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MINNEAPOLIS--(BUSINESS WIRE)--Feb. 5, 2015-- Piper Jaffray Companies (NYSE: PJC) today announced its financial results for the quarter and year ended December 31, 2014.

Financial Highlights

(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.

 
  Three Months Ended   Percent Inc/(Dec)   Twelve Months Ended  
Dec. 31,   Sept. 30,   Dec. 31, 4Q '14   4Q '14 Dec. 31,   Dec. 31, Percent
(Amounts in thousands, except per share data) 2014 2014 2013 vs. 3Q '14 vs. 4Q '13 2014 2013 Inc/(Dec)
As Adjusted(1)
Net revenues $ 148,394 $ 155,850 $ 182,643 (4.8 )% (18.8 )% $ 632,439 $ 516,401 22.5 %
Net income from continuing operations $ 14,700 $ 16,885 $ 30,453 (12.9 )% (51.7 )% $ 72,114 $ 59,547 21.1 %
Earnings per diluted common share from continuing operations $ 0.90 $ 1.03 $ 1.91 (12.6 )% (52.9 )% $ 4.42 $ 3.56 24.2 %
Pre-tax operating margin from continuing operations 15.9 % 17.3 % 23.1 % 18.0 % 16.6 %
 
U.S. GAAP
Net revenues $ 150,548 $ 159,426 $ 187,576 (5.6 )% (19.7 )% $ 648,138 $ 525,195 23.4 %
Net income from continuing operations $ 12,543 $ 14,668 $ 27,952 (14.5 )% (55.1 )% $ 63,172 $ 49,829 26.8 %
Earnings per diluted common share from continuing operations $ 0.77 $ 0.90 $ 1.75 (14.4 )% (56.0 )% $ 3.87 $ 2.98 29.9 %
Earnings per diluted common share $ 0.77 $ 0.90 $ 1.70 (14.4 )% (54.7 )% $ 3.87 $ 2.70 43.3 %
Pre-tax operating margin from continuing operations 14.3 % 16.1 % 22.4 % 17.0 % 14.4 %
 

(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 fourth quarter of 2014, on a U.S. GAAP basis, net revenues from continuing operations were $150.5 million, and net income from continuing operations was $12.5 million, or $0.77 per diluted common share.

For the twelve months ended December 31, 2014, net revenues from continuing operations on a U.S. GAAP basis were $648.1 million. Net income from continuing operations on a U.S. GAAP basis was $63.2 million, or $3.87 per diluted common share, in 2014.

"With our strong finish to the year, we produced the best results for our shareholders since we reemerged as a public company a decade ago,” said Andrew S. Duff, Chairman and Chief Executive Officer. “Our prudent management coupled with targeted investments in our businesses generated an ROE of 8.1% for the year, an improvement of nearly 600 basis points over the past three years.”

Fourth Quarter Results from Continuing Operations – Non-GAAP Basis
Throughout 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 Results
For the fourth quarter of 2014, adjusted net revenues were $148.4 million, down 19% compared to $182.6 million in the fourth quarter of 2013 due primarily to lower equity financing revenues, lower asset management performance fees, and lower investment gains from our merchant banking and firm investments. Adjusted net revenues decreased 5% compared to the third quarter of 2014 due to lower advisory services revenues, partially offset by higher equity and debt financing revenues and higher equity institutional brokerage revenues.

For the fourth quarter of 2014, adjusted compensation and benefits expenses were $92.6 million, down 16% compared to the fourth quarter of 2013 due to lower revenues and operating income. Adjusted compensation and benefits expenses decreased 4% compared to the third quarter of 2014.

For the fourth quarter of 2014, adjusted compensation and benefits expenses were 62.4% of adjusted net revenues, compared to 60.6% and 61.5% for the fourth quarter of 2013 and the third quarter of 2014, respectively. The adjusted compensation ratio increased compared to both periods due to a lower revenue base. Our compensation ratio was also higher in the fourth quarter of 2014 as we made adjustments to reflect our business activity for the full year.

