Financial Highlights for the three months ended June 30, 2015:
- Net revenues of $44.3 million
- Net income of $2.9 million, or $0.32 per diluted share
- Repurchased 135 thousand shares at a total cost of $2.9 million
- Initiated cash dividend of $0.20 per share payable on August 28, 2015
- Tangible book value per share of $28.52, up from $28.33 on March 31, 2015
ARLINGTON, Va., July 15, 2015 (GLOBE NEWSWIRE) -- FBR & Co. (NASDAQ:FBRC) ("FBR" or the "Company"), a leading investment bank serving the middle market, today reported net income of $2.9 million, or $0.32 per diluted share, for the second quarter of 2015, compared to net income of $7.0 million, or $0.58 per diluted share, for the second quarter of 2014 and a net loss of $2.5 million, or $0.29 per share, for the first quarter of 2015. For the first half of 2015, FBR reported net income of $0.4 million, or $0.04 per diluted share, compared to net income of $12.6 million, or $1.04 per diluted share, for the first half of 2014.
"In spite of a continued sluggish new-issue market, especially in our key industry verticals, I'm pleased with the revenue improvement during the second quarter," said Richard J. Hendrix, chairman and chief executive officer. "Over the balance of the year our focus will continue to be on delivering exceptional execution for issuers and bringing to market ideas and investment opportunities that generate alpha for investors."
Pre-tax operating income for the second quarter of 2015 was $4.4 million, compared to operating income of $9.0 million for the second quarter of 2014 and an operating loss of $3.8 million for the first quarter of 2015. Second quarter 2015 revenues were $44.3 million, compared to $57.1 million for the second quarter of 2014 and $27.1 million for the first quarter of 2015. For the second quarter of 2015, the company's pre-tax operating margin of 10 percent was negatively impacted by heightened investment banking deal expenses.
Composition of Revenues
Investment Banking
Investment banking revenue was $29.7 million for the second quarter of 2015 compared to $35.8 million for the second quarter of 2014 and $12.7 million for the first quarter of 2015. Second quarter revenue was generated by 13 client engagements representing $3.8 billion in transaction value. For the first half of 2015, investment banking revenue was $42.4 million compared to $72.4 million for the first half of 2014. The decline in first half 2015 revenue versus the prior year primarily reflects the completion of fewer sole-managed private transactions.
Institutional Brokerage
Net revenue generated in institutional brokerage was $14.3 million for the second quarter of 2015, compared to $14.6 million for the second quarter of 2014 and $13.7 million for the first quarter of 2015. For the first half of 2015, institutional brokerage revenue, inclusive of securities lending, was $28.0 million, compared to $29.7 million for the first half of 2014. Securities lending activity was initiated during the third quarter of 2014 and therefore related revenues are not reflected in first half 2014 results.
Investment Income, Net Interest Income and Dividends
The Company recognized investment income, including interest and dividends, of $0.3 million for the second quarter of 2015, compared to $6.7 million for the second quarter of 2014 and $0.6 million for the first quarter of 2015. For the first half of 2015, investment income, including interest and dividends, was $0.9 million, compared to $9.3 million for the first half of 2014.
Expenses
Non-compensation fixed expenses for the second quarter 2015 totaled $9.6 million, compared to $10.9 million for the second quarter of 2014 and $10.1 million for the first quarter of 2015.
Compensation and benefits expense for the second quarter 2015 was $24.3 million, compared to $32.1 million for the second quarter of 2014 and $18.0 million for the first quarter of 2015. The compensation-to-net revenue ratio was 55 percent in the second quarter and 59 percent for the first half of 2015. This compared to 56 percent and 57 percent in comparable periods of 2014.
Employees
At June 30, 2015, the Company had 293 full-time employees, compared to 290 at March 31, 2015 and 300 at December 31, 2014.
Share Repurchase Activity
During the second quarter, the Company repurchased 135 thousand shares of its common stock at an average price of $21.40 per share. For the first half of 2015, FBR repurchased 1.1 million shares at an average price per share of $24.42 for a total of $26.6 million. As of June 30, 2015, the Company had 615 thousand shares remaining under its repurchase authorization.
Since 2010, FBR has repurchased 10.6 million shares returning capital of over $206 million to shareholders.
Quarterly Dividend
On June 16, 2015, the Board of Directors approved the declaration of the Company's first cash dividend. At that time, the Board declared an initial quarterly dividend of $0.20 per common share payable on August 28, 2015 to shareholders of record on July 31, 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 June 30, 2015, FBR continues to maintain an unlevered and transparent balance sheet, with no debt, and cash and cash equivalents of $71.2 million.
Shareholders' equity as of June 30, 2015 was $235 million, and tangible book value per share was $28.52 based on 8.070 million shares outstanding, compared to shareholders' equity of $235 million, and tangible book value per share of $28.33 as of March 31, 2015.
