Cohen & Company (COHN) Q4 2024 Earnings Call March 10, 2025 04:21 PM ET Company Participants Lester Brafman - Chief Executive OfficerJoseph Pooler - Executive VP, CFO & Treasurer Operator Good morning, ladies and gentlemen, and welcome to Cohen and Company's Fourth Quarter twenty twenty four Earnings Call. My name is Sherry, and I will be your operator for today. Before we begin, Cohen and Company would like to remind everyone that some of the statements the company makes during this call contain forward lo ...

Cohen & Company (COHN) Q4 2024 Earnings Call March 10, 2025 10:00 AM ET Company Participants Lester Brafman - Chief Executive OfficerJoseph Pooler - Executive VP, CFO & Treasurer Operator Good morning, ladies and gentlemen, and welcome to Cohen and Company's Fourth Quarter twenty twenty four Earnings Call. My name is Sherry, and I will be your operator for today. Before we begin, Cohen and Company would like to remind everyone that some of the statements the company makes during this call contain forward lo ...

Financial Performance - For Q4 2024, net loss attributable to Cohen & Company Inc. was $2.0 million, or $1.21 per diluted share, compared to net income of $2.2 million, or $1.31 per diluted share in Q3 2024[6]. - Total revenues for Q4 2024 were $18.5 million, down from $31.7 million in the prior quarter and $34.5 million in the prior year quarter[6]. - The company reported a net loss of $6,875,000 for the three months ended December 31, 2024, compared to a net income of $26,881,000 for the same period in 2023[14]. - Basic earnings per share for the three months ended December 31, 2024, was $(1.20), compared to $2.99 for the same period in 2023[14]. - The company’s total operating income (loss) for the twelve months ended December 31, 2024, was $(8,023,000), compared to $6,861,000 for the same period in 2023[14]. Revenue Breakdown - Net trading revenue for Q4 2024 was $8.9 million, up $1.1 million from the prior year quarter, primarily due to higher trading revenue from the mortgage group[6]. - Asset management revenue for Q4 2024 was $2.1 million, slightly down from the prior quarter and up $0.1 million from the prior year quarter[6]. - New issue and advisory revenue for Q4 2024 was $10.1 million, down $12.4 million from the prior quarter and down $8.6 million from the prior year quarter[6]. - Full year revenue for Cohen & Company Capital Markets (CCM) was $38.9 million, nearly double the full year 2023 revenue of $21.9 million[4]. - Total revenues for the three months ended December 31, 2024, were $18,541,000, a decrease from $34,464,000 for the same period in 2023, representing a decline of 46.1%[14]. - Net trading revenue increased to $8,947,000 for the three months ended December 31, 2024, compared to $7,809,000 for the same period in 2023, reflecting a growth of 14.5%[14]. - New issue and advisory revenue decreased significantly to $10,075,000 for the three months ended December 31, 2024, down from $18,722,000 in the same period of 2023, a decline of 46.3%[14]. Expenses and Liabilities - Compensation and benefits expense decreased by $5.0 million from the prior quarter and $3.4 million from the prior year quarter, with 113 employees as of December 31, 2024[6]. - Operating expenses totaled $24,044,000 for the three months ended December 31, 2024, compared to $23,015,000 for the same period in 2023, an increase of 4.5%[14]. - Total liabilities increased to $880,866 million, up from $680,964 million[19]. Assets and Equity - Total equity as of December 31, 2024, was $90.3 million, a decrease from $91.8 million as of December 31, 2023[10]. - Total assets increased to $971,149 million as of December 31, 2023, up from $772,761 million[19]. - Cash and cash equivalents rose to $19,590 million, compared to $10,650 million in the previous period[19]. - Total stockholders' equity slightly increased to $41,728 million from $41,682 million[19]. - Receivables under resale agreements significantly increased to $668,259 million from $408,408 million[19]. - Trading securities sold, not yet purchased decreased to $36,432 million from $65,751 million[19]. Future Outlook - The company anticipates that future performance may be impacted by factors such as inflation, rising interest rates, and geopolitical situations[11]. - The company noted that its revenue and operating results may fluctuate materially from quarter to quarter, suggesting that annual results may be the most meaningful gauge for investors[12]. Adjusted Pre-Tax Income - Adjusted pre-tax income (loss) for the three months ended December 31, 2024, was $(7,705,000), compared to $15,993,000 for the same period in 2023[15]. - Adjusted pre-tax income (loss) is presented as a useful measure of performance, excluding income tax expense and including net income attributable to convertible non-controlling interest[20]. - The company emphasizes that adjusted pre-tax income (loss) should not be viewed as a substitute for net income prepared in accordance with GAAP[21]. - The company’s management uses adjusted pre-tax income (loss) to evaluate enterprise operations performance[21].

