JMP Group LLC (NYSE:JMP), an investment banking and alternative
asset management firm, reported financial results today for the
quarter and full fiscal year ended December 31, 2016.
- Net income attributable to JMP Group
under generally accepted accounting principles, or GAAP, was $0.8
million, or $0.04 per diluted share, compared to a net loss of $1.2
million, or $0.05 per share, for the fourth quarter of 2015. For
the year ended December 31, 2016, GAAP net income was $2.9 million,
or $0.14 per share, compared to a net loss of $0.2 million, or
$0.01 per share, for the year ended December 31, 2015.
- Total net revenues on a GAAP basis were
$36.0 million and $135.0 million for the quarter and year ended
December 31, 2016, respectively, compared to $31.7 million and
$141.2 million for the quarter and year ended December 31, 2015,
respectively.
- Operating net income was $2.8 million,
or $0.13 per diluted share, an increase of 179.3% from
$1.0 million, or $0.04 per share, for the fourth quarter of
2015. For the year ended December 31, 2016, operating net income
was $10.5 million, or $0.48 per share, a decrease of 14.6% from
$12.3 million, or $0.55 per share, for the year ended December
31, 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 $35.5
million, an increase of 19.6% from $29.7 million for the fourth
quarter of 2015. For the year ended December 31, 2016, adjusted net
revenues were $130.2 million, a decrease of 1.9% from $132.6
million for the year ended December 31, 2015. For more information
about adjusted net revenues, including a reconciliation to net
revenues, see the section below titled “Non-GAAP Financial
Measures.”
“Despite a challenging year in the U.S. equities business across
Wall Street, JMP’s 2016 operating earnings of $0.48 per share came
close to the consensus analyst estimate of $0.51 per share from
last February, due to record results for both our M&A advisory
business and our direct principal investments,” said Chairman and
Chief Executive Officer Joe Jolson. “Together, M&A and private
placement fees totaled nearly $33 million from 28
transactions, compared to $12.6 million from 15 transactions in
2015. We met our three-year objective to organically grow this key
franchise to record levels, even as the volume of
sub-billion-dollar U.S. M&A transactions fell by almost 10% in
2016 industry-wide.
“Adjusted revenues from our direct corporate investments were
$18.6 million for the year, a gross return of more than 43% on
invested capital, versus just $2.5 million for 2015. As a result,
net investment income generated by the publicly traded partnership
was $0.65 per share, more than covering the cash distributions of
$0.39 per share declared for 2016 and enabling us to spend the
equivalent of $0.29 per share to repurchase 1.1 million
shares, while maintaining a stable adjusted book value of $5.76 per
share at year-end.
“In 2016, we also spent some potential earnings to invest in the
future, continuing our longstanding counter-cyclical growth
strategy. We added research coverage of alternative energy and
regional banks, hired two M&A-focused senior bankers, launched
a real estate opportunity fund, and protected JMP Securities’
employee base, which shrunk by only 8%, despite a drop of nearly
40% in our capital markets revenues for the year. We believe that
these decisions position us well for future growth and success when
the business cycle turns more favorable.”
Segment Results of Operations
At JMP Securities, the broker-dealer segment, adjusted net
revenues were $20.5 million, an increase of 26.1% from $16.2
million for the fourth quarter of 2015. JMP Securities’ operating
margin on adjusted net revenues was 4.3%, compared to -32.1% for
the fourth quarter of 2015. For the year ended December 31, 2016,
the margin was 2.4%, compared to 5.5% for the year ended December
31, 2015.
The asset management segment produced adjusted net revenues of
$6.1 million, a decrease of 36.1% from $9.6 million for the fourth
quarter of 2015. JMP Group lost 0.2% for the quarter on the capital
invested by the company in hedge funds managed by Harvest Capital
Strategies, compared to gains of 1.3% and 8.8% by the HFRI Equity
Hedge (Total) Index and Russell 2000 Index, respectively. JMP
Group’s net return on invested capital managed by JMP Credit
Advisors was 4.9%, compared to 2.4% for the fourth quarter of
2015.
