JMP Group Inc. (NYSE: JMP), an investment banking and
alternative asset management firm, reported financial results today
for the quarter and six months ended June 30, 2014.
- Adjusted net revenues, which exclude
certain non-cash items and non-controlling interests, were a record
$50.6 million, an increase of 33.2% from $37.9 million for the
second quarter of 2013. For the six months ended June 30, 2014,
adjusted net revenues were a record $94.5 million, an increase of
35.2% from $69.9 million for the six months ended June 30, 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 $4.0 million,
or $0.18 per diluted share, an increase of 22.0% from
$3.3 million, or $0.15 per share, for the second quarter of
2013. For the six months ended June 30, 2014, operating net
income was $8.4 million, or $0.37 per share, an increase of 21.5%
from $6.9 million, or $0.30 per share, for the six months
ended June 30, 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 $57.5 million and
$95.2 million for the quarter and six months ended June 30, 2014,
respectively, compared to $30.9 million and $54.2 million for the
quarter and six months ended June 30, 2013, respectively.
- Net income attributable to JMP Group on
a GAAP basis was $3.2 million, or $0.13 per share, compared to a
net loss of $1.4 million, or $0.06 per share, for the second
quarter of 2013. For the six months ended June 30, 2014, GAAP net
income was $7.2 million, or $0.30 per share, compared to a net loss
of $3.2 million, or $0.14 per share, for the six months ended June
30, 2013.
“I am happy to report another solid quarter for JMP Group, as
JMP Securities continues to benefit from material market share
gains since 2009 in combination with a resurgent equity capital
markets environment,” said Chairman and Chief Executive Officer Joe
Jolson. “For the second quarter, we generated record adjusted net
revenues of $50.6 million and operating earnings of $0.18 per
share. Excluding net investment income and corporate costs, our
three operating platforms earned a record $0.65 per share for the
latest twelve-month period, an increase of 110% from $0.31 per
share for the prior twelve-month period. While we remain committed
to active capital management, our tangible book value per share has
increased 13% in the past year to $6.16, in addition to returning
51% of our operating earnings to stockholders through cash
dividends and share buybacks during that time.”
Segment Results of Operations
At JMP Securities, the broker-dealer segment, adjusted net
revenues were $29.5 million, an increase of 4.4% from $28.3 million
for the second quarter of 2013. The broker-dealer segment’s
operating margin on adjusted net revenues was 16.8%, compared to
20.5% for the prior quarter and 17.0% for the second quarter of
2013.
At Harvest Capital Strategies, the asset management segment,
adjusted net revenues of $15.5 million increased 266.4% from $4.2
million for the second quarter of 2013. JMP Group’s return on its
capital invested in hedge funds managed by Harvest Capital
Strategies was 1.8% for the period.
At JMP Credit Advisors, the corporate credit management segment,
adjusted net revenues totaled $1.5 million, an increase of
21.2% from $1.3 million for the second quarter of 2013. For the
second quarter of 2014, there was a net realized loss of $0.6
million on the sale or payoff of loans underlying collateralized
loan obligations; while, for the second quarter of 2013, there was
a net realized gain of $0.3 million.
A summary of JMP Group’s operating net income per share by
segment for the quarter and six months ended June 30, 2014, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended ($ as shown) June 30,
2014 Mar. 31, 2014 June 30, 2013 June 30, 2014
June 30, 2013 Broker-dealer $0.13 $0.18 $0.13 $0.31 $0.18 Asset
management 0.02 0.01 (0.02 ) 0.03 (0.01 ) Corporate credit
management 0.02 0.00 0.01 0.02 0.01
Operating platform EPS
0.17 0.19 0.12 0.36 0.18 Investment income 0.12 0.13 0.15 0.24 0.35
Corporate costs (0.11 ) (0.13 ) (0.12 ) (0.23 ) (0.23 ) Operating
EPS (diluted) $0.18 $0.19
$0.15
$0.37 $0.30
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 $23.1 million, an increase of
9.5% from $21.1 million for the second quarter of 2013. For the six
months ended June 30, 2014, investment banking revenues were
$48.1 million, an increase of 45.1% from $33.2 million for the
six months ended June 30, 2013.
