A summary of JMP Group’s operating results for the quarter and year ended
Quarter Ended | Year Ended | |||||||||||
(in thousands, except per share amounts) | Dec. 31, 2019 | Sept. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |||||||
Total net revenues |
$23,822 |
$21,024 |
$31,698 |
$100,081 |
$136,424 |
|||||||
Net income/(loss) attributable to JMP Group |
($6,445) |
($4,061) |
($203) |
($6,549) |
($2,187) |
|||||||
Net income/(loss) attributable to JMP Group per share |
($0.33) |
($0.21) |
($0.01) |
($0.32) |
($0.10) |
|||||||
Operating net income/(loss) |
$140 |
($1,963) |
$2,525 |
($851) |
$6,018 |
|||||||
Operating net income/(loss) per share |
$0.01 |
($0.10) |
$0.12 |
($0.04) |
$0.28 |
|||||||
Book value per share |
$3.16 |
$3.72 |
$3.93 |
$3.16 |
$3.93 |
|||||||
Adjusted book value per share |
$3.96 |
$4.51 |
$4.98 |
$3.96 |
$4.98 |
For more information about operating net income, including a reconciliation to net income, and adjusted book value per share, including a reconciliation to book value per share, see the section below titled “Non-GAAP Financial Measures.”
“Our fourth-quarter operating results improved materially, due to our strongest investment banking performance of the year, a recovery in asset management earnings, and good cash returns on our invested capital,” said Chairman and Chief Executive Officer
“We are optimistic that the positive momentum in our investment banking business will continue in 2020. We expect our capital markets activity to rebound after a substandard 2019, and we expect to successfully execute on a record backlog of engaged advisory assignments. For the fourth quarter, capital markets revenues—which include institutional brokerage revenues—increased 43% year over year to
“Our asset management business narrowed its operating loss in 2019 and, including the fee-based revenues from Medalist Partners Corporate Finance recognized as investment income, would have been profitable for the year. At
“Our return on invested capital for the fourth quarter was 12.8% on an annualized basis, more than covering our corporate costs and contributing
“Lastly, we are planning to change the way we return capital to shareholders. We plan to suspend our quarterly dividend and intend to file a tender offer for up to three million of our shares, equal to roughly 15% of our total outstanding shares. While repurchasing shares will reduce shareholders’ equity initially, we will save more than
“We look forward to updating everyone further in late April, when we report our first-quarter results.”
Segment Results of Operations
A summary of JMP Group’s operating net income per share by segment for the quarter and year ended
Quarter Ended | Year Ended | |||||||||||
($ as shown) | Dec. 31, 2019 | Sept. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |||||||
Broker-dealer |
($0.10) |
($0.06) |
$0.08 |
($0.24) |
$0.37 |
|||||||
Asset management: | ||||||||||||
Asset management fee income |
0.03 |
(0.01) |
0.01 |
(0.02) |
(0.03) |
|||||||
Investment income |
0.11 |
0.05 |
0.14 |
0.48 |
(1) |
0.34 |
||||||
Total asset management |
0.14 |
0.03 |
0.14 |
0.46 |
0.31 |
|||||||
Corporate costs |
(0.03) |
(0.08) |
(0.11) |
(0.26) |
(0.41) |
|||||||
Operating EPS (diluted) |
$0.01 |
($0.10) |
$0.12 |
($0.04) |
$0.28 |
(1) |
Includes a gain of $0.08 per share on the sale of a controlling interest in JMP Credit Advisors LLC to Medalist Partners LP. |
|
Note: Due to rounding, numbers in columns above may not sum to totals presented. |
For more information about operating net income, including a reconciliation to net income, see the section below titled “Non-GAAP Financial Measures.”
