Financial Results for the three months ended March 31, 2015:
- Net revenues of $27.1 million
- Net loss of $2.5 million, or $0.29 per share
- Repurchased 955,796 shares at an average price of $24.85 per share
- Shareholders' equity of $235 million and tangible book value per share of $28.33
ARLINGTON, Va., April 21, 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 $2.5 million, or $0.29 per share, for the first quarter of 2015, compared to net income of $5.6 million, or $0.46 per diluted share, for the first quarter of 2014 and $0.9 million, or $0.09 per diluted share, for the fourth quarter of 2014.
"For the first quarter, equity capital markets activity, specifically IPOs and 144As, were down significantly year-over-year, and this slowdown was even more pronounced in our areas of historic strength," said Richard J. Hendrix, chairman and chief executive officer. "This weak environment contributed to an overall weak revenue quarter for FBR. While we know our quarterly results will remain volatile, based on our current pipeline, we expect improvement in both our top and bottom line over the balance of the year."
Pre-tax operating loss for the first quarter of 2015 was $3.8 million compared to operating income of $9.0 million for the first quarter of 2014 and an operating loss of $3.9 million for the fourth quarter of 2014. First quarter 2015 revenues were $27.1 million compared to $54.4 million for the first quarter of 2014 and $28.6 million for the fourth quarter of 2014.
Composition of Revenues
Investment Banking
Investment banking revenue was $12.7 million for the first quarter of 2015 compared to $36.6 million for the first quarter of 2014 and $13.5 million for the fourth quarter of 2014. First quarter revenue was generated by 13 client engagements representing $2.5 billion in transaction value.
Institutional Brokerage
Net revenue generated in institutional brokerage was $13.7 million for the first quarter of 2015, compared to $15.1 million for the first quarter of 2014 and $16.1 million for the fourth quarter of 2014. Net revenue from securities lending is included in institutional brokerage results beginning in the third quarter of 2014.
Investment Income, Net Interest Income and Dividends
The Company recognized investment income, including interest and dividends, of $0.6 million for the first quarter 2015, compared to $2.6 million for the first quarter of 2014 and a loss of $1.1 million for the fourth quarter of 2014.
Expenses
Non-compensation fixed expenses for the first quarter 2015 totaled $10.1 million, compared to $10.6 million and $12.3 million for the first and fourth quarters of 2014, respectively.
Compensation and benefits expense for the first quarter 2015 was $18.0 million or 66 percent of net revenue. This compares to $31.3 million and $16.7 million for the first and fourth quarter of 2014, respectively, representing 58 percent of net revenue for both periods. The Company anticipates that for 2015 the annual compensation-to-net revenue ratio will normalize to a level closer to the 2014 reported result.
Employees
At March 31, 2015, the Company had 290 full-time employees, compared to 300 at December 31, 2014.
Share Repurchase Activity
During the quarter, FBR repurchased 955,796 shares at an average price of $24.85 per share. Earlier today, the Board approved an increase in the Company's available repurchase authorization to a total of 750,000 shares. This authorization represents approximately 10 percent of the Company's total outstanding shares.
Since 2010, FBR has repurchased 10.4 million shares returning capital of over $203 million to shareholders.
Balance Sheet
As of March 31, 2015, FBR continues to maintain an unlevered and transparent balance sheet, with no funded debt, and cash and cash equivalents of $74 million.
Shareholders' equity as of March 31, 2015 was $235 million, and tangible book value per share was $28.33 based on 8.142 million shares outstanding, compared to shareholders' equity of $260 million, and tangible book value per share of $28.63 as of December 31, 2014.
