JMP Group LLC (NYSE: JMP), an investment banking and alternative
asset management firm, reported financial results today for the
quarter ended June 30, 2015.
- Operating net income was $4.9 million,
or $0.22 per diluted share, an increase of 20.3% from
$4.0 million, or $0.18 per share, for the second quarter of
2014. For the six months ended June 30, 2015, operating net
income was $10.0 million, or $0.45 per share, an increase of 18.7%
from $8.4 million, or $0.37 per share, for the six months
ended June 30, 2014. For more information about operating net
income, including a reconciliation to net income attributable to
JMP Group, see the section below titled “Non-GAAP Financial
Measures.”
- Adjusted net revenues, which exclude
certain non-cash items and non-controlling interests, were $38.3
million, a decrease of 23.4% from $50.0 million for the second
quarter of 2014. For the six months ended June 30, 2015, adjusted
net revenues were $75.9 million, a decrease of 19.1% from $93.8
million for the six months ended June 30, 2014. For more
information about adjusted net revenues, including a reconciliation
to net revenues, see the section below titled “Non-GAAP Financial
Measures.”
- Net income attributable to JMP Group
under generally accepted accounting principles, or GAAP, was $5.8
million, or $0.25 per diluted share, compared to $3.2 million, or
$0.13 per share, for the second quarter of 2014. For the six months
ended June 30, 2015, GAAP net income was $3.9 million, or
$0.17 per share, compared to $7.2 million, or $0.30 per share, for
the six months ended June 30, 2014.
- Total net revenues on a GAAP basis were
$40.5 million and $81.4 million for the quarter and six months
ended June 30, 2015, respectively, compared to $57.5 million and
$95.2 million for the quarter and six months ended June 30, 2014,
respectively.
“In the second quarter, JMP Group continued its strong
performance, with operating EPS increasing 22% year over year to
$0.22,” said Chairman and Chief Executive Officer Joe Jolson. “Led
by JMP Securities, our taxable operating subsidiaries had another
strong quarter, earning $0.14 per share, with net corporate
income—net investment income less corporate costs—contributing the
additional $0.07. Our operating return on equity was nearly 15% for
the quarter, of which we paid out approximately 50%, resulting in
an annualized earnings retention rate of more than 7%. We intend to
retain most, if not all, of the taxable earnings from our operating
platforms to support their growth; and, as a result, book value per
share improved to $6.41 at June 30 from $6.14 at March 31.”
Segment Results of OperationsAt JMP Securities, the
broker-dealer segment, adjusted net revenues were $28.9 million, a
decrease of 2.2% from $29.5 million for the second quarter of 2014.
The broker-dealer segment’s operating margin on adjusted net
revenues was 16.4%, compared to 16.8% for the second quarter of
2014.
At Harvest Capital Strategies, the asset management segment,
adjusted net revenues of $4.3 million decreased 71.5% from $15.0
million for the second quarter of 2014. JMP Group’s return on its
capital invested in hedge funds managed by Harvest Capital
Strategies was 0.5% for the quarter.
At JMP Credit Advisors, the corporate credit management segment,
adjusted net revenues totaled $1.4 million, a decrease of
10.9% from $1.5 million for the second quarter of 2014.
A summary of JMP Group’s operating net income per share by
segment for the quarter and six months ended June 30, 2015, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended ($ as shown) June 30,
2015 Mar. 31, 2015 June 30, 2014 June 30, 2015
June 30, 2014 Broker-dealer $0.13 $0.13 $0.13 $0.26 $0.31 Asset
management - 0.01 0.02 0.01 0.03 Corporate credit management 0.01
0.01 0.02 0.02 0.02 Operating platform EPS 0.14 0.14 0.17 0.29 0.36
Net corporate income 0.07 0.09 0.01 0.16 0.01 Operating EPS
(diluted) $0.22 $0.23 $0.18 $0.45 $0.37
Note: Due to rounding, numbers in
columns above may not sum to totals presented.
For more information about segment reporting; adjusted net
revenues, including a reconciliation to net revenues; and operating
net income, including a reconciliation to net income, see the
section below titled “Non-GAAP Financial Measures.”
