Piper Jaffray Companies (NYSE: PJC) today announced its
financial results for the quarter ended September 30,
2014.
Financial Highlights
- Adjusted net income from continuing
operations(1) was $16.9 million, or $1.03 per diluted common
share(1), in the third quarter of 2014, compared to $11.6 million,
or $0.72 per diluted common share, in the third quarter of 2013,
and $20.5 million, or $1.25 per diluted common share, in the second
quarter of 2014.
- Adjusted net revenues from continuing
operations(1) were $155.9 million in the third quarter of 2014,
compared to $125.0 million and $166.7 million in the third quarter
of 2013 and the second quarter of 2014, respectively.
- Advisory services revenues of $66.3
million in the third quarter of 2014 and $145.7 million in the
first nine months of 2014 were both records.
- Adjusted pre-tax operating margin(1)
was 17.3% in the third quarter of 2014, compared to 13.9% and 19.2%
in the third quarter of 2013 and the second quarter of 2014,
respectively.
- Assets under management were $12.2
billion at September 30, 2014, compared to $10.6 billion in
the year-ago period and $12.6 billion at the end of the second
quarter of 2014.
- Rolling 12 month return on average
common shareholders' equity increased to 10.2% at
September 30, 2014, compared to 4.1% at September 30,
2013. Our rolling 12 month return on average tangible common
shareholders' equity(2) improved to 15.2% at September 30,
2014.
- Book value per share increased 8.5%
from September 30, 2013 to $53.26 a share at
September 30, 2014.
Three Months Ended Percent
Inc/(Dec) Nine Months Ended (Amounts in thousands,
except per share data)
Sept. 30, June 30,
Sept. 30, 3Q '14 3Q '14 Sept.
30, Sept. 30, Percent 2014
2014 2013 vs. 2Q '14 vs. 3Q '13
2014 2013 Inc/(Dec) As
Adjusted(1) Net revenues
$ 155,850 $
166,698 $ 125,023 (6.5 )% 24.7 %
$ 484,045 $ 333,758
45.0 % Net income from continuing operations
$ 16,885
$ 20,494 $ 11,646 (17.6 )% 45.0 %
$ 57,414 $ 29,094
97.3 % Earnings per diluted common share from continuing operations
$ 1.03 $ 1.25 $ 0.72 (17.6 )% 43.1 %
$
3.52 $ 1.71 105.8 %
U.S. GAAP Net revenues
$ 159,426 $ 170,031 $ 128,314 (6.2 )% 24.2 %
$
497,590 $ 337,619 47.4 % Net income from continuing
operations
$ 14,668 $ 18,213 $ 6,851 (19.5 )% 114.1 %
$ 50,629 $ 21,877 131.4 % Earnings per diluted common
share from continuing operations
$ 0.90 $ 1.11 $ 0.42
(18.9 )% 114.3 %
$ 3.11 $ 1.29 141.1 % Earnings per
diluted common share
$ 0.90 $ 1.11 $ 0.33 (18.9 )%
172.7 %
$ 3.11 $ 1.06 193.4 % Pre-tax operating
margin from continuing operations
16.1 % 17.9 % 9.4 %
17.9 % 9.9 %
(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 2014, on a U.S. GAAP basis, net
revenues from continuing operations were $159.4 million, and net
income from continuing operations was $14.7 million, or $0.90 per
diluted common share.
“Our results for the third quarter continue to build on our
strong performance throughout the year,” said Andrew S. Duff, Chief
Executive Officer and Chairman, “Record revenues in our Advisory
business reflect the investments we have made in this business over
the past several years and solid progress by our Investment Banking
teams.”
Third Quarter Results from Continuing Operations – 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
2014, adjusted net revenues were $155.9 million, up 25% compared to
$125.0 million in the third quarter of 2013 due primarily to higher
advisory services revenues. Adjusted net revenues decreased 7%
compared to the second quarter of 2014 due to lower equity and debt
financing revenues, partially offset by higher advisory services
revenues.
