Delaware | 001-34516 | 27-0423711 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of Each Class | Trading Symbol | Name of Exchange on Which Registered | ||
Class A Common Stock, par value $0.01 per share | COWN | The Nasdaq Global Market | ||
7.35% Senior Notes due 2027 | COWNZ | The Nasdaq Global Market | ||
7.75% Senior Notes due 2033 | COWNL | The Nasdaq Global Market |
COWEN INC. | ||||
By: | /s/ Owen S. Littman | |||
Name: | Owen S. Littman | |||
Date: | October 24, 2019 | Title: | General Counsel | |
• | Reports GAAP EPS of $0.07 and Economic Operating EPS of $0.34 |
• | Profitability Driven by Higher Year-over-Year Incentive Income and Brokerage Revenues |
• | Cowen Investment Management Launches New Sustainable Investments Strategy |
• | Third quarter 2019 revenue was $252.0 million compared to $221.0 million in the third quarter of 2018. |
• | Third quarter 2019 net income was $2.1 million, or $0.07 per diluted common share, compared to $13.8 million, or $0.45 per diluted common share in the third quarter of 2018. |
• | Third quarter 2019 revenue decreased 4% to $217.1 million from $226.2 million in the prior-year period. |
• | Third quarter 2019 economic income was $5.5 million, or $0.18 per diluted common share, compared to $21.0 million, or $0.68 per diluted common share, in the prior-year period. |
• | Third quarter 2019 economic operating income was $10.6 million, or $0.34 per diluted common share, compared to $23.9 million, or $0.77 per diluted common share, in the prior-year period. |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
September 30 | September 30 | ||||||||||||||||||||
(Dollar amounts in millions, except per share information) | 2019 | 2018 | % | 2019 | 2018 | % | |||||||||||||||
GAAP: | |||||||||||||||||||||
Revenue | $ | 252.0 | $ | 221.0 | 14 | % | $ | 768.3 | $ | 707.0 | 9 | % | |||||||||
Net income (loss) attributable to Cowen Inc. | $ | 3.8 | $ | 15.5 | (75 | )% | $ | 19.4 | $ | 37.7 | (49 | )% | |||||||||
Less: Preferred stock dividends | $ | (1.7 | ) | $ | (1.7 | ) | — | % | $ | (5.1 | ) | $ | (5.1 | ) | — | % | |||||
Net income (loss) attributable to common stockholders | $ | 2.1 | $ | 13.8 | (85 | )% | $ | 14.3 | $ | 32.6 | (56 | )% | |||||||||
ECONOMIC INCOME (NON-GAAP): | |||||||||||||||||||||
Economic income revenue | $ | 217.1 | $ | 226.2 | (4 | )% | $ | 695.0 | $ | 702.1 | (1 | )% | |||||||||
Income (loss) attributable to Cowen Inc. | $ | 7.2 | $ | 22.7 | (68 | )% | $ | 41.4 | $ | 68.5 | (40 | )% | |||||||||
Less: Preferred stock dividends | $ | (1.7 | ) | $ | (1.7 | ) | — | % | $ | (5.1 | ) | $ | (5.1 | ) | — | % | |||||
Economic income (loss) | $ | 5.5 | $ | 21.0 | (74 | )% | $ | 36.3 | $ | 63.4 | (43 | )% | |||||||||
Add: Depreciation and amortization | $ | 5.1 | $ | 2.9 | 75 | % | $ | 15.0 | $ | 8.9 | 69 | % | |||||||||
Economic operating income | $ | 10.6 | $ | 23.9 | (56 | )% | $ | 51.3 | $ | 72.2 | (29 | )% | |||||||||
PER COMMON SHARE (DILUTED) | |||||||||||||||||||||
GAAP: | |||||||||||||||||||||
Earnings (loss) per common share | $ | 0.07 | $ | 0.45 | (85 | )% | $ | 0.46 | $ | 1.07 | (57 | )% | |||||||||
Economic income (non-GAAP): | |||||||||||||||||||||
Economic income (loss) per common share | $ | 0.18 | $ | 0.68 | (74 | )% | $ | 1.16 | $ | 2.07 | (44 | )% | |||||||||
Economic operating income (loss) per common share | $ | 0.34 | $ | 0.77 | (56 | )% | $ | 1.63 | $ | 2.36 | (31 | )% | |||||||||
Note: Amounts may not add up due to rounding. In reporting periods prior to 2Q 2019 Economic Income was labeled as "Economic Income Attributable to Common Shareholders." A reconciliation of economic income (loss) to GAAP net income appears under the section, "Summary Economic Income (Loss) to GAAP Reconciliation." |
• | Improved revenue diversification: |
– | Sequential improvement in incentive income and investment income offset sequentially lower revenues in investment banking and brokerage, highlighting sustainability of the operating business in challenging market conditions. |
– | Non-healthcare revenue as a percentage of investment banking revenue rose to 55% from 43% in 3Q 2018. |
