EPS of $-0.24 decreased by 150% from previous year
"We generated record earnings this quarter, a capstone for a record fiscal year. Our fee-related earnings, FRE margin, and adjusted net income per share were all at our highest levels ever for both our quarterly and annual results." - Scott Hart, Chief Executive Officer
StepStone Group Inc (STEP) QQ4 2025 Results: Record FRE Margin and Robust Private Markets Growth Drive Material AUM Expansion and Dividend Acceleration
Executive Summary
StepStone Group reported a record quarter on a non-GAAP basis, underscored by heightened fee-related earnings (FRE) strength and ongoing scale benefits from private markets. GAAP net loss of $18.5 million and a quarterly EPS of $-0.24 contrasted with an 85% year-over-year rise in FRE to $94.1 million and an adjusted net income of $80.6 million ($0.68 per share). The company also announced a base quarterly dividend of $0.24 and a supplemental dividend of $0.40 for a total FY dividend of $1.36 per Class A share, reflecting sustained cash returns to shareholders. Across the fiscal year, StepStone raised more than $31 billion of gross AUM inflows and grew fee-earning AUM to over $121 billion, driven by strong private wealth adoption and expanding commingled and secondary fund platforms.
Key Performance Indicators
Operating Income
44.17M
QoQ: 113.02% | YoY:-55.15%
EPS
-0.24
QoQ: 90.80% | YoY:-150.00%
Revenue Trend
Margin Analysis
Key Insights
GAAP net loss attributable to STEP: $(18.5) million; EPS: $(0.24)
Highlights and KPIs, Q4 2025 vs. prior year:
- GAAP net loss attributable to STEP: $(18.5) million; EPS: $(0.24)
- Fee-related earnings (FRE): $94.1 million; FRE margin: 44% (core margin ex-retroactive fees: 37%)
- Adjusted net income: $80.6 million; Adjusted EPS: $0.68
- Dividends: Base $0.24 + Supplemental $0.40; full-year dividends: $1.36 per Class A share
- Fee-earning AUM: >$121 billion; UFEC (undeployed fee-earning capital): ~$25 billion; combined fee-earning AUM + UFEC: ~$146 billion
- Gross inflows: $9.9 billion in the quarter; best private wealth quarter with $1.2 billion evergreen subscriptions
- Private wealth platform: assets ~ $8.2 billion at year-end; distribution partners ~500, up from ~300 a year ago
- Real estate secondaries fund: >$3.75 billion; growth equity fund close >$700 million; infrastructure co-investment fund >$1 billion
- Net accrued carry: $738 million; pipeline for realizations remains active
Income Statement
Metric
Value
YoY Change
QoQ Change
Operating Income
44.17M
-55.15%
113.02%
EPS
-0.24
-150.00%
90.80%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the earnings call:
- Strategy and scale: Scott Hart emphasized that record FRE margins and adjusted EPS reflect the benefit of scale across private markets and the ability to capture returns across cycles. He highlighted that the company closed on debut infrastructure co-investment and real estate secondaries funds, expanding commingled funds across all four asset classes.
- Fundraising and asset growth: Mike McCabe underscored over $31 billion of gross AUM inflows for the year, with strong performance in separately managed accounts and commingled funds, and noted notable fund closings (growth equity >$700m; real estate secondaries >$3.75b) and a private wealth platform expansion to $8.2b.
- Profitability and margins: David Park confirmed FRE of $94m for the quarter (44% margin), with ex-retroactive-FEE margins around 37%, signaling core margin strength even after normalizing retroactive items. He also discussed expense discipline, mentioning cash compensation of ~46% of fee revenues and ongoing headcount investments.
- Private markets outlook: Management remained cautiously optimistic about a capital-markets backdrop, emphasizing scenario planning and a focus on deploying capital into dislocations. They highlighted increasing deal activity toward the end of 2024 and into early 2025, followed by volatility in mid-2025 and a vigilant stance for the near term. Management reiterated the goal to remain highly active in fiscal 2026 and to continue growing the private wealth platform and secondary funds.
