-
On
January 1, 2015 ,JMP Group completed a corporate restructuring transaction whereby it converted from a C-corporation (JMP Group Inc. ) to a publicly traded partnership (JMP Group LLC ); in its first quarter under the new structure, the company made three cash distributions totaling$0.105 per share, an increase of 50% from the dividend of$0.07 per share paid in the fourth quarter of 2014. -
Adjusted net revenues, which exclude certain non-cash items and
non-controlling interests, were
$37.6 million , a decrease of 14.2% from$43.8 million for the first quarter of 2014. For more information on adjusted net revenues, including a reconciliation to net revenues, see the section below titled "Non-GAAP Financial Measures." -
Operating net income was
$5.1 million , or$0.23 per diluted share, an increase of 17.1% from$4 .4 million, or$0.19 per share, for the first quarter of 2014. For more information on operating net income, including a reconciliation to net income attributable toJMP Group , see the section below titled "Non-GAAP Financial Measures." -
Total net revenues under generally accepted accounting principles, or
GAAP, were
$41.0 million , compared to$37.7 million for the first quarter of 2014. -
The net loss attributable to
JMP Group on a GAAP basis was$1.9 million , or$0.09 per diluted share, compared to net income of$4.0 million , or$0.17 per share, for the first quarter of 2014. Excluding a one-time tax liability of$0.31 per share for recognizing previously unrealized gains in the transfer of CLO securities and hedge fund limited partnership interests to the new holding company as part of JMP Group's corporate restructuring, GAAP net income would have been$0.22 per share for the first quarter of 2015.
"JMP Group got off to a good start in 2015, with operating earnings per
share increasing 21% year over year to
"For the first quarter, we paid out roughly 45% of our operating EPS in
cash distributions, increasing the payout ratio from 35% in the fourth
quarter of last year. We recently increased our quarterly distribution
to
Segment Results of Operations
At
At Harvest Capital Strategies, the asset management segment, adjusted
net revenues of
At
A summary of JMP Group's operating net income per share by segment for
the quarter ended
Quarter Ended | ||||||
($ as shown) |
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Broker-dealer |
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Asset management | 0.01 | 0.04 | 0.00 | |||
Corporate credit management | 0.01 | 0.00 | 0.00 | |||
Operating platform EPS | 0.14 | 0.11 | 0.18 | |||
Net corporate income | 0.09 | 0.09 | 0.01 | |||
Operating EPS (diluted) |
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Note: Due to rounding, numbers in columns above may not sum to totals presented.
For more information on segment reporting; adjusted net revenues, including a reconciliation to net revenues; and operating net income, including a reconciliation to net income, see the section below titled "Non-GAAP Financial Measures."
Composition of Revenues
Investment Banking
Investment banking revenues were
A summary of the company's investment banking revenues and transaction
counts for the quarter ended
Quarter Ended | ||||||||||||
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($ in thousands) | Count | Revenues | Count | Revenues | Count | Revenues | ||||||
Public equity | 34 |
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27 |
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33 |
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Debt and convertible securities | 5 | 857 | 5 | 1,670 | 6 | 1,571 | ||||||
Private capital markets and other | 1 | 547 | 2 | 1,685 | 1 | 698 | ||||||
Strategic advisory | 4 | 2,695 | 2 | 1,824 | 3 | 3,263 | ||||||
Total | 44 |
|
36 |
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43 |
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Brokerage
Net brokerage revenues were
Asset Management
Asset management-related fee revenues were
Client assets under management at
At
Principal Transactions
Principal transactions generated net
realized and unrealized gains of
A summary of the company's principal transaction revenues for the
quarter ended
Quarter Ended |
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(in thousands) |
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Hedge fund investments |
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Investment in |
