JMP Group LLC (NYSE: JMP), an investment banking and alternative
asset management firm, reported financial results today for the
quarter ended March 31, 2019.
A summary of JMP Group’s operating results for the quarter ended
March 31, 2019, and for comparable prior periods, is set forth
below.
Quarter Ended (in thousands, except per share amounts) Mar.
31, 2019 Dec. 31, 2018 Mar. 31, 2018 Total net
revenues $27,167 $31,698 $27,211 Net income/(loss)
attributable to JMP Group $5,069 ($203 ) ($283 ) Net income/(loss)
attributable to JMP Group per share $0.24 ($0.01 ) ($0.01 )
Operating net income $1,669 $2,525 ($1,631 ) Operating net income
per share $0.08 $0.12 ($0.07 ) Book value per share $4.08
$3.93 $4.34 Adjusted book value per share $4.77 $4.98 $5.23
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 had a better-than-expected first quarter, thanks to very
strong investment results, with operating net income of $0.08 per
share,” said Chairman and Chief Executive Officer Joe Jolson. “JMP
Securities, normally a meaningful contributor to earnings, faced a
stiff headwind in the form of a partial government shutdown and
lost $0.05 per share, with the SEC’s closure drastically curtailing
capital markets activity for much of the period. Asset management
fee income and investment income combined to contribute $0.12 per
share, compared to a loss of $0.07 per share for the first quarter
of 2018. In an important strategic shift, we executed a March sale
of a controlling interest in JMP Credit Advisors to Medalist
Partners, raising additional growth capital for our corporate
credit business and adding approximately $0.08 to operating
EPS.
“With the closing of the Medalist transaction, we completed an
aggressive corporate simplification process that began in the
fourth quarter of last year with the goal of making our business
simpler for us to manage and easier for investors to understand.
Going forward, we do not expect that our CLO investments will be
consolidated in our financial statements, which will mean a
decrease in our total assets from $1.4 billion to approximately
$220 million and a decrease in our long-term debt from
$1.2 billion to approximately $84 million. Additionally, the
sale of our largest hedge fund, Harvest Small Cap Partners, at
year-end substantially reduces the volatility of not only our
revenues—specifically quarterly incentive fee income—but also our
closely-watched compensation ratio. Finally, the IRS recently
approved our previously disclosed election to be taxed as a C
corporation for 2019 and beyond, increasing our corporate tax rate
but removing substantial corporate costs and eliminating Schedule
K-1s for investors.”
Segment Results of Operations
A summary of JMP Group’s operating net income per share by
segment for the quarter ended March 31, 2019, and for comparable
prior periods, is set forth below.
Quarter Ended
($ as shown)
Mar. 31, 2019 Dec. 31, 2018 Mar. 31, 2018
Broker-dealer ($0.05 ) $0.08 $0.08 Asset management
fee income (0.03 ) 0.01 (0.03 ) Investment income 0.23
(1)
0.14 (0.03 ) Total asset management 0.20 0.14 (0.07 )
Corporate costs (0.07 ) (0.11 ) (0.09 ) Operating EPS
(diluted) $0.08 $0.12 ($0.07 )
(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 were $11.9 million, a decrease of
42.5% from $20.7 million for the quarter ended March 31, 2018.
A summary of the company’s investment banking revenues and
transaction counts for the quarter ended March 31, 2019, and for
comparable prior periods, is set forth below.
Quarter Ended Mar. 31, 2019 Dec. 31, 2018 Mar.
31, 2018 ($ in thousands) Count Revenues Count
Revenues Count Revenues Equity and debt origination 17
$6,789 (1) 17 $7,383 (1) 21 $11,862 Strategic advisory and private
placements 6 5,090 5 10,405 7 8,800 Total 23 $11,879 (1) 22 $17,788
(1) 28 $20,662
Brokerage
Net brokerage revenues were $4.5 million, a decrease of 2.8%
from $4.7 million for the quarter ended March 31, 2018.
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 $11.3 million, a decrease of
31.5% from $16.5 million for the quarter ended March 31,
2018.
Asset Management
Asset management fees were $1.7 million, a decrease of 73.5%
from $6.4 million for the quarter ended March 31, 2018. The
decrease is primarily due to the sale of the Harvest Small Cap
Partners hedge fund strategy at year-end 2018. For the quarter
ended March 31, 2018, the fund strategy contributed
$4.8 million to asset management fees. While the sale results
in a considerable loss of asset management revenue, it was
structured to have a neutral to slightly positive effect on JMP
Group’s operating net income going forward, as the company will
share in the fund strategy’s revenues in 2019 and beyond.