• | Steady contribution from recurring revenue businesses: |
– | Brokerage revenues were up 4% year-over-year to $105.9 million. Markets revenue, which includes brokerage, financing and other revenue, was $111.7 million, up 4% from the third quarter of 2018. |
– | Revenue from institutional services (including prime services, clearing, commission management and commission recapture) was $31.6 million, up 13% year-over-year. |
• | Leveraged Cowen's domain expertise ("Cowen DNA") with the operating businesses: |
– | Positioning the investment management platform towards strategies that are salable, scalable and reflect Cowen DNA, such as the new sustainable investments strategy and expansion of the healthcare investments strategy. |
– | Raised approximately $550 million in assets for Cowen branded strategies in the third quarter of 2019. |
• | Increased transparency in segment reporting: |
– | Operating Company ("Op Co") and Asset Company ("Asset Co") reporting structure provides investors with greater insight into the profitability of the Company's business and the monetization potential of legacy investments. |
(Amounts in millions, except per share information) | September 30, 2019 | December 31, 2018 | September 30, 2018 | |||||
Cowen Inc. stockholders' equity | $817.1 | $794.4 | $808.2 | |||||
Common equity (CE) | $715.7 | $693.1 | $706.9 | |||||
Book value per share (CE/CSO) | $24.67 | $24.37 | $24.26 | |||||
Common shares outstanding (CSO) | 29.0 | 28.4 | 29.1 | |||||
Summary Stockholders' Equity Information | ||||||||
Cowen Inc. stockholders' equity | $817.1 | $794.4 | $808.2 | |||||
Less: | ||||||||
Preferred stock | $101.3 | $101.3 | $101.3 | |||||
Common equity (CE) | $715.7 | $693.1 | $706.9 | |||||
Note: Amounts may not add up due to rounding. |
Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30 | June 30 | September 30 | |||||||||||||||||
(Per share information) | 2019 | 2018 | 2019 | 2019 | 2018 | ||||||||||||||
Economic income (loss) per common share (diluted) | $ | 0.18 | $ | 0.68 | $ | 0.49 | $ | 1.16 | $ | 2.07 | |||||||||
Adjustments: | |||||||||||||||||||
Income taxes | (0.04 | ) | (0.17 | ) | (0.16 | ) | (0.30 | ) | (0.52 | ) | |||||||||
Uncrystallized incentive fees | — | (0.03 | ) | — | (0.02 | ) | (0.09 | ) | |||||||||||
Amortization of discount on convertible debt | (0.03 | ) | (0.04 | ) | (0.03 | ) | (0.10 | ) | (0.10 | ) | |||||||||
Debt extinguishment costs | — | — | — | — | (0.02 | ) | |||||||||||||
Retainer fees deferred for GAAP | (0.02 | ) | — | (0.03 | ) | (0.09 | ) | — | |||||||||||
Unrealized gain (loss) on conversion option (a) | — | 0.01 | — | — | (0.24 | ) | |||||||||||||
Goodwill impairment (b) | — | — | (0.13 | ) | (0.13 | ) | — | ||||||||||||
Contingent liability adjustment | (0.01 | ) | — | — | (0.01 | ) | — | ||||||||||||
Transaction-related and other costs | (0.01 | ) | (0.01 | ) | — | (0.04 | ) | (0.02 | ) | ||||||||||
GAAP earnings (loss) per share (diluted) | $ | 0.07 | $ | 0.45 | $ | 0.13 | $ | 0.46 | $ | 1.07 | |||||||||
Note: Amounts may not add due to rounding. |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
September 30 | June 30 | September 30 | ||||||||||||||||||||||||||
(Dollar amounts in millions) | 2019 | 2018 | % | 2019 | % | 2019 | 2018 | % | ||||||||||||||||||||
Investment banking | $ | 70.0 | $ | 77.5 | (10 | )% | $ | 104.2 | (33 | )% | $ | 257.2 | $ | 251.5 | 2 | % | ||||||||||||
Brokerage | 105.9 | 101.7 | 4 | % | 120.7 | (12 | )% | 331.7 | 328.9 | 1 | % | |||||||||||||||||
Management fees | 10.9 | 12.4 | (12 | )% | 10.5 | 4 | % | 31.8 | 38.0 | (16 | )% | |||||||||||||||||
Incentive income | 14.4 | 6.9 | 108 | % | 4.2 | 240 | % | 35.4 | 21.5 | 65 | % | |||||||||||||||||
Investment income (loss) | 16.1 | 27.7 | (42 | )% | 0.5 | NM | 33.5 | 61.9 | (46 | )% | ||||||||||||||||||
Other revenues | (0.1 | ) | 0.1 | NM | 4.3 | NM | 5.4 | 0.3 | NM | |||||||||||||||||||
Total Revenue | $ | 217.1 | $ | 226.2 | (4 | )% | $ | 244.4 | (11 | )% | $ | 695.0 | $ | 702.1 | (1 | )% |
• | Compensation and benefits expense was $116.5 million compared to $126.7 million in the third quarter 2018. The compensation-to-revenue ratio was 53.7%, down from 56.0% in the prior year period. |
