Cowen Investor Presentation
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INVESTOR PRESENTATION JULY 2020 Cautionary notice regarding forward-looking statements This presentation 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 section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K 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. 2 TABLE OF CONTENTS 1. INTRODUCTION 4 2. BUSINESS HIGHLIGHTS 10 3. FINANCIALS 17 3 1. INTRODUCTION INTRODUCTION Cowen: advising and connecting providers and users of capital to help them consistently OutperformTM $1B+ 107 IN TOTAL BANKING CAPITALIZATION TRANSACTIONS IN 1H’20 Impactful Deep Domain Strategic Knowledge Advice ~800 22B High Quality SECURITIES UNDER SHARES TRADED BY Financing Proprietary COVERAGE (AS OF THE EQUITIES DESK Content Transactions 6/30/20) IN 1H’20 Scalable Independent Institutional Trade Quality Execution Platform 5 8,300+ Innovative Value-added DIFFERENTIATED Investment Tools and CONFERENCE 1X1 Products Insights INVESTMENT MEETINGS IN 1H’20 MANAGEMENT STRATEGIES 5 INTRODUCTION Why invest in Cowen? SCALED, MARKET-LEADING Leading independent, unconflicted execution platform and global, multi-asset EQUITIES PLATFORM capabilities. Taking share from underinvested competitors INVESTMENT Provides opportunities for growth and margin expansion through organic BANKING EXCELLENCE growth and acquisition. Revenue diversification (Advisory, non-Healthcare) REPOSITIONING Focus on Cowen-owned scalable, differentiated, actively managed investment INVESTMENT MANAGEMENT products where Cowen has domain expertise WORLD CLASS, DATA DRIVEN Key differentiator in unbundled world, strong foundation for buyside and INDEPENDENT RESEARCH corporate client relationships. Focus on coverage of growth sectors IMPROVING Management and strategy focused on driving higher, consistent return on FINANCIAL RESULTS common equity (ROCE) COWN trades at a significant discount to peers. Strategy aims to eliminate ATTRACTIVE VALUATION this valuation gap and unlock more shareholder value 6 INTRODUCTION Improving Cowen’s performance Execution of these objectives aimed at driving higher return on common equity over the long term OUTCOME FOR OBJECTIVES SHAREHOLDER RETURNS • Scale businesses that will drive margin INCREASED • Focus on opportunities with strong domain expertise EARNINGS POWER (“Cowen DNA”) • Improve revenue diversification GREATER OPERATING • Maintain and grow contribution from recurring revenue CONSISTENCY businesses • Harmonize balance sheet activities with our operating businesses LOWER • Implement philosophy that “balance sheets are meant to be seen, not VOLATILITY heard” • Simplify balance sheet by exiting non-core investments and strategies IMPROVED • Provide insight into earnings drivers and valuation via Operating Co. / TRANSPARENCY Asset Co. segment reporting 7 INTRODUCTION Our strategy to achieve these objectives “Simpler, Fewer, Deeper” is a framework philosophy underlying our long-term objectives 1 2 3 Simplify the business in a Eliminate or resize Go deep in our areas of manner that enables us to businesses as we focus our strength to enhance margin select areas to press for efforts on businesses that opportunity around core growth will drive margin industry strengths Example: Example: Example: Adjusting capital allocation Eliminated five capabilities Launched private healthcare process such that our from investment strategy, which leverages balance sheet activities are management platform in Cowen’s strength in healthcare in harmony with our 2017-19 that were not research and banking, and operating businesses salable and scalable sustainability strategy, built on team domain knowledge 8 INTRODUCTION Cowen: the advantage is in our culture WE INVEST IN OUR CLIENTS’ SUCCESS TENACIOUS VISION EMPATHY SUSTAINABILITY TEAMWORK • Focus on • Deep understanding • Over 100 years of • Leverage intellectual outperformance in of clients’ needs capital markets capital and