Segment Reporting

Change in Segments

During the second quarter of 2019 the Company realigned the information that the Chief Operating Decision Maker regularly reviews to evaluate performance for operating decision-making purposes, including evaluation and allocation of resources. As a result of this change in segment reporting, the Company retrospectively revised prior period results, by segment, to conform to the current period presentation (see Note 1). This structure includes two business segments: Op Co and Asset Co. The structure is based on the Company's domain expertise as a driver of balance sheet harmonization and repeatable revenues for its operating business versus the Company’s long-term monetization strategies.

The Op Co segment consists of Cowen Investment Management (“CIM”), Investment Banking, Markets and Research. The Asset Co segment consists of the Company’s private investments, private real estate business and other legacy multi-sector long/short equity strategies.

Performance Measures

The performance measure for these segments is Economic Income (Loss), which management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels. Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other factors.

In general, Economic Income (Loss) is a pre-tax measure that (i) eliminates the impact of consolidation for Consolidated Funds and excludes (ii) goodwill and intangible impairment (iii) certain other transaction-related adjustments and/or reorganization expenses and (iv) certain costs associated with debt. Economic Operating Income (Loss) represents Economic Income (Loss) before depreciation and amortization expenses. In addition, Economic Income (Loss) revenues include investment income that represents the income the Company has earned in investing its own capital, including realized and unrealized gains and losses, interest and dividends, net of associated investment related expenses. For US GAAP purposes, these items are included in each of their respective line items. Economic Income (Loss) revenues also include management fees, incentive income and investment income earned through the Company's investment as a general partner in certain real estate entities and the Company's investment in the activist business and certain investment funds. For US GAAP purposes, all of these items, are recorded in other income (loss). Economic Income (Loss) recognizes (a) incentive fees during periods when the fees are not yet crystallized for US GAAP reporting and (b) retainer fees, relating to investment banking activities, earned during the period that would otherwise be deferred until closing for US GAAP reporting. In addition, Economic Income (Loss) expenses are reduced by reimbursement from affiliates, which for US GAAP purposes is presented gross as part of revenue.

As further stated below, one major difference between Economic Income (Loss) and US GAAP net income (loss) is that Economic Income (Loss) presents the segments' results of operations without the impact resulting from the full consolidation of any of the Consolidated Funds. The consolidation of these investment funds' results include the pro rata share of the income or loss attributable to other owners of such entities which is reflected in net income (loss) attributable to redeemable non-controlling interest in consolidated subsidiaries in the accompanying condensed consolidated statements of operations. This pro rata share has no effect on the overall financial performance for the segments, as ultimately, this income or loss is not income or loss for the segments themselves. Included in Economic Income (Loss) is the actual pro rata share of the income or loss attributable to the Company as an investor in such entities, which is relevant in management making operating decisions and evaluating financial performance. The Company does not disclose total asset information for its business segments as the information is not reviewed by the CODM.

The following tables set forth operating results for the Company's Op Co and Asset Co segments and related adjustments necessary to reconcile the Company's Economic Income (Loss) measure to arrive at the Company's consolidated US GAAP net income (loss):




	Three Months Ended June 30, 2019
								Adjustments
	Operating Company			Asset Company		Total Economic Income/(Loss)		Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	104,216		$	—	$	104,216	$	—		$	10,489		(a)	$	114,705
Brokerage	120,672			—		120,672		—			(9,290		)	(b)	111,382
Management fees	9,968			500		10,468		(565		)	(2,864		)	(c)	7,039
Incentive income (loss)	2,633			1,596		4,229		—			(4,221		)	(c)	8
Investment income (loss)	(3,141		)	3,626		485		—			(485		)	(d)	—
Interest and dividends	—			—		—		—			40,047			(b)(d)	40,047
Reimbursement from affiliates	—			—		—		(33		)	287			(e)	254
Reinsurance premiums	—			—		—		—			14,331			(f)	14,331
Other revenue	4,304			15		4,319		12			(3,401		)	(f)	930
Consolidated Funds revenues	—			—		—		3,468			—				3,468
Total revenues	238,652			5,737		244,389		2,882			44,893				292,164
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)	5,298			1,408		6,706		—			32,822			(b)(d)	39,528
Total net revenues	233,354			4,329		237,683		2,882			12,071				252,636
Expenses
Non interest expense	215,808			3,011		218,819		—			21,962			(a)(e)(h)(i)	240,781
Goodwill impairments	—			—		—		—			4,100				4,100
Consolidated Funds expenses	—			—		—		2,231			—				2,231
Total expenses	215,808			3,011		218,819		2,231			26,062				247,112
Total other income (loss)	—			—		—		2,827			6,865			(c)(d)(i)	9,692
Income taxes expense / (benefit)	—			—		—		—			5,073			(h)	5,073
Income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds	1,448			235		1,683		3,478			(830		)		4,331
Income (loss) attributable to Cowen Inc.	16,098			1,083		17,181		—			(11,369		)		5,812
Less: Preferred stock dividends	1,341			357		1,698		—			—				1,698
Economic income (loss) / Income (loss) attributable to Cowen Inc. common stockholders	14,757			726		15,483		$	—		$	(11,369	)		$	4,114
Add back: Depreciation and amortization expense	4,945			7		4,952
Economic operating income (loss)	$	19,702		$	733	$	20,435