Composition of Revenues
Investment Banking
Investment banking revenues were
A summary of the company’s investment banking revenues and transaction counts for the quarter and year ended
Quarter Ended |
Year Ended |
|||||||||||||||||||||
Dec. 31, 2019 |
Sept. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
||||||||||||||||||
($ in thousands) | Count | Revenues | Count | Revenues | Count | Revenues | Count | Revenues | Count | Revenues | ||||||||||||
Equity and debt origination |
19 |
$14,557 |
17 |
$8,561 |
17 |
$7,383 |
78 |
$42,236 |
90 |
$54,660 |
||||||||||||
Strategic advisory and private placements |
3 |
6,316 |
6 |
6,667 |
5 |
10,405 |
18 |
23,480 |
22 |
33,447 |
||||||||||||
Total |
22 |
$20,873 |
23 |
$15,228 |
22 |
$17,788 |
96 |
$65,716 |
112 |
$88,107 |
Brokerage
Net brokerage revenues were
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
Asset Management
Asset management fees were
A summary of the company’s client assets under management for the quarter ended
(in millions) | Dec. 31, 2019 | Sept. 30, 2019 | Dec. 31, 2018 | |||||
Harvest Capital Strategies, JMP Asset Management and HCAP Advisors |
$533 |
$554 |
$921 |
|||||
JMP Credit Advisors (1) |
- |
- |
1,245 |
|||||
Client assets under management |
533 |
554 |
2,166 |
|||||
Assets under management by sponsored funds (2) |
5,381 |
5,241 |
3,449 |
|||||
Client assets under management, including sponsored funds |
$5,914 |
$5,795 |
$5,615 |
(1) |
As announced on March 20, 2019, JMP Group sold a 50.1% equity interest in JMP Credit Advisors LLC to Medalist Partners LP and a 4.9% interest to employees of JMP Credit Advisors. Consequently, assets managed by Medalist Partners Corporate Finance, the former JMP Credit Advisors, have been included among sponsored funds since the quarter ended March 31, 2019. |
|
(2) |
Funds managed by third-party asset managers in which JMP Group owns an economic interest. |
Principal Transactions
Principal transactions generated a net loss of
For the year ended
Net Interest Income
Net interest income was
Provision for Loan Losses
No loan loss provision was recorded for the quarter ended
Expenses
Compensation and Benefits
Compensation and benefits expense was
For the year ended
For more information about compensation ratios, see the section below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was
Personnel
At
Other Corporate Actions
The company did not repurchase any outstanding common shares during the quarter ended
Certain Information Regarding the Tender Offer
The tender offer described in this press release has not yet commenced. The information in this press release describing JMP Group’s tender offer is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell shares in the tender offer. On the commencement date of the tender offer, a tender offer statement on Schedule TO, including an offer to purchase, a letter of transmittal and related materials, will be filed with the
Non-GAAP Financial Measures
In addition to the GAAP financial results presented in this press release,
Compensation Ratio
A compensation ratio expresses compensation expense as a percentage of net revenues in a given period. As presented by
A statement of JMP Group’s compensation ratio for the quarter and year ended
Quarter Ended | Year Ended | ||||||||||||||
($ in thousands) | Dec. 31, 2019 | Sept. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||||||||||
Total net revenues |
$23,822 |
$21,024 |
$31,698 |
$100,081 |
$136,424 |
||||||||||
Compensation and benefits |
$22,641 |
$17,506 |
$21,289 |
$77,314 |
$97,359 |
||||||||||
Subtract/(add back): | |||||||||||||||
Share-based awards and deferred compensation |
1,895 |
753 |
(122) |
4,079 |
167 |
||||||||||
Adjusted compensation and benefits |
$20,746 |
$16,753 |
$21,411 |
$73,235 |
$97,192 |
||||||||||
Ratio of compensation expense to net revenues |
95.0% |
83.3% |
67.2% |
77.3% |
71.4% |
||||||||||
Ratio of adjusted compensation expense to net revenues |
87.1% |
79.7% |
67.5% |
73.2% |
71.2% |
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
- the grant of RSUs 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 non-specific loss provision recorded with regard to loans held by collateralized loan obligations and loans held for investment, which is required by GAAP, prior to the quarter ended
March 31, 2019 ;
- 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;
- one-time expenses associated with the redemption of debt underlying JMP Credit Advisors CLO III (in the first quarter of 2018), the redemption of senior notes due 2023 (in the third quarter of 2018 and the third quarter of 2019), and the resulting acceleration of the amortization of remaining capitalized issuance costs;
- one-time transaction costs related to the refinancing of notes issued by JMP Credit Advisors CLO III;
- amortization expense related to an intangible asset resulting from the repurchase of a portion of the management fees from JMP Credit Advisors CLO III;
- unrealized gains or losses on 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
- as of
January 1, 2019 , a combined federal, state and local income tax rate of 26% at the consolidated taxable parent company,JMP Group , while, prior toJanuary 1, 2019 , a combined federal, state and local income tax rate of 26% at the taxable direct subsidiary ofJMP Group and a tax rate of 0% at the company’s other direct subsidiary, which was a “pass-through entity” for tax purposes.
