Cohen & Steers(US:CNS)2024-10-16 20:27Third Quarter 2024 Financial Highlights Cohen & Steers reported strong Q3 2024 financial results with increased revenue, operating income, and diluted EPS, alongside significant growth in assets under management Overview Cohen & Steers reported strong results for the third quarter of 2024, with diluted earnings per share of $0.77 on both a GAAP and as adjusted basis. The company achieved an operating margin of 33.7% (35.7% as adjusted), ending the quarter with $91.8 billion in assets under management (AUM) after experiencing significant net inflows of $1.3 billion - Diluted EPS for Q3 2024 was $0.77 (both GAAP and as adjusted)1 - Operating Margin for Q3 2024 was 33.7% (GAAP) and 35.7% (as adjusted)1 - Ending AUM reached $91.8 billion1 - Net Inflows totaled $1.3 billion1 Financial Performance (GAAP & As Adjusted) On a sequential basis, the company demonstrated robust growth in Q3 2024. Revenue increased by 9.4% to $133.2 million, while operating income grew 16.9% to $44.9 million. This led to a 24.9% increase in net income attributable to common stockholders and a 23.3% rise in diluted EPS compared to Q2 2024 Q3 2024 vs Q2 2024 Financial Highlights (U.S. GAAP) | Metric | Q3 2024 (in thousands) | Q2 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $133,203k | $121,721k | 9.4% | | Operating Income | $44,873k | $38,402k | 16.9% | | Net Income | $39,668k | $31,771k | 24.9% | | Diluted EPS | $0.77 | $0.63 | 23.3% | | Operating Margin | 33.7% | 31.5% | +220 bps | Q3 2024 vs Q2 2024 Financial Highlights (As Adjusted) | Metric | Q3 2024 (in thousands) | Q2 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Net Income | $39,706k | $34,532k | 15.0% | | Diluted EPS | $0.77 | $0.68 | 13.5% | | Operating Margin | 35.7% | 34.9% | +80 bps | Detailed Financial Analysis A detailed analysis of Q3 2024 financial performance reveals growth in revenue and expenses, improved operating margin, and a significant positive shift in non-operating income Revenue Analysis Total revenue for Q3 2024 increased by 9.4% sequentially to $133.2 million. This growth was primarily driven by a 9.4% rise in investment advisory and administration fees, attributed to higher average assets under management across all investment vehicles and one additional day in the quarter Revenue Breakdown (Q3 2024 vs Q2 2024) | Revenue Source | Q3 2024 (in thousands) | Q2 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Open-end funds | $66,761k | $60,301k | 10.7% | | Institutional accounts | $32,956k | $30,179k | 9.2% | | Closed-end funds | $25,680k | $24,097k | 6.6% | | Total Inv. Advisory Fees | $125,397k | $114,577k | 9.4% | | Distribution and service fees | $7,244k | $6,631k | 9.2% | | Total Revenue | $133,203k | $121,721k | 9.4% | - The increase in investment advisory, administration, distribution, and service fees was primarily due to higher average assets under management34 Expense Analysis Total expenses rose 6.0% quarter-over-quarter to $88.3 million. The increase was mainly due to a 6.2% rise in employee compensation and benefits from higher incentive compensation, and an 11.1% increase in distribution and service fees linked to higher average AUM in U.S. open-end funds Expense Breakdown (Q3 2024 vs Q2 2024) | Expense Category | Q3 2024 (in thousands) | Q2 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Employee compensation and benefits | $56,376k | $53,097k | 6.2% | | Distribution and service fees | $14,739k | $13,270k | 11.1% | | General and administrative | $14,874k | $14,684k | 1.3% | | Total Expenses | $88,330k | $83,319k | 6.0% | - The rise in employee compensation was primarily due to higher incentive compensation5 - The previous quarter included $1.2 million in expenses for employee separations5 Operating Margin The company's operating margin improved to 33.7% in the third quarter of 2024, up from 31.5% in the second quarter, indicating that revenue growth outpaced the increase in operating expenses - Operating margin increased by 220 basis points from 31.5% in Q2 2024 to 33.7% in Q3 20247 Non-operating Income (Loss) The company reported total non-operating income attributable to the company of $7.1 million in Q3 2024. This is a significant positive shift from the $4.3 