Cohen & Company Reports Fourth Quarter & Full Year 2019 Financial Results
March 05 2020 - 8:00AM
Cohen & Company Inc. (NYSE American: COHN), a financial
services firm specializing in fixed income markets, today reported
financial results for its fourth quarter and full year ended
December 31, 2019.
Summary Operating Results
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
($ in
thousands) |
12/31/19 |
|
9/30/19 |
|
12/31/18 |
|
12/31/19 |
|
12/31/18 |
|
|
|
|
|
|
|
|
|
|
Total
revenues |
$ |
16,090 |
|
|
$ |
11,267 |
|
|
$ |
15,621 |
|
|
$ |
49,666 |
|
|
$ |
49,386 |
|
Compensation
and benefits |
|
6,159 |
|
|
|
7,017 |
|
|
|
6,425 |
|
|
|
25,972 |
|
|
|
25,385 |
|
Non-compensation operating expenses |
|
5,897 |
|
|
|
4,693 |
|
|
|
6,908 |
|
|
|
19,653 |
|
|
|
20,342 |
|
Operating
income |
|
4,034 |
|
|
|
(443 |
) |
|
|
2,288 |
|
|
|
4,041 |
|
|
|
3,659 |
|
Interest
expense, net |
|
(2,255 |
) |
|
|
(1,536 |
) |
|
|
(2,282 |
) |
|
|
(7,584 |
) |
|
|
(8,487 |
) |
Income
(loss) from equity method affiliates |
|
(188 |
) |
|
|
(109 |
) |
|
|
- |
|
|
|
(553 |
) |
|
|
- |
|
Income
(loss) before income tax expense (benefit) |
|
1,591 |
|
|
|
(2,088 |
) |
|
|
6 |
|
|
|
(4,096 |
) |
|
|
(4,828 |
) |
Income tax
expense (benefit) |
|
394 |
|
|
|
(170 |
) |
|
|
418 |
|
|
|
(523 |
) |
|
|
(841 |
) |
Net income
(loss) |
|
1,197 |
|
|
|
(1,918 |
) |
|
|
(412 |
) |
|
|
(3,573 |
) |
|
|
(3,987 |
) |
Less: Net
income (loss) attributable to the noncontrolling interest |
|
423 |
|
|
|
(702 |
) |
|
|
6 |
|
|
|
(1,519 |
) |
|
|
(1,524 |
) |
Net income
(loss) attributable to Cohen & Company Inc. |
$ |
774 |
|
|
$ |
(1,216 |
) |
|
$ |
(418 |
) |
|
$ |
(2,054 |
) |
|
$ |
(2,463 |
) |
Fully
diluted net income (loss) per share |
$ |
0.56 |
|
|
$ |
(1.06 |
) |
|
$ |
(0.37 |
) |
|
$ |
(1.81 |
) |
|
$ |
(2.14 |
) |
|
|
|
|
|
|
|
|
|
|
- Revenues during the three months ended December 31, 2019
increased $4.8 million from the prior quarter and $0.5 million from
the prior year quarter.
- The increase from the prior quarter was comprised primarily of
(i) an increase of $3.8 million in net trading from higher activity
in the Company’s GCF Repo and Gestational Repo businesses, (ii) an
increase of $1.3 million in new issue and advisory revenue related
to origination fees in the Company’s European fund business,
partially offset by (iii) a decrease of $0.2 million in asset
management revenue due primarily to the successful liquidation of
the Company’s Munda CLO and payment of $0.5 million in related
success fees in the third quarter of 2019.
- The increase from the prior year quarter was comprised
primarily of (i) an increase of $3.2 million in net trading from
higher activity in the Company’s GCF Repo and Gestational Repo
businesses, (ii) an increase of $0.7 million in principal
transactions due to more revenue from the Company’s CLO and other
equity investments, partially offset by (iii) a decrease of $2.9
million in asset management revenue due primarily to the successful
auction and liquidation of an Alesco CDO, and the accompanying $3.0
million of subordinated management fees in arrears that were
recorded, in the prior-year quarter, and (iv) a decrease of $0.5
million in new issue and advisory related to lower origination fees
recorded in the current quarter.
