StepStone Group Inc.STEP
StepStone Group Inc. Fair Value Disclosure
Fair Value Measurements
The Company measures certain assets and liabilities at fair value on a recurring basis. The following tables provide details regarding the classification of these assets and liabilities within the fair value hierarchy as of the dates presented:
Financial Instruments of the Company
| As of March 31, 2025 | |||||||||||||||||||||||
| Level I | Level II | Level III | Total | ||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
Contingent consideration obligation | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Total liabilities | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| As of March 31, 2024 | |||||||||||||||||||||||
| Level I | Level II | Level III | Total | ||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
Contingent consideration obligation | $ | — | $ | — | $ | 53,449 | $ | 53,449 | |||||||||||||||
| Total liabilities | $ | — | $ | — | $ | 53,449 | $ | 53,449 | |||||||||||||||
For the financial instruments presented in the tables above, there were no changes in fair value hierarchy levels during the years ended March 31, 2025 and 2024.
A reconciliation from the beginning balance to the closing balance of Level III financial instruments of the Company are set forth below:
| Year Ended March 31, | |||||||||||
| Contingent consideration obligation | 2025 | 2024 | |||||||||
| Balance, beginning of year: | $ | 53,449 | $ | 36,745 | |||||||
Additions | — | 41 | |||||||||
Change in fair value | 15,776 | 16,809 | |||||||||
Settlements | (69,225) | (146) | |||||||||
| Balance, end of year: | $ | — | $ | 53,449 | |||||||
Changes in unrealized losses included in earnings related to financial liabilities as of reporting date | $ | 15,776 | $ | 16,809 | |||||||
Contingent Consideration
The fair value of the contingent consideration obligation was based on a discounted cash flow analysis using a probability-weighted average estimate of certain performance targets, including revenue levels. The significant unobservable inputs required to value the contingent consideration obligation primarily related to the future expected revenues and the discount rate applied to the expected future revenues and payments of obligations. The management fee revenue target for calendar year 2024 was achieved resulting in the full earn-out amount of $75.0 million, which was fully paid prior to March 31, 2025. In accordance with the contingent consideration arrangement, a portion of the contingent earn-out liability otherwise payable to the sellers included amounts paid to certain of the Company’s employees and former employees during the year ended March 31, 2025. As a result, the contingent consideration liability was settled net of $5.8 million paid. The contingent consideration obligation was included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets as of March 31, 2024. Changes in the fair value of the liabilities are included in general, administrative and other expenses in the consolidated statements of income (loss).
Financial Instruments of Consolidated Funds
| As of March 31, 2025 | |||||||||||||||||||||||
| Level I | Level II | Level III | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Equity securities | $ | — | $ | — | $ | 63,664 | $ | 63,664 | |||||||||||||||
Partnership and LLC interests | — | — | 866 | 866 | |||||||||||||||||||
| Total assets | $ | — | $ | — | $ | 64,530 | $ | 64,530 | |||||||||||||||
| As of March 31, 2024 | |||||||||||||||||||||||
| Level I | Level II | Level III | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Equity securities | $ | — | $ | — | $ | 12,421 | $ | 12,421 | |||||||||||||||
Partnership and LLC interests | — | — | 1,273 | 1,273 | |||||||||||||||||||
| Total assets | $ | — | $ | — | $ | 13,694 | $ | 13,694 | |||||||||||||||
For the financial instruments presented in the tables above, there were no changes in fair value hierarchy levels during the years ended March 31, 2025 and 2024.
The Company generally values its investment funds, which are generally organized as partnership and LLC interests, using the NAV per share equivalent calculated by the investment manager as a practical expedient in determining an independent fair value. The Company does not categorize within the fair value hierarchy investments where fair value is measured using the net asset value per share practical expedient. As of March 31, 2025 and 2024, investments with a combined fair value of $350.5 million and $118.2 million, respectively, are excluded from presentation in the fair value hierarchy as the fair value of these investments were measured at net asset value. As of March 31, 2025 and 2024, investments with a combined fair value of $64.5 million and $13.7 million, respectively, were classified as Level III investments. Depending on the valuation technique, the significant unobservable input used to value these investments classified as Level III could be the enterprise value to revenue multiple or the discounts to recent transaction prices or recent round of financing.
A reconciliation from the beginning balance to the closing balance of Level III financial instruments of Consolidated Funds are set forth below:
| As of March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Financial Instruments of Consolidated Funds | |||||||||||
| Balance, beginning of period: | $ | 13,694 | $ | 6,901 | |||||||
| Transfers into Level III | 9,289 | 1,593 | |||||||||
| Transfers out of Level III | (4,332) | (5,067) | |||||||||
Purchases | 38,369 | 8,813 | |||||||||
Change in fair value | 7,510 | 1,454 | |||||||||
| Balance, end of period: | $ | 64,530 | $ | 13,694 | |||||||
Changes in unrealized gains included in earnings related to financial assets still held at the reporting date | $ | 7,510 | $ | 1,454 | |||||||
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.