Q3 2021 Cowen Inc Earnings Call

Pardon me. This is the operator on today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

[music].

Good morning, and thank you for joining us to discuss cowens results for the third quarter of 2021 by.

By now you should have received a copy of the earnings release, which can be accessed at the investor Dot Calvin dotcom.

After the speaker's presentation, there will be a question and answer session.

As a reminder, today's call is being recorded.

I would now like to hand, the call over to Mr. JT Farley Kevin's head of Investor Relations.

Thank you Carmen before we begin I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward looking statements. These statements are subject to the risks and uncertainties described in our earnings release and other filings with the SEC Cowen has no obligation to update the information presented on today's call also on today's call we will be referencing certain.

Non-GAAP financial measures, which we believe provide useful information for investors reconciliation of those measures to GAAP is consistent with the Companys reconciliation as presented in today's earnings release.

As a reminder, we make available our quarterly financial supplement in the Investor Relations section of our website. We encourage you to review it in conjunction with our earnings release.

Joining us on today's call are Cowen as chair and Chief Executive Officer, Mr. Jeffrey Solomon and our Chief Financial Officer, Mr. Stephen Lasota, now I would like to turn the call over to Jeff.

Good morning, everyone and thank you for joining us for Cowens third quarter 2021 earnings call.

Today I'm happy to provide highlights on our strong operating performance this quarter.

We will also place this performance into the broader context of how the long term strategy. We laid out just three years ago has delivered these strong results.

In that spirit I will share some details about the durability of the business we built.

As well as the steps, we've taken and continue to take to generate strong profitability consistently in a variety of market conditions.

Then Steve will review the financial results for the quarter and after that we will be happy to answer your questions.

Over the past four quarters, we have generated more than $1 $9 billion in revenues, including over $1 billion in investment banking revenues and we have generated over $10 per share and after tax economic operating income that is a 36% return on common equity.

This quarter, we posted $359 million in total revenues and $43 million and after tax economic operating income for our return on common equity of 17, 5%.

This is the 14th out of the last 15 quarters of meaningful profitability with the exception being the first quarter of 2020.

While Cowen stock has risen considerably over the past year, we believe that our valuation remains attractive.

That is part of the reason we have been more aggressive in returning capital to shareholders by repurchasing shares at a record pace, but that's not the only reason.

We've also long said.

Now we would be more aggressive with capital return as we demonstrated lasting improvement in our financial and operating performance. We remain true to our word and we believe in our ability to continue returning capital to shareholders commensurate with our continued performance now.

Now, let me turn to our operating highlights.

The third quarter of 2021 was the second best quarter on record for investment banking revenues surpassed only by the first quarter of this year banking.

Banking revenues were up 43% year over year, and importantly, M&A revenues set a new record above 100 million for the quarter more than three times the level in the third quarter of 2020.

It was a record quarter for both our M&A.

And capital markets advisory practices.

It was the second quarter in a row that advisory, which combines M&A and capital markets Advisory revenues comprised the majority of banking revenues at 67%.

Our results in these areas are a function of the <unk>.

The intentional approach we've taken.

Two diversifying our business by product and sector over the past few years, we were able to achieve this despite headwinds in the equity capital markets this quarter, particularly in biotech.

The industry breath of our banking franchise was clearly evident this quarter sectors outside of healthcare comprised 54% of total banking revenues.

The strong results from industrials technology and consumer sectors.

Within healthcare, we continue to grow our footprint non biotech areas, which include tools and diagnostics Med Tech healthcare services and healthcare it accounted for the majority of our banking healthcare revenues in the quarter at 56%.

The growth in the number of publicly listed disruptive healthcare companies, coupled with the pace of private companies private healthcare company formation will continue to be a tailwind for cowen for the foreseeable future.

Today, there are about 660 publicly traded companies and biotech tools and diagnostic sectors in the United States, that's more than 10% of all publicly traded company operating companies listed on the New York Stock Exchange and NASDAQ and is up from only 200 companies a decade ago.

<unk> has a leading market share of clients in this space.

There will always be fluctuations and capital markets activity in this sector. However, given our market position, we remain confident that we will be able to capture a significant proportion of the ipos follow ons and increasingly debt offerings. When companies decide the time is right to tap the markets or when their financing needs and compel them to do so.

We also saw a rebound in spec deals during the quarter, particularly in advisory assignments stack related revenues accounted for 44% of banking revenues in the third quarter and about one third of banking revenues in the first nine months of 2021.

As a reminder, most of our spec revenues are on the backend.

In other words pipe financings capital markets Advisory and M&A advisory during the <unk> process.

We are not heavily dependent on the continued growth in the listing some stacks in order for them to be a meaningful contributor to our future revenues.

With approximately 500 Spacs looking to compete complete transactions over the next few years, we believe that a large percentage of them will ultimately find transactions.

And the Cowen will benefit even with a small percentage of the market share.

That is why we are selective in partnering with stack management teams choosing the ones. We believe have clear vision and strong chances of success as public companies.

So activity is evident and outcomes looking at specs, which have gone public since the start of 2020, nearly two thirds of Ipos.

Each were book run by Cowen already have deals pending or closed which is almost double the average for all specs in that period.

It is also worth noting that spec mandates makeup under 30% of our current deal backlog.

Demand for advisory and capital markets issuance remained strong into 2022 away from the spec market.

While our pipeline ended the quarter slightly below the second quarter of 2020 one's record levels. It is still up 15% from the start of this year and up 20% since the third quarter of 2020.

We remain quite confident that our current backlog will result in meaningful revenues for Cowen over the next several quarters.

Over the past several years, we have broadened our banking franchise through the acquisitions, such as Courtney and MH.

T. After previously adding teams from Morgan Joseph <unk> Dahlman rose in prior years.

In addition, we become an employer of choice with lateral hiring from across the street in every one of our sectors. It's a good time to be at Cowen.

Our diversified revenue stream and banking is a direct result of these efforts.

We are always looking for great bankers that can help us to continue our momentum to deliver world class outcomes for our clients.

And we've been adding resources at the analyst from the analyst to the Vice President levels. So that we have the capacity needed for our higher level of revenue operating.

And operations.

Our markets business has also remained incredibly resilient, averaging just over $2 $5 million in daily revenue, despite lower market wide volumes again, our decision to invest in areas such as prime brokerage Securities Finance and European trading are paying dividends as we continue to take meaningful share from much larger compare.

<unk>.

While revenues were down 4% year over year, most of the drop about $4 7 million was due to the wind down of our most of our most of our clearing operations, which we decided to do to free up balance sheet capital for other opportunities, including stepping up the buyback.

Highlights for the third quarter included year over year gains in cash and electronic trading Prime services revenues non U S execution in ADR trading.

Prime services in particular is gaining momentum, adding nearly 40 new clients during the third quarter.

<unk> finance growth has also been strong this year, including our new swaps capability, which now has over 50 clients on boarded.

We continue to attract new talent, including the addition of the leading event driven trading team in Europe during the quarter and we're boosting our ETF trading capabilities as well.

The value proposition offered by Cowen as an independent non conflicted partner with World class execution and research capabilities is increasingly compelling to institutional shareholder institutional investors.

That has translated into increased share of wallet for us. According to many third party industry surveys.

While we're making progress at progress on the Buildout of Cowen digital our digital assets initiative.

We're still in the early stages, we are working on building out the legal regulatory and technology framework to onboard clients and the engagement level among clients and the topic is very high more to come on this front as we head into 2022.

Looking at the current quarter, we are off to a good start with average daily revenues slightly above our third quarter average.

And research the third quarter, we welcomed new senior analysts to our biotech and life sciences as well as our tools and diagnostics coverage teams during the quarter, we had sector launches in healthcare facilities and managed care as well as sustainable food and healthy living in total we added coverage of nearly 90, new stocks in the quarter and.

Today, we have almost 950 stocks under coverage, which is the highest its ever been.

In the third quarter, we published 13 of our flagship ahead of the curve series reports.

Clients continue to value, our differentiated research and during the quarter. Our team once again saw significant gain in brokerage boats from our institutional clients.

In investment management.

Management, even with the volatile environment for growth strategies, we added more than $400 million in assets under management compared to the second quarter of 2021 with most of that increase occurring in our healthcare strategy.

Total AUM was $14 8 billion, which is up 25% year over year and up 3% quarter over quarter.

We had a negative mark to market change in economic incentive fees totaling $58 million and this is due to a drop in the value of pro terror, which is the largest investment accounts sustainable investments.

And we had declines in positions and the Cowen healthcare investments strategy.

Despite these marks however incentive fee income is still positive for the first nine months of 2021.

And almost $20 million.

Economic management fees were up 3% over the year to $15 million.

Largely due to higher AUM and the healthcare strategies as well as sustainability an activist.

Those fees are net of a $3 $8 million fund placement fee expenses.

Expensed in full during the quarter, excluding those fees or management fees would have been up more than 25% year over year.

Looking at our five strategies the sustainability strategy had just over $1 3 billion.

AUM at quarter end and overall performance remains strong even when factoring in the drop in the price of pro tariff.

During the quarter the strategy made its third investment in a sustainable dental products firm called quip.

Our healthcare investment strategy completed two new investments and four follow on financings and ended the quarter with just over $1 2 billion in AUM long term performance remains quite strong despite the declines in public positions during the quarter.

The activist strategy grew to almost $7 5 billion, even though the strategy was slightly down in the third quarter and the merger arbitrage strategy had $321 million in AUM.

Strategy did outperform the <unk> merger Arb index during the quarter.

Care royalty strategies ended the quarter with over $3 6 billion in total AUM, which was up $100 million year over year.

Turning to our balance sheet, we had investment income losses of 20 million for this quarter due primarily to the declines in the value in our sustainability in health care strategies as well as declines in some of our merchant banking portfolio.

As is the case with our incentive income or investment income is still positive on a year to date basis at $25 million.

To give you some perspective Cowen has always had quarterly fluctuations in our incentives.

And investment income lines.

And then every single year since the global financial crisis in 2008, we've had positive contributions on an annual basis from our combined incentive and investment income revenue line items.

While noisy at time incentive and investment income are additive to our bottom line when viewed over the longer term. These revenues benefit investors, who are focused on the remarkable growth of our core business over the past few years.

As our investment banking.

And brokerage operations have increased in size and profitability and our management fee income has risen.

As a result of this shift incentive and investment income has become a much smaller part of our annual revenue mix less than 10% of total revenues in each year since 2018 and in year to date 2021, it amounts to just about 3% of our revenues in.

In the coming quarters, we will be providing details to give investors more insight into these revenue lines. So they proved to be less of a distraction.

Before I hand, it over to Steve I'd like to share a few reasons why I continue to believe that we are well positioned to deliver consistent profitability in the years ahead.

We have a proven track record of identifying operating opportunities in areas of the economy that are undergoing significant disruption sectors that require capital and we will have a lot of transaction activity.