Composition of Revenues
Investment BankingInvestment banking revenues were $21.3
million, a decrease of 7.5% from $23.1 million for the second
quarter of 2014. For the six months ended June 30, 2015, investment
banking revenues were $42.0 million, a decrease of 12.7% from
$48.1 million for the six months ended June 30, 2014.
A summary of the company’s investment banking revenues and
transaction counts for the quarter and six months ended June 30,
2015, and for comparable prior periods is set forth below.
Quarter Ended Six Months Ended June 30, 2015
Mar. 31, 2015 June 30, 2014 June 30, 2015 June 30,
2014 ($ in thousands) Count Revenues Count Revenues
Count Revenues Count Revenues Count Revenues
Public equity 27 $14,933 34 $16,595 34 $14,717 61 $31,528 67
$34,238
Debt and convertible securities
6 3,502 5 857 5 1,090 11 4,359 11 2,661
Private capital markets and other
- 75 1 547 - 325 1 622 1 1,023 Strategic advisory 2 2,821 4 2,695 8
6,929 6 5,516 11 10,192 Total 35 $21,331 44 $20,694 47 $23,061 79
$42,025 90 $48,114
BrokerageNet brokerage revenues were $6.4 million, a decrease of
1.1% from $6.5 million for the second quarter of 2014. For the six
months ended June 30, 2015, net brokerage revenues were $12.5
million, a decrease of 5.0% from $13.1 million for the six months
ended June 30, 2014.
Asset ManagementAsset management-related fee revenues were $4.2
million, a decrease of 71.8% from $14.9 million for the second
quarter of 2014, when incentive fees equaled $11.5 million. For the
six months ended June 30, 2015, asset management-related fee
revenues were $9.1 million, a decrease of 56.7% from $21.1
million for the six months ended June 30, 2014. For more
information about asset management-related fee revenues, see the
section below titled “Non-GAAP Financial Measures.”
Client assets under management at June 30, 2015, totaled $2.0
billion, including $0.9 billion of funds managed by Harvest Capital
Strategies and HCAP Advisors and $1.1 billion par value of loans
and cash managed by JMP Credit Advisors. Client assets under
management were $2.0 billion at March 31, 2015, and $1.9 billion at
June 30, 2014. Including sponsored funds in which Harvest Capital
Strategies owns an economic interest, client assets under
management totaled $2.5 billion at June 30, 2015.
At June 30, 2015, private capital, including corporate credit,
small business lending, venture capital and real estate-related
advisory services, represented 62.3% of client assets under
management, including sponsored funds.
Principal TransactionsPrincipal transactions generated net
realized and unrealized gains of $2.9 million and $6.6 million for
the quarter and six months ended June 30, 2015, respectively,
compared to $9.7 million and $6.0 million for the quarter and six
months ended June 30, 2014, respectively. For more information
about principal transaction revenues, see the section below titled
“Non-GAAP Financial Measures.”
Collateralized Loan ObligationsThe net return on invested
capital managed by JMP Credit Advisors was 2.7%, compared to 3.7%
for the second quarter of 2014.
At June 30, 2015, discounts and reserves (including liquidity
discounts, allowances for loan losses and deferred loan fees)
equaled $12.8 million, or 1.3% of gross performing loans
outstanding at JMP Credit. At June 30, 2014, such discounts and
reserves equaled $10.3 million, or 1.2% of gross performing loans
outstanding. There were no impaired loans at either June 30, 2015,
or June 30, 2014.
A general loan loss provision of $0.2 million was offset by the
reversal of a prior loan loss provision of $0.7 million related to
JMP Credit Advisors CLO I, resulting in a net credit to loan loss
reserves of $0.5 million for the quarter. At June 30, 2015,
general loan loss reserves equaled 0.4% of gross performing loans
at JMP Credit.
Net Interest IncomeNet interest income was $5.4 million and
$10.9 million for the quarter and six months ended June 30, 2015,
respectively, compared to $3.8 million and $7.5 million for the
quarter and six months ended June 30, 2014, respectively.
