Market Overview

Cohen & Company Reports Second Quarter 2018 Financial Results

Share:

PHILADELPHIA and NEW YORK, Aug. 01, 2018 (GLOBE NEWSWIRE) -- Cohen & Company Inc. (NYSE:COHN), formerly known as Institutional Financial Markets, Inc., a financial services firm specializing in fixed income markets, today reported financial results for its second quarter ended June 30, 2018. 

Summary Operating Results

                     
      Three Months Ended       Six Months Ended  
($ in thousands) 6/30/18   3/31/18   6/30/17   6/30/18   6/30/17  
                     
Total revenues $   12,190     $   9,338     $   11,374     $   21,528     $   25,866    
Compensation and benefits     6,589         5,194         5,549         11,783         12,734    
Non-compensation operating expenses     4,226         4,504         4,099         8,730         8,818    
Operating income     1,375         (360 )       1,726         1,015         4,314    
Interest expense, net     (2,201 )       (1,819 )       (1,112 )       (4,020 )       (2,724 )  
Income (loss) before income tax expense (benefit)     (826 )       (2,179 )       614         (3,005 )       1,590    
Income tax expense (benefit)     (636 )       (28 )       2         (664 )       7    
Net income (loss)     (190 )       (2,151 )       612         (2,341 )       1,583    
Less: Net income (loss) attributable to the noncontrolling interest     (270 )       (677 )       186         (947 )       485    
Net income (loss) attributable to Cohen & Company Inc. $   80     $   (1,474 )   $   426     $   (1,394 )   $   1,098    
Fully diluted net income (loss) per share $   0.07     $   (1.26 )   $   0.35     $   (1.19 )   $   0.84    
                     

 

  • Revenues during the three months ended June 30, 2018 increased $2.9 million and $0.8 million from the prior quarter and prior year quarter, respectively.
     
    • The increase from the prior quarter was comprised primarily of (i) an increase of $1.0 million in net trading from higher trading activity primarily in municipals, corporates, and GCF matched book repo; (ii) an increase of $1.4 million in asset management due to performance fees earned on European managed accounts in the current quarter; (iii) an increase of $1.0 million in principal transactions due to favorable marks on the Company's investment in EuroDekania; partially offset by (iv) a decrease of $0.5 million in new issue and advisory. 
       
    • The increase from the prior year quarter was comprised primarily of (i) an increase of $1.1 million in net trading from higher trading activity primarily in corporates and GCF matched book repo; (ii) an increase of $1.5 million in asset management due to performance fees earned on European managed accounts in the current quarter; (iii) an increase of $1.4 million in principal transactions due to favorable marks on the Company's investments in EuroDekania, CLO equity, and SPAC equity; partially offset by (iv) a decrease of $2.5 million in other revenue due to a large Star Asia revenue share payment earned in 2017; and (v) a decrease of $0.7 million in new issue and advisory.
       
  • Compensation as a percentage of revenue was 54% for the three months ended June 30, 2018, compared to 56% for the three months ended March 31, 2018, and 49% for the three months ended June 30, 2017. The number of Cohen & Company employees was 87 as of June 30, 2018, compared to 92 as of March 31, 2018, and 82 as of June 30, 2017.
     
  • Interest expense during the three months ended June 30, 2018 increased from the prior quarter and prior year quarter by $0.4 million and $1.1 million, respectively. The increase from the prior quarter was primarily due to $0.2 million of increased interest on redeemable financial instruments, $0.1 million related to a new credit facility, and $0.1 million of increased interest on junior subordinated notes. The increase from the prior year quarter was primarily due to $0.9 million of increased interest on redeemable financial instruments, $0.1 million related to a new credit facility, and $0.1 million of increased interest on junior subordinated notes.
     
  • Income tax benefit increased in the quarter ending June 30, 2018 as a result of the Company estimating that it will incur a net operating loss for 2018 for US income tax purposes.  Therefore, the Company expects to have additional net operating loss carryforwards available to offset a portion of its deferred tax liability in future years. The reduction of the deferred tax liability is recorded as an income tax benefit.

Lester Brafman, Chief Executive Officer of Cohen & Company, said, "We are pleased with the Company's second quarter results, which reflect our improved performance and continued focus on executing our strategic plan. Revenue in the second quarter was driven by better performance in our broker-dealer business as well as gains in our Asset Management and Principal Investing business segments. We continue to focus on the development of several new revenue sources across our Asset Management and Capital Markets platforms that are less dependent on the day-to-day fluctuations of the financial markets. We remain committed to enhancing stockholder value, and in the second quarter we continued to pay our quarterly dividend."  

Total Equity and Dividend Declaration

  • As of June 30, 2018, total equity was $44.9 million, compared to $48.2 million as of December 31, 2017.
  • The Company's Board of Directors has declared a dividend of $0.20 per share. The dividend will be payable on August 31, 2018, to stockholders of record on August 17, 2018. 

