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, 2020.
A summary of JMP Group’s operating results for the quarter and
year ended December 31, 2020, and for comparable prior periods, is
set forth below.
Quarter Ended Year Ended (in thousands, except per share amounts)
Dec. 31, 2020
Sept. 30, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Total net revenues
$53,615
$26,624
$23,822
$115,499
$100,081
Net income/(loss) attributable to JMP Group
$9,009
($3,082
)
($6,445
)
($4,697
)
($6,549
)
Net income/(loss) attributable to JMP Group per share
$0.45
($0.16
)
($0.33
)
($0.24
)
($0.32
)
Operating net income/(loss)
$8,427
$2,076
$140
$12,558
($851
)
Operating net income/(loss) per share
$0.42
$0.10
$0.01
$0.63
($0.04
)
Book value per share
$3.18
$2.74
$3.16
$3.18
$3.16
Adjusted book value per share
$4.03
$3.58
$3.96
$4.03
$3.96
For more information about operating net income, including a
reconciliation to net income, and adjusted book value per share,
including a reconciliation to book value per share, see the section
below titled “Non-GAAP Financial Measures.”
“We are very pleased to report
record operating earnings for both the fourth quarter and the full
year, posting operating EPS of $0.42 and $0.63, respectively,” said
Joe Jolson, chairman and CEO of JMP Group. “While all of our
business units made positive contributions, JMP Securities earned
$0.68 per share on an operating basis, driven by record advisory
revenues as well as strong capital markets revenues. We also took
affirmative steps toward our stated objectives of monetizing
corporate investments and retiring long-term debt. At year end,
Harvest Capital Credit Corporation announced its pending sale to
Portman Ridge Finance Corporation; and, earlier this month, we
redeemed $10 million of our 7.25% senior notes due in 2027. We
expect both of these transactions to be accretive to operating EPS.
Most importantly, our impressive momentum has continued into 2021,
and we are optimistic that a stabilizing U.S. economy could serve
as a positive backdrop as the year progresses.”
“We had a terrific year, and we are enthusiastic about our
prospects for 2021,“ said Mark Lehmann, CEO of JMP Securities. “At
JMP Securities, revenues climbed to a new high, totaling $118.5
million for 2020. Our investment banking revenues were well
diversified, with 60% from public equity and debt capital raising
and 40% from strategic advisory and private placements. Our M&A
business is maturing as we had envisioned when we committed to
building out our capabilities several years ago, with senior hires
proving productive on our platform and contributing to record
annual advisory fees of $40.5 million. From an equity capital
markets standpoint, we have a stronger backlog in the technology
sector than ever before. At the same time, our life sciences
franchise was our biggest contributor to revenues last year, and we
hope to build on our momentum in that area in 2021.”
Segment Results of Operations
A summary of JMP Group’s operating net income per share by
segment for the quarter and year ended December 31, 2020, and for
comparable prior periods, is set forth below.
Quarter Ended Year Ended ($ as shown)
Dec. 31, 2020
Sept. 30, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Broker-dealer
$0.42
$0.12
($0.10
)
$0.68
($0.24
)
Asset management: Asset management fee income
0.03
0.01
0.03
0.01
(0.02
)
Investment income
0.10
0.06
0.11
0.31
0.48
(1)
Total asset management
0.13
0.07
0.14
0.32
0.46
Corporate costs
(0.13
)
(0.09
)
(0.03
)
(0.36
)
(0.26
)
Operating EPS (diluted)
$0.42
$0.10
$0.01
$0.63
($0.04
)
(1)
Includes a gain of $0.08 per share on the
sale of a controlling interest in JMP Credit Advisors LLC to
Medalist Partners LP.
Note: Due to rounding, numbers in
columns above may not sum to totals presented.
For more information about 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 for the quarter were $43.3 million,
an increase of 107.4% from $20.9 million for the quarter ended
December 31, 2019. For the year ended December 31, 2020, investment
banking revenues were $100.4 million, an increase of 52.8% from
$65.7 million for the year ended December 31, 2019.
A summary of the company’s investment banking revenues and
transaction counts for the quarter and year ended December 31,
2020, and for comparable prior periods, is set forth below.
Quarter Ended Year Ended
Dec. 31, 2020
Sept. 30, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
($ in thousands)
Count
Revenues
Count
Revenues
Count
Revenues
Count
Revenues
Count
Revenues
Equity and debt origination
33
$20,658
29
$16,152
19
$14,557
101
$59,936
78
$42,236
Strategic advisory and private placements
12
22,632
4
4,722
3
6,316
25
40,448
18
23,480
Total
45
$43,290
33
$20,874
22
$20,873
126
$100,384
96
$65,716
Brokerage
Net brokerage revenues for the quarter were $4.9 million, an
increase of 10.1% from $4.5 million for the quarter ended December
31, 2019. For the year ended December 31, 2020, net brokerage
revenues were $18.9 million, an increase of 7.4% from $17.6 million
for the year ended December 31, 2019.