Core Viewpoint - Cohen & Company Inc. reported a net loss of $2.0 million for Q4 2024, a significant decline compared to net income in the previous quarters, indicating challenges in revenue generation and operational performance [6][14]. Financial Performance - Total revenues for Q4 2024 were $18.5 million, down from $31.7 million in Q3 2024 and $34.5 million in Q4 2023 [6][14]. - Net trading revenue was $8.9 million, stable compared to the prior quarter and up from $7.8 million in the same quarter last year [6][14]. - Asset management revenue decreased slightly to $2.1 million, while new issue and advisory revenue fell to $10.1 million, down $12.4 million from the previous quarter [6][14]. - Principal transactions and other revenue reported a loss of $2.5 million, worsening from a loss of $1.7 million in the prior quarter [6][14]. Operating Expenses - Compensation and benefits expenses decreased to $12.9 million, down $5.0 million from the prior quarter [6][14]. - Non-compensation operating expenses were $11.1 million, reflecting an increase from $6.6 million in the previous quarter [6][14]. Income and Earnings - The company reported an operating loss of $5.5 million for Q4 2024, compared to an operating income of $7.2 million in Q3 2024 [6][14]. - Net income attributable to Cohen & Company Inc. was a loss of $1.95 million, or $1.21 per diluted share, contrasting with net income of $2.15 million, or $1.31 per diluted share in Q3 2024 [6][14]. - Adjusted pre-tax loss was $7.7 million for Q4 2024, compared to adjusted pre-tax income of $7.7 million in the prior quarter [6][14]. Business Segments - Cohen & Company Capital Markets (CCM) generated full-year revenue of $38.9 million, nearly double the $21.9 million from 2023, despite a decline in Q4 revenue [3][6]. - The mortgage business grew, ending the year with a gestation repo book of $2.7 billion, up over 30% from December 2023 [3][6]. Equity and Dividends - Total equity as of December 31, 2024, was $90.3 million, a decrease from $91.8 million a year earlier [6][14]. - The Board of Directors declared a quarterly dividend of $0.25 per share, payable on April 9, 2025 [6][14].

Core Insights - Cohen & Company Inc. reported a net loss of $2.0 million, or $1.21 per diluted share, for Q4 2024, a decline from a net income of $2.2 million, or $1.31 per diluted share, in Q3 2024 and $4.5 million, or $2.97 per diluted share, in Q4 2023 [6][11] - The company declared a quarterly dividend of $0.25 per share, payable on April 9, 2025, to stockholders of record as of March 26, 2025 [11] - Total revenues for Q4 2024 were $18.5 million, down from $31.7 million in the previous quarter and $34.5 million in the same quarter last year [6][11] Financial Performance - Net trading revenue for Q4 2024 was $8.9 million, comparable to the previous quarter and up from $7.8 million in Q4 2023, primarily due to higher trading revenue from the mortgage group [6][11] - Asset management revenue was $2.1 million for Q4 2024, slightly down from the previous quarter but up from $1.9 million in Q4 2023 [6][11] - New issue and advisory revenue decreased to $10.1 million in Q4 2024, down from $22.5 million in Q3 2024 and $18.7 million in Q4 2023 [6][11] Operating Expenses - Compensation and benefits expense decreased to $12.9 million in Q4 2024, down from $17.9 million in Q3 2024 and $16.3 million in Q4 2023 [6][11] - Non-compensation operating expenses were $11.1 million in Q4 2024, up from $6.6 million in Q3 2024 and $6.7 million in Q4 2023 [6][11] - Interest expense for Q4 2024 was $1.5 million, including $1.2 million on trust preferred securities debt [6][11] Business Segments - Cohen & Company Capital Markets (CCM) generated full-year revenue of $38.9 million in 2024, nearly double the $21.9 million in 2023, despite a decline in Q4 revenue compared to Q3 2024 [3] - The mortgage business grew, ending 2024 with a gestation repo book of $2.7 billion, an increase of over 30% from December 2023 [3] - The company managed approximately $2.3 billion in assets as of December 31, 2024, primarily in fixed income assets [8]