999 | (1,129 | ) | (163 | ) | ||||
Investment in |
(22 | ) | 438 | (302 | ) | ||||
Other principal investments | 1,454 | 491 | 344 | ||||||
Principal transaction revenues before non-controlling interests | 3,744 | 1,166 | 1,586 | ||||||
Non-controlling interests - |
- | 10,963 | (5,279 | ) | |||||
Total principal transaction revenues |
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( |
) |
Due to Harvest Capital Strategies' role as the manager and managing
member of
Collateralized Loan Obligations
The net return on invested
capital managed by
At
The net loan loss provision for the quarter totaled
Net Interest Income
Net interest income was
Expenses
Compensation and Benefits
Compensation and benefits expense
was
Non-Compensation Expense
Non-compensation expense was
Personnel
At
Non-GAAP Financial Measures
In addition to the GAAP
financial results presented in this press release,
Adjusted Net Revenue
Adjusted net revenue is a non-GAAP
financial measure that (i) includes asset management fees, net interest
income, and other revenues eliminated upon the consolidation of
-
base management and incentive fees earned by
Harvest Capital Strategies as manager ofHarvest Growth Capital and Harvest Growth Capital II, both venture capital funds; Harvest Capital Strategies is managing member ofHarvest Growth Capital andHarvest Growth Capital II and, as a result of its ownership,JMP Group consolidated the two funds and eliminated the fees in consolidation until adopting an amended GAAP standard as ofJanuary 1, 2015 ; presenting these fees in prior periods as thoughHarvest Growth Capital and Harvest Growth Capital II were deconsolidated presented the entities' results in a manner similar to those of the other investment funds managed by Harvest Capital Strategies; - the non-specific, non-cash loan loss provision recorded with regard to loans acquired during the period by JMP Credit Advisors CLO II and JMP Credit Advisors III, which is required by GAAP;
- unrealized mark-to-market gains or losses on the company's strategic equity investments as well as certain warrant positions;
-
non-controlling interests in net unrealized gains and losses generated
by
Harvest Growth Capital and Harvest Growth Capital II, of which Harvest Capital Strategies is manager and managing member;JMP Group consolidated the two funds under GAAP untilJanuary 1, 2015 , when an amended GAAP standard no longer required consolidation; in prior periods, unrealized gains and losses that did not accrue to the company were reversed; and - unrealized mark-to-market gains or losses on investments in the company's hedge funds that are made on behalf of employees who opt for such investments under the terms of their deferred compensation agreements; any gains or losses will accrue to the individual employee once the deferred compensation is released to that individual.
A reconciliation of JMP Group's net revenues to its adjusted net
revenues for the quarter ended
Quarter Ended | |||||||||
(in thousands) |
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Revenues: | |||||||||
Non-interest revenues |
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Net interest income | 5,489 | 4,737 | 3,760 | ||||||
Loan loss (provision)/credit | (57 | ) | 1,229 | (497 | ) | ||||
Total net revenues | 40,950 | 53,631 | 37,660 | ||||||
Add back/(subtract): | |||||||||
General loan loss provision/(credit) - collateralized loan obligations |
91 | (487 | ) | 545 | |||||
Net unrealized (gain)/loss on strategic equity investments and warrants |
(1,020 | ) | 1,073 | 174 | |||||
Non-controlling interests - |
- | (10,675 | ) | 5,675 | |||||
Non-controlling interests - other revenues | (2,619 | ) | (1,805 | ) | (189 | ) | |||
Unrealized mark-to-market loss/(gain) - deferred compensation |
195 | (321 | ) | (70 | ) | ||||
Adjusted net revenues |
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Company management has utilized adjusted net revenue, adjusted in the manner described above, as an additional device to aid in understanding and analyzing JMP Group's financial results for the periods presented. Management believes that adjusting net revenue in these ways is useful in that it allows for a better evaluation of the performance of JMP Group's ongoing business and facilitates a meaningful comparison of the company's results in a given period to those in prior and future periods.
