Piper Jaffray Companies (NYSE: PJC) today announced its
financial results for the quarter ended June 30, 2016.
“Execution on our growth strategies highlighted by strong
performance in areas of targeted investment, particularly Public
Finance and Fixed Income, delivered improved results on a more
balanced business mix for the quarter,” said Andrew S. Duff,
Chairman and CEO of Piper Jaffray. “A detailed review of our cost
base, which has expanded due to growth investments, is underway in
order to drive higher returns for our shareholders.”
Financial Highlights
Three Months Ended Percent Inc/(Dec)
(Amounts in thousands, except per share data)
June 30,
Mar. 31, June 30, 2Q '16
2Q '16 2016 2016 2015 vs. 1Q '16
vs. 2Q '15 U.S. GAAP Net revenues
$
170,483 $ 153,556 $ 164,066 11.0
%
3.9
%
Compensation ratio
68.7 % 68.0 % 63.1 %
Non-compensation ratio
27.5 % 29.7 % 21.1 % Pre-tax
operating margin
3.8 % 2.2 % 15.8 % Net income
$ 1,938 $ 2,437 $ 16,999 (20.5 )% (88.6 )% Earnings
per diluted common share
$ 0.12 $ 0.16 $ 1.08 (25.0
)% (88.9 )%
As Adjusted(1) Net revenues
$ 167,188 $ 152,207 $ 163,879 9.8
%
2.0
%
Compensation ratio
64.1 % 66.4 % 62.6 %
Non-compensation ratio
23.1 % 23.0 % 19.5 % Pre-tax
operating margin
12.9 % 10.6 % 17.8 % Net income
$ 13,938 $ 10,609 $ 18,634 31.4
%
(25.2 )% Earnings per diluted common share
$ 0.88 $
0.70 $ 1.19 25.7
%
(26.1 )%
- Strong results in our fixed
income-related businesses, driven by our investments in these
businesses coupled with accommodative markets, produced a
year-over-year increase in revenues. Debt and equity financing
combined to more than offset a decline in advisory services to
drive the sequential increase in revenue.
- Pre-tax operating margin improved
relative to the sequential quarter due to higher net revenues, as
well as moderating expense levels.
- Our rolling 12 month return on average
common shareholders' equity was 2.8% at June 30, 2016. Our
adjusted return on average common shareholders' equity(2) was 6.7%
at June 30, 2016.
- Our U.S. GAAP results were adversely
impacted by acquisition-related compensation expenses and
restructuring and integration costs, which are excluded from our
non-GAAP results.
(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 an explanation of the
calculation of this non-GAAP measure. We believe that the adjusted
rolling 12 month return on average common shareholders' equity
provides a meaningful measure of our return on the core operating
results of the business.
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 variance explanations
for net revenues are consistent with those on both a U.S. GAAP and
non-GAAP basis.
U.S. GAAP Results and
Commentary
Capital Markets
The following table summarizes our Capital Markets business
segment results on a U.S. GAAP basis for the periods presented:
Three Months Ended Percent Inc/(Dec)
June 30, Mar. 31, June 30, 2Q
'16 2Q '16 (Amounts in thousands)
2016
2016 2015 vs. 1Q '16 vs. 2Q '15 Net
revenues
$ 156,739 $ 141,649 $ 146,164
10.7%
7.2
%
Operating expenses
$ 152,028 $ 138,855 $ 123,687
9.5%
22.9
%
Pre-tax operating income
$ 4,711 $ 2,794 $ 22,477
68.6%
(79.0 )% Pre-tax operating margin
3.0 % 2.0 % 15.4 %
- Equity financing revenues of $16.8
million decreased 51% compared to the year-ago period and increased
156% compared to the sequential quarter. The equity capital raising
markets, which peaked a year ago, have gradually improved from the
trough we experienced in the first quarter.
- Debt financing revenues were $33.3
million, up 21% and 109% compared to the second quarter of 2015 and
the first quarter of 2016, respectively, due to increased market
share from our investments in the business, coupled with robust
market conditions.
- Advisory services revenues were $48.1
million, up 9% compared to the second quarter of 2015 due to our
expansion into energy and financial institutions sectors over the
past year. Revenues were down 41% compared to a strong first
quarter of 2016.
- Equity institutional brokerage revenues
of $22.6 million increased 11% and 15% compared to the year-ago
period and the first quarter of 2016, respectively, due to our
expansion into the energy sector through our acquisition of Simmons
& Company International ("Simmons").
- Fixed income institutional brokerage
revenues were $29.0 million, up 41% and 70% compared to the second
quarter of 2015 and first quarter of 2016, respectively. Increased
customer flow activity and a strong performance by the municipals
asset class drove the increase in revenues.
