SEC Filing | Cowen Inc

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cown-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 001-34516

Cowen Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)			27-0423711 (I.R.S. Employer Identification No.)
599 Lexington Avenue New York, New York (Address of Principal Executive Offices)			10022 (Zip Code)

(646) 562-1010

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

7.75% Senior Notes due 2033

COWNL

The Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 2, 2022, there were 27,651,792 shares of the registrant's common stock outstanding.


Item No.			Page No.
PART I. FINANCIAL INFORMATION			4
	1. Unaudited Condensed Consolidated Financial Statements		4
		Condensed Consolidated Statements of Financial Condition	4
		Condensed Consolidated Statements of Operations	6
		Condensed Consolidated Statements of Comprehensive Income (Loss)	8
		Condensed Consolidated Statements of Changes in Equity	9
		Condensed Consolidated Statements of Cash Flows	11
		Notes to Condensed Consolidated Financial Statements	13
	2. Management's Discussion and Analysis of Financial Condition and Results of Operations		66
	3. Quantitative and Qualitative Disclosures About Market Risk		106
	4. Controls and Procedures		106
PART II. OTHER INFORMATION			106
	1. Legal Proceedings		106
	1A. Risk Factors		107
	2. Unregistered Sales of Equity Securities and Use of Proceeds		109
	3. Defaults Upon Senior Securities		110
	4. Mine Safety Disclosures		110
	5. Other Information		110
	6. Exhibits		111
SIGNATURES			112

Table of Contents

Special Note Regarding Forward-Looking Statements

We have made statements in this Quarterly Report on Form 10-Q (including in "Management's Discussion and Analysis of Financial Condition and Results of Operations") that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking terms such as "may," "might," "will," "would," "could," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "project," "possible," "potential," "intend," "seek" or "continue," the negative of these terms and other comparable terminology or similar expressions. In addition, our management may make forward-looking statements to analysts, representatives of the media and others. These forward-looking statements represent only the Company's beliefs regarding future events (many of which, by their nature, are inherently uncertain and beyond our control) and are predictions only, based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In particular, you should consider the risks contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 and the risks contained in Item 1A of this periodic report on Form 10-Q for the three and six months ended June 30, 2022.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised expectations.

Unaudited Condensed Consolidated Financial Statements are presented for the three and six months ended June 30, 2022 and 2021. The Consolidated Financial Statements as of December 31, 2021 were audited.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements


Cowen Inc. Condensed Consolidated Statements of Financial Condition (dollars in thousands, except share and per share data) (unaudited)
	As of June 30, 2022		As of December 31, 2021
Assets
Cash and cash equivalents	$	926,768	$	914,343
Cash collateral pledged	145,570		47,494
Segregated cash	198,772		194,701
Securities owned, at fair value ($1,837,004 and $1,764,853 were pledged to various parties)	2,358,484		2,660,742
Securities purchased under agreements to resell	411		—
Receivable on derivative contracts, at fair value	498,630		286,135
Securities borrowed	1,574,854		1,704,603
Other investments ($122,356 and $137,986 at fair value, respectively)	193,140		274,111
Deposits with clearing organizations, brokers and banks	90,889		111,857
Receivable from brokers, dealers and clearing organizations, net of allowance of $768 and $636, respectively	1,718,766		1,614,347
Receivable from customers, net of allowance of $580 and $687, respectively	216,908		159,418
Fees receivable, net of allowance of $2,086 and $886, respectively	116,350		145,809
Insurance and reinsurance assets	148,825		30,073
Due from related parties	24,296		31,449
Fixed assets, net of accumulated depreciation and amortization of $51,963 and $50,017, respectively	24,340		25,976
Operating lease right-of-use assets	86,645		93,655
Goodwill	234,005		234,005
Intangible assets, net of accumulated amortization of $31,073 and $33,219, respectively	37,659		44,167
Deferred tax asset, net	22,101		21,765
Other assets, net of allowance of $970 and $0 respectively	55,724		54,755
Consolidated Funds
Cash and cash equivalents	25		296