Expenses
Compensation and BenefitsCompensation and benefits expense was
$27.5 million, compared to $38.0 million for the second quarter of
2014. With regard to annually awarded compensation, a concept which
excludes amortization expense from share-based awards but
accelerates and recognizes the cost of net deferred compensation
related to the period, compensation and benefits expense was 63.8%
of adjusted net revenues, compared to 64.9% for the second quarter
of 2014. Further excluding compensation expense related to
strategic initiatives and hedge fund incentive fees, the
compensation ratio was 63.7%, compared to 67.1% for the second
quarter of 2014.
For the six months ended June 30, 2015, compensation and
benefits expense was $54.6 million, compared to $69.4 million for
the six months ended June 30, 2014. With regard to annually awarded
compensation, compensation and benefits expense was 64.9% of
adjusted net revenues, compared to 71.3% for the six months ended
June 30, 2014. Further excluding compensation expense related to
strategic initiatives and hedge fund incentive fees, the
compensation ratio was 64.9%, compared to 68.1% for the six months
ended June 30, 2014.
For more information about compensation ratios, see the section
below titled “Non-GAAP Financial Measures.”
Non-Compensation ExpenseNon-compensation expense was $8.3
million, compared to $7.2 million for the second quarter of 2014.
For the six months ended June 30, 2015, non-compensation expense
was $15.2 million, compared to $13.7 million for the six
months ended June 30, 2014.
Book Value per ShareAt June 30, 2015, JMP Group’s book
value per share was $6.41, as set forth below.
(in thousands, except per share amounts) June 30, 2015
Mar. 31, 2015 June 30, 2014 Shareholders'
equity $136,144 $130,431 $133,593 Book
value per share $6.41 $6.14 $6.16 Basic
shares outstanding 21,241 21,229 21,690 Quarterly operating
ROE (1) 14.6 % 15.6 % 12.2 % LTM operating ROE (1) 13.4 % 12.9 %
11.8 %
(1)
Operating return on equity (ROE) equals operating net income
divided by average shareholders’ equity. For more information about
operating net income, including a reconciliation to net income
attributable to JMP Group, see the section below titled “Non-GAAP
Financial Measures.”
Share Repurchase ActivityJMP Group did not repurchase any
common shares during the quarter. At June 30, 2015, approximately
0.6 million shares remained eligible for repurchase under the
company’s existing repurchase authorization.
PersonnelAt June 30, 2015, the company had 235 full-time
employees, compared to 233 at March 31, 2015, and 231 at June 30,
2014.
Non-GAAP Financial MeasuresIn 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 a 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 RevenueAdjusted net revenue is a non-GAAP financial
measure that (i) includes asset management fees, net interest
income, and other revenues eliminated upon the consolidation of
Harvest Growth Capital and Harvest Growth Capital II (prior to the
early adoption of a new GAAP consolidation standard as of January
1, 2015), (ii) reverses the general loan loss provision taken with
regard to certain CLOs, (iii) reverses net unrealized gains or
losses on strategic equity investments and warrants, (iv) excludes
non-controlling interests in net unrealized gains and losses on
Harvest Growth Capital and Harvest Growth Capital II (prior to the
early adoption of a new GAAP consolidation standard as of January
1, 2015), (v) excludes non-controlling interests in other sources
of revenue that are consolidated according to GAAP, and (vi)
reverses net 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;
Harvest Capital Strategies is managing member of Harvest Growth
Capital and Harvest Growth Capital II and, as a result of its
ownership, JMP Group consolidated the two funds and eliminated the
fees in consolidation until adopting an amended GAAP standard as of
January 1, 2015; presenting these fees in prior periods as though
Harvest Growth Capital and Harvest Growth Capital II were
deconsolidated presented the entities’ results in a manner similar
to those of the other investment funds managed by Harvest Capital
Strategies;
- the non-specific loss provision
recorded with regard to loans held 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 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; JMP Group consolidated the two funds
under GAAP until January 1, 2015, when an amended GAAP standard no
longer required consolidation; in prior periods, unrealized gains