Total capital markets revenues, which consist of net brokerage
revenues produced by the institutional equities division in
addition to equity and debt origination revenues generated by the
investment banking division, were $25.6 million and $78.9 million
for the quarter and year ended December 31, 2020, respectively,
compared to $19.0 million and $59.9 million for the quarter and
year ended December 31, 2019, respectively.
Asset Management
Asset management fees for the quarter were $2.0 million, an
increase of 13.7% from $1.7 million for the quarter ended December
31, 2019. For the year ended December 31, 2020, asset management
fees were $8.3 million, an increase of 12.0% from $7.4 million for
the year ended December 31, 2019.
A summary of the company’s client assets under management for
the quarter ended December 31, 2020, and for comparable prior
periods, is set forth below.
(in millions)
Dec. 31, 2020
Sept. 30, 2020
Dec. 31, 2019
Client assets under management (1)
$660
$600
$595
Assets under management by sponsored funds (2)
4,934
5,005
5,381
Client assets under management, including sponsored funds
$5,594
$5,605
$5,976
(1)
Includes assets managed by Harvest Capital
Strategies, JMP Asset Management, and HCAP Advisors on behalf of
third parties.
(2)
Sponsored funds are asset management
strategies in which JMP Group owns an economic interest. Includes
assets managed by Medalist Partners Corporate Finance, the former
JMP Credit Advisors.
Principal Transactions
Principal transactions generated a net realized and unrealized
gain of $1.8 million for the quarter, compared to a net realized
and unrealized loss of $5.0 million for the quarter ended December
31, 2019. For the year ended December 31, 2020, principal
transactions generated a net realized and unrealized loss of $18.5
million, compared to a net realized and unrealized gain of $1.3
million for the year ended December 31, 2019.
The year-over-year difference is largely due to the impairment
of CLO equity owned by JMP Group. A reduction in the net present
value of forecasted cash flows through the end of the expected life
of the collateralized loan obligations required impairment charges
in the amount of $4.4 million and $21.7 million for the quarter and
year ended December 31, 2020, respectively.
Net Interest Income
Net interest income for the quarter was $0.5 million, a decrease
of 12.0% from $0.6 million for the quarter ended December 31, 2019.
For the year ended December 31, 2020, net interest income was $1.7
million, a decrease of 68.6% from $5.3 million for the year ended
December 31, 2019.
The year-over-year difference is primarily due to a change in
the recognition of income from investments in collateralized loan
obligations following the sale of a majority interest in JMP Credit
Advisors to Medalist Partners in March 2019.
Expenses
Compensation and Benefits
Compensation and benefits expense for the quarter was $33.0
million, compared to $22.6 million for the quarter ended December
31, 2019. As a percentage of net revenues, compensation and
benefits expense was 61.6%, compared to 95.0% for the quarter ended
December 31, 2019. For the year ended December 31, 2020,
compensation and benefits expense was $95.1 million, compared to
$77.3 million for the year ended December 31, 2019. As a percentage
of net revenues, compensation and benefits expense was 82.4%,
compared to 77.3% for the year ended December 31, 2019.
The year-over-year increases in compensation expense and
compensation ratios are inclusive of a severance cost of $2.1
million related to management restructuring that occurred during
the quarter ended September 30, 2020.
Non-Compensation Expense
Non-compensation expense was $7.6 million and $28.4 million for
the quarter and year ended December 31, 2020, respectively,
compared to $8.5 million and $36.2 million for the quarter and year
ended December 31, 2019, respectively.
Share Repurchase Activity
JMP Group did not repurchase any outstanding common shares
during the quarter ended December 31, 2020.
Personnel
At December 31, 2020, the company had 180 full-time employees,
compared to 183 at September 30, 2020, and 209 at December 31,
2019.
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 across 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.
