A summary of JMP Group’s operating results for the quarter and nine months ended
Quarter Ended | Nine Months Ended | |||||||||||||
(in thousands, except per share amounts) | Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | Sept. 30, 2018 | Sept. 30, 2017 | |||||||||
Total net revenues | $33,251 | $44,264 | $32,029 | $104,726 | $79,550 | |||||||||
Net income/(loss) attributable to JMP Group |
$288 | ($1,988 | ) | ($1,235 | ) | ($1,983 | ) | ($14,510 | ) | |||||
Net income/(loss) attributable to JMP Group per share |
$0.01 | ($0.09 | ) | ($0.06 | ) | ($0.09 | ) | ($0.66 | ) | |||||
Operating net income | $1,741 | $3,384 | $2,291 | $3,494 | $767 | |||||||||
Operating net income per share | $0.08 | $0.16 | $0.10 | $0.16 | $0.03 | |||||||||
Book value per share | $4.06 | $4.13 | $4.69 | $4.06 | $4.69 | |||||||||
Adjusted book value per share | $5.07 | $5.08 | $5.42 | $5.07 | $5.42 |
For more information about operating net income, including a reconciliation to net income, and adjusted book value per share, including a reconciliation to book value per share, see the section below titled “Non-GAAP Financial Measures.”
“We had a fairly normal third quarter, with operating EPS of
“Asset management fee income and investment income combined to contribute
“Despite recently increased market volatility, the fourth quarter is off to a reasonable start at
Segment Results of Operations
A summary of JMP Group’s operating net income per share by segment for the quarter and nine months ended
Quarter Ended | Nine Months Ended | ||||||||||||||
($ as shown) | Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | Sept. 30, 2018 | Sept. 30, 2017 | ||||||||||
Broker-dealer | $0.09 | $0.12 | $0.13 | $0.29 | $0.19 | ||||||||||
Asset management fee income | 0.00 | (0.01 | ) | (0.00 | ) | (0.04 | ) | (0.01 | ) | ||||||
Investment income | 0.10 | 0.14 | 0.08 | 0.21 | 0.11 | ||||||||||
Total asset management | 0.10 | 0.13 | 0.07 | 0.17 | 0.10 | ||||||||||
Corporate costs | (0.11 | ) | (0.10 | ) | (0.10 | ) | (0.30 | ) | (0.25 | ) | |||||
Operating EPS (diluted) | $0.08 | $0.16 | $0.10 | $0.16 | $0.03 |
Note: Due to rounding, numbers in columns above may not sum to totals presented. |
For more information about operating net income, including a reconciliation to net income, see the section below titled “Non-GAAP Financial Measures.”
Composition of Revenues
Investment Banking
Investment banking revenues were
A summary of the company’s investment banking revenues and transaction counts for the quarter and nine months ended
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||
Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | Sept. 30, 2018 | Sept. 30, 2017 | |||||||||||||||||||
($ in thousands) | Count | Revenues | Count | Revenues | Count | Revenues | Count | Revenues | Count | Revenues | |||||||||||||
Equity and debt origination |
21 | $11,366 |
(1) |
31 | $24,049 |
(1) |
22 | $15,639 | 73 | $47,276 |
(1) |
82 | $40,493 | ||||||||||
Strategic advisory and private placements |
4 | 9,729 | 6 | 4,513 | 6 | 6,446 | 17 | 23,042 | 14 | 14,320 | |||||||||||||
Total | 25 | $21,095 |
(1) |
37 | $28,562 |
(1) |
28 | $22,085 | 90 | $70,318 |
(1) |
96 | $54,813 |
(1) | Prior to 2018, JMP Group presented investment banking revenues net of related expenses. In the quarter ended March 31, 2018, the company adopted new accounting guidance on revenue recognition, which resulted in the presentation of investment banking revenues and related expenses on a gross basis in the company’s financial statements. These related expenses were $0.9 million and $2.7 million for the quarters ended September 30 and June 30, 2018, respectively, and $5.6 million for the nine months ended September 30, 2018. |
