UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM 8-K



CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  May 1, 2019



JMP Group LLC
(Exact Name of Registrant as Specified in Charter)


Delaware

 

001-36802

 

47-1632931

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

600 Montgomery Street, Suite 1100, San Francisco, California 94111
(Address of Principal Executive Offices, including zip code)

415-835-8900
(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 2.02. Results of Operations and Financial Condition

On May 1, 2019, JMP Group LLC (the “Company”) issued a press release announcing financial results for its first quarter ended March 31, 2019. A copy of the Company's press release containing this information is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information furnished pursuant to Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

The information furnished in this report, including Exhibit 99.1, shall not be deemed to constitute an admission that such information or exhibit is required to be furnished pursuant to Regulation FD or that such information or exhibit contains material information that is not otherwise publicly available. In addition, the Company does not assume any obligation to update such information or exhibit in the future.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits.
The following exhibits are furnished as part of this Current Report on Form 8-K:

99.1         Press release of the Company dated May1, 2019.


Signature(s)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

JMP GROUP LLC

 

 
Date: May 1, 2019 By:

/s/ Raymond Jackson

Raymond Jackson

Chief Financial Officer

Exhibit 99.1

JMP Group Reports First Quarter 2019 Financial Results

SAN FRANCISCO--(BUSINESS WIRE)--May 1, 2019--JMP Group LLC (NYSE: JMP), an investment banking and alternative asset management firm, reported financial results today for the quarter ended March 31, 2019.

A summary of JMP Group’s operating results for the quarter ended March 31, 2019, and for comparable prior periods, is set forth below.

  Quarter Ended
(in thousands, except per share amounts) Mar. 31, 2019   Dec. 31, 2018   Mar. 31, 2018
 
Total net revenues $27,167 $31,698 $27,211
 
Net income/(loss) attributable to JMP Group $5,069 ($203 ) ($283 )
Net income/(loss) attributable to JMP Group per share $0.24 ($0.01 ) ($0.01 )
 
Operating net income $1,669 $2,525 ($1,631 )
Operating net income per share $0.08 $0.12 ($0.07 )
 
Book value per share $4.08 $3.93 $4.34
Adjusted book value per share $4.77 $4.98 $5.23

For more information about operating net income, including a reconciliation to net income, and adjusted book value per share, including a reconciliation to book value per share, see the section below titled “Non-GAAP Financial Measures.”

“We had a better-than-expected first quarter, thanks to very strong investment results, with operating net income of $0.08 per share,” said Chairman and Chief Executive Officer Joe Jolson. “JMP Securities, normally a meaningful contributor to earnings, faced a stiff headwind in the form of a partial government shutdown and lost $0.05 per share, with the SEC’s closure drastically curtailing capital markets activity for much of the period. Asset management fee income and investment income combined to contribute $0.12 per share, compared to a loss of $0.07 per share for the first quarter of 2018. In an important strategic shift, we executed a March sale of a controlling interest in JMP Credit Advisors to Medalist Partners, raising additional growth capital for our corporate credit business and adding approximately $0.08 to operating EPS.

“With the closing of the Medalist transaction, we completed an aggressive corporate simplification process that began in the fourth quarter of last year with the goal of making our business simpler for us to manage and easier for investors to understand. Going forward, we do not expect that our CLO investments will be consolidated in our financial statements, which will mean a decrease in our total assets from $1.4 billion to approximately $220 million and a decrease in our long-term debt from $1.2 billion to approximately $84 million. Additionally, the sale of our largest hedge fund, Harvest Small Cap Partners, at year-end substantially reduces the volatility of not only our revenues—specifically quarterly incentive fee income—but also our closely-watched compensation ratio. Finally, the IRS recently approved our previously disclosed election to be taxed as a C corporation for 2019 and beyond, increasing our corporate tax rate but removing substantial corporate costs and eliminating Schedule K-1s for investors.”


Segment Results of Operations

A summary of JMP Group’s operating net income per share by segment for the quarter ended March 31, 2019, and for comparable prior periods, is set forth below.

