Thomas Weisel Partners Group, Inc. (NASDAQ: TWPG) today released
results for the three months ended March 31, 2010.
The firm reported a net loss of $5.3 million, or $0.16 per
share, for the first quarter of 2010 compared with a net loss of
$23.9 million, or $0.74 per share, for the first quarter of 2009.
Total net revenues increased 21% to $52.2 million for the first
quarter of 2010 versus $43.1 million for the first quarter of
2009.
Adjusting for the non-cash amortization of intangible assets
acquired in the purchase of Westwind Partners, the firm reported a
non-GAAP net loss of $3.5 million, or $0.11 per share, for the
first quarter of 2010. A reconciliation of GAAP results to these
non-GAAP measures is discussed below under "Non-GAAP Financial
Measures."
"We continue to be encouraged by the improving capital markets
environment and our results in the first quarter were led again by
strong investment banking activity, with a significant contribution
from strategic advisory revenues in the technology sector. Our
backlog continues to build, increasing significantly to 19 IPOs on
file compared with six at the beginning of the year. The majority
of these IPOs are expected to price in the second and third
quarters of 2010, which should lead to strong investment banking
revenues in the second half of the year," said Thomas W. Weisel,
Chairman and CEO of Thomas Weisel Partners.
Mr. Weisel continued, "We are extremely pleased to have
announced earlier this week our strategic merger with Stifel
Financial. The combined firm will build the premier middle-market
investment bank with the scale to aggressively compete in all
sectors of the economy. With virtually no overlap in investment
banking and very little in research, the combined firm will be able
to deliver a broader set of product offerings, expanded geographic
reach and enhanced profitability through significant cost
savings."
Business Overview
- Investment Banking Revenues. Investment
banking revenues were $27.2 million in the first quarter of 2010
compared with $11.0 million in the first quarter of 2009 and $30.3
million in the fourth quarter of 2009, an increase of 146% and a
decrease of 10%, respectively. Total transactions for the first
quarter of 2010 were 34 compared with 15 in the year-ago quarter
and 49 in the fourth quarter of 2009. The decrease from the fourth
quarter of 2009 was attributable to completing fewer equity capital
raising transactions resulting in lower capital raising revenues,
which was partially offset by an increase in strategic advisory
revenues.
- Brokerage Revenues. Brokerage revenues
were $21.5 million in the first quarter of 2010 compared with $29.5
million in the first quarter of 2009 and $21.7 million in the
fourth quarter of 2009, a 27% and 1% decrease, respectively.
Revenues in the first quarter of 2010 were comparable to the fourth
quarter of 2009. U.S. equity commissions slightly increased from
the fourth quarter of 2009, consistent with the direction of market
volumes, while Electronic Trading was marginally down.
- Asset Management Revenues. Asset
management revenues were $4.0 million in the first quarter of 2010
compared with $2.7 million in the first quarter of 2009 and $8.4
million in the fourth quarter of 2009. Asset management revenues
consisted of management fees of $3.5 million and net realized and
unrealized gains in private equity and other securities of $0.4
million. Assets under management were $1.6 billion as of March 31,
2010.
- Compensation and Benefits Expenses.
Compensation and benefits expenses were $31.4 million in the first
quarter of 2010 compared with $30.7 million in the first quarter of
2009 and $45.3 million in the fourth quarter of 2009, a 2% increase
and a 31% decrease, respectively.
The non-GAAP compensation ratio, which is defined in note (1) below,
decreased to 60% in the first quarter of 2010 compared with the non-GAAP
ratio of 68% in the year-ago period and 76% in the fourth quarter of 2009. A
reconciliation of GAAP results to these non-GAAP measures is discussed below
under "Non-GAAP Financial Measures."
- Non-compensation Expenses.
Non-compensation expenses were $27.1 million in the first quarter
of 2010 compared with $35.4 million in the first quarter of 2009
and $30.7 million in the fourth quarter of 2009, a decrease of 23%
and 12%, respectively.
- Provision for Taxes. The firm recorded a
tax benefit of $1.1 million in the first quarter of 2010 related
entirely to taxable losses attributable to the firm's Canadian
operations. As of December 31, 2008, the firm recorded a full
valuation allowance on its U.S. and U.K. deferred tax assets and,
therefore, does not recognize a tax benefit on its net loss in
these tax jurisdictions.
