JMP Group Inc (JMP)

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JMP Group Inc. (JMP)

Q4 2007 Earnings Call

March 12, 2008 10:30 am ET

Executives

Joseph Jolson - Chairman and CEO

Thomas Kilian - CFO

Carter Mack - Co-President

Mark Lehmann - Co-President

Andrew Palmer - Head of IR

Analysts

Devin Ryan - Sandler O'Neill

David Trone - Fox-Pitt

Patrick Davitt - Merrill Lynch

Aaron Cadell - Hovde Capital

Lauren Smith - KBW

Presentation

Operator

Welcome to JMP Group's Fourth Quarter 2007 Earnings Call. Today's call is being recorded. (Operator Instructions)

At this time, I would like to turn the conference over to Andrew Palmer, JMP Group's Head of Investor Relations. Please go ahead.

Andrew Palmer

Thank you, and good morning. Welcome to JMP Group's fourth quarter 2007 earnings conference call.

First, I'd like to point out that this morning's press release regarding JMP Group's quarterly and full year results is available on the company's website at www.jmpg.com. In addition, we expect to file a Form 10-Q with the Securities & Exchange Commission later this week, which will be accessible on our website and on the SEC's as well.

In the room with me this morning are Joseph Jolson, Chairman and Chief Executive Officer of JMP Group; Thomas Kilian, our Chief Financial Officer; and Carter Mack and Mark Lehmann, Co-Presidents of JMP Securities.

Before I turn the call over to Joe, I'd like to remind you that some of the comments made during today's call may contain forward-looking statements about future events that by their nature are uncertain and outside of the JMP Group’s control. The company's actual results and financial conditions may differ from what is indicated or implied in these forward-looking statements.

For a discussion of some of the risks and uncertainties that could affect JMP Group's future results please see the description of risk factors included in our forthcoming 10-K and in our Form S-1 registration statement which was filed with the SEC on May 11th, 2007.

That said, I would like to turn the call over to our Chairman and CEO, Joe Jolson.

Joseph Jolson

Thanks, Andrew. I would like to thank everyone on the call today and thank for your interest in JMP Group.

As most of you know, 2007 was our first year as a public company following our IPO in May of 2007. I want to take this opportunity to especially thank all of the employees of JMP for their hard work and their dedication. We had a lot of thing happen this year; some good, some bad, but there has been a lot of change, including being a public company. It was collectively our efforts that produced these results for our shareholders.

Before Thomas goes through our quarterly results in more detail, I want to make a couple of quick comments on the revenues and operating earnings that we produced. I want to point out that we refer to operating earnings as the measure that we look at. Just quickly, it's better defined in our press release, but basically the only difference between operating earnings, going forward, as well as this quarter and GAAP earnings, is the amortization of our IPO stock awards that will be with us for basically the next three years.

As you could see from the press release this morning we actually reported record results in the fourth quarter. Our revenues grew 37% from a year ago to almost to $32 million and this was in the context of a very difficult operating environment, not just for the stock market in general and the second half for the fourth quarter, but also in some of the areas that we focus in.

Our operating earnings grew 27% to $3.3 million or $0.16 per diluted share. For the full year, revenues grew 13% to $98 million and operating earnings grew 12% to $0.52 for fully-diluted shares.

Now Thomas is going to take you through more details here, and then I will come back and make some comments about not just last year but maybe some of the things going on right now. I would also like to mention that Craig Johnson, the President of JMP group just joined us in the room as well. Tom?

Thomas Kilian

Thanks Joe. On a GAAP basis, JMP reported a net income of $2.6 million or $0.12 per diluted share for the fourth quarter. For the full year 2007, the GAAP net income was as follows: For the pre IPO partnership, JMP reported a net loss of $111.7 million for the period from January 1 through May 16th, 2007, due to a non cash one-time expense of $112.9 million related to the company’s corporate reorganization.

For the period from May 16 through December 31, 2007, JMP as the post IPO Corporation reported a net income of $3.9 million. It's already mentioned operating net income for the fourth quarter was $3.3 million, or $0.16 per diluted share. JMP's operating net income for the fiscal year 2007 was $10.1 million, or $0.52 per diluted share.

Note that today's press release details the difference between the company's GAAP net income and its operating net income, and includes a table reconciling the two. Joe has already discussed our total revenues, but I will go into some more specifics of the various business lines here. Investment banking revenues for the fourth quarter were $16.4 million, up 56% from $10.5 million for the fourth quarter of 2006. For 2007 investment banking revenues were $49.3 million, up 12% from $44.1 million for 2006.

Public equity underwriting revenues for the fourth quarter totaled $5.8 million, compared to $6.8 million for the fourth quarter of 2006. Challenging equity capital markets conditions during part of the quarter led us to complete 10 public offerings compared to 14 during the fourth quarter of 2006. However, despite the headwinds in the capital markets, public equity underwriting revenues for 2007 totaled $19.4 million, compared to $18.3 million for 2006, an increase of 6%.

JMP acted as lead manager of 8 public equity offerings raising $646 million in 2007 versus 5 offerings which raised $312 million in the prior year. We had strong strategic advisory revenues for the fourth quarter of $9.4 million, compared to $3.1 million for the fourth quarter of last year.

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