	Three Months Ended June 30, 2018
										Adjustments
	Operating Company			Asset Company			Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	80,042		$	—		$	80,042		$	—		$	4,784		(a)	$	84,826
Brokerage	113,186			—			113,186			—			(9,901		)	(b)	103,285
Management fees	10,938			1,548			12,486			(612		)	(4,501		)	(c)	7,373
Incentive income (loss)	12,321			(2,958		)	9,363			(8		)	(9,307		)	(c)	48
Investment income (loss)	18,476			1,478			19,954			—			(19,954		)	(d)(g)	—
Interest and dividends	—			—			—			—			25,109			(b)(d)	25,109
Reimbursement from affiliates	—			—			—			(65		)	401			(e)	336
Aircraft lease revenue	—			—			—			—			419			(g)	419
Reinsurance premiums	—			—			—			—			9,226			(f)	9,226
Other revenue	(811		)	90			(721		)	—			1,597			(f)	876
Consolidated Funds revenues	—			—			—			3,075			—				3,075
Total revenues	234,152			158			234,310			2,390			(2,127		)		234,573
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)	3,134			990			4,124			—			20,182			(b)(d)	$	24,306
Total net revenues	231,018			(832		)	230,186			2,390			(22,309		)		210,267
Expenses
Non interest expense	203,684			2,281			205,965			—			14,302			(a)(e)(h)(i)	220,267
Consolidated Funds expenses	—			—			—			3,149			—				3,149
Total expenses	203,684			2,281			205,965			3,149			14,302				223,416
Total other income (loss)	—			—			—			23,411			23,737			(c)(d)(i)(j)	47,148
Income taxes expense / (benefit)	—			—			—			—			3,993			(h)	3,993
Income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds	1,672			808			2,480			22,652			(525		)		24,607
Income (loss) attributable to Cowen Inc.	25,662			(3,921		)	21,741			—			(16,342		)		5,399
Less: Preferred stock dividends	1,290			408			1,698			—			—				1,698
Economic income (loss) / Income (loss) attributable to Cowen Inc. common stockholders	24,372			(4,329		)	20,043			$	—		$	(16,342	)		$	3,701
Add back: Depreciation and amortization expense	2,913			46			2,959
Economic operating income (loss)	$	27,285		$	(4,283	)	$	23,002



	Six Months Ended June 30, 2019
								Adjustments
	Operating Company		Asset Company			Total Economic Income (Loss)		Funds Consolidation			Other Adjustments				US GAAP Net Income (Loss)
	(dollars in thousands)
Revenues
Investment banking	$	187,212	$	—		$	187,212	$	—		$	7,599		(a)	$	194,811
Brokerage	225,829		—			225,829		—			(16,984		)	(b)	208,845
Management fees	19,695		1,203			20,898		(1,066		)	(5,652		)	(c)	14,180
Incentive income (loss)	19,270		1,706			20,976		(544		)	(20,409		)	(c)	23
Investment income (loss)	13,001		4,467			17,468		—			(17,468		)	(d)	—
Interest and dividends	—		—			—		—			69,139			(b)(d)	69,139
Reimbursement from affiliates	—		—			—		(67		)	609			(e)	542
Reinsurance premiums	—		—			—		—			20,922			(f)	20,922
Other revenue	5,427		51			5,478		12			(3,499		)	(f)	1,991
Consolidated Funds revenues	—		—			—		5,808			—				5,808
Total revenues	470,434		7,427			477,861		4,143			34,257				516,261
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)	10,615		2,655			13,270		—			55,342			(b)(d)	68,612
Total net revenues	459,819		4,772			464,591		4,143			(21,085		)		447,649
Expenses
Non interest expense	421,562		4,442			426,004		—			34,084			(a)(e)(h)(i)	460,088
Goodwill impairment	—		—			—		—			4,100				4,100
Consolidated Funds expenses	—		—			—		3,713			—				3,713
Total expenses	421,562		4,442			426,004		3,713			38,184				467,901
Total other income (loss)	—		—			—		3,448			47,186			(c)(d)(i)	50,634
Income taxes expense / (benefit)	—		—			—		—			8,250			(h)	8,250
Income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds	3,250		1,181			4,431		3,878			(1,772		)		6,537
Income (loss) attributable to Cowen Inc.	35,007		(851		)	34,156		—			(18,561		)		$	15,595
Less: Preferred stock dividends	2,717		679			3,396		—			—				3,396
Economic income (loss) / Income (loss) attributable to Cowen Inc. common stockholders	32,290		(1,530		)	30,760		$	—		$	(18,561	)		$	12,199
Add back: Depreciation and amortization expense	9,884		24			9,908
Economic operating income (loss)	$	42,174	$	(1,506	)	$	40,668



