Cohen & Steers, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Cohen & Steers is a global investment manager focused on real assets and alternative income. The filing is unaudited.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $122.7 million | $126.1 million | Down 2.7% |
| Operating expenses | $82.4 million | $81.2 million | Up 1.6% |
| Operating income | $40.3 million | $44.9 million | Down 10.3% |
| GAAP operating margin | 32.8% | 35.6% | Down 2.8 percentage points |
| Net income attributable to common stockholders | $34.0 million | $35.3 million | Down 3.7% |
| Diluted EPS | $0.68 | $0.71 | Down 4.2% |
| Adjusted operating margin (non-GAAP) | 35.5% | 38.0% | Down 2.5 percentage points |
| Adjusted diluted EPS (non-GAAP) | $0.70 | $0.76 | Down 7.9% |
Investment advisory and administration fees fell 2.3%, mainly reflecting lower average assets under management (AUM); distribution and service fees fell 9.9%. Higher employee compensation, including accelerated vesting of certain restricted stock units, and higher depreciation and amortization more than offset lower distribution and general and administrative expenses. GAAP non-operating income was $5.0 million, versus $1.6 million, including gains from investments and improved foreign-currency results. The effective tax rate rose to 24.3% from 22.5%.
AUM, cash flow and financial position
- Quarter-end AUM was $81.2 billion, up 1.7% from $79.9 billion at March 31, 2023. In Q1 2024, net outflows were $2.0 billion, market appreciation added $0.7 billion, and distributions were $0.6 billion. Institutional accounts had $2.5 billion of quarterly net outflows; open-end funds had $0.6 billion of net inflows.
- Operating cash flow was positive $4.9 million, versus negative $15.0 million. Investing cash flow was negative $29.4 million and financing cash flow negative $64.3 million. Cash and cash equivalents, including amounts held in consolidated investment vehicles, ended the quarter at $100.1 million, down from $189.6 million at year-end.
- Management reported net liquid assets of $259.3 million at March 31, down from $285.5 million at December 31, 2023. The balance sheet reported cash of $99.5 million; the difference from cash-flow-statement cash reflects $0.6 million included in investments held by consolidated vehicles.
- The company reported no borrowings under its $100 million revolving credit facility, which matures in January 2026, and was in compliance with its covenants. Operating lease liabilities were $141.4 million; total contractual operating lease obligations were $221.9 million.
- Q1 shareholder dividends paid were $29.3 million, and $19.4 million of shares were repurchased to meet employee tax-withholding obligations. The company declared a further $0.59-per-share dividend on May 2, payable May 23, 2024.
Material changes, outlook and risks
- Compared with Q1 2023, AUM rose overall, but quarterly net outflows and a lower average AUM base weighed on fees. For the 12 months ended March 31, 2024, management reported an organic decay rate of 4.3%; the institutional-account rate was 8.2%.
- Management provided no numerical revenue, earnings or AUM guidance in this filing. Results remain sensitive to markets, investment performance, client flows, distributions, interest and currency rates, and the ability to raise assets in closed-end funds.
- On April 22, after quarter-end, the company issued 1,007,057 shares through an at-the-market offering, receiving approximately $68.4 million net. It terminated the program the same day and said proceeds would support general corporate purposes, including seeding strategies and vehicles.
- Investment commitments included up to $50 million to a real estate fund and up to $125 million to CNSREIT. At March 31, $28.3 million and $101.2 million, respectively, remained unfunded. An additional $6.6 million was funded to the real estate fund on May 1. Timing of remaining funding is uncertain; CNSREIT and other seed investments can have redemption restrictions.
- Q1 included accelerated restricted-stock-unit vesting and overlapping lease costs for the former and current headquarters. Management’s non-GAAP adjusted results exclude these and other items, including seed-investment and foreign-currency effects; adjusted measures are supplemental, not GAAP.
- The company said no pending ordinary-course legal matter was believed to have a material adverse effect, and reported no material changes to the risk factors in its 2023 Form 10-K. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether subsequent AUM flows, particularly institutional and global/international real estate outflows, improve or persist.
- How market movements and client flows affect fee revenue, margins, and the reported organic decay rate.
- Cash conversion and liquidity, including the impact of dividends, seed-investment funding, and other capital needs.
- The eventual funding schedule and performance or liquidity of the REOF and CNSREIT commitments.
- The dilution and use of proceeds from the post-quarter ATM share issuance, and the sustainability of the dividend.