Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen and Steards third 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 is being recorded Thursday, October 19th, 2023. I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers Third 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 Cheh. 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 third 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 today. 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 92 cents in the prior year's quarter and 70 cents sequentially. The third quarter of 2023 included an adjustment to compensation and benefits that increased the compensation to revenue ratio. Revenue was $123.6 million for the quarter, compared with $140.2 million in the prior year's quarter, and $120.3 million sequentially. The increase from the second quarter was primarily due to the recognition of performance fees from certain institutional accounts, as well as one additional day in the quarter. Our effective fee rate was 57.6 basis points in the third quarter, compared with 57 basis points in the second quarter. The recognition of performance fees in the third quarter accounted for the majority of the increase in our effective fee rate. Operating income was 43.9 million in the quarter, compared with 60.1 million in the prior year's quarter, and 43.8 million sequentially. and our operating margin decreased to 35.5% from 36.4% last quarter. Expenses increased 4.2% from the second quarter, primarily due to higher compensation and benefits partially offset by lower G&A. The compensation to revenue ratio for the third quarter, which included the adjustment referred to earlier, increased to 42.5%, and is now 40.5% for the nine months ended, 100 basis points higher than our previous guidance. Market depreciation in our asset classes late in the third quarter resulted in quarter end assets under management being approximately 6% lower than our average assets under management. We expect this to result in lower full year revenue than we had forecasted when providing our compensation guidance last quarter. which led us to increase the compensation to revenue ratio in the third quarter in order to balance employee retention with results to shareholders. The decrease in G&A was primarily due to lower than projected costs associated with the now completed implementation of our new trading and order management system, as well as lower recruitment costs, partially offset by increases in business-related travel and entertainment and hosted conferences. 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 $279.9 million at quarter end, compared with $257.9 million last quarter. and we have not drawn on our $100 million three-year revolving credit facility. Assets under management were $75.2 billion at September 30th, a decrease of $5.3 billion or 6.5 percent from June 30th. The decrease was due to market depreciation of $4.6 billion, net outflows of $47 million, and distributions of $604 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 fourth quarter. With respect to compensation and benefits, all things remaining equal, we expect that our compensation to revenue ratio will remain at 40.5%, consistent with the year-to-date ratio I just provided earlier. We expect G&A to increase 5% to 7% from the $52.6 million we recorded in 2022, which is lower than the 9% to 11% increase noted on last quarter's call. Excluding cost projections associated with our new corporate headquarters and the establishment of a new data center, we would expect G&A to be flat when compared with last year. And finally, we expect our effective tax rate will remain at 25.25%. Now I'd like to to turn it over to our Chief Investment Officer, John Che, who will discuss our investment performance.