JMP Group Inc. (NYSE: JMP), an investment banking and
alternative asset management firm, reported financial results today
for the quarter ended March 31, 2014.
- Adjusted net revenues, which exclude
certain non-cash items and non-controlling interests, were $44.1
million, an increase of 37.6% from $32.0 million for the first
quarter of 2013. For more information on adjusted net revenues,
including a reconciliation to net revenues, please see the section
below titled “Non-GAAP Financial Measures.”
- Operating net income was $4.4 million,
or $0.19 per diluted share, an increase of 21.1% from
$3.6 million, or $0.16 per share, for the first quarter of
2013. For more information on operating net income, including a
reconciliation to net income attributable to JMP Group, please see
the section below titled “Non-GAAP Financial Measures.”
- Total net revenues under generally
accepted accounting principles, or GAAP, were $37.7 million,
compared to $23.2 million for the first quarter of 2013.
- Net income attributable to JMP Group on
a GAAP basis was $4.0 million, or $0.17 per share, compared to a
net loss of $1.7 million, or $0.08 per share, for the first quarter
of 2013.
“JMP Group had a very good first quarter, driven by record
earnings at JMP Securities, which jumped 350% year-over-year to
$0.18 per share,” said Chairman and Chief Executive Officer Joe
Jolson. “Total operating EPS of $0.19 exceeded expectations and
provided a great start to 2014. Adjusted net revenues of $44.1
million grew 38% from a year ago, primarily due to record
investment banking revenues of $25.1 million. Our adjusted
operating margin improved to 16.0% for the quarter, compared to
14.1% for the whole of 2013, and our operating return on tangible
equity increased to 13.6%.”
Segment Results of Operations
At JMP Securities, the broker-dealer segment, adjusted net
revenues were $31.8 million, an increase of 83.3% from $17.4
million for the first quarter of 2013, due to in large part to a
substantial increase in investment banking revenues. The
broker-dealer segment’s operating margin on adjusted net revenues
was 20.5% for the quarter, compared to 9.4% for the first quarter
of 2013 and 14.5% for the full year of 2013.
At Harvest Capital Strategies, the asset management segment,
adjusted net revenues of $6.2 million decreased 23.7% from $8.2
million for the first quarter of 2013. For the first quarter of
2014, JMP Group’s return on its capital invested in hedge funds
managed by Harvest Capital Strategies was 2.3%.
At JMP Credit Advisors, the corporate credit management segment,
adjusted net revenues totaled $1.1 million, an increase of
20.0% from $0.9 million for the first quarter of 2013. For the
first quarter of 2014, there was no net gain or loss on the sale or
payoff of loans acquired by JMP Credit in April 2009; while, for
the first quarter of 2013, there was a net realized loss of $0.7
million, which included a loan loss provision of $0.9 million in
connection with an impaired loan.
A summary of JMP Group’s operating net income per share by
segment for the quarter ended March 31, 2014 and for comparable
prior periods is set forth below.
Quarter Ended
($ as shown)
Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Broker-dealer $ 0.18 $
0.12 $ 0.04 Asset management 0.00 0.04 0.03 Corporate credit
management 0.00 0.01 0.00
Operating platform EPS 0.18 0.17 0.07 Investment income 0.13 0.15
0.20 Corporate costs (0.12 ) (0.15 ) (0.11 )
Operating EPS (diluted) $ 0.19 $ 0.17 $ 0.16
For more information on segment reporting; adjusted net
revenues, including a reconciliation to net revenues; and operating
net income, including a reconciliation to net income, please see
the section below titled “Non-GAAP Financial Measures.”
Composition of Revenues
Investment Banking
Investment banking revenues were a record $25.1 million, an
increase of 106.9% from $12.1 million for the first quarter of
2013.
A summary of the company’s investment banking revenues and
transaction counts for the quarter ended March 31, 2014 and for
comparable prior periods is set forth below.
Quarter Ended Mar. 31,
2014 Dec. 31, 2013 Mar. 31, 2013 ($ in thousands) Count Revenues
Count Revenues Count Revenues Public equity 33 $ 19,521 26 $ 10,503
33 $ 8,914 Debt and convertible securities 6 1,571 9 8,730 10 1,648
Private capital markets and other 1 698 - - - 145 Strategic
advisory 3 3,263 3 2,639 1 1,400 Total 43 $
25,053 38 $ 21,872 44 $ 12,107
Brokerage
Net brokerage revenues were $6.7 million, an increase of 28.1%
from $5.2 million for the first quarter of 2013.