Our leading position in biotech to longstanding growth sectors, such as electronics and semiconductors in emerging areas such as sustainability robotics energy transformation in digital health, we have built deep experience in partnering with growth companies.

Our research team is truly ahead of the curve in identifying these emerging trends and investment themes, we lead with research and then we bring all Cowen resources to bear to help companies in these ecosystems and investors in these ecosystems, who are looking to understand and embrace these opportunities.

Now I will I will turn the call over to Steve Lasota for a brief review of our quarterly financial results Steve.

GAAP results for the third quarter of 2021 were as follows total revenues were $412 2 million up 28% year over year from $321 3 million net income attributable to common stockholders was $36 1 million or $1 10 per dilute per diluted share up from.

Net income of $18 6 million or <unk> 62 per diluted share in the prior year period compensation.

Asian and benefit expenses were $201 7 million, an increase of $48 3 million from the prior year period.

Expenses, excluding compensation and depreciation and amortization were $121 9 million for the second quarter G&A expense was.

$4 8 million.

Income tax expense was $12 2 million up from $8 8 million in the prior year period. Please note that we utilized all available net operating losses. During 2020. Therefore, we have been a cash taxpayer since the beginning of 2021.

Now turning to our non-GAAP financial measures, which we refer to as pre tax economic income economic income and economic operating income.

<unk> had total economic income proceeds of $358 8 million Opco pre tax economic income was $60 1 million economic income was $43 5 million and economic operating income was $47 million in the third quarter.

Asset co had economic income proceeds of 238000 pretax economic income loss of $4 8 million and an economic income and economic operating income loss of $3 $8 million.

On an overall basis, we reported pre tax economic income of $55 3 million up from $33 5 million in the prior year period prior year.

<unk>.

Economic income tax expense for the third quarter of 2021 was $13 9 million.

Economic income.

Which is presented net of preferred dividends as well as associated taxes was $39 7 million for the third quarter of 2021 up from $31 8 million in the prior year period.

Third quarter economic operating income, which is economic income excluding G&A was $43 3 million up from $37 4 million in the prior year period totaled.

Total economic proceeds rose, 31% year over year to $359 1 million for the quarter economic investment banking proceeds were up 42% year over year to $262 6 million.

Genomic broke brokerage proceeds were down 4% year over year to $165 million economic management fees for the quarter were up 3% year over year to $15 million in economic incentive income was a loss of $57 7 million in the third quarter versus a loss of $1 3 million in the third quarter of 2012.

<unk>.

Economic investment income was a loss of $20 million versus a loss of $90 5 million in the prior year period.

Turning now to our expenses compensation benefit expense for the quarter was $202 9 million compared to $153 8 million in the prior year period due to increased revenues our comp to proceeds ratio increased year over year from 56, 1% to 56, 5% of economic income proceeds.

For full year 2021, we are targeting an annual compensation ratio between 56, and 57%, although it may vary from quarter to quarter fixed.

Fixed non comp expenses totaled $40 3 million in the first quarter up from $33 1 million in the prior year period.

Variable non comp expenses in the third quarter of 2021 were $48 1 million versus $39 million year over year. The increase in non comp expenses were due primarily to higher travel and entertainment expenses business development expenses and professional service fees.

Despite the increase the non compensation expense ratio declined to 24, 7% of revenues down from $26 three in the third quarter of 2020.

Third quarter, depreciation and amortization expense expenses were $4 8 million compared to $5 7 million in the third quarter of 2020.

We generated economic operating income of $43 3 million or $1 32 per common share, which includes the impact of taxes at an effective rate of 25, 1%.

In future quarters, we expect our effective tax rate to be in the range of 25% to 29% depending on the nature and geographic sources of our income.

Turning to the balance sheet at quarter end the company had invested capital in Okdo totaling $677 7 million down from $831 6 million at the end of June 2021. The change is due in part to the increased share buyback and quarterly mark to market of our balance sheet investments. In addition, we have moved excess operating cash.

Cash <unk> to the holding company level that operating cash was approximately $80 million as of June 32021, and.

In Africa, we had invested capital totaling $122 million at the end of September down from $126 2 million at the end of June 2021.

This change is due primarily to reduction in the value of our investment in the formation eight in eclipse funds turning to our equity common equity, which is stockholders' equity less preferred equity was $1 billion nearly unchanged from the end of June 2021.

Common book value per share, which is common equity divided by total shares outstanding rose to $35 40 as of September 32021 up slightly from 34.

<unk> 35 as of June 32021, tangible book value per share was $29 17 at quarter end up from $28 35 at the end of June 2021 return on common equity was 17, 5% for the third quarter of 2021, well above well above our minimum target.

Are generating mid teens after tax return on common equity on a consistent basis. Looking ahead to 2022, we are confident we can meet or exceed that target absent any extraordinary changes in market conditions.

As we announced this morning, our board of directors maintained our quarterly cash dividend of <unk> 10 per common share during the third quarter, we repurchased a record $52 4 million in stock a total of 146 million shares including purchases executed. According to our existing <unk> one plan that is equivalent to over.

120% of our economic operating income for the nine months of 2021, we purchased shares at value equivalent to 51% of our economic operating income well above our minimum annual guidance range of 25% to 35%.

Our fully diluted share count in the first quarter was weighted average of $32 7 million shares.

Increase of more than $1 1 million shares over the previous quarter's weighted average looking ahead, we will continue to be opportunistic in buybacks, depending on market conditions and available cash flow will be amounts will vary from quarter to quarter. We will also prioritize additional capital returns when we're able to monetize assets on the balance sheet starting with the.

Fourth quarter of 2021, we plan to provide an estimate.

Our incentive and investment income quarterly marks.

Shortly after each quarter end in order to provide more transparency into the quarterly impacts our investment management operations and balance sheet investments have on our overall earnings results and with that I'll turn the call back over to Jeff. Thanks, Steve This quarter's performance and a record performance year to date are the result of years of strategic planning and investment.

We're also representative of what our core operating business can do even when historically strong market for Cowen are challenging.

We have grown revenues faster than most of our peers.

At a 25% annual pace over the past five years the mix of our revenues is just as important to maintaining that consistent profitability in our core business.

Within investment banking, we built out a substantial capital markets Advisory business, which includes M&A advisory and we also added debt capital markets capabilities. So we're able to provide a broader range of financing solutions for our clients as I noted earlier capital markets Advisory is additive to <unk> traditional strength in equity markets underwriting and enables us to drive profitability.

Even at times when issuance slows down as we've seen over the last two quarters.

In markets, our revenues have more than tripled over the past three years as we've expanded from our core strength in U S cash equities into non U S execution options swaps and less volume dependent areas such as Prime services and Securities Finance. We are confident that this business mix can generate at least 2 million a day and revenues on a consistent basis and likelihood.

Higher absent any huge market dislocations and.

In investment management, despite the quarterly volatility in incentive and investment income we focus on private equity style strategies with steady management fee streams, and we would expect our management fees to be in excess of $70 million on an annualized basis going forward with potential upside from additional increases in AUM.

Overall, the revenue mix of Cowen is more balanced and more durable and is built to perform in all manner of market conditions, but the most important reason we are outperforming here at Cowen is because of our team and because of the amazing clients. We serve over the last three years, we've grown our team by a third to 500 people seeking out the best care.

That's where eagle eager to collaborate.

Helped drive favorable outcomes for clients during that period, our revenue per employee has more than doubled to $1 3 million per employee over the last 12 months well above most of the peers in our industry as.

As the saying goes culture eats strategy for breakfast and we are intently focused on building an inclusive durable culture centered on our core values of vision empathy sustainability and tenacious teamwork.

We are fortunate to be in a position, where we're helping clients to achieve their financial and operating objectives every day.

Our entire organization was purpose built to help others to do what they do better and our success is the result of our ability to partner with our clients and their successes. We are extremely grateful to those who continue to place their trust and faith in us.

I am personally grateful for all the hard work that goes into these impressive results. We really do have the best team on the street.

I am proud to be part of it every day with that I will turn the call over to the operator, and we'll open it up for questions.

Thank you and to ask a question simply press star one on your telephone until we draw the question press the pound or hash key.

One moment, while we compile the Q&A roster.

Our first question is from Michael Brown with <unk>. Your line is open.

Great. Thank you operator.

Hi, Jeff Hi, Steve how are you guys.

Good how are you doing Mike.

Good good so I wanted to ask about advisory obviously, a record result, this quarter and hoping you could maybe break that down a little bit further for us and share some of the key strengths this quarter and as you are.

Now what is what is the proportion of your business. That's touching financial sponsors I know that was a key strength of core and so love to just get a little bit of context there.

So I'll answer first of all I think when we've seen the advisory business, obviously kick back on this year significantly and was.

Obviously post the financial crisis, I think everyone had a challenging time with their M&A advisory businesses.

And so we're seeing some of that actually pick up a pace. Although I will also say the backlog continues to be strong so.

I'm very confident in our ability to continue to have M&A revenues in the same area.

A big chunk of that is sponsor business, we're continuing to build out our sponsor platform.

I don't think we break out the specific amount of advisory business as sponsors because that's actually not how we think about it I think we think about it more from.

And industrial coverage model, which includes sponsors, but I have and I think you're right to point out I have said that a big part of the transaction volume that goes on in M&A is sponsor driven.

And our growth in that area as a function of the fact that we are much more relevant to sponsors than we used to be.

So I would anticipate that we'll continue to make.

Those kinds of inroads.

A big chunk of our revenues. This quarter also had to do with the stack back ends which by the way oftentimes crossover into the sponsor area. So when I look at our spec revenue as oftentimes where dual passing.

In our private companies about private sales or public sales, sometimes they break more to private sales to sponsors sometimes they break more to public sales or the opportunity to tap the markets.

Using.

Using a stack backend.

I can't understate, the importance of having that capability because it drives.

Our ability to do other parts of the business and so when you think about it more holistically.

When we think about our M&A advisory business as opposed to just our we just focus on sponsors are we just focus on corporate we have to have that full mix in order to continue to drive our business.

That's helpful to get that insight into your thinking there just a quick clarification. There in your comment I think you had mentioned that you expect advisory to stay around this level is that did I hear that correctly. So you've produced about $100 million of revenue this quarter that we're in.

You see the business operating over the coming quarters.

Yeah, I actually think I mean, I think it can move higher from here.

We look at the growth trajectory and our ability to win assignments I actually think it could move higher I think I was more reflecting the fact that we've reached a pretty significant milestone this quarter in terms of the size of our advisory business.

So I'm more acknowledging that like.

I believe that our ability to continue to produce and when I look at the way the backlog is continuing to queue up.

Very confident that with that.

We will continue to grow.

I was just more of I think the comment was more.

We've reached a new level and I think I've said over and over again our goal on in many instances to do higher highs and higher lows.

