Cohen & Steers: Q1 2018 Earnings Presentation
Summary of First Quarter Assets Under Management March 31, 2018 AUM was $58.5 billion versus $62.1 billion at December 31, Average AUM was $59.2 billion for Q1 2018 versus $62.0 billion for Q4 Net outflows of $95 million in Q1 2018 versus net inflows of $227 million in Q4 Flows Net outflows in subadvisory ex. Japan, open-end funds, and Japan subadvisory Net inflows in advisory Net income was $29.0 million in Q1 2018 versus $26.1 million in Q4 Financial Results, as adjusted Diluted EPS of $0.62 in Q1 2018 versus $0.55 in Q4 Operating margin was 40.6% in Q1 2018 versus 41.5% in Q4 First quarter 2018 results reflected the lower U.S. federal statutory tax rate of 21% Capital Management Declared a quarterly dividend per share of $0.33, an 18% increase from the prior quarter 2 The presentation of prior period amounts has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. Please see pages 16-17 of this presentation for a reconciliation of the as adjusted financial measures to their most directly comparable U.S. GAAP financial measures.
Financial Results, as adjusted $ in millions, except earnings per share and percentages Revenue $89.7 $92.6 $96.7 $99.3 $94.4 Expenses $54.2 $55.2 $56.2 $58.1 $56.1 Diluted Earnings per Share $0.47 $0.50 $0.55 $0.55 $0.62 3 Operating Margin 39.6% 40.4% 41.8% 41.5% 40.6% The presentation of prior period amounts has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. Please see pages 16-17 of this presentation for a reconciliation of the as adjusted financial measures to their most directly comparable U.S. GAAP financial measures.
Revenue, as adjusted $ in millions Open-end Fund Fees $2.7 $7.4 $18.9 Institutional Fees $2.8 $7.7 $19.5 Closed-end Fund Fees $89.7 $92.6 $96.7 $2.7 $7.8 $19.9 Distribution & Service Fees $2.9 $7.9 $20.4 Portfolio Consulting and Other $99.3 $94.4 $2.6 $7.4 $19.2 $24.2 $24.4 $25.6 $26.0 $25.2 $36.5 $38.2 $40.7 $42.1 $40.0 4 The presentation of prior period amounts has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. Please see pages 16-17 of this presentation for a reconciliation of the as adjusted financial measures to their most directly comparable U.S. GAAP financial measures. Total may not foot due to rounding.
Expenses, as adjusted $ in millions Employee Compensation and Benefits General and Administrative $54.2 $55.2 $56.2 Distribution and Service Fees Depreciation and Amortization $58.1 $56.1 $1.1 $1.0 $1.1 $1.1 $1.1 $10.5 $10.2 $10.6 $11.2 $11.1 $13.2 $13.6 $13.0 $13.6 $12.8 $29.4 $30.4 $31.6 $32.2 $31.2 5 The presentation of prior period amounts has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. Please see pages 16-17 of this presentation for a reconciliation of the as adjusted financial measures to their most directly comparable U.S. GAAP financial measures. Total may not foot due to rounding.
Assets Under Management $ in billions Ending AUM Avg. AUM $58.3 $59.7 $61.2 $62.0 $59.2 $58.5 $60.4 $61.5 $62.1 $58.5 6
Assets Under Management Across Vehicle, Strategy, and Client Domicile Subadvisory ex. Japan 10.8% Closed-end Fund 15.2% Japan Subadvisory 16.9% Advisory 19.2% Other 5.1% Global Listed Infrastructure 11.6% Global/International Real Estate 18.7% Preferred Securities 22.3% APAC ex. Japan 4.9% Europe 5.1% Japan 17.4% North America 72.6% Open-end Fund 37.9% U.S. Real Estate 42.3% By Vehicle By Strategy By Client Domicile 7 As of March 31, 2018.
