JMP Group LLC (NYSE:JMP), an investment banking and alternative
asset management firm, reported financial results today for the
quarter and six months ended June 30, 2016.
- The net loss attributable to JMP Group
under generally accepted accounting principles, or GAAP, was $0.3
million, or $0.02 per diluted share, compared to net income of $5.8
million, or $0.25 per share, for the second quarter of 2015. For
the six months ended June 30, 2016, GAAP net income was
$1.5 million, or $0.07 per share, compared to $3.9 million, or
$0.17 per share, for the six months ended June 30, 2015.
- Total net revenues on a GAAP basis were
$29.7 million and $68.3 million for the quarter and six months
ended June 30, 2016, respectively, compared to $40.5 million and
$81.4 million for the quarter and six months ended June 30, 2015,
respectively.
- Operating net income was $2.6 million,
or $0.12 per diluted share, a decrease of 47.1% from
$4.9 million, or $0.22 per share, for the second quarter of
2015. For the six months ended June 30, 2016, operating net
income was $4.7 million, or $0.22 per share, a decrease of 52.6%
from $10.0 million, or $0.45 per share, for the six months
ended June 30, 2015. 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 $28.4
million, a decrease of 25.8% from $38.3 million for the second
quarter of 2015. For the six months ended June 30, 2016,
adjusted net revenues were $65.0 million, a decrease of 14.3% from
$75.9 million for the six months ended June 30, 2015. For more
information about adjusted net revenues, including a reconciliation
to net revenues, see the section below titled “Non-GAAP Financial
Measures.”
“Despite challenging industry conditions, JMP Group produced
operating net income of $0.12 per share for the second quarter, in
large part due to our principal investment activities,” said
Chairman and Chief Executive Officer Joe Jolson. “JMP Securities
posted a loss of $0.06 per share, including a tax benefit, as
equity underwriting revenues fell sharply in a difficult capital
markets environment. As in previous down cycles, we are looking at
opportunities to grow—focusing in particular on our M&A
advisory business—while we await an increase in capital markets
activity. While this strategy may hinder our near-term results, if
successful, we would expect to substantially increase our market
share and earnings power over the next three to five years.
“Earning our current cash distributions and protecting our book
value per share continue to be high priorities, despite the
difficult operating environment. To that end, our diversified
business model, with more than 85% of our book value invested in
our fund strategies and direct investments, has once again proven
to be highly valuable, more than compensating for JMP Securities’
weak results. Net corporate income was $0.17 per share, driven both
by the sale of RiverBanc, a multi-family real estate fund manager
in which JMP Group had been a founding investor since 2011, and by
good returns on our capital in our corporate credit business.”
Segment Results of Operations
At JMP Securities, the broker-dealer segment, adjusted net
revenues were $14.2 million, a decrease of 50.9% from $28.9 million
for the second quarter of 2015. JMP Securities’ operating margin on
adjusted net revenues was negative, at -14.9%, compared to 16.4%
for second quarter of 2015. For the six months ended June 30, 2016,
the margin was 0.7%, compared to 16.7% for the six months ended
June 30, 2015.
For the asset management segment, adjusted net revenues were
$6.2 million, an increase of 10.3% from $5.7 million for second
quarter of 2015. JMP Group lost 0.6% for the quarter on the capital
invested by the company in hedge funds managed by Harvest Capital
Strategies, compared to gains of 1.6% and 3.8% by the HFRI Equity
Hedge (Total) and Russell 2000 indices, respectively. JMP Group’s
net return on invested capital managed by JMP Credit Advisors was
5.0%, compared to 6.2% for the second quarter of 2015.
A summary of JMP Group’s operating net income per share by
segment for the quarter and six months ended June 30, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended
($ as shown) June 30, 2016 Mar. 31, 2016
June 30, 2015 June 30, 2016 June 30, 2015
Broker-dealer ($0.06) $0.07 $0.13 $0.01 $0.26 Asset management 0.01
0.02 0.01 0.03 0.03 Operating platform EPS (0.05) 0.09 0.14 0.04
0.29 Net corporate income 0.17 0.01 0.07 0.18 0.16 Operating EPS
(diluted) $0.12 $0.10 $0.22 $0.22 $0.45 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 Banking
Investment banking revenues were $8.4 million, a decrease of
60.7% from $21.3 million for the second quarter of 2015. For the
six months ended June 30, 2016, investment banking revenues were
$26.7 million, a decrease of 36.5% from $42.0 million for the six
months ended June 30, 2015.
