EX-99.1 2 a19-16291_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

COHEN & COMPANY REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS

 

Philadelphia and New York, August 2, 2019 — Cohen & Company Inc. (NYSE American: COHN), a financial services firm specializing in fixed income markets, today reported financial results for its second quarter ended June 30, 2019.

 

Summary Operating Results

 

 

 

Three Months Ended

 

Six Months Ended

 

($ in thousands)

 

6/30/19

 

3/31/19

 

6/30/18

 

6/30/19

 

6/30/18

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

11,169

 

$

11,145

 

$

12,190

 

$

22,309

 

$

21,528

 

Compensation and benefits

 

6,432

 

6,364

 

6,589

 

12,796

 

11,783

 

Non-compensation operating expenses

 

4,219

 

4,844

 

4,226

 

9,063

 

8,730

 

Operating income

 

518

 

(63

)

1,375

 

450

 

1,015

 

Interest expense, net

 

(1,939

)

(1,859

)

(2,201

)

(3,793

)

(4,020

)

Income (loss) from equity method affiliates

 

(248

)

(8

)

—

 

(256

)

—

 

Income (loss) before income tax expense (benefit)

 

(1,669

)

(1,930

)

(826

)

(3,599

)

(3,005

)

Income tax expense (benefit)

 

(641

)

(106

)

(636

)

(747

)

(664

)

Net income (loss)

 

(1,028

)

(1,824

)

(190

)

(2,852

)

(2,341

)

Less: Net income (loss) attributable to the noncontrolling interest

 

(618

)

(622

)

(270

)

(1,240

)

(947

)

Net income (loss) attributable to Cohen & Company Inc.

 

$

(410

)

$

(1,202

)

$

80

 

$

(1,612

)

$

(1,394

)

Fully diluted net income (loss) per share

 

$

(0.36

)

$

(1.06

)

$

0.07

 

$

(1.42

)

$

(1.19

)

 

·                  Revenues during the three months ended June 30, 2019 increased $24 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 $1.5 million in asset management revenue due primarily to the successful auction and liquidation of one of the Company’s European CDOs in June 2018 as well as one-time incentive fees received from our European accounts in the prior-year quarter, and (ii) a decrease of $0.9 million in principal transactions due to less revenue from the Company’s CLO equity and EuroDekania investments; partially offset by (iii) an increase of $1.5 million in net trading from higher trading activity primarily in municipals, mortgages, and GCF matched book repo.

 

·                  Compensation and benefits expense as a percentage of revenue was 58% for the three months ended June 30, 2019, compared to 57% for the three months ended March 31, 2019, and 54% for the three months ended June 30, 2018. The number of Cohen & Company employees was 91 as of June 30, 2019, compared to 88 as of March 31, 2019, and 87 as of June 30, 2018.

 

·                  Non-compensation operating expenses during the three months ended June 30, 2019 decreased $625 thousand from the prior quarter and were comparable to the prior year quarter. The decrease from the prior quarter was primarily due to higher professional fees in the prior quarter.

 

 

·                  Interest expense during the three months ended June 30, 2019 increased $80 thousand from the prior quarter and decreased $262 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.

 

Total Equity and Dividend Suspension

 

·                  As of June 30, 2019, total equity was $41.6 million, compared to $42.4 million as of December 31, 2018.

 

·                  The Company’s Board of Directors has suspended the quarterly dividend. The Board of Directors will continue to evaluate the dividend policy each quarter, and future decisions as to whether to pay a dividend will be impacted by quarterly operating results and the Company’s capital needs.

 

Lester Brafman, Chief Executive Officer of Cohen & Company, said, “Although our overall results during the second quarter fell short of our expectations, we are pleased with the growth of our TBA, Gestational Repo, and GCF Repo businesses. The Board’s decision to suspend the quarterly dividend will allow the Company to focus on preserving its cash and deploying its capital on new business initiatives, which we believe will generate long-term value for our shareholders.”

 

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 1399022, 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 1399022.

 

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 June 30, 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 June 30, 2019, 82.7% 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.

 

2

 

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.

 

3

 

COHEN & COMPANY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

6/30/19

 

3/31/19

 

6/30/18

 

6/30/19

 

6/30/18

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Net trading

 

$

8,670

 

$

8,729

 

$

7,186

 

$

17,394

 

$

13,377

 

Asset management

 

1,745

 

2,002

 

3,205

 

3,747

 

5,009

 

New issue and advisory

 

—

 

—

 

177

 

—

 

873

 

Principal transactions

 

585

 

350

 

1,443

 

935

 

1,892

 

Other revenue

 

169

 

64

 

179

 

233

 

377

 

Total revenues

 

11,169

 

11,145

 

12,190

 

22,309

 

21,528

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

6,432

 

6,364

 

6,589

 

12,796

 

11,783

 

Business development, occupancy, equipment

 

895

 

811

 

644

 

1,706

 

1,511

 

Subscriptions, clearing, and execution

 