Total Firm Net Flows $ in billions Inflows Outflows Net Flows Organic Growth/ (Decay) 6.3% 9.1% 9.2% 1.5% (0.6%) $3.2 $0.9 $4.0 $3.5 $1.3 $1.4 $3.1 $3.3 ($0.1) ($2.3) ($2.1) ($2.6) ($2.8) ($3.4) 8 Totals may not foot due to rounding.
Net Flows by Investment Vehicle $ in billions Organic Growth/ (Decay) Open-end Funds 12.2% 17.5% 16.0% 14.4% (0.1%) Inflows Outflows Net Flows $2.3 $2.4 $2.3 $2.7 $2.5 $0.6 $0.9 $0.9 $0.8 ($0.0) ($1.7) ($1.5) ($1.4) ($1.8) ($2.5) Advisory Organic Growth/ (Decay) (1.5%) 5.2% 41.1% (5.6%) 10.0% $1.2 $1.0 $0.4 $0.3 $0.3 $0.1 $0.1 ($0.0) () ($0.1) ($0.3) () ($0.1) ($0.3) 9 Totals may not foot due to rounding.
Net Flows by Investment Vehicle $ in billions Organic Growth/ (Decay) Subadvisory ex. Japan 2.9% (0.5%) (13.8%) 4.0% (2.1%) Inflows Outflows Net Flows $0.0 ($0.0) ($0.1) () $0.1 () $0.3 ($0.0) () ($0.4) ($0.3) Organic Growth/ (Decay) Japan Subadvisory 9.0% 9.9% (8.2%) (16.0%) (11.9%) $0.4 $0.6 $0.3 $0.3 ($0.1) ($0.3) $0.4 ($0.3) ($0.6) $0.1 $0.1 ($0.3) ($0.5) ($0.4) ($0.6) 10 Totals may not foot due to rounding.
Net Flows by Investment Strategy $ in billions Organic Growth/ (Decay) U.S. Real Estate 4.0% 6.6% 1.2% (5.4%) (4.2%) Inflows Outflows Net Flows $1.6 $1.4 $1.5 $0.5 $0.3 $0.1 ($1.2) ($1.1) ($1.4) $1.2 $1.3 ($0.4) ($0.3) ($1.5) ($1.6) Organic Growth/ (Decay) Preferred Securities 17.0% 34.0% 30.2% 10.3% 6.3% $1.1 $0.4 $1.4 $1.5 $0.9 $0.9 $1.1 $1.2 $0.3 ($0.7) ($0.5) ($0.6) ($0.8) ($1.0) 11 Totals may not foot due to rounding.
Net Flows by Investment Strategy $ in billions Organic Growth/ (Decay) Global/International Real Estate 8.2% (4.8%) 5.3% 9.1% 6.5% $0.4 $0.4 $0.1 $0.6 $0.5 Inflows Outflows Net Flows () ($0.1) ($0.3) () ($0.3) ($0.3) Organic Growth/ (Decay) Global Listed Infrastructure 8.2% 2.2% 16.9% 4.3% 10.4% $0.1 ($0.0) $0.1 $0.0 ($0.1) $0.4 $0.3 () $0.3 $0.1 ($0.1) ($0.1) 12 Totals may not foot due to rounding.