For the third quarter of 2014, adjusted compensation and
benefits expenses were $95.9 million, up 22% compared to the third
quarter of 2013 due to improved financial results. Adjusted
compensation and benefits expenses decreased 6% compared to the
second quarter of 2014.
For the third quarter of 2014, adjusted compensation and
benefits expenses were 61.5% of adjusted net revenues, compared to
62.7% and 61.0% for the third quarter of 2013 and the second
quarter of 2014, respectively. The adjusted compensation ratio
decreased compared to the year-ago period due to an increased
revenue base.
Adjusted non-compensation expenses were $33.1 million for the
third quarter of 2014, up 14% compared to the year-ago period and
essentially flat compared to the second quarter of 2014. Adjusted
non-compensation expenses were higher compared to the third quarter
of 2013 due primarily to one- time incremental occupancy costs
related to our office space in New York City, higher third party
marketing fees associated with our asset management business, and
higher professional fees.
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. The operating results of our Hong Kong capital
markets business, which we shut down in 2012, and FAMCO, an asset
management subsidiary sold in the second quarter of 2013, are
presented as discontinued operations for all periods presented.
Capital MarketsFor the quarter, Capital Markets generated
adjusted pre-tax operating income of $19.8 million, compared to
$9.8 million and $23.1 million in the third quarter of 2013 and the
second quarter of 2014, respectively.
Adjusted net revenues were $135.9 million, up 27% compared to
the year-ago period and down 6% from the second quarter of
2014.
- Equity financing revenues of $14.3
million decreased 53% and 68% compared to the third quarter of 2013
and the second quarter of 2014, respectively. Revenues decreased
compared to both periods due to fewer completed transactions and
lower revenue per transaction.
- Debt financing revenues were $14.4
million, up 13% compared to the year-ago period due to more
completed transactions, and down 28% compared to the second quarter
of 2014 due to fewer completed transactions.
- Advisory services revenues were $66.3
million, up 228% and 67% compared to the third quarter of 2013 and
the second quarter of 2014, respectively. Revenues increased
compared to both periods due to more completed transactions and
higher revenue per transaction.
- Equity institutional brokerage revenues
of $16.7 million decreased 27% compared to the third quarter of
2013 due to lower client trading volumes, the absence of block
trades during the quarter and losses from our equity strategic
trading activities. Revenues decreased 9% compared to the second
quarter of 2014 due to lower client trading volumes and losses from
our equity strategic trading activities.
- Fixed income institutional brokerage
revenues were $22.7 million, up 33% and 8% compared to the third
quarter of 2013 and the second quarter of 2014, respectively.
Revenues increased compared to the year-ago period due primarily to
higher trading gains.
- Management and performance fees earned
from managing our alternative asset management funds were $1.4
million, compared to $1.1 million in the year-ago period and
essentially flat compared to the sequential quarter.
- Adjusted investment income, which
includes 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 $1.6
million, compared to $4.6 million in the year-ago period and $1.7
million in the second quarter of 2014. The decrease compared to the
third quarter of 2013 was due to lower gains on our merchant
banking investments.
- Long-term financing expenses, which
primarily represents interest paid on the firm's variable rate
senior notes, were $1.6 million, down slightly compared to $1.8
million and $1.7 million in the third quarter of 2013 and the
second quarter of 2014, respectively.
- Adjusted operating expenses for the
third quarter of 2014 were $116.1 million, up 19% compared to the
third quarter of 2013. The increase primarily resulted from higher
compensation expenses due to improved operating results and
business expansion. Compared to the second quarter of 2014,
adjusted operating expenses decreased 5% due to lower compensation
expenses.
- Adjusted segment pre-tax operating
margin was 14.6% compared to 9.1% in the year-ago period and 15.9%
in the second quarter of 2014. Adjusted pre-tax operating margin
improved compared to the third quarter of 2013 due to higher net
revenues and decreased compared to the sequential quarter due to
lower net revenues.
Asset ManagementFor the quarter ended September 30,
2014, Asset Management generated adjusted pre-tax operating income
of $7.1 million, compared to $7.7 million and $8.9 million in the
third quarter of 2013 and the second quarter of 2014,
respectively.
