Cohen & Steers, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022; comparative periods ended June 30, 2021. Amounts are in U.S. dollars. Cohen & Steers is a global investment manager focused on real assets and alternative income. Its fees are principally linked to assets under management (AUM).
Financial performance
| Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 |
|---|---|---|---|---|
| Revenue | $147.4m | $144.3m | $301.6m | $270.0m |
| Operating income | $61.0m | $59.7m | $112.0m | $111.6m |
| Operating margin, GAAP | 41.4% | 41.4% | 37.1% | 41.3% |
| Net income | $26.1m | $52.4m | $73.0m | $104.8m |
| Net income attributable to common stockholders | $52.0m | $46.6m | $94.0m | $95.4m |
| Diluted EPS | $1.06 | $0.95 | $1.91 | $1.95 |
Q2 investment advisory and administration fees rose 2.5%, led by open-end funds; institutional account fees declined 7.9%. H1 revenue increased 11.7%, primarily reflecting higher average AUM across investment vehicles. Q2’s $28.6m investment loss, versus a $7.8m gain a year earlier, drove lower consolidated net income. H1 investment losses were $25.0m, including $35.9m of net unrealized losses on investments still held at period-end. Common-stockholder income differs from consolidated net income because of the allocation to redeemable noncontrolling interests in consolidated investment vehicles.
Management’s non-GAAP “as adjusted” results were Q2 common-stockholder income of $47.2m and diluted EPS of $0.96, versus $45.9m and $0.94 a year earlier. H1 adjusted income was $98.4m and adjusted diluted EPS $2.00, versus $84.5m and $1.73. Adjustments include seed-investment results, accelerated vesting of restricted stock units, foreign-exchange items, tax items and, for H1 2022, $15.2m of RLTY offering costs. Adjusted H1 operating margin was 44.0%, up from 42.9%; these are non-GAAP measures.
AUM, liquidity and capital
- AUM ended June at $87.9bn, down 8.7% from $96.2bn a year earlier. H1 AUM fell $18.8bn, as $17.1bn of market depreciation and $1.7bn of distributions outweighed $39m of net inflows. Q2 net outflows were $717m.
- H1 AUM trends were mixed: open-end funds had $36m net outflows, institutional accounts $481m net outflows, and closed-end funds $556m net inflows. The company reported a 3.2% organic growth rate over the 12 months ended June 30, 2022.
- Cash and cash equivalents were $126.6m at June 30, down from $184.4m at year-end. Net liquid assets were $222.2m, compared with $212.7m. The company reported no outstanding debt.
- H1 operating cash flow was negative $48.8m, compared with positive $90.0m in H1 2021; investing cash flow was negative $43.6m and financing cash flow positive $39.1m. Operating cash use included investment purchases within consolidated vehicles. Financing included $117.8m of net contributions from redeemable noncontrolling interests, $53.7m of dividends and $25.8m of share repurchases for employee tax withholding.
- The company paid $1.10 per share in dividends during H1 and declared a further $0.55 per share dividend on August 4, payable August 25, 2022, subject to the stated record date.
Outlook, risks and other matters
- Management expects operating cash flows to be sufficient for foreseeable obligations and identifies them as the principal working-capital source. No specific earnings or AUM guidance was provided. Future dividends remain subject to board approval and other considerations.
- Management said the Russia-Ukraine conflict has increased market and economic uncertainty, but the company’s exposure to Russian and Ukrainian securities is limited and is not expected to materially affect results. Market declines can reduce AUM-based fees and the value of seed investments; currency and interest-rate changes are additional exposures.
- The company has committed up to $50.0m to the Cohen & Steers Real Estate Opportunities Fund and had funded $21.2m by June 30; the fund determines the timing of the remaining commitment. Contractual obligations totaled $40.6m, including leases, purchase obligations and a transition-tax liability.
- Private real estate valuations rely on estimates and unobservable assumptions and may differ from eventual sale values. The company reported no pending legal matters it believed could materially adversely affect its financial position, results or cash flows. It reported no material changes to previously disclosed risk factors and effective disclosure controls.
Important facts for investors to verify
- Whether AUM-based fee revenue and net flows hold up if market depreciation or institutional outflows persist.
- The composition, valuation assumptions and liquidity of seed investments, especially private real estate and consolidated investment vehicles.
- The drivers and potential recurrence of investment losses, foreign-exchange gains or losses, and the difference between GAAP and adjusted results.
- The remaining timing and funding needs for the $28.8m REOF commitment, alongside cash generation, dividends and other obligations.