[April 26, 2018] |
|
Cowen Announces Record First Quarter 2018 Financial Results
Cowen Inc. (NASDAQ:COWN) ("Cowen" or "the Company") today announced its
operating results for the first quarter ended March 31, 2018.
Financial Highlights
GAAP
-
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.
Economic Income (Non-GAAP)
-
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.
Operating Highlights
-
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.
|
Summary Financial Highlights
|
|
(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."
|
|
Jeffrey M. Solomon, Chief Executive Officer of Cowen, said, "We started
off the year with our strongest quarterly performance since the
formation of Cowen Inc. in 2009. Results were driven largely by growth
in our investment banking and brokerage businesses. These results
reflect the decisions we made to scale businesses, drive margin and
diversify revenue streams. We also continued to make progress on
integration and expense control post the Convergex acquisition. During
the quarter, we also made good initial progress on newer capital
allocation initiatives that we expect to improve long term shareholder
value."
GAAP Financial Review
|
Summary GAAP Financial Information
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|
(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.
|
|
Revenue was $251.4 million compared to $115.0 million in the first
quarter of 2017. The increase was primarily due to the acquisition of
Convergex in June 2017 and strong performance in investment banking as
well as an increase in interest and dividends attributable to securities
financing activities and debt issued during 2014 and 2017.
Employee compensation and benefits expense increased $58.5 million from
the prior year period to $135.1 million. The increase was primarily due
to $136.4 million higher revenue, which resulted in a higher
compensation and benefits accrual, and increased headcount from the
Convergex acquisition.
Interest and dividend expense was $24.5 million compared to $9.9 million
in the prior year period. This was primarily attributable to securities
finance activities related to the June 2017 acquisition of Convergex.
Reinsurance-related expense of $8.7 million increased $2.6 million from
the year ago period. This increase was was due to additional reinsurance
policies the Company entered into in late 2017.
Operating, general, administrative and other expenses increased $36.6
million year over year to $76.2 million. The increase is primarily
related to higher floor brokerage and trade execution costs, due to
higher brokerage revenue, as well as increased marketing and business
development expenses, legal and other professional fees and occupancy
costs, which are mostly related to the acquisition of Convergex in June
2017.
Depreciation and amortization expense of $3.2 million increased $0.2
million from the prior year period. The increase was primarily related
to an increase in amortization of intangible assets related to the
acquisition of Convergex in June 2017.
Other income was $33.8 million compared to $39.4 million in the prior
year period. The decrease primarily related to a decrease in performance
of the Company's own invested capital.
Income tax expense was $6.9 million compared to an income tax expense of
$1.9 million in the prior year quarter. This change is primarily
attributable to higher taxes due to the Company's operating results,
partially offset by the impact of the new reduced statutory Federal tax
rate enacted as part of the Tax Cuts and Jobs Act of 2017.
Income (loss) attributable to redeemable non-controlling interests
increased by $2.1 million to $11.2 million from the prior year period.
The increase was primarily the result of an increase in income earned by
the event driven and private healthcare consolidated funds in the
current year period.
Revenue Recognition
ASC Topic 606 resulted in a cumulative adjustment to retained earnings,
as of January 1, 2018, of $0.6 million related to uncrystallized
incentive fees. During the first quarter of 2018 we deferred $0.4
million of uncrystallized incentive fees and certain incentive fees
allocated to the Company are now presented under an equity ownership
model as net gains (losses) on securities. ASC Topic 606 also changed
the presentation of underwriting expenses to a gross basis which are now
included within our total expenses. ASC Topic 606 was not applied to
economic income (loss) reporting.
Capital
|
Select Balance Sheet Data
|
|
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Repurchase Program
In the first quarter 2018, the Company repurchased $7.6 million of its
common stock, or 539,800 shares, under the Company's existing share
repurchase program. Approximately $17.4 million remains available for
repurchase under the existing program.
Outside the share repurchase program, in the first quarter 2018, the
Company acquired approximately $4.9 million of shares as a result of net
share settlement relating to the vesting of equity awards, or
approximately 343,795 shares.
Economic Income (Loss)
Throughout the remainder of this press release the Company presents
Economic Income financial measures that are not prepared in accordance
with Generally Accepted Accounting Principles ("GAAP"). 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 (iv)
certain costs associated with debt and (v) preferred stock dividends. 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 funds. For US GAAP purposes, all of these items, are recorded in
other income (loss). Economic Income (Loss) recognizes incentive fees
during periods when the fees are not yet crystallized 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.
For a more complete description of Economic Income (Loss) and a
reconciliation of GAAP net income (loss) to Economic Income (Loss) for
the periods presented and additional information regarding the
reconciling adjustments, please see the "Non-GAAP Financial Measures"
section of this press release.
