Piper Jaffray Companies Announces 2013 Second Quarter Results
MINNEAPOLIS--(BUSINESS WIRE)--Jul. 17, 2013--
For the second quarter of 2013, net revenues from continuing operations were
For the quarter ended
“We experienced extremely challenging conditions in the fixed income markets this quarter which adversely impacted our Fixed Income Brokerage business and our results for the quarter. Outside of that business, most of our businesses performed well this quarter led by Asset Management and capital raising in Public Finance and Equities” said
Second Quarter Results from Continuing Operations
Consolidated Expenses
For the second quarter of 2013, compensation and benefits expenses were
For the second quarter of 2013, compensation and benefits expenses were 65.1% of net revenues, compared to 60.7% and 60.4% for the second quarter of 2012 and the first quarter of 2013, respectively. The higher compensation ratio was driven by a change in our business mix, primarily related to trading losses and the impact of fixed components of compensation costs on a reduced revenue base.
Non-compensation expenses were
Business Segment Results
The firm has two reportable business segments: Capital Markets and Asset Management. Consolidated net revenues and expenses are fully allocated to these two segments. The operating results of our
Capital Markets
For the quarter, Capital Markets generated a pre-tax operating loss of
Net revenues were
- Equity financing revenues of
$21.8 million increased 66% and 52% compared to the second quarter of 2012 and the first quarter of 2013, respectively. Revenues were up compared to both periods due to more completed transactions and higher revenue per transaction. - Fixed income financing revenues of
$22.1 million were essentially flat compared to the year-ago period and increased 30% compared to first quarter of 2013. Revenues were favorable compared to the first quarter of 2013 due to more completed transactions. - Advisory services revenues were
$9.4 million , down 36% compared to the second quarter of 2012 due to fewer completed transactions. Advisory service revenues decreased 2% compared to first quarter of 2013. - Equity institutional brokerage revenues of
$21.4 million were up 28% compared to the second quarter of 2012 due to an increase in client trading volumes. Revenues increased 3% compared with the first quarter of 2013. - Fixed income institutional brokerage revenues were
$5.0 million , down 76% and 82% compared to the second quarter of 2012 and the first quarter of 2013, respectively. Revenues were down compared to both periods due to trading losses on inventory positions in the second quarter of 2013. Strategic trading results while lower from previous quarters had positive net revenues. The fixed income market experienced a rapid increase in interest rates, a widening of credit spreads, and a volatile trading environment. These market dynamics negatively impacted our inventory values which were not fully mitigated by our hedging strategies. - Operating expenses for the second quarter were
$83.9 million , down 2% compared to the prior year quarter. Compared to the first quarter of 2013, operating expenses increased 7% due to higher non-compensation expenses. Non-compensation expenses increased compared to the sequential quarter due to the receipt of insurance proceeds for the reimbursement of prior legal settlements in the first quarter of 2013. - Segment pre-tax operating margin was a negative 2.6% compared to 2.0% in the year-ago period and 14.0% in the first quarter of 2013. Pre-tax operating margin in the current quarter was lower compared to both periods due to lower net revenues and the increase in the compensation ratio driven by the change in the revenue mix, primarily related to trading losses.
Asset Management
For the quarter ended
Net revenues were
- Operating expenses for the current quarter were
$12.5 million , up 7% compared to the year-ago period and down 3% compared with the first quarter of 2013. Segment pre-tax operating margin was 30.4%, compared to 25.0% in the year-ago period and 29.6% in the first quarter of 2013. Segment pre-tax margin improved relative to the year ago period due to higher revenues. - Assets under management were
$10.2 billion in the second quarter of 2013, compared to$8.5 billion in the year-ago period and$10.2 billion the first quarter of 2013.