A summary of JMP Group’s operating net income per share by
segment for the quarter and year ended December 31, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Year Ended ($ as shown) Dec. 31, 2016
Sept. 30, 2016 Dec. 31, 2015 Dec. 31, 2016
Dec. 31, 2015 Broker-dealer $ 0.02 $ 0.02 ($0.14 ) $ 0.05 $ 0.14
Asset management 0.04 0.00 $ 0.05 0.07
0.11 Operating platform EPS 0.06 0.02 (0.10 ) 0.13 0.25 Net
corporate income 0.07 0.11 0.14
0.35 0.30 Operating EPS (diluted) $ 0.13 $ 0.13 $ 0.04
$ 0.48 $ 0.55
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 $13.6 million, an increase of
48.6% from $9.2 million for the fourth quarter of 2015. For the
year ended December 31, 2016, investment banking revenues were
$55.4 million, a decrease of 12.3% from $63.1 million for the year
ended December 31, 2015.
A summary of the company’s investment banking revenues and
transaction counts for the quarter and year ended December 31,
2016, and for comparable prior periods is set forth below.
Quarter Ended Year Ended Dec. 31, 2016 Sept.
30, 2016 Dec. 31, 2015 Dec. 31, 2016 Dec. 31, 2015 ($
in thousands) Count Revenues Count Revenues Count
Revenues Count Revenues Count
Revenues Underwriting 13 $ 5,934 14 $ 7,098 11 $ 4,682 51 $ 22,466
97 $ 50,505
Strategic advisory and private
placements
8 7,700 9 7,950 5 4,491 28 32,887 15
12,611 Total 21 $ 13,634 23 $ 15,048 16 $ 9,173 79 $ 55,353
112 $ 63,116
Brokerage and Capital Markets
Net brokerage revenues were $6.8 million, a decrease of 3.2%
from $7.1 million for the fourth quarter of 2015. For the year
ended December 31, 2016, net brokerage revenues were $23.8 million,
a decrease of 7.1% from $25.6 million for the year ended December
31, 2015.
Total capital markets revenues, which consist of underwriting
revenues generated by the investment banking division and net
brokerage revenues generated by the institutional equities
division, were $12.8 million and $46.2 million for the quarter
and year ended December 31, 2016, respectively, compared to $11.7
million and $76.1 million for the quarter and year ended December
31, 2015, respectively.
Asset Management
Asset management fees were $7.8 million, compared to $8.4
million for the fourth quarter of 2015. For the year ended December
31, 2016, asset management fees were $26.8 million, compared to
$24.8 million for the year ended December 31, 2015.
Asset management-related fee revenues reflect 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 $8.4
million, an increase of 4.1% from $8.1 million for the fourth
quarter of 2015. For the year ended December 31, 2016, asset
management-related fee revenues were $26.2 million, an increase of
12.6% from $23.3 million for the year ended December 31, 2015. For
more information about asset management-related fee revenues, see
the section below titled “Non-GAAP Financial Measures.”
Client assets under management at December 31, 2016, totaled
$2.2 billion, including $1.2 billion of funds managed by Harvest
Capital Strategies, JMP Asset Management 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
September 30, 2016, and at December 31, 2015. Including sponsored
funds in which JMP Group owns an economic interest, client assets
under management totaled $3.7 billion at December 31, 2016.
At December 31, 2016, private capital, including corporate
credit, small business lending, venture capital and real
estate-related investments, represented 79.0% of client assets
under management, including sponsored funds.
Principal Transactions
Principal transactions generated a net realized and unrealized
gain of $5.9 million, compared to $2.2 million for the fourth
quarter of 2015. For the year ended December 31, 2016, principal
transactions generated a net realized and unrealized gain of $16.2
million, compared to $7.4 million for the year ended December 31,
2015.
Adjusted principal transaction revenues reverse certain
unrealized market-to-market gains or losses, including those on JMP
Group’s investment in Harvest Capital Credit Corporation, as well
as unrealized losses derived from depreciation and amortization of
real estate investment properties. Adjusted principal transaction
revenues were $6.1 million, an increase of 191.4% from $2.1 million
for the fourth quarter of 2015. For the year ended December 31,
2016, adjusted principal transaction revenues were $18.5 million,
an increase of 136.9% from $7.8 million for the year ended December
31, 2015. For more information about adjusted principal transaction
revenues, including a reconciliation to principal transaction
revenues, see the section below titled “Non-GAAP Financial
Measures.”
