ARLINGTON, Va., Oct. 20, 2009 (GLOBE NEWSWIRE) -- FBR Capital Markets Corporation (Nasdaq:FBCM) (FBR Capital Markets or "the Company") today reported a pre-tax loss of $7.0 million and a net after-tax loss of $7.0 million, or $0.11 per diluted share, for the quarter ended September 30, 2009. These results compare to a pre-tax loss of $46.7 million and a net after-tax loss of $28.6 million, or $0.44 per diluted share, in the third quarter of 2008.
FBR Capital Markets' pre-tax core operating earnings were $1.4 million for the third quarter of 2009 compared to a pre-tax core operating loss of $26.2 million in the third quarter of 2008. This non-GAAP measurement excludes specific non-core items and non-cash expenses, including $5.2 million of stock-based compensation expense. See "Non-GAAP Financial Measures" below for a reconciliation of the Company's non-GAAP pre-tax core operating results to its GAAP pre-tax operating results for the specified 2009 and 2008 periods.
Third quarter 2009 net revenue was up 57% to $71.4 million, compared to $45.6 million in the third quarter of 2008, and up 51% from $47.3 million for the second quarter of 2009. The increased revenue production was primarily due to a meaningful increase in investment banking activity during the third quarter of 2009.
The Company continues its focus on maintaining a reduced cost structure. Third quarter 2009 non-interest expenses were $78.4 million, down 15% compared to the third quarter of 2008, despite the 57% increase in net revenues. Non-compensation expenses in the third quarter of 2009 were $31.3 million, compared with $36.6 million in the third quarter of 2008 and $33.4 million in the second quarter of 2009.
As of September 30, 2009, shareholders' equity totaled $295.8 million, with $244.1 million held in cash, and book value per share was $4.65.
"We have continued to take important steps in broadening our firm and increasing our capabilities to serve middle market issuers. During the third quarter, we launched a credit sales and trading business, onboarded our prime brokerage and listed option leadership teams, and acquired a New York-based corporate advisory firm," said Richard J. Hendrix, President and Chief Executive Officer of FBR Capital Markets. "Even as we have made these and other strategic additions to enhance and diversify our business, we were able to return the company to cash profitability within our core operations. I am confident that through the efforts and commitment of our entire team, we will continue this profit trend through the remainder of the year.
Investors wishing to listen to the earnings call at 8:30 A.M. U.S. EDT, Wednesday, October 21, 2009, may do so via the Web or conference call at:
Webcast link: http://investor.shareholder.com/media/eventdetail.cfm?mediaid=39128&c=FBCM&mediakey=B24792336432B6FD2DEC7C61E86C5B8D&e=0 Conference call dial-in number (domestic, toll-free): 888.477.8284 Conference call dial-in number (international): 201.604.5059 Conference call code: 218055
Replays of the webcast will be available after the call.
FBR Capital Markets Corporation (Nasdaq:FBCM) provides investment banking, merger and acquisition advisory, institutional brokerage, prime brokerage and research services through its subsidiary FBR Capital Markets & Co. FBR Capital Markets focuses capital and financial expertise on seven industry sectors: consumer; diversified industrials; energy & natural resources; financial institutions; insurance; real estate; and technology, media & telecom. Asset management services are provided by FBR Investment Management, Inc., and mutual funds are provided by FBR Fund Advisers, Inc.; both companies are subsidiaries of FBR Capital Markets Corporation. FBR Capital Markets is headquartered in the Washington, D.C. metropolitan area with offices throughout the United States and in London. For more information, please visit www.fbrcapitalmarkets.com.
The FBR Capital Markets Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6405
Statements in this release concerning future performance, developments, events, market forecasts, revenues, expenses, earnings, run rates and any other guidance for present or future periods constitute forward-looking statements that 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 offerings, activity in the secondary securities markets, interest rates, costs of borrowing, interest spreads, 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. For a discussion of these and other risks and important factors that could affect FBR Capital Markets' future results and financial condition, see "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009; "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, 2008; 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 follow.