Asset Management
Asset management-related fee revenues were $6.1 million, a
decrease of 22.2% from $7.9 million for the first quarter of 2013
due to a decline in incentive fees. For more information on asset
management-related fee revenues, please see the section below
titled “Non-GAAP Financial Measures.”
Client assets under management at March 31, 2014 totaled $1.8
billion, including $952.7 million of funds managed by Harvest
Capital Strategies and HCAP Advisors and $845.4 million par value
of loans and cash managed by JMP Credit Advisors. Client assets
under management were $1.7 billion at December 31, 2013 and $1.2
billion at March 31, 2013. Including sponsored funds in which
Harvest Capital Strategies owns an economic interest, client assets
under management totaled $2.0 billion at March 31, 2014.
At March 31, 2014, private capital, including corporate credit,
small business lending, venture capital and real estate-related
advisory services, represented 60.8% of client assets under
management, including sponsored funds.
Principal Transactions
Principal transactions generated a net realized and unrealized
loss of $3.7 million, compared to a net realized and unrealized
gain of $1.9 million for the first quarter of 2013.
A summary of the company’s principal transaction revenues for
the quarter ended March 31, 2014 and for comparable prior periods
is set forth below.
Quarter Ended (in thousands) Mar. 31, 2014
Dec. 31, 2013 Mar. 31, 2013 Hedge fund investments $ 1,707
$ 2,317 $ 1,898 Principal investments:
Investment in Harvest Capital Credit Corporation (163 ) - - Other
principal investments 55 140 85
Total principal investments (108 ) 140 85
Venture investments: Investment in Harvest Growth
Capital funds (302 ) 500 (19 ) Other venture investments and
warrants 289 657 553 Total
venture investments (13 ) 1,157 534
Principal transaction revenues net of
non-controlling interests in Harvest Growth Capital funds
1,586 3,614 2,517
Non-controlling interests in Harvest Growth Capital funds
(5,279 ) 12,264 (599 ) Total principal
transaction revenues
$
(3,693
) $ 15,878 $ 1,918
Included in the net loss of $3.7 million for the quarter ended
March 31, 2014 was a loss of $5.3 million attributable to
non-controlling interests in net realized and unrealized gains at
Harvest Growth Capital and Harvest Growth Capital II, venture
capital funds managed by Harvest Capital Strategies that are
consolidated under GAAP. GAAP accounting requires that JMP Group
consolidate both funds due to Harvest Capital Strategies’ role as
the funds’ manager and managing member, despite the company’s
ownership of just 4.7% of Harvest Growth Capital and 2.2% of
Harvest Growth Capital II. The presentation of adjusted net
revenues elsewhere in this press release excludes JMP Group’s
non-controlling interests in these funds; and, accordingly, the
aforementioned loss of $5.3 million is not included in adjusted net
revenues. Net of its non-controlling interests, JMP Group had a net
realized and unrealized loss of $0.3 million on its investments in
Harvest Growth Capital and Harvest Growth Capital II for the
quarter. For more information on adjusted net revenues, including a
reconciliation to net revenues, please see the section below titled
“Non-GAAP Financial Measures.”
Collateralized Loan Obligations
The net return on invested capital managed by JMP Credit
Advisors was 4.3% for the quarter, compared to 11.2% for the first
quarter of 2013.
At March 31, 2014, discounts and reserves (including liquidity
discounts, allowances for loan losses and deferred loan fees)
equaled $9.1 million, or 1.2% of gross performing loans outstanding
at JMP Credit. There were no impaired loans with associated
discounts or reserves at March 31, 2014; while, at March 31, 2013,
discounts and reserves (including credit discounts, liquidity
discounts, and allowances for loan losses) with regard to impaired
loans equaled $2.6 million, or 0.6% of gross loans outstanding.
A net loan loss provision of $0.5 million for the quarter was
recorded at JMP Credit, which is consolidated under GAAP, primarily
representing a general reserve in connection with the loan
portfolio being accumulated for JMP Credit Advisors CLO III. At
March 31, 2014, general loan loss reserves equaled 0.6% of gross
performing loans at JMP Credit.
Net Interest Income
Net interest income was $3.8 million, compared to net interest
expense of $3.1 million for the first quarter of 2013, when
interest expense due to net amortization of liquidity discounts at
JMP Credit equaled $8.7 million. Excluding the
amortization-related expense for the period, net interest income
would have been $5.6 million for the first quarter of 2013. Further
excluding net interest income of $1.3 million attributable to
Harvest Capital Credit, which, due to its May 2013 initial public
offering, is no longer consolidated by JMP Group, net interest
income would have been $4.3 million for the first quarter of
2013.