Net Interest Income
Net interest income was $2.3 million and $14.0 million for the
quarter and year ended December 31, 2016, respectively, compared to
$5.0 million and $21.1 million for the quarter and year ended
December 31, 2015, respectively. The year-over-year declines were
due to lower average loan balances in 2016 and to a reduced net
interest margin resulting from an increase in three-month Libor and
the ongoing deleveraging of JMP Credit Advisors CLO I.
Collateralized Loan Obligations
At December 31, 2016, discounts and reserves (including
liquidity discounts, allowances for loan losses and deferred loan
fees) equaled $13.0 million, or 1.9% of gross performing loans
managed by JMP Credit Advisors. At December 31, 2015, such
discounts and reserves equaled $14.4 million, or 1.5% 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 $1.2 million, or 38.1%
of gross impaired loans outstanding, at December 31, 2016. There
were no impaired loans at December 31, 2015.
The net loan loss provision for the quarter was $0.6 million,
and at December 31, 2016, general loan loss reserves equaled 0.8%
of gross performing loans managed by JMP Credit Advisors.
Expenses
Compensation and Benefits
Compensation and benefits expense was $31.0 million, compared to
$27.0 million for the fourth quarter of 2015. With regard to
annually awarded compensation, a concept which adjusts compensation
expense related to share-based awards and deferred compensation,
compensation and benefits expense was 73.2% of adjusted net
revenues, compared to 77.2% for the fourth quarter of 2015. Further
excluding compensation expense related to hedge fund incentive
fees, the compensation ratio was 69.7%, compared to 74.4% for the
fourth quarter of 2015.
For the year ended December 31, 2016, compensation and benefits
expense was $101.2 million, compared to $103.6 million for the year
ended December 31, 2015. With regard to annually awarded
compensation, compensation and benefits expense was 71.5% of
adjusted net revenues, compared to 68.8% for the year ended
December 31, 2015. Further excluding compensation expense related
to hedge fund incentive fees, the compensation ratio was 69.3%,
compared to 67.4% for the year ended December 31, 2015.
For more information about compensation ratios, see the section
below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was $7.6 million and $30.9 million for
the quarter and year ended December 31, 2016, respectively,
compared to $7.8 million and $30.7 million for the quarter and year
ended December 31, 2015, respectively.
Share Repurchase Activity
During the quarter ended December 31, 2016, JMP Group
repurchased 341,850 shares of its common stock at an aggregate cost
of $2.1 million, or $6.19 per share. On February 13, 2017, the
company’s board of directors established a new share repurchase
authorization, making 1,000,000 shares eligible to be repurchased
through December 31, 2017.
Personnel
At December 31, 2016, the company had 228 full-time employees,
in line with 228 at September 30, 2016, and down from 247 at
December 31, 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) reverses unrealized losses derived from
depreciation and amortization of real estate investment properties,
(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
related to commercial real estate investments that is recognized by
JMP Group as a result of equity method accounting;
- 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 year ended December 31, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands) Dec. 31, 2016
Sept. 30, 2016 Dec. 31, 2015 Dec. 31, 2016
Dec. 31, 2015 Revenues: Non-interest revenues $ 34,336 $
27,311 $ 27,755 $ 122,569 $ 121,273 Net interest income 2,294 3,260
5,005 13,994 21,061 (Provision for)/reversal of loan losses
(606 ) 104 (1,015 ) (1,586 )
(1,090 ) Total net revenues 36,024 30,675 31,745 134,977 141,244
Add back/(subtract):
General loan loss provision/(reversal) –
collateralized loan obligations
349 (76 ) 602 240 1,144
Unrealized loss – real estate-related
depreciation and amortization
1,718 123 102 4,241 102
Net unrealized (gain)/loss – strategic
equity investments and warrants
(1,211 ) 435 128 (1,540 ) 776
Net unrealized mark-to-market (gain)/loss
– deferred compensation
(276 ) 21 (389 ) (382 ) (479 ) Non-controlling interests
(1,115 ) (1,529 ) (2,518 ) (7,379 )
(10,176 ) Adjusted net revenues $ 35,489 $ 29,649
