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Cohen & Company Reports Fourth Quarter & Full Year 2019 Financial Results

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PHILADELPHIA and NEW YORK, March 05, 2020 (GLOBE NEWSWIRE) -- Cohen & Company Inc. (NYSE American: COHN), a financial services firm specializing in fixed income markets, today reported financial results for its fourth quarter and full year ended December 31, 2019.

Summary Operating Results

Three Months Ended

Year Ended

($ in thousands)

12/31/19

9/30/19

12/31/18

12/31/19

12/31/18

Total revenues

$

16,090

$

11,267

$

15,621

$

49,666

$

49,386

Compensation and benefits

6,159

7,017

6,425

25,972

25,385

Non-compensation operating expenses

5,897

4,693

6,908

19,653

20,342

Operating income

4,034

(443

)

2,288

4,041

3,659

Interest expense, net

(2,255

)

(1,536

)

(2,282

)

(7,584

)

(8,487

)

Income (loss) from equity method affiliates

(188

)

(109

)

-

(553

)

-

Income (loss) before income tax expense (benefit)

1,591

(2,088

)

6

(4,096

)

(4,828

)

Income tax expense (benefit)

394

(170

)

418

(523

)

(841

)

Net income (loss)

1,197

(1,918

)

(412

)

(3,573

)

(3,987

)

Less: Net income (loss) attributable to the noncontrolling interest

423

(702

)

6

(1,519

)

(1,524

)

Net income (loss) attributable to Cohen & Company Inc.

$

774

$

(1,216

)

$

(418

)

$

(2,054

)

$

(2,463

)

Fully diluted net income (loss) per share

$

0.56

$

(1.06

)

$

(0.37

)

$

(1.81

)

$

(2.14

)

  • Revenues during the three months ended December 31, 2019 increased $4.8 million from the prior quarter and $0.5 million from the prior year quarter.

    • The increase from the prior quarter was comprised primarily of (i) an increase of $3.8 million in net trading from higher activity in the Company’s GCF Repo and Gestational Repo businesses, (ii) an increase of $1.3 million in new issue and advisory revenue related to origination fees in the Company’s European fund business, partially offset by (iii) a decrease of $0.2 million in asset management revenue due primarily to the successful liquidation of the Company’s Munda CLO and payment of $0.5 million in related success fees in the third quarter of 2019.

    • The increase from the prior year quarter was comprised primarily of (i) an increase of $3.2 million in net trading from higher activity in the Company’s GCF Repo and Gestational Repo businesses, (ii) an increase of $0.7 million in principal transactions due to more revenue from the Company’s CLO and other equity investments, partially offset by (iii) a decrease of $2.9 million in asset management revenue due primarily to the successful auction and liquidation of an Alesco CDO, and the accompanying $3.0 million of subordinated management fees in arrears that were recorded, in the prior-year quarter, and (iv) a decrease of $0.5 million in new issue and advisory related to lower origination fees recorded in the current quarter.

  • Compensation and benefits expense as a percentage of revenue was 38% for the three months ended December 31, 2019, compared to 62% for the three months ended September 30, 2019, and 41% for the three months ended December 31, 2018. Compensation and benefits expense as a percentage of revenue was 52% for the year ended December 31, 2019, compared to 51% for the year ended December 31, 2018. The number of Cohen & Company employees was 94 as of December 31, 2019, compared to 90 as of September 30, 2019, and 88 as of December 31, 2018.

  • Non-compensation operating expenses during the three months ended December 31, 2019 increased $1.2 million from the prior quarter and decreased $1.0 million from the prior year quarter. The increase from the prior quarter was primarily due to higher professional fees and revenue-driven clearing and execution cost in the current quarter. The decrease from the prior year quarter was due primarily to lower consulting fees in the current quarter; the prior year quarter included a $1.2 million referral fee due to a consultant related to U.S. insurance origination and $1.0 million due to a subadvisor as the result of the successful auction and liquidation of one of the Alesco CDOs that included receipt of $3.0 million of subordinated management fees in arrears.

  • Interest expense during the three months ended December 31, 2019 increased $0.7 million from the prior quarter and was comparable to the prior year quarter. The changes in quarterly interest expense are primarily driven by fluctuation in interest on redeemable financial instruments, which is driven by certain groups’ revenue or profit.

  • Income (loss) from equity method investments relates to the Company-sponsored insurance SPAC, which completed its initial public offering in March 2019, and has eighteen months from its initial public offering to consummate a business combination.

  • As of December 31, 2019, total equity was $48.8 million, compared to $42.4 million as of December 31, 2018. On December 30, 2019, the Company received a capital contribution from Daniel G. Cohen, the Company’s Chairman and Chief Executive of its European Operations, and the DGC Family Fintech Trust, a trust established by Mr. Cohen, valued at $7.8 million.

Lester Brafman, Chief Executive Officer of Cohen & Company, said, “We are pleased with our results from the fourth quarter, as we began to see the benefits from strategic investments in our mortgage business. Our TBA, Gestational Repo, and GCF Repo businesses have reached all-time highs in terms of volume and revenues. Additionally, our Chairman Daniel G. Cohen and a trust established by Daniel contributed capital of $7.8 million this quarter, further stabilizing our capital base and solidifying Daniel’s continued confidence in the Company. We continue to believe that the initiatives underway will generate long-term value for our shareholders, and we are focused on enhancing these results going forward.”

