StepStone Group Inc.STEP
StepStone Group Inc. Stock Compensation Disclosure
Equity-Based Compensation
2020 Long-Term Incentive Plan
The Company has adopted its 2020 Long-Term Incentive Plan (“LTIP”), which allows for the granting of stock options, stock appreciation rights, restricted stock awards, RSUs and performance stock awards to employees, directors and consultants. As of March 31, 2025, there were 28,103,332 shares of Class A common stock available to grant under the LTIP.
Restricted Stock Units
RSUs represent the right to receive payment on the date of vesting in the form of one share of Class A common stock for each RSU. Holders of unvested RSUs do not have the right to vote with the underlying shares of Class A common stock, but are entitled to accrue dividend equivalents which are generally paid in cash when such RSUs vest. The RSUs granted generally vest over four years in equal annual installments. Upon vesting, the Company will typically withhold or cause the participant to sell the number of shares to satisfy the statutory withholding tax obligation and deliver the net number of resulting shares vested.
The change in unvested RSUs is as follows:
| Number of RSUs | Weighted-Average Grant-Date Fair Value Per RSU | ||||||||||
| Balance as of March 31, 2024 | 1,422,658 | $ | 27.12 | ||||||||
| Granted | 451,970 | $ | 53.60 | ||||||||
| Vested | (836,857) | $ | (22.84) | ||||||||
| Forfeited | (13,764) | $ | (29.76) | ||||||||
| Balance as of March 31, 2025 | 1,024,007 | $ | 42.28 | ||||||||
The weighted-average grant-date fair value of RSUs granted during the years ended March 31, 2025, 2024, and 2023 was $53.60, $35.07, and $28.97, respectively. The total fair value as of the respective vesting dates of RSUs vested during the years ended March 31, 2025, 2024 and 2023 was $48.9 million, $24.3 million and $16.5 million, respectively.
Performance-Based Restricted Stock Units
In March 2025, the Company granted PRSUs to certain employees that are subject to both performance-based and service-based vesting conditions. The vesting of the awards is subject to achievement of an annual income contribution target for any fiscal year within a five-year performance period and continued employment through the date the performance target is certified at the end of the fiscal year in which the target is achieved. The performance target may be met in any fiscal year within the five-year performance period, and the vesting date will occur at the end of the fiscal year period in which the target is achieved. If the performance target is not met by the end of the performance period, the awards will immediately be forfeited. Compensation cost is recognized over the requisite service period if it is probable that the performance condition will be satisfied.
The change in unvested PRSUs is as follows:
| Number of PRSUs | Weighted-Average Grant-Date Fair Value Per PRSU | ||||||||||
| Balance as of March 31, 2024 | — | $ | — | ||||||||
| Granted | 69,870 | $ | 53.67 | ||||||||
| Vested | — | $ | — | ||||||||
| Forfeited | — | $ | — | ||||||||
| Balance as of March 31, 2025 | 69,870 | $ | 53.67 | ||||||||
Unvested Partnership Units
In June 2018, the Company issued an aggregate of 5.2% of profits interests (the “Class B2 Interests”) in the Company to certain key employees. These Class B2 Interests provide the recipients with an opportunity to participate in the profits of the Company and proceeds of certain capital events. The Class B2 Interests vest over a period of six years from the grant date, subject to an employee’s continuous service with the Company through the applicable vesting date. Under the terms of the Fifth Amended and Restated Limited Partnership Agreement dated March 8, 2018, the vesting of the awards will occur as follows: (i) 0% during the first three years from the date of issuance, (ii) 30.0% on the third anniversary of the date of issuance, and (iii) 5.8% for each fiscal quarter after the third anniversary of the date of issuance (fully vested on the sixth anniversary of the date of issuance, or June 2024). Upon the final vesting date, all of the Class B2 units were automatically converted into Class B units and unitholders were entitled to purchase from the Company one share of Class B common stock for each Class B unit at its par value. Prior to vesting, holders of Class B2 units did not have the right to receive any distributions from the Partnership, other than tax-related distributions.
The Class B2 Interests are classified as equity-based awards, and the associated equity-based compensation expense is recognized on a straight-line basis over the vesting period, with a corresponding increase to stockholders’ equity in the Company’s consolidated balance sheets.
In June 2024, 2,566,566 outstanding Class B2 units fully vested and were automatically converted into Class B units and all unitholders were entitled to purchase from the Company one share of Class B common stock for each Class B unit at its par value.
Liability Classified Awards
In November 2022, the Company issued a profits interest in SPW to certain employees of the SPW team and concurrently entered into an option agreement which provides that (i) StepStone has the right to acquire the profits interest at the end of any fiscal quarter after June 30, 2027, in exchange for payment of a call price and (ii) the SPW management team, through an entity named CH Equity Partners, LLC, has the right to put the profits interest to StepStone on June 30, 2026 or at the end of any fiscal quarter thereafter, in exchange for payment of a put price. The applicable call or put price is, in certain circumstances, subject to an earn-out or earn-down. The call or put price will be payable in cash unless the Company elects to pay a portion of the consideration in units of the Partnership, each to be exchangeable into shares of the Company’s Class A common stock, and, in either case, rights under one or more tax receivable agreements.
The Company accounted for the profits interest and option agreement as a single unit of account as a liability classified equity-based award. There are no vesting provisions or service requirements related to the award. In determining the fair value of the liability classified awards, the Company considers an income approach using a discounted cash flow analysis, a market approach using observable inputs from similar or comparable transactions in the market and the contractual redemption price. The assumptions used in the analysis are inherently subjective; therefore, the ultimate settlement amount for the liability classified awards may differ materially from the current estimate. The significant unobservable inputs required to value the liability classified awards primarily relate to future projected earnings of SPW and the contractual transaction price, which include a discount rate applied of 34% as of March 31, 2025.
For the years ended March 31, 2025, 2024 and 2023, the Company recognized $651.8 million, $22.9 million and $8.6 million, respectively, of expense related to liability classified awards within equity-based compensation expense in the consolidated statements of income (loss). For the years ended March 31, 2025 and 2024, the Company paid $16.2 million and $3.1 million, respectively, related to the settlement of liability classified awards. For the year ended March 31, 2023, no amounts were paid related to the settlement of liability classified awards. As of March 31, 2025 and 2024, the Company had recognized $663.9 million and $28.3 million, respectively, for liability classified awards within accrued compensation and benefits in the consolidated balance sheets.
Employee Stock Purchase Plan
The Company has an ESPP under which eligible employees may purchase shares of Class A common stock of the Company at six-month period intervals for 85% of the lower of the fair market value on either the first or last trading day of the offering period. Each eligible employee may purchase up to five thousand dollars worth of shares each six-month offering period, limited to a maximum of 1,000 shares. For the year ended March 31, 2025, 69,807 shares were purchased under the ESPP. There were no shares purchased under the ESPP during the years ended March 31, 2024 and 2023 as the ESPP had not yet commenced. As of March 31, 2025, the Company has 2,130,193 shares of Class A common stock reserved for future issuances under the ESPP.
Grants of Limited Partnership Interests
In November 2022, one of the Company’s non-wholly owned subsidiaries issued new partnership interests to certain employees with a grant date fair value of $6.1 million, vesting over six years. The issuance did not impact the Company’s fully diluted interest in the subsidiary.
As of March 31, 2025, $52.1 million of unrecognized non-cash compensation expense in respect of equity-based awards remained to be recognized over a weighted-average period of approximately 3.6 years.
The Company recognized tax benefits related to equity-based awards of $18.4 million, $4.5 million and $1.8 million for the years ended March 31, 2025, 2024 and 2023, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.