Third Quarter Operating Income of $2.7 million
Third Quarter Net Income of $1.5 million, or $0.09 per Diluted Share
Board Declares Dividend of $0.02 per Share
PHILADELPHIA and NEW YORK, Nov. 01, 2016 (GLOBE NEWSWIRE) -- Institutional Financial Markets, Inc. (NYSE MKT:IFMI), a financial services firm specializing in fixed income markets, today reported financial results for its third quarter ended September 30, 2016.
- Operating income was $2.7 million for the three months ended September 30, 2016, compared to $2.2 million for the three months ended June 30, 2016, and $0.6 million for the three months ended September 30, 2015. Operating income was $6.1 million for the nine months ended September 30, 2016, compared to $1.4 million for the nine months ended September 30, 2015.
- Net income was $1.5 million, or $0.09 per diluted share, for the three months ended September 30, 2016, compared to net income of $1.2 million, or $0.07 per diluted share, for the three months ended June 30, 2016 and net loss of $0.6 million, or $0.03 per diluted share, for the three months ended September 30, 2015. Net income was $3.0 million, or $0.17 per diluted share, for the nine months ended September 30, 2016, compared to net loss of $1.9 million, or $0.09 per diluted share, for the nine months ended September 30, 2015.
- Revenue was $14.1 million for the three months ended September 30, 2016, compared to $14.4 million for the three months ended June 30, 2016 and $12.9 million for the three months ended September 30, 2015. Revenue was $42.2 million for the nine months ended September 30, 2016, compared to $36.8 million for the nine months ended September 30, 2015.
- Total operating expenses were $11.4 million for the quarter ended September 30, 2016, compared to $12.2 million for the quarter ended June 30, 2016 and $12.4 million for the quarter ended September 30, 2015. Total operating expenses were $36.1 million for the nine months ended September 30, 2016, compared to $35.4 million for the nine months ended September 30, 2015.
- Compensation as a percentage of revenue was 53% for the three months ended September 30, 2016, compared to 58% for the three months ended June 30, 2016 and 54% for the three months ended September 30, 2015. Compensation as a percentage of revenue was 58% for the nine months ended September 30, 2016, compared to 57% for the nine months ended September 30, 2015. The number of IFMI employees was 83 as of September 30, 2016, compared to 80 as of June 30, 2016, and 93 as of September 30, 2015.
- Non-compensation operating expenses, excluding depreciation and amortization, were $3.9 million for the three months ended September 30, 2016, compared to $3.7 million for the three months ended June 30, 2016 and $5.2 million for the three months ended September 30, 2015. Non-compensation operating expenses, excluding depreciation and amortization, were $11.5 million for the nine months ended September 30, 2016, compared to $14.0 million for the nine months ended September 30, 2015, representing a decrease of 18%.
Lester Brafman, Chief Executive Officer of IFMI, said, “We remain pleased with IFMI’s performance, especially as we report our third consecutive quarter of profitability. We continue to successfully execute on our business strategy with an eye towards stockholder value. Going forward, we will remain focused on growing our mortgage and SBA groups, adding revenue and growing businesses where our clients’ needs are no longer addressed by larger financial institutions. We are also pleased to further enhance stockholder value through our share repurchase program and continuing to pay a quarterly dividend.”
Stock Repurchases
During the third quarter of 2016, IFMI repurchased 80,400 shares of its common stock through open market purchases under its previously announced 10b5-1 agreement with Sandler O’Neill & Partners, L.P. for an aggregate purchase price of $79,245, which represented an average per share price of $0.99. During the first three quarters of 2016, including the previously announced privately negotiated transactions and open market purchases in the first quarter, IFMI repurchased a total of 1,908,480 shares of its common stock for an aggregate purchase price of $2.3 million, which represented an average per share price of $1.22.
Total Equity and Dividend Declaration
- At September 30, 2016, total equity was $46.6 million, compared to $46.2 million as of December 31, 2015.
- The Company’s Board of Directors has declared a dividend of $0.02 per share. The dividend will be payable on November 30, 2016, to stockholders of record on November 16, 2016.
Conference Call
Management will hold a conference call this morning at 10:00 a.m. Eastern Time to discuss these results. The conference call will also be available via webcast. Interested parties can access the webcast by clicking the webcast link on the Company’s website at www.IFMI.com. Those wishing to listen to the conference call with operator assistance can dial (877) 686-9573 (domestic) or (706) 643-6983 (international), participant pass code 7515256, or request the IFMI earnings call. A replay of the call will be available for two weeks following the call by dialing (800) 585-8367 (domestic) or (404) 537-3406 (international), participant pass code 7515256.