Adjusted non-compensation expenses were $32.3 million for the fourth quarter of 2014, up 8% compared to the year-ago period and down slightly compared to the third quarter of 2014. Adjusted non-compensation expenses were higher compared to the fourth quarter of 2013 due primarily to higher third party marketing fees associated with our asset management 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 operating results of our Hong Kong capital markets business, which we shut down in 2012, and FAMCO, an asset management subsidiary sold in 2013, are presented as discontinued operations for all periods presented.

Capital Markets
For the quarter, Capital Markets generated adjusted pre-tax operating income of $18.0 million, compared to $31.1 million and $19.8 million in the fourth quarter of 2013 and the third quarter of 2014, respectively.

Adjusted net revenues were $129.7 million, down 16% and 5% compared to the year-ago period and the third quarter of 2014, respectively.

Asset Management
For the quarter ended December 31, 2014, Asset Management generated adjusted pre-tax operating income of $5.6 million, compared to $11.0 million and $7.1 million in the fourth quarter of 2013 and the third quarter of 2014, respectively.

Net revenues were $18.7 million, down 32% and 6% compared to the fourth quarter of 2013 and the third quarter of 2014, respectively. The decline compared to the year-ago period was due to lower performance fees, the majority of which are recorded in the fourth quarter if earned. Also, investment income/(loss) was a loss of $0.6 million for the current quarter, compared with income of $1.4 million in the fourth quarter of 2013.

Other Matters
In the fourth quarter of 2013, we reversed the full amount of our U.K. subsidiary's deferred tax asset valuation allowance resulting in a $4.0 million, or $0.25 per diluted common share, tax benefit to our results of operations for the quarter.

Full-Year 2014 Results from Continuing Operations – Non-GAAP Basis

Adjusted Consolidated Results
For 2014, adjusted net revenues were $632.4 million, up 23% compared to $516.4 million in 2013 due primarily to higher advisory services revenues.

For 2014, adjusted compensation and benefits expenses were $389.3 million, up 22% compared to 2013, due to improved financial performance. Adjusted compensation and benefits expenses were 61.6% of adjusted net revenues in 2014, down from 61.9% in 2013.

Adjusted non-compensation expenses were $129.5 million in 2014, up 17% compared to 2013. The increase was due to higher expenses from increased business activity, and incremental costs associated with the acquisitions of Seattle-Northwest and Edgeview. Additionally, non-compensation expenses from continuing operations were reduced in 2013 due to the receipt of insurance proceeds for the reimbursement of prior legal settlements.

Business Segment Results

Capital Markets
For 2014, Capital Markets generated adjusted pre-tax operating income of $84.9 million, up 62% from $52.3 million in 2013. Adjusted net revenues were $552.1 million in 2014, up 27% compared to $434.5 million in the prior year, driven by higher advisory services revenues.

Adjusted operating expenses were $467.2 million in 2014, up 22% compared to 2013, due primarily to higher compensation expenses from increased operating results. Adjusted segment pre-tax operating margin increased from 12.0% in 2013 to 15.4% in 2014 due to operating leverage gained from increased revenues.

Asset Management
For 2014, Asset Management generated adjusted pre-tax operating income of $28.8 million, down 14% compared to $33.5 million in 2013. Net revenues were $80.3 million in 2014, down 2% compared to 2013.

Adjusted operating expenses were $51.6 million in 2014, up 7% compared to 2013, due to higher non-compensation expenses. Adjusted segment pre-tax operating margin declined from 40.9% in 2013 to 35.8% in 2014 due to higher non-compensation expenses. Non-compensation expenses were higher due to an increase in third party marketing fees.

Additional Shareholder Information*

 
 
For the Quarter Ended
Dec. 31, 2014   Sept. 30, 2014   Dec. 31, 2013
Full time employees 1,026 1,029 1,026
Equity financings
# of transactions 18 15 26
Capital raised $2.7 billion $3.5 billion $3.8 billion
Negotiated tax-exempt issuances
# of transactions 92 85 97
Par value $1.9 billion $1.8 billion $1.8 billion
Mergers & acquisitions
# of transactions 22 22 15
Aggregate deal value $2.5 billion $4.7 billion $3.0 billion
Asset Management
AUM $11.5 billion $12.2 billion $11.2 billion
Common shareholders’ equity $819.9 million $804.6 million $734.7 million
Number of common shares outstanding (in thousands) 15,265 15,109 14,383
Rolling 12 month return on average common shareholders’ equity ** 8.1% 10.2% 6.2%
Rolling 12 month return on average tangible common shareholders’ equity † 11.8% 15.2% 9.3%
Book value per share $53.71 $53.26 $51.08
Tangible book value per share ‡ $37.82 $37.05 $33.66
 
