Broadpoint Gleacher Securities Group, Inc. (NASDAQ: BPSG), to be
renamed Gleacher & Company, Inc., reported today financial
results for the first quarter ended March 31, 2010. The Company
will hold a conference call this morning, May 4, 2010, at 10:00
A.M. (EDT) (See Conference Call Information below) to discuss these
results.
Highlights for the first quarter ended March 31, 2010 and
March 31, 2009
(In thousands)
Three Months Ended Net Revenues (including net
interest income) March 31,
2010
March 31,
2009
Net revenues $ 79,303 $ 70,560 (Loss)/income
from continuing operations before income taxes (GAAP)
(2,051 ) 9,336 Add back: Compensation expense
associated with the resignations of the former Chief Executive
Officer and the former Chief Financial Officer (1)
13,306 - Adjusted income from continuing
operations before income taxes (Non-GAAP) $ 11,255
$ 9,336
Note: See the paragraph captioned
“Non-GAAP Financial Measures” for additional information.
(1) Compensation expense consists
of $12.7 million non-cash expense.
Highlights of the first quarter include:
- Net revenues of $79.3 million
for the first quarter of 2010, compared to $70.6 million for the
first quarter of 2009. Revenue growth in the first quarter was
driven principally by increased investment banking revenues.
- The pre-tax loss of $2.1 million
includes $13.3 million in compensation expense associated with the
resignations of the former Chief Executive Officer and the former
Chief Financial Officer.
- Annualized net revenue per
employee of $0.9 million.
- Served as joint book-running
manager on two notes offerings totaling $605 million and as sole
dealer manager on a $150 million debt exchange transaction.
- Eric Gleacher assumed the
additional role of Chief Executive Officer.
- Announced the consolidation of
the Company’s branding to Gleacher & Company.
Eric Gleacher, Chairman and Chief Executive Officer, said, “The
long term growth potential of the Company was demonstrated in the
first quarter by our work on the successful Appleton and Reddy Ice
note offerings. These transactions show the strength of the full
service investment banking model---attractive financing terms and
strategic advice for our corporate clients and quality investment
opportunities for our institutional investor clients.”
Peter McNierney, President and Chief Operating Officer, said,
“We are very pleased to have unified the branding of the firm to
Gleacher & Company and consolidated our New York presence to a
single office. This closer coordination of our divisions will allow
us to better provide a full suite of services to our corporate and
institutional clients.”
Overview of Financial Results
for the Quarters Ended March 31, 2010 and March 31, 2009
(In thousands except per share
amounts)
(Unaudited Consolidated Statements
of Operations)
Three Months Ended March 31,
2010 2009 Revenues:
Principal transactions $ 46,306 $ 52,041 Commissions 4,165 4,902
Investment banking 15,098 5,190 Investment gains / (losses), net
150 (9 ) Interest 16,161 10,648 Fees and other 910
1,490 Total revenues 82,790 74,262
Interest expense 3,487 3,702
Net revenues 79,303
70,560 Expenses (excluding interest): Compensation and
benefits* 68,201 52,407 Clearing, settlement and brokerage 1,375
812 Communications and data processing 3,207 2,287 Occupancy,
depreciation and amortization 2,246 1,788 Amortization of
intangible assets 1,078 257 Selling 1,195 925 Other
4,052 2,748 Total expenses (excluding
interest) 81,354 61,224
(Loss) / income before income taxes and discontinued operations
(2,051 ) 9,336 Income tax
(benefit) / expense (1,843 ) 4,357
(Loss) / income from continuing operations (208 ) 4,979
(Loss) / income from discontinued operations, net of taxes
(3 ) 42 Net (loss) / income $
(211 ) $ 5,021
Per share data:
Basic (loss) / earnings per share: Continuing operations $ (0.00 )
$ 0.07 Discontinued operations -
- Net (loss) / income per share $ (0.00 ) $
0.07 Diluted (loss) / earnings per share: Continuing
operations $ (0.00 ) $ 0.06 Discontinued operations -
- Net (loss) / income per share
$ (0.00 ) $ 0.06 Weighted average common and common
equivalent shares outstanding:
Basic 119,301 75,526 Diluted 119,301
79,798
*Compensation and benefits
detail:
Salary, bonus and benefits $ 46,508 $ 44,964 Earnout associated
with BNY transaction 3,124 4,723 Employee stock-based compensation
18,569 2,720 Total
$ 68,201 $ 52,407
Discussion of operating results for the first quarter of 2010
compared to the first quarter of 2009
Net revenues for the first quarter of 2010 were $79.3 million,
an increase of $8.7 million, or 12 percent, from $70.6 million in
the first quarter of 2009. Pre-tax loss from continuing operations
in the first quarter was $2.1 million compared to pre-tax income
from continuing operations of $9.3 million in the prior year
quarter. The first quarter pre-tax loss includes compensation
expense of $13.3 million related to the resignations of the former
Chief Executive Officer and the former Chief Financial Officer.
