COWEN INC. [COWN] Filings

10-Q 1 cown-20220331.htm 10-Q cown-20220331

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 March 31, 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 April 29, 2022, there were 27,494,230 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)	7
		Condensed Consolidated Statements of Changes in Equity	8
		Condensed Consolidated Statements of Cash Flows	10
		Notes to Condensed Consolidated Financial Statements	12
	2. Management's Discussion and Analysis of Financial Condition and Results of Operations		60
	3. Quantitative and Qualitative Disclosures About Market Risk		91
	4. Controls and Procedures		91
PART II. OTHER INFORMATION			91
	1. Legal Proceedings		91
	1A. Risk Factors		92
	2. Unregistered Sales of Equity Securities and Use of Proceeds		92
	3. Defaults Upon Senior Securities		93
	4. Mine Safety Disclosures		93
	5. Other Information		93
	6. Exhibits		94
SIGNATURES			95

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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 months ended March 31, 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 months ended March 31, 2022 and 2021. The Consolidated Financial Statements as of December 31, 2021 were audited.

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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 March 31, 2022		As of December 31, 2021
Assets
Cash and cash equivalents	$	512,978	$	914,343
Cash collateral pledged	52,865		47,494
Segregated cash	220,882		194,701
Securities owned, at fair value ($1,704,831 and $1,764,853 were pledged to various parties)	2,763,514		2,660,742
Securities purchased under agreements to resell	19,621		—
Receivable on derivative contracts, at fair value	342,712		286,135
Securities borrowed	1,761,146		1,704,603
Other investments ($131,766 and $137,986 at fair value, respectively)	237,628		274,111
Deposits with clearing organizations, brokers and banks	105,854		111,857
Receivable from brokers, dealers and clearing organizations, net of allowance of $616 and $636, respectively	1,487,911		1,614,347
Receivable from customers, net of allowance of $587 and $687, respectively	159,625		159,418
Fees receivable, net of allowance of $828 and $886, respectively	128,136		145,809
Due from related parties	21,666		31,449
Fixed assets, net of accumulated depreciation and amortization of $52,254 and $50,017, respectively	25,037		25,976
Operating lease right-of-use assets	95,430		93,655
Goodwill	234,005		234,005
Intangible assets, net of accumulated amortization of $37,470 and $33,219, respectively	40,731		44,167
Deferred tax asset, net	19,608		21,765
Other assets, net of allowance of $834 and $0 respectively	99,427		84,828
Consolidated Funds
Cash and cash equivalents	23		296


Other investments	97,182		99,067

Other assets	46		46
Total Assets	$	8,426,027	$	8,748,814
Liabilities, Temporary Equity and Permanent Equity
Liabilities
Securities sold, not yet purchased, at fair value	$	974,867	$	1,201,448
Securities sold under agreements to repurchase	229,192		63,469
Payable for derivative contracts, at fair value	46,814		60,163
Securities loaned	1,735,852		1,586,572
Payable to brokers, dealers and clearing organizations	587,540		586,553
Payable to customers	2,243,654		2,432,612
Commission management payable	126,968		102,990
Compensation payable	176,210		443,580
Operating lease liabilities	99,800		98,883
Notes payable and other debt	625,766		623,371

Fees payable	6,580		16,483
Due to related parties	27		—
Accounts payable, accrued expenses and other liabilities	241,110		236,088
Consolidated Funds

Due to related parties	—		23




Accounts payable, accrued expenses and other liabilities	174		225
Total Liabilities	$	7,094,554	$	7,452,460

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Cowen Inc. Condensed Consolidated Statements of Financial Condition (dollars in thousands, except share and per share data) (unaudited)
	As of March 31, 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 March 31, 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, 56,835,283 shares issued and 27,614,903 outstanding as of March 31, 2022 and 62,500,000 shares authorized, 55,826,893 shares issued and 27,778,964 outstanding as of December 31, 2021, respectively (including 901,374 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 March 31, 2022 and December 31, 2021, respectively	—		—
Additional paid-in capital	1,127,160		1,100,667
Retained earnings	491,189		461,982
Accumulated other comprehensive income (loss)	—		(2)
Less: Class A common stock held in treasury, at cost, 29,220,380 and 28,047,929 shares as of March 31, 2022 and December 31, 2021, respectively	(583,535)		(547,112)
Total Cowen Inc. Stockholders' Equity	1,035,148		1,015,869
Nonredeemable non-controlling interests	175,575		159,735
Total Permanent Equity	$	1,210,723	$	1,175,604
Total Liabilities, Redeemable Preferred Stock and Permanent Equity	$	8,426,027	$	8,748,814