- Capital. As of March 31, 2010, the firm's
cash and cash equivalents were $61.9 million, reflecting a decline
from the year-end balance primarily the result of paying accrued
2009 compensation expenses. Shareholders' equity and book value per
share were $127.8 million and $3.89, respectively, and tangible
shareholders' equity and tangible book value per share were $113.9
million and $3.47, respectively.
- Strategic New Hires. The firm is committed to increasing the value of its
franchise by focusing on building its revenue generating capability
through opportunistically hiring senior talent. In Investment
Banking, we added two senior professionals, Aaron Hill and Keith
Sipes, to the Media & Telecom team. In Brokerage, the firm
added Charles Chon as a senior analyst covering Medical Devices,
Michael Nelson as a senior analyst covering Telecom Services,
Jordan Rohan as a senior analyst covering Internet Services, Sean
Owens to the Institutional Sales team focusing on the Midwest and
Michael Smith in Private Client Services focusing on Canada.
The firm is also pleased to announce that David Fowler has joined TWP as a
Senior Managing Director of TWP and Head of Capital Markets of TWP Canada.
Mr. Fowler brings detailed industry knowledge, strong institutional
relationships and a broad range of contacts among the key players in our
industry. Mr. Fowler will be directly responsible for the Canadian Brokerage
business and coordination of the business activities for the Canadian
Investment Banking group to increase the firm's Canadian franchise. Mr.
Fowler was previously a Managing Director in Equity Capital Markets and Head
of Global Institutional Equity Sales at RBC Capital Markets and brings over
25 years of institutional equity sales and investment banking experience.
- Strategic Combination With Stifel
Financial. On April 26, 2010, the firm announced that it had
entered into a definitive agreement to merge with Stifel Financial.
Together, the firm and Stifel will build the premier middle-market
investment bank with exposure to all sectors of the economy.
Shareholders of Thomas Weisel Partners will receive 0.1364 shares
of Stifel common stock for each share of Thomas Weisel Partners
common stock. The transaction is valued at more than $300 million.
The combined firm will benefit from increased revenue opportunities
and significant back office cost savings, particularly in
brokerage, which should lead to enhanced profitability.
The transaction was approved by both firms' Boards of Directors and is
subject to Thomas Weisel Partners shareholder approval, regulatory approvals
and other customary closing conditions. The transaction is expected to close
on or about June 30, 2010.
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(Dollar amounts in thousands, except book value per share)
(Unaudited)
Three Months Ended March
31,
--------------------------
2010 2009
------------ ------------
Revenue Detail:
Investment banking
Capital raising $ 10,944 $ 8,601
Strategic advisory 16,227 2,425
------------ ------------
Total investment banking 27,171 11,026
Brokerage 21,511 29,456
Asset management
Management fees 3,530 3,590
Private equity realized and unrealized losses
- net (205) (1,849)
Other securities realized and unrealized
gains - net 627 984
------------ ------------
Total asset management 3,952 2,725
Interest income 127 375
------------ ------------
Total revenues 52,761 43,582
------------ ------------
Interest expense (605) (483)
------------ ------------
Net revenues $ 52,156 $ 43,099
============ ============
Investment Banking Transactions:
Capital raising 24 11
Strategic advisory 10 4
------------ ------------
Total transactions 34 15
------------ ------------
Average revenue per transaction $ 799 $ 735
Other Metrics:
Non-GAAP compensation ratio(1) 60.0% 67.9%
Non-compensation ratio(2) 52.0% 82.2%
Assets under management $ 1,584,391 $ 1,320,390
Shareholders' equity $ 127,784 $ 150,032
Less: Other intangible assets (13,836) (19,893)
------------ ------------
Tangible shareholders' equity $ 113,948 $ 130,139
============ ============
Common shares outstanding(3) 32,845 31,512
Book value per share $ 3.89 $ 4.76
Tangible book value per share $ 3.47 $ 4.13
(1) The firm's non-GAAP compensation ratio is the ratio of the
firm's compensation and benefits expenses (excluding expenses
associated with the initial grant of restricted stock units) to net
revenues (excluding investment gains and losses attributable to
investments in private equity). Without excluding these amounts,
the firm's ratio of compensation and benefits expenses to net
revenues is 60.2% and 71.2% for the three months ended March 31,
2010 and 2009, respectively.
