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IFMI Reports Third Quarter 2016 Financial Results

Third Quarter Operating Income of $2.7 million

Third Quarter Net Income of $1.5 million, or $0.09 per Diluted Share

Board Declares Dividend of $0.02 per Share

PHILADELPHIA and NEW YORK, Nov. 01, 2016 (GLOBE NEWSWIRE) -- Institutional Financial Markets, Inc. (NYSE MKT:IFMI), a financial services firm specializing in fixed income markets, today reported financial results for its third quarter ended September 30, 2016.

  • Operating income was $2.7 million for the three months ended September 30, 2016, compared to $2.2 million for the three months ended June 30, 2016, and $0.6 million for the three months ended September 30, 2015. Operating income was $6.1 million for the nine months ended September 30, 2016, compared to $1.4 million for the nine months ended September 30, 2015.
  • Net income was $1.5 million, or $0.09 per diluted share, for the three months ended September 30, 2016, compared to net income of $1.2 million, or $0.07 per diluted share, for the three months ended June 30, 2016 and net loss of $0.6 million, or $0.03 per diluted share, for the three months ended September 30, 2015. Net income was $3.0 million, or $0.17 per diluted share, for the nine months ended September 30, 2016, compared to net loss of $1.9 million, or $0.09 per diluted share, for the nine months ended September 30, 2015.
  • Revenue was $14.1 million for the three months ended September 30, 2016, compared to $14.4 million for the three months ended June 30, 2016 and $12.9 million for the three months ended September 30, 2015. Revenue was $42.2 million for the nine months ended September 30, 2016, compared to $36.8 million for the nine months ended September 30, 2015.
  • Total operating expenses were $11.4 million for the quarter ended September 30, 2016, compared to $12.2 million for the quarter ended June 30, 2016 and $12.4 million for the quarter ended September 30, 2015. Total operating expenses were $36.1 million for the nine months ended September 30, 2016, compared to $35.4 million for the nine months ended September 30, 2015.
  • Compensation as a percentage of revenue was 53% for the three months ended September 30, 2016, compared to 58% for the three months ended June 30, 2016 and 54% for the three months ended September 30, 2015. Compensation as a percentage of revenue was 58% for the nine months ended September 30, 2016, compared to 57% for the nine months ended September 30, 2015. The number of IFMI employees was 83 as of September 30, 2016, compared to 80 as of June 30, 2016, and 93 as of September 30, 2015.
  • Non-compensation operating expenses, excluding depreciation and amortization, were $3.9 million for the three months ended September 30, 2016, compared to $3.7 million for the three months ended June 30, 2016 and $5.2 million for the three months ended September 30, 2015. Non-compensation operating expenses, excluding depreciation and amortization, were $11.5 million for the nine months ended September 30, 2016, compared to $14.0 million for the nine months ended September 30, 2015, representing a decrease of 18%.

Lester Brafman, Chief Executive Officer of IFMI, said, “We remain pleased with IFMI’s performance, especially as we report our third consecutive quarter of profitability. We continue to successfully execute on our business strategy with an eye towards stockholder value. Going forward, we will remain focused on growing our mortgage and SBA groups, adding revenue and growing businesses where our clients’ needs are no longer addressed by larger financial institutions. We are also pleased to further enhance stockholder value through our share repurchase program and continuing to pay a quarterly dividend.”

Stock Repurchases

During the third quarter of 2016, IFMI repurchased 80,400 shares of its common stock through open market purchases under its previously announced 10b5-1 agreement with Sandler O’Neill & Partners, L.P. for an aggregate purchase price of $79,245, which represented an average per share price of $0.99. During the first three quarters of 2016, including the previously announced privately negotiated transactions and open market purchases in the first quarter, IFMI repurchased a total of 1,908,480 shares of its common stock for an aggregate purchase price of $2.3 million, which represented an average per share price of $1.22.

Total Equity and Dividend Declaration

  • At September 30, 2016, total equity was $46.6 million, compared to $46.2 million as of December 31, 2015.
  • The Company’s Board of Directors has declared a dividend of $0.02 per share. The dividend will be payable on November 30, 2016, to stockholders of record on November 16, 2016.

