en & pany (US:COHN)2025-05-02 15:28PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 2025 financials show total assets increased to $978.1 million, but net income significantly declined to $0.9 million due to reduced equity affiliate income Consolidated Balance Sheets Total assets slightly increased to $978.1 million by March 31, 2025, while total liabilities rose and total equity decreased to $85.7 million Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $978,050 | $971,149 | | Cash and cash equivalents | $13,985 | $19,590 | | Investments-trading | $160,566 | $148,332 | | Receivables under resale agreements | $673,700 | $668,259 | | Total Liabilities | $892,390 | $880,866 | | Securities sold under agreements to repurchase | $707,454 | $695,966 | | Total Equity | $85,660 | $90,283 | | Non-controlling interest | $43,656 | $48,555 | Consolidated Statements of Operations and Comprehensive Income (Loss) Q1 2025 total revenues increased to $28.7 million, but net income attributable to the company significantly declined to $0.3 million due to reduced equity affiliate income Consolidated Statements of Operations Highlights (in thousands) | Income Statement Item | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total Revenues | $28,740 | $18,564 | | Net trading | $9,211 | $9,848 | | New issue and advisory | $33,239 | $24,388 | | Principal transactions and other income (loss) | ($15,730) | ($18,389) | | Total Operating Expenses | $28,633 | $21,939 | | Compensation and benefits | $21,666 | $14,839 | | Operating Income (Loss) | $107 | ($3,375) | | Income (loss) from equity method affiliates | $2,418 | $29,045 | | Net Income (Loss) | $938 | $23,506 | | Net Income (Loss) Attributable to Cohen & Company Inc. | $329 | $2,023 | | Diluted EPS | $0.19 | $1.28 | Consolidated Statements of Changes in Equity Total equity decreased by $4.6 million to $85.7 million in Q1 2025, primarily due to distributions to non-controlling interests and the sale of Vellar GP interest - Total equity decreased by $4,623 thousand during the first quarter of 2025, from $90,283 thousand to $85,660 thousand27 - Key drivers of the equity decrease include distributions to convertible non-controlling interests ($1,796 thousand), redemption of convertible non-controlling interest units ($954 thousand), sale of interest in Vellar GP ($1,691 thousand), and other non-convertible non-controlling interest distributions ($1,236 thousand)27 Consolidated Statements of Cash Flows Q1 2025 saw net cash used in operations of $6.4 million, leading to a $5.6 million decrease in cash and cash equivalents to $14.0 million Consolidated Cash Flow Highlights (in thousands) | Cash Flow Item | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($6,372) | $5,137 | | Net cash provided by (used in) investing activities | $4,189 | ($2,856) | | Net cash provided by (used in) financing activities | ($3,631) | ($999) | | Net increase (decrease) in cash and cash equivalents | ($5,605) | $1,179 | | Cash and cash equivalents, end of period | $13,985 | $11,829 | Notes to Consolidated Financial Statements (Unaudited) Notes detail accounting policies, key events like Vellar GP sale and CDO management contract sale, and segment reporting, highlighting SPAC-related income - On February 25, 2025, the Company sold its 33.4% interest in Vellar GP, recording a loss on sale of $836 thousand79 - On March 13, 2025, the Company entered into a Master Transaction Agreement (MTA) with an affiliate of Hildene Capital Management to sell its rights and obligations for five CDO management agreements for an aggregate base purchase price of $3.5 million828386 - As of March 31, 2025, the Company had $2.3 billion in assets under management (AUM), with $1.0 billion in collateralized debt obligations (CDOs)38 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 revenue growth driven by advisory fees, offset by a sharp decline in net income due to reduced equity affiliate income, highlighting liquidity and market risks Overview and Business Environment The company's three segments are highly sensitive to economic conditions, market volatility, and interest rates, with significant exposure to the volatile SPAC market - The company's business is organized into three segments: Capital Markets, Asset Management, and Principal Investing333336 - The business is materially affected by economic conditions, market volatility, and interest rates, which are beyond its control339 - A significant portion of the Principal Investing business and CCM advisory activities are concentrated in the SPAC market, which has seen equity price declines, impacting results349350351 - Rising or elevated interest rates have negatively impacted the company by reducing the fair value of fixed income securities, creating equity market instability, reducing new issue volumes, and decreasing mortgage activity356358 Recent Events Q1 2025 saw the sale of the company's Vellar GP interest, resulting in an $836 thousand loss, and an agreement