*   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:
 
  As of   As of   As of
(Amounts in thousands) Dec. 31, 2014 Sept. 30, 2014 Dec. 31, 2013
Average common shareholders’ equity $ 783,425 $ 759,971 $ 728,187
Deduct: average goodwill and identifiable intangible assets 246,598 248,568 244,770
 
Average tangible common shareholders’ equity $ 536,827 $ 511,403 $ 483,417
 
  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) Dec. 31, 2014 Sept. 30, 2014 Dec. 31, 2013
Common shareholders’ equity $ 819,912 $ 804,633 $ 734,676
Deduct: goodwill and identifiable intangible assets 242,536 244,854 250,564
 
Tangible common shareholders’ equity $ 577,376 $ 559,779 $ 484,112
 

Additional Shareholder Information* – Continued

 
 
For the Year Ended
Dec. 31, 2014   Dec. 31, 2013
Equity financings
# of transactions 97 92
Capital raised $20.8 billion $19.9 billion
Negotiated tax-exempt issuances
# of transactions 351 413
Par value $7.7 billion $7.9 billion
Mergers & acquisitions
# of transactions 77 36
Aggregate deal value $13.7 billion $4.8 billion
 

* Number of employees, transaction data, and AUM reflect continuing operations; other numbers reflect continuing and discontinued results.

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., Feb. 5 at 9 a.m. ET (8 a.m. CT). The earnings release will be available on or after Feb. 5 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 #69387923. 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 Feb. 5 at the same Web address or by calling (855)859-2056 and referencing reservation #69387923.

About Piper Jaffray

Piper Jaffray is an investment bank and asset management firm serving clients in the U.S. and internationally. Proven advisory teams combine deep industry, product and sector expertise with ready access to capital. Founded in 1895, the firm is headquartered in Minneapolis and has offices across the United States and in London, Hong Kong and Zurich. www.piperjaffray.com

Cautionary Note Regarding Forward-Looking Statements

This press release and the conference call to discuss the contents of this press release contain forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are subject to significant risks and uncertainties that are difficult to predict. These forward-looking statements cover, among other things, statements made about general economic and market conditions (including the outlook for equity markets and the interest rate environment), the environment and prospects for corporate advisory transactions and capital markets (including our performance in specific sectors), 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), potential acquisitions or strategic hires, 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:

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.

© 2015 Piper Jaffray Companies, 800 Nicollet Mall, Suite 1000, Minneapolis, Minnesota 55402-7020

Piper Jaffray Companies

       

Preliminary Results of Operations (U.S. GAAP – Unaudited)

 
Three Months Ended Percent Inc/(Dec) Twelve Months Ended
Dec. 31,   Sept. 30,   Dec. 31, 4Q '14   4Q '14 Dec. 31,   Dec. 31, Percent
(Amounts in thousands, except per share data) 2014 2014 2013 vs. 3Q '14 vs. 4Q '13 2014 2013 Inc/(Dec)
Revenues:
Investment banking $ 82,613 $ 94,911 $ 91,639 (13.0 )% (9.8 )% $ 369,811 $ 248,563 48.8 %
Institutional brokerage 42,324 35,923 46,572 17.8 (9.1 ) 156,809 146,648 6.9
Asset management 20,242 21,595 27,461 (6.3 ) (26.3 ) 85,062 83,045 2.4
Interest 11,781 10,828 14,940 8.8 (21.1 ) 48,716 50,409 (3.4 )
Investment income 434   2,690   13,281   (83.9 ) (96.7 ) 12,813   21,566   (40.6 )
Total revenues 157,394 165,947 193,893 (5.2 ) (18.8 ) 673,211 550,231 22.4

 