Expenses
Compensation and Benefits
Compensation and benefits expense was $31.4 million, compared to
$19.6 million for the first quarter of 2013. Excluding the cost of
stock-based awards but accelerating and recognizing the cost of net
deferred compensation related to the quarter, compensation and
benefits expense was 69.7% of adjusted net revenues, compared to
62.4% for the first quarter of 2013. Further excluding compensation
expense related to strategic initiatives, the compensation ratio
was 68.4%, compared to 58.5% for the first quarter of 2013. For
more information on compensation ratios, please see the section
below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was $6.5 million, compared to $6.2
million for the first quarter of 2013.
Personnel
At March 31, 2014, the company had 232 full-time employees,
compared to 235 at December 31, 2013 and 218 at March 31, 2013.
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. These non-GAAP measures are provided to enhance
investors’ overall understanding of the company’s current financial
performance. Furthermore, company management believes that this
presentation enables more meaningful comparison of JMP Group’s
financial performance in various periods. However, the non-GAAP
financial results presented should not be considered a substitute
for results that are presented in a manner consistent with GAAP. A
limitation of the non-GAAP financial measures presented is that the
adjustments concern gains, losses or expenses that JMP Group
generally expects to continue to recognize. The adjustment of these
non-GAAP items should not be construed as an inference that these
gains or expenses are unusual, infrequent or non-recurring.
Therefore, both GAAP measures of JMP Group’s 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.
Adjusted Net Revenue
Adjusted net revenue is a non-GAAP financial measure that (i)
includes asset management fees, net interest income or expense, and
other revenues eliminated upon the consolidation of Harvest Growth
Capital, Harvest Growth Capital II and Harvest Capital Credit
(until its IPO on May 2, 2013), (ii) excludes the net amortization
of liquidity discounts on loans held and asset-backed securities
issued by JMP Credit Advisors CLO I, (iii) reverses the general
loan loss provision taken with regard to JMP Credit Advisors CLO II
and JMP Credit Advisors CLO III, (iv) adjusts for unrealized
mark-to-market gains and losses recorded at Harvest Capital Credit
(prior to its IPO on May 2, 2013), (v) reverses net unrealized
gains and losses on strategic equity investments and warrants, and
(vi) excludes the non-controlling interest in net unrealized gains
and losses on Harvest Growth Capital and Harvest Growth Capital II.
In particular, adjusted net revenue adjusts for:
- base management and incentive fees
earned by Harvest Capital Strategies as manager of Harvest Growth
Capital and Harvest Growth Capital II, both venture capital funds,
and Harvest Capital Credit, a small business lending strategy;
Harvest Capital Strategies is managing member of Harvest Growth
Capital and Harvest Growth Capital II and was the external manager
of Harvest Capital Credit, and, as a result of its ownership of
each (until the IPO of Harvest Capital Credit on May 2, 2013), JMP
Group has consolidated the three entities (for the appropriate
periods) in accordance with GAAP accounting standards and has
eliminated the fees in consolidation; presenting these fees as
though Harvest Growth Capital, Harvest Growth Capital II and
Harvest Capital Credit were deconsolidated presents the entities’
results in a manner similar to those of the other investment funds
managed by Harvest Capital Strategies;
- the non-cash net amortization of
liquidity discounts associated with JMP Credit Advisors CLO I, due
to scheduled contractual principal repayments, for periods prior to
that ended September 30, 2013;
- the non-specific, non-cash loan loss
provision recorded with regard to loans acquired during the period
by JMP Credit Advisors CLO II and JMP Credit Advisors III, which is
required by GAAP;
- unrealized mark-to-market gains or
losses on the investment portfolio at Harvest Capital Credit;
- unrealized mark-to-market gains or
losses on the company’s strategic equity investments as well as
certain warrant positions; and
- non-controlling interests in net
unrealized gains and losses generated by Harvest Growth Capital and
Harvest Growth Capital II, of which Harvest Capital Strategies is
manager and managing member; under GAAP, JMP Group consolidates the
two funds, however, as presented, unrealized gains and losses that
do not accrue to the company are reversed.
A reconciliation of JMP Group’s net revenues to its adjusted net
revenues for the quarter ended March 31, 2014 and for comparable
prior periods is set forth below.