- Investment income, which includes
realized and unrealized gains and losses on investments (including
amounts attributable to noncontrolling interests) in our merchant
banking fund, and firm investments, were $7.5 million for the
quarter, compared to $0.2 million and $2.1 million in the year-ago
period and the sequential quarter, respectively. In the second
quarter of 2016, we recorded higher gains on the merchant banking
portfolio.
- Operating expenses for the second
quarter of 2016 were $152.0 million, up 23% compared to the second
quarter of 2015 due to higher compensation expenses from higher
acquisition-related costs and increased revenues. Higher
non-compensation expenses as a result of business expansion, as
well as restructuring and integration costs principally related to
our acquisition of Simmons, also drove the increase from the
year-ago period. Operating expenses were up 10% compared to the
first quarter of 2016 due to higher compensation expenses from
higher acquisition-related costs and increased revenues.
- Segment pre-tax operating margin was
3.0% compared to 15.4% in the year-ago period and 2.0% in the first
quarter of 2016. Pre-tax operating margin was lower compared to the
second quarter of 2015 as compensation and non-compensation
expenses increased relative to revenues, primarily due to an
increase in acquisition-related expenses.
Asset Management
The following table summarizes our Asset Management business
segment results on a U.S. GAAP basis for the periods presented:
Three Months Ended Percent Inc/(Dec)
June 30, Mar. 31, June 30, 2Q
'16 2Q '16 (Amounts in thousands)
2016
2016 2015 vs. 1Q '16 vs. 2Q '15 Net
revenues
$ 13,744 $ 11,907 $ 17,902 15.4% (23.2 )%
Operating expenses
$ 11,946 $ 11,259 $ 14,520 6.1%
(17.7 )% Pre-tax operating income
$ 1,798 $ 648 $
3,382 177.5% (46.8 )% Pre-tax operating margin
13.1 %
5.4 % 18.9 %
- Management and performance fees of
$12.8 million decreased 31% compared to the year-ago period due to
lower management fees from both our value equity and MLP product
offerings. The decrease was driven by lower assets under management
(AUM) resulting from market depreciation, and net client outflows
from our value equity products.
- Investment income/(loss) on firm
capital invested in our strategies was income of $0.9 million for
the current quarter, compared with losses of $0.7 million and $1.0
million in the second quarter of 2015 and the first quarter of
2016, respectively.
- Operating expenses for the current
quarter were $11.9 million, down 18% compared to the year-ago
period due to lower compensation expenses from a decline in net
revenues. Operating expenses were up 6% compared to the first
quarter of 2016 due to higher non-compensation expenses.
- Segment pre-tax operating margin was
13.1% in the second quarter of 2016, compared to 18.9% in the
year-ago period and 5.4% in the sequential quarter. Segment pre-tax
operating margin was lower compared to the second quarter of 2015
primarily due to a decline in management fees, and higher compared
to the first quarter of 2016 due to investment income on firm
capital invested in our strategies.
- AUM was $8.1 billion at the end of the
second quarter of 2016, compared to $11.4 billion in the year-ago
period and $7.5 billion at the end of the first quarter of 2016.
The increase in AUM in the second quarter of 2016 was due to net
market appreciation from our MLP product offerings, which were
partially offset by net client outflows in our value equity product
offerings.
Non-GAAP Results and
Commentary
Throughout this section 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 this adjusted
basis alongside 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."
Capital Markets
The following table summarizes our Capital Markets business
segment results on a non-GAAP basis for the periods presented:
Three Months Ended Percent Inc/(Dec)
June 30, Mar. 31, June 30, 2Q
'16 2Q '16 (Amounts in thousands)
2016
2016 2015 vs. 1Q '16 vs. 2Q '15
Adjusted net revenues
$ 153,444 $ 140,300 $ 145,977
9.4% 5.1
%
Adjusted operating expenses
$ 135,106 $ 126,276 $
121,651 7.0% 11.1
%
Adjusted pre-tax operating income
$ 18,338 $ 14,024 $
24,326 30.8% (24.6 )% Adjusted pre-tax operating margin
12.0
% 10.0 % 16.7 %
- The variance explanations for net
revenues on a non-GAAP basis are consistent with those on a U.S.
GAAP basis.
- Adjusted operating expenses for the
second quarter of 2016 were $135.1 million, up 11% compared to the
second quarter of 2015 due to higher compensation and
non-compensation expenses as a result of expansion into the energy
and financial institutions sectors. Adjusted operating expenses
were up 7% compared to the first quarter of 2016 due to higher
compensation expenses from increased revenues, as well as higher
non-compensation expenses primarily due to a full quarter of
expenses related to the Simmons acquisition.
