JMP Group Inc. (NYSE: JMP), a growth-oriented investment banking
and asset management firm, today reported financial results for the
quarter ended March 31, 2007. For the first quarter of 2007, total
revenues increased 16.7% to $21.9 million, from $18.8 million for
the first quarter of 2006. Net income increased 100.2% to $0.8
million, from $0.4 million for the quarter ended March 31, 2006.
Diluted net income per unit of Class A and Class B common interest
was $0.17, compared to $0.11 for the quarter ended March 31, 2006.
Because JMP Group completed its initial public offering and a
related conversion to a C corporation on May 16, 2007, subsequent
to the end of its first fiscal quarter, first-quarter GAAP results
reflect JMP�Group�s business activity as JMP Group LLC, a limited
liability company. Adjusting for the corporate reorganization as
though it had occurred on January 1, 2007, the company reported
non-GAAP operating net income for the quarter ended March�31, 2007,
of $2.5 million, or $0.17 per diluted share. Business highlights
for the first quarter of 2007: Investment banking revenues
increased 10.7% to $11.5 million, from $10.4 million for the
quarter ended March 31, 2006. Strategic advisory and private
capital raising services comprised 70.4% of investment banking
revenue for the quarter, compared to 43.3% for the first quarter of
2006. Institutional brokerage revenues increased 25.3% to a record
$8.6 million, from $6.9 million for the quarter ended March 31,
2006. Assets under management stabilized, with $224.0 million of
client assets held in alternative asset investment vehicles at
quarter-end, compared to $209.1 million at the end of the first
quarter of 2006. �We had a solid first quarter, thanks in part to
JMP�s diversified business model,� said Joseph A. Jolson, Chairman
and Chief Executive Officer of JMP Group. �Our institutional equity
sales and trading platform had a record quarter, growing revenues
and trading volumes substantially at a time when the broader
industry is experiencing contracting margins and volumes. Our
investment banking group was able to more than offset a slowdown in
public equity underwriting by significantly increasing M&A and
private capital markets activity during the period, which enabled
us to grow our first-quarter investment banking revenues at a
double-digit rate year-over-year. These results highlight the
advantages of JMP�s diversified franchise and the firm�s ability to
respond to and profit in a variety of market environments.� Revenue
Investment Banking Investment banking revenues were $11.5 million
for the quarter, an increase of 10.7% from $10.4 million for the
first quarter of 2006. As a percentage of total revenues,
investment banking revenues decreased to 52.4% for the quarter
ended March 31, 2007, from 55.3% for the quarter ended March 31,
2006. Equity underwriting revenues totaled $3.4 million for the
quarter, a decrease of 42.2% from $5.9 million for the quarter
ended March 31, 2006. During the quarter, JMP Securities, JMP
Group�s broker-dealer subsidiary, executed six public equity
offerings with total proceeds of $781.1 million, compared to 10
public equity offerings with total proceeds of $1.7 billion during
the first quarter of 2006. Strategic advisory fee revenues, which
include M&A success fees, totaled $3.5 million for the quarter,
an increase of 103.7% from $1.7 million for the quarter ended March
31, 2006. In the first quarter of 2007, JMP Securities acted as a
strategic advisor on four transactions with an aggregate value of
$299.0 million, compared to three transactions with an aggregate
value of $35.0 million in the first quarter of 2006. Private
placement fee revenues totaled $4.6 million for the quarter, an
increase of 65.0% from $2.8 million for the quarter ended March 31,
2006. JMP Securities acted as placement agent for six private
placements during the first quarter of 2007, raising $138.6 million
in total proceeds, compared to seven private placements in the
first quarter of 2006, raising $330.0 million in total proceeds. In
the quarter ended March 31, 2007, JMP Securities was sole placement
agent for three private securities offerings, while in the quarter
ended March 31, 2006, JMP Securities did not act as a sole
placement agent. Institutional Brokerage Net institutional
brokerage revenues were $8.6 million for the quarter, an increase
of 25.3% from $6.9�million in the first quarter of 2006. As a
percentage of total revenues, brokerage revenues increased to 39.4%
for the quarter ended March 31, 2007, from 36.7% for the quarter
ended March 31, 2006. Asset Management Asset management fee
revenues produced by JMP Asset Management, JMP Group�s alternative
asset management subsidiary, were $0.9 million for the quarter,
unchanged from $0.9 million for the quarter ended March 31, 2006.