Net revenues were $20.0 million, up 11% compared to the third
quarter of 2013 and down 9% compared to the second quarter of 2014.
The increase compared to the year-ago period was due to higher
management fees from increased assets under management (AUM) driven
by net market appreciation. Net revenues declined compared to the
sequential quarter due to lower investment income, and lower
management fees from decreased AUM.
- Adjusted operating expenses for the
current quarter were $12.8 million, up 24% compared to the year-ago
period due to higher compensation and non-compensation expenses,
and down slightly compared to the second quarter of 2014.
- Adjusted segment pre-tax operating
margin was 35.7%, compared to 42.6% in the year-ago period and
40.7% in the second quarter of 2014. Adjusted segment pre-tax
operating margin declined relative to the third quarter of 2013 due
to higher non-compensation expenses, and declined from the
sequential quarter due to lower investment income.
- AUM was $12.2 billion at the end of the
third quarter of 2014, compared to $10.6 billion in the year-ago
period and $12.6 billion at the end of the second quarter of 2014.
The decrease in AUM compared to sequential quarter was driven by
net market depreciation.
Additional Shareholder
Information*
For the Quarter Ended Sept. 30, 2014
June 30, 2014 Sept. 30, 2013 Full time
employees 1,029 999 1,002
Equity financings # of
transactions
15 33 27 Capital raised
$3.5 billion
$9.2 billion $4.8 billion
Negotiated tax-exempt issuances #
of transactions
85 112 61 Par value
$1.8 billion $2.4
billion $1.3 billion
Mergers & acquisitions # of
transactions
22 16 11 Aggregate deal value
$4.7
billion $3.7 billion $1.2 billion
Asset Management AUM
$12.2 billion $12.6 billion $10.6 billion
Common
shareholders’ equity $804.6 million $787.8 million
$707.4 million
Number of common shares outstanding (in
thousands) 15,109 14,995 14,404
Rolling 12 month
return on average common shareholders’ equity ** 10.2%
9.2% 4.1%
Rolling 12 month return on average tangible common
shareholders’ equity † 15.2% 13.9% 6.1%
Book value
per share $53.26 $52.54 $49.11
Tangible book value
per share ‡ $37.05 $36.06 $31.56 * Number of
employees, transaction data, and AUM reflect continuing operations;
other numbers reflect continuing and discontinued results.
** 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:
(Amounts in thousands) As of As of As
of Sept. 30, 2014 June 30, 2014 Sept. 30, 2013 Average common
shareholders’ equity $ 759,971 $ 740,280 $ 730,347 Deduct: average
goodwill and identifiable intangible assets 248,568 249,096
243,884 Average tangible common shareholders’
equity $ 511,403 $ 491,184 $ 486,463
‡ 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:
(Amounts in thousands) As of As of As of Sept. 30, 2014 June
30, 2014 Sept. 30, 2013 Common shareholders’ equity $ 804,633 $
787,848 $ 707,365 Deduct: goodwill and identifiable intangible
assets 244,854 247,172 252,761 Tangible
common shareholders’ equity $ 559,779 $ 540,676 $
454,604
Conference CallAndrew 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., October 23 at 9 a.m. ET (8 a.m. CT). The earnings
release will be available on or after October 23 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 #10199975. 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 October 23
at the same Web address or by calling (855)859-2056 and referencing
reservation #10199975.
About Piper JaffrayPiper 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 StatementsThis
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), anticipated financial results
generally (including expectations regarding our non-compensation
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), our strategic priorities (including growth in public
finance, asset management, and corporate advisory), the market
positioning of and prospects for our public finance business, 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 capital markets 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;
- interest rate volatility, especially if
the changes are rapid or severe, could 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; 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, 2013 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, 2013, 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.
© 2014 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 (Amounts in thousands, except per share
data)
Sept. 30, June 30, Sept.