- Valuation and NCI buy-in: The call included an update on non-controlling interest buy-ins and a plan to issue ~3.2 million shares, with cash and equity consideration designed to be accretive while maintaining execution simplicity.
We generated record earnings this quarter, a capstone for a record fiscal year. Our fee-related earnings, FRE margin, and adjusted net income per share were all at our highest levels ever for both our quarterly and annual results.
— Scott Hart, Chief Executive Officer
Growth on our private wealth platform this past year has been nothing short of spectacular. With assets more than doubling, distribution growing by nearly 200 unique partners, and improved profitability contributing meaningfully to the firm's blended pay rate.
— Mike McCabe, Head of Strategy
Forward Guidance
Outlook and risk assessment: StepStone articulated a cautiously optimistic view amid a volatile macro backdrop and evolving trade policy dynamics. The company expects continued elevated levels of fundraising and deployment across asset classes, supported by a broad and expanding distribution network (nearly 500 platforms for private wealth). Management stressed the importance of scenario planning to adapt to asset-class, regional, and sector-specific shifts, while leveraging its information edge in private markets. Key guidance signals include: (i) continued growth in FRE margins with potential normalization around mid-30s on a core basis (ex retro fees), (ii) sustained high re-up rates and growth in fee-earning AUM driven by managed accounts and private wealth cross-sell, (iii) ongoing capital deployment in dislocations, and (iv) multiple ongoing fundraising initiatives (co-investment funds, multi-strategy venture fund, corporate lending funds, and debut infrastructure secondaries). Investment thesis: leverage scale and data-enabled platforms to capitalize on private market outperformance relative to public markets, while maintaining disciplined risk management and diversification across geographies and asset classes. Critical factors for investors to monitor include: changes in macro volatility and policy, the pace of private market realizations, the cadence of flagship fund closes, the evolution of UFEC deployment, and the pace of cross-selling within StepStone Private Wealth.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
STEP Focus
0.00%
0.00%
0.00%
0.00%
MVF
1.00%
89.30%
2.38%
9.60%
MQY
68.10%
67.10%
-7.05%
-3.33%
FOCS
40.30%
9.01%
0.87%
121.52%
FHI
67.70%
26.00%
5.79%
9.60%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
StepStone’s investment thesis remains anchored in a scalable, data-enabled private markets platform with diversified revenue streams and a growing private wealth business. The combination of expanding fee-earning AUM, a durable FRE margin, and strong fundraising momentum supports a favorable long-term trajectory, even as near-term macro uncertainty could dampen quarterly flows. The company’s strategy to increase cross-selling across wealth and institutional clients, expand outside the US, and deploy capital into dislocations aligns with the secular growth of private markets versus public markets. Investors should monitor: (1) progression of flagship fund closings and time-to-close cadence, (2) the sustainability of retroactive fees versus core fees, (3) UFEC deployment versus deployed AUM, (4) realized carry and carry timing to gauge near-term earnings visibility, and (5) macro policy developments that could influence liquidity in private markets. Overall, StepStone’s differentiated scale, product breadth (S Prime, Spring, Instruqt, CredX), and expanding global distribution point to a compelling, multi-year growth path, supported by a strong dividend framework and ongoing capital return strategy.
Key Investment Factors
Growth Potential
- Private wealth platform expansion beyond the US, with Europe and other regions as white space; expecting continued expansion in platform assets and fund offerings.
- Depth of private markets product suite (S Prime, Spring, Instruqt, CredX) supports higher asset inflows and cross-selling across wealth and institutional clients.
- Real estate and infrastructure secondaries funds in market with oversubscribed closes; potential for further scale as LP liquidity and dislocations persist.
- Ongoing funnel of flagship funds (co-investment, multi-strategy venture, corporate lending, opportunistic lending) could translate into new fee-earning AUM and enhanced fee mix.
- Retention of re-up rates >90% and expansion of deployed capital in managed accounts suggests durable, recurring revenue streams and visibility into AUM growth.
Profitability Risk
- Exposure to private markets cycle risk and macro volatility, including trade policy shifts and broad market uncertainty that could impact deal flow and realizations.
- Dependency on retroactive fees for a portion of reported FRE margins; normalization could compress quarterly margins toward core levels.
