PHILADELPHIA, PA — Cohen & Company Inc. (NYSE American: COHN) recently reported financial results for its first quarter ended March 31, 2023.
Summary Operating Results
| Three Months Ended | ||||||||||||
| ($ in thousands) | 3/31/23 | 12/31/22 | 3/31/22 | |||||||||
| Net trading | $ | 8,210 | $ | 9,644 | $ | 12,022 | ||||||
| Asset management | 2,025 | 1,761 | 1,889 | |||||||||
| New issue and advisory | 900 | 4,235 | 3,770 | |||||||||
| Principal transactions and other revenue | (2,311 | ) | (3,190 | ) | (18,363 | ) | ||||||
| Total revenues | 8,824 | 12,450 | (682 | ) | ||||||||
| Compensation and benefits | 10,537 | 8,970 | 13,879 | |||||||||
| Non-compensation operating expenses | 5,770 | 6,251 | 5,317 | |||||||||
| Operating income | (7,483 | ) | (2,771 | ) | (19,878 | ) | ||||||
| Interest expense, net | (1,592 | ) | (1,179 | ) | (1,351 | ) | ||||||
| Income (loss) from equity method affiliates | (395 | ) | (6,401 | ) | (12,104 | ) | ||||||
| Income (loss) before income tax expense (benefit) | (9,470 | ) | (10,351 | ) | (33,333 | ) | ||||||
| Income tax expense (benefit) | 584 | 1,260 | 1,833 | |||||||||
| Net income (loss) | (10,054 | ) | (11,611 | ) | (35,166 | ) | ||||||
| Less: Net income (loss) attributable to the non-convertible non-controlling interest | 97 | (4,223 | ) | (14,704 | ) | |||||||
| Enterprise net income (loss) | (10,151 | ) | (7,388 | ) | (20,462 | ) | ||||||
| Less: Net income (loss) attributable to the convertible non-controlling interest | (7,514 | ) | (4,387 | ) | (12,850 | ) | ||||||
| Net income (loss) attributable to Cohen & Company Inc. | $ | (2,637 | ) | $ | (3,001 | ) | $ | (7,612 | ) | |||
| Fully diluted net income (loss) per share | $ | (1.77 | ) | $ | (2.10 | ) | $ | (5.46 | ) | |||
| Adjusted pre-tax income (loss) | $ | (9,567 | ) | $ | (6,128 | ) | $ | (18,629 | ) | |||
| Fully diluted adjusted pre-tax income (loss) per share | $ | (1.74 | ) | $ | (1.13 | ) | $ | (3.35 | ) | |||
Lester Brafman, Chief Executive Officer of Cohen & Company, said, “Our investment portfolio continues to impact our results, as our combined negative principal transactions revenue and loss from equity method affiliates amounted to $3.0 million for the quarter. The prolonged slump in investment banking and origination resulted in less than expected new issue and advisory revenue during the quarter. We strongly believe in our team of bankers and originators, as we continue to build our pipeline, and look forward to more favorable capital markets. As we move forward, we remain focused on enhancing stockholder value, and in the first quarter we continued to pay our quarterly dividend.”
Financial Highlights
- Net loss attributable to Cohen & Company Inc. was $2.6 million, or $1.77 per diluted share, for the three months ended March 31, 2023, compared to net loss of $3.0 million, or $2.10 per diluted share, for the three months ended December 31, 2022, and net loss of $7.6 million, or $5.46 per diluted share, for the three months ended March 31, 2022. Adjusted pre-tax loss was $9.6 million, or $1.74 per diluted share, for the three months ended March 31, 2023, compared to adjusted pre-tax loss of $6.1 million, or $1.13 per diluted share, for the three months ended December 31, 2022, and adjusted pre-tax loss of $18.6 million, or $3.35 per diluted share, for the three months ended March 31, 2022. Adjusted pre-tax income (loss) and adjusted pre-tax income (loss) per diluted share are not measures recognized under GAAP. See Note 1 below.
- Revenues were $8.8 million for the three months ended March 31, 2023, compared to $12.5 million for the prior quarter and negative $0.7 million for the prior year quarter.
- Net trading revenue was $8.2 million for the three months ended March 31, 2023, down $1.4 million from the prior quarter and $3.8 million from the prior year quarter. The decrease from both prior quarters was due primarily to lower trading revenue by the Company’s mortgage group.
- Asset management revenue was $2.0 million for the three months ended March 31, 2023, up $0.3 million from the prior quarter and $0.1 million from the prior year quarter. The increase from both prior quarters was due primarily to an incentive allocation earned by the manager of the Company’s SPAC funds in the current quarter.
- New issue and advisory revenue was $0.9 million for the three months ended March 31, 2023, down $3.3 million from the prior quarter and $2.9 million from the prior year quarter. In the current quarter, the Cohen & Company Capital Markets investment banking team generated $0.7 million and the U.S. insurance origination team generated $0.2 million of the new issue and advisory revenue.
- Principal transactions and other revenue was negative $2.3 million for the three months ended March 31, 2023, compared to negative $3.2 million in the prior quarter and negative $18.4 million in the prior year quarter. In all quarters presented, the negative principal transactions and other revenue was primarily due to mark-to-market adjustments on the Company’s principal investments related to the Company’s involvement in the SPAC market as a sponsor, asset manager, and investor, which has resulted in increased holdings of public equity positions in post-business combination companies, which holdings are often restricted and are subject to market adjustments, both up and down.
- Compensation and benefits expense during the three months ended March 31, 2023 increased $1.6 million from the prior quarter and decreased $3.3 million from the prior year quarter. The number of Company employees was 121 as of March 31, 2023, compared to 121 as of December 31, 2022, and 115 as of March 31, 2022.
- Interest expense during the three months ended March 31, 2023 increased $0.4 million from the prior quarter and $0.2 million from the prior year quarter.
- Loss from equity method affiliates for the three months ended March 31, 2023 was $0.4 million, compared to loss from equity method affiliates of $6.4 million for the prior quarter and loss from equity method affiliates of $12.1 million for the prior year quarter.
- Income tax expense for the three months ended March 31, 2023 was $0.6 million, compared to $1.3 million in the prior quarter, and $1.8 million in the prior year quarter. The Company will continue to evaluate its operations on a quarterly basis and may adjust the valuation allowance applied against the Company’s net operating loss and net capital loss tax assets. Future adjustments could be material and may result in additional tax benefit or tax expense.
Total Equity and Dividend Declaration
- As of March 31, 2023, total equity was $82.4 million, compared to $94.0 million as of December 31, 2022; the non-convertible non-controlling interest component of total equity was $153 thousand as of March 31, 2023 and $17 thousand as of December 31, 2022. Thus, the total equity excluding the non-convertible non-controlling interest component was $82.2 million as of March 31, 2023, an $11.8 million decrease from $94.0 million as of December 31, 2022.
- The Company’s Board of Directors has declared a quarterly dividend of $0.25 per share, payable on June 2, 2023, to stockholders of record as of May 18, 2023. The Board of Directors will continue to evaluate the dividend policy each quarter, and future decisions regarding dividends may be impacted by quarterly operating results and the Company’s capital needs.
For more information, visit www.cohenandcompany.com.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News.