resources innovative ways expertise across the platform • Match the solution • Core expertise areas with the circumstance • Solutions that pass • Aggressively pursue provide actionable the test of time world-class outcomes insights 9 2. BUSINESS HIGHLIGHTS BUSINESS HIGHLIGHTS Investment banking: leader in financings, growing advisory Multi-year effort to diversify our mix towards higher margin activities while we press on our capital markets strengths GROWING CAPITAL MARKETS AND ADVISORY REVENUE • Market leader in financing and advising biopharmaceutical companies Providing breakout of CM-Advisory and CM-Underwriting – Management expects these areas to continue to grow for $352 the foreseeable future $329 – Top 3 bookrunner for life sciences transactions since 2016* $289 • Expanding footprint in merger advisory – 2019 was a record year for advisory revenue – Growing organically and through acquisition $223 $224 $219 $247 $200 • Closed acquisition of Quarton International in January 2019 • Provides advisory business with significant scale, revenue $133 diversification, and cross-border expertise $182 $199 • Mandated pipeline continues to look strong $49 $107 • Key industry verticals experiencing growth $38 – Consumer / Cannabis $82 $84 – Healthcare $42 $50 $24 $27 – Industrials – Information Technology & Services 2015 2016 2017 2018 2019 1H'20 – Technology M&A Capital Markets CM Advisory CM Underwriting *Source: ECM Analytics as of June 30, 2020. Excludes issuers with proceeds less than $20mm and greater than $1bn 11 BUSINESS HIGHLIGHTS Strength from Healthcare Focus and Capital Markets REVENUE BY PRODUCT REVENUE BY INDUSTRY (US$ in thousands) (US$ in thousands) 200,000 200,000 Initiating Separation of CM-Advisory and CM-Underwriting 180,000 180,000 160,000 160,000 140,000 140,000 120,000 71% 120,000 72% 100,000 100,000 80,000 80,000 62% 69% 62% 67% 58% 42% 48% 75% 60,000 57% 60,000 76% 85% 60% 68% 57% 46% 71% 57% 82% 40,000 13% 40,000 9% 9% 14% 28% 19% 19% 58% 20,000 20,000 52% 38% 54% 42% 40% 34% 16% 43% 29% 28% 24% 32% 25% 24% 20% 15% 18% 11% 0 0 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 M&A CM - Advisory CM - Underwriting CM - Total Non-Healthcare Healthcare Note: Inclusive of Quarton metrics beginning 1/1/19. 2019 Cowen metrics include $7.8M of TriArtisan advisory revenue. 12 BUSINESS HIGHLIGHTS Research: deep commitment to being premier Ranked #3 U.S. Research provider in 2019 StarMine Analyst Awards • Research drives key investment themes across the platform • One of the largest research franchises on the Street that has consistently invested in its platform – This is in contrast to a 10% decline in investment dollars for sell-side equity research on the Street overall(1) • Taking share in wake of post-MiFID II unbundling • World-class conferences and corporate access create important network effect RESEARCH PLATFORM: RICH AND DEEP • About two-thirds of our equity research is PUBLISHING ANALYSTS EQUITY COVERAGE on stocks with a market capitalization Today 54 Basic Materials < $10 billion 2012 27 3% Capital • Analysts average 15 years of research Goods SECURITIES UNDER COVERAGE 11% experience, including 8 years at Cowen Today 800 Consumer Healthcare 32% 2012 424 14% • One of the strongest Washington research Energy (2) 14% benches on the Street S&P 500® COVERED TMT 26% Today 45% 2012 27% (1) Change in average cost, 2009-2013. Source: McLagan Financial Benchmark. A study from Coalition similarly found that the number of analysts at the 12 largest banks declined 10% from 2012 to 2016. (2) Per Institutional Investor 2018 poll. Cowen Washington Research Group produces commentaries on political, economic or market conditions and is not intended as a research report as defined by applicable regulation. 13 BUSINESS HIGHLIGHTS Markets: diversified, scaled and differentiated Leading independent, non-conflicted trade execution platform • Leading independent, unconflicted trade execution COWEN IS A LEADING