Cowen Announces Financial Results for Full Year 2022

Rhea-AI Summary

Cowen reported a 4Q22 GAAP net income of $11.2 million, translating to $0.34 per diluted share, down 83% from the previous year. The Economic Operating Income was $9.6 million ($0.29 per diluted share), marking an 89% decline year-over-year. Revenue fell to $413.9 million, 16% lower than 4Q21, largely due to a decrease in investment banking activity, which dropped by $125.2 million to $138.7 million. Full-year revenue was $1.54 billion, down 27% from $2.1 billion in 2021. Cowen is set to be acquired by TD Bank Group for $1.3 billion, with the transaction expected to close in early 2023, pending regulatory approvals.

Positive

• Completed share repurchase of $31.1 million, reducing outstanding shares.
• Quarterly cash dividend of $0.12 declared, payable March 15, 2023.

Negative

• 4Q22 revenue fell by 16% to $413.9 million, primarily due to lower investment banking activity.
• 4Q22 net income down 83% year-over-year, significantly impacting earnings per share.
• Full-year 2022 revenue of $1.54 billion represents a 27% decrease from 2021.

• Reports 4Q22 GAAP Net Income to common stockholders of $11.2 million, or $0.34 per diluted share
• Economic Operating Income of $9.6 million, or $0.29 per diluted share (Non-GAAP)

NEW YORK, Feb. 17, 2023 (GLOBE NEWSWIRE) -- Cowen Inc. (NASDAQ: COWN) (“Cowen” or “the Company”) today announced its operating results for the fourth quarter and full year ended December 31, 2022.

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 remains on track to close in the first calendar quarter of 2023 and is subject to customary closing conditions, including receipt of certain regulatory approvals.

Fourth Quarter 2022 Financial Summary

	Operating Results (GAAP)								Economic Operating Income (Non-GAAP)
	Three Months Ended December 31,								Three Months Ended December 31,
($ in millions, except per share information)		2022			2021		Δ %			2022			2021		Δ %
Revenue/Economic Proceeds (Non-GAAP)	$	413.9		$	494.3		(16)%		$	371.7		$	454.0		(18)%
Net income (loss) attributable to common stockholders for diluted earnings per share/Economic Operating Income (Non-GAAP)	$	11.2		$	63.3		(82)%		$	9.6		$	86.7		(89)%
Earnings (loss) per common share (diluted)	$	0.34		$	2.02		(83)%		$	0.29		$	2.77		(90)%
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."

Capital Optimization Update
During 2022, the Company repurchased $31.1 million of its common stock, or 1,069,002 shares, at an average price of $29.07 per share under the Company's existing share repurchase program. Outside the share repurchase program, the Company acquired approximately $36.1 million of stock as a result of net share settlements relating to the vesting of equity awards, or 1,058,933 shares, at an average price of $34.07 per share.

Quarterly Cash Dividend
On February 14, 2023, the Board of Directors declared a cash dividend of $0.12 per common share. The dividend will be payable on March 15, 2023, to stockholders of record as of the close of trading on March 1, 2023. If the merger with TD is consummated prior to the close of trading on March 1, 2023, no dividend will be paid to stockholders of Cowen who hold common shares prior to the closing of the merger with TD.

