Thomas Weisel Partners Group, Inc. (NASDAQ: TWPG) today released
results for the three and nine months ended September 30, 2009.
The firm reported a net loss of $14.4 million, or $0.44 per
share, for the third quarter of 2009 compared with a net loss of
$109.2 million, or $3.41 per share, for the third quarter of 2008.
For the nine months ended September 30, 2009, the firm reported a
net loss of $48.5 million, or $1.49 per share, compared with a net
loss of $137.1 million, or $4.22 per share, for the nine months
ended September 30, 2008. The results for the three and nine months
of 2008 include a non-cash goodwill impairment charge of $92.6
million or $2.89 per share and $2.84 per share, respectively.
Total net revenues decreased 11% to $43.6 million for the third
quarter of 2009 versus $49.0 million for the third quarter of 2008.
For the nine months ended September 30, 2009, total net revenues
were $134.9 million, a decline of 15% compared with $158.0 million
for the nine months ended September 30, 2008.
Adjusting for the non-cash amortization of intangible assets
acquired in the purchase of Westwind Partners, the firm reported a
non-GAAP net loss of $12.8 million, or $0.39 per share, for the
third quarter of 2009 and a non-GAAP net loss of $43.4 million, or
$1.34 per share, for the nine months ended September 30, 2009. A
reconciliation of GAAP results to these non-GAAP measures is
discussed below under "Non-GAAP Financial Measures."
"We are encouraged by the sequential growth in investment
banking revenues and by the continued level of activity across
every growth vertical in which we operate. We believe that
companies with strong fundamentals, particularly those in the
technology and resource sectors, will lead us out of this cycle,"
said Thomas W. Weisel, Chairman and CEO of Thomas Weisel Partners.
"A main focus of ours has been on reducing our operating cost
structure while maintaining the scale, breadth and depth of our
platform in order to be an impact player as the capital markets
activity returns."
Business Overview
-- Investment Banking Revenues. Investment banking revenues were $15.6
million in the third quarter of 2009 compared with $17.5 million in the
third quarter of 2008 and $14.3 million in the second quarter of 2009, a
decrease of 11% and an increase of 9%, respectively. Total transactions
for the third quarter of 2009 were 23 compared with 13 in the year-ago
quarter and 28 in the second quarter of 2009. The increase in revenues
from the second quarter of 2009 was primarily attributable to strength in
equity capital raising activity, particularly in Canada.
-- Brokerage Revenues. Brokerage revenues were $24.3 million in the
third quarter of 2009 compared with $33.7 million in the third quarter of
2008 and $27.7 million in the second quarter of 2009, a 28% and 13%
decrease, respectively. Results in the third quarter of 2009 decreased
from the second quarter of 2009 mainly due to a decrease in U.S. equity
commissions, which were impacted by lower market volumes, coupled with a
decline in revenues from Electronic and Block Trading.
-- Asset Management Revenues. Asset management revenues were $3.9
million in the third quarter of 2009 compared with net losses of $2.3
million in the third quarter of 2008 and revenues of $6.4 million in the
second quarter of 2009. Asset management revenues consisted of management
fees of $3.8 million, net realized and unrealized gains in warrants and
other securities of $0.2 million and net realized and unrealized private
equity losses of $65 thousand. Assets under management were $1.4 billion
as of September 30, 2009.
-- Compensation and Benefits Expenses. Compensation and benefits
expenses were $27.3 million in the third quarter of 2009 compared with
$36.9 million in the third quarter of 2008 and $30.1 million in the second
quarter of 2009, a 26% and 9% decrease, respectively.
The non-GAAP compensation ratio, which is defined in note (1) below,
decreased to 63% in the third quarter of 2009 compared with the non-
GAAP ratio of 68% in the year-ago period and increased slightly from
the second quarter of 2009. A reconciliation of GAAP results to these
non-GAAP measures is discussed below under "Non-GAAP Financial
Measures."
-- Non-compensation Expenses. Non-compensation expenses were $30.3
million in the third quarter of 2009, which included a non-cash facilities
charge of $2.6 million or $0.08 per share as result of further downsizing
the firm's real estate footprint in San Francisco. This compares with non-
compensation expenses of $39.1 million in the third quarter of 2008,
excluding the goodwill impairment charge, and $29.1 million in the second
quarter of 2009. Excluding the facilities charge, non-compensation
expenses would have totaled $27.7 million, a decrease of 29% from the year-
ago quarter, excluding the goodwill impairment, and a decrease of 5% from
the second quarter of 2009.
