EX-99.1 2 ex991earningsreleaseq2.htm EX-99.1 Document





cowenlogo1a1211.jpg


COWEN ANNOUNCES RECORD FINANCIAL RESULTS FOR SECOND QUARTER 2020

•Reports Record 2Q20 US GAAP Net Income of $112.1 million or $3.83 per share
•Record Economic Operating Income of $166.9 million, or $5.69 per share
•The Nikola investment contributed $64.9 million to Economic Operating Income, or $2.21 per share
•Strong Book Value Growth, up $5.82 per share to $28.96, Tangible Book Value up $5.86 to $22.94 per share

NEW YORK - July 28, 2020 - Cowen Inc. (NASDAQ: COWN) (“Cowen” or “the Company”) today announced its operating results for the second quarter ended June 30, 2020.

Jeffrey M. Solomon, Chair and Chief Executive Officer of Cowen, said, "We outperformed across the entire organization in the second quarter. With record revenues in our banking and markets businesses as well as a strong contribution from our investment management operations, we generated record profitability, even before factoring in the unrealized investment gains from Nikola. In an environment of heightened volatility and macroeconomic uncertainty, we remain dedicated to helping our clients navigate with our strategic advice, capital raising expertise, advanced execution capabilities and world-class research and differentiated investment products.”
Second Quarter 2020 Financial Summary
US GAAPEconomic Operating Income
Three Months Ended
June 30,		Three Months Ended
June 30,
($ in millions, except per share information)20202019Δ %20202019Δ %
Revenue$418.8  $292.2  43 %$558.7  $244.4  129 %
Net income (loss) attributable to common stockholders$112.1  $4.1  N/A$166.9  $20.4  718 %
Earnings (loss) per common share (diluted)$3.83  $0.13  N/A$5.69  $0.65  775 %
Note: Throughout this press release the Company presents non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). A reconciliation of these non-GAAP measures appears under the section, "Reconciliation of US GAAP (Unaudited) to Economic Operating Income (Loss)."

Second Quarter 2020 Operating Financial Highlights (US GAAP) (unaudited)

Second quarter 2020 US GAAP revenue was $418.8 million compared to $292.2 million in the second quarter of 2019.

Second quarter 2020 US GAAP employee compensation and benefits expenses was $305.3 million, an increase of $168.9 million from the prior-year period.

Second quarter 2020 US GAAP income tax expense was $44.9 million compared to $5.1 million in the prior-year quarter.

Second quarter 2020 US GAAP total expenses totaled $411.5 million, an increase of $164.0 million from the prior-year period.

Second quarter 2020 US GAAP net income attributable to common stockholders was $112.1 million compared to net income attributable to common stockholders of $4.1 million in the second quarter of 2019.
1






Second Quarter 2020 Operating Financial Highlights (Non-GAAP)

•Record Investment Banking performance:
–Strongest quarter on record driven by capital markets activity in biotech and healthcare tools & diagnostics. Revenues for the month of June alone surpassed any quarter on record
–M&A revenue strong despite difficult economic backdrop, including record single fee from Nikola engagement

•Record markets revenues with continuing share gains:
–Markets revenue, which includes brokerage, financing and other revenue, was a record $169.2 million ($2.69 million/day)
–Posted strong performances in electronic trading, European trading, derivatives and prime brokerage
–Securities finance and special situations, including SPAC trading, rebounded sharply after a difficult 1Q20

•Strong momentum in investment management:
–Record incentive income accrual driven by IPOs in the healthcare investment strategy portfolio and strong performance in the activist strategy. Management fee revenue run-rate at highest level since 2016

•Invested capital - Strong returns with reduced risk:
–Record investment income driven by valuation of Nikola investment ($129.8 million) and rebound in other balance sheet investments
–Reduced investment risk in portfolio in March/April and increased hedging to reflect a more volatile trading environment due to economic uncertainty

Capital Optimization Update

As of June 30, 2020, Cowen had book value of $28.96 per common share and tangible book value per common
share of $22.94, up from book value of $24.77 and tangible book value of $18.72 at December 31, 2019.

In the second quarter of 2020, the Company repurchased $6.6 million of its common stock, or 446,800 shares, at an average price of $14.67 under the Company's existing share repurchase program.