A summary of the company’s investment banking revenues and
transaction counts for the quarter and six months ended June 30,
2016, and for comparable prior periods is set forth below.
Quarter Ended Six Months Ended
June 30, 2016 Mar. 31, 2016 June 30,
2015 June 30, 2016 June 30, 2015
($ in thousands)
Count Revenues Count Revenues Count
Revenues Count Revenues Count
Revenues Public equity 8 $2,750 10 $6,224 27 $14,933 18
$8,974 61 $31,528
Debt and convertible securities
7 769 - 50 6 3,502 7 819 11 4,359
Private capital markets and other
1 600 - 4 - 75 1 604 1 622 Strategic advisory 5 4,256 4 12,018 2
2,821 9 16,274 6 5,516 Total 21 $8,375 14 $18,296 35 $21,331 35
$26,671 79 $42,025
Brokerage
Net brokerage revenues were $5.8 million, a decrease of 9.3%
from $6.4 million for the second quarter of 2015. For the six
months ended June 30, 2016, net brokerage revenues were $11.9
million, a decrease of 4.5% from $12.5 million for the six months
ended June 30, 2015.
Asset Management
Asset management fees were $5.6 million, compared to $4.7
million for the second quarter of 2015. For the six months ended
June 30, 2016, asset management fees were $14.9 million,
compared to $9.4 million for the six months ended June 30,
2015.
Asset management-related fee revenue reflects asset management
fees net of non-controlling interests in HCAP Advisors as well as
certain fee revenues reported in the company’s financial statements
as other income. Asset management-related fee revenues were $5.0
million, an increase of 18.3% from $4.2 million for the second
quarter of 2015. For the six months ended June 30, 2016, asset
management-related fee revenues were $13.9 million, an increase of
52.5% from $9.1 million for the six months ended June 30, 2015, due
to incentive fees of $6.1 million, compared to $1.8 million
for the same period in 2015. 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, 2016, totaled $2.3
billion, including $1.2 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 $2.3 billion at March 31, 2016,
and $2.0 billion at June 30, 2015. Including sponsored funds in
which JMP Group owns an economic interest, client assets under
management totaled $2.7 billion at June 30, 2016.
At June 30, 2016, private capital, including corporate credit,
small business lending, venture capital and real estate-related
advisory services, represented 69.9% of client assets under
management, including sponsored funds.
Principal Transactions
Principal transactions generated a net realized and unrealized
gain of $6.6 million, compared to $2.9 million for the second
quarter of 2015. For the six months ended June 30, 2016, principal
transactions generated a net realized and unrealized gain of $7.6
million, compared to $6.6 million for the six months ended June 30,
2015.
Adjusted principal transaction revenue reverses unrealized
market-to-market gains or losses as well as real estate-related
depreciation and amortization expense. Adjusted principal
transaction revenues were $8.2 million, an increase of 168.9%
from $3.1 million for the second quarter of 2015. For the six
months ended June 30, 2016, asset management-related fee revenues
were $9.1 million, an increase of 51.8% from $6.0 million for the
six months ended June 30, 2015. For more information about
principal transaction revenues, see the section below titled
“Non-GAAP Financial Measures.”
Collateralized Loan Obligations
At June 30, 2016, discounts and reserves (including liquidity
discounts, allowances for loan losses and deferred loan fees)
equaled $14.1 million, or 1.5% of gross performing loans managed by
JMP Credit Advisors. At June 30, 2015, such discounts and reserves
equaled $12.8 million, or 1.3% of gross performing loans
outstanding. With regard to impaired loans, discounts and reserves
(including credit discounts, allowances for loan losses, and
deferred loan fees) equaled $0.9 million, or 29.6% of gross
impaired loans outstanding, at June 30, 2016. There were no
impaired loans at June 30, 2015.
