Cowen Announces Financial Results for Third Quarter 2022


  • Reports 3Q22 GAAP Net Income to common stockholders of $12.7 million, or $0.39 per diluted share
  • Economic Operating Income of $24.4 million, or $0.76 per diluted share (Non-GAAP)
  • Declared quarterly cash dividend of $0.12 per share

NEW YORK, Oct. 28, 2022 (GLOBE NEWSWIRE) -- Cowen Inc. (NASDAQ: COWN) (“Cowen” or “the Company”) today announced its operating results for the third quarter ended September 30, 2022.

Jeffrey M. Solomon, Chair and Chief Executive Officer of Cowen, said, "Cowen delivered another profitable quarter despite the challenging economic backdrop and weak market conditions, powered by strong performance in our operating company segment. Our results demonstrate that our business is operating at a higher level than it was before the pandemic and the strategic positioning over the last several years have enabled us to continue performing well. Even though we expect the markets to remain difficult for the remainder of the year, we believe we are well positioned to gain market share, particularly in partnership with our new colleagues at TD, who we expect to formally join early in 2023. We remain deeply committed to meeting our clients' evolving needs by providing timely strategic advice, innovative financing solutions, world-class investment research, advanced trading and execution capabilities as well as differentiated investment products."

Announced Transaction

On August 2, 2022, TD Bank Group ("TD”) and Cowen announced a definitive agreement for TD to acquire Cowen in an all-cash transaction valued at approximately $1.3 billion, or $39 for each Class A common share of Cowen. The transaction is expected to close in the first calendar quarter of 2023, and is subject to customary closing conditions, including approvals from the Company's shareholders and various U.S., Canadian and foreign regulatory authorities.

Third Quarter 2022 Financial Summary

 Operating Results
(GAAP)
 Economic Operating Income
(Non-GAAP)
 Three Months Ended
September 30,
 Three Months Ended
September 30,
($ in millions, except per share information) 2022  2021 Δ %  2022  2021 Δ %
            
            
Revenue/Economic Proceeds (Non-GAAP)$410.8 $412.2 (<1)% $340.8 $359.1 (5)%
Net income (loss) attributable to common stockholders for diluted earnings per share/Economic Operating Income (Non-GAAP)$12.7 $36.1 (65)% $24.4 $43.3 (44)%
Earnings (loss) per common share (diluted)$0.39 $1.10 (65)% $0.76 $1.32 (42)%
            
Note: Throughout this press release the Company presents Non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). A reconciliation of these Non-GAAP measures appears under the section, "Reconciliation of US GAAP (Unaudited) to Non-GAAP Measures."


Third Quarter 2022 Operating Financial Highlights

  • Sustained Performance in Markets :
    • Brokerage Economic Proceeds of $2.69 million per trading day in 3Q'22, up 7% year-over-year
    • Strong results in derivatives trading, securities finance, and prime brokerage

  • Strong Results in Banking:
    • Banking revenues increased 53% sequentially from 2Q'22 driven by strong performance in M&A
    • All advisory revenues, including M&A, comprised 69% of IB revenues in 3Q'22 - that compares to 59% for FY 2021
    • Demonstrated strong sector coverage in healthcare and industrials and from teams in Midwest and Europe

  • Investment Management:
    • Management fees economic proceeds were $22.3 million, up 48% from 3Q'21 primarily related to an increase in management fees from the healthcare and activist investments strategies
    • As of September 30, 2022, the Company had AUM of $14.1 billion, down 5% from September 30, 2021

  • Invested Capital:
    • As of September 30, 2022, the Company had invested capital in Op Co totaling $731.1 million, down from $745.7 million as of June 30, 2022
    • As of September 30, 2022, the Company had invested capital in Asset Co totaling $90.9 million, down from $115.5 million as of June 30, 2022
    • The largest Asset Co investments are the investment in Italian wireless broadband provider Linkem S.p.A ($55.6 million excluding carried interest) and private equity funds Formation8/Eclipse ($27.1 million)

Capital Optimization Update

In the third quarter of 2022, the Company repurchased $3.6 million of its common stock, or 150,000 shares, at an average price of $24.33 per share under the Company's existing share repurchase program. Outside the share repurchase program, the Company acquired approximately $12.1 million of stock as a result of net share settlements relating to the vesting of equity awards, or 314,052 shares, at an average price of $38.46 per share. Approximately $25 million is currently available for repurchase under the program.

Quarterly Cash Dividend

On October 26, 2022, the Board of Directors declared a cash dividend of $0.12 per common share. The dividend will be payable on December 15, 2022, to stockholders of record on December 1, 2022.


Select Balance Sheet Data

(Amounts in millions, except per share information)   
 September 30, 2022 December 31, 2021
Common equity (CE)$1,053.3 $1,015.9
    
Book value per share (CE/CSO)$37.60 $36.57
    
Common shares outstanding (CSO)28.0 27.8
    
Note: Common Equity (CE) is equivalent to Cowen Inc. stockholders’ equity.   