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

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Cowen Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited)
	Three Months Ended March 31,
		2022		2021
Revenues
Investment banking		$	101,542	$	304,834
Brokerage		168,738		173,737
Investment income (loss)
Securities principal transactions, net		91,252		63,965
Portfolio fund principal transactions, net		(6,098)		15,403
Carried interest allocations		(17,067)		96,769
Total investment income (loss)		68,087		176,137
Management fees		16,769		25,742
Incentive income		633		2,258
Interest and dividends		46,335		59,388

Insurance and reinsurance premiums		11,321		7,117
Other revenues, net		(949)		1,660
Consolidated Funds
Principal transactions, net		(1,886)		(3,349)
Interest and dividends		2		2

Total revenues		410,592		747,526
Interest and dividends expense		46,524		57,641
Total net revenues		364,068		689,885

Expenses
Employee compensation and benefits		187,178		388,196
Brokerage and trade execution costs		40,591		45,656
Underwriting expenses		259		6,915
Professional, advisory and other fees		13,682		15,460
Service fees		7,150		5,731
Communications		9,471		9,267
Occupancy and equipment		10,316		9,540
Depreciation and amortization		7,185		4,354
Client services and business development		6,569		6,848

Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs		7,343		6,455

Other expenses		12,763		(3,340)
Consolidated Funds

Professional, advisory and other fees		42		110

Other expenses		63		161
Total expenses		302,612		495,353
Other income (loss)
Net gains (losses) on other investments		5,580		12,645
Bargain purchase gain, net of tax		—		3,855
Gain/(loss) on debt extinguishment		—		(4,538)




Total other income (loss)		5,580		11,962
Income (loss) before income taxes		67,036		206,494
Income tax expense (benefit)		11,889		54,428
Net income (loss)		55,147		152,066
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds		20,131		4,562
Net income (loss) attributable to Cowen Inc.		35,016		147,504
Preferred stock dividends		1,698		1,698
Net income (loss) attributable to Cowen Inc. common stockholders		$	33,318	$	145,806
Weighted average common shares outstanding:
Basic		28,386		27,359
Diluted (See Note 21)		31,772		33,565
Earnings (loss) per share:
Basic		$	1.17	$	5.33
Diluted (See Note 21)		$	1.05	$	4.34

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

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Cowen Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(dollars in thousands)

(unaudited)


	Three Months Ended March 31,

		2022	2021
Net income (loss)				$	55,147		$	152,066
Other comprehensive income (loss), net of tax:
Foreign currency translation			2			4



Total other comprehensive income (loss), net of tax				2			4
Comprehensive income (loss)				$	55,149		$	152,070
Less: Comprehensive income (loss) attributable to non-controlling interests				20,131			4,562
Comprehensive income (loss) attributable to Cowen Inc.				$	35,018		$	147,508

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

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Cowen Inc.

Condensed Consolidated Statements of Changes in Equity

(dollars in thousands, except share data)

(unaudited)


		Three Months Ended March 31,
		2022		2021
Permanent Equity Shares		(in shares)
	Common Shares Outstanding
	Beginning balance	27,778,964		26,845,628

	Restricted stock awards issued	949,803		705,512

	Common stock issuance for partial settlement of contingent liability from prior acquisition	58,587		56,801
	Purchase of treasury stock, at cost	(1,172,451)		(755,610)

	Ending balance	27,614,903		26,852,331

	Series A Convertible Preferred Shares Outstanding
	Beginning balance	—		120,750

	Ending balance	—		120,750

Permanent Equity		(in dollars)
	Total Cowen Inc. Stockholders' Equity (beginning of period)	$	1,015,869	$	969,497
	Class A Common stock
	Beginning balance	334		334

	Ending balance	334		334

	Series A Convertible Preferred stock
	Beginning balance	—		1

	Ending balance	—		1

	Treasury stock
	Beginning balance	(547,112)		(346,870)
	Purchase of treasury stock, at cost	(36,423)		(26,904)
	Ending balance	(583,535)		(373,774)

	Additional Paid-in Capital
	Beginning balance	1,100,667		1,130,138


	Common stock issuance for partial settlement of contingent liability from prior acquisition	1,881		2,202


	Amortization of share based awards	24,612		19,037
	Ending balance	$	1,127,160

COWEN INC. [COWN] Filings

COWEN INC. [COWNL] Filings