Conference Call

Management will hold a conference call this morning at 10:00 a.m. Eastern Time to discuss these results. The conference call will also be available via webcast. Interested parties can access the webcast by clicking the webcast link on the Company's website at www.cohenandcompany.com. Those wishing to listen to the conference call with operator assistance can dial (877) 686-9573 (domestic) or (706) 643-6983 (international), participant pass code 4396513, or request the Cohen & Company earnings call.  A replay of the call will be available for two weeks following the call by dialing (800) 585-8367 (domestic) or (404) 537-3406 (international), participant pass code 4396513.

About Cohen & Company

Cohen & Company is a financial services company specializing in fixed income markets. It was founded in 1999 as an investment firm focused on small-cap banking institutions, but has grown to provide an expanding range of capital markets and asset management services. Cohen & Company's operating segments are Capital Markets, Asset Management, and Principal Investing. The Capital Markets segment consists of fixed income sales, trading, and matched book repo financing as well as new issue placements in corporate and securitized products, and advisory services, operating primarily through Cohen & Company's subsidiaries, J.V.B. Financial Group, LLC in the United States and Cohen & Company Financial Limited in Europe. The Asset Management segment manages assets through collateralized debt obligations, managed accounts, and investment funds. As of June 30, 2018, the Company managed approximately $3.2 billion in fixed income assets in a variety of asset classes including US and European trust preferred securities, subordinated debt, and corporate loans. As of June 30, 2018, 88.2% of the Company's assets under management were in collateralized debt obligations that Cohen & Company manages, which were all securitized prior to 2008. The Principal Investing segment has historically been comprised of investments in Cohen & Company's sponsored investment vehicles, but has changed to include investments in certain non-sponsored vehicles. For more information, please visit www.cohenandcompany.com.

Forward-looking Statements

This communication contains certain statements, estimates, and forecasts with respect to future performance and events. These statements, estimates, and forecasts are "forward-looking statements." In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may,"  " might,"  "will,"  "should," "expect," "plan,"  "anticipate,"  "believe,"  "estimate," "predict," "potential," "seek," or "continue" or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this communication are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties, and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied in the forward-looking statements including, but not limited to, those discussed under the heading "Risk Factors" and "Management's Discussion and Analysis of Financial Condition" in our filings with the Securities and Exchange Commission ("SEC"), which are available at the SEC's website at www.sec.gov and our website at www.cohenandcompany.com/investor-relations/sec-filings. Such risk factors include the following: (a) a decline in general economic conditions or the global financial markets, (b) losses caused by financial or other problems experienced by third parties, (c) losses due to unidentified or unanticipated risks, (d) a lack of liquidity, i.e., ready access to funds for use in our businesses, (e) the ability to attract and retain personnel, (f) litigation and regulatory issues, (g) competitive pressure, (h) an inability to generate incremental income from acquired businesses, (i) unanticipated market closures due to inclement weather or other disasters, (j) losses (whether realized or unrealized) on our principal investments, including on our CLO investments, (k) the possibility that payments to the Company of subordinated management fees from its European CLO will continue to be deferred or will be discontinued, and (l) the possibility that the stockholder rights plan may fail to preserve the value of the Company's deferred tax assets, whether as a result of the acquisition by a person of 5% of the Company's common stock or otherwise. As a result, there can be no assurance that the forward-looking statements included in this communication will prove to be accurate or correct. In light of these risks, uncertainties, and assumptions, the future performance or events described in the forward-looking statements in this communication might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Cautionary Note Regarding Quarterly Financial Results

Due to the nature of our business, our revenue and operating results may fluctuate materially from quarter to quarter.  Accordingly, revenue and net income in any particular quarter may not be indicative of future results. Further, our employee compensation arrangements are in large part incentive-based and, therefore, will fluctuate with revenue. The amount of compensation expense recognized in any one quarter may not be indicative of such expense in future periods.  As a result, we suggest that annual results may be the most meaningful gauge for investors in evaluating our business performance.
  

                   
  COHEN & COMPANY INC.                    
  CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)                    
  (in thousands, except per share data)                    
                                             