The net loan loss provision related to collateralized loan
obligations for the quarter was $10,000, with a reversal of the
general loan loss reserve in the amount of $0.7 million offsetting
a specific provision of $0.7 million in connection with loans
underlying certain collateralized loan obligations. At June 30,
2016, general loan loss reserves equaled 0.6% of gross performing
loans managed by JMP Credit Advisors.
Net Interest Income
Net interest income was $4.0 million and $8.4 million for the
quarter and six months ended June 30, 2016, respectively, compared
to $5.4 million and $10.9 million for the quarter and six months
ended June 30, 2015, respectively.
Expenses
Compensation and Benefits
Compensation and benefits expense was $20.7 million, compared to
$27.5 million for the second quarter of 2015. 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 69.3% of adjusted net
revenues, compared to 63.8% for the second quarter of 2015. Further
excluding compensation expense related to hedge fund incentive
fees, the compensation ratio was 68.4%, compared to 63.7% for the
second quarter of 2015.
For the six months ended June 30, 2016, compensation and
benefits expense was $48.1 million, compared to $54.6 million for
the six months ended June 30, 2015. With regard to annually awarded
compensation, compensation and benefits expense was 72.0% of
adjusted net revenues, compared to 64.9% for the six months ended
June 30, 2015. Further excluding compensation expense related to
hedge fund incentive fees, the compensation ratio was 69.6%,
compared to 64.9% for the six months ended June 30, 2016.
For more information about compensation ratios, see the section
below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was $8.0 million and $15.8 million for
the quarter and six months ended June 30, 2016, respectively,
compared to $8.3 million and $15.2 million for the quarter and six
months ended June 30, 2015, respectively.
Book Value per Share
At June 30, 2016, JMP Group’s book value per share was $5.75, as
set forth below.
(in thousands, except per share amounts) June
30, 2016 Mar. 31, 2016 June 30, 2015
Shareholders' equity $120,379 $122,736 $136,144 Book
value per share $5.75 $5.79 $6.41 Basic shares outstanding
20,945 21,201 21,241 Quarterly operating ROE (1) 8.5% 7.0%
14.6% LTM operating ROE (1) 5.5% 7.2% 13.4%
(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 Activity
During the quarter ended June 30, 2016, JMP Group repurchased
269,334 shares of its common stock at an aggregate price of $1.4
million, or $5.22 per share. At quarter-end, 1.3 million shares
remained eligible for repurchase under the company’s repurchase
authorization.
Personnel
At June 30, 2016, the company had 233 full-time employees,
compared to 232 at March 31, 2016, and 235 at June 30, 2015.
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 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 Revenue
Adjusted net revenue is a non-GAAP financial measure that (i)
reverses the general loan loss provision taken with regard to
certain CLOs, (ii) excludes real estate-related depreciation and
amortization expense, (iii) reverses net unrealized gains or losses
on strategic equity investments and warrants, (iv) reverses net
unrealized mark-to-market gains or losses on investments related to
deferred compensation, and (v) excludes non-controlling interests
in various sources of revenue that are consolidated according to
GAAP. In particular, adjusted net revenue adjusts for:
- 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;
- depreciation and amortization expense
resulting from commercial real estate investments;
- unrealized mark-to-market gains or
losses on the company’s strategic equity investments as well as
certain warrant positions;
- 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; and
- non-controlling interests in revenues
generated by consolidated entities, including HCAP Advisors and
CLOs managed by JMP Credit Advisors.
A reconciliation of JMP Group’s net revenues to its adjusted net
revenues for the quarter and six months ended June 30, 2016, and
for comparable prior periods is set forth below.
