Delaware | 001-34516 | 27-0423711 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
COWEN INC. | ||||
By: | /s/ Owen S. Littman | |||
Name: | Owen S. Littman | |||
Date: | April 26, 2018 | Title: | General Counsel | |
• | Revenue rose 119% year over year to a record $251.4 million compared to $115.0 million in the prior year period. |
• | Net income attributable to common stockholders was $15.2 million or $0.50 per diluted common share compared to $1.3 million or $0.05 per diluted common share in the prior year period. |
• | The Company adopted ASC Topic 606 Revenue from Contracts with Customers, ("ASC Topic 606") as amended. The Company applied this new revenue recognition guidance using the modified retrospective method effective January 1, 2018 and therefore there is no impact on previously issued results. The effect on the current quarter results is outlined within this press release. |
• | The Company achieved a new revenue quarterly high. Revenue increased 88% year over year to $241.5 million compared to $128.6 million in the prior year period. |
• | The Company also generated record Economic Income of $24.1 million or $0.79 per diluted share compared to Economic Income of $5.5 million or $0.19 per diluted share in the prior year period. |
• | On a GAAP and economic income basis, investment banking revenue increased 168% and 157% year over year to $98.0 million and $93.9 million, respectively. The quarter was led by very strong performance in equity financings as well as a growing contribution from advisory and non-healthcare sectors. |
• | Brokerage revenue rose 109% and 118% year over year to $105.7 million and $114.1 million on a GAAP and economic income basis, respectively. The increase was primarily attributable to the acquisition of Convergex in June 2017. |
• | As of April 1, 2018, assets under management were $10.8 billion, a $0.2 billion decrease from January 1, 2018. |
• | On a GAAP basis, the compensation to revenue ratio was 47% compared to 50% in the prior year period. On an economic income basis, the compensation to revenue ratio declined to 56% from 58% due to a shift in business mix as a result of the Convergex acquisition. |
• | Book value per share was $22.27 as of March 31, 2018, compared to $21.82 as of December 31, 2017. Tangible book value per share was $19.25 as of March 31, 2018 compared to $18.77 as of December 31, 2017. |
(Dollar amounts in millions, except per share information) | Three Months Ended | ||||||||||||||||
March 31, | Dec. 31, | ||||||||||||||||
2018 | 2017 | % | 2017 | % | |||||||||||||
GAAP: | |||||||||||||||||
Revenue | $ | 251.4 | $ | 115.0 | 119 | % | $ | 204.5 | 23 | % | |||||||
Net income (loss) attributable to Cowen common stockholders | $ | 15.2 | $ | 1.3 | NM | $ | (77.8 | ) | NM | ||||||||
Earnings (loss) per share (diluted) | $ | 0.50 | $ | 0.05 | NM | $ | (2.51 | ) | NM | ||||||||
Economic Income (non-GAAP): | |||||||||||||||||
Economic income revenue | $ | 241.5 | $ | 128.6 | 88 | % | $ | 183.0 | 32 | % | |||||||
Economic income (loss) attributable to Cowen | $ | 24.1 | $ | 5.5 | 341 | % | $ | (9.4 | ) | NM | |||||||
Economic income per share (diluted) | $ | 0.79 | $ | 0.19 | 311 | % | $ | (0.30 | ) | NM | |||||||
Note: Amounts may not add due to rounding. NM indicates not meaningful. A reconciliation of economic income (loss) to net income appears under the section, "Summary Economic Income (Loss) to GAAP Reconciliation." |
