FBR & Co. Reports Third Quarter 2015 Financial Results
Declares $0.20 per Share Quarterly Cash Dividend
Financial Highlights for the three months ended September 30, 2015:
- Net revenues of $25.6 million
- Net loss of $3.4 million, or $0.43 per share
- On September 1, 2015, completed the acquisition of MLV& Co.
- Repurchased 483 thousand shares at a total cost of $10.9 million
- On October 19, 2015, FBR's Board approved an increase in the Company's available repurchase authorization to 1.0 million shares
ARLINGTON, Va., Oct. 20, 2015 (GLOBE NEWSWIRE) -- FBR & Co. (NASDAQ:FBRC) ("FBR" or the "Company"), a leading investment bank serving the middle market, today reported a net loss of $3.4 million, or $0.43 per share, for the third quarter of 2015, compared to net income of $3.5 million, or $0.31 per diluted share, for the third quarter of 2014 and net income of $2.9 million, or $0.32 per diluted share, for the second quarter of 2015. For the first nine months of 2015, FBR reported a net loss of $3.1 million, or $0.37 per share, compared to net income of $16.1 million, or $1.36 per diluted share, for the same period in 2014.
"The market for new issue equities continued to be challenging in the third quarter particularly within some of our key industry sectors. Additionally, increased market volatility added to the challenging conditions leading to a difficult revenue quarter," said Richard J. Hendrix, chairman and chief executive officer. "As we navigate this weak environment, we continue to focus on our strategic efforts - adding depth to our healthcare business, strengthening our equity capital markets presence through the addition of a market-leading ATM product offering, and continuing our accretive share buyback program."
Pre-tax operating loss for the third quarter of 2015 was $6.3 million, compared to operating income of $3.3 million for the third quarter of 2014 and $4.4 million for the second quarter of 2015. Third quarter 2015 revenues were $25.6 million, compared to $42.1 million for the third quarter of 2014 and $44.3 million for the second quarter of 2015.
For the first nine months of 2015, the Company's pre-tax operating loss was $5.8 million on revenue of $96.9 million, compared to pre-tax operating income of $21.3 million on revenue of $153.6 million for the same period in 2014.
Composition of Revenues
Investment Banking
Investment banking revenue was $14.8 million for the third quarter of 2015, compared to $29.3 million for the third quarter of 2014 and $29.7 million for the second quarter of 2015. Third quarter revenue was generated by 9 client engagements, representing $1.2 billion in transaction value. For the first nine months of 2015, investment banking revenue was $57.2 million, compared to $101.7 million for the same period of 2014. The decline in the first nine month's revenue versus the prior year primarily reflects the completion of fewer sole-managed private transactions.
Institutional Brokerage
Net revenue generated in institutional brokerage, inclusive of securities lending, was $13.2 million for the third quarter of 2015, compared to $13.1 million for the third quarter of 2014 and $14.3 million for the second quarter of 2015. For the first nine months of 2015, institutional brokerage revenue was $41.2 million, compared to $42.9 million for the same period in 2014.
Investment Income, Net Interest Income and Dividends
The Company recognized an investment loss, including interest and dividends, of $2.4 million for the third quarter of 2015, compared to a loss of $0.3 million for the third quarter of 2014 and income of $0.3 million for the second quarter of 2015. For the first nine months of 2015, investment loss, including interest and dividends was $1.5 million, compared to investment income of $9.0 million for the same period in 2014.
Expenses
Non-compensation fixed expenses for the third quarter 2015 totaled $10.6 million, including a one-time expense of $0.7 million related to the acquisition of MLV& Co., compared to $10.0 million for the third quarter of 2014 and $9.6 million for the second quarter of 2015.
Compensation and benefits expense for the third quarter 2015 was $17.6 million, compared to $23.8 million for the third quarter of 2014 and $24.3 million for the second quarter of 2015. The compensation-to-net revenue ratio was 69 percent in the third quarter and 62 percent for the first nine months of 2015. This compares to 56 percent and 57 percent in comparable periods in 2014.
Employees
At September 30, 2015, the Company had 304 full-time employees, compared to 293 at June 30, 2015 and 307 at September 30, 2014.
Share Repurchase Activity
During the third quarter, the Company repurchased 483 thousand shares of its common stock at an average price of $22.51 per share. For the first nine months of 2015, FBR has repurchased 1.6 million shares at an average price per share of $23.84 for a total of $37.5 million.
Earlier this week, the Board approved an increase in the Company's available repurchase authorization to a total of 1.0 million shares. This authorization represents approximately 14 percent of the Company's total outstanding shares. Since 2010, FBR has repurchased 11.1 million shares returning capital of over $217 million to shareholders.
