Cowen Group, Inc. Announces 2013 Second Quarter Financial Results

Cowen Group, Inc. Announces 2013 Second Quarter Financial Results

NEW YORK--(BUSINESS WIRE)-- Cowen Group, Inc. (NAS: COWN) ("Cowen" or "Company") today announced its operating results for the second quarter ended June 30, 2013.

2013 Second Quarter Highlights (1)

  • Cowen Group, Inc. reported second quarter 2013 economic income of $1.5 million compared to an economic loss of $6.0 million in the prior year period.
  • Second quarter 2013 revenue rose 22% year over year to $81.1 million.
  • The broker-dealer segment reported its highest quarterly revenue since the Cowen / Ramius business combination in 2009. Second quarter 2013 revenue was $58.8 million,(2) a $16.6 million increase from the year ago period.
    • Brokerage revenue of $33.3 million was its highest quarterly revenue since the second quarter 2009.
    • Investment banking revenue improved to $25.6 million, the highest level since the second quarter 2007.
  • Assets under management at July 1, 2013 were $9.0 billion. AUM increased by $110 million during the quarter and is up $970 million since January 1, 2013.
  • Fixed non compensation expense declined 3% year over year to $23.8 million. These figures reflect the first full quarter of Dahlman Rose in second quarter 2013 results.
  • The second quarter 2013 increase in variable non compensation expense reflects the growth in total revenue. Variable non compensation expense was $8.6 million, an increase of $1.4 million year over year.
  • Second quarter 2013 compensation to revenue ratio was 59% compared to 63% in the prior year period.
    ____________________________________________________________________________________________________
    (1) All financial highlights are presented on an Economic Income basis.
    (2) Includes broker-dealer segment's allocation of Investment Income (Loss) and Other Revenue.

Peter A. Cohen, Chairman and CEO of Cowen Group said, "We reported a profitable second quarter with economic income of $1.5 million. The broker-dealer's banking and equities businesses reported their best revenue quarter in years. The changes we made in recent years are contributing to our improved results. Ramius is seeing positive momentum across a number of the capabilities on our platform with solid performance and a strong pipeline of client interest. Our fixed expenses as a percent of revenue declined year over year, even with a full quarter of Dahlman Rose in the second quarter numbers. I am encouraged to see results improving across our business units. However, we have a lot more to accomplish in the upcoming quarters in what continues to be a challenging environment."

2013 Second Quarter GAAP Financial Information and Select Balance Sheet Data

For the second quarter 2013, the Company reported a GAAP net income of $1.1 million, or $0.01 per share, as compared to a GAAP net loss of $7.9 million, or $(0.07) per share, in the second quarter 2012. The year-over-year increase was primarily due to an increase in revenue.

The following table summarizes the Company's GAAP financial results for the three months ended June 30, 2013 and 2012, and March 31, 2013; and the six months ended June 30, 2013 and 2012.

Summary GAAP Financial Information

       
(Dollar amounts in millions, except per share information) Three Months Ended Six Months Ended
June 30,         Mar 31,     June 30,    
2013     2012

  %  

2013 % 2013     2012 %
 
Revenues $ 81.2 $ 59.5 37 % $ 67.2 21 % $ 148.4 $ 116.9 27 %
Expenses (86.6 ) (77.4 ) 12 % (83.1 ) 4 % (169.7 ) (154.2 ) 10 %
Other income (loss) 8.9 7.8 15 % 17.0 (48 )% 25.9 33.4 (23 )%
Income tax benefit (expense) (0.2 ) (0.2 ) NM (0.2 ) NM (0.3 ) (0.3 ) %
Net income (loss) from operations $ 3.3 $ (10.4 ) NM $ 0.9 NM $ 4.3 $ (4.1 ) NM
 
Net income (loss) attributable to noncontrolling interests in consolidated subsidiaries 2.3   (2.4 ) NM 3.5   NM 5.8   (0.2 ) NM
Net income (loss) attributable to Cowen Group, Inc. $ 1.1   $ (7.9 ) NM $ (2.6 ) NM $ (1.5 ) $ (4.0 ) NM
 
Earnings (loss) per basic share:
Income (loss) from operations $ 0.01 $ (0.07 ) NM $ (0.02 ) NM $ (0.01 ) $ (0.03 ) NM

Note: Amounts may not add due to rounding.