• | Fixed non-compensation expenses increased $2.4 million year over year to $37.1 million. |
• | Variable non-compensation expenses were $37.3 million, up from $30.7 million in the third quarter 2018. |
• | Net income attributable to non-controlling interests increased by $4.7 million to $6.8 million for the three months ended September 30, 2019, compared with $2.1 million in the prior-year period. Non-controlling interests represent the portion of net income or loss attributable to certain non-wholly owned subsidiaries that is allocated to the Company's partners in those subsidiaries. |
• | The Op Co segment consists of four divisions: Cowen Investment Management (CIM), Investment Banking, Markets, and Research. Each of Op Co’s four divisions leverage the Research division’s core domain expertise to drive harmonized repeatable revenue for the segment. |
• | The CIM division offers investors access to a number of strategies to meet their specific needs including merger arbitrage, activism, healthcare royalties, and private healthcare investing which leverage the content and domain expertise that are aligned with the Company's core areas of expertise ("Cowen DNA"). |
• | The Investment Banking division includes public and private capital raising transactions and providing strategic advisory services. |
• | The Markets division includes trading equity and equity-linked securities on behalf of institutional investors as well as a full-service suite of prime brokerage services, cross-asset trading, securities finance, global execution, clearing and commission management businesses. |
• | The Research division provides thought leadership and domain expertise that helps facilitate brokerage revenue in the Markets division, drive deal flow in the Investment Banking division and facilitate investor relationships and investing within CIM’s investment products. |
• | The Asset Co segment consists of certain of the Company’s private investments, private real estate assets and other legacy investments. While the Asset Co segment is not a reportable segment, the Company provides segment level information for Asset Co. |
Three Months Ended | Nine Months Ended | ||||||||||
September 30 | September 30 | ||||||||||
(Dollar amounts in millions) | 2019 | 2018 | 2019 | 2018 | |||||||
Capital Markets | $53.1 | $55.3 | $200.0 | $200.4 | |||||||
Advisory | 17.0 | 22.2 | 57.2 | 51.1 | |||||||
Total | $70.0 | $77.5 | $257.2 | $251.5 |
Three Months Ended | Nine Months Ended | ||||||
September 30 | September 30 | ||||||
2019 | 2018 | 2019 | 2018 | ||||
Capital Markets | 30 | 31 | 106 | 99 | |||
Of which bookrun: | 15 | 19 | 68 | 69 | |||
Advisory | 13 | 6 | 32 | 21 | |||
Total | 43 | 37 | 138 | 120 |
Cowen Inc. | |||||||||||||||
US GAAP Preliminary Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||
(Dollar amounts in thousands, except per share data) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30 | September 30 | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | |||||||||||||||
Investment banking | $ | 77,292 | $ | 81,923 | $ | 272,103 | $ | 264,737 | |||||||
Brokerage | 93,995 | 92,035 | 302,840 | 301,053 | |||||||||||
Management fees | 7,300 | 7,546 | 21,480 | 22,336 | |||||||||||
Incentive income | 701 | 33 | 724 | 97 | |||||||||||
Interest and dividends | 60,707 | 26,448 | 129,846 | 77,511 | |||||||||||
Reimbursement from affiliates | 238 | 353 | 780 | 1,066 | |||||||||||
Aircraft lease revenue | — | 375 | — | 1,509 | |||||||||||
Reinsurance premiums | 8,146 | 8,378 | 29,068 | 26,251 | |||||||||||
Other | 1,237 | 1,634 | 3,228 | 3,846 | |||||||||||
Consolidated Funds revenues | 2,431 | 2,303 | 8,239 | 8,579 | |||||||||||
Total revenue | 252,047 | 221,028 | 768,308 | 706,985 | |||||||||||
Interest and dividends expense | 56,477 | 26,000 | 125,089 | 74,846 | |||||||||||
Total net revenue | 195,570 | 195,028 | 643,219 | 632,139 | |||||||||||
Expenses | |||||||||||||||
Employee compensation and benefits | 114,206 | 127,303 | 380,378 | 394,288 | |||||||||||
