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04/29/21
JMP Group Reports First Quarter 2021 Financial Results

SAN FRANCISCO--(BUSINESS WIRE)--Apr. 29, 2021-- JMP Group LLC (NYSE: JMP), an investment banking and alternative asset management firm, reported financial results today for the quarter ended March 31, 2021.

A summary of JMP Group’s operating results for the quarter ended March 31, 2021, and for comparable prior periods, is set forth below.

      Quarter Ended
  (in thousands, except per share amounts)   Mar. 31, 2021   Dec. 31, 2020   Mar. 31, 2020
               
  Total net revenues  

$38,493

 

$53,615

 

$5,267

 

               
  Net income/(loss) attributable to JMP Group  

$1,089

 

$9,009

 

($11,748

)

  Net income/(loss) attributable to JMP Group per share  

$0.05

 

$0.45

 

($0.60

)

               
  Operating net income/(loss)  

$3,784

 

$8,427

 

($537

)

  Operating net income/(loss) per share  

$0.18

 

$0.42

 

($0.03

)

               
  Book value per share  

$3.38

 

$3.18

 

$2.64

 

  Adjusted book value per share  

$4.24

 

$4.03

 

$3.45

 

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.”

“Driven by strong results at JMP Securities, JMP Group posted operating EPS of $0.18 for the first quarter and a record $0.84 for the latest 12 months,” said Joe Jolson, chairman and CEO of JMP Group. “We continue to make good progress at refocusing our company on its core operations, while looking to opportunistically monetize corporate investments and retire long-term debt. We redeemed $10 million of senior notes in February and expect to reduce the remaining balance later this year, if the sale of Harvest Capital Credit Corporation closes in June as planned. Our adjusted book value per share has increased from $3.45 to $4.24 over the past year, and improving this metric continues to be a key objective for us.”

“We’re very proud of our first-quarter results, as they represent a continuation of the terrific momentum we built during such a successful 2020,“ said Mark Lehmann, president of JMP Group and CEO of JMP Securities. “JMP Securities produced capital markets revenues of $31.6 million, a new record not just for the first quarter but for any quarter of the year. We underwrote nine IPOs and 18 follow-on offerings during the period, bookrunning five of those transactions. In addition, our ECM backlog is as strong as it’s ever been, across multiple verticals, making us optimistic about our prospects for the balance of the year. On the advisory front, we remain active, and our M&A fee revenues should build as many of the deals in a very full pipeline close in coming quarters.“

 

Segment Results of Operations

A summary of JMP Group’s operating net income per share by segment for the quarter ended March 31, 2021, and for comparable prior periods, is set forth below.

      Quarter Ended
($ as shown)   Mar. 31, 2021   Dec. 31, 2020   Mar. 31, 2020
             
Broker-dealer  

$0.21

 

 

$0.42

 

 

($0.01

)

               
Asset management:            
  Asset management fee income  

0.00

 

 

0.03

 

 

(0.02

)

  Investment income  

0.06

 

 

0.10

 

 

0.07

 

  Total asset management  

0.06

 

 

0.13

 

 

0.05

 

               
Corporate costs  

(0.08

)

 

(0.13

)

 

(0.07

)

               
  Operating EPS (diluted)  

$0.18

 

 

$0.42

 

 

($0.03

)

                     
 

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 for the quarter were $32.6 million, an increase of 122.7% from $14.6 million for the quarter ended March 31, 2020. The $32.6 million for the quarter ended March 31, 2021, represents a record first-quarter total and the second-largest total for any quarter in the company’s history, trailing only the $43.3 million recorded for the quarter ended December 31, 2020.

A summary of the company’s investment banking revenues and transaction counts for the quarter ended March 31, 2021, and for comparable prior periods, is set forth below.

    Quarter Ended
    Mar. 31, 2021   Dec. 31, 2020   Mar. 31, 2020
($ in thousands)   Count   Revenues   Count   Revenues   Count   Revenues
                         
Equity and debt origination  

41

 

$25,670

 

33

 

$20,658

 

17

 

$8,556

Strategic advisory and private placements  

6

 

6,899

 

12

 

22,632

 

4

 

6,069

                         
Total  

47

 

$32,569

 

45

 

$43,290

 

21

 

$14,625

Brokerage

Net brokerage revenues for the quarter were $5.9 million, an increase of 41.0% from $4.2 million for the quarter ended March 31, 2020.

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 $31.6 million for the quarter, an increase of 147.8% from $12.7 million for the quarter ended March 31, 2020.

 

Asset Management

Asset management fees for the quarter were $2.2 million, an increase of 26.4% from $1.7 million for the quarter ended March 31, 2020.

A summary of the company’s client assets under management for the quarter ended March 31, 2021, and for comparable prior periods, is set forth below.

  (in millions)   Mar. 31, 2021   Dec. 31, 2020   Mar. 31, 2020
               
  Client assets under management (1)  

$694

 

$660

 

$549

  Assets under management by sponsored funds (2)  

4,825

 

4,934

 

5,136

               
  Client assets under management including sponsored funds  

$5,519

 

$5,594

 

$5,685

(1)

Includes assets managed by Harvest Capital Strategies, JMP Asset Management, and HCAP Advisors on behalf of third parties.

