COWN
$37.09
Cowen Group
($.66)
(1.75%)
Earnings Details
Quarter December 2020
Thursday, February 11, 2021 7:00:00 AM
Tweet Share Watch
Summary

Cowen Group Beats

Cowen Group (COWN) reported Quarter December 2020 earnings of $4.58 per share on revenue of $441.0 million. The consensus earnings estimate was $2.53 per share on revenue of $379.1 million. The Earnings Whisper number was $3.11 per share. Revenue grew 56.9% on a year-over-year basis.

Cowen Group, Inc. provides research, brokerage and investment banking services to companies and institutional investor clients in the healthcare, technology, media and telecommunications, consumer, aerospace & defense & alternative energy sectors.

Results
Reported Earnings
$4.58
Earnings Whisper
$3.11
Consensus Estimate
$2.53
Reported Revenue
$441.0 Mil
Revenue Estimate
$379.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cowen Announces Record Financial Results for Full Year 2020

  • Reports Record 4Q20 US GAAP Net Income of $90.5 million, or $2.98 per diluted share
  • Economic Operating Income in 4Q20 of $138.7 million, or $4.58 per diluted share (Non-GAAP)
  • Record FY20 US GAAP Net Income attributable to Cowen Inc. stockholders of $209.6 million and record FY20 Economic Operating income of $335.9 million (Non-GAAP)
  • Record quarter and year for Investment Banking and Brokerage
  • Maintained quarterly cash dividend of $0.08 per common share

NEW YORK, Feb. 11, 2021 (GLOBE NEWSWIRE) -- Cowen Inc. (NASDAQ: COWN) (“Cowen” or “the Company”) today announced its operating results for the fourth quarter and full year ended December 31, 2020.

Jeffrey M. Solomon, Chair and Chief Executive Officer of Cowen, said, "I am proud of the dedication and hard work the Cowen team exhibited to achieve the strongest results in the firm's history. Because 2020 was a year of tremendous challenge, uncertainty and hardship for many, I am equally proud of our efforts to help our clients, our communities, and each other. We are grateful every day to be in a position to help our clients help others by solving their problems and enabling them to realize their visions. We are thankful that they put their trust in us. As we look ahead to 2021, we strive to live by our core values of vision, empathy, sustainability and tenacious teamwork."


Fourth Quarter 2020 Financial Summary

 US GAAP Economic Operating Income
(Non-GAAP)
 Three Months Ended
December 31,
 Three Months Ended
December 31,
($ in millions, except per share information)2020 2019 ? % 2020 2019 ? %
            
            
Revenue/Economic Proceeds (Non-GAAP)$502.9 $281.1 79% $512.7 $248.3 106%
Net income (loss) attributable to common stockholders/Economic Operating Income (Non-GAAP)$90.5 $3.5 2,486% $138.7 $16.3 751%
Earnings (loss) per common share (diluted)$2.98 $0.11 2,609% $4.58 $0.53 764%
            
Note: Throughout this press release the Company presents non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). A reconciliation of these non-GAAP measures appears under the section, "Reconciliation of US GAAP (Unaudited) to Non-GAAP Measures."


Fourth Quarter and Full Year 2020 Operating Financial Highlights

Record Investment Banking performance:  
 Record quarter and year for overall revenues, capital markets issuance and advisory and M&A revenues
 Broad strength across products. Biotech, tools & diagnostics and sustainability all key earnings drivers
 Record M&A proceeds driven by several high-fee engagements. Deal pipeline now at record high level
   
• Record Brokerage performance with continuing share gains:  
 Markets Economic Proceeds (Non-GAAP) of $657.3 million ($2.60 million/trading day) in FY20, with a 4Q20 record high of $188.3 million ($2.94 million/day) (Non-GAAP).1
 Strong growth in electronic trading, non-US execution, prime services, outsourced trading, securities finance, and special situations
   
• Strong momentum in investment management:  
 Management fees at highest annual level since 2016, four investment strategies grew AUM year-over-year
   
Invested capital:
 Full-year 2020 investment income economic proceeds (Non-GAAP) of $29.2 million from gains in balance sheet investments including Cowen Healthcare Investments and the Merchant Banking portfolio, including the sale of the Company's common shares of Nikola Corporation.
 As of December 31, 2020, the Company had invested capital in Op Co totaling $722.8 million, down from $784.2 million as of September 30, 2020.
 As of December 31, 2020, the Company had invested capital in Asset Co totaling $131.0 million, an increase of $2.3 million from the invested capital invested as of September 30, 2020.
 The largest Asset Co investments were the investment in Italian wireless broadband provider Linkem S.p.A ($82.7 million), private equity funds Formation8/Eclipse ($39.2 million) and other private investments ($9.1 million).
   
Assets under Management
 As of December 31, 2020, the Company had assets under management of $12.5 billion, up $0.7 billion from September 30, 2020 and an increase of $1.1 billion from December 31, 2019, respectively.