(Dollar amounts in millions, except per share information) | Three Months Ended | ||||||||||||||||
March 31, | Dec. 31, | ||||||||||||||||
2018 | 2017 | % | 2017 | % | |||||||||||||
Revenue | $ | 251.4 | $ | 115.0 | 119 | % | $ | 204.5 | 23 | % | |||||||
Net income (loss) attributable to Cowen | $ | 16.9 | $ | 3.0 | NM | $ | (76.0 | ) | NM | ||||||||
Preferred stock dividends | $ | 1.7 | $ | 1.7 | — | % | $ | 1.7 | — | % | |||||||
Net income (loss) attributable to Cowen common stockholders | $ | 15.2 | $ | 1.3 | NM | $ | (77.8 | ) | NM | ||||||||
Earnings (loss) per share (diluted) | $0.50 | $0.05 | NM | $(2.51) | NM | ||||||||||||
Note: Amounts may not add due to rounding. NM indicates not meaningful. |
(Amounts in millions, except per share information) | March 31, | Dec. 31, | March 31, | |||||
2018 | 2017 | 2017 | ||||||
Cowen Inc. stockholders' equity | $758.8 | $748.0 | $778.3 | |||||
Common equity (CE) | $657.5 | $646.7 | $676.9 | |||||
Tangible common equity (TCE) | $568.2 | $556.1 | $591.8 | |||||
Book value per share (CE/CSO) | $22.27 | $21.82 | $24.79 | |||||
Tangible book value per share (TCE/CSO) | $19.25 | $18.77 | $21.67 | |||||
Common shares outstanding (CSO) | 29.5 | 29.6 | 27.3 | |||||
Reconciliation of GAAP Cowen Inc. stockholders' equity to tangible common equity: | ||||||||
Cowen Inc. stockholders' equity | $758.8 | $748.0 | $778.3 | |||||
Less: | ||||||||
Preferred stock | 101.3 | 101.3 | 101.3 | |||||
Common equity (CE) | $657.5 | $646.7 | $676.9 | |||||
Less: | ||||||||
Goodwill & intangibles | 89.2 | 90.6 | 85.1 | |||||
Tangible common equity (TCE) | $568.2 | $556.1 | $591.8 | |||||
Note: Amounts may not add due to rounding. |
(Dollar amounts in millions, except per share information) | Three Months Ended | ||||||||||||||||
March 31, | Dec. 31, | ||||||||||||||||
2018 | 2017 | % | 2017 | % | |||||||||||||
Revenue | $ | 241.5 | $ | 128.6 | 88 | % | $ | 183.0 | 32 | % | |||||||
Economic Income (Loss) | $ | 24.1 | $ | 5.5 | 341 | % | $ | (9.4 | ) | NM | |||||||
Economic Income (Loss) per share (diluted) | $ | 0.79 | $ | 0.19 | 311 | % | $ | (0.30 | ) | NM | |||||||
Note: Amounts may not add due to rounding. NM indicates not meaningful. |
Three Months Ended | |||||||||||
March 31, | Dec. 31, | ||||||||||
(Per share information) | 2018 | 2017 | 2017 | ||||||||
Economic Income (Loss) per share (diluted) | $ | 0.81 | $ | 0.20 | $ | (0.30 | ) | ||||
Adjustments: | |||||||||||
Preferred dividends | (0.06 | ) | (0.06 | ) | (0.05 | ) | |||||
Taxes | (0.23 | ) | (0.07 | ) | (1.32 | ) | |||||
Certain costs associated with debt | 0.01 | — | (0.48 | ) | |||||||
Bargain purchase gain | (0.01 | ) | — | (0.03 | ) | ||||||
Transaction-related and other costs | (0.01 | ) | (0.02 | ) | (0.33 | ) | |||||
GAAP earnings (loss) per share (diluted) | $ | 0.50 | $ | 0.05 | $ | (2.51 | ) | ||||
Note: Amounts may not add due to rounding. |
Three Months Ended | ||||||||||||||||||
March 31, | Dec. 31, | |||||||||||||||||
(Dollar amounts in millions) | 2018 | 2017 | % | 2017 | % | |||||||||||||
Investment banking | $ | 93.9 | $ | 36.6 | 157 | % | $ | 65.5 | 43 | % | ||||||||
Brokerage | 114.1 | 52.3 | 118 | % | 103.5 | 10 | % | |||||||||||
Management fees | 13.1 | 13.9 | (6 | )% | 13.3 | (1 | )% | |||||||||||