and losses that did not accrue to the company were 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, 2015, and
for comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands) June
30, 2015 Mar. 31, 2015 June 30, 2014 June 30, 2015
June 30, 2014 Revenues: Non-interest revenues $34,499
$35,518 $53,942 $70,017 $88,339 Net interest income 5,415 5,489
3,788 10,904 7,548 Loan loss (provision)/credit 545 (57 )
(212 ) 488 (709 )
Total net revenues
40,459 40,950 57,518 81,409 95,178 Add back/(subtract):
General loan loss provision/(credit) –
collateralized loan obligations
124 91 380 215 925
Net unrealized (gain)/loss on strategic
equity investments and warrants
190 (1,020 ) (72 ) (831 ) 102
Non-controlling interests – Harvest Growth
Capital funds
- - (6,614 ) - (939 )
Non-controlling interests – other
revenues
(2,500 ) (2,619 ) (578 ) (5,118 ) (767 )
Unrealized mark-to-market loss/(gain) –
deferred compensation
7 195 (656 ) 202 (726 ) Adjusted net
revenues $38,280 $37,597 $49,978 $75,877
$93,773
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 RevenuesAsset 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, until January 1, 2015, JMP Group
consolidated Harvest Growth Capital and Harvest Growth Capital II
in accordance with GAAP; for prior periods, asset management fees
generated by the two funds were 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, 2015, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands) June
30, 2015 Mar. 31, 2015 June 30, 2014 June 30, 2015
June 30, 2014 Base management fees: Fees reported as
asset management fees $3,419 $3,710 $3,163 $7,129 $6,147
Fees earned at Harvest Growth Capital and
Harvest Growth Capital II
- - 366 - 745
Less: Non-controlling interest in HCAP
Advisors
(319 ) (300 ) (215 ) (619 ) (406 ) Total base management fees 3,100
3,410 3,314 6,510 6,486
Incentive fees: Fees reported as asset management fees 1,302 952
11,695 2,255 14,255
Less: Non-controlling interest in HCAP
Advisors
(250 ) (194 ) (238 ) (444 ) (62 ) Total incentive fees 1,052
758 11,457 1,811 14,193 Other
fee income: Total fundraising and other fees 62 740
152 802 372
Asset management-related fee revenues
$4,214 $4,908 $14,922 $9,123 $21,051
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.
Adjusted Principal Transaction RevenuesAdjusted principal
transaction revenue is a non-GAAP financial measure that reverses
net unrealized gains and losses on (i) strategic equity investments
and warrants and (ii) investments related to deferred compensation,
in keeping with the calculation of adjusted net revenue, as
detailed above.
A summary of the company’s principal transaction revenues for
the quarter and six months ended June 30, 2015, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands) June
30, 2015 Mar. 31, 2015 June 30, 2014 June 30, 2015
June 30, 2014 Hedge fund investments $618 $1,313
$2,255 $1,997 $3,963
Investment in Harvest Capital Credit
Corporation
735 999 19 1,735 (144 )
Investment in Harvest Growth Capital
funds
264 (22 ) 284 242 (19 ) Other principal investments 1,240 1,454
147 2,627 491
Principal transaction revenues before
non-controlling interests
2,857 3,744 2,705 6,601 4,291
Non-controlling interests – Harvest Growth
Capital funds
- - 6,983 - 1,704 Total
principal transaction revenues 2,857 3,744 9,688
6,601 5,995 Add back/(subtract):
Unrealized mark to market loss/(gain) –
Strategic equity investments and warrants
191 (1,021 ) (72 ) (830 ) 102
Unrealized mark-to-market loss/(gain) –
net deferred compensation
7 195 (655 ) 202 (725 )
Non-controlling interests – Harvest Growth
Capital funds
- - (6,983 ) - (1,704 ) Total operating
adjustments 198 (826 ) (7,710 ) (628 ) (2,327 )
Total adjusted principal transaction
revenues
$3,055 $2,918 $1,978 $5,973 $3,668
Due to Harvest Capital Strategies’ role as the manager and
managing member of Harvest Growth Capital and Harvest Growth
Capital II, GAAP previously required that JMP Group consolidate the
two venture capital funds, despite the company’s very limited
ownership of each one. Following a recent amendment to GAAP
standards regarding consolidation, JMP Group no longer consolidates
the funds; the company elected to adopt the new standard early, as
it is not required until 2016. In the table above, principal
transaction revenues before non-controlling interests are presented
so that all periods are comparable. Total principal transaction
revenues, while not comparable across periods due to the recently
revised accounting standards, reflect GAAP for each of the periods
shown.