Conference Call
Investors wishing to listen to the earnings call at 9:00 A.M. U.S. EDT, Wednesday, April 22, 2015, may do so via the Web or conference call at:
Webcast link: http://edge.media-server.com/m/p/x8ik3hkr
Conference call dial-in number (domestic, toll-free): 855.425.4204
Conference call dial-in number (international): 484.756.4245
Access code: 18450574
About FBR
FBR & Co. (Nasdaq:FBRC) provides investment banking, merger and acquisition advisory, institutional brokerage, and research services through its subsidiary FBR Capital Markets & Co. FBR focuses capital and financial expertise on the following industry sectors: consumer; diversified industrials; energy & natural resources; financial institutions; healthcare; insurance; 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 | ||
| March 31, | ||
| 2015 | 2014 | |
| REVENUES: | ||
| Investment banking: | ||
| Capital raising | $ 9,284 | $ 33,316 |
| Advisory | 3,391 | 3,323 |
| Institutional brokerage | 12,243 | 15,091 |
| Net investment income | 3,350 | 3,834 |
| Interest | 6,985 | 284 |
| Dividends & other | 271 | 187 |
| Total revenues | 35,524 | 56,035 |
| Interest expense | 8,429 | 1,677 |
| Revenues, net of interest expense | 27,095 | 54,358 |
| NON-INTEREST EXPENSES: | ||
| Compensation and benefits | 17,955 | 31,300 |
| Professional services | 2,373 | 2,938 |
| Business development | 1,888 | 2,368 |
| Clearing and brokerage fees | 1,223 | 1,224 |
| Occupancy and equipment | 3,058 | 3,152 |
| Communications | 3,011 | 2,892 |
| Other operating expenses | 1,430 | 1,469 |
| Total non-interest expenses | 30,938 | 45,343 |
| (Loss) income before income taxes | (3,843) | 9,015 |
| Income tax (benefit) provision | (1,321) | 3,405 |
| Net (loss) income | $ (2,522) | $ 5,610 |
| Basic (loss) earnings per share | $ (0.29) | $ 0.51 |
| Diluted (loss) earnings per share | $ (0.29) | $ 0.46 |
| Weighted average shares - basic | 8,827 | 10,968 |
| Weighted average shares - diluted | 8,827 | 12,087 |
| FBR & CO. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (Dollars in thousands, except per share amounts) | ||
| (Unaudited) | ||
| ASSETS |
March 31, 2015 |
December 31, 2014 |
| Cash and cash equivalents | $ 74,047 | $ 108,962 |
| Receivables: | ||
| Securities borrowed | 748,070 | 594,674 |
| Due from brokers, dealers and clearing organizations | 311,584 | 94,489 |
| Customers | 2,224 | 3,349 |
| Other | 5,486 | 5,227 |
| Financial instruments owned, at fair value | 149,045 | 166,047 |
| Other investments, at cost | 7,000 | 7,000 |
| Goodwill and intangibles | 4,832 | 4,921 |
| Furniture, equipment and leasehold improvements, net | 15,657 | 15,388 |
| Deferred tax assets, net of valuation allowance | 29,997 | 28,648 |
| Prepaid expenses and other assets | 6,457 | 6,392 |
| Total assets | $ 1,354,399 | $ 1,035,097 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Liabilities: | ||
| Securities loaned | $ 752,909 | $ 595,717 |
| Securities sold but not yet purchased, at fair value | 329,765 | 121,310 |
| Accrued compensation and benefits | 12,093 | 34,571 |
| Accounts payable, accrued expenses and other liabilities | 24,167 | 23,093 |
| Total liabilities | 1,118,934 | 774,691 |
| Shareholders' equity: | ||
| Common stock | 8 | 8 |
| Additional paid-in capital | 281,568 | 302,720 |
| Restricted stock units | 33,130 | 34,353 |
| Accumulated other comprehensive income | -- | 44 |
| Accumulated deficit | (79,241) | (76,719) |
| Total shareholders' equity | 235,465 | 260,406 |
| Total liabilities and shareholders' equity | $ 1,354,399 | $ 1,035,097 |
| Book Value per Share | $28.92 | $29.18 |
| Tangible Book Value per Share | $28.33 | $28.63 |
| Shares Outstanding (in thousands) | 8,142 | 8,923 |
| FBR & CO. | |||||
| Financial & Statistical Supplement - Operating Results | |||||
| (Dollars in thousands) | |||||
| (Unaudited) | |||||
| Q-1 15 | Q-4 14 | Q-3 14 | Q-2 14 | Q-1 14 | |
| Revenues, net of interest expense | $ 27,095 | $ 28,572 | $ 42,097 | $ 57,098 | $ 54,358 |
| Expenses: | |||||
| Variable | 5,414 | 4,560 | 13,214 | 22,279 | 19,763 |
| Fixed | 25,524 | 27,950 | 25,575 | 25,844 | 25,580 |
| (Loss) income before income taxes | (3,843) | (3,938) | 3,308 | 8,975 | 9,015 |
| Income tax (benefit) provision | (1,321) | (4,870) | (193) | 1,999 | 3,405 |
| Net (loss) income | $ (2,522) | $ 932 | $ 3,501 | $ 6,976 | $ 5,610 |
| Return on equity (trailing twelve months) | 3.3% | 6.2% | 8.6% | 9.0% | 22.4% |
| Fixed expenses | $ 25,524 | $ 27,950 | $ 25,575 | $ 25,844 | $ 25,580 |
| Less: Non-cash expenses1 | 2,398 | 2,593 | 2,406 | 2,374 | 2,173 |
| Corporate transaction costs2 | -- | 1,132 | -- | -- | -- |
| Core fixed costs3 | $ 23,126 | $ 24,225 | $ 23,169 | $ 23,470 | $ 23,407 |
| Statistical Data | |||||
| Revenues per employee (annualized) | $ 374 | $ 381 | $ 548 | $ 766 | $ 745 |
| Employee count | 290 | 300 | 307 | 298 | 292 |
| 1 Non-cash expenses include compensation costs associated with stock-based awards and amortization of intangibles. | |||||
| 2 Corporate transaction costs 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. | |||||