The change resulted in an increase to AUA of approximately $70 billion for the quarter ended March 31, 2021.

### Fee-Earning AUM

FEAUM reflects the assets from which we earn management fee revenue (i.e., fee basis) and includes assets in our SMAs, focused commingled funds and assets held directly by our clients for which we have fiduciary oversight and are paid fees as the manager of the assets. Our SMAs and focused commingled funds typically pay management fees based on capital commitments, net invested capital and, in certain cases, NAV, depending on the fee terms. Management fees are only marginally affected by market appreciation or depreciation because substantially all of the StepStone Funds pay management fees based on capital commitments or net invested capital. As a result, management fees and FEAUM are not materially affected by changes in market value.

Our calculation of FEAUM may differ from the calculations of other asset managers and, as a result, may not be comparable to similar measures presented by other asset managers.

### Undeployed Fee-Earning Capital

Undeployed fee-earning capital represents the amount of capital commitments to StepStone Funds that has not yet been invested or considered active but will generate management fee revenue once this capital is invested or activated.

### Key Non-GAAP Financial Measures

Below is a description of our non-GAAP financial measures. These measures are presented on a basis other than GAAP and should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.

### Adjusted Revenues and Adjusted Net Income

Adjusted net income (“ANI”) is a non-GAAP performance measure that we present on a pre-tax and after-tax basis used to evaluate profitability. ANI represents the after-tax net realized income attributable to us. The components of revenues used in the determination of ANI (“adjusted revenues”) comprise net management and advisory fees, incentive fees (including the deferred portion) and realized carried interest allocations. In addition, ANI excludes: (a) unrealized carried interest allocation revenues and related compensation, (b) unrealized investment income, (c) equity-based compensation for awards granted prior to and in connection with our IPO, (d) amortization of intangibles and (e) certain other items that we believe are not indicative of our core operating performance, including charges associated with acquisitions and corporate transactions, contract terminations and employee severance. ANI does not reflect legacy Greenspring carried interest allocation revenues, legacy Greenspring carried interest-related compensation and legacy Greenspring investment income as none of the economics are attributable to us. ANI is income before taxes fully taxed at our blended statutory rate. We believe ANI and adjusted revenues are useful to investors because they enable investors to evaluate the performance of our business across reporting periods.

### Fee-Related Earnings

Fee-related earnings (“FRE”) is a non-GAAP performance measure used to monitor our baseline earnings from recurring management and advisory fees. FRE is a component of ANI and comprises net management and advisory fees, less operating expenses other than performance fee-related compensation, equity-based compensation for awards granted prior to and in connection with our IPO, amortization of intangibles and other non-core operating items. FRE is presented before income taxes. We believe FRE is useful to investors because it provides additional insight into the operating profitability of our business and our ability to cover direct base compensation and operating expenses from total fee revenues.

### Adjusted Net Income Per Share

ANI per share measures our per-share earnings assuming all Class B units and Class C units in the Partnership are exchanged for Class A common stock in SSG, including the dilutive impact of outstanding equity-based awards. ANI per share is calculated as ANI divided by adjusted shares outstanding. We believe ANI per share is useful to investors because it enables them to better evaluate per-share operating performance across reporting periods.

### Consolidated Results of Operations

The following is a discussion of our unaudited consolidated results of operations for the periods presented. This information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

*(in thousands)*

| Revenues | Three Months Ended December 31, 2021 | 2020 | Nine Months Ended December 31, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Management and advisory fees, net | $106,384 | $70,093 | $268,028 | $209,245 |
| Performance fees: |  |  |  |  |
| Incentive fees | 27 | 313 | 6,005 | 5,098 |
| Carried interest allocations: |  |  |  |  |
| Realized | 66,559 | 26,063 | 169,053 | 38,257 |
| Unrealized | 132,535 | 150,681 | 452,789 | 176,050 |
| Total carried interest allocations | 199,094 | 176,744 | 621,842 | 214,307 |
| Legacy Greenspring carried interest allocations(1) | 104,960 | — | 104,960 | — |
| Total revenues | 410,465 | 247,150 | 1,000,835 | 428,650 |
| **Expenses** |  |  |  |  |
| Compensation and benefits: |  |  |  |  |
| Cash-based compensation | 51,665 | 36,732 | 138,217 | 113,858 |
| Equity-based compensation | 3,407 | 3,206 | 10,363 | 4,641 |
| Performance fee-related compensation: |  |  |  |  |
| Realized | 34,033 | 10,241 | 86,122 | 17,952 |
| Unrealized | 68,368 | 73,629 | 228,146 | 83,487 |
| Total performance fee-related compensation | 102,401 | 83,870 | 314,268 | 101,439 |
| Legacy Greenspring performance fee-related compensation(1) | 104,960 | — | 104,960 | — |
| Total compensation and benefits | 262,433 | 123,808 | 567,808 | 219,938 |
| General, administrative and other | 30,299 | 12,624 | 72,049 | 34,487 |
| Total expenses | 292,732 | 136,432 | 639,857 | 254,425 |
| **Other income (expense)** |  |  |  |  |
| Investment income | 7,230 | 5,361 | 20,841 | 6,508 |
| Legacy Greenspring investment income(1) | 17,890 | — | 17,890 | — |
| Interest income | 43 | 83 | 329 | 342 |
| Interest expense | (543) | (26) | (637) | (7,353) |
| Other income (loss) | (273) | 799 | (2,662) | 1,261 |
| Total other income | 24,347 | 6,217 | 35,761 | 758 |
| Income before income tax | 142,080 | 116,935 | 396,739 | 174,983 |
| Income tax expense | 15,787 | 9,546 | 16,065 | 11,585 |
| Net income | 126,293 | 107,389 | 380,674 | 163,398 |
| Less: Net income attributable to non-controlling interests in subsidiaries | 7,091 | 5,496 | 18,737 | 18,634 |
| Less: Net income attributable to non-controlling interests in legacy Greenspring entities(1) | 17,890 | — | 17,890 | — |
| Less: Net income attributable to non-controlling interests in the Partnership | 52,966 | 76,315 | 191,977 | 119,976 |
| Net income attributable to StepStone Group Inc. | $48,346 | $25,578 | $152,070 | $24,788 |

(1) Reflects amounts attributable to consolidated VIEs for which we did not acquire any direct economic interests. See notes 3, 5 and 14 to our condensed consolidated financial statements included elsewhere in this quarterly report.

### Revenues

#### Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Total revenues increased $163.3 million, or 66%, to $410.5 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, due to the inclusion of legacy Greenspring carried interest allocations in the current year as well as higher carried interest allocations and net management and advisory fees.

Net management and advisory fees increased $36.3 million, or 52%, to $106.4 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The increase was driven by new client activity and a 52% growth in average FEAUM (or 27% excluding the impact of Greenspring) across the platform, as well as retroactive fees of $1.2 million from the final closing for StepStone Tactical Growth Fund III (“STGF III”) and additional closings of StepStone’s private equity co-investment fund. For new investors, fees relating to periods prior to the closing date are considered retroactive.

Incentive fees decreased $0.3 million, or 91%, to $27 thousand for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020.

Realized carried interest allocation revenues increased $40.5 million, or 155%, to $66.6 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, reflecting higher realization activity within our private equity funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal, unrealized carried interest allocation revenues increased $22.4 million, or 13%, to $199.1 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The increase in unrealized carried interest allocations for the three months ended December 31, 2021 primarily reflected a larger increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

Legacy Greenspring carried interest allocation revenues of $105.0 million for the three months ended December 31, 2021 reflect gross realized carried interest allocations of $24.6 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $80.4 million.

#### Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

Total revenues increased $572.2 million, or 133%, to $1,000.8 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, due to higher carried interest allocations, net management and advisory fees and incentive fees and the inclusion of legacy Greenspring carried interest allocations in the current year.

Net management and advisory fees increased $58.8 million, or 28%, to $268.0 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. The increase was driven by new client activity and a 34% growth in average FEAUM (or 27% excluding the impact of Greenspring) across the platform, as well as retroactive fees of $4.3 million from the final closing for STGF III and additional closings of StepStone’s private equity co-investment fund. The prior year period included $9.0 million of retroactive fees from the final closing of StepStone Real Estate Partners IV. For new investors, fees relating to periods prior to the closing date are considered retroactive.

Incentive fees increased $0.9 million, or 18%, to $6.0 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020.

Realized carried interest allocation revenues increased $130.8 million, or 342%, to $169.1 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, reflecting higher realization activity within our private equity funds. Unrealized carried interest allocation revenues include the reversal of realized carried interest allocation revenues. Excluding the reversal, unrealized carried interest allocation revenues increased $407.5 million, or 190%, to $621.8 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. The increase in unrealized carried interest allocations for the nine months ended December 31, 2021 primarily reflected a larger increase in the cumulative allocation of gains associated with the underlying portfolios within our private equity funds.

For fiscal 2021, our investments in StepStone Funds and accrued carried interest allocations initially experienced a decline during the first three months, primarily reflecting the unrealized depreciation in the fair value of certain underlying fund investments driven by the impact of COVID-19, and have subsequently seen a significant increase, reflecting the unrealized appreciation in the fair value of certain underlying fund investments primarily driven by the continued recovery in global financial markets.

Legacy Greenspring carried interest allocation revenues of $105.0 million for the nine months ended December 31, 2021 reflect gross realized carried interest allocations of $27.6 million and unrealized carried interest allocations, net of the reversal of realized carried interest allocations, of $77.3 million for the period from September 20, 2021 to December 31, 2021.

### Expenses

#### Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Total expenses increased $156.3 million, or 115%, to $292.7 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, due to the inclusion of legacy Greenspring performance fee-related compensation in the current year as well as increases in performance fee-related compensation, general, administrative and other expenses, cash-based compensation and equity-based compensation.

Cash-based compensation increased $14.9 million, or 41%, to $51.7 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, due to increased staffing and compensation levels. Our average full-time headcount increased 33% (or 10% excluding the impact of Greenspring) in the current year period as compared to the prior year period.

Equity-based compensation increased $0.2 million, or 6%, to $3.4 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The increase was attributable to additional grants of restricted stock units (“RSUs”) made to certain employees and directors since our IPO in September 2020.

Performance fee-related compensation expense increased $18.5 million, or 22%, to $102.4 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, primarily reflecting the increase in carried interest allocation revenue. Realized performance fee-related compensation increased $23.8 million, or 232%, to $34.0 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, primarily reflecting higher realization activity.

Legacy Greenspring performance fee-related compensation expense of $105.0 million for the three months ended December 31, 2021 reflects gross realized performance fee-related compensation expense of $24.6 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $80.4 million.

General, administrative and other expenses increased $17.7 million, or 140%, to $30.3 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The increase primarily reflected $10.1 million in amortization expense for intangibles, $1.6 million of travel and associated costs for investment evaluation and client service, $1.2 million in information and technology expenses, $1.2 million in loss on change in fair value for contingent consideration obligation, $0.8 million in professional fees, $0.7 million in occupancy costs and other general operating expenses. We anticipate travel and other expenses will continue to increase up to pre-pandemic levels as the COVID-19 situation improves, and that costs associated with being a public company will continue to be reflected in our expenses going forward.

#### Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

Total expenses increased $385.4 million, or 151%, to $639.9 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, reflecting increases in performance fee-related compensation, equity-based compensation, cash-based compensation, general, administrative and other expenses and the inclusion of legacy Greenspring performance fee-related compensation in the current year.

Cash-based compensation increased $24.4 million, or 21%, to $138.2 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, due to increased staffing and compensation levels. Our average full-time headcount increased 18% (or 11% excluding the impact of Greenspring) in the current year period as compared to the prior year period.

Equity-based compensation increased $5.7 million, or 123%, to $10.4 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. The increase was attributable to the grant of RSUs made to certain employees and directors in connection with our IPO in September 2020. As such grants were not outstanding for the period prior to the IPO, this resulted in lower expense in the prior year period.

Performance fee-related compensation expense increased $212.8 million, or 210%, to $314.3 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, primarily reflecting the increase in carried interest allocation revenue. Realized performance fee-related compensation increased $68.2 million, or 380%, to $86.1 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, primarily reflecting higher realization activity.

Legacy Greenspring performance fee-related compensation expense of $105.0 million for the nine months ended December 31, 2021 reflects gross realized performance fee-related compensation expense of $27.6 million and unrealized performance fee-related compensation expense, net of the reversal of realized performance fee-related compensation expense, of $77.3 million for the period from September 20, 2021 to December 31, 2021.

General, administrative and other expenses increased $37.6 million, or 109%, to $72.0 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. The increase primarily reflected $13.5 million in transaction costs, $10.9 million in amortization expense for intangibles, $3.1 million in professional fees, $2.5 million in insurance costs, $2.0 million of travel and associated costs for investment evaluation and client service, $1.4 million in occupancy costs, $1.2 million in information and technology expenses, $1.2 million in loss on change in fair value for contingent consideration obligation and other general operating expenses. We anticipate travel and other expenses will continue to increase to pre-pandemic levels as the COVID-19 situation improves, and that costs associated with being a public company will continue to be reflected in our expenses going forward.

### Other Income (Expense)

#### Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Investment income increased $1.9 million, or 35%, to $7.2 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.

Legacy Greenspring investment income of $17.9 million for the three months ended December 31, 2021 reflects gross realized investment income of $3.6 million and unrealized investment income, net of the reversal of realized investment income, of $14.3 million.

Interest income decreased $40 thousand, or 48%, to $43 thousand for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020.

Interest expense increased $0.5 million to $0.5 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The increase was primarily due to interest on the average outstanding balances under the Revolver during the current period. There was no debt outstanding in the prior year period as a result of the full repayment of our previously outstanding senior secured term loan in connection with the IPO in September 2020.

Other income (loss) decreased $1.1 million to a loss of $0.3 million for the three months ended December 31, 2021 from income of $0.8 million for the three months ended December 31, 2020, primarily reflecting net foreign currency transaction losses.

#### Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

Investment income increased $14.3 million, or 220%, to $20.8 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, primarily reflecting overall changes in the valuations of the underlying investments in the StepStone Funds.

Legacy Greenspring investment income of $17.9 million for the nine months ended December 31, 2021 reflects gross realized investment income of $4.9 million and unrealized investment income, net of the reversal of realized investment income, of $13.0 million for the period from September 20, 2021 to December 31, 2021.

Interest income decreased $13 thousand, or 4%, to $0.3 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020.

Interest expense decreased $6.7 million, or 91%, to $0.6 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. The decrease was primarily due to the full repayment of our previously outstanding senior secured term loan in connection with the IPO in September 2020, partially offset by interest on average outstanding balances under the Revolver during the current period.

Other income (loss) decreased $3.9 million to a loss of $2.7 million for the nine months ended December 31, 2021 from income of $1.3 million for the nine months ended December 31, 2020, primarily reflecting net foreign currency transaction losses, losses related to the write-off of certain property and equipment, and losses related to adjustments in connection with the Tax Receivable Agreements.