Cowen Inc.
US GAAP Preliminary Unaudited Condensed Consolidated Statements of Operations
(Dollar and share amounts in thousands, except per share data)
        
 Three Months Ended Nine Months Ended
 September 30 September 30
  2022   2021   2022   2021 
Revenue       
Investment banking$154,480  $273,532  $356,191  $803,347 
Brokerage 135,516   131,371   458,910   444,168 
Investment income (loss)       
Securities principal transactions, net (41,170)  7,291   81,624   111,828 
Portfolio fund principal transactions, net (247)  (11,121)  (15,807)  2,400 
Carried interest allocations 9,443   (60,471)  (39,707)  768 
    Total investment income (loss) (31,974)  (64,301)  26,110   114,996 
Management fees 16,655   15,334   50,141   56,071 
Incentive income    6   633   2,433 
Interest and dividends 147,884   45,978   242,764   167,539 
Insurance and reinsurance premiums 10,737   12,586   36,336   31,196 
Other revenues, net 376   (1,078)  (7,198)  2,612 
Consolidated Funds revenues (22,883)  (1,191)  (40,091)  (3,843)
Total revenue 410,791   412,237   1,123,796   1,618,519 
Interest and dividends expense 76,270   43,035   176,719   163,749 
Total net revenue 334,521   369,202   947,077   1,454,770 
Expenses       
Employee compensation and benefits 203,878   201,686   542,378   809,068 
Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs 13,116   13,172   23,630   24,843 
Operating, general, administrative and other expenses 112,045   108,633   298,227   308,710 
Depreciation and amortization expense 6,994   4,796   21,176   13,715 
Consolidated Funds expenses 70   124   229   519 
Total expenses 336,103   328,411   885,640   1,156,855 
Other income (loss)       
Net (losses) gains on other investments (1,637)  4,266   7,470   23,641 
Bargain purchase gain, net of tax          3,855 
Gain/(loss) on debt extinguishment          (4,538)
Total other income (loss) (1,637)  4,266   7,470   22,958 
Income (loss) before income taxes (3,219)  45,057   68,907   320,873 
Income tax expense/(benefit) 4,476   12,192   22,273   76,864 
Net income (loss) (7,695)  32,865   46,634   244,009 
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and funds (22,046)  (4,938)  (16,896)  13,379 
Net income (loss) attributable to Cowen Inc. 14,351   37,803   63,530   230,630 
Less: Preferred stock dividends 1,698   1,698   5,094   5,094 
Net income (loss) attributable to Cowen Inc. common stockholders$12,653  $36,105  $58,436  $225,536 
        
Earnings (loss) per share:       
Basic$0.45  $1.25  $2.08  $8.14 
Diluted$0.39  $1.10  $1.87  $6.78 
        
Weighted average shares used in per share data:       
Basic 28,044   28,864   28,107   27,718 
Diluted 32,302   32,724   31,197   33,264 


U.S. GAAP Financial Measures

Third quarter 2022 revenue was $410.8 million versus $412.2 million in the third quarter of 2021. The year-over-year decrease was due primarily to reduced investment banking activity offset by higher interest and dividend income.

Third quarter 2022 investment banking revenues decreased $119.1 million to $154.5 million. During the quarter, the Company completed 15 underwriting transactions and 41 strategic advisory transactions, including seven debt capital markets transactions.

Third quarter 2022 brokerage revenues increased $4.1 million to $135.5 million. The increase was attributable to an increase in institutional services activity, primarily Prime Services and Securities Finance.

Third quarter 2022 investment income losses decreased $32.3 million to a loss of $32.0 million. The year-over-year decrease is primarily due to positive carried interest allocations offset by losses in securities principal transactions.

Third quarter 2022 interest and dividends increased $101.9 million to $147.9 million for the three months ended September 30, 2022 compared with $46.0 million in the prior year period. The increase in interest and dividends is primarily attributable to dividends receivable from event strategy market making activity and securities finance activity. The increase in the securities finance activity is due to higher customer demand which has created more matched book opportunities for international securities.

Third quarter 2022 employee compensation and benefits expenses were $203.9 million, an increase of $2.2 million from the prior-year period. The increase is primarily due to a higher compensation and benefits accrual ratio in the current period.

Third quarter 2022 total expenses were $336.1 million, an increase of $7.7 million from the prior-year period. The increase was primarily driven by higher operating, general, and administrative expenses.

Third quarter 2022 income tax expense was $4.5 million compared to $12.2 million income tax expense in the prior-year quarter. The decrease was primarily due to the year-over-year decrease in the Company's income before income taxes.

Third quarter 2022 net income attributable to common stockholders was $12.7 million, down from $36.1 million in the third quarter of 2021.