 

Capital Optimization Update

As of December 31, 2020, Cowen had book value of $32.34 per common share and tangible book value per common share of $25.95, up from book value of $30.48 and tangible book value of $24.32 at September 30, 2020, and up from book value of $24.77 and tangible book value of $18.72 at December 31, 2019.

In the fourth quarter of 2020, the Company repurchased $3.9 million of its common stock, or 165,040 shares, at an average price of $23.46 under the Company's existing share repurchase program. Outside the share repurchase program, in the fourth quarter of 2020 the Company acquired approximately $8.9 million of stock as a result of net share settlements relating to the vesting of equity awards, or 361,082 shares, at an average price of $24.51.

For full-year 2020, the Company repurchased 3,139,751 shares for $47.3 million, or an average price of $15.07 under the Company's existing share repurchase program. Outside the share repurchase program, in 2020 the Company acquired approximately $15.1 million of shares as a result of net share settlements relating to the vesting of equity awards, or 866,784 shares at an average price of $17.48.

Maintained Quarterly Cash Dividend

The Company maintained its quarterly cash dividend payable on its common stock. On February 10, 2021, the Board of Directors declared a cash dividend of $0.08 per common share. The dividend will be payable on March 15, 2021, to stockholders of record on March 1, 2021.


Select Balance Sheet Data

(Amounts in millions, except per share information)   
 December 31, 2020 December 31, 2019
Cowen Inc. stockholders' equity$969.5 $809.9
Common equity (CE)$868.2 $708.5
Tangible common equity (TCE)$696.7 $535.6
    
Book value per share (CE/CSO)$32.34 $24.77
Tangible book value per share (TCE/CSO)$25.95 $18.72
    
Common shares outstanding (CSO) 26.8  28.6
    

Note: Common Equity (CE) is calculated as Cowen Inc, stockholders’ equity less our preferred stock issuance.
Tangible common equity (TCE) is calculated as common equity (CE) less goodwill and net intangible assets.



Cowen Inc.
US GAAP Preliminary Unaudited Condensed Consolidated Statements of Operations
(Dollar and share amounts in thousands, except per share data)
        
 Three Months Ended Twelve Months Ended
 December 31 December 31
 2020 2019 2020 2019
Revenue       
Investment banking$266,135  $102,922  $769,486  $375,025 
Brokerage147,479  99,907  572,548  402,747 
Management fees12,304  11,128  47,515  32,608 
Incentive income465  823  592  1,547 
Interest and dividends59,912  45,067  187,459  174,913 
Reimbursement from affiliates271  246  1,048  1,026 
Reinsurance premiums11,204  17,267  30,147  46,335 
Other3,912  2,205  8,621  5,433 
Consolidated Funds revenues1,238  1,570  5,888  9,809 
Total revenue502,920  281,135  1,623,304  1,049,443 
Interest and dividends expense61,875  43,539  187,725  168,628 
Total net revenue441,045  237,596  1,435,579  880,815 
Expenses       
Employee compensation and benefits277,394  147,161  860,531  535,772 
Reinsurance claims, commissions and amortization of deferred acquisition costs12,189  18,931  33,905  44,070 
Operating, general, administrative and other expenses104,890  84,584  369,840  335,499 
Depreciation and amortization expense5,353  5,470  22,677  20,460 
Goodwill impairment      4,100 
Consolidated Funds expenses616  2,734  5,409  8,963 
Total expenses400,442  258,880  1,292,362  948,864 
Other income (loss)       
Net (losses) gains on securities, derivatives and other investments92,139  18,969  175,877  80,409 
Gain/(loss) on debt extinguishment2,719    2,719   
Consolidated Funds net (losses) gains5,034  36,827  (24,376) 58,363 
Total other income (loss)99,892  55,796  154,220  138,772 
Income (loss) before income taxes140,495  34,512  297,437  70,723 
Income tax expense/(benefit)37,784  5,238  90,373  14,853 
Net income (loss)102,711  29,274  207,064  55,870 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and funds10,544  24,051  (9,299) 31,239 
Net income (loss) attributable to Cowen Inc.92,167  5,223  216,363  24,631 
Less: Preferred stock dividends1,698  1,698  6,792  6,792 
Net income (loss) attributable to Cowen Inc. common stockholders$90,469  $3,525  $209,571  $17,839 
        
Earnings (loss) per share:       
Basic$3.36  $0.12  $7.54  $0.60 
Diluted$2.98  $0.11  $7.10  $0.57 
        
Weighted average shares used in per share data:       
Basic26,934  29,046  27,790  29,525 
Diluted30,316  30,722  29,519  31,286 



U.S. GAAP Financial Measures

Fourth quarter 2020 revenue was $502.9 million versus $281.1 million in the fourth quarter of 2019. Full year 2020 revenue was $1.6 billion compared to $1.0 billion in the prior year. The year-over-year increase was due primarily to increased investment banking and brokerage activity.

Fourth quarter 2020 investment banking revenues increased $163.2 million to $266.1 million. Full year 2020 investment banking revenue increased $394.5 million to $769.5 million. During full-year 2020 the Company completed 165 underwriting transactions, 74 strategic advisory transactions and 12 debt capital markets transactions.