### Income Tax Expense

Income tax expense primarily reflects U.S. federal and state income taxes on our share of taxable income generated by the Partnership, as well as local and foreign income taxes of certain of the Partnership’s subsidiaries. Prior to the Reorganization and IPO, income tax expense consisted of local income taxes and foreign income taxes for subsidiaries that have operations outside of the United States, as the Partnership is treated as a flow-through entity and is not subject to U.S. federal and state income taxes.

Our effective income tax rate was 11.1% and 8.2% for the three months ended December 31, 2021 and 2020, respectively, and 4.0% and 6.6% for the nine months ended December 31, 2021 and 2020, respectively. Our overall effective tax rate in each of the periods described above is less than the statutory rate primarily because a portion of income is allocated to non-controlling interests, as the tax liability on such income is borne by the holders of such non-controlling interests.

#### Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Income tax expense increased $6.2 million, or 65%, to $15.8 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The increase was primarily related to U.S. federal and state income taxes recognized on our share of taxable income generated by the Partnership as a result of additional exchanges that occurred since December 31, 2020, which increased our ownership in the Partnership as of December 31, 2021.

#### Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

Income tax expense increased $4.5 million, or 39%, to $16.1 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. The increase was primarily related U.S. federal and state income taxes recognized on our share of taxable income generated by the Partnership as a result of additional exchanges that occurred since December 31, 2020, which increased our ownership in the Partnership as of December 31, 2021, partially offset by the recognition of an income tax benefit of $25.3 million for the release of a valuation allowance during the current year as a result of the Greenspring acquisition. Additionally, for the period prior to the Reorganization and IPO, we operated as a partnership for U.S. federal income tax purposes and were not subject to U.S. federal and state income taxes.

### Net Income Attributable to Non-Controlling Interests in Subsidiaries

Net income attributable to non-controlling interests in subsidiaries increased $1.6 million, or 29%, to $7.1 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.

Net income attributable to non-controlling interests in subsidiaries increased $0.1 million, or 1%, to $18.7 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020. The increase was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly-owned by us.

### Net Income Attributable to Non-Controlling Interests in Legacy Greenspring Entities

Net income attributable to non-controlling interests in legacy Greenspring entities represent the net income or loss attributable to the interests held by the legacy Greenspring general partner entities. We did not acquire any direct economic interests in the legacy Greenspring general partner entities. As a result, all of the net income or loss related to the legacy Greenspring general partner entities is allocated to non-controlling interests in legacy Greenspring entities. Net income attributable to non-controlling interests in legacy Greenspring entities was $17.9 million for the three and nine months ended December 31, 2021.

### Net Income Attributable to Non-Controlling Interests in the Partnership

Net income attributable to non-controlling interests in the Partnership represents the portion of net income or loss attributable to the interests held by the Class B and Class C unitholders of the Partnership. Net income attributable to non-controlling interests in the Partnership was $53.0 million and $76.3 million for the three months ended December 31, 2021 and 2020, respectively, and $192.0 million and $120.0 million for the nine months ended December 31, 2021 and 2020, respectively. Prior to the Reorganization and IPO, all of our income or loss relates to the Partnership and has been presented as non-controlling interests in the Partnership.

### Operating Metrics

### Assets Under Management

AUM was $80 billion as of December 31, 2020, $121 billion as of September 30, 2021 and $127 billion as of December 31, 2021.

### Assets Under Advisement

Assets related to our advisory accounts were $253 billion as of December 31, 2020, $397 billion as of September 30, 2021 and $421 billion as of December 31, 2021. As described under “Key Operating Metrics—Assets Under Advisement,” we modified our calculation of AUA beginning in the quarter ended March 31, 2021 to include, with respect to our advisory clients, the portion of their portfolio assets for which we do not directly provide recommendations, monitoring and/or reporting services. This change increased AUA by approximately $70 billion for the quarter ended March 31, 2021. Prior period amounts have not been recast for this change because such historical data does not exist.

### Fee-Earning AUM

#### Three Months Ended December 31, 2021

FEAUM increased $5 billion, or 7%, to $71 billion as of December 31, 2021 as compared to $67 billion as of September 30, 2021. The increase was primarily attributable to a $2 billion increase in focused commingled funds and $3 billion from SMAs.

#### Nine Months Ended December 31, 2021

FEAUM increased $19 billion, or 37%, to $71 billion as of December 31, 2021 as compared to $52 billion as of March 31, 2021. The increase was primarily attributable to a $14 billion increase in focused commingled funds due to the Greenspring acquisition, which added approximately $11 billion of FEAUM, and $5 billion from SMAs.

*(in millions)*

|  | Three Months Ended December 31, 2021 SMAs | Focused Commingled Funds | Total | Nine Months Ended December 31, 2021 SMAs | Focused Commingled Funds | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | $43,167 | $23,513 | $66,680 | $40,561 | $11,447 | $52,008 |
| Contributions(1) | 3,145 | 2,045 | 5,190 | 6,689 | 3,276 | 9,965 |
| Distributions(2) | (837) | (205) | (1,042) | (1,837) | (750) | (2,587) |
| Acquisitions(3) | — | — | — | — | 11,407 | 11,407 |
| Market value, FX and other(4) | 424 | (20) | 404 | 486 | (47) | 439 |
| Ending balance | $45,899 | $25,333 | $71,232 | $45,899 | $25,333 | $71,232 |

(1) Contributions consist of new capital commitments that earn fees on committed capital and capital contributions to funds and accounts that earn fees on net invested capital or NAV.

(2) Distributions consist of returns of capital from funds and accounts that pay fees on net invested capital or NAV and reductions in fee-earning AUM from funds that moved from a committed capital to net invested capital fee basis or from funds and accounts that no longer pay fees.

(3) Includes approximately $11.4 billion of focused commingled funds added as a result of the Greenspring acquisition.

(4) Market value, FX and other primarily consist of changes in market value appreciation (depreciation) for funds that pay on NAV and the effect of foreign exchange rate changes on non-U.S. dollar denominated commitments.

The following tables set forth FEAUM by asset class and selected weighted-average management fee rate data:

*(in millions)*

| FEAUM | As of December 31, 2021 | March 31, 2021 | December 31, 2020 |
| --- | ---: | ---: | ---: |
| Private equity(1) | $40,044 | $24,533 | $20,960 |
| Infrastructure | 14,902 | 12,605 | 12,251 |
| Private debt | 11,586 | 10,483 | 9,052 |
| Real estate | 4,700 | 4,387 | 4,367 |
| Total | $71,232 | $52,008 | $46,630 |

(1) Balance as of December 31, 2021 includes approximately $11.4 billion of focused commingled funds added as a result of the Greenspring acquisition.

| Weighted-average fee rate(1) | As of December 31, 2021 | March 31, 2021 | December 31, 2020 |
| --- | ---: | ---: | ---: |
| Private equity(2) | 0.63% | 0.62% | 0.64% |
| Real estate, infrastructure and private debt asset classes(3) | 0.41% | 0.42% | 0.41% |
| Total | 0.52% | 0.52% | 0.52% |

(1) Weighted-average fee rates reflect the applicable management fees for the last 12 months ending on each period presented, and is inclusive of any retroactive fees for such period.

(2) The change in weighted-average fee rates primarily reflected the timing of new funds.

(3) The change in weighted-average fee rates primarily reflected shifts in asset class mix.

### Undeployed Fee-Earning Capital

As of December 31, 2021, we had $17.3 billion of undeployed fee-earning capital, which will generate management fee revenue once this capital is invested or activated.