Select Balance Sheet Data

(Amounts in millions, except per share information)
	December 31, 2022				December 31, 2021
Common equity (CE)	$	1,064.2			$	1,015.9
Book value per share (CE/CSO)	$	37.69			$	36.57
Common shares outstanding (CSO)		28.2				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								Twelve Months Ended
	December 31								December 31
		2022				2021				2022				2021
Revenue
Investment banking	$	138,651			$	263,815			$	494,842			$	1,067,162
Brokerage		133,382				140,994				592,292				585,162
Investment income (loss)
Securities principal transactions, net		31,205				10,282				112,829				122,110
Portfolio fund principal transactions, net		11,365				(2,062	)			(4,442	)			338
Carried interest allocations		8,152				4,291				(31,555	)			5,059
Total investment income (loss)		50,722				12,511				76,832				127,507
Management fees		16,529				16,216				66,670				72,287
Incentive income		13				299				646				2,732
Interest and dividends		69,370				51,753				312,134				219,292
Insurance and reinsurance premiums		186				8,435				36,522				39,631
Other revenues, net		14,208				2,599				7,010				5,211
Consolidated Funds revenues		(9,134	)			(2,342	)			(49,225	)			(6,185	)
Total revenue		413,927				494,280				1,537,723				2,112,799
Interest and dividends expense		82,407				47,638				259,126				211,387
Total net revenue		331,520				446,642				1,278,597				1,901,412
Expenses
Employee compensation and benefits		229,008				237,303				771,386				1,046,371
Insurance and reinsurance claims, commissions and amortization of deferred acquisition costs		(35,890	)			9,095				(12,260	)			33,938
Operating, general, administrative and other expenses		126,243				121,540				424,470				430,250
Depreciation and amortization expense		6,549				5,289				27,725				19,004
Consolidated Funds expenses		19				111				248				630
Total expenses		325,929				373,338				1,211,569				1,530,193
Other income (loss)
Net (losses) gains on other investments		2,143				11,853				9,613				35,494
Bargain purchase gain, net of tax		—				—				—				3,855
Gain/(loss) on debt extinguishment		—				—				—				(4,538	)
Total other income (loss)		2,143				11,853				9,613				34,811
Income (loss) before income taxes		7,734				85,157				76,641				406,030
Income tax expense/(benefit)		(11,487	)			25,175				10,786				102,039
Net income (loss)		19,221				59,982				65,855				303,991
Net income (loss) attributable to non-controlling interests in consolidated subsidiaries and funds		6,293				(4,999	)			(10,603	)			8,380
Net income (loss) attributable to Cowen Inc.		12,928				64,981				76,458				295,611
Less: Preferred stock dividends		1,698				1,698				6,792				6,792
Net income (loss) attributable to Cowen Inc. common stockholders	$	11,230			$	63,283			$	69,666			$	288,819
Earnings (loss) per share:
Basic	$	0.40			$	2.28			$	2.47			$	10.42
Diluted	$	0.34			$	2.02			$	2.21			$	8.85
Weighted average shares used in per share data:
Basic		28,411				27,731				28,183				27,721
Diluted		32,744				31,355				31,544				32,628

U.S. GAAP Financial Measures

Fourth quarter 2022 revenue was $413.9 million versus $494.3 million in the fourth quarter of 2021. Full-year 2022 revenue was $1.54 billion, down from $2.1 billion for full-year 2021. The year-over-year decrease was primarily due to reduced investment banking activity.

Fourth quarter 2022 investment banking revenues decreased $125.2 million to $138.7 million. Full-year 2022 investment banking revenues decreased $572.3 million to $494.8 million. During full-year 2022, the Company completed 49 underwriting transactions and 137 strategic advisory transactions.

Fourth quarter 2022 brokerage revenues decreased $7.6 million to $133.4 million. Full-year 2022 brokerage revenues increased $7.1 million to $592 million. The year-over-year increase was attributable to an increase in institutional services activity.

Fourth quarter 2022 investment income increased $38.2 million to $50.7 million. Full-year 2022 investment income decreased $50.6 million to $76.8 million. The year-over-year decrease is primarily due to negative carried interest allocations.

Fourth quarter 2022 interest and dividends increased $17.6 million to $69.4 million. Full-year 2022 interest and dividends income increased $92.8 million to $312.1 million. The increase in interest and dividends is primarily attributable to dividends receivable.

Fourth quarter 2022 employee compensation and benefits expenses were $229.0 million, a decrease of $8.3 million from the prior-year period. Full-year 2022 employee compensation and benefits expenses decreased $275 million to $771.4 million. The year-over-year decrease was primarily due to lower revenue.

Fourth quarter 2022 total expenses were $325.9 million, a decrease of $47.4 million from the prior-year period. Full-year 2022 total expenses decreased $318.6 million to $1.21 billion. The year-over-year decrease was primarily driven by lower compensation expenses associated with lower revenues.

Fourth quarter 2022 income tax benefit was $11.5 million compared to $25.2 million income tax expense in the prior-year quarter. Full-year 2022 income tax expense decreased $91.2 million to $10.8 million. The decrease was primarily due to the year-over-year decrease in the Company's income before income taxes.

Fourth quarter 2022 net income attributable to common stockholders was $11.2 million, down from $63.3 million in the fourth quarter of 2021. Full-year 2022 net income decreased $219.1 million to $69.7 million.

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.