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) | Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | |||
Harvest Capital Strategies, JMP Asset Management and HCAP Advisors |
$880 | $889 | $1,186 | |||
JMP Credit Advisors | 1,211 | 1,111 | 827 | |||
Client assets under management | 2,091 | 2,000 | 2,013 | |||
Assets under management by sponsored funds (1) | 3,751 | 3,580 | 1,236 | |||
Client assets under management, including sponsored funds |
$5,842 | $5,580 | $3,249 |
(1) | Funds managed by third-party asset managers in which JMP Group owns an economic interest. |
Principal Transactions
Principal transactions generated a net realized and unrealized gain of
Net Interest Income
Net interest income was
Provision for Loan Losses
The net loan loss provision was
Expenses
Compensation and Benefits
Compensation and benefits expense was
For the nine months ended
For more information about compensation ratios, see the section below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was
Share Repurchase Activity
During the quarter ended
Personnel
At
Non-GAAP Financial Measures
In addition to the GAAP financial results presented in this press release,
Compensation Ratio
A compensation ratio expresses compensation expense as a percentage of net revenues in a given period. As presented by
A statement of JMP Group’s compensation ratio for the quarter and nine months ended
Quarter Ended | Nine Months Ended | ||||||||||||||
($ in thousands) | Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | Sept. 30, 2018 | Sept. 30, 2017 | ||||||||||
Total net revenues | $33,251 | $44,264 | $32,029 | $104,726 | $79,550 | ||||||||||
Compensation and benefits | $22,671 | $29,138 | $24,563 | $76,070 | $69,013 | ||||||||||
Subtract/(add back): | |||||||||||||||
Share-based awards and deferred compensation | 76 | 69 | 696 | 289 | 1,863 | ||||||||||
Adjusted compensation and benefits | $22,595 | $29,069 | $23,867 | $75,781 | $67,150 | ||||||||||
Ratio of compensation expense to net revenues |
68.2 | % | 65.8 | % | 76.7 | % | 72.6 | % | 86.8 | % | |||||
Ratio of adjusted compensation expense to net revenues |
68.0 | % | 65.7 | % | 74.5 | % | 72.4 | % | 84.4 | % |
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 JMP Credit Advisors CLO II (while outstanding),
JMP Credit Advisors CLO III, JMP Credit Advisors CLO IV and JMP Credit Advisors CLO V and to loans held for investment, which is required by GAAP; - 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 2021 (in the fourth quarter of 2017), the partial redemption of senior notes due 2023 (in the third quarter of 2018), and the resulting acceleration of the amortization of remaining capitalized issuance costs for each;
- 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 equity of 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
- a combined federal, state and local income tax rate of 26% 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 and nine months ended
Quarter Ended | Nine Months Ended | ||||||||||||||
(in thousands, except per share amounts) | Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | Sept. 30, 2018 | Sept. 30, 2017 | ||||||||||
Net income/(loss) attributable to JMP Group | $288 | ($1,988 | ) | ($1,235 | ) | ($1,983 | ) | ($14,510 | ) | ||||||
Add back/(subtract): | |||||||||||||||
Income tax expense/(benefit) | 527 | 4,895 | 1,113 | (146 | ) | (169 | ) | ||||||||
Income/(loss) before taxes | 815 | 2,907 | (122 | ) | (2,129 | ) | (14,679 | ) | |||||||