- Adjusted segment pre-tax operating
margin was 12.0% compared to 16.7% in the year-ago period and 10.0%
in the first quarter of 2016. Adjusted pre-tax operating margin was
lower compared to the second quarter of 2015 as compensation and
non-compensation expenses increased relative to revenues due to
funding related to our growth initiatives, and higher compared to
the sequential quarter primarily due to increased net
revenues.
Asset Management
The following table summarizes our Asset Management business
segment results on a non-GAAP basis for the periods presented:
Three Months Ended Percent Inc/(Dec)
June 30, Mar. 31, June 30, 2Q
'16 2Q '16 (Amounts in thousands)
2016
2016 2015 vs. 1Q '16 vs. 2Q '15
Adjusted net revenues
$ 13,744 $ 11,907 $ 17,902
15.4% (23.2 )% Adjusted operating expenses
$ 10,559 $
9,863 $ 13,010 7.1% (18.8 )% Adjusted pre-tax operating income
$ 3,185 $ 2,044 $ 4,892 55.8% (34.9 )% Adjusted
pre-tax operating margin
23.2 % 17.2 % 27.3 %
Adjusted segment pre-tax operating margin excluding investment
income/(loss) *
17.5 % 23.4 % 30.2 %
* Management believes that presenting adjusted segment pre-tax
operating margin excluding investment income/(loss) provides the
most meaningful basis for comparison of the operating results for
the Asset Management segment across periods.
- The variance explanations for net
revenues, operating expenses and margin on a non-GAAP basis are
consistent with those on a U.S. GAAP basis. The difference between
our U.S. GAAP and non-GAAP operating expenses is due to intangible
asset amortization expense. See also discussion above on AUM.
Other Matters
In the second quarter of 2016, we incurred $3.4 million of
restructuring and integration charges. These charges principally
resulted from costs to vacate redundant leased office space,
contract termination fees and transaction costs related to our
acquisition of Simmons.
During the second quarter of 2016, we repurchased $42.7 million,
or 1,063,000 shares of our common stock, at an average price of
$40.15 per share.
Additional Shareholder Information
For the Quarter Ended June 30, 2016
Mar. 31, 2016 June 30, 2015 Full time
employees 1,299 1,283 1,100
Equity financings #
of transactions
16 7 26 Capital raised
$3.5 billion
$1.2 billion $6.0 billion
Municipal negotiated issuances #
of transactions
192 129 226 Par value
$5.0 billion
$2.9 billion $4.6 billion
Advisory transactions # of
transactions
22 36 18 Aggregate deal value
$2.4
billion $5.9 billion $4.2 billion
Asset Management AUM
$8.1 billion $7.5 billion $11.4 billion
Common
shareholders’ equity $775.0 million $805.2 million
$789.6 million
Number of common shares outstanding (in
thousands) 12,425 13,268 13,904
Rolling 12 month
return on average common shareholders’ equity * 2.8%
4.7% 7.5%
Adjusted rolling 12 month return on average common
shareholders’ equity † 6.7% 7.2% 8.5%
Book value per
share $62.38 $60.69 $ 56.79
Tangible book value per
share ‡ $35.94 $35.69 $ 39.60 * 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.
† Adjusted Rolling 12 month return on average common
shareholders' equity is computed by dividing adjusted net income
for the last 12 months by average monthly common shareholders'
equity. For a detailed explanation of the components of adjusted
net income, see "Reconciliation of U.S. GAAP to Selected Summary
Financial Information." Management believes that the adjusted
rolling 12 month return on average common shareholders' equity
provides a meaningful measure of our return on the core operating
results of the business. ‡ 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) June 30, 2016 Mar. 31, 2016 June 30, 2015
Common shareholders’ equity $ 775,011 $ 805,180 $ 789,635 Deduct:
goodwill and identifiable intangible assets 328,491 331,707
238,990 Tangible common shareholders’ equity $ 446,520
$ 473,473 $ 550,645
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., Jul. 28 at 9 a.m. ET (8
a.m. CT). The earnings release will be available on or after Jul.
28 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 #43558164. 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 Jul. 28 at the same Web address or by calling
(855)859-2056 and referencing reservation #43558164.