A summary of the company’s client assets under management for
the quarter ended March 31, 2019, and for comparable prior periods,
is set forth below.
(in millions) Mar. 31, 2019 Dec. 31, 2018 Mar.
31, 2018
Harvest Capital Strategies, JMP Asset
Management and HCAP Advisors
$517 $921 $883 JMP Credit Advisors (1) - 1,245 965 Client assets
under management 517 2,166 1,848 Assets under management by
sponsored funds (2) 4,928 3,449 3,420
Client assets under management, including
sponsored funds
$5,445 $5,615 $5,268
(1)
As announced on March 20, 2019, JMP Group
sold a 50.1% equity interest in JMP Credit Advisors LLC to Medalist
Partners LP and a 4.9% interest to employees of JMP Credit
Advisors. Consequently, assets managed by Medalist Partners
Corporate Finance, the former JMP Credit Advisors, are included
among sponsored funds as of March 31, 2019.
(2)
Funds managed by third-party asset
managers in which JMP Group owns an economic interest.
Principal Transactions
Principal transactions generated a net gain of $5.3 million,
compared to a net loss of $3.6 million for the quarter ended March
31, 2018. The difference is primarily due to a gain of $3.4 million
on the previously announced sale of a majority interest in JMP
Credit Advisors for the quarter ended March 31, 2019, in addition
to a gain of $0.2 million on JMP Group’s investment in
Workspace Property Trust, compared to a loss of $2.0 million on the
investment for the quarter ended March 31, 2018, due to costs
associated with a failed initial public offering.
Net Interest Income
Net interest income was $3.5 million, an increase of 17.0% from
$3.0 million for the quarter ended March 31, 2018.
Provision for Loan Losses
For the quarter ended March 31, 2019, there was no loan loss
provision, compared to a net loan loss provision of $1.5 million
for the quarter ended March 31, 2018, as a result of
better-than-expected credit performance and the deconsolidation of
the collateralized loan obligations managed by JMP Credit Advisors
from JMP Group’s financial statements.
Expenses
Compensation and Benefits
Compensation and benefits expense was $17.2 million, compared to
$24.3 million for the quarter ended March 31, 2018. As a percentage
of net revenues, compensation and benefits expense was 63.4%,
compared to 89.2% for the quarter ended March 31, 2018. With regard
to annually awarded compensation, a non-GAAP measure that adjusts
compensation expense related to share-based awards and deferred
compensation, compensation and benefits expense was 60.3% of net
revenues, compared to 88.6% for the quarter ended March 31,
2018.
For more information about compensation ratios, see the section
below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was $8.9 million, compared to $10.3
million for the quarter ended March 31, 2018.
Share Repurchase Activity
During the quarter ended March 31, 2019, JMP Group repurchased
approximately 157,000 shares of its common stock at an aggregate
cost of $0.7 million, or $4.23 per share.
Personnel
At March 31, 2019, the company had 197 full-time employees,
compared to 228 at December 31, 2018, and 211 at March 31, 2018.
The decrease in 2019 is primarily due to the sale of the Harvest
Small Cap Partners fund strategy at year-end 2018 and the sale of a
majority interest in JMP Credit Advisors in March 2019, as the
related employees departed JMP Group upon the closing of both
transactions.
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.
Compensation Ratio
A compensation ratio expresses compensation expense as a
percentage of net revenues in a given period. As presented by JMP
Group, an adjusted compensation ratio is a non-GAAP financial
measure that utilizes adjusted compensation and benefits expense as
the numerator. This adjusted ratio excludes certain
compensation-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 and deferred compensation (so that
the compensation expenses used in the numerator correspond to the
adjusted net revenues generated in the periods presented).
A statement of JMP Group’s compensation ratio for the quarter
ended March 31, 2019, and for comparable prior periods, is set
forth below.