Core Viewpoint - Cohen & Company Inc. is set to release its financial results for Q4 and the full year 2024 on March 10, 2025, followed by a conference call to discuss these results [1]. Company Overview - Cohen & Company is a financial services firm that offers a range of capital markets and asset management services, operating through segments such as Capital Markets, Asset Management, and Principal Investing [3]. - The Capital Markets segment includes services like fixed income sales, trading, underwriting, and advisory services, primarily through subsidiaries in the U.S. and Europe [3]. - As of December 31, 2024, the company managed approximately $2.3 billion in assets, focusing on fixed income assets across various classes, including U.S. and European securities and commercial real estate loans [3]. Conference Call Details - The conference call will be accessible via webcast on the company's homepage, with dial-in options for those preferring operator assistance [2]. - A replay of the conference call will be available for three days post-event, allowing interested parties to catch up on the discussion [2].

Financial Data and Key Metrics Changes - The net income attributable to Cohen & Company, Inc. was $2.2 million for Q3 2024, translating to $1.31 per fully diluted share, compared to a net loss of $2.3 million or $1.47 per share in the prior quarter and a net loss of $400,000 or $0.28 per share in the same quarter last year [5] - Adjusted pretax income was $7.7 million for the quarter, a significant improvement from an adjusted pretax loss of $8.6 million in the prior quarter and an adjusted pretax loss of $8.4 million in the prior year quarter [5] - The company's performance at the adjusted pretax line improved by $26.5 million year-to-date versus 2023 [4] Business Line Data and Key Metrics Changes - Cohen & Company Capital Markets (CCM) generated $21.4 million in advisory revenue, acting as lead bookrunner on one SPAC IPO, with a robust pipeline expected to continue through the end of the year [4] - New issue and advisory revenue reached $22.5 million in Q3, an increase of $16 million from Q2 and $15.2 million from the year-ago quarter [5] - Net trading revenue was $8.8 million, comparable to Q2 and up $1.3 million from Q3 2023, driven by higher trading revenue from various groups [7] - Asset management revenue totaled $2.1 million, stable compared to the prior quarter and up $400,000 from the prior year quarter [7] - Principal transactions and other revenue was negative $1.7 million, primarily due to mark-to-market adjustments on principal investments related to SPACs [7] Market Data and Key Metrics Changes - The equity value of post-business combination SPACs has continued to decline, negatively impacting the value of founder shares received [7] - The company’s total equity at the end of the quarter was $100.6 million, up from $91.8 million at the end of the previous year [9] Company Strategy and Development Direction - The company remains focused on enhancing long-term sustained value for stockholders, including the continued payment of quarterly dividends [4] - The Board will evaluate the dividend policy each quarter, with future decisions potentially impacted by quarterly operating results and capital needs [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future earnings potential despite ongoing unfavorable mark-to-market adjustments on the principal investment portfolio [4] - The company anticipates continued volatility in its principal portfolio and operating results due to market conditions [7] Other Important Information - Compensation and benefits expense for the quarter was $17.9 million, up from prior quarters due to fluctuations in revenue and related variable incentive compensation [8] - The number of employees at the end of the quarter was 113, down from 121 in the prior quarter [8] Q&A Session Summary - No specific questions or answers were recorded during the Q&A session, as the call concluded shortly after the management's remarks [10][11]