Feel pretty good about where we are in the advisory and the growth the advisory business and also say.

It's taken us awhile to get here and I think there were a lot of people who felt like it was going to be really hard for us to build a meaningful advisory business and I know a lot of.

And.

Our competitors actually have much more meaningful advisory businesses and they started faster I would just say when you take a look at the compound annual growth of our advisory business. I don't think there is a firm that's growing faster on the street, which suggest to me that we can continue to take share in a meaningful way and so I would focus investors more on the growth rate of our advisory business, because I think that's actually indicative of the share that.

We can take.

Yes, certainly impressive to see when you get 80.

84 million in 2019, so that's great to hear.

And I got to give credit I got to give credit to the team here just.

That doesn't happen by accident and I think we.

We talked about a few years ago and you probably remember this how we were investing through the through the cycle in particular in 18 and 19, we made significant investments in our compensation ratios reflected those investments.

<unk>.

There were a lot of.

There are a lot of doubters out there that we could actually make meaningful progress, but you can see in a quarter like this quarter, where you have a real significant slowdown.

IPO activity in follow on activity, particularly in the biotech sector. This is a real indication that the investments that we've made in 18 and 19 in the acquisitions that we've made particularly <unk> and <unk> are really gained significant traction and that gives us great confidence in our ability to operate in multiple market environments.

I appreciate that Jeff.

And maybe just a quick one on the capital returns you ran through.

Some some of the thoughts there and I appreciate that I guess.

You just put a little finer point on that.

You did.

A record amount this quarter you did about $50 million last quarter is that kind of is that the right way to think about the pace here near term and can you maybe just give us a broad update on the capital allocation philosophy broadly.

So I think we're not changing our guidance in terms of the minimum amounts were going to buyback, but as I said at the beginning of the year. We are we will be very active and we see opportunities to do this and I think third quarter was a good example of we had some opportunities to buy stock cheap and I'm all for that right.

Back to my days on the buy side and know how to buy things when I think they are mispriced.

So I'm.

Im happy to that we were able to do it we certainly have the financial wherewithal to do it.

And we will continue to be active I think we also recognize that we took care of the convert which I think when you look at.

Fully diluted shares outstanding that was a big objective of ours and so we said we would continue to buyback aggressively.

And we have and I think we will continue to do so as our operating business continues to thrive.

Alright, Thanks, Jeff I appreciate the color on that.

Alright, Thanks, Mike.

Thank you. Our next question comes from <unk> <unk> with Piper Sandler Your line is open.

Thanks, Good morning, guys.

Just sticking on the on the M&A front.

We are hearing.

Hearing the commentary around the strength of your sort of piece back pipeline today, but kind of looking forward kind of given the uncertain nature of the economy at this point some maybe yellow flashing light how are you guys thinking about the effects that could have and I just saw the <unk>, but kind of M&A more generally and some of the core verticals like healthcare consumer industrial is over.

Next year do you think you can grow through any dislocations in industry trends, given your smaller but sort of growing base that you're working off of.

So great questions, you mean, and obviously something we think about it I think.

I aspire to be big enough, one day, and M&A to actually have general market conditions impact our flows that would be great. I think we have a lot of room to go before we get there. So I think from our standpoint.

We're taking share I can't stress this enough like we didn't used to compete with.

Bunch of firms in this space at all and now we're competing and winning in part because of the breadth of the product offering that we have so I actually am not terribly concerned about economic headwinds and how that might impact our business specifically I mean, obviously, if there is a huge economic down drafted it could impact everybody's business, but I look at our.

Business and I'm like we just had a very significant dislocation and not that long ago in the first and second quarter of last year and now we're seeing a pick up in M&A activity across the board and that M&A activity and also access to capital. So when you think about the number of specs that are public and the amount of business that <unk>.

Has to get done because of the time constraints around <unk> over the next 12 months to 18 months, it's hard to make the argument that the general economic conditions will impact our ability to continue to grow advisory business. I. Just think there is a lot of stuff right in front of us with a very significant installed base.

It gives me a higher degree of confidence in our what I can see into the future than maybe at any other time in so.

Listen I don't Im not smart enough to predict quarter over quarter. I think you can always have that those kinds of fluctuations when I look out over the next year or two at the work that we have to do in the sectors that we have to do.

There is a lot to get done and so I remain very upbeat about it.

Great. Thanks, that's really helpful. And then turning to brokerage I appreciate the color on the progress of that brokerage growth and diversification I'm. Just wondering if you could step back a little bit and kind of frame the shift in that business over the last few years, maybe talk about what how the product offerings have changed in the business.

<unk> impacted your positioning moving forward to capture more of those revenues on both kind of brokerage and services perspective.

Yes, so I think we can win.

There is actually not a lot of folks that understand the intricacies and dynamics of equity market structure and equity market trading in particular, I think what we recognize as the world really falls into two categories. There is a big players who use central risk books and waste and their.

Dark pools to to really drive volumes.

That's not our game right, we don't have dark pools here and we're not using risk capital to drive outcomes. We're much more agency focused and I think there you've got to be at the top of your game, both algorithmically as well as in research. So you have to excel at both of those and I think what the gains the share gains that we've shown and the continued share gains.

That put us well inside the top 10.

In terms of our market share that's bigger than at least half of the bulge in terms of our of our.

Our market position, that's because they've they've stumbled and I think it's hard to to regain that momentum. It's not like you can you can all of a sudden wake up tomorrow and rebuild our world class equity research franchise, that's a hard thing to do.

We have that I don't think you can wake up tomorrow and rebuild your algorithms.

Get them re installed on People's desks that people use them, that's a hard thing to do so they're very good.

Give me the very thing that we've done with <unk>.

And ourselves.

To have not just meaningful share gains that meaningful like consistent share gains so.

Our gains over the course of the past year to year and a half are not eroding in terms of market share and thats phenomenal.

So those are the strategies, we pursued will will continue to do that and when you think about adding on in.

In places like.

What I would call non execution, driven businesses like securities Finance and swaps.

That is an area that we have a lot of ground to take.

We can.

Really penetrate the wallet from existing clients in a way that others can't.

And then you look at what we've done in Europe, I mean again, we are much bigger than we used to be in Europe, we still don't actually move the needle when you look at market share and so there is a real opportunity for us to continue to take share there. So.

I continue to remain.

Bold up on our ability to grow our business.

I know some people think it will be harder to do in the future.

Les <unk>.

Concerned about that.

Okay, great. Thanks for taking my questions.

Thanks, Amit.

Thank you. Our next question comes from Devin Ryan with JMP Securities. Your line is open.

Great Good morning, guys.

How are you doing devin.

Terrific. Thank you.

I guess first question here, just digging a little bit more on the outlook for the underwriting businesses clearly.

Coming off of a fantastic year.

There's a lot of things that are hitting and I just want to unpack a little bit as you guys are thinking about maybe budgeting for 2022 and I. Appreciate you probably some of this is hard to share because you have to predict the future, but do you think about just the business and where.

Maybe.

Micro level, where you are you are hitting on all cylinders or maybe even feels like it's above.

Normal versus kind of where they are.

No room for growth.

How would you kind of break it down as we head into next year, if youre looking at your backlog like where where there could be upside in revenues and where maybe the bar is a bit high and then just within that as well I know you said two thirds of the facts that you were.

Working on it either.

The deal have a pending deal but.

I suspect of that two thirds theres still a number working through the process, where there is somewhat predictable revenues.

And then the remaining one third.

Revenue still to come so is that <unk> are still kind of this embedded kind of night.

Momentum of spec revenue.

To come in 2022.

Deals closing to get the majority of revenues on closing.

Okay. So a lot in there to unpack. So let me just make sure I want to make sure that I.

Actually address it.

Are you talking about banking backlog specifically.

Yes.

Secondly, what im getting at like you'd be thinking about the backlog heading into 2022, despite where.

And where there may be some some capacity and growth in them were.

Where the bar feels a little bit higher just given how well.

You did.

I have done in 2021.

Yes, so I actually feel like.

There's a lot of room to grow in advisory.

That's for sure.

Also and as I mentioned earlier that a lot of that has to do with.

The fact that I think a significant number of spec theyre going to get back end deals done.

They may not be done at the same valuation levels.

Maybe some fee compression.

We've just begun to think about the volume that has to get done as an industry and it's going to be significant.

I just have been a brown the spec space for a long time I think that sponsors are highly motivated to get deals done.

That I can't think of any other space.

We're in M&A advisory, where there is a group of individuals who have to get something done any timeframe and we can debate how much of them are going to get deals done and how much of them I will just say my experiences the vast majority of them will figure out ways to get deals done.

Because the economic pain of not getting a deal done is too great.

So it's going to be a really busy 2022.

First back back ends and it's going to be a really busy deal in 2020 for Cowen.

What I'll also say a bunch of companies are coming to us.

And they are exploring specs and we are the best at back as hands down bar. None. So when you come to Cowen you are coming to get advice, maybe on whether or not that's a path for you, but while youre here Youre also hearing about the other opportunities for you to either monetize or capital raise if that's not the best path for you.

And then I think one of the things that's driving our advisory business as the inbound calls.

From people, who want to understand the spec market better that's both sponsors and companies.

When they're here, we're walking them through their alternatives.

In many cases, that's driving other outcomes in both capital markets advisory or what I would call the debt advisory business or private placements that theyre doing that maybe it makes sense for them to do one more round of private financing. Those are calls we were not getting two years ago, because there just wasn't enough happening around that.

So the knock on effect of being the preeminent spak player has enabled us to continue to grow businesses. Other than other places that is part of the reason why I remain as buildup as I am on our ability to drive advisory business going forward.

Does that makes sense.

It does and then I mean, if you can also on the underwriting side of the business.

I'll have to think about.

Maybe at a more granular level, where the bar is high into 2022 and I. Appreciate you can continue to do better, but just where you just.

Just kind of a special year.

Versus like where there's capacity in things things things could be better longer term clearly underwriting business.

Spanning the footprint youre, increasing market share, but just trying to think about after what is a phenomenal year, we're getting questions around what does that imply for 2022, so just like any more granularity around.

The individual sector, maybe from a sector perspective, where the borrowers.

Alright, So let me let me try to give you a little bit of color on that so if you look at our underwriting revenue over the course of the past two quarters, it's been about $86 million rate each quarter.

And if you think about the mix right. We know if you just take a look at biotech which has been the primary driver for talents underwriting revenue historically that has been the last quarter was the worst quarter for.

In terms of volume.

Terms of biotech performance right. It's been the most horrendous six month period in biotech stocks.

Honestly since I can remember and so many of those companies have chosen not to actually finance themselves. We were mandated in our mandated on a number of situations that just didn't go because of market conditions.

Yes.

<unk>.

Underwriting business has remained pretty consistent where did that come from well, we're much more relevant than we used to be in areas like.