(2) The firm's non-compensation ratio is the ratio of total
expenses (other than compensation and benefits expenses and
interest expense) to net revenues.
(3) Includes 6,183,121 exchangeable shares issued by TWP
Acquisition Company (Canada), Inc., the firm's wholly-owned
subsidiary. Each exchangeable share is exchangeable at any time
into a share of common stock of the firm, entitles the holder to
dividend and other rights substantially economically equivalent to
those of a share of common stock, and, through a voting trust,
entitles the holder to a vote along with shares of common stock on
matters presented to shareholders of the firm.
Non-GAAP Financial Measures
The firm has reported in this press release its net loss and
basic and diluted loss per share for the three months ended March
31, 2010 on a non-GAAP basis by:
- adjusting its GAAP net loss of $5.3 million to exclude the
after-tax non-cash expense associated with the amortization of
intangible assets acquired as a result of its acquisition of
Westwind Partners of $1.8 million;
- using its non-GAAP net loss of $3.5 million as the numerator of
its non-GAAP basic and diluted loss per share calculations;
and
- using as the denominator of its non-GAAP basic and diluted loss
per share calculations the basic and diluted weighted average
shares used, respectively, as the denominator of its GAAP basic and
diluted loss per share calculations.
A reconciliation of the firm's GAAP net loss to its non-GAAP net
loss for the three months ended March 31, 2010 is set forth below
(in millions):
Three Months Ended
March 31, 2010
--------------------
Net loss $ (5.3)
Exclusion of the after-tax non-cash expense associated
with the amortization of intangible assets acquired as
a result of the firm's acquisition of Westwind Partners 1.8
--------------------
Non-GAAP net loss $ (3.5)
====================
The following table sets forth the firm's GAAP basic and diluted
weighted average shares outstanding and its GAAP basic and diluted
net loss per share for the three months ended March 31, 2010, as
well as the non-GAAP net loss per share after applying the
adjustments described above:
Three Months Ended
March 31, 2010
--------------------
Weighted average shares used in computation of net loss
per share:
Basic (in thousands) 32,928
Diluted (in thousands) 32,928
Net loss per share:
Basic ($0.16)
Diluted ($0.16)
Non-GAAP net loss per share:
Basic ($0.11)
Diluted ($0.11)
The firm's non-GAAP compensation ratio is the ratio of the
firm's compensation and benefits expenses (excluding expenses
relating to the initial grant of restricted stock units) to net
revenues (excluding investment gains and losses attributable to
investments in private equity). Without excluding these amounts,
the firm's ratio of compensation and benefits expenses to net
revenues is 60.2% and 71.2% for the three months ended March 31,
2010 and 2009, respectively.
Three Months Ended Three Months Ended
March 31, 2010 March 31, 2009
-------------------- --------------------
(in millions)
Compensation and benefits expenses $ 31.4 $ 30.7
Exclusion of the pre-tax non-cash
expense associated with the
initial grant of restricted stock
units - 0.2
-------------------- --------------------
Non-GAAP compensation and benefits
expense $ 31.4 $ 30.5
==================== ====================
Net revenues $ 52.2 $ 43.1
Exclusion of investment losses in
private equity 0.2 1.8
-------------------- --------------------
Non-GAAP net revenues $ 52.4 $ 44.9
==================== ====================
The firm's non-compensation expenses are calculated by adjusting
its total expenses to exclude interest minus compensation and
benefits expenses.
Three Months Ended Three Months Ended
March 31, 2010 March 31, 2009
-------------------- --------------------
(in millions)
Total expenses excluding interest $ 58.5 $ 66.1
Less compensation and benefits
expenses 31.4 30.7
-------------------- --------------------
Non-compensation expenses $ 27.1 $ 35.4
==================== ====================
The firm views the expense associated with the amortization of
intangible assets acquired as a result of its acquisition of
Westwind Partners as a non-cash event. Additionally, the firm views
the exclusion of its grant of restricted stock units in connection
with its initial public offering from compensation and benefits
expense as a non-GAAP compensation and benefits expense and the
exclusion of investment gains and losses in its private equity
portfolios from net revenues as non-GAAP net revenues for
calculating the firm's non-GAAP compensation ratio. The firm's
management has utilized non-GAAP calculations of its compensation
ratio, net revenues and net loss and non-GAAP calculations of basic
and diluted loss per share that are adjusted in the manner
described above as an additional device to aid in understanding and
analyzing the firm's financial results in the three months ended
March 31, 2010. The firm's management believes that these non-GAAP
measures will allow for a better evaluation of the operating
performance of its business and facilitate meaningful comparison of
its results in the current period to those in prior periods and
future periods. The firm's reference to these measures should not,
however, be considered as a substitute for results that are
presented in a manner consistent with GAAP. These non-GAAP measures
are provided to enhance investors' overall understanding of the
firm's current financial performance and its prospects for the
future. Specifically, the firm's management believes that the
non-GAAP measures provide useful information to both management and
investors by excluding certain items that may not be indicative of
the firm's core operating results and business outlook.