As a percentage of total revenues, asset management fees decreased
to 4.1% for the first quarter of 2007 from 4.7% for the first
quarter of 2006. Client assets under management totaled $224.0
million at quarter-end, compared to $209.1 million at the end of
the first quarter of 2006. Principal Transactions and Other Income
Principal transaction revenues and other income, including interest
and dividends, totaled $0.9 million for the quarter, an increase of
47.5% from $0.6 million for the first quarter of 2006. As a
percentage of total revenues, principal transaction revenues and
other income increased to 4.1% for the quarter ended March 31,
2007, from 3.3% for the quarter ended March 31, 2006. Expenses
Compensation and Benefits Compensation and benefits expense was
$12.8 million for the first quarter of 2007, an increase of 12.6%
from $11.4 million for the first quarter of 2006. The increase is
primarily attributable to higher revenues, which were 16.7% greater
for the first quarter of 2007 than for the first quarter of 2006.
As a percentage of revenues, compensation and benefits for the
quarter ended March 31, 2007, decreased to 58.6% of total revenues,
from 60.7% for the quarter ended March 31, 2006. Following the IPO,
compensation and benefits expense, excluding equity-based awards
made prior to and in connection with the IPO, is expected to equal
between 55% and 60% of total revenues each year. Compensation and
benefits expense includes salaries and incentive compensation paid
or accrued during the period but excludes income allocation and
accretion in connection with Redeemable Class A member interests,
which was eliminated as of May 16, 2007 as a result of the
company�s corporate reorganization and IPO. Non-Compensation
Expense Non-compensation expense was $5.1 million for the quarter,
unchanged from $5.1 million for the first quarter of 2006.
Increased brokerage execution costs resulting from increased
trading volumes for the quarter ended March 31, 2007, were offset
by a decrease in administration expense resulting from the shift in
timing of an annual conference hosted by JMP Securities from March
2006 to May of this year. Initial Public Offering On May 16, 2007,
JMP Group Inc. completed its IPO and corporate reorganization,
exchanging common stock for all previously outstanding membership
interests in JMP Group LLC and issuing 7,199,864 new shares of
common stock. Selling stockholders sold an additional 1,999,098
shares of common stock in the offering. Net proceeds to the company
from the offering totaled approximately $71.2 million. In
connection with JMP Group�s corporate reorganization in May 2007,
Redeemable Class A member interests were exchanged for shares of
the company�s common stock and classified as equity. Prior to the
reorganization, Redeemable Class A member interests were accounted
for as a liability under Statement of Financial Accounting
Standards No. 123 (R), Share-Based Payment, and JMP Group will
account for the exchange in the company�s consolidated financial
statements for the period ended June 30, 2007. Details of the
accounting impact of the reorganization can be found in the Form
10-Q filed by JMP Group Inc. with the Securities and Exchange
Commission for the period ended March 31, 2007. Non-GAAP Financial
Measures In addition to the GAAP financial results presented in
this release, JMP Group is providing non-GAAP financial measures,
such as non-GAAP operating net income, on a total and per share
basis. The non-GAAP financial information for the quarter ended
March 31, 2007, is based upon JMP Group�s historical consolidated
financial statements and is adjusted to reflect the corporate
reorganization completed in May 2007 in connection with the
company�s initial public offering. In particular, the adjustments
give effect to the exchange of Redeemable Class A member interests
and Class A and Class B common interests in JMP Group LLC for
common stock in JMP Group Inc. as though the exchange had occurred
on January 1, 2007. The calculation of non-GAAP operating net
income includes the add-back of income allocation and accretion
expense related to Redeemable Class A member interests which would
not have been recorded if the Redeemable Class A member interests
had already been converted into common stock. The non-GAAP
calculation also includes the add-back of interest expense related
to Redeemable Class A member interests because, as a corporation,
the company would not pay any interest on capital contributed by
JMP Group�s employee members. In addition, the non-GAAP calculation
adjusts income tax expense as though the company had been a
corporate taxpayer at an assumed combined federal, state and local
income tax rate of 42%. Prior to its corporate reorganization, JMP
Group had been a limited liability company and was not subject to
income taxes. Non-GAAP operating income excludes the pro forma
compensation expense related to the grant of 1,931,060 restricted
stock units in connection with JMP Group�s IPO. The non-GAAP
adjusted basic number of common shares outstanding is based on the
assumed exchange of Redeemable Class A member interests and Class A
and Class B common interests for the company�s common stock. The
non-GAAP adjusted diluted number of common shares outstanding
excludes the pro forma dilutive impact of 1,931,060 restricted
stock units granted in connection with JMP Group�s IPO. A
reconciliation of the company�s first quarter 2007 GAAP net income
to the company�s first quarter 2007 non-GAAP operating net income
is set forth below. (in thousands, except per share amounts) For
the Three Months Ended March 31, 2007 � Net income $825� Add back:
Income allocation and accretion � Redeemable Class A member
interests 3,050� Interest expense � Redeemable Class A member
interests 419� Subtract: Provision for income taxes (1,804)
Non-GAAP operating net income $2,490� � Operating earnings per
share: Basic $0.17� Diluted 0.17� � Non-GAAP adjusted weighted
average shares used in calculating non-GAAP operating earnings per