Fourth Quarter and Full Year 2022 Non-GAAP Financial Review

Economic Proceeds

	Three Months Ended																						Twelve Months Ended
	December 31, 2022										December 31, 2021												December 31, 2022												December 31, 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	$	132,371		$	—			$	132,371		$	255,155			$	—			$	255,155			$	478,184			$	—			$	478,184			$	1,025,688		$	—			$	1,025,688
Brokerage		167,320			—				167,320			170,347				—				170,347				719,208				—				719,208				728,525			—				728,525
Management fees		19,942			150				20,092			19,807				289				20,096				82,681				850				83,531				79,255			1,200				80,455
Incentive income		13,542			(1,511	)			12,031			13,508				(6	)			13,502				(12,678	)			(13,143	)			(25,821	)			34,579			(1,153	)			33,426
Investment income (loss)		9,925			(9,292	)			633			(8,553	)			2,650				(5,903	)			21,226				(20,837	)			389				8,542			6,014				14,556
Other economic proceeds		39,239			5				39,244			792				(1	)			791				57,299				7				57,306				7,942			(2	)			7,940
Total: Economic Proceeds		382,339			(10,648	)			371,691			451,056				2,932				453,988				1,345,920				(33,123	)			1,312,797				1,884,531			6,059				1,890,590
Economic Interest Expense / (Income)		10,563			1,274				11,837			4,879				698				5,577				5,233				283				5,516				23,914			3,779				27,693
Net Economic Proceeds	$	371,776		$	(11,922	)		$	359,854		$	446,177			$	2,234			$	448,411			$	1,340,687			$	(33,406	)		$	1,307,281			$	1,860,617		$	2,280			$	1,862,897

Economic Proceeds were $371.7 million, down 18% from the prior-year period. Full-year 2022 economic proceeds were $1,312.8 million, down 31% year-over-year.

Investment Banking Economic Proceeds were $132.4 million, down 48% from the prior-year period. Full-year 2022 banking proceeds were $478.2 million, down 53% year-over-year. The decrease was primarily due to reduced capital markets activity.

Brokerage Economic Proceeds were $167.3 million, down 2% from the prior-year period. Full-year 2022 brokerage proceeds were $719.2 million, down 1% year-over-year.

Management Fees Economic Proceeds were $20.1 million, flat from the prior-year period. Full-year 2022 management fees were $83.5 million, up 4% year-over-year.

Incentive Income Economic Proceeds were a gain of $12.0 million in the fourth quarter of 2022 versus a gain of $13.5 million in the prior-year period. Full-year 2022 incentive income proceeds were a loss of $25.8 million. The decline was primarily due to a decrease in performance fees.

Investment Income Economic Proceeds were a gain of $0.6 million in the fourth quarter of 2022 versus a loss of $5.9 million in the prior-year period. Full-year 2022 investment income proceeds were $0.4 million, a decrease of $14.2 million year-over-year.

Economic Interest Expense (Income) was an expense of $11.8 million, versus an expense of $5.6 million in the prior-year period. Full-year 2022 interest expense decreased $22.2 million year-over-year. The decrease in expense was primarily due to gains from mark-to-market adjustments on interest rate swaps.

Economic Expenses

	Three Months Ended																			Twelve Months Ended
	December 31, 2022									December 31, 2021										December 31, 2022									December 31, 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	$	230,245		$	326		$	230,571		$	246,170		$	(7,266	)		$	238,904		$	772,202		$	2,330		$	774,532		$	1,046,730		$	3,871		$	1,050,601
Non-Compensation Expenses		113,429			123			113,552			93,994			174				94,168			412,192			232			412,424			359,577			187			359,764
Depreciation & Amortization		6,544			5			6,549			5,282			7				5,289			27,702			23			27,725			18,982			22			19,004
Non-Controlling Interest		502			—			502			1,142			—				1,142			2,314			—			2,314			5,314			—			5,314
Total: Economic Expenses	$	350,720		$	454		$	351,174		$	346,588		$	(7,085	)		$	339,503		$	1,214,410		$	2,585		$	1,216,995		$	1,430,603		$	4,080		$	1,434,683

Economic Compensation Expenses were $230.6 million, down 3% from prior year period. Full-year 2022 economic compensation expenses were $774.5 million, down 26% year-over-year. Full-year 2022 economic compensation-to-proceeds ratio was 59%.