Economic Income (Non-GAAP) Financial Review
|
Summary Economic Income (Loss) Financial Information
|
|
(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.
|
|
|
Summary Economic Income (Loss) to GAAP Reconciliation
|
|
|
|
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.
|
|
Total Economic Income revenue was $241.5 million compared to $128.6
million in the first quarter of 2017. The increase in Economic Income
revenue was primarily attributable to an increase in investment banking
and brokerage activity.
|
Economic Income Revenue
|
|
|
|
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.
|
|
Non-interest expense was $209.3 million compared to $117.2 million in
the prior year period. Items included in non-interest expenses are
discussed below.
-
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).
Interest expense increased $1.6 million to $6.0 million compared to the
year ago period as a result of our refinancing activities in December
2017. Interest expense primarily relates to debt issued in 2014 and 2017.
Investment Management Segment
Assets Under Management
As of April 1, 2018, the Company had assets under management of $10.8
billion, a $0.2 billion decrease from January 1, 2018.
Management fees were $12.4 million compared to $13.1 million in the
prior year period. The decrease was primarily related to a decrease in
management fees from the healthcare royalty business.
Incentive income was $5.2 million compared to $3.1 million in the prior
year period. This increase was primarily related to an increase in
performance fees from the event driven and private healthcare businesses
as well as one of our funds.
Investment income for the segment was $11.9 million, compared to $15.1
million in the first quarter 2017. The decrease was primarily related to
a decrease in performance of the Company's own invested capital.
Investment Bank Segment
Brokerage revenue increased $61.8 million to $114.1 million in the first
quarter 2018 compared to $52.3 million in the first quarter 2017. This
was primarily attributable to the acquisition of Convergex in June 2017.
Investment banking revenue was $93.9 million, a 157% increase over the
prior year period. The increase was primarily due to higher equity
underwriting and advisory activity.
|
Investment Banking Revenue Summary
|
|
|
|
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
|
|
|
|
|
|
|
|
|
Investment Banking Transaction Count
|
|
|
|
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
|
|
|
|
|
|
Investment income for the segment was $2.4 million versus $6.5 million
in the first quarter 2017.
Earnings Conference Call with Management
The Company will host a conference call to discuss its 2018 first
quarter results on Thursday, April 26, 2018, at 9:00 am ET. The call can
be accessed by dialing 1-(855) 760-0961 domestic or 1-(631) 485-4850
international. The passcode for the call is 2092367. A replay of the
call will be available beginning at 12:00 pm ET April 26, 2018 through
12:00 pm ET May 3, 2018. To listen to the replay of this call, please
dial 1-(855) 859-2056 domestic or 1-(404) 537-3406 international and
enter passcode 2092367. The call can also be accessed through
live audio webcast or by delayed replay on the Company's website at www.cowen.com.
About Cowen Inc.
Cowen Inc. is a diversified financial services firm and, together with
its consolidated subsidiaries, provides investment management,
investment banking, research, sales and trading, prime brokerage, global
clearing and commission management through its two business segments:
Cowen Investment Management and its affiliates make up the Company's
investment management segment, while Cowen and Company, a member of
FINRA and SIPC, and its affiliates make up the Company's investment bank
segment. Cowen Investment Management provides investment management
solutions to a global client base and manages a significant portion of
Cowen's proprietary capital. Cowen and its affiliates offer industry
focused investment banking for growth-oriented companies, domain
knowledge-driven research, a sales and trading platform for
institutional investors, global clearing and commission management
services and also a comprehensive suite of prime brokerage services.
Founded in 1918, the firm is headquartered in New York and has offices
worldwide. To download Cowen's investor relations app, which offers
access to SEC filings, news releases, webcasts and presentations, please
visit the App
Store for iPhone and iPad or Google
Play for Android mobile devices.
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. 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.
|
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
|
|
|
|
|
|
|
Appendix: Non-GAAP Financial Measures
In addition to the results presented above in accordance with generally
accepted accounting principles, or GAAP, the Company presents financial
measures that are non-GAAP measures, such as Economic Income (Loss) and
Economic Income (Loss) excluding certain non-cash items. The Company
believes that these non-GAAP measures, viewed in addition to, and not in
lieu of, the Company's reported GAAP results, provide useful information
to investors regarding its performance and overall results of
operations. These metrics are an integral part of the Company's internal
reporting to measure the performance of its businesses and the overall
effectiveness of senior management. Reconciliations to comparable 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)
Economic Income (Loss) may not be comparable to similarly titled
measures used by other public companies. Cowen uses Economic Income
(Loss) as a measure of its operating performance, not as a measure of
liquidity. 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 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 GAAP, including its
consolidated funds. Economic Income (Loss) is considered by management
as a supplemental measure to the GAAP results to provide a more complete
understanding of its performance as management measures it.
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 (iv)
certain costs associated with debt and (v) preferred stock dividends. 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 funds. For US GAAP purposes, all of these items, are recorded in
other income (loss). Economic Income (Loss) recognizes incentive fees
during periods when the fees are not yet crystallized 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.
|
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.
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180426005809/en/
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