Reinsurance claims, commissions and amortization of deferred acquisition costs | 8,195 | 8,773 | 25,139 | 27,428 | |||||||||||
Operating, general, administrative and other expenses | 83,851 | 70,247 | 250,915 | 221,770 | |||||||||||
Depreciation and amortization expense | 5,082 | 3,139 | 14,990 | 9,558 | |||||||||||
Goodwill impairment | — | — | 4,100 | — | |||||||||||
Consolidated Funds expenses | 2,516 | 1,687 | 6,229 | 7,267 | |||||||||||
Total expenses | 213,850 | 211,149 | 681,751 | 660,311 | |||||||||||
Other income (loss) | |||||||||||||||
Net (losses) gains on securities, derivatives and other investments | 18,446 | 32,040 | 61,440 | 64,728 | |||||||||||
Gain/(loss) on debt extinguishment | — | — | — | (556 | ) | ||||||||||
Consolidated Funds net (losses) gains | 13,896 | 9,942 | 21,536 | 58,792 | |||||||||||
Total other income (loss) | 32,342 | 41,982 | 82,976 | 122,964 | |||||||||||
Income (loss) before income taxes | 14,062 | 25,861 | 44,444 | 94,792 | |||||||||||
Income tax expense/(benefit) | 1,365 | 5,083 | 9,615 | 15,999 | |||||||||||
Net income (loss) | 12,697 | 20,778 | 34,829 | 78,793 | |||||||||||
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and funds | 8,884 | 5,290 | 15,421 | 41,053 | |||||||||||
Net income (loss) attributable to Cowen Inc. | 3,813 | 15,488 | 19,408 | 37,740 | |||||||||||
Less: Preferred stock dividends | 1,698 | 1,698 | 5,094 | 5,094 | |||||||||||
Net income (loss) attributable to Cowen Inc. common stockholders | $ | 2,115 | $ | 13,790 | $ | 14,314 | $ | 32,646 | |||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.07 | $ | 0.47 | $ | 0.48 | $ | 1.10 | |||||||
Diluted | $ | 0.07 | $ | 0.45 | $ | 0.46 | $ | 1.07 | |||||||
Weighted average shares used in per share data: | |||||||||||||||
Basic | 29,529 | 29,610 | 29,687 | 29,662 | |||||||||||
Diluted | 31,264 | 30,844 | 31,381 | 30,613 |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of US GAAP and Economic Revenue for the Three Months Ended September 30, 2019 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
US GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenues | |||||||||||||||
Investment banking | $ | 77,292 | $ | (7,270 | ) | (a) | $ | — | $ | 70,022 | |||||
Brokerage | 93,995 | 11,865 | (b) | — | 105,860 | ||||||||||
Management fees | 7,300 | 3,033 | (c) | 574 | 10,907 | ||||||||||
Incentive income | 701 | 13,663 | (c) | 13 | 14,377 | ||||||||||
Investment income | — | 16,053 | (d) | — | 16,053 | ||||||||||
Interest and dividends | 60,707 | (60,707 | ) | (b)(d) | — | — | |||||||||
Reimbursement from affiliates | 238 | (265 | ) | (e) | 27 | — | |||||||||
Reinsurance premiums | 8,146 | (8,146 | ) | (f) | — | — | |||||||||
Other revenue | 1,237 | (1,389 | ) | (f) | 26 | (126 | ) | ||||||||
Consolidated Funds | 2,431 | — | (2,431 | ) | — | ||||||||||
Total revenues | $ | 252,047 | $ | (33,163 | ) | $ | (1,791 | ) | $ | 217,093 | |||||
Note: The following is a summary of the adjustments made to US GAAP revenue to Economic Income revenue: | |
(1) | Other adjustments include reclassifications between other income (loss), non-controlling interests and interest and non-interest expenses based on the nature of the respective line item. |
(2) | Fund consolidation reflects the impact of consolidation. The related elimination entries of the Consolidated Funds are not included in Economic Income. Adjustments include elimination of incentive income and management fees earned from the Consolidated Funds. |
Other Adjustments: | |
(a) | Economic Income (Loss) presents underwriting expenses net of investment banking revenues, expenses reimbursed from clients within their respective expense category. Economic Income (Loss) also records retainer fees, relating to investment banking activities, collectible during the period that would otherwise be deferred until closing for US GAAP reporting. |
(b) | 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. |
(c) | Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents, (ii) records income from uncrystallized incentive fees and (iii) the Company's proportionate share of management and incentive fees of certain real estate operating entities, the healthcare royalty business and the activist business. |
