Cohen & Steers, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Cohen & Steers is a global asset manager specializing in real assets and alternative income. Its fees are principally tied to assets under management (AUM). This is an annual report; it does not provide a standalone fourth-quarter results summary.
Financial and operating results
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $489.6 million | $566.9 million |
| Operating income | $164.5 million | $215.9 million |
| Operating margin | 33.6% | 38.1% |
| Net income attributable to common stockholders | $129.0 million | $171.0 million |
| Diluted EPS | $2.60 | $3.47 |
| Adjusted diluted EPS (non-GAAP) | $2.84 | $3.70 |
| Adjusted operating margin (non-GAAP) | 36.2% | 43.0% |
| Net cash from operating activities | $172.0 million | $61.7 million |
- Revenue fell 13.6%, principally because average AUM was lower. Investment advisory and administration fees declined 13.2% to $459.4 million; distribution and service fees declined 19.6% to $28.2 million.
- Total expenses decreased 7.4% to $325.2 million. Lower compensation and distribution costs were partly offset by a 21.7% increase in general and administrative expense, including $10.6 million of incremental lease costs related to the new headquarters.
- Net income was $136.6 million before $7.6 million attributable to noncontrolling interests. The effective tax rate rose to 25.3% from 21.7%.
- Cash and cash equivalents were $187.4 million at year-end, and net liquid assets were $285.5 million, up from $271.6 million. The company reported no borrowings under its $100 million revolving credit facility, which matures January 20, 2026.
- Investing cash outflow was $114.8 million, including $57.0 million of property and equipment purchases, primarily for the headquarters build-out. Financing cash outflow was $119.1 million, including $112.4 million of dividends paid and $21.5 million of share repurchases for employee tax withholding.
AUM and changes versus prior year
- Year-end AUM increased 3.4% to $83.1 billion from $80.4 billion. Market appreciation of $7.5 billion more than offset net outflows of $2.0 billion and distributions of $2.8 billion. The overall organic decay rate was 2.5%.
- U.S. real estate remained the largest strategy at $38.6 billion, or 46.4% of AUM. Preferred securities AUM fell to $18.2 billion from $19.8 billion, with $1.9 billion of net outflows; it represented 21.8% of AUM.
- Open-end fund AUM was $37.0 billion, institutional account AUM was $35.0 billion, and closed-end fund AUM was $11.1 billion. Institutional AUM rose 8.2%, chiefly due to market appreciation; open-end fund AUM was nearly flat.
- Despite the AUM recovery from 2022, revenue, operating income, net income, EPS and margins declined year over year. Management attributed the prior-period pressure on asset values to elevated interest rates, particularly in real estate and preferred securities.
Outlook, risks and unusual items
- The filing gives no specific revenue, earnings or AUM guidance. Management notes that 2024 rate reductions are possible but that persistent inflation and elevated rates could weigh on investment values, demand and opportunities. Results remain sensitive to markets, flows and fee rates.
- Key business risks include concentration in real estate and preferred securities, market and interest-rate exposure, client withdrawals, competition and fee pressure, dependence on distribution intermediaries, and concentration in a major institutional client. Daiwa Asset Management represented approximately 5.2% of total 2023 revenue and 10.5% of year-end AUM.
- The company cites commercial real estate stress, including office weakness, refinancing constraints and loan defaults; preferred-security risks include banking-sector stress and the 2023 write-down of a financial institution’s contingent capital securities. Cybersecurity, regulatory change, technology and AI, key-person retention and operational disruption are also identified risks.
- Management anticipates paying dividends subject to board approval. A quarterly dividend of $0.59 per share was declared February 22, 2024. The 2023 annual dividend was $2.28 per share.
- Outstanding commitments included up to $50 million to REOF, with $28.3 million unfunded at year-end, and up to $125 million to CNSREIT, with $124.8 million unfunded at year-end. The company funded another $23.6 million to CNSREIT in January 2024.
- Unusual financial items include $9.7 million of prior-headquarters lease transition and other costs in 2023, and $15.2 million of RLTY offering costs in 2022. Adjusted figures are non-GAAP and exclude specified items; management’s adjustment methodology changed in 2023.
- The filing’s cover-page checkbox indicates that the financial statements reflect a correction of an error, but the provided filing text does not clearly describe the correction or its impact.
- The company reported no pending legal matters it believed could materially adversely affect its financial position, cash flows or results. Auditors issued unqualified opinions on the financial statements and internal control over financial reporting; valuation of Level 3 investments was identified as a critical audit matter.
Important facts for investors to verify
- Review the filing’s error-correction disclosure and related financial statement impact; the supplied text does not provide a clear explanation.
- Track AUM flows, especially continued preferred-securities outflows, real estate performance and the company’s organic decay rate.
- Assess how interest rates and commercial real estate conditions affect AUM, fee revenue and margins.
- Monitor the Daiwa relationship and other revenue concentrations, as well as the funding schedule and liquidity impact of REOF and CNSREIT commitments.
- Compare GAAP results with adjusted results, including the adjustments and methodology changes, and evaluate the ongoing cost of the new headquarters.