  Quarter Ended

($ as shown)

Mar. 31, 2019   Dec. 31, 2018     Mar. 31, 2018
 
Broker-dealer ($0.05 ) $0.08 $0.08
 
Asset management fee income (0.03 ) 0.01 (0.03 )
Investment income 0.23  

(1)

0.14   (0.03 )
Total asset management 0.20 0.14 (0.07 )
 
Corporate costs (0.07 ) (0.11 ) (0.09 )
 
Operating EPS (diluted) $0.08   $0.12   ($0.07 )

(1)

 

Includes a gain of $0.08 per share on the sale of a controlling interest in JMP Credit Advisors LLC to Medalist Partners LP.

Note: Due to rounding, numbers in columns above may not sum to totals presented.

For more information about 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 $11.9 million, a decrease of 42.5% from $20.7 million for the quarter ended March 31, 2018.

A summary of the company’s investment banking revenues and transaction counts for the quarter ended March 31, 2019, and for comparable prior periods, is set forth below.

  Quarter Ended
Mar. 31, 2019   Dec. 31, 2018   Mar. 31, 2018
($ in thousands) Count   Revenues Count   Revenues Count   Revenues
Equity and debt origination 17 $6,789 (1) 17 $7,383 (1) 21 $11,862
Strategic advisory and private placements 6 5,090 5 10,405 7 8,800
Total 23 $11,879 (1) 22 $17,788 (1) 28 $20,662

Brokerage

Net brokerage revenues were $4.5 million, a decrease of 2.8% from $4.7 million for the quarter ended March 31, 2018.

Total capital markets revenues, which consist of net brokerage revenues produced by the institutional equities division in addition to equity and debt origination revenues generated by the investment banking division, were $11.3 million, a decrease of 31.5% from $16.5 million for the quarter ended March 31, 2018.


Asset Management

Asset management fees were $1.7 million, a decrease of 73.5% from $6.4 million for the quarter ended March 31, 2018. The decrease is primarily due to the sale of the Harvest Small Cap Partners hedge fund strategy at year-end 2018. For the quarter ended March 31, 2018, the fund strategy contributed $4.8 million to asset management fees. While the sale results in a considerable loss of asset management revenue, it was structured to have a neutral to slightly positive effect on JMP Group’s operating net income going forward, as the company will share in the fund strategy’s revenues in 2019 and beyond.

A summary of the company’s client assets under management for the quarter ended March 31, 2019, and for comparable prior periods, is set forth below.

(in millions)   Mar. 31, 2019   Dec. 31, 2018   Mar. 31, 2018

Harvest Capital Strategies, JMP Asset Management and HCAP Advisors

$517 $921 $883
JMP Credit Advisors (1) - 1,245 965
Client assets under management 517 2,166 1,848
Assets under management by sponsored funds (2) 4,928 3,449 3,420

Client assets under management, including sponsored funds

$5,445 $5,615 $5,268

(1)

 

As announced on March 20, 2019, JMP Group sold a 50.1% equity interest in JMP Credit Advisors LLC to Medalist Partners LP and a 4.9% interest to employees of JMP Credit Advisors. Consequently, assets managed by Medalist Partners Corporate Finance, the former JMP Credit Advisors, are included among sponsored funds as of March 31, 2019.

(2)

Funds managed by third-party asset managers in which JMP Group owns an economic interest.

Principal Transactions

Principal transactions generated a net gain of $5.3 million, compared to a net loss of $3.6 million for the quarter ended March 31, 2018. The difference is primarily due to a gain of $3.4 million on the previously announced sale of a majority interest in JMP Credit Advisors for the quarter ended March 31, 2019, in addition to a gain of $0.2 million on JMP Group’s investment in Workspace Property Trust, compared to a loss of $2.0 million on the investment for the quarter ended March 31, 2018, due to costs associated with a failed initial public offering.

Net Interest Income

Net interest income was $3.5 million, an increase of 17.0% from $3.0 million for the quarter ended March 31, 2018.

Provision for Loan Losses

For the quarter ended March 31, 2019, there was no loan loss provision, compared to a net loan loss provision of $1.5 million for the quarter ended March 31, 2018, as a result of better-than-expected credit performance and the deconsolidation of the collateralized loan obligations managed by JMP Credit Advisors from JMP Group’s financial statements.