Outside the share repurchase program, in the second quarter of 2020 the Company acquired approximately $3.2 million of shares as a result of net share settlements relating to the vesting of equity awards, or 262,160 shares, at an average price of $12.22.

For the first half of 2020, the Company repurchased 1,830,457 shares for $24.6 million, or an average price of $13.42 under the Company's existing share repurchase program. Outside the share repurchase program, in the first half of 2020 the Company acquired approximately $6 million of shares as a result of net share settlements relating to the vesting of equity awards, or 490,717 shares at an average price of $12.29.

Quarterly Cash Dividend

The Company maintained its quarterly cash dividend payable on its common stock. On July 21, 2020, the Board of Directors declared a cash dividend of $0.04 per common share, payable on September 15, 2020, to stockholders of record on September 1, 2020.

2





Select Balance Sheet Data
(Amounts in millions, except per share information)
June 30, 2020December 31, 2019
Cowen Inc. stockholders' equity$901.7$809.9
Common equity (CE)$800.4$708.5
Tangible common equity (TCE)$634.1$535.6
Book value per share (CE/CSO)$28.96$24.77
Tangible book value per share (TCE/CSO)$22.94$18.72
Common shares outstanding (CSO)27.628.6
Note: Common Equity (CE) is calculated as Cowen Inc, stockholders’ equity less our preferred stock issuance.
Tangible common equity (TCE) is calculated as common equity (CE) less goodwill and net intangible assets.


3





Cowen Inc.
US GAAP Preliminary Unaudited Condensed Consolidated Statements of Operations
(Dollar and share amounts in thousands, except per share data)
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Revenue
Investment banking$203,982  $114,705  $309,010  $194,811  
Brokerage147,224  111,382  286,586  208,845  
Management fees11,653  7,039  23,257  14,180  
Incentive income—  8  —  23  
Interest and dividends47,918  40,047  89,995  69,139  
Reimbursement from affiliates247  254  508  542  
Reinsurance premiums5,967  14,331  16,438  20,922  
Other1,490  930  3,340  1,991  
Consolidated Funds revenues359  3,468  3,515  5,808  
Total revenue418,840  292,164  732,649  516,261  
Interest and dividends expense49,304  39,528  88,096  68,612  
Total net revenue369,536  252,636  644,553  447,649  
Expenses
Employee compensation and benefits305,282  136,409  429,710  268,291  
Reinsurance claims, commissions and amortization of deferred acquisition costs6,434  10,782  16,864  16,944  
Operating, general, administrative and other expenses92,027  89,063  180,166  167,064  
Depreciation and amortization expense6,200  4,952  11,642  9,908  
Goodwill impairment—  4,100  —  4,100  
Consolidated Funds expenses1,585  2,231  4,299  3,713  
Total expenses411,528  247,537  642,681  470,020  
Other income (loss)
Net (losses) gains on securities, derivatives and other investments196,502  3,910  152,519  42,994  
Consolidated Funds net (losses) gains37,370  5,782  (35,795) 7,640  
Total other income (loss)233,872  9,692  116,724  50,634  
Income (loss) before income taxes191,880  14,791  118,596  28,263  
Income tax expense/(benefit)44,932  5,073  43,759  8,250  
Net income (loss)146,948  9,718  74,837  20,013  
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and funds33,113  3,906  (29,075) 4,418  
Net income (loss) attributable to Cowen Inc.113,835  5,812  103,912  15,595  
Less: Preferred stock dividends1,698  1,698  3,396  3,396  
Net income (loss) attributable to Cowen Inc. common stockholders$112,137  $4,114  $100,516  $12,199  
Earnings (loss) per share:
Basic$4.01  $0.14  $3.55  $0.41  
Diluted$3.83  $0.13  $3.39  $0.39  
Weighted average shares used in per share data:
Basic27,983  29,769  28,289  29,766  
Diluted29,316  31,522  29,644  31,572  





