Declares $0.20 per Share Quarterly Cash Dividend
Financial Highlights for the three months ended June 30, 2016:
- Net revenues of $20.9 million
- Net loss of $8.2 million, or $1.08 per share
- Repurchased 720 thousand shares of common stock, through a combination of open market purchases and netting of shares for tax withholding purposes on employee share vestings, at a total cost of $12.8 million
- Shareholders’ equity of $173 million and tangible book value per share of $22.89 on June 30, 2016
ARLINGTON, Va., July 14, 2016 (GLOBE NEWSWIRE) -- FBR & Co. (NASDAQ:FBRC) ("FBR" or the “Company"), a leading investment bank serving the middle market, today reported a net loss of $8.2 million, or $1.08 per share, on revenues of $20.9 million for the second quarter of 2016, compared to net income of $2.9 million, or $0.32 per diluted share, on revenues of $44.3 million for the second quarter of 2015, and a net loss of $5.5 million, or $0.72 per share, on revenues of $17.9 million for the first quarter of 2016. For the first half of 2016, FBR reported a net loss of $13.7 million, or $1.80 per share, compared to net income of $0.4 million, or $0.04 per diluted share, for the first half of 2015.
Composition of Revenues
Investment Banking
Investment banking revenue was $8.6 million for the second quarter of 2016, compared to $29.7 million for the second quarter of 2015 and $4.2 million for the first quarter of 2016. During the quarter, FBR completed 18 client engagements representing $1.7 billion in transaction value, compared to 13 transactions representing $3.8 billion in transaction value for the same period in 2015, and 11 transactions representing $975 million in transaction value in the first quarter of 2016. Transactions were completed across all industry groups with healthcare, real estate and energy being the largest contributors.
For the first half of 2016, investment banking revenue was $12.8 million compared to $42.4 million for the first half of 2015. The decline in first half 2016 revenue versus the prior year primarily reflects continued challenges for the small cap IPO market as year-over-year activity declined by approximately 60 percent.
Institutional Brokerage
Net revenue generated in institutional brokerage was $11.6 million for the second quarter of 2016, compared to $14.3 million for the second quarter of 2015, and $14.4 million for the first quarter of 2016. Lower industry-wide cash equities volume during the second quarter of 2016 led to the quarter-over-quarter decline in revenue. For the first half of 2016, institutional brokerage revenue was $26.0 million compared to $28.0 million for the first half of 2015.
Expenses
Non-compensation fixed expenses for the second quarter of 2016 totaled $10.4 million, including expenses of approximately $1.0 million related to higher Annual Meeting costs as a result of a contested proxy vote, compared to $9.6 million for the second quarter of 2015 and $9.7 million for the first quarter of 2016. Compensation and benefits expense for the second quarter of 2016 was $16.7 million, compared to $24.3 million for the second quarter of 2015 and $18.0 million for the first quarter of 2016.
Employees
At June 30, 2016, the Company had 290 full-time employees, compared to 287 at March 31, 2016, and 293 at June 30, 2015.
Share Repurchase Activity
During the quarter ended June 30, 2016, the Company repurchased approximately 575 thousand shares of its common stock in the open market at an aggregate price of $10.1 million, or an average price of $17.49 per share. Also, FBR acquired an additional 145 thousand shares outside of the share repurchase program as a result of netting of shares for tax withholding purposes on employee share vestings for $2.7 million.
Today the Board approved an increase in the Company’s available repurchase authorization to 750 thousand shares. Since 2010, FBR has repurchased 12.2 million shares in the open market, thereby returning over $237 million to shareholders.
Quarterly Dividend
The Board of Directors declared a quarterly cash dividend of $0.20 per common share to be paid August 26, 2016 to all shareholders of record as of the close of business on July 29, 2016.
Balance Sheet
As of June 30, 2016, FBR continues to maintain an unlevered and highly-liquid balance sheet, with cash and cash equivalents of $51.3 million, compared to $52.8 million as of March 31, 2016. Over the last twelve months, FBR has significantly reduced its investment and trading desk positions in order to fund repurchase activity. The Company ended the second quarter of 2016 with net investment positions of approximately $47 million, down from $65 million at the end of first quarter 2016 and $87 million at the end of 2015.