FBR CAPITAL MARKETS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Quarter ended Nine months ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
REVENUES:
Investment banking:
Capital raising $ 28,977 $ 6,762 $ 37,549 $ 75,632
Advisory 4,744 5,999 12,726 15,267
Institutional brokerage:
Principal transactions 10,468 2,610 31,638 13,455
Agency commissions 21,008 33,792 73,184 89,499
Asset management:
Base management fees 2,896 3,710 7,941 12,507
Net investment income (loss) 29 (11,043) (49) (15,326)
Interest income 346 8,680 1,389 16,022
Other 2,972 184 4,293 710
-------- -------- -------- --------
Total revenues 71,440 50,694 168,671 207,766
Interest expense -- 5,139 252 7,677
-------- -------- -------- --------
Revenues, net of interest
expense 71,440 45,555 168,419 200,089
-------- -------- -------- --------
NON-INTEREST EXPENSES:
Compensation and benefits 47,129 55,604 119,680 174,740
Professional services 5,891 9,281 15,019 29,285
Business development 2,931 5,189 9,160 23,833
Clearing and brokerage fees 3,787 3,810 10,844 10,775
Occupancy and equipment 9,062 8,077 24,822 25,045
Communications 5,258 5,700 15,611 17,908
Impairment of intangible
assets -- -- 5,350 --
Other operating expenses 4,340 4,576 12,089 11,389
-------- -------- -------- --------
Total non-interest
expenses 78,398 92,237 212,575 292,975
-------- -------- -------- --------
Loss before income taxes (6,958) (46,682) (44,156) (92,886)
Income tax provision (benefit) 12 (18,122) 725 (28,903)
-------- -------- -------- --------
Net loss $ (6,970) $(28,560) $(44,881) $(63,983)
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Basic loss per share $ (0.11) $ (0.44) $ (0.76) $ (0.99)
======== ======== ======== ========
Diluted loss per share $ (0.11) $ (0.44) $ (0.76) $ (0.99)
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Weighted average shares -
basic (in thousands) 63,181 64,988 58,912 64,741
======== ======== ======== ========
Weighted average shares -
diluted (in thousands) 63,181 64,988 58,912 64,741
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Non-GAAP Financial Measures
In addition to the financial results reported in accordance with generally accepted accounting principles (GAAP), FBR Capital Markets has disclosed non-GAAP pre-tax core operating earnings (losses) for the quarters ended September 30, 2009 and 2008 in this press release. This non-GAAP measurement is used by management to analyze and assess the results of the core capital markets and asset management operating units. In determining core earnings (losses), FBR Capital Markets has excluded from GAAP financial results the following non-core operating items: (1) severance costs associated with reductions in headcount (2) corporate transaction costs, which includes costs related to reductions in physical space and costs associated with business combinations and acquisitions, and (3) net investment income (losses) from our mortgage-backed securities and long-term investments. FBR Capital Markets has also excluded the following non-cash expenses: (1) impairment of intangible assets, (2) compensation costs associated with stock-based awards and (3) amortization of intangible assets. Management believes that this non-GAAP measurement assists investors in understanding the impact of these non-core items and non-cash expenses on the performance of the Company, and provides additional clarity around the firm's forward earnings capacity and trend.
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 FBR Capital Markets' business and these effects should not be ignored in evaluating and analyzing our financial results. Therefore, management believes income (loss) before income taxes on a GAAP basis and core earnings (loss) before income taxes on a non-GAAP basis should be considered together.
The following table presents a reconciliation of the GAAP financial results to non-GAAP measurements discussed above (dollars in thousands).