- Compensation and benefits expense as a percentage of revenue
was 38% for the three months ended December 31, 2019, compared to
62% for the three months ended September 30, 2019, and 41% for the
three months ended December 31, 2018. Compensation and benefits
expense as a percentage of revenue was 52% for the year ended
December 31, 2019, compared to 51% for the year ended December 31,
2018. The number of Cohen & Company employees was 94 as of
December 31, 2019, compared to 90 as of September 30, 2019, and 88
as of December 31, 2018.
- Non-compensation operating expenses during the three months
ended December 31, 2019 increased $1.2 million from the prior
quarter and decreased $1.0 million from 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. The decrease from the prior year quarter was
due primarily to lower consulting fees in the current quarter; the
prior year quarter included a $1.2 million referral fee due to a
consultant related to U.S. insurance origination and $1.0 million
due to a subadvisor as the result of the successful auction and
liquidation of one of the Alesco CDOs that included receipt of $3.0
million of subordinated management fees in arrears.
- Interest expense during the three months ended December 31,
2019 increased $0.7 million from the prior quarter and was
comparable to the prior year quarter. The changes in quarterly
interest expense are primarily driven by fluctuation in 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 December 31, 2019, total equity was $48.8 million,
compared to $42.4 million as of December 31, 2018. On December 30,
2019, the Company received a capital contribution from Daniel G.
Cohen, the Company’s Chairman and Chief Executive of its European
Operations, and the DGC Family Fintech Trust, a trust established
by Mr. Cohen, valued at $7.8 million.
Lester Brafman, Chief Executive Officer of Cohen
& Company, said, “We are pleased with our results from the
fourth quarter, as we began to see the benefits from strategic
investments in our mortgage business. Our TBA, Gestational Repo,
and GCF Repo businesses have reached all-time highs in terms of
volume and revenues. Additionally, our Chairman Daniel G. Cohen and
a trust established by Daniel contributed capital of $7.8 million
this quarter, further stabilizing our capital base and solidifying
Daniel’s continued confidence in the Company. We continue to
believe that the initiatives underway will generate long-term value
for our shareholders, and we are focused on enhancing these results
going forward.”
Conference Call
The Company will no longer hold conference calls
in connection with the release of its quarterly and annual
financial results.
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 (Europe) Limited in
Europe. The Asset Management segment manages assets through
collateralized debt obligations, managed accounts, and investment
funds. As of December 31, 2019, the Company managed approximately
$2.8 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 December 31, 2019, 79.7% 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 |
|
Year Ended |
|
|
|
12/31/19 |
|
9/30/19 |
|
12/31/18 |
|
12/31/19 |
|
12/31/18 |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
