Piper Jaffray Companies Announces 2013 Third Quarter Results
For the third quarter of 2013, net revenues from continuing operations
were
For the quarter ended September 30, 2013, net income, including
continuing and discontinued operations, was
“The diversification in our mix of businesses contributed to our solid
performance for the quarter. Our equity-related businesses, led by
equity capital raising and asset management, registered strong
performance and third quarter M&A revenue surpassed the revenue
generated in the first half of the year. In Fixed Income, we rebounded
from a challenging second quarter, while the results in our Public
Finance business reflected soft market conditions,” said
Third Quarter Results from Continuing Operations
Consolidated Expenses
For the third quarter of 2013, compensation and benefits expenses were
For the third quarter of 2013, compensation and benefits expenses were 61.9% of net revenues, compared to 59.4% and 65.1% for the third quarter of 2012 and the second quarter of 2013, respectively. The compensation ratio increased compared to the third quarter of 2012 due to a change in our business mix, and decreased compared to the second quarter of 2013 due to an increased 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
pre-tax operating income of
Net revenues were
-
Equity financing revenues of
$30.0 million increased 60% and 38% compared to the third quarter of 2012 and the second quarter of 2013, respectively. Revenues were up compared to both periods due to more completed transactions. -
Fixed income financing revenues of
$12.8 million were down 23% and 42% compared to the year-ago period and second quarter of 2013, respectively. Revenues were unfavorable compared to both periods due to fewer completed transactions. -
Advisory services revenues were
$20.2 million , up 24% and 115% compared to the third quarter of 2012 and the second quarter of 2013, respectively, due to more completed transactions. -
Equity institutional brokerage revenues of
$23.0 million increased 28% and 7% compared to the third quarter of 2012 and the second quarter of 2013, respectively. Revenues increased compared to both periods due to improved trading performance. -
Fixed income institutional brokerage revenues were
$20.4 million , down 56% compared to the third quarter of 2012. Results from the firm's strategic trading business, particularly in the mortgage-backed securities strategy, were lower in the current quarter compared to the robust year-ago period. Fixed income institutional brokerage rebounded significantly in the current quarter compared to revenues of$5.0 million in the second quarter of 2013 as we overcame the rate shocks we experienced late in the second quarter of 2013. -
Operating expenses for the third quarter were
$103.9 million , up 10% compared to the prior year quarter, due to higher non-compensation expenses. Operating expenses increased 24% compared to the second quarter of 2013, resulting from higher compensation expenses due to improved operating results as well as higher non-compensation expenses. The non-compensation expenses were higher primarily due to$5.0 million of restructuring and intangible amortization expenses related to our recent acquisitions of Seattle Northwest and Edgeview. - Segment pre-tax operating margin was 5.8% compared to 17.9% in the year-ago period and a negative 2.6% in the second quarter of 2013. Pre-tax operating margin in the current quarter was lower compared to the year-ago period due to lower net revenues and higher non-compensation expenses. Pre-tax operating margin improved compared to the sequential quarter due to higher net revenues, offset in part by higher non-compensation expenses.
Asset Management
For the quarter ended September 30, 2013,
asset management generated pre-tax operating income of
Net revenues were
-
Operating expenses for the current quarter were
$12.3 million , up 8% compared to the year-ago period and down slightly compared with the second quarter of 2013. Segment pre-tax operating margin was 31.6%, compared to 29.4% in the year-ago period and 30.4% in the second quarter of 2013. Segment pre-tax margin improved relative to both periods due to higher net revenues. -
Assets under management were
$10.6 billion at the end of the third quarter of 2013, compared to$9.2 billion in the year-ago period and$10.2 billion at the end of the second quarter of 2013. Increases in AUM have been driven by market appreciation.