30, 3Q '14 3Q '14 Sept. 30,
Sept. 30, Percent 2014 2014 2013
vs. 2Q '14 vs. 3Q '13 2014 2013
Inc/(Dec) Revenues: Investment banking $ 94,911 $
103,813 $ 62,848 (8.6 )% 51.0 % $ 287,198 $ 156,924 83.0 %
Institutional brokerage 35,923 34,528 35,318 4.0 1.7 114,485
100,076 14.4 Asset management 21,595 22,266 18,701 (3.0 ) 15.5
64,820 55,584 16.6 Interest 10,828 12,448 12,360 (13.0 ) (12.4 )
36,935 35,469 4.1 Investment income 2,690 2,921 5,279
(7.9 ) (49.0 ) 12,379 8,285 49.4 Total
revenues 165,947 175,976 134,506 (5.7 ) 23.4 515,817 356,338 44.8
Interest expense 6,521 5,945 6,192 9.7
5.3 18,227 18,719 (2.6 ) Net
revenues 159,426 170,031 128,314 (6.2 ) 24.2
497,590 337,619 47.4
Non-interest expenses: Compensation and benefits 97,180
103,076 79,426 (5.7 ) 22.4 300,745 210,531 42.9 Occupancy and
equipment 8,312 7,061 6,509 17.7 27.7 22,151 18,869 17.4
Communications 5,661 5,432 5,778 4.2 (2.0 ) 17,048 16,040 6.3 Floor
brokerage and clearance 1,905 1,788 2,109 6.5 (9.7 ) 5,527 6,506
(15.0 ) Marketing and business development 6,827 6,709 5,447 1.8
25.3 19,787 16,384 20.8 Outside services 9,155 9,914 8,082 (7.7 )
13.3 27,837 23,745 17.2 Restructuring and integration costs — —
3,823 N/M N/M — 3,823 N/M Intangible asset amortization expense
2,318 2,318 2,899 — (20.0 ) 6,954 6,221 11.8 Other operating
expenses 2,376 3,316 2,181 (28.3 ) 8.9
8,719 1,939 349.7 Total non-interest expenses
133,734 139,614 116,254 (4.2 ) 15.0
408,768 304,058 34.4
Income from
continuing operations before income tax expense 25,692 30,417
12,060 (15.5 ) 113.0 88,822 33,561 164.7 Income tax expense
8,596 10,049 2,886 (14.5 ) 197.9 28,472
10,130 181.1
Income from continuing
operations 17,096 20,368 9,174 (16.1 ) 86.4 60,350 23,431 157.6
Discontinued operations: Loss from discontinued
operations, net of tax — — (1,529 ) N/M N/M —
(3,921 ) N/M
Net income 17,096 20,368 7,645 (16.1 )
123.6 60,350 19,510 209.3 Net income applicable to
noncontrolling interests 2,428 2,155 2,323
12.7 4.5 9,721 1,554 525.5
Net income applicable to Piper Jaffray Companies (a)
$ 14,668 $ 18,213 $ 5,322 (19.5 )% 175.6 % $
50,629 $ 17,956 182.0 %
Net income
applicable to Piper Jaffray Companies’ common shareholders (a)
$ 13,552 $ 16,717 $ 4,826 (18.9 )% 180.8 % $
46,386 $ 16,163 187.0 %
Amounts applicable
to Piper Jaffray Companies Net income from continuing
operations $ 14,668 $ 18,213 $ 6,851 (19.5 )% 114.1 % $ 50,629 $
21,877 131.4 % Net loss from discontinued operations — —
(1,529 ) N/M N/M — (3,921 ) N/M Net income applicable
to Piper Jaffray Companies $ 14,668 $ 18,213 $ 5,322 (19.5 )% 175.6
% $ 50,629 $ 17,956 182.0 %
Earnings/(loss) per basic
common share Income from continuing operations $ 0.90 $ 1.12 $
0.42 (19.6 )% 114.3 % $ 3.12 $ 1.29 141.9 % Loss from discontinued
operations — — (0.09 ) N/M N/M — (0.23 ) N/M
Earnings per basic common share $ 0.90 $ 1.12 $ 0.33 (19.6 )% 172.7
% $ 3.12 $ 1.06 194.3 %
Earnings/(loss) per diluted
common share Income from continuing operations $ 0.90 $ 1.11 $
0.42 (18.9 )% 114.3 % $ 3.11 $ 1.29 141.1 % Loss from discontinued
operations — — (0.09 ) N/M N/M — (0.23 ) N/M
Earnings per diluted common share $ 0.90 $ 1.11 $ 0.33 (18.9 )%
172.7 % $ 3.11 $ 1.06 193.4 %
Weighted average number of
common shares outstanding Basic 15,066 14,958 14,621 0.7 % 3.0
% 14,880 15,271 (2.6 )% Diluted 15,129 15,013 14,626 0.8 % 3.4 %
14,934 15,284 (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 from Continuing Operations (U.S. GAAP –
Unaudited) Three Months Ended Percent
Inc/(Dec) Nine Months Ended (Dollars in thousands)
Sept. 30, June 30, Sept. 30,
3Q '14 3Q '14 Sept. 30, Sept.
