Piper Jaffray Companies (NYSE: PJC) today announced its
financial results for the quarter ended September 30,
2015.
During the quarter, we produced strong
results across most of our operating businesses relative to markets
which became challenging as the quarter progressed.
Financial Highlights
- Adjusted net income(1) was $7.3
million, or $0.48 per diluted common share(1), in the third quarter
of 2015, compared to $16.9 million, or $1.03 per diluted common
share, in the third quarter of 2014, and $18.6 million, or $1.19
per diluted common share, in the second quarter of 2015.
- Excluding a $9.8 million legal
settlement, adjusted net income would have been $13.2 million, or
$0.87 per diluted common share, in the third quarter of 2015.
- Adjusted net revenues(1) were $148.4
million in the third quarter of 2015, compared to $155.9 million
and $163.9 million in the third quarter of 2014 and the second
quarter of 2015, respectively.
- Adjusted pre-tax operating margin(1)
was 7.0% in the third quarter of 2015, compared to 17.3% and 17.8%
in the third quarter of 2014 and the second quarter of 2015,
respectively.
- Assets under management were $9.4
billion at September 30, 2015, compared to $12.2 billion in
the year-ago period and $11.4 billion at the end of the second
quarter of 2015.
- Rolling 12 month return on average
common shareholders' equity decreased to 6.3% at September 30,
2015, compared to 10.2% at September 30, 2014. Our rolling 12
month return on average tangible common shareholders' equity(2)
decreased to 9.0% at September 30, 2015, compared to 15.2% at
September 30, 2014.
- Book value per share increased 7% from
September 30, 2014 to $57.03 a share at September 30,
2015.
Three Months Ended Percent Inc/(Dec)
Nine Months Ended (Amounts in thousands,
Sept. 30, June 30, Sept. 30,
3Q '15 3Q '15 Sept. 30, Sept.
30, Percent except per share data)
2015
2015 2014 vs. 2Q '15 vs. 3Q '14
2015 2014 Inc/(Dec) As
Adjusted(1) Net revenues
$ 148,394 $
163,879 $ 155,850 (9.4)% (4.8)%
$ 468,012 $ 484,045
(3.3)% Net income
$ 7,250 $ 18,634 $ 16,885 (61.1)%
(57.1)%
$ 44,703 $ 57,414 (22.1)% Earnings per
diluted common share
$ 0.48 $ 1.19 $ 1.03 (59.7)%
(53.4)%
$ 2.83 $ 3.52 (19.6)% Pre-tax operating
margin
7.0 % 17.8 % 17.3 %
14.8 % 18.6
%
U.S. GAAP Net revenues
$ 149,617 $
164,066 $ 159,426 (8.8)% (6.2)%
$ 475,554 $ 497,590
(4.4)% Net income
$ 4,831 $ 16,999 $ 14,668 (71.6)%
(67.1)%
$ 38,802 $ 50,629 (23.4)% Earnings per
diluted common share
$ 0.32 $ 1.08 $ 0.90 (70.4)%
(64.4)%
$ 2.46 $ 3.11 (20.9)% Pre-tax operating
margin
4.5 % 15.8 % 16.1 %
13.4 % 17.9
%
(1)
A non-U.S. GAAP ("non-GAAP") measure. For
a detailed explanation of the adjustments made to the corresponding
U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected
Summary Financial Information." We believe that presenting our
results and measures on an adjusted basis in conjunction with U.S.
GAAP measures provides the most meaningful basis for comparison of
our operating results across periods.
(2)
A non-GAAP measure. See the "Additional
Shareholder Information" section for a detailed explanation of the
adjustment made to the corresponding U.S. GAAP measure. We believe
that the rolling 12 month return on average tangible common
shareholders' equity is a meaningful measure of our return on
tangible assets deployed in the business.
For the third quarter of 2015, on a U.S. GAAP basis, net
revenues were $149.6 million, and net income was $4.8 million, or
$0.32 per diluted common share.
"Our core businesses performed well during the quarter relative
to markets that were volatile and challenging," said Andrew S.
Duff, Chairman and Chief Executive Officer. "In particular, our
advisory and capital raising businesses continued to produce strong
results, somewhat offset by sharp declines in energy-related stocks
which adversely impacted our asset management products and
investments."
Third Quarter Results – Non-GAAP BasisThroughout the
Adjusted Consolidated Results and Business Segment Results sections
of this press release we present financial measures that are not
prepared in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"). The non-GAAP financial measures include
adjustments to exclude (1) revenues and expenses related to
noncontrolling interests, (2) amortization of intangible assets
related to acquisitions, (3) compensation for acquisition-related
agreements and (4) restructuring and acquisition integration costs.
Management believes that presenting results and measures on an
adjusted basis in conjunction with U.S. GAAP measures provides the
most meaningful basis for comparison of its operating results
across periods. For a detailed explanation of the adjustments made
to the corresponding U.S. GAAP measures, see "Reconciliation of
U.S. GAAP to Selected Summary Financial Information."
Adjusted Consolidated ResultsFor the third quarter of
2015, adjusted net revenues were $148.4 million, down 5% compared
to $155.9 million in the third quarter of 2014. The decrease was
due to lower advisory services and asset management revenues,
partially offset by higher equity and debt financing revenues.