million loss in Q2 2024, primarily driven by a substantial net gain from investments of $19.0 million, compared to a $2.0 million loss in the prior quarter Non-operating Income (Loss) Attributable to the Company (in thousands) | Category | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | Interest and dividend income | $5,420 | $5,057 | | Gain (loss) from investments—net | $18,975 | $(2,018) | | Foreign currency gain (loss)—net | $(1,692) | $(483) | | Net (income) loss attributable to noncontrolling interests | $(15,615) | $1,694 | | Total Non-operating income (loss) | $7,088 | $4,250 | Income Taxes The effective income tax rate for the third quarter of 2024 was 23.7%, a decrease from 25.5% in the second quarter of 2024. The change was influenced by factors including a valuation allowance and state and local income taxes Effective Income Tax Rate Reconciliation | Component | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | U.S. statutory tax rate | 21.0% | 21.0% | | State and local income taxes, net | 2.5% | 2.9% | | Valuation allowance | (1.4%) | (0.2%) | | Non-deductible executive compensation | 1.2% | 1.4% | | Other | 0.4% | 0.4% | | Effective income tax rate | 23.7% | 25.5% | Assets Under Management (AUM) Total assets under management significantly increased in Q3 2024, driven by strong market appreciation and net inflows across all investment vehicles and strategies AUM Overview Total assets under management reached $91.8 billion at the end of Q3 2024, a significant 13.7% increase from $80.7 billion at the end of Q2 2024. This growth was propelled by strong market appreciation of $10.4 billion and net inflows of $1.3 billion, which were partially offset by distributions - The $11.1 billion increase in AUM during Q3 2024 was composed of Net Inflows of +$1.3 billion, Market Appreciation of +$10.4 billion, and Distributions of -$0.6 billion10 AUM by Investment Vehicle All investment vehicles experienced AUM growth in Q3 2024. Open-end funds and institutional accounts led the way with increases of 14.8% and 14.5%, respectively. Open-end funds saw a notable turnaround with net inflows of $1.2 billion, a reversal from outflows in the previous quarter AUM by Investment Vehicle (in millions) | Vehicle | Sep 30, 2024 | Jun 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Open-end funds | $42,979 | $37,451 | 14.8% | | Institutional accounts | $36,892 | $32,222 | 14.5% | | Closed-end funds | $11,909 | $11,036 | 7.9% | | Total | $91,780 | $80,709 | 13.7% | - Institutional Accounts: Growth was driven by $1.1 billion in net inflows into U.S. real estate and significant market appreciation11 - Open-end Funds: Growth was driven by market appreciation in U.S. real estate ($984 million) and global/international real estate ($934 million)11 AUM by Investment Strategy Growth in AUM was broad-based across strategies, with U.S. real estate showing the strongest performance, increasing 18.0% to $45.7 billion. Global/international real estate and global listed infrastructure also posted double-digit growth of 14.7% and 12.9%, respectively AUM by Investment Strategy (in millions) | Strategy | Sep 30, 2024 | Jun 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | U.S. real estate | $45,685 | $38,717 | 18.0% | | Preferred securities | $18,929 | $18,094 | 4.6% | | Global/international real estate | $14,986 | $13,064 | 14.7% | | Global listed infrastructure | $9,535 | $8,446 | 12.9% | | Other | $2,645 | $2,388 | 10.8% | | Total | $91,780 | $80,709 | 13.7% | Investment Performance The company's investment strategies consistently outperformed benchmarks across all time horizons, with a high percentage of AUM in top-rated funds % of Total AUM in Outperforming Strategies | Period | Sep 30, 2024 | | :--- | :--- | | 1-Year | 98% | | 3-Year | 95% | | 5-Year | 97% | | 10-Year | 99% | - As of September 30, 2024, 97% of U.S. open-end fund AUM was rated 4 or 5 stars by Morningstar1214 Balance Sheet and Other Information The company's balance sheet strengthened in Q3 2024, with increased liquidity and stockholders' equity, alongside corporate information regarding earnings calls and company profile Balance Sheet Summary The company's financial position strengthened during the quarter. As of September 