Cowen Inc.

Good morning, and thank you for joining us to discuss Cowen's results for the third quarter of 2021. By now, you should have received a copy of the earnings release, which can be accessed at investor.cowen.com. After the speaker's presentation, there will be a question and answer session. As a reminder, today's call is being recorded. I would now like to hand the call over to Mr. J.T. Farley, Cowen's Head of Investor Relations.

Thank you, Carmen. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties described in our earnings release and other filings with the SEC. Cowen has no obligation to update the information presented on today's call. Also on today's call, we will be referencing certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of those measures to GAAP is consistent with the company's reconciliation as presented in today's earnings release. As a reminder, we make available a quarterly financial supplement in the investor relations section of our website. We encourage you to review it in conjunction with our earnings release. Joining us on today's call are Cowen's Chair and Chief Executive Officer, Mr. Jeffrey Solomon, and our Chief Financial Officer, Mr. Stephen Lasoda. Now, I would like to turn the call over to Jeff. Thank you, JT.

Good morning, everyone, and thank you for joining us for Cowen's third quarter 2021 earnings call. Today, I'm happy to provide highlights on our strong operating performance this quarter. I will also place this performance into the broader context of how the long-term strategy we laid out just three years ago has delivered these strong results. In that spirit, I will share some details about the durability of the business we've built, as well as the steps we've taken and continue to take to generate strong profitability consistently in a variety of market conditions. Then Steve will review the financial results of the quarter, and after that, we will be happy to answer your questions. Over the past four quarters, we have generated more than $1.9 billion in revenues, including over $1 billion in investment banking revenues. And we have generated over $10 per share in after-tax economic operating income. That is a 36% return on common equity. This quarter, we posted $359 million in total revenues and $43 million in after-tax economic operating income for a return on common equity of 17.5%. This is the 14th out of the last 15 quarters of meaningful profitability, with the exception being the first quarter of 2020. While Cowen stock has risen considerably over the past year, we believe that our valuation remains attractive. That is part of the reason we have been more aggressive in returning capital to shareholders by repurchasing shares at a record pace. But that's not the only reason. We've also long said, that we would be more aggressive with capital return as we demonstrated lasting improvement in our financial and operating performance. We've remained true to our word, and we believe in our ability to continue returning capital to shareholders commensurate with our continued performance. Now let me turn to our operating highlights. The third quarter of 2021 was the second best quarter on record for investment banking revenues, surpassed only by the first quarter of this year. Banking revenues were up 43% year over year, And importantly, M&A revenues set a new record above $100 million for the quarter, more than three times the level in the third quarter of 2020. It was a record quarter for both our M&A and capital markets advisory practices. It was the second quarter in a row that advisory, which combines M&A and capital markets advisory revenues, comprised the majority of banking revenues at 67%. Our results in these areas are a function of the – of the intentional approach we've taken to diversifying our business by product and sector over the past few years. We were able to achieve this despite headwinds in the equity capital markets this quarter, particularly in biotech. The industry breadth of our banking franchise was clearly evident this quarter. Sectors outside of healthcare comprise 54% of total banking revenues, strong results from industrials, technology, and the consumer sectors. Within healthcare, we continue to grow our footprint. Non-biotech areas, which include tools and diagnostics, medtech, healthcare services, and healthcare IT, accounted for the majority of our banking healthcare revenues in the quarter at 56%. The growth in the number of publicly listed disruptive healthcare companies, coupled with a pace of private healthcare company formation, will continue to be a tailwind for Cowen for the foreseeable future. Today, there are about 660 publicly traded companies in biotech, tools, and diagnostic sectors in the United States. That's more than 10% of all publicly traded operating companies listed on the New York Stock Exchange and NASDAQ and is up from only 200 companies a decade ago. Cowen has a leading market share of clients in this space. There will always be fluctuations in capital markets activity in this sector. However, given our market position, we remain confident that we will be able to capture a significant proportion of the IPOs, follow-ons, and increasingly debt offerings when companies decide the time is right to tap the markets or when their financing needs compel them to do so. We also saw a rebound in SPAC deals during the quarter, particularly in advisory assignments. SPAC-related revenues accounted for 44% of banking revenues in the third quarter and about one-third of banking revenues in the first nine months of 2021. As a reminder, Most of our SPAC revenues are on the back end. In other words, pipe financings, capital markets advisory, and M&A advisory during the D-SPAC process. We are not heavily dependent on the continued growth in the listings of SPACs in order for them to be a meaningful contributor to our future revenues. With approximately 500 SPACs looking to complete transactions over the next few years, we believe that a large percentage of them will ultimately find transactions. and the calendar will benefit even with a small percentage of the market share. That is why we are selective in partnering with SPAC management teams, choosing the ones we believe have clear vision and strong chances of success as public companies. This selectivity is evident in outcomes. Looking at SPACs which have gone public since the start of 2020, nearly two-thirds of IPOs which were book-run by Callen, already have deals pending or closed, which is almost double the average for all SPACs in that period. It is also worth noting that SPAC mandates make up under 30% of our current deal backlog. Demand for advisory and capital markets issuance remains strong into 2022, away from the SPAC market. While our pipeline ended the quarter slightly below the second quarter of 2021's record levels, it is still up 15% from the start of this year, and up 20% since the third quarter of 2020. We remain quite confident that our current backlog will result in meaningful revenues for Cowen over the next several quarters. Over the past several years, we have broadened our banking franchise through the acquisitions such as Quarton and MHT, after previously adding teams from Morgan Joseph and Dolman Rose in prior years. In addition, we've become an employer of choice with lateral hiring from across the street in every one of our sectors. it's a good time to be a Cowan. Our diversified revenue stream in banking is a direct result of