	Six Months Ended June 30, 2018
									Adjustments
	Operating Company			Asset Company			Total Economic Income (Loss)		Funds Consolidation			Other Adjustments				US GAAP Net Income (Loss)
	(dollars in thousands)
Revenues
Investment banking	$	173,966		$	—		$	173,966	$	—		$	8,848		(a)	$	182,814
Brokerage	227,257			—			227,257		—			(18,239		)	(b)	209,018
Management fees	22,217			3,396			25,613		(1,815		)	(9,008		)	(c)	14,790
Incentive income (loss)	15,360			(801		)	14,559		(17		)	(14,478		)	(c)	64
Investment income (loss)	36,710			(2,454		)	34,256		—			(34,256		)	(d)(g)	—
Interest and dividends	—			—			—		—			51,063			(b)(d)	51,063
Reimbursement from affiliates	—			—			—		(133		)	846			(e)	713
Aircraft lease revenue	—			—			—		—			1,134			(g)	1,134
Reinsurance premiums	—			—			—		—			17,873			(f)	17,873
Other revenue	(147		)	313			166		—			2,046			(f)	2,212
Consolidated Funds revenues	—			—			—		6,276			—				6,276
Total revenues	475,363			454			475,817		4,311			5,829				485,957
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)	7,661			2,420			10,081		—			38,765			(b)(d)	48,846
Total net revenues	467,702			(1,966		)	465,736		4,311			(32,936		)		437,111
Expenses
Non interest expense	410,059			5,239			415,298		—			28,284			(a)(e)(h)(i)	443,582
Consolidated Funds expenses	—			—			—		5,580			—				5,580
Total expenses	410,059			5,239			415,298		5,580			28,284				449,162
Total other income (loss)	—			—			—		33,458			47,524			(c)(d)(i)(j)	80,982
Income taxes expense / (benefit)	—			—			—		—			10,916			(h)	10,916
Income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds	3,812			826			4,638		32,189			(1,064		)		35,763
Income (loss) attributable to Cowen Inc.	53,831			(8,031		)	45,800		—			(23,548		)		22,252
Less: Preferred stock dividends	2,581			815			3,396		—			—				3,396
Economic income (loss) / Income (loss) attributable to Cowen Inc. common stockholders	51,250			(8,846		)	42,404		$	—		$	(23,548	)		$	18,856
Add back: Depreciation and amortization expense	5,842			103			5,945
Economic operating income (loss)	$	57,092		$	(8,743	)	$	48,349

The following is a summary of the adjustments made to US GAAP net income (loss) to arrive at

Economic Income (Loss):

Funds Consolidation: The impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in Economic Income (Loss). Adjustments to reconcile to US GAAP net income (loss) included elimination of incentive income and management fees earned from the Consolidated Funds and addition of investment fund expenses excluding management fees paid, investment fund revenues and investment income (loss).

Other Adjustments:

(a) Economic Income (Loss) presents underwriting expenses net of investment banking revenues, expenses reimbursed

from clients within their respective expense category. Economic Income (Loss) also records retainer fees, relating to investment banking activities, collectible 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 which

are shown gross in interest income and interest expense for US GAAP.

uncrystallized incentive fees and (iii) the Company's 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) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of

revenues under US GAAP.

(f) Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of

expenses, within other revenue.

(g) Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss).

(h) Economic Income (Loss) excludes income taxes and acquisition related adjustments as management does not consider

these items when evaluating the performance of the segment.

(i) Economic Income (Loss) recognizes the Company's proportionate share of expenses, for certain real estate

operating entities and the activist business, for which the investments are recorded under the equity method of accounting for investments.

(j) Economic Income (Loss) excludes gain/(loss) on debt extinguishment.

For the three and six months ended June 30, 2019 and 2018, there was no one investment fund or other customer which represented more than 10% of the Company's total revenues.