Asset Management - As of September 30, 2024, the company had approximately $2.37 billion in assets under management (AUM), with 41% in collateralized debt obligations (CDOs) [338] - A significant portion of the company's asset management revenue is derived from CDO management, which has been adversely affected by the decline in CDO assets [349] - The total assets under management (AUM) reached $2,365,525 as of September 30, 2024, compared to $2,013,372 as of September 30, 2023, reflecting an increase of $352,153 [373] - The mortgage group's revenue is highly dependent on U.S. mortgage origination volumes, which are influenced by interest rates and the overall health of the U.S. economy [357] Revenue and Income - Revenues increased by $12,540, or 26%, to $61,057 for the nine months ended September 30, 2024, compared to $48,517 for the same period in 2023 [364] - Net trading revenue rose by $4,345, or 19%, to $27,462 for the nine months ended September 30, 2024, compared to $23,117 for the same period in 2023 [368] - Asset management fees increased by $1,524, or 28%, to $6,942 for the nine months ended September 30, 2024, compared to $5,418 for the same period in 2023 [374] - New issue and advisory revenues surged by $43,805, or 459%, to $53,347 for the nine months ended September 30, 2024, compared to $9,542 for the same period in 2023 [364] - Net income attributable to Cohen & Company Inc. was $1,824 for the nine months ended September 30, 2024, compared to a net loss of $9,661 for the same period in 2023, representing a change of $11,485 [366] - Income from equity method affiliates increased significantly to $22,366 for the nine months ended September 30, 2024, compared to a loss of $1,608 for the same period in 2023, a change of $23,974 [366] Operating Expenses - Operating expenses totaled $63,577 for the nine months ended September 30, 2024, an increase of $10,472, or 20%, from $53,105 for the same period in 2023 [366] - Compensation and benefits increased by $7,696, or 22%, to $43,453 for the nine months ended September 30, 2024, compared to $35,757 for the same period in 2023 [392] - Business development, occupancy, and equipment expenses increased by $712, or 18%, to $4,599 for the nine months ended September 30, 2024, compared to $3,887 for the same period in 2023 [394] - Professional fee and other operating expenses increased by $1,987, or 32%, to $8,138 for the nine months ended September 30, 2024, compared to $6,151 for the same period in 2023 [395] Market Conditions - The company has not completed a new securitization since 2008, leading to a decline in asset management revenue from historical highs due to asset maturities and defaults [349] - Margin pressures in the fixed income brokerage business have increased due to heightened competition and declining market activity, leading to expectations of continued margin compression [355] - Rising interest rates have created instability in equity markets, negatively impacting equity financing and business combination volumes [358] Trading Activities - The company’s trading activities are sensitive to market movements, with revenue generated from proprietary trading and riskless trades [346] - The principal investing segment has been significantly impacted by declines in equity prices of SPACs, resulting in substantial principal transaction losses during 2023 and the first nine months of 2024 [353] - The SPAC market activities have become a significant part of the principal investing segment, with the company sponsoring multiple SPACs since 2018 [351] Cash Flow and Capital Management - Cash flow from operating activities for the nine months ended September 30, 2024, was $5,042, a significant recovery from $(36,177) in the same period of 2023 [476] - Cash and cash equivalents increased to $14,290 as of September 30, 2024, up from $10,650 at the end of 2023, reflecting an increase of $3,640 [479] - The company has seven primary uses for capital, including funding operations, expansion, investments, mergers, dividends, stock repurchases, and debt repayment [477] Risk Management - The company is subject to counterparty risk primarily in collateralized securities transactions and TBA activities [530] - The company faces general settlement risk in its fixed income and equity trading activities, which may lead to losses if a counterparty fails to settle a trade [532] - The company emphasizes the importance of liquidity management in its trading operations to safeguard against settlement risks [532] - Ongoing evaluations of counterparty creditworthiness are crucial for maintaining trading integrity and minimizing losses [532]