4





Second Quarter 2020 Economic Income Financial Review
Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
(Dollar amounts in thousands)Op CoAsset CoTotalOp CoAsset CoTotalOp CoAsset CoTotalOp CoAsset CoTotal
Investment banking$190,430  $—  $190,430  $104,216  $—  $104,216  $289,627  $—  $289,627  $187,212  $—  $187,212  
Brokerage167,067  —  167,067  124,044  —  124,044  299,739  —  299,739  235,916  —  235,916  
Management fees14,234  168  14,402  9,968  500  10,468  27,351  372  27,723  19,695  1,203  20,898  
Incentive income45,392  983  46,375  2,633  1,596  4,229  43,449  (1,161) 42,288  19,270  1,706  20,976  
Investment income (loss)142,379  (1,893) 140,486  (6,513) 3,626  (2,887) 122,931  (13,548) 109,383  2,914  4,467  7,381  
Other revenues(62) 2  (60) 4,304  15  4,319  498  2  500  5,427  51  5,478  
Total revenue559,440  (740) 558,700  238,652  5,737  244,389  783,595  (14,335) 769,260  470,434  7,427  477,861  
Interest Expense / Discount Amortization6,102  1,469  7,571  5,298  1,408  6,706  12,445  2,904  15,349  10,615  2,655  13,270  
Total net revenues553,338  (2,209) 551,129  233,354  4,329  237,683  771,150  (17,239) 753,911  459,819  4,772  464,591  
Compensation & Benefits304,644  438  305,082  134,454  1,955  136,409  429,650  1,136  430,786  264,703  3,652  268,355  
Fixed non-compensation expense34,755  105  34,860  37,171  1,244  38,415  72,094  251  72,345  71,428  1,862  73,290  
Variable non-compensation expense40,817  5  40,822  39,428  40  39,468  84,109  12  84,121  76,514  85  76,599  
Depreciation & Amortization5,657  6  5,663  4,945  7  4,952  11,085  12  11,097  9,884  24  9,908  
Non-Controlling Interest1,739  —  1,739  1,258  —  1,258  3,479  —  3,479  2,283  —  2,283  
Total expenses387,612  554  388,166  217,256  3,246  220,502  600,417  1,411  601,828  424,812  5,623  430,435  
Less: Preferred Dividend1,387  311  1,698  1,341  357  1,698  2,745  651  3,396  2,717  679  3,396  
Economic Income (Loss) attributable to Common Shareholders164,339  (3,074) 161,265  14,757  726  15,483  167,988  (19,301) 148,687  32,290  (1,530) 30,760  
Add: Depreciation & Amortization5,657  6  5,663  4,945  7  4,952  11,085  12  11,097  9,884  24  9,908  
Economic Operating Income (Loss) attributable to Common Shareholders$169,996  $(3,068) $166,928  $19,702  $733  $20,435  $179,073  $(19,289) $159,784  $42,174  $(1,506) $40,668  
Economic Income per common share$5.61  $(0.10) $5.50  $0.47  $0.02  $0.49  $5.67  $(0.65) $5.02  $1.02  $(0.05) $0.97  
Economic Operating Income per common share$5.80  $(0.10) $5.69  $0.63  $0.02  $0.65  $6.04  $(0.65) $5.39  $1.34  $(0.05) $1.29  


5






Revenues included in Economic Income were a record $558.7 million versus $244.4 million in the second quarter of 2019, an increase of 129%. Op Co revenue included in economic income was $559.4 million while Asset Co revenue included in economic income was a loss of $0.7 million.

Investment Banking revenues were a record $190.4 million, up 83% versus the prior-year period, driven by stronger ECM activity as well as higher-fee M&A transactions.

Brokerage revenues of $167.1 million were up 35% versus the prior-year period, driven by strength in derivatives, electronic trading and non-US trading.

Management Fees rose 38% year-over-year to $14.4 million in the second quarter, driven by the launch of the sustainability strategy and growth in assets in the private healthcare strategy and the healthcare royalties strategy. Management fees included a gain of $0.2 million in Asset Co.

Incentive Income posted record revenues of $46.4 million in the second quarter of 2020, up from $4.2 million in the prior-year period. Second quarter 2020 incentive income reflects stronger investment performance in the healthcare strategy and the activist strategy, as well as a gain of $1.0 million in Asset Co.

Investment Income posted record revenues of $140.5 million, versus a loss of $2.9 million in the prior-year period. The second quarter 2020 revenues include a $129.8 million unrealized gain on the investment in Nikola and improved performance in the event driven strategy, the healthcare strategy and the activist strategy. Investment income includes markdowns in Asset Co investments of $1.9 million.