Sure.

AI robotics, our consumer business. If you look at the number of book run transactions, we've done in consumer alone in the last two quarters that tells you something different is happening at Cowen. We're finally, beginning to monetize the investments we made in.

Banking.

And and also our research footprint.

So again, you can't do Ipos and follow ons, unless you've got a really high quality research footprint, we've made investments in that over the past few years.

We've discussed and when the buyer when the inevitable biotech slowdown occurred.

We picked up the slack and other areas that we're that wasn't happening. So I look at the next year and unlike.

I know all of these are bunch of these biotech companies that were mandated on have to raise money.

It's not really an option for them after a while price just they can wait for a while to see if market conditions are better then inevitably they have to raise money and when they do we'll be there.

And so I look at this and I say all of this business that I thought we were going to do in biotech if there'd been a halfway decent tape over the last few quarters that just got deferred.

And that makes me feel really good because actually I look out at.

The back half of this quarter, maybe and into the beginning half of next year.

No theres going to be a bunch of those companies that are probably going to have to finance I'll also remind people that is not in our backlog. So biotech follow ons, which has been a huge driver of <unk> revenue they are there.

They are rarely if ever.

In backlog because by the time you actually.

He'd becomes qualified for mandated backlog youre actually in the market and your pricing them overnight or in two days. So again I'm looking at the Shadow here and saying we know all of these companies are going to have to finish the last thing on that front as I think people are waiting to see what happens with drug pricing policy.

It's been a big thing in biotech obviously.

We'll see what happens with the bipartisan infrastructure plan.

There there is likely to be some clarity around where drug pricing is going to fall in that plan and once there is clarity.

It will be safe for people to invest in biotech and pharma and I will just say people have been on the sidelines for the last six months because of the uncertainty of where this is going to fall I don't know that I'm smart enough to know where that is going to fall, but once it does people will be able to readjust and there'll be back in the market and I actually think there's a very significant probability that will cut.

You bid now I don't do market timing I just.

I'm a student of that business because it is an important part of our business at Cowen and Thats, what I think.

We'll see how that plays out over the next few weeks.

Okay.

Terrific. Thanks, Jeff for all that color, that's very helpful and just a follow up question here you talked about expanding the footprint I think sometimes not appreciated fully people look at Cowen I mean head count is up 16% over.

Over the last two years since the end of 2019, it's up 10% just even from the end of 2020. So you guys are growing the footprint pretty substantially.

So what I want to connect this to us it feels like Youre getting operating leverage off of that because you have infrastructure in place.

Legible.

And so over time, it doesn't happen necessarily overnight, but over time that should drive operating margins higher as you grow the footprint.

Two things one how are you thinking about growth into 2022 can you keep up kind of this type of pace, we were growing upper single digits low double digits.

Sprint annually and then in terms of like the need to add more infrastructure underneath it.

Where do you feel like you need to kind of.

Ed versus where.

Can you really get some additional positive operating leverage because it does as I said feel like as you're adding more people youre seeing positive operating leverage off of that as we've seen over the last couple of years, yes.

Yes, so two things on that front first I think it's really important. This is the first time, we've actually articulated two people or revenue per head.

And we've done it on a rolling 12 month basis. So you can actually see how that operating leverage actually works at the topline naturally our expenses are going to go up nominally in terms of aggregate dollars because we have more people and we're bringing them back to office spaces.

And we've got to make sure that we've invested in that infrastructure to bring them back in things like hotels software, we actually need more space in some instances because we've done some acquisitions in areas geographically, particularly in San Francisco, where.

And in New York, we brought on so many teams.

They need places to go we just we increased the footprint primarily around revenue producers and and.

And thats been a good.

Good thing for us so part of what Youre seeing is the infrastructure and market data services and telecommunications infrastructure.

We're also not asking people to bring there.

Your desktop home operating systems back to the office. So we've had to make some investments in fixed infrastructure to make sure that.

That people have desks, both in office and equipment at home and we've regionalized. This is a big thing for US we've made a decision to in particular in New York.

We've regionalized our office footprint. So we've got new offices in Red Bank Summit.

We built a much bigger space and Stanford, where we had extra space and we've built that space out.

Be open hopefully in the next few weeks.

Long Island. This is enabling our best talent to be able to work near where they live so as we return to office.

Not necessarily returning to commuting because of the efficiency gains we've seen from people not having to commute has been amazing so what youre seeing part of our of our uptick in fixed cost as a function of the fact that where more people and we're redesigning the workplace of the future having.

Having said that I expect we will continue to drive those margins pretty hard because.

We're seeing we're just exiting this period of time at a much higher revenue run rate.

And that's really what we expect to see going forward.

Okay great.

Thank you very much I'll leave it there.

Great. Thanks Devin.

Thank you. Our next question is from Steven <unk> with Wolfe Research. Your line is open.

Hi, Good morning, Jeff Good morning, Steve.

Hi, Steve Good morning.

So wanted to just ask a question on the brokerage business now that we've entered a period of more normalized trading activity.

I was hoping you could speak to the sustainability of the $2 5 million per day run rate and I was also hoping you can just unpack some of the factors that maybe drove some of the pressure on the services revenue line do you see it.

Historically this has been much less volatile and you cited some strong kpis in terms of new client adds.

Trying to unpack some of the different puts and takes there.

Yeah. So let me let me take the services I really quickly that we.

We sold off a part of our clearing business and we reduced our clearing footprint there so.

Again, everyone looks at topline numbers, we're actually looking at capital utilization, which is another thing that I think people need to focus on rate. There is this perception that we have too much capital tied up in certain businesses and we definitely had capital tied up in the clearing business last year and made a conscious choice.

To exit that business and moved that off that's part of what's enabled us to do more share buybacks, so, but obviously the revenue drop there as a function of the fact that clearing.

In the service line.

That was a conscious choice. So that's really the drive there when you strip that out.

We're continuing to see growth in <unk>.

And our swaps business in our prime brokerage business outsource trading is a big part of that these are the things that are driving our performance there and I don't see that abating anytime soon again, one when investors and I think you probably see this a little bit in your business. They have a finite amount of wallet they want to aggregate that wallet with people.

<unk>, who are able to provide them services and so what we've done is now that we're now that we're onboarding. So many clients and we are so relevant to them in cash equities and algorithmic execution. We're just we're opening up other pockets for them to pay us.

They may choose we want to make it easy for them to pay us in a broad variety of ways. So that they can continue to consume what they consume on the research front or <unk> or whatever it happens to be so our view is.

We'll see quarter over quarter moves between cash execution algorithmic execution and services, but overtime. Our expectation is that services business will be a much more stable part because once you open up prime brokerage accounts and swap accounts like people don't move them around as much at least not from where we are.

If you're running a really big prime brokerage business like some of our larger competitors people move bounces between those folks all the time when people are moving their balances to calendar or doing it with intentionality to get Cowen paid.

And so theyre not likely to move it away.

And that's what we've seen is the stickiness of our prime business and our Securities Finance business and our swaps business is actually really helping us to maintain that $2 5 million.

A day.

Alright, thats, great color and just.

A follow up.

Just switching gears a bit aligned.

Royalty partners.

I know there are some limitations in terms of what you can share about something you can provide some sort of update on that.

That that IPO is expected to re launch.

And then if you can give any sort of context around what your ownership will today, how much of it is reflected on the balance sheet and how would you deploy proceeds once there is some sort of monetization of that.

So obviously, we were disappointed with market conditions probably.

<unk>.

They launched the deal and it was probably the worst time that we've seen in sort of.

Biotech and healthcare business to try to get a deal done so.

Pull that deal will re circuit.

We'll re figure that out I expect it.

What we saw is actually interesting is as meaningful demand I just don't think it was the valuation level that we.

That we had hoped and so it makes sense for us to re <unk>.

When you think about that when market conditions are better the value is still there. So I wanted to be clear, but we don't show. It I think you put out a research report that rightly points out that we don't carry any of our stakes.

On.

And any value on the balance sheet.

And there are meaningful I mean, obviously they are those are if we werent mark them to market.

They're they're meaningful pickups in book value.

And so.

What I was saying is on healthcare royalties will continue to monitor market conditions.

I don't think it will happen in the fourth quarter, but as we head into next year, what's been validated for us as a.

The ability to do a permanent capital vehicle in that space is hugely valuable.

And we will continue to pursue that and the market will always be this way.

Okay, and just one final.

Question for me.

Jack.

Had noted that you would provide some additional context or some incremental disclosures.

Some of your investments I think you had touched on that a little bit in your prepared remarks, but was hoping you can provide some additional color on what incremental disclosures you plan on providing.

That business in your investment portfolio does generally remained prosper okay.

Yes, Steven.

What we've seen others do as disclosed at the end of the quarter some realized events around our incentive fees so that people have.

An earlier view into whats whats going on in that line. So we plan on doing that in the future.

Okay, well just take away and we're just trying to take away the guessing game there.

We obviously, we had an incredible incentive income in the first quarter of this year and I think when you look at those numbers nobody here and nobody on this phone probably thought that was sustainable and so when you look at the mean reversion people just always trying to guess.

Coming into the quarter and I think we should just probably tell you what it is earlier so that people can drop it in their models.

It's music to my ears.

So it would certainly welcome that disclosure alright, thanks, so much for taking my questions.

Thanks, Steve.

Okay.

Thank you. Our next question comes from James <unk> with Goldman Sachs. Your line is open.

Good morning.

Just wanted to ask.

Your ability to generate leverage from here.

How's that.

Go ahead specifically.

Sorry, sorry.

So you've had tremendous success in growing the top line over the past few years. So I just wanted to touch on your ability to generate top leverage from here as you generate.

We continue to grow the franchise.

Listen I think we actually generated a significant amount of comp leverage so far when you look at a lot of our competitors. They skew much higher in terms of comp to revenue ratio than we do we've got businesses here that are lower comp to revenue ratio and I think when you look at.

And our business.

I think we are.

I wouldn't expect it to move too much off of this I would say longer term as we grow our advisory business that will be higher margin business lower actually fixed cost. So actually you can make the argument that if we see higher.

In advisory business, the comp level might actually comprehensive might go up but margins will also go up and I think that's really what we focus on James's is margin.

Comp levels really fall out of business mix and things like that.

Okay. That's really helpful. Thank you.

Alright, and I am not showing any further questions in the queue I will turn the call back to Jeffrey Solomon for final remarks.

Thanks, operator, and thanks, everybody for listening in this morning.

As I often do I think it is important to highlight.

Just.

And the amazing team that we have here I mentioned it earlier I also should you say it feels amazing that when great people from all across the.

<unk> want to come work at Cowen.

Part of what we're seeing here in the explosive growth that we've been able to experience, particularly during the pandemic is that.

There are some really talented people.

Working at other places that want to come work at Cowen.

And.