A limitation of utilizing these non-GAAP measures is that the
GAAP accounting effects of these events do in fact reflect the
underlying financial results of the firm's business, and these
effects should not be ignored in evaluating and analyzing the
firm's financial results. Therefore, management believes that both
the firm's GAAP measures and these non-GAAP measures of the firm's
financial performance should be considered together.
Cautionary Note Regarding Forward-Looking
Statements
Statements in this press release that relate to Stifel or Thomas
Weisel Partners' future plans, objectives, expectations,
performance, events and the like may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Future events, risks and uncertainties, individually or in
the aggregate, could cause our actual results to differ materially
from those expressed or implied in these forward-looking
statements. The material factors and assumptions that could cause
actual results to differ materially from current expectations
include, without limitation, the following: (1) the inability to
close the merger in a timely manner; (2) the inability to complete
the merger due to the failure to obtain stockholder approval and
adoption of the merger agreement and approval of the merger or the
failure to satisfy other conditions to completion of the merger,
including required regulatory and court approvals; (3) the failure
of the transaction to close for any other reason; (4) the
possibility that the integration of Thomas Weisel Partners'
business and operations with those of Stifel may be more difficult
and/or take longer than anticipated, may be more costly than
anticipated and may have unanticipated adverse results relating to
Thomas Weisel Partners' or Stifel's existing businesses; (5) the
challenges of integrating and retaining key employees; (6) the
effect of the announcement of the transaction on Stifel's, Thomas
Weisel Partners' or the combined company's respective business
relationships, operating results and business generally; (7) the
possibility that the anticipated synergies and cost savings of the
merger will not be realized, or will not be realized within the
expected time period; (8) the possibility that the merger may be
more expensive to complete than anticipated, including as a result
of unexpected factors or events; (9) the challenges of maintaining
and increasing revenues on a combined company basis following the
close of the merger; (10) diversion of management's attention from
ongoing business concerns; (11) general competitive, economic,
political and market conditions and fluctuations; (12) actions
taken or conditions imposed by the United States and foreign
governments; (13) adverse outcomes of pending or threatened
litigation or government investigations; (14) the impact of
competition in the industries and in the specific markets in which
Stifel and Thomas Weisel Partners, respectively, operate; and (15)
other factors that may affect future results of the combined
company described in the section entitled "Risk Factors" in the
proxy statement/prospectus to be mailed to Thomas Weisel Partners'
shareholders and in Stifel's and Thomas Weisel Partners' respective
filings with the U.S. Securities and Exchange Commission ("SEC")
that are available on the SEC's web site located at www.sec.gov,
including the sections entitled "Risk Factors" in Stifel's Form
10-K for the fiscal year ended December 31, 2009, and "Risk
Factors" in Thomas Weisel Partners' Form 10-K for the fiscal year
ended December 31, 2009. Readers are strongly urged to read the
full cautionary statements contained in those materials. We assume
no obligation to update any forward-looking statements to reflect
events that occur or circumstances that exist after the date on
which they were made.