Interest expense 6,846   6,521   6,317   5.0   8.4   25,073   25,036   0.1  
 
Net revenues 150,548   159,426   187,576   (5.6 ) (19.7 ) 648,138   525,195   23.4  
 
Non-interest expenses:
Compensation and benefits 93,765 97,180 111,933 (3.5 ) (16.2 ) 394,510 322,464 22.3
Occupancy and equipment 6,080 8,312 6,624 (26.9 ) (8.2 ) 28,231 25,493 10.7
Communications 5,684 5,661 5,391 0.4 5.4 22,732 21,431 6.1
Floor brokerage and clearance 2,094 1,905 1,764 9.9 18.7 7,621 8,270 (7.8 )
Marketing and business development 7,473 6,827 5,219 9.5 43.2 27,260 21,603 26.2
Outside services 9,218 9,155 9,237 0.7 (0.2 ) 37,055 32,982 12.3
Restructuring and integration costs 866 N/M N/M 4,689 N/M
Intangible asset amortization expense 2,318 2,318 1,772 30.8 9,272 7,993 16.0
Other operating expenses 2,427   2,376   2,718   2.1   (10.7 ) 11,146   4,657   139.3  
Total non-interest expenses 129,059   133,734   145,524   (3.5 ) (11.3 ) 537,827   449,582   19.6  
 
Income from continuing operations before income tax expense 21,489 25,692 42,052 (16.4 ) (48.9 ) 110,311 75,613 45.9
 
Income tax expense 7,514   8,596   10,260   (12.6 ) (26.8 ) 35,986   20,390   76.5  
 
Income from continuing operations 13,975 17,096 31,792 (18.3 ) (56.0 ) 74,325 55,223 34.6
 
Discontinued operations:
Loss from discontinued operations, net of tax     (818 ) N/M N/M   (4,739 ) N/M
 
Net income 13,975 17,096 30,974 (18.3 ) (54.9 ) 74,325 50,484 47.2
 
Net income applicable to noncontrolling interests 1,432   2,428   3,840   (41.0 ) (62.7 ) 11,153   5,394   106.8  
 
Net income applicable to Piper Jaffray Companies (a) $ 12,543   $ 14,668   $ 27,134   (14.5 )% (53.8 )% $ 63,172   $ 45,090   40.1 %
 
Net income applicable to Piper Jaffray Companies’ common shareholders (a) $ 11,700   $ 13,552   $ 24,445   (13.7 )% (52.1 )% $ 58,141   $ 40,596   43.2 %
 
Amounts applicable to Piper Jaffray Companies
Net income from continuing operations $ 12,543 $ 14,668 $ 27,952 (14.5 )% (55.1 )% $ 63,172 $ 49,829 26.8 %
Net loss from discontinued operations     (818 ) N/M N/M   (4,739 ) N/M
Net income applicable to Piper Jaffray Companies $ 12,543 $ 14,668 $ 27,134 (14.5 )% (53.8 )% $ 63,172 $ 45,090 40.1 %
 
Earnings/(loss) per basic common share
Income from continuing operations $ 0.77 $ 0.90 $ 1.75 (14.4 )% (56.0 )% $ 3.88 $ 2.98 30.2 %
Loss from discontinued operations     (0.05 ) N/M N/M   (0.28 ) N/M
Earnings per basic common share $ 0.77 $ 0.90 $ 1.70 (14.4 )% (54.7 )% $ 3.88 $ 2.70 43.7 %
 
Earnings/(loss) per diluted common share
Income from continuing operations $ 0.77 $ 0.90 $ 1.75 (14.4 )% (56.0 )% $ 3.87 $ 2.98 29.9 %
Loss from discontinued operations     (0.05 ) N/M N/M   (0.28 ) N/M
Earnings per diluted common share $ 0.77 $ 0.90 $ 1.70 (14.4 )% (54.7 )% $ 3.87 $ 2.70 43.3 %
 
Weighted average number of common shares outstanding
Basic 15,241 15,066 14,378 1.2 % 6.0 % 14,971 15,046 (0.5 )%
Diluted 15,293 15,129 14,397 1.1 % 6.2 % 15,025 15,061 (0.2 )%
 