Compensation and benefits expense was $305.1 million compared to $136.4 million in the second quarter of 2019. The increase was due to higher revenues, and includes a 50% compensation-to-revenue accrual for the unrealized gains from the Nikola investment. Despite the increase in the compensation accrual amount, the second quarter 2020 compensation-to-revenue ratio fell to 54.6%, down from 59.6% in 1Q20 and down from 55.8% in 2Q19.

Fixed non-compensation expenses decreased $3.6 million from the prior-year period to $34.9 million. The decrease was due in part to lower professional fees and consulting costs.

Variable non-compensation expenses were $40.8 million, up from $39.5 million in the second quarter of 2019. The increase is related in part to higher brokerage and trade execution costs due to increased volumes, offset by lower travel, entertainment and business development expenses.

Economic Operating Income, which represents Economic Income attributable to common stockholders before depreciation and amortization, was $166.9 million for the second quarter of 2020, up from $20.4 million in the prior-year period. Second quarter 2020 Economic Operating Income for Op Co was $170.0 million, while Asset Co Economic Operating loss was $3.1 million.

Assets Under Management As of June 30, 2020, the Company had assets under management of $11.5 billion, up $0.7 billion from March 31, 2020 and a decrease of $0.6 billion from June 30, 2019, respectively.

Invested Capital As of June 30, 2020, the Company had invested capital in Op Co totaling $711.8 million, up from $539.9 million as of March 31, 2020. The biggest increase was the stake in Nikola Corporation ($129.8 million).

As of July 1, 2020, the Company had invested capital in Asset Co totaling $124.4 million, a reduction of $2.3 million from the invested capital invested as of March 31, 2020.

The largest Asset Co investments were the stake in Italian wireless broadband provider Linkem ($73.6 million), private equity funds Formation8/Eclipse ($38.9 million) and other private investments ($5.1 million).

6





Earnings Conference Call
 
Management will hold a conference call today, July 28, 2020 at 9:00 am ET to discuss these results and provide an update on business conditions.

Chair and Chief Executive Officer Jeffrey M. Solomon and Chief Financial Officer Stephen A. Lasota will host the presentation, followed by a question and answer period.

U.S. dial in: (855) 760-0961
International dial-in: (631) 485-4850
Passcode: 5580959

Please call the conference telephone number at least 15 minutes prior to the start time.

The call can also be accessed through live audio webcast via this direct link:
http://edge.media-server.com/mmc/p/bohrvhbk

A replay of the call will be available for one week beginning at 12:00 pm ET on July 28, 2020 on the Company’s website at investor.cowen.com/events/ or via the following numbers:

U.S. replay dial-in: (855) 859-2056
International replay dial-in: (404) 537-3406
Replay ID: 5580959

About Cowen Inc.
Cowen Inc. (“Cowen” or the “Company”) is a diversified financial services firm offering investment banking services, research, sales and trading, prime brokerage, global clearing, commission management services and investment management. Cowen focuses on delivering value-added capabilities to our clients in order to help them outperform. Founded in 1918, the Company is headquartered in New York and has offices worldwide. Learn more at Cowen.com 

Investor Relations Contact:
JT Farley
(646) 562-1056
james.farley@cowen.com
Source: Cowen Inc.

























7






Cautionary Note Regarding Forward-Looking Statements
 
This press release contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events. Forward-looking statements include statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. As a result of the spread of COVID-19, economic uncertainties have arisen that have the potential in future periods to negatively impact the Company’s business, financial condition, results of operation, cash flows, strategies and prospects. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and impact on our clients, employees, vendors and the markets in which we operate our businesses, all of which are uncertain and cannot be reasonably estimated at this time. The Company’s actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. The Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are available at our website at www.cowen.com and at the Securities and Exchange Commission website at www.sec.gov. Unless required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this press release.


 Non-GAAP Financial Measures
 
In addition to the results presented above in accordance with US GAAP, the Company presents supplemental financial measures that are non-GAAP measures. The Company believes that these non-GAAP measures, viewed in addition to, and not in lieu of, the Company’s reported US GAAP results, provide useful information to investors and analysts regarding its performance and overall results of operations as it presents investors and analysts with a supplemental operating view of the Company’s financials to help better inform their analysis of the Company’s performance.  These metrics are an integral part of the Company’s internal reporting to measure the performance of its business segments, allocate capital and other strategic decisions as well as assess the overall effectiveness of senior management. Reconciliations to comparable US GAAP measures are available in the accompanying schedules. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other public companies, and are not identical to corresponding measures used in our various agreements or public filings.
 
