Summary Operating Results
($ in thousands) | Three Months Ended | Nine Months Ended | ||||||||||||
9/30/23 | 6/30/23 | 9/30/22 | 9/30/23 | 9/30/22 | ||||||||||
Net trading | $ 7,491 | $ 7,416 | $ 7,966 | $ 23,117 | $ 30,365 | |||||||||
Asset management | 1,788 | 1,605 | 3,456 | 5,418 | 7,243 | |||||||||
New issue and advisory | 7,247 | 1,395 | 13,235 | 9,542 | 20,486 | |||||||||
Principal transactions and other revenue | 595 | 12,156 | (1,192 | ) | 10,440 | (26,157 | ) | |||||||
Total revenues | 17,121 | 22,572 | 23,465 | 48,517 | 31,937 | |||||||||
Compensation and benefits | 15,219 | 10,001 | 15,227 | 35,757 | 41,320 | |||||||||
Non-compensation operating expenses | 6,006 | 5,572 | 5,390 | 17,348 | 15,809 | |||||||||
Operating income (loss) | (4,104 | ) | 6,999 | 2,848 | (4,588 | ) | (25,192 | ) | ||||||
Interest expense, net | (1,685 | ) | (1,630 | ) | (1,346 | ) | (4,907 | ) | (3,803 | ) | ||||
Income (loss) from equity method affiliates | (702 | ) | (511 | ) | 618 | (1,608 | ) | (14,530 | ) | |||||
Income (loss) before income tax expense (benefit) | (6,491 | ) | 4,858 | 2,120 | (11,103 | ) | (43,525 | ) | ||||||
Income tax expense (benefit) | (755 | ) | 5,550 | 1,761 | 5,379 | 3,534 | ||||||||
Net income (loss) | (5,736 | ) | (692 | ) | 359 | (16,482 | ) | (47,059 | ) | |||||
Less: Net income (loss) attributable to the non-convertible non-controlling interest | 1,936 | 6,503 | (109 | ) | 8,536 | (18,980 | ) | |||||||
Enterprise net income (loss) | (7,672 | ) | (7,195 | ) | 468 | (25,018 | ) | (28,079 | ) | |||||
Less: Net income (loss) attributable to the convertible non-controlling interest | (7,249 | ) | (594 | ) | 1,387 | (15,357 | ) | (17,691 | ) | |||||
Net income (loss) attributable to | $ (423 | ) | $ (6,601 | ) | $ (919 | ) | $ (9,661 | ) | $ (10,388 | ) | ||||
Fully diluted net income (loss) per share | $ (0.28 | ) | $ (4.34 | ) | $ (0.64 | ) | $ (6.40 | ) | $ (7.33 | ) | ||||
Adjusted pre-tax income (loss) | $ (8,427 | ) | $ (1,645 | ) | $ 2,229 | $ (19,639 | ) | $ (24,545 | ) | |||||
Fully diluted adjusted pre-tax income (loss) per share | $ (1.52 | ) | $ (0.30 | ) | $ 0.41 | $ (3.55 | ) | $ (4.49 | ) |
Adjusted pre-tax income (loss) is not a measure recognized under
Financial Highlights
- Net loss attributable to
Cohen & Company Inc. was$0.4 million , or$0.28 per diluted share, for the three months endedSeptember 30, 2023 , compared to net loss of$6.6 million , or$4.34 per diluted share, for the three months endedJune 30, 2023 , and net loss of$0.9 million , or$0.64 per diluted share, for the three months endedSeptember 30, 2022 . Adjusted pre-tax loss was$8.4 million , or$1.52 per diluted share, for the three months endedSeptember 30, 2023 , compared to adjusted pre-tax loss of$1.6 million , or$0.30 per diluted share, for the three months endedJune 30, 2023 , and adjusted pre-tax income of$2.2 million , or$0.41 per diluted share, for the three months endedSeptember 30, 2022 . Adjusted pre-tax income (loss) and adjusted pre-tax income (loss) per diluted share are not measures recognized under GAAP. See Note 1 below. - Revenues were
$17.1 million for the three months endedSeptember 30, 2023 , compared to$22.6 million for the prior quarter and$23.5 million for the prior year quarter.- Net trading revenue was
$7.5 million for the three months endedSeptember 30, 2023 , similar to the prior quarter and down$0.5 million from the prior year quarter. The decrease from the prior year quarter was due primarily to lower trading revenue by our corporate, primary CD, and municipal groups, partially offset by our treasury and mortgage groups. - Asset management revenue was
$1.8 million for the three months endedSeptember 30, 2023 , up$0.2 million from the prior quarter and down$1.7 million from the prior year quarter. The decrease from the prior year quarter was due primarily to the successful auction of an Alesco CDO inSeptember 2022 , and the accompanying$1.6 million of subordinated management fees in arrears that were recorded in the prior year quarter. - New issue and advisory revenue was
$7.2 million for the three months endedSeptember 30, 2023 , up$5.9 million from the prior quarter and down$6.0 million from the prior year quarter. In the current quarter, theCohen & Company Capital Markets investment banking team generated$6.0 million and the European insurance origination team generated$1.2 million of the new issue and advisory revenue. - Principal transactions and other revenue was
$0.6 million for the three months endedSeptember 30, 2023 , compared to$12.2 million in the prior quarter and negative$1.2 million in the prior year quarter. The current quarter includes negative$6.8 million from the write down of our investment inStoa USA Inc. / FlipOS. DuringSeptember 2019 throughMarch 2023 , the Company invested a cumulative$0.8 million of cash inStoa USA Inc. / FlipOS, the value of which was increased by positive mark-to-market adjustments whenStoa USA Inc. / FlipOS received additional rounds of private equity funding in 2021 and 2022. During the third quarter of 2023,Stoa USA Inc. / FlipOS ceased operations.