Quarter Ended
Six Months Ended
(in thousands)
June 30, 2016 Mar. 31, 2016 June 30,
2015 June 30, 2016 June 30, 2015 Revenues:
Non-interest revenues $26,162 $34,760 $34,499 $60,922 $70,017 Net
interest income 4,014 4,426 5,415 8,440 10,904 Loan loss provision
(453 ) (631 ) 545 (1,084 ) 488 Total net revenues
29,723 38,555 40,459 68,278 81,409
Add back/(subtract):
General loan loss provision –
collateralized loan obligations
(440 ) 407 124 (33 ) 215
Depreciation and amortization – commercial
real estate
2,070 330 - 2,400 -
Net unrealized (gain)/loss – strategic
equity investments and warrants
(435 ) (329 ) 190 (764 ) (831 )
Net unrealized mark-to-market (gain)/loss
– deferred compensation
(50 ) (77 ) 7 (127 ) 202 Non-controlling interests (2,465 ) (2,270
) (2,500 ) (4,735 ) (5,118 ) Adjusted net revenues $28,403
$36,616 $38,280 $65,019 $75,877
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 (i) excludes the non-controlling interest in asset
management subsidiary HCAP Advisors and (ii) includes 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.
A statement of JMP Group’s asset management-related fee revenues
for the quarter and six months ended June 30, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended
(in thousands) June 30, 2016 Mar. 31, 2016
June 30, 2015 June 30, 2016 June 30, 2015
Base management fees: Fees reported as asset management fees
$4,139 $4,135 $3,419 $8,274 $7,129
Less: Non-controlling interest in HCAP
Advisors
(362 ) (364 ) (319 ) (726 ) (619 ) Total base management fees 3,777
3,771 3,100 7,548 6,510
Incentive fees: Fees reported as asset management fees 1,448 5,191
1,302 6,640 2,255
Less: Non-controlling interest in HCAP
Advisors
(287 ) (263 ) (250 ) (550 ) (444 ) Total incentive fees 1,161
4,928 1,052 6,090 1,811
Other fee income: Total fundraising and other fees 46 227
62 272 802
Asset management-related fee revenues
$4,984 $8,926 $4,214 $13,910 $9,123
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 Revenues
Adjusted principal transaction revenue is a non-GAAP financial
measure that (i) reverses net unrealized gains and losses on
strategic equity investments and warrants and on investments
related to deferred compensation and (ii) excludes real
estate-related depreciation and amortization expense, 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, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended
(in thousands)
June 30, 2016 Mar. 31, 2016 June 30,
2015 June 30, 2016 June 30, 2015 Hedge fund
investments ($266 ) ($600 ) $618 ($866 ) $1,997
Investment in Harvest Capital Credit
Corporation
435 314 735 748 1,735
Investment in Harvest Growth Capital
funds
(156 ) (7 ) 264 (163 ) 242 Other principal investments 6,619
1,223 1,240 7,843 2,627 Total principal
transaction revenues 6,632 930 2,857 7,562
6,601 Add back/(subtract):
Unrealized mark-to-market (gain)/loss –
strategic equity investments and warrants
(435 ) (329 ) 191 (764 ) (830 )
Unrealized mark-to-market (gain)/loss –
net deferred compensation
(51 ) (77 ) 7 (128 ) 202
Depreciation and amortization – commercial
real estate
2,070 330 - 2,400 -
Total operating adjustments
1,584 (76 ) 198 1,508 (628 )
Total adjusted principal transaction
revenues
$8,216 $854 $3,055 $9,070 $5,973
Company management utilizes adjusted principal transaction
revenue because it is a component of adjusted net revenue. The
exclusion of certain elements of principal transaction revenues, as
presented above, results in an adjusted measure that is included as
“Principal transactions” among JMP Group’s revenues in the non-GAAP
presentation of segment results of operations that appears below.
Management believes that adjusting principal transaction revenues
and total revenues in these ways is useful in that it allows for a
clearer understanding and comparison of JMP Group’s financial
results for the periods presented.
Compensation Ratio
A compensation ratio expresses compensation expense as a
percentage of net revenues in a given period. As utilized by JMP
Group, an adjusted compensation ratio is a non-GAAP financial
measure that employs adjusted net revenues as the denominator in
its calculation. Furthermore, this ratio adjusts the financial
impact of certain compensation-related and transaction-related
expenses that are or are not recognized under GAAP. In particular,
the adjusted compensation ratio reverses compensation expense and
unrealized mark-to-market gains or losses related to share-based
awards, deferred compensation and non-controlling interests (so
that the compensation expenses used in the numerator correspond to
the adjusted net revenues generated in the periods presented). In
addition, the company presents a further adjusted compensation
ratio that excludes any compensation related to incentive fees
generated by hedge funds, a majority of which is passed through to
the funds’ investment teams if earned.