$ 29,670 $ 130,157 $ 132,611
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 year ended December 31, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands) Dec. 31, 2016
Sept. 30, 2016 Dec. 31, 2015 Dec. 31, 2016
Dec. 31, 2015 Base management fees: Fees reported as asset
management fees $ 3,851 $ 4,160 $ 4,172 $ 16,285 $ 15,432
Less: Non-controlling interest in HCAP
Advisors
(337 ) (355 ) (362 ) (1,418 )
(1,332 ) Total base management fees 3,514
3,805 3,810 14,867 14,100
Incentive fees: Fees reported as asset management
fees 3,983 (116 ) 4,274 10,506 9,360
Less: Non-controlling interest in HCAP
Advisors
43 (73 ) (420 ) (582 )
(1,131 ) Total incentive fees 4,026 (189 )
3,854 9,924 8,229
Other fee income: Total fundraising and other fees 872
261 418 1,408
943
Asset management-related fee revenues
$ 8,412 $ 3,877 $ 8,082 $ 26,199 $
23,272
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) reverses unrealized
losses derived from depreciation and amortization of real estate
investment properties, 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 year ended December 31, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands) Dec. 31, 2016
Sept. 30, 2016 Dec. 31, 2015 Dec. 31, 2016
Dec. 31, 2015 Hedge fund investments $ 200 $ 939 $ 3,145 $
272 $ 4,922
Investment in Harvest Capital Credit
Corporation
1,211 (435 ) (128 ) 1,525 128 Other principal investments
4,446 2,260 (769 ) 14,384
2,359 Total principal transaction revenues
5,857 2,764 2,248 16,181
7,409 Add back/(subtract):
Unrealized mark-to-market (gain)/loss –
strategic equity investments and warrants
(1,211 ) 435 128 (1,540 ) 776
Unrealized mark-to-market (gain)/loss –
net deferred compensation
(276 ) 20 (389 ) (382 ) (478 )
Unrealized loss – real estate-related
depreciation and amortization
1,718 123 102
4,241 102 Total operating adjustments
231 578 (159 ) 2,319
400
Total adjusted principal transaction
revenues
$ 6,088 $ 3,342 $ 2,089 $ 18,500 $
7,809
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 year ended December 31, 2016, and for comparable prior periods
is set forth below.
Quarter Ended Year Ended ($ in thousands) Dec. 31,
2016 Sept. 30, 2016 Dec. 31, 2015 Dec. 31, 2016
Dec. 31, 2015 Compensation Ratio Adjusted net
revenues $ 35,489 $ 29,649 $ 29,670 $ 130,157
$ 132,605 Compensation and benefits $ 30,960 $
22,167 $ 27,023 $ 101,233 $ 103,560 Subtract/(add back):
Compensation expense – stock options and SARs 483 274 417 1,253
2,235 Compensation expense – RSUs 233 309 588 746 1,606
Compensation expense – deferred compensation 3,742 1,126 2,433
4,788 6,972
Unrealized mark-to-market gain/(loss) –
deferred compensation
276 (21 ) 390 382 479 Compensation expense – non-controlling
interest 262 207 280
1,018 1,063 Adjusted compensation and
benefits $ 25,964 $ 20,272 $ 22,915 $ 93,046
$ 91,205
Adjusted ratio of compensation expense to
revenues
73.2 % 68.4 % 77.2 % 71.5 % 68.8 %
Compensation Ratio Excluding Hedge Fund
Incentive Fees
Adjusted net revenues $ 35,489 $ 29,649 $ 29,670 $ 130,157 $
132,605 Subtract: Compensation expense – hedge fund incentive fees
4,055 - 3,318
9,163 5,580
Adjusted net revenues, excluding hedge
fund incentive fees
$ 31,434 $ 29,649 $ 26,352 $ 120,994 $
127,025 Adjusted compensation and benefits $ 25,964 $
20,272 $ 22,915 $ 93,046 $ 91,205 Subtract: Compensation expense –
hedge fund incentive fees 4,055 -
3,318 9,163 5,580
Adjusted compensation and benefits,
excluding hedge fund incentive fees
$ 21,909 $ 20,272 $ 19,597 $ 83,883 $
85,625
Adjusted ratio of compensation expense to
revenues, excluding hedge fund incentive fees
69.7 % 68.4 % 74.4 % 69.3 % 67.4 %
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
amortization expense related to JMP Credit Advisors CLO III, (iv)
reverses unrealized losses derived from depreciation and
amortization of real estate investment properties, (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 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;
- amortization expense related to an
intangible asset resulting from the repurchase of a portion of the
equity of JMP Credit Advisors CLO III;
- depreciation and amortization expense
related to commercial real estate investments that is recognized by
JMP Group as a result of equity method accounting;
- 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 year ended December 31, 2016, and for
comparable prior periods is set forth below.
