Cohen & Company Reports Fourth Quarter & Full Year 2022 Financial Results

Cohen & Company

PHILADELPHIA, PA — Cohen & Company Inc. (NYSE: COHN) this week reported financial results for its fourth quarter and full year ended December 31, 2022.

Summary Operating Results

Three Months Ended Twelve Months Ended
($ in thousands) 12/31/22 9/30/22 12/31/21 12/31/22 12/31/21
Net trading $ 9,644 $ 7,966 $ 15,204 $ 40,009 $ 69,385
Asset management 1,761 3,456 5,136 9,004 10,923
New issue and advisory 4,235 13,235 17,209 24,721 28,736
Principal transactions and other revenue (3,190 ) (1,192 ) (10,507 ) (29,347 ) 37,324
Total revenues 12,450 23,465 27,042 44,387 146,368
Compensation and benefits 8,970 15,227 23,634 50,290 85,048
Non-compensation operating expenses 6,251 5,390 6,069 22,060 21,727
Operating income (2,771 ) 2,848 (2,661 ) (27,963 ) 39,593
Interest expense, net (1,179 ) (1,346 ) (1,706 ) (4,982 ) (7,233 )
Other non-operating income 2,127
Income (loss) from equity method affiliates (6,401 ) 618 28,498 (20,931 ) 36,010
Income (loss) before income tax expense (benefit) (10,351 ) 2,120 24,131 (53,876 ) 70,497
Income tax expense (benefit) 1,260 1,761 (4,117 ) 4,794 (3,541 )
Net income (loss) (11,611 ) 359 28,248 (58,670 ) 74,038
Less: Net income (loss) attributable to the non-convertible non-controlling interest (4,223 ) (109 ) 17,738 (23,203 ) 35,574
Enterprise net income (loss) (7,388 ) 468 10,510 (35,467 ) 38,464
Less: Net income (loss) attributable to the convertible non-controlling interest (4,387 ) 1,387 6,354 (22,078 ) 26,656
Net income (loss) attributable to Cohen & Company Inc. $ (3,001 ) $ (919 ) $ 4,156 $ (13,389 ) $ 11,808
Fully diluted net income (loss) per share $ (2.10 ) $ (0.64 ) $ 2.43 $ (9.43 ) $ 7.83
Adjusted pre-tax income (loss) $ (6,128 ) $ 2,229 $ 6,393 $ (30,673 ) $ 32,796
Fully diluted adjusted pre-tax income (loss) per share $ (1.13 ) $ 0.41 $ 1.23 $ (5.62 ) $ 6.50
Adjusted pre-tax income (loss) is not a measure recognized under U.S. generally accepted accounting principles (“GAAP”). See Note 1 below.

Lester Brafman, Chief Executive Officer of Cohen & Company, said, “Continued turbulent market conditions impacted our reported financial results in the quarter, particularly from negative mark-to-market adjustments on our principal investing portfolio. Our principal investing segment accounted for substantially all of our consolidated adjusted pre-tax loss for the quarter and for the full year. Despite this challenging market backdrop, our Cohen & Company Capital Markets investment banking team continues to grow market share as an advisor and agent, with multiple recently announced leadership engagements. We remain focused on our strategic objectives, and we are confident that past investments will translate into higher revenues in the future, especially from the Cohen & Company Capital Markets team. As we move forward, we are committed to enhancing stockholder value, and in the fourth quarter we continued to pay our quarterly dividend.”