-- Provision for Taxes. The firm recorded a tax expense of $0.3 million
or a negative 2.4% effective tax rate in the third quarter of 2009. As of
December 31, 2008, the firm recorded a full valuation allowance on its U.S.
and U.K. deferred tax assets and, therefore, did not recognize a tax
benefit on its net loss in these tax jurisdictions. The third quarter tax
expense related entirely to taxable income attributable to the firm's
Canadian operations.
-- Capital. As of September 30, 2009, the firm's cash and cash
equivalents were $66.3 million, shareholders' equity and book value per
share were $140.3 million and $4.43, respectively, and tangible
shareholders' equity and tangible book value per share were $122.9 million
and $3.88, respectively.
The firm is planning to file a universal shelf registration statement
on Form S-3 with the Securities and Exchange Commission to register up
to $100 million in securities. The firm has no immediate plans to
raise capital under the shelf registration statement. The shelf
registration statement will provide the firm with the flexibility to
raise capital or to take advantage of growth opportunities as they
occur.
It is the firm's intention to file the shelf registration statement as
soon as practicable, but there can be no assurance that the firm will
actually make such a filing or that the SEC will declare the
registration statement effective. The firm's intention to file a shelf
registration statement is a forward-looking statement as defined by the
"safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. A number of factors may occur that would cause actual
results to differ materially from the forward-looking statements
contained herein. The statements above shall not constitute an offer
to sell or the solicitation of an offer to buy any securities.
-- New Board Member. The firm was pleased to announce that Robert E.
Grady joined the Board of Directors in September 2009. Mr. Grady's venture
capital experience developed at both Carlyle and as Chairman of the
National Venture Capital Association, as well as his extensive capital
markets and M&A expertise, will be important as the firm continues to
refine its strategy for future growth. With Mr. Grady's addition, the
firm's Board of Directors increased to eight members, including seven
independent directors.
Additionally, the firm established the position of Lead Director to the
Board, appointing Matthew R. Barger in this capacity. Mr. Barger is
currently a Senior Advisor to Hellman & Friedman, a private equity
firm, where he spent more than 20 years holding positions including
Chairman of the Investment Committee and Managing General Partner. Mr.
Barger is a Director of a number of investment advisory firms,
including Hall Capital Partners.
-- Strategic New Hires. Over the course of the third quarter, Matthew
Allard joined the firm as a Managing Director in Investment Banking focused
on financial sponsors, Hank Lammens joined the firm as a Managing Director
in Trading and Kevin Travis joined the firm as a Director in Trading
focused on the middle markets.
The firm is also pleased to announce that Abi Subramanian will join the
firm as a Managing Director in Capital Markets focused on private
capital. Mr. Subramanian brings detailed industry knowledge in all
aspects of the emerging growth economy with respect to private
placements for leading private and public companies. Mr. Subramanian
was previously a senior banker at Jefferies and Cowen and brings deep
client relationships across venture capital, private equity and
corporate clients developed over 15 years of investment banking
experience.
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(Dollar amounts in thousands, except book value per share)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenue Detail:
Investment banking
Capital raising $ 10,429 $ 3,962 $ 27,162 $ 25,204
Strategic advisory 5,139 13,569 13,700 26,762
----------- ----------- ----------- -----------
Total investment
banking 15,568 17,531 40,862 51,966
Brokerage 24,256 33,652 81,455 104,646
Asset management
Management fees 3,778 3,754 10,701 10,883
Private equity
realized and
unrealized gains and
(losses) - net (65) (2,375) (1,762) (4,133)
Other securities
realized and
unrealized gains and
(losses) - net 219 (3,708) 4,163 (6,865)
----------- ----------- ----------- -----------
Total asset
management 3,932 (2,329) 13,102 (115)
Interest income 198 1,828 743 6,701
----------- ----------- ----------- -----------
Total revenues 43,954 50,682 136,162 163,198
----------- ----------- ----------- -----------
Interest expense (400) (1,636) (1,223) (5,214)
----------- ----------- ----------- -----------
Net revenues $ 43,554 $ 49,046 $ 134,939 $ 157,984
=========== =========== =========== ===========
Investment Banking
Transactions:
Capital raising 17 8 50 53
Strategic advisory 6 5 16 15
----------- ----------- ----------- -----------
Total transactions 23 13 66 68
----------- ----------- ----------- -----------
Average revenue per
transaction $ 677 $ 1,349 $ 618 $ 764
Other Metrics:
Non-GAAP compensation
ratio(1) 62.6% 68.5% 64.3%
Non-compensation
ratio(2) 69.6% 70.3%
Assets under
management $ 1,360,175 $ 1,392,211 $ 1,360,175 $ 1,392,211
Shareholders' equity $ 140,293 $ 237,048 $ 140,293 $ 237,048
Less: Other intangible
assets (17,402) (31,167) (17,402) (31,167)
----------- ----------- ----------- -----------
Tangible shareholders'
equity $ 122,891 $ 205,881 $ 122,891 $ 205,881
=========== =========== =========== ===========
Common shares
outstanding(3) 31,695 30,806 31,695 30,806
Book value per share $ 4.43 $ 7.69 $ 4.43 $ 7.69
Tangible book value
per share $ 3.88 $ 6.68 $ 3.88 $ 6.68
(1) The firm's non-GAAP compensation ratio is the ratio of the firm's
compensation and benefits expenses (excluding expenses associated with
the initial grant of restricted stock units) to net revenues (excluding
investment gains and losses attributable to investments in private equity).
