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 25, 2019 | Title: | General Counsel | |
• | First quarter 2019 revenue was $224.1 million compared to $251.4 million in the first quarter of 2018. |
• | First quarter 2019 net income was $8.1 million or $0.26 per diluted common share, compared to $15.2 million, or $0.50 per diluted common share in the first quarter of 2018. |
• | First quarter 2019 revenue decreased 3% to $233.5 million from $241.5 million in the prior year period. |
• | First quarter 2019 economic income was $17.0 million compared to $24.1 million in the prior year period. |
• | First quarter 2019 economic income attributable to common stockholders was $15.3 million or $0.48 per diluted common share compared to $22.4 million or $0.73 per diluted common share in the prior year period. |
Three Months Ended | ||||||||||
March 31 | ||||||||||
(Dollar amounts in millions, except per share information) | 2019 | 2018 | % | |||||||
GAAP: | ||||||||||
Revenue | $ | 224.1 | $ | 251.4 | (11 | )% | ||||
Net income (loss) attributable to Cowen Inc. | $ | 9.8 | $ | 16.9 | (42 | )% | ||||
Less: Preferred stock dividends | $ | (1.7 | ) | $ | (1.7 | ) | — | % | ||
Net income (loss) attributable to common stockholders | $ | 8.1 | $ | 15.2 | (47 | )% | ||||
ECONOMIC INCOME (NON-GAAP): | ||||||||||
Economic income revenue | $ | 233.5 | $ | 241.5 | (3 | )% | ||||
Economic income (loss) attributable to Cowen Inc. | $ | 17.0 | $ | 24.1 | (29 | )% | ||||
Less: Preferred stock dividends | $ | (1.7 | ) | $ | (1.7 | ) | — | % | ||
Economic income (loss) attributable to common stockholders | $ | 15.3 | $ | 22.4 | (32 | )% | ||||
Add: Depreciation and amortization | $ | 5.0 | $ | 3.0 | 66 | % | ||||
Economic operating income attributable to common stockholders | $ | 20.2 | $ | 25.3 | (20 | )% | ||||
PER COMMON SHARE (DILUTED) | ||||||||||
GAAP: | ||||||||||
Earnings (loss) per common share | $ | 0.26 | $ | 0.50 | (49 | )% | ||||
Economic income (non-GAAP): | ||||||||||
Economic income (loss) per common share | $ | 0.48 | $ | 0.73 | (34 | )% | ||||
Economic operating income (loss) per common share | $ | 0.64 | $ | 0.83 | (23 | )% | ||||
Note: Amounts may not add up due to rounding. A reconciliation of economic income (loss) to GAAP net income appears under the section, "Summary Economic Income (Loss) to GAAP Reconciliation." |
• | Scaled businesses that will drive margin: |
– | Advisory revenue increased 97% year-over-year to $28.4 million |
– | First quarter of operations including the addition of Quarton International, a leading middle-market financial advisory firm. The acquisition of Quarton closed on January 2, 2019 |
• | Improved revenue diversification: |
– | Non-healthcare revenue as a percentage of investment banking revenue rose to 52% from 24% in 1Q 2018 |
– | Advisory as a percentage of investment banking revenue was 34%, up from 15% in 1Q 2018 |
• | Maintained contribution from recurring revenue businesses: |
– | Markets revenue, which includes brokerage, financing and other revenue, was $112.7 million compared to $117.0 million in first quarter 2018 |
• | Leveraged Cowen's domain expertise ("Cowen DNA") with the operating businesses |
– | Positioning the investment management platform towards strategies that are salable, scalable and reflect Cowen DNA, such as the private healthcare investment management strategy |
• | Simplified balance sheet by exiting non-core strategies: |
– | Exited long-short equity strategy at end of February 2019 |
• | Book value per share decreased slightly to $24.12 as of March 31, 2019, compared to $24.37 as of December 31, 2018 |
• | During the quarter, the Company repurchased 315,400 shares for $4.7 million, at an average price of $14.77, under the Company's existing share repurchase program |
(Amounts in millions, except per share information) | March 31, 2019 | December 31, 2018 | March 31, 2018 | |||||
Cowen Inc. stockholders' equity | $814.8 | $794.4 | $758.8 | |||||
Common equity (CE) | $713.5 | $693.1 | $657.5 | |||||
Book value per share (CE/CSO) | $24.12 | $24.37 | $22.27 | |||||
Common shares outstanding (CSO) | 29.6 | 28.4 | 29.5 | |||||
Summary Stockholders' Equity Information | ||||||||
Cowen Inc. stockholders' equity | $814.8 | $794.4 | $758.8 | |||||
Less: | ||||||||
Preferred stock | $101.3 | $101.3 | $101.3 | |||||
Common equity (CE) | $713.5 | $693.1 | $657.5 | |||||
Note: Amounts may not add up due to rounding. |
