Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen and Steers second quarter 2023 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 star followed by the one on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference call is being recorded Thursday, July 20th, 2023. I would now like to 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 2023 Earnings Conference Call. Joining me are our Chief Executive Officer, Joe Harvey, our Chief Financial Officer, Matt Stadler, and our Chief Investment Officer, John Chegg. 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.cohenandsteers.com. With that, I'll turn the call over to Matt.

Thank you, Brian. Good morning, everyone. Thanks for joining us. As on previous calls, my remarks this morning will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on pages 18 and 19 of the earnings release and on slides 16 through 20 of the earnings presentation. Yesterday, we reported earnings of 70 cents per share compared with 96 cents in the prior year's quarter and 76 cents sequentially. Revenue was $120.3 million for the quarter, compared with $147.7 million in the prior year's quarter and $126.3 million sequentially. The decrease in revenue from the first quarter was primarily due to lower average assets under management across all three types of investment vehicles, partially offset by one additional day in the quarter. Our effective fee rate was 57 basis points in the second quarter, compared with 57.6 basis points in the first quarter. The decline was primarily due to mix, as open-end funds represented a lesser portion of our average assets under management in the second quarter than they did in the first quarter. Operating income was 43.8 million in the quarter, compared with 64 million in the prior year's quarter. and 48 million sequentially. And our operating margin decreased to 36.4% from 38% last quarter, due primarily to a second quarter adjustment to compensation that increased the compensation to revenue ratio. Expenses decreased 2.2% from the first quarter, primarily due to lower distribution and service fees and a decrease in G&A. The decrease in expenses related to distribution and service fees was primarily due to lower average assets under management in U.S. open-end funds, partially offset by one additional day in the quarter. The decrease in G&A was primarily due to lower non-client related travel and entertainment and a decrease in recruitment fees. Although compensation and benefits were essentially flat when compared with the first quarter, The compensation to revenue ratio increased to 40.5% for the second quarter, 200 basis points higher than our previous guidance. The increase, which included an adjustment to bring the compensation to revenue ratio to 39.5% for the six months ended, was primarily due to lower revenue than originally forecasted and recorded severance costs. Our effective tax rate remained at 25.25%, consistent with the guidance provided on our last call. 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 $257.9 million at quarter end, compared with $247.6 million last quarter. and we have not drawn on the $100 million three-year revolving credit facility that we entered into at the beginning of the fiscal year. Assets under management were $80.4 billion at June 30th, up slightly from $79.9 billion at March 31st. The increase was due to market appreciation of $1.8 billion, partially offset by net outflows of $512 million and distributions of $757 million. Joe Harvey will provide an update on our flows and institutional pipeline of awarded unfunded mandates. Let me briefly discuss a few items to consider for the second half of the year. With respect to compensation and benefits, all things remaining equal, we expect that our compensation to revenue ratio will remain at 39.5%, consistent with the year-to-date ratio I referenced earlier. Next, Based on our ongoing review of non-client related expenses, we expect G&A to increase 9 to 11% from the 52.6 million we recorded in 2022, which is lower than the 12 to 14% increase noted on last quarter's call. The increase relates primarily to cost projections associated with our new corporate headquarters, as well as certain other strategic initiatives, such as the establishment of a new data center, and a pending upgrade to our trading and order management system. Excluding these costs, we would expect G&A to increase 2 to 4 percent. And finally, we expect our effective tax rate will remain at 25.25 percent. Now I'd like to turn it over to our Chief Investment Officer, John Shea, who will discuss our investment performance.