Asset Management-Related Fee Revenues
Asset
management-related fee revenue is a non-GAAP financial measure that sums
asset management fees with certain fee revenues (in particular, asset
management fundraising fees generated by
A statement of JMP Group's asset management-related fee revenues for the
quarter ended
Quarter Ended | |||||||||
(in thousands) |
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Base management fees: | |||||||||
Fees reported as asset management fees |
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Fees earned at |
- | 281 | 378 | ||||||
Less: Non-controlling interest in |
(300 | ) | (267 | ) | (191 | ) | |||
Total base management fees | 3,410 | 3,590 | 3,171 | ||||||
Incentive fees: | |||||||||
Fees reported as asset management fees | 952 | 7,013 | 2,561 | ||||||
Less: Non-controlling interest in |
(194 | ) | (558 | ) | 175 | ||||
Total incentive fees | 758 | 6,455 | 2,736 | ||||||
Other fee income: | |||||||||
Total fundraising and other fees | 740 | 1,769 | 222 | ||||||
Asset management-related fee revenues |
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Company management has utilized asset management-related fee revenue as a means of assessing the performance of JMP Group's combined asset management activities, including its fundraising and other services for third parties. Management believes that asset management-related fee revenues, as presented above, provide useful information by indicating the relative contributions of base management fees and performance-related incentive fees, thus facilitating a comparison of those fees in a given period to those in prior and future periods. Management also believes that asset management-related fee revenue is a more meaningful measure than standalone asset management fees as reported, because asset management-related fee revenues represent the combined impact of JMP Group's various asset management activities on the company's total net revenues.
Compensation Ratio
A compensation ratio expresses
compensation expense as a percentage of net revenues in a given period.
As utilized by
A statement of JMP Group's compensation ratio for the quarter ended
Quarter Ended | ||||||
($ in thousands) |
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Compensation Ratios | ||||||
Adjusted net revenues |
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Compensation and benefits |
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Subtract/(add back): | ||||||
Compensation expense - stock options and SARs | 674 | 509 | 395 | |||
Compensation expense - RSUs | 407 | 1,181 | 853 | |||
Compensation expense - net deferred compensation | 1,069 | (2,004) | (597) | |||
Unrealized mark-to-market gain - deferred compensation | (195) | 321 | 70 | |||
Compensation expense - non-controlling interest | 267 | (289) | 322 | |||
Adjusted compensation and benefits | 24,842 | 26,192 | 30,333 | |||
Subtract: | ||||||
Compensation expense - strategic initiatives | - | (850) | 610 | |||
Adjusted compensation and benefits, excluding strategic initiatives |
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Adjusted ratio of compensation expense to revenues | 66.1% | 63.2% | 69.3% | |||
Adjusted ratio of compensation expense to revenues, excluding strategic initiatives |
66.1% | 65.3% | 67.9% | |||
Compensation Ratios Excluding Hedge Fund Incentive Fees | ||||||
Adjusted net revenues |
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Subtract: | ||||||
Compensation expense - hedge fund incentive fees | 68 | 5,477 | 2,445 | |||
Adjusted net revenues, excluding hedge fund incentive fees |
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Adjusted compensation and benefits, excluding strategic initiatives |
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Subtract: | ||||||
Compensation expense - hedge fund incentive fees | 68 | 5,477 | 2,445 | |||
Adjusted compensation and benefits, excluding strategic initiatives and hedge fund incentive fees |
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Adjusted ratio of compensation expense to revenues, excluding strategic initiatives and hedge fund incentive fees |
66.0% | 60.0% | 66.0% |
Company management has utilized compensation ratios, adjusted in the manners described above, to assess JMP Group's personnel expenses as they relate to its revenues for the periods presented. Management believes that adjusted compensation ratios provide useful information by including or excluding certain expenses as a means of representing the company's ongoing personnel costs resulting from its core business activities. Management also believes that compensation ratios are useful measures because they allow and facilitate meaningful comparisons of the company's personnel expenses in a given period to those in prior and future periods.