Adjusted net revenues decreased 9% compared to the second quarter
of 2015 due to lower equity and debt financing revenues, partially
offset by higher advisory services revenues.
For the third quarter of 2015, adjusted compensation and
benefits expenses of $95.4 million were essentially flat compared
to the third quarter of 2014. Adjusted compensation and benefits
expenses decreased 7% compared to the second quarter of 2015 due
primarily to lower revenues.
For the third quarter of 2015, adjusted compensation and
benefits expenses were 64.3% of adjusted net revenues, compared to
61.5% and 62.6% for the third quarter of 2014 and the second
quarter of 2015, respectively. The adjusted compensation ratio
increased compared to both the year-ago period and the sequential
quarter due to compensation expenses associated with significant
hiring in the current year in our Capital Markets segment to expand
our financial institutions group.
Adjusted non-compensation expenses were $42.6 million for the
third quarter of 2015, up 29% and 33% compared to the year-ago
period and the second quarter of 2015, respectively. The increase
compared to both periods was due to higher legal reserves resulting
from settlement of a legal matter totaling $9.8 million on a
pre-tax basis.
On an adjusted basis, our effective tax rate was 30.0% for the
third quarter of 2015, compared to 37.2% and 36.2% for the third
quarter of 2014 and the second quarter of 2015, respectively. The
reduced effective tax rate for the third quarter of 2015 was due to
the impact of tax-exempt interest income representing a larger
proportion of our pre-tax income.
Business Segment ResultsThe firm has two reportable
business segments: Capital Markets and Asset Management.
Consolidated net revenues and expenses are fully allocated to these
two segments.
Capital MarketsFor the quarter, Capital Markets generated
adjusted pre-tax operating income of $10.5 million, compared to
$19.8 million and $24.3 million in the third quarter of 2014 and
the second quarter of 2015, respectively.
Adjusted net revenues were $136.4 million, up slightly compared
to the year-ago period and down 7% compared to the second quarter
of 2015.
- Equity financing revenues of $24.4
million increased 71% compared to the year-ago period due to more
completed transactions and higher revenue per transaction. Revenues
decreased 32% compared to the sequential quarter due to fewer
completed transactions and lower revenue per transaction.
- Debt financing revenues were $20.5
million, up 42% compared to the third quarter of 2014 due to more
completed transactions, and down 32% compared to a very strong
second quarter of 2015 due to fewer completed transactions.
- Advisory services revenues were $47.0
million, down 29% compared to the robust third quarter of 2014 due
to lower revenue per transaction. Revenues increased 17% compared
to the sequential quarter due to more completed transactions.
- Equity institutional brokerage revenues
of $20.0 million increased 20% compared to the year-ago period due
to higher client trading volumes. Revenues decreased 2% compared to
the second quarter of 2015.
- Fixed income institutional brokerage
revenues were $18.3 million, down 20% compared to the third quarter
of 2014 due to lower trading gains. Revenues declined 11% compared
to the sequential quarter due to lower sales credits and reduced
trading gains.
- Management and performance fees earned
from managing our alternative asset management funds were $1.9
million, compared to $1.4 million and $0.6 million in the year-ago
period and the sequential quarter, respectively. The increase
compared to the second quarter of 2015 was due to higher management
fees.
- Adjusted investment income, which
includes realized and unrealized gains and losses on our
investments in the merchant banking fund and the municipal bond
fund that we manage for third party investors, and other firm
investments, was $6.1 million for the quarter, compared to $1.6
million in the year-ago period. Adjusted investment income was not
significant in the second quarter of 2015. In the third quarter of
2015, we recorded higher gains on our merchant banking firm
investments compared to both of the prior periods.
- Long-term financing expenses, which
primarily represent interest paid on the firm's variable rate
senior notes, were $1.7 million, compared to $1.6 million in both
the year-ago period and the sequential quarter, respectively.
- Adjusted operating expenses for the
third quarter of 2015 were $125.9 million, up 9% and 4% compared to
the third quarter of 2014 and the second quarter of 2015,
respectively. The increase compared to both periods was due to
higher legal reserves.
- Adjusted segment pre-tax operating
margin was 7.7% compared to 14.6% in the year-ago period and 16.7%
in the second quarter of 2015. Adjusted pre-tax operating margin
declined compared to both periods due to higher non-compensation
costs resulting from a legal settlement, as well as additional
expenses associated with our financial institutions group
expansion.
Asset ManagementFor the quarter ended September 30,
2015, Asset Management generated an adjusted pre-tax operating loss
of $0.1 million, compared to adjusted pre-tax operating income of
$7.1 million and $4.9 million in the third quarter of 2014 and the
second quarter of 2015, respectively.
Net revenues were $12.0 million, down 40% and 33% compared to
the third quarter of 2014 and the second quarter of 2015,
respectively. The decrease compared to both periods was due to
lower management fees from decreased assets under management (AUM)
driven by market depreciation. Also, investment losses on firm
capital invested in our strategies was $5.1 million for the current
quarter, compared with a loss of $0.3 million and $0.7 million in
the third quarter of 2014 and the second quarter of 2015,
respectively.