Q3 - 09 Q2 - 09 Q1 - 09 Q4 - 08 Q3 - 08
-------- -------- -------- --------- --------
--------------------------------------------------------------------
Net revenues
before net
investment
income/loss $ 71,411 $ 45,959 $ 51,098 $ 47,828 $ 56,598
--------------------------------------------------------------------
GAAP pre-tax
loss $ (6,958) $(21,640) $(15,558) $(105,334) $(46,682)
Non-core items:
Severance 219 191 560 10,425 3,575
Corporate
transaction
costs 2,274 -- -- -- --
Net investment
loss, MBS -- -- 1,043 33,622 --
Net investment
(income) loss,
long-term
investments (29) (1,369) 404 32,387 11,043
Non-cash
expenses:
Impairment of
intangible
assets -- 5,350 -- -- --
Stock
compensation
expense 5,213 4,786 4,341 6,806 5,540
Amortization
of intangible
assets 685 291 291 291 291
-------- -------- -------- --------- --------
Non-GAAP pre-tax
core operating
income (loss) $ 1,404 $(12,391) $ (8,919) $ (21,803) $(26,233)
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FBR CAPITAL MARKETS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
30-Sep-09 31-Dec-08
--------- ---------
ASSETS
Cash and cash equivalents $ 244,147 $ 207,801
Receivables 16,506 32,110
Investments:
Mortgage-backed securities, at fair value -- 454,339
Long-term investments 35,581 41,174
Trading securities, at fair value 52,095 17,954
Due from brokers, dealers and clearing
organizations 87,768 --
Derivative assets, at fair value -- 264
Goodwill and intangible assets, net 8,685 8,943
Furniture, equipment and leasehold
improvements, net 17,717 24,442
Prepaid expenses and other assets 9,598 13,342
--------- ---------
Total assets $ 472,097 $ 800,369
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Securities sold but not yet purchased, at
fair value $ 30,543 $ 8,325
Repurchase agreements -- 416,037
Accrued compensation and benefits 37,233 43,919
Accounts payable, accrued expenses and other
liabilities 21,932 25,352
Due to brokers, dealers and clearing
organizations 86,566 3,009
--------- ---------
Total liabilities 176,274 496,642
--------- ---------
Shareholders' equity:
Common stock 64 60
Additional paid-in capital 424,517 396,059
Restricted stock units 17,606 9,309
Accumulated other comprehensive loss -- (218)
Accumulated deficit (146,364) (101,483)
--------- ---------
Total shareholders' equity 295,823 303,727
--------- ---------
Total liabilities and shareholders' equity $ 472,097 $ 800,369
========= =========
Book Value per Share $ 4.65 $ 5.18
Shares Outstanding (in thousands) 63,571 58,652
FBR CAPITAL MARKETS CORPORATION
Financial & Statistical Supplement - Operating Results
(Dollars in thousands)
(Unaudited)
Q-3 09 Q-2 09 Q-1 09 Q-4 08 Q-3 08
-------- -------- -------- --------- --------
Revenues, net of
interest expense $ 71,440 $ 47,328 $ 49,651 $ (18,181) $ 45,555
Non-interest
expenses:
Variable 29,360 19,405 21,143 17,801 30,640
Fixed 49,038 44,213 44,066 69,352 61,597
Impairment of
intangible
assets -- 5,350 -- -- --
-------- -------- --------- --------- --------
Loss before income
taxes (6,958) (21,640) (15,558) (105,334) (46,682)
Income tax
provision
(benefit) 12 104 609 25,413 (18,122)
-------- -------- -------- --------- --------
Net loss $(6,970) $(21,744) $(16,167) $(130,747) $(28,560)
======== ======== ======== ========= ========
Fixed expenses $ 49,038 $ 44,213 $ 44,066 $ 69,352 $ 61,597
Less: Non-cash
expenses 5,898 5,077 4,632 7,097 5,831
Corporate
transaction
costs 2,274 -- -- -- --
Severance 219 191 560 10,425 3,575
-------- -------- -------- --------- --------
Cash fixed costs $ 40,647 $ 38,945 $ 38,874 $ 51,830 $ 52,191
======== ======== ======== ========= ========
Statistical Data
Net assets under
management (in
millions)
Mutual funds $1,468.1 $1,364.9 $1,079.8 $ 1,179.4 $1,427.1
Managed accounts -- -- 128.8 216.6 276.8
Hedge & offshore
funds 3.0 4.1 16.1 21.0 27.5
Private equity and
venture capital
funds 12.3 12.4 13.6 15.9 16.2
-------- -------- -------- --------- --------
Total $1,483.4 $1,381.4 $1,238.3 $ 1,432.9 $1,747.6
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Employee count 583 554 550 568 652
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