JMP Group Inc. (NYSE:JMP), an investment banking and alternative
asset management firm, reported financial results today for the
quarter ended March 31, 2009.
Financial Highlights
- Net income was $33,945, or $0.00
per diluted share, for the quarter ended March 31, 2009, compared
to $0.7 million, or $0.03 per diluted share, for the quarter ended
March�31, 2008.
- Operating net income was $0.6
million, or $0.03 per diluted share, for the quarter ended
March�31, 2009, compared to $0.9 million, or $0.04 per diluted
share, for the quarter ended March�31, 2008. For more information
on operating net income, including a reconciliation to net income,
please see the sections below titled �Non-GAAP Financial Measures�
and �Operating Net Income.�
- Total revenues were $25.0
million for the first quarter of 2009, compared to $19.8�million
for the first quarter of 2008.
- Investment banking revenues were
$4.1 million for the first quarter of 2009, compared to
$8.1�million for the first quarter of 2008.
- Net brokerage revenues were $8.5
million for the first quarter of 2009, compared to $8.1�million for
the first quarter of 2008.
- Asset management-related fee
revenues were $8.7 million for the first quarter of 2009, compared
to $3.3�million for the first quarter of 2008. Asset
management-related fee revenues include asset management fees as
well as fee revenues reported in the company�s financial statements
as other income (comprised of asset management fundraising fees
generated by JMP Group�s broker-dealer affiliate, JMP Securities,
and revenues from fee-sharing arrangements with other asset
managers) but exclude net investment income reported as principal
transaction revenues. Fee revenues classified as other income were
$0.3 million and $0.5 million for the first quarters of 2009 and
2008, respectively.
- Client assets under management
at March 31, 2009 totaled $501.9�million, compared to
$356.7�million at March 31, 2008.
- Principal transactions generated
a net realized and unrealized gain of $2.9 million for the first
quarter of 2009, compared to a net realized and unrealized loss of
$1.4�million for the first quarter of 2008.
�While continued distress in the global capital markets is
beyond our control, we were able to execute on our plan and achieve
modest levels of profitability balanced with opportunistic growth
in the first quarter,� said Chairman and Chief Executive Officer
Joe Jolson. �Our operating earnings of $0.03 per share were
primarily attributable to strong fund performance across the board
at our Harvest Capital Strategies subsidiary and continued market
share gains in our institutional brokerage business, somewhat
offset by depressed investment banking revenues and additions to
our loan loss reserve. Since year-end, we have continued to attract
senior producers to our platform, as demonstrated by a nine percent
year-to-date net increase in headcount. We remain optimistic that
efforts to selectively recruit top producers to JMP in investment
banking, sales and trading, research and asset management will be
successful during the current industry downturn. In the past few
months, we have also closed strategic investments in two new growth
platforms: HuaMei Capital Company, our joint venture with China
Merchants Securities and MVC Capital; and, more recently, Cratos
Capital Partners, a middle-market, corporate credit alternative
asset manager.�
First Quarter 2009 Revenues
Investment Banking
Total investment banking revenues were $4.1 million for the
quarter, a decrease of 49.2% from $8.1�million for the quarter
ended March 31, 2008. The company executed six investment banking
transactions during the quarter, compared to eight transactions
during the first quarter of 2008. Investment banking revenues
equaled 16.4% of total revenues, compared to 41.0% in the quarter
ended March 31, 2008.
Public equity underwriting revenues were $1.1 million, down from
$2.5�million for the first quarter of 2008, as the company executed
two public equity offerings, versus four a year ago. Private
placement fee revenues were $0.3 million, down from $3.6�million
for the first quarter of 2008, with the company executing one
private placement, compared to two a year earlier. Strategic
advisory revenues were $2.7�million, up from $2.0 million for the
first quarter of 2008, with the company acting as a strategic
advisor on three completed transactions, versus two a year ago.
Brokerage
Net brokerage revenues were $8.5 million, an increase of 4.9%
from $8.1�million for the quarter ended March 31, 2008. Net
brokerage revenues equaled 34.1% of total revenues, compared to
41.2% in the first quarter of 2008.
Asset Management
Asset management fees were $8.5 million, an increase of 208.8%
from $2.7 million for the quarter ended March�31, 2008. Asset
management fees equaled 33.8% of total revenues, compared to 13.9%
in the first quarter of 2008. Client assets under management
totaled $501.9 million at March 31, 2009, an increase of 40.7% from
$356.7�million at March 31, 2008 and an increase of 13.3% from
$443.0 million at December 31, 2008.