Other Matters
In the second quarter of 2013, the firm repurchased
Second Quarter Results from Discontinued Operations
Discontinued operations includes the operating results of our
For the quarter ended
Additional Shareholder Information*
| For the Quarter Ended: | ||||||||||||
| June 30, 2013 | Mar. 31, 2013 | June 30, 2012 | ||||||||||
| Number of employees | 939 | 911 | 892 | |||||||||
| Equity financings | ||||||||||||
| # of transactions | 22 | 17 | 15 | |||||||||
| Capital raised | $5.0 billion | $6.2 billion | $1.6 billion** | |||||||||
| Tax-exempt issuance | ||||||||||||
| # of transactions | 185 | 152 | 164 | |||||||||
| Par value | $3.5 billion | $2.5 billion | $2.6 billion | |||||||||
| Mergers & acquisitions | ||||||||||||
| # of transactions | 4 | 3 | 7 | |||||||||
| Aggregate deal value | $0.2 billion | $0.5 billion | $2.1 billion | |||||||||
| Asset Management | ||||||||||||
| AUM | $10.2 billion | $10.2 billion | $8.5 billion | |||||||||
| Common shareholders’ equity | $729.9 million | $752.4 million | $703.4 million | |||||||||
| Annualized qtrly. return on avg. common shareholders’ equity *** | 1.3% | 5.5% |
3.8% | |||||||||
| Book value per share: | $47.83 | $47.02 | $46.27 | |||||||||
| Tangible book value per share(1): |
$32.44 |
$32.10 |
$29.84 | |||||||||
* Number of employees, transaction data, and AUM reflect continuing operations; other numbers reflect continuing and discontinued results.
** Due to size, Facebook IPO capital has been excluded
*** Annualized return on average common shareholders’ equity is computed by dividing annualized net income by average monthly common shareholders’ equity.
Conference Call
About
Cautionary Note Regarding Forward-Looking Statements
This press release and the conference call to discuss the contents of this press release contain forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are subject to significant risks and uncertainties that are difficult to predict. These forward-looking statements cover, among other things, statements made about general economic and market conditions (including the interest rate environment), financial results for fixed income institutional brokerage (including inventory valuations, strategic trading results, and hedging activities), the environment and prospects for capital markets and corporate advisory transactions, the expected benefits of our acquisitions of
© 2013
| Piper Jaffray Companies | ||||||||||||||||||||||||||||||||
| Preliminary Unaudited Results of Operations | ||||||||||||||||||||||||||||||||
| Three Months Ended | Percent Inc/(Dec) | Six Months Ended | ||||||||||||||||||||||||||||||
|
(Amounts in thousands, except per share data) |
June 30, | Mar. 31, | June 30, | 2Q '13 | 2Q '13 | June 30, | June 30, | Percent | ||||||||||||||||||||||||
| 2013 |
2013 |
2012 | vs. 1Q '13 | vs. 2Q '12 | 2013 | 2012 | Inc/(Dec) | |||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| Investment banking | $ | 52,846 | $ | 40,362 | $ | 49,368 | 30.9 | % | 7.0 | % | $ | 93,208 | $ | 97,453 | (4.4 | ) | % | |||||||||||||||
| Institutional brokerage | 20,560 | 43,260 | 31,207 | (52.5 | ) | (34.1 | ) | 63,820 | 75,287 | (15.2 | ) | |||||||||||||||||||||
| Asset management | 18,031 | 18,211 | 16,030 | (1.0 | ) | 12.5 | 36,242 | 32,563 | 11.3 | |||||||||||||||||||||||
| Interest | 14,360 | 13,363 | 12,139 | 7.5 | 18.3 | 27,723 | 23,285 | 19.1 | ||||||||||||||||||||||||
| Other income | 3,310 | 2,953 | 979 | 12.1 | 238.1 | 6,263 | 1,007 | 521.9 | ||||||||||||||||||||||||