Add back/(subtract): | |||||||||||||||
Share-based awards and deferred compensation |
76 | 69 | 696 | 289 | 1,863 | ||||||||||
General loan loss provision/(reversal) – collateralized loan obligations |
855 | 1,164 | (136 | ) | 2,348 | 697 | |||||||||
Early retirement of debt | 170 | - | - | 1,488 | 5,432 | ||||||||||
Restructuring costs – CLO portfolios | - | (10 | ) | 14 | 54 | 300 | |||||||||
Amortization of intangible asset – CLO III | 69 | 69 | 69 | 207 | 207 | ||||||||||
Unrealized (gain)/loss – real estate-related depreciation and amortization |
260 | (24 | ) | 2,571 | 1,864 | 6,472 | |||||||||
Unrealized mark-to-market (gain)/loss – strategic equity investments and warrants |
(327 | ) | (295 | ) | (191 | ) | 16 | 297 | |||||||
Operating income/(loss) before taxes | 1,918 | 3,880 | 2,901 | 4,137 | 589 | ||||||||||
Income tax expense/(benefit) | 177 | 496 | 610 | 643 | (178 | ) | |||||||||
Operating net income/(loss) | $1,741 | $3,384 | $2,291 | $3,494 | $767 | ||||||||||
Operating net income/(loss) per share: | |||||||||||||||
Basic | $0.08 | $0.16 | $0.11 | $0.16 | $0.04 | ||||||||||
Diluted (1) | $0.08 | $0.16 | $0.10 | $0.16 | $0.03 | ||||||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 21,435 | 21,537 | 21,525 | 21,545 | 21,583 | ||||||||||
Diluted (1) | 21,737 | 21,745 | 22,058 | 21,713 | 22,001 |
(1) | On a GAAP basis, the weighted average number of diluted shares outstanding for the quarters ended June 30, 2018, and September 30, 2017, was 21,536,707 and 21,525,122, respectively, and for the nine months ended September 30, 2018, and September 30, 2017, was 21,544,879 and 21,582,943, 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) | Sept. 30, 2018 | June 30, 2018 | Sept. 30, 2017 | ||||||
Shareholders' equity | $86,734 | $88,654 | $100,710 | ||||||
Accumulated unrealized loss – | |||||||||
real estate-related depreciation and amortization | $13,815 | $13,555 | $10,777 | ||||||
Accumulated general loan loss provision – | |||||||||
collateralized loan obligations | 7,806 | 6,951 | 4,778 | ||||||
Adjusted shareholders' equity | $108,355 | $109,160 | $116,265 | ||||||
Book value per share | $4.06 | $4.13 | $4.69 | ||||||
Adjusted book value per share | $5.07 | $5.08 | $5.42 | ||||||
Basic shares outstanding | 21,357 | 21,486 | 21,461 | ||||||
Quarterly operating ROE (1) | 7.9 | % | 14.9 | % | 8.9 | % | |||
LTM operating ROE (1) | 7.6 | % | 7.9 | % | 3.2 | % | |||
Quarterly adjusted operating ROE (1) | 6.4 | % | 12.2 | % | 7.8 | % | |||
LTM adjusted operating ROE (1) | 6.3 | % | 6.7 | % | 2.9 | % |
(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
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
Disclosure Information
About
JMP GROUP LLC |
||||
Consolidated Statements of Financial Condition |
||||
(Unaudited) |
||||
(in thousands) | Sept. 30, 2018 | Dec. 31, 2017 | ||
Assets | ||||
Cash and cash equivalents | $73,143 | $85,594 | ||
Restricted cash and deposits | 48,586 | 51,727 | ||
Marketable securities owned, at fair value | 20,194 | 20,825 | ||
Other investments | 15,793 | 27,984 | ||
Loans held for investment, net of allowance for loan losses | 5,606 | 83,948 | ||
Loans collateralizing asset-backed securities issued, net of allowance for loan losses |
1,164,404 | 765,583 | ||
Other assets | 35,840 | 40,965 | ||
Total assets | $1,363,566 | $1,076,626 | ||
Liabilities and Shareholders' Equity | ||||
Liabilities: | ||||
Marketable securities sold, but not yet purchased, at fair value | $5,604 | $7,919 | ||
Accrued compensation | 33,371 | 43,131 | ||
Asset-backed securities issued, net of issuance costs | 1,112,049 | 738,248 | ||