A statement of JMP Group’s compensation ratio for the quarter
and six months ended June 30, 2016, and for comparable prior
periods is set forth below.
Quarter Ended Six Months Ended
($ in thousands) June 30, 2016 Mar. 31, 2016
June 30, 2015 June 30, 2016 June 30,
2015 Compensation Ratio Adjusted net revenues
$28,403 $36,616 $38,280 $65,019 $75,877
Compensation and benefits $20,681 $27,425 $27,524
$48,106 $54,588 Subtract/(add back): Compensation expense – stock
options and SARs 281 215 815 496 1,489 Compensation expense – RSUs
(48 ) 252 375 204 782 Compensation expense – deferred compensation
435 (515 ) 1,669 (80 ) 2,739
Unrealized mark-to-market gain – deferred
compensation
50 77 (7 ) 127 (202 ) Compensation expense – non-controlling
interest 271 278 262 550 530
Adjusted compensation and benefits $19,692 $27,118
$24,410 $46,809 $49,250
Adjusted ratio of compensation expense to
revenues
69.3%
74.1%
63.8%
72.0%
64.9%
Compensation Ratio Excluding Hedge Fund Incentive Fees
Adjusted net revenues $28,403 $36,616 $38,280 $65,019 $75,877
Subtract: Compensation expense – hedge fund incentive fees 879
4,228 29 5,107 97
Adjusted net revenues, excluding hedge
fund incentive fees
$27,524 $32,388 $38,251 $59,912 $75,780
Adjusted compensation and benefits $19,692 $27,118
$24,410 $46,809 $49,250 Subtract: Compensation expense – hedge fund
incentive fees 879 4,228 29 5,107 97
Adjusted compensation and benefits,
excluding hedge fund incentive fees
$18,813 $22,890 $24,381 $41,702 $49,153
Adjusted ratio of compensation expense to
revenues, excluding hedge fund incentive fees
68.4%
70.7%
63.7%
69.6%
64.9%
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 share-based awards and
deferred compensation, (ii) reverses the general loan loss
provision taken with regard to certain CLOs, (iii) excludes real
estate-related depreciation and amortization expense, (iv) reverses
net unrealized gains and losses on strategic equity investments and
warrants, and (v) 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 in a given period but
recognized as a GAAP expense over the subsequent three years less
(b) GAAP expense recognized in a given period but already reflected
in the operating income of a prior period; the purpose of this
adjustment is to fully reflect compensation awarded in a given
year, notwithstanding the timing of GAAP expense;
- 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;
- depreciation and amortization expense
resulting from commercial real estate investments;
- 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, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended
June 30, 2016 Mar. 31, 2016 June 30,
2015 June 30, 2016 June 30, 2015 Net
(loss)/income attributable to JMP Group ($327 ) $1,803 $5,826
$1,476 $3,934 Add back: Income tax (benefit)/expense (246 )
50 (2,864 ) (196 ) 4,136 (Loss)/income before taxes
(573 ) 1,853 2,962 1,280 8,070 Add back/(subtract):
Compensation expense – stock options and
SARs
281 215 815 496 1,489 Compensation expense – RSUs (48 ) 252 375 204
782
Compensation expense – net deferred
compensation
435 (515 ) 1,669 (80 ) 2,738
General loan loss (reversal)/provision –
collateralized loan obligations
(440 ) 407 124 (33 ) 215
Depreciation and amortization – commercial
real estate
2,070 330 - 2,400 -
Unrealized mark-to-market loss/(gain) –
strategic equity investments and warrants
(435 ) (329 ) 189 (764 ) (831 ) Operating income before
taxes 1,290 2,213 6,134 3,503 12,463 Income tax
(benefit)/expense (1,278 ) 55 1,284 (1,223 ) 2,482
Operating net income $2,568 $2,158 $4,850
$4,726 $9,981 Operating net income per
share: Basic $0.12 $0.10 $0.23 $0.22 $0.47 Diluted (1) $0.12 $0.10
$0.22 $0.22 $0.45 Weighted average shares outstanding: Basic
21,058 21,349 21,233 21,204 21,225 Diluted (1) 21,703 21,707 22,540
21,634 22,325 (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 and six months
ended June 30, 2016, was 21,058,018 and 21,765,412, respectively.