Net trading |
$ |
12,299 |
|
|
$ |
8,479 |
|
|
$ |
9,106 |
|
|
$ |
38,172 |
|
|
$ |
29,298 |
|
|
|
Asset management |
|
1,795 |
|
|
|
2,018 |
|
|
|
4,708 |
|
|
|
7,560 |
|
|
|
12,536 |
|
|
|
New issue and advisory |
|
1,580 |
|
|
|
250 |
|
|
|
2,105 |
|
|
|
1,831 |
|
|
|
2,979 |
|
|
|
Principal transactions |
|
276 |
|
|
|
310 |
|
|
|
(466 |
) |
|
|
1,521 |
|
|
|
3,825 |
|
|
|
Other revenue |
|
140 |
|
|
|
210 |
|
|
|
168 |
|
|
|
582 |
|
|
|
748 |
|
|
|
Total revenues |
|
16,090 |
|
|
|
11,267 |
|
|
|
15,621 |
|
|
|
49,666 |
|
|
|
49,386 |
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
6,159 |
|
|
|
7,017 |
|
|
|
6,425 |
|
|
|
25,972 |
|
|
|
25,385 |
|
|
|
Business development, occupancy, equipment |
|
926 |
|
|
|
770 |
|
|
|
759 |
|
|
|
3,402 |
|
|
|
2,995 |
|
|
|
Subscriptions, clearing, and execution |
|
2,950 |
|
|
|
2,403 |
|
|
|
2,209 |
|
|
|
9,682 |
|
|
|
8,627 |
|
|
|
Professional services and other operating |
|
1,942 |
|
|
|
1,440 |
|
|
|
3,855 |
|
|
|
6,251 |
|
|
|
8,459 |
|
|
|
Depreciation and amortization |
|
79 |
|
|
|
80 |
|
|
|
85 |
|
|
|
318 |
|
|
|
261 |
|
|
|
Total operating expenses |
|
12,056 |
|
|
|
11,710 |
|
|
|
13,333 |
|
|
|
45,625 |
|
|
|
45,727 |
|
|
|
Operating income (loss) |
|
4,034 |
|
|
|
(443 |
) |
|
|
2,288 |
|
|
|
4,041 |
|
|
|
3,659 |
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
(2,255 |
) |
|
|
(1,536 |
) |
|
|
(2,282 |
) |
|
|
(7,584 |
) |
|
|
(8,487 |
) |
|
|
Income (loss) from equity method affiliates |
|
(188 |
) |
|
|
(109 |
) |
|
|
- |
|
|
|
(553 |
) |
|
|
- |
|
|
|
Income (loss) before income tax expense (benefit) |
|
1,591 |
|
|
|
(2,088 |
) |
|
|
6 |
|
|
|
(4,096 |
) |
|
|
(4,828 |
) |
|
|
Income tax expense (benefit) |
|
394 |
|
|
|
(170 |
) |
|
|
418 |
|
|
|
(523 |
) |
|
|
(841 |
) |
|
|
Net income (loss) |
|
1,197 |
|
|
|
(1,918 |
) |
|
|
(412 |
) |
|
|
(3,573 |
) |
|
|
(3,987 |
) |
|
|
Less: Net income (loss) attributable to the noncontrolling
interest |
|
423 |
|
|
|
(702 |
) |
|
|
6 |
|
|
|
(1,519 |
) |
|
|
(1,524 |
) |
|
|
Net income (loss) attributable to Cohen & Company Inc. |
$ |
774 |
|
|
$ |
(1,216 |
) |
|
$ |
(418 |
) |
|
$ |
(2,054 |
) |
|
$ |
(2,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) attributable to Cohen & Company Inc. |
$ |
774 |
|
|
$ |
(1,216 |
) |
|
$ |
(418 |
) |
|
$ |
(2,054 |
) |
|
$ |
(2,463 |
) |
|
|
Basic shares
outstanding |
|
1,125 |
|
|
|
1,144 |
|
|
|
1,118 |
|
|
|
1,137 |
|
|
|
1,152 |
|
|
|
Net income
(loss) attributable to Cohen & Company Inc. per share |
$ |
0.69 |
|
|
$ |
(1.06 |
) |
|
$ |
(0.37 |
) |
|
$ |
(1.81 |
) |
|
$ |
(2.14 |
) |
|
|
Fully
Diluted |
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) attributable to Cohen & Company Inc. |
$ |
774 |
|
|
$ |
(1,216 |
) |
|
$ |
(418 |
) |
|
$ |
(2,054 |
) |
|
$ |
(2,463 |
) |
|
|
Net income
(loss) attributable to the convertible noncontrolling interest |
|
523 |
|
|
|
(645 |
) |
|
|
6 |
|
|
|
(1,231 |
) |
|
|
(1,524 |
) |
|
|
Net interest
attributable to convertible debt |
|
374 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Income tax
and conversion adjustment |
|
(123 |
) |
|
|
79 |
|
|
|
(206 |
) |
|
|
246 |
|
|
|
390 |
|
|
|
Enterprise
net income (loss) |
$ |
1,548 |
|
|
$ |
(1,782 |
) |
|
$ |