Shareholders’ equity as of June 30, 2016 was $173 million, and tangible book value per share was $22.89, based on 7.28 million shares outstanding, compared to shareholders’ equity of $195 million and tangible book value per share of $24.60 as of March 31, 2016.
Conference Call
Investors wishing to listen to the earnings call at 9:00 A.M. U.S. EDT, Friday, July 15, 2016, may do so via the Web or conference call at:
Webcast link: http://edge.media-server.com/m/p/hf5e4tuq
Conference call dial-in number (domestic, toll-free): 855.425.4204
Conference call dial-in number (international): 484.756.4245
Access code: 39768169
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; industrials; 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, 2015; 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, | ||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| REVENUES: | |||||||||||||||||||
| Investment banking: | |||||||||||||||||||
| Capital raising | $ | 6,796 | $ | 27,827 | $ | 9,326 | $ | 37,111 | |||||||||||
| Advisory | 1,838 | 1,901 | 3,458 | 5,292 | |||||||||||||||
| Institutional brokerage | 9,550 | 12,441 | 21,734 | 24,684 | |||||||||||||||
| Interest | 7,382 | 8,008 | 15,746 | 14,993 | |||||||||||||||
| Net investment income (loss) | 479 | 3,679 | (439 | ) | 7,029 | ||||||||||||||
| Dividends & other | 189 | 192 | 312 | 463 | |||||||||||||||
| Total revenues | 26,234 | 54,048 | 50,137 | 89,572 | |||||||||||||||
| Interest expense | 5,347 | 9,792 | 11,350 | 18,221 | |||||||||||||||
| Revenues, net of interest expense | 20,887 | 44,256 | 38,787 | 71,351 | |||||||||||||||
| NON-INTEREST EXPENSES: | |||||||||||||||||||
| Compensation and benefits | 16,692 | 24,275 | 34,687 | 42,230 | |||||||||||||||
| Occupancy and equipment | 3,178 | 3,103 | 6,511 | 6,161 | |||||||||||||||
| Communications | 2,214 | 2,576 | 4,768 | 5,587 | |||||||||||||||
| Professional services | 2,678 | 4,439 | 4,298 | 6,812 | |||||||||||||||
| Business development | 2,326 | 2,642 | 3,940 | 4,530 | |||||||||||||||
| Clearing and brokerage fees | 1,271 | 1,336 | 2,555 | 2,559 | |||||||||||||||
| Other operating expenses | 1,718 | 1,487 | 3,303 | 2,917 | |||||||||||||||
| Total non-interest expenses | 30,077 | 39,858 | 60,062 | 70,796 | |||||||||||||||
| (Loss) income before income taxes | (9,190 | ) | 4,398 | (21,275 | ) | 555 | |||||||||||||
| Income tax (benefit) provision | (982 | ) | 1,499 | (7,613 | ) | 178 | |||||||||||||
| Net (loss) income | $ | (8,208 | ) | $ | 2,899 | $ | (13,662 | ) | $ | 377 | |||||||||
| Basic (loss) income per share | $ | (1.08 | ) | $ | 0.36 | $ | (1.80 | ) | $ | 0.04 | |||||||||
| Diluted (loss) income per share | $ | (1.08 | ) | $ | 0.32 | $ | (1.80 | ) | $ | 0.04 | |||||||||
| Weighted average shares - basic | 7,600 | 8,084 | 7,584 | 8,453 | |||||||||||||||
| Weighted average shares - diluted | 7,600 | 9,159 | 7,584 | 9,634 | |||||||||||||||
| Cash dividends per common share | $ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.20 | |||||||||||
| FBR & CO. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||
| (Unaudited) | ||||||||||
| June 30, | December 31, | |||||||||
| ASSETS | 2016 | 2015 | ||||||||
| Cash and cash equivalents | $ | 51,347 | $ | 70,067 | ||||||
| Receivables: | ||||||||||
