Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen and Steers first quarter 2024 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 number 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, April 18th, 2024. And 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 First Quarter 2024 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 first 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 statements. 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. 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.cohenandsears.com. With that, I'll turn the call over to Matt.

Thank you, Brian. Good morning, everyone. As in previous quarters, my remarks will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on pages 13 and 14 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 76 cents in the prior year's quarter and 67 cents sequentially. Revenue was $122.9 million in the quarter compared with $126.3 million in the prior year's quarter and $119 million sequentially. The increase in revenue from the fourth quarter was primarily due to higher average assets under management across all three types of investment vehicles and an increase in the effective fee rate partially offset by one fewer day in the quarter. The fourth quarter included $1.3 million of performance fees. Our effective fee rate was 58 basis points in the first quarter, compared with 57.7 basis points in the fourth quarter. Excluding the 1.3 million of performance fees, the fourth quarter effective fee rate would have been 57 basis points. The increase in the first quarter fee rate was due in part to the termination of two institutional accounts with assets under management of 2.3 billion. that eliminated their strategic allocation to real estate. These two accounts had lower than average fee rates. Operating income was $43.7 million in the quarter, compared with $48 million in the prior year's quarter and $41.3 million sequentially. And our operating margin increased to 35.5% from 34.7% last quarter. Expenses increased 2% from the fourth quarter, primarily due to higher compensation and benefits, an increase in depreciation and amortization, and higher distribution and service fees, partially offset by a decrease in G&A. The compensation to revenue ratio for the first quarter was 40.5%, consistent with the guidance provided on our last call. The first quarter included the full quarter effect of depreciating and amortizing fixed assets and leasehold improvements associated with our new corporate headquarters. The fourth quarter included only one month of depreciation and amortization expense. The increase in distribution and service fees was primarily due to higher average assets under management in U.S. open-end funds, and the decrease in G&A was primarily due to lower recruitment fees. Our effective tax rate was 25.4 percent for the quarter, in line 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 $233.1 million at quarter end, compared with $318.8 million last quarter. Firm liquidity as of March 31st reflected the payment of employee bonuses in January as well as the firm's customary repurchase of common stock to satisfy withholding tax obligations arising from the vesting and delivery of restricted stock units to participating employees. It also reflected the funding of a portion of our capital commitment to cone and steers income opportunities REIT, or recently launched non-traded REIT, which made its first real property investment in January. and we have not drawn on our $100 million revolving credit facility. Assets under management were $81.2 billion at March 31st, a decrease of $1.9 billion, or 2.3 percent from December 31st. The decrease was due to net outflows of $2 billion, $2.3 billion of which was attributable to the two terminated accounts I mentioned earlier, and distributions of $610 million, partially offset by market appreciation of $679 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 remainder of the year. With respect to compensation and benefits, we continue to take a disciplined and measured approach to both new and replacement hires so that, all things being equal, we would expect to maintain a compensation to revenue ratio of 40.5 percent. We expect GNA to increase 5 to 7 percent for the year from the 55 million we recorded in 2023. As a reminder, 2023 GNA included an adjustment to reduce accrued costs associated with the implementation of our trade order management system. Excluding that adjustment, we would expect G&A to increase three to five percent. The majority of the increase is related to investments in technology, as well as costs associated with the relocation of our London and Tokyo offices. We continue to review all of our non-client related expenses. As I noted earlier, the first quarter included the full effect of depreciating and amortizing fixed assets and leasehold improvements for our new corporate headquarters. We expect appreciation and amortization expense to approximate $9.5 million for 2024. And finally, we expect that our effective tax rate will remain at 25.4%. Now I'd like to turn it over to our Chief Investment Officer, John Che, who will discuss our investment performance.