Q1 2021 Cohen & Company Inc Earnings Call

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Good morning, ladies and gentlemen, and welcome to the Cohen and company first quarter 2021 earnings call. My name is Stephanie and I'll be your operator for today.

Before we begin Cohen <unk> company would like to remind everyone that some of the statements. The company makes during this call may contain forward looking statements under the applicable.

Securities Laws. These statements may involve risks and uncertainties that could cause the company's actual results to differ materially from the results discussed in such forward looking statements.

Forward looking statements made during this call are made only as of the date of this call and.

And the company undertakes no obligation to update such forward looking statements to reflect subsequent events or circumstances.

And the company advises you to read the cautionary note regarding forward looking statements and its earnings release and the most recent annual report on form 10-K filed with the SEC.

I would now like to turn the call over to Mr. Lester Brafman, Chief Executive Officer of Cohen and company. Please go ahead Sir.

Thank you Stephanie and thank you everyone for joining us for our first quarter 2021 earnings call with me on the call is Joe Pooler, our CFO.

And the least we are extremely pleased with this quarter's results. This quarter shows the enormous earning potential of this platform and we continue to build adjacent business lines with expectations of growing and consistent revenue streams down the road.

And the first quarter, our net trading revenue and 19%.

And the million thanks to strong performances from our mortgage repo and corporate trading groups and our gestation repo group our gestation repo book grew to $4 1 billion up from $3 3 billion at the end of 2020.

Also in the quarter, our second company sponsors back into acquisition to close this merger agreement with Metro mile contributing $33 4 million to adjusted pre tax income.

And we're excited to announce the hiring of several types of investment bankers with broad experience and M&A advisory and private capital markets equity capital markets and pipe transactions. We expect that this added expertise will create another source of revenue to complement and continued growth of our spec franchise and contribute to our overall operating leverage looking ahead and we're excited.

And build on our momentum as we go up is grow our business, while remaining committed to executing on our strategic priorities with a continued focus on proactively managing our risk and capital structure as well as enhancing stockholder value.

Now I will turn the call over to Joe to walk through this quarters financial highlights in more detail.

Joe.

Thank you left or we will start with our statement of operations. Our net income attributable to Cohen and company, Inc. Shareholders was $9 4 million for the quarter were $6 98 per fully diluted share compared to $14 8 million for the prior quarter or seven point.

$7.64 per fully diluted share and net loss of $3 1 million for the prior year quarter or $2.70 per fully diluted share. Our adjusted pretax income was $37 6 million for the quarter compared to $23 8 million for the prior quarter.

And adjusted pre tax loss of $4 1 million for the prior year quarter as Lester mentioned in the first quarter. Our second company sponsored back into acquisition Corp. Two closed its merger with Metro miles contributing $33 4 million to the quarters adjusted pre tax and.

Carl.

Note that adjusted pretax income is not a measure recognized under U S generally accepted accounting principles.

See our disclosures calculations and reconciliations surrounding adjusted pretax income and our earnings release.

Net trading revenue came in at $19 2 million and the first quarter up $1 1 million from the fourth quarter and up 600000 and from the first quarter of 2020, the increase from both prior quarters was primarily the result of increased trading from our gestation and repo trading group.

Asset management revenue totaled $2 1 million and in the quarter down $1 7 million from the prior quarter and up 500000 and from the year ago quarter.

The changes from both prior quarters were primarily related to the timing of incentive allocations earned by the manager of our spec funds and the fourth quarter of 2020 and to a lesser extent and the first quarter of 2021.

First quarter 'twenty, one principal transactions and other revenue was $79 6 million, which included $73 2 million of revenue related to Metro miles stock held by our consolidated sponsor entities after into acquisition Corp, twos merger with Metro mile.

Which closed on February 9th of 'twenty one.

It is important to note that approximately 54% of our consolidated into two spec sponsor entity assets are owned by non controlling interests.

$26 6 million of the Noncontrolling interest reduction to our net income for the first quarter and $13 $1 million of our equity compensation expense, both relate to the non controlling interests and the consolidated and suite to spec sponsor entities.

Principal transactions revenue includes all gains and losses and income earned on our $107 million and investment portfolio.

Suffice as other investments at fair value on our balance sheet.

This investment portfolio has increased recently due to our <unk> portfolio growing as our spec franchise expands.

The investment portfolio includes $72 9 million of Metro miles stock at the end of the quarter of which $39 $8 million will be distributed to the noncontrolling interest investors in the sponsor entities.

And the portfolio also includes $15 6 million of shifts stock at the end of the quarter.

Of the $72 9 million and Metro miles stock 51, 8 million is currently restricted from sale and accordance with terms, we have disclosed in previous filings and up to $15 $6 million of shifts stock $13 4 million is currently restricted from sales again in accordance with.

Terms, we've previously disclosed.

Compensation and benefits expense for the first quarter was $26 6 million, which included $13 1 million of stock compensation expense related to employee ownership of founder shares from ensue acquisition Corp, twos merger with Metro mile.

Compensation as a percentage of revenue was two.

26% and the first quarter compared to 35% and the fourth quarter and 80% in the prior year first quarter.

Number of Cohen employees has grown to 98 from 87 eight year and.

Net interest expense for the first quarter was $2 million, including 646000 on our two trust preferred debt instruments 579000 on our senior notes 723000, and on our redeemable financial instruments and 65000 on our credit line.

At the end of the first quarter, we repaid in full the remaining 4 million and redeemable financial instrument that supports our gcs repo business.

Loss from equity method affiliates during the quarter totaled 835000 compared to the prior quarter loss of 244000 and the prior year quarter loss of 107000.

And the fluctuation and loss from equity method affiliates was primarily related to pre business combination expenses incurred by the company's three sponsored and insurance specs, which we're at various stages of finding a merger target during the quarters presented.

During the first quarter income tax expense was 868000 compared to income tax benefits of $8 million and the prior quarter and 372000 and the prior year quarter.

As a reminder, the prior quarters and income tax benefit was primarily the result of the reduction and the valuation allowance applied against the company's net operating loss and net capital loss tax assets.

In terms of our balance sheet at the end of the quarter. Our total equity was $154 7 million and increase of $53 2 million from the prior year and total equity $45 million on current quarter and total equity was non convertible non controlling.

Triste, primarily from the non controlling interests and our consolidated spec sponsor entities.

Also at the end of the quarter Stockholders' equity was $53 5 million, a $9 6 million increase from the prior year and stockholders' equity balance.

Consolidated corporate indebtedness was carried at $47 3 million and our redeemable financial instruments were carried at $8 million.

Additional details regarding the mentioned spec transactions are available on the company's filings with the SEC, including our 10-Q, which we expect to file today or tomorrow.

With that I will turn it back to Lester for some closing remarks.

[noise] lessor.

Thanks, Joe Please direct any offline and investor questions to Joe Pooler at 215, 701, $895, two or via E Mail to Investor Relations at Cowen and company Dot Com.

Good day contact information can also be found at the bottom of our earnings release.

Operator, you can now open the call lines for questions. If there are any.

At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad again that is star then the number one on your telephone keypad to ask a question, we'll pause for just a moment.

Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.

Okay.

At this time there are no question and thank you I'll turn it back over to management.

Thank you. Thank you all for joining us today, and we look forward to speaking next quarter.

Thank you very much.

Thank you. This concludes today's conference call you may now disconnect.

Yes.

Yeah.

Okay.

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Yeah.

Good morning.

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