Economic Income (Loss) may not be comparable to similarly titled measures used by other public companies. Economic Income (Loss) should not be considered in isolation or as a substitute for operating income, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared in accordance with US GAAP. As a result of the adjustments made to arrive at Economic Income (Loss) described below, Economic Income (Loss) has limitations in that it does not take into account certain items included or excluded under US GAAP, including its consolidated funds.
 
In general, Economic Income (Loss) is a pre-tax measure that (i) includes management reclassifications which the Company believes provides additional insight on the performance of the Company’s core businesses and divisions (ii) eliminates the impact of consolidation for Consolidated Funds and excludes (iii) goodwill and intangible impairment (iv) certain other transaction-related adjustments and/or reorganization expenses and (v) certain costs associated with debt. Economic Operating Income (Loss) is a similar measure but before depreciation and amortization expenses.











8






Reconciliation of Net Income Attributable to Cowen Inc. Common Stockholders to Economic Income and Economic Operating Income

Three Months EndedSix Months Ended
June 30,June 30,
(Dollar amounts in thousands)
2020201920202019
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders$112,137  $4,114  $100,516  $12,199  
Adjustments:
Income tax expense (benefit)44,837  5,039  43,554  8,281  
Uncrystallized incentive fees—  150  —  606  
Amortization of discount on convertible debt1,131  1,071  2,242  2,117  
Retainer fees revenue deferred for US GAAP—  836  —  2,272  
Contingent liability adjustments2,596  —  1,758  —  
Goodwill & intangible impairment545  4,100  545  4,100  
Transaction-related and other costs19  173  72  1,185  
Economic Income (Loss)$161,265  $15,483  $148,687  $30,760  
Add back: Depreciation and amortization expense5,663  4,952  11,097  9,908  
Economic Operating Income (Loss)$166,928  $20,435  $159,784  $40,668  
Earnings Per Common Share (Diluted) to Economic Income Per Common Share (Diluted) and Economic Operating Income Per Common Share (Diluted)

Three Months EndedSix Months Ended
June 30,June 30,
(Dollars per share)2020201920202019
Earnings (loss) per common share (diluted):$3.83  $0.13  $3.39  $0.39  
Adjustments:
Income tax expense (benefit)1.53  0.16  1.47  0.26  
Uncrystallized incentive fees—  —  —  0.02  
Amortization of discount on convertible debt0.04  0.03  0.08  0.07  
Retainer fees revenue deferred for US GAAP—  0.03  —  0.07  
Fund start-up costs recognized for US GAAP—  —  —  —  
Contingent liability adjustments0.09  —  0.06  —  
Goodwill & intangible impairment0.01  0.13  0.02  0.12  
Transaction-related and other costs—  0.01  —  0.04  
Economic income (Loss) per common share (diluted) $5.50  $0.49  $5.02  $0.97  
Add back: Depreciation and amortization expense0.19  0.16  0.37  0.32  
Economic Operating Income (Loss) per common share (diluted)$5.69  $0.65  $5.39  $1.29  

