Cowen Group, Inc. Announces 2009 First Quarter Results
First Quarter Financial Overview
For the quarter ended
-- Total revenue was $43.7 million , representing a decrease of 20% from
$55.0 million in the prior year period and a 5% increase from $41.6
million in the previous quarter
-- The compensation and benefits expense to revenue ratio was 65%
compared to 60% in the prior year period
-- Excludes $0.8 million and $(4.2) million of IPO award expense
(benefit) for the quarters ended March 31, 2009 and 2008,
respectively
-- Adjusted operating loss of $5.9 million compared to an adjusted
operating loss of $1.9 million for the first quarter of 2008 (see
"Non-GAAP Financial Measures" below for a discussion of adjusted
operating income)
-- Operating income excluding non-cash items was $2.4 million in the
first quarter of 2009 compared to $1.5 million in the first quarter of
2008 (see "Non-GAAP Financial Measures" below for a discussion of
operating income excluding non-cash items)
First Quarter Operational Overview
-- First quarter equity new issue revenue was essentially flat
year-over-year and increased $1.2 million over the fourth quarter of
2008
-- Core brokerage revenue decreased 9% year-over-year and increased 2%
sequentially (see "Non-GAAP Financial Measures" below for a discussion
of core brokerage revenue)
-- First quarter strategic advisory revenue decreased 72% compared to the
prior year period and decreased 34% sequentially
-- Non-compensation expense for the first quarter decreased $2.6 million ,
or 11%, year-over-year. Compared to the fourth quarter of 2008,
non-compensation expense decreased $2.1 million , or 9%.
-- As of May 1, 2009 , headcount was down 8% from December 31, 2008 . The
overall decrease includes the addition of 13 officer-level personnel
in research, investment banking and brokerage.
Recent Developments
-- Cowen expanded its brokerage capabilities with the formation of the
Portfolio Trading Group offering quantitative trading strategies to
our institutional clients. In addition, Cowen recently expanded its
brokerage platform to include trading of financials and REITs.
-- Cowen enhanced its private capital raising capabilities with the
addition of two managing directors in the Private Equity Group .
-- Cowen continued to expand its alternative asset management business
with the addition of two senior professionals who will oversee the
development of a Commodity Trading Advisor (CTA) joint venture. These
new hires will commence employment late in the second quarter upon the
expiration of certain post-employment obligations to their previous
employer.
-- Cowen recently completed its transition from 100% owner to minority
owner of Cowen Asset Management, LLC , which was concurrently renamed
Crosswind Investments, LLC . Formerly a wholly-owned subsidiary of
Cowen Group, Inc. , Crosswind is now an investment management firm
majority owned by former employees of Cowen. In addition, Cowen
Group, Inc. intends to wind down its traditional asset management
operations in the United Kingdom .
Results of Operations
Brokerage
Cowen's core brokerage revenue (see "Non-GAAP Financial Measures" below
for a discussion of core brokerage revenue) decreased
Investment Banking
Investment banking revenue was
-- Equity underwriting revenue was $1.5 million , essentially flat
compared to the prior year period and an increase of $1.2 million
compared to the fourth quarter of 2008. In the first quarter of 2009,
growth sector public equity capital raising activity decreased 73% and
61% year-over-year when measured by proceeds raised and number of
completed transactions, respectively. During the first quarter of
2009, the Company co-managed one underwritten transaction raising
proceeds of $320 million .
-- Private equity revenue was $0.7 million in the first quarter of 2009,
a decrease of $0.6 million , or 43%, compared to $1.3 million in the
first quarter of 2008. Compared to the fourth quarter of 2008,
private equity revenue increased $0.3 million . The year-over-year
decrease was primarily attributable to decreased transaction volume.
Growth sector private capital raising activity in the first quarter
decreased 48% and 40% year-over-year when measured by number of
completed transactions and proceeds raised, respectively. During the
first quarter of 2009, the Company completed two private transactions
raising proceeds of approximately $12.0 million .
-- Strategic advisory revenue was $3.1 million in the first quarter of
2009, a decrease of $8.0 million , or 72%, compared to $11.1 million in
the first quarter of 2008. Sequentially, strategic advisory revenue
decreased 34%, or $1.6 million . The year-over-year decrease was the
result of decreased transaction volume. Compared to the prior year
period, growth sector strategic advisory activity decreased 69% and
65%(1) when measured by number of transactions and transaction value,
respectively. During the first quarter of 2009, Cowen completed four
strategic advisory assignments with an aggregate disclosed value of
$173 million .
Interest and Dividend Income
Interest and dividend income was
Other
Other revenues in the first quarter of 2009 were
Compensation Expense and Headcount
Employee compensation and benefits expense increased
As of
Non-Compensation Expense
Non-compensation expense was
Provision for Income Taxes
The Company recorded an income tax benefit of
Earnings Conference Calls with Management
Management holds conference calls to discuss the Company's six-month and
full-year results. The next conference call will be announced shortly after
the close of the second quarter ending
About
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.
The Company's actual results could differ materially from those anticipated in
forward-looking statements for many reasons, including the factors described
in the section entitled "Risk Factors" in the Company's Annual Report on Form
10-K 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
(1) Excludes Merck/Schering-Plough and Pfizer/Wyeth transactions.