Company management utilizes adjusted principal transaction
revenue because it is a component of adjusted net revenue. The
exclusion of certain elements of principal transaction revenues, as
presented above, results in an adjusted measure that is included as
“Principal transactions” among JMP Group’s revenues in the non-GAAP
presentation of segment results of operations that appears below.
Management believes that adjusting principal transaction revenues
and total revenues in these ways is useful in that it allows for a
clearer understanding and comparison of JMP Group’s financial
results for the periods presented.
Compensation RatioA 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 share-based awards, deferred compensation and
non-controlling interests (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. In addition, the company presents an adjusted
compensation ratio that excludes any compensation related to
incentive fees generated by hedge funds, a majority of which is
passed through to the funds’ investment teams if earned.
A statement of JMP Group’s compensation ratio for the quarter
and six months ended June 30, 2015, and for comparable prior
periods is set forth below.
Quarter Ended Six Months Ended ($ in thousands) June
30, 2015 Mar. 31, 2015 June 30, 2014 June 30, 2015
June 30, 2014 Compensation Ratios Adjusted net
revenues $38,280 $37,597 $49,978 $75,877
$93,773 Compensation and benefits $27,524
$27,064 $37,979 $54,588 $69,355 Subtract/(add back):
Compensation expense – stock options and SARs 815 674 504 1,489 899
Compensation expense – RSUs 375 407 934 782 1,787
Compensation expense – net deferred
compensation
1,670 1,069 (891 ) 2,739 (1,488 )
Unrealized mark-to-market gain – deferred
compensation
(7 ) (195 ) 656 (202 ) 726 Compensation expense – non-controlling
interest 262 267 328 530 650
Adjusted compensation and benefits 24,409 24,842
36,448 49,250 66,781 Subtract:
Compensation expense – strategic initiatives - - 500
- 1,110
Adjusted compensation and benefits,
excluding strategic initiatives
$24,409 $24,842 $35,948 $49,250 $65,671
Adjusted ratio of compensation expense to
revenues
63.8 % 66.1 % 72.9 % 64.9 % 71.2 %
Adjusted ratio of compensation expense to
revenues, excluding strategic initiatives
63.8 % 66.1 % 71.9 % 64.9 % 70.0 % Compensation Ratios
Excluding Hedge Fund Incentive Fees Adjusted net revenues
$38,280 $37,597 $49,978 $75,877 $93,773 Subtract:
Compensation expense – hedge fund
incentive fees
29 68 10,385 97 12,831
Adjusted net revenues, excluding hedge
fund incentive fees
$38,251 $37,529 $39,593 $75,780 $80,942
Adjusted compensation and benefits,
excluding strategic initiatives
$24,409 $24,842 $35,948 $49,250 $65,671
Subtract:
Compensation expense – hedge fund
incentive fees
29 68 10,385 97 12,831
Adjusted compensation and benefits,
excluding strategic initiatives and hedge fund incentive fees
$24,380 $24,774 $25,563 $49,153 $52,840
Adjusted ratio of compensation expense to
revenues, excluding strategic initiatives and hedge fund incentive
fees
63.7 % 66.0 % 64.6 % 64.9 % 65.3 %
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 IncomeOperating net income is a non-GAAP financial
measure that (i) reverses compensation expense related to
share-based awards and deferred compensation, (ii) reverses the
general loan loss provision taken with regard to certain CLOs,
(iii) reverses net unrealized gains and losses on strategic equity
investments and warrants, and (iv) assumes an effective tax rate.
