SAN FRANCISCO, CA (TSX: TWP) today released results for the
quarter ended March 31, 2008, reporting a net loss of $17.8
million, or $0.54 per share, on net revenues of $48.9 million.
Adjusting for certain one-time events related to its initial public
offering and the amortization of intangible assets acquired in the
Westwind Partners transaction, the firm reported a non-GAAP net
loss of $14.8 million, or $0.45 per share. A reconciliation between
GAAP results and these non-GAAP measures is discussed below under
"Non-GAAP Financial Measures."
First quarter 2008 consolidated results include Westwind
Partners and are compared with historical pro forma combined
results for Thomas Weisel Partners and Westwind Partners. These
historical pro forma amounts are further described under
"Historical Pro Forma Combined Results" below.
Business Highlights
-- Investment Banking Revenues. Investment banking revenues
decreased to $11.5 million in the first quarter of 2008 compared to
$52.8 million in the historical pro forma combined first quarter of
2007. Total transactions for the first quarter were 23 compared to
a historical pro forma combined total of 49 in the year-ago
quarter.
"The equity capital markets environment in the first quarter of
2008 was extremely challenging, which directly impacted our first
quarter results," said Thomas Weisel, Chairman and CEO. "At the
beginning of the second quarter, our total backlog of filed,
announced and engaged transactions was up slightly compared to the
beginning of the first quarter of 2008. However, near term equity
capital market conditions remain difficult and uncertain, and at
this point, we have not experienced material improvements."
"As an alternative to the equity capital markets, several of our
IPO clients are pursuing either a strategic alternative or a
private financing. M&A continues to be active as evident by our
five recently announced transactions, which include: Saxon Energy
Service's sale to Schlumberger and First Reserve Corporation for
approximately C$590 million, Nuance Communications' $400 million
acquisition of eScription, Iomega's $215 million sale to EMC
Corporation, Frontier Pacific Mining's sale to Eldorado Gold
Corporation for C$157 million and WJ Communications' sale to
TriQuint Semiconductor for $72 million," continued Mr. Weisel.
-- Brokerage Revenues. Brokerage revenues increased to $36.1
million in the first quarter of 2008 compared to $31.9 million in
the historical pro forma combined first quarter of 2007.
"Growth in our electronic trading platform, the team we hired
for special situations overnight block trading and the opening of
new offices in the midwest and Europe all contributed to the
year-over-year improvements," commented Tony Stais, Director of
Trading.
-- Asset Management Revenues. Asset management revenues
decreased to $0.3 million in the first quarter of 2008 compared to
$5.7 million in the historical pro forma combined first quarter of
2007.
"In asset management, our $3.7 million of management fees were
offset by mark-to-market losses primarily stemming from two public
companies held in our healthcare venture fund, Trans1 and Hansen
Medical. These losses were partially offset by gains experienced in
our venture capital fund of funds and our technology venture fund,"
said Mr. Weisel.
-- Compensation and Benefits Expense Ratio. Compensation and
benefits expense decreased to $40.4 million in the first quarter of
2008 compared to $56.3 million in the historical pro forma combined
quarter of 2007. The compensation ratio increased to 76% compared
to the historical pro forma combined ratio of 59% in the year-ago
period and a compensation ratio of 60% in the historical pro forma
combined fourth quarter 2007.
The increase in the compensation ratio is the result of fixed
elements within compensation and benefits expense, such as salary,
guarantees, taxes and benefits and equity award expense, combined
with lower revenues. The fourth quarter comparison excludes a
one-time charge for accelerated retention and severance amount of
$24.8 million discussed further and reconciled in our 2007 year-end
earnings release filed with the SEC on February 13, 2008.
-- Reducing Headcount and Adding Key Hires. Early in the
quarter, the firm reduced total headcount by 9%. Over the next
couple of weeks, the firm will further reduce headcount by another
13%. This will bring the total year-to-date reductions to
approximately 160 employees or 22%, leaving the firm with
approximately 600 employees going forward.
The firm will continue to selectively upgrade its talent pool
within revenue generation areas. Two additional salespeople were
recently hired in Boston, one of whom, Ken Murphy, is the new head
of sales in Boston. Recently announced, the firm added Eamon Hurley
to the investment banking team in the energy sector. In research,
the firm added Kurt Molnar in Canada, and Mike Scialla in the U.S.,
to cover oil & gas exploration & production companies. The
firm also augmented its mining coverage with the addition of
Heather Douglas who will cover large capitalization international
gold companies.
