Cowen Group, Inc. Announces 2009 Second Quarter Results
Second Quarter Financial Overview
For the quarter ended
-- Total revenue was$49.8 million , representing a decrease of 21% from$62.7 million in the prior year period and a 14% increase from$43.7 million in the previous quarter. -- The compensation and benefits expense to revenue ratio was 62% compared to 60% in the prior year period. -- Excludes$0.5 million and$1.3 million of IPO award expense for the quarters endedJune 30, 2009 and 2008, respectively. -- Adjusted operating loss of$4.0 million compared to an adjusted operating loss of$1.1 million for the second quarter of 2008 (see "Non-GAAP Financial Measures" below for a discussion of adjusted operating income). -- Operating income excluding non-cash items was$3.3 million in the second quarter of 2009 compared to income of$2.9 million in the second quarter of 2008 (see "Non-GAAP Financial Measures" below for a discussion of operating income excluding non-cash items). Financial Overview of Six Month Period EndedJune 30, 2009 For the six month period endedJune 30, 2009 , the Company reported a net loss attributable toCowen Group, Inc. of$11.0 million , or$0.95 per share, compared to a net loss attributable toCowen Group, Inc. of$0.1 million in the prior year period, or$0.01 per share. -- Total revenue was$93.5 million , representing a decrease of 21% from$117.7 million in the prior year period. -- The compensation and benefits expense to revenue ratio was 63% compared to 60% in the prior year period. -- Excludes$1.3 million and a reversal of$2.9 million of IPO award expense for the six month periods endedJune 30, 2009 and 2008, respectively. -- Adjusted operating loss of$10.0 million compared to an adjusted
operating loss of
Financial Measures" below for a discussion of adjusted operating
income).
-- Operating income excluding non-cash items was $5.7 million in the six
month period ended June 30, 2009 compared to $4.4 million for the six
month period ended June 30, 2008 (see "Non-GAAP Financial Measures"
below for a discussion of operating income excluding non-cash items).
Second Quarter Operational Overview
-- Second quarter underwriting revenue decreased 94% year-over-year and
decreased 82% over the first quarter of 2009.
-- Core brokerage revenue decreased 7% year-over-year and decreased 5%
sequentially (see "Non-GAAP Financial Measures" below for a discussion
of core brokerage revenue).
-- Second quarter strategic advisory revenue decreased 28% compared to
the prior year period and increased by $6.5 million sequentially.
-- Non-compensation expense decreased $3.2 million , or 12%,
year-over-year. Compared to the first quarter of 2009,
non-compensation expense increased $1.6 million , or 7%.
-- As of July 15, 2009 , headcount was down 8%, to 424 full-time
employees, compared to December 31, 2008 . The overall decrease
includes the addition of 21 officer-level personnel in research,
investment banking, brokerage and commodity trading.
Recent Developments
-- On June 4, 2009 , Cowen and Ramius LLC , a privately-owned global
alternative asset manager, announced that they have agreed to combine
their businesses into a new holding company. The transaction is
subject to Cowen stockholder approval, regulatory approval and other
customary closing conditions. Assuming these conditions are met, the
transaction is expected to close in the fourth quarter of 2009. On
company,LexingtonPark Parent Corp. , including a proxy statement of Cowen, was filed in connection with the transaction. A copy of the Form S-4 is available at theSecurities and Exchange Commission website at www.sec.gov.
-- Cowen expanded its research capabilities with the addition of a senior
analyst focused on
companies.
-- Cowen expanded its health care investment banking capabilities with
the addition of a managing director focused on health care services.
-- Cowen expanded its brokerage capabilities with the addition of a
managing director and head of the institutional sales desk in
as well as a senior institutional research sales professional in
-- Cowen commenced the development of a Commodity Trading Advisor (CTA)
business with the addition of three senior professionals in the second
quarter.
Results of Operations
Brokerage
Cowen's core brokerage revenue (see "Non-GAAP Financial Measures" below
for a discussion of core brokerage revenue) decreased$2.7 million , or 7%, to$34.3 million in the second quarter of 2009, compared to$37.0 million in the prior year period. Sequentially, core brokerage revenue decreased 5% compared to$36.0 million in the first quarter of 2009. Overall brokerage revenue decreased$2.1 million , or 6%, to$35.0 million for the three months endedJune 30, 2009 compared with$37.1 million in the second quarter of 2008. Compared to the first quarter of 2009, overall brokerage revenue decreased$0.6 million , or 2%. The year-over-year decreases in both core brokerage and overall brokerage resulted primarily from a reduction in per share commissions, a reduction in volumes in our traditional cash equities business, and a higher loss ratio as we provided greater liquidity to our clients, partially offset by increased revenue in our listed options business and our program trading business.