Quarter Ended (in thousands) Mar. 31, 2014
Dec. 31, 2013 Mar. 31, 2013 Revenues: Non-interest revenues
$ 34,397 $ 55,474 $ 27,338 Net interest income/(expense) 3,760
4,458 (3,141 ) General loan loss provision (497 )
(246 ) (949 ) Total net revenues 37,660 59,686 23,248
Asset management fees earned on Harvest
Growth Capital funds and Harvest Capital Credit (1)(2)
378 386 858 Dividend distribution from Harvest Capital Credit (2) -
- 257
Less: Net interest income and other
revenues from Harvest Capital Credit (2)
- - (1,327 )
Total net revenues including fee revenues
from consolidated entities
38,038 60,072 23,036
Add back/(subtract):
Net amortization of liquidity discounts on
loans and asset-backed securities issued
- - 8,740 Loan loss provision – collateralized loan obligations 550
200 - Unrealized mark-to-market (gain) – Harvest Capital Credit - -
(516 )
Net unrealized loss on strategic equity
investments and warrants
174 21 157
Non-controlling interests in net
unrealized losses/(gains) on Harvest Growth Capital funds
5,297 (12,248 ) 599 Adjusted net
revenues $ 44,059 $ 48,045 $ 32,016
(1) Adjustments to reflect economic contributions from two
Harvest Growth Capital funds and Harvest Capital Credit as though
deconsolidated for purposes of financial reporting; upon
deconsolidation, fee revenues and dividend payments would be
recognized, while net interest income and other revenues generated
by these entities would not be recorded by JMP Group.
(2) Subsequent to its IPO on May 2, 2013, Harvest Capital Credit
is no longer consolidated; therefore, fees and dividends related to
Harvest Capital Credit are included in non-interest revenues
following that date.
Company management has utilized adjusted net revenue, 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 adjusting net revenue
in these ways is useful in that it allows for a better evaluation
of the performance of JMP Group’s ongoing business and facilitates
a meaningful comparison of the company’s results in a given period
to those in prior and future periods.
Asset Management-Related Fee Revenues
Asset management-related fee revenue is a non-GAAP financial
measure that sums asset management fees with certain fee revenues
(in particular, asset management fundraising fees generated by JMP
Securities, loan fees, and revenues from fee-sharing arrangements
with other asset managers) that are reported in JMP Group’s
financial statements as other income. In addition, asset
management-related fee revenues incorporate base management and
incentive fees earned by Harvest Capital Strategies as manager of
Harvest Growth Capital, Harvest Growth Capital II and Harvest
Capital Credit. JMP Group consolidates the two Harvest Growth
Capital funds and Harvest Capital Credit (until its IPO on May 2,
2013) in accordance with GAAP accounting standards; however, asset
management fees generated by these entities are included in asset
management-related fee revenues as though deconsolidated.
A statement of JMP Group’s asset management-related fee revenues
for the quarter ended March 31, 2014 and for comparable prior
periods is set forth below.
Quarter Ended (in thousands) Mar. 31, 2014
Dec. 31, 2013 Mar. 31, 2013 Base management fees: Fees
reported as asset management fees $ 2,594 $ 2,612 $ 2,365
Fees earned at Harvest Growth Capital,
Harvest Growth Capital II and Harvest Capital Credit/HCAP
Advisors
768 697 508 Total base management fees
3,362 3,309 2,873 Incentive
fees: Fees reported as asset management fees 2,919 7,423 4,387
Fees earned at Harvest Growth Capital,
Harvest Growth Capital II and Harvest Capital Credit/HCAP
Advisors
(359 ) - 350 Total incentive fees 2,560
7,423 4,737 Other fee income:
Fundraising and other fees 223 217 288
Total other fee income 223 217 288
Asset management-related fee revenues: Fees reported as
asset management fees 5,513 10,035 6,752 Fees reported as other
income 223 217 288
Fees earned at Harvest Growth Capital,
Harvest Growth Capital II and Harvest Capital Credit/HCAP
Advisors
409 697 858
Total asset management-related fee
revenues
$ 6,145 $ 10,949 $ 7,898
Company management has utilized asset management-related fee
revenue as a means of assessing the performance of JMP Group’s
combined asset management activities, including its fundraising and
other services for third parties. Management believes that asset
management-related fee revenues, as presented above, provide useful
information by indicating the relative contributions of base
management fees and performance-related incentive fees, thus
facilitating a comparison of those fees in a given period to those
in prior and future periods. Management also believes that asset
management-related fee revenue is a more meaningful measure than
standalone asset management fees as reported, because asset
management-related fee revenues represent the combined impact of
JMP Group’s various asset management activities on the company’s
total net revenues.