Quarterly Dividend
The Board of Directors also declared a quarterly cash dividend of $0.20 per common share to be paid November 27, 2015 to all shareholders of record as of the close of business on November 2, 2015. It is the Company's expectation that it will maintain a program of paying dividends on a quarterly basis, subject to Board approval.
Balance Sheet
As of September 30, 2015, FBR continues to maintain an unlevered and transparent balance sheet, with cash and cash equivalents of $64.2 million, compared to $71.2 million as of June 30, 2015.
Shareholders' equity as of September 30, 2015 was $223 million, and tangible book value per share was $28.47 based on 7.627 million shares outstanding, compared to shareholders' equity of $235 million, and tangible book value per share of $28.52 as of June 30, 2015.
Conference Call
Investors wishing to listen to the earnings call at 9:00 A.M. U.S. EDT, Wednesday, October 21, 2015, may do so via the Web or conference call at:
Webcast link: http://edge.media-server.com/m/p/n992nwcu
Conference call dial-in number (domestic, toll-free): 855.425.4204
Conference call dial-in number (international): 484.756.4245
Access code: 48797153
About FBR
FBR & Co. (Nasdaq:FBRC) provides investment banking, merger and acquisition advisory, institutional brokerage, and research services through its subsidiaries FBR Capital Markets & Co. and MLV & Co. FBR focuses capital and financial expertise on the following industry sectors: consumer; energy & natural resources; financial institutions; healthcare; insurance; industrials; real estate; and technology, media & telecom. FBR is headquartered in the Washington, D.C. metropolitan area with offices throughout the United States. For more information, please visit www.fbr.com.
Statements in this release concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates and any other guidance on present or future periods constitute forward-looking statements. These forward-looking statements are subject to a number of factors, risks and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances. These factors include, but are not limited to, the effect of demand for public and private securities offerings, activity in the secondary securities markets, interest rates, the risks associated with merchant banking investments, the realization of gains and losses on principal investments, available technologies, competition for business and personnel, and general economic, political and market conditions. Financial results may fluctuate substantially from quarter-to-quarter depending on the number, size and timing of completed transactions. We have experienced, and expect to experience in the future, significant variations in our revenues and results of operations and, as a result, are unlikely to achieve steady and predictable earnings on a quarterly basis. For a discussion of these and other risks and important factors that could affect FBR's future results and financial condition, see "Risk Factors" in Part I, Item 1A and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014; and other items throughout the Company's Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Financial data follows.
| FBR & CO. | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (Dollars in thousands, except per share amounts) | ||||
| (Unaudited) | ||||
|
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| REVENUES: | ||||
| Investment banking: | ||||
| Capital raising | $ 14,626 | $ 27,137 | $ 51,737 | $ 95,765 |
| Advisory | 150 | 2,152 | 5,442 | 5,947 |
| Institutional brokerage | 11,176 | 11,946 | 35,860 | 41,680 |
| Net investment income | 777 | 3,075 | 7,806 | 16,000 |
| Interest | 8,394 | 4,861 | 23,387 | 5,415 |
| Dividends & other | 168 | 226 | 631 | 806 |
| Total revenues | 35,291 | 49,397 | 124,863 | 165,613 |
| Interest expense | 9,711 | 7,300 | 27,932 | 12,060 |
| Revenues, net of interest expense | 25,580 | 42,097 | 96,931 | 153,553 |
| NON-INTEREST EXPENSES: | ||||
| Compensation and benefits | 17,604 | 23,771 | 59,835 | 87,141 |
| Professional services | 2,835 | 3,663 | 9,647 | 11,025 |
| Business development | 2,293 | 2,764 | 6,824 | 8,189 |
| Clearing and brokerage fees | 1,438 | 1,155 | 3,997 | 3,516 |
| Occupancy and equipment | 3,169 | 3,067 | 9,330 | 9,222 |
| Communications | 2,532 | 2,873 | 8,119 | 8,621 |
| Other operating expenses | 2,018 | 1,496 | 4,933 | 4,541 |
| Total non-interest expenses | 31,889 | 38,789 | 102,685 | 132,255 |
| (Loss) income before income taxes | (6,309) | 3,308 | (5,754) | 21,298 |