Distributions by Investment Vehicle $ in billions Open-end Funds Japan Subadvisory () ($0.3) () ($0.6) () ($0.8) ($0.8) ($0.7) ($0.6) ($0.6) Closed-end Funds Total ($0.1) ($0.1) ($0.1) ($0.1) ($0.1) ($1.1) ($1.2) ($1.0) ($1.3) ($0.9) 13
10-Year 5-Year 3-Year 1-Year Investment Performance % of Total AUM in Outperforming Strategies 1 % of U.S. Open-End Fund AUM by Morningstar Rating 2 As of 3/31/2018 83% 67% 96% Not Rated 1 or 2 Star 3 Star 4 or 5 Star 3/31/2016 3/31/ 3/31/2018 98% 96% 93% 5% 1% 8% 3/31/2016 3/31/ 3/31/2018 73% 77% 99% 3/31/2016 3/31/ 3/31/2018 86% 100% 94% 100% 3/31/2016 3/31/ 3/31/2018 1 Past performance is no guarantee of future results. Outperformance is determined by annualized investment performance of all accounts in each investment strategy measured gross of fees and net of withholding taxes in comparison to performance of each account s reference benchmark measured net of withholding taxes, where applicable. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided by Cohen & Steers. 2 Past performance is no guarantee of future results. Based on independent rating by Morningstar, Inc. of investment performance of each Cohen & Steers-sponsored open-end U.S.- registered mutual fund for all share classes for the overall period as of March 31, 2018. Overall Morningstar rating is a weighted average based on the 3-year, 5-year and 10-year Morningstar rating. Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided by Cohen & Steers. See Legal Disclosures on page 18 of this presentation for more information about our investment performance. 14
Cash, Cash Equivalents and Seed Investments $ in millions Non-U.S. Cash U.S. Cash Seed Investments 1 $215.3 $241.6 $260.9 $256.9 $231.6 $62.1 $63.4 $58.6 $63.2 $63.0 $68.5 $100.9 $117.3 $109.1 $85.1 $88.2 $77.6 $81.6 $84.4 $83.6 15 March 31, June 30, September 30, December 31, March 31, 2018 1 Excludes certain illiquid seed investments. Totals may not foot due to rounding.
Non-GAAP Reconciliation $ in thousands, except per share data Reconciliation of U.S. GAAP Net Income Attributable to Common Stockholders and U.S. GAAP Earnings per Share to Net Income Attributable to Common Stockholders, As Adjusted, and Earnings per Share, As Adjusted * Amounts round to less than $0.01 per share. (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (2) Represents (i) dividend income and realized (gains) losses on seed investments in Company-sponsored funds, (ii) the Company's proportionate share of the results of operations of seed investments classified as equity method investments, including realized and unrealized (gains) losses and (iii) realized and unrealized (gains) losses from individual investment securities held for purposes of establishing a performance track record. (3) Represents amounts related to the accelerated vesting of certain restricted stock units due to retirements. (4) Represents expenses for the first quarter of 2018 associated with the evaluation of a potential business transaction that the Company did not pursue and the refund of foreign withholding taxes for the first and third quarter of. (5) Tax adjustments are summarized in the following table: Three Months Ended 16 March 31, June 30, Three Months Ended September 30, December 31, March 31, 2018 Net income attributable to common stockholders, U.S. GAAP $22,985 $23,474 $25,082 $20,398 $27,586 Deconsolidation (1) (312) (264) (558) (1,216) 481 Results from seed investments (2) (68) (64) (521) (471) 1,774 Accelerated vesting of restricted stock units (3) 298 224 General and administrative (4) (68) (950) 871 Tax adjustments (5) (621) 269 2,300 7,120 (1,703) Net income attributable to common stockholders, as adjusted $21,916 $23,415 $25,651 $26,055 $29,009 Diluted weighted average shares outstanding 46,603 46,902 47,047 47,300 47,152 Diluted earnings per share, U.S. GAAP $0.49 $0.50 $0.53 $0.43 $0.59 Deconsolidation (1) (0.01) (0.01) (0.01) (0.03) 0.01 Results from seed investments (2) * * (0.01) (0.01) 0.04 Accelerated vesting of restricted stock units (3) 0.01 0.01 General and administrative (4) * (0.02) 0.02 Tax adjustments (5) (0.01) 0.01 0.05 0.15 (0.04) Diluted earnings per share, as adjusted $0.47 $0.50 $0.55 $0.55 $0.62 March 31, June 30, September 30, December 31, March 31, 2018 Transition tax $ $ $ $8,432 $ Remeasurement of deferred and other tax balances 4,300 Tax reserves (700) 1,665 (4,737) Other tax related items 78 (25) (5) (826) (1,003) Tax-effect of non-gaap adjustments 1 294 640 (49) (700) Total tax adjustments ($621) $269 $2,300 $7,120 ($1,703) *Totals may not foot due to rounding.
