Cohen & Company Q1 2026 Earnings Call - Q1 Earnings Dip Driven by One-Time ProCap SPAC Costs as Core Revenue Holds Steady
Summary
Cohen & Company reported a sharp sequential decline in profitability for Q1 2026, with net income falling to $1.5 million from $8.1 million in Q4 2025. The drop was almost entirely mechanical, stemming from the absence of a $33 million one-time gain from the ProCap Financial SPAC combination that inflated the prior quarter. On a like-for-like basis, the underlying business held its ground. Investment banking and new issue revenue came in at $45.7 million, while net trading revenue ticked up to $13.2 million, buoyed by activity in mortgage, SPAC equity, and preferred equity desks. The firm’s gestation repo book continued to scale, reaching $3.9 billion.
Management is pivoting the narrative toward sustainable growth in frontier sectors. The completion of the $230 million Columbus Circle Capital Corp. II SPAC IPO signals a renewed pipeline for deal flow, particularly in digital assets, energy transition, and natural resources. However, the cost structure remains a point of friction. Compensation and benefits consumed 71% of revenue, a heavy toll that underscores the high-variable cost model of the investment banking franchise. With no analyst questions received during the call, the market is left to piece together whether the sequential earnings miss was a temporary accounting anomaly or a signal of a broader demand slowdown in boutique advisory markets.
Key Takeaways
- Net income attributable to shareholders fell to $1.5 million ($0.42 per diluted share), down sharply from $8.1 million ($1.48 per share) in Q4 2025, though up from $300,000 ($0.19 per share) in Q1 2025.
- Adjusted pre-tax income dropped to $4 million from $18.3 million in the prior quarter, a decline primarily attributable to the absence of a $33 million one-time gain from the ProCap Financial SPAC combination that closed in Q4.
- Investment banking and new issue revenue totaled $45.7 million, down from $54.7 million in Q4 but nearly double the $20.2 million recorded in Q1 2025, driven by SPAC M&A and IPO transactions.
- Net trading revenue came in at $13.2 million, a slight sequential decline of $600,000 but a $4 million year-over-year increase, supported by higher activity in mortgage, SPAC equity, CMO, and preferred equity trading groups.
- The gestation repo business continued to expand, with the book size reaching $3.9 billion at the end of the quarter, providing a stable, scaling revenue stream.
- Principal transactions and other revenue swung to negative $3.4 million, compared to positive $31.5 million in Q4, highlighting the volatility and dependency on discrete deal closures in this segment.
- Compensation and benefits expense remained elevated at $41.3 million, representing 71% of revenue, though down $16.5 million from the prior quarter due to the wind-down of ProCap-related founder share expenses.
- The firm completed the $230 million IPO of its sponsored SPAC, Columbus Circle Capital Corp. II, in February 2026, with CCM purchasing 360,000 placement units using its $3.6 million underwriting fee.
- Total enterprise equity decreased by $4.9 million to $97.8 million at quarter-end, while consolidated corporate indebtedness stood at $28.6 million after the firm repaid $4.5 million of senior promissory notes during the quarter.
- The board declared a quarterly dividend of $0.25 per share, payable on June 2, signaling management's commitment to capital return despite the sequential earnings decline and ongoing evaluation of the dividend policy.
Full Transcript
Operator: Morning, ladies and gentlemen, and welcome to Cohen & Company’s first quarter 2026 earnings call. My name is Carrie, and I’ll be your operator for today. Before we begin, Cohen & Company would like to remind everyone that some of the statements the company makes during the call may contain forward-looking statements under applicable securities laws. These statements may involve risks and uncertainties that could cause the company’s actual results to differ materially from the results discussed in such forward-looking statements. The forward-looking statements made during this call are made only as of the date of this call, and the company undertakes no obligation to update such statements to reflect subsequent events or circumstances. Cohen & Company advises you to read the cautionary note regarding forward-looking statements in its earnings release and in its most recent annual report on Form 10-K filed with the SEC.
Earlier today, Cohen & Company issued a press release announcing first quarter 2026 financial results. Today’s discussion is complementary to that press release, which is available on the company’s website at cohenandcompany.com. This conference call is being recorded, and a replay of it will be available for 3 days, beginning shortly after the conclusion of this call. The company’s remarks also include certain non-GAAP financial measures that management believes are meaningful when evaluating the company’s performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measures is provided in the company’s earnings release. After the prepared remarks, the call will be opened up for questions. I would now like to turn the call over to Mr. Lester Brafman, Chief Executive Officer of Cohen & Company. Please go ahead, sir.
Lester Brafman, Chief Executive Officer (CEO), Cohen & Company: Thank you, Carrie, and thank you everyone for joining us for our first quarter 2026 earnings call. With me on the call is Joe Pooler, our CFO. We are pleased to deliver another strong quarter driven by the ongoing expansion of our client franchise, in particular, our full-service boutique investment bank, Cohen & Company Capital Markets, continue to generate positive results with a focus on frontier technologies, including digital assets, energy transition, and natural resources. During the quarter, our gestation repo business continued to grow, reaching a book size of $3.9 billion, and our sponsor SPAC, Columbus Circle Capital Corp. II, completed its $230 million IPO. We are encouraged by the momentum we have built as we look for opportunities to further grow our top-line revenue and profitability.
We remain confident in our future earnings potential and committed to enhancing long-term sustained value for our stockholders to the return of capital, including our quarterly dividend. Now, I will turn the call over to Joe to walk through this quarter’s financial highlights in more detail.