- Adjusted operating expenses for the
current quarter were $12.1 million, down 6% and 7% compared to the
year-ago period and the second quarter of 2015, respectively, due
to lower compensation expenses.
- Adjusted segment pre-tax operating
margin was a negative 1.2%, compared to 35.7% in the third quarter
of 2014 and 27.3% in the second quarter of 2015. Adjusted segment
pre-tax operating margin declined relative to both periods
primarily due to investment losses and lower management fees.
- AUM was $9.4 billion at the end of the
third quarter of 2015, compared to $12.2 billion in the year-ago
period and $11.4 billion at the end of the second quarter of 2015.
The decreases in AUM have been driven by market depreciation,
primarily from our MLP product offerings.
Other MattersOn September 30, 2015, we completed the
purchase of the assets of River Branch Holdings LLC, an equity
investment banking boutique focused on the financial institutions
sector. The acquisition further strengthens our mergers and
acquisitions leadership in the middle markets and adds investment
banking resources dedicated to banks, thrifts, and depository
institutions, building upon the recent expansion of our financial
institutions group.
On October 9, 2015, we completed the acquisition of BMO
Capital Markets GKST Inc., BMO's municipal bond sales, trading and
origination business. This acquisition expands our fixed income
institutional sales, trading and underwriting platforms.
Additionally, it strengthens our strategic analytic and advisory
capabilities, and supports our growing financial institutions group
with their coverage of bank clients.
In the third quarter of 2015, we incurred $1.5 million of
restructuring and integration charges. These charges principally
resulted from severance benefits and transaction costs related to
these acquisitions. Additionally, we expect to incur approximately
$6.0 million to $7.0 million of restructuring and integration costs
in the fourth quarter of 2015.
Additional Shareholder Information
For the Quarter Ended Sept. 30, 2015
June 30, 2015 Sept 30, 2014 Full time
employees 1,094 1,100 1,029
Equity financings #
of transactions
22 27 15 Capital raised
$3.0 billion
$6.1 billion $3.5 billion
Negotiated tax-exempt issuances #
of transactions
104 155 85 Par value
$2.3 billion
$3.9 billion $1.8 billion
Mergers & acquisitions # of
transactions
21 14 22 Aggregate deal value
$6.9
billion $3.5 billion $4.7 billion
Asset Management AUM
$9.4 billion $11.4 billion $12.2 billion
Common
shareholders’ equity $795.4 million $789.6 million
$804.6 million
Number of common shares outstanding (in
thousands) 13,947 13,904 15,109
Rolling 12 month
return on average common shareholders’ equity * 6.3%
7.5% 10.2%
Rolling 12 month return on average tangible common
shareholders’ equity † 9.0% 10.8% 15.2%
Book value
per share $57.03 $56.79 $53.26
Tangible book value
per share ‡ $39.36 $39.60 $37.05 * Rolling
12 month return on average common shareholders' equity is computed
by dividing net income applicable to Piper Jaffray Companies' for
the last 12 months by average monthly common shareholders' equity.
† Rolling 12 month return on average tangible common
shareholders' equity is computed by dividing net income applicable
to Piper Jaffray Companies' for the last 12 months by average
monthly common shareholders' equity less average goodwill and
identifiable intangible assets. Management believes that the
rolling 12 month return on average tangible common shareholders'
equity is a meaningful measure of our return on tangible assets
deployed in the business. Average common shareholders’ equity is
the most directly comparable GAAP financial measure to average
tangible shareholders’ equity. The following is a reconciliation of
average common shareholders’ equity to average tangible common
shareholders’ equity: As of As of As of
(Amounts in thousands) Sept. 30, 2015 June 30, 2015 Sept. 30, 2014
Average common shareholders’ equity $ 811,643 $ 811,208 $ 759,971
Deduct: average goodwill and identifiable intangible assets 241,545
242,824 248,568 Average tangible common shareholders’ equity
$ 570,098 $ 568,384 $ 511,403 ‡ Tangible book value
per share is computed by dividing tangible common shareholders’
equity by common shares outstanding. Tangible common shareholders’
equity equals total common shareholders’ equity less goodwill and
identifiable intangible assets. Management believes that tangible
book value per share is a meaningful measure of the tangible assets
deployed in our business. 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, 2015 June 30, 2015
Sept. 30, 2014 Common shareholders’ equity $ 795,385 $ 789,635 $
804,633 Deduct: goodwill and identifiable intangible assets 246,362
238,990 244,854 Tangible common shareholders’
equity $ 549,023 $ 550,645 $ 559,779
Conference Call
Andrew S. Duff, chairman and chief executive officer, and Debbra
L. Schoneman, chief financial officer, will hold a conference call
to review the financial results on Thur., Oct. 29 at 9 a.m. ET (8
a.m. CT). The earnings release will be available on or after Oct.
29 at the firm's Web site at www.piperjaffray.com. The call can be accessed via
webcast or by dialing (888)810-0209 or (706)902-1361
(international) and referencing reservation #48306907. Callers
should dial in at least 15 minutes prior to the call time. A replay
of the conference call will be available beginning at approximately
12 p.m. ET Oct. 29 at the same Web address or by calling
(855)859-2056 and referencing reservation #48306907.