- Net trading revenue was
- Compensation and benefits expense during the three months ended
September 30, 2023 increased$5.2 million from the prior quarter and was even with the prior year quarter. The number of Company employees was 114 as ofSeptember 30, 2023 , compared to 117 as ofJune 30, 2023 , and 122 as ofSeptember 30, 2022 . - Interest expense during the three months ended
September 30, 2023 was comparable to the prior quarter and increased$0.3 million from the prior year quarter. The increase from the prior year quarter was primarily due to higher interest on our trust preferred securities debt. - Loss from equity method affiliates for the three months ended
September 30, 2023 was$0.7 million , compared to loss from equity method affiliates of$0.5 million for the prior quarter and income from equity method affiliates of$0.6 million for the prior year quarter. - Income tax benefit for the three months ended
September 30, 2023 was$0.8 million , compared to income tax expense of$5.6 million in the prior quarter, and income tax expense of$1.8 million in the prior year quarter. The Company will continue to evaluate its operations on a quarterly basis and may adjust the valuation allowance applied against the Company's net operating loss and net capital loss tax assets. Future adjustments could be material and may result in additional tax benefit or tax expense.
Total Equity and Dividend Declaration
- As of
September 30, 2023 , total equity was$72.7 million , compared to$94.0 million as ofDecember 31, 2022 ; the non-convertible non-controlling interest component of total equity was$6.2 million as ofSeptember 30, 2023 and$17 thousand as ofDecember 31, 2022 . Thus, the total equity excluding the non-convertible non-controlling interest component was$66.5 million as ofSeptember 30, 2023 , a$27.5 million decrease from$94.0 million as ofDecember 31, 2022 . - The Company’s Board of Directors has declared a quarterly dividend of
$0.25 per share, payable onDecember 1, 2023 , to stockholders of record as ofNovember 17, 2023 . 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 Company’s capital needs.
Update on Quarterly Conference Calls
About
Note 1: Adjusted pre-tax income (loss) and adjusted pre-tax income (loss) per share are non-GAAP measures of performance. Please see the discussion under “Non-GAAP Measures” below. Also see the tables below for the reconciliations of non-GAAP measures of performance to their corresponding GAAP measures of performance.