### Non-GAAP Financial Measures

The following table presents the components of FRE and ANI:

*(in thousands)*

|  | Three Months Ended December 31, 2021 | 2020 | Nine Months Ended December 31, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Management and advisory fees, net | $106,384 | $70,093 | $268,028 | $209,245 |
| Less: |  |  |  |  |
| Cash-based compensation | 51,665 | 36,732 | 138,217 | 113,858 |
| Equity-based compensation(1) | 178 | — | 401 | — |
| General, administrative and other | 30,299 | 12,624 | 72,049 | 34,487 |
| Plus: |  |  |  |  |
| Amortization of intangibles | 10,958 | 835 | 13,448 | 2,505 |
| Non-core items(2) | 1,628 | 768 | 15,551 | 5,037 |
| **Fee-related earnings** | 36,828 | 22,340 | 86,360 | 68,442 |
| Plus: |  |  |  |  |
| Realized carried interest allocations | 66,559 | 26,063 | 169,053 | 38,257 |
| Incentive fees | 27 | 313 | 6,005 | 5,098 |
| Deferred incentive fees | — | — | 5,811 | 4,700 |
| Realized investment income | 1,834 | 2,344 | 6,668 | 4,012 |
| Interest income | 43 | 83 | 329 | 342 |
| Write-off of unamortized deferred financing costs | — | — | — | 3,526 |
| Other income (loss)(3) | (273) | 799 | (1,271) | 1,261 |
| Less: |  |  |  |  |
| Realized performance fee-related compensation | 34,033 | 10,241 | 86,122 | 17,952 |
| Interest expense | 543 | 26 | 637 | 7,353 |
| Income attributable to non-controlling interests in subsidiaries(4) | 7,716 | 5,628 | 19,341 | 19,297 |
| **Pre-tax adjusted net income** | 62,726 | 36,047 | 166,855 | 81,036 |
| Less: Income taxes(5) | 14,145 | 9,012 | 37,626 | 20,260 |
| **Adjusted net income** | $48,581 | $27,035 | $129,229 | $60,776 |

(1) Reflects equity-based compensation for awards granted subsequent to the IPO.

(2) Includes transaction costs ($0.3 million for the three months ended December 31, 2020, and $13.8 million and $0.3 million for the nine months ended December 31, 2021 and 2020, respectively), severance costs ($0.1 million and $4.1 million for the nine months ended December 31, 2021 and 2020, respectively), loss on change in fair value for contingent consideration obligation ($1.6 million for the three and nine months ended December 31, 2021, and $0.4 million for the three and nine months ended December 31, 2020), and other non-core operating income and expenses.

(3) Reflects other income (loss) net of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(1.4) million for the nine months ended December 31, 2021).

(4) Reflects the portion of pre-tax adjusted net income of our subsidiaries attributable to non-controlling interests.

(5) Represents corporate income taxes at a blended statutory rate of 22.6% applied to pre-tax adjusted net income for the three and nine months ended December 31, 2021, and a blended statutory rate of 25.0% applied to pre-tax adjusted net income for the three and nine months ended December 31, 2020. The 22.6% rate for the three and nine months ended December 31, 2021 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.6%, and the 25.0% rate for the three and nine months ended December 31, 2020 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 4.0%.

### Adjusted Revenues and Adjusted Net Income

#### Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Adjusted revenues increased $76.5 million, or 79%, to $173.0 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, primarily reflecting increases in net management and advisory fees and realized carried interest allocation revenues.

ANI increased $21.5 million, or 80%, to $48.6 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, primarily due to higher net realized performance fee-related earnings (incentive fees, including the deferred portion, plus realized carried interest allocation revenues, less realized performance fee-related compensation) and the increase in FRE as discussed below.

#### Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

Adjusted revenues increased $191.6 million, or 74%, to $448.9 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, primarily reflecting increases in net management and advisory fees, realized carried interest allocation revenues and incentive fees.

ANI increased $68.5 million, or 113%, to $129.2 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, primarily due to higher net realized performance fee-related earnings, lower interest expense and the increase in FRE as discussed below.

### Adjusted Net Income Per Share

The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted shares outstanding used in the computation of ANI per share for the three and nine months ended December 31, 2021 and 2020.

*(in thousands, except share and per share amounts)*

|  | Three Months Ended December 31, 2021 | 2020 | Nine Months Ended December 31, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Adjusted net income | $48,581 | $27,035 | $129,229 | $60,776 |
| Weighted-average shares of Class A common stock outstanding – Basic | 57,875,758 | 29,237,500 | 46,247,353 | 29,237,500 |
| Assumed vesting of RSUs | 1,125,798 | 1,012,657 | 1,390,538 | 977,400 |
| Assumed vesting and exchange of Class B2 units | 2,481,677 | 2,454,818 | 2,480,591 | 2,449,298 |
| Exchange of Class B units in the Partnership(1) | 50,327,243 | 65,578,831 | 53,511,397 | 65,578,831 |
| Exchange of Class C units in the Partnership(2) | 3,003,274 | — | 1,116,423 | — |
| Adjusted shares(3) | 114,813,750 | 98,283,806 | 104,746,302 | 98,243,029 |
| Adjusted net income per share | $0.42 | $0.28 | $1.23 | $0.62 |

(1) Assumes the full exchange of Class B units in the Partnership for Class A common stock of SSG pursuant to the Class B Exchange Agreement.

(2) Assumes the full exchange of Class C units in the Partnership for Class A common stock of SSG pursuant to the Class C Exchange Agreement.

(3) Class A common stock did not exist prior to the Reorganization and IPO in September 2020. As a result, the computation of ANI per share for the period prior to the Reorganization and IPO assumes the same number of adjusted shares outstanding as reported for the period after the IPO through September 30, 2020.

### Fee-Related Earnings

#### Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

FRE increased $14.5 million, or 65%, to $36.8 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020, primarily reflecting higher net management and advisory fees, partially offset by higher cash-based compensation and general, administrative and other expenses.

#### Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

FRE increased $17.9 million, or 26%, to $86.4 million for the nine months ended December 31, 2021 as compared to the nine months ended December 31, 2020, primarily reflecting higher net management and advisory fees, partially offset by higher cash-based compensation, general, administrative and other expenses and equity-based compensation.

### Reconciliation of GAAP to Non-GAAP Financial Measures

The table below shows a reconciliation of revenues to adjusted revenues.

*(in thousands)*

|  | Three Months Ended December 31, 2021 | 2020 | Nine Months Ended December 31, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $410,465 | $247,150 | $1,000,835 | $428,650 |
| Unrealized carried interest allocations | (132,535) | (150,681) | (452,789) | (176,050) |
| Deferred incentive fees | — | — | 5,811 | 4,700 |
| Legacy Greenspring carried interest allocations | (104,960) | — | (104,960) | — |
| Adjusted revenues | $172,970 | $96,469 | $448,897 | $257,300 |

70

The table below shows a reconciliation of income before income tax to ANI and FRE.