Other Matters
In the third quarter of 2013, the firm
repurchased
Third Quarter Results from Discontinued Operations
Discontinued operations include the operating results of our
For the quarter ended September 30, 2013, the net loss from discontinued
operations was
|
Additional Shareholder Information* |
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| For the Quarter Ended: | ||||||||||||
| Sept. 30, 2013 | June 30, 2013 | Sept. 30, 2012 | ||||||||||
| Full time employees | 1002 | 918 | 903 | |||||||||
| Equity financings | ||||||||||||
| # of transactions | 28 | 22 | 14 | |||||||||
| Capital raised | $4.8 billion | $5.0 billion | $2.5 billion | |||||||||
| Negotiated tax-exempt issuances | ||||||||||||
| # of transactions | 61 | 143 | 76 | |||||||||
| Par value | $1.3 billion | $2.9 billion | $1.6 billion | |||||||||
| Mergers & acquisitions | ||||||||||||
| # of transactions | 11 | 4 | 6 | |||||||||
| Aggregate deal value | $1.0 billion | $0.2 billion | $0.7 billion | |||||||||
| Asset Management | ||||||||||||
| AUM | $10.6 billion | $10.2 billion | $9.2 billion | |||||||||
| Common shareholders’ equity | $707.4 million | $729.9 million | $724.6 million | |||||||||
| Annualized quarterly return on common shareholders’ equity** | 3.0% | 1.3% | 11.0% | |||||||||
| Book value per share: | $49.11 | $47.83 | $47.58 | |||||||||
| Tangible book value per share(1): | $31.56 | $32.44 | $31.30 | |||||||||
|
*Number of employees, transaction data, and AUM reflect continuing operations; other numbers reflect continuing and discontinued results. |
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|
**Annualized return on average common shareholders' equity is computed by dividing annualized net income by average monthly common shareholders' equity. |
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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 and outlook for equity markets), 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
(including our performance in specific sectors), our integration of
Forward-looking statements involve inherent risks and uncertainties, both known and unknown, and important factors could cause actual results to differ materially from those anticipated or discussed in the forward-looking statements. These risks, uncertainties and important factors include, but are not limited to, the following:
- market and economic conditions or developments may be unfavorable, including in specific sectors in which we operate, and these conditions or developments, such as market fluctuations or volatility, may adversely affect our business, revenue levels and profitability;
- further interest rate volatility, especially if the changes continue to be rapid or severe, could continue to negatively impact our fixed income institutional business;
- strategic trading activities comprise a meaningful portion of our fixed income institutional brokerage revenue, and results from these activities may be volatile and vary significantly, including the possibility of incurring losses, on a quarterly and annual basis;
- the volume of anticipated investment banking transactions as reflected in our deal pipelines (and the net revenues we earn from such transactions) may differ from expected results if there is a decline in macroeconomic conditions or the financial markets, or if the terms of any transactions are modified;
- the expected benefits of the Seattle-Northwest and Edgeview transactions may take longer than anticipated to achieve and may not be achieved in their entirety or at all, and will depend upon our integration of the companies proving successful; and