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
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.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Net trading | $ | 7,491 | $ | 7,416 | $ | 7,966 | $ | 23,117 | $ | 30,365 | |||||||||||||
Asset management | 1,788 | 1,605 | 3,456 | 5,418 | 7,243 | ||||||||||||||||||
New issue and advisory | 7,247 | 1,395 | 13,235 | 9,542 | 20,486 | ||||||||||||||||||
Principal transactions and other revenue | 595 | 12,156 | (1,192 | ) | 10,440 | (26,157 | ) | ||||||||||||||||
Total revenues | 17,121 | 22,572 | 23,465 | 48,517 | 31,937 | ||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Compensation and benefits | 15,219 | 10,001 | 15,227 | 35,757 | 41,320 | ||||||||||||||||||
Business development, occupancy, equipment | 1,268 | 1,318 | 1,234 | 3,887 | 3,777 | ||||||||||||||||||
Subscriptions, clearing, and execution | 2,409 | 2,343 | 2,112 | 6,877 | 6,025 | ||||||||||||||||||
Professional services and other operating | 2,189 | 1,762 | 1,905 | 6,151 | 5,593 | ||||||||||||||||||
Depreciation and amortization | 140 | 149 | 139 | 433 | 414 | ||||||||||||||||||
Total operating expenses | 21,225 | 15,573 | 20,617 | 53,105 | 57,129 | ||||||||||||||||||
Operating income (loss) | (4,104 | ) | 6,999 | 2,848 | (4,588 | ) | (25,192 | ) | |||||||||||||||
Non-operating income (expense) | |||||||||||||||||||||||
Interest expense, net | (1,685 | ) | (1,630 | ) | (1,346 | ) | (4,907 | ) | (3,803 | ) | |||||||||||||
Income (loss) from equity method affiliates | (702 | ) | (511 | ) | 618 | (1,608 | ) | (14,530 | ) | ||||||||||||||
Income (loss) before income tax expense (benefit) | (6,491 | ) | 4,858 | 2,120 | (11,103 | ) | (43,525 | ) | |||||||||||||||
Income tax expense (benefit) | (755 | ) | 5,550 | 1,761 | 5,379 | 3,534 | |||||||||||||||||
Net income (loss) | (5,736 | ) | (692 | ) | 359 | (16,482 | ) | (47,059 | ) | ||||||||||||||
Less: Net income (loss) attributable to the non-convertible non-controlling interest | 1,936 | 6,503 | (109 | ) | 8,536 | (18,980 | ) | ||||||||||||||||
Enterprise net income (loss) | (7,672 | ) | (7,195 | ) | 468 | (25,018 | ) | (28,079 | ) | ||||||||||||||
Less: Net income (loss) attributable to the convertible non-controlling interest | (7,249 | ) | (594 | ) | 1,387 | (15,357 | ) | (17,691 | ) | ||||||||||||||
Net income (loss) attributable to | $ | (423 | ) | $ | (6,601 | ) | $ | (919 | ) | $ | (9,661 | ) | $ | (10,388 | ) | ||||||||
Earnings per share | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Net income (loss) attributable to | $ | (423 | ) | $ | (6,601 | ) | $ | (919 | ) | $ | (9,661 | ) | $ | (10,388 | ) | ||||||||
Basic shares outstanding | 1,522 | 1,520 | 1,429 | 1,510 | 1,417 | ||||||||||||||||||
Net income (loss) attributable to | $ | (0.28 | ) | $ | (4.34 | ) | $ | (0.64 | ) | $ | (6.40 | ) | $ | (7.33 | ) | ||||||||
Fully Diluted | |||||||||||||||||||||||
Net income (loss) attributable to | $ | (423 | ) | $ | (6,601 | ) | $ | (919 | ) | $ | (9,661 | ) | $ | (10,388 | ) | ||||||||
Net income (loss) attributable to the convertible non-controlling interest | (7,249 | ) | - | - | - | - | |||||||||||||||||
Income tax and conversion adjustment | 6,114 | - | - | - | - | ||||||||||||||||||
Net income (loss) attributable to | $ | (1,558 | ) | $ | (6,601 | ) | $ | (919 | ) | $ | (9,661 | ) | $ | (10,388 | ) | ||||||||
Basic shares outstanding | 1,522 | 1,520 | 1,429 | 1,510 | 1,417 | ||||||||||||||||||
4,014 | - | - | - | - | |||||||||||||||||||
Fully diluted shares outstanding (1) | 5,536 | 1,520 | 1,429 | 1,510 | 1,417 | ||||||||||||||||||
Fully diluted net income (loss) per share | $ | (0.28 | ) | $ | (4.34 | ) | $ | (0.64 | ) | $ | (6.40 | ) | $ | (7.33 | ) | ||||||||
Reconciliation of adjusted pre-tax income (loss) to net income (loss) attributable to | |||||||||||||||||||||||
Net income (loss) attributable to | $ | (423 | ) | $ | (6,601 | ) | $ | (919 | ) | $ | (9,661 | ) | $ | (10,388 | ) | ||||||||
Addback (deduct): Income tax expense (benefit) | (755 | ) | 5,550 | 1,761 | 5,379 | 3,534 | |||||||||||||||||
Addback (deduct): Net income (loss) attributable to the convertible non-controlling interest | (7,249 | ) | (594 | ) | 1,387 | (15,357 | ) | (17,691 | ) | ||||||||||||||
Adjusted pre-tax income (loss) | (8,427 | ) | (1,645 | ) | 2,229 | (19,639 | ) | (24,545 | ) | ||||||||||||||