 

The Company's stockholders' equity as of June 30, 2013, was $506.1 million, or book value per share of $4.29, compared to stockholders' equity of $503.1 million, or book value per share of $4.35, as of March 31, 2013. At June 30, 2013, the Company's tangible book value per share was $3.87 compared to $3.91 as of March 31, 2013.

Select Balance Sheet Data

             
(Dollar amounts in millions, except per share information) June 30, March 31, June 30
2013 2013 2012
Stockholders' equity $ 506.1 $ 503.1 $ 511.9
Tangible stockholders' equity $ 456.0 $ 452.0 473.3
Common shares outstanding 117.9 115.7 114.2
 
Book value per share $ 4.29 $ 4.35 $ 4.48
Tangible book value per share $ 3.87 $ 3.91 $ 4.14
 

Economic Income (Loss)

Throughout the remainder of this press release the Company presents Economic Income financial measures that are not prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). In general, Economic Income (Loss) is a pre-tax measure that (i) eliminates the impact of consolidation for consolidated funds, (ii) excludes equity award expense related to the November 2009 Ramius/Cowen transaction, and (iii) excludes certain other acquisition-related and/or reorganization expenses. In addition, Economic Income (Loss) revenues include investment income that represents the income the Company has earned in investing its own capital, including realized and unrealized gains and losses, interest and dividends, net of associated investment related expenses. For US GAAP purposes, these items are included in each of their respective line items. Economic Income (Loss) revenues also include management fees, incentive income and investment income earned through the Company's investment as a general partner in certain real estate entities and the Company's investment in the Value and Opportunity business. For US GAAP purposes, all of these items are recorded in other income (loss). In addition, Economic Income (Loss) expenses are reduced by reimbursement from affiliates, which for US GAAP purposes is presented gross as part of revenue.

For a more complete description of Economic Income (Loss) and a reconciliation of GAAP net income (loss) to Economic Income (Loss) for the periods presented and additional information regarding the reconciling adjustments, please see the "Non-GAAP Financial Measures" section of this press release.

The table below summarizes the Company's Economic Income financial results for the three months ended June 30, 2013 and 2012, and March 31, 2013; and the six months ended June 30, 2013 and 2012.

Summary Economic Income (Loss) Financial Information

 
(Dollar amounts in millions, except per share information)     Three Months Ended     Six Months Ended
June 30,         Mar 31,     June 30,    
2013     2012

  %  

2013

  %  

2013     2012

  %  

 
Revenues $ 81.1 $ 66.2 22 % $ 74.9 8 % $ 156.0 $ 145.4 7 %
Expenses (78.7 ) (71.9 ) 9 % (74.4 ) 6 % (153.1 ) (144.9 ) 6 %
Net Economic Income (Loss) before non-controlling interests 2.4 (5.7 ) NM 0.5 NM 2.9 0.5 NM
Economic Income (Loss) $ 1.5   $ (6.0 ) NM $ (1.3 ) NM $ 0.2   $ (0.1 ) NM
 
Economic Income (Loss) per share $ 0.01   $ (0.05 ) NM $ (0.01 ) NM $ 0.00   $0.00 NM
 
Economic Income (Loss) excluding certain non-cash items $ 8.8   $ 2.2   NM $ 6.0   NM $ 14.8   $ 14.8   %

Note: Amounts may not add due to rounding.

 

2013 Second Quarter Economic Income Review

Total Economic Income Revenue

Total economic income revenue for the second quarter 2013 was $81.1 million, a 22% increase compared to $66.2 million in the second quarter 2012. The increase in economic income revenue was primarily the result of an increase in investment banking and brokerage revenue, partially offset by a decrease in investment income.

Economic Income Revenue

 
    Three Months Ended     Six Months Ended
June 30,         Mar 31,     June 30,    
(Dollar amounts in millions) 2013     2012 % 2013 % 2013     2012 %
 
Investment banking $ 25.6 $ 16.3 57 % $ 17.2 49 % $ 42.7 31.9 34 %
Brokerage 33.3 24.6 36 % 28.0 19 % 61.3 48.6 26 %
Management fees 14.6 14.6 0 % 14.1 3 % 28.8 28.6 1 %
Incentive income 3.8 2.6 46 % 5.1 (27 )% 8.9 6.6 35 %
Investment income 3.6 8.3 (57 )% 10.9 (67 )% 14.4 29.4 (51 )%
Other revenue 0.3   (0.1 ) NM (0.4 ) NM (0.2 ) 0.3   NM
Total Revenues $ 81.1   $ 66.2   22 % $ 74.9   8 % $ 156.0   $ 145.4   7 %


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