(618 |
) |
|
$ |
(3,039 |
) |
|
$ |
(3,597 |
) |
|
|
Basic shares
outstanding |
|
1,125 |
|
|
|
1,144 |
|
|
|
1,118 |
|
|
|
1,137 |
|
|
|
1,152 |
|
|
|
Unrestricted
Operating LLC membership units exchangeable into COHN shares |
|
581 |
|
|
|
532 |
|
|
|
532 |
|
|
|
544 |
|
|
|
532 |
|
|
|
Additional
dilutive shares |
|
1,051 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Fully
diluted shares outstanding |
|
2,757 |
|
|
|
1,676 |
|
|
|
1,650 |
|
|
|
1,681 |
|
|
|
1,684 |
|
|
|
Fully
diluted net income (loss) per share |
$ |
0.56 |
|
|
$ |
(1.06 |
) |
|
$ |
(0.37 |
) |
|
$ |
(1.81 |
) |
|
$ |
(2.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
COHEN & COMPANY INC. |
CONSOLIDATED BALANCE SHEETS |
(in thousands) |
|
|
|
|
|
|
|
|
December 31,
2019 |
|
|
|
|
|
(unaudited) |
|
December 31, 2018 |
|
|
Assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
8,304 |
|
|
$ |
14,106 |
|
|
|
Receivables from brokers, dealers, and clearing agencies |
|
96,132 |
|
|
|
129,812 |
|
|
|
Due from related parties |
|
466 |
|
|
|
793 |
|
|
|
Other receivables |
|
46,625 |
|
|
|
12,072 |
|
|
|
Investments - trading |
|
307,852 |
|
|
|
301,235 |
|
|
|
Other investments, at fair value |
|
14,864 |
|
|
|
13,768 |
|
|
|
Receivables under resale agreements |
|
7,500,002 |
|
|
|
7,632,230 |
|
|
|
Investment in equity method affiliate |
|
3,799 |
|
|
|
- |
|
|
|
Goodwill |
|
7,992 |
|
|
|
7,992 |
|
|
|
Right-of-use asset - operating leases |
|
7,155 |
|
|
|
- |
|
|
|
Other assets |
|
8,433 |
|
|
|
3,621 |
|
|
|
Total assets |
$ |
8,001,624 |
|
|
$ |
8,115,629 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Payables to brokers, dealer, and clearing agencies |
$ |
241,261 |
|
|
$ |
201,598 |
|
|
|
Accounts payable and other liabilities |
|
20,295 |
|
|
|
11,452 |
|
|
|
Accrued compensation |
|
4,046 |
|
|
|
5,254 |
|
|
|
Trading securities sold, not yet purchased |
|
77,947 |
|
|
|
120,122 |
|
|
|
Securities sold under agreements to repurchase |
|
7,534,443 |
|
|
|
7,671,764 |
|
|
|
Deferred income taxes |
|
1,339 |
|
|
|
2,017 |
|
|
|
Lease liability - operating leases |
|
7,693 |
|
|
|
- |
|
|
|
Redeemable financial instruments |
|
16,983 |
|
|
|
17,448 |
|
|
|
Debt |
|
48,861 |
|
|
|
43,536 |
|
|
|
Total liabilities |
|
7,952,868 |
|
|
|
8,073,191 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Voting nonconvertible preferred stock |
|
27 |
|
|
|
5 |
|
|
|
Common stock |
|
12 |
|
|
|
12 |
|
|
|
Additional paid-in capital |
|
68,714 |
|
|
|
68,591 |
|
|
|
Accumulated other comprehensive loss |
|
(915 |
) |
|
|
(908 |
) |
|
|
Accumulated deficit |
|
(34,519 |
) |
|
|
(31,926 |
) |
|
|
Total stockholders' equity |
|
33,319 |
|
|
|
35,774 |
|
|
|
Noncontrolling interest |
|
15,437 |
|
|
|
6,664 |
|
|
|
Total equity |
|
48,756 |
|
|
|
42,438 |
|
|
|
Total liabilities and equity |
$ |
8,001,624 |
|
|
$ |
8,115,629 |
|
|
|
|
|
|
|
|
Contact: |
|
|
|
|
|
Investors -Cohen & Company Inc.Joseph W.
Pooler, Jr.Executive Vice President andChief Financial
Officer215-701-8952investorrelations@cohenandcompany.com |
|
Media -Joele Frank, Wilkinson Brimmer KatcherJames
Golden or Andrew Squire212-355-4449jgolden@joelefrank.com or
asquire@joelefrank.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