Conference Call

Management will hold a conference call this morning at 10:00 a.m. Eastern Time to discuss these results. The conference call will also be available via webcast. Interested parties can access the webcast by clicking the webcast link on the Company’s website at www.IFMI.com. Those wishing to listen to the conference call with operator assistance can dial (877) 686-9573 (domestic) or (706) 643-6983 (international), participant pass code 7515256, or request the IFMI earnings call. A replay of the call will be available for two weeks following the call by dialing (800) 585-8367 (domestic) or (404) 537-3406 (international), participant pass code 7515256.

About IFMI

IFMI is a financial services company specializing in fixed income markets. IFMI was founded in 1999 as an investment firm focused on small-cap banking institutions, but has grown to provide an expanding range of capital markets and asset management services. IFMI’s operating segments are Capital Markets, Principal Investing, and Asset Management. The Capital Markets segment consists of fixed income sales, trading, and financing as well as new issue placements in corporate and securitized products, and advisory services, operating primarily through IFMI’s subsidiaries, J.V.B. Financial Group, LLC in the United States and Cohen & Company Financial Limited in Europe. The Principal Investing segment has historically been comprised of investments in IFMI sponsored investment vehicles, but has changed to include investments in certain non-sponsored vehicles. The Asset Management segment manages assets through collateralized debt obligations, permanent capital vehicles, and managed accounts. As of September 30, 2016, IFMI managed approximately $3.8 billion in fixed income assets in a variety of asset classes including US trust preferred securities, European hybrid capital securities, and mortgage- and asset-backed securities. As of September 30, 2016, almost all of IFMI’s assets under management, or 95.0%, were in collateralized debt obligations that IFMI manages, which were all securitized prior to 2008. For more information, please visit www.IFMI.com.

Forward-looking Statements

This communication contains certain statements, estimates, and forecasts with respect to future performance and events. These statements, estimates, and forecasts are “forward-looking statements.” In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “ might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “seek,” or “continue” or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this communication are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties, and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied in the forward-looking statements including, but not limited to, those discussed under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition” in our filings with the Securities and Exchange Commission (“SEC”), which are available at the SEC’s website at www.sec.gov and our website at www.IFMI.com/sec-filings. Such risk factors include the following: (a) a decline in general economic conditions or the global financial markets, (b) losses caused by financial or other problems experienced by third parties, (c) losses due to unidentified or unanticipated risks, (d) a lack of liquidity, i.e., ready access to funds for use in our businesses, (e) the ability to attract and retain personnel, (f) litigation and regulatory issues, (g) competitive pressure, (h) an inability to generate incremental income from acquired businesses, (i) unanticipated market closures due to inclement weather or other disasters, (j) losses (whether realized or unrealized) on our principal investments, including on our CLO investments, (k) an inability to achieve projected integration synergies, (l) that the sale of our European operations will not occur, (m) the possibility that payments to the Company of subordinated management fees from its European CLO will not resume, and (n) the possibility that the stockholder rights plan may fail to preserve the value of the Company’s deferred tax assets, whether as a result of the acquisition by a person of 5% of the Company’s common stock or otherwise. As a result, there can be no assurance that the forward-looking statements included in this communication will prove to be accurate or correct. In light of these risks, uncertainties, and assumptions, the future performance or events described in the forward-looking statements in this communication might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Cautionary Note Regarding Quarterly Financial Results

Due to the nature of our business, our revenue and operating results may fluctuate materially from quarter to quarter. Accordingly, revenue and net income in any particular quarter may not be indicative of future results. Further, our employee compensation arrangements are in large part incentive-based and, therefore, will fluctuate with revenue. The amount of compensation expense recognized in any one quarter may not be indicative of such expense in future periods. As a result, we suggest that annual results may be the most meaningful gauge for investors in evaluating our business performance.