Three Months Ended | |||||||||||
March 31 | Dec. 31 | ||||||||||
(Per share information) | 2019 | 2018 | 2018 | ||||||||
Economic income (loss) per common share (diluted) | $ | 0.48 | $ | 0.73 | $ | 0.19 | |||||
Adjustments: | |||||||||||
Income taxes | (0.10 | ) | (0.23 | ) | 0.01 | ||||||
Uncrystallized incentive fees | (0.01 | ) | (0.01 | ) | 0.08 | ||||||
Amortization of discount on convertible debt | (0.03 | ) | — | (0.03 | ) | ||||||
Exited business costs | — | — | (0.08 | ) | |||||||
Retainer fees deferred for GAAP | (0.05 | ) | — | — | |||||||
Unrealized gain (loss) on conversion option (a) | — | 0.01 | — | ||||||||
Transaction-related and other costs | (0.03 | ) | (0.01 | ) | (0.07 | ) | |||||
GAAP earnings (loss) per share (diluted) | $ | 0.26 | $ | 0.50 | $ | 0.11 | |||||
Note: Amounts may not add due to rounding. |
Three Months Ended | |||||||||||||||||
March 31 | Dec. 31 | ||||||||||||||||
(Dollar amounts in millions) | 2019 | 2018 | % | 2018 | % | ||||||||||||
Investment banking | $ | 83.0 | $ | 93.9 | (12 | )% | $ | 77.6 | 7 | % | |||||||
Brokerage | 105.2 | 114.1 | (8 | )% | 123.4 | (15 | )% | ||||||||||
Management fees | 10.4 | 13.1 | (21 | )% | 11.2 | (7 | )% | ||||||||||
Incentive income | 16.7 | 5.2 | 222 | % | 2.3 | 635 | % | ||||||||||
Investment income (loss) | 17.0 | 14.3 | 19 | % | (5.6 | ) | NM | ||||||||||
Other revenues | 1.2 | 0.9 | 31 | % | (1.4 | ) | NM | ||||||||||
Total Revenue | $ | 233.5 | $ | 241.5 | (3 | )% | $ | 207.4 | 13 | % |
• | Compensation and benefits expense was $129.7 million compared to $134.1 million in the first quarter 2018. The compensation to revenue ratio was 55.5%, unchanged from 55.5% in the prior year period. |
• | Fixed non-compensation expenses increased $0.5 million year over year to $35.2 million. |
• | Variable non-compensation expenses were $37.7 million, down slightly from $38.0 million in the first quarter 2018. |
• | Net income (loss) attributable to non-controlling interests increased by $0.6 million to $2.7 million for the three months ended March 31, 2019 compared with $2.2 million in the prior year period. Non-controlling interest represents the portion of net income or loss attributable to certain non-wholly owned subsidiaries that is allocated to the Company's partners in those subsidiaries. |
Three Months Ended | |||||
March 31 | |||||
(Dollar amounts in millions) | 2019 | 2018 | |||
Capital Markets | $54.6 | $79.6 | |||
Advisory | 28.4 | 14.4 | |||
Total | $83.0 | $93.9 |
Three Months Ended | |||
March 31 | |||
2019 | 2018 | ||
Capital Markets | 30 | 37 | |
Of which bookrun: | 21 | 28 | |
Advisory | 9 | 5 | |
Total | 39 | 42 |
Cowen Inc. | |||||||
US GAAP Preliminary Unaudited Condensed Consolidated Statements of Operations | |||||||
(Dollar amounts in thousands, except per share data) | |||||||
Three Months Ended | |||||||
March 31 | |||||||
2019 | 2018 | ||||||
Revenue | |||||||
Investment banking | $ | 80,106 | $ | 97,988 | |||
Brokerage | 97,463 | 105,733 | |||||
Management fees | 7,141 | 7,417 | |||||
Incentive income | 15 | 16 | |||||
Interest and dividends | 29,092 | 25,954 | |||||
Reimbursement from affiliates | 288 | 377 | |||||
Aircraft lease revenue | — | 715 | |||||
Reinsurance premiums | 6,591 | 8,647 | |||||
Other | 1,061 | 1,336 | |||||
Consolidated Funds revenues | 2,340 | 3,201 | |||||
Total revenue | 224,097 | 251,384 | |||||
Interest and dividends expense | 29,084 | 24,540 | |||||
Total net revenue | 195,013 | 226,844 | |||||
Expenses | |||||||
Employee compensation and benefits | 130,188 | 135,140 | |||||
Reinsurance claims, commissions and amortization of deferred acquisition costs | 6,162 | 8,731 | |||||
Operating, general, administrative and other expenses | 78,001 | 76,219 | |||||
Depreciation and amortization expense | 4,956 | 3,225 | |||||
Consolidated Funds expenses | 1,482 | 2,431 | |||||
Total expenses | 220,789 | 225,746 | |||||
Other income (loss) | |||||||
Net (losses) gains on securities, derivatives and other investments | 39,084 | 15,969 | |||||
Consolidated Funds net (losses) gains | 1,858 | 17,865 | |||||
Total other income (loss) | 40,942 | 33,834 | |||||
Income (loss) before income taxes | 15,166 | 34,932 | |||||
Income tax expense/(benefit) | 3,177 | 6,923 | |||||
Net income (loss) | 11,989 | 28,009 | |||||
Net income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and funds | 2,206 | 11,156 | |||||
Net income (loss) attributable to Cowen Inc. | 9,783 | 16,853 | |||||