A summary of the company’s investment banking revenues and
transaction counts for the quarter and six months ended June 30,
2014, and for comparable prior periods is set forth below.
Quarter Ended Six Months Ended June 30, 2014
Mar. 31, 2014 June 30, 2013 June 30, 2014 June 30,
2013 ($ in thousands) Count Revenues Count Revenues
Count Revenues Count Revenues Count Revenues
Public equity 34 $14,717 33 $19,521 37 $9,517 67 $34,238 70 $18,431
Debt and convertible securities
5 1,090 6 1,571 8 4,890 11 2,661 18 6,538
Private capital markets and other
- 325 1 698 2 2,830 1 1,023 2 2,975 Strategic advisory 8 6,929 3
3,263 4 3,820 11 10,192 5 5,220 Total 47 $23,061 43 $25,053 51
$21,057 90 $48,114 95 $33,164
Brokerage
Net brokerage revenues were $6.5 million, a decrease of 7.2%
from $7.0 million for the second quarter of 2013. For the six
months ended June 30, 2014, net brokerage revenues were $13.1
million, an increase of 7.9% from $12.2 million for the six months
ended June 30, 2013.
Asset Management
Asset management-related fee revenues were $15.4 million, an
increase of 277.3% from $4.1 million for the second quarter of
2013, largely due to an increase in incentive fees to $11.2 million
from $0.8 million. For the six months ended June 30, 2014, asset
management-related fee revenues were $21.5 million, an
increase of 79.7% from $12.0 million for the six months ended June
30, 2013. For more information on asset management-related fee
revenues, please see the section below titled “Non-GAAP Financial
Measures.”
Client assets under management at June 30, 2014, totaled $1.9
billion, including $1.0 billion of funds managed by Harvest Capital
Strategies and HCAP Advisors and $889.9 million par value of loans
and cash managed by JMP Credit Advisors. Client assets under
management were $1.8 billion at March 31, 2014, and $1.6
billion at June 30, 2013. Including sponsored funds in which
Harvest Capital Strategies owns an economic interest, client assets
under management totaled $2.2 billion at June 30, 2014.
At June 30, 2014, private capital, including corporate credit,
small business lending, venture capital and real estate-related
advisory services, represented 60.0% of client assets under
management, including sponsored funds.
Principal Transactions
Principal transactions generated net realized and unrealized
gains of $9.7 million and $6.0 million for the quarter and six
months ended June 30, 2014, respectively, compared to $2.3 million
and $4.2 million for the quarter and six months ended June 30,
2013, respectively.
A summary of the company’s principal transaction revenues for
the quarter and six months ended June 30, 2014, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands) June
30, 2014 Mar. 31, 2014 June 30, 2013 June 30, 2014
June 30, 2013 Hedge fund investments $2,255
$1,707 $908 $3,963 $2,806
Principal investments:
Investment in Harvest Capital Credit
Corporation
19 (163 ) (136 ) (144 ) (136 ) Other principal investments (108 )
55 54 (53 ) 139 Total principal investments
(89 ) (108 ) (82 ) (197 ) 3 Venture investments:
Investment in Harvest Growth Capital
funds
284 (302 ) 86 (19 ) 67 Other venture investments and warrants 255
289 485 544 1,037 Total venture
investments 539 (13 ) 571 525 1,104
Principal transaction revenues net of
non-controlling interests in Harvest Growth Capital funds
2,705 1,586 1,397 4,291 3,913
Non-controlling interests in Harvest
Growth Capital funds
6,983 (5,279 ) 895 1,704 296 Total
principal transaction revenues $9,688 ($3,693 ) $2,292
$5,995 $4,209
Included in the net gain of $9.7 million for the quarter ended
June 30, 2014, was a gain of $7.0 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 4.8% of Harvest Growth Capital and 2.3% 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 gain of $7.0 million is not included in adjusted net
revenues. Net of its non-controlling interests, JMP Group had a net
realized and unrealized gain 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
reconciliation to net revenues, please see the section below titled
“Non-GAAP Financial Measures.”
