Cohen & Company Reports Third Quarter 2019 Financial Results
October 30 2019 - 8:00AM
Cohen & Company Inc. (NYSE American: COHN), a financial
services firm specializing in fixed income markets, today reported
financial results for its third quarter ended September 30,
2019.
Summary Operating Results
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
($ in
thousands) |
9/30/19 |
|
6/30/19 |
|
9/30/18 |
|
9/30/19 |
|
9/30/18 |
|
|
|
|
|
|
|
|
|
|
Total revenues |
$ |
11,267 |
|
|
$ |
11,169 |
|
|
$ |
12,237 |
|
|
$ |
33,576 |
|
|
$ |
33,765 |
|
Compensation
and benefits |
|
7,017 |
|
|
|
6,432 |
|
|
|
7,177 |
|
|
|
19,813 |
|
|
|
18,960 |
|
Non-compensation operating expenses |
|
4,693 |
|
|
|
4,219 |
|
|
|
4,704 |
|
|
|
13,756 |
|
|
|
13,434 |
|
Operating
income |
|
(443 |
) |
|
|
518 |
|
|
|
356 |
|
|
|
7 |
|
|
|
1,371 |
|
Interest
expense, net |
|
(1,536 |
) |
|
|
(1,939 |
) |
|
|
(2,185 |
) |
|
|
(5,329 |
) |
|
|
(6,205 |
) |
Income
(loss) from equity method affiliates |
|
(109 |
) |
|
|
(248 |
) |
|
|
- |
|
|
|
(365 |
) |
|
|
- |
|
Income
(loss) before income tax expense (benefit) |
|
(2,088 |
) |
|
|
(1,669 |
) |
|
|
(1,829 |
) |
|
|
(5,687 |
) |
|
|
(4,834 |
) |
Income tax
expense (benefit) |
|
(170 |
) |
|
|
(641 |
) |
|
|
(595 |
) |
|
|
(917 |
) |
|
|
(1,259 |
) |
Net income
(loss) |
|
(1,918 |
) |
|
|
(1,028 |
) |
|
|
(1,234 |
) |
|
|
(4,770 |
) |
|
|
(3,575 |
) |
Less: Net
income (loss) attributable to the noncontrolling interest |
|
(702 |
) |
|
|
(618 |
) |
|
|
(583 |
) |
|
|
(1,942 |
) |
|
|
(1,530 |
) |
Net income
(loss) attributable to Cohen & Company Inc. |
$ |
(1,216 |
) |
|
$ |
(410 |
) |
|
$ |
(651 |
) |
|
$ |
(2,828 |
) |
|
$ |
(2,045 |
) |
Fully
diluted net income (loss) per share |
$ |
(1.06 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.57 |
) |
|
$ |
(2.48 |
) |
|
$ |
(1.76 |
) |
|
|
|
|
|
|
|
|
|
|
- Revenues during the three months ended September 30, 2019
increased $98 thousand from the prior quarter and decreased $1.0
million from the prior year quarter.
- The decrease from the prior year quarter was comprised
primarily of (i) a decrease of $2.1 million in principal
transactions due to less revenue from the Company’s CLO and other
equity investments and (ii) a decrease of $800 thousand in asset
management revenue due primarily to one-time incentive fees
received from our European accounts in the prior-year quarter;
partially offset by (iii) an increase of $1.7 million in net
trading from higher trading activity primarily in municipals,
agencies, and mortgages and (iv) an increase of $250 thousand in
new issue and advisory related to an origination fee in our US
Insurance business.
- Compensation and benefits expense as a percentage of revenue
was 62% for the three months ended September 30, 2019, compared to
58% for the three months ended June 30, 2019, and 59% for the three
months ended September 30, 2018. The number of Cohen & Company
employees was 90 as of September 30, 2019, compared to 90 as of
June 30, 2019, and 86 as of September 30, 2018.