30, Percent 2014 2014 2013 vs.
2Q '14 vs. 3Q '13 2014 2013
Inc/(Dec) Capital Markets Investment banking
Financing Equities $ 14,269 $ 44,058 $ 30,010 (67.6 )% (52.5 )% $
93,628 $ 66,085 41.7 % Debt 14,435 20,174 12,808 (28.4 ) 12.7
48,148 51,971 (7.4 ) Advisory services 66,320 39,695
20,215 67.1 228.1 145,743 39,165
272.1 Total investment banking 95,024 103,927 63,033 (8.6 )
50.8 287,519 157,221 82.9 Institutional sales and trading
Equities 16,711 18,366 22,958 (9.0 ) (27.2 ) 59,337 65,077 (8.8 )
Fixed income 22,737 21,085 17,083 7.8
33.1 69,060 49,732 38.9 Total
institutional sales and trading 39,448 39,451 40,041 — (1.5 )
128,397 114,809 11.8 Management and performance fees 1,387
1,388 1,094 (0.1 ) 26.8 4,512 2,677 68.5 Investment income
5,224 4,998 7,892 4.5 (33.8 ) 20,600 14,213 44.9 Long-term
financing expenses (1,613 ) (1,705 ) (1,797 ) (5.4 ) (10.2 ) (5,058
) (5,618 ) (10.0 ) Net revenues 139,470 148,059 110,263 (5.8
) 26.5 435,970 283,302 53.9 Operating expenses 119,001
124,691 103,906 (4.6 ) 14.5 364,622
266,301 36.9 Segment pre-tax operating
income $ 20,469 $ 23,368 $ 6,357 (12.4 )%
222.0 $ 71,348 $ 17,001 319.7 % Segment
pre-tax operating margin 14.7 % 15.8 % 5.8 % 16.4 % 6.0 %
Asset Management Management and performance fees Management
fees $ 19,738 $ 20,600 $ 17,547 (4.2 )% 12.5 % $ 59,474 $ 52,191
14.0 % Performance fees 470 278 60 69.1
683.3 834 716 16.5 Total management and
performance fees 20,208 20,878 17,607 (3.2 ) 14.8 60,308 52,907
14.0 Investment income/(loss) (252 ) 1,094 444
N/M N/M 1,312 1,410 (7.0 ) Net revenues 19,956
21,972 18,051 (9.2 ) 10.6 61,620 54,317 13.4 Operating
expenses 14,733 14,923 12,348 (1.3 ) 19.3
44,146 37,757 16.9 Segment
pre-tax operating income $ 5,223 $ 7,049 $ 5,703
(25.9 )% (8.4 )% $ 17,474 $ 16,560 5.5 %
Segment pre-tax operating margin 26.2 % 32.1 % 31.6 % 28.4 %
30.5 %
Total Net revenues $ 159,426 $ 170,031 $
128,314 (6.2 )% 24.2 % $ 497,590 $ 337,619 47.4 % Operating
expenses 133,734 139,614 116,254 (4.2 ) 15.0
408,768 304,058 34.4 Pre-tax
operating income $ 25,692 $ 30,417 $ 12,060
(15.5 )% 113.0 % $ 88,822 $ 33,561 164.7 %
Pre-tax operating margin 16.1 % 17.9 % 9.4 % 17.9 % 9.9 %
Segment pre-tax operating income and
segment pre-tax operation margin exclude the results of
discontinued operations.