A reconciliation of JMP Group’s net income to its operating net income for the quarter and year ended
Quarter Ended |
Year Ended |
||||||||||||||
(in thousands, except per share amounts) |
Dec. 31, 2019 |
Sept. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
||||||||||
Net income/(loss) attributable to JMP Group |
($6,445) |
($4,061) |
($203) |
($6,549) |
($2,187) |
||||||||||
Add back/(subtract): | |||||||||||||||
Income tax expense/(benefit) |
(988) |
(1,220) |
1,313 |
(6,827) |
1,167 |
||||||||||
Income/(loss) before taxes |
(7,433) |
(5,281) |
1,110 |
(13,376) |
(1,020) |
||||||||||
Add back/(subtract): | |||||||||||||||
Share-based awards and deferred compensation |
1,895 |
753 |
(122) |
4,079 |
167 |
||||||||||
General loan loss provision/(reversal) – collateralized loan obligations |
- |
- |
530 |
- |
2,878 |
||||||||||
Impairment of CLO equity |
4,204 |
- |
- |
4,204 |
- |
||||||||||
Early retirement of debt |
- |
625 |
- |
625 |
1,488 |
||||||||||
Restructuring costs – CLO portfolios |
- |
- |
- |
- |
54 |
||||||||||
Amortization of intangible asset – CLO III |
- |
- |
69 |
277 |
276 |
||||||||||
Unrealized (gain)/loss – real estate-related depreciation and amortization |
354 |
647 |
369 |
1,779 |
2,233 |
||||||||||
Unrealized mark-to-market (gain)/loss – strategic equity investments and warrants |
1,169 |
604 |
837 |
1,262 |
853 |
||||||||||
Operating income/(loss) before taxes |
189 |
(2,652) |
2,793 |
(1,150) |
6,929 |
||||||||||
Income tax expense/(benefit) |
49 |
(689) |
268 |
(299) |
911 |
||||||||||
Operating net income/(loss) |
$140 |
($1,963) |
$2,525 |
($851) |
$6,018 |
||||||||||
Operating net income/(loss) per share: | |||||||||||||||
Basic |
$0.01 |
($0.10) |
$0.12 |
($0.04) |
$0.28 |
||||||||||
Diluted (1) |
$0.01 |
($0.10) |
$0.12 |
($0.04) |
$0.28 |
||||||||||
Weighted average shares outstanding: | |||||||||||||||
Basic |
19,402 |
19,324 |
21,326 |
20,189 |
21,490 |
||||||||||
Diluted (1) |
19,661 |
19,582 |
21,614 |
20,323 |
21,701 |
(1) |
On a GAAP basis, the weighted average number of diluted shares outstanding for the quarters ended December 31, 2019, September 30, 2019, and December 31, 2018, and for the years ended December 31, 2019, and December 31, 2018, was 19,401,844, 19,324,427, 21,326,473, 20,188,887 and 21,490,277, 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
(in thousands, except per share amounts) |
Dec. 31, 2019 |
Sept. 30, 2019 |
Dec. 31, 2018 |
|||||
Shareholders' equity |
$61,688 |
$71,849 |
$83,707 |
|||||
Accumulated unrealized loss – real estate-related depreciation and amortization |
$15,500 |
$15,238 |
$14,184 |
|||||
Accumulated general loan loss provision – collateralized loan obligations |
- |
- |
8,337 |
|||||
Adjusted shareholders' equity |
$77,188 |
$87,087 |
$106,227 |
|||||
Book value per share |
$3.16 |
$3.72 |
$3.93 |
|||||
Adjusted book value per share |
$3.96 |
$4.51 |
$4.98 |
|||||
Basic shares outstanding |
19,509 |
19,324 |
21,320 |
|||||
Quarterly operating ROE (1) |
0.8% |
(10.7%) |
11.8% |
|||||
LTM operating ROE (1) |
(1.1%) |
1.9% |
6.7% |
|||||
Quarterly adjusted operating ROE (1) |
0.7% |
(8.9%) |
9.4% |
|||||
LTM adjusted operating ROE (1) |
(0.9%) |
1.6% |
5.5% |
(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
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 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 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
Disclosure Information
About
JMP GROUP LLC |
||||||
Consolidated Statements of Financial Condition |
||||||
(Unaudited) |
||||||
(in thousands) |
Dec. 31, 2019 |
Dec. 31, 2018 |
||||
Assets | ||||||
Cash and cash equivalents |
$49,630 |
$70,927 |
||||
Restricted cash and deposits |
1,287 |
61,881 |
||||
Marketable securities owned |
73,101 |
18,874 |
||||
Other investments |
35,309 |
16,124 |
||||
Loans held for investment, net of allowance for loan losses |