Net interest attributable to convertible debt | - | - | - | - | 327 | ||||||||||||||||||
Enterprise pre-tax income (loss) for fully diluted adjusted pre-tax income (loss) per share calculation | $ | (8,427 | ) | $ | (1,645 | ) | $ | 2,229 | $ | (19,639 | ) | $ | (24,218 | ) | |||||||||
Adjusted fully diluted shares outstanding (2) | 5,545 | 5,535 | 5,394 | 5,528 | 5,389 | ||||||||||||||||||
Fully diluted adjusted pre-tax income (loss) per share | $ | (1.52 | ) | $ | (0.30 | ) | $ | 0.41 | $ | (3.55 | ) | $ | (4.49 | ) | |||||||||
(1) When the fully diluted net income (loss) per share is anti-dilutive, the basic shares outstanding are presented on this line item. | |||||||||
(2) Adjusted fully diluted shares outstanding includes (a) weighted average unrestricted and restricted |
CONSOLIDATED BALANCE SHEETS | ||||||||||
(in thousands) | ||||||||||
(unaudited) | ||||||||||
Assets | ||||||||||
Cash and cash equivalents | $ | 13,350 | $ | 29,101 | ||||||
Receivables from brokers, dealers, and clearing agencies | 106,740 | 140,933 | ||||||||
Due from related parties | 800 | 787 | ||||||||
Other receivables | 5,947 | 9,527 | ||||||||
Investments - trading | 193,476 | 211,828 | ||||||||
Other investments, at fair value | 40,324 | 28,022 | ||||||||
Receivables under resale agreements | 418,134 | 437,692 | ||||||||
Investment in equity method affiliates | 8,760 | 8,929 | ||||||||
Deferred income taxes | 1,735 | 6,934 | ||||||||
109 | 109 | |||||||||
Right-of-use asset - operating leases | 8,055 | 9,647 | ||||||||
Other assets | 3,569 | 3,546 | ||||||||
Total assets | $ | 800,999 | $ | 887,055 | ||||||
Liabilities | ||||||||||
Payables to brokers, dealers, and clearing agencies | $ | 129,773 | $ | 134,985 | ||||||
Accounts payable and other liabilities | 6,217 | 11,439 | ||||||||
Accrued compensation | 14,337 | 12,434 | ||||||||
Trading securities sold, not yet purchased | 95,755 | 133,957 | ||||||||
Other investments sold, not yet purchased, at fair value | 18,131 | 78 | ||||||||
Securities sold under agreements to repurchase | 417,946 | 452,797 | ||||||||
Operating lease liability | 8,772 | 10,447 | ||||||||
Redeemable financial instruments | 7,868 | 7,868 | ||||||||
Debt | 29,479 | 29,024 | ||||||||
Total liabilities | 728,278 | 793,029 | ||||||||
Equity | ||||||||||
Voting non-convertible preferred stock | 27 | 27 | ||||||||
Common stock | 18 | 17 | ||||||||
Additional paid-in capital | 74,264 | 72,801 | ||||||||
Accumulated other comprehensive loss | (972 | ) | (955 | ) | ||||||
Accumulated deficit | (36,181 | ) | (25,151 | ) | ||||||
Total stockholders' equity | 37,156 | 46,739 | ||||||||
Non-controlling interest | 35,565 | 47,287 | ||||||||
Total equity | 72,721 | 94,026 | ||||||||
Total liabilities and equity | $ | 800,999 | $ | 887,055 | ||||||
Non-GAAP Measures
Adjusted pre-tax income (loss) and adjusted pre-tax income (loss) per diluted share
Adjusted pre-tax income (loss) is not a financial measure recognized by GAAP. Adjusted pre-tax income (loss) represents net income (loss) attributable to
We present adjusted pre-tax income (loss) and related per diluted share amounts in this release because we consider them to be useful and appropriate supplemental measures of our performance. Adjusted pre-tax income (loss) and related per diluted share amounts help us to evaluate our performance without the effects of certain GAAP calculations that may not have a direct cash or recurring impact on our current operating performance. In addition, our management uses adjusted pre-tax income (loss) and related per diluted share amounts to evaluate the performance of our enterprise operations. Adjusted pre-tax income (loss) and related per diluted share amounts, as we define them, are not necessarily comparable to similarly named measures of other companies and may not be appropriate measures for performance relative to other companies. Adjusted pre-tax income (loss) should not be assessed in isolation from or construed as a substitute for net income (loss) attributable to
Contact: | |
Investors - | Media |
Executive Vice President and | 212-355-4449 |
Chief Financial Officer | zgenirs@joelefrank.com |
215-701-8952 | |
investorrelations@cohenandcompany.com |
Source:
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