About Piper Jaffray
Piper Jaffray is an investment bank and asset management firm
serving clients in the U.S. and internationally. Proven advisory
teams combine deep industry, product and sector expertise with
ready access to capital. Founded in 1895, the firm is headquartered
in Minneapolis and has offices across the United States and in
London, Hong Kong and Zurich. www.piperjaffray.com
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 outlook for equity markets and
the interest rate environment), the environment and prospects for
corporate advisory transactions and capital markets (including our
performance in specific sectors and the outlook for the fourth
quarter), anticipated financial results generally (including
expectations regarding our noncompensation expenses, compensation
and benefits expense, compensation ratio (including the impact of
our expansion into the financial institutions sector), revenue
levels, operating margins, earnings per share, effective tax rate,
and return on equity), current deal pipelines (or backlogs),
financial results for our asset management segment (including our
performance in specific sectors, e.g. energy-based MLPs),the
liquidity of fixed income markets and impact on our related
inventory, our strategic priorities (including growth in public
finance, asset management, and corporate advisory), potential
acquisitions or strategic hires, the expected benefits of our
expansion into the financial institutions sector within equity
investment banking that includes the acquisition of River Branch
Holdings LLC as well as the acquisition of BMO Capital Markets GKST
Inc., or other similar matters.
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;
- net revenues from equity and debt
financings and corporate advisory engagements may vary materially
depending on the number, size, and timing of completed
transactions, and completed transactions do not generally provide
for subsequent engagements;
- 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;
- asset management revenue may vary based
on investment performance and market and economic factors, and
these factors may impact certain sectors that are more heavily
weighted to our business, e.g. energy-based MLP funds;
- interest rate volatility, especially if
the changes are rapid or severe, could negatively impact our fixed
income institutional business and the negative impact could be
exaggerated by reduced liquidity in the fixed income markets;
- 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;
- potential acquisitions targets or
strategic hires may not be available on reasonable terms or at all,
and we may not be able to effectively integrate any business or
groups of employees we acquire or hire, and the expected benefits
of any acquisitions or strategic hires, including that of River
Branch Holdings LLC and BMO Capital Markets GKST Inc., may take
longer than anticipated to achieve and may not be achieved in their
entirety or at all;
- 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, 2014 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, 2014, and
updated in our subsequent reports filed with the SEC (available at
our Web site at www.piperjaffray.com
and at the SEC Web site at www.sec.gov).
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.
© 2015 Piper Jaffray Companies, 800 Nicollet
Mall, Suite 1000, Minneapolis, Minnesota 55402-7020
Piper Jaffray Companies
Preliminary Results of Operations (U.S. GAAP –
Unaudited)
Three Months Ended Percent Inc/(Dec)
Nine Months Ended Sept. 30,
June 30, Sept. 30, 3Q '15 3Q
'15 Sept. 30, Sept. 30, Percent
(Amounts in thousands, except per share data)
2015
2015 2014 vs. 2Q '15 vs. 3Q '14
2015 2014 Inc/(Dec) Revenues:
Investment banking $ 91,640 $ 106,069 $ 94,911 (13.6 )% (3.4 )% $
284,786 $ 287,198 (0.8 )% Institutional brokerage 34,182 36,661