- Non-compensation operating expenses during the three months
ended September 30, 2019 increased $474 thousand from the prior
quarter and were comparable to the prior year quarter. The increase
from the prior quarter was primarily due to higher professional
fees and revenue-driven clearing and execution cost in the current
quarter.
- Interest expense during the three months ended September 30,
2019 decreased $403 thousand from the prior quarter and $649
thousand from the prior year quarter. The changes in both periods
were due to interest on redeemable financial instruments, which is
driven by certain groups’ revenue or profit.
- Income (loss) from equity method investments relates to the
Company-sponsored insurance SPAC, which completed its initial
public offering in March 2019, and has eighteen months from its
initial public offering to consummate a business
combination.
- As of September 30, 2019, total equity was $39.7 million,
compared to $42.4 million as of December 31, 2018.
Lester Brafman, Chief Executive Officer of Cohen
& Company, said, “Our third quarter performance was impacted by
the shock to overnight repo funding rates in September and slower
than anticipated growth from new issue revenue opportunities. While
we are disappointed with our results from the quarter, we are
pleased with the overall growth in our Mortgage business, as our
TBA and Gestational Repo businesses have reached all-time highs in
terms of volume and revenues. We continue to believe that the
initiatives underway will generate long-term value for our
shareholders, and we are focused on improving these results going
forward.”
Conference Call
Management will hold a conference call this
morning at 10:00 a.m. Eastern Time to discuss these results. The
conference call will also be available via webcast. Interested
parties can access the webcast by clicking the webcast link on the
Company’s website at www.cohenandcompany.com. Those wishing to
listen to the conference call with operator assistance can dial
(877) 686-9573 (domestic) or (706) 643-6983 (international),
participant pass code 6295843, or request the Cohen & Company
earnings call. A replay of the call will be available for two
weeks following the call by dialing (800) 585-8367 (domestic) or
(404) 537-3406 (international), participant pass code 6295843.
About Cohen & Company
Cohen & Company is a financial services
company specializing in fixed income markets. It was founded in
1999 as an investment firm focused on small-cap banking
institutions but has grown to provide an expanding range of capital
markets and asset management services. Cohen & Company’s
operating segments are Capital Markets, Asset Management, and
Principal Investing. The Capital Markets segment consists of fixed
income sales, trading, and matched book repo financing as well as
new issue placements in corporate and securitized products, and
advisory services, operating primarily through Cohen &
Company’s subsidiaries, J.V.B. Financial Group, LLC in the United
States and Cohen & Company Financial Limited in Europe. The
Asset Management segment manages assets through collateralized debt
obligations, managed accounts, and investment funds. As of
September 30, 2019, the Company managed approximately $2.7 billion
in fixed income assets in a variety of asset classes including US
and European trust preferred securities, subordinated debt, and
corporate loans. As of September 30, 2019, 82.4% of the Company’s
assets under management were in collateralized debt obligations
that Cohen & Company manages, which were all securitized prior
to 2008. The Principal Investing segment is comprised primarily of
investments that we have made for the purpose of earning an
investment return rather than investments made to support our
trading, matched book repo, or other capital markets business
activity. For more information, please visit
www.cohenandcompany.com.