Joe Pooler, Chief Financial Officer (CFO), Cohen & Company: Thank you, Lester. Beginning with the discussion of our operating results for the quarter, our net income attributable to Cohen & Company Inc. shareholders was $1.5 million for the quarter, or $0.42 per fully diluted share, compared to net income of $8.1 million for the prior quarter, or $1.48 per fully diluted share, and net income of $300,000 for the prior year quarter, or $0.19 per fully diluted share. Our fully diluted earnings per share calculation reflects all convertible membership units in our primary operating subsidiary, Cohen & Company, LLC, as if they are converted to shares, and also reflects an income tax expense adjustment at an estimated effective tax rate as if our ownership structure was a full C corp for the entire period presented.
Our adjusted pre-tax income was $4 million for the quarter, compared to adjusted pre-tax income of $18.3 million for the prior quarter and adjusted pre-tax income of $1.3 million for the prior year quarter. As a reminder, adjusted pre-tax income and loss is a key earnings measurement for us as it incorporates enterprise earnings attributable to our convertible non-controlling interest, which is substantially held by our founder and chairman, Daniel Cohen. Daniel holds his interest in the enterprise through the primary operating subsidiary, Cohen & Company, LLC, which is a consolidated subsidiary of Cohen & Company Inc. Investment banking and new issue revenue was $45.7 million in the first quarter, compared to $54.7 million in the prior quarter and $20.2 million in the year-ago quarter.
In the quarter, all our investment banking and new issue revenue came from our CCM business and was primarily driven by SPAC M&A and SPAC IPO transactions. Net trading revenue came in at $13.2 million in the first quarter, down $600,000 from the prior quarter and up $4 million from the first quarter of 2025. The increase from the prior year quarter was due primarily to higher trading revenue from our mortgage, SPAC equity, CMO, and preferred equity trading groups. Our gestation repo book of business was $3.9 billion at the end of the quarter. Asset management revenue totaled $2.4 million in the quarter. First quarter principal transactions and other revenue was negative $3.4 million, compared to positive $31.5 million in the prior quarter and negative $2.7 million in the prior year quarter.
In the prior quarter, recall the closing of the ProCap Financial, Inc. business combination generated $33 million of principal transactions revenue, including the markup of consolidated founder and placement shares held by the sponsor of the Columbus Circle One SPAC, as well as $16.5 million of compensation and benefits expense related to founder shares allocable to employees and $8.5 million of non-convertible non-controlling interest expense related to founder shares allocable to third-party investors in the consolidated sponsor. Compensation and benefits expense for the quarter was $41.3 million, or 71% of revenue, which was down $ sixteen and a half million from the prior quarter and up $19.6 million from the prior year quarter.
The change from the prior quarter was again, primarily the result of the $sixteen and a half million of compensation and benefits expense related to the founder shares allocable to employees upon the closing of the ProCap Financial and Columbus Circle 1 SPAC business combination in the prior quarter. The change from the prior year quarter was primarily the result of normal fluctuations in revenue and the related variable incentive compensation expense. The number of company employees was 128 at the end of the first quarter, compared to 126 at the end of the year and 117 at the end of the prior year quarter. Net interest expense for the quarter was $1.3 million, including $1.2 million on our trust preferred debt securities. During the quarter, we repaid $4.5 million of our senior promissory notes.
Loss from equity method affiliates totaled $500,000 in the quarter, compared to a loss from equity method affiliates of $5.1 million in the prior quarter and income from equity method affiliates of $2.4 million in the prior year quarter. As Lester mentioned, our sponsored SPAC, Columbus Circle Capital Corp. II, completed its $230 million IPO on February 12, 2026. The number of the SPAC’s founder shares currently allocated to the company is 2.4 million, but such number of shares will not be finally and definitively determined until the consummation of a business combination. Additionally, CCM used its underwriting fee of $3.6 million from this SPAC IPO to purchase 360,000 placement units in the related private placement.
In terms of our balance sheet, at the end of the quarter, total equity was $100.1 million, compared to $103.1 million at the end of the year. The non-convertible, non-controlling interest component of total equity was $2.4 million at the end of the quarter and $400,000 at the end of the year. Thus, the total enterprise equity, excluding this non-convertible, non-controlling interest component, was $97.8 million at the end of the quarter, a $4.9 million decrease from $102.6 at the end of the year. At quarter end, consolidated corporate indebtedness was carried at $28.6 million. We declared a quarterly dividend of $0.25 per share payable on June second to stockholders of record as of May eighteenth.
The board of directors will continue to evaluate the dividend policy each quarter, and future decisions regarding dividends may be impacted by quarterly operating results and the company’s capital needs. With that, I’ll turn it back over to Lester.
Lester Brafman, Chief Executive Officer (CEO), Cohen & Company: Thanks, Joe. Operator, we’ll open up to any questions.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that is star one if you would like to ask a question. We’ll pause for just a moment. It appears there are no questions. I would like to turn the floor back over to Lester Brafman for closing comments.
Lester Brafman, Chief Executive Officer (CEO), Cohen & Company: Thank you, and thank you, everyone. We remain confident in our ability to execute on our strategic priorities, continuing driving progress as we enhance long-term value for stockholders. Please direct any offline investor questions to Joe Pooler, 215-701-8952, or via email to [email protected]. The contact information can also be found at the bottom of our earnings release. Thanks, everyone, for joining, and we look forward to speaking to you next quarter. Thank you.
Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines, and have a wonderful day.