9






 Three Months Ended June 30, 2020
 US GAAPReclassifications and Adjustments Economic Income
(Dollars amounts in thousands)Net income (loss)Management ReclassificationsFund Consolidation Reclassifications (j)Income Statement Adjustments Total Economic Income/(Loss)Operating CompanyAsset Company
Revenues    
Investment banking$203,982  $(13,552) a, b$—  $—  $190,430  $190,430  $—  
Brokerage147,224  19,843  c, h—  —  167,067  167,067  —  
Management fees11,653  2,114  d, e635  —  14,402  14,234  168  
Incentive income (loss)—  46,375  e—  —  46,375  45,392  983  
Investment income (loss)—  140,486  f—  —  140,486  142,379  (1,893) 
Interest and dividends47,918  (47,918) c—  —  —  —  —  
Reimbursement from affiliates247  (272) b25  —  —  —  —  
Reinsurance premiums5,967  (5,967) g—  —  —  —  —  
Other revenue1,490  (1,532) g(18) —  (60) (62) 2  
Consolidated Funds revenues359  —  (359) —  —  —  —  
Total revenues418,840  139,577  283  —  558,700  559,440  (740) 
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)49,304  (40,602) c—  (1,131) l7,571  6,102  1,469  
Total net revenues369,536  180,179  283  1,131  551,129  553,338  (2,209) 
Expenses 
Compensation & Benefits305,282  (200) i—  305,082  304,644  438  
Fixed non-compensation expense—  37,475  e, j—  (2,615) m34,860  34,755  105  
Variable non-compensation expense—  40,822  j—  —  40,822  40,817  5  
Other non-compensation US GAAP expense98,461  (98,461) a, b, d, g, i—  —  —  —  —  
Depreciation & Amortization6,200  8  —  (545) p5,663  5,657  6  
Non-Controlling Interest—  1,739  j—  —  1,739  1,739  —  
Consolidated Funds expenses1,585  —  (1,585) —  —  —  —  
Total expenses411,528  (18,617) (1,585) (3,160) 388,166  387,612  554  
Other income (loss)233,872  (201,994) e, f, h(31,878) —  —  —  —  
Income taxes expense / (benefit)44,932  (95) —  44,837  n—  —  —  
Income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds33,113  (3,103) j(30,010) —  —  —  —  
Income (loss) attributable to Cowen Inc.113,835  —  —  (40,546) 162,963  165,726  (2,763) 
Less: Preferred stock dividends1,698  —  —  —  1,698  1,387  311  
Economic Income (Loss)/ Income (loss) attributable to Cowen Inc. common stockholders112,137  —  —  (40,546) 161,265  164,339  (3,074) 
Add back: Depreciation and amortization expense5,663  5,657  6  
Economic Operating Income (Loss)$166,928  $169,996  $(3,068) 




10






 Three Months Ended June 30, 2019
 US GAAPReclassifications and AdjustmentsEconomic Income
(Dollars amounts in thousands)Net income (loss)Management ReclassificationsFund Consolidation Reclassifications (k)Income Statement AdjustmentsTotal Economic Income/(Loss)Operating CompanyAsset Company
Revenues   
Investment banking$114,705  $(11,325) a, b$—  $836  o$104,216  $104,216  $—  
Brokerage111,382  12,662  c, h—  —  124,044  124,044  —  
Management fees7,039  2,864  d, e565  —  10,468  9,968  500  
Incentive income (loss)8  4,071  e—  150  o4,229  2,633  1,596  
Investment income (loss)—  (2,887) f—  —  (2,887) (6,513) 3,626  
Interest and dividends40,047  (40,047) c—  —  —  —  —  
Reimbursement from affiliates254  (287) b33  —  —  —  —  
Reinsurance premiums14,331  (14,331) g—  —  —  —  —  
Other revenue930  3,401  g(12) —  4,319  4,304  15  
Consolidated Funds revenues3,468  —  (3,468) —  —  —  —  
Total revenues292,164  (45,879) (2,882) 986  244,389  238,652  5,737  
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)39,528  (31,751) c—  (1,071) l6,706  5,298  1,408  
Total net revenues252,636  (14,128) (2,882) 2,057  237,683  233,354  4,329  
Expenses  
Compensation & Benefits136,409  —  i—  —  136,409  134,454  1,955  
Fixed non-compensation expense—  38,588  e, j—  (173) m38,415  37,171  1,244  
Variable non-compensation expense—  39,468  j—  —  39,468  39,428  40  
Other non-compensation US GAAP expense99,845  (99,845) a, b, d, g, i—  —  —  —  —  
Depreciation & Amortization4,952  —  —  —  4,952  4,945  7  
Non-Controlling Interest—  1,258  j—  —  1,258  1,258  —  
Goodwill impairments4,100  —  —  (4,100) p—  —  —  
Consolidated Funds expenses2,231  —  (2,231) —   —  —  —  
Total expenses247,537  (20,531) (2,231) (4,273)  220,502  217,256  3,246  
Other income (loss)9,692  (6,865) e, f, h(2,827) —  —  —  —  
Income taxes expense / (benefit)5,073  (34) —  (5,039) o—  —  —  
Income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds3,906  (428) j(3,478)  —  —  —  
Income (loss) attributable to Cowen Inc.5,812  —  —  11,369  17,181  16,098  1,083  
Less: Preferred stock dividends1,698  —  —  —  1,698  1,341  357  
Economic Income (Loss)/ Income (loss) attributable to Cowen Inc. common stockholders4,114  —  —  11,369  15,483  14,757  726  
Add back: Depreciation and amortization expense4,952  4,945  7  
Economic Operating Income (Loss)$20,435  $19,702  $733  