Quarter Ended Year Ended Dec. 31, 2016
Sept. 30, 2016 Dec. 31, 2015 Dec. 31, 2016 Dec. 31,
2015
Net income/(loss) attributable to JMP
Group
$ 789 $ 661 ($1,151 ) $ 2,926 ($208 ) Add back: Income tax
(benefit)/expense (3,855 ) (597 ) (3,572 )
(4,648 ) 221 (Loss)/income before taxes (3,066
) 64 (4,723 ) (1,722 ) 13 Add back/(subtract):
Compensation expense – stock options and
SARs
483 274 417 1,253 2,235 Compensation expense – RSUs 233 309 588 746
1,606
Compensation expense – net deferred
compensation
3,742 1,126 2,433 4,788 6,972
General loan loss provision/(reversal) –
collateralized loan obligations
349 (76 ) 602 240 1,144 Amortization of intangible asset – CLO III
138 - - 138 -
Unrealized loss – real estate-related
depreciation and amortization
1,718 123 102 4,241 102
Unrealized mark-to-market (gain)/loss –
strategic equity investments and warrants
(1,211 ) 435 128 (1,540 )
776 Operating income before taxes 2,386 2,255 (453 )
8,144 12,848 Income tax (benefit)/expense (452 )
(641 ) (1,469 ) (2,316 ) 593
Operating net income $ 2,838 $ 2,896 $ 1,016 $
10,460 $ 12,255 Operating net income per share: Basic
$ 0.13 $ 0.14 $ 0.05 $ 0.50 $ 0.58 Diluted (1) $ 0.13 $ 0.13 $ 0.04
$ 0.48 $ 0.55 Weighted average shares outstanding: Basic 21,071
20,946 21,257 21,105 21,237 Diluted (1) 22,018 21,844 22,588 21,765
22,428 (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 year ended
December 31, 2016, was 22,024,335 and 21,841,293, 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 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) reverses unrealized losses derived
from depreciation and amortization of real estate investment
properties, (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 December 31, 2016, is set forth
below.
Quarter Ended December 31, 2016
Net Broker- Asset
Operating Corporate Elimin- JMP (in thousands, except per share
amounts) Dealer Mgmt. Platforms
Income ations Group Revenues: Investment banking $ 13,634 -
$ 13,634 - - $ 13,634 Brokerage 6,834 - 6,834 - - 6,834 Asset
management-related fees 3 $ 6,112 6,115 $ 3,801 ($1,504 ) 8,412
Principal transactions - - - 6,088 - 6,088 Gain/(loss) on sale and
payoff of loans - - - (850 ) - (850 ) Net dividend income - - - 263
- 263 Net interest income - - - 1,189 - 1,189 Provision for loan
losses - - - (81 ) - (81
) Adjusted net revenues 20,471 6,112 26,583 10,410 (1,504 ) 35,489
Expenses: Non-interest expense/(income) 19,594
4,783 24,377 10,230 (1,504 ) 33,103
Operating income before taxes 877 1,329 2,206 180 - 2,386
Income tax expense/(benefit) 333 505 838
(1,290 ) - (452 ) Operating net income $ 544 $
824 $ 1,368 $ 1,470 - $ 2,838 Operating net
income per share: Basic $ 0.03 $ 0.04 $ 0.06 $ 0.07 - $ 0.13
Diluted (1) $ 0.02 $ 0.04 $ 0.06 $ 0.07 - $ 0.13 (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 December 31, 2016, was
22,024,335.
A statement of JMP Group’s operating net income on a segment
basis for the year ended December 31, 2016, is set forth below.