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, Aberdeen, 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, capital markets and public finance transactions
(including our performance in specific sectors and the outlook for
future quarters), anticipated financial results generally
(including expectations regarding our noncompensation expenses,
compensation and benefits expense, compensation ratio, 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), the expected
benefits of our expansion into the financial institutions and
energy sectors, including the expected benefits of the integration
of Simmons and Company International, River Branch Holdings LLC,
and 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 product trends favoring passive investment products, and
investment performance and market factors, with market factors
impacting 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;
- we may not be able to effectively
integrate any business or groups of employees we acquire or hire,
and the expected benefits (e.g. cost and revenue synergies) of any
acquisitions or strategic hires, including that of Simmons and
Company International, 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, 2015 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, 2015, 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.
© 2016 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) Six Months Ended June 30,
Mar. 31, June 30, 2Q '16 2Q
'16 June 30, June 30, Percent
(Amounts in thousands, except per share data)
2016
2016 2015 vs. 1Q '16 vs. 2Q '15
2016 2015 Inc/(Dec) Revenues:
Investment banking $ 97,414 $ 103,938 $ 106,069 (6.3 )% (8.2 )% $
201,352 $ 193,146 4.2
%
Institutional brokerage 48,185 32,049 36,661 50.3 31.4 80,234
72,697 10.4 Asset management 14,595 13,848 19,257 5.4 (24.2 )
28,443 39,779 (28.5 ) Interest 7,922 8,829 11,422 (10.3 ) (30.6 )
16,751 23,627 (29.1 ) Investment income/(loss) 8,276 937
(3,299 ) 783.2 (350.9 ) 9,213 9,292
(0.9 ) Total revenues 176,392 159,601 170,110 10.5 3.7 335,993
338,541 (0.8 ) Interest expense 5,909 6,045
6,044 (2.2 ) (2.2 ) 11,954 12,604 (5.2 )
Net revenues 170,483 153,556 164,066
11.0 3.9 324,039 325,937 (0.6 )
Non-interest expenses: Compensation and benefits 117,148
104,436 103,554 12.2 13.1 221,584 199,411 11.1 Outside services
10,184 8,451 8,885 20.5 14.6 18,635 17,069 9.2 Occupancy and
equipment 8,850 7,718 6,983 14.7 26.7 16,568 13,766 20.4
Communications 7,294 7,330 5,088 (0.5 ) 43.4 14,624 11,416 28.1
Marketing and business development 9,171 7,004 7,239 30.9 26.7
16,175 14,221 13.7 Trade execution and clearance 1,916 1,762 1,977
8.7 (3.1 ) 3,678 3,974 (7.4 ) Restructuring and integration costs
3,433 6,773 — (49.3 ) N/M 10,206 — N/M Intangible asset
amortization expense 4,094 3,296 1,773 24.2 130.9 7,390 3,546 108.4
Other operating expenses 1,884 3,344 2,708
(43.7 ) (30.4 ) 5,228 5,383 (2.9 ) Total non-interest
expenses 163,974 150,114 138,207 9.2
18.6 314,088 268,786 16.9
Income before income tax expense 6,509 3,442 25,859 89.1
(74.8 ) 9,951 57,151 (82.6 ) Income tax expense 1,996
256 9,542 679.7 (79.1 ) 2,252 19,032
(88.2 )
Net income 4,513 3,186 16,317 41.7
(72.3 ) 7,699 38,119 (79.8 ) Net income/(loss) applicable to
noncontrolling interests 2,575 749 (682 ) 243.8
(477.6 ) 3,324 4,148 (19.9 )
Net
income applicable to Piper Jaffray Companies (a) $ 1,938
$ 2,437 $ 16,999 (20.5 )% (88.6 )% $ 4,375 $
33,971 (87.1 )%
Net income applicable to Piper
Jaffray Companies’ common shareholders (a) $ 1,577 $
2,124 $ 15,699 (25.8 )% (90.0 )% $ 3,685 $
31,513 (88.3 )%
Earnings per common share
Basic $ 0.12 $ 0.16 $ 1.08 (25.0 )% (88.9 )% $ 0.28 $ 2.12 (86.8 )%
Diluted $ 0.12 $ 0.16 $ 1.08 (25.0 )% (88.9 )% $ 0.28 $ 2.11 (86.7
)%
Weighted average number of common shares
outstanding Basic 12,927 13,160 14,487 (1.8 )% (10.8 )% 13,043
14,888 (12.4 )% Diluted 12,942 13,172 14,513 (1.7 )% (10.8 )%
13,056 14,920 (12.5 )%
(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) Six Months Ended June 30,
Mar. 31, June 30, 2Q '16 2Q
'16 June 30, June 30, Percent
(Dollars in thousands)
2016 2016 2015 vs.