No one really ever asked me this question, but the single greatest metrics.

And I use as a measure.

Or how we are doing is whether or not the people who are at other firms want to come here and do what they do and whether or not they're able to do it better here than anywhere else.

And whether or not the people that are already here are staying here and.

They are living on the promise that.

<unk>.

And whether or not we're able to deliver on the promise that we give them.

That's happening at Cowen and bunch of use cases, and things that validate our strategy around recruiting and retention.

And it makes me really feel good about where we are so more to come and I look forward to catching up with you on the next quarterly call have a great day everyone.

Yes.

And with that we conclude today's conference call. Thank you for participating and you may now disconnect.

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Okay.

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Good morning, and thank you for joining us to discuss cowens results for the third quarter of 2021.

Now you should have received a copy of the earnings release, which can be accessed at the investor Dot Calvin Dot com.

After the speaker's presentation, there will be a question and answer session. As a reminder, today's call is being recorded I would now like to hand, the call over to Mr. JT Farley Collins head of Investor Relations.

Thank you Carmen before we begin I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward looking statements. These statements are subject to the risks and uncertainties described in our earnings release and other filings with the SEC Cowen has no obligation to update the information presented on today's call also on today's call we will be referencing <unk>.

Certain non-GAAP financial measures, which we believe provide useful information for investors reconciliation of those measures to GAAP is consistent with the Companys reconciliation as presented in today's earnings release.

As a reminder, we make available our quarterly financial supplement in the Investor Relations section of our website. We encourage you to review it in conjunction with our earnings release George.

Joining us on today's call are Cowen as chair and Chief Executive Officer, Mr. Jeffrey Solomon and our Chief Financial Officer, Mr. Steven looks better now I would like to turn the call over to Jeff.

Good morning, everyone and thank you for joining us for Cowens third quarter 2021 earnings call.

Today I'm happy to provide highlights on our strong operating performance this quarter.

I'll also places performance into the broader context of how the long term strategy, we laid out just three years ago.

These strong results.

In that spirit I will share some details about the durability of the business we've built.

As well as the steps, we've taken and continue to take to generate strong profitability consistently in a variety of market conditions.

Then Steve will review the financial results for the quarter and after that we will be happy to answer your questions.

Over the past four quarters, we have generated more than $1 $9 billion in revenues, including over $1 billion in investment banking revenues and we have generated over $10 per share in after tax economic operating income that is a 36% return on common equity.

This quarter, we posted 359 million in total revenues and 43 million and after tax economic operating income for our return on common equity of 17, 5%.

This is the 14th out of the last 15 quarters of meaningful profitability with the exception being the first quarter of 2020.

While Cowen stock has risen considerably over the past year, we believe that our valuation remains attractive.

As part of the reason we have been more aggressive in returning capital to shareholders by repurchasing shares at a record pace, but that's not the only reason.

We have also long said.

Now we would be more aggressive with capital return as we demonstrated lasting improvement in our financial and operating performance. We remain true to our word and we believe in our ability to continue returning capital to shareholders commensurate with our continued performance now.

Now, let me turn to our operating highlights.

The third quarter of 2021 was the second best quarter on record for investment banking revenues surpassed only by the first quarter of this year. Thank.

<unk> revenues were up 43% year over year, and importantly, M&A revenues set a new record above 100 million for the quarter more than three times the level in the third quarter of 2020.

It was a record quarter for both our M&A.

And capital markets advisory practices.

It was the second quarter in a row that advisory, which combines M&A and capital markets Advisory revenues comprised the majority of banking revenues at 67%.

Our results in these areas are a function of the.

The intentional approach we've taken.

Two diversifying our business by product and sector over the past few years, we were able to achieve this despite headwinds.

In the equity capital markets this quarter, particularly in biotech.

The industry breath of our banking franchise was clearly evident this quarter sectors outside of healthcare comprised 54% of total banking revenues.

The strong results from industrials technology and consumer sectors.

Within healthcare, we continue to grow our footprint non biotech areas, which include tools and diagnostics Med Tech healthcare services and healthcare it accounted for the majority of our banking <unk>.

<unk> revenues in the quarter at 56%.

The growth in the number of publicly listed disruptive healthcare companies, coupled with the pace of private companies.

Private healthcare company formation will continue to be a tailwind for cowen for the foreseeable future.

Today, there are about 660 publicly traded companies and biotech tools and diagnostic sectors in the United States, that's more than 10% of all publicly traded company operating companies listed on the New York Stock Exchange and NASDAQ and is up from only 200 companies a decade ago.

Cowen has a leading market share of clients in this space.

There will always be fluctuations and capital markets activity in this sector. However, given our market position, we remain confident that we will be able to capture a significant proportion of the ipos follow ons and increasingly debt offerings. When companies decide that the time is right to tap the markets or when their financing needs and compel them to do so.

We also saw a rebound in spec deals during the quarter, particularly in advisory assignments stack related revenues accounted for 44% of banking revenues in the third quarter and about one third of banking revenues in the first nine months of 2021.

As a reminder, most of our spec revenues are on the backend.

In other words pipe financings capital markets Advisory and M&A advisory during the <unk> process, we are not heavily dependent on our continued growth in the listings of the stacks in order for them to be a meaningful contributor to our future revenues with approximately 500 spacs looking to compete complete.

Transactions over the next few years, we believe that a large percentage of them will ultimately find transactions and.

And the Cowen will benefit even with a small percentage of the market share.

That is why we are selective in partnering with back management teams choosing the ones. We believe have clear vision and strong chances of success as public companies. This deal activity is evident and outcomes looking at specs, which have gone public since the start of 2020, nearly two thirds of Ipos.

Were book run by Cowen already have deals pending or closed which is almost double the average for all specs in that period.

It is also worth noting that spec mandates makeup under 30% of our current deal backlog.

Demand for advisory and capital markets issuance remained strong into 2022 away from this back market.

While our pipeline ended the quarter slightly below the second quarter of 2020 one's record levels. It is still up 15% from the start of this year and up 20% since the third quarter of 2020.

We remain quite confident that our current backlog will result in meaningful revenues for Cowen over the next several quarters.

Over the past several years, we have broadened our banking franchise through the acquisitions such as Courtin.

H T. After previously adding teams from Morgan Joseph and Dahlman rose in prior years.

In addition, we become an employer of choice with lateral hiring from across the street in every one of our sectors. It's a good time to be at Cowen.

Our diversified revenue stream and banking is a direct result of these efforts.

We are always looking for great bankers that can help us to continue our momentum to deliver world class outcomes for our clients.

And we've been adding resources at the analyst from the analyst to the.

The vice president levels, so that we have the capacity needed for our higher level of revenue operating revenue and operations.

Our markets business has also remained incredibly resilient, averaging just over $2 $5 million in daily revenue, despite lower market wide volumes.

Our decision to invest in areas such as Prime brokerage Securities Finance and European trading are paying dividends as we continue to take meaningful share from much larger competitors.

While revenues were down 4% year over year, most of the drop about $4 $7 million was due to the wind down of our most of our most of our clearing operations, which we decided to do to free up balance sheet capital for other opportunities, including stepping up the buyback.

Highlights for the third quarter included year over year gains in cash and electronic trading Prime services revenues non U S execution in ADR trading.

Prime services in particular is gaining momentum, adding nearly 40 new clients during the third quarter.

Just curious finance growth has also been strong this year, including our new swaps capability, which now has over 50 clients on boarded.

We continue to attract new talent, including the addition of the leading event driven trading team in Europe during the quarter and we are boosting our ETF trading capabilities as well.

The value proposition offered by Cowen as an independent non conflicted partner with World class execution and research capabilities is increasingly compelling to institutional shareholders and institutional investors.

That has translated into increased share of wallet for us Accordingly, too many third party industry surveys.

While we're making progress at progress on the Buildout of Cowen digital our digital assets initiative.

We're still in the early stages, we are working on building out the legal regulatory and technology framework to onboard clients and the engagement level among clients and the topic is very high more to come on this front as we head into 2022.

Looking at the current quarter, we are off to a good start with average daily revenues slightly above our third quarter average.

Okay.

And research the third quarter, we welcomed new senior analysts to our biotech and life sciences as well as our tools and diagnostics coverage teams during the quarter, we had sector launches in healthcare facilities and managed care as well as sustainable food and healthy living in total we added coverage of nearly 90, new stocks in the quarter and today we have.

Most 950 stocks under coverage, which is the highest its ever been.

In the third quarter, we published 13 of our flagship ahead of the curve series reports.

Clients continue to value, our differentiated research and during the quarter. Our team once again saw significant gain in brokerage boats from our institutional clients.

In investment management, even with the volatile environment for growth strategies, we added more than $400 million in assets under management compared to the second quarter of 2021 with most of that increase occurring in our healthcare strategy.

Total AUM was $14 8 billion, which is up 25% year over year and up 3% quarter over quarter.

We had a negative mark to market change in economic incentive fees totaling $58 million and this is due to a drop in the value of proteinuria, which is the largest investment accounts sustainable investments.

And we had declines in positions and the Cowen healthcare investments strategy. Despite these marks however incentive fee income is still positive for the first nine months of 2021.

And almost $20 million.

Economic management fees were up 3% over the year to $15 million.

Largely due to higher AUM and healthcare strategies as well as sustainability an activist.

Those fees are net of a $3 $8 million fund placement fee that we.

Expensed in full during the quarter, excluding those fees or management fees would have been up more than 25% year over year.

Looking at our five strategies the sustainability strategy had just over $1 3 billion.

AUM at quarter end and overall performance remains strong even when factoring in the drop in the price of pro Tara.

During the quarter the strategy made its third investment in a sustainable central products firm called quip.

Our healthcare investment strategy completed two new investments and four follow on financings and ended the quarter with just over $1 2 billion in AUM long term performance remains quite strong despite the declines in public positions during the quarter.

The activist strategy grew to almost $7 $5 billion, even though the strategy was slightly down in the third quarter and the merger arbitrage strategy had $321 million in AUM. The strategy did outperform the <unk> merger Arb index during the quarter.

Healthcare royalty strategies ended the quarter with over $3 6 billion in total AUM, which was up $100 million year over year.

Turning to our balance sheet, we had investment income losses of 20 million for this quarter due primarily to the declines in the value in our sustainability in health care strategies as well as declines in some of our merchant banking portfolio.

As is the case with our incentive income or investment income is still positive on a year to date basis at $20 5 million.

I'll give you some perspective Cowen has always had quarterly fluctuations in our incentive and investment income lines and in every single year since the global financial crisis. In 2008, we've had positive contributions on an annual basis from our combined incentive and investment income revenue line items.

While noisy at time incentive and investment income are additive to our bottom line when viewed over the longer term. These revenues benefit investors, who are focused on the remarkable growth of our core business over the past few years.

As our investment banking.