*(in thousands)*

|  | Three Months Ended December 31, 2021 | 2020 | Nine Months Ended December 31, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Income before income tax | $142,080 | $116,935 | $396,739 | $174,983 |
| Net income attributable to non-controlling interests in subsidiaries(1) | (7,716) | (5,628) | (19,341) | (19,297) |
| Net income attributable to non-controlling interests in legacy Greenspring entities | (17,890) | — | (17,890) | — |
| Unrealized carried interest allocation revenue | (132,535) | (150,681) | (452,789) | (176,050) |
| Unrealized performance fee-related compensation | 68,368 | 73,629 | 228,146 | 83,487 |
| Unrealized investment income | (5,396) | (3,017) | (14,173) | (2,496) |
| Deferred incentive fees | — | — | 5,811 | 4,700 |
| Equity-based compensation(2) | 3,229 | 3,206 | 9,962 | 4,641 |
| Amortization of intangibles | 10,958 | 835 | 13,448 | 2,505 |
| Write-off of unamortized deferred financing costs | — | — | — | 3,526 |
| Tax Receivable Agreements adjustments through earnings | — | — | 1,391 | — |
| Non-core items(3) | 1,628 | 768 | 15,551 | 5,037 |
| Pre-tax adjusted net income | 62,726 | 36,047 | 166,855 | 81,036 |
| Income taxes(4) | (14,145) | (9,012) | (37,626) | (20,260) |
| Adjusted net income | 48,581 | 27,035 | 129,229 | 60,776 |
| Income taxes(4) | 14,145 | 9,012 | 37,626 | 20,260 |
| Realized carried interest allocation revenue | (66,559) | (26,063) | (169,053) | (38,257) |
| Realized performance fee-related compensation | 34,033 | 10,241 | 86,122 | 17,952 |
| Realized investment income | (1,834) | (2,344) | (6,668) | (4,012) |
| Incentive fees | (27) | (313) | (6,005) | (5,098) |
| Deferred incentive fees | — | — | (5,811) | (4,700) |
| Interest income | (43) | (83) | (329) | (342) |
| Interest expense | 543 | 26 | 637 | 7,353 |
| Other (income) loss(5) | 273 | (799) | 1,271 | (1,261) |
| Write-off of unamortized deferred financing costs | — | — | — | (3,526) |
| Net income attributable to non-controlling interests in subsidiaries(1) | 7,716 | 5,628 | 19,341 | 19,297 |
| Fee-related earnings | $36,828 | $22,340 | $86,360 | $68,442 |

(1) Reflects the portion of pre-tax adjusted net income of our subsidiaries attributable to non-controlling interests.

(2) Reflects equity-based compensation for awards granted prior to and in connection with the IPO.

(3) Includes transaction costs ($0.3 million for the three months ended December 31, 2020, and $13.8 million and $0.3 million for the nine months ended December 31, 2021 and 2020, respectively), severance costs ($0.1 million and $4.1 million for the nine months ended December 31, 2021 and 2020, respectively), loss on change in fair value for contingent consideration obligation ($1.6 million for the three and nine months ended December 31, 2021, and $0.4 million for the three and nine months ended December 31, 2020), and other non-core operating income and expenses.

(4) Represents corporate income taxes at a blended statutory rate of 22.6% applied to pre-tax adjusted net income for the three and nine months ended December 31, 2021, and a blended statutory rate of 25.0% applied to pre-tax adjusted net income for the three and nine months ended December 31, 2020. The 22.6% rate for the three and nine months ended December 31, 2021 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 1.6%, and the 25.0% rate for the three and nine months ended December 31, 2020 is based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 4.0%.

(5) Reflects other income (loss) net of amounts for Tax Receivable Agreements adjustments recognized as other income (loss) ($(1.4) million for the nine months ended December 31, 2021).

### Investment Performance

The following table presents information relating to the performance of all the investments that StepStone has recommended and subsequently tracked across asset classes and investment strategies, except as set forth in greater detail below. The data for these investments is generally presented from the inception date of each strategy and asset class through September 30, 2021 and have not been adjusted to reflect acquisitions or disposals of investments subsequent to that date.

The historical results of our investments are not indicative of future results to be expected of existing or new investment funds, and are not a proxy for the performance of our Class A common stock, including because:

- market conditions and investment opportunities may differ from those in the past;
- the performance of our funds is largely based on the NAV (as defined below) of the funds’ investments, including unrealized gains, which may never be realized;
- newly-established funds may generate lower investment returns during the period that they initially deploy their capital;
- changes in the global tax and regulatory environment may impact both the investment preferences of our clients and the financing strategies employed by businesses in which particular funds invest, which may reduce the overall capital available for investment and the availability of suitable investments, thereby reducing investment returns in the future;
- competition for investment opportunities, resulting from the increasing amount of capital invested in private markets alternatives, may increase the cost and reduce the availability of suitable investments, thereby reducing investment returns in the future; and
- the industries and businesses in which particular funds invest will vary.

Historical and future returns of investments included in our track record are not directly correlated to potential returns on our Class A common stock.

For the purposes of the following table:

- “Invested capital” refers to the total amount of all investments made by a fund, including commitment-reducing and non-commitment-reducing capital calls;
- “NAV” refers to the estimated fair value of unrealized investments plus any net assets or liabilities associated with the investment as of September 30, 2021;
- “IRR” refers to the annualized internal rate of return for all investments within the relevant investment strategy on an inception-to-date basis as of September 30, 2021 (except as noted otherwise below), based on contributions, distributions and unrealized value;
- “Net IRR” refers to IRR net of fees and expenses charged by both the underlying fund managers and StepStone;
- “TVM” refers to the total value to paid-in capital or invested capital expressed as a multiple, and is calculated as distributions plus unrealized valuations divided by invested capital (excluding capitalized costs); and
- “Net TVM” refers to the total value to paid-in capital or invested capital expressed as a multiple, and is calculated as distributions plus unrealized valuations divided by invested capital (including all capitalized costs).

### StepStone Performance Summary by Asset Class

| PRIVATE EQUITY INVESTMENT STRATEGY(1,3) | NET IRR(2) | NET TVM(2) | REAL ESTATE INVESTMENT STRATEGY(3,4) | NET IRR(2) | NET TVM(2) | INFRASTRUCTURE INVESTMENT STRATEGY(3,5) | NET IRR(2) | PRIVATE DEBT INVESTMENT STRATEGY(3,7) | IRR(7) |
| --- | ---: | ---: | --- | ---: | ---: | --- | ---: | --- | ---: |
| Primaries | 19.7% | 1.7x | Core/Core+ fund investments | 8.5% | 1.5x | Primaries | 9.9% | Direct lending (Gross)(8) | 7.4% |
| Secondaries | 21.6% | 1.6x | Value-add/opportunistic fund investments | 10.1% | 1.4x | Secondaries | 11.5% | Distressed debt (Gross)(8) | 10.8% |
| Co-investments | 25.1% | 1.9x | Real estate debt fund investments | 6.2% | 1.2x | Co-investments(6) | 8.6% | Other (Gross)(8,9) | 9.6% |
|  |  |  | Value-add/opportunistic secondaries & co-investments | 14.8% | 1.3x |  |  | **Private debt gross track record(8)** | 8.7% |
|  |  |  |  |  |  |  |  | **Private debt net track record** | 7.9% |

(1) Private Equity includes 1,242 investments totaling $120.3 billion of capital commitments and excludes (i) two advisory co-investments and 137 client-directed investments, totaling $100.0 million and $16.4 billion, respectively, of capital commitments, (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment. Investment returns are calculated on a constant currency adjusted reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date.