- our stock price may fluctuate as a result of several factors, including but not limited to, changes in our revenues and operating results.
A further listing and description of these and other risks,
uncertainties and important factors can be found in the sections titled
“Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2012 and “Management's Discussion and
Analysis of Financial Condition and Results of Operations” in Part II,
Item 7 of our Annual Report on Form 10-K for the year ended December 31,
2012, and updated in our subsequent reports filed with the
Forward-looking statements speak only as of the date they are made, and readers are cautioned not to place undue reliance on them. We undertake no obligation to update them in light of new information or future events.
© 2013
| Piper Jaffray Companies | ||||||||||||||||||||||||||||||||
| Preliminary Unaudited Results of Operations | ||||||||||||||||||||||||||||||||
| Three Months Ended | Percent Inc/(Dec) | Nine Months Ended | ||||||||||||||||||||||||||||||
| (Amounts in thousands, except per share data) | Sept. 30, | June 30, | Sept. 30, | 3Q '13 | 3Q '13 | Sept. 30, | Sept. 30, | Percent | ||||||||||||||||||||||||
| 2013 | 2013 | 2012 | vs. 2Q '13 | vs. 3Q '12 | 2013 | 2012 | Inc/(Dec) | |||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| Investment banking | $ | 62,373 | $ | 52,846 | $ | 51,083 | 18.0 | % | 22.1 | % | $ | 155,581 | $ | 148,536 | 4.7 | % | ||||||||||||||||
| Institutional brokerage | 37,218 | 20,560 | 58,719 | 81.0 | (36.6 | ) | 101,038 | 134,006 | (24.6 | ) | ||||||||||||||||||||||
| Asset management | 18,309 | 18,031 | 16,136 | 1.5 | 13.5 | 54,551 | 48,699 | 12.0 | ||||||||||||||||||||||||
| Interest | 16,259 | 14,360 | 12,457 | 13.2 | 30.5 | 43,982 | 35,742 | 23.1 | ||||||||||||||||||||||||
| Other income | 4,679 | 3,310 | 235 |
|
41.4 | N/M | 10,942 | 1,242 | 781.0 | |||||||||||||||||||||||
| Total revenues | 138,838 | 109,107 | 138,630 | 27.2 | 0.2 | 366,094 | 368,225 | (0.6 | ) | |||||||||||||||||||||||
| Interest expense | 10,524 | 9,335 | 7,125 | 12.7 | 47.7 | 28,475 | 20,184 | 41.1 | ||||||||||||||||||||||||
| Net revenues | 128,314 | 99,772 | 131,505 | 28.6 | (2.4 | ) | 337,619 | 348,041 | (3.0 | ) | ||||||||||||||||||||||
| Non-interest expenses: | ||||||||||||||||||||||||||||||||
| Compensation and benefits | 79,426 | 65,000 | 78,070 | 22.2 | 1.7 | 210,531 | 209,467 | 0.5 | ||||||||||||||||||||||||
| Occupancy and equipment | 6,509 | 6,543 | 6,057 | (0.5 | ) | 7.5 | 18,869 | 19,671 | (4.1 | ) | ||||||||||||||||||||||
| Communications | 5,778 | 5,030 | 5,276 | 14.9 | 9.5 | 16,040 | 16,112 | (0.4 | ) | |||||||||||||||||||||||
| Floor brokerage and clearance | 2,109 | 2,247 | 1,825 | (6.1 | ) | 15.6 | 6,506 | 5,934 | 9.6 | |||||||||||||||||||||||
| Marketing and business development | 5,447 | 5,957 | 4,259 | (8.6 | ) | 27.9 | 16,384 | 14,982 | 9.4 | |||||||||||||||||||||||
| Outside services | 8,082 | 8,449 | 6,747 | (4.3 | ) | 19.8 | 23,745 | 19,810 | 19.9 | |||||||||||||||||||||||
| Restructuring and integration costs | 3,823 | - | - | N/M | N/M | 3,823 | 3,642 | 5.0 | ||||||||||||||||||||||||
| Intangible asset amortization expense | 2,899 | 1,661 | 1,736 | 74.5 | 67.0 | 6,221 | 5,208 | 19.5 | ||||||||||||||||||||||||
| Other operating expenses | 2,181 | 1,552 | 2,183 | 40.5 | (0.1 | ) | 1,939 | 6,986 | (72.2 | ) | ||||||||||||||||||||||
| Total non-interest expenses | 116,254 | 96,439 | 106,153 | 20.5 | 9.5 | 304,058 | 301,812 | 0.7 | ||||||||||||||||||||||||
|
Income from continuing operations before income tax expense |
12,060 | 3,333 | 25,352 | 261.8 | (52.4 | ) | 33,561 | 46,229 | (27.4 | ) | ||||||||||||||||||||||