35,923 (6.8 ) (4.8 ) 106,879 114,485 (6.6 ) Asset management 18,951
19,257 21,595 (1.6 ) (12.2 ) 58,730 64,820 (9.4 ) Interest 9,128
11,422 10,828 (20.1 ) (15.7 ) 32,755 36,935 (11.3 ) Investment
income/(loss) 831 (3,299 ) 2,690 N/M (69.1 )
10,123 12,379 (18.2 ) Total revenues 154,732 170,110
165,947 (9.0 ) (6.8 ) 493,273 515,817 (4.4 ) Interest
expense 5,115 6,044 6,521 (15.4 ) (21.6 )
17,719 18,227 (2.8 ) Net revenues 149,617
164,066 159,426 (8.8 ) (6.2 ) 475,554
497,590 (4.4 )
Non-interest expenses:
Compensation and benefits 96,132 103,554 97,180 (7.2 ) (1.1 )
295,543 300,745 (1.7 ) Outside services 9,316 8,885 9,155 4.9 1.8
26,385 27,837 (5.2 ) Occupancy and equipment 7,025 6,983 8,312 0.6
(15.5 ) 20,791 22,151 (6.1 ) Communications 6,234 5,088 5,661 22.5
10.1 17,650 17,048 3.5 Marketing and business development 6,965
7,239 6,827 (3.8 ) 2.0 21,186 19,787 7.1 Trade execution and
clearance 1,982 1,977 1,905 0.3 4.0 5,956 5,527 7.8 Restructuring
and integration costs 1,496 — — N/M N/M 1,496 — N/M Intangible
asset amortization expense 1,773 1,773 2,318 — (23.5 ) 5,319 6,954
(23.5 ) Other operating expenses 11,906 2,708 2,376
339.7 401.1 17,289 8,719 98.3
Total non-interest expenses 142,829 138,207
133,734 3.3 6.8 411,615 408,768
0.7
Income before income tax expense 6,788
25,859 25,692 (73.7 ) (73.6 ) 63,939 88,822 (28.0 ) Income
tax expense 1,573 9,542 8,596 (83.5 ) (81.7 )
20,605 28,472 (27.6 )
Net income 5,215
16,317 17,096 (68.0 ) (69.5 ) 43,334 60,350 (28.2 ) Net
income/(loss) applicable to noncontrolling interests 384
(682 ) 2,428 N/M (84.2 ) 4,532 9,721
(53.4 )
Net income applicable to Piper Jaffray Companies
(a) $ 4,831 $ 16,999 $ 14,668 (71.6 )%
(67.1 )% $ 38,802 $ 50,629 (23.4 )%
Net
income applicable to Piper Jaffray Companies’ common shareholders
(a) $ 4,448 $ 15,699 $ 13,552 (71.7 )%
(67.2 )% $ 35,908 $ 46,386 (22.6 )%
Earnings per common share Basic $ 0.32 $ 1.08 $ 0.90 (70.4
)% (64.4 )% $ 2.46 $ 3.12 (21.2 )% Diluted $ 0.32 $ 1.08 $ 0.90
(70.4 )% (64.4 )% $ 2.46 $ 3.11 (20.9 )%
Weighted average
number of common shares outstanding Basic 13,938 14,487 15,066
(3.8 )% (7.5 )% 14,568 14,880 (2.1 )% Diluted 13,952 14,513 15,129
(3.9 )% (7.8 )% 14,594 14,934 (2.3 )%
(a)
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 Segment Data (U.S. GAAP – Unaudited)
Three Months Ended Percent Inc/(Dec)
Nine Months Ended Sept. 30,
June 30, Sept. 30, 3Q '15 3Q
'15 Sept. 30, Sept. 30, Percent
(Dollars in thousands)
2015 2015 2014 vs.
2Q '15 vs. 3Q '14 2015 2014
Inc/(Dec) Capital Markets Investment banking
Financing Equities $ 24,437 $ 35,755 $ 14,269 (31.7 )% 71.3
%
$ 96,681 $ 93,628 3.3
%
Debt 20,476 30,098 14,435 (32.0 ) 41.8 72,312 48,148 50.2 Advisory
services 46,958 40,139 66,320 17.0
(29.2 ) 116,363 145,743 (20.2 ) Total investment
banking 91,871 105,992 95,024 (13.3 ) (3.3 ) 285,356 287,519 (0.8 )
Institutional sales and trading Equities 20,026 20,407
16,711 (1.9 ) 19.8 59,338 59,337 — Fixed income 18,259
20,482 22,737 (10.9 ) (19.7 ) 59,958 69,060
(13.2 ) Total institutional sales and trading 38,285 40,889
39,448 (6.4 ) (2.9 ) 119,296 128,397 (7.1 ) Management and
performance fees 1,898 621 1,387 205.6 36.8 3,926 4,512 (13.0 )
Investment income 7,274 215 5,224 N/M 39.2 22,194 20,600 7.7
Long-term financing expenses (1,668 ) (1,553 ) (1,613 ) 7.4
3.4 (4,781 ) (5,058 ) (5.5 ) Net revenues
137,660 146,164 139,470 (5.8 ) (1.3 ) 425,991 435,970 (2.3 )
Operating expenses 129,224 123,687 119,001 4.5
8.6 369,114 364,622 1.2
Segment pre-tax operating income $ 8,436 $ 22,477 $
20,469 (62.5 )% (58.8 )% $ 56,877 $ 71,348
(20.3 )% Segment pre-tax operating margin 6.1 % 15.4 % 14.7
% 13.4 % 16.4 %
Asset Management Management and
performance fees Management fees $ 17,053 $ 18,436 $ 19,738 (7.5 )%
(13.6 )% $ 54,596 $ 59,474 (8.2 )% Performance fees — 200