For the quarter, on a GAAP basis, the weighted average number of
diluted shares outstanding was equivalent to the weighted average
number of basic shares outstanding, due to the company’s net loss
for the period. Under GAAP, in a period of net loss, dilutive
securities are disregarded in the calculation of earnings per
share.
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 presentation of 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 real estate-related
depreciation and amortization expense, (iv) excludes
non-controlling interests in various sources of revenue that are
consolidated according to GAAP, and (v) 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, based on the company’s best estimation of the
subsidiary’s average rate of taxation over the long term.
A statement of JMP Group’s operating net income on a segment
basis for the quarter ended June 30, 2016, is set forth below.
Quarter Ended June 30, 2016
Net
Broker- Asset Operating Corporate Elimin- JMP (in
thousands, except per share amounts) Dealer Mgmt. Platforms
Income ations Group Revenues: Investment banking $8,375 -
$8,375 - - $8,375 Brokerage 5,811 - 5,811 - - 5,811 Asset
management-related fees - $6,246 6,246 $36 ($1,298 ) 4,984
Principal transactions - - - 8,216 - 8,216 Gain on sale and payoff
of loans - - - (305 ) - (305 ) Net dividend income - - - 143 - 143
Net interest income - - - 2,003 - 2,003 Reversal of loan losses -
- - (824 ) - (824 ) Adjusted net revenues
14,186 6,246 20,432 9,269 (1,298 ) 28,403 Expenses:
Non-interest expense/(income) 16,306 5,855 22,161
6,250 (1,298 ) 27,113
Operating (loss)/income before taxes
(2,120 ) 391 (1,729 ) 3,019 - 1,290 Income tax
(benefit)/expense (805 ) 149 (656 ) (622 ) - (1,278 )
Operating net (loss)/income ($1,315 ) $242 ($1,073 ) $3,641
- $2,568 Operating net (loss)/income per
share: Basic ($0.06 ) $0.01 ($0.05 ) $0.17 - $0.12 Diluted (1)
($0.06 ) $0.01 ($0.05 ) $0.17 - $0.12 (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 ended June 30, 2016, was 21,058,018, equivalent to the
weighted average number of basic shares outstanding, due to the
company’s net loss for the period. Under GAAP, in a period of net
loss, dilutive securities are disregarded in the calculation of
earnings per share.
A statement of JMP Group’s operating net income on a segment
basis for the six months ended June 30, 2016, is set forth
below.
Six Months Ended June 30, 2016
Net
Broker- Asset Operating Corporate Elimin- JMP (in
thousands, except per share amounts) Dealer Mgmt. Platforms
Income ations Group Revenues: Investment banking $26,671 -
$26,671 - - $26,671 Brokerage 11,906 - 11,906 - - 11,906 Asset
management-related fees - $16,422 16,422 $123 ($2,635 ) 13,910
Principal transactions - - - 9,070 - 9,070 Gain on sale and payoff
of loans - - - (667 ) - (667 ) Net dividend income - - - 567 - 567
Net interest income - - - 4,374 - 4,374 Reversal of loan losses - -
- (812 ) - (812 ) Adjusted net revenues 38,577 16,422 54,999
12,655 (2,635 ) 65,019 Expenses: Non-interest
expense/(income) 38,305 15,297 53,602 10,549 (2,635 ) 61,516
Operating income before taxes 272 1,125 1,397 2,106 - 3,503
Income tax expense/(benefit) 104 427 531 (1,754 ) -
(1,223 ) Operating net income $168 $698 $866 $3,860 -
$4,726 Operating net income per share: Basic $0.01
$0.03 $0.04 $0.18 - $0.22 Diluted (1) $0.01 $0.03 $0.04 $0.18 -
$0.22 (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 six months ended June
30, 2016, was 21,765,412.
