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Cowen Group Inc (NASDAQ:COWN)
Q3 2019 Earnings Call
Oct 24, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. Thank you for joining Cowen's Conference Call to discuss the results for the third quarter of 2019. By now you should have received a copy of the Company's earnings release, which can be accessed at www.cowen.com. Before we begin, the Company has asked me to remind you that some of the statements and 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 the Company's earnings release and other filings with the SEC. Cowen has no obligation to update the information presented on the call. A more complete description of these and other risks and uncertainties, and assumptions is included in the Company's filings with the SEC, which are available on the Company's website. Also on today's call, our speakers will reference certain non-GAAP financial measures, which the Company believes will 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.

Now I would like to turn the call over to Mr. Jeffrey Solomon, Chairman and Chief Executive Officer.

Jeffrey Solomon -- Chairman and Chief Executive Officer

Thank you, operator. Good morning everyone and welcome to Cowen's Third Quarter 2019 Conference Call. This is Jeff Solomon and joining me today on the call is our CFO, Steve Lasota. As a reminder, we made quarterly financial supplement available in the Investor Relations section of our website. We encourage you to review it in conjunction with our earnings release. The supplement presents our business in two segments, our operating company or op-co and our non-core asset company or asset-co.This format aims to provide insights into the profitability of our core business and the value of the legacy investments on our balance sheet. The supplement also highlights the progress we're making toward achieving our long-term objective of mid-teens average return on common equity on a sustainable basis over the business cycle.

So turning to our results, the third quarter of 2019 marked another quarter of profitability on both the GAAP and an economic income basis, despite challenging market conditions for investment banking. We also made significant progress in repositioning of Cowen Investment Management. During the quarter, we launched our new Cowen Sustainable Investment Strategy, grew our assets under management in Cowen Healthcare Investments and completed the sale of our interest in the RCG Longview real-estate strategy.

In the third quarter we took advantage of an opportunity to increase our share repurchases during the open trading window. And as we announced today, we bought back 663,000 shares of our common stock for $10.4 million. The Board of Directors has authorized an increase in our share repurchase program and the amount remaining for buybacks is currently $25 million. We also continued to make strategic investments in the business, including upgrading our clearing capabilities and making targeted hires across the firm. These investments impact our comp and non-comp expenses in the near-term, but the additional spending is necessary to further increase our revenue diversity and position us for future revenue growth.

Taking a look at the performance of our operating businesses in banking and capital markets. Investment banking revenue in the third quarter was down 10% year-over-year, impacted by an industrywide slowdown in deal activity in July and August. Equity capital markets comprised 68% of our banking revenue, which is down from 71% in the third quarter of 2018. We booked 30 capital markets transactions during the quarter and we served as a bookrunner on 15 of them.

Healthcare continues to be our strongest sector. However, industry diversification continues, non-healthcare investment banking revenue represented 55% of total investment banking revenue in the third quarter, up from 43% in the third quarter of 2018. We continue to selectively build out our sector capability organically. Recently, adding two Managing Directors in our Capital Markets Group including one focus on private placement markets, as well as in MD focused on industrial technology. While M&A revenues were down 23% year-over-year, they were actually up 43% sequentially. Quarton continues to gain momentum as the integration progresses nicely and revenues were up significantly compared to the second quarter.

Overall, the pipeline for advisory deals remain solid so far in the fourth quarter. I should add however that the macro environment is increasingly a factor in timing in the timing of future deals and then our ability to convert that backlog. If high levels of volatility and uncertainty persist this could obviously impact the conversion rate of the deal pipeline.

Now turning to our markets division, markets revenue, which includes brokerage, securities financing and other revenues was up 4% year-over-year. Highlights during the quarter included strength in cross-asset trading, special situations, securities finance and derivatives. Revenue for our Institutional Services segment, which includes prime services, clearing, commission management, and commission recapture was up 13%. We continue to gain industry recognition for our service offerings, including being named the Best Outsourced Trading Solution in a poll at the 2019 Hedge Week Awards. We were also named the Best Boutique Prime Broker at the HFM US Hedge Fund Services Awards.

In addition, our commission management platform, Westminster, was highlighted as a quality leader in Greenwich Associates Benchmark Equity Commission Management Survey. And while we are grateful for the recognition, we are working to make our offerings even more valuable to our clients by adding complementary capabilities. We are building on a full-service ETF trading and market making desk, and during the quarter we expanded our European execution desk with the addition of seven experienced sales trading hires from a European bank that exited equity trading. We expect the competitive landscape to continue shifting as other large banks rethink their market position in equities. And while it is still early days, we are pleased with the increased level of client engagement around these new additions to our European team.