Operating Net Income
Operating net income is a non-GAAP
financial measure that (i) reverses compensation expense related to
stock-based awards and deferred compensation, (ii) reverses the general
loan loss provision taken with regard to certain CLOs, (iii) reverses
net unrealized gains and losses on strategic equity investments and
warrants, and (iv) assumes an effective tax rate. In particular,
operating net income adjusts for:
- the grant of RSUs and stock options;
- net deferred compensation, which consists of (a) deferred compensation awarded at year-end 2012 and 2013 and reflected in operating net income for 2012 and 2013, though recognized as a GAAP expense in 2013, 2014 and 2015, less (b) compensation awarded at year-end 2013 and year-end 2014 and deferred into 2014, 2015 and 2016;
- the non-specific, non-cash loan loss provision recorded with regard to loans acquired during the period by JMP Credit Advisors CLO II and JMP Credit Advisors III, which is required by GAAP;
- unrealized mark-to-market gains or losses on the company's strategic equity investments as well as certain warrant positions; and
-
a combined federal, state and local income tax rate of 38% at the
taxable direct subsidiary of parent company
JMP Group , while applying a tax rate of 0% to the company's other direct subsidiary, which is a "pass-through entity" for tax purposes.
A reconciliation of JMP Group's net income to its operating net income
for the quarter ended
Quarter Ended | ||||||
(in thousands, except per share amounts) |
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Net income attributable to |
( |
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Add back: | ||||||
Income tax expense | 7,000 | 2,409 | 1,696 | |||
Income before taxes | 5,108 | 7,073 | 5,694 | |||
Add back/(subtract): | ||||||
Compensation expense - stock options and SARs | 674 | 509 | 395 | |||
Compensation expense - RSUs | 407 | 1,181 | 853 | |||
Compensation expense - net deferred compensation | 1,069 | (2,004) | (597) | |||
General loan loss provision - collateralized loan obligations | 91 | (487) | 545 | |||
Unrealized mark-to-market loss/(gain) - strategic equity investments and warrants |
(1,020) | 1,073 | 174 | |||
Operating income before taxes | 6,329 | 7,345 | 7,064 | |||
Income tax expense | 1,198 | 2,792 | 2,684 | |||
Operating net income |
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Operating net income per share: | ||||||
Basic |
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Diluted (1) |
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Weighted average shares outstanding: | ||||||
Basic | 21,216 | 20,716 | 21,820 | |||
Diluted (1) | 22,218 | 22,502 | 22,806 |
(1) |
In 2013 and the first quarter of 2014, |
Company management has utilized operating net income on a total and per share basis, adjusted in the manner described above, as an additional device to aid in understanding and analyzing JMP Group's financial results for the periods presented. Management believes that operating net income provides useful information by excluding certain items that may not be representative of the company's core operating results or core business activities. Management also believes that operating net income is a useful measure because it allows for a better evaluation of the performance of JMP Group's ongoing business and facilitates a meaningful comparison of the company's results in a given period to those in prior and future periods.
Segment Reporting
In order to demonstrate the contribution
to the company's results of each of its primary businesses on a
standalone basis,
Total net revenues have been adjusted, in part, as detailed above in the section titled "Adjusted Net Revenue," and the resulting adjusted net revenues (i) reverses the general loan loss provision taken with regard to certain CLOs, (ii) reverses net unrealized gains and losses on strategic equity investments and warrants, (iii) excludes non-controlling interests in other sources of revenue that are consolidated according to GAAP, and (iv) reverses unrealized mark-to-market gains or losses on investments related to deferred compensation. Total non-interest expenses have been adjusted, in part, as detailed above in the section titled "Operating Net Income," and the resulting adjusted non-interest expense reverses compensation expense related to stock-based awards and deferred compensation. Expenses derived from non-controlling interests in entities that are consolidated according to GAAP have also been reversed. For the purposes of calculating operating net income, an effective tax rate of 38% is assumed for JMP Group's taxable subsidiary.
