JMP Group Inc. (NYSE:JMP), a growth-oriented investment banking and
asset management firm, today reported financial results for the
quarter and six months ended June 30, 2007. On May 16, 2007, the
company completed its initial public offering and a related
corporate reorganization, 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 totaled
approximately $73.1 million. Following its corporate
reorganization, JMP Group Inc. is organized as a C corporation and,
as of May 16, 2007, succeeded to the business of JMP Group LLC. For
the purposes of financial reporting, JMP Group Inc. is considered
the �Successor� to JMP Group LLC, which is the �Predecessor.�
Therefore, consolidated results of operations are presented (i) for
the Predecessor for the periods ended June�30,�2006, and for the
periods from April 1, 2007 through May 15,�2007 and January 1, 2007
through May�15,�2007 (pre-reorganization), and (ii) for the
Successor for the period from May 16, 2007 through June 30, 2007
(post-reorganization). Highlights of the quarter and the six months
ended June 30, 2007 included: For the period from April 1 through
May 15, 2007, JMP Group LLC, or the Predecessor, reported a net
loss of $112.5 million, primarily as the result of a non-cash,
one-time expense of $112.9�million related to the corporate
reorganization. For the period from May 16 through June�30, 2007,
JMP Group Inc., or the Successor, reported net income of $2.8
million. For more information about the non-cash, one-time expense
related to the corporate reorganization, please see the section
below captioned �Non-Cash Expense Related to Exchange of Redeemable
Class A Member Interests.� Operating net income for the quarter
ended June 30, 2007 was $2.2 million, or $0.12 per diluted share.
For the six months ended June 30, 2007, operating net income was
$4.7 million, or $0.28 per diluted share. Operating net income is a
non-GAAP financial measure and gives effect to the corporate
reorganization as though it had been completed on December
31,�2006, adjusts for compensation expense related to stock-based
compensation in connection with the company�s IPO and assumes an
effective tax rate of 42%. For further information on operating net
income, including a reconciliation to net loss (combined
Predecessor/Successor), please see the sections below captioned
�Operating Net Income� and �Non-GAAP Financial Measures.� Total
revenues were $23.1 million for the quarter, compared to $24.4
million for the quarter ended June 30, 2006. For the six months
ended June 30, 2007, total revenues were $45.0 million, an increase
of 4.2% from $43.2 million for the same period in 2006. Investment
banking revenues were $12.0 million for the quarter, compared to
$14.4 million for the quarter ended June 30, 2006. For the six
months ended June 30, 2007, investment banking revenues were $23.5
million, a decrease of 4.9% from $24.7 million for the same period
in 2006. Net institutional brokerage revenues were $8.4 million for
the quarter, compared to $7.5 million for the quarter ended June
30, 2006. For the six months ended June 30, 2007, net brokerage
revenues were $17.1 million, an increase of 18.7% from $14.4
million for the same period in 2006. Asset management fee revenues
were $0.9 million for the quarter, compared to $0.7 million for the
quarter ended June 30, 2006. For the six months ended June 30,
2007, asset management fee revenues were $1.8 million, an increase
of 11.1% from $1.6 million for the same period in 2006. Assets
under management totaled $238.4 million as of June 30, 2007, an
increase of 23.1% from $193.7�million as of June�30, 2006 and 6.4%
from $224.0 million as of March 31, 2007. Costs related
specifically to the company�s IPO and reorganization that were
expensed during the quarter totaled $4.9 million, including $3.2
million of compensation expense recognized for accelerated vesting
of stock options, $1.2 million of compensation expense recognized
for restricted stock units granted in connection with the IPO, and
$0.4 million of one-time professional fees. In addition,
underwriting fees of $2.0 million from the company�s role as joint
bookrunning manager of its own IPO were not recognized as revenue
but were instead included in net offering proceeds and recorded as