Our markets division continues to perform strongly overall and we believe we are well positioned to gain additional share. In research, we expanded our coverage universe to just over 800 stocks, which is up 6% from the third quarter of 2018, including initiations, on the human capital management sector. We continue to have the strong client management with increased attendance in recent conferences and a jump of more than 50% in the number of corporates participating in Cowen non-deal roadshows.

Moving to Investment Management. As a reminder, we are concentrating on growing private equity style investment vehicles and are targeting our strategies in core areas of expertise at our firm, or what we call Cowen DNA. This is an important part of our simpler, fewer, deeper philosophy. As a result of these efforts, we're seeing strong traction in Cowen branded strategies with approximately $550 million in assets raised during the third quarter. We launched a new sustainable investing strategy with just over $200 million in commitments and this strategy is focused on the key investment themes of renewables and storage, clean transportation, sustainable food production, and industrial efficiency.

We also raised nearly $350 million in additional capital in our Healthcare Investment strategies and had two significant portfolio events, the IPO of Livongo in July and the sale of Semma Therapeutics. Our Healthcare Royalty Strategies completed two investments, representing approximately $95 million in capital and with these two investments, HSR has now finished investing its third fund and currently has over $1 billion in capital to invest in royalties and debt-like structures of commercial or near-commercial stage healthcare products and companies.

Our merger arbitrage strategy was recognized as a best arbitrage manager hedge fund at the 2019 Hedge Week US Awards. The strategy has generated positive returns for the quarter and is outperforming the HFRX merger arb index year-to-date for 2019. And our activist fund was essentially flat for the quarter, but remains positive year-to-date.

As I mentioned earlier, we completed the sale of our interest in RCG Longview Management, a management company for the legacy real-estate funds in which we were invested. We also completed a transaction to sell some of the real-estate assets on our balance sheet. These transactions had little impact on our results for the third quarter, but raised approximately $8.6 million in cash. We will be working to exit other legacy real-estate investments and our asset company over the coming quarters. Regarding asset-co, as a reminder, we are committed to monetizing these legacy investments when we can. We will consider both price and timing and factors when looking to divest these holdings.

And now, before we answer your questions, I will turn the call over to Steve Lasota for a brief review of our financials. Steve?

Stephen Lasota -- Chief Financial Officer

Thanks, Jeff. For the third quarter of 2019 we reported GAAP net income attributable to common shareholders of $2.1 million, a decrease of $11.7 million from the prior year period. GAAP revenue was up 14% year-over-year to $252 million from $221 million in the prior year period due to increased securities finance activity. In the third quarter of 2019 GAAP comp and benefit expenses were $114.2 million. Non-comp expenses for the third quarter of 2019 were $94.6 million and G&A was $5.1 million. Our income from gains on investments was $32.3 million. Income tax expense was $1.4 million and non-controlling interest expense was $8.9 million.

Now turning to our non-GAAP financial measures, which we refer to as economic income. As a reminder, effective starting with the second quarter of 2019, the company now has the following business segments. The operating company segment or op-co consist of four divisions, Cowen Investment Management, Investment Banking, Markets and Research. The asset-co segments consists of certain of our private investments, real estate holdings and other legacy multi-strategy funds. As a reminder, we use economic income to measure our performance and to make certain operating decisions. In general economic income is a pre-tax measure that eliminates the impact of consolidation for consolidated funds and excludes goodwill and intangible impairment, certain other transaction related adjustments or reorganization expenses and certain costs associated with debt.

Economic income revenues also includes incentive income earned during the period when incentive fees are not yet crystallized with GAAP reporting, as well as investment banking repayment fees collectible during the period that would otherwise be deferred for GAAP reporting. The remainder of my remarks will be based on these non-GAAP financial measures. We reported economic income of $5.5 million for the third quarter of 2019, compared to $21 million in the prior year period. Third quarter economic operating income which is economic income before depreciation and amortization expenses was $10.6 million compared to $23.9 million in the third quarter of 2018. Economic income revenue decreased 4% year-over-year to $217.1 million. For the quarter, Investment Banking revenue was down 10% year-over-year to $70 million. Q3 brokerage revenue was up 4% year-over-year to $105.9 million. Management fees for the quarter were $10.9 million compared to $12.4 million from the prior year period.