Fourth quarter 2020 brokerage revenues increased $47.6 million to $147.5 million. Full year 2020 brokerage revenues increased $169.8 million to $572.5 million. The revenue growth was attributable to an increase in institutional brokerage, including special situations trading and electronic trading commissions, as well as an increase in institutional services, primarily prime brokerage.

Fourth quarter 2020 employee compensation and benefits expenses was $277.4 million, an increase of $130.2 million from the prior-year period. Full year 2020 employee compensation and benefits expenses was $860.5 million compared to $535.8 million in the prior year. The year-over-year increase was due primarily to higher total revenues resulting in a higher compensation and benefits accrual.

Fourth quarter 2020 income tax expense was $37.8 million compared to $5.2 million in the prior-year quarter. Full year 2020 income tax expense was $90.4 million compared to $14.9 million in the prior year. The year-over-year change was primarily attributable to the increase in the Company's income before income taxes.

Fourth quarter 2020 total expenses totaled $400.4 million, an increase of $141.6 million from the prior-year period. Full year 2020 total expenses totaled $1.3 billion, compared to $948.9 million in the prior year. The year-over-year increase was due to higher compensation expenses and higher non-compensation expenses associated with increased investment banking and brokerage activity, partially offset by a reduction in marketing and business development expenses.

Fourth quarter 2020 net income attributable to common stockholders was $90.5 million compared to $3.5 million in the fourth quarter of 2019. Full-year 2020 net income attributable to common stockholders was $209.6 million compared to net income of $17.8 million in the prior year.

Non-GAAP Financial Measures 

Throughout this press release, the Company presents supplemental financial measures that are not prepared in accordance with U.S. GAAP. These non-GAAP financial measures include (i) Economic Income (Loss), (ii) Economic Operating Income (Loss), (iii) Economic Proceeds and related components, (iv) Net Economic Proceeds and related components (v) Economic Expenses and related components and (vi) related per share measures. The Company believes that these non-GAAP financial measures, viewed in addition to, and not in lieu of, the Company’s reported US GAAP results, provide useful information to investors and analysts regarding its performance and overall results of operations as it presents investors and analysts with a supplemental operating view of the Company’s financials to help better inform their analysis of the Company’s performance.

These Non-GAAP financial measures are an integral part of the Company’s internal reporting to measure the performance of its business segments, allocate capital and other strategic decisions as well as assess the overall effectiveness of senior management. The Company believes that presenting these non-GAAP measures may provide expanded transparency into the Company’s business operations, growth opportunities and expense allocation decisions.

The Company’s primary non-GAAP financial measures of profit or loss are Economic Income (Loss) and Economic Operating Income (Loss). Economic Income (Loss) is a pre-tax measure that (i) includes management reclassifications which the Company believes provides additional insight on the performance of the Company’s core businesses and divisions (ii) eliminates the impact of consolidation for Consolidated Funds and excludes (iii) goodwill and intangible impairment (iv) certain other transaction-related adjustments and/or reorganization expenses and (v) certain costs associated with debt. Economic Operating Income (Loss) is a similar measure but before depreciation and amortization expenses. The Company believes that these non-GAAP financial measures provide analysts and investors transparency into the measures of profit and loss management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels. Additionally, the measures provide investors and analysts with additional insight into the activities of the Company’s core businesses, taking into account, among other things, the impact of minority investment stakes, securities borrowing and lending activities and expenses from investment banking activities on US GAAP reported results.

In addition to Economic Income (Loss) and Economic Operating Income (Loss), the Company also presents Economic Proceeds, Net Economic Proceeds, Economic Expenses, as well as their related components. These measures include management reclassifications and the elimination of the impact of the consolidation for Consolidated funds as described for Economic Income (Loss) and Economic Operating Income (Loss) described above. These adjustments are meant to provide comparability to our peers as well as to provide investors and analysts with transparency into how the Company manages its operating businesses and how analysts and investors review and analyze the Company’s and its peers’ similar lines of businesses. For example, among others, within the Company’s Op Co business segment, investors and analysts typically review and analyze the performance of investment banking revenues net of underwriting expenses and excluding the impact of reimbursable expenses. Additionally, the performance of the Company’s Markets business is typically analyzed as a unit incorporating commissions, interest from securities financing transactions and gains and losses from proprietary and facilitation trading. The Company’s investment management business performance is analyzed and reviewed by investors and analysts through investment income, incentive income and management fees. The presentation of Economic Proceeds, Net Economic Proceeds, Economic Expenses as well as their related components align with these and other examples of how the Company’s business activities and performance are reviewed by analysts and investors in addition to providing simplification related to legacy businesses and investments for which the Company maintains long-term monetization strategies . Additionally, the Company manages its operating businesses to an Economic Compensation-to-Proceeds ratio. Presentation of Economic Compensation Expense and Economic Proceeds provides transparency in addition to the Company’s US GAAP Compensation Expense.