additional paid-in capital. A dividend of $0.025 per share of
common stock was declared for the second quarter of 2007,
representing a prorated quarterly dividend for the period from the
company�s IPO on May 16, 2007 through June 30, 2007, based upon a
quarterly dividend rate of $0.05 per share. The company�s board of
directors has authorized the repurchase of up to one million shares
of JMP Group�s outstanding common stock during the next twelve
months. Combined Predecessor/Successor Financial Results For
purposes of comparing the three- and six-month periods ended June
30, 2007 and June 30, 2006 discussed herein, the company has
aggregated the Predecessor period from January 1, 2007 through
May�15, 2007 and the Successor period from May 16, 2007 through
June 30, 2007, without further adjustment. The aggregated results
are presented in the �Combined Predecessor/Successor� columns in
the financial results below. Three Months Ended June 30, 2007 � � �
� April 1, 2007throughMay 15, 2007 May 16, 2007throughJune 30, 2007
Combined Predecessor/Successor Three MonthsEndedJune 30, 2006 (in
thousands) Predecessor Successor � Predecessor � Revenues:
Investment banking $4,562 $7,462 $12,024 $14,351 Brokerage 4,355
4,070 8,425 7,478 Asset management fees 330 560 890 711 Principal
transactions 609 (170) 439 987 Interest, dividends and other income
602 734 1,336 914 Total revenues 10,458 12,656 23,114 24,441 �
Expenses: Compensation and benefits 5,562 11,745 17,307 14,565
Income allocation and accretion � Redeemable Class A member
interests 114,369 - 114,369 3,169 Administration 766 880 1,646 962
Brokerage, clearing and exchange fees 551 607 1,158 1,018 Interest
and dividend expense 179 59 238 391 Other 1,522 2,012 3,534 3,206
Total expenses 122,949 15,303 138,252 23,311 � Income before
minority interest and income tax (112,491) (2,647) (115,138) 1,130
Income tax benefit - (5,339) (5,339) - Minority interest 32 (74)
(42) 3 � Net (loss)/income ($112,523) $2,766 ($109,757) $1,127 Six
Months Ended June 30, 2007 Jan. 1, 2007throughMay 15, 2007 May 16,
2007throughJune 30, 2007 � Combined Predecessor/Successor Six
MonthsEndedJune 30, 2006 � (in thousands) Predecessor Successor �
Predecessor � Revenues: Investment banking $16,055 $7,462 $23,517
$24,738 Brokerage 12,987 4,070 17,057 14,365 Asset management fees
1,218 560 1,778 1,601 Principal transactions 541 (170) 371 1,112
Interest, dividends and other income 1,571 734 2,305 1,399 Total
revenues 32,372 12,656 45,028 43,215 � Expenses: Compensation and
benefits 18,393 11,745 30,138 25,965 Income allocation and
accretion � Redeemable Class A member interests 117,418 - 117,418
5,001 Administration 1,771 880 2,651 2,234 Brokerage, clearing and
exchange fees 1,689 607 2,296 1,929 Interest and dividend expense
683 59 742 732 Other 3,948 2,012 5,960 5,812 Total expenses 143,902
15,303 159,205 41,673 � Income before minority interest and income
tax (111,530) (2,647) (114,177) 1,542 Income tax benefit - (5,339)
(5,339) - Minority interest 167 (74) 93 3 � Net (loss)/income
($111,697) $2,766 ($108,931) $1,539 Revenues Investment Banking
Total investment banking revenues were $12.0 million for the
quarter, compared to $14.4�million for the second quarter of 2006.
As a percentage of total revenues, investment banking revenues were
52.0%, compared to 58.7% in the quarter ended June 30, 2006. Public
equity underwriting revenues totaled $5.6 million for the quarter,
an increase of 21.8% from $4.6�million for the second quarter of
2006. During the quarter, the company executed 11 public equity
offerings with total proceeds of $1.5 billion, compared to nine
public equity offerings with total proceeds of $0.9 billion during
the quarter ended June 30, 2006. Strategic advisory revenues, which
include M&A success fees, totaled $4.7 million for the quarter,
an increase of 44.9% from $3.2 million for the second quarter of
2006. During the quarter, the company acted as a strategic advisor
on five completed transactions with an aggregate value of $229.3
million, compared to six completed transactions with an aggregate
value of $430.6 million in the second quarter of 2006. Private
placement fee revenues totaled $1.8 million for the quarter, a
decrease of 72.7% from $6.6 million for the second quarter of 2006.