Incentive income | 5.2 | 3.1 | 70 | % | 7.4 | (30 | )% | |||||||||||
Investment income (loss) | 14.3 | 21.6 | (34 | )% | (6.6 | ) | NM | |||||||||||
Other revenues | 0.9 | 1.1 | (20 | )% | (0.1 | ) | NM | |||||||||||
Total Revenue | $ | 241.5 | $ | 128.6 | 88 | % | $ | 183.0 | 32 | % | ||||||||
Note: Amounts may not add due to rounding. NM indicates not meaningful. |
• | Compensation and benefits expense was $134.1 million compared to $75.0 million in the first quarter 2017. The increase was due to higher revenue during the 2018 period as compared to 2017, which resulted in a higher compensation and benefits accrual, and increased headcount from the Convergex acquisition. The compensation to revenue ratio was 56% compared to 58% for the prior year period. The lower compensation to Economic Income revenue ratio is due to a shift in the Company's overall business mix as a result of the acquisition of Convergex in June 2017. |
• | Fixed non-compensation expenses increased 46% year over year to $34.7 million from $23.8 million. The increase was attributable to the acquisition of Convergex in June 2017. |
• | Depreciation and amortization expense was $3.0 million compared to $2.6 million in the prior year period. |
• | Variable non-compensation expenses were $38.0 million compared to $16.4 million in the first quarter 2017. The increase was primarily related to higher floor brokerage and trade execution costs related to the acquisition of Convergex in June 2017 which included a mix of higher variable cost businesses (as a percentage of revenue). |
Three Months Ended | |||||
March 31, | |||||
(Dollar amounts in millions) | 2018 | 2017 | |||
Equity Underwriting | $79.3 | $32.1 | |||
Debt Underwriting | 0.3 | (0.1 | ) | ||
Advisory | 14.4 | 4.5 | |||
Total | $93.9 | $36.6 |
Three Months Ended | |||
March 31, | |||
2018 | 2017 | ||
Equity Underwriting | 36 | 23 | |
Of which bookrun: | 28 | 14 | |
Debt Underwriting | 1 | — | |
Advisory | 5 | 2 | |
Total | 42 | 25 |
Cowen Inc. | |||||||
GAAP Preliminary Unaudited Condensed Consolidated Statements of Operations | |||||||
(Dollar amounts in thousands, except per share data) | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Revenue | |||||||
Investment banking | $ | 97,988 | $ | 36,553 | |||
Brokerage | 105,733 | 50,534 | |||||
Management fees | 7,417 | 8,708 | |||||
Incentive income | 16 | 546 | |||||
Interest and dividends | 25,954 | 5,089 | |||||
Reimbursement from affiliates | 377 | 1,652 | |||||
Aircraft lease revenue | 715 | 1,059 | |||||
Reinsurance premiums | 8,647 | 7,089 | |||||
Other | 1,336 | 1,400 | |||||
Consolidated Funds revenues | 3,201 | 2,341 | |||||
Total revenue | 251,384 | 114,971 | |||||
Expenses | |||||||
Employee compensation and benefits | 135,140 | 76,673 | |||||
Interest and dividends | 24,540 | 9,930 | |||||
Reinsurance claims, commissions and amortization of deferred acquisition costs | 8,731 | 6,178 | |||||
Operating, general, administrative and other expenses | 76,219 | 39,601 | |||||
Depreciation and amortization expense | 3,225 | 3,028 | |||||
Consolidated Funds expenses | 2,431 | 4,963 | |||||
Total expenses | 250,286 | 140,373 | |||||
Other income (loss) | |||||||
Net (losses) gains on securities, derivatives and other investments | 15,969 | 26,056 | |||||