470 N/M N/M 208 834 (75.1
) Total management and performance fees 17,053 18,636 20,208 (8.5 )
(15.6 ) 54,804 60,308 (9.1 ) Investment income/(loss) (5,096
) (734 ) (252 ) 594.3 N/M (5,241 ) 1,312 N/M
Net revenues 11,957 17,902 19,956 (33.2 ) (40.1 )
49,563 61,620 (19.6 ) Operating expenses 13,605
14,520 14,733 (6.3 ) (7.7 ) 42,501 44,146
(3.7 ) Segment pre-tax operating income/(loss) $
(1,648 ) $ 3,382 $ 5,223 N/M N/M $
7,062 $ 17,474 (59.6 )% Segment pre-tax
operating margin (13.8 )% 18.9 % 26.2 % 14.2 % 28.4 %
Total Net revenues $ 149,617 $ 164,066 $ 159,426 (8.8 )%
(6.2 )% $ 475,554 $ 497,590 (4.4 )% Operating expenses
142,829 138,207 133,734 3.3 6.8
411,615 408,768 0.7 Pre-tax operating
income $ 6,788 $ 25,859 $ 25,692 (73.7 )%
(73.6 )% $ 63,939 $ 88,822 (28.0 )% Pre-tax
operating margin 4.5 % 15.8 % 16.1 % 13.4 % 17.9 %
N/M — Not meaningful
Piper Jaffray Companies
Preliminary Selected Summary Financial Information (Non-GAAP
– Unaudited) (1)
Three Months Ended Percent Inc/(Dec)
Nine Months Ended Sept. 30,
June 30, Sept. 30, 3Q '15 3Q
'15 Sept. 30, Sept. 30, Percent
(Amounts in thousands, except per share data)
2015
2015 2014 vs. 2Q '15 vs. 3Q '14
2015 2014 Inc/(Dec) Revenues:
Investment banking $ 91,640 $ 106,069 $ 94,911 (13.6 )% (3.4 )% $
284,786 $ 287,198 (0.8 )% Institutional brokerage 34,182 36,661
35,923 (6.8 ) (4.8 ) 106,879 114,485 (6.6 ) Asset management 18,951
19,257 21,595 (1.6 ) (12.2 ) 58,730 64,820 (9.4 ) Interest 7,885
8,114 8,028 (2.8 ) (1.8 ) 25,244 27,835 (9.3 ) Investment
income/(loss) 631 (1,151 ) 859 N/M (26.5 )
7,932 5,106 55.3 Total revenues 153,289
168,950 161,316 (9.3 ) (5.0 ) 483,571 499,444 (3.2 )
Interest expense 4,895 5,071 5,466 (3.5 )
(10.4 ) 15,559 15,399 1.0 Adjusted net
revenues (2) $ 148,394 $ 163,879 $ 155,850
(9.4 )% (4.8 )% $ 468,012 $ 484,045 (3.3 )%
Non-interest expenses: Adjusted compensation and benefits
(3) $ 95,442 $ 102,650 $ 95,869 (7.0 )% (0.4
)% $ 292,698 $ 296,729 (1.4 )% Ratio of adjusted
compensation and benefits to adjusted net revenues 64.3 % 62.6 %
61.5 % 62.5 % 61.3 % Adjusted non-compensation expenses (4)
$ 42,589 $ 32,011 $ 33,088 33.0
%
28.7
%
$ 106,247 $ 97,245 9.3
%
Ratio of adjusted non-compensation expenses to adjusted net
revenues 28.7 % 19.5 % 21.2 % 22.7 % 20.1 %
Adjusted
income: Adjusted income before adjusted income tax expense (5)
$ 10,363 $ 29,218 $ 26,893 (64.5 )% (61.5 )% $
69,067 $ 90,071 (23.3 )% Adjusted operating margin
(6) 7.0 % 17.8 % 17.3 % 14.8 % 18.6 %
Adjusted income tax
expense (7) 3,113 10,584 10,008 (70.6 )
(68.9 ) 24,364 32,657 (25.4 )
Adjusted net
income (8) $ 7,250 $ 18,634 $ 16,885 (61.1
)% (57.1 )% $ 44,703 $ 57,414 (22.1 )% Effective tax
rate (9) 30.0 % 36.2 % 37.2 % 35.3 % 36.3 %
Adjusted net
income applicable to Piper Jaffray Companies’ common shareholders
(10) $ 6,676 $ 17,209 $ 15,600 (61.2 )%
(57.2 )% $ 41,369 $ 52,602 (21.4 )%
Adjusted earnings per diluted common share $ 0.48 $
1.19 $ 1.03 (59.7 )% (53.4 )% $ 2.83 $ 3.52
(19.6 )%
Weighted average number of common shares
outstanding Diluted 13,952 14,513 15,129 (3.9 )% (7.8 )% 14,594
14,934 (2.3 )%
This presentation includes non-GAAP measures. The non-GAAP
measures are not meant to be considered in isolation or as a
substitute for the corresponding U.S. GAAP measures, and should be
read only in conjunction with our consolidated financial statements
prepared in accordance with U.S. GAAP. For a detailed explanation
of the adjustments made to the corresponding U.S. GAAP measures,
see "Reconciliation of U.S. GAAP to Selected Summary Financial
Information."
N/M — Not meaningful
Piper Jaffray Companies
Preliminary Adjusted Segment Data (Non-GAAP –
Unaudited)
Three Months Ended Percent Inc/(Dec)
Nine Months Ended Sept. 30,
June 30, Sept. 30, 3Q '15 3Q
'15 Sept. 30, Sept. 30, Percent
(Dollars in thousands)
2015 2015 2014 vs.