11






Six Months Ended June 30, 2020
US GAAPReclassifications and AdjustmentsEconomic Income
(Dollars amounts in thousands)Net income (loss)Management ReclassificationsFund Consolidation Reclassifications (k)Income Statement AdjustmentsTotal Economic Income/(Loss)Operating CompanyAsset Company
Revenues
Investment banking$309,010  $(19,383) a, b$—  $—  $289,627  $289,627  $—  
Brokerage286,586  13,153  c, h—  —  299,739  299,739  —  
Management fees23,257  3,154  d, e1,312  —  27,723  27,351  372  
Incentive income (loss)—  42,288  e—  —  42,288  43,449  (1,161) 
Investment income (loss)—  109,383  f—  —  109,383  122,931  (13,548) 
Interest and dividends89,995  (89,995) c—  —  —  —  —  
Reimbursement from affiliates508  (558) b50  —  —  —  —  
Reinsurance premiums16,438  (16,438) g—  —  —  —  —  
Other revenue3,340  (2,822) g(18) —  500  498  2  
Consolidated Funds revenues3,515  —  (3,515) —  —  —  —  
Total revenues732,649  38,782  (2,171) —  769,260  783,595  (14,335) 
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)88,096  (70,505) c—  (2,242) l15,349  12,445  2,904  
Total net revenues644,553  109,287  (2,171) 2,242  753,911  771,150  (17,239) 
Expenses
Compensation & Benefits429,710  1,076  i—  —  430,786  429,650  1,136  
Fixed non-compensation expense—  74,175  e, j—  (1,830) m72,345  72,094  251  
Variable non-compensation expense—  84,121  j—  —  84,121  84,109  12  
Other non-compensation US GAAP expense197,030  (197,030) a, b, d, g, i—  —  —  
Depreciation & Amortization11,642  —  —  (545) p11,097  11,085  12  
Non-Controlling Interest—  3,479  j—  —  3,479  3,479  —  
Consolidated Funds expenses4,299  —  (4,299) —  —  —  —  
Total expenses642,681  (34,179) (4,299) (2,375) 601,828  600,417  1,411  
Other income (loss)116,724  (146,902) e, f, h30,178  —  —  —  —  
Income taxes expense / (benefit)43,759  (205) —  (43,554) —  —  —  
Income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds(29,075) (3,231)  j32,306  —  —  —  —  
Income (loss) attributable to Cowen Inc.$103,912  —  —  48,171  n152,083  170,733  (18,650) 
Less: Preferred stock dividends3,396  —  —  —  3,396  2,745  651  
Economic Income (Loss)/ Income (loss) attributable to Cowen Inc. common stockholders$100,516  $—  $—  $48,171  148,687  167,988  (19,301) 
Add back: Depreciation and amortization expense11,097  11,085  12  
Economic Operating Income (Loss)$159,784  $179,073  $(19,289) 


