Q1 2022 Cohen & Company Inc Earnings Call

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Good morning, ladies and gentlemen, and welcome to Cohen <unk> Company's first quarter 2022 earnings call. My name is Tara and I will be your operator for today before we begin at Cowen <unk> company would like to remind everyone that some of the statements. The company makes during this call may contain forward looking statements under applicable securities laws.

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

Forward looking statements made during this call are made only as of the date of this call and the company undertakes no obligation to update update such statements to reflect subsequent events or circumstances Cohen <unk> company advises you to read the cautionary note regarding forward looking statements in its earnings release and its in its most recent annual report on form.

10-K filed with the SEC.

I would now like to turn the call over to Mr. Lester Brafman, Chief Executive Officer of Cowen <unk> Company, Sir the floor is yours.

Thank you Karen and thanks, everyone for joining us for our first quarter 2022 earnings call with me on the call is Joe Pooler, our CFO .

Our financial results for the first quarter were impacted by significant unrealized negative mark to market adjustments in our principal investing portfolio.

Nevertheless, we continue to focus on our strategic objectives and are confident that the initials initiatives underway and investment banking commercial real estate loan origination asset management gestational repo in our spec franchise broadly will generate long term value for our shareholders in the first quarter. We also continue to pay a regular quarterly dividend as we've stated in the past.

The government a spec market as a sponsor asset manager Investor as a result of increased holdings of public equity positions and post business combinations companies as part of our principal investing portfolio.

So.

It's also important to realize that for the most part there is a de minimus cost. So most of these investments the current economic uncertainty and capital markets disruption May continue to result in increased volatility in the spec market may further impact our reported results going forward now I'll turn the call over to Joe to walk through this quarters financial highlights in more detail.

Thank you Lester.

I'd like to start with a note that we will be filing a corrected earnings release momentarily, we apologize for any inconvenience that may cause our initial relief had an incorrect adjusted pre tax loss number for the first quarter of 'twenty two.

I'll start with our statement of operations otherwise our net loss attributable to Cohen <unk> Company, Inc. Was $7 6 million for the quarter were $5 46 per fully diluted share compared to net income of $4 2 million for the prior quarter were $2 43 per fully diluted share.

And net income up $9 4 million for the prior year quarter or $6 98 per fully diluted share.

Our adjusted pre tax loss was $18 6 million for the first quarter of <unk> 22, compared to adjusted pre tax income of $6 4 million for the prior quarter and adjusted pre tax income of $37 6 million for the prior year quarter.

Note that adjusted pretax income and loss is not a measure recognized under U S. GAAP.

Our disclosures calculations and reconciliations surrounding adjusted pre tax income and loss in our earnings release.

First quarter 'twenty, two principal transactions and other revenue was negative $18 4 million as Lester noted the negative principal transactions and other revenue was primarily due to mark to market adjustments on our principal investments related to our involvement in the spec market, which has resulted in increased holdings of <unk>.

Equity positions and post business combination companies.

Furthermore, substantial portion of the negative mark to market adjustments in the first quarter was effectively a give back of prior period favorable mark to market adjustments.

Note that the $18 4 million of negative principal transactions and other revenue in the current quarter is offset by a $7 5 million credit recorded in the net income loss attributable to the non convertible non controlling interest line item.

Principal transactions revenue includes all gains and losses and income earned on our $49 6 million dollar investment portfolio classified as other investments at fair value on our balance sheet.

New issue and advisory revenue was $3 8 million in the quarter, a decrease of $13 4 million from the fourth quarter and an increase of $1 9 million from the year ago quarter. During the first quarter, our investment banking group generated $1 $5 million in advisory revenue.

Our commercial real estate opportunities group generated $1 million of origination revenue in our U S insurance team generated $1 $2 million of origination revenue.

Net trading revenue came in at $12 million in the quarter down $3 2 million from the prior quarter and down $7 2 million from the prior year quarter.