Piper Jaffray Companies Preliminary
Selected Summary Financial Information from Continuing Operations
(Non-GAAP – Unaudited) (1) Three Months
Ended Percent Inc/(Dec) Nine Months
Ended (Amounts in thousands, except per share data)
Sept. 30, June 30, Sept. 30,
3Q '14 3Q '14 Sept. 30, Sept.
30, Percent 2014 2014 2013 vs.
2Q '14 vs. 3Q '13 2014 2013
Inc/(Dec) Revenues: Investment banking $ 94,911 $
103,813 $ 62,848 (8.6 )% 51.0 % $ 287,198 $ 156,924 83.0 %
Institutional brokerage 35,923 34,528 35,318 4.0 1.7 114,485
100,076 14.4 Asset management 21,595 22,266 18,701 (3.0 ) 15.5
64,820 55,584 16.6 Interest 8,028 9,451 9,605 (15.1 ) (16.4 )
27,835 28,892 (3.7 ) Investment income 859 1,666
3,872 (48.4 ) (77.8 ) 5,106 8,584 (40.5 )
Total revenues 161,316 171,724 130,344 (6.1 ) 23.8 499,444 350,060
42.7 Interest expense 5,466 5,026 5,321
8.8 2.7 15,399 16,302 (5.5 )
Adjusted net revenues (2) $ 155,850 $ 166,698 $
125,023 (6.5 )% 24.7 % $ 484,045 $ 333,758
45.0 %
Non-interest expenses: Adjusted compensation
and benefits (3) $ 95,869 $ 101,660 $ 78,445
(5.7 )% 22.2 % $ 296,729 $ 208,908 42.0 % Ratio of
adjusted compensation and benefits to adjusted net revenues 61.5 %
61.0 % 62.7 % 61.3 % 62.6 % Adjusted non-compensation
expenses (4) $ 33,088 $ 33,042 $ 29,138 0.1 %
13.6 % $ 97,245 $ 81,176 19.8 % Ratio of adjusted
non-compensation expenses to adjusted net revenues 21.2 % 19.8 %
23.3 % 20.1 % 24.3 %
Adjusted income: Adjusted income
from continuing operations before adjusted income tax expense (5) $
26,893 $ 31,996 $ 17,440 (15.9 )% 54.2 % $
90,071 $ 43,674 106.2 % Adjusted operating margin (6)
17.3 % 19.2 % 13.9 % 18.6 % 13.1 %
Adjusted income tax
expense (7) 10,008 11,502 5,794 (13.0 )
72.7 32,657 14,580 124.0
Adjusted net income from continuing operations (8) $ 16,885
$ 20,494 $ 11,646 (17.6 )% 45.0 % $ 57,414
$ 29,094 97.3 % Effective tax rate (9) 37.2 % 35.9 %
33.2 % 36.3 % 33.4 %
Adjusted net income from continuing
operations applicable to Piper Jaffray Companies’ common
shareholders (10) $ 15,600 $ 18,811 $ 10,561
(17.1 )% 47.7 % $ 52,602 $ 26,189 100.9 %
Adjusted earnings per diluted common share from
continuing operations $ 1.03 $ 1.25 $ 0.72
(17.6 )% 43.1 % $ 3.52 $ 1.71 105.8 %
Weighted average number of common shares outstanding Diluted
15,129 15,013 14,626 0.8 % 3.4 % 14,934 15,284 (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."
Piper Jaffray Companies Preliminary
Adjusted Segment Data from Continuing Operations (Non-GAAP –
Unaudited) Three Months Ended
Percent Inc/(Dec) Nine Months Ended
(Dollars in thousands)
Sept. 30, June 30, Sept. 30,
3Q '14 3Q '14 Sept. 30, Sept.
30, Percent 2014 2014 2013 vs.