Year Ended December 31, 2016
Net Broker- Asset
Operating Corporate Elimin- JMP (in thousands, except per share
amounts) Dealer Mgmt. Platforms Income ations Group
Revenues: Investment banking $ 55,353 - $ 55,353 - - $ 55,353
Brokerage 23,755 - 23,755 - - 23,755 Asset management-related fees
6 $ 27,830 27,836 $ 3,924 ($5,561 ) 26,199 Principal transactions -
- - 18,500 - 18,500 Gain/(loss) on sale and payoff of loans - - -
(1,485 ) - (1,485 ) Net dividend income - - - 1,091 - 1,091 Net
interest income - - - 7,620 - 7,620 Provision for loan losses
- - - (876 ) - (876 )
Adjusted net revenues 79,114 27,830 106,944 28,774 (5,561 ) 130,157
Expenses: Non-interest expense/(income) 77,231
25,256 102,487 25,087 (5,561 ) 122,013
Operating income before taxes 1,883 2,574 4,457 3,687 -
8,144 Income tax expense/(benefit) 716 978
1,694 (4,010 ) - (2,316 ) Operating net income
$ 1,167 $ 1,596 $ 2,763 $ 7,697 - $ 10,460
Operating net income per share: Basic $ 0.06 $ 0.08 $ 0.13 $ 0.36 -
$ 0.50 Diluted (1) $ 0.05 $ 0.07 $ 0.13 $ 0.35 - $ 0.48 (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 year ended December 31, 2016, was 21,841,293.
Book Value per Share
At December 31, 2016, JMP Group’s book value per share was
$5.56. Adding back accumulated depreciation and amortization
expense related to commercial real estate investments that is
recognized by JMP Group as a result of equity method accounting
reflects the reversal of that expense in the calculation of
adjusted net revenues, adjusted principal transaction revenues and
operating net income and results in an adjusted book value per
share of $5.76, as set forth below.
(in thousands, except per share amounts) Dec. 31, 2016
Sept. 30, 2016 Dec. 31, 2015 Shareholders'
equity $ 119,377 $ 121,801 $ 125,112
Accumulated unrealized loss – real
estate-related depreciation and amortization
4,304 2,586 63 Adjusted
shareholders' equity $ 123,681 $ 124,387 $ 125,175
Book value per share $ 5.56 $ 5.82 $
5.77 Adjusted book value per share $ 5.76 $ 5.94
$ 5.77 Basic shares outstanding 21,457 20,939
21,681 Quarterly operating ROE (1) 9.4 % 9.6 % 3.2 % LTM
operating ROE (1) 8.6 % 7.0 % 9.3 % Quarterly adjusted
operating ROE (1) 9.2 % 9.4 % 3.2 % LTM adjusted operating ROE (1)
8.4 % 6.9 % 9.3 % (1) Operating return on equity (ROE)
equals operating net income divided by average shareholders’
equity. Adjusted operating ROE equals operating net income divided
by average adjusted shareholders’ equity. For more information
about operating net income, including a reconciliation to net
income attributable to JMP Group, see the section above titled
“Operating Net Income.”
Company management utilizes adjusted book value on a total and
per share basis, adjusted in the manner described above, as an
additional means of evaluating JMP Group’s efforts to retain
earnings and build shareholders’ equity. Management believes that
adjusted book value per share provides useful information by
excluding non-cash expenses related to real estate investments that
otherwise obscure the company’s increases and decreases in net
worth as a result of its core business activities. Management also
believes that adjusted book value allows for a better comparison of
shareholder’s equity and the return on that equity in a given
period to those in prior and future periods.
Cautionary Note Regarding Quarterly Financial Results
Due to the nature of its business, JMP Group’s quarterly
revenues and net income may fluctuate materially depending on: the
size and number of investment banking transactions on which it
advises; the timing of the completion of those transactions; the
size and number of 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.
Disclosure Information
JMP Group uses the investor relations section of its website as
a means of complying with its disclosure obligations under
Regulation FD. Accordingly, investors should monitor the company’s
website in addition to its press releases, SEC filings, and
investor conference calls and webcasts.
Conference Call
JMP Group will hold a conference call to discuss the results
detailed herein at 10:00 a.m. EST on Thursday, February 16, 2017.
To participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
53368506.
