PHILADELPHIA, PA — Cohen & Company Inc. (NYSE American: COHN) recently reported financial results for its third quarter ended September 30, 2023.
Summary Operating Results
| ($ in thousands) | Three Months Ended | Nine Months Ended | ||||||||||||
| 9/30/23 | 6/30/23 | 9/30/22 | 9/30/23 | 9/30/22 | ||||||||||
| Net trading | $ 7,491 | $ 7,416 | $ 7,966 | $ 23,117 | $ 30,365 | |||||||||
| Asset management | 1,788 | 1,605 | 3,456 | 5,418 | 7,243 | |||||||||
| New issue and advisory | 7,247 | 1,395 | 13,235 | 9,542 | 20,486 | |||||||||
| Principal transactions and other revenue | 595 | 12,156 | (1,192 | ) | 10,440 | (26,157 | ) | |||||||
| Total revenues | 17,121 | 22,572 | 23,465 | 48,517 | 31,937 | |||||||||
| Compensation and benefits | 15,219 | 10,001 | 15,227 | 35,757 | 41,320 | |||||||||
| Non-compensation operating expenses | 6,006 | 5,572 | 5,390 | 17,348 | 15,809 | |||||||||
| Operating income (loss) | (4,104 | ) | 6,999 | 2,848 | (4,588 | ) | (25,192 | ) | ||||||
| Interest expense, net | (1,685 | ) | (1,630 | ) | (1,346 | ) | (4,907 | ) | (3,803 | ) | ||||
| Income (loss) from equity method affiliates | (702 | ) | (511 | ) | 618 | (1,608 | ) | (14,530 | ) | |||||
| Income (loss) before income tax expense (benefit) | (6,491 | ) | 4,858 | 2,120 | (11,103 | ) | (43,525 | ) | ||||||
| Income tax expense (benefit) | (755 | ) | 5,550 | 1,761 | 5,379 | 3,534 | ||||||||
| Net income (loss) | (5,736 | ) | (692 | ) | 359 | (16,482 | ) | (47,059 | ) | |||||
| Less: Net income (loss) attributable to the non-convertible non-controlling interest | 1,936 | 6,503 | (109 | ) | 8,536 | (18,980 | ) | |||||||
| Enterprise net income (loss) | (7,672 | ) | (7,195 | ) | 468 | (25,018 | ) | (28,079 | ) | |||||
| Less: Net income (loss) attributable to the convertible non-controlling interest | (7,249 | ) | (594 | ) | 1,387 | (15,357 | ) | (17,691 | ) | |||||
| Net income (loss) attributable to Cohen & Company Inc. | $ (423 | ) | $ (6,601 | ) | $ (919 | ) | $ (9,661 | ) | $ (10,388 | ) | ||||
| Fully diluted net income (loss) per share | $ (0.28 | ) | $ (4.34 | ) | $ (0.64 | ) | $ (6.40 | ) | $ (7.33 | ) | ||||
| Adjusted pre-tax income (loss) | $ (8,427 | ) | $ (1,645 | ) | $ 2,229 | $ (19,639 | ) | $ (24,545 | ) | |||||
| Fully diluted adjusted pre-tax income (loss) per share | $ (1.52 | ) | $ (0.30 | ) | $ 0.41 | $ (3.55 | ) | $ (4.49 | ) | |||||
Lester Brafman, Chief Executive Officer of Cohen & Company, said, “Our results were mixed during the third quarter, driven by stronger new issue and advisory revenue and weaker principal transactions revenue. Of the $7.2 million new issue and advisory revenue, $6.0 million was generated by the Cohen & Company Capital Markets investment banking team and $1.2 million was generated by the European origination team. Our principal transactions revenue was negatively affected by the $6.8 million write-off of our investment in Stoa USA Inc. / FlipOS, a property technology company, which was impacted by the changing US housing market. We are optimistic about the future and hope to see more realization of our deal pipeline in the near term, and remain focused on enhancing stockholder value including through continued payment of our quarterly dividend.”
Financial Highlights
- Net loss attributable to Cohen & Company Inc. was $0.4 million, or $0.28 per diluted share, for the three months ended September 30, 2023, compared to net loss of $6.6 million, or $4.34 per diluted share, for the three months ended June 30, 2023, and net loss of $0.9 million, or $0.64 per diluted share, for the three months ended September 30, 2022. Adjusted pre-tax loss was $8.4 million, or $1.52 per diluted share, for the three months ended September 30, 2023, compared to adjusted pre-tax loss of $1.6 million, or $0.30 per diluted share, for the three months ended June 30, 2023, and adjusted pre-tax income of $2.2 million, or $0.41 per diluted share, for the three months ended September 30, 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 $17.1 million for the three months ended September 30, 2023, compared to $22.6 million for the prior quarter and $23.5 million for the prior year quarter.
- Net trading revenue was $7.5 million for the three months ended September 30, 2023, similar to the prior quarter and down $0.5 million from the prior year quarter. The decrease from the prior year quarter was due primarily to lower trading revenue by its corporate, primary CD, and municipal groups, partially offset by the Company’s treasury and mortgage groups.
- Asset management revenue was $1.8 million for the three months ended September 30, 2023, up $0.2 million from the prior quarter and down $1.7 million from the prior year quarter. The decrease from the prior year quarter was due primarily to the successful auction of an Alesco CDO in September 2022, and the accompanying $1.6 million of subordinated management fees in arrears that were recorded in the prior year quarter.
- New issue and advisory revenue was $7.2 million for the three months ended September 30, 2023, up $5.9 million from the prior quarter and down $6.0 million from the prior year quarter. In the current quarter, the Cohen & Company Capital Markets investment banking team generated $6.0 million and the European insurance origination team generated $1.2 million of the new issue and advisory revenue.
- Principal transactions and other revenue was $0.6 million for the three months ended September 30, 2023, compared to $12.2 million in the prior quarter and negative $1.2 million in the prior year quarter. The current quarter includes negative $6.8 million from the write down of the Company’s investment in Stoa USA Inc. / FlipOS. During September 2019 through March 2023, the Company invested a cumulative $0.8 million of cash in Stoa USA Inc. / FlipOS, the value of which was increased by positive mark-to-market adjustments when Stoa USA Inc. / FlipOS received additional rounds of private equity funding in 2021 and 2022. During the third quarter of 2023, Stoa USA Inc. / FlipOS ceased operations.
- Compensation and benefits expense during the three months ended September 30, 2023 increased $5.2 million from the prior quarter and was even with the prior year quarter. The number of Company employees was 114 as of September 30, 2023, compared to 117 as of June 30, 2023, and 122 as of September 30, 2022.
- Interest expense during the three months ended September 30, 2023 was comparable to the prior quarter and increased $0.3 million from the prior year quarter. The increase from the prior year quarter was primarily due to higher interest on the Company’s trust preferred securities debt.
- Loss from equity method affiliates for the three months ended September 30, 2023 was $0.7 million, compared to loss from equity method affiliates of $0.5 million for the prior quarter and income from equity method affiliates of $0.6 million for the prior year quarter.
- Income tax benefit for the three months ended September 30, 2023 was $0.8 million, compared to income tax expense of $5.6 million in the prior quarter, and income tax expense of $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 September 30, 2023, total equity was $72.7 million, compared to $94.0 million as of December 31, 2022; the non-convertible non-controlling interest component of total equity was $6.2 million as of September 30, 2023 and $17 thousand as of December 31, 2022. Thus, the total equity excluding the non-convertible non-controlling interest component was $66.5 million as of September 30, 2023, a $27.5 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 December 1, 2023, to stockholders of record as of November 17, 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.
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