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CST: 17/11/2019 21:16:10   

Cohen & Company Reports Third Quarter 2019 Financial Results

18 Days ago

PHILADELPHIA and NEW YORK, Oct. 30, 2019 (GLOBE NEWSWIRE) -- 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  


 

 

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