1Q '16 vs. 2Q '15 2016 2015
Inc/(Dec) Capital Markets Investment banking
Financing Equities $ 16,786 $ 6,566 $ 34,324 155.7
%
(51.1 )% $ 23,352 $ 70,331 (66.8 )% Debt 33,325 15,972 27,648 108.6
20.5 49,297 48,636 1.4 Advisory services 48,112 81,629
44,020 (41.1 ) 9.3 129,741 74,518
74.1 Total investment banking 98,223 104,167 105,992
(5.7 ) (7.3 ) 202,390 193,485 4.6 Institutional sales and
trading Equities 22,612 19,669 20,407 15.0 10.8 42,281 39,312 7.6
Fixed income 28,952 17,054 20,482 69.8
41.4 46,006 41,699 10.3 Total
institutional sales and trading 51,564 36,723 40,889 40.4 26.1
88,287 81,011 9.0 Management and performance fees 1,794 965
621 85.9 188.9 2,759 2,028 36.0 Investment income 7,451
2,086 215 257.2 N/M 9,537 14,920 (36.1 ) Long-term financing
expenses (2,293 ) (2,292 ) (1,553 ) — 47.6 (4,585 )
(3,113 ) 47.3 Net revenues 156,739 141,649 146,164
10.7 7.2 298,388 288,331 3.5 Operating expenses 152,028
138,855 123,687 9.5 22.9 290,883
239,890 21.3 Segment pre-tax operating
income $ 4,711 $ 2,794 $ 22,477 68.6
%
(79.0 )% $ 7,505 $ 48,441 (84.5 )% Segment
pre-tax operating margin 3.0 % 2.0 % 15.4 % 2.5 % 16.8 %
Asset Management Management and performance fees Management
fees $ 12,801 $ 12,883 $ 18,436 (0.6 )% (30.6 )% $ 25,684 $ 37,543
(31.6 )% Performance fees — — 200 N/M
(100.0 ) — 208 (100.0 ) Total management and
performance fees 12,801 12,883 18,636 (0.6 ) (31.3 ) 25,684 37,751
(32.0 ) Investment income/(loss) 943 (976 ) (734 )
(196.6 ) (228.5 ) (33 ) (145 ) (77.2 ) Net revenues 13,744
11,907 17,902 15.4 (23.2 ) 25,651 37,606 (31.8 ) Operating
expenses 11,946 11,259 14,520 6.1 (17.7
) 23,205 28,896 (19.7 ) Segment pre-tax
operating income $ 1,798 $ 648 $ 3,382 177.5
%
(46.8 )% $ 2,446 $ 8,710 (71.9 )% Segment
pre-tax operating margin 13.1 % 5.4 % 18.9 % 9.5 % 23.2 %
Total Net revenues $ 170,483 $ 153,556 $ 164,066 11.0
%
3.9
%
$ 324,039 $ 325,937 (0.6 )% Operating expenses 163,974
150,114 138,207 9.2 18.6 314,088
268,786 16.9 Pre-tax operating income $
6,509 $ 3,442 $ 25,859 89.1
%
(74.8 )% $ 9,951 $ 57,151 (82.6 )% Pre-tax
operating margin 3.8 % 2.2 % 15.8 % 3.1 % 17.5 %
N/M — Not meaningful
Piper Jaffray Companies
Preliminary Selected Summary Financial
Information (Non-GAAP – Unaudited) (1)
Three Months Ended Percent
Inc/(Dec) Six Months Ended June 30,
Mar. 31, June 30, 2Q '16 2Q
'16 June 30, June 30, Percent
(Amounts in thousands, except per share data)
2016
2016 2015 vs. 1Q '16 vs. 2Q '15
2016 2015 Inc/(Dec) Revenues:
Investment banking $ 97,414 $ 103,938 $ 106,069 (6.3 )% (8.2 )% $
201,352 $ 193,146 4.2
%
Institutional brokerage 47,776 32,336 36,661 47.7 30.3 80,112
72,697 10.2 Asset management 14,595 13,848 19,257 5.4 (24.2 )
28,443 39,779 (28.5 ) Interest 7,409 8,362 8,114 (11.4 ) (8.7 )
15,771 17,359 (9.1 ) Investment income/(loss) 5,721 (412 )
(1,151 ) N/M (597.0 ) 5,309 7,301 (27.3 )
Total revenues 172,915 158,072 168,950 9.4 2.3 330,987 330,282 0.2
Interest expense 5,727 5,865 5,071 (2.4
) 12.9 11,592 10,664 8.7
Adjusted net revenues (2) $ 167,188 $ 152,207 $
163,879 9.8
%
2.0
%
$ 319,395 $ 319,618 (0.1 )%
Non-interest
expenses: Adjusted compensation and benefits (3) $ 107,086
$ 101,130 $ 102,650 5.9
%
4.3
%
$ 208,216 $ 197,256 5.6
%
Ratio of adjusted compensation and benefits to adjusted net
revenues 64.1 % 66.4 % 62.6 % 65.2 % 61.7 % Adjusted
non-compensation expenses (4) $ 38,579 $ 35,009 $
32,011 10.2
%
20.5
%
$ 73,588 $ 63,658 15.6
%
Ratio of adjusted non-compensation expenses to adjusted net
