Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen and Steers second quarter 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Thursday, July 21st, 2022. I will now turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen and Steers. Please go ahead.

Thank you, and welcome to the Cohen and Steers Second Quarter 2022 Earnings Conference Call. Joining me are our Chief Executive Officer, Joe Harvey, our Chief Financial Officer, Matt Stadler, and our Chief Investment Officer, John Che. I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying second quarter earnings release and presentation, our most recent annual report on Form 10-K, and our other SEC filings. We assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund or other investment vehicle. Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation, as well as links to our SEC filings, are available in the investor relations section of our website at www.cohensteers.com. With that, I'll turn the call over to Matt.

Thank you, Brian. Good morning, everyone. My remarks this morning will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on pages 19 and 20 of the earnings release and on slides 16 through 19 of the earnings presentation. Yesterday, we reported earnings of 96 cents per share, compared with 94 cents in the prior year's quarter and $1.04 sequentially. Second quarter included cumulative adjustments to compensation and benefits and income taxes that increased our compensation-to-revenue ratio and lowered our effective tax rate. Revenue was $147.7 million for the quarter, compared with $144.4 million in the prior year's quarter and $154.3 million sequentially. The decrease in revenue from the first quarter was primarily attributable to lower average assets under management, partially offset by one additional day in the quarter. Our effective fee rate was 58.2 basis points in the second quarter compared with 57.6 basis points in the first quarter. Operating income was 64 million in the quarter compared with 62.6 million in the prior year's quarter and 68.9 million sequentially. Our operating margin decreased to 43.3% from 44.7% last quarter. The second quarter included the cumulative adjustment to increase the compensation to revenue ratio. Expenses decreased 1.9% when compared with the first quarter, as lower compensation and benefits and distribution and service fees were partially offset by higher G&A. The compensation to revenue ratio with the just mentioned cumulative adjustment increased to 34.77% for the second quarter, and is now 34.25% for the six months ended, 50 basis points higher than our previous guidance. Notwithstanding a reduction in our incentive compensation accrual driven by lower revenue resulting from market depreciation, we continue to target hiring at senior positions, which are key to our business plan, primarily in investments, information technology, and certain infrastructure support roles. The decrease in distribution service fee expense was primarily due to lower average assets under management in U.S. open-end funds. And the increase in G&A was primarily due to higher travel and entertainment and an increase in recruitment fees. Our effective tax rate, which also included a cumulative adjustment, was 24.98% for the second quarter and is now 25.25% for the six months ended. The reduction in the effective tax rate from the first quarter was primarily due to lower state and local income taxes, partially offset by an increase in the impact of the non-deductible portion of executive compensation that was commensurate with a decrease in the previously forecasted pre-tax base. Page 15 of the earnings presentation sets forth our cash and cash equivalents, corporate investments in U.S. Treasury securities, and liquid seed investments for the current and trailing four quarters. Our firm liquidity totaled $227.7 million at quarter end, compared with $180.7 million last quarter, and we continue to be debt-free. Assets under management totaled $87.9 billion at June 30th, a decrease of $14.3 billion, or 14%, from March 31st. The decrease was due to market depreciation of $12.5 billion, net outflows of $717 million, and distributions of $1 billion. The last time we recorded net outflows was the second quarter of 2019. Advisory accounts had net outflows of $408 million during the quarter compared with net outflows of $42 million during the first quarter. as 769 million of inflows were more than offset by 1.2 billion of outflows. Joe Harvey will provide some color on our advisory flows, as well as an update on our institutional pipeline of awarded unfunded mandates. PAN sub-advisory had net inflows of 23 million during the second quarter, compared with net inflows of 116 million during the first quarter. Distributions from these portfolios totaled 242 million compared with 271 million last quarter. Sub-advisory excluding Japan had net outflows of 90 million, as a new $131 million global real estate mandate in the Middle East was more than offset by outflows from a number of clients who rebalanced their portfolios. Open-end funds had net outflows of 244 million during the quarter, with inflows into multi-strategy real estate assets and U.S. real estate being more than offset by outflows from preferred securities. Distributions total $624 million, $556 million of which was reinvested. Let me briefly discuss a few items to consider for the second half of the year. With respect to compensation and benefits, we expect our compensation-to-revenue ratio will remain at 34.25%. We expect G&A to increase 10% to 12% from the 25.4 million we recorded in the first half of 2022. We will continue to make incremental investments in technology, including the implementation of new systems, cloud migration, and upgrades to our infrastructure and cybersecurity framework. We also expect that both travel and entertainment and sponsored conference costs will increase. And we expect our effective tax rate will remain at 25.25%. Now I'd like to turn it over to our Chief Investment Officer, John Shea, who will discuss our investment performance.