Compensation Ratio
A compensation ratio expresses GAAP compensation expense as a
percentage of GAAP net revenues in a given period. Adjusted
compensation ratios are non-GAAP financial measures that utilize
adjusted net revenues as the denominator in their calculation.
Furthermore, these ratios adjust the financial impact of certain
compensation-related and transaction-related expenses that are or
are not recognized under GAAP. In particular, the adjusted
compensation ratio reverses compensation expense related to
stock-based awards and deferred compensation (so that the
compensation expenses used in the numerator are those that
correspond to the adjusted net revenues generated in the periods
presented) as well as a one-time administrative cost incurred by
JMP Group in connection with the initial public offering of Harvest
Capital Credit Corporation in May 2013. The adjusted compensation
ratio is further adjusted by excluding compensation paid to
employees hired in connection with the company’s strategic
investments in new business initiatives.
A statement of JMP Group’s compensation ratio for the quarter
ended March 31, 2014 and for comparable prior periods is set forth
below.
Quarter Ended ($ in thousands) Mar. 31, 2014
Dec. 31, 2013 Mar. 31, 2013 Adjusted net revenues $ 44,059
$ 48,045 $ 32,016 Compensation and
benefits $ 31,376 $ 33,366 $ 19,605 Subtract/(add back):
Compensation expense – stock option grants 395 262 137 Compensation
expense – post-IPO RSU grants 853 804 616 Compensation expense –
net deferred compensation (597 ) (2,623 ) (1,124 ) IPO-related
administrative expense – Harvest Capital Credit Corporation
- 450 - Adjusted compensation
and benefits 30,725 34,473
19,976 Subtract: Compensation expense – strategic
initiatives 610 895 1,250
Adjusted non-compensation expense,
excluding strategic initiatives
$ 30,115 $ 33,578 $ 18,726 Adjusted
ratio of compensation expense to revenues 69.7 % 71.8 % 62.4 %
Adjusted ratio of compensation expense to
revenues, excluding strategic initiatives
68.4 % 69.9 % 58.5 %
Company management has utilized compensation ratios, adjusted in
the manners described above, to assess JMP Group’s personnel
expenses as they relate to its revenues for the periods presented.
Management believes that adjusted compensation ratios provide
useful information by including or excluding certain expenses as a
means of representing the company’s ongoing personnel costs
resulting from its core business activities. Management also
believes that compensation ratios are useful measures because they
allow and facilitate meaningful comparisons of the company’s
personnel expenses in a given period to those in prior and future
periods.
Operating Net Income
Operating net income is a non-GAAP financial measure that (i)
reverses compensation expense related to stock-based awards and
deferred compensation, (ii) excludes the net amortization of
liquidity discounts on loans held and asset-backed securities
issued by JMP Credit Advisors CLO I, (iii) reverses the general
loan loss provision taken with regard to JMP Credit Advisors CLO II
and JMP Credit Advisors CLO III, (iv) adjusts for unrealized
mark-to-market gains and losses recorded at Harvest Capital Credit,
(v) reverses net unrealized gains and losses on strategic equity
investments and warrants, and (vi) assumes an effective tax rate.
In particular, operating net income adjusts for:
- the grant of RSUs and stock options
subsequent to the company’s IPO;
- net deferred compensation, which
consists of (a) deferred compensation awarded at year-end 2012 and
reflected in operating net income for 2012 though recognized as a
GAAP expense in 2013 and 2014 less (b) compensation awarded at
year-end 2013 and deferred into 2014 and 2015;
- the non-cash net amortization of
liquidity discounts associated with JMP Credit Advisors CLO I, due
to scheduled contractual principal repayments, for periods prior to
that ended September 30, 2013;
- the non-specific, non-cash loan loss
provision recorded with regard to loans acquired during the period
by JMP Credit Advisors CLO II and JMP Credit Advisors III, which is
required by GAAP;
- unrealized mark-to-market gains or
losses on the investment portfolio at Harvest Capital Credit;
- 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 38%.
A reconciliation of JMP Group’s net income to its operating net
income for the quarter ended March 31, 2014 and for comparable
prior periods is set forth below.
Quarter Ended (in thousands, except per share amounts) Mar.