(2)

Sponsored funds are asset management strategies in which JMP Group owns an economic interest. Includes assets managed by Medalist Partners Corporate Finance, the former JMP Credit Advisors.

Principal Transactions

Principal transactions generated a net realized and unrealized loss of $3.2 million for the quarter, compared to a net realized and unrealized loss of $17.6 million for the quarter ended March 31, 2020. The year-over-year difference is in part due to the impairment of CLO equity owned by JMP Group. A reduction in the net present value of forecasted cash flows through the end of the expected life of the collateralized loan obligations required an impairment charge of $4.6 million for the quarter ended March 31, 2021. For the quarter ended March 31, 2020, the impairment charge was $13.5 million.

Net Interest Income

Net interest income for the quarter was $0.5 million, an increase of 23.4% from $0.4 million for the quarter ended March 31, 2020.

Expenses

Compensation and Benefits

Compensation and benefits expense for the quarter was $29.9 million, compared to $16.2 million for the quarter ended March 31, 2020. As a percentage of net revenues, compensation and benefits expense was 77.8%, compared to 307.8% for the quarter ended March 31, 2020.

Non-Compensation Expense

Non-compensation expense for the quarter was $7.0 million, compared to $8.1 million for the quarter ended March 31, 2020.

Share Repurchase Activity

JMP Group did not repurchase any outstanding common shares during the quarter ended March 31, 2021.

Personnel

At March 31, 2021, the company had 179 full-time employees, compared to 180 at December 31, 2020, and 192 at March 31, 2020.

 

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.

Operating Net Income

Operating net income is a non-GAAP financial measure that (i) excludes compensation expense related to share-based awards and deferred compensation, (ii) reverses impairment charges related to CLO equity, (iii) excludes costs resulting from the early retirement of debt, (iv) reverses unrealized gains or losses on real estate investments, (v) reverses net unrealized gains and losses on strategic equity investments and warrants, and (vi) assumes an effective tax rate. In particular, operating net income adjusts for:

  • the grant of restricted stock units and options;
  • net deferred compensation, which consists of (a) deferred compensation awarded in a given period but recognized as a GAAP expense over the subsequent three years, less (b) GAAP expense recognized in a given period but already reflected in the operating income of a prior period; the purpose of this adjustment is to fully reflect compensation awarded in a given year, notwithstanding the timing of GAAP expense;
  • the impairment of CLO equity recorded among principal transactions, as the company believes that the forecasted reduction in future cash flows will be mitigated by a change in the interest rate environment and that distributions will be larger than currently projected;
  • expenses associated with the redemption of outstanding senior notes and the resulting acceleration of the amortization of remaining capitalized issuance costs;
  • unrealized gains or losses related to commercial real estate investments, adjusted for non-cash expenditures, including depreciation and amortization;
  • 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 26% at the consolidated taxable parent company, JMP Group.
 

A reconciliation of JMP Group’s net income to its operating net income for the quarter ended March 31, 2021, and for comparable prior periods is set forth below.

      Quarter Ended
  (in thousands, except per share amounts)   Mar. 31, 2021   Dec. 31, 2020   Mar. 31, 2020
           
  Net income/(loss) attributable to JMP Group  

$1,089

 

 

$9,009

 

 

($11,748

)

               
  Add back/(subtract):            
  Income tax expense/(benefit)  

379

 

 

3,907

 

 

(7,239

)

  Income/(loss) before taxes  

1,468

 

 

12,916

 

 

(18,987

)

             
  Add back/(subtract):          
  Share-based awards and deferred compensation  

(521

)

 

(2,440

)

 

546

 

  Impairment of CLO equity  

4,587

 

 

4,420

 

 

13,523

 

  Early retirement of debt  

288

 

 

-

 

 

89

 

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

371

 

 

564

 

 

338

 

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

(1,080

)

 

(4,072

)

 

3,766

 

  Operating income/(loss) before taxes  

5,113

 

 

11,388

 

 

(725

)

             
  Income tax expense/(benefit)  

1,329

 

 

2,961

 

 

(189

)

  Operating net income/(loss)  

$3,784

 

 

$8,427

 

 

($537

)

             
  Operating net income/(loss) per share:          
  Basic  

$0.19

 

 

$0.43

 

 

($0.03

)

  Diluted (1)  

$0.18

 

 

$0.42

 

 

($0.03

)

             
  Weighted average shares outstanding:          
  Basic  

19,824

 

 

19,709

 

 

19,532

 

  Diluted (1)  

20,678

 

 

19,943

 

 

19,654

 

(1)

On a GAAP basis, the weighted average number of diluted shares outstanding for the quarter ended March 31, 2020, was 19,531,824. Due to the company’s net loss for the period, all share counts are equivalent to the weighted average number of basic shares outstanding. 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, 2021, JMP Group’s book value per share was $3.38. 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 operating net income. The add-back includes a tax provision related to the expense reversed in a given period, due to the company’s election to be taxed as a C corporation as of January 1, 2019. As a result, adjusted book value per share was $4.24 for the quarter ended March 31, 2021, as set forth below.