-- Strong Balance Sheet Position. At the end of the first
quarter of 2008, shareholders' equity and book value per share were
$357 million and $11.04, respectively, and tangible shareholders'
equity and tangible book value per share were $240 million and
$7.40, respectively.
"Over the course of the year, we expect our available cash and
net short term assets to be approximately $150 million, of which
approximately $100 million is currently used to capitalize our
broker-dealer entities," said Lionel F. Conacher, President and
Chief Operating Officer. "By right-sizing our firm, combined with
our healthy balance sheet and strategic new hires, we are
positioning ourselves to fully leverage our diversified platform
when stability returns to the capital markets environment,"
continued Mr. Conacher.
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA FOR THE THREE MONTHS ENDED MARCH 31, 2008
AND PRELIMINARY PRO FORMA SELECTED FINANCIAL DATA FOR THE
THREE MONTHS ENDED MARCH 31, 2007
(Dollar amounts in thousands, except book value per share)
(Unaudited)
Three Months Ended
March 31,
--------------------
Pro Forma
2008 2007****
--------- ---------
Revenue Detail:
Investment banking
Capital raising $ 7,388 $ 25,493
Mergers and acquisitions 4,108 27,351
--------- ---------
Total investment banking 11,496 52,844
Brokerage 36,134 31,850
Asset management
Management fees 3,660 3,879
Private equity gains (losses) (2,089) 1,383
Other securities (1,222) 453
--------- ---------
Total asset management 349 5,715
Interest income 3,025 4,158
Other revenue - 920
--------- ---------
Total revenues 51,004 95,487
Interest expense (2,080) (2,470)
--------- ---------
Net revenues $ 48,924 $ 93,017
========= =========
Investment Banking Transactions:
Capital raising 19 37
Mergers and acquisitions 4 12
--------- ---------
Total investment banking transactions 23 49
--------- ---------
Revenue per transaction $ 499 $ 1,078
Other Metrics:
Non-GAAP compensation ratio* 75.6% 59.4%
Non-compensation ratio** 71.5% 32.2%
IPO equity award expense $ 1,807 $ 1,861
Shareholders' equity 357,250 n/a
Less: Goodwill and Other Intangible Assets (117,714) n/a
---------
Tangible shareholders' equity 239,536 n/a
=========
Common shares outstanding*** 32,357 n/a
Book value per share $ 11.04 n/a
Tangible book value per share $ 7.40 n/a
* The firm?s Non-GAAP compensation ratio is the ratio of the firm?s
compensation and benefits expense (excluding expenses relating to IPO
equity awards) to net revenues (excluding investment gains and losses
attributable to investments in partnerships and other securities). Without
excluding these amounts, the firm?s ratio of compensation and benefits
expense to net revenues is 82.6% and 60.6% for the three months ended March
31, 2008 and 2007, respectively.
** The firm?s non-compensation ratio is the ratio of all expense (other
than compensation and benefits expense and interest expense) to net
revenues.
*** Includes 6,639,478 shares of TWP Acquisition Company (Canada), Inc.,
the firm?s wholly-owned subsidiary. Each exchangeable share is exchangeable
at any time into a share of common stock of the firm, entitles the holder
to dividend and other rights substantially economically equivalent to those
of a share of common stock, and through a voting trust, entitles the holder
to a vote along with shares of common stock on matters presented to
shareholders.
**** The preliminary pro forma amounts depict results we estimate we would
have had during the three months ended March 31, 2007 if the acquisition of
Westwind Partners that we consummated in January 2008 had been consummated
as of January 1, 2007. Further information regarding these preliminary pro
forma amounts is set forth below under "Historical Pro Forma Combined
Results."
Historical Pro Forma Combined Results
The firm has reported in this press release a preliminary
unaudited pro forma consolidated statement of operations for the
three months ended March 31, 2007 (and information derived
therefrom), which gives effect to the firm's acquisition of
Westwind Partners as if the acquisition had occurred on January 1,
2007. This preliminary unaudited pro forma consolidated statement
of operations is based on historical financial statements of Thomas
Weisel Partners and Westwind Partners, giving effect to the
acquisition applying the assumptions and adjustments discussed in
the notes accompanying the pro forma consolidated statement of
operations attached hereto. The preliminary unaudited pro forma
consolidated financial statements should be read in conjunction
with the firm's Quarterly Report on Form 10-Q for the three months
ended March 31, 2007 and its Annual Report on Form 10 K for the
year ended December 31, 2007, as well as the historical financial
statements of Westwind Partners that are an annex to the proxy
statement the firm filed with the SEC on November 7, 2007.