In particular, operating net income adjusts for:
- the grant of RSUs and options;
- net deferred compensation, which
consists of (a) deferred compensation awarded at year-end 2012 and
2013 and reflected in operating net income for 2012 and 2013,
though recognized as a GAAP expense in 2013, 2014 and 2015, less
(b) compensation awarded at year-end 2013 and year-end 2014 and
deferred into 2014, 2015 and 2016;
- the non-specific loan loss provision
recorded with regard to loans held 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 company’s strategic equity investments as well as
certain warrant positions; and
- a combined federal, state and local
income tax rate of 38% at the taxable direct subsidiary of parent
company JMP Group, while applying a tax rate of 0% to the company’s
other direct subsidiary, which is a “pass-through entity” for tax
purposes.
A reconciliation of JMP Group’s net income to its operating net
income for the quarter and six months ended June 30, 2015, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in thousands, except
per share amounts) June 30, 2015 Mar. 31, 2015 June
30, 2014 June 30, 2015 June 30, 2014 Net income
attributable to JMP Group LLC $5,826 ($1,892 ) $3,195 $3,934 $7,193
Add back: Income tax expense (2,864 ) 7,000 2,450
4,136 4,146
Income before taxes
2,962 5,108 5,645 8,070 11,339 Add back/(subtract):
Compensation expense – stock options and
SARs
815 674 504 1,489 899 Compensation expense – RSUs 375 407 934 782
1,787
Compensation expense – net deferred
compensation
1,669 1,069
(891
) 2,738 (1,488 )
General loan loss provision –
collateralized loan obligations
124 91 380 215 925
Unrealized mark-to-market loss/(gain) –
strategic equity investments and warrants
189 (1,020 ) (72 ) (831 ) 102 Operating income before
taxes 6,134 6,329 6,500 12,463 13,564 Income tax expense
1,284 1,198 2,470 2,482 5,154
Operating net income $4,850 $5,131 $4,030
$9,981 $8,410 Operating net income per share:
Basic $0.23 $0.24 $0.19 $0.47 $0.39 Diluted (1) $0.22 $0.23 $0.18
$0.45 $0.37 Weighted average shares outstanding: Basic
21,233 21,216 21,712 21,225 21,766 Diluted (1) 22,540 22,218 22,901
22,325 22,778
(1)
In 2013 and the first quarter of 2014, JMP Group issued
restricted share units, or RSUs, bearing non-forfeitable
distribution equivalent rights. GAAP requires RSUs with
non-forfeitable distribution equivalent rights to be included in
the diluted share count (without applying the treasury method).
Management presents 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 was
22,963,757; given that denominator, operating net income per
diluted share would remain $0.22. On a GAAP basis, the weighted
average number of diluted shares outstanding for the six months
ended June 30, 2015, was 22,799,610; given that denominator,
operating net income per diluted share would remain $0.45.
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 ReportingIn 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) reverses the general loan loss
provision taken with regard to certain CLOs, (ii) reverses net
unrealized gains and losses on strategic equity investments and
warrants, (iii) excludes non-controlling interests in other sources
of revenue that are consolidated according to GAAP, and (iv)
reverses unrealized mark-to-market gains or losses on investments
related to deferred compensation. 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 share-based awards
and deferred compensation. Expenses derived from non-controlling
interests in entities that are consolidated according to GAAP have
also been reversed. For the purposes of calculating operating net
income, an effective tax rate of 38% is assumed for JMP Group’s
taxable subsidiary.
A statement of JMP Group’s operating net income on a segment
basis for the quarter ended June 30, 2015, is set forth below.
Quarter Ended June 30, 2015 Corporate
Net Broker- Asset Credit Operating Corporate
Elimin- JMP (in thousands, except per share amounts) Dealer Mgmt.