Reconciliations to comparable US GAAP measures are presented along with the Company’s Non-GAAP financial measures. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other public companies and are not identical to corresponding measures used in our various agreements or public filings.

These Non-GAAP measures should not be considered in isolation or as a substitute for revenue, expenses, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared in accordance with US GAAP. As a result of the adjustments made to arrive at Economic Income (Loss) described below, Economic Income (Loss) has limitations in that it does not take into account certain items included or excluded under US GAAP, including its consolidated funds.


Economic Proceeds

 Three Months Ended Twelve Months Ended
 December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
(Dollar amounts in thousands)Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total
Economic Proceeds                       
Investment banking$254,402  $  $254,402  $96,711  $  $96,711  $729,180  $  $729,180  $351,085  $  $351,085 
Brokerage185,824    185,824  113,047    113,047  652,647    652,647  459,143    459,143 
Management fees16,430  312  16,742  10,305  187  10,492  58,154  946  59,100  40,321  1,976  42,297 
Incentive income42,606  1,769  44,375  10,603  370  10,973  83,435  1,927  85,362  44,600  1,132  45,732 
Investment income (loss)5,220  5,108  10,328  18,788  (2,178) 16,610  37,786  (8,564) 29,222  32,614  3,111  35,725 
Other economic proceeds1,073  1  1,074  490  1  491  775  5  780  5,785  58  5,843 
Total: Economic Proceeds505,555  7,190  512,745  249,944  (1,620) 248,324  1,561,977  (5,686) 1,556,291  933,548  6,277  939,825 
Economic Interest Expense6,048  1,109  7,157  6,205  1,402  7,607  24,519  5,123  29,642  22,576  5,449  28,025 
Net Economic Proceeds$499,507  $6,081  $505,588  $243,739  $(3,022) $240,717  $1,537,458  $(10,809) $1,526,649  $910,972  $828  $911,800 


Economic Proceeds were $512.7 million versus $248.3 million in the fourth quarter of 2019, an increase of 106%. Full-year 2020 economic proceeds rose 67%.

Investment Banking Economic Proceeds were $254.4 million, up 163% versus the prior-year period, driven by stronger equity capital markets activity as well as higher-fee M&A transactions. Full-year 2020 banking proceeds rose 108%.

Brokerage Economic Proceeds of $185.8 million were up 64% versus the prior-year period, driven by strength in non-US trading, electronic trading, prime services and securities finance. Full-year 2020 brokerage proceeds rose 42%.

Management Fees Economic Proceeds rose 60% year-over-year to $16.7 million in the fourth quarter, driven by higher AUM in the sustainability strategy, private healthcare strategy and the healthcare royalties strategy. Full-year 2020 management fees rose 40%.

Incentive Income Economic Proceeds were $44.4 million in the fourth quarter of 2020, up from income of $11.0 million in the prior-year period. Fourth quarter 2020 incentive income reflects higher performance fees in the private healthcare strategy and the activist strategy. Full-year 2020 incentive income rose 87%.

Investment Income Economic Proceeds posted income of $10.3 million, versus income of $16.6 million in the prior-year period. Fourth quarter 2020 proceeds include increases in the value of investments in the private healthcare strategy, activist strategy and merchant banking portfolio, partially offset by a negative-mark-to market adjustment on Cowen's Nikola holdings, which were substantially reduced during the quarter. Full-year 2020 investment income economic proceeds declined 18%.


Economic Expenses

 Three Months Ended Twelve Months Ended
 December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
(Dollar amounts in thousands)Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total
Economic Expenses                       
Compensation & Benefits$278,273  $1,674  $279,947  $145,875  $687  $146,562  $860,753  $3,767  $864,520  $532,468  $5,070  $537,538 
Non-Compensation Expenses83,976  (46) 83,930  72,997  1,311  74,308  312,173  350  312,523  294,614  3,924  298,538 
Depreciation & Amortization5,900  5  5,905  5,447  6  5,453  22,655  22  22,677  20,403  36  20,439 
Non-Controlling Interest1,308    1,308  1,852    1,852  6,892    6,892  4,796    4,796 
Total: Economic Expenses$369,457  $1,633  $371,090  $226,171  $2,004  $228,175  $1,202,473  $4,139  $1,206,612  $852,281  $9,030  $861,311 


Economic Compensation Expenses expense was $279.9 million compared to $146.6 million in the fourth quarter of 2019. The increase was due to higher revenues offset only partially by a lower economic compensation-to-proceeds ratio. The fourth quarter 2020 economic compensation-to-proceeds ratio was 54.6%, down from 56.1% in 3Q20 and down from 59.0% in 4Q19. Full-year 2020 compensation-to-proceeds ratio was 55.6%, down from 57.2% in full-year 2019.