Incentive income was $14.4 million in the third quarter, up from $6.9 million in Q3 of 2018, due in part to higher performance fees from our Healthcare Investment strategy. Investment income for the quarter was $16.1 million, down from $27.7 million in the prior year period due to the $23 million impact of Tilray investment valuation in the third quarter of 2018. And finally, other revenue was $0.1 million in the third quarter, unchanged from a year ago.

Turning to our expenses, comp and benefits expense for the quarter was $116.5 million compared to $126.7 million in the prior year period. Our comp to revenue ratio dropped year-over-year from 56% to 53.7% of economic income revenues. Please note that although our comp to revenue ratio dropped this quarter, our non-controlling interest expense rose to $6.8 million, up from $2.1 million a year ago, due in part to higher incentive fees related to improved investment performance in some Cowen's investment strategies. Going forward, we would expect our comp ratio to move back toward our target range of 55% to 56%, although it could be higher in some quarters, depending on the timing of hires and fluctuations in revenues.

Fixed non-comp expenses totaled $37.1 million in the third quarter, up from $34.7 million in the prior year period. Variable non-comp expenses in the third quarter of 2019 was $37.3 million compared to $30.7 million in the third quarter of 2018. The increase in non-comps reflects increased business development expenses and fixed expenses from new hires and increased legal and head hunting fees, as well as the impact of the Quarton acquisition. It also reflects a one-time benefit of $2 million in the third quarter of 2018 from credits for clearing and trading activity fees. Depreciation and amortization expenses were $5.1 million compared to $2.9 million in the third quarter of 2018 due to the Quarton acquisition.

Looking at our business segments, as of September 30th, 2019, the company had invested capital in operating company totaling $571 million. Op-co had total revenues of $216.7 million and economic Income of $8.3 million in the third quarter of 2019. As of September 30th 2019, the company had invested capital in asset-co totaling $145 million. Asset-co had total revenues of $0.4 million and an economic loss of $2.7 million in the third quarter.

Turning to our equity, common equity which is stockholders' equity less preferred equity was $715.7 million compared to $693.1 million as of December 31st last year. Common book value per share, which is common equity divided by total shares outstanding increased slightly to $24.67 as of September 30th compared to $24.37 as of December 31st. Return on common equity was an annualized 5.9% in the third quarter of 2019 down from 13.7% for 3Q 2018. In the financial supplement, we also provide a segment breakout of return on common equity for the third quarter of 2019. Op-co had ROCE of 8% in contrast asset-co had ROCE of negative 23.9%.

With that, I'll turn the call back over to Jeff.

Jeffrey Solomon -- Chairman and Chief Executive Officer

Thanks, Steve. So to sum it up, we demonstrated strong momentum in our Investment Management segment in the third quarter and maintained profitability overall despite weaker market conditions in Investment Banking, even as we continue to invest in our capabilities. This result demonstrates the increasing revenue diversity of our business.

With that, I will open it up for questions, operator.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Please standby while we compile the Q&A roster.

And our first question comes from Sumeet Mody with Sandler O'Neill. Your line is now open.

Sumeet Mody -- Sandler O'Neill -- Analyst

Thanks, good morning guys. Hey, just wanted to touch on Quarton first to start off. I appreciate the color in the prepared remarks, but how is the progress tracked versus the firm's overall expectations through the first three quarters and maybe just a little more color on that pipeline, is it bit of a timing issue there in the third or are we going to see a little bit more coming into the fourth just from the timing of closings and maybe just a little more color around the pipeline will be helpful.

Jeffrey Solomon -- Chairman and Chief Executive Officer

So I would say the pipeline -- I'll start by saying the pipeline has actually grown significantly all year long, and it's the biggest, it's been since the acquisition which is ultimately one of the best indicators that the business works and it works as we expected it to do. I think the challenge that we're seeing sometimes, in particular in Europe, is that there's a little bit more uncertainty certainly around Brexit and things like the economic challenges I think in Europe. And so we're seeing slower conversion rates on some of that backlog, but as it relates to the overall progress, it is on track. I think we are seeing the conversion rates continue to pick up in the third quarter, we expect that to continue in the fourth quarter, which is basically what we had projected to have happen when we did the acquisition. So all-in-all, it's well within the expectations of Cowen that we had set forth we budgeted for this year and we're very pleased with it.