Revenues from principal transactions and commissions were $50.5
million in the first quarter of 2010, a decrease of $6.5 million,
or 11 percent, compared to the first quarter of 2009, due to
decreased revenues of $8.9 million in corporate bonds and $1.0
million in equities, partially offset by an increase in mortgage
and asset backed revenues of $3.5 million. Investment banking
revenues increased $9.9 million over the first quarter of 2009 to
$15.1 million, due to an increase in capital markets activity and
advisory activity. Investment gains were $0.2 million compared to a
$9,000 loss in the first quarter of 2009. Net interest income
increased by $5.7 million over the first quarter of 2009 to $12.7
million in the first quarter of 2010, primarily due to coupon
interest generated on higher mortgage and asset backed securities
inventory levels. Fees and other revenues of $0.9 million decreased
by $0.6 million compared to the first quarter of 2009, primarily
due to a decrease in payments received for equity research.
Non-interest expenses for the first quarter of 2010 of $81.4
million increased $20.2 million, or 33 percent, compared to $61.2
million in the first quarter of 2009. In the first quarter of 2010,
compensation and benefits expense was $68.2 million, an increase of
$15.8 million, or 30 percent, over the prior year quarter,
primarily due to the expense associated with the resignations of
the former CEO and former CFO as well as an increase in revenues of
12 percent. Clearing, settlement and brokerage costs were $1.4
million, an increase of $0.6 million, or 69 percent, compared to
the prior year quarter due to an increase in the costs associated
with new fixed income products traded. Communications and data
processing expense of $3.2 million increased by $0.9 million
compared to the first quarter of 2009 due to increased business
activity. Occupancy, depreciation and amortization expense of $2.2
million increased $0.5 million, or 26 percent, compared to the
first quarter of 2009 due to the leasing of additional office
space. Amortization of intangibles increased $0.8 million, or 319
percent, to $1.1 million in the first quarter of 2010 due to the
acquisition of Gleacher Partners, which occurred in June of 2009.
Selling expense increased $0.3 million, or 29 percent, to $1.2
million in the first quarter of 2010 due to an increase in sales
activity. Other expenses increased $1.3 million, or 47 percent, to
$4.1 million in the first quarter of 2010 primarily due to an
increase in professional service fees and the implementation of a
new SIPC assessment fee.
Condensed Consolidated Statements
of Financial Condition
(In thousands except per share and
share amounts)
(Unaudited Consolidated Statements
of Financial Condition)
March 31, December 31, As of
2010 2009 Assets Cash and cash equivalents $ 33,288 $
24,997 Cash segregated for regulatory purposes 100 100 Receivables
from: Brokers, dealers and clearing agencies 13,671 19,797 Others
14,587 17,105 Securities owned, at fair value 832,360 979,701
Investments 19,756 19,326 Office equipment and leasehold
improvements, net 4,554 3,069 Goodwill 106,141 105,694 Intangible
assets 18,185 19,263 Deferred tax assets, net 21,974 16,137 Other
assets 11,109 10,974
Total Assets $ 1,075,725 $ 1,216,163
Liabilities Payables to: Brokers, dealers and clearing
agencies $ 555,592 $ 691,495 Others 13,211 14,180 Securities sold,
but not yet purchased, at fair value 96,175 72,988 Accrued
compensation 23,205 70,728 Accounts payable 1,696 2,203 Accrued
expenses 5,326 4,754 Income taxes payable 1,836 2,397 Deferred tax
liabilities 2,751 2,817 Mandatorily redeemable preferred stock
24,477 24,419 Total
Liabilities 724,269 885,981
Commitments and Contingencies Subordinated debt
1,197 1,197 Shareholders’ Equity
Common stock; $.01 par value; authorized 200,000,000 and
200,000,000 shares, respectively; issued 128,901,290 and
125,056,247 shares, respectively; and outstanding 128,294,480 and
124,357,163 shares, respectively 1,251 1,251 Additional paid-in
capital 433,541 411,633 Deferred compensation 534 534 Accumulated
deficit (83,353 ) (83,142 ) Treasury stock, at cost (606,810 shares
and 699,084 shares, respectively) (1,714 )
(1,291 ) Total Shareholders’ Equity 350,259
328,985 Total Liabilities and
Shareholders’ Equity $ 1,075,725 $ 1,216,163
Income Tax Note
The Company’s effective income tax rate from continuing
operations for the three month period ended March 31, 2010 of 89.9%
resulted in an income tax benefit of approximately $1.8 million.