| Securities borrowed | 969,006 | 685,037 | ||||||||
| Due from brokers, dealers and clearing organizations | 5,922 | 5,513 | ||||||||
| Customers | 4,422 | 1,429 | ||||||||
| Other | 3,188 | 5,895 | ||||||||
| Financial instruments owned, at fair value | 47,571 | 94,923 | ||||||||
| Other investments, at cost | 6,539 | 6,539 | ||||||||
| Goodwill and intangibles | 6,011 | 6,273 | ||||||||
| Furniture, equipment, software and leasehold improvements, net | 13,865 | 15,071 | ||||||||
| Deferred tax assets, net of valuation allowance | 45,642 | 37,497 | ||||||||
| Prepaid expenses and other assets | 6,027 | 5,172 | ||||||||
| Total assets | $ | 1,159,540 | $ | 933,416 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Liabilities: | ||||||||||
| Securities loaned | $ | 968,681 | $ | 687,443 | ||||||
| Financial instruments sold, not yet purchased, at fair value | - | 1,934 | ||||||||
| Accrued compensation and benefits | 2,838 | 13,325 | ||||||||
| Accounts payable, accrued expenses and other liabilities | 15,304 | 19,947 | ||||||||
| Total liabilities | 986,823 | 722,649 | ||||||||
| Shareholders' equity: | ||||||||||
| Common stock | 7 | 7 | ||||||||
| Additional paid-in capital | 254,963 | 259,011 | ||||||||
| Restricted stock units | 15,076 | 35,929 | ||||||||
| Accumulated deficit | (97,329 | ) | (84,180 | ) | ||||||
| Total shareholders' equity | 172,717 | 210,767 | ||||||||
| Total liabilities and shareholders' equity | $ | 1,159,540 | $ | 933,416 | ||||||
| Book Value per Share | $ | 23.72 | $ | 28.69 | ||||||
| Tangible Book Value per Share | $ | 22.89 | $ | 27.83 | ||||||
| Shares Outstanding (in thousands) | 7,282 | 7,347 | ||||||||
| FBR & CO. | ||||||||||||||||||||
| Financial & Statistical Supplement - Operating Results | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Q-2 16 | Q-1 16 | Q-4 15 | Q-3 15 | Q-2 15 | ||||||||||||||||
| Revenues, net of interest expense | $ | 20,887 | $ | 17,900 | $ | 23,464 | $ | 25,580 | $ | 44,256 | ||||||||||
| Expenses: | ||||||||||||||||||||
| Variable | 6,728 | 6,436 | 7,467 | 5,712 | 17,094 | |||||||||||||||
| Fixed | 23,349 | 23,549 | 26,001 | 26,178 | 22,764 | |||||||||||||||
| Income (loss) before income taxes | (9,190 | ) | (12,085 | ) | (10,004 | ) | (6,309 | ) | 4,398 | |||||||||||
| Income tax (benefit) provision | (982 | ) | (6,631 | ) | (5,594 | ) | (2,881 | ) | 1,499 | |||||||||||
| Net (loss) income | $ | (8,208 | ) | $ | (5,454 | ) | $ | (4,410 | ) | $ | (3,428 | ) | $ | 2,899 | ||||||
| Return on equity (trailing twelve months) | -10.6 | % | -4.8 | % | -3.2 | % | -0.9 | % | 1.8 | % | ||||||||||
| Fixed expenses | $ | 23,349 | $ | 23,549 | $ | 26,001 | $ | 26,178 | $ | 22,764 | ||||||||||
| Less: Non-cash expenses1 | 582 | - | 1,701 | 2,373 | 1,134 | |||||||||||||||
| Corporate transaction costs2 | - | - | - | 691 | - | |||||||||||||||
| Core fixed costs3 | $ | 22,767 | $ | 23,549 | $ | 24,300 | $ | 23,114 | $ | 21,630 | ||||||||||
| Statistical Data | ||||||||||||||||||||
| Revenues per employee (annualized) | $ | 288 | $ | 249 | $ | 310 | $ | 337 | $ | 604 | ||||||||||
| Employee count | 290 | 287 | 303 | 304 | 293 | |||||||||||||||
| 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. |
| 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. | |