Our asset management revenue totaled $1 9 million in the quarter, which was down $3 2 million from the prior quarter and $2 million from the year ago quarter. The decrease from the prior quarter was primarily related to an incentive allocation earned by the manager of our <unk> funds in the fourth quarter comp.

Sensation and benefits expense for the first quarter of 2002 was $13 9 million, which was down from both the prior quarters, primarily due to revenue decreases and corresponding declines in variable incentive compensation.

The number of company employees was 115 as of March 31 of 22 compared to 118 as of December 31 of 'twenty, one and 98 as of the prior year quarter end.

Net interest expense for the quarter was $1 4 million, including 657000 on our two trust preferred debt instruments 446000 on our senior notes of 176000 on our redeemable financial instruments and 72000 on our credit line.

Loss from equity method affiliates during the quarter totaled $12 1 million.

Income and loss from equity method affiliates fluctuate primarily depending on the timing of the closing of the business combinations by our equity method investees that our sponsors are specs, which typically typically result in increased value of founder shares allocable to us by the sponsors upon closing.

However, during the current quarter a reduction in the value of the founder shares held by our equity method Investees and allocable to us resulted in a corresponding loss on our investments and equity method affiliates.

Note that the loss in the current quarter is offset by a $7 2 million credit recorded in the net income loss attributable to the non convertible non controlling interest line item.

During the first quarter income tax expense was 1.8 million compared to income tax benefit of $4 1 million in the prior quarter and income tax expense of 868000 in the prior year quarter.

We will continue to evaluate our operations on a quarterly basis and may make adjustments to our valuation allowances applied against our net operating loss and net capital loss tax assets going forward.

In terms of the balance sheet at the end of the quarter total equity was $121 5 million compared to $151 4 million as of December 31, the non convertible non controlling interest component of total equity was $11 5 million at quarter end.

<unk> $31 8 million at year end, thus the total equity excluding the nonconvertible non controlling interest was $110 million at the end of March of $9 $6 million decrease from the $119 6 million at year end.

In March the holder of our 2017 convertible notes.

<unk> Fintech trust converted the $15 million note into $10 million 345000 units of membership interests in our operating LLC at the conversion rate specified in the note agreement of $1 45 per unit.

As a result of the conversion.

The 2017 convertible note was canceled in its entirety the units of membership interest. These units of membership interest have the same conversion and redemption rates as the existing convertible noncontrolling interest units.

Thus the $10 million 345000 units can be converted into 1 million 34483 common shares of Cowen and company stock.

At quarter end consolidated corporate indebtedness was carried at $28 6 million and our redeemable financial instruments was carried at $8 million.

As Lester mentioned, we have declared a quarterly dividend of <unk> 25 per share payable on June 3rd to stockholders of record as of May 20.

The board of directors will continue to evaluate the dividend policy each quarter and future decisions regarding dividends may be impacted by quarterly operating results and the Companys capital needs.

With that I'll turn it back over to Lester.

Thank you Joe and at this time, we will.

Take some questions.

Okay.

Operator any questions any questions.

Alright.

Please direct any offering I'm, sorry, my apologies I didn't realize the mic wasn't working I will give instructions for the audience. The floor is now open for questions. If you do have a question you May press star one on your telephone keypad at this time, if youre using a speakerphone, we ask that while posing your question you pick up your handset to provide the best data quality again that's.

Star one on your telephone keypad, if you'd like to ask a question.

And Mr. Brookman, there appear to be no questions at this time.

Thanks, Joe and thanks, everyone for joining us please direct any offline investor questions to Joe Pooler at 215, 701, 895, two or via E Mail to Investor Relations at Cowen and company Dot Com.

Contact information can also be found the bottom of our earnings release.

Thank you all for joining us today and you guys have a have a great day. Thank you.

This does conclude today's conference. We thank you again for your participation you may disconnect. Your lines at this time and have a great day.

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