| Income tax expense | 2,886 | 1,644 | 10,194 | 75.5 | (71.7 | ) | 10,130 | 12,048 | (15.9 | ) | ||||||||||||||||||||||
| Income from continuing operations | 9,174 | 1,689 | 15,158 | 443.2 | (39.5 | ) | 23,431 | 34,181 | (31.5 | ) | ||||||||||||||||||||||
| Discontinued operations: | ||||||||||||||||||||||||||||||||
| Income/(loss) from discontinued operations, net of tax | (1,529 | ) | (1,871 | ) | 5,171 | (18.3 | ) | N/M | (3,921 | ) | (2,066 | ) | 89.8 | |||||||||||||||||||
| Net income/(loss) | 7,645 | (182 | ) | 20,329 | N/M | (62.4 | ) | 19,510 | 32,115 | (39.2 | ) | |||||||||||||||||||||
| Net income/(loss) applicable to noncontrolling interests | 2,323 | (2,670 | ) | 665 | N/M | 249.3 | 1,554 | 2,671 | (41.8 | ) | ||||||||||||||||||||||
|
Net income applicable to Piper Jaffray Companies (1) |
$ | 5,322 | $ | 2,488 | $ | 19,664 | 113.9 | % | (72.9 | ) | % | $ | 17,956 | $ | 29,444 | (39.0 | ) | % | ||||||||||||||
|
Net income applicable to Piper Jaffray Companies' common shareholders (1) |
$ | 4,826 | $ | 2,266 | $ | 16,840 | 113.0 | % | (71.3 | ) | % | $ | 16,163 | $ | 25,151 | (35.7 | ) | % | ||||||||||||||
| Amounts applicable to Piper Jaffray Companies | ||||||||||||||||||||||||||||||||
| Net income from continuing operations | $ | 6,851 | $ | 4,359 | $ | 14,493 | 57.2 | % | (52.7 | ) | % | $ | 21,877 | $ | 31,510 | (30.6 | ) | % | ||||||||||||||
| Net income/(loss) from discontinued operations | (1,529 | ) | (1,871 | ) | 5,171 | (18.3 | ) | N/M | (3,921 | ) | (2,066 | ) | 89.8 | |||||||||||||||||||
| Net income applicable to Piper Jaffray Companies | $ | 5,322 | $ | 2,488 | $ | 19,664 | 113.9 | % | (72.9 | ) | % | $ | 17,956 | $ | 29,444 | (39.0 | ) | % | ||||||||||||||
| Earnings/(loss) per basic common share | ||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | 0.42 | $ | 0.25 | $ | 0.82 | 68.0 | % | (48.8 | ) | % | $ | 1.29 | $ | 1.71 | (24.6 | ) | % | ||||||||||||||
| Income/(loss) from discontinued operations | (0.09 | ) | (0.11 | ) | 0.29 | (18.2 | ) | N/M | (0.23 | ) | (0.11 | ) | 109.1 | |||||||||||||||||||
| Earnings per basic common share | $ | 0.33 | $ | 0.15 | $ | 1.11 | 120.0 | % | (70.3 | ) | % | $ | 1.06 | $ | 1.60 | (33.8 | ) | % | ||||||||||||||
| Earnings/(loss) per diluted common share | ||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | 0.42 | $ | 0.25 | $ | 0.82 | 68.0 | % | (48.8 | ) | % | $ | 1.29 | $ | 1.71 | (24.6 | ) | % | ||||||||||||||
| Income/(loss) from discontinued operations | (0.09 | ) | (0.11 | ) | 0.29 | (18.2 | ) | N/M | (0.23 | ) | (0.11 | ) | 109.1 | |||||||||||||||||||
| Earnings per diluted common share | $ | 0.33 | $ | 0.15 | $ | 1.11 | 120.0 | % | (70.3 | ) | % | $ | 1.06 | $ | 1.60 | (33.8 | ) | % | ||||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||||||||||||||||||
| Basic | 14,621 | 15,621 | 15,210 | (6.4 | ) | % | (3.9 | ) | % | 15,271 | 15,736 | (3.0 | ) | % | ||||||||||||||||||
| Diluted | 14,626 | 15,626 | 15,210 | (6.4 | ) | % | (3.8 | ) | % | 15,284 | 15,736 | (2.9 | ) | % | ||||||||||||||||||
| (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) | Nine Months Ended | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | Sept. 30, | June 30, | Sept. 30, | 3Q '13 | 3Q '13 | Sept. 30, | Sept. 30, | Percent | ||||||||||||||||||||||||
| 2013 | 2013 | 2012 | vs. 2Q '13 | vs. 3Q '12 | 2013 | 2012 | Inc/(Dec) | |||||||||||||||||||||||||
| Capital Markets | ||||||||||||||||||||||||||||||||
| Investment banking |
|
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| Financing | ||||||||||||||||||||||||||||||||