Without excluding these amounts, the firm's ratio of compensation and
benefits expenses to net revenues is 62.7% and 75.2% for the three months
ended September 30, 2009 and 2008, respectively, and 65.3% and 75.4% for
the nine months ended September 30, 2009 and 2008, respectively.
(2) The firm's non-compensation ratio is the ratio of total expenses
(other than compensation and benefits expense) to net revenues.
(3) Includes 6,260,618 exchangeable shares issued by 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 of the
firm.
Non-GAAP Financial Measures
The firm has reported in this press release its net loss and
basic and diluted loss per share for the three months ended
September 30, 2009 on a non-GAAP basis by:
-- using a net loss of $12.8 million as the numerator of its non-GAAP
basic and diluted loss per share calculations, which amount is calculated
by adjusting its GAAP net loss of $14.4 million to exclude the after-tax
non-cash expense associated with the amortization of intangible assets
acquired as a result of its acquisition of Westwind Partners of $1.6
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 has reported in this press release its net loss and
basic and diluted loss per share for the nine months ended
September 30, 2009 on a non-GAAP basis by:
-- using a net loss of $43.4 million as the numerator of its non-GAAP
basic and diluted loss per share calculations, which amount is calculated
by adjusting its GAAP net loss of $48.5 million to exclude (i) the after-
tax non-cash expense associated with its initial grant of restricted stock
units of $0.1 million and (ii) the after-tax non-cash expense associated
with the amortization of intangible assets acquired as a result of its
acquisition of Westwind Partners of $5.0 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.
A reconciliation of the firm's GAAP net loss to its non-GAAP net
loss for the three and nine months ended September 30, 2009 is set
forth below (in millions):
Three Months Ended Nine Months Ended
September 30, 2009 September 30, 2009
------------------- -------------------
(in millions)
Net loss $ (14.4) $ (48.5)
Exclusion of the after-tax
non-cash expense associated with
the initial grant of restricted
stock units - 0.1
Exclusion of the after-tax
non-cash expense associated with
the amortization of intangible
assets acquired as a result of
the firm's acquisition of
Westwind Partners 1.6 5.0
------------------- -------------------
Non-GAAP net loss $ (12.8) $ (43.4)
=================== ===================
Basic net loss and diluted net 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 net loss per share for the three and
nine months ended September 30, 2009, as well as the non-GAAP net
loss per share after applying the adjustments described above:
Three Months Ended Nine Months Ended
September 30, 2009 September 30, 2009
------------------- -------------------
Weighted average shares used in
computation of net loss per
share:
Basic (in thousands) 32,703 32,464
Diluted (in thousands) 32,703 32,464
Net loss per share:
Basic $ (0.44) $ (1.49)
Diluted $ (0.44) $ (1.49)
Non-GAAP net loss per share:
Basic $ (0.39) $ (1.34)
Diluted $ (0.39) $ (1.34)
The firm's non-GAAP compensation ratio is the ratio of the
firm's compensation and benefits expenses (excluding expenses
relating to the initial grant of restricted stock units) to net
revenues (excluding investment gains and losses attributable to
investments in private equity). Without excluding these amounts,
the firm's ratio of compensation and benefits expenses to net
revenues is 62.7% and 75.2% for the three months ended September
30, 2009 and 2008, respectively, and 65.3% and 75.4% for the nine
months ended September 30, 2009 and 2008, respectively.
Three Months Ended Nine Months Ended
September 30, 2009 September 30, 2009
-------------------- --------------------
(in millions)
Compensation and benefits
expenses $ 27.3 $ 88.1
Exclusion of the pre-tax non-cash
expense associated with the
initial grant of restricted
stock units - 0.2
-------------------- --------------------
Non-GAAP compensation and
benefits expense $ 27.3 $ 87.9
==================== ====================
Net revenues $ 43.6 $ 134.9
Exclusion of investment (gains)
losses in private equity 0.0 1.8
-------------------- --------------------
Non-GAAP net revenues $ 43.6 $ 136.7
==================== ====================
The firm's non-compensation expenses are calculated by adjusting
its total expenses excluding interest minus compensation and
benefits expenses.