(d) | Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). |
(e) | Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. |
(f) | Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of US GAAP and Economic Revenue for the Three Months Ended September 30, 2018 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
US GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenues | |||||||||||||||
Investment banking | $ | 81,923 | $ | (4,413 | ) | (a) | $ | — | $ | 77,510 | |||||
Brokerage | 92,035 | 9,637 | (b) | — | 101,672 | ||||||||||
Management fees | 7,546 | 4,459 | (c) | 381 | 12,386 | ||||||||||
Incentive income | 33 | 6,857 | (c)(a) | 20 | 6,910 | ||||||||||
Investment income | — | 27,672 | (d)(g) | — | 27,672 | ||||||||||
Interest and dividends | 26,448 | (26,448 | ) | (b)(d) | — | — | |||||||||
Reimbursement from affiliates | 353 | (418 | ) | (e) | 65 | — | |||||||||
Aircraft lease revenue | 375 | (375 | ) | (g) | — | — | |||||||||
Reinsurance premiums | 8,378 | (8,378 | ) | (f) | — | — | |||||||||
Other revenue | 1,634 | (1,551 | ) | (f) | — | 83 | |||||||||
Consolidated Funds | 2,303 | — | (2,303 | ) | — | ||||||||||
Total revenues | $ | 221,028 | $ | 7,042 | $ | (1,837 | ) | $ | 226,233 | ||||||
Note: The following is a summary of the adjustments made to US GAAP revenue to Economic Income revenue: | |
(1) | Other adjustments include reclassifications between other income (loss), non-controlling interests and interest and non-interest expenses based on the nature of the respective line item. |
(2) | Fund consolidation reflects the impact of consolidation. The related elimination entries of the Consolidated Funds are not included in Economic Income. Adjustments include elimination of incentive income and management fees earned from the Consolidated Funds. |
Other Adjustments: | |
(a) | Economic Income (Loss) presents underwriting expenses net of investment banking revenues, expenses reimbursed from clients within their respective expense category. Economic Income (Loss) also records retainer fees, relating to investment banking activities, collectible during the period that would otherwise be deferred until closing for US GAAP reporting. |
(b) | 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. |
(c) | Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents, (ii) records income from uncrystallized incentive fees and (iii) the Company's proportionate share of management and incentive fees of certain real estate operating entities, the healthcare royalty business and the activist business. |
(d) | Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). |
(e) | Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. |
(f) | Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. |
(g) | Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss). |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of US GAAP and Economic Revenue for the Nine Months Ended September 30, 2019 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
US GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenues | |||||||||||||||
Investment banking | $ | 272,103 | $ | (14,869 | ) | (a) | $ | — | $ | 257,234 | |||||
Brokerage | 302,840 | 28,849 | (b) | — | 331,689 | ||||||||||
Management fees | 21,480 | 8,684 | (c) | 1,640 | 31,804 | ||||||||||
Incentive income | 724 | 34,072 | (c) | 557 | 35,353 | ||||||||||
Investment income | — | 33,522 | (d) | — | 33,522 | ||||||||||
Interest and dividends | 129,846 | (129,846 | ) | (b)(d) | — | — | |||||||||
Reimbursement from affiliates | 780 | (874 | ) | (e) | 94 | — | |||||||||
Reinsurance premiums | 29,068 | (29,068 | ) | (f) | — | — | |||||||||
Other revenue | 3,228 | 2,109 | (f) | 14 | 5,351 | ||||||||||
Consolidated Funds | 8,239 | — | (8,239 | ) | — | ||||||||||
Total revenues | $ | 768,308 | $ | (67,421 | ) | $ | (5,934 | ) | $ | 694,953 | |||||
Note: The following is a summary of the adjustments made to US GAAP revenue to Economic Income revenue: | |