2,056

 

2,273

 

2,151

 

4,329

 

3,985

 

Professional services and other operating

 

1,190

 

1,679

 

1,379

 

2,869

 

3,121

 

Depreciation and amortization

 

78

 

81

 

52

 

159

 

113

 

Total operating expenses

 

10,651

 

11,208

 

10,815

 

21,859

 

20,513

 

Operating income (loss)

 

518

 

(63

)

1,375

 

450

 

1,015

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(1,939

)

(1,859

)

(2,201

)

(3,793

)

(4,020

)

Income (loss) from equity method affiliates

 

(248

)

(8

)

—

 

(256

)

—

 

Income (loss) before income tax expense (benefit)

 

(1,669

)

(1,930

)

(826

)

(3,599

)

(3,005

)

Income tax expense (benefit)

 

(641

)

(106

)

(636

)

(747

)

(664

)

Net income (loss)

 

(1,028

)

(1,824

)

(190

)

(2,852

)

(2,341

)

Less: Net income (loss) attributable to the noncontrolling interest

 

(618

)

(622

)

(270

)

(1,240

)

(947

)

Net income (loss) attributable to Cohen & Company Inc.

 

$

(410

)

$

(1,202

)

$

80

 

$

(1,612

)

$

(1,394

)

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Cohen & Company Inc.

 

$

(410

)

$

(1,202

)

$

80

 

$

(1,612

)

$

(1,394

)

Basic shares outstanding

 

1,144

 

1,133

 

1,173

 

1,139

 

1,173

 

Net income (loss) attributable to Cohen & Company Inc. per share

 

$

(0.36

)

$

(1.06

)

$

0.07

 

$

(1.42

)

$

(1.19

)

 

 

 

 

 

 

 

 

 

 

 

 

Fully Diluted

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Cohen & Company Inc.

 

$

(410

)

$

(1,202

)

$

80

 

$

(1,612

)

$

(1,394

)

Net income (loss) attributable to the convertible noncontrolling interest

 

(491

)

(618

)

(270

)

(1,109

)

(947

)

Income tax and conversion adjustment

 

298

 

53

 

306

 

351

 

313

 

Enterprise net income (loss)

 

$

(603

)

$

(1,767

)

$

116

 

$

(2,370

)

$

(2,028

)

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares outstanding

 

1,144

 

1,133

 

1,173

 

1,139

 

1,173

 

Unrestricted Operating LLC membership units exchangeable into COHN shares

 

532

 

532

 

532

 

532

 

532

 

Additional dilutive shares

 

—

 

—

 

14

 

—

 

—

 

Fully diluted shares outstanding

 

1,676

 

1,665

 

1,719

 

1,671

 

1,705

 

Fully diluted net income (loss) per share

 

$

(0.36

)

$

(1.06

)

$

0.07

 

$

(1.42

)

$

(1.19

)

 

4

 

COHEN & COMPANY INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

June 30, 2019

 

 

 

 

 

(unaudited)

 

December 31, 2018

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

13,077

 

$

14,106

 

Receivables from brokers, dealers, and clearing agencies

 

123,865

 

129,812

 

Due from related parties

 

495

 

793

 

Other receivables

 

7,271

 

12,072

 

Investments - trading

 

237,950

 

301,235

 

Other investments, at fair value

 

7,402

 

13,768

 

Receivables under resale agreements

 

6,054,821

 

7,632,230

 

Investment in equity method affiliate

 

3,519

 

—

 

Goodwill

 

7,992

 

7,992

 

Right-of-use asset - operating leases

 

7,773

 

—

 

Other assets

 

4,916

 

3,621

 

Total assets

 

$

6,469,081

 

$

8,115,629

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Payables to brokers, dealer, and clearing agencies

 

$

126,433

 

$

201,598

 

Accounts payable and other liabilities

 

12,663

 

11,452

 

Accrued compensation

 

2,755

 

5,254

 

Trading securities sold, not yet purchased

 

107,636

 

120,122

 

Securities sold under agreements to repurchase

 

6,104,767

 

7,671,764

 

Deferred income taxes

 

1,270

 

2,017

 

Lease liability - operating leases

 

8,338

 

—

 

Redeemable financial instruments

 

18,638

 

17,448

 

Debt

 

45,002

 

43,536

 

Total liabilities

 

6,427,502

 

8,073,191

 

 

 

 

 

 

 

Equity

 

 

 

 

 

Voting nonconvertible preferred stock

 

5

 

5

 

Common stock

 

12

 

12

 

Additional paid-in capital

 

68,819

 

68,591

 

Accumulated other comprehensive loss

 

(904

)

(908

)

Accumulated deficit

 

(34,077

)

(31,926

)

Total stockholders’ equity

 

33,855

 

35,774

 

Noncontrolling interest

 

7,724

 

6,664

 

Total equity

 

41,579

 

42,438

 

Total liabilities and equity

 

$

6,469,081

 

$

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

 

 

 

5