          Three Months Ended       Six Months Ended                      
      6/30/18   3/31/18   6/30/17   6/30/18   6/30/17                    
    Revenues                                        
    Net trading $   7,186     $   6,191     $   6,095     $   13,377     $   14,170                        
    Asset management     3,205         1,804         1,731         5,009         4,423                        
    New issue and advisory     177         696         868         873         1,980                        
    Principal transactions     1,443         449         21         1,892         490                        
    Other revenue     179         198         2,659         377         4,803                        
    Total revenues     12,190         9,338         11,374         21,528         25,866                        
    Operating expenses                                        
    Compensation and benefits     6,589         5,194         5,549         11,783         12,734                        
    Business development, occupancy, equipment     644         867         697         1,511         1,283                        
    Subscriptions, clearing, and execution     2,151         1,834         1,667         3,985         3,380                        
    Professional services and other operating     1,379         1,742         1,674         3,121         4,028                        
    Depreciation and amortization     52         61         61         113         127                        
    Total operating expenses     10,815         9,698         9,648         20,513         21,552                        
    Operating income (loss)     1,375         (360 )       1,726         1,015         4,314                        
    Non-operating income (expense)                                        
    Interest expense, net     (2,201 )       (1,819 )       (1,112 )       (4,020 )       (2,724 )                      
    Income (loss) before income tax expense (benefit)     (826 )       (2,179 )       614         (3,005 )       1,590                        
    Income tax expense (benefit)     (636 )       (28 )       2         (664 )       7                        
    Net income (loss)     (190 )       (2,151 )       612         (2,341 )       1,583                        
    Less: Net income (loss) attributable to the noncontrolling interest     (270 )       (677 )       186         (947 )       485                        
    Net income (loss) attributable to Cohen & Company Inc. $   80     $   (1,474 )   $   426     $   (1,394 )   $   1,098                        
                                             
  Earnings per share                    
    Basic                                        
    Net income (loss) attributable to Cohen & Company Inc. $   80     $   (1,474 )   $   426     $   (1,394 )   $   1,098                        
    Basic shares outstanding     1,173         1,172         1,217         1,173         1,208                        
    Net income (loss) attributable to Cohen & Company Inc. per share $   0.07     $   (1.26 )   $   0.35     $   (1.19 )   $   0.91                        
    Fully Diluted                                        
    Net income (loss) attributable to Cohen & Company Inc. $   80     $   (1,474 )   $   426     $   (1,394 )   $   1,098                        
    Net income (loss) attributable to the noncontrolling interest     (270 )       (677 )       186         (947 )       485                        
    Net interest attributable to convertible debt     -          -          354         -          435                        
    Income tax and conversion adjustment     306         7         -          313         -                         
    Enterprise net income (loss) $   116     $   (2,144 )   $   966     $   (2,028 )   $   2,018                        
    Basic shares outstanding     1,173         1,172         1,217         1,173         1,208                        
    Unrestricted Operating LLC membership units exchangeable into COHN shares     532         532         532         532         532                        
    Additional share attributable to convertible debt     -          -          1,035         -          644                        
    Additional dilutive shares     14         -          8         -          14                        
    Fully diluted shares outstanding     1,719         1,704         2,792         1,705         2,398                        
    Fully diluted net income (loss) per share $   0.07     $   (1.26 )   $   0.35     $   (1.19 )   $   0.84                        
                                             
                       
                     


 
  COHEN & COMPANY INC.  
  CONSOLIDATED BALANCE SHEETS  
  (in thousands)  
               
      June 30, 2018        
      (unaudited)   December 31, 2017    
    Assets          
    Cash and cash equivalents $   16,621     $   22,933      
    Receivables from brokers, dealers, and clearing agencies     95,321         103,596      
    Due from related parties     464         545      
    Other receivables     4,571         3,513      
    Investments - trading     180,236         202,257      
    Other investments, at fair value     31,424         12,867      
    Receivables under resale agreements     2,415,347         1,680,883      
    Goodwill     7,992         7,992      
    Other assets     2,785         1,672      
    Total assets $   2,754,761     $   2,036,258      
               
    Liabilities          
    Payables to brokers, dealer, and clearing agencies $   89,916     $   130,558      
    Accounts payable and other liabilities     9,089         5,208      
    Accrued compensation     2,777         4,406      
    Trading securities sold, not yet purchased     88,546         91,887      
    Securities sold under agreements to repurchase     2,455,973         1,692,279      
    Deferred income taxes     2,166         2,855      
    Redeemable financial instruments     16,732         16,732      
    Debt     44,622         44,177      
    Total liabilities     2,709,821         1,988,102      
               
    Equity          
    Voting nonconvertible preferred stock     5         5      
    Common stock     12         12      
    Additional paid-in capital     69,015         69,202      
    Accumulated other comprehensive loss     (880 )       (850 )    
    Accumulated deficit     (30,403 )       (28,497 )    
    Total stockholders' equity     37,749         39,872      
    Noncontrolling interest     7,191         8,284      
    Total equity     44,940         48,156      
    Total liabilities and equity $   2,754,761     $   2,036,258      
               

Contact:

Investors -                                                                                                           
Cohen & Company Inc.                                                                     
Joseph W. Pooler, Jr.                                                                         
Executive Vice President and                                                          
Chief Financial Officer                                                                       
215-701-8952
investorrelations@cohenandcompany.com

Media -                                 
Joele Frank, Wilkinson Brimmer Katcher
James Golden or Andrew Squire
212-355-4449
jgolden@joelefrank.com or asquire@joelefrank.com

Primary Logo

View Comments and Join the Discussion!