A statement of JMP Group's operating net income on a segment basis for
the quarter ended
Quarter Ended |
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Corporate | Net | ||||||||||||||||
Broker- | Asset | Credit | Operating | Corporate | Elimin- | JMP | |||||||||||
(in thousands, except per share amounts) | Dealer | Mgmt. | Mgmt. | Platforms | Income | ations | Group | ||||||||||
Revenues: | |||||||||||||||||
Investment banking |
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- | - |
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- | - |
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Brokerage | 6,065 | - | - | 6,065 | - | - | 6,065 | ||||||||||
Asset management-related fees | - |
|
|
6,370 | - |
( |
) | 4,908 | |||||||||
Principal transactions | - | - | - | - |
|
- | 2,918 | ||||||||||
Gain on sale and payoff of loans | - | - | - | - | (390 | ) | - | (390 | ) | ||||||||
Net dividend income | - | - | - | - | 191 | - | 191 | ||||||||||
Net interest income | - | - | - | - | 3,209 | - | 3,209 | ||||||||||
Provision for loan losses | - | - | - | - | 2 | - | 2 | ||||||||||
Adjusted net revenues | 26,759 | 5,000 | 1,370 | 33,129 | 5,930 | (1,462 | ) | 37,597 | |||||||||
Expenses: | |||||||||||||||||
Non-interest expense/(income) | 22,200 | 4,755 | 1,022 | 27,977 | 4,753 | (1,462 | ) | 31,268 | |||||||||
Operating income before taxes | 4,559 | 245 | 348 | 5,152 | 1,177 | - | 6,329 | ||||||||||
Income tax expense/(benefit) | 1,732 | 93 | 132 | 1,957 | (759 | ) | - | 1,198 | |||||||||
Operating net income |
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- |
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Operating net income per share: | |||||||||||||||||
Basic |
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- |
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Diluted (1) |
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- |
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(1) |
In 2013 and the first quarter of 2014, |
Book Value per Share
At
(in thousands, except per share amounts) |
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Shareholders' equity |
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Book value per share |
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Basic shares outstanding | 21,229 | 21,216 | 21,833 | |||
Quarterly operating ROE (1) |
15.6% | 13.5% | 13.6% | |||
LTM operating ROE (1) |
12.9% | 12.4% | 11.4% |
(1) |
Operating return on equity (ROE) equals operating net income divided by average shareholders' equity. |
Share Repurchase Activity
Cautionary Note Regarding Quarterly Financial Results
Due to
the nature of its business, JMP Group's quarterly revenues and net
income may fluctuate materially depending on: the size and number of
investment banking transactions on which it advises; the timing of the
completion of those transactions; the size and number of securities
trades which it executes for brokerage customers; the performance of its
asset management funds and inflows and outflows of assets under
management; gains or losses stemming from sales of or prepayments on, or
losses stemming from defaults on, loans underlying the company's
collateralized loan obligations; and the effect of the overall condition
of the securities markets and economy as a whole. Accordingly, revenues
and net income in any particular quarter may not be indicative of future
results. Furthermore, JMP Group's compensation expense is generally
based upon revenues and can fluctuate materially in any quarter,
depending upon the amount and sorts of revenue recognized as well as
other factors. The amount of compensation and benefits expense
recognized in a particular quarter may not be indicative of such expense
in any future period. As a result, the company suggests that its annual
results may be the most meaningful gauge for investors in evaluating the
performance of its business.
Cautionary Note Regarding Forward-Looking Statements
This
press release may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements provide JMP Group's current expectations or forecasts about
future events, including 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 that could cause actual results to differ materially from
those expected or implied by the forward-looking statements. 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 Form 10-K for the year ended
Conference Call
The conference call will also be broadcast live over the Internet and will be accessible via a link in the investor relations section of the company's website, at investor.jmpg.com/events.cfm. The Internet broadcast will be archived and will remain available on the website for future replay.