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, 2015, as filed with the U.S. Securities and Exchange Commission
on March 12, 2016, 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, 2015, 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 Thursday, July 28, 2016. To
participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
53363232.
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
Operations
(Unaudited)
(in thousands) June 31, 2016
Dec. 31, 2015 Assets Cash and cash equivalents
$69,972 $68,551 Restricted cash and deposits 75,792 52,572
Marketable securities owned, at fair value 27,891 28,493 Other
investments 53,223 68,859 Loans held for investment, net of
allowance for loan losses 2,198 2,595
Loans collateralizing asset-backed
securities issued, net of allowance for loan losses
903,798 969,665 Cash collateral posted for total return swap 25,240
25,000 Deferred tax assets 10,688 8,315 Other assets 36,903 46,808
Total assets $1,205,705 $1,270,858 Liabilities and
Shareholders' Equity Liabilities: Marketable securities
sold, but not yet purchased, at fair value $13,769 $13,284 Accrued
compensation 18,513 39,470 Asset-backed securities issued, net of
issuance costs 888,902 930,224 Bond payable, net of issuance costs
91,575 91,825 Deferred tax liability 12,590 14,693 Other
liabilities 33,365 28,468 Total liabilities 1,058,714 1,117,964
Shareholders' Equity: Total JMP Group LLC shareholders'
equity 120,379 125,112 Non-redeemable non-controlling interest
26,612 27,782 Total equity 146,991 152,894 Total liabilities and
shareholders' equity $1,205,705 $1,270,858
JMP GROUP LLC
Consolidated Statements of
Operations
(Unaudited)
Quarter Ended Year Ended
(in thousands, except per share amounts) June 30, 2016
June 30, 2015 June 30, 2016 June 30, 2015
Revenues: Investment banking $8,375 $21,331 $26,671 $42,025
Brokerage 5,811 6,404 11,906 12,469 Asset management fees 5,588
4,721 14,914 9,383 Principal transactions 6,632 2,857 7,562 6,601
(Loss)/gain on sale, payoff and mark-to-market of loans (533 )
(1,132 ) (909 ) (1,710 ) Net dividend income 243 256 506 447 Other
income 46 62 272 802
Non-interest revenues
26,162 34,499 60,922 70,017
Interest income 12,124 12,801 24,525 25,578 Interest expense (8,110
) (7,386 ) (16,085 ) (14,674 ) Net interest income 4,014
5,415 8,440 10,904 Provision for loan
losses (453 ) 545 (1,084 ) 488
Total net revenues
29,723 40,459 68,278 81,409
Non-interest expenses: Compensation and benefits 20,681 27,524
48,106 54,588 Administration 2,014 2,293 3,832 3,985 Brokerage,
clearing and exchange fees 813 814 1,574 1,612 Travel and business
development 1,238 1,295 2,529 2,233 Communications and technology
1,044 982 2,060 1,952 Occupancy 930 961 1,866 1,774 Professional
fees 1,053 1,040 2,126 2,014 Depreciation 324 215 656 441 Other 540
698 1,161 1,228 Total non-interest
expense 28,637 35,822 63,910 69,827
Net income before income tax expense 1,086 4,637 4,368
11,582 Income tax (benefit)/expense (246 ) (2,864 ) (196 ) 4,136
Net income
1,332 7,501 4,564 7,446
Less: Net income attributable to
non-redeemable non-controlling interest
1,659 1,675 3,088 3,512 Net
(loss)/income attributable to JMP Group ($327 ) $5,826
$1,476 $3,934 Net (loss)/income attributable
to JMP Group per share: Basic ($0.02 ) $0.26 $0.07 $0.18 Diluted
($0.02 ) $0.25 $0.07 $0.17 Weighted average common shares
outstanding: Basic 21,058 21,233 21,204 21,225 Diluted 21,058
22,964 21,766 22,800
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160727006396/en/
Investor Relations ContactJMP Group LLCAndrew Palmer,
415-835-8978apalmer@jmpg.comorMedia Relations ContactsDukas
Linden Public Relations, Inc.Seth Linden,
212-704-7385seth@dlpr.comBen Jaffe, 212-704-7385ben@dlpr.com
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