(1) | Other adjustments include reclassifications between other income (loss), non-controlling interests and interest and non-interest expenses based on the nature of the respective line item. |
(2) | Fund consolidation reflects the impact of consolidation. The related elimination entries of the Consolidated Funds are not included in Economic Income. Adjustments include elimination of incentive income and management fees earned from the Consolidated Funds. |
Other Adjustments: | |
(a) | Economic Income (Loss) presents underwriting expenses net of investment banking revenues, expenses reimbursed from clients within their respective expense category. Economic Income (Loss) also records retainer fees, relating to investment banking activities, collectible during the period that would otherwise be deferred until closing for US GAAP reporting. |
(b) | 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. |
(c) | Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents, (ii) records income from uncrystallized incentive fees and (iii) the Company's proportionate share of management and incentive fees of certain real estate operating entities, the healthcare royalty business and the activist business. |
(d) | Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). |
(e) | Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. |
(f) | Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. |
Cowen Inc. | |||||||||||||||
Unaudited Reconciliation of US GAAP and Economic Revenue for the Nine Months Ended September 30, 2018 | |||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||
Adjustments | |||||||||||||||
Other | Funds | Economic | |||||||||||||
US GAAP | Adjustments (1) | Consolidation (2) | Income | ||||||||||||
Revenues | |||||||||||||||
Investment banking | $ | 264,737 | $ | (13,261 | ) | (a) | $ | — | $ | 251,476 | |||||
Brokerage | 301,053 | 27,876 | (b) | — | 328,929 | ||||||||||
Management fees | 22,336 | 13,465 | (c) | 2,197 | 37,998 | ||||||||||
Incentive income | 97 | 21,336 | (c) | 37 | 21,470 | ||||||||||
Investment income | — | 61,927 | (d)(g) | — | 61,927 | ||||||||||
Interest and dividends | 77,511 | (77,511 | ) | (b)(d) | — | — | |||||||||
Reimbursement from affiliates | 1,066 | (1,264 | ) | (e) | 198 | — | |||||||||
Aircraft lease revenue | 1,509 | (1,509 | ) | (g) | — | — | |||||||||
Reinsurance premiums | 26,251 | (26,251 | ) | (f) | — | — | |||||||||
Other revenue | 3,846 | (3,596 | ) | (f) | — | 250 | |||||||||
Consolidated Funds | 8,579 | — | (8,579 | ) | — | ||||||||||
Total revenues | $ | 706,985 | $ | 1,212 | $ | (6,147 | ) | $ | 702,050 | ||||||
Note: The following is a summary of the adjustments made to US GAAP revenue to Economic Income revenue: | |
(1) | Other adjustments include reclassifications between other income (loss), non-controlling interests and interest and non-interest expenses based on the nature of the respective line item. |
(2) | Fund consolidation reflects the impact of consolidation. The related elimination entries of the Consolidated Funds are not included in Economic Income. Adjustments include elimination of incentive income and management fees earned from the Consolidated Funds. |
Other Adjustments: | |
(a) | Economic Income (Loss) presents underwriting expenses net of investment banking revenues, expenses reimbursed from clients within their respective expense category. Economic Income (Loss) also records retainer fees, relating to investment banking activities, collectible during the period that would otherwise be deferred until closing for US GAAP reporting. |
(b) | 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. |
(c) | Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents, (ii) records income from uncrystallized incentive fees and (iii) the Company's proportionate share of management and incentive fees of certain real estate operating entities, the healthcare royalty business and the activist business. |
(d) | Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends). |
(e) | Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. |
(f) | Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of expenses, within other revenue. |
(g) | Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss). |