During the quarter, the company acted as placement agent for five
private securities offerings raising $285.5 million in total
proceeds, compared to eight private securities offerings raising
$306.7 million in total proceeds during the quarter ended June 30,
2006. Institutional Brokerage Net institutional brokerage revenues
totaled $8.4 million for the quarter, compared to $7.5�million for
the second quarter of 2006. As a percentage of total revenues,
brokerage revenues were 36.4%, compared to 30.6% in the quarter
ended June 30, 2006. Asset Management Asset management fee revenues
totaled $0.9 million for the quarter, compared to $0.7�million for
the second quarter of 2006. As a percentage of total revenues,
asset management fees were 3.9%, compared to 2.9% in the quarter
ended June 30, 2006. At June 30, 2007, assets under management
totaled $238.4�million, compared to $193.7 million at June 30, 2006
and $224.0 million at March 31, 2007. Principal Transactions and
Other Income Principal transaction revenues and other income,
including interest and dividends, totaled $1.8 million for the
quarter, compared to $1.9 million for the second quarter of 2006.
As a percentage of total revenues, principal transaction revenues
and other income were 7.7%, compared to 7.8% for the quarter ended
June 30, 2006. Expenses Compensation and Benefits Compensation and
benefits expense totaled $17.3 million for the quarter, compared to
$14.6�million for the second quarter of 2006. $4.5 million of the
$17.3 million recorded is attributable to compensation expense
related to stock-based compensation granted in connection with or
prior to the company�s IPO. This expense is composed of $3.2
million recognized due to the accelerated vesting of stock options
and $1.2 million recognized for restricted stock units granted in
connection with the IPO. As a percentage of total revenues,
compensation and benefits expense was 74.9% for the quarter,
compared to 59.6% for the quarter ended June 30, 2006. Excluding
the cost of stock-based awards related to the company�s IPO,
compensation and benefits expense was 55.6% of total revenues for
the quarter ended June 30, 2007. Income Allocation and Accretion
Income allocation and accretion totaled $114.4 million for the
quarter, compared to $3.2 million for the second quarter of 2006,
due primarily to a one-time, non-cash expense of $112.9�million as
a result of the exchange of Redeemable Class A member interests in
JMP Group LLC for shares of the common stock of JMP Group Inc. at
the time of its IPO. Because a corporate reorganization as a
C�corporation was executed by JMP Group in connection with its IPO,
income allocation and accretion expense will not be incurred by the
company in future periods. Non-Compensation Expense
Non-compensation expense totaled $6.6 million for the quarter,
compared to $5.6 million for the second quarter of 2006. The
increase was due primarily to the change in timing of JMP
Securities� annual San Francisco-based research conference from
March in 2006 to May in 2007 as well as to one-time professional
fees of $0.4 million resulting from the IPO process and additional
ongoing costs related to operating as a public company. Operating
Net Income Operating net income is a non-GAAP financial measure and
gives effect to the corporate reorganization as though it had been
completed on December 31,�2006, adjusts for compensation expense
related to stock-based compensation in connection with the
company�s initial public offering and assumes an effective tax rate
of 42%. In particular, operating net income includes the following
adjustments: The add-back of income allocation and accretion
expense related to Redeemable Class A member interests, which was a
non-cash expense that would not have been recorded if the
Redeemable Class A member interests had been converted into common
stock as of December 31, 2006; The add-back of interest expense
related to Redeemable Class A member interests because, as a
corporation, the company no longer pays any interest on employee
members� capital; The reversal of the effect of stock-based
compensation events that occurred in connection with the company�s
IPO, in particular (i) one-time compensation expense in the amount
of $3.2 million associated with accelerated vesting of 1,335,000
stock options and (ii) compensation expense in the amount of $1.2
million associated with the grant of 1,931,060 restricted stock
units; An adjustment for income tax expense as though the company
had been a corporation for the entirety of the periods presented,
at an assumed combined federal, state and local income tax rate of
42%; and An adjustment for shares outstanding, assuming that 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. had occurred on December 31, 2006. A reconciliation of
the company�s net loss (combined Predecessor/Successor) to the
company�s operating net income for the quarter and six months ended
June 30, 2007 is set forth below. Three Months Six Months Ended
Ended (in thousands, except per share amounts) June 30, 2007 June
30, 2007 � Net loss (combined Predecessor/Successor) ($109,757)
($108,931) Add back: Income tax benefit (5,339) (5,339) Minority
interest (42) 93 Loss before taxes and minority interest (combined