| Equities | $ | 30,010 | $ | 21,772 | $ | 18,781 | 37.8 | % | 59.8 | % | $ | 66,085 | $ | 55,141 | 19.8 | % | ||||||||||||||||
| Debt | 12,808 | 22,131 | 16,573 | (42.1 | ) | (22.7 | ) | 51,971 | 53,598 | (3.0 | ) | |||||||||||||||||||||
| Advisory services | 20,215 | 9,409 | 16,317 | 114.8 | 23.9 | 39,180 | 41,670 | (6.0 | ) | |||||||||||||||||||||||
| Total investment banking | 63,033 | 53,312 | 51,671 | 18.2 | 22.0 | 157,236 | 150,409 | 4.5 | ||||||||||||||||||||||||
| Institutional sales and trading | ||||||||||||||||||||||||||||||||
| Equities | 22,960 | 21,392 | 17,927 | 7.3 | 28.1 | 65,087 | 55,589 | 17.1 | ||||||||||||||||||||||||
| Fixed income | 20,437 | 4,959 | 46,690 | 312.1 | (56.2 | ) | 53,439 | 95,773 | (44.2 | ) | ||||||||||||||||||||||
| Total institutional sales and trading | 43,397 | 26,351 | 64,617 | 64.7 | (32.8 | ) | 118,526 | 151,362 | (21.7 | ) | ||||||||||||||||||||||
| Other income/(loss) | 3,833 | 2,146 | (1,039 | ) | 78.6 | N/M | 7,519 | (2,141 | ) | N/M | ||||||||||||||||||||||
| Net revenues | 110,263 | 81,809 | 115,249 | 34.8 | (4.3 | ) | 283,281 | 299,630 | (5.5 | ) | ||||||||||||||||||||||
| Operating expenses | 103,906 | 83,937 | 94,671 | 23.8 | % | 9.8 | 266,301 | 266,529 | (0.1 | ) | ||||||||||||||||||||||
| Segment pre-tax operating income/(loss) | $ | 6,357 | $ | (2,128 | ) | $ | 20,578 | N/M | (69.1 | ) | % | $ | 16,980 | $ | 33,101 | (48.7 | ) | % | ||||||||||||||
| Segment pre-tax operating margin | 5.8 | % | (2.6 | )% | 17.9 | % | 6.0 | % | 11.0 | % | ||||||||||||||||||||||
| Asset Management | ||||||||||||||||||||||||||||||||
| Management and performance fees | ||||||||||||||||||||||||||||||||
| Management fees | $ | 17,547 | $ | 17,567 | $ | 15,800 | (0.1 | ) | % | 11.1 | % | $ | 52,212 | $ | 47,213 | 10.6 | % | |||||||||||||||
| Performance fees | 60 | 305 | 22 | (80.3 | ) | 172.7 | 716 | 664 | 7.8 | |||||||||||||||||||||||
| Total management and performance fees | 17,607 | 17,872 | 15,822 | (1.5 | ) | 11.3 | 52,928 | 47,877 | 10.5 | |||||||||||||||||||||||
| Other income | 444 | 91 | 434 | 387.9 | 2.3 | 1,410 | 534 | 164.0 | ||||||||||||||||||||||||
| Net revenues | 18,051 | 17,963 | 16,256 | 0.5 | 11.0 | 54,338 | 48,411 | 12.2 | ||||||||||||||||||||||||
| Operating expenses | 12,348 | 12,502 | 11,482 | (1.2 | ) | 7.5 | 37,757 | 35,283 | 7.0 | |||||||||||||||||||||||
| Segment pre-tax operating income | $ | 5,703 | $ | 5,461 | $ | 4,774 | 4.4 | % | 19.5 | % | $ | 16,581 | $ | 13,128 | 26.3 | % | ||||||||||||||||
| Segment pre-tax operating margin | 31.6 | % | 30.4 | % | 29.4 | % | 30.5 | % | 27.1 | % | ||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||
| Net revenues | $ | 128,314 | $ | 99,772 | $ | 131,505 | 28.6 | % | (2.4 | ) | % | $ | 337,619 | $ | 348,041 | (3.0 | ) | % | ||||||||||||||
| Operating expenses | 116,254 | 96,439 | 106,153 | 20.5 | 9.5 | 304,058 | 301,812 | 0.7 | ||||||||||||||||||||||||
| Pre-tax operating income | $ | 12,060 | $ | 3,333 | $ | 25,352 | 261.8 | % | (52.4 | ) | % | $ | 33,561 | $ | 46,229 | (27.4 | ) | % | ||||||||||||||
| Pre-tax operating margin | 9.4 | % | 3.3 | % | 19.3 | % | 9.9 | % | 13.3 | % | ||||||||||||||||||||||
| 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) | Sept. 30, 2013 | June 30, 2013 | Sept. 30, 2012 | |||||||||||||||
| Common shareholders' equity | $ | 707,365 | $ | 729,880 | $ | 724,616 | ||||||||||||
| Deduct: goodwill and identifiable intangible assets | 252,761 | 234,780 | 247,905 | |||||||||||||||
| Tangible common shareholders' equity | $ | 454,604 | $ | 495,100 | $ | 476,711 | ||||||||||||
Source:
Piper Jaffray Companies
Tom Smith, 612-303-6336
Investor
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