Mgmt. Platforms Income ations Group Revenues: Investment
banking $21,331 - - $21,331 - - $21,331 Brokerage 6,404 - - 6,404 -
- 6,404 Asset management-related fees - $4,284 $1,378 5,662 ($21 )
($1,427 ) 4,214 Principal transactions (1) 1,135 - - 1,135 1,920 -
3,055 Gain/(loss) on sale and payoff of loans - - - - (809 ) - (809
) Net dividend income - - - - 255 - 255 Net interest income - - - -
3,134 - 3,134 Provision for loan losses - - - - 696 -
696 Adjusted net revenues 28,870 4,284 1,378 34,532 5,175
(1,427 ) 38,280 Expenses: Non-interest expense/(income)
24,124 4,147 999 29,270 4,304 (1,427 ) 32,147
Operating income before taxes 4,746 137 379 5,262 871 - 6,133
Income tax expense/(benefit) 1,803 52 144 1,999 (716 ) -
1,283 Operating net income $2,943 $85 $235 $3,263
$1,587 - $4,850 Operating net income
per share: Basic $0.14 $0.00 $0.01 $0.15 $0.07 - $0.23 Diluted (2)
$0.13 $0.00 $0.01 $0.14 $0.07 - $0.22
(1)
Revenues of $1.1 million at broker-dealer segment represent
net realized investment gain on the exercise of warrants related to
investment banking activity.
(2)
In 2013 and the first quarter of 2014, JMP Group issued restricted
share units, or RSUs, bearing non-forfeitable distribution
equivalent rights. GAAP requires RSUs with non-forfeitable
distribution equivalent rights to be included in the diluted share
count (without applying the treasury method). Management presents 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 was 22,963,757; given that denominator,
operating net income per diluted share would remain $0.22.
A statement of JMP Group’s operating net income on a segment
basis for the six months ended June 30, 2015, is set forth
below.
Six Months Ended June 30, 2015 Corporate
Net Broker- Asset Credit Operating
Corporate Elimin- JMP (in thousands, except per share amounts)
Dealer Mgmt. Mgmt. Platforms Income ations Group Revenues:
Investment banking $42,025 - - $42,025 - - $42,025 Brokerage 12,469
- - 12,469 - - 12,469 Asset management-related fees - $9,285 $2,748
12,033 ($21 ) ($2,889 ) 9,123
Principal transactions (1)
1,135 - - 1,135 4,838 - 5,973 Gain/(loss) on sale and payoff of
loans - - - - (1,199 ) - (1,199 ) Net dividend income - - - - 446 -
446 Net interest income - - - - 6,342 - 6,342 Provision for loan
losses - - - - 698 - 698 Adjusted net revenues
55,629 9,285 2,748 67,662 11,104 (2,889 ) 75,877 Expenses:
Non-interest expense/(income) 46,324 8,901 2,022 57,247 9,057
(2,889 ) 63,415 Operating income before taxes 9,305
384 726 10,415 2,047 - 12,462 Income tax expense/(benefit)
3,535 145 276 3,956 (1,475 ) - 2,481 Operating net
income $5,770 $239 $450 $6,459 $3,522 - $9,981
Operating net income per share: Basic $0.27 $0.01 $0.02
$0.30 $0.17 - $0.47 Diluted (2) $0.26 $0.01 $0.02 $0.29 $0.16 -
$0.45
(1)
Revenues of $1.1 million at broker-dealer segment represent
net realized investment gain on the exercise of warrants related to
investment banking activity.
(2)
In 2013 and the first quarter of 2014, JMP Group issued restricted
share units, or RSUs, bearing non-forfeitable distribution
equivalent rights. GAAP requires RSUs with non-forfeitable
distribution equivalent rights to be included in the diluted share
count (without applying the treasury method). Management presents 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, 2015, was 22,799,610;
given that denominator, operating net income per diluted share
would remain $0.45.
Cautionary Note Regarding Quarterly Financial ResultsDue
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 StatementsThis
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, 2014, as filed
with the U.S. Securities and Exchange Commission on March 13, 2015,
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, 2014, and all other periodic
reports are available on JMP Group’s website at www.jmpg.com and on
the SEC’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 24, 2015. To
participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
88962208.
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 LLC is an investment banking and asset management firm
that provides investment banking, equity research, and sales and
trading services to corporate and institutional clients as well as
alternative asset management products and services to institutional
and high-net-worth investors. JMP Group conducts its investment
banking and research, sales and trading activities through JMP
Securities; its hedge fund and other investment activities though
Harvest Capital Strategies; the underwriting and management of
investments in senior secured debt through JMP Credit Advisors; and
the management of Harvest Capital Credit Corporation (NASDAQ:
HCAP), a business development company that finances small and
midsized businesses, through HCAP Advisors. For more information,
visit www.jmpg.com.