revenues 23.1 % 23.0 % 19.5 % 23.0 % 19.9 %
Adjusted
income: Adjusted income before adjusted income tax expense (5)
$ 21,523 $ 16,068 $ 29,218 33.9
%
(26.3 )% $ 37,591 $ 58,704 (36.0 )% Adjusted
operating margin (6) 12.9 % 10.6 % 17.8 % 11.8 % 18.4 %
Adjusted income tax expense (7) 7,585 5,459
10,584 38.9 (28.3 ) 13,044 21,251 (38.6
)
Adjusted net income (8) $ 13,938 $ 10,609
$ 18,634 31.4
%
(25.2 )% $ 24,547 $ 37,453 (34.5 )% Effective tax
rate (9) 35.2 % 34.0 % 36.2 % 34.7 % 36.2 %
Adjusted net
income applicable to Piper Jaffray Companies’ common shareholders
(10) $ 11,349 $ 9,247 $ 17,209 22.7
%
(34.1 )% $ 20,675 $ 34,743 (40.5 )%
Adjusted earnings per diluted common share $ 0.88 $
0.70 $ 1.19 25.7
%
(26.1 )% $ 1.58 $ 2.33 (32.2 )%
Weighted
average number of common shares outstanding Diluted 12,942
13,172 14,513 (1.7 )% (10.8 )% 13,056 14,920 (12.5 )%
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) Six Months Ended June 30,
Mar. 31, June 30, 2Q '16 2Q
'16 June 30, June 30, Percent
(Dollars in thousands)
2016 2016 2015 vs.
1Q '16 vs. 2Q '15 2016 2015
Inc/(Dec) Capital Markets Investment banking
Financing Equities $ 16,786 $ 6,566 $ 34,324 155.7
%
(51.1 )% $ 23,352 $ 70,331 (66.8 )% Debt 33,325 15,972 27,648 108.6
20.5 49,297 48,636 1.4 Advisory services 48,112 81,629
44,020 (41.1 ) 9.3 129,741 74,518
74.1 Total investment banking 98,223 104,167 105,992
(5.7 ) (7.3 ) 202,390 193,485 4.6 Institutional sales and
trading Equities 22,612 19,669 20,407 15.0 10.8 42,281 39,312 7.6
Fixed income 28,212 17,054 20,482 65.4
37.7 45,266 41,699 8.6 Total
institutional sales and trading 50,824 36,723 40,889 38.4 24.3
87,547 81,011 8.1 Management and performance fees 1,794 965
621 85.9 188.9 2,759 2,028 36.0 Investment income 4,896 737
28 564.3 N/M 5,633 8,601 (34.5 ) Long-term financing
expenses (2,293 ) (2,292 ) (1,553 ) — 47.6 (4,585 )
(3,113 ) 47.3 Adjusted net revenues (2) 153,444
140,300 145,977 9.4 5.1 293,744 282,012 4.2 Adjusted
operating expenses (12) 135,106 126,276 121,651
7.0 11.1 261,382 235,252 11.1
Adjusted segment pre-tax operating income (5) $
18,338 $ 14,024 $ 24,326 30.8
%
(24.6 )% $ 32,362 $ 46,760 (30.8 )% Adjusted
segment pre-tax operating margin (6) 12.0 % 10.0 % 16.7 % 11.0 %
16.6 %
Asset Management Management and
performance fees Management fees $ 12,801 $ 12,883 $ 18,436 (0.6 )%
(30.6 )% $ 25,684 $ 37,543 (31.6 )% Performance fees — —
200 N/M (100.0 ) — 208 (100.0 )
Total management and performance fees 12,801 12,883 18,636 (0.6 )
(31.3 ) 25,684 37,751 (32.0 ) Investment income/(loss) 943
(976 ) (734 ) (196.6 ) (228.5 ) (33 ) (145 ) (77.2 )
Net revenues 13,744 11,907 17,902 15.4 (23.2 ) 25,651 37,606 (31.8
) Adjusted operating expenses (13) 10,559 9,863
13,010 7.1 (18.8 ) 20,422 25,662
(20.4 ) Adjusted segment pre-tax operating income (13) $
3,185 $ 2,044 $ 4,892 55.8
%
(34.9 )% $ 5,229 $ 11,944 (56.2 )% Adjusted
segment pre-tax operating margin (6) 23.2 % 17.2 % 27.3 % 20.4 %
31.8 % Adjusted segment pre-tax operating margin excluding
investment income/(loss) * 17.5 % 23.4 % 30.2 % 20.5 % 32.0 %
Total Adjusted net revenues (2) $ 167,188 $ 152,207 $
163,879 9.8
%
2.0
%
$ 319,395 $ 319,618 (0.1 )% Adjusted operating expenses (12)
145,665 136,139 134,661 7.0 8.2
281,804 260,914 8.0 Adjusted pre-tax
operating income (5) $ 21,523 $ 16,068 $ 29,218
33.9
%
(26.3 )% $ 37,591 $ 58,704 (36.0 )% Adjusted
pre-tax operating margin (6) 12.9 % 10.6 % 17.8 % 11.8 % 18.4 %
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."
