Q3 2022 Cohen & Company Inc Earnings Call

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

These statements may involve risks and uncertainties that would cause the company's actual results to differ materially from the results discussed.

All 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 such statements to reflect that.

Hence the circumstance.

Company advises you to read the cautionary note regarding forward looking statements in its earnings release.

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 and company. Please go ahead Sir.

Thank you Maria and thank you everyone for joining us for our third quarter 2022 earnings call with me on the call Sue Fuller our CFO .

Accompanying navigated difficult market conditions and continue to successfully execute our strategies strategy generating $2 2 million of adjusted pre tax income in the third quarter.

We are pleased that both our investment banking and use insurance origination teams close key transactions and generate generated new issue and advisory revenue.

Although our reported financial results continue to be impacted by unrealized negative mark to market adjustments on our principal investing portfolio. We remain focused on our strategic objectives, and we are confident that the expansion of our investment banking and commercial real estate teams will continue to translate into higher revenues in the future.

As we move forward, we are committed to enhancing stockholder value and in the third quarter. We continued to pay our quarterly dividend now I will turn the call over to Joe to walk through this quarters financial highlights in more detail.

Yeah.

Thank you Lester will start with our statement of operations.

Net loss attributable to Cohen <unk> Company, Inc. Was 900000 for the quarter were 64 cents per fully diluted share compared to net loss of $1 $9 million for the prior quarter or $1 53 per fully diluted share and net loss of $3 4 million for the prior.

Per year quarter were $3 46 per fully diluted share our adjusted pre tax income was $2 2 million for the quarter compared to adjusted pre tax loss of $8 1 million for the prior quarter and adjusted pre tax loss of $14 9 million for the prior year quarter.

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

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

Third quarter 2022 principal transactions and other revenue was negative $1 2 million for the quarter 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 as a sponsor asset manager and invest.

<unk>, which has resulted in increased holdings of public equity positions and post business combination companies.

Principal transactions revenue includes all gains and losses and income earned on our $37 7 million of investment portfolio.

It's defined as other investments at fair value on our balance sheet.

Net trading revenue came in at $8 million in the third quarter down $2 4 million from the second quarter and down $8 6 million from the third quarter of 'twenty one.

The current quarter's net trading revenue includes a $4 $6 million loss.

Third during the liquidation of reverse repo collateral related to a mortgage originator clients bankruptcy filing.

New issue and advisory revenue was $13 2 million in the third quarter, an increase of $9 8 million from the second quarter and an increase of $4 4 million from the year ago quarter. During the third quarter, our investment banking group Cohen <unk> company capital markets generated $10 5 million in advisory revenues.

And our U S insurance team generated $2 $7 million of origination revenue.

Our asset management revenue totaled $3 5 million in the quarter, which was up $1 6 million from both the prior quarter in the prior year quarter.

During September of 'twenty to one of our Alaska Cdos had a successful auction and $1 6 million of subordinated management fees in arrears was recorded as.

As a result of the CDO liquidation IRA AUM decreased by approximately $100 million and we will earn no additional asset management fees from this CDO.

Compensation and benefits expense for the third quarter of 2002 was $15 2 million, which was up from the prior quarter and down from the prior year quarter, primarily due to fluctuations in revenue and the related variable incentive compensation.

The number of company employees was 122 as of September 30, or 22 compared to 121 as of June 30, 22, and 115 as at the end of the third quarter last year.

Net interest expense for the third quarter of 2002 was $1 3 million, including 921000 on our two trust preferred debt instruments 113000 on our senior notes 244000 on our redeemable financial instruments and 67000 on our credit line.

Income from equity method affiliates during the third quarter totaled 600000.

Dollars of income.

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

During the third quarter income tax expense was $1 8 million compared to income tax benefit of 60000 in the prior quarter and income tax benefit of 248000 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 our balance sheet at the end of the quarter total equity was $105 6 million compared to 151 4 million at the end of the year.

The non convertible non controlling interest component of total equity was $4 2 million at the end of the quarter and $31 8 million at the end of the year. Thus the total equity excluding the non convertible non controlling interest component was 101 4 million at the end.

For the quarter and $18 2 million a decrease from $119 6 million at the end of the year.

At quarter end consolidated corporate indebtedness was carried at $28 9 million and our redeemable financial instruments were carried at $8 million.

As Lester mentioned, we've declared a quarterly dividend of <unk> 25 per share payable on December 2nd to stockholders of record as of November 18th of 'twenty two.

Order 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 for closing comments.

Thanks, Joe Please direct any offline investor questions to Joe Pooler at 2157, or one 895, two or via E mail to Investor Relations at Cowen and company Dot Com.

Contact information can also be found at the bottom of our earnings release, operator, you can now open the call lines for questions and thank everyone for joining us on our call today.

Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from Mccann for participants using speaker equipment. It may be nessus.

Sorry to pick up your handset before pressing the star keys.

One moment, please I'll we poll for questions.

Yeah.

Yes.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

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It appears that we have no questions at this time.

I would now like to turn the floor back over to Mr. Brookman for closing comments.

Thank you operator, and thanks, everyone for joining our call. We look forward to speaking with you next quarter. So have a nice the rest of the week. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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