CLO V warehouse facility | - | 61,250 | ||
Bond payable, net of issuance costs | 83,395 | 93,103 | ||
Note payable | 829 | - | ||
Other liabilities | 28,024 | 22,796 | ||
Total liabilities | 1,263,272 | 966,447 | ||
Shareholders' Equity: | ||||
Total JMP Group LLC shareholders' equity | 86,734 | 96,335 | ||
Non-redeemable non-controlling interest | 13,560 | 13,844 | ||
Total equity | 100,294 | 110,179 | ||
Total liabilities and shareholders' equity | $1,363,566 | $1,076,626 |
JMP GROUP LLC |
||||||||||||
Consolidated Statements of Operations |
||||||||||||
(Unaudited) |
||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||
(in thousands, except per share amounts) | Sept. 30, 2018 | Sept. 30, 2017 | Sept. 30, 2018 | Sept. 30, 2017 | ||||||||
Revenues: | ||||||||||||
Investment banking | $21,095 | $22,085 | $70,319 | $54,813 | ||||||||
Brokerage | 4,676 | 4,763 | 14,787 | 15,127 | ||||||||
Asset management fees | 3,702 | 4,014 | 15,505 | 14,078 | ||||||||
Principal transactions | 469 | (1,392 | ) | (1,467 | ) | (3,608 | ) | |||||
Gain/(loss) on sale and payoff of loans | (556 | ) | 278 | (888 | ) | 1,208 | ||||||
Net dividend income | 320 | 278 | 935 | 817 | ||||||||
Other income | 306 | 282 | 666 | 921 | ||||||||
Non-interest revenues | 30,012 | 30,308 | 99,857 | 83,356 | ||||||||
Interest income | 18,652 | 10,900 | 47,031 | 29,663 | ||||||||
Interest expense | (13,789 | ) | (8,811 | ) | (35,125 | ) | (24,649 | ) | ||||
Net interest income | 4,863 | 2,089 | 11,906 | 5,014 | ||||||||
Gain/(loss) on repurchase or early retirement of debt | (170 | ) | - | (2,838 | ) | (5,332 | ) | |||||
Provision for loan losses | (1,454 | ) | (368 | ) | (4,199 | ) | (3,488 | ) | ||||
Total net revenues | 33,251 | 32,029 | 104,726 | 79,550 | ||||||||
Non-interest expenses: | ||||||||||||
Compensation and benefits | 22,671 | 24,563 | 76,070 | 69,013 | ||||||||
Administration | 2,302 | 1,459 | 7,246 | 5,999 | ||||||||
Brokerage, clearing and exchange fees | 808 | 740 | 2,373 | 2,288 | ||||||||
Travel and business development | 1,080 | 709 | 3,236 | 2,735 | ||||||||
Managed deal expenses | 614 | - | 4,528 | - | ||||||||
Communications and technology | 1,040 | 1,046 | 3,149 | 3,150 | ||||||||
Occupancy | 1,172 | 1,117 | 3,432 | 3,339 | ||||||||
Professional fees | 1,272 | 1,094 | 4,315 | 3,109 | ||||||||
Depreciation | 285 | 277 | 836 | 891 | ||||||||
Other | 369 | 366 | 1,532 | 1,993 | ||||||||
Total non-interest expense | 31,613 | 31,371 | 106,717 | 92,517 | ||||||||
Net income/(loss) before income tax | 1,638 | 658 | (1,991 | ) | (12,967 | ) | ||||||
Income tax expense/(benefit) | 527 | 1,113 | (146 | ) | (169 | ) | ||||||
Net income/(loss) | 1,111 | (455 | ) | (1,845 | ) | (12,798 | ) | |||||
Less: Net income/(loss) attributable to non-redeemable non-controlling interest |
823 | 780 | 138 | 1,712 | ||||||||
Net income/(loss) attributable to JMP Group | $288 | ($1,235 | ) | ($1,983 | ) | ($14,510 | ) | |||||
Net income/(loss) attributable to JMP Group per share: | ||||||||||||
Basic | $0.01 | ($0.06 | ) | ($0.09 | ) | ($0.67 | ) | |||||
Diluted | $0.01 | ($0.06 | ) | ($0.09 | ) | ($0.67 | ) | |||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 21,435 | 21,525 | 21,545 | 21,583 | ||||||||
Diluted | 21,737 | 21,525 | 21,545 | 21,583 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181024005751/en/
Source:
Investor Relations Contact
JMP Group LLC
Andrew Palmer, 415-835-8978
apalmer@jmpg.com
or
Media Relations Contacts
Dukas Linden Public Relations, Inc.
Zach Leibowitz, 646-722-6528
zach@dlpr.com
or
Alyssa Noud, 646-722-6525
alyssa@dlpr.com