Consolidated Funds net (losses) gains | 17,865 | 13,346 | |||||
Total other income (loss) | 33,834 | 39,402 | |||||
Income (loss) before income taxes | 34,932 | 14,000 | |||||
Income tax expense/(benefit) | 6,923 | 1,911 | |||||
Net income (loss) | 28,009 | 12,089 | |||||
Net income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and funds | 11,156 | 9,105 | |||||
Net income (loss) attributable to Cowen Inc. | 16,853 | 2,984 | |||||
Preferred stock dividends | 1,698 | 1,698 | |||||
Net income (loss) attributable to Cowen Inc. common stockholders | $ | 15,155 | $ | 1,286 | |||
Earnings (loss) per share: | |||||||
Basic | $ | 0.51 | $ | 0.05 | |||
Diluted | $ | 0.50 | $ | 0.05 | |||
Weighted average shares used in per share data: | |||||||
Basic | 29,625 | 27,601 | |||||
Diluted | 30,492 | 28,401 |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of GAAP and Economic Revenue for the Three Months Ended March 31, 2018 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenue | |||||||||||||||
Investment banking | $ | 97,988 | $ | (4,064 | ) | (g) | $ | — | $ | 93,924 | |||||
Brokerage | 105,733 | 8,338 | (f) | — | 114,071 | ||||||||||
Management fees | 7,417 | 4,506 | (a) | 1,203 | 13,126 | ||||||||||
Incentive income | 16 | 5,172 | (a)(g) | 9 | 5,197 | ||||||||||
Investment income | — | 14,301 | (b)(d) | — | 14,301 | ||||||||||
Interest and dividends | 25,954 | (25,954 | ) | (b) | — | — | |||||||||
Reimbursement from affiliates | 377 | (445 | ) | (c) | 68 | — | |||||||||
Aircraft lease revenue | 715 | (715 | ) | (d) | — | — | |||||||||
Reinsurance premiums | 8,647 | (8,647 | ) | (e) | — | — | |||||||||
Other revenues | 1,336 | (449 | ) | (e) | — | 888 | |||||||||
Consolidated Funds | 3,201 | — | (3,185 | ) | — | ||||||||||
Total revenue | $ | 251,384 | $ | (7,957 | ) | $ | (1,905 | ) | $ | 241,507 | |||||
Note: The following is a summary of the adjustments made to US GAAP revenue to Economic Income revenue: | |||||||||||||||
(1) Other adjustments include reclassifications between other income (loss), redeemable non-controlling interests and interest and non-interest expenses based on the nature of the respective line item | |||||||||||||||
(2) Fund consolidation includes the impact of consolidation. The related elimination entries of the Consolidated Funds are not included in Economic Income. Adjustments include elimination of incentive income and management fees earned from the Consolidated Funds. | |||||||||||||||
Other Adjustments: | |||||||||||||||
(a) Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents and (ii) our proportionate share of management and incentive fees of certain real estate operating entities, the healthcare royalty business and the activist business. | |||||||||||||||
(b) Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). | |||||||||||||||
(c) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | |||||||||||||||
(d) Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss). | |||||||||||||||
(e) Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. | |||||||||||||||
(f) Economic Income (Loss) brokerage revenues included net securities borrowed and securities loaned activities. | |||||||||||||||
(g) Economic Income (Loss) presents underwriting expenses net of investment banking revenues and records income from uncrystallized incentive fees. |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of GAAP and Economic Revenue for the Three Months Ended March 31, 2017 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenue | |||||||||||||||