The preliminary unaudited pro forma consolidated statement of
operations for the three months ended March 31, 2007 was prepared
using the purchase method of accounting with Thomas Weisel Partners
treated as the accounting acquiror. The preliminary unaudited pro
forma consolidated statement of operations does not purport to be
indicative of the results of operations that would have actually
been obtained had such transactions been completed as of the
assumed date and for the period presented, or which may be obtained
in the future. The preliminary pro forma adjustments are described
in the notes accompanying the preliminary unaudited pro forma
consolidated statement of operations attached hereto and are based
upon available information and certain assumptions that management
of Thomas Weisel Partners believes are reasonable.
All amounts presented in the preliminary unaudited pro forma
consolidated statement of operations are in U.S. dollars based on
the exchange rate described in the notes accompanying the pro forma
consolidated statement of operations attached hereto.
Non-GAAP Financial Measures
The firm has reported in this press release its net loss for the
first quarter of 2008 on a non-GAAP basis by:
-- excluding $1.0 million of after-tax non-cash expense associated with
its initial grant of restricted stock units made in connection with its
initial public offering; and
-- excluding $2.0 million of after-tax non-cash expense associated with
the amortization of intangible assets acquired as a result of its
acquisition of Westwind Partners on January 2, 2008 (with such amortization
being based on a preliminary allocation of the purchase price).
The firm has also reported in this press release its basic and
diluted loss per share for the first quarter of 2008 on a non-GAAP
basis by:
-- using a net loss of $14.8 million as the numerator of its non-GAAP
basic and diluted loss per share calculations, which amount is derived by
beginning with its GAAP net loss of $17.8 million and adjusting to exclude
(i) the after-tax non-cash expense associated with its initial grant of
restricted stock units of $1.0 million and (ii) the estimated after-tax non-
cash expense associated with the amortization of intangible assets acquired
as a result of its acquisition of Westwind Partners of $2.0 million; and
-- using as the denominator of its non-GAAP basic and diluted loss per
share calculations the basic and diluted weighted average shares used,
respectively, as the denominator of its GAAP basic and diluted loss per
share calculations.
The firm views its grant of restricted stock units in connection
with its initial public offering as a one-time event because,
although the firm expects to grant restricted stock units and other
share-based compensation in the future, it does not expect to make
any such substantial grants outside of its regular compensation and
hiring process, as the firm did when it granted restricted stock
units in connection with its initial public offering. Similarly,
the firm views its acquisition of Westwind Partners, and the
related acquisition of intangible assets, as a one-time event.
The firm's management has utilized a non-GAAP calculation of net
loss and non-GAAP calculations of basic and diluted loss per share
that are adjusted in the manner described above as an additional
device to aid in understanding and analyzing the firm's financial
results in the first quarter of 2008. The firm's management
believes that these non-GAAP measures will allow for a better
evaluation of the operating performance of its business and
facilitate meaningful comparison of its results in the current
period to those in prior periods and future periods. The firm's
reference to these measures should not, however, be considered as a
substitute for results that are presented in a manner consistent
with GAAP. These non-GAAP measures are provided to enhance
investors' overall understanding of the firm's current financial
performance and its prospects for the future. Specifically, the
firm's management believes that the non-GAAP measures provide
useful information to both management and investors by excluding
certain items that may not be indicative of the firm's core
operating results and business outlook.
A limitation of utilizing these non-GAAP measures of net loss
and basic and diluted loss per share is that the GAAP accounting
effects of these events do in fact reflect the underlying financial
results of the firm's business and these effects should not be
ignored in evaluating and analyzing the firm's financial results.
Therefore, management believes that both the firm's GAAP measures
of net loss and basic and diluted loss per share and these non-GAAP
measures of the firm's financial performance should be considered
together.