* Management believes that presenting adjusted segment pre-tax
operating margin excluding investment income/(loss) provides the
most meaningful basis for comparison of the operating results for
the Asset Management segment across periods.
N/M — Not meaningful
Piper Jaffray Companies
Reconciliation of U.S. GAAP to Selected
Summary Financial Information (1) (Unaudited)
Three Months Ended Six Months Ended
June 30, Mar. 31, June 30,
June 30, June 30, (Amounts in thousands,
except per share data)
2016 2016 2015
2016 2015 Consolidated Net revenues:
Net revenues – U.S. GAAP basis $ 170,483 $ 153,556 $ 164,066 $
324,039 $ 325,937 Adjustments: Revenue related to noncontrolling
interests (11) (3,295 ) (1,349 ) (187 ) (4,644 ) (6,319 ) Adjusted
net revenues $ 167,188 $ 152,207 $ 163,879 $
319,395 $ 319,618
Compensation and
benefits: Compensation and benefits – U.S. GAAP basis $ 117,148
$ 104,436 $ 103,554 $ 221,584 $ 199,411 Adjustments:
Compensation from acquisition-related
agreements
(10,062 ) (3,306 ) (904 ) (13,368 ) (2,155 ) Adjusted compensation
and benefits $ 107,086 $ 101,130 $ 102,650 $
208,216 $ 197,256
Non-compensation
expenses: Non-compensation expenses – U.S. GAAP basis $ 46,826
$ 45,678 $ 34,653 $ 92,504 $ 69,375 Adjustments: Non-compensation
expenses related to noncontrolling interests (11) (720 ) (600 )
(869 ) (1,320 ) (2,171 ) Restructuring and integration costs (3,433
) (6,773 ) — (10,206 ) — Amortization of intangible assets related
to acquisitions (4,094 ) (3,296 ) (1,773 ) (7,390 ) (3,546 )
Adjusted non-compensation expenses $ 38,579 $ 35,009
$ 32,011 $ 73,588 $ 63,658
Income
before income tax expense: Income before income tax expense –
U.S. GAAP basis $ 6,509 $ 3,442 $ 25,859 $ 9,951 $ 57,151
Adjustments: Revenue related to noncontrolling interests (11)
(3,295 ) (1,349 ) (187 ) (4,644 ) (6,319 ) Expenses related to
noncontrolling interests (11) 720 600 869 1,320 2,171 Compensation
from acquisition-related agreements 10,062 3,306 904 13,368 2,155
Restructuring and integration costs 3,433 6,773 — 10,206 —
Amortization of intangible assets related to acquisitions 4,094
3,296 1,773 7,390 3,546 Adjusted
income before adjusted income tax expense $ 21,523 $ 16,068
$ 29,218 $ 37,591 $ 58,704
Income tax expense: Income tax expense – U.S. GAAP basis $
1,996 $ 256 $ 9,542 $ 2,252 $ 19,032 Tax effect of adjustments:
Compensation from acquisition-related agreements 3,439 1,286 352
4,725 839 Restructuring and integration costs 557 2,635 — 3,192 —
Amortization of intangible assets related to acquisitions 1,593
1,282 690 2,875 1,380 Adjusted
income tax expense $ 7,585 $ 5,459 $ 10,584 $
13,044 $ 21,251
Net income applicable to
Piper Jaffray Companies: Net income applicable to Piper Jaffray
Companies – U.S. GAAP basis $ 1,938 $ 2,437 $ 16,999 $ 4,375 $
33,971 Adjustments: Compensation from acquisition-related
agreements 6,623 2,020 552 8,643 1,316 Restructuring and
integration costs 2,876 4,138 — 7,014 — Amortization of intangible
assets related to acquisitions 2,501 2,014 1,083
4,515 2,166 Adjusted net income $ 13,938
$ 10,609 $ 18,634 $ 24,547 $ 37,453
Net income applicable to Piper Jaffray Companies'
common shareholders: Net income applicable to Piper Jaffray
Companies' common stockholders – U.S. GAAP basis $ 1,577 $ 2,124 $
15,699 $ 3,685 $ 31,513 Adjustments: Compensation from