Economic Fixed Non-Compensation Expenses in the fourth quarter of 2022 were up $1.1 million from the prior-year period at $45.0 million. Full-year 2022 economic fixed non-compensation expenses were $172.0 million, up 7% year-over-year due in part to an increase in headcount as well as investments in infrastructure. The fixed non-compensation-to-economic-proceeds ratio rose from 8.5% in FY'21 to 13.1% in FY'22.

Economic Variable Non-Compensation Expenses were $68.6 million in the fourth quarter of 2022, up from $50.3 million in the fourth quarter of 2021. Full-year 2022 economic variable non-compensation expenses were $240.5 million, an increase of 20% year-over-year due in part to increased client event and entertainment costs and a change in business mix. The variable non-compensation-to-proceeds ratio rose from 10.6% in FY'21 to 18.3% in FY'22.

Economic Depreciation and Amortization Expenses were $6.5 million in the fourth quarter of 2022 compared to $5.3 million in the fourth quarter of 2021. Full-year 2022 economic depreciation and amortization expenses were $27.7 million, an increase of 46% due primarily to expenses associated with the Portico acquisition in late 2021.

Economic Income and Economic Operating Income

	Three Months Ended																			Twelve Months Ended
	December 31, 2022										December 31, 2021									December 31, 2022										December 31, 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)	$	21,056		$	(12,376	)		$	8,680		$	99,589		$	9,319		$	108,908		$	126,277		$	(35,991	)		$	90,286		$	430,014		$	(1,800	)		$	428,214
Economic income tax expense		5,474			(3,218	)			2,256			22,090			2,489			24,579			32,832			(9,358	)			23,474			109,654			(460	)			109,194
Preferred stock dividends		1,511			187				1,698			1,477			221			1,698			5,943			849				6,792			5,841			951				6,792
Economic Income (Loss)	$	14,071		$	(9,345	)		$	4,726		$	76,022		$	6,609		$	82,631			87,502			(27,482	)			60,020			314,519			(2,291	)			312,228
Add back: Depreciation and amortization expense, net of taxes		4,843			3				4,846			4,072			5			4,077			20,500			17				20,517			14,142			16				14,158
Economic Operating Income (Loss)	$	18,914		$	(9,342	)		$	9,572		$	80,094		$	6,614		$	86,708		$	108,002		$	(27,465	)		$	80,537		$	328,661		$	(2,275	)		$	326,386
Economic Income per diluted share	$	0.43		$	(0.29	)		$	0.14		$	2.42		$	0.21		$	2.64		$	2.77		$	(0.87	)		$	1.90		$	9.64		$	(0.07	)		$	9.57
Economic Operating Income per diluted share	$	0.58		$	(0.29	)		$	0.29		$	2.55		$	0.21		$	2.77		$	3.42		$	(0.87	)		$	2.55		$	10.07		$	(0.07	)		$	10.00

The following tables reconciles total US GAAP Revenues and Other Income (Loss) to total Economic Proceeds for the three and twelve months ended December 31, 2022 and 2021:

For the three months ended December 31, 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)		$	138,651			$	133,382			$	50,722			$	16,529			$	13		$	69,370			$	186			$	14,208			$	(9,134	)		$	2,143			$	416,070
Management Presentation Reclassifications:
Underwriting expenses	a		(1,867	)			—				—				—				—			—				—				—				—				—				(1,867	)
Reimbursable client expenses	b		(4,413	)			—				—				—				—			—				—				(234	)			—				—				(4,647	)
Securities financing interest expense	c		—				(6,783	)			—				—				—			(19,690	)			—				—				—				—				(26,473	)
Fund start-up costs, distribution and other fees	d		—				—				—				(395	)			—			—				—				(549	)			—				—				(944	)
Certain equity method investments	e		—				—				—				3,928				3,866			—				—				—				—				(5,763	)			2,031
Carried interest	f		—				—				(8,152	)			—				8,152			—				—				—				—				—				—
Proprietary trading, interest and dividends	g		—				4,981				(29,216	)			—				—			(44,480	)			—				(10,258	)			—				29,204				(49,769	)
Insurance related activities expenses	h		—				—				—				—				—			—				(186	)			36,077				—				—				35,891
Facilitation trading gains and losses	i		—				35,740				(6,705	)			—				—			(5,200	)			—				—				—				(25,584	)			(1,749	)
Total Management Presentation Reclassifications:			(6,280	)			33,938				(44,073	)			3,533				12,018			(69,370	)			(186	)			25,036				—				(2,143	)			(47,527	)
Fund Consolidated Reclassifications	l		—				—				(6,016	)			30				—			—				—				—				9,134				—				3,148
Total Economic Proceeds		$	132,371			$	167,320			$	633			$	20,092			$	12,031		$	—			$	—			$	39,244			$	—			$	—			$	371,691

