Cohen & Company Inc (COHN) 2024 Q3 法說會逐字稿

Good morning, ladies and gentlemen and welcome to Cohen & Company Inc third quarter, 2024 earnings call. My name is Darryl and I will be your operator for today before we begin, Cohen and company would like to remind everyone that some of the statements the company makes during this call may contain forward-looking statements under applicable securities laws. These statements may involve risks and uncertainties that can cause the company's actual results to differ materially from the results discussed in such forward-looking statements.

The forward-looking statements made during this call are made only as of the date of this call and the company undertakes no obligation to update such statements to reflect subsequent events or circumstances. Cohen and company advises you to read the cautionary note regarding forward-looking statements and its earnings release. And in its most recent annual report on form 10-K filed with the SEC earlier today, Cohen and company issued a press release announcing third quarter 2024 financial results. Today's discussion is complementary to that press release which is available on the company's website at Cohen and company dotcom. This conference call is being recorded and a replay of it will be available for three days beginning shortly after the conclusion of this call. The company's remarks are also includes certain non-GAAP financial measures that management believes are meaningful when evaluating the company's performance, a reconciliation of these non-Gaap financial measures to the comparable GAAP measures provided in the company's earnings release. After the prepared remarks, the call will be opened for questions. I would now like to hand the call over to Mr Lester Brafman, Chief Executive Officer of Cohen and Company.

Thank you, Darryl and thank you everyone for joining us for our third quarter, 2024 earnings call with me on the call is Joseph W. Pooler, Jr. our co the positive trends for the first half of the year extended into the third quarter with a strong execution and continued momentum from cone and company capital markets CCCM. Our full service boutique investment banking operation. We are proud to report that CCC MM generated $21.4 million of advisory revenue and acted as lead bookrunner on one back IPO MS pipeline remains robust and we expect consistent production from CM throughout the end of the year. The company's performance at the adjusted pretax line has improved by $26.5 million year-to-date versus 2023. Despite the impact of ongoing unfavorable mark to market adjustments in our principal investing portfolio, we remain confident about our future earnings potential and are focused on enhancing long term sustained value for our stockholders including through continued payment of our quarterly dividend. Now I will return the call over to Joe to walk through this quarter's financial highlights in more detail.

Thank you, Lester. I'll begin with a discussion of our operating results for the quarter. Our net income attributable to Cohen and Company Inc was $2.2 million for the quarter or $1.31 per fully diluted share compared to net loss of $2.3 million for the prior quarter or $1.47 per fully diluted share and net loss of 400,000 for the prior year quarter or 28¢ per fully diluted share. Our adjusted pretax income was $7.7 million for the quarter compared to adjusted pretax loss of $8.6 million for the prior quarter and adjusted pretax loss of $8.4 million for the prior year quarter. As a reminder, adjusted pretax income and loss is a key earnings measurement for us as it incorporates enterprise earnings attributable to our convertible noncontrolling interest which is substantially held by our founder and Chairman Daniel Cohen. Daniel holds his interest in the enterprise through the primary operating subsidiary, Cohen and Company LLC, which is a consolidated subsidiary of Cohen and Company Inc.

New issue in advisory revenue was $22.5 million in the third quarter, an increase of $16 million from the second quarter and an increase of $15.2 million from the year ago quarter. Our revenue earned from the new issue in advisory revenue has been and we expect we will continue to be volatile. We earn revenue from a limited number of engagements. A small change in the number of engagements can result in quarter to quarter fluctuations in the revenue recognized. The average revenue per engagement can fluctuate as well.

And our revenue is generally earned when an underlying transaction closes. Thus, the timing of underlying transactions increases the volatility of our revenue recognition.

In addition, we have received financial instruments as consideration for advisory services provided by CCM instead of cash in some cases which are included in other investments at fair value, other investments sold, not yet purchased and investments in equity method affiliates in our consolidated balance sheets, net trading revenue came in at 8.8 million in the third quarter which was comparable to the second quarter and up 1.3 million from the third quarter of 23. The increase from the prior year quarter was due primarily to higher trading revenue from our agency group, mortgage group and the new Middle Markets Group which is a component of our wholesale group.

Our asset management revenue totaled 2.1 million in the quarter which was comparable to the prior quarter and up 400,000 from the prior year quarter.

The change from the prior year quarter was related primarily to deferred performance fees in one of our European funds, third quarter principal transactions and other revenue was negative 1.7 million primarily due to mark to market adjustments on our principal investments related to our involvement in the spec market as a sponsor, asset management, asset manager investor and adviser, which has resulted in increased holdings of public equity positions in post business combination companies, equity value of post business combination specs has continued to decline. Leading many of the founder shares we receive to decrease in value negatively impacting both the equity method and the principal transaction line items. We anticipate that there will continue to be volatility in our principal portfolio and therefore our operating results. In addition, in certain cases, we receive inve investment banking consideration from DPE clients in the form of investment assets and those investment assets have subsequently fallen in value.

Principal transactions. Revenue includes all gains and losses and income earned on our $37 million net investment portfolio compensation and benefits expense for the quarter was 17.9 million which was up from both prior quarters. Primarily due to fluctuations in revenue income from equity method affiliates net of our nonconvertible, noncontrolling interest and the related variable incentive compensation. The number of company employees was 113 at the end of the quarter compared to 120 at at 121 at the end of the prior quarter and 114 as of September 30 of 23 net interest expense for the third quarter of 24 was 1.3 million including 1.2 million on our two Trust preferred Debt instruments 187,000 on our senior notes 19,000 on our credit line and negative 139,000 on our redeemable financial instrument.

During September of 24 we restructured two thirds or 5.1 million of the redeemable financial instrument into a promissory note and repaid third or 2.6 million in cash loss from equity method affiliates during the quarter totaled 700,000 during the quarter. There was also an offsetting 2.5 million credit recorded in the net income loss attributable to the nonconvertible noncontrolling interest line item. These nonconvertible noncontrolling interests represent ownership in certain consolidated subsidiaries by the portfolio managers of our former spec fund and of our current spec series funds.

The charge is generally an offset to certain amounts that we record in our net income loss from equity method affiliates line item and in our principal transactions and other revenue line items.

In terms of our balance sheet at the end of the quarter, total equity was 100.6 million compared to 91.8 million at the end of the year. The nonconvertible noncontrolling interest component of total equity was 14.5 million at the end of the quarter and 9.6 million at the end of the year. Thus the total enterprise equity excluding the nonconvertible noncontrolling interest component was 86.1 million as of September 3,024 a 3.95 million increase from 82.2 million at the end of the year at quarter end, consolidated corporate indebtedness was carried at 34.9 million reflecting the increase from refinancing 5.1 million of the redeemable financial instrument into a promissory note.

As Lester mentioned, we have declared a quarterly dividend of 25¢ per share payable on December 5th of 24 to stockholders of record. As of November 20th of 24 the board 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 with that. I'll turn it back over to Lester.

Thanks Joe. Please direct any offline investor questions to Joe Pooler at 2157018952 or via email to investor relations at cone and company dotcom. The contact information can also be found at the bottom of our earnings release operator. You can now open the call lines for questions.

Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. One moment please. While we pull for your questions,

I'm not seeing any questions at this time. I'd like to hand the call back over to management for any closing comments.

Alright. Well, thank you all for joining us today and we look forward to speaking to you our next quarterly release.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.