31, 2014 Dec. 31, 2013 Mar. 31, 2013 Net
income/(loss) attributable to JMP Group Inc. $ 3,998 $ 3,493
$
(1,719
) Add back: Income tax expense/(benefit) 1,696
3,772 (812 ) Income/(loss) before taxes 5,694
7,265 (2,531 ) Add back/(subtract): Compensation expense –
stock options 395 262 137 Compensation expense – post-IPO RSUs 853
804 616 Compensation expense – deferred compensation (597 ) (2,623
) (1,124 )
Net amortization of liquidity discounts –
JMP Credit Advisors CLO I
- - 8,740 Loan loss provision – collateralized loan obligations 545
146 - IPO-related expense – Harvest Capital Credit - 450 -
Unrealized mark-to-market (gain) – Harvest
Capital Credit
- - (162 )
Unrealized mark-to-market loss – strategic
equity investments and warrants
174 21 157 Operating
income before taxes 7,064 6,325 5,833 Income tax expense
(assumed rate of 38%) 2,684 2,403
2,216 Operating net income $ 4,380 $ 3,922
$ 3,617 Operating net income per share: Basic
$ 0.20 $ 0.18 $ 0.16 Diluted (1) $ 0.19 $ 0.17 $ 0.16
Weighted average shares outstanding: Basic 21,820 21,825 22,607
Diluted (1) 22,806 22,701 22,905
(1) In 2013 and the first quarter of 2014, JMP Group issued
restricted stock units, or RSUs, bearing non-forfeitable dividend
equivalent rights. GAAP requires RSUs with non-forfeitable dividend
equivalent rights to be included in the diluted share count
(without applying the treasury method). Management prefers to
present a non-GAAP diluted share count for the period, in keeping
with the presentation for quarters not impacted by this GAAP
requirement for such RSUs. The non-GAAP diluted share count
reflects the impact of such RSUs under the treasury method, which
is consistent with the calculation of the dilutive impact of all
other RSUs outstanding. On a GAAP basis, the weighted average
number of diluted shares outstanding for the quarter ended March
31, 2014 was 23,611,899; given that denominator, operating net
income per diluted share would have been unchanged, at $0.19.
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
certain items that may not be representative of the company’s core
operating results or core business activities. Management also
believes that operating net income is a useful measure because it
allows for a better evaluation of the performance of JMP Group’s
ongoing business and facilitates a meaningful comparison of the
company’s results in a given period to those in prior and future
periods.
Segment Reporting
In order to demonstrate the contribution to the company’s
results of each of its primary businesses on a standalone basis,
JMP Group presents the operating net income generated by each
segment in the tables that follow. Management believes that this
presentation enables investors to better understand the separate
but interrelated financial operations of the company’s various
business lines and to more accurately assess the contribution of
each to JMP Group’s aggregate results.
Total net revenues have been adjusted, in part, as detailed
above in the section titled “Adjusted Net Revenue,” and the
resulting adjusted net revenues (i) include asset management fees,
net interest income or expense, and other revenues eliminated upon
the consolidation of Harvest Growth Capital, Harvest Growth Capital
II and Harvest Capital Credit (until its IPO on May 2, 2013), (ii)
exclude the net amortization of liquidity discounts on loans held
and asset-backed securities issued by JMP Credit Advisors CLO I,
(iii) reverse the general loan loss provision taken in connection
with the origination of JMP Credit Advisors CLO II, (iv) adjust for
unrealized mark-to-market gains and losses recorded at Harvest
Capital Credit; (v) reverse net unrealized gains and losses on
strategic equity investments and warrants and (vi) exclude
non-controlling interests in net unrealized gains and losses on
Harvest Growth Capital and Harvest Growth Capital II. Total
non-interest expenses have been adjusted, in part, as detailed
above in the section titled “Operating Net Income,” and the
resulting adjusted non-interest expense reverses compensation
expense related to stock-based awards granted subsequent to JMP
Group’s initial public offering. For the purposes of calculating
operating net income, an effective tax rate of 38% is assumed.
A statement of JMP Group’s operating net income on a segment
basis for the quarter ended March 31, 2014 is set forth below.