Forward-looking Statements
This communication contains certain statements,
estimates, and forecasts with respect to future performance and
events. These statements, estimates, and forecasts are
“forward-looking statements.” In some cases, forward-looking
statements can be identified by the use of forward-looking
terminology such as “may,” “ might,” “will,”
“should,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” “seek,”
or “continue” or the negatives thereof or variations thereon or
similar terminology. All statements other than statements of
historical fact included in this communication are forward-looking
statements and are based on various underlying assumptions and
expectations and are subject to known and unknown risks,
uncertainties, and assumptions, and may include projections of our
future financial performance based on our growth strategies and
anticipated trends in our business. These statements are based on
our current expectations and projections about future events. There
are important factors that could cause our actual results, level of
activity, performance, or achievements to differ materially from
the results, level of activity, performance, or achievements
expressed or implied in the forward-looking statements including,
but not limited to, those discussed under the heading “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition” in our filings with the Securities and Exchange
Commission (“SEC”), which are available at the SEC’s website at
www.sec.gov and our website at
www.cohenandcompany.com/investor-relations/sec-filings. Such risk
factors include the following: (a) a decline in general economic
conditions or the global financial markets, (b) losses caused by
financial or other problems experienced by third parties, (c)
losses due to unidentified or unanticipated risks, (d) a lack of
liquidity, i.e., ready access to funds for use in our businesses,
(e) the ability to attract and retain personnel, (f) litigation and
regulatory issues, (g) competitive pressure, (h) an inability to
generate incremental income from new or expanded businesses, (i)
unanticipated market closures due to inclement weather or other
disasters, (j) losses (whether realized or unrealized) on our
principal investments, including on our CLO investments, (k) the
possibility that payments to the Company of subordinated management
fees from its European CLO will continue to be deferred or will be
discontinued, and (l) the possibility that the stockholder rights
plan may fail to preserve the value of the Company’s deferred tax
assets, whether as a result of the acquisition by a person of 5% of
the Company’s common stock or otherwise. As a result, there can be
no assurance that the forward-looking statements included in this
communication will prove to be accurate or correct. In light of
these risks, uncertainties, and assumptions, the future performance
or events described in the forward-looking statements in this
communication might not occur. Accordingly, you should not rely
upon forward-looking statements as a prediction of actual results
and we do not undertake any obligation to update any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
Cautionary Note Regarding Quarterly Financial
Results
Due to the nature of our business, our revenue
and operating results may fluctuate materially from quarter to
quarter. Accordingly, revenue and net income in any
particular quarter may not be indicative of future results.
Further, our employee compensation arrangements are in large part
