Cohen & Steers, Inc. — Q1 2020 Form 10-Q
Business context and reporting period
Global investment manager specializing in real assets and alternative income. This unaudited filing covers the three months ended March 31, 2020; comparisons are with Q1 2019 unless otherwise noted.
Financial and operating metrics
| Metric | Q1 2020 | Prior period / change |
|---|---|---|
| Revenue | $105.8 million | $94.2 million; up 12.3% |
| Operating income / margin | $28.4 million / 26.8% | $35.4 million / 37.6% |
| Net income attributable to common stockholders | $20.6 million | $32.5 million |
| Diluted EPS | $0.42 | $0.68 |
| Adjusted net income attributable to common stockholders / diluted EPS | $29.4 million / $0.61 | $27.4 million / $0.58 |
| Operating cash flow | $(5.6) million | $(29.5) million |
| Cash and cash equivalents | $43.0 million | $101.4 million at Dec. 31, 2019 |
| Net liquid assets | $155.0 million | $178.9 million at Dec. 31, 2019 |
| Debt | None outstanding | |
| Assets under management (AUM) | $57.4 billion at March 31 | Down 13.2% year over year and 20.5% from Dec. 31, 2019 |
Revenue growth reflected higher average AUM across investment vehicles and one additional day in the quarter. Q1 ended with $1.2 billion in net inflows, more than offset by $15.3 billion of market depreciation and $0.7 billion of distributions. GAAP net income attributable to common stockholders was affected by investment losses and the allocation of losses to redeemable noncontrolling interests.
Material changes and unusual items
- Investment losses were $22.0 million, mainly unrealized losses on investments; management reported a 17.3% loss on seed investments excluding the portion attributable to third-party interests. The comparable period had $13.9 million of investment gains.
- General and administrative expense rose 106.2% to $23.6 million, primarily reflecting $11.9 million of costs related to a closed-end fund rights offering. Excluding specified items, adjusted operating margin was 38.2%, versus 38.1%.
- GAAP effective tax rate was 2.2%, versus 24.2%, reflecting valuation allowances and discrete tax items. Adjusted effective tax rate was 27.4%.
- Cash declined by $57.1 million before foreign-exchange effects. Financing uses included $25.8 million of share repurchases to satisfy employee tax withholding on vested restricted stock units and $18.7 million of dividends paid.
Outlook, risks, and contingencies
Management provided no numerical earnings or AUM guidance. It said operations had not been materially disrupted by the pandemic as of the filing, and that cash and expected operating cash flows should be adequate for anticipated commitments. Management emphasized that the pandemic’s duration and economic effects were highly uncertain. Sustained market declines, redemptions, reduced demand, or client losses could lower AUM, fee revenue, profitability, and future dividend capacity; remote work also heightens operational, vendor, and cybersecurity risks.
The company had no debt. It reported no pending legal matters believed likely to materially affect results or financial condition. It had an unfunded co-investment commitment of approximately $1.3 million, with timing uncertain. On May 7, 2020, it declared a $0.39 per-share quarterly dividend, payable June 2 to holders of record May 18.
Important facts for investors to verify
- Subsequent AUM, flows, and fee revenue as markets and the COVID-19 disruption evolved.
- Whether seed-investment values, investment losses, and related tax assumptions changed materially.
- Cash generation and liquidity after the quarter’s buybacks, dividends, and other commitments.
- The recurring versus one-time nature of rights-offering costs and the difference between GAAP and adjusted results.
- Dividend capacity and any changes in the company’s pandemic-related operational, vendor, or cybersecurity risks.