Investment Banking
Investment banking revenue was
-- Underwriting revenue was
prior year period and a decrease of 82% compared to the first quarter
of 2009. During the second quarter of 2009, the Company co-managed
one debt underwritten transaction raising proceeds of $225 million .
-- Private equity revenue was
a decrease of$0.8 million , or 29%, compared to$2.8 million in the second quarter of 2008. Compared to the first quarter of 2009, private equity revenue increased$1.3 million . During the second quarter of 2009, the Company completed three private transactions raising proceeds of approximately$62 million . -- Strategic advisory revenue was$9.6 million in the second quarter of 2009, a decrease of$3.8 million , or 28%, compared to$13.4 million in
the second quarter of 2008. Sequentially, strategic advisory revenue
increased by
of a reduction in transaction volume. During the second quarter of
2009, Cowen completed three strategic advisory assignments, including
the
Interest and Dividend Income
Interest and dividend income was
Other
Other revenues in the second quarter of 2009 were $2.8 million , a decrease
of $1.3 million , or 32%, compared to $4.1 million in the second quarter of
2008. Management fees in the second quarter of 2008 included $1.6 million of
one time fees paid by investors admitted to the Cowen Healthcare Royalty Fund
during the quarter, as such investors were required to pay their pro rata
portion of fees retroactive to the date of the first closing of the fund.
Absent the one time fees, CHRP management fees increased $0.7 million in the
second quarter of 2009 compared to the second quarter of 2008.
Compensation Expense and Headcount
Employee compensation and benefits expense decreased $7.5 million , or 19%,
to $31.4 million for the three months ended June 30, 2009 compared with $38.9
million in the second quarter of 2008. Employee compensation and benefits
expense for the second quarter of 2009 included $0.5 million of expense
associated with the initial grant of equity to the Company's employees in
connection with its initial public offering, compared to $1.3 million of such
expense in the second quarter of 2008. Excluding the expenses associated with
the initial grant of equity, employee compensation and benefits expense as a
percentage of total revenues was 62% and 60% for three months ended June 30,
2009 and 2008, respectively.
As of July 15, 2009 , the Company had 424 full-time employees, an 8%
reduction from December 31, 2008 . The overall reduction includes the addition
of 21 officer-level professionals in research, investment banking, brokerage
and commodity trading.
Non-Compensation Expense
Non-compensation expense was$22.9 million in the second quarter of 2009, a decrease of$3.2 million , or 12%, compared with$26.1 million in the prior year period. The decrease was primarily attributable to decreases in communications expense, other expense, and marketing and business development expense. Compared to the first quarter of 2009, non-compensation expense increased$1.6 million , or 7%, from$21.3 million . This increase was primarily attributable to an increase in other expenses associated with professional fees related to the proposed merger with Ramius.
Provision for Income Taxes
The Company recorded an income tax benefit of
Additional Information
Stockholders, investors and industry analysts are encouraged to contact
the Company directly regarding general information requests or specific
questions about the Company's financial results. General information requests
should be directed to the Company's Director of Communications, Jean Calleja ,
at (646) 562-1880. Questions regarding the Company's financial results should
be directed to the Company's Chief Financial Officer, Tom Conner , at (646)
562-1719.
About
Cowen Group, Inc. , through its operating subsidiaries, provides investment
banking, equity research, sales and trading, and alternative asset management
services to companies and institutional investor clients in the healthcare,
technology, media and telecommunications, aerospace & defense, consumer and
alternative energy sectors. Our investment banking business includes Cowen
Latitude Asia, a boutique specializing in crossborder M&A and capital raising
transactions.
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 Securities and Exchange
Commission , and in the proxy statement of Cowen contained in the registration
statement on Form S-4 of LexingtonPark Parent Corp. , 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 can also be found at the Securities and Exchange Commission website at
www.sec.gov, along with the registration statement on Form S-4 of
LexingtonPark Parent Corp. 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.