I also say, it's early days in terms of the integration, but I continue to be very encouraged by the collaboration of our collective teams and the integration is going well. And I just think long term, that's what you look for when you do these kinds of things. And so I know that's a bit of a soft comment, but when I see our teams joint pitching and over time there doesn't seem to be any difference between who came from where, those are great signs for me that we did the right thing culturally and long-term that's really what's going to drive the value of the business.

Sumeet Mody -- Sandler O'Neill -- Analyst

Thanks, that's helpful. And then just one on the Capital Markets side, we've seen some of the bulge bracket peers outperform on the debt underwriting side this quarter from some lower fee rates -- excuse me, lower interest rates in the third. How is that mix for you guys in the quarter, I mean is DCM becoming more kind of prevalent now that interest rates are lowering a little bit or is that still kind of too smaller to tell?

Jeffrey Solomon -- Chairman and Chief Executive Officer

I would say we're not meaningful enough yet in the debt Capital Markets to be affected by the overall market trends. It's good news and bad news, that we reposition that business at the beginning of the year to really refocus our efforts on debt placement and we're seeing that traction. When we pitch companies about their financing options, we like to be able to provide full solutions. And so sometimes those solutions turn out to be equity, sometimes it's hybrid and convertibles, sometimes is debt placement, I just think when we -- the team that we have brought on is doing an amazing job, they're in just about every capital markets and financing pitch, they're in every one of them. And so you're seeing, we're starting to get some traction around that.

I would certainly say increasingly with the Quarton acquisition for lower middle market and for middle market sponsors, that's an area where we're seeing significant traction where we didn't used to have traction at all really in any meaningful way and so I'm encouraged by what's happening in that area. And in particular, I think it's helping us to win business across the entire Capital Markets landscape, which is sometimes that translates into equity or convertibles or structured credit. It is part of the long-term solution that we provide to clients and I'm very happy with it.

Sumeet Mody -- Sandler O'Neill -- Analyst

Alright, great. I'll hop back in the queue. Thanks for taking my questions.

Operator

Thank you. And our next question comes from Chris Walsh with Buckingham Research. Your line is now open.

Chris Walsh -- Buckingham Research -- Analyst

Hey guys, good morning.

Jeffrey Solomon -- Chairman and Chief Executive Officer

Hi, Chris.

Stephen Lasota -- Chief Financial Officer

Good morning.

Chris Walsh -- Buckingham Research -- Analyst

So I just wanted to touch on the state of the IPO market. We've clearly seen deal activity slow in recent months from an industry standpoint and would you see them being such an important part of the overall franchise. Can you just talk about how that's impacted your ability to pull deals through the backlog from announcement to completion?

Jeffrey Solomon -- Chairman and Chief Executive Officer

Yes, I mean I don't -- I would say we're a little bit different than most other firms because of our focus on, particular, in biotech, which really marches to the beat of its own drum. I would say the challenges we've had in that market are more a function of the fact that we just need company -- companies to mature enough to actually get them public. And when I look at that space, the challenge for us really more there is company formation and management teams, getting them ready and getting them out, is actually the gating item there as opposed to whether or not there is demand from the investment side. That's actually one of the primary drivers for us.

I look at what we've done outside of biotech and say that we've actually booked around more deals outside of biotech in this year than in any other year. And that's actually very encouraging to me because it demonstrates that the muscle memory associated with doing IPOs is really strong at Cowen and so we've executed I think pretty wonderfully. But the most of our ECM business is really follow-on business and there if you look at the mix, companies are coming to market, in particular with our focus on biotech, biotech companies tend to raise money in multiple market environments and that's exactly what we said and exactly what we're experiencing. Those companies when they decide to pull the trigger and do a financing, oftentimes they might be in the backlog for like a day and a half, it's not even like when they make a decision or there is a positive event and they want to raise capital, we have to be there for them all the time.

And so when you look at our product mix, it's actually less dependent on the IPO market and more dependent on when our clients need to raise money. In difficult market conditions they may wait a quarter or two, but invariably they have to fund their business models and so they come to market when they need -- when they need to come to market. And so for us the primary driver is how many of our clients remain public and how often are they going to have to raise capital and that puts a really strong floor under our ECM business, which I think is different frankly than most other firms on the Street given our focus in the biotech space.