Economic Non-compensation Expenses Fourth quarter 2020 fixed non-compensation expenses increased $3.5 million from the prior-year period to $39.8 million. The increase was due in part to higher service fees offset only partially by reduced office service expenses. Variable non-compensation expenses were $44.1 million, up from $38.0 million in the fourth quarter of 2019. The increase is related in part to higher brokerage and trade execution costs due to increased volumes, partially offset by lower travel, entertainment and business development expenses. Full-year 2020 non-compensation-to-proceeds ratio was 20.1%, down from 31.8% in full-year 2019.


Economic Income and Economic Operating Income

 Three Months Ended Twelve Months Ended
 December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019
(Dollar amounts in thousands)Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total
Economic Income (loss) *$128,607  $4,193  $132,800  $16,193  $(5,349) $10,844  $329,381  $(16,136) $313,245  $53,257  $(9,560) $43,697 
Add: Depreciation & amortization5,900  5  5,905  5,447  6  5,453  22,655  22  22,677  20,403  36  20,439 
Economic Operating Income (Loss)$134,507  $4,198  $138,705  $21,640  $(5,343) $16,297  $352,036  $(16,114) $335,922  $73,660  $(9,524) $64,136 
                        
Economic Income per common share$4.24  $0.14  $4.38  $0.53  $(0.17) $0.35  $11.16  $(0.55) $10.60  $1.69  $(0.31) $1.40 
Economic Operating Income per common share$4.44  $0.14  $4.58  $0.70  $(0.17) $0.53  $11.93  $(0.55) $11.38  $2.35  $(0.30) $2.06 

* Economic Income (loss) is net of preferred dividends


The following tables reconciles total US GAAP Revenues and Other Income (Loss) to total Economic Proceeds for the three and twelve months ended December 31, 2020 and 2019:

For the three months ended December 31, 2020
(Dollar amounts in thousands)
 Investment
Banking
 Brokerage Management
Fees
 Incentive
Income
 Investment
Income
 Interest and
Dividends
 Reimbursement
from Affiliates
 Reinsurance
premiums
 Other
revenues
 Consolidated
Funds
Revenues
 Other
Income
(Loss)
 Total
Total US GAAP Revenues and Other Income (Loss)  $266,135  $147,479  $12,304  $465  $  $59,912  $271  $11,204  $3,912  $1,238  $99,892  $602,812 
Management Presentation Reclassifications:                         
Underwriting expensesa(6,041)                     (6,041)
Reimbursable client expensesb(5,692)           (271)         (5,963)
Securities financing interest expensec  958        (46,911)           (45,953)
Fund start-up costs and distribution feesd  (293) (540) (467)         (1,773)     (3,073)
Certain equity method investmentse    3,439  6,879              (7,362) 2,956 
Carried interestf      37,498              (37,498)  
Proprietary trading gains and lossesg        29,944  (4,786)     (64)   (39,125) (14,031)
Insurance related activities expensesh              (11,204) (987)     (12,191)
Facilitation trading gains and lossesi  37,680      (19,616) (8,215)         (11,809) (1,960)
Total Management Presentation Reclassifications: (11,733) 38,345  2,899  43,910  10,328  (59,912) (271) (11,204) (2,824)   (95,794) (86,256)
Fund Consolidated Reclassificationsl    1,539            (14) (1,238) (1,379) (1,092)
Income Statement Adjustments                        
Debt extinguishmentq                    (2,719) (2,719)
Total Economic Proceeds $254,402  $185,824  $16,742  $44,375  $10,328  $  $  $  $1,074  $  $  $512,745 



For the three months ended December 31, 2019
(Dollar amounts in thousands)
 Investment
Banking
 Brokerage Management
Fees
 Incentive
Income
 Investment
Income
 Interest and
Dividends
 Reimbursement
from Affiliates
 Reinsurance
premiums
 Other
revenues
 Consolidated
Funds
Revenues
 Other
Income
(Loss)
 Total
Total US GAAP Revenues and Other Income (Loss) $102,922  $99,907  $11,128  $823  $  $45,067  $246  $17,267  $2,205  $1,570  $55,796  $336,931 
Management Presentation Reclassifications:                        
Underwriting expensesa(2,684)                     (2,684)
Reimbursable client expensesb(10,139)           (274)         (10,413)
Securities financing interest expensec  6,791        (34,984)           (28,193)
Fund start-up costs and distribution feesd    (4,314)           (1,120)     (5,434)
Certain equity method investmentse    3,049  4,240              (5,169) 2,120 
Carried interestf      5,867              (5,867)  
Proprietary trading gains and lossesg        20,934  (4,667)     (728)   (12,076) 3,463 
Insurance related activities expensesh              (17,267) 134      (17,133)
Facilitation trading gains and lossesi6,612  6,349      (4,324) (5,416)         (5,090) (1,869)
Total Management Presentation Reclassifications: (6,211) 13,140  (1,265) 10,107  16,610  (45,067) (274) (17,267) (1,714)   (28,202) (60,143)
Fund Consolidated Reclassificationsl    629  43      28      (1,570) (27,594) (28,464)
Total Economic Proceeds $96,711  $113,047  $10,492  $10,973  $16,610  $  $  $  $491  $  $  $248,324 