Conference Call

The Company will no longer hold conference calls in connection with the release of its quarterly and annual financial results.

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 (Europe) Limited in Europe. The Asset Management segment manages assets through collateralized debt obligations, managed accounts, and investment funds. As of December 31, 2019, the Company managed approximately $2.8 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 December 31, 2019, 79.7% 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 is comprised primarily of investments that we have made for the purpose of earning an investment return rather than investments made to support our trading, matched book repo, or other capital markets business activity. 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 new or expanded 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

Year Ended

12/31/19

9/30/19

12/31/18

12/31/19

12/31/18

Revenues

Net trading

$

12,299

$

8,479

$

9,106

$

38,172

$

29,298

Asset management

1,795

2,018

4,708

7,560

12,536

New issue and advisory

1,580

250

2,105

1,831

2,979

Principal transactions

276

310

(466

)

1,521

3,825

Other revenue

140

210

168

582

748

Total revenues

16,090

11,267

15,621

49,666

49,386

Operating expenses

Compensation and benefits

6,159

7,017

6,425

25,972

25,385

Business development, occupancy, equipment

926

770

759

3,402

2,995

Subscriptions, clearing, and execution

2,950

2,403

2,209

9,682

8,627

Professional services and other operating

1,942

1,440

3,855

6,251

8,459

Depreciation and amortization

79

80

85

318

261

Total operating expenses

12,056

11,710

13,333

45,625

45,727

Operating income (loss)

4,034

(443

)

2,288

4,041

3,659

Non-operating income (expense)

Interest expense, net

(2,255

)

(1,536

)

(2,282

)

(7,584

)

(8,487

)

Income (loss) from equity method affiliates

(188

)

(109

)

-

(553

)

-

Income (loss) before income tax expense (benefit)

1,591

(2,088

)

6

(4,096

)

(4,828

)

Income tax expense (benefit)

394

(170

)

418

(523

)

(841

)

Net income (loss)

1,197

(1,918

)

(412

)

(3,573

)

(3,987

)

Less: Net income (loss) attributable to the noncontrolling interest

423

(702

)

6

(1,519

)

(1,524

)

Net income (loss) attributable to Cohen & Company Inc.

$

774

$

(1,216

)

$

(418

)

$

(2,054

)

$

(2,463

)

Earnings per share

Basic

Net income (loss) attributable to Cohen & Company Inc.

$

774

$

(1,216

)

$

(418

)

$

(2,054

)

$

(2,463

)

Basic shares outstanding

1,125

1,144

1,118

1,137

1,152

Net income (loss) attributable to Cohen & Company Inc. per share

$

0.69

$

(1.06

)

$

(0.37

)

$

(1.81

)

$

(2.14

)

Fully Diluted

Net income (loss) attributable to Cohen & Company Inc.

$

774

$

(1,216

)

$

(418

)

$

(2,054

)

$

(2,463

)

Net income (loss) attributable to the convertible noncontrolling interest

523

(645

)

6

(1,231

)

(1,524

)

Net interest attributable to convertible debt

374

-

-

-

-

Income tax and conversion adjustment

(123

)

79

(206

)

246

390

Enterprise net income (loss)

$

1,548

$

(1,782

)

$

(618

)

$

(3,039

)

$

(3,597

)

Basic shares outstanding

1,125

1,144

1,118

1,137

1,152

Unrestricted Operating LLC membership units exchangeable into COHN shares

581

532

532

544

532

Additional dilutive shares

1,051

-

-

-

-

Fully diluted shares outstanding

2,757

1,676

1,650

1,681

1,684

Fully diluted net income (loss) per share

$

0.56

$

(1.06

)

$

(0.37

)

$

(1.81

)

$

(2.14

)


COHEN & COMPANY INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31, 2019

(unaudited)

December 31, 2018

Assets

Cash and cash equivalents

$

8,304

$

14,106

Receivables from brokers, dealers, and clearing agencies

96,132

129,812

Due from related parties

466

793

Other receivables

46,625

12,072

Investments - trading

307,852

301,235

Other investments, at fair value

14,864

13,768

Receivables under resale agreements

7,500,002

7,632,230

Investment in equity method affiliate

3,799

-

Goodwill

7,992

7,992

Right-of-use asset - operating leases

7,155

-

Other assets

8,433

3,621

Total assets

$

8,001,624

$

8,115,629

Liabilities

Payables to brokers, dealer, and clearing agencies

$

241,261

$

201,598

Accounts payable and other liabilities

20,295

11,452

Accrued compensation

4,046

5,254

Trading securities sold, not yet purchased

77,947

120,122

Securities sold under agreements to repurchase

7,534,443

7,671,764

Deferred income taxes

1,339

2,017

Lease liability - operating leases

7,693

-

Redeemable financial instruments

16,983

17,448

Debt

48,861

43,536

Total liabilities

7,952,868

8,073,191

Equity

Voting nonconvertible preferred stock

27

5

Common stock

12

12

Additional paid-in capital

68,714

68,591

Accumulated other comprehensive loss

(915

)

(908

)

Accumulated deficit

(34,519

)

(31,926

)

Total stockholders' equity

33,319

35,774

Noncontrolling interest

15,437

6,664

Total equity

48,756

42,438

Total liabilities and equity

$

8,001,624

$

8,115,629


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