Collateralized Loan Obligations
The net returns on invested capital managed by JMP Credit
Advisors were 3.7% and 8.1% for the quarter and six months ended
June 30, 2014, respectively, compared to 6.3% and 18.2% for the
quarter and six months ended June 30, 2013, respectively.
At June 30, 2014, discounts and reserves (including liquidity
discounts, allowances for loan losses and deferred loan fees)
equaled $10.3 million, or 1.2% of gross performing loans
outstanding at JMP Credit. At June 30, 2013, such discounts and
reserves equaled $10.1 million, or 1.5% of gross performing loans
outstanding. There were no impaired loans with associated discounts
or reserves at either June 30, 2014, or June 30, 2013.
A net loan loss provision of $0.2 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
June 30, 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 $2.4 million for the second quarter of 2013, when
interest expense due to net amortization of liquidity discounts at
JMP Credit equaled $6.2 million. Excluding the
amortization-related expense for the period, net interest income
would have been $3.8 million for the second quarter of 2013.
Further excluding net interest income of $0.5 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 $3.3 million for the second
quarter of 2013.
For the six months ended June 30, 2014, net interest income was
$7.5 million, compared to net interest expense of $5.5 million for
the six months ended June 30, 2013, when interest expense due to
net amortization of liquidity discounts at JMP Credit equaled
$15.0 million. Excluding the amortization-related expense for
the period, net interest income would have been $9.4 million for
the six months ended June 30, 2013. Further excluding net interest
income of $1.8 million attributable to Harvest Capital Credit,
which, as previously noted, is no longer consolidated by JMP Group,
net interest income would have been $7.6 million for the six months
ended June 30, 2013.
Expenses
Compensation and Benefits
Compensation and benefits expense was $38.0 million, compared to
$24.8 million for the second quarter of 2013. Excluding the cost of
stock-based awards but accelerating and recognizing the cost of net
deferred compensation related to the period, compensation and
benefits expense was 72.7% of adjusted net revenues, compared to
65.5% for the second quarter of 2013. Further excluding
compensation expense related to strategic initiatives, the
compensation ratio was 71.8%, compared to 61.5% for the second
quarter of 2013.
For the six months ended June 30, 2014, compensation and
benefits expense was $69.4 million, compared to $44.4 million for
the six months ended June 30, 2013. Excluding the cost of
stock-based awards but accelerating and recognizing the cost of net
deferred compensation related to the period, compensation and
benefits expense was 71.3% of adjusted net revenues, compared to
64.0% for the six months ended June 30, 2013. Further excluding
compensation expense related to strategic initiatives, the
compensation ratio was 70.1%, compared to 60.1% for the six months
ended June 30, 2013.
For more information on compensation ratios, please see the
section below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was $7.2 million, compared to $9.0
million for the second quarter of 2013. For the six months ended
June 30, 2014, non-compensation expense was $13.7 million, compared
to $15.1 million for the six months ended June 30, 2013.
Personnel
At June 30, 2014, the company had 232 full-time employees,
compared to 232 at March 31, 2014, and 218 at June 30, 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 other CLOs, (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, (vi) excludes the non-controlling interest in net
unrealized gains and losses on Harvest Growth Capital and Harvest
Growth Capital II, and (vii) reverses unrealized mark-to-market
gains or losses on investments related to deferred compensation. 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 ending
on or before June 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;
- 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; and
- unrealized mark-to-market gains or
losses on investments in the company’s hedge funds that are made on
behalf of employees who opt for such investments under the terms of
their deferred compensation agreements; any gains or losses will
accrue to the individual employee once the deferred compensation is
released to that individual.