Non-GAAP Financial Measures 

Throughout this press release, the Company presents supplemental financial measures that are not prepared in accordance with US GAAP. These Non-GAAP financial measures include (i) Pre-tax Economic Income (Loss) (ii) Economic Income (Loss), (iii) Economic Operating Income (Loss), (iv) Economic Proceeds and related components, (v) Net Economic Proceeds and related components, (vi) Economic Expenses and related components and (vii) related per share measures. The Company believes that these Non-GAAP financial measures, viewed in addition to, and not in lieu of, the Company’s reported US GAAP results, provide useful information to investors and analysts regarding its performance and overall results of operations as it presents investors and analysts with a supplemental operating view of the Company’s financials to help better inform their analysis of the Company’s performance.

These Non-GAAP financial measures are an integral part of the Company’s internal reporting to measure the performance of its business segments, allocate capital and other strategic decisions as well as assess the overall effectiveness of senior management. The Company believes that presenting these Non-GAAP measures may provide expanded transparency into the Company’s business operations, growth opportunities and expense allocation decisions.

The Company’s primary Non-GAAP financial measures of profit or loss are Pre-tax Economic Income (Loss), Economic Income (Loss) and Economic Operating Income (Loss). Pre-tax Economic Income (Loss) is a pre-tax measure which (i) includes management reclassifications which the Company believes provide additional insight on the performance of the Company’s core businesses and divisions; (ii) eliminates the impact of consolidation for Consolidated Funds; and excludes (iii) goodwill and intangible impairment, (iv) certain other transaction-related adjustments and/or reorganization expenses, as well as (v) certain costs associated with debt. Economic Income (Loss) is a similar measure, but after tax, which includes the Company’s income tax expense or benefit calculated on Pre-tax Economic Income (Loss) once all currently available net operating losses have been utilized (this occurred during tax year 2020) and is presented after preferred stock dividends. Economic Operating Income (Loss) is a similar measure to Economic Income (Loss), but before depreciation and amortization expenses. The Company believes that these Non-GAAP financial measures provide analysts and investors transparency into the measures of profit and loss management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels. Additionally, the measures provide investors and analysts with additional insight into the activities of the Company’s core businesses, taking into account, among other things, the impact of minority investment stakes, securities borrowing and lending activities and expenses from investment banking activities on US GAAP reported results. The Company presents Pre-tax Economic Income (Loss) in addition to Economic Income (Loss) and Economic Operating Income (Loss) to provide insight to investors and analysts on how the Company manages its tax position over time.

In addition to Pre-tax Economic Income (Loss), Economic Income (Loss) and Economic Operating Income (Loss), the Company also presents Economic Proceeds, Net Economic Proceeds, Economic Expenses, as well as their related components. These measures include management reclassifications and the elimination of the impact of the consolidation for Consolidated funds as described above. These adjustments are meant to provide comparability to our peers as well as to provide investors and analysts with transparency into how the Company manages its operating businesses and how analysts and investors review and analyze the Company’s and its peers’ similar lines of businesses. For example, among others, within the Company’s Op Co business segment, investors and analysts typically review and analyze the performance of investment banking revenues net of underwriting expenses and excluding the impact of reimbursable expenses. Additionally, the performance of the Company’s Markets business is typically analyzed as a unit incorporating commissions, interest from securities financing transactions and gains and losses from proprietary and facilitation trading. The Company’s investment management business performance is analyzed and reviewed by investors and analysts through investment income, incentive income and management fees. The presentation of Economic Proceeds, Net Economic Proceeds, Economic Expenses as well as their related components align with these and other examples of how the Company’s business activities and performance are reviewed by analysts and investors in addition to providing simplification related to legacy businesses and investments for which the Company maintains long-term monetization strategies. Additionally, the Company manages its operating businesses to an Economic Compensation-to-Proceeds ratio. Presentation of Economic Compensation Expense and Economic Proceeds provides transparency in addition to the Company’s US GAAP Compensation Expense.

Reconciliations to comparable US GAAP measures are presented along with the Company’s Non-GAAP financial measures. The Non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other public companies and are not identical to corresponding measures used in our various agreements or public filings.

These Non-GAAP measures should not be considered in isolation or as a substitute for revenue, expenses, income (loss) before income taxes, net income, operating cash flows, investing and financing activities, or other income or cash flow statement data prepared in accordance with US GAAP. As a result of the adjustments made to arrive at these Non-GAAP measures described below, these Non-GAAP measures have limitations in that they do not take into account certain items included or excluded under US GAAP, including its consolidated funds.


