Cowen Group, Inc. Announces 2009 First Quarter Results
First Quarter Financial Overview
For the quarter ended
-- Total revenue was
$43.7 million, representing a decrease of 20% from $55.0 millionin the prior year period and a 5% increase from $41.6 millionin the previous quarter -- The compensation and benefits expense to revenue ratio was 65% compared to 60% in the prior year period -- Excludes $0.8 millionand $(4.2) million of IPO award expense (benefit) for the quarters ended March 31, 2009and 2008, respectively -- Adjusted operating loss of $5.9 millioncompared to an adjusted operating loss of $1.9 millionfor the first quarter of 2008 (see "Non-GAAP Financial Measures" below for a discussion of adjusted operating income) -- Operating income excluding non-cash items was $2.4 millionin the first quarter of 2009 compared to $1.5 millionin the first quarter of 2008 (see "Non-GAAP Financial Measures" below for a discussion of operating income excluding non-cash items) First Quarter Operational Overview -- First quarter equity new issue revenue was essentially flat year-over-year and increased $1.2 millionover the fourth quarter of 2008 -- Core brokerage revenue decreased 9% year-over-year and increased 2% sequentially (see "Non-GAAP Financial Measures" below for a discussion of core brokerage revenue) -- First quarter strategic advisory revenue decreased 72% compared to the prior year period and decreased 34% sequentially -- Non-compensation expense for the first quarter decreased $2.6 million, or 11%, year-over-year. Compared to the fourth quarter of 2008, non-compensation expense decreased $2.1 million, or 9%. -- As of May 1, 2009, headcount was down 8% from December 31, 2008. The overall decrease includes the addition of 13 officer-level personnel in research, investment banking and brokerage. Recent Developments -- Cowen expanded its brokerage capabilities with the formation of the Portfolio Trading Groupoffering quantitative trading strategies to our institutional clients. In addition, Cowen recently expanded its brokerage platform to include trading of financials and REITs. -- Cowen enhanced its private capital raising capabilities with the addition of two managing directors in the Private Equity Group. -- Cowen continued to expand its alternative asset management business with the addition of two senior professionals who will oversee the development of a Commodity Trading Advisor (CTA) joint venture. These new hires will commence employment late in the second quarter upon the expiration of certain post-employment obligations to their previous employer. -- Cowen recently completed its transition from 100% owner to minority owner of Cowen Asset Management, LLC, which was concurrently renamed Crosswind Investments, LLC. Formerly a wholly-owned subsidiary of Cowen Group, Inc., Crosswind is now an investment management firm majority owned by former employees of Cowen. In addition, Cowen Group, Inc.intends to wind down its traditional asset management operations in the United Kingdom. Results of Operations
Cowen's core brokerage revenue (see "Non-GAAP Financial Measures" below
for a discussion of core brokerage revenue) decreased
Investment banking revenue was
-- Equity underwriting revenue was
$1.5 million, essentially flat compared to the prior year period and an increase of $1.2 millioncompared to the fourth quarter of 2008. In the first quarter of 2009, growth sector public equity capital raising activity decreased 73% and 61% year-over-year when measured by proceeds raised and number of completed transactions, respectively. During the first quarter of 2009, the Company co-managed one underwritten transaction raising proceeds of $320 million. -- Private equity revenue was $0.7 millionin the first quarter of 2009, a decrease of $0.6 million, or 43%, compared to $1.3 millionin the first quarter of 2008. Compared to the fourth quarter of 2008, private equity revenue increased $0.3 million. The year-over-year decrease was primarily attributable to decreased transaction volume. Growth sector private capital raising activity in the first quarter decreased 48% and 40% year-over-year when measured by number of completed transactions and proceeds raised, respectively. During the first quarter of 2009, the Company completed two private transactions raising proceeds of approximately $12.0 million. -- Strategic advisory revenue was $3.1 millionin the first quarter of 2009, a decrease of $8.0 million, or 72%, compared to $11.1 millionin the first quarter of 2008. Sequentially, strategic advisory revenue decreased 34%, or $1.6 million. The year-over-year decrease was the result of decreased transaction volume. Compared to the prior year period, growth sector strategic advisory activity decreased 69% and 65%(1) when measured by number of transactions and transaction value, respectively. During the first quarter of 2009, Cowen completed four strategic advisory assignments with an aggregate disclosed value of $173 million.
Interest and Dividend Income
Interest and dividend income was
Other revenues in the first quarter of 2009 were
Compensation Expense and Headcount
Employee compensation and benefits expense increased
Non-compensation expense was
Provision for Income Taxes
The Company recorded an income tax benefit of
Earnings Conference Calls with Management
Management holds conference calls to discuss the Company's six-month and
full-year results. The next conference call will be announced shortly after
the close of the second quarter ending
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking
statements provide the Company's current expectations or forecasts of future
events. Forward-looking statements include statements about the Company's
expectations, beliefs, plans, objectives, intentions, assumptions and other
statements that are not historical facts. Forward-looking statements are
subject to known and unknown risks and uncertainties and are based on
potentially inaccurate assumptions that could cause actual results to differ
materially from those expected or implied by the forward-looking statements.