Other investments	81,855		99,067

Other assets	46		46
Total Assets	$	8,755,063	$	8,748,814
Liabilities, Temporary Equity and Permanent Equity
Liabilities
Securities sold, not yet purchased, at fair value	$	1,091,489	$	1,201,448
Securities sold under agreements to repurchase	177,052		63,469
Payable for derivative contracts, at fair value	50,407		60,163
Securities loaned	1,353,229		1,586,572
Payable to brokers, dealers and clearing organizations	719,972		586,553
Payable to customers	2,445,298		2,432,612
Commission management payable	128,623		102,990
Insurance and reinsurance liabilities	362,709		71,269
Compensation payable	210,916		443,580
Operating lease liabilities	90,985		98,883
Notes payable and other debt	623,792		623,371

Fees payable	11,804		16,483

Accounts payable, accrued expenses and other liabilities	147,898		164,819
Consolidated Funds

Due to related parties	—		23




Accounts payable, accrued expenses and other liabilities	159		225
Total Liabilities	$	7,414,333	$	7,452,460

Table of Contents


Cowen Inc. Condensed Consolidated Statements of Financial Condition (dollars in thousands, except share and per share data) (unaudited)

	As of June 30, 2022		As of December 31, 2021
(continued)
Commitments and Contingencies (Note 22)



Redeemable Series A Convertible Preferred stock, par value $0.01 per share: 10,000,000 shares authorized, 120,750 shares issued and outstanding as of June 30, 2022 (aggregate liquidation preference of $120,750) and 10,000,000 shares authorized, 120,750 shares issued and outstanding as of December 31, 2021 (aggregate liquidation preference of $120,750)	$	120,750	$	120,750

Permanent Equity
Class A common stock, par value $0.01 per share: 62,500,000 shares authorized, 57,319,922 shares issued and 27,801,792 outstanding as of June 30, 2022 and 62,500,000 shares authorized, 55,826,893 shares issued and 27,778,964 outstanding as of December 31, 2021, respectively (including 960,238 and 901,374 restricted shares, respectively)	334		334
Class B common stock, par value $0.01 per share: 62,500,000 authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	—		—
Additional paid-in capital	1,138,329		1,100,667
Retained earnings	499,609		461,982
Accumulated other comprehensive income (loss)	1		(2)
Less: Class A common stock held in treasury, at cost, 29,518,130 and 28,047,929 shares as of June 30, 2022 and December 31, 2021, respectively	(591,102)		(547,112)
Total Cowen Inc. Stockholders' Equity	1,047,171		1,015,869
Nonredeemable non-controlling interests	172,809		159,735
Total Permanent Equity	$	1,219,980	$	1,175,604
Total Liabilities, Redeemable Preferred Stock and Permanent Equity	$	8,755,063	$	8,748,814

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents


Cowen Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited)
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues
Investment banking	$	100,169	$	224,981	$	201,711	$	529,815
Brokerage	154,656		139,060		323,394		312,797
Investment income (loss)
Securities principal transactions, net	31,542		40,572		122,794		104,537
Portfolio fund principal transactions, net	(9,462)		(1,882)		(15,560)		13,521
Carried interest allocations	(32,083)		(35,530)		(49,150)		61,239
Total investment income (loss)	(10,003)		3,160		58,084		179,297
Management fees	16,717		14,995		33,486		40,737
Incentive income	—		169		633		2,427
Interest and dividends	48,545		62,173		94,880		121,561

Insurance and reinsurance premiums	14,278		11,493		25,599		18,610
Other revenues, net	(6,625)		2,031		(7,574)		3,690
Consolidated Funds
Principal transactions, net	(15,326)		693		(17,212)		(2,656)
Interest and dividends	2		2		4		4

Total revenues	302,413		458,757		713,005		1,206,282
Interest and dividends expense	53,925		63,073		100,449		120,714
Total net revenues	248,488		395,684		612,556		1,085,568
Expenses
Employee compensation and benefits	151,322		219,186		338,500		607,382
Brokerage and trade execution costs	44,635		38,813		85,226		84,469
Underwriting expenses	889		6,152		1,148		13,067
Professional, advisory and other fees