Third Quarter 2022 Non-GAAP Financial Review

Economic Proceeds

 Three Months Ended Nine Months Ended
 September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
(Dollar amounts in thousands)Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total
Economic Proceeds                       
Investment banking$149,359  $  $149,359  $262,618  $  $262,618  $345,812  $  $345,812  $770,533 $  $770,533
Brokerage 172,097      172,097   160,486      160,486   551,888      551,888   558,178     558,178
Management fees 22,125   193   22,318   14,739   295   15,034   62,738   700   63,438   59,448  911   60,359
Incentive income 15,591   (10,428)  5,163   (57,288)  (447)  (57,735)  (26,220)  (11,632)  (37,852)  21,071  (1,148)  19,923
Investment income (loss) (790)  (13,155)  (13,945)  (20,418)  391   (20,027)  11,301   (11,545)  (244)  17,095  3,364   20,459
Other economic proceeds 5,837      5,837   (1,320)  (1)  (1,321)  18,060   1   18,061   7,150  (1)  7,149
Total: Economic Proceeds 364,219   (23,390)  340,829   358,817   238   359,055   963,579   (22,476)  941,103   1,433,475  3,126   1,436,601
Economic Interest Expense / (Income) (1,161)  (191)  (1,352)  5,669   820   6,489   (5,331)  (991)  (6,322)  19,035  3,082   22,117
Net Economic Proceeds$365,380  $(23,199) $342,181  $353,148  $(582) $352,566  $968,910  $(21,485) $947,425  $1,414,440 $44  $1,414,484


Economic Proceeds were $340.8 million versus $359.1 million in the third quarter of 2021, a decrease of 5%.

Investment Banking Economic Proceeds were $149.4 million, down 43% from the prior-year period. The decrease was due primarily to reduced equity capital markets activity.

Brokerage Economic Proceeds of $172.1 million were 7% higher versus the prior-year period. The increase was due in part to higher options, ADR trading, securities finance, and prime services, partially offset by reduced special situations and cash trading revenues.

Management Fees Economic Proceeds rose 48% year-over-year to $22.3 million. This increase in management fees was primarily related to an increase in management fees from the healthcare and activist investments strategies.

Incentive Income Economic Proceeds were a gain of $5.2 million in the third quarter of 2022 versus a loss of $57.7 million in the prior-year period. The gain in 3Q 2022 was driven by Cowen Healthcare Investments and our sustainable business and was partially offset by a decrease in performance in our multi-strategy business.

Investment Income Economic Proceeds were a loss of $13.9 million versus a loss of $20.0 million in the prior-year period, a decrease of $6.1 million. The loss in 3Q 2022 was primarily driven by mark down of the value of our Linkem position, an Italian wireless broadband provider, driven by lower projected future cash flows and a decline in market value of comparables.

Economic Interest Expense (Income). In the third quarter of 2022 Cowen had interest income gain of $1.4 million, versus an expense of $6.5 million in the prior-year period. Third quarter 2022 interest expense included a $11.1 million gain from a mark-to-market adjustment on an interest rate swap used to offset interest on floating-rate debt.


Economic Expenses

 Three Months Ended Nine Months Ended
 September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
(Dollar amounts in thousands)Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total
Economic Expenses                       
Compensation & Benefits$204,296 $508 $204,804 $198,702 $4,186 $202,888 $541,956 $2,003 $543,959 $800,560 $11,137 $811,697
Non-Compensation Expenses 101,205  74  101,279  88,356  38  88,394  298,763  110  298,873  265,582  13  265,595
Depreciation & Amortization 6,989  5  6,994  4,790  6  4,796  21,158  18  21,176  13,700  15  13,715
Non-Controlling Interest 826    826  1,216    1,216  1,812    1,812  4,171    4,171
Total: Economic Expenses$313,316 $587 $313,903 $293,064 $4,230 $297,294 $863,689 $2,131 $865,820 $1,084,013 $11,165 $1,095,178


Economic Compensation Expenses were $204.8 million compared to $202.9 million in the third quarter of 2021. The economic compensation-to-proceeds ratio was 60.1%, higher than prior-year period ratio of 56.5%, reflecting our view that we will likely end the year closer to the higher end of our targeted compensation-to-proceeds ratio of 59% for FY 2022.

Economic Fixed Non-Compensation Expenses in the third quarter 2022 fixed non-compensation expenses were up $2.9 million from the prior-year period at $43.3 million. The year-over-year increase is due in part to an increase in headcount as well as an increase in professional and advisory fees and communication costs. The fixed non-compensation-to-economic-proceeds ratio rose from 11.2% in 3Q'21 to 12.7% in 3Q'22.

Economic Variable Non-Compensation Expenses were $58.0 million, up from $48.1 million in the third quarter of 2021, due in part to higher trade execution costs from increased markets activity as well as increased client event and entertainment costs. The variable non-compensation-to-proceeds ratio rose from 13.4% in 3Q'21 to 17.0% in 3Q'22.

Economic Depreciation and Amortization Expenses were $7.0 million compared to $4.8 million in the third quarter of 2021. The year-over-year increase is due primarily to expenses associated with the Portico acquisition in late 2021.