2Q '14 vs. 3Q '13 2014 2013
Inc/(Dec) Capital Markets Investment banking
Financing Equities $ 14,269 $ 44,058 $ 30,010 (67.6 )% (52.5 )% $
93,628 $ 66,085 41.7 % Debt 14,435 20,174 12,808 (28.4 ) 12.7
48,148 51,971 (7.4 ) Advisory services 66,320 39,695
20,215 67.1 228.1 145,743 39,165
272.1 Total investment banking 95,024 103,927 63,033 (8.6 )
50.8 287,519 157,221 82.9 Institutional sales and trading
Equities 16,711 18,366 22,958 (9.0 ) (27.2 ) 59,337 65,077 (8.8 )
Fixed income 22,737 21,085 17,083 7.8
33.1 69,060 49,732 38.9 Total
institutional sales and trading 39,448 39,451 40,041 — (1.5 )
128,397 114,809 11.8 Management and performance fees 1,387
1,388 1,094 (0.1 ) 26.8 4,512 2,677 68.5 Investment income
1,648 1,665 4,601 (1.0 ) (64.2 ) 7,055 10,352 (31.8 )
Long-term financing expenses (1,613 ) (1,705 ) (1,797 ) (5.4 )
(10.2 ) (5,058 ) (5,618 ) (10.0 ) Adjusted net revenues (2)
135,894 144,726 106,972 (6.1 ) 27.0 422,425 279,441 51.2
Adjusted operating expenses (12) 116,120 121,675
97,217 (4.6 ) 19.4 355,516 258,273 37.7
Adjusted segment pre-tax operating income (5) $
19,774 $ 23,051 $ 9,755 (14.2 )% 102.7
$ 66,909 $ 21,168 216.1 % Adjusted segment
pre-tax operating margin (6) 14.6 % 15.9 % 9.1 % 15.8 % 7.6 %
Asset Management Management and performance fees
Management fees $ 19,738 $ 20,600 $ 17,547 (4.2 )% 12.5 % $ 59,474
$ 52,191 14.0 % Performance fees 470 278 60
69.1 683.3 834 716 16.5 Total
management and performance fees 20,208 20,878 17,607 (3.2 ) 14.8
60,308 52,907 14.0 Investment income/(loss) (252 ) 1,094
444 N/M N/M 1,312 1,410 (7.0 )
Net revenues 19,956 21,972 18,051 (9.2 ) 10.6 61,620 54,317 13.4
Adjusted operating expenses (13) 12,837 13,027
10,366 (1.5 ) 23.8 38,458 31,811 20.9
Adjusted segment pre-tax operating income (13) $
7,119 $ 8,945 $ 7,685 (20.4 )% (7.4 )% $
23,162 $ 22,506 2.9 % Adjusted segment pre-tax
operating margin (6) 35.7 % 40.7 % 42.6 % 37.6 % 41.4 %
Total Adjusted net revenues (2) $ 155,850 $ 166,698 $
125,023 (6.5 )% 24.7 % $ 484,045 $ 333,758 45.0 % Adjusted
operating expenses (12) 128,957 134,702 107,583
(4.3 ) 19.9 393,974 290,084 35.8
Adjusted pre-tax operating income (5) $ 26,893 $
31,996 $ 17,440 (15.9 )% 54.2 % $ 90,071 $
43,674 106.2 % Adjusted pre-tax operating margin (6)
17.3 % 19.2 % 13.9 % 18.6 % 13.1 %
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."