(2) Net IRR and Net TVM are presented solely for illustrative purposes and do not represent actual returns received by any investor in any of the StepStone Funds represented above. StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate):

i. Primaries: 25 basis points of net invested capital for management fee, 5 basis points of capital commitments for fund expenses, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs.

ii. Secondaries: 125 basis points (60 basis points for Infrastructure) on capital commitments in years 1 through 4 for management fee. In year 5, management fees step down to 90% of the previous year’s fee. Secondaries also include 5 basis points of capital commitments for fund expenses, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs. Secondaries also include 12.5% of paid and unrealized carry (15.0% of paid and unrealized carry for Real Estate), with an 8% preferred return hurdle.

iii.Co-investments: 100 basis points on net committed capital for management fee, 5 basis points of capital commitments for fund expenses, and 1 basis point of capital commitments drawn down in the first cash flow quarter for organizational costs. Co-investments also include 10.0% of paid and unrealized carry (15.0% of paid and unrealized carry for Real Estate), with an 8% preferred return hurdle.

Net IRR and Net TVM for certain investments may have been impacted by StepStone’s or the underlying fund manager’s use of subscription backed credit facilities by such vehicles. Reinvested/recycled amounts increase contributed capital. Investment returns reflect NAV data for underlying investments as of September 30, 2021, as reported by underlying managers up to 100 days following September 30, 2021. For investment returns where NAV data is not available by 100 days following September 30, 2021, such NAVs are adjusted for cash activity following the last available reported NAV.

(3) Investments of former clients are included in performance summary past the client termination date until such time as StepStone stops receiving current investment data (quarterly valuations and cash flows) for the investment. At that point, StepStone will then ‘liquidate’ the fund by entering a distribution amount equal to the last reported NAV, thus ending its contribution to the track record as of that date. Historical performance contribution will be maintained up until the ‘liquidation’ date.

(4) Real Estate includes 428 investments totaling $61.5 billion of capital commitments and excludes (i) 49 client-directed investments, totaling $6.1 billion of capital commitments, (ii) six secondary core/core+ investments, totaling $572.1 million, (iii) four advisory fund investments totaling $463.6 million, and (iv) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment. Investment returns are calculated on a constant currency adjusted reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date. Includes the discretionary track record of Courtland Partners, Ltd., which StepStone acquired on April 1, 2018 (the “Courtland acquisition”).

(5) Infrastructure includes 161 investments totaling $31.7 billion of capital commitments and excludes (i) approximately 11 infrastructure investments made by the Partnership prior to the formation of the Infrastructure subsidiary in 2013 or made prior to the Courtland acquisition, and 16 client-directed investments, totaling $501.9 million and $1.2 billion, respectively, of capital commitments, and (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment. Investment returns are calculated on a constant currency adjusted reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date.

(6) Includes asset management investments.

(7) Private Debt includes 630 investments totaling $29.0 billion of capital commitments and excludes (i) 27 client-directed investments, totaling $2.0 billion of capital commitments, and (ii) investments for which StepStone does not provide monitoring and reporting services to the client that made the investment. Investment returns are calculated on a constant currency adjusted reporting basis converting non-USD investment cash flows and NAVs to USD using the foreign currency exchange rate corresponding to each client’s first cash flow date. IRR is presented solely for illustrative purposes and does not represent actual returns received by any investor in any of the StepStone Funds represented above. StepStone fees and expenses are based on the following assumptions (management fees represent an annual rate): Private Debt fund investments include 65 basis points on the quarterly net asset value for management fee. Net IRR for certain investments may have been impacted by StepStone’s or the underlying fund manager’s use of subscription backed credit facilities by such vehicles. Reinvested/recycled amounts increase contributed capital. Investment returns reflect NAV data for underlying investments as of September 30, 2021, as reported by underlying managers up to 100 days following September 30, 2021. For investment returns where NAV data is not available by 100 days following September 30, 2021, such NAVs are adjusted for cash activity following the last available reported NAV.

(8) Subset performance is presented net of fees and expenses charged by the underlying fund manager only (performance results do not reflect StepStone fees and expenses).

(9) Other includes mezzanine debt, infrastructure debt, collateralized loan obligations, private performing debt, senior debt, fund of funds, leasing, regulatory capital, trade finance and intellectual property/royalty.

### Liquidity and Capital Resources

### Sources and Uses of Liquidity

We generate cash primarily from management and advisory fees and realized carried interest allocations. We have historically managed our liquidity and capital resource needs through (a) cash generated from our operating activities, (b) realizations from investment activities, (c) borrowings, interest payments and repayments under credit agreements and other borrowing arrangements, (d) funding capital commitments to our funds, and funding our growth initiatives, including capital expenditures and acquisitions to expand into new businesses.

As of December 31, 2021, we had $136.9 million of cash, cash equivalents and restricted cash and $1,446.2 million of investments in StepStone Funds, including $1,347.4 million of accrued carried interest allocations, against $62.8 million in debt obligations, net of debt issuance costs, and $688.1 million in accrued carried interest-related compensation payable.

Ongoing sources of cash include (a) management and advisory fees, which are collected monthly or quarterly, (b) carried interest allocations and incentive fees, which are volatile and largely unpredictable as to amount and timing; and (c) distributions from our investments in the StepStone Funds. We use cash flow from operations and distributions from our investments in the StepStone Funds to pay compensation and related expenses, general and administrative expenses, income taxes, debt service, capital expenditures, dividends to our stockholders and distributions to holders of Partnership units, and to make investments in the StepStone Funds. We believe we will have sufficient cash to meet our obligations for the next 12 months.

### Cash Flows

The following table summarizes our cash flows attributable to operating, investing and financing activities:

*(in thousands)*

|  | Nine Months Ended December 31, 2021 | 2020 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $181,978 | $120,297 |
| Net cash used in investing activities | (201,475) | (8,549) |
| Net cash used in financing activities | (27,073) | (12,505) |
| Effect of exchange rate changes | (377) | (191) |
| Net increase (decrease) in cash, cash equivalents and restricted cash | $(46,947) | $99,052 |

#### Operating Activities

Operating activities provided $182.0 million and $120.3 million of cash for the nine months ended December 31, 2021 and 2020, respectively. For the nine months ended December 31, 2021 and 2020, respectively, these amounts primarily consisted of the following:

- net income, after adjustments for non-cash items (including unrealized carried interest allocations, unrealized performance fee-related compensation, and unrealized investment income), of $165.4 million and $89.7 million; and
- net change in operating assets and liabilities of $16.6 million and $30.6 million.

#### Investing Activities

Investing activities used $201.5 million and $8.5 million of cash for the nine months ended December 31, 2021 and 2020, respectively, and primarily consisted of the following amounts:

- net contributions to investments of $10.3 million and $7.5 million;
- net contributions to investments in legacy Greenspring entities of $8.1 million and $0 million;
- purchases of fixed assets of $1.6 million and $1.0 million; and
- cash payments for acquisitions, net of cash acquired, of $181.5 million and $0 million.

#### Financing Activities

Financing activities used $27.1 million and $12.5 million of cash for the nine months ended December 31, 2021 and 2020, respectively, and primarily consisted of the following:

- sale of non-controlling interests of $0 million and $3.3 million;
- proceeds from IPO, net of underwriting discounts, of $0 million and $337.8 million;
- net borrowings on revolving credit facility of $65.0 million and $0 million;
- payment of deferred financing costs of $2.4 million and $0 million;
- purchase of non-controlling interests of $3.0 million and $131.3 million;
- payment of deferred offering costs of $1.3 million and $9.7 million;
- payments on prior term loan of $0 million and $147.0 million;
- distributions to non-controlling interests of $74.5 million and $64.9 million;
- proceeds from capital contributions to legacy Greenspring entities of $9.1 million and $0 million;
- distributions to non-controlling interests in legacy Greenspring entities of $4.6 million and $0 million;
- dividends paid to common stockholders of $14.8 million and $0 million; and
- payments to related parties under the Tax Receivable Agreements of $0.7 million and $0 million.