Expenses

Compensation and Benefits

Compensation and benefits expense was $17.2 million, compared to $24.3 million for the quarter ended March 31, 2018. As a percentage of net revenues, compensation and benefits expense was 63.4%, compared to 89.2% for the quarter ended March 31, 2018. With regard to annually awarded compensation, a non-GAAP measure that adjusts compensation expense related to share-based awards and deferred compensation, compensation and benefits expense was 60.3% of net revenues, compared to 88.6% for the quarter ended March 31, 2018.

For more information about compensation ratios, see the section below titled “Non-GAAP Financial Measures.”

Non-Compensation Expense

Non-compensation expense was $8.9 million, compared to $10.3 million for the quarter ended March 31, 2018.

Share Repurchase Activity

During the quarter ended March 31, 2019, JMP Group repurchased approximately 157,000 shares of its common stock at an aggregate cost of $0.7 million, or $4.23 per share.

Personnel

At March 31, 2019, the company had 197 full-time employees, compared to 228 at December 31, 2018, and 211 at March 31, 2018. The decrease in 2019 is primarily due to the sale of the Harvest Small Cap Partners fund strategy at year-end 2018 and the sale of a majority interest in JMP Credit Advisors in March 2019, as the related employees departed JMP Group upon the closing of both transactions.


Non-GAAP Financial Measures

In addition to the GAAP financial results presented in this press release, JMP Group presents the non-GAAP financial measures discussed below. These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance. Furthermore, company management believes that this presentation enables a more meaningful comparison of JMP Group’s financial performance across various periods. However, the non-GAAP financial results presented should not be considered a substitute for results that are presented in a manner consistent with GAAP. A limitation of the non-GAAP financial measures presented is that the adjustments concern gains, losses or expenses that JMP Group generally expects to continue to recognize. The adjustment of these non-GAAP items should not be construed as an inference that these gains or expenses are unusual, infrequent or non-recurring. Therefore, both GAAP measures of JMP Group’s financial performance and the respective non-GAAP measures should be considered together. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies.

Compensation Ratio

A compensation ratio expresses compensation expense as a percentage of net revenues in a given period. As presented by JMP Group, an adjusted compensation ratio is a non-GAAP financial measure that utilizes adjusted compensation and benefits expense as the numerator. This adjusted ratio excludes certain compensation-related expenses that are or are not recognized under GAAP. In particular, the adjusted compensation ratio reverses compensation expense and unrealized mark-to-market gains or losses related to share-based awards and deferred compensation (so that the compensation expenses used in the numerator correspond to the adjusted net revenues generated in the periods presented).

A statement of JMP Group’s compensation ratio for the quarter ended March 31, 2019, and for comparable prior periods, is set forth below.

  Quarter Ended
($ in thousands) Mar. 31, 2019   Dec. 31, 2018   Mar. 31, 2018
 
Total net revenues $27,167   $31,698   $27,211  
 
Compensation and benefits $17,222 $21,289 $24,261

Subtract/(add back):

Share-based awards and deferred compensation 844   (122 ) 144  
Adjusted compensation and benefits $16,378   $21,411   $24,117  
 
Ratio of compensation expense to net revenues

63.4%

 

67.2%

 

89.2%

 

Ratio of adjusted compensation expense to net revenues

60.3%

 

67.5%

 

88.6%

 


Operating Net Income

Operating net income is a non-GAAP financial measure that (i) reverses compensation expense related to share-based awards and deferred compensation, (ii) reverses the general loan loss provision taken with regard to certain CLOs, (iii) excludes the impact of the early retirement of debt issued by JMP Group and a CLO, (iv) excludes transaction costs related to a CLO, (v) excludes amortization expense related to a CLO, (vi) reverses unrealized gains or losses related to real estate investment properties, (vii) reverses net unrealized gains and losses on strategic equity investments and warrants, and (viii) assumes an effective tax rate. In particular, operating net income adjusts for:


A reconciliation of JMP Group’s net income to its operating net income for the quarter ended March 31, 2019, and for comparable prior periods is set forth below.