Predecessor/Successor) (115,140) (114,177) � Add back: Income
allocation and accretion � Redeemable Class A member interests
114,369 117,418 Interest expense � Redeemable Class A member
interests 126 545 Compensation expense � stock-based compensation
in connection with IPO 4,456 4,456 Operating income before taxes
3,811 8,242 � Provision for income taxes (assumed tax rate of 42%)
1,601 3,462 Minority interest (43) 93 Operating net income $2,253
$4,687 � � Operating earnings per share: Basic $0.12 $0.28 Diluted
$0.12 $0.28 � Weighted average shares used in calculating operating
earnings per share: (1) Basic 18,439 16,647 Diluted 18,616 16,767 �
(1) Weighted average shares, basic and diluted, are calculated as
follows: Three Months Ended June 30, 2007 Six Months Ended June 30,
2007 April 1, 2007throughMay 15, 2007 May 16, 2007throughJune 30,
2007 Predecessor/ Successor Combined Jan. 1, 2007throughMay 15,
2007 May 16, 2007throughJune 30, 2007 Predecessor/ Successor
Combined Predecessor Successor � Predecessor Successor � � Weighted
average basic shares outstanding 14,800 (a) 22,025 18,493 14,800
(a) 22,025 16,647 � Effect of potential dilutive securities:
Options to purchase Class B common interests 79 (b) - 38 105 (b) -
78 Options to purchase common shares - 52 (c) 27 - 52 (c) 13
Restricted stock units - 114 (d) 58 - 114 (d) 29 � � � � � �
Weighted average diluted shares outstanding 14,879 22,191 18,616
14,905 22,191 16,767 � (a) Reflects an adjustment for the assumed
issuance of shares of the company�s common stock to members of JMP
Group LLC in exchange for their respective membership interests in
connection with the corporate reorganization. (b) Dilutive impact
of options to acquire Class�B common interests converted in the
corporate reorganization at a one-for-one ratio into options to
acquire shares of the company�s common stock. (c) Dilutive impact
of options to acquire shares of the company�s common stock. (d)
Dilutive impact of restricted stock units granted in connection
with the initial public offering. Non-Cash Expense Related to
Exchange of Redeemable Class A Member Interests Prior to the
corporate reorganization, Redeemable Class A member interests were
accounted for as a liability due to a redemption right, as required
under Statement of Financial Accounting Standards No.�123 (R),
Share-Based Payment. In connection with the reorganization,
Redeemable Class A member interests were exchanged for shares of
the company�s common stock and reclassified from liability to
equity. The liability-to-equity exchange of the Redeemable Class A
member interests required the company to mark the Redeemable Class
A member interests to fair market value and to record a non-cash
expense related to the change in value. The company accounted for
the exchange in its consolidated financial statements as follows:
The company recorded a one-time non-cash expense as a component of
�Income allocation and accretion � Redeemable Class A member
interests� equal to $112.9 million, which represents the difference
between (i) the equity amount recorded for the shares of common
stock issued in exchange for the Redeemable Class A member
interests and (ii) the carrying amount of the Redeemable Class A
member interests prior to the reorganization. The company recorded
additional equity equal to $111.2 million for the 10,109,957 shares
of common stock exchanged for the Redeemable Class A member
interests, based on the initial public offering price of $11.00 per
share. Dividend On August 7, 2007, the board of directors of JMP
Group declared a dividend of $0.025 per share for the second
quarter of 2007, to be paid on August 30, 2007 to common
stockholders of record on August 23, 2007. This cash amount
represents a prorated quarterly dividend for the period from the
company�s initial public offering on May 16, 2007 through June 30,
2007, based upon a quarterly dividend rate of $0.05 per share.
Share Repurchase Authorization JMP Group�s board of directors has
authorized the repurchase of up to one million shares of the
company�s outstanding common stock during the next twelve months.
The authorization will be exercised from time to time, subject to
market conditions, the relative attractiveness of other capital
deployment opportunities and regulatory considerations. JMP Group
may repurchase shares on the open market or in private
transactions. The stock repurchase program may be modified or
discontinued at any time. 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 combined
Predecessor/Successor results as well as operating net income, on a
total and per share basis. When evaluating results of operations,
company management views the quarter and six months ended June 30,
2007 as two whole measurement periods instead of two pairs of
distinct periods�which must be divided and reported separately
according to GAAP. Consequently, the company is presenting the
operating results of the Predecessor and Successor on a combined
basis for the quarter and six months ended June 30, 2007. This
combined presentation is a non-GAAP summation of the Predecessor�s
pre-reorganization results of operations for the period from
January 1, 2007 through May�15, 2007 and the Successor�s results of
operations for the period from May 16, 2007 through June 30, 2007.