these efforts. We are always looking for great bankers that can help us to continue our momentum, to deliver world-class outcomes for our clients, and we've been adding resources from the analyst to the vice president levels so that we have the capacity needed for our higher level of revenue and operations. Our markets business has also remained incredibly resilient, averaging just over $2.5 million in daily revenue despite lower market-wide volumes. Again, our decision to invest in areas such as prime brokerage, securities finance, and European trading are paying dividends as we continue to take meaningful share from much larger competitors. While revenues were down 4% year over year, most of the drop, about $4.7 million, was due to the wind-down of most of our clearing operations. which we decided to do to free up balance sheet capital for other opportunities, including stepping up the buyback. Highlights for the third quarter included year-over-year gains in cash and electronic trading, prime services revenues, non-U.S. execution, and ADR trading. Prime services in particular is gaining momentum, adding nearly 40 new clients during the third quarter. Securities finance growth has also been strong this year, including our new swaps capability, which now has over 50 clients onboarded. We continue to attract new talent, including the addition of a leading event-driven trading team in Europe during the quarter, and we're boosting our ETF trading capabilities as well. The value proposition offered by Cowen as an independent, non-conflicted partner with world-class execution and research capabilities is increasingly compelling to institutional investors. That has translated into increased share of wallet for us, according to many third-party industry surveys. While we're making progress on the build-out of Cowan Digital, our digital assets initiative, we're still in the early stages. We are working on building out the legal, regulatory, and technology framework to onboard clients, and the engagement level among clients on the topic is very high. More to come on this front as we head into 2022. Looking at the current quarter, we are off to a good start with average daily revenues slightly above our third quarter average. In research, the third quarter, we welcomed new senior analysts to our biotech and life sciences, as well as our tools and diagnostics coverage teams. During the quarter, we had sector launches in healthcare facilities and managed care, as well as sustainable food and healthy living. In total, We added coverage of nearly 90 new stocks in the quarter, and today we have almost 950 stocks under coverage, which is the highest it's ever been. In the third quarter, we published 13 of our flagship Ahead of the Curve series reports. Clients continue to value our differentiated research, and during the quarter, our team once again saw significant gain in brokerage votes from our institutional clients. In investment management, even with the volatile environment for growth strategies, we added more than $400 million in assets under management compared to the second quarter of 2021, with most of that increase occurring in our healthcare strategy. Total AUM was $14.8 billion, which is up 25% year-over-year and up 3% quarter-over-quarter. We had a negative mark-to-market change in economic incentive fees, totaling $58 million. And this is due to a drop in the value of Proterra, which is the largest investment in Cowan Sustainable Investments. And we had declines in positions in the Cowan Healthcare Investment Strategy. Despite these marks, however, incentive fee income is still positive for the first nine months of 2021 at almost $20 million. Economic management fees were up 3% over the year to $15 million, largely due to higher AUM in the healthcare strategies as well as sustainability and activists. Those fees are net of a $3.8 million fund placement fee that we expensed in full during the quarter. Excluding those fees, our management fees would have been up more than 25% year over year. Looking at our five strategies, the sustainability strategy had just over $1.3 billion AUM at quarter end, and overall performance remains strong even when factoring in the drop in the price of Proterra. During the quarter, the strategy made its third investment in a sustainable development dental products firm called Quip. Our healthcare investment strategy completed two new investments and four follow-on financings and ended the quarter with just over $1.2 billion in AUM. Long-term performance remains quite strong despite the declines in public positions during the quarter. The activist strategy grew to almost $7.5 billion, even though the strategy was slightly down in the third quarter, and the merger arbitrage strategy had $321 million in AUM The strategy did outperform the HFRX merger arm index during the quarter. Healthcare royalty strategies ended the quarter with over $3.6 billion in total AUM, which is up $100 million year over year. Turning to our balance sheet, we had investment income losses of $20 million for this quarter due primarily to the declines in the value in our sustainability and healthcare strategies, as well as declines in some of our merchant banking portfolios. As is the case with our incentive income, our investment income is still positive on a year-to-date basis at $20.5 million. To give you some perspective, Cowen has always had quarterly fluctuations in our incentive and investment income lines. And in every single year since the global financial crisis in 2008, we've had positive contributions on an annual basis from our combined incentive and investment income revenue line items. While noisy at times, incentive and investment income are additive to our bottom line when viewed over the longer term. These revenues benefit investors who are focused on the remarkable growth of our core business over the past few years as our investment banking and brokerage operations have increased in size and profitability and our management fee income has risen. As a result of this shift, incentive and investment income has become a much smaller part of our annual revenue mix. Less than 10% of total revenues in each year since 2018, and in year-to-date 2021, it amounts to just about 3% of our revenues. In the coming quarters, we will be providing details to give investors more insight into these revenue lines so they prove to be less of a distraction. Before I hand it over to Steve, I'd like to share a few reasons why I continue to believe that we are well-positioned to deliver consistent profitability in the years ahead. We have a proven track record of identifying opportunities in areas of the economy that are undergoing significant disruption, sectors that require capital and will have a lot of transaction activity. From our leading position in biotech to longstanding growth sectors such as electronics and semiconductors and emerging areas such as sustainability, robotics, energy transformation, and digital health, we have built deep experience in partnering with growth companies. Our research team is truly ahead of the curve in identifying these emerging trends and investment themes. We lead with research, and then we bring all of Calend's resources to bear to help companies in these ecosystems and investors in these ecosystems who are looking to understand and embrace these opportunities. Now, I will turn the call over to Steve Lasoda for a brief review of our quarterly financial results. Steve?