A reconciliation of JMP Group’s net revenues to its adjusted net
revenues for the quarter and six months ended June 30, 2014, and
for comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands) June
30, 2014 Mar. 31, 2014 June 30, 2013 June 30, 2014
June 30, 2013 Revenues: Non-interest revenues $53,942
$34,397 $34,273 $88,339 $61,611 Net interest income/(expense) 3,788
3,760 (2,394 ) 7,548 (5,535 ) Loan loss provision (212 ) (497 )
(975 ) (709 ) (1,924 ) Total net revenues 57,518 37,660 30,904
95,178 54,152
Asset management fees earned on Harvest
Growth Capital funds and Harvest Capital Credit (1) (2)
366 378 522 744 1,379
Dividend distribution from Harvest Capital
Credit (2)
- - 421 - 678
Less: Net interest income and other
revenues from Harvest Capital Credit (2)
- - (789 ) - (2,116 )
Total net revenues including fee revenues
from consolidated entities
57,884 38,038 31,058 95,922 54,093
Add back/(subtract):
Net amortization of liquidity discounts on
loans and asset-backed securities issued
- - 6,239 - 14,979
General loan loss provision –
collateralized loan obligations
382 550 1,128 932 1,128
Unrealized mark-to-market (gain) – Harvest
Capital Credit
- - - - (515 )
Realization of mark-to-market gain –
Harvest Capital Credit
- - 772 - 772
Net unrealized (gain)/loss on strategic
equity investments and warrants
(72 ) 174 (243 ) 102 (86 )
Non-controlling interests in net
unrealized (gains)/losses on Harvest Growth Capital funds
(6,980 ) 5,297 (895 ) (1,683 ) (296 )
Unrealized mark-to-market (gain) –
deferred compensation
(656 ) (70 ) (113 ) (726 ) (153 ) Adjusted net revenues $50,558
$43,989 $37,946 $94,547 $69,922
(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 and six months ended June 30, 2014, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands) June
30, 2014 Mar. 31, 2014 June 30, 2013 June 30, 2014
June 30, 2013 Base management fees: Fees reported as
asset management fees $2,725 $2,594 $2,552 $5,319 $4,917
Fees earned at Harvest Growth Capital,
Harvest Growth Capital II and Harvest Capital Credit/HCAP
Advisors
804 768 595 1,572 1,103 Total base
management fees 3,529 3,362 3,147 6,891
6,020 Incentive fees: Fees reported as asset management fees
11,209 2,919 836 14,128 5,223
Fees earned at Harvest Growth Capital,
Harvest Growth Capital II and Harvest Capital Credit/HCAP
Advisors
485 (359 ) 66 126 416 Total incentive fees
11,694 2,560 902 14,254 5,639
Other fee income: Fundraising and other fees 152 223
26 375 314 Total other fee income 152 223
26 375 314 Asset management-related fee
revenues $15,375 $6,145 $4,075 $21,520
$11,973
Summations:
Fees reported as asset management fees
$13,934
$5,513
$3,388
$19,447
$10,140
Fees earned at Harvest Growth Capital,
Harvest Growth Capital II and Harvest Capital Credit/HCAP
Advisors
1,289 409 661 1,698 1,519 Fees reported as other income 152 223 26
375 314
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 compensation expense as a
percentage of net revenues in a given period. As utilized by JMP
Group, an adjusted compensation ratio is a non-GAAP financial
measure that employs adjusted net revenues as the denominator in
its calculation. Furthermore, this ratio adjusts 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 and
unrealized mark-to-market gains or losses related to stock-based
awards and deferred compensation (so that the compensation expenses
used in the numerator correspond to the adjusted net revenues
generated in the periods presented). The adjusted compensation
ratio is further adjusted by excluding compensation paid to
employees hired in connection with JMP Group’s strategic
investments in new business initiatives.
A statement of JMP Group’s compensation ratio for the quarter
and six months ended June 30, 2014, and for comparable prior
periods is set forth below.
Quarter Ended
Six Months Ended ($ in thousands) June 30, 2014 Mar.
31, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Adjusted net revenues $50,558 $43,989 $37,946
$94,547 $69,922 Compensation and
benefits $37,979 $31,376 $24,776 $69,355 $44,381 Subtract/(add
back):
Compensation expense – stock option
grants
504 395 259 899
396
Compensation expense – post-IPO RSU
grants
934 853 704 1,787 1,320
Compensation expense – net deferred
compensation
(891 ) (597 ) (1,146 ) (1,488 ) (2,270 )
Unrealized mark-to-market gain – deferred
compensation
656 70 113 726 153 Adjusted
compensation and benefits 36,776 30,655 24,846
67,431 44,782 Subtract:
Compensation expense – strategic
initiatives
500 610 1,520 1,110 2,770
Adjusted compensation and benefits,
excluding strategic initiatives
$36,276 $30,045 $23,326 $66,321 $42,012
Adjusted ratio of compensation expense to
revenues
72.7 % 69.7 % 65.5 % 71.3 % 64.0 %
Adjusted ratio of compensation expense to
revenues, excluding strategic initiatives
71.8 % 68.3 % 61.5 % 70.1 % 60.1 %
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 other CLOs, (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 ending
on or before June 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 and six months ended June 30, 2014, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands, except
per share amounts)
June 30, 2014
Mar. 31, 2014
June 30, 2013
June 30, 2014
June 30, 2013
Net income/(loss) attributable to JMP
Group Inc.
$3,195 $3,998 ($1,435 ) $7,193 ($3,154 ) Add back:
Income tax expense/(benefit) 2,450 1,696 (644 ) 4,146
(1,456 ) Income/(loss) before taxes 5,645 5,694 (2,079 )
11,339 (4,610 ) Add back/(subtract): Compensation expense –
stock options 504 395 259 899 396 Compensation expense – post-IPO
RSUs 934 853 704 1,787 1,320
Compensation expense – deferred
compensation
(891 ) (597 ) (1,146 ) (1,488 ) (2,270 )
Net amortization of liquidity discounts –
JMP Credit Advisors CLO I
- - 6,239 - 14,979
General loan loss provision –
collateralized loan obligations
380 545 821 925 821
Unrealized mark-to-market (gain)/loss –
Harvest Capital Credit
- - - - (162 )
Realization of mark-to-market gain –
Harvest Capital Credit
- - 772 - 772
Unrealized mark-to-market loss/(gain) –
strategic equity investments and warrants
(72 ) 174 (243 ) 102 (86 ) Operating income before
taxes 6,500 7,064 5,327 13,564 11,160 Income tax expense
(assumed rate of 38%) 2,470 2,684 2,024 5,154
4,240 Operating net income $4,030 $4,380
$3,303 $8,410 $6,920 Operating
net income per share: Basic $0.19 $0.20 $0.15 $0.39 $0.31 Diluted
(1) $0.18 $0.19 $0.15 $0.37 $0.30 Weighted average shares
outstanding: Basic 21,712 21,820 22,199 21,766 22,402 Diluted (1)
22,901 22,806 22,707 22,778 22,744
(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 and six months ended June 30, 2014, was 23,744,777 and
23,639,612, respectively. Given those denominators, operating net
income per diluted share would have instead been $0.17 for the
quarter and $0.36 for the six months ended June 30, 2014,
respectively.
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 with regard to
other CLOs, (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 June 30, 2014, is set forth below.
Quarter Ended June 30, 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 $23,059 - - $23,059 - - $2 $23,061 - $23,061
Brokerage $6,474 - - 6,474 - - - 6,474 - 6,474 Asset
management-related fees (1) - $15,461 $1,546 17,007 - - (1,632 )
15,375 ($367 ) 15,008 Principal transactions (2) - - - - $1,977 - -
1,977 6,983 8,960 Gain on sale and payoff of loans - - - - (551 ) -
- (551 ) - (551 ) Net dividend income - - - - 262 - - 262 - 262 Net
interest income - - - - 3,791 - - 3,791 (3 ) 3,788 Provision for
loan losses - - - - 169 - - 169 -
169 Adjusted net revenues 29,533 15,461 1,546 46,540
5,648 - (1,630 ) 50,558 6,613 57,171 Expenses: Non-interest
expense/(income) (3) 24,560 14,533 988 40,081 1,466 3,975 (1,632 )
43,890 60 43,950 Less: Non-controlling interest (4) - 73 -
73 92 - - 165 6,553 6,718
Operating income/(loss) before taxes
4,973 855 558 6,386 4,090 (3,975 ) 2 6,503 - 6,503 Income
tax expense/(benefit) 1,890 325 212 2,427 1,554 (1,509 ) 1
2,473 - 2,473 Operating net
income/(loss) $3,083 $530 $346 $3,959 $2,536 ($2,466 ) $1
$4,030 - $4,030
Operating net income/(loss) per share:
Basic $0.14 $0.02 $0.02 $0.18 $0.12 ($0.11 ) $0.00 $0.19 - $0.19
Diluted (5) $0.13 $0.02 $0.02 $0.17 $0.12 ($0.11 ) $0.00 $0.18 -
$0.18
(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 $7.0 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
$61,000 that are recognized upon consolidation of two Harvest
Growth Capital funds.