And brokerage operations have increased in size and profitability and our management fee income has risen.

As a result of this shift incentive and investment income has become a much smaller part of our annual revenue mix less than 10% of total revenues in each year since 2018 and in year to date 2021, it amounts to just about 3% of our revenues.

In the coming quarters, we will be providing details to give investors more insight into these revenue lines. So they proved to be less of a distraction.

Before I hand, it over to Steve I'd like to share a few reasons why I continue to believe that we are well positioned to deliver consistent profitability in the years ahead.

We have a proven track record of identifying operate opportunities in areas of the economy that are undergoing significant disruption sectors that require capital and we will have a lot of transaction activity.

From our leading position in biotech to longstanding growth sectors, such as electronics and semiconductors in emerging areas such as sustainability robotics energy transformation in digital health, we have built deep experience in partnering with growth companies.

Our research team is truly ahead of the curve and identifying these emerging trends and investment themes. We lead with research and then we bring all of <unk> resources to bear to help companies in these ecosystems and investors in these ecosystems, who are looking to understand and embrace these opportunities.

Now I will turn the call over to Steve Lasota for a brief review of our quarterly financial results. Steve. Thanks, Jeff GAAP results for the third quarter of 2021 were as follows total revenues were $412 2 million up 28% year over year from $321 3 million net income.

Both to common stockholders was $36 1 million or $1 10 per diluted per diluted share up from net income of $18 6 million or <unk> 62 per diluted share in the prior year period.

Compensation and benefit expenses were $201 7 million, an increase of $48 3 million from the prior year period.

Expenses, excluding compensation and depreciation and amortization were $121 9 million for the second quarter G&A expense was $4 8 million.

Income tax expense was $12 2 million up from $8 8 million in the prior year period. Please note that we utilized all available net operating losses. During 2020. Therefore, we have been a cash taxpayer since the beginning of 2021.

Now turning to our non-GAAP financial measures, which we refer to as pre tax economic income economic income and economic operating income.

<unk> had total economic income proceeds of $358 8 million Opco pre tax economic income was $60 1 million economic income was $43 5 million and economic operating income was $47 million in the third quarter.

Asset co had economic income proceeds of 238 pre tax economic income loss of $4 8 million and an economic income and economic operating income loss of $3 8 million on.

On an overall basis, we reported pre tax economic income of $55 3 million up from $33 5 million in the prior year period prior year period.

Economic income tax expense for the third quarter of 2021 was $13 9 million.

Economic income.

Which is presented net of preferred dividends as well as associated taxes was $39 7 million for the third quarter of 2021 up from $31 8 million in the prior year period.

Third quarter economic operating income, which is economic income excluding G&A was $43 3 million up from $37 4 million in the prior year period.

Total economic proceeds rose, 31% year over year to $359 1 million for the quarter economic investment banking proceeds were up 42% year over year to $262 6 million economic broke brokerage proceeds were down 4% year over year to 160.

$5 million economic management fees for the quarter were up 3% year over year to $15 million in economic incentive income was a loss of $57 7 million in the third quarter versus a loss of $1 3 million in the third quarter of 2020.

Economic investment income was a loss of $20 million versus a loss of $90 5 million in the prior year period.

Turning now to our expenses compensation and benefit expense for the quarter was $202 9 million compared to $153 8 million in the prior year period due to increased revenues our comp to proceeds ratio increased year over year from 56, 1% to 56, 5% of economic income proceeds.

For full year 2021, we are targeting an annual compensation ratio between 56, and 57%, although it may vary from quarter to quarter fixed.

Fixed non comp expenses totaled $40 3 million in the first quarter up from $33 1 million in the prior year period.

Variable non comp expenses in the third quarter of 2021 were $48 1 million versus $39 million year over year. The increase in non comp expenses were due primarily to higher travel and entertainment expenses business development expenses and professional service fees.

<unk> increased the non compensation expense ratio declined to 24, 7% of revenues down from $26 three in the third quarter of 2020.

Third quarter, depreciation and amortization expense expenses were $4 8 million compared to $5 7 million in the third quarter of 2020, we generated economic operating income of $43 3 million or $1 32 per common share, which includes the impact of taxes at an effective rate of 25, 1%.

In future quarters, we expect our effective tax rate to be in the range of 25% to 29% depending on the nature and geographic sources of our income.

Turning to the balance sheet at quarter end the company had invested capital in Okdo totaling $677 7 million down from $831 6 million at the end of June 2021. The change is due in part to the increased share buyback and quarterly mark to market of our balance sheet investments. In addition, we have moved excess operating.

Cash out of Opco to the holding company level that operating cash was approximately $80 million as of June 32021, and.

In Africa, we had invested capital totaling $122 million at the end of September down from $126 2 million at the end of June 2021.

This change is due primarily to reduction in the value of our investment in the formation eight in eclipse funds turning to our equity common equity, which is stockholders' equity less preferred equity was $1 billion nearly unchanged from the end of June 2021.

Common book value per share, which is common equity divided by total shares outstanding rose to $35 40 as of September 32021 up slightly from 34.

<unk> 35 as of June 32021, tangible book value per share was $29 17 at quarter end up from $28 35 at the end of June 2021 return on common equity was 17, 5% for the third quarter of 2021, well over well above our minimum target.

Are generating mid teens after tax return on common equity on a consistent basis. Looking ahead to 2022, we are confident we can meet or exceed that target absent any extraordinary changes in market conditions.

As we announced this morning, our board of directors maintained our quarterly cash dividend at <unk> 10 per common share during the third quarter, we repurchased a record $52 4 million in stock a total of 146 million shares including purchases executed according to our existing <unk> plants that is equivalent to over.

120% of our economic operating income for the nine months of 2021, we purchased shares at value equivalent to 51% of our economic operating income well above our minimum annual guidance range of 25% to 35%.

Our fully diluted share count in the first quarter was weighted average of $32 7 million shares.

Increase of more than $1 1 million shares over the previous quarter's weighted average looking ahead, we will continue to be opportunistic in buybacks, depending on market conditions and available cash flow of the amounts will vary from quarter to quarter. We will also prioritize additional capital returns when we're able to monetize assets on the balance sheet starting with <unk>.

Fourth quarter of 2021, we plan to provide an estimate of our incentive and investment income quarterly marks.

After each quarter end in order to provide more transparency into the quarterly impacts our investment management operations and balance sheet investments have on our overall earnings results and with that I'll turn the call back over to Jeff. Thanks, Steve This quarter's performance and a record performance year to date are the result of years of strategic planning and investment there.

We're also representative of what our core operating business can do even when historically strong market for calling our challenging.

While we have grown revenues faster than most of our peers at.

At a 25% annual pace over the past five years the mix of our revenues is just as important to maintaining that consistent profitability in our core business.

Within investment banking, we built out a substantial capital markets Advisory business, which includes M&A advisory and we also added debt capital markets capabilities. So we're able to provide a broader range of financing solutions for our clients as I noted earlier capital markets Advisory is additive to <unk> traditional strength in equity markets underwriting and enables us to drive profitability.

Even at times when issuance slows down as we've seen over the last two quarters.

In markets, our revenues have more than tripled over the past three years as we've expanded from our core strength in U S cash equities into non U S execution options swaps and less volume dependent areas such as Prime services and Securities Finance. We are confident that this business mix can generate at least 2 million a day and revenues on a consistent basis and likely.

Higher absent any huge market dislocations and.

In investment management, despite the quarterly volatility in incentive and investment income we focus on private equity style strategies with steady management fee streams, and we would expect our management fees to be in excess of $70 million on an annualized basis going forward with potential upside from additional increases in AUM.

Overall, the revenue mix of Cowen is more balanced and more durable and is built to perform in all manner of market conditions, but the most important reason we are outperforming here at Cowen is because of our team and because of the amazing clients we serve.

Over the last three years, we've grown our team by a third to 500 people seeking out the best candidates for Eagle eager to collaborate.

To help drive favorable outcomes for clients during that period, our revenue per employee has more than doubled to $1 3 million per employee over the last 12 months well above most of the peers in our industry as.

As the saying goes culture eats strategy for breakfast and we are intently focused on building an inclusive durable culture centered on our core values of vision empathy sustainability and tenacious teamwork.

We are fortunate to be in a position, where we're helping clients to achieve their financial and operating objectives every day.

Our entire organization was purpose built to help others to do what they do better and our success is the result of our ability to partner with our clients and their successes. We are extremely grateful to those who continue to place their trust and faith in us.

I am personally grateful for all the hard work that goes into these impressive results. We really do have the best team on the street.

I am proud to be part of it every day with that I will turn the call over to the operator, and we'll open it up for questions.

Thank you and to ask a question simply press star one on your telephone to withdraw your question press the pound or hash key.

One moment, while we compile the Q&A roster.

Our first question is from Michael Brown with <unk>. Your line is open.

Great. Thank you operator.

Hi, Jeff Hi, Steve how are you guys.

Good how are you doing Mike.

So I wanted to ask about advisory obviously, a record result, this quarter and hoping you could maybe break that down a little bit further for us and changed some of the key strengths this quarter and.

As you're answering that what is what is the proportion of your business at touching financial sponsors I know that was a key strength of core and so love to just get a little bit of context there.

So I'll answer first of all I think when we've seen the advisory business, obviously kick back on this year significantly it was.

Obviously post the financial crisis, I think everyone had a challenging time with their M&A advisory businesses.

And so we're seeing some of that actually pick up a pace. Although I will also say the backlog continues to be strong so.

I'm very confident in our ability to continue to have M&A revenues in the same area.

A big chunk of that is sponsored business, we're continuing to build out our sponsor platform.

I don't think we break out the specific amount of advisory business as sponsors because that's actually not how we think about it I think we think about it more from.

And industrial coverage model, which includes sponsors, but I have and I think you're right to point out I have said that a big part of the transaction volume that goes on in M&A is sponsor driven.

And our growth in that area as a function of the fact that we are much more relevant to sponsors than we used to be.

So I would anticipate that we'll continue to make.

Those kinds of inroads.

A big chunk of our revenues. This quarter also had to do with the stack back ends which by the way oftentimes crossover into the sponsor area. So when I look at our spec revenue as oftentimes where dual pathing, where.

We're talking to private companies about private sales or public sales, sometimes they break more to private sales to sponsors sometimes they break more to public sales or the opportunity to tap the markets using.

Using a stack backend.

I can't understate, the importance of having that capability because it drives.

Our ability to do other parts of the business and so when you think about it more holistically.

When we think about our M&A advisory business as opposed to just our we just focus on sponsors are we just focus on corporates, we have to have that full mix in order to continue to drive our business.

That's helpful to get that insight into your thinking there.

Just a quick clarification there in your comment I think you had mentioned that you expect advisory to stay around this level is that did I hear that correctly. So you produced about $100 million of revenue this quarter is that where.