JMP GROUP LLC
Consolidated Statements of Financial
Condition
(Unaudited)
(in thousands) June 30, 2015 Dec. 31, 2014
Assets Cash and cash equivalents $35,511 $101,362 Restricted
cash and deposits 107,840 67,102 Marketable securities owned, at
fair value 58,820 29,466 Other investments 79,363 208,947 Loans
held for investment, net of allowance for loan losses 2,611 1,997
Loans collateralizing asset-backed
securities issued, net of allowance for loan losses
982,486 1,038,848 Cash collateral posted for total return swap
25,000 - Deferred tax assets 11,324 10,570 Other assets 47,236
57,900 Total assets $1,350,191 $1,516,192 Liabilities and
Shareholders' Equity Liabilities: Marketable securities
sold, but not yet purchased, at fair value $13,633 $15,048 Accrued
compensation 21,842 54,739 Asset-backed securities issued 987,434
1,001,137 Bond payable 94,300 94,300 Deferred tax liability 20,837
19,161 Other liabilities 47,540 42,878 Total liabilities 1,185,586
1,227,263 Shareholders' Equity: Total JMP Group LLC
shareholders' equity 136,144 132,597 Non-redeemable non-controlling
interest 28,461 156,332 Total equity 164,605 288,929 Total
liabilities and shareholders' equity $1,350,191 $1,516,192
JMP GROUP LLC
Consolidated Statements of
Operations
(Unaudited)
Quarter Ended Year Ended (in thousands, except per
share amounts) June 30, 2015 June 30, 2014 June 30, 2015
June 30, 2014 Revenues: Investment banking $21,331
$23,061 $42,025 $48,114 Brokerage 6,404 6,474 12,469 13,130 Asset
management fees 4,721 14,858 9,383 20,402 Principal transactions
2,857 9,688 6,601 5,995 Gain/(loss) on sale, payoff and
mark-to-market of loans (1,132 ) (551 ) (1,710 ) (171 ) Net
dividend income 256 262 447 497 Other income 62 150
802 372 Non-interest revenues 34,499 53,942
70,017 88,339 Interest income 12,801
9,212 25,578 17,800 Interest expense (7,386 ) (5,424 ) (14,674 )
(10,252 ) Net interest income 5,415 3,788 10,904
7,548 Provision for loan losses 545
(212 ) 488 (709 ) Total net revenues 40,459 57,518
81,409 95,178 Non-interest expenses:
Compensation and benefits 27,524 37,979 54,588 69,355
Administration 2,293 1,760 3,985 3,482 Brokerage, clearing and
exchange fees 814 818 1,612 1,743 Travel and business development
1,295 980 2,233 1,831 Communications and technology 982 942 1,952
1,890 Occupancy 961 851 1,774 1,676 Professional fees 1,040 1,269
2,014 2,076 Depreciation 215 227 441 454 Other 698 330
1,228 542 Total non-interest expense 35,822
45,156 69,827 83,049 Net income
before income tax expense 4,637 12,362 11,582 12,129 Income tax
expense/(benefit) (2,864 ) 2,450 4,136 4,146
Net income 7,501 9,912 7,446 7,983
Less: Net income attributable to
non-redeemable non-controlling interests
1,675 6,717 3,512 790 Net income
attributable to JMP Group LLC $5,826 $3,195 $3,934
$7,193 Net income attributable to JMP Group
LLC per share: Basic $0.26 $0.14 $0.18 $0.31 Diluted $0.25 $0.13
$0.17 $0.30 Weighted average common shares outstanding:
Basic 21,233 21,712 21,225 21,766 Diluted 22,964 23,745 22,800
23,640
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version on businesswire.com: http://www.businesswire.com/news/home/20150724005108/en/
Investor Relations ContactJMP Group LLCAndrew Palmer,
415-835-8978apalmer@jmpg.comorMedia Relations ContactsDukas
Public RelationsSeth Linden, 212-704-7385seth@dukaspr.comZach
Leibowitz, 212-704-7385zach@dukaspr.com
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