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 a diversified capital markets 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, venture and private capital, and credit
management activities though Harvest Capital Strategies, JMP Asset
Management and JMP Credit Advisors; and the management of Harvest
Capital Credit Corporation (NASDAQ:HCAP), a business development
company, through HCAP Advisors. For more information, visit
www.jmpg.com.
JMP GROUP LLC
Consolidated Statements of Financial
Condition
(Unaudited)
(in thousands) Dec. 31, 2016 Dec. 31, 2015
Assets Cash and cash equivalents $ 85,492 $ 68,551 Restricted cash
and deposits 227,656 52,572 Marketable securities owned, at fair
value 18,722 28,493 Other investments 32,869 68,859 Loans held for
sale, at fair value 32,488 - Loans held for investment, net of
allowance for loan losses 1,930 2,595 Loans collateralizing
asset-backed securities issued, net of allowance for loan losses
654,127 969,665 Cash collateral posted for total return swap 25,000
25,000 Deferred tax assets 7,942 8,315 Other assets 39,604
46,808 Total assets $ 1,125,830 $ 1,270,858
Liabilities and Shareholders' Equity Liabilities: Marketable
securities sold, but not yet purchased, at fair value $ 4,747 $
13,284 Accrued compensation
36,158
39,470 Asset-backed securities issued, net of issuance costs
825,854 930,224 Bond payable, net of issuance costs 91,785 91,825
Deferred tax liability 3,872 14,693 Other liabilities
28,120
28,468 Total liabilities 990,536 1,117,964
Shareholders' Equity: Total JMP Group LLC shareholders' equity
119,377 125,112 Non-redeemable non-controlling interest
15,917 27,782 Total equity 135,294 152,894
Total liabilities and shareholders' equity $ 1,125,830 $ 1,270,858
JMP GROUP LLC Consolidated Statements of Operations
(Unaudited)
Quarter Ended Year Ended
(in thousands, except per share
amounts)
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016 Dec. 31, 2015 Revenues: Investment
banking $ 13,634 $ 9,173 $ 55,353 $ 63,116 Brokerage 6,834 7,062
23,755 25,577 Asset management fees 7,833 8,445 26,791 24,791
Principal transactions 5,856 2,248 16,182 7,409 (Loss)/gain on
sale, payoff and mark-to-market of loans (957 ) 76 (1,918 ) (1,604
) Net dividend income 263 331 999 1,041 Other income 873
420 1,407 943
Non-interest revenues 34,336 27,755
122,569 121,273 Interest income
10,787 12,548 46,784 50,801 Interest expense (8,493 )
(7,543 ) (32,790 ) (29,740 ) Net interest income
2,294 5,005 13,994
21,061 Provision for loan losses (606 )
(1,015 ) (1,586 ) (1,090 ) Total net revenues
36,024 31,745 134,977
141,244 Non-interest expenses: Compensation and
benefits 30,960 27,023 101,233 103,560 Administration 1,384 1,525
7,024 7,229 Brokerage, clearing and exchange fees 802 924 3,110
3,378 Travel and business development 1,223 1,412 4,771 4,746
Communications and technology 1,079 1,013 4,172 3,929 Occupancy
1,048 938 3,901 3,657 Professional fees 1,154 1,047 4,399 4,313
Depreciation 312 346 1,280 1,177 Other 621 550
2,273 2,243 Total non-interest
expense 38,583 34,778 132,163
134,232 Net (loss)/income before income
tax expense (2,559 ) (3,033 ) 2,814 7,012 Income tax
expense/(benefit) 507 (3,572 ) (4,648 )
221 Net (loss)/income (3,066 ) 539 7,462 6,791
Less: Net (loss)/income attributable to
non-redeemable non-controlling interest
(3,855 ) 1,690 4,536
6,999 Net income/(loss) attributable to JMP Group $ 789
($1,151 ) $ 2,926 ($208 ) Net
income/(loss) attributable to JMP Group per share: Basic $ 0.04
($0.05 ) $ 0.14 ($0.01 ) Diluted $ 0.04 ($0.05 ) $ 0.13 ($0.01 )
Weighted average common shares outstanding: Basic 21,071
21,257 21,105 21,237 Diluted 22,024 21,257 21,841 21,237
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170215006272/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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