### Revolving Credit Facility

In September 2021, we entered into the Credit Agreement with various lenders in connection with the Greenspring acquisition. The Credit Agreement was arranged by JPMorgan Chase Bank, N.A., as administrative agent, and provides for a $225.0 million multicurrency Revolver with a five-year maturity. As of December 31, 2021, we had $62.8 million outstanding on the Revolver, net of debt issuance costs.

Borrowings under the Revolver bear interest at a variable rate per annum. We may designate each borrowing as (i) in the case of any borrowing in U.S. dollars, a base rate loan or a LIBOR rate loan, (ii) in the case of any borrowing denominated in Euros, a EURIBOR rate loan, (iii) in the case of any borrowing denominated in British Pounds Sterling, a SONIA loan, (iv) in the case of any borrowing denominated in Swiss Francs, a SARON loan, and (v) in the case of any borrowing denominated in Australian dollars, an AUD rate loan. Borrowings bear interest equal to (i) in the case of base rate loans, 1.00% plus the greatest of (a) the Prime Rate, (b) the New York Federal Reserve Bank Rate plus 0.50% and (c) the 1 month LIBOR, multiplied by the Statutory Reserve Rate (as defined in the Credit Agreement), plus 1.00%, (ii) in the case of a LIBOR rate loan, the LIBOR rate multiplied by the Statutory Reserve Rate plus 2.00%, (iii) in the case of a EURIBOR rate loan, the EURIBOR rate multiplied by the Statutory Reserve Rate plus 2.00%, (iv) in the case of a SONIA loan, the Sterling Overnight Index Average plus 2.03%, (v) in the case of a SARON loan, the Swiss Average Rate Overnight plus 2.00%, and (vi) in the case of an AUD rate loan, the AUD Screen Rate (as defined in the Credit Agreement) multiplied by the Statutory Reserve Rate plus 2.20%. The interest rate in effect for the Revolver as of December 31, 2021 was 2.13%.

Borrowings under the Revolver may be repaid at any time during the term of the Credit Agreement and, subject to certain terms and conditions, may be reborrowed prior to the maturity date. Any outstanding principal amounts, together with any accrued interest thereon, shall be due and payable on the maturity date. The maturity date for the Revolver is September 20, 2026.

The Revolver bears a fee on undrawn commitments equal to 0.25% per annum if total utilization of revolving commitments is equal to or greater than 50% and 0.35% per annum if total utilization of revolving commitments is less than 50%.

Under the terms of the Credit Agreement, certain of our assets serve as pledged collateral. In addition, the Credit Agreement contains covenants that, among other things: limit our ability to incur indebtedness; create, incur or allow liens; transfer or dispose of assets; merge with other companies; make certain investments; pay dividends or make distributions; engage in new or different lines of business; and engage in transactions with affiliates. The Credit Agreement also contains financial covenants requiring us to maintain a total net leverage ratio, and a minimum total of fee-earning assets under management beginning with the quarter ending December 31, 2021. As of December 31, 2021, we were in compliance with the total net leverage ratio and minimum fee-earning assets under management covenants.

We can use available funding capacity under the Revolver to satisfy letters of credit in amounts up to $10.0 million. Amounts used to satisfy the letters of credit reduce the available capacity under the Revolver. As of December 31, 2021, we had outstanding letters of credit totaling $2.9 million.

### Equity Transactions

In June 2020, StepStone Group Real Assets LP (“SRA”) completed a transaction to repurchase partnership interests in SRA from a former partner for approximately $3.3 million, and subsequently sold an equal number of partnership interests to certain employees of SRA for approximately $3.3 million, resulting in no net proceeds to SRA.

In connection with the consummation of the IPO, we issued new partnership interests to certain StepStone professionals in SRA in exchange for their partnership interests in SRA, which increased our interest in SRA to approximately 49% and decreased the interest of the StepStone professionals in SRA to approximately 51%.

In March 2021, we conducted an underwritten public offering of 9,200,000 shares of Class A common stock, including 1,200,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, sold by selling stockholders at a public offering price of $29.50 per share. In connection with the offering, we issued 9,200,000 shares of Class A common stock to the selling stockholders in exchange for 9,200,000 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. We did not receive any proceeds from the sale of shares by the selling stockholders.

In June 2021, we issued 1,898,438 shares of Class A common stock to certain limited partners of the Partnership in exchange for 1,898,438 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

In September 2021, we issued 12,686,756 shares of Class A common stock and 3,071,519 Class C units of the Partnership as partial consideration for the Greenspring acquisition. In connection with the transaction, we amended the limited partnership agreement to create a new Class C limited partnership interest and admit the new limited partners that received Class C units as consideration for the Greenspring acquisition. We also entered into an agreement with the Class C limited partners to allow for exchange of Class C units to shares of Class A common stock of the Company on a one for one basis. The Class C limited partners became parties to the Exchanges Tax Receivable Agreement as a result of the transaction.

In September 2021, we issued 2,087,281 shares of Class A common stock to certain limited partners of the Partnership in exchange for 2,087,281 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

In November 2021, we conducted an underwritten public offering of 4,500,000 shares of Class A common stock sold by selling stockholders at a public offering price of $51.83 per share. In connection with the offering, we issued 3,958,204 shares of Class A common stock to certain selling stockholders in exchange for 3,958,204 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us. We also issued 142,695 shares of Class A common stock to certain selling stockholders in exchange for 142,695 Class C units and a corresponding number of Class A units of the Partnership were issued to us. We did not receive any proceeds from the sale of shares by the selling stockholders.

In December 2021, we issued 935,235 shares of Class A common stock to certain limited partners of the Partnership in exchange for 935,235 Class B units. A corresponding number of shares of Class B common stock were automatically redeemed at par value and canceled in connection with such exchange and a corresponding number of Class A units of the Partnership were issued to us.

### Future Sources and Uses of Liquidity

In the future, we may issue additional equity or debt with the objective of increasing our available capital. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents, and our ability to obtain future financing.

#### Dividend and Distribution Policy

On June 15, 2021, we announced a dividend of $0.07 per share of Class A common stock, which was paid on July 15, 2021 to holders of record at the close of business on June 30, 2021.

On August 10, 2021, we announced a dividend of $0.07 per share of Class A common stock, which was paid on September 15, 2021 to holders of record at the close of business on August 31, 2021.

On November 9, 2021, we announced a dividend of $0.15 per share of Class A common stock, which was paid on December 15, 2021 to holders of record as of the close of business on November 30, 2021.

On February 8, 2022, we announced a dividend of $0.15 per share of Class A common stock, payable on March 15, 2022 to holders of record as of the close of business on February 28, 2022.

We may pay additional dividends to holders of our Class A common stock in the future. The declaration and payment by us of any future dividends to Class A stockholders is at the sole discretion of our board of directors. Subject to funds being legally available, we will cause the Partnership to make pro rata distributions to its limited partners, including us, in amounts sufficient to make payment of applicable income and other taxes, to make payments under the Tax Receivable Agreements, and to make payment for corporate and other general expenses. Because our board of directors may determine to pay or not pay dividends to our Class A stockholders, our Class A stockholders may not necessarily receive dividend distributions relating to our excess distributions, even if the Partnership makes excess distributions to us.