2Q '15 vs. 3Q '14 2015 2014
Inc/(Dec) Capital Markets Investment banking
Financing Equities $ 24,437 $ 35,755 $ 14,269 (31.7 )% 71.3
%
$ 96,681 $ 93,628 3.3
%
Debt 20,476 30,098 14,435 (32.0 ) 41.8 72,312 48,148 50.2 Advisory
services 46,958 40,139 66,320 17.0
(29.2 ) 116,363 145,743 (20.2 ) Total investment
banking 91,871 105,992 95,024 (13.3 ) (3.3 ) 285,356 287,519 (0.8 )
Institutional sales and trading Equities 20,026 20,407
16,711 (1.9 ) 19.8 59,338 59,337 — Fixed income 18,259
20,482 22,737 (10.9 ) (19.7 ) 59,958 69,060
(13.2 ) Total institutional sales and trading 38,285 40,889
39,448 (6.4 ) (2.9 ) 119,296 128,397 (7.1 ) Management and
performance fees 1,898 621 1,387 205.6 36.8 3,926 4,512 (13.0 )
Investment income 6,051 28 1,648 N/M 267.2 14,652 7,055
107.7 Long-term financing expenses (1,668 ) (1,553 ) (1,613
) 7.4 3.4 (4,781 ) (5,058 ) (5.5 ) Adjusted
net revenues (2) 136,437 145,977 135,894 (6.5 ) 0.4 418,449 422,425
(0.9 ) Adjusted operating expenses (12) 125,936
121,651 116,120 3.5 8.5 361,188
355,516 1.6 Adjusted segment pre-tax operating
income (5) $ 10,501 $ 24,326 $ 19,774 (56.8 )%
(46.9 )% $ 57,261 $ 66,909 (14.4 )% Adjusted
segment pre-tax operating margin (6) 7.7 % 16.7 % 14.6 % 13.7 %
15.8 %
Asset Management Management and performance
fees Management fees $ 17,053 $ 18,436 $ 19,738 (7.5 )% (13.6 )% $
54,596 $ 59,474 (8.2 )% Performance fees — 200 470
N/M N/M 208 834 (75.1 ) Total
management and performance fees 17,053 18,636 20,208 (8.5 ) (15.6 )
54,804 60,308 (9.1 ) Investment income/(loss) (5,096 ) (734
) (252 ) 594.3 N/M (5,241 ) 1,312 N/M
Net revenues 11,957 17,902 19,956 (33.2 ) (40.1 ) 49,563
61,620 (19.6 ) Adjusted operating expenses (13) 12,095
13,010 12,837 (7.0 ) (5.8 ) 37,757
38,458 (1.8 ) Adjusted segment pre-tax operating
income/(loss) (13) $ (138 ) $ 4,892 $ 7,119 N/M
N/M $ 11,806 $ 23,162 (49.0 )%
Adjusted segment pre-tax operating margin (6) (1.2 )% 27.3 % 35.7 %
23.8 % 37.6 %
Total Adjusted net revenues (2) $
148,394 $ 163,879 $ 155,850 (9.4 )% (4.8 )% $ 468,012 $ 484,045
(3.3 )% Adjusted operating expenses (12) 138,031
134,661 128,957 2.5 7.0 398,945
393,974 1.3 Adjusted pre-tax operating income
(5) $ 10,363 $ 29,218 $ 26,893 (64.5 )% (61.5
)% $ 69,067 $ 90,071 (23.3 )% Adjusted pre-tax
operating margin (6) 7.0 % 17.8 % 17.3 % 14.8 % 18.6 %
This presentation includes non-GAAP measures. The non-GAAP
measures are not meant to be considered in isolation or as a
substitute for the corresponding U.S. GAAP measures, and should be
read only in conjunction with our consolidated financial statements
prepared in accordance with U.S. GAAP. For a detailed explanation
of the adjustments made to the corresponding U.S. GAAP measures,
see "Reconciliation of U.S. GAAP to Selected Summary Financial
Information."
N/M — Not meaningful
Piper Jaffray Companies
Reconciliation of U.S. GAAP to Selected Summary Financial
Information (1) (Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30,
Sept. 30, Sept. 30, (Amounts in thousands,
except per share data)
2015 2015 2014
2015 2014 Net revenues: Net revenues – U.S.
GAAP basis $ 149,617 $ 164,066 $ 159,426 $ 475,554 $ 497,590
Adjustments: Revenue related to noncontrolling interests (11)
(1,223 ) (187 ) (3,576 ) (7,542 ) (13,545 ) Adjusted net revenues $
148,394 $ 163,879 $ 155,850 $ 468,012 $
484,045
Compensation and benefits:
Compensation and benefits – U.S. GAAP basis $ 96,132 $ 103,554 $
97,180 $ 295,543 $ 300,745 Adjustments: Compensation from
acquisition-related agreements (690 ) (904 ) (1,311 ) (2,845 )
(4,016 ) Adjusted compensation and benefits $ 95,442 $
102,650 $ 95,869 $ 292,698 $ 296,729
Non-compensation expenses: Non-compensation expenses
– U.S. GAAP basis $ 46,697 $ 34,653 $ 36,554 $ 116,072 $ 108,023
Adjustments: Non-compensation expenses related to noncontrolling
interests (11) (839 ) (869 ) (1,148 ) (3,010 ) (3,824 )
Restructuring and integration costs (1,496 ) — — (1,496 ) —
Amortization of intangible assets related to acquisitions (1,773 )
(1,773 ) (2,318 ) (5,319 ) (6,954 ) Adjusted non-compensation
expenses $ 42,589 $ 32,011 $ 33,088 $ 106,247
$ 97,245
Income before income tax
expense: Income before income tax expense – U.S. GAAP basis $
6,788 $ 25,859 $ 25,692 $ 63,939 $ 88,822 Adjustments: Revenue
related to noncontrolling interests (11) (1,223 ) (187 ) (3,576 )
(7,542 ) (13,545 ) Expenses related to noncontrolling interests
(11) 839 869 1,148 3,010 3,824 Compensation from
acquisition-related agreements 690 904 1,311 2,845 4,016
Restructuring and integration costs 1,496 — — 1,496 — Amortization
of intangible assets related to acquisitions 1,773 1,773
2,318 5,319 6,954 Adjusted income
before adjusted income tax expense $ 10,363 $ 29,218
$ 26,893 $ 69,067 $ 90,071
Income
tax expense: Income tax expense – U.S. GAAP basis $ 1,573 $
9,542 $ 8,596 $ 20,605 $ 28,472 Tax effect of adjustments:
Compensation from acquisition-related agreements 268 352 510 1,107
1,562 Restructuring and integration costs 582 — — 582 —