The effective income tax rate includes the benefit of a discrete
item of 41.6% due to the reversal of prior year non-deductible
share-based compensation previously granted to the Company’s former
CEO. In 2009, the compensation was not deductible due to the
application of IRC Section 162(m), but became deductible as a
result of the officer’s separation from the Company in the current
quarter. The effective rate also differs from the statutory rate of
35% primarily due to state and local income taxes, preferred stock
dividends, non-deductible compensation and meals and entertainment
expense.
Non-GAAP Financial Measures
The Company has presented non-GAAP financial measures to enhance
an investor’s evaluation of the Company’s operating results.
Annualized net revenue per employee, stated previously in this
press release, may be viewed as a non-GAAP financial measure. We
calculate this number by dividing our net revenue for the quarter
by the average number of employees during the period and
multiplying by four. Our annualized net revenue per average number
of employees during the first quarter of 2010, calculated using our
first quarter net revenues of $79.3 million, and an average of 343
employees, was $0.925 million.
Adjusted income from continuing operations, stated previously in
this press release is a non-GAAP financial measure. We calculate
this number by adding back to our GAAP pre-tax loss, the severance
expense and related employee benefits and the remaining stock based
compensation amortization for the former CEO and the former CFO
since the dates of their resignations.
Conference Call Information
The Company will hold a conference call today, May 4, 2010, at
10:00 A.M. (EDT). This call will be webcast and can be accessed on
the Investor Relations portion of the Company’s website at
www.gleacher.com, as well as being distributed through Thomson
StreetEvents Network. Individual investors can listen to the call
at www.earnings.com, Thomson’s individual investor portal, powered
by StreetEvents. Institutional investors can access the call via
Thomson StreetEvents (www.streetevents.com), a password protected
event management site. To participate on the call, please dial
888.713.4216 for domestic calls or 617.213.4868 for international
calls, participant passcode 34423033 or request the Broadpoint
Gleacher earnings call. For those who cannot listen to the live
broadcast, a recording of the call will be available for seven days
following the call by dialing 888.286.8010 for domestic calls or
617.801.6888 for international calls, participant passcode
52612678.
About Gleacher & Company
Broadpoint Gleacher Securities Group, Inc. (NASDAQ: BPSG), to be
renamed Gleacher & Company, Inc., is an independent investment
bank that provides corporations and institutional investors with
strategic, research-based investment opportunities, capital
raising, and financial advisory services, including merger and
acquisition, restructuring, recapitalization and strategic
alternative analysis services. For more information, please visit
http://www.gleacher.com.
Forward Looking Statements
This press release contains "forward-looking statements." These
statements are not historical facts but instead represent the
Company's belief regarding future events, many of which, by their
nature, are inherently uncertain and outside of the Company's
control. The Company's forward-looking statements are subject to
various risks and uncertainties, including the conditions of the
securities markets, generally, and acceptance of the Company's
services within those markets and other risks and factors
identified from time to time in the Company's filings with the
Securities and Exchange Commission. It is possible that the
Company's actual results and financial condition may differ,
possibly materially, from the anticipated results and financial
condition indicated in its forward-looking statements. You are
cautioned not to place undue reliance on these forward-looking
statements. The Company does not undertake to update any of its
forward-looking statements.
Broadpoint Gleacher Securities Grp., Inc. (MM) (NASDAQ:BPSG)
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