Principal Transactions
Principal transactions generated a net realized and unrealized
gain of $2.9 million, compared to a net realized and unrealized
loss of $1.4 million for the quarter ended March 31, 2008. The gain
for the first quarter of 2009 was primarily due to the performance
of the company�s investments in funds managed by its asset
management arm, Harvest Capital Strategies.
Included among principal transactions are JMP Group�s
investments in publicly-traded New York Mortgage Trust, Inc.
(NASDAQ: NYMT) and Hercules Technology Growth Capital, Inc.
(NASDAQ: HTGC). In the first quarter of 2009, JMP Group had an
unrealized gain of $1.2 million on its investment in New York
Mortgage Trust and an unrealized loss of $1.3 million on its
investment in Hercules Technology Growth Capital, versus unrealized
losses of $2.3 million and $0.7 million, respectively, in the first
quarter of 2008. For the quarter ended March 31, 2009, the net
unrealized loss on these two investments totaled $0.1�million,
equivalent to $0.00�per share after tax and minority interest,
compared to a net unrealized loss of $3.0�million, equivalent to
$0.08 per share after tax and minority interest, for the quarter
ended March 31, 2008.
Interest, Dividends and Other Income
Interest, dividends and other income totaled $1.0 million,
compared to $2.1 million for the quarter ended March 31, 2008.
Interest and dividends equaled $0.7 million, compared to $1.6
million for the first quarter of 2008. Interest and dividend income
is derived from the company�s loan portfolio and deposit accounts
as well as from investments in certain preferred and common stocks.
The sharp year-over-year decline in interest and dividend income
was primarily due to a drop of more than 400 basis points in
short-term interest rates to essentially zero percent since the
beginning of 2008. Other income was $0.3�million for the first
quarter of 2009, compared to $0.5�million for the first quarter of
2008. Other income is primarily composed of revenue sharing
arrangements with, and fees earned to raise capital for,
third-party investment partnerships or funds.
First Quarter 2009 Expenses
Compensation and Benefits
Compensation and benefits expense was $18.8 million for the
quarter, an increase of 49.3% from $12.6�million for the quarter
ended March 31, 2008. Of the $18.8 million recorded for the first
quarter of 2009, $1.0�million was non-cash, stock-based
compensation expense attributable to restricted stock units granted
in connection with the company�s initial public offering, and $0.4
million was non-cash, stock-based compensation expense related to
restricted stock units granted subsequent to the IPO.
Performance-based cash compensation increased 137.5% to $10.2
million for the first quarter of 2009 from $4.3 million for the
first quarter of 2008, primarily as a result of a significant
increase in asset management revenues for the quarter ended March
31, 2009. In the first quarter of 2009, 76.9% of asset management
revenues were incentive fees, for which the company accrues bonus
compensation at a much higher rate than for other revenues. As a
result, compensation and benefits for the first quarter of 2009
were much greater than they had been for the first quarter of 2008,
when incentive fees earned were significantly less.
As a percentage of total revenues, pro forma compensation and
benefits expense (which excludes the cost of IPO-related stock
grants) was 71.3% for the first quarter, compared to 58.5% for the
quarter ended March 31, 2008. Further adjusted to exclude a net
unrealized loss of $0.1 million on JMP Group�s investments in New
York Mortgage Trust and Hercules Technology Growth Capital as well
as interest expense of $0.1 million and a loan loss provision of
$0.7 million, the adjusted pro forma compensation ratio was 73.5%
for the first quarter of 2009, compared to 68.2% for the full
fiscal year 2008, when the net unrealized loss on the two corporate
investments equaled $8.5 million, interest expense was $0.6
million, loan loss provisions totaled $2.9 million, and deferred
2007 stock-based compensation expenses of $6.2�million were
incurred but reversed for the purposes of calculating the adjusted
ratio.
Non-Compensation Expense
Non-compensation expense totaled $6.1 million, a decrease of
8.4% from $6.7�million for the quarter ended March 31, 2008. The
decrease was due to a decline in travel and business development
expenses, professional fees and interest and dividend expense as
well as other savings, which were partially offset by a loan loss
provision of $0.7 million.
Dividend
On May 5, 2009, the board of directors of JMP Group declared a
dividend of $0.01 per share for the first quarter of 2009, to be
paid on Friday, June 5, 2009 to common stockholders of record as of
Friday, May�22, 2009.
Share Repurchase Activity
During the quarter ended March 31, 2009, JMP Group repurchased a
total of 57,832 shares of its common stock at an average price of
$4.53 per share, or $0.3 million in aggregate.
At March 31, 2009, JMP Group�s tangible book value per share was
$5.19.