Operating Net Income
Operating net income is a non-GAAP financial measure that (i)
excludes compensation expense related to share-based awards and
deferred compensation, (ii) reverses impairment charges related to
CLO equity, (iii) reverses a restructuring charge, (iv) excludes
the impact of the early retirement of debt issued by JMP Group and
a collateralized loan obligation, or “CLO,” (v) excludes
transaction costs related to a CLO, (vi) excludes amortization
expense related to a CLO, (vii) reverses unrealized gains or losses
related to real estate investment properties, (vi) reverses net
unrealized gains and losses on strategic equity investments and
warrants, and (vii) assumes an effective tax rate. In particular,
operating net income adjusts for:
- the grant of restricted stock units 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 impairment of CLO equity recorded among principal
transactions, as the company believes that the forecasted reduction
in future cash flows will be mitigated by a change in the interest
rate environment and that distributions will be larger than
currently projected;
- a charge recorded in connection with severance costs deriving
from a management restructuring and reduction in headcount;
- expenses associated with the redemption of senior notes due
2023 in the third quarter of 2019 and the resulting acceleration of
the amortization of remaining capitalized issuance costs;
- transaction costs related to the refinancing of notes issued by
JMP Credit Advisors CLO III;
- amortization expense related to an intangible asset resulting
from the repurchase of a portion of the management fees from JMP
Credit Advisors CLO III;
- unrealized gains or losses on commercial real estate
investments, adjusted for non-cash expenditures, including
depreciation and amortization;
- 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 26% at
the consolidated taxable parent company, JMP Group.
A reconciliation of JMP Group’s net income to its operating net
income for the quarter and year ended December 31, 2020, and for
comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands, except per share amounts)
Dec. 31, 2020
Sept. 30, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Net income/(loss) attributable to JMP Group
$9,009
($3,082
)
($6,445
)
($4,697
)
($6,549
)
Add back/(subtract): Income tax expense/(benefit)
3,907
(128
)
(988
)
(3,284
)
(6,827
)
Income/(loss) before taxes
12,916
(3,210
)
(7,433
)
(7,981
)
(13,376
)
Add back/(subtract): Share-based awards and deferred
compensation
(2,440
)
71
1,895
(1,953
)
4,079
Impairment of CLO equity
4,420
2,746
4,204
21,702
4,204
Restructuring charge
-
2,056
-
2,056
-
Early retirement of debt
-
-
-
89
625
Amortization of intangible asset – CLO III
-
-
-
-
277
Unrealized (gain)/loss – real estate-related depreciation and
amortization
564
438
354
1,856
1,779
Unrealized mark-to-market (gain)/loss – strategic equity
investments and warrants
(4,072
)
704
1,169
1,200
1,262
Operating income/(loss) before taxes
11,388
2,805
189
16,969
(1,150
)
Income tax expense/(benefit)
2,961
729
49
4,411
(299
)
Operating net income/(loss)
$8,427
$2,076
$140
$12,558
($851
)
Operating net income/(loss) per share: Basic
$0.43
$0.11
$0.01
$0.64
($0.04
)
Diluted (1)
$0.42
$0.10
$0.01
$0.63
($0.04
)
Weighted average shares outstanding: Basic
19,709
19,628
19,402
19,613
20,189
Diluted (1)
19,943
19,860
19,661
19,805
20,323
(1)
On a GAAP basis, the weighted average
number of diluted shares outstanding for the quarters ended
September 30, 2020, and December 31, 2019, was 19,628,340 and
19,401,844, respectively. On a GAAP basis, the weighted average
number of diluted shares outstanding for the years ended December
31, 2020, and December 31, 2019, was 19,613,057 and 20,188,887,
respectively. All such share counts were equivalent to the weighted
average number of basic shares outstanding, due to the company’s
net loss for the periods. Under GAAP, in a period of net loss,
dilutive securities are disregarded in the calculation of earnings
per share.
Book Value per Share
At December 31, 2020, JMP Group’s book value per share was
$3.18. 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
operating net income. The add-back includes a tax provision related
to the expense reversed in a given period, due to the company’s
election to be taxed as a C corporation as of January 1, 2019. As a
result, adjusted book value per share was $4.03 for the quarter
ended December 31, 2020, as set forth below.
(in thousands, except per share amounts)
Dec. 31, 2020
Sept. 30, 2020
Dec. 31, 2019
Shareholders' equity
$62,940
$53,868
$61,688
Accumulated unrealized loss – real estate-related depreciation and
amortization
16,873
16,456
15,500
Adjusted shareholders' equity
$79,813
$70,324
$77,188
Book value per share
$3.18
$2.74
$3.16
Adjusted book value per share
$4.03
$3.58
$3.96
Basic shares outstanding
19,790
19,636
19,509
Quarterly operating ROE (1)
57.7%
15.1%
0.8%
LTM operating ROE (1)
21.9%
7.2%
(1.1%)
Quarterly adjusted operating ROE (1)
44.9%
11.6%
0.7%
LTM adjusted operating ROE (1)
17.1%
5.7%
(0.9%)
(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.”
Conference Call
JMP Group will hold a conference call to discuss the company’s
results of operations at 10:00 a.m. ET on Friday, February 19,
2021. To participate in the call, dial (888) 566-6060 (domestic) or
(973) 200-3100 (international). The conference identification
number is 5454327.