Quarter Ended March 31,
2014 Corp. Invest- HGC Consoli- Broker- Asset Credit
Operating ment Corp. Elimin- JMP Consoli- dated JMP (in thousands,
except per share amounts) Dealer Mgmt. Mgmt. Platforms Income Costs
ations Group dation Group Revenues: Investment banking $
25,143 - - $ 25,143 - -
$
(90
) $ 25,053 - $ 25,053 Brokerage 6,656 - - 6,656 - - - 6,656 - 6,656
Asset management-related fees (1) 50 $ 6,224 $ 1,061 7,335 - -
(1,190 ) 6,145
$
(379
) 5,766 Principal transactions (2) - - - - $ 1,760 - - 1,760 (5,279
) (3,519 ) Gain on sale and payoff of loans - - - - 380 - - 380 -
380 Net dividend income - - - - 235 - - 235 - 235 Net interest
income - - - - 3,777 - - 3,777 (18 ) 3,759 Provision for loan
losses - - - - 53
- - 53 -
53 Adjusted net revenues 31,849 6,224 1,061 39,134
6,205 - (1,280 ) 44,059 (5,676 ) 38,383 Expenses:
Non-interest expense/(income) (3) 25,335 6,432 1,024 32,791 1,360
4,239 (1,190 ) 37,200 42 37,242 Less: Non-controlling
interest (4) - (356 ) - (356 )
150 - - (206 ) (5,718 )
(5,924 )
Operating income/(loss) before taxes
6,514 148 37 6,699 4,695 (4,239 ) (90 ) 7,065 - 7,065 Income
tax expense/(benefit) 2,475 56 14
2,545 1,785 (1,611 ) (34 )
2,685 - 2,685 Operating
net income/(loss) $ 4,039 $ 92 $ 23 $ 4,154 $ 2,910
$
(2,628
)
$
(56
) $ 4,380 - $ 4,380
Operating net income/(loss) per share:
Basic $ 0.19 $ 0.00 $ 0.00 $ 0.19 $ 0.13
$
(0.12
)
$
(0.00
) $ 0.20 - $ 0.20 Diluted (5) $ 0.18 $ 0.00 $ 0.00 $ 0.18 $ 0.13
$
(0.12
)
$
(0.00
) $ 0.19 - $ 0.19
(1) Reflects revenues detailed in section above titled “Asset
Management-Related Fee Revenues;” management fees of
$0.4 million are eliminated upon consolidation of two Harvest
Growth Capital funds.
(2) Reverses net unrealized gains and losses on strategic equity
investments and warrants. Excludes non-controlling interests in net
realized and unrealized gains totaling $5.3 million that are
recognized upon consolidation of two Harvest Growth Capital
funds.
(3) Reverses stock-based compensation expense as well as
accounting adjustments related to deferred compensation expense and
excludes fund-related expenses totaling $42,000 that are recognized
upon consolidation of two Harvest Growth Capital funds.
(4) Excludes non-controlling interests totaling $5.7 million in
the net realized and unrealized gains of two Harvest Growth Capital
funds that are recognized upon consolidation of the entities.
(5) In 2013 and the first quarter of 2014, JMP Group issued
restricted stock units, or RSUs, bearing non-forfeitable dividend
equivalent rights. GAAP requires RSUs with non-forfeitable dividend
equivalent rights to be included in the diluted share count
(without applying the treasury method). Management prefers to
present a non-GAAP diluted share count for the period, in keeping
with the presentation for quarters not impacted by this GAAP
requirement for such RSUs. The non-GAAP diluted share count
reflects the impact of such RSUs under the treasury method, which
is consistent with the calculation of the dilutive impact of all
other RSUs outstanding. On a GAAP basis, the weighted average
number of diluted shares outstanding for the quarter ended March
31, 2014 was 23,611,899; given that denominator, operating net
income per diluted share would have been unchanged, at $0.19.
Book Value per Share
At March 31, 2014, JMP Group’s tangible book value per share was
$5.97, as set forth below.
(in thousands, except per share amounts) Mar.
31, 2014 Dec. 31, 2013 Mar. 31, 2013 Total JMP Group
stockholders' equity $ 130,373 $ 126,385 $ 125,238 Less: Goodwill
and intangible assets - - -
Tangible stockholders' equity $ 130,373 $ 126,385
$ 125,238 Tangible book value per share $ 5.97
$ 5.79 $ 5.54 Basic shares outstanding
21,833 21,819 22,609 Quarterly operating ROTE (1) 13.6 %
12.5 % 11.5 % LTM operating ROTE (1) 11.4 % 10.9 % 12.5 %
(1) Return on tangible equity (ROTE) equals annualized operating
net income divided by average tangible stockholders’ equity.
Share Repurchase Activity
During the quarter, JMP Group repurchased 4,656 shares of its
common stock at an aggregate price of approximately $33,000, or
$7.04 per share. At March 31, 2014, approximately 1.1 million
shares remained eligible for repurchase under the company’s
existing repurchase authorization.