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Financial Highlights

  • Net loss attributable to Cohen & Company Inc. was $3.0 million, or $2.10 per diluted share, for the three months ended December 31, 2022, compared to net loss of $0.9 million, or $0.64 per diluted share, for the three months ended September 30, 2022, and net income of $4.2 million, or $2.43 per diluted share, for the three months ended December 31, 2021. Adjusted pre-tax loss was $6.1 million, or $1.13 per diluted share, for the three months ended December 31, 2022, compared to adjusted pre-tax income of $2.2 million, or $0.41 per diluted share, for the three months ended September 30, 2022, and adjusted pre-tax income of $6.4 million, or $1.23 per diluted share, for the three months ended December 31, 2021. 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 $12.5 million for the three months ended December 31, 2022, compared to $23.5 million for the prior quarter and $27.0 million for the prior year quarter.
    • Net trading revenue was $9.6 million for the three months ended December 31, 2022, up $1.7 million from the prior quarter and down $5.6 million from the prior year quarter. The increase from the prior quarter was due primarily to higher trading revenue from the Company’s mortgage and municipal groups, while the decrease from the prior year quarter was due primarily to lower trading revenue from itsmortgage and corporate groups.
    • Asset management revenue was $1.8 million for the three months ended December 31, 2022, down $1.7 million from the prior quarter and down $3.4 million from the prior year quarter. The decrease from the prior quarter was due primarily to the successful auction of an Alesco collateralized debt obligation (“CDO”) in September 2022, and the accompanying $1.6 million of subordinated management fees in arrears that were recorded in the prior quarter. The decrease from the prior year quarter was due primarily to an incentive allocation earned by the manager of the Company’s SPAC funds in the prior year quarter.
    • New issue and advisory revenue was $4.2 million for the three months ended December 31, 2022, down $9.0 million from the prior quarter and $13.0 million from the prior year quarter. In the current quarter, the Cohen & Company Capital Markets investment banking team generated $2.9 million, the European insurance origination team generated $1.2 million, and the commercial real estate origination team generated $0.1 million of the new issue and advisory revenue.
    • Principal transactions and other revenue was negative $3.2 million for the three months ended December 31, 2022, compared to negative $1.2 million in the prior quarter and negative $10.5 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, often restricted, which are subject to market adjustments, both up and down.
  • Compensation and benefits expense during the three months ended December 31, 2022 decreased $6.3 million from the prior quarter and $14.7 million from the prior year quarter. The number of Company employees was 121 as of December 31, 2022, compared to 122 as of September 30, 2022, and 118 as of December 31, 2021.
  • Interest expense during the three months ended December 31, 2022 decreased $0.2 million from the prior quarter and $0.5 million from the prior year quarter.
  • Loss from equity method affiliates for the three months ended December 31, 2022 was $6.4 million, compared to income from equity method affiliates of $0.6 million for the prior quarter and income from equity method affiliates of $28.5 million for the prior year quarter. The liquidation of the Company’s sponsored SPAC, INSU Acquisition Corp. III, accounted for $4.8 million of the loss from equity method affiliates during the three months ended December 31, 2022, which is offset by a $4.2 million credit recorded in the net income (loss) attributable to the non-convertible non-controlling interest line item. Income (loss) from equity method affiliates also fluctuates depending on the timing of the closing of any business combinations by the Company’s equity method investees that are sponsors of SPACs, which typically result in increased value of founder shares allocable to the Company by the sponsors.
  • Income tax expense for the three months ended December 31, 2022 was $1.3 million, compared to $1.8 million in the prior quarter, and income tax benefit of $4.1 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.
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Total Equity and Dividend Declaration

  • As of December 31, 2022, total equity was $94.0 million, compared to $151.4 million as of December 31, 2021; the non-convertible non-controlling interest component of total equity was $17 thousand as of December 31, 2022 and $31.9 million as of December 31, 2021. Thus, the total equity excluding the non-convertible non-controlling interest component was $94.0 million as of December 31, 2022, a $25.6 million decrease from $119.6 million as of December 31, 2021.
  • The Company’s Board of Directors has declared a quarterly dividend of $0.25 per share, payable on April 5, 2023, to stockholders of record as of March 22, 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.

Note 1: Adjusted pre-tax income (loss) and adjusted pre-tax income (loss) per share are non-GAAP measures of performance. See the discussion under “Non-GAAP Measures” within the Company’s original earnings release. Also, see the original earnings release tables for the reconciliations of non-GAAP measures of performance to their corresponding GAAP measures of performance.

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