Additional Information
In connection with the proposed merger, Stifel will be filing a
registration statement on Form S-4 that will include a proxy
statement of Thomas Weisel Partners that also constitutes a
prospectus of Stifel and other relevant documents relating to the
acquisition of Thomas Weisel Partners with the Securities and
Exchange Commission (the "SEC"). Stifel and Thomas
Weisel Partners shareholders are urged to read the registration
statement and any other relevant documents filed with the SEC,
including the proxy statement/prospectus that will be part of the
registration statement, because they will contain important
information about Stifel, Thomas Weisel Partners and the proposed
transaction. The final proxy statement/prospectus will be
mailed to shareholders of Thomas Weisel Partners. Investors and
security holders will be able to obtain free copies of the
registration statement and proxy statement/prospectus (when
available) as well as other filed documents containing information
about Stifel and Thomas Weisel Partners, without charge, at the
SEC's website (www.sec.gov). Free copies of Stifel's SEC filings
are also available on Stifel's website (www.stifel.com), and free
copies of Thomas Weisel Partners' SEC filings are available on
Thomas Weisel Partners' website (www.tweisel.com). Free copies of
Stifel's filings also may be obtained by directing a request to
Stifel's Investor Relations by phone to (314) 342-2000 or in
writing to Stifel Financial Corp., Attention: Investor Relations,
501 North Broadway, St. Louis, Missouri 63102. Free copies of
Thomas Weisel Partners' filings also may be obtained by directing a
request to Thomas Weisel Partners' Investor Relations by phone to
415-364-2500, in writing to Thomas Weisel Partners Group, Inc.,
Attention: Investor Relations, One Montgomery Street, San
Francisco, CA 94104, or by email to
investorrelations@tweisel.com.
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy securities, nor shall there be any
sale of securities in any jurisdiction in which such solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction.
Proxy Solicitation
Stifel, Thomas Weisel Partners and their respective directors
and executive officers may be deemed, under SEC rules, to be
participants in the solicitation of proxies from the shareholders
of Thomas Weisel Partners with respect to the proposed transaction.
More detailed information regarding the identity of the potential
participants, and their direct or indirect interests, by securities
holdings or otherwise, will be set forth in the registration
statement and proxy statement/prospectus and other materials to be
filed with the SEC in connection with the proposed transaction.
Information regarding Stifel's directors and executive officers is
also available in Stifel's definitive proxy statement for its 2010
Annual Meeting of Shareholders filed with the SEC on February 26,
2010. Information regarding Thomas Weisel Partners' directors and
executive officers is also available in Thomas Weisel Partners'
definitive proxy statement for its 2009 Annual Meeting of
Shareholders filed with the SEC on April 16, 2009. These documents
are available free of charge at the SEC's web site at www.sec.gov
and from Investor Relations at Thomas Weisel Partners and Stifel
Financial.
About Thomas Weisel Partners Group,
Inc.
Thomas Weisel Partners Group, Inc. is an investment bank,
founded in 1998, focused principally on the growth sectors of the
economy. Thomas Weisel Partners generates revenues from three
principal sources: investment banking, brokerage and asset
management. The investment banking group is comprised of two
disciplines: corporate finance and strategic advisory. The
brokerage group provides equity and non-equity securities sales and
trading services to institutional investors, and offers brokerage,
advisory and cash management services to high-net-worth individuals
and corporate clients. The asset management group consists of:
private equity, public equity and distribution management. Thomas
Weisel Partners is headquartered in San Francisco with additional
offices in Baltimore, Boston, Calgary, Chicago, Dallas, Denver, New
York, Portland, Toronto, London and Zurich. For more information,
please visit www.tweisel.com.
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
------------------------------
2010 2009
-------------- --------------
Revenues:
Investment banking $ 27,171 $ 11,026
Brokerage 21,511 29,456
Asset management 3,952 2,725
Interest income 127 375
-------------- --------------
Total revenues 52,761 43,582
Interest expense (605) (483)
-------------- --------------
Net revenues 52,156 43,099
============== ==============
Expenses excluding interest:
Compensation and benefits 31,400 30,678
Brokerage execution, clearance and
account administration 6,091 6,412
Communications and data processing 4,177 4,638
Depreciation and amortization of property
and equipment 938 2,603
Amortization of other intangible assets 3,043 2,933
Marketing and promotion 2,528 1,784
Occupancy and equipment 3,901 4,087
Other expenses 6,441 12,977
-------------- --------------
Total expenses excluding interest 58,519 66,112
-------------- --------------
Loss before taxes (6,363) (23,013)
Provision for taxes (tax benefit) (1,090) 840
-------------- --------------
Net loss $ (5,273) $ (23,853)
============== ==============
Net loss per share:
Basic net loss per share $ (0.16) $ (0.74)
Diluted net loss per share $ (0.16) $ (0.74)
Weighted average shares used in computation
of per share data:
Basic weighted average shares outstanding 32,928 32,094
Diluted weighted average shares
outstanding 32,928 32,094
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