1,210 |
29,608 |
||||
Loans collateralizing asset-backed securities issued, net of allowance for loan losses |
- |
1,161,463 |
||||
Other assets |
64,445 |
32,365 |
||||
Total assets |
$224,982 |
$1,391,242 |
||||
Liabilities and Shareholders' Equity | ||||||
Liabilities: | ||||||
Marketable securities sold, but not yet purchased |
$3,855 |
$4,626 |
||||
Accrued compensation |
30,253 |
41,609 |
||||
Bond payable, net of issuance costs |
82,584 |
83,497 |
||||
Note payable |
6,812 |
829 |
||||
Asset-backed securities issued, net of issuance costs |
- |
1,112,342 |
||||
CLO warehouse facility |
- |
22,500 |
||||
Other liabilities |
40,117 |
28,633 |
||||
Total liabilities |
163,621 |
1,294,036 |
||||
Shareholders' Equity: | ||||||
Total JMP Group LLC shareholders' equity |
61,688 |
83,707 |
||||
Non-redeemable non-controlling interest |
(327) |
13,499 |
||||
Total equity |
61,361 |
97,206 |
||||
Total liabilities and shareholders' equity |
$224,982 |
$1,391,242 |
JMP GROUP LLC | |||||||||||||
Consolidated Statements of Operations |
|||||||||||||
(Unaudited) |
|||||||||||||
Quarter Ended |
Year Ended |
||||||||||||
(in thousands, except per share amounts) |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|||||||||
Revenues: | |||||||||||||
Investment banking |
$20,873 |
$17,788 |
$65,716 |
$88,107 |
|||||||||
Brokerage |
4,468 |
5,923 |
17,628 |
20,710 |
|||||||||
Asset management fees |
1,742 |
3,643 |
7,427 |
19,148 |
|||||||||
Principal transactions |
(5,027) |
(820) |
1,344 |
(2,287) |
|||||||||
Gain/(loss) on sale and payoff of loans |
- |
356 |
(38) |
(532) |
|||||||||
Net dividend income |
316 |
346 |
1,184 |
1,281 |
|||||||||
Other income |
856 |
351 |
2,373 |
1,017 |
|||||||||
Non-interest revenues |
23,228 |
27,587 |
95,634 |
127,444 |
|||||||||
Interest income |
2,410 |
19,463 |
21,801 |
66,494 |
|||||||||
Interest expense |
(1,816) |
(14,427) |
(16,458) |
(49,552) |
|||||||||
Net interest income |
594 |
5,036 |
5,343 |
16,942 |
|||||||||
Gain/(loss) on repurchase or early retirement of debt |
- |
- |
(458) |
(2,838) |
|||||||||
Provision for loan losses |
- |
(925) |
(438) |
(5,124) |
|||||||||
Total net revenues |
23,822 |
31,698 |
100,081 |
136,424 |
|||||||||
Non-interest expenses: | |||||||||||||
Compensation and benefits |
22,641 |
21,289 |
77,314 |
97,359 |
|||||||||
Administration |
2,409 |
1,658 |
9,387 |
8,904 |
|||||||||
Brokerage, clearing and exchange fees |
655 |
724 |
2,706 |
3,097 |
|||||||||
Travel and business development |
1,609 |
1,594 |
5,240 |
4,830 |
|||||||||
Managed deal expenses |
584 |
321 |
3,136 |
4,849 |
|||||||||
Communications and technology |
1,149 |
958 |
4,390 |
4,107 |
|||||||||
Occupancy |
1,201 |
1,338 |
5,229 |
4,770 |
|||||||||
Professional fees |
846 |
1,131 |
4,359 |
5,446 |
|||||||||
Depreciation |
288 |
288 |
1,203 |
1,124 |
|||||||||
Other |
(200) |
462 |
500 |
1,994 |
|||||||||
Total non-interest expense |
31,182 |
29,763 |
113,464 |
136,480 |
|||||||||
Net income/(loss) before income tax |
(7,360) |
1,935 |
(13,383) |
(56) |
|||||||||
Income tax expense/(benefit) |
(988) |
1,313 |
(6,827) |
1,167 |
|||||||||
Net income/(loss) |
(6,372) |
622 |
(6,556) |
(1,223) |
|||||||||
Less: Net income/(loss) attributable to non-redeemable non-controlling interest |
73 |
825 |
(7) |
964 |
|||||||||
Net income/(loss) attributable to JMP Group |
($6,445) |
($203) |
($6,549) |
($2,187) |
|||||||||
Net income/(loss) attributable to JMP Group per share: | |||||||||||||
Basic |
($0.33) |
($0.01) |
($0.32) |
($0.10) |
|||||||||
Diluted |
($0.33) |
($0.01) |
($0.32) |
($0.10) |
|||||||||
Weighted average common shares outstanding: | |||||||||||||
Basic |
19,402 |
21,326 |
20,189 |
21,490 |
|||||||||
Diluted |
19,402 |
21,326 |
20,189 |
21,490 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200219005920/en/
Source:
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