About IFMI
IFMI is a financial services company specializing in fixed income markets. IFMI was founded in 1999 as an investment firm focused on small-cap banking institutions, but has grown to provide an expanding range of capital markets and asset management services. IFMI’s operating segments are Capital Markets, Principal Investing, and Asset Management. The Capital Markets segment consists of fixed income sales, trading, and financing as well as new issue placements in corporate and securitized products, and advisory services, operating primarily through IFMI’s subsidiaries, J.V.B. Financial Group, LLC in the United States and Cohen & Company Financial Limited in Europe. The Principal Investing segment has historically been comprised of investments in IFMI sponsored investment vehicles, but has changed to include investments in certain non-sponsored vehicles. The Asset Management segment manages assets through collateralized debt obligations, permanent capital vehicles, and managed accounts. As of September 30, 2016, IFMI managed approximately $3.8 billion in fixed income assets in a variety of asset classes including US trust preferred securities, European hybrid capital securities, and mortgage- and asset-backed securities. As of September 30, 2016, almost all of IFMI’s assets under management, or 95.0%, were in collateralized debt obligations that IFMI manages, which were all securitized prior to 2008. For more information, please visit www.IFMI.com.
Forward-looking Statements
This communication contains certain statements, estimates, and forecasts with respect to future performance and events. These statements, estimates, and forecasts are “forward-looking statements.” In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “ might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “seek,” or “continue” or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this communication are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties, and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied in the forward-looking statements including, but not limited to, those discussed under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition” in our filings with the Securities and Exchange Commission (“SEC”), which are available at the SEC’s website at www.sec.gov and our website at www.IFMI.com/sec-filings. Such risk factors include the following: (a) a decline in general economic conditions or the global financial markets, (b) losses caused by financial or other problems experienced by third parties, (c) losses due to unidentified or unanticipated risks, (d) a lack of liquidity, i.e., ready access to funds for use in our businesses, (e) the ability to attract and retain personnel, (f) litigation and regulatory issues, (g) competitive pressure, (h) an inability to generate incremental income from acquired businesses, (i) unanticipated market closures due to inclement weather or other disasters, (j) losses (whether realized or unrealized) on our principal investments, including on our CLO investments, (k) an inability to achieve projected integration synergies, (l) that the sale of our European operations will not occur, (m) the possibility that payments to the Company of subordinated management fees from its European CLO will not resume, and (n) the possibility that the stockholder rights plan may fail to preserve the value of the Company’s deferred tax assets, whether as a result of the acquisition by a person of 5% of the Company’s common stock or otherwise. As a result, there can be no assurance that the forward-looking statements included in this communication will prove to be accurate or correct. In light of these risks, uncertainties, and assumptions, the future performance or events described in the forward-looking statements in this communication might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
Cautionary Note Regarding Quarterly Financial Results
Due to the nature of our business, our revenue and operating results may fluctuate materially from quarter to quarter. Accordingly, revenue and net income in any particular quarter may not be indicative of future results. Further, our employee compensation arrangements are in large part incentive-based and, therefore, will fluctuate with revenue. The amount of compensation expense recognized in any one quarter may not be indicative of such expense in future periods. As a result, we suggest that annual results may be the most meaningful gauge for investors in evaluating our business performance.
| INSTITUTIONAL FINANCIAL MARKETS, INC. | ||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | ||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| 9/30/16 | 6/30/16 | 9/30/15 | 9/30/16 | 9/30/15 | ||||||||||||||||||
| Revenues | ||||||||||||||||||||||
| Net trading | $ | 10,486 | $ | 11,285 | $ | 8,333 | $ | 31,973 | $ | 22,346 | ||||||||||||
| Asset management | 1,781 | 1,569 | 2,332 | 5,662 | 6,890 | |||||||||||||||||
| New issue and advisory | 811 | 984 | 2,119 | 2,176 | 4,268 | |||||||||||||||||
| Principal transactions | 536 | 56 | (638 | ) | 718 | 340 | ||||||||||||||||
| Other revenue | 476 | 471 | 781 | 1,661 | 2,928 | |||||||||||||||||