Conference Call
Investors wishing to listen to the earnings call at 9:00 A.M. U.S. EDT, Thursday, July 16, 2015, may do so via the Web or conference call at:
Webcast link: http://edge.media-server.com/m/p/xsahm5z4
Conference call dial-in number (domestic, toll-free): 855.425.4204
Conference call dial-in number (international): 484.756.4245
Access code: 73461463
About FBR
FBR & Co. 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 | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| REVENUES: | ||||
| Investment banking: | ||||
| Capital raising | $ 27,827 | $ 35,312 | $ 37,111 | $ 68,628 |
| Advisory | 1,901 | 472 | 5,292 | 3,795 |
| Institutional brokerage | 12,441 | 14,643 | 24,684 | 29,734 |
| Net investment income | 3,679 | 9,091 | 7,029 | 12,925 |
| Interest | 8,008 | 270 | 14,993 | 554 |
| Dividends & other | 192 | 393 | 463 | 580 |
| Total revenues | 54,048 | 60,181 | 89,572 | 116,216 |
| Interest expense | 9,792 | 3,083 | 18,221 | 4,760 |
| Revenues, net of interest expense | 44,256 | 57,098 | 71,351 | 111,456 |
| NON-INTEREST EXPENSES: | ||||
| Compensation and benefits | 24,275 | 32,070 | 42,230 | 63,370 |
| Professional services | 4,439 | 4,424 | 6,812 | 7,362 |
| Business development | 2,642 | 3,057 | 4,530 | 5,425 |
| Clearing and brokerage fees | 1,336 | 1,137 | 2,559 | 2,361 |
| Occupancy and equipment | 3,103 | 3,003 | 6,161 | 6,155 |
| Communications | 2,576 | 2,856 | 5,587 | 5,748 |
| Other operating expenses | 1,487 | 1,576 | 2,917 | 3,045 |
| Total non-interest expenses | 39,858 | 48,123 | 70,796 | 93,466 |
| Income before income taxes | 4,398 | 8,975 | 555 | 17,990 |
| Income tax provision | 1,499 | 1,999 | 178 | 5,404 |
| Net income | $ 2,899 | $ 6,976 | $ 377 | $ 12,586 |
| Basic earnings per share | $ 0.36 | $ 0.65 | $ 0.04 | $ 1.15 |
| Diluted earnings per share | $ 0.32 | $ 0.58 | $ 0.04 | $ 1.04 |
| Weighted average shares - basic | 8,084 | 10,795 | 8,453 | 10,927 |
| Weighted average shares - diluted | 9,159 | 11,965 | 9,634 | 12,050 |
| Cash dividends declared per common share | $ 0.20 | $ -- | $ 0.20 | $ -- |
| FBR & CO. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (Dollars in thousands, except per share amounts) | ||
| (Unaudited) | ||
| June 30, | December 31, | |
| ASSETS | 2015 | 2014 |
| Cash and cash equivalents | $ 71,170 | $ 108,962 |
| Receivables: | ||
| Securities borrowed | 683,269 | 594,674 |
| Due from brokers, dealers and clearing organizations | 323,949 | 94,489 |
| Customers | 2,897 | 3,349 |
| Other | 5,945 | 5,227 |
| Financial instruments owned, at fair value | 120,949 | 166,047 |
| Other investments, at cost | 7,000 | 7,000 |
| Goodwill and intangibles | 4,742 | 4,921 |
| Furniture, equipment and leasehold improvements, net | 15,161 | 15,388 |
| Deferred tax assets, net of valuation allowance | 28,497 | 28,648 |
| Prepaid expenses and other assets | 5,390 | 6,392 |
| Total assets | $ 1,268,969 | $ 1,035,097 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Liabilities: | ||
| Securities loaned | $ 685,266 | $ 595,717 |
| Securities sold but not yet purchased, at fair value | 300,571 | 121,310 |
| Accrued compensation and benefits | 20,668 | 34,571 |
| Accounts payable, accrued expenses and other liabilities | 27,599 | 23,093 |
| Total liabilities | 1,034,104 | 774,691 |
| Shareholders' equity: | ||
| Common stock | 8 | 8 |
| Additional paid-in capital | 277,465 | 302,720 |
| Restricted stock units | 33,734 | 34,353 |
| Accumulated other comprehensive income | -- | 44 |
| Accumulated deficit | (76,342) | (76,719) |
| Total shareholders' equity | 234,865 | 260,406 |
| Total liabilities and shareholders' equity | $ 1,268,969 | $ 1,035,097 |
| Book Value per Share | $29.10 | $29.18 |
| Tangible Book Value per Share | $28.52 | $28.63 |
| Shares Outstanding (in thousands) | 8,070 | 8,923 |
| FBR & CO. | |||||
| Financial & Statistical Supplement - Operating Results | |||||
| (Dollars in thousands) | |||||
| (Unaudited) | |||||
| Q-2 15 | Q-1 15 | Q-4 14 | Q-3 14 | Q-2 14 | |
| Revenues, net of interest expense | $ 44,256 | $ 27,095 | $ 28,572 | $ 42,097 | $ 57,098 |
| Expenses: | |||||
| Variable | 17,094 | 5,414 | 4,560 | 13,214 | 22,279 |
| Fixed | 22,764 | 25,524 | 27,950 | 25,575 | 25,844 |
| Income (loss) before income taxes | 4,398 | (3,843) | (3,938) | 3,308 | 8,975 |
| Income tax provision (benefit) | 1,499 | (1,321) | (4,870) | (193) | 1,999 |
| Net income (loss) | $ 2,899 | $ (2,522) | $ 932 | $ 3,501 | $ 6,976 |
| Return on equity (trailing twelve months) | 1.8% | 3.3% | 6.2% | 8.6% | 9.0% |
| Fixed expenses | $ 22,764 | $ 25,524 | $ 27,950 | $ 25,575 | $ 25,844 |
| Less: Non-cash expenses1 | 1,134 | 2,398 | 2,593 | 2,406 | 2,374 |
| Corporate transaction costs2 | -- | -- | 1,132 | -- | -- |
| Core fixed costs3 | $ 21,630 | $ 23,126 | $ 24,225 | $ 23,169 | $ 23,470 |
| Statistical Data | |||||
| Revenues per employee (annualized) | $ 604 | $ 374 | $ 381 | $ 548 | $ 766 |
| Employee count | 293 | 290 | 300 | 307 | 298 |
| 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. | |||||