Earnings call transcript: Cohen & Co reports Q4 2024 net loss, stock dips

Cohen & Company Inc (COHN) reported a net loss of $2 million for the fourth quarter of 2024, translating to a loss of $1.21 per diluted share. This marks a significant downturn from the same period last year when the company recorded a net income of $4.5 million, or $2.97 per diluted share. Following the earnings announcement, Cohen & Co’s stock price fell by 0.74%, closing at $9.43, reflecting investor concerns over the company’s financial performance.

Key Takeaways

• Cohen & Co reported a Q4 2024 net loss of $2 million, contrasting with a net income in Q4 2023.
• The company’s stock price decreased by 0.74% after the earnings release.
• Despite a challenging quarter, the company expanded its market share in investment banking.

Company Performance

Cohen & Co experienced a challenging fourth quarter in 2024, with a net loss indicating a reversal from the previous year’s profitability. The company’s performance was impacted by negative principal transactions revenue amounting to $22.6 million. However, the firm nearly doubled its full-year Cohen and Company Capital Markets (CCM) revenue to $38.9 million from $21.9 million in 2023, showcasing growth in its core business areas.

Financial Highlights

• Q4 2024 Net Loss: $2 million ($1.21 per diluted share)
• Q4 2023 Net Income: $4.5 million ($2.97 per diluted share)
• Full Year CCM Revenue: $38.9 million (up from $21.9 million in 2023)
• Total New Issue and Advisory Revenue for 2024: $61.6 million
• Negative principal transactions revenue: $22.6 million

Outlook & Guidance

Cohen & Co remains optimistic about its future earnings potential, despite acknowledging the volatility in its principal portfolio. The company plans to continue focusing on enhancing long-term stockholder value and will evaluate its dividend policy quarterly based on operating results. For FY 2025, the company forecasts a revenue of $159.98 million.

Executive Commentary

CEO Lester Brafman stated, "In 2024, Cohen and Company Capital Markets continued to grow market share," highlighting the company’s efforts to expand its presence in the investment banking sector. CFO Joe Pooler added, "Our revenue earned from new issue and advisory revenue has been and we expect will continue to be volatile," indicating potential fluctuations in future earnings.

Risks and Challenges

• Elevated mortgage rates continue to pose challenges for the company’s mortgage business.
• The investment banking market remains volatile, affecting revenue stability.
• Declining equity values in post-business combination SPACs could impact financial results.
• The company’s ability to manage negative principal transactions revenue is critical.
• Evaluating the dividend policy amid fluctuating operating results remains a priority.

Cohen & Co’s Q4 2024 earnings call highlighted both the challenges and opportunities facing the company, as it navigates a volatile market environment while striving to enhance shareholder value.

Full transcript - Cohen & Company Inc (COHN) Q4 2024:

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 looking statements under applicable security laws. These statements may involve risks and uncertainties that could cause the company’s actual results to differ materially from the results discussed in such forward looking statements. The forward looking statements made during the call are made only as of the date of this call and the company undertakes no obligation to update such statements to reflect subsequent events or circumstances.

Cohen and Company advised you to read the cautionary note regarding forward looking statements in its earnings release and its most recent annual report on Form 10 ks filed with the SEC. Earlier today, Cowen and Company issued a press release announcing fourth quarter and full year twenty twenty four financial results. Today’s discussion is complementary to that press release, which is available on the company’s website at cohenandcompany.com. This conference call is being recorded and a replay will be available for three days beginning shortly after the conclusion of this call. The company’s remarks also include certain non GAAP financial measures that management believes are meaningful when evaluating the company’s performance.

A reconciliation of these non GAAP financial measures to comparable GAAP measures is provided in the company’s earnings release. After the prepared remarks, the call will be open for questions. I would now like to turn the call over to Mr. Lester Brafman, Chief Executive Officer of Cowen and Company. Please go ahead, sir.

Lester Brafman, Chief Executive Officer, Cohen and Company: Thank you, Sherry, and thank you everybody for joining us for our fourth quarter twenty twenty four earnings call. With me on the call is Joe Pooler, our CFO. In 2024, Cohen and Company Capital Markets, our full service boutique investment bank, which we refer to as CCM, continued to grow market share as an advisor, agent and expanding into underwriting initial public offerings. While CCM revenue was down compared to the third quarter of twenty twenty four, our actions to strengthen the business throughout the year generated full year CCM revenue of $38,900,000 from nearly 50 clients and almost doubled the full year 2023 CCM revenue of $21,900,000 Despite continued elevated mortgage rates and lower levels of mortgage origination, we were able to grow our mortgage business in 2024, ending the year with a gestation repo book of $2,700,000,000 up more than 30% from December 2023. We remain confident about our future earnings potential and are focused on enhancing long term sustained value for our stockholders, including through continued payment of our quarterly dividend.

Now, I will turn the call over to Joe to walk through this quarter’s financial highlights in more detail.