(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) Twelve Months Ended
Dec. 31,   Sept. 30,   Dec. 31, 4Q '14   4Q '14 Dec. 31,   Dec. 31, Percent
(Dollars in thousands) 2014 2014 2013 vs. 3Q '14 vs. 4Q '13 2014 2013 Inc/(Dec)
Capital Markets
Investment banking
Financing
Equities $ 23,056 $ 14,269 $ 34,139 61.6 % (32.5 )% $ 116,684 $ 100,224 16.4 %
Debt 19,583 14,435 22,313 35.7 (12.2 ) 67,731 74,284 (8.8 )
Advisory services 40,433   66,320   35,255   (39.0 ) 14.7   186,176   74,420   150.2  
Total investment banking 83,072 95,024 91,707 (12.6 ) (9.4 ) 370,591 248,928 48.9
 
Institutional sales and trading
Equities 22,874 16,711 26,092 36.9 (12.3 ) 82,211 91,169 (9.8 )
Fixed income 23,140   22,737   26,543   1.8   (12.8 ) 92,200   76,275   20.9  
Total institutional sales and trading 46,014 39,448 52,635 16.6 (12.6 ) 174,411 167,444 4.2
 
Management and performance fees 886 1,387 1,214 (36.1 ) (27.0 ) 5,398 3,891 38.7
 
Investment income 3,446 5,224 16,191 (34.0 ) (78.7 ) 24,046 30,404 (20.9 )
 
Long-term financing expenses (1,597 ) (1,613 ) (1,802 ) (1.0 ) (11.4 ) (6,655 ) (7,420 ) (10.3 )
 
Net revenues 131,821 139,470 159,945 (5.5 ) (17.6 ) 567,791 443,247 28.1
 
Operating expenses 114,039   119,001   126,930   (4.2 ) (10.2 ) 478,661   393,231   21.7  
 
Segment pre-tax operating income $ 17,782   $ 20,469   $ 33,015   (13.1 )% (46.1 ) $ 89,130   $ 50,016   78.2 %
 
Segment pre-tax operating margin 13.5 % 14.7 % 20.6 % 15.7 % 11.3 %
 
Asset Management
Management and performance fees
Management fees $ 19,298 $ 19,738 $ 19,123 (2.2 )% 0.9 % $ 78,772 $ 71,314 10.5 %
Performance fees 58   470   7,124   (87.7 ) (99.2 ) 892   7,840   (88.6 )
Total management and performance fees 19,356 20,208 26,247 (4.2 ) (26.3 ) 79,664 79,154 0.6
 
Investment income/(loss) (629 ) (252 ) 1,384   149.6   N/M 683   2,794   (75.6 )
 
Net revenues 18,727 19,956 27,631 (6.2 ) (32.2 ) 80,347 81,948 (2.0 )
 
Operating expenses 15,020   14,733   18,594   1.9   (19.2 ) 59,166   56,351   5.0  
 
Segment pre-tax operating income $ 3,707   $ 5,223   $ 9,037   (29.0 )% (59.0 )% $ 21,181   $ 25,597   (17.3 )%
 
Segment pre-tax operating margin 19.8 % 26.2 % 32.7 % 26.4 % 31.2 %
 
Total
Net revenues $ 150,548 $ 159,426 $ 187,576 (5.6 )% (19.7 )% $ 648,138 $ 525,195 23.4 %
 
Operating expenses 129,059   133,734   145,524   (3.5 ) (11.3 ) 537,827   449,582   19.6  
 
Pre-tax operating income $ 21,489   $ 25,692   $ 42,052   (16.4 )% (48.9 )% $ 110,311   $ 75,613   45.9 %
 
Pre-tax operating margin 14.3 % 16.1 % 22.4 % 17.0 % 14.4 %
 

Segment pre-tax operating income and segment pre-tax operation margin exclude the results of discontinued operations.