Less: Preferred stock dividends | 1,698 | 1,698 | |||||
Net income (loss) attributable to Cowen Inc. common stockholders | $ | 8,085 | $ | 15,155 | |||
Earnings (loss) per share: | |||||||
Basic | $ | 0.27 | $ | 0.51 | |||
Diluted | $ | 0.26 | $ | 0.50 | |||
Weighted average shares used in per share data: | |||||||
Basic | 29,750 | 29,625 | |||||
Diluted | 31,625 | 30,492 |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of US GAAP and Economic Revenue for the Three Months Ended March 31, 2019 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
US GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenue | |||||||||||||||
Investment banking | $ | 80,106 | $ | 2,885 | (a) | $ | — | $ | 82,991 | ||||||
Brokerage | 97,463 | 7,694 | (b) | — | 105,157 | ||||||||||
Management fees | 7,141 | 2,789 | (c) | 501 | 10,431 | ||||||||||
Incentive income | 15 | 16,188 | (c)(a) | 544 | 16,747 | ||||||||||
Investment income | — | 16,984 | (d)(e) | — | 16,984 | ||||||||||
Interest and dividends | 29,092 | (29,092 | ) | (d) | — | — | |||||||||
Reimbursement from affiliates | 288 | (321 | ) | (f) | 70 | — | |||||||||
Aircraft lease revenue | — | — | (e) | — | — | ||||||||||
Reinsurance premiums | 6,591 | (6,591 | ) | (g) | — | — | |||||||||
Other revenues | 1,061 | 98 | (g) | — | 1,159 | ||||||||||
Consolidated Funds | 2,340 | — | (2,340 | ) | — | ||||||||||
Total revenue | $ | 224,097 | $ | 10,634 | $ | (1,225 | ) | $ | 233,469 | ||||||
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) presents underwriting expenses net of investment banking revenues, expenses reimbursed from clients within their respective expense category and records income from uncrystallized incentive fees. Economic Income (Loss) also records retainer fees, relating to investment banking activities, earned during the period that would otherwise be deferred until closing for US GAAP reporting. | |||||||||||||||
(b) Economic Income (Loss) brokerage revenues included net securities borrowed and securities loaned activities. | |||||||||||||||
(c) 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. | |||||||||||||||
(d) Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). | |||||||||||||||
(e) Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss). | |||||||||||||||
(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | |||||||||||||||
(g) Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of US GAAP and Economic Revenue for the Three Months Ended March 31, 2018 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
US GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenue | |||||||||||||||
Investment banking | $ | 97,988 | $ | (4,064 | ) | (a) | $ | — | $ | 93,924 | |||||
Brokerage | 105,733 | 8,338 | (b) | — | 114,071 | ||||||||||
Management fees | 7,417 | 4,506 | (c) | 1,203 | 13,126 | ||||||||||
Incentive income | 16 | 5,172 | (c)(a) | 9 | 5,197 | ||||||||||
Investment income | — | 14,301 | (d)(e) | — | 14,301 | ||||||||||
Interest and dividends | 25,954 | (25,954 | ) | (d) | — | — | |||||||||
Reimbursement from affiliates | 377 | (445 | ) | (f) | 68 | — | |||||||||
Aircraft lease revenue | 715 | (715 | ) | (e) | — | — | |||||||||
Reinsurance premiums | 8,647 | (8,647 | ) | (g) | — | — | |||||||||
Other revenues | 1,336 | (448 | ) | (g) | — | 888 | |||||||||
Consolidated Funds | 3,201 | — | (3,201 | ) | — | ||||||||||
Total revenue | $ | 251,384 | $ | (7,956 | ) | $ | (1,921 | ) | $ | 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) presents underwriting expenses net of investment banking revenues, expenses reimbursed from clients within their respective expense category and records income from uncrystallized incentive fees. Economic Income (Loss) also records retainer fees, relating to investment banking activities, earned during the period that would otherwise be deferred until closing for US GAAP reporting. | |||||||||||||||
(b) Economic Income (Loss) brokerage revenues included net securities borrowed and securities loaned activities. | |||||||||||||||
(c) 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. | |||||||||||||||
(d) Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). | |||||||||||||||
(e) Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss). | |||||||||||||||
(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | |||||||||||||||
(g) Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. |
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end