30, 2024, cash, cash equivalents, U.S. Treasurys, and liquid seed investments increased to $348.4 million from $325.1 million at the end of Q2. Stockholders' equity also grew to $491.0 million from $463.2 million Key Balance Sheet Items | Item | Sep 30, 2024 | Jun 30, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents, U.S. Treasurys and liquid seed investments | $348.4 million | $325.1 million | | Stockholders' equity | $491.0 million | $463.2 million | Corporate Information This section provides logistical details for the Q3 2024 earnings conference call scheduled for October 17, 2024. It also includes a corporate profile describing Cohen & Steers as a global investment manager specializing in real assets and alternative income, along with standard forward-looking statement disclaimers - An earnings conference call is scheduled for October 17, 2024, at 10:00 a.m. (ET)16 - Cohen & Steers is a global investment manager founded in 1986, specializing in real assets and alternative income17 Appendix: Financial Tables and Reconciliations The appendix provides comprehensive financial tables and reconciliations, detailing consolidated statements of income, AUM roll-forwards, and adjustments from GAAP to as-adjusted results Consolidated Statements of Income The appendix provides detailed consolidated statements of income for both the three-month and nine-month periods ending September 30, 2024, with comparisons to the corresponding periods in 2023. For the nine-month period, total revenue grew 1.9% year-over-year, while net income attributable to common stockholders increased by 6.3% Three Months Ended September 30 (in thousands) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $133,203 | $123,737 | 7.7% | | Operating income | $44,873 | $40,871 | 9.8% | | Net income attributable to common stockholders | $39,668 | $32,140 | 23.4% | | Diluted EPS | $0.77 | $0.65 | 19.1% | Nine Months Ended September 30 (in thousands) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $377,634 | $370,449 | 1.9% | | Operating income | $123,540 | $126,611 | (2.4%) | | Net income attributable to common stockholders | $105,443 | $99,232 | 6.3% | | Diluted EPS | $2.08 | $2.00 | 3.8% | AUM Roll-Forward This section contains comprehensive AUM roll-forward tables for quarterly and nine-month periods. It details the changes in AUM due to inflows, outflows, market appreciation/depreciation, and distributions, broken down by investment vehicle (Open-end, Institutional, Closed-end), institutional account type (Advisory, Subadvisory), and investment strategy (U.S. Real Estate, Preferreds, etc.) Total AUM Roll-Forward - Three Months Ended Sep 30, 2024 (in millions) | Component | Amount | | :--- | :--- | | Beginning AUM (Jun 30, 2024) | $80,709 | | Net Inflows | $1,284 | | Market Appreciation | $10,378 | | Distributions | $(591) | | Ending AUM (Sep 30, 2024) | $91,780 | Total AUM Roll-Forward - Nine Months Ended Sep 30, 2024 (in millions) | Component | Amount | | :--- | :--- | | Beginning AUM (Dec 31, 2023) | $83,136 | | Net Outflows | $(1,031) | | Market Appreciation | $11,549 | | Distributions | $(1,874) | | Ending AUM (Sep 30, 2024) | $91,780 | Reconciliations of U.S. GAAP to As Adjusted Financial Results This section provides detailed reconciliations of U.S. GAAP financial results to the 'As Adjusted' non-GAAP measures used by management. Adjustments are made for items such as the impact of consolidated investment vehicles, accelerated vesting of restricted stock units, non-recurring expenses, and foreign currency exchange effects to offer greater transparency into operating performance Reconciliation of Net Income - Q3 2024 (in thousands) | Description | Amount | | :--- | :--- | | Net income, U.S. GAAP | $39,668 | | Seed investments—net | $(3,458) | | Accelerated vesting of restricted stock units | $2,336 | | Foreign currency exchange gains—net | $2,191 | | Tax adjustments—net | $(1,031) | | Net income, as adjusted | $39,706 | Reconciliation of Operating Income - Q3 2024 (in thousands) | Description | Amount | | :--- | :--- | | Operating income, U.S. GAAP | $44,873 | | Consolidated investment vehicles | $414 | | Accelerated vesting of restricted stock units | $2,336 | | Operating income, as adjusted | $47,623 |