  Quarter Ended
(in thousands, except per share amounts) Mar. 31, 2019   Dec. 31, 2018   Mar. 31, 2018
 
Net income/(loss) attributable to JMP Group $5,069 ($203 ) ($283 )
 
Add back/(subtract):
Income tax expense/(benefit) (4,102 ) 1,313   (5,568 )
Income/(loss) before taxes 967 1,110 (5,851 )
 
Add back/(subtract):
Share-based awards and deferred compensation 844 (122 ) 144

General loan loss provision/(reversal) – collateralized loan obligations

- 530 329
Early retirement of debt - - 1,318
Restructuring costs – CLO portfolios - - 64
Amortization of intangible asset – CLO III 277 69 69

Unrealized (gain)/loss – real estate-related depreciation and amortization

557 369 1,628

Unrealized mark-to-market (gain)/loss – strategic equity investments and warrants

(390 ) 837   638  
Operating income/(loss) before taxes 2,255 2,793 (1,661 )
 
Income tax expense/(benefit) 586   268   (30 )
Operating net income/(loss) $1,669   $2,525   ($1,631 )
 
Operating net income/(loss) per share:
Basic $0.08 $0.12 ($0.08 )
Diluted (1) $0.08 $0.12 ($0.07 )
 
Weighted average shares outstanding:
Basic 21,288 21,326 21,666
Diluted (1) 21,429 21,614 21,811

(1)

 

On a GAAP basis, the weighted average number of diluted shares outstanding for the quarters ended December 31, 2018, and March 31, 2018, was 21,326,473 and 21,665,652, respectively, equivalent to the weighted average number of basic shares outstanding, due to the company’s net loss for those periods. Under GAAP, in a period of net loss, dilutive securities are disregarded in the calculation of earnings per share.


Book Value per Share

At March 31, 2019, JMP Group’s book value per share was $4.08. Adding back accumulated depreciation and amortization expense related to commercial real estate investments that is recognized by JMP Group as a result of equity method accounting reflects the reversal of that expense in the calculation of adjusted net revenues, adjusted principal transaction revenues and operating net income. Starting with the quarter ended March 31, 2019, the add-back includes a tax provision related to the expense reversed in that period, due to the company’s election to be taxed as a C corporation as of January 1, 2019. Likewise, adding back the accumulated general loan loss provision related to collateralized loan obligations reflects the reversal of that provision in the calculation of adjusted net revenues and operating net income, an adjustment not made subsequent to the sale of a majority interest in JMP Credit Advisors in March 2019. As a result, adjusted book value per share was $4.77 for the quarter ended March 31, 2019, as set forth below.

(in thousands, except per share amounts)   Mar. 31, 2019   Dec. 31, 2018   Mar. 31, 2018
 
Shareholders' equity $86,633   $83,707   $93,418  
 

Accumulated unrealized loss – real estate-related depreciation and amortization

$14,596 $14,184 $13,578

Accumulated general loan loss provision – collateralized loan obligations

-   8,337   5,787  
Adjusted shareholders' equity $101,229   $106,227   $112,783  
 
Book value per share $4.08   $3.93   $4.34  
Adjusted book value per share $4.77   $4.98   $5.23  
 
Basic shares outstanding 21,210 21,320 21,547
 
Quarterly operating ROE (1)

7.8%

 

11.8%

 

(6.9%

)

LTM operating ROE (1)

10.6%

 

6.7%

 

4.7%

 

 
Quarterly adjusted operating ROE (1)

6.4%

 

9.4%

 

(5.8%

)

LTM adjusted operating ROE (1)

8.7%

 

5.5%

 

4.1%

 

(1)

 

Operating return on equity (ROE) equals operating net income divided by average shareholders’ equity. Adjusted operating ROE equals operating net income divided by average adjusted shareholders’ equity. For more information about operating net income, including a reconciliation to net income attributable to JMP Group, see the section above titled “Operating Net Income.”


Conference Call

JMP Group will hold a conference call to discuss the results detailed herein at 10:00 a.m. ET on Thursday, May 2, 2019. To participate in the call, dial (888) 566-6060 (domestic) or (973) 200-3100 (international). The conference identification number is 7289566.

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.

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 December 31, 2018, as filed with the U.S. Securities and Exchange Commission on March 28, 2019, as well as in the similarly captioned sections of other periodic reports filed by the company under the Exchange Act. The Form 10-K for the year ended December 31, 2017, and all other periodic reports are available on JMP Group’s website at www.jmpg.com and on the SEC’s website at www.sec.gov. Unless required by law, JMP Group undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this press release.