Where you see the business operating over the coming quarters.

Yes, I actually think I mean, I think it could move higher from here.

When we look at the growth trajectory and our ability to win assignments I actually think it could move higher I think I was more reflecting the fact that we've reached a pretty significant milestone this quarter in terms of the size of our advisory business.

So I'm more acknowledging that like I I believe that our ability to continue to produce and when I look at the way the backlog is continuing to queue up.

Very confident that.

With that we will continue to grow.

Just more of I think the comment was more.

We've reached a new level and I think I've said over and over again our goal on in many instances to do higher highs and higher lows and I feel pretty good about where we are in the advisory and the growth advisory business I'd also say.

It's taken us awhile to get here and I think there were a lot of people who felt like it was going to be really hard for us to build a meaningful advisory business and I know a lot of our <unk>.

Competitors actually have much more meaningful advisory businesses and they started faster I would just say when you take a look at the compound annual growth of our advisory business I don't think Theres a firm that's growing faster on the street, which suggest to me that we can continue to take share in a meaningful way and so I would focus investors more on the growth rate of our advisory business, because I think thats actually indicative of the share that we.

Can take.

Okay.

Yes, certainly impressive to see when you get I think 84 million in 2019, so that's great to hear.

I got to give.

I give credit to the team here.

That doesn't happen by accident and I think we.

We talked about a few years ago and you probably remember this how we were investing through the through the cycle in particular in 18 and 19, we made significant investments in our compensation ratios reflected those investments in and.

I think there were a lot of.

I think there are a lot of doubters out there that we could actually make meaningful progress, but you can see in a quarter like this quarter, where you have a real significant slowdown in IPO activity in follow on activity, particularly in the biotech sector. This is a real indication that the investments that we've made in 18 and 19 in the acquisitions that we've made particularly Courtney and MH T. R.

I really gained significant traction and that gives us great confidence in our ability to operate in multiple market environments.

I appreciate that Jeff.

And maybe just a quick one on the capital returns you ran through.

Some some of.

The thoughts there and I appreciate that I guess.

Maybe put a little finer point on that.

You did.

A record amount this quarter you did about $50 million last quarter is that kind of is that the right way to think about the pace here near term and can you maybe just give us a broad update on the capital allocation philosophy broadly.

Yes, so I think we're not changing our guidance in terms of the minimum amounts were going to buyback, but as I said at the beginning of the year. We are we will be very active and we see opportunities to do this.

Third quarter was a good example of we had some opportunities to buy stock cheap and I'm all for that right.

Back to my days on the buy side I know how to buy things when I think they are mispriced. So.

I'm happy that we were able to do it we certainly have the financial wherewithal to do it.

And we will continue to be active I think we also recognize that we took care of the convert which I think when you look at.

Fully diluted shares outstanding that was a big objective of ours and so we said we would continue to buy back aggressively.

And we have and I think we'll continue to do so as our operating business continues to thrive.

Alright, Thanks, Jeff I appreciate the color on that.

Alright, Thanks, Mike.

Thank you. Our next question comes from <unk> <unk> with Piper Sandler Your line is open.

Thanks, Good morning, guys.

Just sticking on the on the M&A front.

We've.

Hearing the commentary around the strength of your sort of dis back pipeline today, but.

Looking forward kind of given the uncertain nature of the economy at this point some maybe yellow flashing light how are you guys thinking about the effects that could have now as you saw the <unk> split kind of M&A more generally and some of the core verticals like healthcare consumer industrial is over the next year do you think you can grow through any dislocations and industry trends.

Given your smaller but sort of growing base that you're working off of.

So great questions, you mean, and I've said is obviously something we think about I think.

I aspire to be big enough, one day, and M&A to actually have general market conditions impact our flows that would be great. I think we have a lot of room to go before we get there so I think for our standpoint.

We're taking share I can't stress this enough like we didn't used to compete with a bunch of firms in this space at all and now we're competing and winning in part because of the breadth of the product offering that we have so I actually am not terribly concerned about economic headwinds and how that might impact our business specifically.

Obviously, if there is a huge economic downdraft.

Could impact everybody's business, but I look at our business and I'm like we just had a very significant dislocation and not that long ago in the first and second quarter of last year and now we're seeing a pickup in M&A activity across the board and that M&A activity and also access to capital. So when you think about the number of specs that are public.

And the amount of business that has to get done because of the time constraints around spacs over the next 12 months to 18 months, it's hard to make the argument that.

General economic conditions will impact our ability to continue to grow advisory business. As you think theres a lot of stuff right in front of us with a very significant installed base that gives me a higher degree of confidence in our what I can see into the future than maybe at any other time in so.

Listen I don't I'm, not smart enough to predict quarter over quarter. I think you could always have that those kinds of fluctuations when I look out over the next year or two at the work that we have to do in the sectors that we have to do.

There's just there's a lot to get done and so I remain continue very upbeat about it.

Great. Thanks, that's really helpful. And then turning to brokerage I appreciate the color on the progress of that brokerage growth and diversification. Just wondering if you could step back a little bit and kind of frame the shift in that business over the last few years, maybe talk about.

What how the product offerings have changed in the business, how thats impacted your positioning moving forward to capture more of those revenues on both kind of brokerage and services perspective.

Yes, so I think we can win.

There is actually not a lot of folks that understand the intricacies and dynamics of equity market structure and equity market trading in particular, I think what we recognize as the world really falls into two categories. There is the big players, who use central risk books and waste and their dark.

Dark pools to to really drive volumes.

That's not our game right, we don't have dark pools here and we're not using risk capital to drive outcomes. We're much more agency focused and I think there you have got to be at the top of your game, both algorithmically as well as in research. So you have to excel at both of those and I think what the gains the share gains that we've shown and the continued share gains.

That put us well inside the top 10.

In terms of our market share that's bigger than at least half of the bulge in terms of our of our.

Our market position, that's because they've they've stumbled and I think it is hard to regain that momentum. It's not like you can you can all of a sudden wake up tomorrow and rebuild our world class equity research franchise, that's a hard thing to do.

We have that I don't think you can wake up tomorrow and rebuild your algorithms.

And get them re installed on People's desks that people use them. That's a hard thing to do so the very.

It gives me the very thing that we've done with.

We've positioned ourselves.

To have not just meaningful share gains that meaningful like consistent share gains.

No.

Our gains over the course of the past year to year and a half are not eroding in terms of market share and thats phenomenal.

And so those are the strategies, we pursued wealth will continue to do that and when you think about adding on in places like.

What I would call non execution, driven businesses like securities Finance and swaps.

That is an area that we have a lot of ground to take.

We can really penetrate the wallet from existing clients in a way that others can't.

And then when you look at what we've done in Europe, I mean again, we are much bigger than we used to be in Europe, we still don't actually move the needle when you look at market share and so there is a real opportunity for us to continue to take share there. So.

I continue to remain.

Bold up on our ability to grow our business.

I know some people think it will be harder to do in the future.

Les <unk>.

Concerned about that.

Okay, great. Thanks for taking my questions.

Thanks, Jimmy thank.

Thank you. Our next question comes from Devin Ryan with JMP Securities. Your line is open.

Great Good morning, guys.

Hi, <unk> and Devin.

Terrific. Thank you.

I guess first question here, just digging a little bit more on the outlook for the underwriting businesses clearly.

Coming off of a fantastic year.

A lot of things that are hitting and I just want to unpack a little bit as you guys are thinking about maybe budgeting for 2022 and I. Appreciate you probably some of this is hard to share because you have to predict the future, but do you think about just the business and where.

Maybe.

Micro level, where you are you are hitting on all cylinders or maybe even feels like it's above.

Normal versus kind of where there is still room for growth.

How would you kind of break it down as we head into next year Youre looking at your backlog like where where there could be upside in revenues and where maybe the bar is a bit high and then just within that as well I know you said two thirds of the fact that youre.

Working on it either.

The deal have a pending deal but.

I suspect of that two thirds theres still a number working through the process, where there is somewhat predictable revenues.

And then the remaining one third quarter revenue still to come. So is that <unk> are still kind of this embedded kind of night.

Momentum of spec revenue, that's going to come in 2022.

Clothes and you get the majority of revenues on closing.

Okay. So a lot in there to unpack so make sure I want to make sure that I am.

Actually address it.

You're talking about banking backlog specifically.

Yes.

Really what I'm getting at like you would be thinking about the backlog heading into 2022, despite where.

And where there may be some some capacity and growth in the where were.

Where the bar feels a little bit higher just given how well.

You did.

We have done in 2021.

Yes, so I actually feel like.

There's a lot of room to grow in advisory.

That's for sure.

Also and as I mentioned earlier that a lot of that has to do with.

The fact that I think are significant numbers back theyre going to get back end deals done.

They may not be done at the same valuation levels.

Maybe some fee compression.

We've just begun to think about the volume that has to get done as an industry and it's going to be significant.

I just have been a brown the spec space for a long time I think that sponsors are highly motivated to get deals done.

That I can't think of any other space.

We're in M&A advisory, where there is a group of individuals who have to get something done in a timeframe and we can debate how much of them are going to get deals done and how much of them I will just say my experiences the vast majority of them will figure out ways to get deals done.

Because the economic pain of not getting a deal done is too great.

So it's going to be a really busy 2022.

And first back back ends and it's going to be really busy deal in 2020 for Cowen.

What I'll also say a bunch of companies are coming to us.

And they are exploring specs and we are the best at back as hands down bar. None. So when you come to Cowen you are coming to get advice, maybe on whether or not that's a path for you, but while youre here Youre also hearing about the other opportunities for you to either monetize or capital raise if thats not the best path for you.

And I think one of the things that's driving our advisory business as the inbound calls.

From people, who want to understand the spec market better that's both sponsors and companies.

When they're here, we're walking them through their alternatives.

In many cases, it's driving other outcomes in both capital markets advisory or what I would call the debt advisory business or private placements that theyre doing maybe it makes sense for them to do one more round of private financing. Those are calls we were not getting two years ago, because there just wasn't enough happening around that.

So the knock on effect of being the preeminent spak player has enabled us to continue to grow businesses. Other than other places that is part of the reason why I remain as buildup as I am on our ability to drive advisory business going forward.

Does that makes sense.

And then if you can also on the underwriting side of the business.

To think about.

Maybe at a more granular level, where the bar is high into 2022 and I. Appreciate you can continue to do better, but just where you just.

Kind of a special year.

Versus like where there's capacity in things things could be better longer term clearly the underwriting business youre expanding the footprint you are increasing market share, but just trying to think about after what is a phenomenal year, we're getting questions around what does that imply for 2022, so just like any more granular.

Surety around.

The individual sector, maybe from a sector perspective, like where the borrowers.

All right. So let me let me try to give you a little bit of color on that so if you look at our underwriting revenue over the course of the past two quarters, it's been about $86 million each quarter.