Three Months Ended Nine Months Ended
September 30, 2009 September 30, 2009
-------------------- --------------------
(in millions)
Total expenses excluding interest $ 57.6 $ 182.9
Less compensation and benefits
expenses 27.3 88.1
-------------------- --------------------
Non-compensation expenses $ 30.3 $ 94.8
==================== ====================
The firm views its grant of restricted stock units in connection
with its initial public offering and the expense associated with
the amortization of intangible assets acquired as a result of its
acquisition of Westwind Partners as non-cash events. Additionally,
the firm views the exclusion of its grant of restricted stock units
from compensation and benefits expense as a non-GAAP compensation
and benefits expense and the exclusion of investment gains and
losses in its private equity portfolios from net revenues as
non-GAAP net revenues for calculating the firm's non-GAAP
compensation ratio. The firm's management has utilized non-GAAP
calculations of its compensation ratio, net revenues and 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 three and nine months ended September 30, 2009. 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 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 and these non-GAAP measures of the firm's
financial performance should be considered together.
Quarterly Earnings Conference Call
Thomas Weisel Partners will host its third quarter conference
call on Wednesday, October 28, 2009 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,
Ryan Stroub, by dialing (866) 746-9599 (domestic) or (702) 696-4728
(international). The confirmation code for both the domestic and
international lines is: 36120830.
A live audio webcast of the call, as well as the company's
results, will be available through the Investor Relations/Webcasts
section of the company's website, www.tweisel.com, which can also
be accessed directly at:
http://www.tweisel.com/AboutUs/InvestorRelations/Webcasts. To
listen to the live audio webcast of the 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 of
the conference call will be available through the above-referenced
website beginning one hour following the completion of the call
through November 13, 2009.
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, the state of the financial markets and the economy,
particularly as they relate to the growth sectors that the firm is
focused on, Thomas Weisel Partners' ability to implement its
strategic initiatives and achieve the expected benefits of the
acquisition of Westwind Partners, retain its professionals, as well
as other competitive, economic, political, and market conditions
and fluctuations, government and industry regulation, risks
relating to the acquisition of Westwind Partners, 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, 2008 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.
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 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, Denver, New York, Portland, Toronto, London and Zurich.
For more information, please visit www.tweisel.com.
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues:
Investment banking $ 15,568 $ 17,531 $ 40,862 $ 51,966
Brokerage 24,256 33,652 81,455 104,646
Asset management 3,932 (2,329) 13,102 (115)
Interest income 198 1,828 743 6,701
---------- ---------- ---------- ----------
Total revenues 43,954 50,682 136,162 163,198
Interest expense (400) (1,636) (1,223) (5,214)
---------- ---------- ---------- ----------
Net revenues 43,554 49,046 134,939 157,984
---------- ---------- ---------- ----------
Expenses excluding
interest:
Compensation and benefits 27,312 36,869 88,051 119,046
Brokerage execution,
clearance and account
administration 6,123 7,461 19,027 20,333
Communications and data
processing 4,171 5,502 13,226 17,101
Depreciation and
amortization of property
and equipment 1,835 1,901 6,364 5,721
Amortization of other
intangible assets 2,664 3,833 8,530 11,564
Goodwill impairment - 92,597 - 92,597
Marketing and promotion 2,083 3,329 5,387 11,151
Occupancy and equipment 7,206 7,588 15,874 18,249
Other expenses 6,215 9,445 26,464 25,039
---------- ---------- ---------- ----------
Total expenses
excluding interest 57,609 168,525 182,923 320,801
---------- ---------- ---------- ----------
Loss before taxes (14,055) (119,479) (47,984) (162,817)
Provision for taxes (tax
benefit) 336 (10,300) 470 (25,706)
Net loss $ (14,391) $ (109,179) $ (48,454) $ (137,111)
========== ========== ========== ==========
Net loss per share:
Basic net loss per share $ (0.44) $ (3.41) $ (1.49) $ (4.22)
Diluted net loss per
share $ (0.44) $ (3.41) $ (1.49) $ (4.22)
Weighted average shares
used in computation of per
share data:
Basic weighted average
shares outstanding 32,703 31,992 32,464 32,498
Diluted weighted average
shares outstanding 32,703 31,992 32,464 32,498
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