A reconciliation of the firm's first quarter of 2008 GAAP net
loss to its first quarter of 2008 non-GAAP net loss is set forth
below (in millions):
Net loss $(17.8)
Exclusion of the after-tax non-cash expense associated
with initial grant of restricted stock units 1.0
Exclusion of the estimated after-tax non-cash expense
associated with the amortization of intangible assets
acquired as a result of the firm's acquisition of Westwind
Partners 2.0
------
Non-GAAP net loss $(14.8)
======
The firm calculates loss per share in accordance with FASB
Statement No. 128, Earnings per Share. Basic loss and diluted loss
per share is calculated by dividing net loss by the weighted
average number of common shares outstanding for the period.
The following table sets forth the firm's GAAP basic and diluted
weighted average shares outstanding and its GAAP basic and diluted
loss per share for the first quarter of 2008, as well as non-GAAP
loss per share for the first quarter of 2008 after applying the
adjustments described above:
Weighted average shares used in computation of loss per share and
non-GAAP loss per share:
Basic (in thousands) 32,989
Diluted (in thousands) 32,989
Loss per share:
Basic ($ 0.54)
Diluted ($ 0.54)
Non-GAAP loss per share:
Basic ($ 0.45)
Diluted ($ 0.45)
Quarterly Earnings Conference Call
Thomas Weisel Partners Group, Inc. will host its first quarter
conference call on Wednesday, April 30, 2008 at 5:00 p.m. Eastern
time (2:00 p.m. Pacific time). The conference call may include
forward-looking statements, including guidance as to future
results.
All interested parties are invited to listen to Thomas Weisel
Partners' Chairman and Chief Executive Officer, Thomas W. Weisel,
President and Chief Operating Officer, Lionel F. Conacher, and
Chief Financial Officer, Shaugn S. Stanley, by dialing 888/801-6504
(domestic) or 913/312-0698 (international). The confirmation code
for both the domestic and international lines is: 4859804.
A live web cast of the call, as well as the firm's results, will
be available through the investor relations/webcasts section of its
website, www.tweisel.com. To listen to the live call, please go to
the website at least 15 minutes early to register, download, and
install any necessary audio software.
For those who cannot listen to the live broadcast, a replay will
be available on this site one hour after the call through May 16,
2008.
About Thomas Weisel Partners Group, Inc.
Thomas Weisel Partners Group, Inc. is an investment bank,
founded in 1998, focused principally on the growth sectors of the
economy. Thomas Weisel Partners Group, Inc. generates revenues from
three principal sources: investment banking, brokerage and asset
management. The investment banking group is comprised of two
disciplines: corporate finance and strategic advisory. The
brokerage group provides equity and convertible debt securities
sales and trading services to institutional investors, and offers
brokerage, advisory and cash management services to high-net-worth
individuals and corporate clients. The asset management group
consists of: private equity, public equity and distribution
management. Thomas Weisel Partners is headquartered in San
Francisco with additional offices in Baltimore, Boston, Calgary,
Chicago, Cleveland, Denver, Montreal, New York, Portland, Silicon
Valley, Toronto, London, Mumbai and Zurich. For more information,
please visit www.tweisel.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, which
are subject to risks, uncertainties and assumptions about us. In
some cases, you can identify these statements by forward-looking
words such as "may," "might," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "optimistic,"
"potential," "future" or "continue," the negative of these terms
and other comparable terminology. These statements are only
predictions based on our current expectations about future events.
There are important factors that could cause actual results, level
of activity, performance or achievements or other events or
circumstances to differ materially from the results, level of
activity, performance or achievements expressed or implied by these
forward-looking statements. These factors include, but are not
limited to, Thomas Weisel Partners' ability to implement its
strategic initiatives and achieve the expected benefits of the
acquisition of Westwind Partners, integrate Westwind Partners'
operations and retain its professionals, as well as competitive,
economic, political, and market conditions and fluctuations,
government and industry regulation, other risks relating to the
acquisition, including the effect of the completion of the
transaction on the companies' business relationships, operating
results and business generally and other factors. Some of the other
factors are those that are discussed in Item 1A - "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2007
and in our Quarterly Reports on Form 10-Q filed with the SEC
thereafter. We do not assume responsibility for the accuracy or
completeness of any forward-looking statement and you should not
rely on forward-looking statements as predictions of future events.
We are under no duty to update any of these forward-looking
statements to conform them to actual results or revised
expectations.