to sell five CDO management contracts for $3.5 million - On February 25, 2025, the company sold its entire 33.4% interest in Vellar GP for $10, recording a loss on sale of $836 thousand360362 - On March 13, 2025, the company agreed to sell five CDO management contracts to an affiliate of Hildene Capital Management for an aggregate base purchase price of $3.5 million364365368 - Through March 31, 2025, the company recognized $352 thousand in asset management revenue that will reduce the final purchase price from the Hildene transaction369 Results of Operations (Q1 2025 vs. Q1 2024) Q1 2025 total revenues rose 55% to $28.7 million, but net income attributable to the company fell 84% to $0.3 million due to a 92% decline in equity affiliate income Consolidated Results of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $28,740 | $18,564 | $10,176 | 55% | | New issue and advisory | $33,239 | $24,388 | $8,851 | 36% | | Total Operating Expenses | $28,633 | $21,939 | ($6,694) | (31%) | | Compensation and benefits | $21,666 | $14,839 | ($6,827) | (46%) | | Operating Income / (Loss) | $107 | ($3,375) | $3,482 | 103% | | Income / (loss) from equity method affiliates | $2,418 | $29,045 | ($26,627) | (92%) | | Net Income / (Loss) Attributable to Cohen & Company Inc. | $329 | $2,023 | ($1,694) | (84%) | - The decrease in income from equity method affiliates was primarily driven by SPAC sponsor entities, which generated $2.1 million in income in Q1 2025 compared to $29.2 million in Q1 2024412413 Liquidity and Capital Resources Cash and cash equivalents decreased to $14.0 million in Q1 2025, with significant capital concentrated in regulated broker-dealer subsidiaries, limiting parent company liquidity - Cash and cash equivalents decreased by $5,605 thousand to $13,985 thousand as of March 31, 2025433437 - The company's U.S. broker-dealer, JVB, is subject to SEC and FINRA net capital rules, which restrict capital withdrawals. As of March 31, 2025, JVB's equity was $78.1 million out of the company's total consolidated equity of $85.7 million, indicating significant capital concentration in the regulated subsidiary428448449 Contractual Obligations Summary (in thousands) | Obligation | Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease arrangements | $21,725 | $2,284 | $4,902 | $4,776 | $9,763 | | Debt Maturities & Interest | $106,406 | $12,319 | $11,072 | $8,293 | $74,822 | | Other Operating Obligations | $1,410 | $1,143 | $251 | $16 | $0 | | Total | $129,541 | $15,746 | $16,225 | $13,085 | $84,585 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces market risk from fixed income and equity positions, estimating losses of $2.0 million from a 100 bps yield curve shift and $1.3 million from a 10% equity price drop - As of March 31, 2025, a 100 basis point adverse shift across the yield curve would result in an estimated loss of $1,978 thousand on the company's net interest rate sensitive assets476 - A 10% adverse change in equity prices would result in an estimated loss of $1,323 thousand on the company's equity price sensitive assets as of March 31, 2025477 - A 100 basis point change in variable base rates would change the company's annual cash paid for interest on its debt by $481 thousand479 - The company manages counterparty and settlement risk through credit assessments, requiring collateral (margin), and utilizing haircuts on collateralized financing transactions485486 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025490 - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, internal controls491 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal and regulatory matters, which management believes will not materially affect its financial condition or operations - The company is involved in routine legal and regulatory matters, which management believes will not have a material adverse effect on its financial condition281493 Item 1A. Risk Factors No material changes have occurred in the significant risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred in the significant risk factors from those disclosed in the Annual Report on 10-K for the year ended December 31, 2024494 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company made no equity security repurchases in Q1 2025, and dividend payments are subject to business performance and regulated subsidiary restrictions - The company made no purchases of its own equity securities during the first quarter of 2025498 Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None499 Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - None499 Item 5. Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the first quarter of 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the first quarter of 2025499 Item 6. Exhibits The report includes various exhibits filed with Form 10-Q, such as the Master Transaction Agreement and CEO/CFO certifications - Exhibits filed include the Master Transaction Agreement dated March 13, 2025, and CEO/CFO certifications500