| Income tax (benefit) provision | (2,881) | (193) | (2,703) | 5,211 |
| Net (loss) income | $ (3,428) | $ 3,501 | $ (3,051) | $ 16,087 |
| Basic (loss) earnings per share | $ (0.43) | $ 0.34 | $ (0.37) | $ 1.51 |
| Diluted (loss) earnings per share | $ (0.43) | $ 0.31 | $ (0.37) | $ 1.36 |
| Weighted average shares - basic | 7,899 | 10,171 | 8,266 | 10,642 |
| Weighted average shares - diluted | 7,899 | 11,419 | 8,266 | 11,798 |
| Cash dividends per common share | $ -- | $ -- | $ 0.20 | $ -- |
| FBR & CO. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (Dollars in thousands, except per share amounts) | ||
| (Unaudited) | ||
| ASSETS |
September 30, 2015 |
December 31, 2014 |
| Cash and cash equivalents | $ 64,196 | $ 108,962 |
| Receivables: | ||
| Securities borrowed | 760,190 | 594,674 |
| Due from brokers, dealers and clearing organizations | 89,256 | 94,489 |
| Customers | 3,707 | 3,349 |
| Other | 7,812 | 5,227 |
| Financial instruments owned, at fair value | 115,660 | 166,047 |
| Other investments, at cost | 7,000 | 7,000 |
| Goodwill and intangibles | 5,858 | 4,921 |
| Furniture, equipment and leasehold improvements, net | 15,427 | 15,388 |
| Deferred tax assets, net of valuation allowance | 31,654 | 28,648 |
| Prepaid expenses and other assets | 5,161 | 6,392 |
| Total assets | $ 1,105,921 | $ 1,035,097 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Liabilities: | ||
| Securities loaned | $ 759,364 | $ 595,717 |
| Securities sold but not yet purchased, at fair value | 82,553 | 121,310 |
| Accrued compensation and benefits | 19,587 | 34,571 |
| Accounts payable, accrued expenses and other liabilities | 21,451 | 23,093 |
| Total liabilities | 882,955 | 774,691 |
| Shareholders' equity: | ||
| Common stock | 7 | 8 |
| Additional paid-in capital | 266,918 | 302,720 |
| Restricted stock units | 35,811 | 34,353 |
| Accumulated other comprehensive income | -- | 44 |
| Accumulated deficit | (79,770) | (76,719) |
| Total shareholders' equity | 222,966 | 260,406 |
| Total liabilities and shareholders' equity | $ 1,105,921 | $ 1,035,097 |
| Book Value per Share | $29.23 | $29.18 |
| Tangible Book Value per Share | $28.47 | $28.63 |
| Shares Outstanding (in thousands) | 7,627 | 8,923 |
| FBR & CO. | |||||
| Financial & Statistical Supplement - Operating Results | |||||
| (Dollars in thousands) | |||||
| (Unaudited) | |||||
| Q-3 15 | Q-2 15 | Q-1 15 | Q-4 14 | Q-3 14 | |
| Revenues, net of interest expense | $ 25,580 | $ 44,256 | $ 27,095 | $ 28,572 | $ 42,097 |
| Expenses: | |||||
| Variable | 5,712 | 17,094 | 5,414 | 4,560 | 13,214 |
| Fixed | 26,178 | 22,764 | 25,524 | 27,950 | 25,575 |
| Income (loss) before income taxes | (6,309) | 4,398 | (3,843) | (3,938) | 3,308 |
| Income tax provision (benefit) | (2,881) | 1,499 | (1,321) | (4,870) | (193) |
| Net income (loss) | $ (3,428) | $ 2,899 | $ (2,522) | $ 932 | $ 3,501 |
| Return on equity (trailing twelve months) | -0.9% | 1.8% | 3.3% | 6.2% | 8.6% |
| Fixed expenses | $ 26,178 | $ 22,764 | $ 25,524 | $ 27,950 | $ 25,575 |
| Less: Non-cash expenses1 | 2,373 | 1,134 | 2,398 | 2,593 | 2,406 |
| Corporate transaction costs2 | 691 | -- | -- | 1,132 | -- |
| Core fixed costs3 | $ 23,114 | $ 21,630 | $ 23,126 | $ 24,225 | $ 23,169 |
| Statistical Data | |||||
| Revenues per employee (annualized) | $ 337 | $ 604 | $ 374 | $ 381 | $ 548 |
| Employee count | 304 | 293 | 290 | 300 | 307 |
| 1 Non-cash expenses include compensation costs associated with stock-based awards and amortization of intangibles. | |||||
| 2 Corporate transaction costs in Q3 2015 include non-recurring costs related to a business combination and in Q4 2014 include non-recurring costs related to moving into new office space. | |||||
| 3 Core fixed costs is a non-GAAP measurement used by management to analyze and assess the Company's fixed operating costs. Management believes that this non-GAAP measurement assists investors in understanding the impact of the items noted in footnotes 1 and 2 on the performance of the Company. | |||||
| A limitation of utilizing this non-GAAP measure is that the GAAP accounting effects of these items do in fact reflect the underlying financial results of the Company and these effects should not be ignored in evaluating and analyzing the Company's financial results. Therefore, management believes fixed expenses on a GAAP basis and core fixed costs on a non-GAAP basis should be considered together. | |||||
CONTACT: Media:
Shannon Hawkins
703.469.1190
shawkins@fbr.com
Investors:
Linda E. Eddy
703.312.9715
leddy@fbr.com
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