Economic Income and Economic Operating Income

 Three Months Ended Nine Months Ended
 September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
(Dollar amounts in thousands)Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total Op Co Asset Co Total
Pre-tax Economic Income (Loss)$52,064 $(23,786) $28,278 $60,084 $(4,812) $55,272 $105,221 $(23,616) $81,605 $330,427 $(11,121) $319,306
Economic income tax expense 13,537  (6,184)  7,353  15,111  (1,256)  13,855  27,358  (6,140)  21,218  87,563  (2,947)  84,616
Preferred stock dividends 1,494  204   1,698  1,477  221   1,698  4,432  662   5,094  4,364  730   5,094
Economic Income (Loss) $37,033 $(17,806) $19,227 $43,496 $(3,777) $39,719  73,431  (18,138)  55,293  238,500  (8,904)  229,596
Add back: Depreciation and amortization expense, net of taxes 5,172  4   5,176  3,548  5   3,553  15,657  13   15,670  10,070  15   10,085
Economic Operating Income (Loss)$42,205 $(17,802) $24,403 $47,044 $(3,772) $43,272 $89,088 $(18,125) $70,963 $248,570 $(8,889) $239,681
                        
Economic Income per diluted share$1.15 $(0.55) $0.60 $1.33 $(0.12) $1.21 $2.35 $(0.58) $1.77 $7.17 $(0.27) $6.90
Economic Operating Income per diluted share$1.31 $(0.55) $0.76 $1.44 $(0.12) $1.32 $2.86 $(0.58) $2.27 $7.47 $(0.27) $7.21


Reconciliation of US GAAP (Unaudited) to Non-GAAP Measures

The following tables reconciles total US GAAP Revenues and Other Income (Loss) to total Economic Proceeds for the three and nine months ended September 30, 2022 and 2021:

For the three months ended September 30, 2022
(Dollar amounts in thousands)
 Investment Banking Brokerage Investment Income  Management Fees Incentive Income Interest and Dividends Reinsurance Premiums  Other Revenues, net Consolidated Funds Revenues Other Income (Loss) Total
Total US GAAP Revenues and Other Income (Loss) $154,480  $135,516  $(31,974) $16,655  $  $147,884  $10,737  $376  $(22,883) $(1,637) $409,154 
Management Presentation Reclassifications:                      
Underwriting expensesa (1,899)                             (1,899)
Reimbursable client expensesb (3,222)                    (260)        (3,482)
Securities financing interest expensec    (2,254)           (26,267)              (28,521)
Fund start-up costs, distribution and other feesd          (379)           (605)        (984)
Certain equity method investmentse          6,004   (3,095)              161   3,070 
Carried interestf       (9,443)     11,363                  1,920 
Proprietary trading, interest and dividendsg    (72,984)  48,641      (3,105)  (36,632)     8,705      24,478   (30,897)
Insurance related activities expensesh                   (10,737)  (2,379)        (13,116)
Facilitation trading gains and lossesi    111,819   (6,090)        (84,985)           (23,002)  (2,258)
Total Management Presentation Reclassifications:  (5,121)  36,581   33,108   5,625   5,163   (147,884)  (10,737)  5,461      1,637   (76,167)
Fund Consolidated Reclassificationsl       (15,079)  38               22,883      7,842 
Total Economic Proceeds $149,359  $172,097  $(13,945) $22,318  $5,163  $  $  $5,837  $  $  $340,829 


For the three months ended September 30, 2021
(Dollar amounts in thousands)
 Investment Banking Brokerage Investment Income  Management Fees Incentive Income Interest and Dividends Reinsurance Premiums Other Revenues, net Consolidated Funds Revenues Other Income (Loss) Total
Total US GAAP Revenues and Other Income (Loss) $273,532  $131,371  $(64,301) $15,334  $6  $45,978  $12,586  $(1,078) $(1,191) $4,266  $416,503 
Management Presentation Reclassifications:                      
Underwriting expensesa (7,208)                             (7,208)
Reimbursable client expensesb (3,706)                    (389)        (4,095)
Securities financing interest expensec    1,565            (30,417)              (28,852)
Fund start-up costs, distribution and other feesd    (94)     (4,328)           (610)        (5,032)
Certain equity method investmentse          3,974   2,592               (4,575)  1,991 
Carried interestf       60,471      (60,263)                 208 
Proprietary trading, interest and dividendsg    8,523   (14,436)     (157)  (5,658)     1,341      12,381   1,994 
Insurance related activities expensesh                   (12,586)  (586)        (13,172)
Facilitation trading gains and lossesi    19,121   (535)        (9,903)     1      (12,072)  (3,388)
Total Management Presentation Reclassifications:  (10,914)  29,115   45,500   (354)  (57,828)  (45,978)  (12,586)  (243)     (4,266)  (57,554)
Fund Consolidated Reclassificationsl       (1,226)  54   87            1,191      106 
Total Economic Proceeds $262,618  $160,486  $(20,027) $15,034  $(57,735) $  $  $(1,321) $  $  $359,055 