Chris Walsh -- Buckingham Research -- Analyst

Great, thanks, Jeff. And then just one other one on Investment Management. This morning's release outlines your recent launch of the new sustainability strategy in Cowen Investment Management and you indicated you raised $550 million in Cowen branded strategies during the quarter. The question is, what would you say your outlook for AUM growth moving forward is and should we expect to see modest growth looking ahead?

Jeffrey Solomon -- Chairman and Chief Executive Officer

Sure, yes, it's a great question. So, we had articulated the strategy that we're going to pivot ourselves more to private equity style fund raising because of the sustainability and the consistency of management fees associated with that. And these are the -- along with Healthcare Royalty Partners, those three funds are going to make up the bulk of our AUM growth for the foreseeable future. We won't be always on raising them, the private equity rhythm is a little bit different rate, you raise, you invest then you raise and you invest. And so I don't think you'll see that happen all the time.

But one of the things I won't say about the strategies, certainly the sustainability strategy, Health Care Royalty strategy and the Cowen Healthcare Investment strategies, they're all full fee-paying. So one of the things we try to focus on is capacity constrained products. Our goal is to optimize for obviously returns and these are funds that have capacity constraints around them and as a result we can charge higher management fees for those because it's hard to get them.

The Cowen Sustainable Investment Strategy, I think it's still open and we have an opportunity to increase the size of that and we're in active dialog. So you could see -- as this is our first close, so you could see us increasing AUM over the next 6 to 12 months, as we have more meaningful dialogs with investors. And certainly Cowen Healthcare Investments remains open the $300 million and change we raised in that fund there is still capacity in that fund for us to do a subsequent close and I think you'll see that happening.

And I think Healthcare Royalty Partners will have its final close on its most recent fund at some point in the not too distant future and so you'll see some increase there. And then you're going to see kind of playing out for a while as we get those funds invested. So to me, it's a different way of looking at our Asset Management business. Certainly the departure of our or the divestiture of our real-estate business makes it looks like our headline AUM numbers have gone down, but that business wasn't contributing meaningfully at all to the profitability or even the revenue line.

And so you're seeing it a much more true picture of how we're driving economics through that business and I don't want to overstate it. We've been cleaning up a lot of things in the business for the past two years and this is really the first quarter where I feel like a lot of the investments we've made and the business that we've made, it feels like a pivot and it feels like we're in a position where we're adding AUM in strategies that are more Cowen DNA-oriented and that gives us a pretty good trajectory as we look forward

forward.

Chris Walsh -- Buckingham Research -- Analyst

Got it. Thanks, Jeff.

Jeffrey Solomon -- Chairman and Chief Executive Officer

Great.

Operator

Thank you. [Operator Instructions] Our next question comes from Devin Ryan with JMP Securities. Your line is now open.

Devin Ryan -- JMP Securities -- Analyst

Great. Good morning, Jeff, Steve, how are you guys?

Jeffrey Solomon -- Chairman and Chief Executive Officer

Yes, Devin, how are you, buddy?

Devin Ryan -- JMP Securities -- Analyst

Doing well, doing well. So first question. Jeff, you had mentioned in the prepared remarks that you're seeing some of the large banks were examining their equities footprint which we see as well. I just wanted to dig into that a bit more and really just how you see this playing out how it might impact revenues may be up for grabs and brokerage and does the wallet shrink ratably as these clients just look to pay a little bit less.

And really, also how does the retrenchment impact the outlook for equity underwriting opportunities?

Jeffrey Solomon -- Chairman and Chief Executive Officer

Yes, let me take your first question. Certainly, I think if you're a casual participant in the global equities business, you have to be asking yourself why am I doing this. I don't -- we've been saying this for years and I think a lot of us who have more clients of the street for a long time recognize that there is still overcapacity in this industry and the mediocrity that comes along with traditional equity execution still exists, it takes a while for that to change.

But I think the announcement from some of the European banks and some of the rumors we're hearing suggest that we're moving more quickly to have people to get out of businesses where they can't be top tier and we've been planning for this for a while. And you can see that, certainly with our moves, whether it's in our McLaughlin data or in other data that we look at in terms of volumes, even daily average advertise volume, Cowen is at the top of a lot of those rankings and we're absorbing that. I think we're definitely benefiting from the fact that other banks are exiting the business.