incentive-based and, therefore, will fluctuate with revenue. The
amount of compensation expense recognized in any one quarter may
not be indicative of such expense in future periods. As a
result, we suggest that annual results may be the most meaningful
gauge for investors in evaluating our business
performance.
COHEN & COMPANY INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
(in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
9/30/19 |
|
6/30/19 |
|
9/30/18 |
|
9/30/19 |
|
9/30/18 |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
Net trading |
$ |
8,479 |
|
|
$ |
8,670 |
|
|
$ |
6,816 |
|
|
$ |
25,873 |
|
|
$ |
20,193 |
|
|
|
Asset management |
|
2,018 |
|
|
|
1,745 |
|
|
|
2,818 |
|
|
|
5,765 |
|
|
|
7,827 |
|
|
|
New issue and advisory |
|
250 |
|
|
|
- |
|
|
|
- |
|
|
|
250 |
|
|
|
873 |
|
|
|
Principal transactions |
|
310 |
|
|
|
585 |
|
|
|
2,400 |
|
|
|
1,245 |
|
|
|
4,292 |
|
|
|
Other revenue |
|
210 |
|
|
|
169 |
|
|
|
203 |
|
|
|
443 |
|
|
|
580 |
|
|
|
Total revenues |
|
11,267 |
|
|
|
11,169 |
|
|
|
12,237 |
|
|
|
33,576 |
|
|
|
33,765 |
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
7,017 |
|
|
|
6,432 |
|
|
|
7,177 |
|
|
|
19,813 |
|
|
|
18,960 |
|
|
|
Business development, occupancy, equipment |
|
770 |
|
|
|
895 |
|
|
|
725 |
|
|
|
2,476 |
|
|
|
2,236 |
|
|
|
Subscriptions, clearing, and execution |
|
2,403 |
|
|
|
2,056 |
|
|
|
2,433 |
|
|
|
6,732 |
|
|
|
6,418 |
|
|
|
Professional services and other operating |
|
1,440 |
|
|
|
1,190 |
|
|
|
1,483 |
|
|
|
4,309 |
|
|
|
4,604 |
|
|
|
Depreciation and amortization |
|
80 |
|
|
|
78 |
|
|
|
63 |
|
|
|
239 |
|
|
|
176 |
|
|
|
Total operating expenses |
|
11,710 |
|
|
|
10,651 |
|
|
|
11,881 |
|
|
|
33,569 |
|
|
|
32,394 |
|
|
|
Operating income (loss) |
|
(443 |
) |
|
|
518 |
|
|
|
356 |
|
|
|
7 |
|
|
|
1,371 |
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
(1,536 |
) |
|
|
(1,939 |
) |
|
|
(2,185 |
) |
|
|
(5,329 |
) |
|
|
(6,205 |
) |
|
|
Income (loss) from equity method affiliates |
|
(109 |
) |
|
|
(248 |
) |
|
|
- |
|
|
|
(365 |
) |
|
|
- |
|
|
|
Income (loss) before income tax expense (benefit) |
|
(2,088 |
) |
|
|
(1,669 |
) |
|
|
(1,829 |
) |
|
|
(5,687 |
) |
|
|
(4,834 |
) |
|
|
Income tax expense (benefit) |
|
(170 |
) |
|
|
(641 |
) |
|
|
(595 |
) |
|
|
(917 |
) |
|
|
(1,259 |
) |
|
|
Net income (loss) |
|
(1,918 |
) |
|
|
(1,028 |
) |
|
|
(1,234 |
) |
|
|
(4,770 |
) |
|
|
(3,575 |
) |
|
|
Less: Net income (loss) attributable to the noncontrolling
interest |
|
(702 |
) |
|
|
(618 |
) |
|
|
(583 |
) |
|
|
(1,942 |
) |
|
|
(1,530 |
) |
|
|
Net income (loss) attributable to Cohen & Company Inc. |
$ |
(1,216 |
) |
|
$ |
(410 |
) |
|
$ |
(651 |
) |
|
$ |
(2,828 |
) |
|
$ |
(2,045 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) attributable to Cohen & Company Inc. |
$ |
(1,216 |
) |
|
$ |
(410 |
) |
|
$ |
(651 |
) |
|
$ |
(2,828 |
) |
|
$ |
(2,045 |
) |
|
|
Basic shares
outstanding |
|
1,144 |
|
|
|
1,144 |
|
|
|
1,145 |
|
|
|
1,140 |
|
|
|
1,164 |
|
|
|
Net income
(loss) attributable to Cohen & Company Inc. per share |
$ |
(1.06 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.57 |
) |
|
$ |
(2.48 |
) |
|
$ |
(1.76 |
) |
|
|
Fully
Diluted |
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) attributable to Cohen & Company Inc. |
$ |
(1,216 |
) |
|
$ |
(410 |
) |
|
$ |
(651 |
) |
|
$ |
(2,828 |
) |
|
$ |
(2,045 |
) |
|
|
Net income
(loss) attributable to the convertible noncontrolling interest |
|
(645 |
) |
|
|
(491 |
) |
|
|