Company management believes that the combined presentation provides
additional information that enables meaningful comparison of the
company�s financial performance during uniform periods. Company
management has utilized operating net income on a total and per
share basis, adjusted in the manner described above, as an
additional device to aid in understanding and analyzing JMP Group�s
financial results for the periods presented. Specifically,
management believes that operating net income provides useful
information by excluding or including certain items that may not be
indicative of the company�s core operating results or business
outlook and that are not reflective of the results that JMP Group
would have reported had the company operated as a corporation since
the beginning of the periods presented. In addition, management
uses operating income on a total and per share basis in determining
the compensation of the company�s senior executive officers.
Presenting operating net income on a total and per share basis for
the interim periods presented will enable the company�s public
investors to assess the company�s financial results in a manner
that is most relevant to an owner of the company�s common stock.
Furthermore, management believes that operating net income is a
useful measure because it will allow for a better evaluation of the
operating performance of JMP Group�s business and will facilitate a
meaningful comparison of the company�s results in the current
period to those in prior periods and future periods. Although JMP
Group expects to grant restricted stock unit awards or other
share-based compensation in the future, the company does not expect
to make any such substantial grants to employees outside of its
regular compensation and hiring process, as it did when JMP Group
granted restricted stock unit awards in connection with its initial
public offering. 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 awards
of stock-based compensation, the accounting treatment for the
corporate reorganization effected on May 16, 2007 and the stock
repurchase program. 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. 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 as well as in the similarly
captioned sections of our periodic reports filed under the Exchange
Act. The Registration Statement and the periodic reports are
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
INC. Consolidated Statements of Income (Unaudited) � Three Months
EndedJune 30, 2007 Six Months EndedJune 30, 2007 April 1,
2007throughMay 15, 2007 May 16, 2007throughJune 30, 2007 Three
MonthsEndedJune 30, 2006 Jan. 1, 2007throughMay 15, 2007 May 16,
2007throughJune 30, 2007 SixMonthsEndedJune 30, 2006 (in thousands,
except per share amounts) Predecessor Successor Predecessor
Predecessor Successor Predecessor � Revenues: Investment banking
$4,562 $7,462 $14,351 $16,055 $7,462 $24,738 Brokerage 4,355 4,070
7,478 12,987 4,070 14,365 Asset management fees 330 560 711 1,218
560 1,601 Principal transactions 609 (170) 987 541 (170) 1,112
Interest and dividends 474 693 776 1,245 693 1,237 Other income 128
41 138 326 41 162 Total revenues 10,458 12,656 24,441 32,372 12,656
43,215 � Expenses: Compensation and benefits 5,562 11,745 14,565
18,393 11,745 25,965 Income allocation and accretion � Redeemable
Class A member interests 114,369 - 3,169 117,418 - 5,001
Administration 766 880 962 1,771 880 2,234 Brokerage, clearing and
exchange fees 551 607 1,018 1,689 607 1,929 Travel and business
development 500 395 1,057 1,197 395 1,794 Communications and
technology 448 488 812 1,390 488 1,613 Occupancy 233 233 467 700
233 914 Professional fees 151 622 350 376 622 551 Depreciation 169
153 431 526 153 851 Interest and dividend expense 179 59 391 683 59
732 Other 21 121 89 (241) 121 89 Total expenses 122,949 15,303
23,311 143,902 15,303 41,673 � (Loss)/income before income tax
benefit and minority interest (112,491) (2,647) 1,130 (111,530)
(2,647) 1,542 Income tax benefit - (5,339) - - (5,339) - Minority
interest 32 (74) 3 167 (74) 3 Net (loss)/income ($112,523) $2,766
$1,127 ($111,697) $2,766 $1,539 � Net income per common share:
Basic $0.13 $0.13 Diluted $0.12 $0.12 � Weighted average common
shares: Basic 22,025 22,025 Diluted 22,191 22,191 � Net
(loss)/income per unit � Class A common interests: Basic ($23.99)
$0.30 ($23.84) $0.41 Diluted ($23.99) $0.30 ($23.84) $0.41 � �
Weighted average units � Class A common interests, basic and
diluted 2,390 1,432 2,385 1,432 � Net (loss) income per unit �
Class B common interests: Basic ($23.99) $0.30 ($23.84) $0.41
Diluted ($23.99) $0.30 ($23.84) $0.41 � Weighted average units �
Class B common interests, basic and diluted 2,300 2,300 2,300 2,300
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