Preliminary Unaudited Consolidated Statements of Operations
(Dollar amounts in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues
Investment banking $11,848 $20,502 $17,075 $34,364
Brokerage 35,015 37,116 70,623 75,199
Interest and dividend income 114 919 291
2,142
Other 2,808 4,133 5,529 5,955
----- ----- ----- -----
Total revenues 49,785 62,670 93,518 117,660
------ ------ ------ -------
Expenses
Employee compensation and benefits 31,388 38,905 60,533 67,714
Floor brokerage and trade execution 3,369 3,073 6,230 5,513
Service fees 4,187 4,117 8,359 8,326
Communications 2,892 3,893 5,998 7,542
Occupancy and equipment 4,092 4,030 8,226 8,219
Marketing and business development 2,409 3,877 5,263 7,503
Depreciation and amortization 703 649 1,505
1,287
Other 5,261 6,493 8,662 11,658
----- ----- ----- ------
Total expenses 54,301 65,037 104,776 117,762
------ ------ ------- -------
Loss before income taxes (4,516) (2,367) (11,258) (102)
Benefit for income taxes (134) (1,656) (410) (45)
---- ------ ---- ---
Net loss (4,382) (711) (10,848) (57)
Less: Net income attributable to
noncontrolling interest 55 - 104 -
-- - --- -
Net loss attributable to Cowen
Group, Inc. $(4,437) $(711) $(10,952) $(57)
======= ===== ========
====
Earnings (loss) per share:
Basic $(0.38) $(0.06) $(0.95) $(0.01)
Diluted $(0.38) $(0.06) $(0.95) $(0.01)
Weighted average shares used in per share data:
Basic 11,658 11,238 11,531 11,246
Diluted 11,658 11,238 11,531 11,246
Other Metrics at June 30, 2009 and 2008
Cowen Group, Inc. stockholders'
equity $138,397 $206,959
Common shares outstanding 15,124 14,367
Book value per share $9.15 $14.41
Tangible book value per share * $8.97 $10.92
* Tangible book value per share at June 30, 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
(written off in the third quarter of 2008), divided by common shares
outstanding. Tangible book value per share at March 31, 2009 was $9.01 .
Cowen Group, Inc.
Non-GAAP Financial Measures
Three
Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
(dollars in millions)
Reconciliation of Operating Income (Loss) to
Adjusted Operating Income
(Loss)
--------------------------------------------
Loss before income taxes $(4.5) $(2.4) $(11.3)
$(0.1)
Exclusion of share-based compensation
expense (reversal) related to IPO awards 0.5 1.3 1.3 (2.9)
--- --- --- ----
Adjusted operating loss $(4.0) $(1.1) $(10.0) $(3.0)
===== ===== ====== =====
Reconciliation of Operating Income (Loss) to
Operating Income (Loss)
Excluding Non-cash Items
-------------------------------------------
Loss before income taxes $(4.5) $(2.4) $(11.3)
$(0.1)
Exclusion of share-based and other non-
cash deferred compensation expense
(benefit) 7.1 4.6 15.5 3.2
Exclusion of depreciation and
amortization expense 0.7 0.7 1.5 1.3
--- --- --- ---
Operating income excluding non-cash
items $3.3 $2.9 $5.7 $4.4
==== ==== ==== ====
Reconciliation of Brokerage Revenue to Core
Brokerage Revenue
-------------------------------------------
Brokerage revenue $35.0 $37.1 $70.6 $75.2
Exclusion of the loss (income) 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 (0.7) (0.1) (0.3) 1.5
---- ---- ---- ---
Core brokerage revenue $34.3 $37.0 $70.3 $76.7
===== ===== ===== =====
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 and six month period ended June 30, 2009 and 2008 on a non-GAAP basis by
taking income (loss) before taxes and excluding the non-cash share-based
compensation expense (reversal) associated with equity awards granted in
connection with our IPO. Management believes that the grant of equity awards
in connection with our IPO was an extraordinary non-recurring event.
Management further believes that investors will benefit from an explanation of
our results excluding the impact of this extraordinary non-recurring item as
it allows for a better understanding of our ongoing business.
We have reported in this press release our operating income excluding
non-cash items for the three and six month period 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 and six month periods ended June 30, 2009 and 2008 on a non-GAAP basis
by:
-- 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. -0-08/06/2009 /CONTACT:Thomas Conner , Chief Financial Officer,Cowen 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 -- NY57685 -- 768508/06/2009 08:30 EDT http://www.prnewswire.com