(583 |
) |
|
|
(1,754 |
) |
|
|
(1,530 |
) |
|
|
Income tax
and conversion adjustment |
|
79 |
|
|
|
298 |
|
|
|
283 |
|
|
|
430 |
|
|
|
596 |
|
|
|
Enterprise
net income (loss) |
$ |
(1,782 |
) |
|
$ |
(603 |
) |
|
$ |
(951 |
) |
|
$ |
(4,152 |
) |
|
$ |
(2,979 |
) |
|
|
Basic shares
outstanding |
|
1,144 |
|
|
|
1,144 |
|
|
|
1,145 |
|
|
|
1,140 |
|
|
|
1,164 |
|
|
|
Unrestricted
Operating LLC membership units exchangeable into COHN shares |
|
532 |
|
|
|
532 |
|
|
|
532 |
|
|
|
532 |
|
|
|
532 |
|
|
|
Fully
diluted shares outstanding |
|
1,676 |
|
|
|
1,676 |
|
|
|
1,677 |
|
|
|
1,672 |
|
|
|
1,696 |
|
|
|
Fully
diluted net income (loss) per share |
$ |
(1.06 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.57 |
) |
|
$ |
(2.48 |
) |
|
$ |
(1.76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
COHEN & COMPANY INC. |
CONSOLIDATED BALANCE SHEETS |
(in thousands) |
|
|
|
|
|
|
|
|
September 30,
2019 |
|
|
|
|
(unaudited) |
|
|
December 31, 2018 |
|
|
|
Assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
14,130 |
|
|
$ |
14,106 |
|
|
|
Receivables from brokers, dealers, and clearing agencies |
|
99,283 |
|
|
|
129,812 |
|
|
|
Due from related parties |
|
317 |
|
|
|
793 |
|
|
|
Other receivables |
|
5,949 |
|
|
|
12,072 |
|
|
|
Investments - trading |
|
243,928 |
|
|
|
301,235 |
|
|
|
Other investments, at fair value |
|
6,892 |
|
|
|
13,768 |
|
|
|
Receivables under resale agreements |
|
7,052,919 |
|
|
|
7,632,230 |
|
|
|
Investment in equity method affiliate |
|
3,410 |
|
|
|
- |
|
|
|
Goodwill |
|
7,992 |
|
|
|
7,992 |
|
|
|
Right-of-use asset - operating leases |
|
7,460 |
|
|
|
- |
|
|
|
Other assets |
|
5,142 |
|
|
|
3,621 |
|
|
|
Total assets |
$ |
7,447,422 |
|
|
$ |
8,115,629 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Payables to brokers, dealer, and clearing agencies |
$ |
130,004 |
|
|
$ |
201,598 |
|
|
|
Accounts payable and other liabilities |
|
10,682 |
|
|
|
11,452 |
|
|
|
Accrued compensation |
|
3,664 |
|
|
|
5,254 |
|
|
|
Trading securities sold, not yet purchased |
|
90,016 |
|
|
|
120,122 |
|
|
|
Securities sold under agreements to repurchase |
|
7,099,614 |
|
|
|
7,671,764 |
|
|
|
Deferred income taxes |
|
1,100 |
|
|
|
2,017 |
|
|
|
Lease liability - operating leases |
|
8,011 |
|
|
|
- |
|
|
|
Redeemable financial instruments |
|
18,540 |
|
|
|
17,448 |
|
|
|
Debt |
|
46,091 |
|
|
|
43,536 |
|
|
|
Total liabilities |
|
7,407,722 |
|
|
|
8,073,191 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Voting nonconvertible preferred stock |
|
5 |
|
|
|
5 |
|
|
|
Common stock |
|
12 |
|
|
|
12 |
|
|
|
Additional paid-in capital |
|
68,949 |
|
|
|
68,591 |
|
|
|
Accumulated other comprehensive loss |
|
(1,009 |
) |
|
|
(908 |
) |
|
|
Accumulated deficit |
|
(35,293 |
) |
|
|
(31,926 |
) |
|
|
Total stockholders' equity |
|
32,664 |
|
|
|
35,774 |
|
|
|
Noncontrolling interest |
|
7,036 |
|
|
|
6,664 |
|
|
|
Total equity |
|
39,700 |
|
|
|
42,438 |
|
|
|
Total liabilities and equity |
$ |
7,447,422 |
|
|
$ |
8,115,629 |
|
|
|
|
|
|
|
|
Contact: |
|
|
|
|
|
Investors - |
|
Media - |
Cohen &
Company Inc. |
|
Joele Frank,
Wilkinson Brimmer Katcher |
Joseph W.
Pooler, Jr. |
|
James Golden
or Andrew Squire |
Executive
Vice President and |
|
212-355-4449 |
Chief
Financial Officer |
|
jgolden@joelefrank.com or asquire@joelefrank.com |
215-701-8952 |
|
|
investorrelations@cohenandcompany.com |
|
Cohen & (AMEX:COHN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cohen & (AMEX:COHN)
Historical Stock Chart
From Apr 2023 to Apr 2024