Non-GAAP Reconciliation $ in thousands, except percentages Reconciliation of U.S. GAAP Operating Income and U.S. GAAP Operating Margin to Operating Income, As Adjusted and Operating Margin, As Adjusted Three Months Ended March 31, June 30, September 30, December 31, March 31, 2018 Revenue, U.S. GAAP (1) $89,741 $92,714 $96,787 $99,454 $94,464 Deconsolidation (2) (66) (88) (101) (148) (51) Revenue, as adjusted $89,675 $92,626 $96,686 $99,306 $94,413 Expenses, U.S. GAAP (1) $54,213 $55,357 $55,814 $58,566 $57,245 Deconsolidation (2) (121) (172) (222) (274) (251) Accelerated vesting of restricted stock units (3) (298) (224) General and administrative (4) 68 950 (871) Expenses, as adjusted $54,160 $55,185 $56,244 $58,068 $56,123 Operating income, U.S. GAAP $35,528 $37,357 $40,973 $40,888 $37,219 Deconsolidation (2) 55 84 121 126 200 Accelerated vesting of restricted stock units (3) 298 224 General and administrative (4) (68) (950) 871 Operating income, as adjusted $35,515 $37,441 $40,442 $41,238 $38,290 Operating margin, U.S. GAAP 39.6% 40.3% 42.3% 41.1% 39.4% Operating margin, as adjusted 39.6% 40.4% 41.8% 41.5% 40.6% (1) The presentation of prior period amounts has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. (2) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (3) Represents amounts related to the accelerated vesting of certain restricted stock units due to retirements. (4) Represents expenses for the first quarter of 2018 associated with the evaluation of a potential business transaction that the Company did not pursue and the refund of foreign withholding taxes for the first and third quarter of. Reconciliation of U.S. GAAP Non-operating Income (Loss) to Non-operating Income (Loss), As Adjusted Three Months Ended March 31, June 30, September 30, December 31, March 31, 2018 Non-operating income (loss), U.S. GAAP $227 $261 $2,327 $2,839 ($199) Deconsolidation (1) (326) 128 (1,335) (1,750) (1,057) Results from seed investments (2) (68) (64) (521) (471) 1,774 Non-operating income (loss), as adjusted ($167) $325 $471 $618 $518 (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (2) Represents (i) dividend income and realized (gains) losses on seed investments in Company-sponsored funds, (ii) the Company's proportionate share of the results of operations of seed investments classified as equity method investments, including realized and unrealized (gains) losses and (iii) realized and unrealized (gains) losses from individual investment securities held for purposes of establishing a performance track record. 17
Legal Disclosures This presentation and other statements that Cohen & Steers may make may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect management's current views with respect to, among other things, the Company's operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative versions of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these forward-looking statements. The Company believes that these factors include, but are not limited to, the risks described in the Risk Factors section of the Company's Annual Report on Form 10- K for the year ended December 31, (Form 10-K), which is accessible on the Securities and Exchange Commission's website at www.sec.gov and on the Company's website at www.cohenandsteers.com. These factors are not exhaustive and should be read in conjunction with the other cautionary statements that are included in the Company's Form 10-K and other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. This presentation contains non-gaap financial measures that we believe are meaningful in evaluating the Company s performance. For disclosures on these non-gaap financial measures and their U.S. GAAP reconciliations, you should refer to the Non-GAAP Reconciliation contained on pages 16-17 of this presentation. Investment Performance: 2018 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Morningstar calculates its ratings based on a risk-adjusted return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars and the bottom 10% receive one star. Copyright 2018 Cohen & Steers, Inc. All rights reserved. 18