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 December
31, 2013, as filed with the Securities and Exchange Commission on
March 13, 2014, as well as in the similarly captioned sections of
other periodic reports filed by the company under the Exchange Act.
The Form 10-K for the year ended December 31, 2013 and all other
periodic reports are available on JMP Group’s website at
www.jmpg.com and on the Securities and Exchange Commission’s
website at 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 Wednesday, April 23, 2014. To
participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
31646719.
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.
About JMP Group
JMP Group Inc. is an investment banking and asset management
firm that provides investment banking, sales and trading, and
equity research services to corporate and institutional clients as
well as alternative asset management products and services to
institutional and high-net-worth investors. JMP Group operates
through three subsidiaries: JMP Securities, Harvest Capital
Strategies and JMP Credit Advisors. For more information, visit
www.jmpg.com.
JMP GROUP INC.
Consolidated Statements of Financial
Condition
(Unaudited)
(in thousands) Mar. 31, 2014 Dec. 31, 2013
Assets Cash and cash equivalents $ 41,676 $ 65,906
Restricted cash and deposits 75,550 68,029 Marketable securities
owned, at fair value 31,505 29,295 Other investments 180,678
161,773
Loans collateralizing asset-backed
securities issued, net of allowance for loan losses
783,326 727,270 Deferred tax assets 13,868 12,492 Other assets
37,212 57,166 Total assets $ 1,163,815 $ 1,121,931
Liabilities and Stockholders' Equity Liabilities:
Marketable securities sold, but not yet purchased, at fair value $
14,506 $ 13,749 Accrued compensation 18,256 51,347 Asset-backed
securities issued 713,508 716,423 Line of credit - 2,895 Note
payable - 15,000 Warehouse credit facility – JMP Credit Advisors
CLO III 50,413 - Bond payable 94,300 46,000 Deferred tax liability
3,841 3,625 Other liabilities 36,036 35,652 Total
liabilities 930,860 884,691 Stockholders'
Equity: Total JMP Group Inc. stockholders' equity 130,373 126,385
Non-redeemable non-controlling interest 102,582
110,855 Total equity 232,955 237,240 Total
liabilities and stockholders' equity $ 1,163,815 $ 1,121,931
JMP GROUP INC.
Consolidated Statements of
Operations
(Unaudited)
Quarter Ended
(in thousands, except per share
amounts)
Mar. 31, 2014 Mar. 31, 2013 Revenues: Investment banking $
25,053 $ 12,107 Brokerage 6,656 5,194 Asset management fees 5,544
6,751 Principal transactions (3,693 ) 1,917 Gain on sale, payoff
and mark-to-market of loans 380 1,089 Net dividend income/(expense)
235 (8 ) Other income 222 288
Non-interest revenues 34,397 27,338
Interest income 8,588 8,158 Interest expense (4,828 )
(11,299 ) Net interest income/(expense) 3,760
(3,141 ) Provision for loan losses (497 )
(949 ) Total net revenues 37,660 23,248
Non-interest expenses: Compensation and benefits
31,376 19,605 Administration 1,722 1,331 Brokerage, clearing and
exchange fees 925 887 Travel and business development 851 958
Communications and technology 948 853 Occupancy 825 804
Professional fees 807 1,024 Depreciation 227 226 Other 212
83 Total non-interest expense 37,893
25,771 (Loss) before income tax expense
(233 ) (2,523 ) Income tax expense 1,696 (812
) Net (loss) (1,929 ) (1,711 ) Less: Net (loss)/income attributable
to noncontrolling interests (5,927 ) 8 Net
income/(loss) attributable to JMP Group Inc. $ 3,998
$
(1,719
) Net income/(loss) attributable to JMP Group Inc. per
share: Basic $ 0.17
$
(0.08
) Diluted $ 0.17
$
(0.08
) Weighted average common shares outstanding: Basic 21,820
22,607 Diluted 23,612 22,607
Investor Relations ContactJMP Group Inc.Andrew Palmer,
415-835-8978apalmer@jmpg.comorMedia Relations ContactDukas
Public RelationsSeth Linden, 212-704-7385seth@dukaspr.comZach
Leibowitz, 212-704-7385zach@dukaspr.com
JMP (NYSE:JMP)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
JMP (NYSE:JMP)
Historical Stock Chart
Von Jul 2023 bis Jul 2024