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)
2014 2014
2013 2014 2013 Net revenues: Net
revenues – U.S. GAAP basis $ 159,426 $ 170,031 $ 128,314 $ 497,590
$ 337,619 Adjustments: Revenue related to noncontrolling interests
(11) (3,576 ) (3,333 ) (3,291 ) (13,545 ) (3,861 ) Adjusted net
revenues $ 155,850 $ 166,698 $ 125,023 $
484,045 $ 333,758
Compensation and
benefits: Compensation and benefits – U.S. GAAP basis $ 97,180
$ 103,076 $ 79,426 $ 300,745 $ 210,531 Adjustments: Compensation
from acquisition-related agreements (1,311 ) (1,416 ) (981 ) (4,016
) (1,623 ) Adjusted compensation and benefits $ 95,869 $
101,660 $ 78,445 $ 296,729 $ 208,908
Non-compensation expenses: Non-compensation expenses
– U.S. GAAP basis $ 36,554 $ 36,538 $ 36,828 $ 108,023 $ 93,527
Adjustments: Non-compensation expenses related to noncontrolling
interests (11) (1,148 ) (1,178 ) (968 ) (3,824 ) (2,307 )
Restructuring and integration costs — — (3,823 ) — (3,823 )
Amortization of intangible assets related to acquisitions (2,318 )
(2,318 ) (2,899 ) (6,954 ) (6,221 ) Adjusted non-compensation
expenses $ 33,088 $ 33,042 $ 29,138 $ 97,245
$ 81,176
Income from continuing operations
before income tax expense: Income from continuing operations
before income tax expense – U.S. GAAP basis $ 25,692 $ 30,417 $
12,060 $ 88,822 $ 33,561 Adjustments: Revenue related to
noncontrolling interests (11) (3,576 ) (3,333 ) (3,291 ) (13,545 )
(3,861 ) Expenses related to noncontrolling interests (11) 1,148
1,178 968 3,824 2,307 Compensation from acquisition-related
agreements 1,311 1,416 981 4,016 1,623 Restructuring and
integration costs — — 3,823 — 3,823 Amortization of intangible
assets related to acquisitions 2,318 2,318 2,899
6,954 6,221 Adjusted income from continuing
operations before adjusted income tax expense $ 26,893 $
31,996 $ 17,440 $ 90,071 $ 43,674
Income tax expense: Income tax expense – U.S. GAAP
basis $ 8,596 $ 10,049 $ 2,886 $ 28,472 $ 10,130 Tax effect of
adjustments: Compensation from acquisition-related agreements 510
551 382 1,562 632 Restructuring and integration costs — — 1,487 —
1,487 Amortization of intangible assets related to acquisitions 902
902 1,039 2,623 2,331 Adjusted
income tax expense $ 10,008 $ 11,502 $ 5,794 $
32,657 $ 14,580
Net income from continuing
operations applicable to Piper Jaffray Companies: Net income
from continuing operations applicable to Piper Jaffray Companies –
U.S. GAAP basis $ 14,668 $ 18,213 $ 6,851 $ 50,629 $ 21,877
Adjustments: Compensation from acquisition-related agreements 801
865 599 2,454 991 Restructuring and integration costs — — 2,336 —
2,336 Amortization of intangible assets related to acquisitions
1,416 1,416 1,860 4,331 3,890
Adjusted net income from continuing operations $ 16,885 $
20,494 $ 11,646 $ 57,414 $ 29,094
Net income from continuing operations applicable to Piper
Jaffray Companies' common shareholders: Net income from
continuing operations applicable to Piper Jaffray Companies' common
stockholders – U.S. GAAP basis $ 13,552 $ 16,717 $ 6,213 $ 46,386 $
19,692 Adjustments: Compensation from acquisition-related
agreements 740 794 543 2,248 892 Restructuring and integration
costs — — 2,118 — 2,103 Amortization of intangible assets related
to acquisitions 1,308 1,300 1,687 3,968
3,502 Adjusted net income from continuing operations
applicable to Piper Jaffray Companies' common stockholders $ 15,600
$ 18,811 $ 10,561 $ 52,602 $ 26,189
Earnings per diluted common share from continuing
operations: Earnings per diluted common share – U.S. GAAP basis
$ 0.90 $ 1.11 $ 0.42 $ 3.11 $ 1.29 Adjustments: Compensation from
acquisition-related agreements 0.05 0.05 0.04 0.15 0.06
Restructuring and integration costs — — 0.14 — 0.14 Amortization of
intangible assets related to acquisitions 0.09 0.09
0.12 0.27 0.23 Adjusted earnings per diluted
common share from continuing operations $ 1.03 $ 1.25
$ 0.72 $ 3.52 $ 1.71
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 from continuing operations 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 from continuing
operations 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 from continuing operations 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.
Piper JaffrayInvestor Relations ContactTom Smith,
612-303-6336
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