Cowen Group, Inc.
Preliminary Unaudited Consolidated
Statements of Operations
(Dollar amounts in thousands, except per share data)
Three Months Ended
March 31,
2009 2008
Revenues
Investment banking $5,227 $13,862
Brokerage 35,608 38,083
Interest and dividend income 177 1,223
Other 2,721 1,822
Total revenues 43,733 54,990
Expenses
Employee compensation and benefits 29,145 28,809
Floor brokerage and trade execution 2,861 2,440
Service fees 4,172 4,209
Communications 3,106 3,649
Occupancy and equipment 4,134 4,189
Marketing and business development 2,854 3,626
Depreciation and amortization 802 638
Other 3,401 5,165
Total expenses 50,475 52,725
(Loss) income before income taxes (6,742) 2,265
(Benefit) provision for income taxes (276) 1,611
Net (loss) income (6,466) 654
Less: Net income attributable to
noncontrolling interest 49 -
Net (loss) income attributable to
Cowen Group, Inc. $(6,515) $654
Earnings (loss) per share:
Basic $(0.57) $0.06
Diluted $(0.57) $0.05
Weighted average shares used in per
share data:
Basic 11,402 11,253
Diluted 11,402 11,895
Other Metrics at March 31, 2009 and 2008
Cowen Group, Inc. stockholders' equity $139,488 $203,451
Common shares outstanding 15,171 14,429
Book value per share $9.19 $14.10
Tangible book value per share * $9.01 $10.63
* Tangible book value per share is calculated as follows:
stockholders' equity, equity, Tangible book value per share at
March 31, 2009 is calculated as follows: Cowen Group, Inc.
stockholders' equity, less $2.8 million of goodwill and intangible
assets, divided by common shares outstanding. Tangible book value
per share at March 31, 2008 is calculated as follows: Cowen Group,
Inc. stockholders' equity, less $50.0 million of goodwill, divided
by common shares outstanding.
Cowen Group, Inc.
Non-GAAP Financial Measures
Three Months Ended
March 31,
2009 2008
(dollars in millions)
Reconciliation of Operating Income (Loss) to
Adjusted Operating Income (Loss)
(Loss) income before income taxes $(6.7) $2.3
Exclusion of share-based compensation
expense (reversal) related to IPO awards 0.8 (4.2)
Adjusted operating loss $(5.9) $(1.9)
Reconciliation of Operating Income (Loss) to
Operating Income (Loss) Excluding Non-cash Items
(Loss) income before income taxes $(6.7) $2.3
Exclusion of share-based and other non-cash
deferred compensation expense (benefit) 8.3 (1.4)
Exclusion of depreciation and amortization
expense 0.8 0.6
Operating income excluding non-cash items $2.4 $1.5
Three Months Ended
03/31/09 03/31/08 12/31/08
(dollars in millions)
Reconciliation of Brokerage Revenue to Core
Brokerage Revenue
Brokerage revenue $35.6 $38.1 $33.3
Exclusion of the loss from warrants,
asset management seed funds, restricted
stock received in connection with the
demutualization of certain exchanges and
mutual fund investments held as a hedge
against legacy deferred compensation
obligations 0.4 1.6 2.0
Core brokerage revenue $36.0 $39.7 $35.3
Non-GAAP Financial Measures
In addition to the results presented above in accordance with generally accepted accounting principles, or GAAP, the Company presents financial measures that are non-GAAP measures, such as adjusted operating income (loss), operating income (loss) excluding non-cash items and core brokerage revenue. The Company believes that these non-GAAP measures, viewed in addition to and not in lieu of the Company's reported GAAP results, provide useful information to investors regarding its performance and overall results of operations. These metrics are an integral part of the Company's internal reporting to measure the performance of its business and the overall effectiveness of senior management. Reconciliations to comparable GAAP measures are available in the accompanying schedules. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies, and are not identical to corresponding measures used in our various agreements or public filings.
We have reported in this press release our adjusted operating loss for the
three months ended
We have reported in this press release our operating income excluding
non-cash items for the three months ended
-- the share-based and other non-cash deferred compensation expense
(deferred compensation expense that does not involve a cash payment
during the period); and
-- the non-cash depreciation and amortization expense.
Management believes that the non-GAAP calculation of operating income (loss) excluding non-cash items will allow for a better understanding of the actual cash basis income (loss) generated in each period presented.
We have reported in this press release our core brokerage revenue for the
three months ended
-- excluding the income or loss from warrants, asset management seed
funds, restricted stock received in connection with the
demutualization of certain exchanges and mutual fund investments held
as a hedge against legacy deferred compensation obligations.
Management believes that the non-GAAP calculation of core brokerage revenue will allow for a better understanding of the revenue generated by our sales and trading activities as it excludes gains and losses associated with activities that are not conducted by our sales and trading professionals, but that are required to be reported in the brokerage line item.
SOURCE-->Cowen Group, Inc. -0-05/07/2009 /CONTACT:Thomas Conner , Chief Financial Officer ofCowen Group, Inc. , +1-646-562-1719/ /Web Site: http://www.cowen.com / (COWN) CO:Cowen Group, Inc. ST:New York IN: FIN SU: ERN PR -- NY12959 -- 295905/07/2009 08:00 EDT http://www.prnewswire.com