Certainly with the team that we hired in Europe that is a direct result of European bank exiting the space and that team being a very talented team and us being able to bolt on tactically in an area where we just didn't have a strong presence. We got our European equity execution presence through the Convergex acquisition and it's really good. We just haven't really been able to scale it until we could find the right talent. And so, I mean we have great talent at Cowen, it just wasn't scaled to be fair and the integration of the team that we had at Cowen and this new team has been great in the first months and changed since we've been together and clients recognized that.

And I think increasingly in a post-MiFID II world, I've said this before, but bear us repeating. You need to be excellent in research, you need to be excellent in trading

trading, and you can't be casual in either or you don't get a wallet. And so I feel very, very good about what we're doing there because I can see it in the numbers every day and I hear from clients every day that what we're doing is differentiated and they are thankful.

Now what does that mean for their wallets overall? I don't -- we're not building our business expecting the global equity wallet to increase. That's not what's going to happen here, but we are building it to be able to take share from lesser competitors. That's what we've been doing over the past six years with our algorithmic offering and a bunch of our offerings. I think we have a world-class product that is non-conflicted that really speaks to the needs of the buy side and as a result we're seeing that play through and that's really what I feel and we are seeing it in the numbers.

As it relates to the IPO markets, can you just repeat the question for me, so I make sure I answer it directly.

Devin Ryan -- JMP Securities -- Analyst

Sure, right. So it's interconnected, just trying to think about if you have players pulling back in their equity trading capabilities or potentially research footprints, if you will. How do you see that if you believe that impacting the equity underwriting outlook as well?

Jeffrey Solomon -- Chairman and Chief Executive Officer

Yes, I think the two are disconnected, I really do. I think you can't be in the equity distribution game unless you have an equity distribution platform. So I think -- and we know that IPOs and the IPO windows are sporadic, we're not living in the 1990's where they seem to be coming in bucket loads every week. That's not the way it has been and that's not the way we anticipate it being. And so you have the ability, world-class secondary trading capability and world-class research capability to maintain that engagement and then when you have products to put through that pipeline, you put it through it when it happens. We are -- one of the reasons we did the Convergex acquisition on the reasons we've scaled it, that business needs to stand on its own if we have a soft patch in a new equity underwritings and it does at the scale that we're at, we are in a much better shape than we were like seven years ago when we could -- when it was -- there were some days when you could feel the real slowdown and it would slow down increasingly at Cowen and that's -- we're not experiencing that.

Now the flip side of that is when you have -- when the markets are a little bit more quiet like they were in July and August. Obviously, our volumes were down, but they were down less than I would say a lot of our competitors. And so the business strategy that we pursued to be excellent in both research and excellent and sales and trading, that gets augmented when the pipeline for new issue was open. In particular, in the biotech, which is a big part of our business, we are increasingly leveraging off of the fact that we have bookrunner status and that the -- our ability to engage with our corporate clients and our investor clients and be be that valuable intermediary between the two is a real differentiator and that's why when our companies -- when our corporate clients decided they want to raise money, that's why they come to us, because we're in that dialog everyday multiple times a day.

And I would say, if you are -- for some of the banks who are not in the dialog every day with their equity distribution platforms, it is hard to wake up one day and start selling new issue, that's to us it may not appear obvious, but the fact that we are always on with our clients and engaged on a daily basis multiple times a day is what makes us one of the best underwriters because we're just -- we're bringing that product as part of our regular dialog as opposed to, hey, we have something special today, that we haven't really talked about in a long time and that's, I think, again it speaks to the integration of the platform and why we've been able to be successful when so many others have not been.

Devin Ryan -- JMP Securities -- Analyst

Right, right exactly and I guess I asked the question from the angle that if people pullback in equity distribution or equity sales and trading if you will, ultimately if you cut research on a name from 10 to 3 that the remaining firms that are engaged with our corporate may have a better opportunity or better economics on the underwriting side, but yeah, we can -- move on.

Jeffrey Solomon -- Chairman and Chief Executive Officer

No, but I think that's true. I do think that's true. I will say, when you look at our market share outside of biotech and how we've increase and how we become more focused on doing book run deals outside of biotech as we've built that out. Certainly, we're leveraging that and I would say, again, if you look at certain deals like, we were on the Peloton IPO is a great example of a place where we were a bookrunner. And we're probably one of the only non-lending firms, if not the only non-lending firm on that cover. Okay, so why are we there? Because we are excellent at research and excellent at trading and we can bring to bear a differentiated offering for that company relative to a lot of other players. And so your point is, well taking in, we're seeing it, we're not dependent on having all this happen all the time in order for our business model to be successful, although of course we would love to see that happen.