For the three months ended December 31, 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)		$	263,815			$	140,994			$	12,511			$	16,216			$	299			$	51,753			$	8,435			$	2,599			$	(2,342	)		$	11,853			$	506,133
Management Presentation Reclassifications:
Underwriting expenses	a		(4,703	)			—				—				—				—				—				—				—				—				—				(4,703	)
Reimbursable client expenses	b		(3,957	)			—				—				—				—				—				—				(234	)			—				—				(4,191	)
Securities financing interest expense	c		—				(1,126	)			—				—				—				(32,855	)			—				—				—				—				(33,981	)
Fund start-up costs, distribution and other fees	d		—				—				—				(341	)			—				—				—				(719	)			—				—				(1,060	)
Certain equity method investments	e		—				—				—				4,168				9,212				—				—				—				—				(10,962	)			2,418
Carried interest	f		—				—				(4,291	)			—				4,396				—				—				—				—				—				105
Proprietary trading, interest and dividends	g		—				9,371				(13,028	)			—				(285	)			(7,217	)			—				(195	)			—				12,767				1,413
Insurance related activities expenses	h		—				—				—				—				—				—				(8,435	)			(660	)			—				—				(9,095	)
Facilitation trading gains and losses	i		—				21,108				20				—				—				(11,681	)			—				—				—				(13,658	)			(4,211	)
Total Management Presentation Reclassifications:			(8,660	)			29,353				(17,299	)			3,827				13,323				(51,753	)			(8,435	)			(1,808	)			—				(11,853	)			(53,305	)
Fund Consolidated Reclassifications	l		—				—				(1,115	)			53				(120	)			—				—				—				2,342				—				1,160
Total Economic Proceeds		$	255,155			$	170,347			$	(5,903	)		$	20,096			$	13,502			$	—			$	—			$	791			$	—			$	—			$	453,988

For the twelve months ended December 31, 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)		$	494,842			$	592,292			$	76,832			$	66,670			$	646			$	312,134			$	36,522			$	7,010			$	(49,225	)		$	9,613			$	1,547,336
Management Presentation Reclassifications:
Underwriting expenses	a		(4,914	)			—				—				—				—				—				—				—				—				—				(4,914	)
Reimbursable client expenses	b		(11,744	)			—				—				—				—				—				—				(1,101	)			—				—				(12,845	)
Securities financing interest expense	c		—				(10,363	)			—				—				—				(103,924	)			—				—				—				—				(114,287	)
Fund start-up costs, distribution and other fees	d		—				—				—				(1,513	)			—				—				—				(2,445	)			—				—				(3,958	)
Certain equity method investments	e		—				—				—				18,208				7,135				—				—				—				—				(16,040	)			9,303
Carried interest	f		—				—				31,555				—				(28,781	)			—				—				—				—				—				2,774
Proprietary trading gains and losses	g		—				(55,407	)			(67,956	)			—				(4,821	)			(98,139	)			—				5,060				—				92,981				(128,282	)
Insurance related activities expenses	h		—				—				—				—				—				—				(36,522	)			48,782				—				—				12,260
Facilitation trading gains and losses	i		—				192,686				(7,547	)			—				—				(110,071	)			—				—				—				(86,554	)			(11,486	)
Total Management Presentation Reclassifications:			(16,658	)			126,916				(43,948	)			16,695				(26,467	)			(312,134	)			(36,522	)			50,296				—				(9,613	)			(251,435	)
Fund Consolidated Reclassifications	l		—				—				(32,495	)			166				—				—				—				—				49,225				—				16,896
Total Economic Proceeds		$	478,184			$	719,208			$	389			$	83,531			$	(25,821	)		$	—			$	—			$	57,306			$	—			$	—			$	1,312,797