| Total revenues | 109,107 | 118,149 | 109,723 | (7.7 | ) | (0.6 | ) | 227,256 | 229,595 | (1.0 | ) | |||||||||||||||||||||
| Interest expense | 9,335 | 8,616 | 6,625 | 8.3 | 40.9 | 17,951 | 13,059 | 37.5 | ||||||||||||||||||||||||
| Net revenues | 99,772 | 109,533 | 103,098 | (8.9 | ) | (3.2 | ) | 209,305 | 216,536 | (3.3 | ) | |||||||||||||||||||||
| Non-interest expenses: | ||||||||||||||||||||||||||||||||
| Compensation and benefits | 65,000 | 66,105 | 62,601 | (1.7 | ) | 3.8 | 131,105 | 131,397 | (0.2 | ) | ||||||||||||||||||||||
| Occupancy and equipment | 6,543 | 5,817 | 6,752 | 12.5 | (3.1 | ) | 12,360 | 13,614 | (9.2 | ) | ||||||||||||||||||||||
| Communications | 5,030 | 5,232 | 4,939 | (3.9 | ) | 1.8 | 10,262 | 10,836 | (5.3 | ) | ||||||||||||||||||||||
| Floor brokerage and clearance | 2,247 | 2,150 | 2,002 | 4.5 | 12.2 | 4,397 | 4,109 | 7.0 | ||||||||||||||||||||||||
| Marketing and business development | 5,957 | 4,980 | 5,845 | 19.6 | 1.9 | 10,937 | 10,723 | 2.0 | ||||||||||||||||||||||||
| Outside services | 8,449 | 7,214 | 7,225 | 17.1 | 16.9 | 15,663 | 13,063 | 19.9 | ||||||||||||||||||||||||
| Restructuring-related expense | - | - | 3,642 | N/M | N/M | - | 3,642 | N/M | ||||||||||||||||||||||||
| Intangible asset amortization expense | 1,661 | 1,661 | 1,736 | - | (4.3 | ) | 3,322 | 3,472 | (4.3 | ) | ||||||||||||||||||||||
| Other operating expenses | 1,552 | (1,794 | ) | 2,701 | N/M | (42.5 | ) | (242 | ) | 4,803 | N/M | |||||||||||||||||||||
| Total non-interest expenses | 96,439 | 91,365 | 97,443 | 5.6 | (1.0 | ) | 187,804 | 195,659 | (4.0 | ) | ||||||||||||||||||||||
|
Income from continuing operations before income tax expense/(benefit) |
3,333 | 18,168 | 5,655 | (81.7 | ) | (41.1 | ) | 21,501 | 20,877 | 3.0 | ||||||||||||||||||||||
| Income tax expense/(benefit) | 1,644 | 5,600 | (5,699 | ) | (70.6 | ) | N/M | 7,244 | 1,854 | 290.7 | ||||||||||||||||||||||
| Income from continuing operations | 1,689 | 12,568 | 11,354 | (86.6 | ) | (85.1 | ) | 14,257 | 19,023 | (25.1 | ) | |||||||||||||||||||||
| Discontinued operations: | ||||||||||||||||||||||||||||||||
| Loss from discontinued operations, net of tax | (1,871 | ) | (521 | ) | (3,934 | ) | 259.1 | (52.4 | ) | (2,392 | ) | (7,237 | ) | (66.9 | ) | |||||||||||||||||
| Net income/(loss) | (182 | ) | 12,047 | 7,420 | N/M | N/M | 11,865 | 11,786 | 0.7 | |||||||||||||||||||||||
| Net income/(loss) applicable to noncontrolling interests | (2,670 | ) | 1,901 | 569 | N/M | N/M | (769 | ) | 2,006 | N/M | ||||||||||||||||||||||
| Net income applicable to Piper Jaffray Companies (1) | $ | 2,488 | $ | 10,146 | $ | 6,851 | (75.5 | ) | % | (63.7 | ) | % | $ | 12,634 | $ | 9,780 | 29.2 | % | ||||||||||||||
|
Net income applicable to Piper Jaffray Companies' common shareholders (1) |
$ | 2,266 | $ | 8,966 | $ | 5,890 | (74.7 | ) | % | (61.5 | ) | % | $ | 11,333 | $ | 8,344 | 35.8 | % | ||||||||||||||
| Amounts applicable to Piper Jaffray Companies | ||||||||||||||||||||||||||||||||
| Net income from continuing operations | $ | 4,359 | $ | 10,667 | $ | 10,785 | (59.1 | ) | % | (59.6 | ) | % | $ | 15,026 | $ | 17,017 | (11.7 | ) | % | |||||||||||||
| Net loss from discontinued operations | (1,871 | ) | (521 | ) | (3,934 | ) | 259.1 | (52.4 | ) | (2,392 | ) | (7,237 | ) | (66.9 | ) | |||||||||||||||||
| Net income applicable to Piper Jaffray Companies | $ | 2,488 | $ | 10,146 | $ | 6,851 | (75.5 | ) | % | (63.7 | ) | % | $ | 12,634 | $ | 9,780 | 29.2 | % | ||||||||||||||