For the nine months ended September 30, 2022
(Dollar amounts in thousands)
 Investment Banking Brokerage Investment Income  Management Fees Incentive Income Interest and Dividends Reinsurance Premiums  Other Revenues, net Consolidated Funds Revenues Other Income (Loss) Total
Total US GAAP Revenues and Other Income (Loss) $356,191  $458,910  $26,110  $50,141  $633  $242,764  $36,336  $(7,198) $(40,091) $7,470  $1,131,266 
Management Presentation Reclassifications:                      
Underwriting expensesa (3,047)                             (3,047)
Reimbursable client expensesb (7,332)                    (866)        (8,198)
Securities financing interest expensec    (3,580)           (84,233)              (87,813)
Fund start-up costs, distribution and other feesd          (1,119)           (1,896)        (3,015)
Certain equity method investmentse          14,279   3,269               (10,276)  7,272 
Carried interestf       39,707      (36,936)                 2,771 
Proprietary trading gains and lossesg    (60,388)  (38,739)     (4,818)  (53,661)     15,315      63,780   (78,511)
Insurance related activities expensesh                   (36,336)  12,706         (23,630)
Facilitation trading gains and lossesi    156,946   (842)        (104,870)           (60,974)  (9,740)
Total Management Presentation Reclassifications:  (10,379)  92,978   126   13,160   (38,485)  (242,764)  (36,336)  25,259      (7,470)  (203,911)
Fund Consolidated Reclassificationsl       (26,480)  137               40,091      13,748 
Total Economic Proceeds $345,812  $551,888  $(244) $63,438  $(37,852) $  $  $18,061  $  $  $941,103 


For the nine months ended September 30, 2021
(Dollar amounts in thousands)
 Investment Banking Brokerage Investment Income  Management Fees Incentive Income Interest and Dividends Reinsurance Premiums  Other Revenues, net Consolidated Funds Revenues Other Income (Loss) Total
Total US GAAP Revenues and Other Income (Loss) $803,347  $444,168  $114,996  $56,071  $2,433  $167,539  $31,196  $2,612  $(3,843) $22,958  $1,641,477 
Management Presentation Reclassifications:                      
Underwriting expensesa (20,275)                             (20,275)
Reimbursable client expensesb (12,539)                    (972)        (13,511)
Securities financing interest expensec    9,132            (121,073)              (111,941)
Fund start-up costs, distribution and other feesd    (360)     (8,850)           (1,914)        (11,124)
Certain equity method investmentse          10,976   16,590               (21,298)  6,268 
Carried interestf       (768)     1,090                  322 
Proprietary trading gains and lossesg    34,870   (79,871)     (207)  (12,016)     1,070      34,148   (22,006)
Insurance related activities expensesh                   (31,196)  6,353         (24,843)
Facilitation trading gains and lossesi    70,368   (11,055)        (34,450)           (36,491)  (11,628)
Total Management Presentation Reclassifications:  (32,814)  114,010   (91,694)  2,126   17,473   (167,539)  (31,196)  4,537      (23,641)  (208,738)
Fund Consolidated Reclassificationsl       (2,843)  2,162   17            3,843      3,179 
Income Statement Adjustments                      
Acquisition related amountsn                            (3,855)  (3,855)
Debt extinguishmentp                            4,538   4,538 
Total Income Statement Adjustments:                             683   683 
Total Economic Proceeds $770,533  $558,178  $20,459  $60,359  $19,923  $  $  $7,149  $  $  $1,436,601 


The following table reconciles total US GAAP interest and dividends expense to total Economic Interest Expense for the three and nine months ended September 30, 2022 and 2021:

  Three Months Ended September 30, Nine Months Ended September 30,
(Dollar amounts in thousands) 2022   2021   2022   2021 
Total US GAAP Interest & Dividend Expense $76,270  $43,035  $176,719  $163,749 
Management Presentation Reclassifications:        
Securities financing interest expensec (28,521)  (28,852)  (87,813)  (111,941)
Fund start-up costs, distribution and other feesd (129)  (1,088)  (2,337)  (2,257)
Proprietary trading gains and lossesg (46,638)  (3,192)  (82,922)  (8,678)
Facilitation trading gains and lossesi (2,258)  (3,388)  (9,740)  (11,628)
Total Management Presentation Reclassifications:  (77,546)  (36,520)  (182,812)  (134,504)
Income Statement Adjustments:       
Accelerated debt costsp          (5,557)
Amortization of discount/(premium) on debtm (76)  (26)  (229)  (1,571)
Total Income Statement Adjustments:  (76)  (26)  (229)  (7,128)
Total Economic Interest Expense / (Income)$(1,352) $6,489  $(6,322) $22,117 


The following tables reconcile total US GAAP Expenses and non-controlling interests to total Economic Expenses for the three and nine months ended September 30, 2022 and 2021:

  Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
(Dollar amounts in thousands)  Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total
Total US GAAP $203,878  $132,225  $(22,046) $314,057  $201,686  $126,725  $(4,938) $323,473 
Management Presentation Reclassifications:                
Underwriting expensesa    (1,899)     (1,899)     (7,208)     (7,208)
Reimbursable client expensesb    (3,482)     (3,482)     (4,095)     (4,095)
Fund start-up costs, distribution and other feesd    (855)     (855)     (3,944)     (3,944)
Certain equity method investmentse    3,070      3,070      1,991      1,991 
Carried interestf    1,920      1,920      208      208 
Proprietary trading gains and lossesg    1,607   14,134   15,741      478   4,708   5,186 
Insurance related activities expensesh    (13,116)     (13,116)     (13,172)     (13,172)
Associated partner/banker compensationj 1,274   (1,274)        1,550   (1,550)      
Management company non-Controlling interestk (348)  (478)  826      (348)  (868)  1,216    
Total Management Presentation Reclassifications:  926   (14,507)  14,960   1,379   1,202   (28,160)  5,924   (21,034)
Fund Consolidated Reclassificationsl    (70)  7,912   7,842      (124)  230   106 
Income Statement Adjustments:                
Acquisition related adjustmentsn    (7,694)     (7,694)     (1,007)     (1,007)
Contingent liability adjustmentsn    (1,681)     (1,681)     (4,244)     (4,244)
Total Income Statement Adjustments:     (9,375)     (9,375)     (5,251)     (5,251)
Total Economic Expenses $204,804  $108,273  $826  $313,903  $202,888  $93,190  $1,216  $297,294 


  Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
(Dollar amounts in thousands) Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total Employee Compensation and Benefits Non-compensation US GAAP Expenses (including Depreciation and Amortization) Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and investment funds Total
Total US GAAP $542,378  $343,262  $(16,896) $868,744  $809,068  $347,787  $13,379  $1,170,234 
Management Presentation Reclassifications:                
Underwriting expensesa    (3,047)     (3,047)     (20,275)     (20,275)
Reimbursable client expensesb    (8,198)     (8,198)     (13,511)     (13,511)
Fund start-up costs, distribution and other feesd    (678)     (678)     (8,867)     (8,867)
Certain equity method investmentse    7,272      7,272      6,268      6,268 
Carried interestf    2,771      2,771      322      322 
Proprietary trading gains and lossesg    1,492   2,919   4,411      3,749   (17,077)  (13,328)
Insurance related activities expensesh    (23,630)     (23,630)     (24,843)     (24,843)
Associated partner/banker compensationj 2,626   (2,626)        3,672   (3,672)      
Management company non-Controlling interestk (1,045)  (767)  1,812      (1,043)  (3,128)  4,171    
Total Management Presentation Reclassifications:  1,581   (27,411)  4,731   (21,099)  2,629   (63,957)  (12,906)  (74,234)
Fund Consolidated Reclassificationsl    (229)  13,977   13,748      (519)  3,698   3,179 
Income Statement Adjustments:                
Acquisition related amountsn    (7,852)     (7,852)     (1,324)     (1,324)
Contingent liability adjustmentsn    12,279      12,279      (2,677)     (2,677)
Total Income Statement Adjustments:     4,427      4,427      (4,001)     (4,001)
Total Economic Expenses $543,959  $320,049  $1,812  $865,820  $811,697  $279,310  $4,171  $1,095,178 


The following table reconciles US GAAP Net Income (loss) Attributable to Cowen Inc. Common Stockholders to Pre-tax Economic Income (Loss), Economic Income (loss) and Economic Operating Income (loss):

   Three Months Ended September 30, Nine Months Ended September 30,
(Dollar amounts in thousands)  2022   2021   2022   2021 
          
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders $12,653  $36,105  $58,436  $225,536 
 Income Statement Adjustments:        
 US GAAP Income tax expense (benefit)o 4,476   12,192   22,273   76,864 
 Amortization of discount (premium) on debtm 76   26   229   1,571 
 Debt extinguishment gain (loss) and/or accelerated debt costsp          10,095 
 Bargain purchase gainn          (3,855)
 Contingent liability adjustmentsn 1,681   4,244   (12,279)  2,677 
 Acquisition related amountsn 7,694   1,007   7,852   1,324 
 Preferred stock dividendsq 1,698   1,698   5,094   5,094 
 Pre-tax Economic Income (Loss)  28,278   55,272   81,605   319,306 
 Economic income tax expense  (7,353)  (13,855)  (21,218)  (84,616)
 Preferred stock dividends  (1,698)  (1,698)  (5,094)  (5,094)
 Economic Income (Loss)   19,227   39,719   55,293   229,596 
 Add back: Depreciation and amortization expense, net of taxes  5,176   3,553   15,670   10,085 
 Economic Operating Income (Loss) $24,403  $43,272  $70,963  $239,681 


The following table reconciles US GAAP Net Income (loss) Attributable to Cowen Inc. Common Stockholders Earnings Per Common Share (Diluted) to Pre-tax Economic Income (loss) Per Common Share (Diluted), Economic Income (loss) Per Common Share (Diluted) and Economic Operating Income (loss) Per Common Share (Diluted):

   Three Months Ended September 30, Nine Months Ended September 30,
(Dollars per share)  2022   2021   2022   2021 
          