For the twelve months ended December 31, 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)		$	1,067,162			$	585,162			$	127,507			$	72,287			$	2,732			$	219,292			$	39,631			$	5,211			$	(6,185	)		$	34,811			$	2,147,610
Management Presentation Reclassifications:
Underwriting expenses	a		(24,978	)			—				—				—				—				—				—				—				—				—				(24,978	)
Reimbursable client expenses	b		(16,496	)			—				—				—				—				—				—				(1,206	)			—				—				(17,702	)
Securities financing interest expense	c		—				8,006				—				—				—				(153,928	)			—				—				—				—				(145,922	)
Fund start-up costs, distribution and other fees	d		—				(361	)			—				(9,190	)			—				—				—				(2,633	)			—				—				(12,184	)
Certain equity method investments	e		—				—				—				15,142				25,802				—				—				—				—				(32,261	)			8,683
Carried interest	f		—				—				(5,059	)			—				5,486				—				—				—				—				—				427
Proprietary trading gains and losses	g		—				44,241				(92,900	)			—				(494	)			(19,233	)			—				875				—				46,918				(20,593	)
Insurance related activities expenses	h		—				—				—				—				—				—				(39,631	)			5,693				—				—				(33,938	)
Facilitation trading gains and losses	i		—				91,477				(11,034	)			—				—				(46,131	)			—				—				—				(50,151	)			(15,839	)
Total Management Presentation Reclassifications:			(41,474	)			143,363				(108,993	)			5,952				30,794				(219,292	)			(39,631	)			2,729				—				(35,494	)			(262,046	)
Fund Consolidated Reclassifications	l		—				—				(3,958	)			2,216				(100	)			—				—				—				6,185				—				4,343
Income Statement Adjustments
Bargain purchase gain	n		—				—				—				—				—				—				—				—				—				(3,855	)			(3,855	)
Debt extinguishment	p		—				—				—				—				—				—				—				—				—				4,538				4,538
Total Income Statement Adjustments:			—				—				—				—				—				—				—				—				—				683				683
Total Economic Proceeds		$	1,025,688			$	728,525			$	14,556			$	80,455			$	33,426			$	—			$	—			$	7,940			$	—			$	—			$	1,890,590

The following table reconciles total US GAAP interest and dividends expense to total Economic Interest Expense for the three and twelve months ended December 31, 2022 and 2021:

		Three Months Ended December 31,								Twelve Months Ended December 31,
(Dollar amounts in thousands)			2022				2021				2022				2021
Total US GAAP Interest & Dividend Expense		$	82,407			$	47,638			$	259,126			$	211,387
Management Presentation Reclassifications:
Securities financing interest expense	c		(26,473	)			(33,981	)			(114,287	)			(145,922	)
Fund start-up costs, distribution and other fees	d		(867	)			—				(3,204	)			(2,257	)
Proprietary trading gains and losses	g		(41,402	)			(3,837	)			(124,324	)			(12,515	)
Facilitation trading gains and losses	i		(1,749	)			(4,211	)			(11,486	)			(15,839	)
Total Management Presentation Reclassifications:			(70,491	)			(42,029	)			(253,301	)			(176,533	)
Income Statement Adjustments:
Accelerated debt costs	p		—				—				—				(5,557	)
Amortization of discount/(premium) on debt	m		(79	)			(32	)			(309	)			(1,604	)
Total Income Statement Adjustments:			(79	)			(32	)			(309	)			(7,161	)
Total Economic Interest Expense / (Income)		$	11,837			$	5,577			$	5,516			$	27,693

The following tables reconcile total US GAAP Expenses and non-controlling interests to total Economic Expenses for the three and twelve months ended December 31, 2022 and 2021:

		Three Months Ended December 31, 2022																Three Months Ended December 31, 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		$	229,008			$	96,921			$	6,293			$	332,222			$	237,303			$	136,035			$	(4,999	)		$	368,339
Management Presentation Reclassifications:
Underwriting expenses	a		—				(1,867	)			—				(1,867	)			—				(4,703	)			—				(4,703	)
Reimbursable client expenses	b		—				(4,647	)			—				(4,647	)			—				(4,191	)			—				(4,191	)
Fund start-up costs, distribution and other fees	d		—				(77	)			—				(77	)			—				(1,060	)			—				(1,060	)
Certain equity method investments	e		—				2,031				—				2,031				—				2,418				—				2,418
Carried interest	f		—				—				—				—				—				105				—				105
Proprietary trading gains and losses	g		—				1,093				(9,460	)			(8,367	)			—				1,522				3,728				5,250
Insurance related activities expenses	h		—				35,891				—				35,891				—				(9,095	)			—				(9,095	)
Associated partner/banker compensation	j		1,884				(1,884	)			—				—				1,949				(1,949	)			—				—
Management company non-controlling interest	k		(321	)			(181	)			502				—				(348	)			(794	)			1,142				—
Total Management Presentation Reclassifications:			1,563				30,359				(8,958	)			22,964				1,601				(17,747	)			4,870				(11,276	)
Fund Consolidated Reclassifications	l		—				(19	)			3,167				3,148				—				(111	)			1,271				1,160
Income Statement Adjustments:
Acquisition related adjustments	n		—				(8,442	)			—				(8,442	)			—				(5,271	)			—				(5,271	)
Contingent liability adjustments	n		—				1,282				—				1,282				—				(12,440	)			—				(12,440	)
Goodwill and/or other impairment	r		—				—				—				—				—				(1,009	)			—				(1,009	)
Total Income Statement Adjustments:			—				(7,160	)			—				(7,160	)			—				(18,720	)			—				(18,720	)
Total Economic Expenses		$	230,571			$	120,101			$	502			$	351,174			$	238,904			$	99,457			$	1,142			$	339,503

		Twelve months Ended December 31, 2022																Twelve months Ended December 31, 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		$	771,386			$	440,183			$	(10,603	)		$	1,200,966			$	1,046,371			$	483,822			$	8,380			$	1,538,573
Management Presentation Reclassifications:
Underwriting expenses	a		—				(4,914	)			—				(4,914	)			—				(24,978	)			—				(24,978	)
Reimbursable client expenses	b		—				(12,845	)			—				(12,845	)			—				(17,702	)			—				(17,702	)
Fund start-up costs, distribution and other fees	d		—				(754	)			—				(754	)			—				(9,927	)			—				(9,927	)
Certain equity method investments	e		—				9,303				—				9,303				—				8,683				—				8,683
Carried interest	f		—				2,774				—				2,774				—				427				—				427
Proprietary trading gains and losses	g		—				2,583				(6,541	)			(3,958	)			—				5,275				(13,353	)			(8,078	)
Insurance related activities expenses	h		—				12,260				—				12,260				—				(33,938	)			—				(33,938	)
Associated partner/banker compensation	j		4,509				(4,509	)			—				—				5,621				(5,621	)			—				—
Management company non-controlling interest	k		(1,363	)			(951	)			2,314				—				(1,391	)			(3,923	)			5,314				—
Total Management Presentation Reclassifications:			3,146				2,947				(4,227	)			1,866				4,230				(81,704	)			(8,039	)			(85,513	)
Fund Consolidated Reclassifications	l		—				(248	)			17,144				16,896				—				(630	)			4,973				4,343
Income Statement Adjustments:
Acquisition related amounts	n		—				(16,293	)			—				(16,293	)			—				(6,593	)			—				(6,593	)
Contingent liability adjustments	n		—				13,560				—				13,560				—				(15,118	)			—				(15,118	)
Goodwill and/or other impairment	r		—				—				—				—				—				(1,009	)			—				(1,009	)
Total Income Statement Adjustments:			—				(2,733	)			—				(2,733	)			—				(22,720	)			—				(22,720	)
Total Economic Expenses		$	774,532			$	440,149			$	2,314			$	1,216,995			$	1,050,601			$	378,768			$	5,314			$	1,434,683