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. After-tax per share amounts, except for GAAP net
income per share, have been calculated on an operational basis
assuming a tax rate of 42%. Company management believes that this
presentation provides additional information that enables
meaningful comparison of JMP Group�s financial performance in
various 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 the company�s
current financial performance. A limitation of utilizing non-GAAP
measures is that the GAAP accounting treatment of events does in
fact reflect the underlying financial results of JMP Group�s
business, which should not be ignored in evaluating and analyzing
the company. Therefore, company management believes that both JMP
Group�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.
Operating Net Income
Operating net income is a non-GAAP financial measure that
reverses stock-based compensation expense related to JMP Group�s
May 2007 initial public offering and assumes an effective tax rate
of 42%. In particular, operating net income adjusts for the grant
of 1,931,060 restricted stock units at the time of the company�s
IPO, which resulted in non-cash compensation expense of $1.0
million for the quarter ended March 31, 2009 and $1.0�million for
the quarter ended March 31, 2008.
A reconciliation of the company�s net income to the company�s
operating net income for the quarters ended March 31, 2009 and
March 31, 2008 is set forth below.
� Three Months Ended (in thousands, except per share amounts) Mar.
31, 2009 � Mar. 31, 2008 � Net (loss)/income $ 34 $ 679 � Add back:
Income tax expense/(benefit) � 52 � (160 ) Income before taxes 86
519 � Add back: Compensation expense � IPO-related stock-based
compensation � 959 � 1,035 � Operating income before taxes 1,045
1,554 � Income tax expense (assumed tax rate of 42%) � 439 � 653 �
Operating net income $ 606 $ 901 � � Operating net income per
share: Basic $ 0.03 $ 0.04 Diluted $ 0.03 $ 0.04 � Weighted average
shares used in calculating operating net income per share: Basic
20,500 20,546 Diluted 20,702 20,839
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. 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. Management
also believes that operating net income is a useful measure because
it allows for a better evaluation of the operating performance of
JMP Group�s business and facilitates a meaningful comparison of the
company�s results in the current period to those in prior periods
and future periods.
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 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. Further, JMP
Group�s compensation expense is generally based upon revenue and
can fluctuate materially in any particular quarter depending upon
the amount and sort 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. 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 Form 10-K for the year ended December
31, 2008 as filed with the Securities and Exchange Commission on
March 9, 2009 as well as in the similarly captioned sections of our
other periodic reports filed under the Exchange Act. The Form 10-K
for the year ended December 31, 2008 and all other 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, 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.
Conference Call
JMP Group will hold a conference call to discuss the results
detailed herein at 10:00 a.m. EDT on Thursday, May 7, 2009. To
participate in the call, dial 800-895-1549 (domestic) or
785-424-1057 (international). The conference identification code is
�7JMP1088.�
The conference call will be broadcast live over the Internet and
will be accessible via a link in the investor relations section of
the company�s website, at http://investor.jmpg.com. The Internet
broadcast will be archived and will remain available on the website
for future replay.
About JMP Group
JMP Group Inc. is a full-service investment banking and
alternative 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 three subsidiaries, JMP Securities, JMP Capital and Harvest
Capital Strategies. For more information, visit www.jmpg.com.
JMP GROUP INC.
Consolidated Statements of
Operations
(Unaudited)
� � Three Months Ended (in thousands, except per share amounts)
Mar. 31, 2009 Mar. 31, 2008 � Revenues: Investment banking $ 4,116
$ 8,107 Brokerage 8,539 8,142 Asset management fees 8,466 2,742
Principal transactions 2,890 (1,380 ) Interest and dividends 746
1,592 Other income � 267 � 549 � Total revenues 25,024 19,752 �
Expenses: Compensation and benefits 18,801 12,589 Administration
1,121 1,281 Brokerage, clearing and exchange fees 1,250 1,373
Travel and business development 337 929 Communications and
technology 863 994 Occupancy 581 470 Professional fees 956 1,180
Depreciation 197 266 Interest and dividend expense 102 216 Loss
provision on loans receivable 725 - Other � 4 � (9 ) Total expenses
� 24,937 � 19,289 � � Income before income tax expense/(benefit) 87
463 Income tax expense/(benefit) � 52 �
(160
) Net income 35
623
� Less: Net income/(loss) attributable to noncontrolling interest �
1 � (56 ) Net income attributable to JMP Group Inc. $ 34 $
679
� � Net income attributable to JMP Group Inc. common stockholders
per share: Basic $ 0.00 $ 0.03 Diluted $ 0.00 $ 0.03 � Weighted
average common shares outstanding: Basic 20,500 20,546 Diluted
20,702 20,839
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