Investment banking | $ | 36,553 | $ | — | $ | — | $ | 36,553 | |||||||
Brokerage | 50,534 | 1,779 | (f) | — | 52,313 | ||||||||||
Management fees | 8,708 | 4,711 | (a) | 527 | 13,946 | ||||||||||
Incentive income | 546 | 2,025 | (a) | 489 | 3,060 | ||||||||||
Investment income | — | 21,626 | (b)(d) | — | 21,626 | ||||||||||
Interest and dividends | 5,089 | (5,089 | ) | (b) | — | ||||||||||
Reimbursement from affiliates | 1,652 | (1,730 | ) | (c) | 78 | — | |||||||||
Aircraft lease revenue | 1,059 | (1,059 | ) | (d) | — | — | |||||||||
Reinsurance premiums | 7,089 | (7,089 | ) | (e) | — | — | |||||||||
Other revenues | 1,400 | (296 | ) | (e) | — | 1,104 | |||||||||
Consolidated Funds | 2,341 | (2,341 | ) | — | |||||||||||
Total revenue | $ | 114,971 | $ | 14,878 | $ | (1,247 | ) | $ | 128,602 | ||||||
Note: The following is a summary of the adjustments made to US GAAP revenue to Economic Income revenue: | |||||||||||||||
(1) Other adjustments include reclassifications between other income (loss), redeemable non-controlling interests and interest and non-interest expenses based on the nature of the respective line item | |||||||||||||||
(2) Fund consolidation includes the impact of consolidation. The related elimination entries of the Consolidated Funds are not included in Economic Income. Adjustments include elimination of incentive income and management fees earned from the Consolidated Funds. | |||||||||||||||
Other Adjustments: | |||||||||||||||
(a) Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents and (ii) our proportionate share of management and incentive fees of certain real estate operating entities, the healthcare royalty business and the activist business. | |||||||||||||||
(b) Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). | |||||||||||||||
(c) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | |||||||||||||||
(d) Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss). | |||||||||||||||
(e) Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. | |||||||||||||||
(f) Economic Income (Loss) brokerage revenues included net securities borrowed and securities loaned activities. |
$_B;XK\%?)H>IR)!G)MY?FC)^ ME===?M*?$"YMC")["'(QYD5L0P_'=7T?JWP7\!:S(7N?#]O$QZ_9OW6?^^<5 MDQ?L[?#F*0.ND3$CLUW(1^6: /C_ %+5-8\4ZLUUJ-Q<:C>RGEFRS'\*]B^% M'[/FHZQ>0:OXR@-IIJD.EJW^LG^H["OHS0? /A?PRROHNBVEO*O281@O_P!] M=:Z*@"*VMH;.VCM[6-8H8U"HBC 4#M4M%% $=Q"ES;2P2#*2(48>Q&*^ ?'G MAU_"WCK5=(*%4M[AO*XZQDY4_EBOT"K(O_"GA_5;QKK4M$L+NX8 -+-;([$# MIR10!\0?##PTWBKXC:3II0M"TPDFXZ1JG>%M!TBZ^TZ7 MHUC9SX*^;!;JC8/49 K5H \-_:B\/?;_ -::S$F7T^RM4M[.&."",;4CC4*JCT %2T !..M M?"WQGOH=3^+VNW-JP>/SE3<.1E5"G]0:^Z& 92K#((P0>]83^!O"DDC/)X 2)P\3.C#HRD@BI_[1O_\ G\N?^_K?XU]]?\('X2_Z M%K2O_ -/\*/^$#\)?]"UI7_@&G^% 'P+_:-__P _ES_W];_&E6ZO[B18OM-P MQ=@H!D8Y)K[Y_P"$#\)?]"UI7_@&G^%*O@7PHCAD\-Z4K*<@BS3@_E0 O@G3 MAI7@;1K,#!CLXMW^\5!/ZYKX]^.M[%?_ !?U=K9MZQ,(BPY!(Z_SK[>50BA5 M "@8 '85AR^"/"TTK2S>'=+>1SEF:T0DGU/% 'CW[*5]"WA?6;$L!.ETK["> M2I7K^=>_5F:;X;T31IFETG2;*RD<;6>W@5"1Z$@5IT %>:?&CX7P_$#PTTUE M&JZS9J6MI,?ZP==A^O:O2Z* /SBNK2>SNI;:ZB:.:)BCHPP017T]^R=QX6\0 M?]?L?_H%>RW7@[PU?74ES>Z!IMQ/(=SRR6J,S'U)(YJYIFB:7HL CZ?;6* ?2-N=;>)4#'U..M %ZBBB@ HHHH **** "BBB@#__V0$! end