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 for future replay.
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 many
factors, including: 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, including, but not limited to, the anticipated effects of
COVID-19 on the company’s business, results of operations and
financial condition, and the potential timelines for reopening the
economy and its improvement. Forward-looking statements reflect JMP
Group’s current expectations or forecasts about future events,
including beliefs, plans, objectives, intentions, assumptions and
other statements that are not historical facts. The words “may,”
“could,” “should,” “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “plan,” “predict” and similar expressions and their
variants, as they relate to JMP Group, may identify forward-looking
statements. 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, 2019, as filed
with the U.S. Securities and Exchange Commission on March 30, 2020,
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, 2019, 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. Any forward-looking statements
contained in this press release speak only as of the date hereof.
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
webcasts.
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 venture capital and private capital activities
through Harvest Capital Strategies and JMP Asset Management; 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, 2020
Dec. 31, 2019
Assets Cash and cash equivalents
$91,444
$49,630
Restricted cash and deposits
1,287
1,287
Marketable securities owned
55,494
73,101
Other investments
26,821
35,309
Loans held for investment, net of allowance for loan losses
994
1,210
Other assets
65,291
69,720
Total assets
$241,331
$230,257
Liabilities and Shareholders' Equity Liabilities:
Marketable securities sold, but not yet purchased
$ -
$3,855
Accrued compensation
46,353
30,253
Bond payable, net of issuance costs
80,912
82,584
Note payable
10,610
6,812
Other liabilities
41,048
45,392
Total liabilities
178,923
168,896
Shareholders' Equity: Total JMP Group LLC shareholders'
equity
62,940
61,688
Non-redeemable non-controlling interest
(532
)
(327
)
Total equity
62,408
61,361
Total liabilities and shareholders' equity
$241,331
$230,257
JMP GROUP LLC
Consolidated Statements of
Operations
(Unaudited)
Quarter Ended Year Ended (in thousands, except per share amounts)
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Revenues: Investment banking
$43,290
$20,873
$100,384
$65,716
Brokerage
4,918
4,468
18,926
17,628
Asset management fees
1,981
1,742
8,320
7,427
Principal transactions
1,809
(5,027
)
(18,528
)
1,344
Gain/(loss) on sale and payoff of loans
-
-
-
(38
)
Net dividend income
159
316
400
1,184
Other income
1,047
856
3,735
2,373
Non-interest revenues
53,204
23,228
113,237
95,634
Interest income
2,263
2,410
8,654
21,801
Interest expense
(1,740
)
(1,816
)
(6,977
)
(16,458
)
Net interest income
523
594
1,677
5,343
Gain/(loss) on repurchase or early retirement of debt
-
-
697
(458
)
Provision for loan losses
(112
)
-
(112
)
(438
)
Total net revenues
53,615
23,822
115,499
100,081
Non-interest expenses: Compensation and benefits
33,037
22,641
95,138
77,314
Administration
1,893
2,409
6,590
9,387
Brokerage, clearing and exchange fees
709
655
2,610
2,706
Travel and business development
211
1,609
1,252
5,240
Managed deal expenses
1,077
584
3,605
3,136
Communications and technology
1,108
1,149
4,394
4,390
Occupancy
1,198
1,201
4,785
5,229
Professional fees
1,261
846
3,658
4,359
Depreciation
277
288
1,500
1,203
Other
(159
)
(200
)
42
500
Total non-interest expense
40,612
31,182
123,574
113,464
Net income/(loss) before income tax
13,003
(7,360
)
(8,075
)
(13,383
)
Income tax expense/(benefit)
3,907
(988
)
(3,284
)
(6,827
)
Net income/(loss)
9,096
(6,372
)
(4,791
)
(6,556
)
Less: Net income/(loss) attributable to non-redeemable
non-controlling interest
87
73
(94
)
(7
)
Net income/(loss) attributable to JMP Group
$9,009
($6,445
)
($4,697
)
($6,549
)
Net income/(loss) attributable to JMP Group per share: Basic
$0.46
($0.33
)
($0.24
)
($0.32
)
Diluted
$0.45
($0.33
)
($0.24
)
($0.32
)
Weighted average common shares outstanding: Basic
19,709
19,402
19,613
20,189
Diluted
19,943
19,402
19,613
20,189
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210218005826/en/
Investor Relations Contact JMP Group LLC Andrew Palmer
(415) 835-8978 apalmer@jmpg.com Media Relations Contacts
Dukas Linden Public Relations, Inc. Zach Leibowitz (646) 722-6528
zach@dlpr.com Michael Falco (646) 808-3611 michael@dlpr.com
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