#### Tax Receivable Agreements

We have entered into an Exchanges Tax Receivable Agreement with the partners of the Partnership as of the date of the IPO and with the Class C limited partners, and a Reorganization Tax Receivable Agreement with certain pre-IPO institutional investors (collectively, the “Tax Receivable Agreements”). The Tax Receivable Agreements provide for payment by SSG to these continuing partners and pre-IPO institutional investors of the Partnership of 85% of the amount of the net cash tax savings, if any, that SSG realizes (or, under certain circumstances, is deemed to realize) as a result of increases in tax basis (and utilization of certain other tax benefits) resulting from (i) SSG’s acquisition of such continuing partner’s and institutional investor’s Partnership units in connection with the Reorganization and IPO and (ii) in the case of the Exchanges Tax Receivable Agreement, any payments SSG makes under the Exchanges Tax Receivable Agreement (including tax benefits related to imputed interest). SSG will retain the benefit of the remaining 15% of these net cash tax savings under both Tax Receivable Agreements.

### Contractual Obligations and Commitments

In the ordinary course of business, we enter into contractual arrangements that require future cash payments.

In September 2021, we completed the acquisition of 100% of Greenspring. The transaction agreement includes an earn-out of up to $75 million that is payable in 2025 subject to the achievement of certain management fee revenue targets for calendar year 2024. As of December 31, 2021, the contingent consideration liability in respect of the Greenspring acquisition was $19.4 million.

Also in connection with the Greenspring acquisition, we, indirectly through our subsidiaries, became the sole and/or managing member of certain entities, each of which is the general partner of an investment fund (“legacy Greenspring general partner entities”). We did not acquire any direct economic interests attributable to the legacy Greenspring general partner entities, including legacy Greenspring investments in funds and carried interest allocations. However, certain arrangements negotiated as part of the acquisition represent variable interests that could be significant. We determined that the legacy Greenspring general partner entities are VIEs and it is the primary beneficiary of each such entity because it has a controlling financial interest in each entity. As a result, we consolidate these entities. As of December 31, 2021, there are $42.1 million of unfunded commitments held by the legacy Greenspring general partner entities in legacy Greenspring funds for which we do not hold an economic interest.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that would expose us to any liability or require us to fund losses or guarantee target returns to clients in our funds that are not reflected in our condensed consolidated financial statements. See notes 4 and 15, respectively, to our condensed consolidated financial statements included elsewhere in this quarterly report for information on variable interest entities and commitments and contingencies.

### Critical Accounting Policies

We prepare our condensed consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and judgments, however, are both subjective and subject to change, and actual amounts may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.

See note 2 to our condensed consolidated financial statements included elsewhere in this quarterly report, and note 2 to our audited consolidated financial statements in our Form 10-K for the year ended March 31, 2021 for a summary of our significant accounting policies.

### Recent Accounting Developments

Information regarding recent accounting developments and their effects to us can be found in note 2 to our condensed consolidated financial statements included elsewhere in this quarterly report.

## Market risk

As filed, 6,696 characters.

In the normal course of business, we are exposed to a broad range of risks inherent in the financial markets in which we participate, including price risk, interest-rate risk, access to and cost of financing risk, liquidity risk, counterparty risk and foreign exchange-rate risk. Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies, fundraising practices or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit markets or financial market dislocations.

### Market Risk

Our predominant exposure to market risk is related to our role as general partner or investment manager for our focused commingled funds and SMAs and the sensitivities to movements in the fair value of their investments, which may adversely affect our performance fee revenues and investment income.

Our management fee and advisory fee revenue is only marginally affected by changes in investment values because our management fees are generally based on commitments or net invested capital and our advisory fees are fixed. As of December 31, 2021, NAV-based management fees represented approximately 2% of total net management and advisory fees. We estimate that a 10% decline in market values of the investments held in our funds as of December 31, 2021 would result in an approximate $1.0 million decrease to annual management fees.

The fair value of the financial assets and liabilities of our focused commingled funds and SMAs may fluctuate in response to changes in the fair value of a fund’s underlying investments, foreign currency exchange rates, commodity prices and interest rates. The effect of these risks is as follows:

- Incentive fees from our funds are not materially affected by changes in the fair value of unrealized investments because they are based on realized gains and subject to achievement of performance criteria rather than on the fair value of the fund’s assets prior to realization. As of December 31, 2021, we had $18.5 million of deferred incentive fee revenue recorded in accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheets.
- We earn carried interest allocation revenue from certain of the StepStone Funds based on cumulative fund performance to date, subject to specified performance criteria. Our carried interest allocation is affected by changes in market factors. However, the degree of impact will vary depending on several factors, including but not limited to (i) the performance criteria for each individual fund in relation to how that fund’s results of operations are affected by changes in market factors; (ii) whether such performance criteria are annual or over the life of the fund; (iii) to the extent applicable, the previous performance of each fund in relation to its performance criteria; and (iv) whether each funds’ performance related distributions are subject to contingent repayment. As a result, the impact of changes in market factors on carried interest allocation revenue will vary widely from fund to fund. An overall decrease of 10% in the general equity markets would not necessarily drive the same impact on our funds’ valuations, as many of our investments in our funds are illiquid and do not trade on any exchange. Additionally, as a large percentage of our carried interest allocation revenues are paid to employees as carried interest-related compensation, the overall net impact to our income would be mitigated by lower compensation payments. As of December 31, 2021, the maximum amount of carried interest allocations (excluding legacy Greenspring carried interest allocations) subject to contingent repayment was an estimated $189.1 million, net of tax, assuming the fair value of all investments was zero, a possibility that we view as remote.
- Investment income changes in relation to realized and unrealized gains and losses of the underlying investments in our funds in which we have a general partner commitment. Based on investments (excluding legacy Greenspring investments in funds) held as of December 31, 2021, we estimate that a 10% decline in fair value of the investments would result in a $9.9 million decrease in the amount of income.

### Exchange Rate Risk

Our business is affected by movements in the exchange rate between the U.S. dollar and non-U.S. dollar currencies in respect of revenues and expenses of our foreign offices that are denominated in non-U.S. dollar currencies and cash and other balances we hold in non-functional currencies. The amount of revenues and expenses attributable to our foreign offices is not material in relation to our U.S. offices. Therefore, changes in exchange rates are not expected to materially affect our condensed consolidated financial statements.

Certain of our focused commingled funds and SMAs hold investments denominated in non-U.S. dollar currencies that may be affected by movements in the exchange rate between the U.S. dollar and foreign currencies, which could affect investment performance. The currency exposure related to investments in foreign currency assets is limited to our general partner interest, which is typically no more than one percent of total capital commitments. Changes in exchange rates are not expected to materially affect our condensed consolidated financial statements.

### Interest Rate Risk

As of December 31, 2021, we had $65.0 million in borrowings outstanding under our Revolver. The Revolver accrues interest at a variable rate. As of December 31, 2021, we estimate that interest expense would increase by $0.7 million on an annualized basis as a result of a 100 basis point increase in interest rates. Of the $136.9 million of cash, cash equivalents and restricted cash as of December 31, 2021, we estimate that interest income would increase by $1.4 million on an annualized basis as a result of a 100 basis point increase in interest rates.

### Credit Risk

We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In such agreements, we depend on the respective counterparty to make payment or otherwise perform. We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.

## Controls and procedures

As filed, 2,718 characters.

#### Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective to provide reasonable assurance that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

#### Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 173 characters.

There have been no material changes from the risk factors previously disclosed in Part 1, Item 1A of our annual report on Form 10-K for the fiscal year ended March 31, 2021.

Filed Feb 10, 2022.
Source: SEC EDGAR, the filing index for accession 0001796022-22-000006. Last ingested by Listed: Nov 5, 2026, 17:07 ET. No prices; not investment advice.