- Concentration risk in large real estate and infrastructure secondaries funds; if fundraising slows, near-term fee revenues could be volatile.
- Incremental compensation and headcount investments tied to long-duration performance may compress near-term margins if fee revenue grows slower than costs.
- Competition in evergreen/semi-liquid private markets products; channel disruption or alternative platforms could affect fund inflows and distribution dynamics.
- Regulatory and valuation risks in private assets and cross-border expansions; reliance on GP-led secondaries introduces execution risk and fund lifecycle timing.
- Potential NCI buy-ins create dilution and require modeling of share-based compensation and equity issuance effects on earnings accretion.
Financial Position
- Asset-light private markets platform with broad diversification across primary, secondary, and co-investment vehicles.
- Strong asset growth, with fee-earning AUM surpassing $121b and UFEC around $25b, implying substantial deployment capacity and liquidity for future opportunities.
- Leverage exposure appears modest in the reported numbers, with long-term debt of $365.8m and total liabilities of ~$2.81b, indicating a disciplined balance sheet in the context of rapid AUM growth.
- Record FRE margin (44% for the quarter) supports cash-generation potential and investor returns, with ex-retro margins around 37%, suggesting resilient core profitability independent of retroactive fees.
- Net accrued carry at $738m signals substantial potential future realizations and aligns with a long-horizon value creation model.
- Dividend policy (base $0.24, supplemental $0.40; $1.36 annual) demonstrates active capital return to shareholders while funding growth investments (e.g., NCI buy-ins).
SWOT Analysis
Strengths
Largest scale among private markets managers with fee-earning AUM >$121B and UFEC ~$25B, offering durable recurring revenue and deployment capacity
Strong FRE margin (44% in Q4 2025; core margin ~37% ex retro fees) and record adjusted NI per share ($0.68)
Rapid expansion of StepStone Private Wealth with >$8.2B AUM and ~500 distribution platforms, underpinning diversified fee mix
Robust fundraising momentum: >$31B gross AUM inflows in fiscal year; multiple large fund closings (growth equity >$700m; real estate secondaries >$3.75B) and debut infrastructure co-investment fund
Diversified asset classes and product suites across primary, secondaries, co-investments (PE, real estate, infrastructure, private credit) with ticker-enabled access (S Prime, CredX, Instruqt)
High client engagement and stickiness: managed account re-up rate above 90% and ~30% growth in re-up accounts on average
Strong realization pipeline and momentum in the near term with a track record of capitalizing on market dislocations
Clear strategic emphasis on data and technology to improve underwriting, valuation, and client acquisition
Weaknesses
GAAP net loss ($18.5m) in Q4 2025, highlighting earnings volatility and potential for quarterly noise
Core margin is still sensitive to retroactive fees and quarterly bonus accruals; normalization could pressure FRE margin in some quarters
Reliance on private markets cycles and external fundraising environment, which can be volatile and subject to macro policy changes
Limited disclosure of cash flow from operations in reported data outside non-GAAP metrics, which can obscure liquidity dynamics
Balance sheet liquidity and debt maturity profile are not fully disclosed in the provided data, limiting visibility into funding flexibility
Opportunities
Expansion into international markets (Europe, Asia) to grow the private wealth and institutional client base
Continued growth of secondary and co-investment funds in real estate and infrastructure to capture heightened liquidity demand
Further deepening of the private wealth platform with new products and cross-selling to existing distribution partners
Execution of flagship funds in market (PE co-investment, multi-strategy venture, infrastructure-focused funds) to drive incremental fee-earning AUM
Leveraging data/Spy benchmarking insights to enhance client value proposition and attract more assets
Increased use of tickers to broaden accessibility and democratize private market access
Threats
Macroeconomic uncertainty, geopolitical risks, and policy shifts influencing private market deal activity and realizations
Bid-ask spreads and market volatility may hinder timely realizations and valuations, impacting Q/Q earnings volatility
Intensified competition in evergreen/private markets platforms could pressure fundraising and fee rates
Regulatory scrutiny around private markets and non-GAAP disclosures may affect operating flexibility and cost structure
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