N/M — Not meaningful

Piper Jaffray Companies

       

Preliminary Selected Summary Financial Information from Continuing Operations (Non-GAAP – Unaudited) (1)

 
Three Months Ended Percent Inc/(Dec) Twelve Months Ended
Dec. 31,   Sept. 30,   Dec. 31, 4Q '14   4Q '14 Dec. 31,   Dec. 31, Percent
(Amounts in thousands, except per share data) 2014 2014 2013 vs. 3Q '14 vs. 4Q '13 2014 2013 Inc/(Dec)
Revenues:
Investment banking $ 82,613 $ 94,911 $ 91,639 (13.0 )% (9.8 )% $ 369,811 $ 248,563 48.8 %
Institutional brokerage 42,324 35,923 46,572 17.8 (9.1 ) 156,809 146,648 6.9
Asset management 20,242 21,595 27,461 (6.3 ) (26.3 ) 85,062 83,045 2.4
Interest 8,853 8,028 11,400 10.3 (22.3 ) 36,688 40,292 (8.9 )
Investment income 125   859   10,956   (85.4 ) (98.9 ) 5,231   19,540   (73.2 )
Total revenues 154,157 161,316 188,028 (4.4 ) (18.0 ) 653,601 538,088 21.5
 
Interest expense 5,763   5,466   5,385   5.4   7.0   21,162   21,687   (2.4 )
 
Adjusted net revenues (2) $ 148,394   $ 155,850   $ 182,643   (4.8 )% (18.8 )% $ 632,439   $ 516,401   22.5 %
 
Non-interest expenses:
Adjusted compensation and benefits (3) $ 92,552   $ 95,869   $ 110,652   (3.5 )% (16.4 )% $ 389,281   $ 319,560   21.8 %
Ratio of adjusted compensation and benefits to adjusted net revenues 62.4 % 61.5 % 60.6 % 61.6 % 61.9 %
 
Adjusted non-compensation expenses (4) $ 32,254   $ 33,088   $ 29,860   (2.5 )% 8.0 % $ 129,499   $ 111,036   16.6 %
Ratio of adjusted non-compensation expenses to adjusted net revenues 21.7 % 21.2 % 16.3 % 20.5 % 21.5 %
 
Adjusted income:
Adjusted income from continuing operations before adjusted income tax expense (5) $ 23,588   $ 26,893   $ 42,131   (12.3 )% (44.0 )% $ 113,659   $ 85,805   32.5 %
Adjusted operating margin (6) 15.9 % 17.3 % 23.1 % 18.0 % 16.6 %
 
Adjusted income tax expense (7) 8,888   10,008   11,678   (11.2 ) (23.9 ) 41,545   26,258   58.2  
 
Adjusted net income from continuing operations (8) $ 14,700   $ 16,885   $ 30,453   (12.9 )% (51.7 )% $ 72,114   $ 59,547   21.1 %
Effective tax rate (9) 37.7 % 37.2 % 27.7 % 36.6 % 30.6 %
 
Adjusted net income from continuing operations applicable to Piper Jaffray Companies’ common shareholders (10) $ 13,712   $ 15,600   $ 27,435   (12.1 )% (50.0 )% $ 66,371   $ 53,612   23.8 %
 
Adjusted earnings per diluted common share from continuing operations $ 0.90   $ 1.03   $ 1.91   (12.6 )% (52.9 )% $ 4.42   $ 3.56   24.2 %
 
Weighted average number of common shares outstanding
Diluted 15,293 15,129 14,397 1.1 % 6.2 % 15,025 15,061 (0.2 )%
 

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) Twelve Months Ended
Dec. 31,   Sept. 30,   Dec. 31, 4Q '14   4Q '14 Dec. 31,   Dec. 31, Percent
(Dollars in thousands) 2014 2014 2013 vs. 3Q '14 vs. 4Q '13 2014 2013 Inc/(Dec)
Capital Markets
Investment banking
Financing
Equities $ 23,056 $ 14,269 $ 34,139 61.6 % (32.5 )% $ 116,684 $ 100,224 16.4 %
Debt 19,583 14,435 22,313 35.7 (12.2 ) 67,731 74,284 (8.8 )
Advisory services 40,433   66,320   35,255   (39.0 ) 14.7   186,176   74,420   150.2  
Total investment banking 83,072 95,024 91,707 (12.6 ) (9.4 ) 370,591 248,928 48.9
 