| Earnings/(loss) per basic common share | ||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | 0.25 | $ | 0.60 | $ | 0.58 | (58.3 | ) | % | (56.9 | ) | % | $ | 0.86 | $ | 0.91 | (5.5 | ) | % | |||||||||||||
| Loss from discontinued operations | (0.11 | ) | (0.03 | ) | (0.21 | ) | 266.7 | (47.6 | ) | (0.14 | ) | (0.39 | ) | (64.1 | ) | |||||||||||||||||
| Earnings per basic common share | $ | 0.15 | $ | 0.58 | $ | 0.37 | (74.1 | ) | % | (59.5 | ) | % | $ | 0.73 | $ | 0.52 | 40.4 | % | ||||||||||||||
| Earnings/(loss) per diluted common share | ||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | 0.25 | $ | 0.60 | $ | 0.58 | (58.3 | ) | % | (56.9 | ) | % | $ | 0.86 | $ | 0.91 | (5.5 | ) | % | |||||||||||||
| Loss from discontinued operations | (0.11 | ) | (0.03 | ) | (0.21 | ) | 266.7 | (47.6 | ) | (0.14 | ) | (0.39 | ) | (64.1 | ) | |||||||||||||||||
| Earnings per diluted common share | $ | 0.15 | $ | 0.57 | $ | 0.37 | (73.7 | ) | % | (59.5 | ) | % | $ | 0.73 | $ | 0.52 | 40.4 | % | ||||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||||||||||||||||||
| Basic | 15,621 | 15,582 | 15,932 | 0.3 | % | (2.0 | ) | % | 15,602 | 16,002 | (2.5 | ) | % | |||||||||||||||||||
| Diluted | 15,626 | 15,610 | 15,932 | 0.1 | % | (1.9 | ) | % | 15,619 | 16,002 | (2.4 | ) | % | |||||||||||||||||||
| (1) Net income applicable to Piper Jaffray Companies is the total net income earned by the Company. Piper Jaffray Companies calculates earnings per common share using the two-class method, which requires the allocation of consolidated net income between common shareholders and participating security holders, which in the case of Piper Jaffray Companies, represents unvested restricted stock with dividend rights. | ||||||||||||||||||||||||||||||||
| N/M - Not meaningful | ||||||||||||||||||||||||||||||||
| Piper Jaffray Companies | ||||||||||||||||||||||||||||||||
| Preliminary Unaudited Segment Data from Continuing Operations | ||||||||||||||||||||||||||||||||
| Three Months Ended | Percent Inc/(Dec) | Six Months Ended | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | June 30, | Mar. 31, | June 30, | 2Q '13 | 2Q '13 | June 30, | June 30, | Percent | ||||||||||||||||||||||||
| 2013 | 2013 | 2012 | vs. 1Q '13 | vs. 2Q '12 | 2013 | 2012 | Inc/(Dec) | |||||||||||||||||||||||||
| Capital Markets | ||||||||||||||||||||||||||||||||
| Investment banking | ||||||||||||||||||||||||||||||||
| Financing | ||||||||||||||||||||||||||||||||
| Equities | $ | 21,772 | $ | 14,303 | $ | 13,132 | 52.2 | % | 65.8 | % | $ | 36,075 | $ | 36,360 | (0.8 | ) | % | |||||||||||||||
| Debt | 22,131 | 17,032 | 22,256 | 29.9 | (0.6 | ) | 39,163 | 37,025 | 5.8 | |||||||||||||||||||||||
| Advisory services | 9,409 | 9,556 | 14,631 | (1.5 | ) | (35.7 | ) | 18,965 | 25,353 | (25.2 | ) | |||||||||||||||||||||
| Total investment banking | 53,312 | 40,891 | 50,019 | 30.4 | 6.6 | 94,203 | 98,738 | (4.6 | ) | |||||||||||||||||||||||
| Institutional sales and trading | ||||||||||||||||||||||||||||||||
| Equities | 21,392 | 20,735 | 16,682 | 3.2 | 28.2 | 42,127 | 37,662 | 11.9 | ||||||||||||||||||||||||
| Fixed income | 4,959 | 28,043 | 20,620 | (82.3 | ) | (76.0 | ) | 33,002 | 49,083 | (32.8 | ) | |||||||||||||||||||||
| Total institutional sales and trading | 26,351 | 48,778 | 37,302 | (46.0 | ) | (29.4 | ) | 75,129 | 86,745 | (13.4 | ) | |||||||||||||||||||||
| Other income/(loss) | 2,146 | 1,540 | 265 | 39.4 | 709.8 | 3,686 | (1,102 | ) | N/M | |||||||||||||||||||||||
| Net revenues | 81,809 | 91,209 | 87,586 | (10.3 | ) | (6.6 | ) | 173,018 | 184,381 | (6.2 | ) | |||||||||||||||||||||