| Total revenues | 14,090 | 14,365 | 12,927 | 42,190 | 36,772 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||||
| Compensation and benefits | 7,464 | 8,388 | 7,044 | 24,392 | 20,783 | |||||||||||||||||
| Business development, occupancy, equipment | 718 | 651 | 901 | 2,033 | 2,543 | |||||||||||||||||
| Subscriptions, clearing, and execution | 1,678 | 1,502 | 1,786 | 4,702 | 5,132 | |||||||||||||||||
| Professional services and other operating | 1,513 | 1,542 | 2,488 | 4,718 | 6,353 | |||||||||||||||||
| Depreciation and amortization | 66 | 72 | 150 | 220 | 611 | |||||||||||||||||
| Total operating expenses | 11,439 | 12,155 | 12,369 | 36,065 | 35,422 | |||||||||||||||||
| Operating income (loss) | 2,651 | 2,210 | 558 | 6,125 | 1,350 | |||||||||||||||||
| Non-operating income (expense) | ||||||||||||||||||||||
| Interest expense | (991 | ) | (992 | ) | (984 | ) | (2,973 | ) | (2,951 | ) | ||||||||||||
| Income (loss) before income taxes | 1,660 | 1,218 | (426 | ) | 3,152 | (1,601 | ) | |||||||||||||||
| Income tax expense (benefit) | 130 | 17 | 221 | 157 | 267 | |||||||||||||||||
| Net income (loss) | 1,530 | 1,201 | (647 | ) | 2,995 | (1,868 | ) | |||||||||||||||
| Less: Net income (loss) attributable to the noncontrolling interest | 489 | 371 | (114 | ) | 925 | (432 | ) | |||||||||||||||
| Net income (loss) attributable to IFMI | $ | 1,041 | $ | 830 | $ | (533 | ) | $ | 2,070 | $ | (1,436 | ) | ||||||||||
| Earnings per share | ||||||||||||||||||||||
| Basic | ||||||||||||||||||||||
| Net income (loss) attributable to IFMI | $ | 1,041 | $ | 830 | $ | (533 | ) | $ | 2,070 | $ | (1,436 | ) | ||||||||||
| Basic shares outstanding | 11,807 | 11,906 | 15,229 | 12,328 | 15,203 | |||||||||||||||||
| Net income (loss) attributable to IFMI per share | $ | 0.09 | $ | 0.07 | $ | (0.03 | ) | $ | 0.17 | $ | (0.09 | ) | ||||||||||
| Fully Diluted | ||||||||||||||||||||||
| Net income (loss) attributable to IFMI | $ | 1,041 | $ | 830 | $ | (533 | ) | $ | 2,070 | $ | (1,436 | ) | ||||||||||
| Net income (loss) attributable to the noncontrolling interest | 489 | 371 | (114 | ) | 925 | (432 | ) | |||||||||||||||
| Adjustment (1) | (23 | ) | (1 | ) | (72 | ) | (33 | ) | (72 | ) | ||||||||||||
| Enterprise net income (loss) | $ | 1,507 | $ | 1,200 | $ | (719 | ) | $ | 2,962 | $ | (1,940 | ) | ||||||||||
| Basic shares outstanding | 11,807 | 11,906 | 15,229 | 12,328 | 15,203 | |||||||||||||||||
| Unrestricted Operating LLC membership units exchangeable into IFMI shares | 5,324 | 5,324 | 5,324 | 5,324 | 5,324 | |||||||||||||||||
| Additional dilutive shares | 130 | 62 | - | 91 | - | |||||||||||||||||
| Fully diluted shares outstanding | 17,261 | 17,292 | 20,553 | 17,743 | 20,527 | |||||||||||||||||
| Fully diluted net income (loss) per share | $ | 0.09 | $ | 0.07 | $ | (0.03 | ) | $ | 0.17 | $ | (0.09 | ) | ||||||||||
| (1) An adjustment is included for the following reasons: (a) if the non-controlling interest membership units had been converted at the beginning of the period, the Company would have incurred a higher income tax expense or realized a higher income tax benefit, as applicable; and (b) to adjust the non-controlling interest amount to be consistent with the weighted average share calculation. | ||||||||||||||||||||||
| INSTITUTIONAL FINANCIAL MARKETS, INC. | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (in thousands) | |||||||||||
| September 30, 2016 | |||||||||||
| (unaudited) | December 31, 2015 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 10,085 | $ | 14,115 | |||||||
| Receivables from brokers, dealers, and clearing agencies | 68,910 | 39,812 | |||||||||
| Due from related parties | 73 | 77 | |||||||||
| Other receivables | 2,512 | 4,079 | |||||||||
| Investments - trading | 131,006 | 94,741 | |||||||||
| Other investments, at fair value | 7,860 | 14,880 | |||||||||
| Receivables under resale agreements | 288,286 | 128,011 | |||||||||
| Goodwill | 7,992 | 7,992 | |||||||||
| Other assets | 4,651 | 4,708 | |||||||||
| Total assets | $ | 521,375 | $ | 308,415 | |||||||
| Liabilities | |||||||||||
| Payables to brokers, dealer, and clearing agencies | $ | 75,825 | $ | 55,779 | |||||||
| Due to related parties | 50 | 50 | |||||||||
| Accounts payable and other liabilities | 3,364 | 3,362 | |||||||||
| Accrued compensation | 4,080 | 3,612 | |||||||||
| Trading securities sold, not yet purchased | 55,539 | 39,184 | |||||||||
| Securities sold under agreements to repurchase | 302,800 | 127,913 | |||||||||
| Deferred income taxes | 3,794 | 3,804 | |||||||||
| Debt | 29,290 | 28,535 | |||||||||
| Total liabilities | 474,742 | 262,239 | |||||||||
| Equity | |||||||||||
| Voting nonconvertible preferred stock | 5 | 5 | |||||||||
| Common stock | 12 | 13 | |||||||||
| Additional paid-in capital | 69,382 | 71,570 | |||||||||
| Accumulated other comprehensive loss | (997 | ) | (939 | ) | |||||||
| Accumulated deficit | (29,536 | ) | (30,889 | ) | |||||||
| Total stockholders' equity | 38,866 | 39,760 | |||||||||
| Noncontrolling interest | 7,767 | 6,416 | |||||||||
| Total equity | 46,633 | 46,176 | |||||||||
| Total liabilities and equity | $ | 521,375 | $ | 308,415 | |||||||