(in thousands, except per share amounts)   Mar. 31, 2021   Dec. 31, 2020   Mar. 31, 2020
             
Shareholders' equity  

$66,933

 

 

$62,940

 

 

$51,629

 

           
Accumulated unrealized loss – real estate-related depreciation and amortization  

17,148

 

 

16,873

 

 

15,750

 

Adjusted shareholders' equity  

$84,081

 

 

$79,813

 

 

$67,379

 

             
Book value per share  

$3.38

 

 

$3.18

 

 

$2.64

 

Adjusted book value per share  

$4.24

 

 

$4.03

 

 

$3.45

 

           
Basic shares outstanding  

19,825

 

 

19,790

 

 

19,547

 

             
Quarterly operating ROE (1)  

23.3

%

 

57.7

%

 

(3.8

%)

LTM operating ROE (1)  

28.9

%

 

21.9

%

 

(4.4

%)

             
Quarterly adjusted operating ROE (1)  

18.5

%

 

44.9

%

 

(3.0

%)

LTM adjusted operating ROE (1)  

22.6

%

 

17.1

%

 

(3.6

%)

(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 not hold a conference call in connection with the release of the company’s financial results.

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 many factors, including: 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 collateralized loan obligations in which the company has financial interests; 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 reflect JMP Group’s current expectations or forecasts about future events, including beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. The words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to JMP Group, may identify forward-looking statements. 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, 2020, as filed with the U.S. Securities and Exchange Commission on March 29, 2021, 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, 2020, 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. Any forward-looking statements contained in this press release speak only as of the date hereof. 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 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 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, 2021   Dec. 31, 2020
           
  Assets        
           
  Cash and cash equivalents  

$61,204

 

 

$91,444

 

  Restricted cash and deposits  

1,293

 

 

1,287

 

  Marketable securities owned  

57,653

 

 

55,494

 

  Loans held for investment, net of allowance for loan losses  

901

 

 

994

 

  Other investments  

25,093

 

 

26,821

 

  Other assets  

69,120

 

 

65,291

 

  Total assets  

$215,264

 

 

$241,331

 

           
  Liabilities and Shareholders' Equity        
           
  Liabilities:        
  Marketable securities sold, but not yet purchased  

$446

 

 

$ -

 

  Accrued compensation  

18,264

 

 

46,353

 

  Bond payable, net of issuance costs  

71,289

 

 

80,912

 

  Note payable  

10,610

 

 

10,610

 

  Other liabilities  

48,174

 

 

41,048

 

  Total liabilities  

148,783

 

 

178,923

 

           
  Shareholders' Equity:        
  Total JMP Group LLC shareholders' equity  

66,933

 

 

62,940

 

  Non-redeemable non-controlling interest  

(452

)

 

(532

)

  Total equity  

66,481

 

 

62,408

 

  Total liabilities and shareholders' equity  

$215,264

 

 

$241,331

 

 

JMP GROUP LLC

Consolidated Statements of Operations

(Unaudited)

     
    Quarter Ended
(in thousands, except per share amounts)   Mar. 31, 2021   Mar. 31, 2020
         
Revenues:      
Investment banking  

$32,569

 

 

$14,625

 

Brokerage  

5,905

 

 

4,187

 

Asset management fees  

2,169

 

 

1,716

 

Principal transactions  

(3,211

)

 

(17,552

)

Net dividend income  

-

 

 

227

 

Other income  

816

 

 

935

 

Non-interest revenues  

38,248

 

 

4,138

 

         
Interest income  

2,101

 

 

2,214

 

Interest expense  

(1,568

)

 

(1,782

)

Net interest income  

533

 

 

432

 

         
Gain/(loss) on repurchase or early retirement of debt  

(288

)

 

697

 

Total net revenues  

38,493

 

 

5,267

 

         
Non-interest expenses:      
Compensation and benefits  

29,945

 

 

16,213

 

Administration  

1,491

 

 

2,222

 

Brokerage, clearing and exchange fees  

680

 

 

634

 

Travel and business development  

67

 

 

922

 

Managed deal expenses  

1,398

 

 

588

 

Communications and technology  

1,107

 

 

1,129

 

Occupancy  

1,198

 

 

1,199

 

Professional fees  

827

 

 

890

 

Depreciation  

275

 

 

548

 

Other  

(42

)

 

-

 

Total non-interest expense  

36,946

 

 

24,345

 

       
Net income/(loss) before income tax  

1,547

 

 

(19,078

)

Income tax expense/(benefit)  

379

 

 

(7,239

)

Net income/(loss)  

1,168

 

 

(11,839

)

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

79

 

 

(91

)

Net income/(loss) attributable to JMP Group  

$1,089

 

 

($11,748

)

         
Net income/(loss) attributable to JMP Group per share:        
Basic  

$0.05

 

 

($0.60

)

Diluted  

$0.05

 

 

($0.60

)

       
Weighted average common shares outstanding:      
Basic  

19,824

 

 

19,532

 

Diluted  

20,678

 

 

19,532

 

 

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

Michael Falco
(646) 808-3611
michael@dlpr.com

Source: JMP Group LLC