| Operating expenses | 83,937 | 78,458 | 85,803 | 7.0 | % | (2.2 | ) | % | 162,395 | 171,858 | (5.5 | ) | ||||||||||||||||||||
| Segment pre-tax operating income/(loss) | $ | (2,128 | ) | $ | 12,751 | $ | 1,783 | N/M | N/M | $ | 10,623 | $ | 12,523 | (15.2 | ) | % | ||||||||||||||||
| Segment pre-tax operating margin | (2.6 | )% | 14.0 | % | 2.0 | % | 6.1 | % | 6.8 | % | ||||||||||||||||||||||
| Asset Management | ||||||||||||||||||||||||||||||||
| Management and performance fees | ||||||||||||||||||||||||||||||||
| Management fees | $ | 17,567 | $ | 17,098 | $ | 15,564 | 2.7 | % | 12.9 | % | $ | 34,665 | $ | 31,413 | 10.4 | % | ||||||||||||||||
| Performance fees | 305 | 351 | 218 | (13.1 | ) | 39.9 | 656 | 642 | 2.2 | |||||||||||||||||||||||
| Total management and performance fees | 17,872 | 17,449 | 15,782 | 2.4 | 13.2 | 35,321 | 32,055 | 10.2 | ||||||||||||||||||||||||
| Other income/(loss) | 91 | 875 | (270 | ) | (89.6 | ) | N/M | 966 | 100 | 866.0 | ||||||||||||||||||||||
| Net revenues | 17,963 | 18,324 | 15,512 | (2.0 | ) | 15.8 | 36,287 | 32,155 | 12.9 | |||||||||||||||||||||||
| Operating expenses | 12,502 | 12,907 | 11,640 | (3.1 | ) | 7.4 | 25,409 | 23,801 | 6.8 | |||||||||||||||||||||||
| Segment pre-tax operating income | $ | 5,461 | $ | 5,417 | $ | 3,872 | 0.8 | % | 41.0 | % | $ | 10,878 | $ | 8,354 | 30.2 | % | ||||||||||||||||
| Segment pre-tax operating margin | 30.4 | % | 29.6 | % | 25.0 | % | 30.0 | % | 26.0 | % | ||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||
| Net revenues | $ | 99,772 | $ | 109,533 | $ | 103,098 | (8.9 | ) | % | (3.2 | ) | % | $ | 209,305 | $ | 216,536 | (3.3 | ) | % | |||||||||||||
| Operating expenses | 96,439 | 91,365 | 97,443 | 5.6 | (1.0 | ) | 187,804 | 195,659 | (4.0 | ) | ||||||||||||||||||||||
| Pre-tax operating income | $ | 3,333 | $ | 18,168 | $ | 5,655 | (81.7 | ) | % | (41.1 | ) | % | $ | 21,501 | $ | 20,877 | 3.0 | % | ||||||||||||||
| Pre-tax operating margin | 3.3 | % | 16.6 | % | 5.5 | % | 10.3 | % | 9.6 | % | ||||||||||||||||||||||
| N/M - Not meaningful | ||||||||||||||||||||||||||||||||
| Segment pre-tax operating income/(loss) and segment pre-tax operating margin exclude the results of discontinued operations. | ||||||||||||||||||||||||||||||||
| FOOTNOTES | ||||||||||||||||||||||||
| (1) | Tangible common shareholders' equity | |||||||||||||||||||||||
| Tangible shareholders’ equity equals total shareholders’ equity less all goodwill and identifiable intangible assets. Tangible book value per share is computed by dividing tangible shareholders’ equity by common shares outstanding. Management believes that tangible book value per share is a more meaningful measure of our book value per share. Shareholders’ equity is the most directly comparable GAAP financial measure to tangible shareholders’ equity. The following is a reconciliation of shareholders’ equity to tangible shareholders’ equity: | ||||||||||||||||||||||||
| As of | As of | As of | ||||||||||||||||||||||
| (Amounts in thousands) | June 30, 2013 | Mar. 31, 2013 | June 30, 2012 | |||||||||||||||||||||
| Common shareholders' equity | $ | 729,880 | $ | 752,434 | $ | 703,385 | ||||||||||||||||||
| Deduct: goodwill and identifiable intangible assets | 234,780 | 238,819 | 249,822 | |||||||||||||||||||||
| Tangible common shareholders' equity | $ | 495,100 | $ | 513,615 | $ | 453,563 | ||||||||||||||||||
Source:
Piper Jaffray Companies
Tom Smith, 612-303-6336
Investor Relations