For the twelve months ended December 31, 2020
(Dollar amounts in thousands)
 Investment
Banking
 Brokerage Management
Fees
 Incentive
Income
 Investment
Income
 Interest and
Dividends
 Reimbursement
from Affiliates
 Reinsurance
premiums
 Other
revenues
 Consolidated
Funds
Revenues
 Other
Income
(Loss)
 Total
Total US GAAP Revenues and Other Income (Loss) $769,486  $572,548  $47,515  $592  $  $187,459  $1,048  $30,147  $8,621  $5,888  $154,220  $1,777,524 
Management Presentation Reclassifications:                        
Underwriting expensesa(22,565)                     (22,565)
Reimbursable client expensesb(17,741)           (1,098)         (18,839)
Securities financing interest expensec  14,499        (142,998)           (128,499)
Fund start-up costs and distribution feesd  (293) (3,970) (719)         (2,529)     (7,511)
Certain equity method investmentse    12,540  24,121              (28,346) 8,315 
Carried interestf      61,335              (61,335)  
Proprietary trading gains and lossesg        42,564  (17,442)     (1,518)   (56,351) (32,747)
Insurance related activities expensesh              (30,147) (3,759)     (33,906)
Facilitation trading gains and lossesi  65,893      (13,342) (27,019)         (31,768) (6,236)
Total Management Presentation Reclassifications: (40,306) 80,099  8,570  84,737  29,222  (187,459) (1,098) (30,147) (7,806)   (177,800) (241,988)
Fund Consolidated Reclassificationsl    3,015  33      50    (35) (5,888) 26,299  23,474 
Income Statement Adjustments                        
Debt extinguishmentq                    (2,719) (2,719)
Total Economic Proceeds $729,180  $652,647  $59,100  $85,362  $29,222  $  $  $  $780  $  $  $1,556,291 



For the twelve months ended December 31, 2019
(Dollar amounts in thousands)
 Investment
Banking
 Brokerage Management
Fees
 Incentive
Income
 Investment
Income
 Interest and
Dividends
 Reimbursement
from Affiliates
 Reinsurance
premiums
 Other
revenues
 Consolidated
Funds
Revenues
 Other
Income
(Loss)
 Total
Total US GAAP Revenues and Other Income (Loss) $375,025  $402,747  $32,608  $1,547  $  $174,913  $1,026  $46,335  $5,433  $9,809  $138,772  $1,188,215 
Management Presentation Reclassifications:                        
Underwriting expensesa(15,067)                     (15,067)
Reimbursable client expensesb(15,485)           (1,148)         (16,633)
Securities financing interest expensec  22,198        (132,000)           (109,802)
Fund start-up costs and distribution feesd    (5,500)           (1,123)     (6,623)
Certain equity method investmentse    12,919  19,975              (25,204) 7,690 
Carried interestf      23,610              (23,610)  
Proprietary trading gains and lossesg        54,455  (24,067)     (725)   (44,631) (14,968)
Insurance related activities expensesh              (46,335) 2,243      (44,092)
Facilitation trading gains and lossesi6,612  34,198      (18,730) (18,846)         (8,662) (5,428)
Total Management Presentation Reclassifications: (23,940) 56,396  7,419  43,585  35,725  (174,913) (1,148) (46,335) 395    (102,107) (204,923)
Fund Consolidated Reclassificationsl    2,270  600      122    15  (9,809) (36,665) (43,467)
Total Economic Proceeds $351,085  $459,143  $42,297  $45,732  $35,725  $  $  $  $5,843  $  $  $939,825 



The following table reconciles total US GAAP interest and dividends expense to total Economic Interest Expense for the three and twelve months ended December 31, 2020 and 2019:

  Three Months Ended December 31, Twelve Months Ended December 31,
(Dollar amounts in thousands)2020 2019 2020 2019
Total US GAAP Interest & Dividend Expense $61,875  $43,539  $187,725  $168,628 
Management Presentation Reclassifications:        
Securities financing interest expensec(45,953) (28,193) (128,499) (109,802)
Proprietary trading gains and lossesg(5,700) (4,781) (18,849) (21,076)
Facilitation trading gains and lossesi(1,960) (1,869) (6,236) (5,428)
Total Management Presentation Reclassifications: (53,613) (34,843) (153,584) (136,306)
Income Statement Adjustments:       
Amortization of discount/(premium) on debtm(1,105) (1,089) (4,499) (4,297)
Total Economic Interest Expense$7,157  $7,607  $29,642  $28,025 



The following tables reconcile total US GAAP Expenses and non-controlling interests to total Economic Expenses for the three and twelve months ended December 31, 2020 and 2019:

  Three Months Ended December 31, 2020 Three Months Ended December 31, 2019
(Dollar amounts in thousands)  Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total
Total US GAAP $277,394  $123,048  $10,544  $410,986  $147,161  $111,719  $24,051  $282,931 
Management Presentation Reclassifications:                
Underwriting expensesa  (6,041)   (6,041)   (2,684)   (2,684)
Reimbursable client expensesb  (5,963)   (5,963)   (10,413)   (10,413)
Fund start-up costs and distribution feesd  (3,073)   (3,073)   (5,434)   (5,434)
Certain equity method investmentse  2,956    2,956    2,120    2,120 
Proprietary trading gains and lossesg  1,737  (10,068) (8,331)   6,565  1,679  8,244 
Insurance related activities expensesh  (12,191)   (12,191)   (17,133)   (17,133)
Associated partner/banker compensationj2,908  (2,908)     1,054  (1,054)    
Management company non-Controlling interestk(355) (953) 1,308    (1,653) (199) 1,852   
Total Management Presentation Reclassifications: 2,553  (26,436) (8,760) (32,643) (599) (28,232) 3,531  (25,300)
Fund Consolidated Reclassificationsl  (616) (476) (1,092)   (2,734) (25,730) (28,464)
Income Statement Adjustments:                
Acquisition adjustmentsn  (4,282)   (4,282)   (992)   (992)
Goodwill and/or other impairmento  (1,879)   (1,879)        
Total Income Statement Adjustments:   (6,161)   (6,161)   (992)   (992)
Total Economic Expenses $279,947  $89,835  $1,308  $371,090  $146,562  $79,761  $1,852  $228,175 



  Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019
(Dollar amounts in thousands) Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total
Total US GAAP $860,531  $431,831  $(9,299) $1,283,063  $535,772  $413,092  $31,239  $980,103 
Management Presentation Reclassifications:                
Underwriting expensesa  (22,565)   (22,565)   (15,067)   (15,067)
Reimbursable client expensesb  (18,839)   (18,839)   (16,633)   (16,633)
Fund start-up costs and distribution feesd  (7,511)   (7,511)   (6,623)   (6,623)
Certain equity method investmentse  8,315    8,315    7,690    7,690 
Proprietary trading gains and lossesg  5,686  (19,584) (13,898)   2,843  3,265  6,108 
Insurance related activities expensesh  (33,906)   (33,906)   (44,092)   (44,092)
Associated partner/banker compensationj5,377  (5,377)     3,419  (3,419)    
Management company non-Controlling interestk(1,388) (5,504) 6,892    (1,653) (3,143) 4,796   
Total Management Presentation Reclassifications: 3,989  (79,701) (12,692) (88,404) 1,766  (78,444) 8,061  (68,617)
Fund Consolidated Reclassificationsl  (5,409) 28,883  23,474    (8,963) (34,504) (43,467)
Income Statement Adjustments:                
Acquisition adjustmentsn  (9,098)   (9,098)   (2,608)   (2,608)
Goodwill and/or other impairmento  (2,423)   (2,423)   (4,100)   (4,100)
Total Income Statement Adjustments:   (11,521)   (11,521)   (6,708)   (6,708)
Total Economic Expenses $864,520  $335,200  $6,892  $1,206,612  $537,538  $318,977  $4,796  $861,311 



The following table reconciles US GAAP Net Income (loss) Attributable to Cowen Inc. Common Stockholders to Economic Income (loss) and Economic Operating Income (loss):

   Three Months Ended Twelve Months Ended
   December 31 December 31
(Dollar amounts in thousands) 2020 2019 2020 2019
          
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders $90,469  $3,525  $209,571  $17,839 
 Income Statement Adjustments:        
 Income tax expense (benefit)p37,784  5,238  90,373  14,853 
 Amortization of discount (premium) on debtm1,105  1,089  4,499  4,297 
 Debt extinguishmentq(2,719)   (2,719)  
 Goodwill and other impairmento1,879    2,423  4,100 
 Transaction-related and other costsn4,282  992  9,098  2,608 
 Economic Income (Loss) $132,800  $10,844  $313,245  $43,697 
 Add back: Depreciation and amortization expense 5,905  5,453  22,677  20,439 
 Economic Operating Income (Loss) $138,705  $16,297  $335,922  $64,136 



The following table reconciles US GAAP Net Income (loss) Attributable to Cowen Inc. Common Stockholders Earnings Per Common Share (Diluted) to Economic Income (loss) Per Common Share (Diluted) and Economic Operating Income (loss) Per Common Share (Diluted):

   Three Months Ended Twelve Months Ended
   December 31 December 31
(Dollars per share) 2020 2019 2020 2019
          
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders $2.98  $0.11  $7.10  $0.57 
 Income Statement Adjustments:        
 Income tax expense (benefit)p1.25  0.17  3.06  0.47 
 Amortization of discount (premium) on debtm0.04  0.04  0.15  0.14 
 Debt extinguishmentq(0.09)   (0.09)  
 Goodwill and other impairmento0.06    0.08  0.13 
 Transaction-related and other costsn0.15  0.03  0.30  0.08 
 Economic income (Loss) per common share (diluted)  $4.39  $0.35  $10.60  $1.39 
 Add back: Depreciation and amortization expense 0.19  0.18  0.77  0.66 
 Economic Operating Income (Loss) per common share (diluted) $4.58  $0.53  $11.37  $2.05 