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders $0.39  $1.10  $1.87  $6.78 
 Income Statement Adjustments:        
 US GAAP Income tax expense (benefit)o 0.14   0.37   0.71   2.31 
 Amortization of discount (premium) on debtm       0.01   0.05 
 Debt extinguishment gain (loss) and accelerated debt costsp          0.30 
 Bargain purchase gainn          (0.12)
 Contingent liability adjustmentsn 0.05   0.13   (0.39)  0.08 
 Acquisition related amountsn 0.24   0.03   0.25   0.04 
 Preferred stock dividendsq 0.05   0.05   0.16   0.15 
 Pre-tax Economic Income (Loss) per common share (diluted)  0.88   1.69   2.62   9.60 
 Economic income tax expense  (0.23)  (0.42)  (0.68)  (2.54)
 Preferred stock dividends  (0.05)  (0.05)  (0.16)  (0.15)
 Economic income (Loss) per common share (diluted)   0.60   1.21   1.77   6.90 
 Add back: Depreciation and amortization expense, net of taxes  0.16   0.11   0.50   0.31 
 Economic Operating Income (Loss) per common share (diluted) $0.76  $1.32  $2.27  $7.22 

Note: Amounts may not add due to rounding.

Adjustments made to US GAAP Net Income (Loss) to arrive at Economic Operating Income (Loss)

Management Reclassifications
 Management reclassification adjustments and fund consolidation reclassification adjustments have no effect on Economic Operating Income (Loss). These adjustments are reclassifications to change the location of certain line items.
aUnderwriting expenses: Economic Proceeds presents investment banking revenues net of underwriting expenses.
bReimbursable client expenses: Economic Proceeds presents expenses reimbursed from clients and affiliates within their respective expense category but is included as a part of revenues under US GAAP.
cSecurities financing interest expense: Brokerage within Economic Proceeds included net securities borrowed and securities loaned activities which are shown gross in interest income and interest expense for US GAAP.
dFund start-up costs, distribution and other fees: Economic Proceeds and Economic Interest Expense are net of fund start-up costs and distribution fees paid to agents and other debt service costs.
eCertain equity method investments: Economic Proceeds and Economic Expenses recognize the Company's proportionate share of management and incentive fees and associated share of expenses on a gross basis for equity method investments within the activist business, real estate operating entities and the healthcare royalty business. The Company applies the equity method of accounting to these entities and accordingly the results from these businesses are recorded within Other Income (Loss) for US GAAP.
fCarried interest: The Company applies an equity ownership model to carried interest which is recorded in Investment income - Carried interest allocation for US GAAP. The Company presents carried interest as Incentive Income Economic Proceeds.
gProprietary trading, interest and dividends: Economic Proceeds presents interest and dividends from the Company's proprietary trading in investment income.
hInsurance related activities expenses: Economic Proceeds presents underwriting income from the Company's insurance and reinsurance related activities, net of expenses, within other revenue. The costs are recorded within expenses for US GAAP reporting.
iFacilitation trading gains and losses: Economic Brokerage Proceeds presents gains and losses on investments held as part of the Company's facilitation and trading business within brokerage revenues as these investments are directly related to the markets business activities while these are presented in Investment income - Securities principal transactions, net for US GAAP reporting.
jAssociated partner/banker compensation reclassification: Economic Compensation Expense presents certain payments to associated banking partners as compensation rather than non-compensation expenses.
kManagement company non-controlling interest: Economic Expenses non-controlling interest represents only operating entities that are not wholly owned by the Company. The Company also presents non-controlling interests within total expenses for Economic Income (Loss).
Fund Consolidation Reclassifications
lThe impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in Economic Income (Loss). Adjustments to reconcile to US GAAP Net Income (Loss) included elimination of incentive income and management fees earned from the Consolidated Funds and addition of investment fund expenses excluding management fees paid, investment fund revenues and investment income (loss).
Income Statement Adjustments
mPre-tax Economic Income (Loss) excludes the amortization of discount (premium) on debt.
nPre-tax Economic Income (Loss) excludes acquisition related adjustments (including bargain purchase gain and contingent liability adjustments).
oPre-tax Economic Income (Loss) excludes US GAAP income taxes.
pPre-tax Economic Income (Loss) excludes gain/(loss) on debt extinguishment and accelerated debt costs.
qPre-tax Economic income (Loss) excludes preferred stock dividends.

About Cowen Inc.
Cowen Inc. (“Cowen” or the “Company”) is a diversified financial services firm that provides investment banking, research, sales and trading, prime brokerage, outsourced trading and commission management services. Cowen also has an investment management division which offers actively managed alternative investment products. Founded in 1918, the Company is headquartered in New York and has offices worldwide. Learn more at Cowen.com

Investor Relations Contact:
Steve Lasota, Chief Financial Officer
(646) 662-2778
stephen.lasota@cowen.com
Source: Cowen Inc.

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. As a result of the spread of COVID-19, economic uncertainties have arisen that have the potential in future periods to negatively impact the Company’s business, financial condition, results of operation, cash flows, strategies and prospects. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and impact on our clients, employees, vendors and the markets in which we operate our businesses, all of which are uncertain and cannot be reasonably estimated at this time. The Company’s actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the sections entitled “Risk Factors” 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 Securities and Exchange Commission. The Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are available at our website at www.cowen.com and at the Securities and Exchange Commission website at www.sec.gov. Unless required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this press release.