About
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||||
Consolidated Statements of Financial Condition | ||||
(Unaudited) |
||||
(in thousands) |
|
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Assets | ||||
Cash and cash equivalents |
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Restricted cash and deposits | 75,164 | 67,102 | ||
Marketable securities owned, at fair value | 36,952 | 29,466 | ||
Other investments | 87,930 | 208,947 | ||
Loans held for investment, net of allowance for loan losses | 1,952 | 1,997 | ||
Loans collateralizing asset-backed securities issued, net of allowance for loan losses |
1,031,613 | 1,038,848 | ||
Deferred tax assets | 11,509 | 10,570 | ||
Other assets | 44,554 | 57,900 | ||
Total assets |
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Liabilities and Shareholders' Equity | ||||
Liabilities: | ||||
Marketable securities sold, but not yet purchased, at fair value |
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Accrued compensation | 10,853 | 54,739 | ||
Asset-backed securities issued | 995,046 | 1,001,137 | ||
Bond payable | 94,300 | 94,300 | ||
Deferred tax liability | 21,129 | 19,161 | ||
Other liabilities | 39,274 | 42,878 | ||
Total liabilities | 1,178,279 | 1,227,263 | ||
Stockholders' Equity: | ||||
Total |
130,431 | 132,597 | ||
Non-redeemable non-controlling interest | 30,301 | 156,332 | ||
Total equity | 160,732 | 288,929 | ||
Total liabilities and shareholders' equity |
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Consolidated Statements of Operations | ||||||
(Unaudited) |
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Quarter Ended | ||||||
(in thousands, except per share amounts) |
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Revenues: | ||||||
Investment banking |
|
|
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Brokerage | 6,065 | 6,656 | ||||
Asset management fees | 4,662 | 5,544 | ||||
Principal transactions | 3,744 | (3,693 | ) | |||
Gain/(loss) on sale, payoff and mark-to-market of loans | (578 | ) | 380 | |||
Net dividend income | 191 | 235 | ||||
Other income | 740 | 222 | ||||
Non-interest revenues | 35,518 | 34,397 | ||||
Interest income | 12,777 | 8,588 | ||||
Interest expense | (7,288 | ) | (4,828 | ) | ||
Net interest income | 5,489 | 3,760 | ||||
Provision for loan losses | (57 | ) | (497 | ) | ||
Total net revenues | 40,950 | 37,660 | ||||
Non-interest expenses: | ||||||
Compensation and benefits | 27,064 | 31,376 | ||||
Administration | 1,692 | 1,722 | ||||
Brokerage, clearing and exchange fees | 798 | 925 | ||||
Travel and business development | 938 | 851 | ||||
Communications and technology | 970 | 948 | ||||
Occupancy | 813 | 825 | ||||
Professional fees | 974 | 807 | ||||
Depreciation | 226 | 227 | ||||
Other | 530 | 212 | ||||
Total non-interest expense | 34,005 | 37,893 | ||||
Net income/(loss) before income tax expense | 6,945 | (233 | ) | |||
Income tax expense | 7,000 | 1,696 | ||||
Net income/(loss) | (55 | ) | (1,929 | ) | ||
Less: Net income/(loss) attributable to non-redeemable non-controlling interests |
1,837 | (5,927 | ) | |||
Net income/(loss) attributable to |
( |
) |
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Net income/(loss) attributable to |
||||||
Basic |
( |
) |
|
|||
Diluted |
( |
) |
|
|||
Weighted average common shares outstanding: | ||||||
Basic | 21,216 | 21,820 | ||||
Diluted | 21,216 | 23,612 |
Investor Relations Contact
apalmer@jmpg.com
or
Media
Relations Contacts
Dukas Public Relations
seth@dukaspr.com
or
zach@dukaspr.com
Source:
News Provided by Acquire Media