Adjustments made to US GAAP Net Income (Loss) to arrive at Economic Operating Income (Loss)

Management Reclassifications
 Management reclassification adjustments and fund consolidation reclassification adjustments have no effect on economic income. These adjustments are reclassifications to change the location of certain line items.
aUnderwriting expenses: Economic Income (Loss) presents investment banking revenues net of underwriting expenses.
bReimbursable client expenses: Economic Income (Loss) presents expenses reimbursed from clients and affiliates within their respective expense category but is included as a part of revenues under US GAAP.
cSecurities financing interest expense: Economic Income (Loss) brokerage revenues included net securities borrowed and securities loaned activities which are shown gross in interest income and interest expense for US GAAP.
dFund start-up costs and distribution fees: Economic Income (Loss) presents revenues net of fund start-up costs and distribution fees paid to agents.
eCertain equity method investments: Economic Income (Loss) recognizes the Company's proportionate share of management and incentive fees and associated share of expenses on a gross basis for equity method investments within the activist business, real estate operating entities and the healthcare royalty business. The Company applies the equity method of accounting to these entities and accordingly the results from these businesses are recorded within Other Income (Loss) for US GAAP.
fCarried interest: The Company applies an equity ownership model to carried interest which is recorded in Other Income (Loss) for US GAAP. The Company presents carried interest as incentive income for Economic Income (Loss).
gProprietary trading gains and losses: Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends) for which the majority of this activity is shown in other income (loss) for US GAAP reporting.
hInsurance related activities expenses: Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. The costs are recorded within expenses for US GAAP reporting.
iFacilitation trading gains and losses: Economic Income (Loss) recognizes gains and losses on investments held as part of the Company's facilitation and trading business within brokerage revenues as these investments are directly related to the markets business activities.
jAssociated partner/banker compensation reclassification: Economic Income (Loss) presents certain payments to associated banking partners as compensation rather than non-compensation expenses.
kManagement company non-controlling interest: Economic income (Loss) non-controlling interest represents only operating entities that are not wholly owned by the Company. The Company also presents non-controlling interests within total expenses for Economic Income (Loss).
Fund Consolidation Reclassifications
lThe impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in Economic Income (Loss). Adjustments to reconcile to US GAAP Net Income (Loss) included elimination of incentive income and management fees earned from the Consolidated Funds and addition of investment fund expenses excluding management fees paid, investment fund revenues and investment income (loss).
Income Statement Adjustments
mEconomic Income (Loss) excludes the amortization of discount (premium) on debt.
nEconomic Income (Loss) excludes acquisition related adjustments.
oEconomic Income (Loss) excludes goodwill and other impairments.
pEconomic Income (Loss) excludes income taxes.
qEconomic Income (Loss) excludes gain/(loss) on debt extinguishment.


Earnings Conference Call

Management will hold a conference call today, February 11, 2021 at 9:00 am ET to discuss these results and provide an update on business conditions.

Chair and Chief Executive Officer Jeffrey M. Solomon and Chief Financial Officer Stephen A. Lasota will host the presentation, followed by a question and answer period.

U.S. dial in: (855) 760-0961
International dial-in: (631) 485-4850
Passcode: 9894979

Please call the conference telephone number at least 15 minutes prior to the start time.

The call can also be accessed through live audio webcast via this direct link:
https://edge.media-server.com/mmc/p/qyu9qc6t

A replay of the call will be available for one week beginning at 12:00 pm ET on February 11, 2021 on the Company’s website at investor.cowen.com/investor-calls or via the following numbers:

U.S. replay dial-in: (855) 859-2056
International replay dial-in: (404) 537-3406
Replay ID: 9894979

About Cowen Inc.
Cowen Inc. (“Cowen” or the “Company”) is a diversified financial services firm offering investment banking services, research, sales and trading, prime brokerage, global clearing, commission management services and investment management. Cowen focuses on delivering value-added capabilities to our clients in order to help them outperform. Founded in 1918, the Company is headquartered in New York and has offices worldwide. Learn more at Cowen.com

Investor Relations Contact:
JT Farley
(646) 562-1056
james.farley@cowen.com
Source: Cowen Inc.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events. Forward-looking statements include statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. As a result of the spread of COVID-19, economic uncertainties have arisen that have the potential in future periods to negatively impact the Company’s business, financial condition, results of operation, cash flows, strategies and prospects. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and impact on our clients, employees, vendors and the markets in which we operate our businesses, all of which are uncertain and cannot be reasonably estimated at this time. The Company’s actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. The Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are available at our website at www.cowen.com and at the Securities and Exchange Commission website at www.sec.gov. Unless required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this press release.

1 Markets Economic Proceeds is comprised of Brokerage Economic Proceeds (Non-GAAP) of $652.6 million as well as $3.1 million of management fees for Prime Services and $1.7 million of miscellaneous fees presented in Management Fees Economic Proceeds (Non-GAAP) and Other Economic Proceeds (Non-GAAP) respectively.


Primary Logo

Source: Cowen Inc.