acquisition-related agreements 5,393 1,761 510 7,280 1,221
Restructuring and integration costs 2,343 3,607 — 5,907 —
Amortization of intangible assets related to acquisitions 2,036
1,755 1,000 3,803 2,009 Adjusted
net income applicable to Piper Jaffray Companies' common
stockholders $ 11,349 $ 9,247 $ 17,209 $
20,675 $ 34,743
Earnings per diluted common
share: Earnings per diluted common share – U.S. GAAP basis $
0.12 $ 0.16 $ 1.08 $ 0.28 $ 2.11 Adjustments: Compensation from
acquisition-related agreements 0.42 0.13 0.04 0.56 0.08
Restructuring and integration costs 0.18 0.27 — 0.45 — Amortization
of intangible assets related to acquisitions 0.16 0.13
0.07 0.29 0.13 Adjusted earnings per
diluted common share $ 0.88 $ 0.70 $ 1.19 $
1.58 $ 2.33
Three Months Ended
Six Months Ended June 30, Mar.
31, June 30, June 30, June
30, (Amounts in thousands, except per share data)
2016
2016 2015 2016 2015 Capital
Markets Net revenues: Net revenues – U.S. GAAP basis $
156,739 $ 141,649 $ 146,164 $ 298,388 $ 288,331 Adjustments:
Revenue related to noncontrolling interests (11) (3,295 ) (1,349 )
(187 ) (4,644 ) (6,319 ) Adjusted net revenues $ 153,444 $
140,300 $ 145,977 $ 293,744 $ 282,012
Operating expenses: Operating expenses – U.S. GAAP
basis $ 152,028 $ 138,855 $ 123,687 $ 290,883 $ 239,890
Adjustments: Expenses related to noncontrolling interests (11) (720
) (600 ) (869 ) (1,320 ) (2,171 ) Compensation from
acquisition-related agreements (10,062 ) (3,306 ) (904 ) (13,368 )
(1,941 ) Restructuring and integration costs (3,433 ) (6,764 ) —
(10,197 ) — Amortization of intangible assets related to
acquisitions (2,707 ) (1,909 ) (263 ) (4,616 ) (526 ) Adjusted
operating expenses $ 135,106 $ 126,276 $ 121,651
$ 261,382 $ 235,252
Segment pre-tax
operating income: Segment pre-tax operating income – U.S. GAAP
basis $ 4,711 $ 2,794 $ 22,477 $ 7,505 $ 48,441 Adjustments:
Revenue related to noncontrolling interests (11) (3,295 ) (1,349 )
(187 ) (4,644 ) (6,319 ) Expenses related to noncontrolling
interests (11) 720 600 869 1,320 2,171 Compensation from
acquisition-related agreements 10,062 3,306 904 13,368 1,941
Restructuring and integration costs 3,433 6,764 — 10,197 —
Amortization of intangible assets related to acquisitions 2,707
1,909 263 4,616 526 Adjusted
segment pre-tax operating income $ 18,338 $ 14,024 $
24,326 $ 32,362 $ 46,760
Asset
Management Operating expenses: Operating expenses – U.S.
GAAP basis $ 11,946 $ 11,259 $ 14,520 $ 23,205 $ 28,896
Adjustments: Compensation from acquisition-related agreements — — —
— (214 ) Restructuring and integration costs — (9 ) — (9 ) —
Amortization of intangible assets related to acquisitions (1,387 )
(1,387 ) (1,510 ) (2,774 ) (3,020 ) Adjusted operating expenses $
10,559 $ 9,863 $ 13,010 $ 20,422 $
25,662
Segment pre-tax operating income:
Segment pre-tax operating income – U.S. GAAP basis $ 1,798 $ 648 $
3,382 $ 2,446 $ 8,710 Adjustments: Compensation from
acquisition-related agreements — — — — 214 Restructuring and
integration costs — 9 — 9 — Amortization of intangible assets
related to acquisitions 1,387 1,387 1,510
2,774 3,020 Adjusted segment pre-tax operating income
$ 3,185 $ 2,044 $ 4,892 $ 5,229 $
11,944
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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