(4) Excludes non-controlling interests
totaling $6.6 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 June 30, 2014, was 23,744,777; given that
denominator, operating net income per diluted share would have been
$0.17.
A statement of JMP Group’s operating net income on a segment
basis for the six months ended June 30, 2014, is set forth
below.
Six Months Ended June 30, 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 $48,202 - - $48,202 - - ($88 ) $48,114
- $48,114 Brokerage 13,130 - - 13,130 - - - 13,130 - 13,130 Asset
management-related fees (1) 50 $21,685 $2,607 24,342 - - (2,822 )
21,520 ($746 ) 20,774 Principal transactions (2) - - - - $3,667 - -
3,667 1,704 5,371 Gain on sale and payoff of loans - - - - (171 ) -
- (171 ) - (171 ) Net dividend income - - - - 497 - - 497 - 497 Net
interest income - - - - 7,568 - - 7,568 (20 ) 7,548 Provision for
loan losses - - - - 222 - - 222
- 222 Adjusted net revenues 61,382 21,685
2,607 85,674 11,783 - (2,910 ) 94,547 938 95,485 Expenses:
Non-interest expense/(income) (3) 49,876 20,914 2,012 72,802 2,826
8,214 (2,822 ) 81,020 103 81,123 Less: Non-controlling
interest (4) - (283 ) - (283 ) 242 - - (41 )
835 794
Operating income/(loss) before taxes
11,506 1,054 595 13,155 8,715 (8,214 ) (88 ) 13,568 - 13,568
Income tax expense/(benefit) 4,372 401 226 4,999
3,312 (3,120 ) (33 ) 5,158 - 5,158
Operating net income/(loss) $7,134 $653 $369 $8,156
$5,403 ($5,094 ) ($55 ) $8,410 - $8,410
Operating net income/(loss) per share:
Basic $0.33 $0.03 $0.02 $0.37 $0.25 ($0.23 ) ($0.00 ) $0.39 - $0.39
Diluted (5) $0.31 $0.03 $0.02 $0.36 $0.24 ($0.23 ) ($0.00 ) $0.37 -
$0.37
(1) Reflects revenues detailed in section
above titled “Asset Management-Related Fee Revenues;” management
fees of $0.7 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 $1.7 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
$103,000 that are recognized upon consolidation of two Harvest
Growth Capital funds.
(4) Excludes non-controlling interests
totaling $0.8 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 six
months ended June 30, 2014, was 23,639,612; given that denominator,
operating net income per diluted share would have been $0.36.
Book Value per Share
At June 30, 2014, JMP Group’s tangible book value per share was
$6.16, as set forth below.
(in thousands, except per share amounts) June 30, 2014
Mar. 31, 2014 June 30, 2013 Total JMP Group
stockholders' equity $133,593 $130,373 $121,120 Less: Goodwill and
intangible assets - - - Tangible stockholders' equity $133,593
$130,373 $121,120 Tangible book value per share $6.16 $5.97 $5.47
Basic shares outstanding 21,690 21,833 22,138 Quarterly
operating ROTE (1) 13.5% 13.6% 10.7% LTM operating ROTE (1) 12.2%
11.4% 12.9%
(1) Return on tangible equity (ROTE)
equals annualized operating net income divided by average tangible
stockholders’ equity.
