Cohen & Steers, Inc. Q1 2010 Earnings Call Transcript

Cohen & Steers, Inc. Q1 2010 Earnings Call Transcript
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Cohen & Steers, Inc. (CNS)

Q1 2010 Earnings Call Transcript

April 22, 2010 11:00 am ET

Executives

Salvatore Rappa – SVP and Associate General Counsel

Matt Stadler – EVP and CFO

Bob Steers – Co-Chairman and Co-CEO

Marty Cohen – Co-Chairman and Co-CEO

Joe Harvey – President, Chief Investment Officer and Senior Portfolio Manager

Analysts

Mike Carrier – Deutsche Bank

Dov Hellman – Sidoti & Company

Alex Blostein – Goldman Sachs

Cynthia Mayer – Bank of America

Presentation

Operator

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Previous Statements by CNS
» Cohen & Steers, Inc. Q4 2009 Earnings Call Transcript
» Cohen & Steers Q4 2008 Earnings Call Transcript
» Cohen & Steers, Inc. Q3 2008 Earnings Call Transcript

Welcome to the Cohen & Steers' first quarter 2010 financial results conference call. During the presentation, all participants will be on a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Mr. Salvatore Rappa, Senior Vice President and Associate General Counsel. Please go ahead, sir.

Salvatore Rappa

Thank you and welcome to the Cohen & Steers' first quarter 2010 earnings conference call. Joining me are Co-Chairman and Co-Chief Executive Officers, Marty Cohen and Bob Steers; our President, Joe Harvey; and our Chief Financial Officer, Matt Stadler.

Before I turn the call over to Matt, I want to point out that during the course of this conference call we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from these – from those indicated in these statements. We believe that some of these factors are described in the Risk Factors section of our 2009 Form 10-K, which is available on our website at cohenandsteers.com.

I want to remind you that the company makes – assumes no duty to update any forward-looking statements. Also the presentation we make today contains pro forma or non-GAAP financial measures, which we believe are meaningful in evaluating the company’s performance. For detailed disclosures on these pro forma metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued yesterday and then our previous earnings releases, each available on our website.

Finally, this presentation may contain information with respect to the investment performance of certain of our funds. I want to remind you that past performance is not a guarantee of future performance. For more complete information about these funds, including charges, expenses, and risks, please call 1-800-330-7348 for a prospectus.

With that, I’ll turn the call over to Matt.

Matt Stadler

Thank you, Sal. Good morning, everyone. Thanks for joining. Yesterday, we reported net income of $0.21 per share compared with a loss of $0.34 per share in the prior year and net income of $0.27 per share sequentially. The first quarter of 2009 included a $0.39 per share impairment charge on available-for-sale securities. After adjusting for this item, earnings per share were $0.05.

We reported revenue for the quarter of $41.3 million compared with $23.5 million in the prior year and $39.9 million sequentially. The increase in revenue from the prior year is attributable to higher average assets, resulting primarily from market appreciation and institutional net inflows. Average assets for the quarter were $24.9 billion compared with $12.7 billion in the prior year and $23 billion sequentially.

Our effective fee rates for the quarter were 61.5 basis points, down from 63 basis points last quarter. The decline was primarily due to a higher proportion of institutional inflows from existing sub-advisory accounts which are lower fee-paying.

Pretax income for the quarter was $13.5 million compared with a pretax loss of $16.2 million in the prior year and pretax income of $15.3 million sequentially. The prior year's quarter included an impairment charge of $18.2 million on available-for-sale securities. After adjusting for this item, pretax income for the first quarter of 2009 was $2 million. Our pretax profit margin for the first quarter was 33% and our operating margin increased to 30% this quarter from 28% last quarter.

Turning to assets under management, our assets under management increased to $27.2 billion from $24.8 billion at December 31st. Market appreciation of $1.3 billion and net inflows of $1.1 billion accounted for the increase in assets. At March 31st, U.S. REIT common stocks comprised 43% of the total assets we manage, followed by international REIT common stocks of 27%, large cap value at 11%, preferreds at 8%, and listed infrastructure and utilities at 8%.

Our open-funds had assets under management of $7 billion at March 31st, an increase of $673 million or 11% from the fourth quarter. The increase was due to market appreciation of $416 million and net inflows of $257 million. Domestic REIT portfolios had $162 million of net inflows while international and global portfolios had $95 million of net inflows. Our organic growth rate for open-end funds was 16% if you annualize first quarter flows.

Assets under management in our closed-end funds totaled $5.7 billion at March 31st, an increase of $190 million or 3% from the fourth quarter. The increase was attributable to market appreciation. Assets under management and our institutional separate accounts totaled $14.5 billion at March 31st, an increase of $1.5 billion or 12% from the fourth quarter. The increase was comprised of net inflows of $874 million, the majority of which was some sub-advised accounts into global and large-cap value portfolios and market appreciation of $675 million.

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