Joe Pooler, Chief Financial Officer, Cohen and Company: Thank you, Lester. I will begin with a discussion of our operating results for the quarter. Our net loss attributable to Cohen and Company Inc. Was $2,000,000 for the quarter or $1.21 per fully diluted share compared to net income of $2,200,000 for the prior quarter or $1.31 per fully diluted share and net income of $4,500,000 for the prior year quarter or $2.97 per fully diluted share. Our adjusted pretax loss was $7,700,000 for the quarter compared to adjusted pretax income of $7,700,000 for the prior quarter and adjusted pretax income of $16,000,000 for the prior year quarter.

As a reminder, adjusted pre tax income loss is a key earnings measurement for us as it incorporates enterprise earnings attributable to our convertible non controlling interest, which is substantially held by our Founder and Chairman, Daniel Cohen. Daniel holds his interest in the enterprise through the primary operating subsidiary, Cohen and Company LLC, which is a consolidated subsidiary of Cohen and Company Inc. New issue and advisory revenue was $10,000,000 in the fourth quarter, a decrease of $12,400,000 from the third quarter and a decrease of $8,600,000 from the year ago quarter. Our revenue earned from new issue and advisory revenue has been and we expect will continue to be volatile. We earned revenue from a limited number of engagements.

A small change in the number of engagements can result in quarter to quarter fluctuations in the revenue recognized. The average revenue per engagement can fluctuate as well. And our revenue is generally earned when an underlying transaction closes, thus the timing of underlying transactions increases the volatility of our revenue recognition. In addition, we have received financial instruments as consideration for advisory services provided by our CCM team instead of cash at times, which investments are included in our other investments at fair value line item in the balance sheet. CCM generated a total of $61,600,000 of new issue and advisory revenue during 2024, but this amount was offset by $22,600,000 of negative principal transactions revenue during ’twenty four related to losses on investment assets received as consideration.

Net trading revenue came in at $8,900,000 in the quarter, which was comparable to the third quarter and up $1,100,000 from the fourth quarter of ’twenty three. Our asset management revenue totaled 2,100,000 in the quarter, which was down slightly from the prior quarter and up slightly from the prior year quarter. Fourth quarter principal transactions and other revenue was negative $2,500,000 primarily due to mark to market adjustments on our principal investments related to previously received consideration by our CCM team and as well as our ongoing involvement in the SPAC market as an asset manager and investor, which has resulted in increased holdings of public equity positions in post business combination companies. Equity value of post business combination SPACs has continued to decline, leading many of the shares we received to decrease in value, negatively impacting both the equity method and the principal transactions line items in our statement of operations. We anticipate that there will continue to be volatility in our principal portfolio and therefore our operating results.

As previously noted, in certain cases, we

Lester Brafman, Chief Executive Officer, Cohen and Company: do receive investment

Joe Pooler, Chief Financial Officer, Cohen and Company: banking consideration from clients, including de de SPAC clients in the form of investment assets, and those investment assets have subsequently fallen in value. Principal transactions revenue includes all gains and losses and income earned on our $33,600,000 net investment portfolio. Compensation and benefits expense for the quarter was $12,900,000 which was down from both prior quarters, primarily due to fluctuations in revenue, income from equity method affiliates net of our non convertible non controlling interest and the related variable incentive compensation. The number of company employees was 113 at the end of the year compared to 113 at the end of the prior quarter and 118 at the end of the prior year. Net interest expense for the quarter was $1,500,000 including $1,160,000 on our two trust preferred debt instruments, dollars 292,000 on our senior promissory notes and $19,000 on our credit line.

As a reminder, during the third quarter of ’twenty four, we restructured two thirds or 5,100,000 of our redeemable financial instrument into a promissory note and repaid 1 third or 2 point 6 million dollars in cash. In terms of the balance sheet, at the end of the year, total equity was $90,300,000 compared to $91,800,000 at the end of ’twenty three. The non convertible non controlling interest component of total equity was at $11,500,000 at the end of the year compared to $9,600,000 at the end of ’twenty three. Thus, the total enterprise equity excluding the non convertible non controlling interest was $78,800,000 as of December thirty one of ’twenty four, a $3,400,000 decrease from the prior year. At quarter end, consolidated corporate indebtedness was carried at $34,900,000 As Lester mentioned, we have declared a quarterly dividend of $0.25 per share payable on April 9 to stockholders of record as of March 26.

The Board of Directors will continue to evaluate the dividend policy each quarter and future decisions regarding dividends will be impacted by quarterly operating results and our capital needs. With that, I’ll turn it back over to Lester for closing remarks.

Lester Brafman, Chief Executive Officer, Cohen and Company: Thanks, Joe. Please direct any offline investor questions to Joe Pooler at (215) 701-8952 or via email at investorrelationscohenandcompany dot com. The contact information can also be found at the bottom of our earnings release. Operator, you can now open the call lines for questions and thank everyone for joining us on our call today.

Operator: Thank There are no further questions at this time. Would you like to make any closing remarks?

Lester Brafman, Chief Executive Officer, Cohen and Company: No, that’s it. I hope to see everybody in our next quarterly call. Thank you very

Operator: much. Thank you. This will conclude today’s conference. You may disconnect at this time. And thank you for your participation.

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