Share Repurchase Activity
During the quarter ended June 30, 2014, JMP Group repurchased
205,912 shares of its common stock at an aggregate price of
approximately $1.3 million, or $6.47 per share. At quarter-end,
approximately 0.9 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 Friday, July 25, 2014. To
participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
77141806.
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) June 30, 2014 Dec. 31, 2013
Assets Cash and cash equivalents $49,603 $65,906
Restricted cash and deposits 97,156 68,029 Marketable securities
owned, at fair value 36,842 29,295 Other investments 190,349
161,773
Loans collateralizing asset-backed
securities issued, net of allowance for loan losses
815,671 727,270 Deferred tax assets 8,959 12,492 Other assets
50,528 57,166 Total assets $1,249,108 $1,121,931 Liabilities
and Stockholders' Equity Liabilities: Marketable securities
sold, but not yet purchased, at fair value $24,669 $13,749 Accrued
compensation 40,615 51,347 Asset-backed securities issued 710,104
716,423 Note payable - 15,000 Line of credit 691 2,895 Warehouse
credit facility – JMP Credit Advisors CLO III 97,510 - Bond payable
94,300 46,000 Deferred tax liability 4,295 3,625 Other liabilities
35,263 35,652 Total liabilities 1,007,447 884,691
Stockholders' Equity: Total JMP Group Inc. stockholders' equity
133,593 126,385 Non-redeemable non-controlling interest 108,068
110,855 Total equity 241,661 237,240 Total liabilities and
stockholders' equity $1,249,108 $1,121,931
JMP GROUP INC.
Consolidated Statements of
Operations
(Unaudited)
Quarter Ended Six Months Ended (in thousands,
except per share amounts) June 30, 2014 June 30, 2013 June
30, 2014 June 30, 2013 Revenues: Investment banking
$23,061 $21,057 $48,114 $33,164 Brokerage 6,474 6,980 13,130 12,174
Asset management fees 14,858 3,527 20,402 10,278 Principal
transactions 9,688 2,292 5,995 4,209 Loss/(gain) on sale, payoff
and mark-to-market of loans (551 ) 336 (171 ) 1,425 Net dividend
income 262 55 497 47 Other income 150 26 372
314 Non-interest revenues 53,942 34,273 88,339
61,611 Interest income 9,212 7,711 17,800
15,869 Interest expense (5,424 ) (10,105 ) (10,252 ) (21,404 ) Net
interest income/(expense) 3,788 (2,394 ) 7,548 (5,535
) Provision for loan losses (212 ) (975 ) (709 ) (1,924 )
Total net revenues 57,518 30,904 95,178 54,152
Non-interest expenses: Compensation and benefits
37,979 24,776 69,355 44,381 Administration 1,760 4,005 3,482 5,336
Brokerage, clearing and exchange fees 818 1,025 1,743 1,912 Travel
and business development 980 1,039 1,831 1,997 Communications and
technology 942 832 1,890 1,685 Occupancy 851 808 1,676 1,612
Professional fees 1,269 812 2,076 1,836 Depreciation 227 238 454
464 Other 330 224 542 307 Total
non-interest expense 45,156 33,759 83,049
59,530 Net income/(loss) before income tax expense
12,362 (2,855 ) 12,129 (5,378 ) Income tax expense/(benefit) 2,450
(644 ) 4,146 (1,456 ) Net income/(loss) 9,912 (2,211
) 7,983 (3,922 )
Less: Net income/(loss) attributable to
noncontrolling interests
6,717 (776 ) 790 (768 ) Net income/(loss)
attributable to JMP Group Inc. $3,195 ($1,435 ) $7,193
($3,154 )
Net income/(loss) attributable to JMP
Group Inc. per share:
Basic $0.14 ($0.06 ) $0.31 ($0.14 ) Diluted $0.13 ($0.06 ) $0.30
($0.14 ) Weighted average common shares outstanding: Basic
21,712 22,199 21,766 22,402 Diluted 23,745 22,199 23,640 22,402
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