The Company's actual results could differ materially from those anticipated in
forward-looking statements for many reasons, including the factors described
in the section entitled "Risk Factors" in the Company's Annual Report on Form
10-K and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q, as filed with the
(1) Excludes Merck/
Schering-Ploughand Pfizer/ Wyethtransactions. Cowen Group, Inc. Preliminary Unaudited Consolidated Statements of Operations (Dollar amounts in thousands, except per share data) Three Months Ended March 31, 2009 2008 Revenues Investment banking $5,227 $13,862 Brokerage 35,608 38,083 Interest and dividend income 177 1,223 Other 2,721 1,822 Total revenues 43,733 54,990 Expenses Employee compensation and benefits 29,145 28,809 Floor brokerage and trade execution 2,861 2,440 Service fees 4,172 4,209 Communications 3,106 3,649 Occupancy and equipment 4,134 4,189 Marketing and business development 2,854 3,626 Depreciation and amortization 802 638 Other 3,401 5,165 Total expenses 50,475 52,725 (Loss) income before income taxes (6,742) 2,265 (Benefit) provision for income taxes (276) 1,611 Net (loss) income (6,466) 654 Less: Net income attributable to noncontrolling interest 49 - Net (loss) income attributable to Cowen Group, Inc. $(6,515) $654 Earnings (loss) per share: Basic $(0.57) $0.06 Diluted $(0.57) $0.05 Weighted average shares used in per share data: Basic 11,402 11,253 Diluted 11,402 11,895 Other Metrics at March 31, 2009and 2008 Cowen Group, Inc. stockholders' equity $139,488 $203,451 Common shares outstanding 15,171 14,429 Book value per share $9.19 $14.10 Tangible book value per share * $9.01 $10.63 * Tangible book value per share is calculated as follows: stockholders' equity, equity, Tangible book value per share at March 31, 2009is calculated as follows: Cowen Group, Inc.stockholders' equity, less $2.8 millionof goodwill and intangible assets, divided by common shares outstanding. Tangible book value per share at March 31, 2008is calculated as follows: Cowen Group, Inc.stockholders' equity, less $50.0 millionof goodwill, divided by common shares outstanding. Cowen Group, Inc. Non-GAAP Financial Measures Three Months Ended March 31, 2009 2008 (dollars in millions) Reconciliation of Operating Income (Loss) to Adjusted Operating Income (Loss) (Loss) income before income taxes $(6.7) $2.3 Exclusion of share-based compensation expense (reversal) related to IPO awards 0.8 (4.2) Adjusted operating loss $(5.9) $(1.9) Reconciliation of Operating Income (Loss) to Operating Income (Loss) Excluding Non-cash Items (Loss) income before income taxes $(6.7) $2.3 Exclusion of share-based and other non-cash deferred compensation expense (benefit) 8.3 (1.4) Exclusion of depreciation and amortization expense 0.8 0.6 Operating income excluding non-cash items $2.4 $1.5 Three Months Ended 03/31/09 03/31/08 12/31/08 (dollars in millions) Reconciliation of Brokerage Revenue to Core Brokerage Revenue Brokerage revenue $35.6 $38.1 $33.3 Exclusion of the loss from warrants, asset management seed funds, restricted stock received in connection with the demutualization of certain exchanges and mutual fund investments held as a hedge against legacy deferred compensation obligations 0.4 1.6 2.0 Core brokerage revenue $36.0 $39.7 $35.3
Non-GAAP Financial Measures
In addition to the results presented above in accordance with generally accepted accounting principles, or GAAP, the Company presents financial measures that are non-GAAP measures, such as adjusted operating income (loss), operating income (loss) excluding non-cash items and core brokerage revenue. The Company believes that these non-GAAP measures, viewed in addition to and not in lieu of the Company's reported GAAP results, provide useful information to investors regarding its performance and overall results of operations. These metrics are an integral part of the Company's internal reporting to measure the performance of its business and the overall effectiveness of senior management. Reconciliations to comparable GAAP measures are available in the accompanying schedules. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies, and are not identical to corresponding measures used in our various agreements or public filings.
We have reported in this press release our adjusted operating loss for the
three months ended
We have reported in this press release our operating income excluding
non-cash items for the three months ended
-- the share-based and other non-cash deferred compensation expense (deferred compensation expense that does not involve a cash payment during the period); and -- the non-cash depreciation and amortization expense.
Management believes that the non-GAAP calculation of operating income (loss) excluding non-cash items will allow for a better understanding of the actual cash basis income (loss) generated in each period presented.
We have reported in this press release our core brokerage revenue for the
three months ended
-- excluding the income or loss from warrants, asset management seed funds, restricted stock received in connection with the demutualization of certain exchanges and mutual fund investments held as a hedge against legacy deferred compensation obligations.
Management believes that the non-GAAP calculation of core brokerage revenue will allow for a better understanding of the revenue generated by our sales and trading activities as it excludes gains and losses associated with activities that are not conducted by our sales and trading professionals, but that are required to be reported in the brokerage line item.
Cowen Group, Inc.-0- 05/07/2009/CONTACT: Thomas Conner, Chief Financial Officer of Cowen Group, Inc., +1-646-562-1719/ /Web Site: http://www.cowen.com / (COWN) CO: Cowen Group, Inc.ST: New YorkIN: FIN SU: ERN PR -- NY12959 -- 2959 05/07/2009 08:00 EDThttp://www.prnewswire.com