Devin Ryan -- JMP Securities -- Analyst

Got it, OK. Thanks, Jeff, very helpful. And then we talked a lot on the biotech kind of contribution, but the cannabis has obviously been a big focus and a really nice area of growth for the firm. This stocks have been under pressure recently, so I'm just curious how that's affecting the intermediate term outlook for that, I guess sector, if you will, within the Banking business and if that's having any effect on kind of the pipeline or expectation , just revenues from that part of the business?

Jeffrey Solomon -- Chairman and Chief Executive Officer

Yes, that's a good question, Devin. So, we -- it's an emerging business and I would say, just like any emerging business, it goes through ups and downs and certainly the last quarter in the last three months has been reevaluation of some fundamentals in a business. You're kind of say, it's been actually a very difficult investment area for a lot of folks. We are having a much more holistic conversations with cannabis companies. And again, I want to reiterate, most of the conversations that we're having are outside the United States from a regulatory standpoint.

And we understand that the dynamics of how you get from point A to point B, in terms of the idea versus the execution, there is some -- some of the companies have had more challenges than others. At being able to deliver on the promise of a commercial success. And that's happened, I think in any emerging industry, this is an industry that is really less than in many perspectives, less than five years old. And a lot of the companies that we're focusing on are building out their growing capabilities and their distribution capabilities, and their commercial capabilities and some of them are stumbling on that and as a result, investors have gotten a little bit nervous.

What I'll say about that space is, that I think interesting is, there doesn't seem to be a debt yet in the US capital markets. So, when you see other industries stumble in many instances people say, I didn't like that valuation, but if it's down 20% or 25%, I would be interested in owning it there. And I think one of the things we're seeing with cannabis businesses is there is usually a binary decision on the part of investors. Am I going to be involved in the industry or am I not going to be involved in the industry. And I think that element of it has kept certain players from entering even though valuations are arguably way more attractive now than they were three, six, nine months ago. That's going to play out over time.

We believe and I think we've said it on previous calls and we certainly said it in on our research, this is a very long game, cannabis isn't going away. In fact, arguably, given there is some of the challenges around the opioid epidemic cannabis from a medical standpoint offers a very viable long-term solution for pain management. The market has to catch up to that. And when it does, the players in this space that we believe we bank will benefit significantly. And it will look much more like a consumer product, a CPG company, then it will like a new technology or an agro industrial company. And we continue to position ourselves to be the leader and being able to articulate why we think certain companies will perform and others won't. And we're in a significant dialogs, not only on financings but on M&A and strategy and partnerships and I look at that space over the next five years and say there are very few firms who have the depth of knowledge and understanding in the network that we have and, however, that plays out, we're going to be in a position to capitalize on that and that's just really what we need to do, markets come, markets go, we need to make sure that we're making investments and things that over the long-term will benefit our shareholders.

Devin Ryan -- JMP Securities -- Analyst

Great color. Thanks very much. Jeff, I'll leave it there.

Jeffrey Solomon -- Chairman and Chief Executive Officer

Great.

Operator

Thank you. And I'm showing no further questions in the queue at this time, I would like to turn the call back to Jeffrey Solomon for any closing remarks.

Jeffrey Solomon -- Chairman and Chief Executive Officer

Well, right, thank you everybody for taking the time to fit in with us this morning. Before we sign off, I obviously, I want to thank the team here at Cowen for all of the hard work and dedication. Results like these in challenging markets don't come easy, but I continue to be inspired by our colleagues who live our core values of vision, empathy, sustainability, integrations [Phonetic] team work every day. And I'm very confident that our commitment will continue to deliver results for our clients, for our shareholders and for ourselves over the long-term. Thank you all for joining us and we look forward to speaking with you again on our next call in February. Have a good day.

Operator

[Operator Closing Remarks].

Duration: 40 minutes

Call participants:

Jeffrey Solomon -- Chairman and Chief Executive Officer

Stephen Lasota -- Chief Financial Officer

Sumeet Mody -- Sandler O'Neill -- Analyst

Chris Walsh -- Buckingham Research -- Analyst

Devin Ryan -- JMP Securities -- Analyst

Devin Ryan -- JMP Securities -- Analyst

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