And if you think about the mix right. We know if you just take a look at biotech what has been the primary driver for talents underwriting revenue historically that has been the last quarter was the worst quarter for them in terms of volume.

In terms of biotech performance right. It's been the most horrendous six months period in biotech stocks.

Honestly since I can remember and so many of those companies have chosen not to actually finance themselves. We were mandated in our mandated on a number of situations that just didn't go because of market conditions, so yet cowens.

Underwriting business has remained pretty consistent where did that come from well, we're much more relevant than we used to be in areas like.

<unk>.

AI robotics, our consumer business. If you look at the number of book run transactions, we've done in consumer alone in the last two quarters that tells you something different is happening at Cowen we're.

Finally, beginning to monetize the investments we made.

In banking.

And and also our research footprint.

So again, you can't do Ipos and follow ons, unless you've got a really high quality research footprint, we've made investments in that over the past few years as we've discussed and when the buyer when the inevitable biotech slowdown occurred.

We picked up the slack and other areas, where there wasn't happening so I look at the next year NII.

No. All of these are bunch of these biotech companies that were mandated on have to raise money like it's not really an option for them. After a while price just they can wait for a while to see if market conditions are better.

Inevitably they have to raise money and when they do we'll be there and so I look at this and I would say all of this business that I thought we were going to do in biotech if there'd been a halfway decent tape over the last few quarters that just got deferred.

And that makes me feel really good because actually I look out at the.

Back half of this quarter, maybe and into the beginning half of next year I already know theres going to be a bunch of those companies that are probably going to have to finance I'll also remind people that is not in our backlog. So biotech follow ons, which has been a huge driver of <unk> revenue. They are they are rarely if ever are in backlog.

Because by the time you actually.

It becomes qualified for mandated backlog youre actually in the market and your pricing them overnight or in two days. So again I'm looking at the Shadow here and saying we know all of these companies are going to have to finish the last thing on that front as I think people are waiting to see what happens with drug pricing policy, where.

That's been a big thing in biotech obviously.

We will see what happens with the bipartisan infrastructure plan.

There there is likely to be some clarity.

Round, where drug pricing is going to fall in that plan and once there is clarity.

It will be safe for people to invest in biotech and pharma and I will just say people have been on the sidelines for the last six months because of the uncertainty of where this is going to fall I don't know that I'm smart enough to know where that is going to fall, but once it does people will be able to readjust and there'll be back in the market and I actually think there is a very significant probability that will cut.

You bid now I don't do market timing I just.

I'm a student of that business because it is an important part of our business in Cowen and Thats, what I think.

We'll see how that plays out over the next few weeks.

Okay.

Terrific. Thanks, Jeff for all that color, that's very helpful and just a follow up question here you talked about expanding the footprint I think sometimes not appreciated fully people look at Cowen I mean head count is up 16% over.

Over the last two years since the end of 2019 is up 10% even from the end of 2020. So you guys are growing the footprint pretty substantially.

So what I want to connect this to us it feels like you are getting operating leverage off of that because you have infrastructure in place.

<unk> Leverages a bowl.

And so over time, it doesn't happen necessarily overnight, but over time that should drive operating margins higher as you grow the footprint.

Two things one how are you thinking about growth into 2022 can you keep up kind of this type of pace, we were growing upper single digits low double digits.

Sprint annually and then in terms of like the need to add more infrastructure underneath it that way.

There, where do you feel like you need to kind of.

Ed versus where.

Can you really get some additional positive operating leverage because it does as I said feel like as youre, adding more people youre seeing positive operating leverage off of that as we've seen over the last couple of years, yes.

Yes, so two things on that front first I think it's really important. This is the first time, we've actually articulated to people our revenue per head.

And we've done it on a rolling 12 month basis. So you can actually see how that operating leverage actually works at the topline naturally our expenses are going to go up nominally in terms of aggregate dollars, because we have more people and we're bringing them back.

Two office spaces.

And we've got to make sure that we've invested in that infrastructure to bring them back in things like hotels software, we actually need more space in some instances because we've done some acquisitions in areas geographically.

Particularly in San Francisco, where.

And in New York, we brought on so many teams.

They need places to go we just we increase the footprint primarily around revenue producers and and.

And thats been.

Good thing for us so part of what Youre seeing is the infrastructure and market data services and telecommunications infrastructure.

We're also not asking people to bring their their desktop home operating systems back to the office. So we've had to make some investments in fixed infrastructure to make sure that.

That people have desks, both in office and equipment at home and we've regionalized. This is a big thing for US we made a decision to in particular in New York.

We've regionalized our office footprint. So we've got new offices in Red Bank Summit we've.

We've built a much bigger space and Stanford, where we had extra space and we built that stays out it'll be open hopefully in the next few weeks long Island. This is enabling our best talent to be able to work near where they live so as we return to office, we're not necessarily returning to commuting because.

The efficiency gains we've seen from people not having to commute has been amazing so what youre seeing part of our of our uptick in fixed cost is a function of the fact that where more people and we're redesigning the workplace of the future having said that I expect will continue to drive those margins pretty hard.

Because we.

We're seeing we're just exiting this period of time at a much higher revenue run rate.

And that's really what we expect to see going forward.

Okay great.

Thank you very much I'll leave it there.

Great. Thanks Devin.

Thank you. Our next question is from Steven <unk> with Wolfe Research. Your line is open.

Hi, Good morning, Jeff Good morning, Steve.

<unk> morning.

So wanted to just ask a question on the brokerage business now that we've entered a period of more normalized trading activity.

I was hoping you could speak Jackson is sustainability of it.

$2 5 million per day run rate I was also hoping you can just unpack some of the factors that maybe drove some of the pressure on the services revenue line. These fees have historically thats been much less volatile and you cited some strong kpis in terms of new client add.

Trying to unpack some of the different puts and takes there.

Yes, So let me let me take the services I really quickly.

We sold off a part of our clearing business and we reduced our clearing footprint there so.

Again, everyone looks at topline numbers were actually Mezz with looking at capital utilization, which is another thing that I think people need to focus on rate. There is this perception that we have too much capital tied up in certain businesses and we definitely had capital tied up in the clearing business last year and made a conscious choice.

To exit that business and moved that off that's part of what's enabled us to do more share buybacks, so, but obviously the revenue drop there as a function of the fact that clearing.

In the service line.

That was a conscious choice. So that's really the drive there when you strip that out.

We're continuing to see growth in <unk>.

And our swaps business in our prime brokerage business outsource trading is a big part of that these are the things that are driving our performance there and I don't see that abating anytime soon again, one when investors and I think you probably see this a little bit in your business. They have a finite amount of wallet they want to aggregate that wallet with people.

All who are able to provide them services and so what we've done is now that we're now that we're onboarding. So many clients and we are so relevant to them in cash equities and algorithmic execution. We're just opening up other pockets for them to pay us.

They may choose that we want to make it easy for them to pay us in a broad variety of ways. So that they can continue to consume what they consume on the research front or <unk> or whatever it happens to be so our view is.

We'll see quarter over quarter moves between cash execution algorithmic execution and services, but overtime. Our expectation is that services business will be a much more stable part because once you open up prime brokerage accounts and swap accounts like people don't move them around as much at least not from where we are.

If you're running a really big prime brokerage business like some of our larger competitors people move balances between those folks all the time when people are moving their balances to calendar doing it with intentionality to get Cowen paid.

And so theyre not likely to move it away.

And that's what we've seen is the stickiness of our prime business and our Securities Finance business and our swaps business is actually really helping us to maintain that $2 5 million.

A day.

Alright, thats, great color and just.

A follow up just.

Switching gears a bit aligned with <unk>.

<unk> partners.

I know there are some limitations in terms of what you can share about hoping you can provide some sort of update on that.

That that IPO is expected to re launch.

And then if you can give any sort of context around what your ownership will today, how much of it is reflected on the balance sheet and how would you deploy proceeds once there is some sort of monetization of that.

So obviously, we're disappointed with market conditions probably.

Matic of.

They launched the deal and it was probably the worst time that we've seen in sort of.

<unk> biotech and healthcare business to try to get a deal done so.

Pull that deal will re circuit.

We'll really figure that out I expect it.

What we saw is actually interesting is as meaningful demand I just don't think it was the valuation level that we.

That we had hoped and so it makes sense for us to re <unk>.

When you think about that when market conditions are better the value is still there. So I wanted to be clear, but we don't show. It I think you put out a research report that rightly points out that we don't carry any of our stakes.

On.

And any value on the balance sheet.

And there are meaningful I mean, obviously there.

Those are if we were to mark them to market.

They're they're meaningful pickups in book value.

And so.

What I would say is on healthcare royalties will continue to monitor market conditions.

I don't think it will happen in the fourth quarter, but as we head into next year, what's been validated for us as a.

The ability to do a permanent capital vehicle in that space is hugely valuable.

And we will continue to pursue that in the market won't always be this way.

Okay, and just one final.

Question for me.

Jack.

Had noted that you would provide some additional context or some incremental disclosures.

Some of your investments I think you had touched on that a little bit in your prepared remarks, maybe hoping you can provide some additional color on what incremental disclosures you plan on providing.

That business in your investment portfolio that has generally remained prosper okay.

Yes, Steven.

What we've seen others do as disclosed at the end of the quarter some realized events around our incentive fees so that people.

We have an earlier view into whats whats going on in that line. So we plan on doing that in the future.

Okay, Great I would just say, we're just trying to take away the guessing game there.

We obviously, we had an incredible.

Income in the first quarter of this year and I think when you look at those numbers nobody here and nobody on this phone probably thought that was sustainable.

And so when you when you look at the mean reversion people just always trying to guess.

Coming into the quarter and I think we should just probably tell you what it is earlier so that people can drop it in their models.

Domestic suppliers.

So it would certainly welcome that disclosure alright, thanks, so much for taking my questions.

Thanks, Steve Thank you.

Okay.

Thank you. Our next question comes from James <unk> with Goldman Sachs. Your line is open.

Hi, good morning.

I just wanted to ask about Europe.

When you generate comp leverage from here.

Yeah.

How's that.

Go ahead specifically.

Alright, sorry about that.

So you've had tremendous success in growing the top line over the past few years. So I just wanted to touch on your ability to generate leverage from here as you generate.

Continue to grow the franchise.

Yeah listen I think we actually generated a significant amount of comp leverage so far when you look at a lot of our competitors. They skew much higher in terms of comp to revenue ratio than we do we've got businesses here that are lower comp to revenue ratio and I think when you look at.

In our business.

I think we are.

I wouldn't expect it to move too much off of this I would say longer term as we grow our advisory business that will be higher margin business lower actually fixed cost. So actually you can make the argument that if we see higher.

In advisory business, the comp level, Mike actually a comprehensive might go up but margins will also go up and I think that's really what we focus on James is is margin.

And comp levels really fall.