INSTITUTIONAL FINANCIAL MARKETS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
Three Months Ended
Nine Months Ended
9/30/16 6/30/16 9/30/15 9/30/16 9/30/15
Revenues
Net trading$10,486 $11,285 $8,333 $31,973 $22,346
Asset management 1,781 1,569 2,332 5,662 6,890
New issue and advisory 811 984 2,119 2,176 4,268
Principal transactions 536 56 (638) 718 340
Other revenue 476 471 781 1,661 2,928
Total revenues 14,090 14,365 12,927 42,190 36,772
Operating expenses
Compensation and benefits 7,464 8,388 7,044 24,392 20,783
Business development, occupancy, equipment 718 651 901 2,033 2,543
Subscriptions, clearing, and execution 1,678 1,502 1,786 4,702 5,132
Professional services and other operating 1,513 1,542 2,488 4,718 6,353
Depreciation and amortization 66 72 150 220 611
Total operating expenses 11,439 12,155 12,369 36,065 35,422
Operating income (loss) 2,651 2,210 558 6,125 1,350
Non-operating income (expense)
Interest expense (991) (992) (984) (2,973) (2,951)
Income (loss) before income taxes 1,660 1,218 (426) 3,152 (1,601)
Income tax expense (benefit) 130 17 221 157 267
Net income (loss) 1,530 1,201 (647) 2,995 (1,868)
Less: Net income (loss) attributable to the noncontrolling interest 489 371 (114) 925 (432)
Net income (loss) attributable to IFMI$1,041 $830 $(533) $2,070 $(1,436)
Earnings per share
Basic
Net income (loss) attributable to IFMI$1,041 $830 $(533) $2,070 $(1,436)
Basic shares outstanding 11,807 11,906 15,229 12,328 15,203
Net income (loss) attributable to IFMI per share$0.09 $0.07 $(0.03) $0.17 $(0.09)
Fully Diluted
Net income (loss) attributable to IFMI$1,041 $830 $(533) $2,070 $(1,436)
Net income (loss) attributable to the noncontrolling interest 489 371 (114) 925 (432)
Adjustment (1) (23) (1) (72) (33) (72)
Enterprise net income (loss)$1,507 $1,200 $(719) $2,962 $(1,940)
Basic shares outstanding 11,807 11,906 15,229 12,328 15,203
Unrestricted Operating LLC membership units exchangeable into IFMI shares 5,324 5,324 5,324 5,324 5,324
Additional dilutive shares 130 62 - 91 -
Fully diluted shares outstanding 17,261 17,292 20,553 17,743 20,527
Fully diluted net income (loss) per share$0.09 $0.07 $(0.03) $0.17 $(0.09)
(1) An adjustment is included for the following reasons: (a) if the non-controlling interest membership units had been converted at the beginning of the period, the Company would have incurred a higher income tax expense or realized a higher income tax benefit, as applicable; and (b) to adjust the non-controlling interest amount to be consistent with the weighted average share calculation.


INSTITUTIONAL FINANCIAL MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2016
(unaudited) December 31, 2015
Assets
Cash and cash equivalents$10,085 $14,115
Receivables from brokers, dealers, and clearing agencies 68,910 39,812
Due from related parties 73 77
Other receivables 2,512 4,079
Investments - trading 131,006 94,741
Other investments, at fair value 7,860 14,880
Receivables under resale agreements 288,286 128,011
Goodwill 7,992 7,992
Other assets 4,651 4,708
Total assets$521,375 $308,415
Liabilities
Payables to brokers, dealer, and clearing agencies$75,825 $55,779
Due to related parties 50 50
Accounts payable and other liabilities 3,364 3,362
Accrued compensation 4,080 3,612
Trading securities sold, not yet purchased 55,539 39,184
Securities sold under agreements to repurchase 302,800 127,913
Deferred income taxes 3,794 3,804
Debt 29,290 28,535
Total liabilities 474,742 262,239
Equity
Voting nonconvertible preferred stock 5 5
Common stock 12 13
Additional paid-in capital 69,382 71,570
Accumulated other comprehensive loss (997) (939)
Accumulated deficit (29,536) (30,889)
Total stockholders' equity 38,866 39,760
Noncontrolling interest 7,767 6,416
Total equity 46,633 46,176
Total liabilities and equity$521,375 $308,415


Contact: Investors: Institutional Financial Markets, Inc. Joseph W. Pooler, Jr. Executive Vice President and Chief Financial Officer 215-701-8952 investorrelations@ifmi.com Media: Joele Frank, Wilkinson Brimmer Katcher James Golden or Andrew Squire 212-355-4449 jgolden@joelefrank.com or asquire@joelefrank.com

Source:Institutional Financial Markets