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
2008
AND PRELIMINARY PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2007
(In thousands, except per share data)
(Unaudited)
Three Three Months Ended March 31, 2007
Months ------------------------------------------
Ended Thomas
March Weisel Westwind Pro Forma Pro Forma
31, 2008 Partners (a) Adjustments Combined
-------- -------- -------- -------- --------
Revenues:
Investment banking $ 11,496 $ 39,292 $ 13,552 $ - $ 52,844
Brokerage 36,134 28,856 2,994 -- 31,850
Asset management 349 5,715 -- -- 5,715
Interest income 3,025 4,348 231 (421)(b) 4,158
Other revenue -- 920 -- -- 920
-------- -------- -------- -------- --------
Total revenues 51,004 79,131 16,777 (421) 95,487
Interest expense (2,080) (2,442) (28) -- (2,470)
-------- -------- -------- -------- --------
Net revenues 48,924 76,689 16,749 (421) 93,017
-------- -------- -------- -------- --------
Expenses excluding
interest:
Compensation and
benefits 40,389 43,990 12,337 -- 56,327
Brokerage
execution,
clearance and
account
administration 6,478 4,713 260 -- 4,973
Communications and
data processing 5,864 4,711 544 -- 5,255
Depreciation and
amortization of
property and
equipment 1,887 1,724 105 (41)(c) 1,788
Amortization of
other intangible
assets 3,360 -- -- 3,360(d) 3,360
Marketing and
promotion 4,047 3,613 580 -- 4,193
Occupancy and
equipment 5,387 4,051 290 -- 4,341
Other expense 7,964 5,005 1,056 -- 6,061
-------- -------- -------- -------- --------
Total expenses
excluding
interest 75,376 67,807 15,172 3,319 86,298
-------- -------- -------- -------- --------
Income (loss) before
taxes (26,452) 8,882 1,577 (3,740) 6,719
Provision for taxes
(tax benefit) (8,647) 3,481 575 (1,225)(e) 2,831
-------- -------- -------- -------- --------
$
Net income (loss) (17,805) $ 5,401 $ 1,002 $ (2,515) $ 3,888
======== ======== ======== ======== ========
Earnings (loss) per
share:
Basic earnings
(loss) per share $ (0.54) $ 0.21 $ 0.12
Diluted earnings
(loss) per share $ (0.54) $ 0.20 $ 0.11
Weighted average
shares used in
computation of per
share data:
Basic weighted
average shares
outstanding 32,989 26,070 7,009(f) 33,079
Diluted weighted
average shares
outstanding 32,989 26,882 7,009(f) 33,891
Notes to the Preliminary Pro Forma Consolidated Statements of Operations
for the three months ended March 31, 2007 are set forth on the following
page.
Notes to the Unaudited Pro Forma Consolidated Statement of
Operations
(a) Westwind statement of operations has been converted from
Canadian dollars to U.S. dollars for the pro forma presentation.
For the unaudited pro forma consolidated statement of operations
for the three months ended March 31, 2007, amounts were converted
based on the average exchange rate for the period from January 1,
2007 to March 31, 2007 which was 0.85365.
(b) An adjustment to interest income for the estimated interest
amount that would not have been recognized by Thomas Weisel
Partners during the three months ended March 31, 2007 on the $45
million cash portion of the transaction consideration. The weighted
average interest rate for the three months ended March 31, 2007 is
estimated to be 3.75%.
(c) Reflects an adjustment to depreciation and amortization of
property and equipment for the estimated amount that would not have
been recognized by Westwind during the three months ended March 31,
2007 related to the write down of property and equipment to bring
the acquired assets to fair value on the date of acquisition.
(d) Reflects the amortization of other intangible assets that
were recorded as a result of the acquisition of $3.4 million for
the three months ended March 31, 2007.
(e) To record an income tax impact on the pre-tax pro forma
adjustments. The firm's combined effective tax rate subsequent to
the pro forma tax adjustment is equal to 42%.
(f) The acquisition of Westwind by Thomas Weisel Partners for a
purchase price of (i) $45 million in cash and (ii) 7,009,112 shares
of Thomas Weisel Partners common stock or exchangeable shares. The
fair value of the Thomas Weisel Partners common stock to be issued
was based upon the average of the closing prices of one share of
common stock during the five trading day period beginning two
trading days prior to the date the transaction was announced.
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