12






Six Months Ended June 30, 2019
US GAAPReclassifications and AdjustmentsEconomic Income
(Dollars amounts in thousands)Net income (loss)Management ReclassificationsFund Consolidation Reclassifications (k)Income Statement AdjustmentsTotal Economic Income/(Loss)Operating CompanyAsset Company
Revenues
Investment banking$194,811  $(9,871) a, b$—  $2,272  o$187,212  $187,212  $—  
Brokerage208,845  27,071  c, h—  —  235,916  235,916  —  
Management fees14,180  5,651  d, e1,067  —  20,898  19,695  1,203  
Incentive income (loss)23  19,804  e543  606  o20,976  19,270  1,706  
Investment income (loss)—  7,381  f—  —  7,381  2,914  4,467  
Interest and dividends69,139  (69,139) c—  —  —  —  —  
Reimbursement from affiliates542  (609) b67  —  —  —  —  
Reinsurance premiums20,922  (20,922) g—  —  —  —  —  
Other revenue1,991  3,499  g(12) —  5,478  5,427  51  
Consolidated Funds revenues5,808  —  (5,808) —  —  —  —  
Total revenues516,261  (37,135) (4,143) 2,878  477,861  470,434  7,427  
Interest expense (Economic Income/(Loss)) / Interest and dividend expense (US GAAP)68,612  (53,225) c—  (2,117) l13,270  10,615  2,655  
Total net revenues447,649  16,090  (4,143) 4,995  464,591  459,819  4,772  
Expenses
Compensation & Benefits268,291  64  i—  —  268,355  264,703  3,652  
Fixed non-compensation expense—  74,475  e, j—  (1,185) m73,290  71,428  1,862  
Variable non-compensation expense—  76,599  j—  —  76,599  76,514  85  
Other non-compensation US GAAP expense184,008  (184,008) a, b, d, g, i—  —  —  —  —  
Depreciation & Amortization9,908  —  —  —  9,908  9,884  24  
Non-Controlling Interest—  2,283  j—  —  2,283  2,283  —  
Goodwill impairment4,100  —  —  (4,100) p—  —  —  
Consolidated Funds expenses3,713  —  (3,713) —  —  —  —  
Total expenses470,020  (30,587) (3,713) (5,285) 430,435  424,812  5,623  
Other income (loss)50,634  (47,186) e, f, h(3,448) —  —  —  —  
Income taxes expense / (benefit)8,250  31  —  (8,281) n—  —  —  
Income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds4,418  (540) j(3,878) —   —  —  —  
Income (loss) attributable to Cowen Inc.$15,595  —  —  18,561  34,156  35,007  (851) 
Less: Preferred stock dividends3,396  —  —  —  3,396  2,717  679  
Economic Income (Loss)/ Income (loss) attributable to Cowen Inc. common stockholders$12,199  $—  $—  $18,561  30,760  32,290  (1,530) 
Add back: Depreciation and amortization expense9,908  9,884  24  
Economic Operating Income (Loss)$40,668  $42,174  $(1,506) 


13





Adjustments made to US GAAP net income (loss) to arrive at Economic Operating Income (Loss)
Management Reclassifications
Management reclassification adjustments and fund consolidation reclassification adjustments have no effect on economic income. These adjustments are reclassifications to change the location of certain line items.
aEconomic Income (Loss) presents underwriting expenses net of investment banking revenues.
bEconomic Income (Loss) presents expenses reimbursed from clients and affiliates within their respective expense category but is included as a part of revenues under US GAAP.
cEconomic 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.
dEconomic Income (Loss) recognizes revenues net of fund start-up costs and distribution fees paid to agents.
eEconomic Income (Loss) recognizes the Company's proportionate share of management and incentive fees and associated share of expenses on a gross basis for certain real estate operating entities, the healthcare royalty business and the activist business. Additionally, carried interest, which the Company applies an equity ownership model to, is recorded in other income (loss) for US GAAP and is shown as incentive income for Economic Income (Loss).
fEconomic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends) for which the majority of this activity is shown in other income (loss) for US GAAP reporting.
gEconomic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. The costs are recorded within expenses for US GAAP reporting.
hEconomic Income (Loss) recognizes gains and losses on investments held as part of the Company's facilitation and trading business within brokerage revenues as these investments are directly related to the markets business activities.
iEconomic Income (Loss) presents certain payments to associated banking partners as compensation rather than non-compensation expenses.
jEconomic Income (Loss) presents US GAAP expenses as either Fixed non-compensation or Variable non-compensation expenses. The Company also presents US GAAP Income (loss) attributable to non-controlling interests within total other expenses for Economic Income (Loss).
Fund Consolidation Reclassifications
kThe 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).
Income Statement Adjustments
lEconomic Income (Loss) excludes the amortization of discount on convertible debt.
mEconomic Income (Loss) excludes acquisition related adjustments as management does not consider these items when evaluating the performance of the Company.
nEconomic Income (Loss) excludes income taxes.
oFor periods prior to the first quarter of 2020, Economic Income (Loss) records a) income from uncrystallized incentive fees and b) retainer fees, relating to investment banking activities, earned during the period that would otherwise be deferred until closing for US GAAP reporting. Similar amounts are not adjusted subsequently.
pEconomic Income (Loss) excludes goodwill and intangible impairment.

14