Disclosure Information

JMP Group uses the investor relations section of its website as a means of complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor the company’s website in addition to its press releases, SEC filings, and investor conference calls and webcasts.

About JMP Group

JMP Group LLC is a diversified capital markets firm that provides investment banking, equity research, and sales and trading services to corporate and institutional clients as well as alternative asset management products and services to institutional and high-net-worth investors. JMP Group conducts its investment banking and research, sales and trading activities through JMP Securities; its hedge fund, venture capital and private capital activities through Harvest Capital Strategies and JMP Asset Management; and the management of Harvest Capital Credit Corporation (NASDAQ: HCAP), a business development company, through HCAP Advisors. For more information, visit www.jmpg.com.


JMP GROUP LLC

Consolidated Statements of Financial Condition

(Unaudited)

(in thousands)   Mar. 31, 2019   Dec. 31, 2018
 
Assets
 
Cash and cash equivalents $41,909 $70,927
Restricted cash and deposits 1,221 61,881
Marketable securities owned 92,190 18,874
Other investments 23,447 16,124
Loans held for investment, net of allowance for loan losses 4,962 29,608

Loans collateralizing asset-backed securities issued, net of allowance for loan losses

- 1,161,463
Other assets 58,036   32,365
Total assets $221,765   $1,391,242
 
Liabilities and Shareholders' Equity
 
Liabilities:
Marketable securities sold, but not yet purchased $2,696 $4,626
Accrued compensation 5,647 41,609
Bond payable, net of issuance costs 83,600 83,497
Note payable 829 829
Asset-backed securities issued, net of issuance costs - 1,112,342
CLO warehouse facility - 22,500
Other liabilities 42,546   28,633
Total liabilities 135,318   1,294,036
 
Shareholders' Equity:
Total JMP Group LLC shareholders' equity 86,633 83,707
Non-redeemable non-controlling interest (186 ) 13,499
Total equity 86,447   97,206
Total liabilities and shareholders' equity $221,765   $1,391,242

JMP GROUP LLC

Consolidated Statements of Operations

(Unaudited)

  Quarter Ended
(in thousands, except per share amounts) Mar. 31, 2019   Mar. 31, 2018
 
Revenues:
Investment banking $11,879 $20,662
Brokerage 4,535 4,664
Asset management fees 1,703 6,425
Principal transactions 5,288 (3,620 )
Gain/(loss) on sale and payoff of loans (17 ) (182 )
Net dividend income 296 296
Other income (35 ) 49  
Non-interest revenues 23,649   28,294  
 
Interest income 14,291 12,710
Interest expense (10,773 ) (9,702 )
Net interest income 3,518   3,008  
 
Gain/(loss) on repurchase or early retirement of debt - (2,626 )
Provision for loan losses -   (1,465 )
Total net revenues 27,167   27,211  
 
Non-interest expenses:
Compensation and benefits 17,222 24,261
Administration 1,929 2,233
Brokerage, clearing and exchange fees 701 777
Travel and business development 1,021 954
Managed deal expenses 533 1,566
Communications and technology 1,053 1,062
Occupancy 1,423 1,117
Professional fees 1,456 1,905
Depreciation 297 264
Other 495   387  
Total non-interest expense 26,130   34,526  
 
Net income/(loss) before income tax 1,037 (7,315 )
Income tax expense/(benefit) (4,102 ) (5,568 )
Net income/(loss) 5,139 (1,747 )

Less: Net income/(loss) attributable to non-redeemable non-controlling interest

70   (1,464 )
Net income/(loss) attributable to JMP Group $5,069   ($283 )
 
Net income/(loss) attributable to JMP Group per share:
Basic $0.24 ($0.01 )
Diluted $0.24 ($0.01 )
 
Weighted average common shares outstanding:
Basic 21,288 21,666
Diluted 21,429 21,666

CONTACT:
Investor Relations Contact
JMP Group LLC
Andrew Palmer
(415) 835-8978
apalmer@jmpg.com

Media Relations Contacts
Dukas Linden Public Relations, Inc.
Zach Leibowitz
(646) 722-6528
zach@dlpr.com

Alyssa Noud
(646) 722-6525
alyssa@dlpr.com