Amortization of intangible assets related to acquisitions 690
690 902 2,070 2,623 Adjusted
income tax expense $ 3,113 $ 10,584 $ 10,008 $
24,364 $ 32,657
Net income applicable to
Piper Jaffray Companies: Net income applicable to Piper Jaffray
Companies – U.S. GAAP basis $ 4,831 $ 16,999 $ 14,668 $ 38,802 $
50,629 Adjustments: Compensation from acquisition-related
agreements 422 552 801 1,738 2,454 Restructuring and integration
costs 914 — — 914 — Amortization of intangible assets related to
acquisitions 1,083 1,083 1,416 3,249
4,331 Adjusted net income $ 7,250 $ 18,634 $
16,885 $ 44,703 $ 57,414
Net income
applicable to Piper Jaffray Companies' common shareholders: Net
income applicable to Piper Jaffray Companies' common stockholders –
U.S. GAAP basis $ 4,448 $ 15,699 $ 13,552 $ 35,908 $ 46,386
Adjustments: Compensation from acquisition-related agreements 389
510 740 1,608 2,248 Restructuring and integration costs 842 — — 846
— Amortization of intangible assets related to acquisitions 997
1,000 1,308 3,007 3,968 Adjusted
net income applicable to Piper Jaffray Companies' common
stockholders $ 6,676 $ 17,209 $ 15,600 $
41,369 $ 52,602
Earnings per diluted common
share: Earnings per diluted common share – U.S. GAAP basis $
0.32 $ 1.08 $ 0.90 $ 2.46 $ 3.11 Adjustments: Compensation from
acquisition-related agreements 0.03 0.04 0.05 0.11 0.15
Restructuring and integration costs 0.06 — — 0.06 — Amortization of
intangible assets related to acquisitions 0.07 0.07
0.09 0.21 0.27 Adjusted earnings per diluted
common share $ 0.48 $ 1.19 $ 1.03 $ 2.83
$ 3.52
This presentation includes non-GAAP measures. The non-GAAP
measures are not meant to be considered in isolation or as a
substitute for the corresponding U.S. GAAP measures, and should be
read only in conjunction with our consolidated financial statements
prepared in accordance with U.S. GAAP.
Piper Jaffray Companies
Notes to Non-GAAP Financial Schedules
(1) Selected Summary Financial Information are non-GAAP
measures. Management believes that presenting results and measures
on an adjusted basis in conjunction with U.S. GAAP measures
provides the most meaningful basis for comparison of its operating
results across periods. (2) A non-GAAP measure which
excludes revenues related to noncontrolling interests (see (11)
below). (3) A non-GAAP measure which excludes compensation
expense from acquisition-related agreements. (4) A non-GAAP
measure which excludes (a) non-compensation expenses related to
noncontrolling interests (see (11) below), (b) restructuring and
integration costs and (c) amortization of intangible assets related
to acquisitions. (5) A non-GAAP measure which excludes (a)
revenues and expenses related to noncontrolling interests (see (11)
below), (b) compensation from acquisition-related agreements, (c)
restructuring and integration costs and (d) amortization of
intangible assets related to acquisitions. (6) A non-GAAP
measure which represents adjusted income before adjusted income tax
expense as a percentage of adjusted net revenues. (7) A
non-GAAP measure which excludes the income tax benefit from (a)
compensation from acquisition-related agreements, (b) restructuring
and integration costs and (c) amortization of intangible assets
related to acquisitions. (8) A non-GAAP measure which
represents net income earned by the Company excluding (a)
compensation expense from acquisition-related agreements, (b)
restructuring and integration costs, (c) amortization of intangible
assets related to acquisitions and (d) the income tax
expense/(benefit) allocated to the adjustments. (9)
Effective tax rate is a non-GAAP measure which is computed based on
a quotient, the numerator of which is adjusted income tax expense
and the denominator of which is adjusted income before adjusted
income tax expense. (10) Piper Jaffray Companies calculates
earnings per common share using the two-class method, which
requires the allocation of consolidated adjusted net income between
common shareholders and participating security holders, which in
the case of Piper Jaffray Companies, represents unvested stock with
dividend rights. (11) Noncontrolling interests include
revenue and expenses from consolidated alternative asset management
entities that are not attributable, either directly or indirectly,
to Piper Jaffray Companies. (12) A non-GAAP measure which
excludes (a) expenses related to noncontrolling interests (see (11)
above), (b) compensation from acquisition-related agreements, (c)
restructuring and integration costs and (d) amortization of
intangible assets related to acquisitions. (13) A non-GAAP
measure which excludes (a) compensation from acquisition-related
agreements and (b) amortization of intangible assets related to
acquisitions.
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Piper Jaffray CompaniesInvestor Relations ContactTom Smith,
612-303-6336
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