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 December 31,								Twelve Months Ended December 31,
(Dollar amounts in thousands)			2022				2021				2022				2021
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders		$	11,230			$	63,283			$	69,666			$	288,819
Income Statement Adjustments:
US GAAP Income tax expense (benefit)	o		(11,487	)			25,175				10,786				102,039
Amortization of discount (premium) on  debt	m		79				32				309				1,604
Goodwill and/or other impairment	r		—				1,009				—				1,009
Debt extinguishment gain (loss) and/or accelerated debt costs	p		—				—				—				10,095
Bargain purchase gain	n		—				—				—				(3,855	)
Contingent liability adjustments	n		(1,282	)			12,440				(13,560	)			15,118
Acquisition related amounts	n		8,442				5,271				16,293				6,593
Preferred stock dividends	q		1,698				1,698				6,792				6,792
Pre-tax Economic Income (Loss)			8,680				108,908				90,286				428,214
Economic income tax expense			(2,256	)			(24,579	)			(23,474	)			(109,194	)
Preferred stock dividends			(1,698	)			(1,698	)			(6,792	)			(6,792	)
Economic Income (Loss)			4,726				82,631				60,020				312,228
Add back: Depreciation and amortization expense, net of taxes			4,846				4,077				20,517				14,158
Economic Operating Income (Loss)		$	9,572			$	86,708			$	80,537			$	326,386

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 December 31,								Twelve Months Ended December 31,
(Dollars per share)			2022				2021				2022				2021
US GAAP Net income (loss) attributable to Cowen Inc. common stockholders		$	0.34			$	2.02			$	2.21			$	8.85
Income Statement Adjustments:
US GAAP Income tax expense (benefit)	o		(0.35	)			0.80				0.34				3.13
Amortization of discount (premium) on  debt	m		—				—				0.01				0.05
Goodwill and/or other impairment	r		—				0.03				—				0.03
Debt extinguishment gain (loss) and accelerated debt costs	p		—				—				—				0.31
Bargain purchase gain	n		—				—				—				(0.12	)
Contingent liability adjustments	n		(0.04	)			0.40				(0.43	)			0.46
Acquisition related amounts	n		0.26				0.17				0.52				0.20
Preferred stock dividends	q		0.05				0.05				0.22				0.21
Pre-tax Economic Income (Loss) per common share (diluted)			0.27				3.47				2.86				13.12
Economic income tax expense			(0.07	)			(0.78	)			(0.74	)			(3.35	)
Preferred stock dividends			(0.05	)			(0.05	)			(0.22	)			(0.21	)
Economic income (Loss) per common share (diluted)			0.14				2.64				1.90				9.57
Add back: Depreciation and amortization expense, net of taxes			0.15				0.13				0.65				0.44
Economic Operating Income (Loss) per common share (diluted)		$	0.29			$	2.77			$	2.55			$	10.01

        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.
a	Underwriting expenses:  Economic Proceeds presents investment banking revenues net of underwriting expenses.
b	Reimbursable 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.
c	Securities 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.
d	Fund 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.
e	Certain 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.
f	Carried 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.
g	Proprietary trading, interest and dividends: Economic Proceeds presents interest and dividends from the Company's proprietary trading in investment income.
h	Insurance 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.
i	Facilitation 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.
j	Associated partner/banker compensation reclassification: Economic Compensation Expense presents certain payments to associated banking partners as compensation rather than non-compensation expenses.
k	Management 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
l	The 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
m	Pre-tax Economic Income (Loss) excludes the amortization of discount (premium) on debt.
n	Pre-tax Economic Income (Loss) excludes acquisition related adjustments (including bargain purchase gain and contingent liability adjustments).
o	Pre-tax Economic Income (Loss) excludes US GAAP income taxes.
p	Pre-tax Economic Income (Loss) excludes gain/(loss) on debt extinguishment and accelerated debt costs.
q	Pre-tax Economic income (Loss) excludes preferred stock dividends.
r	Economic Income (Loss) excludes goodwill and other impairments.

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.

FAQ

What were Cowen's 4Q22 earnings results?

Cowen reported a 4Q22 GAAP net income of $11.2 million, or $0.34 per diluted share, which is a decrease of 83% year-over-year.

How did Cowen's revenue change in 4Q22?

Cowen's revenue in 4Q22 was $413.9 million, a decrease of 16% compared to 4Q21, primarily due to a decline in investment banking activity.

What was Cowen's full-year revenue for 2022?

Cowen's total revenue for 2022 was $1.54 billion, down 27% from $2.1 billion in 2021.

What is the acquisition deal between Cowen and TD Bank Group?

TD Bank Group announced an agreement to acquire Cowen for approximately $1.3 billion, or $39 per Class A common share, expected to close in early 2023.

Is Cowen paying a dividend in 2023?

Yes, Cowen declared a cash dividend of $0.12 per common share, payable on March 15, 2023, to stockholders of record as of March 1, 2023.