Quarter Ended ($ in thousands) Mar. 31, 2019 Dec. 31,
2018 Mar. 31, 2018 Total net revenues $27,167
$31,698 $27,211 Compensation and benefits
$17,222 $21,289 $24,261
Subtract/(add back):
Share-based awards and deferred compensation 844 (122 ) 144
Adjusted compensation and benefits $16,378 $21,411
$24,117 Ratio of compensation expense to net
revenues
63.4%
67.2%
89.2%
Ratio of adjusted compensation expense to net revenues
60.3%
67.5%
88.6%
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 the
impact of the early retirement of debt issued by JMP Group and a
CLO, (iv) excludes transaction costs related to a CLO, (v) excludes
amortization expense related to a CLO, (vi) reverses unrealized
gains or losses related to real estate investment properties, (vii)
reverses net unrealized gains and losses on strategic equity
investments and warrants, and (viii) 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 loss provision
recorded with regard to loans held by collateralized loan
obligations and loans held for investment, which is required by
GAAP, prior to the quarter ended March 31, 2019;
- one-time expenses associated with the
redemption of debt underlying JMP Credit Advisors CLO III (in
the first quarter of 2018), the redemption of senior notes due 2021
(in the fourth quarter of 2017), the partial redemption of senior
notes due 2023 (in the third quarter of 2018), and the resulting
acceleration of the amortization of remaining capitalized issuance
costs for each;
- one-time 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
- as of the quarter ended March 31, 2019,
a combined federal, state and local income tax rate of 26% at the
consolidated taxable parent company, JMP Group, while, prior to the
quarter ended March 31, 2019, a combined federal, state and
local income tax rate of 26% at the taxable direct subsidiary of
JMP Group and a tax rate of 0% at the company’s other direct
subsidiary, which was a “pass-through entity” for tax
purposes.
A reconciliation of JMP Group’s net income to its operating net
income for the quarter ended March 31, 2019, and for comparable
prior periods is set forth below.
Quarter Ended (in thousands, except per share amounts) Mar.
31, 2019 Dec. 31, 2018 Mar. 31, 2018 Net
income/(loss) attributable to JMP Group $5,069 ($203 ) ($283 )
Add back/(subtract): Income tax expense/(benefit) (4,102 )
1,313 (5,568 ) Income/(loss) before taxes 967 1,110 (5,851 )
Add back/(subtract): Share-based awards and deferred
compensation 844 (122 ) 144
General loan loss provision/(reversal) –
collateralized loan obligations
- 530 329 Early retirement of debt - - 1,318 Restructuring costs –
CLO portfolios - - 64 Amortization of intangible asset – CLO III
277 69 69
Unrealized (gain)/loss – real
estate-related depreciation and amortization
557 369 1,628
Unrealized mark-to-market (gain)/loss –
strategic equity investments and warrants
(390 ) 837 638 Operating income/(loss) before taxes
2,255 2,793 (1,661 ) Income tax expense/(benefit) 586
268 (30 ) Operating net income/(loss) $1,669 $2,525
($1,631 ) Operating net income/(loss) per share:
Basic $0.08 $0.12 ($0.08 ) Diluted (1) $0.08 $0.12 ($0.07 )
Weighted average shares outstanding: Basic 21,288 21,326 21,666
Diluted (1) 21,429 21,614 21,811
(1)
On a GAAP basis, the weighted average
number of diluted shares outstanding for the quarters ended
December 31, 2018, and March 31, 2018, was 21,326,473 and
21,665,652, respectively, equivalent to the weighted average number
of basic shares outstanding, due to the company’s net loss for
those 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 March 31, 2019, JMP Group’s book value per share was $4.08.
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. Starting with the quarter ended March 31, 2019, the
add-back includes a tax provision related to the expense reversed
in that period, due to the company’s election to be taxed as a C
corporation as of January 1, 2019. Likewise, adding back the
accumulated general loan loss provision related to collateralized
loan obligations reflects the reversal of that provision in the
calculation of adjusted net revenues and operating net income, an
adjustment not made subsequent to the sale of a majority interest
in JMP Credit Advisors in March 2019. As a result, adjusted book
value per share was $4.77 for the quarter ended March 31, 2019, as
set forth below.