Financial Performance - Net income attributable to Cohen & Company Inc. was $2.2 million, or $1.31 per diluted share, for Q3 2024, compared to a net loss of $2.3 million, or $1.47 per diluted share, for Q2 2024[4]. - Total revenues for Q3 2024 were $31.7 million, up from $10.8 million in the prior quarter and $17.1 million in the prior year quarter[5]. - New issue and advisory revenue was $22.5 million for Q3 2024, an increase of $16.0 million from the prior quarter and $15.2 million from the prior year quarter[6]. - Adjusted pre-tax income was $7.7 million for Q3 2024, compared to an adjusted pre-tax loss of $8.6 million for Q2 2024[4]. - Total revenues for the three months ended September 30, 2024, were $31.695 million, a significant increase from $17.121 million for the same period in 2023, representing an 84.9% year-over-year growth[19]. - Net income attributable to Cohen & Company Inc. for the three months ended September 30, 2024, was $2.150 million, compared to a net loss of $2.349 million for the same period in 2023[20]. - Adjusted pre-tax income for the three months ended September 30, 2024, was $7.738 million, a recovery from an adjusted loss of $8.582 million in the same quarter of the previous year[21]. - The company reported a basic earnings per share of $1.32 for the three months ended September 30, 2024, compared to a loss per share of $1.45 for the same period in 2023[20]. Operating Expenses - Compensation and benefits expense increased by $7.2 million from the prior quarter to $17.9 million in Q3 2024[8]. - Total operating expenses for the three months ended September 30, 2024, were $24.473 million, up from $21.225 million in the same quarter of 2023, reflecting a 10.6% increase[19]. Assets and Equity - As of September 30, 2024, total equity was $100.6 million, up from $91.8 million as of December 31, 2023[13]. - Total assets increased to $818,011,000 as of September 30, 2024, up from $772,761,000 on December 31, 2023, representing a growth of approximately 5.9%[24]. - Total stockholders' equity rose to $100,625,000, compared to $91,797,000, indicating an increase of about 9.9%[24]. Cash and Liabilities - Cash and cash equivalents rose to $14,290,000, compared to $10,650,000, marking an increase of about 34.5%[24]. - Total liabilities increased to $717,386,000, up from $680,964,000, reflecting a rise of approximately 5.3%[24]. - Payables to brokers, dealers, and clearing agencies decreased significantly to $53,674,000 from $111,085,000, a reduction of about 51.7%[24]. - Securities sold under agreements to repurchase increased to $545,993,000 from $408,203,000, an increase of approximately 33.8%[24]. Revenue Streams - Net trading revenue was $8.8 million for Q3 2024, comparable to the prior quarter and up $1.3 million from the prior year quarter[5]. - The company experienced a net trading revenue of $8.816 million for the three months ended September 30, 2024, slightly up from $7.491 million in the same period last year[19]. - Asset management revenue increased to $2.147 million for the three months ended September 30, 2024, compared to $1.788 million for the same period in 2023, marking a 20.1% increase[19]. - The company’s principal transactions and other revenue showed a loss of $1.727 million for the three months ended September 30, 2024, an improvement from a loss of $6.578 million in the same quarter of 2023[19]. Dividends and Future Outlook - The Company declared a quarterly dividend of $0.25 per share, payable on December 5, 2024[14]. - The company anticipates continued fluctuations in revenue and operating results due to the nature of its business, suggesting that annual results may be the most meaningful gauge for investors[18]. Other Financial Metrics - Loss from equity method affiliates was $0.7 million for Q3 2024, compared to a loss of $6.0 million in the prior quarter[10]. - The Company managed approximately $2.4 billion in primarily fixed income assets as of September 30, 2024[16]. - The investment in equity method affiliates increased to $26,153,000 from $14,241,000, a growth of approximately 83.9%[24]. - Adjusted pre-tax income (loss) is presented as a useful measure of performance, excluding certain GAAP calculations[27]. - The company reported an increase in accumulated other comprehensive loss to $(948,000) from $(944,000)[24]. - The company continues to evaluate performance using adjusted pre-tax income (loss) and related per diluted share amounts[28].

Core Viewpoint - Cohen & Company Inc. reported strong financial results for Q3 2024, showing significant revenue growth and a return to profitability compared to previous quarters and the same period last year [1][3][4]. Financial Performance - Total revenues for Q3 2024 were $31.7 million, a substantial increase from $10.8 million in Q2 2024 and $17.1 million in Q3 2023 [2][4]. - Net income attributable to Cohen & Company Inc. was $2.2 million, or $1.31 per diluted share, compared to a net loss of $2.3 million, or $1.47 per diluted share, in Q2 2024 and a net loss of $0.4 million, or $0.28 per diluted share, in Q3 2023 [4][15]. - Adjusted pre-tax income for Q3 2024 was $7.7 million, or $1.34 per diluted share, compared to an adjusted pre-tax loss of $8.6 million in Q2 2024 and a loss of $8.4 million in Q3 2023 [4][18]. Revenue Breakdown - Net trading revenue was $8.8 million, consistent with the prior quarter and up from $7.5 million in the prior year [2][4]. - Asset management revenue reached $2.1 million, stable compared to the previous quarter and up from $1.8 million year-over-year [2][4]. - New issue and advisory revenue surged to $22.5 million, up from $6.5 million in Q2 2024 and $7.2 million in Q3 2023 [2][4]. Operating Expenses - Compensation and benefits expenses increased to $17.9 million in Q3 2024, up from $10.7 million in Q2 2024 and $15.2 million in Q3 2023 [2][4]. - Total operating expenses for Q3 2024 were $24.5 million, compared to $17.2 million in Q2 2024 and $21.2 million in Q3 2023 [12]. Equity and Dividends - Total equity as of September 30, 2024, was $100.6 million, an increase from $91.8 million at the end of 2023 [5][21]. - The Board of Directors declared a quarterly dividend of $0.25 per share, payable on December 5, 2024 [5][6]. Future Outlook - The CEO expressed confidence in the company's future earnings potential and highlighted a robust pipeline for the Capital Markets segment, expecting consistent production through the end of the year [3][4].