Institutional sales and trading
Equities 22,874 16,711 26,092 36.9 (12.3 ) 82,211 91,169 (9.8 )
Fixed income 23,140   22,737   26,543   1.8   (12.8 ) 92,200   76,275   20.9  
Total institutional sales and trading 46,014 39,448 52,635 16.6 (12.6 ) 174,411 167,444 4.2
 
Management and performance fees 886 1,387 1,214 (36.1 ) (27.0 ) 5,398 3,891 38.7
 
Investment income 1,292 1,648 11,258 (21.6 ) (88.5 ) 8,347 21,610 (61.4 )
 
Long-term financing expenses (1,597 ) (1,613 ) (1,802 ) (1.0 ) (11.4 ) (6,655 ) (7,420 ) (10.3 )
 
Adjusted net revenues (2) 129,667 135,894 155,012 (4.6 ) (16.4 ) 552,092 434,453 27.1
 
Adjusted operating expenses (12) 111,682   116,120   123,884   (3.8 ) (9.8 ) 467,198   382,157   22.3  
 
Adjusted segment pre-tax operating income (5) $ 17,985   $ 19,774   $ 31,128   (9.0 )% (42.2 ) $ 84,894   $ 52,296   62.3 %
 
Adjusted segment pre-tax operating margin (6) 13.9 % 14.6 % 20.1 % 15.4 % 12.0 %
 
Asset Management
Management and performance fees
Management fees $ 19,298 $ 19,738 $ 19,123 (2.2 )% 0.9 % $ 78,772 $ 71,314 10.5 %
Performance fees 58   470   7,124   (87.7 ) (99.2 ) 892   7,840   (88.6 )
Total management and performance fees 19,356 20,208 26,247 (4.2 ) (26.3 ) 79,664 79,154 0.6
 
Investment income/(loss) (629 ) (252 ) 1,384   149.6   N/M 683   2,794   (75.6 )
 
Net revenues 18,727 19,956 27,631 (6.2 ) (32.2 ) 80,347 81,948 (2.0 )
 
Adjusted operating expenses (13) 13,124   12,837   16,628   2.2   (21.1 ) 51,582   48,439   6.5  
 
Adjusted segment pre-tax operating income (13) $ 5,603   $ 7,119   $ 11,003   (21.3 )% (49.1 )% $ 28,765   $ 33,509   (14.2 )%
 
Adjusted segment pre-tax operating margin (6) 29.9 % 35.7 % 39.8 % 35.8 % 40.9 %
 
Total
Adjusted net revenues (2) $ 148,394 $ 155,850 $ 182,643 (4.8 )% (18.8 )% $ 632,439 $ 516,401 22.5 %
 
Adjusted operating expenses (12) 124,806   128,957   140,512   (3.2 ) (11.2 ) 518,780   430,596   20.5  
 
Adjusted pre-tax operating income (5) $ 23,588   $ 26,893   $ 42,131   (12.3 )% (44.0 )% $ 113,659   $ 85,805   32.5 %
 
Adjusted pre-tax operating margin (6) 15.9 % 17.3 % 23.1 % 18.0 % 16.6 %
 

This presentation includes non-GAAP measures. The non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information."

N/M — Not meaningful

Piper Jaffray Companies

   
 

Reconciliation of U.S. GAAP to Selected Summary Financial Information (1) (Unaudited)

 
Three Months Ended Twelve Months Ended
Dec. 31,   Sept. 30,   Dec. 31, Dec. 31,   Dec. 31,
(Amounts in thousands, except per share data) 2014 2014 2013 2014 2013
Net revenues:
Net revenues – U.S. GAAP basis $ 150,548 $ 159,426 $ 187,576 $ 648,138 $ 525,195
Adjustments:
Revenue related to noncontrolling interests (11) (2,154 ) (3,576 ) (4,933 ) (15,699 ) (8,794 )
Adjusted net revenues $ 148,394   $ 155,850   $ 182,643   $ 632,439   $ 516,401  
 