(in thousands, except per share amounts) Mar. 31, 2019
Dec. 31, 2018 Mar. 31, 2018 Shareholders'
equity $86,633 $83,707 $93,418
Accumulated unrealized loss – real
estate-related depreciation and amortization
$14,596 $14,184 $13,578
Accumulated general loan loss provision –
collateralized loan obligations
- 8,337 5,787 Adjusted shareholders' equity
$101,229 $106,227 $112,783 Book value
per share $4.08 $3.93 $4.34 Adjusted book
value per share $4.77 $4.98 $5.23 Basic
shares outstanding 21,210 21,320 21,547 Quarterly operating
ROE (1)
7.8%
11.8%
(6.9%
)
LTM operating ROE (1)
10.6%
6.7%
4.7%
Quarterly adjusted operating ROE (1)
6.4%
9.4%
(5.8%
)
LTM adjusted operating ROE (1)
8.7%
5.5%
4.1%
(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 results
detailed herein at 10:00 a.m. ET on Thursday, May 2, 2019. To
participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
7289566.
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.
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, 2018, as filed with the U.S. Securities and Exchange Commission
on March 28, 2019, 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, 2017, 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.
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 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) Mar. 31, 2019 Dec. 31, 2018
Assets Cash and cash equivalents $41,909 $70,927 Restricted
cash and deposits 1,221 61,881 Marketable securities owned 92,190
18,874 Other investments 23,447 16,124 Loans held for investment,
net of allowance for loan losses 4,962 29,608
Loans collateralizing asset-backed
securities issued, net of allowance for loan losses
- 1,161,463 Other assets 58,036 32,365 Total assets $221,765
$1,391,242 Liabilities and Shareholders' Equity
Liabilities: Marketable securities sold, but not yet
purchased $2,696 $4,626 Accrued compensation 5,647 41,609 Bond
payable, net of issuance costs 83,600 83,497 Note payable 829 829
Asset-backed securities issued, net of issuance costs - 1,112,342
CLO warehouse facility - 22,500 Other liabilities 42,546
28,633 Total liabilities 135,318 1,294,036
Shareholders' Equity: Total JMP Group LLC shareholders' equity
86,633 83,707 Non-redeemable non-controlling interest (186 ) 13,499
Total equity 86,447 97,206 Total liabilities and
shareholders' equity $221,765 $1,391,242
JMP GROUP LLC
Consolidated Statements of
Operations
(Unaudited)
Quarter Ended (in thousands, except per share amounts) Mar.
31, 2019 Mar. 31, 2018 Revenues: Investment banking
$11,879 $20,662 Brokerage 4,535 4,664 Asset management fees 1,703
6,425 Principal transactions 5,288 (3,620 ) Gain/(loss) on sale and
payoff of loans (17 ) (182 ) Net dividend income 296 296 Other
income (35 ) 49 Non-interest revenues 23,649 28,294
Interest income 14,291 12,710 Interest expense
(10,773 ) (9,702 ) Net interest income 3,518 3,008
Gain/(loss) on repurchase or early retirement of debt -
(2,626 ) Provision for loan losses - (1,465 ) Total net
revenues 27,167 27,211 Non-interest expenses:
Compensation and benefits 17,222 24,261 Administration 1,929 2,233
Brokerage, clearing and exchange fees 701 777 Travel and business
development 1,021 954 Managed deal expenses 533 1,566
Communications and technology 1,053 1,062 Occupancy 1,423 1,117
Professional fees 1,456 1,905 Depreciation 297 264 Other 495
387 Total non-interest expense 26,130 34,526
Net income/(loss) before income tax 1,037 (7,315 ) Income
tax expense/(benefit) (4,102 ) (5,568 ) Net income/(loss) 5,139
(1,747 )
Less: Net income/(loss) attributable to
non-redeemable non-controlling interest
70 (1,464 ) Net income/(loss) attributable to JMP Group
$5,069 ($283 ) Net income/(loss) attributable to JMP
Group per share: Basic $0.24 ($0.01 ) Diluted $0.24 ($0.01 )
Weighted average common shares outstanding: Basic 21,288 21,666
Diluted 21,429 21,666
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190501005834/en/
Investor Relations ContactJMP Group LLCAndrew Palmer(415)
835-8978apalmer@jmpg.com
Media Relations ContactsDukas Linden Public Relations,
Inc.Zach Leibowitz(646) 722-6528zach@dlpr.com
Alyssa Noud(646) 722-6525alyssa@dlpr.com
JMP (NYSE:JMP)
Historical Stock Chart
From Jun 2024 to Jul 2024
JMP (NYSE:JMP)
Historical Stock Chart
From Jul 2023 to Jul 2024