Q2 2021 Cohen & Company Inc Earnings Call

Moving to this call may contain forward looking statements under the applicable securities laws.

And if may and.

Volume risks and uncertainties that could cause the company's actual results to differ materially from those results discussed and such forward looking and creating minutes.

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

I'd now like to turn the call.

Call over to Mr. Demonstrative, Roffman, and Chief Executive Officer, Cowen and company.

Thank you. Thank you everybody for joining us from our second quarter 2014 on earnings call with me and on the call Joe Pooler our CFO.

Alright.

And that hasn't hasn't been fat and decisions.

Continuing to favorably.

And the results of our second quarter revenue was impacted by a negative mark to market adjustments on the company's principal investments.

On to sponsors and which we have equity method investments closer related business combinations generating $5.5 million and income for the company during the quarter. Our investment banking pipeline is picking up and we recently hired a group of experienced professionals from launch of commercial real estate origination.

Going back to your physician business and.

Additionally, we are pleased to announce the reinstatement of a quarterly cash dividend, which will allow us to return capital to our shareholders, while continuing to invest and the company's growth initiatives. We continue to believe and the net initials underway will generate long term value for our shareholders and we remain focused on enhancing stockholder value.

Now I will turn the call over to Joe to walk through this quarters.

And financial highlights in more detail.

Thank you Lester will start with our statement of operations. Our net income attributable to Cohen <unk> Company, Inc. Shareholders was $1.7 million for the quarter were $1.21 per fully diluted share compared to $9.4.

And for the prior quarter or $6.98 per fully diluted share and 900000 for the prior year quarter or <unk> 69 per diluted share.

Our adjusted pretax income was $3.7 million for the quarter compared to $37.6 million from the prior quarter.

And $4.4 million from the prior year quarter note that adjusted pretax income is not a measure recognized under U S generally accepted accounting principles.

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

Changes in our.

Our second quarter 2021 earnings measurements and revenues compared to first quarter 2021 were significantly impacted by the closing of our second sponsored Spacs business combination in the first quarter the metro mile insurance expect to merger, which closed in February of 'twenty.

Net trading revenue came in at $18.4 million and the second quarter down 800000, and from the first quarter and down $1.6 million from the second quarter of 'twenty.

Decreases were primarily the result of decreased trading from our wholesale corporate and DCF repo.

Trading groups on a favorable note our gestation repo revenue continued to grow with quarterly revenue of $11.8 million on quarter, ending repo balances up $3.8 billion.

Second quarter 2021 principal transactions and other revenue was negative 11 million.

<unk>, which included $12.8 million of negative revenue related to mark to market principles transaction losses on Metro miles stock.

Note that this $12.8 million of negative principal transactions revenue in the current quarter is offset by a $9 million credit recorded in the net.

Attributable to non the nonconvertible non controlling interest line item.

The consolidated subsidiary, where the unfavorable mark to market losses were recorded had noncontrolling interest, which have been allocated approximately 70% of the negative mark to market.

By the end of the quarter.

Loss related consolidated subsidiary had become wholly owned and the Noncontrolling interest have received via distribution, they're allocated shares of Metro model.

As a reminder, the merger between Metro model and the company's second sponsored insurance back closed in February 'twenty, 1 and.

And generated $73.2 million of principal transactions revenue and the first quarter.

Principal transactions revenue includes all gains and losses and income earned on our $66.7 million investment portfolio classified as other investments at fair value on our balance sheet.

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

The investment portfolio includes $22.2 million of Metro miles stock at June 30, and the portfolio also includes $16 million of shifts stock at June 30.

Of the $22.2 million and Metro miles stock.

All $22.2 million is currently restricted from sale in accordance with the terms we've disclosed in previous filings.

And of the $16 million of shifts stock $13.8 million is currently restricted from sale in accordance with terms we've previously.

Closed.

Compensation and benefits expense for the second quarter of 'twenty, 1 was $14.2 million comp.

Compensation as a percentage of revenue was 141% and the quarter. This high percentage was substantially impacted by the $12.8 million and negative mark to Mark good adjusted.

The sales related to Metro model.

And a reminder, 70%.

Back in the net loss attributable both to the non convertible non controlling interest.

The number of Cohen employees at the end of June was 109 compared to 98 at the end of March and.

<unk> 4 at the end of the prior year June.

Net interest expense for the quarter was $1.8 million, including 652000 on our 2 trust preferred debt instruments 588000 on our senior notes 476000 on our redeemable financial instruments and 66.

And 97 and on our credit line.

And the first quarter of 'twenty, 1 we repaid in full the remaining $4 million redeemable financial instrument supporting our DCF repo business.

And the second quarter of 'twenty, 1 other non operating income was $2.1 million, which represents the forgiveness of 90.

98% of our Paycheck protection program loan that was funded in may of 'twenty and forgiven by the SBA and June of 'twenty 1.

Income from equity method affiliates during the quarter totaled $5.5 million, which was primarily driven by income from our equity method investments.

<unk> in the sponsors of 2 specs, which closed their business combinations during the second quarter a 21.

The increased value of the founder shares held by the sponsors of these 2 specs.

Which we are entitled to and allocation from the sponsors generated $5.5 million of income.

Come from equity method investments and the second quarter.

In summary, despite a quarterly revenue of only $10.1 million, which was driven down by the $12.8 million gross negative mark to market on our consolidated spec sponsors metro mile position.

Below the line income.

And credit from 3 items in particular allowed us to generate positive earnings, namely the noncontrolling interest and $9 million share of the negative $12.8 million of revenue to $5.5 million of income on equity method investments related to the founder shares and our $2.1 million.

P P loan forgiveness and other income line item.

So these items collectively helped us to generate positive net income attributable to Cohen and company, Inc. Shareholders and positive adjusted pre tax income of $1.7 million and $3.7 million respectively.

In terms of our balance sheet.

And of the quarter total equity was $126.4 million.

Compared to $101.4 million at the end of the year.

And the non convertible non controlling interest component of total equity was 7.7 million at the end of the quarter and $27.8 million at the end of the year.

Thus the total equity excluding the non convertible non controlling interest was $118.8 million at the end of the quarter of $45.1 million increase from $73.6 million at the end of the year.

Consolidated corporate indebtedness was carried at $45.4 million.

And our redeemable financial instruments were carried at $8 million.

We've declared a dividend of <unk> 25 per share, which will be payable on August 27th of 'twenty, 1 to stockholders of record on August 13th.

The board of directors will continue to evaluate the dividend policy each quarter.

And future decisions regarding dividends may be impacted by quarterly operating results and the Companys capital needs.

With that I will turn it back over the last day.

Thank you Joe.

And thank you all for joining our call today, please direct any offline investor questions to Joe.

At 2157, and 1.895, 2 or via email at Investor Relations at Cowen and company Dot Com. The contact information can also be found at the bottom of our earnings release. Operator, you can now open the call lines for questions and thank you all for joining us for joining us today.

At this time, if you would like to ask.

Poolers and press Star 1 on your Touchtone phone.

Okay.

And once again that is star 1 on your Touchtone phone, if you would like to ask a question and 1 moment, while we queue.

Good question.

And it appears gentleman that there are no further questions at this time.

Okay, great. Thanks, guys for joining the call today, and we look forward to speaking to you next quarter.

Good day.

This does conclude today's conference.

I'll disconnect your lines and everyone have a good day.

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You may now.

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