share: Basic 14,800� Diluted 14,916� Further information regarding
these non-GAAP financial measures is included in JMP Group�s Form
10-Q for the period ended March 31, 2007, as filed with the
Securities and Exchange Commission and is available on JMP Group�s
website at http://www.jmpg.com and on the Securities and Exchange
Commission�s website at http://www.sec.gov. JMP Group�s management
has utilized non-GAAP measures of the company�s financial
performance that are adjusted in the manner presented above as an
additional device to aid in understanding and analyzing operating
results for the first quarter of 2007. Company management believes
that these non-GAAP measures provide useful information by
excluding certain items that may not be representative of the
company�s core business activities and outlook, and by excluding or
including certain items that are not reflective of the results of
the corporate entity that is the public company followed by
investors. In particular, the pro forma compensation expense and
the pro forma dilutive impact of the grants of restricted stock
units made in connection with the company�s IPO are non-cash items
and are not taken into account by management when analyzing our
performance and making internal planning or budgeting decisions
about our operations. Additionally, because the company converted
from a limited liability company to a C corporation after the end
of the first quarter, management believes that these non-GAAP
measures will allow for a meaningful comparison of the company�s
results in the current period with those in prior and future
periods. The non-GAAP financial results presented should not be
considered a substitute for results that are presented in a manner
consistent with GAAP. These non-GAAP measures are provided to
enhance investors� overall understanding of JMP Group�s current
financial performance. A limitation of utilizing non-GAAP measures
is that the GAAP accounting effects of events do in fact reflect
the underlying financial results of JMP Group�s business, which
should not be ignored in evaluating and analyzing the company.
Therefore, management believes that both the company�s GAAP
measures of its 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. 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 equity trades it
executes for brokerage customers; the performance of its asset
management funds and inflows and outflows of assets under
management; and the affect 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. Further, JMP Group�s compensation expense is
generally based upon revenue and can fluctuate materially in any
particular quarter depending upon the amount of revenue recognized
as well as other factors. The amount of compensation and benefits
expense recognized in any particular quarter may not be indicative
of such expense in a future period. As a result, the company
suggests that 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
contains 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. Forward-looking statements include statements
about the company�s expectations, beliefs, plans, objectives,
intentions, assumptions and other statements that are not
historical facts, including statements about the company�s ratio of
compensation and benefits expense to total revenues, and the
accounting treatment for the corporate reorganization effected on
May 16, 2007. Forward-looking statements are subject to known and
unknown risks and uncertainties and are based on potentially
inaccurate assumptions that could cause actual results to differ
materially from those expected or implied by the forward-looking
statements. JMP Group�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 Registration
Statement on Form S-1 as filed with the Securities and Exchange
Commission on May 11, 2007. The Registration Statement is available
on JMP Group�s website at http://www.jmpg.com and on the Securities
and Exchange Commission�s website at http://www.sec.gov. Unless
required by law, the company undertakes no obligation to publicly
update or revise any forward-looking statement to reflect
circumstances or events after the date of this press release. About
JMP Group JMP Group Inc. is a full-service investment banking and
asset management firm that provides investment banking, sales and
trading, and equity research services to corporate and
institutional clients and alternative asset management products to
institutional and high-net-worth investors. JMP Group operates
through two subsidiaries, JMP Securities LLC and JMP Asset
Management LLC. For more information, visit www.jmpg.com. JMP GROUP
LLC Consolidated Statements of Income (Unaudited) � For the Three
Months Ended March 31, (in thousands, except per share amounts)
2007� 2006� � Revenues: Investment banking $11,493� $10,386�
Brokerage 8,632� 6,887� Asset management fees 888� 890� Principal
transactions (68) 125� Interest and dividends 771� 461� Other
income 198� 25� Total revenues 21,914� 18,774� � Expenses:
Compensation and benefits 12,831� 11,400� Income allocation and
accretion � � � Redeemable Class A member interests 3,050� 1,832�
Administration 1,000� 1,273� Brokerage, clearing and exchange fees
1,139� 911� Travel and business development 697� 736�
Communications and technology 941� 802� Occupancy 466� 447�
Professional fees 225� 201� Depreciation 357� 420� Interest and
dividend expense 504� 341� Other (257) (1) Total expenses 20,953�
18,362� � Income before minority interest and income tax 961� 412�
Minority interest 136� -� � Net income attributable to Class A and
Class B common interests $825� $412� � Net income per unit � Class
A common interests: Basic $0.18� $0.11� Diluted 0.17� 0.11� �
Weighted average number of units outstanding � Class A common
interests: Basic 2,381� 1,431� Diluted 2,441� 1,431� � Net income
per unit � Class B common interests: Basic $0.18� $0.11� Diluted
0.17� 0.11� � Weighted average number of units outstanding � Class
B common interests: Basic 2,300� 2,300� Diluted 2,357� 2,300�
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