Cohen & Company Inc (COHN) 2025 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Cohen & Company's second-quarter 2025 earnings call. My name is Alicia, and I'll be your operator for today.

Before we begin, Cohen & Company would like to remind everyone that some of the statements the company makes during this call may contain forward-looking statements under applicable security laws. These statements may involve risks and uncertainties that could 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 obligations to update such statements to reflect the subsequent events or circumstances. Cohen & Company advises you to read the cautionary note regarding forward-looking statements in its earnings release and its most recent annual report on Form 10-K filed with the SEC.

Earlier today, Cohen & Company issued a press release announcing second-quarter 2025 financial results. Today's discussion is complementary to that press release, which is available on the company's website at cohenandcompany.com. 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 also include 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 is provided in the company's earnings release. After the prepared remarks, the call will be opened up for questions.

I would now like to turn the call over to Mr. Lester Brafman, Chief Executive Officer of Cohen & Company.

Thank you, Alicia, and thank you, everyone, for joining us for our second-quarter 2025 earnings call. With me on the call is Joe Pooler, our CFO.

We are pleased with our second-quarter results, which were driven by a strong performance from our full-service boutique investment banking operation, Cohen & Company Capital Markets or what we call CCM. During the quarter, CCM generated $37.4 million in new issue and advisory revenue across 25 clients and is entering the second half of the year with strong momentum and a robust pipeline.

In addition, in June 2025, our sponsor SPAC, Columbus Circle Capital Corp., I, entered into a business combination agreement with ProCap BTC, a Bitcoin-native financial services firm. As sponsor, we retained 2.1 million founder shares. Upon closing, which is expected to occur by the end of the year, the combined company will operate as ProCap Financial, Inc., and hold up to $1 billion in bitcoin on its balance sheet.

As our involvement in the SPAC market continues to grow, we are excited to have launched our SPAC-focused equity trading desk. This new trading desk generated more than $1.4 million in trading revenue in its first quarter of operation. And we expect it will serve as a complementary strategy to CCM moving forward.

We remain confident in our future earnings potential and committed to creating long-term, sustained value for our stockholders, including through our quarterly dividend. As we disclosed in our process -- in our press release this morning, the company's Board of Directors has declared a quarterly dividend of $0.25 a share, payable on August 29, 2025, to stockholders as of record August 15, 2025.

Now I will turn the call over to Joe to walk through this quarter's financial highlights in more detail.

Thank you, Lester. I will begin with a discussion of our operating results for the quarter.

Our net income attributable to Cohen & Company Inc., shareholders was $1.4 million for the quarter or $0.81 per fully diluted share compared to net income of $300,000 for the prior quarter or $0.19 per fully diluted share; and net loss of $2.3 million for the prior-year quarter or $1.47 per fully diluted share. Our adjusted pretax income was $5.5 million for the quarter compared to adjusted pretax income of $1.3 million for the prior quarter and adjusted pretax loss of $8.6 million for the prior-year quarter.

As a reminder, adjusted pretax income or 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 & Company, LLC, which is a consolidated subsidiary of Cohen & Company Inc.

New issuance advisory revenue was $37.4 million in the quarter, an increase of $4.2 million from the prior quarter and an increase of $30.9 million from the year-ago quarter. All our new issue and advisory revenue came from our CCM business and was primarily driven by SPAC M&A and SPAC IPO transactions. CCM also generated $6.7 million of positive principal transactions revenue during the quarter.

As a reminder, we have received financial instruments as consideration for new issue and advisory services provided by CCM instead of cash at times, which are included in other investments at fair value on our consolidated balance sheets. Net trading revenue came in at $10.8 million in the second quarter, up $1.5 million from the prior quarter and up $2 million from the second quarter of '24.

Asset Management revenue totaled $2.2 million in the quarter, up slightly from both prior quarters. Second-quarter Principal Transactions and other revenue was $9.5 million, primarily due to the $6.7 million in gains on our Principal Investments related to previously received consideration by CCM, as well as certain gains related to our ongoing involvement in the SPAC market outside of CCM as an asset manager and an investor.

Principal Transactions revenue includes all the gains and losses and income earned on our $50.6 million net investment portfolio. Compensation and benefits expense for the second quarter was $44.3 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 118 as of the end of June compared to 117 at the end of March and 121 as of the prior-year quarter. Net interest expense for the quarter was $1.5 million, including $1.2 million on our two trust preferred debt instruments, $288,000 on our senior promissory notes, and $22,000 on our credit line.

Gain on sale of management contracts for the three months ended June was $800,000, which resulted from the closing of the sale of two of our legacy Alesco CDO management contracts. We are actively pursuing consents for the sale of the remaining three Alesco CDO management contracts in accordance with our previously announced master transaction agreement.

Once complete, there will be no future Asset Management revenue from the company's legacy Alesco CDOs. Loss from equity method affiliates totaled $1.4 million, primarily due to our consolidated sponsor entities investment in Columbus Circle Capital Corp., I, our sponsored SPAC.

In terms of our balance sheet, at the end of June, total equity was $92.5 million compared to $90.3 million at the end of 2024. The nonconvertible, noncontrolling interest component of total equity was $10.9 million as of June 30, and $11.5 million at the end of the year.

Thus, the total enterprise equity, excluding the nonconvertible, noncontrolling interest, was $81.6 million at the end of June, a $2.7 million increase from $78.8 million at the end of the year. At quarter-end, consolidated indebtedness was carried at $32.6 million. During the second quarter, we repaid $2.6 million of our senior promissory notes.

As Lester mentioned, we declared a quarterly dividend of $0.25 per share, payable on August 29 to stockholders of record as of August 15. 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 other capital needs.

With that, I'll turn it back over to Lester.

Thanks, Joe. And before we open the call for questions, I wanted to take a moment to thank all of our employees for their continued hard work and dedication to Cohen & Company. We remain confident in our ability to navigate the current environment, execute on our strategic priorities, and continue driving progress as we enhance long-term value for our stockholders.

Please direct any offline investor questions to Joe Pooler at 215-701-8952 or via e-mail to investorrelations@cohenandcompany.com. The contact information can also be found at the bottom of our earnings release.

Operator, you can now open the call lines for questions. And thank you, everyone, for joining today.

(Operator Instructions) Thank you. I don't see any questions at this time. I'd like to pass the call back over to management for any closing remarks.

Thanks, Alicia, and thanks, everyone, for joining in today. We look forward to reconvening at our next call this -- following quarter. Thank you, again, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.