Compensation and benefits:
Compensation and benefits – U.S. GAAP basis $ 93,765 $ 97,180 $ 111,933 $ 394,510 $ 322,464
Adjustments:
Compensation from acquisition-related agreements (1,213 ) (1,311 ) (1,281 ) (5,229 ) (2,904 )
Adjusted compensation and benefits $ 92,552   $ 95,869   $ 110,652   $ 389,281   $ 319,560  
 
Non-compensation expenses:
Non-compensation expenses – U.S. GAAP basis $ 35,294 $ 36,554 $ 33,591 $ 143,317 $ 127,118
Adjustments:
Non-compensation expenses related to noncontrolling interests (11) (722 ) (1,148 ) (1,093 ) (4,546 ) (3,400 )
Restructuring and integration costs (866 ) (4,689 )
Amortization of intangible assets related to acquisitions (2,318 ) (2,318 ) (1,772 ) (9,272 ) (7,993 )
Adjusted non-compensation expenses $ 32,254   $ 33,088   $ 29,860   $ 129,499   $ 111,036  
 
Income from continuing operations before income tax expense:
Income from continuing operations before income tax expense – U.S. GAAP basis $ 21,489 $ 25,692 $ 42,052 $ 110,311 $ 75,613
Adjustments:
Revenue related to noncontrolling interests (11) (2,154 ) (3,576 ) (4,933 ) (15,699 ) (8,794 )
Expenses related to noncontrolling interests (11) 722 1,148 1,093 4,546 3,400
Compensation from acquisition-related agreements 1,213 1,311 1,281 5,229 2,904
Restructuring and integration costs 866 4,689
Amortization of intangible assets related to acquisitions 2,318   2,318   1,772   9,272   7,993  
Adjusted income from continuing operations before adjusted income tax expense $ 23,588   $ 26,893   $ 42,131   $ 113,659   $ 85,805  
 
Income tax expense:
Income tax expense – U.S. GAAP basis $ 7,514 $ 8,596 $ 10,260 $ 35,986 $ 20,390
Tax effect of adjustments:
Compensation from acquisition-related agreements 472 510 498 2,034 1,130
Restructuring and integration costs 337 1,824
Amortization of intangible assets related to acquisitions 902   902   583   3,525   2,914  
Adjusted income tax expense $ 8,888   $ 10,008   $ 11,678   $ 41,545   $ 26,258  
 
Net income from continuing operations applicable to Piper Jaffray Companies:
Net income from continuing operations applicable to Piper Jaffray Companies – U.S. GAAP basis $ 12,543 $ 14,668 $ 27,952 $ 63,172 $ 49,829
Adjustments:
Compensation from acquisition-related agreements 741 801 783 3,195 1,774
Restructuring and integration costs 529 2,865
Amortization of intangible assets related to acquisitions 1,416   1,416   1,189   5,747   5,079  
Adjusted net income from continuing operations $ 14,700   $ 16,885   $ 30,453   $ 72,114   $ 59,547  
 
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 $ 11,700 $ 13,552 $ 25,182 $ 58,141 $ 44,863
Adjustments:
Compensation from acquisition-related agreements 691 740 705 2,941 1,597
Restructuring and integration costs 477 2,579
Amortization of intangible assets related to acquisitions 1,321   1,308   1,071   5,289   4,573  
Adjusted net income from continuing operations applicable to Piper Jaffray Companies' common stockholders $ 13,712   $ 15,600   $ 27,435   $ 66,371   $ 53,612  
 
Earnings per diluted common share from continuing operations:
Earnings per diluted common share – U.S. GAAP basis $ 0.77 $ 0.90 $ 1.75 $ 3.87 $ 2.98
Adjustments:
Compensation from acquisition-related agreements 0.05 0.05 0.05 0.20 0.11
Restructuring and integration costs 0.03 0.17
Amortization of intangible assets related to acquisitions 0.09   0.09   0.07   0.35   0.30  
Adjusted earnings per diluted common share from continuing operations $ 0.90   $ 1.03   $ 1.91   $ 4.42   $ 3.56  
 

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, (b) restructuring and integration costs and (c) amortization of intangible assets and related to acquisitions.

Source: Piper Jaffray Companies

Piper Jaffray Companies
Investor Relations Contact
Tom Smith, 612-303-6336