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IFMI Reports Second Quarter 2017 Financial Results

Second Quarter Operating Income of $1.7 million

Second Quarter Income before Income Taxes of $0.6 million

Second Quarter Net Income of $0.6 million, or $0.03 per Diluted Share

Board Declares Dividend of $0.02 per Share

PHILADELPHIA and NEW YORK, Aug. 03, 2017 (GLOBE NEWSWIRE) -- Institutional Financial Markets, Inc. (NYSE American:IFMI), a financial services firm specializing in fixed income markets, today reported financial results for its second quarter ended June 30, 2017.

  • Operating income was $1.7 million for the three months ended June 30, 2017, compared to $2.6 million for the three months ended March 31, 2017, and $2.2 million for the three months ended June 30, 2016. Operating income was $4.3 million for the six months ended June 30, 2017, compared to $3.5 million for the six months ended June 30, 2016.
  • Income before income taxes was $0.6 million for the three months ended June 30, 2017, compared to $1.0 million for the three months ended March 31, 2017, and $1.2 million for the three months ended June 30, 2016. Income before income taxes was $1.6 million for the six months ended June 30, 2017, compared to $1.5 million for the six months ended June 30, 2016.
  • Net income was $0.6 million, or $0.03 per diluted share, for the three months ended June 30, 2017, compared to $1.0 million, or $0.05 per diluted share, for the three months ended March 31, 2017, and $1.2 million, or $0.07 per diluted share, for the three months ended June 30, 2016. Net income was $1.6 million, or $0.08 per diluted share, for the six months ended June 30, 2017, compared to $1.5 million, or $0.08 per diluted share, for the six months ended June 30, 2016.
  • Revenue was $11.4 million for the three months ended June 30, 2017, compared to $14.5 million for the three months ended March 31, 2017, and $14.4 million for the three months ended June 30, 2016. Revenue was $25.9 million for the six months ended June 30, 2017, compared to $28.1 million for the six months ended June 30, 2016.
  • Total operating expenses were $9.6 million for the three months ended June 30, 2017, compared to $11.9 million for the three months ended March 31, 2017, and $12.2 million for the three months ended June 30, 2016. Total operating expenses were $21.6 million for the six months ended June 30, 2017, compared to $24.6 million for the six months ended June 30, 2016.
  • Compensation as a percentage of revenue was 49% for the three months ended June 30, 2017, compared to 50% for the three months ended March 31, 2017, and 58% for the three months ended June 30, 2016. Compensation as a percentage of revenue was 49% for the six months ended June 30, 2017, compared to 60% for the six months ended June 30, 2016. The number of IFMI employees was 82 as of June 30, 2017, compared to 80 as of March 31, 2017, and 80 as of June 30, 2016.
  • Non-compensation operating expenses, excluding depreciation and amortization, were $4.0 million for the three months ended June 30, 2017, compared to $4.7 million for the three months ended March 31, 2017, and $3.7 million for the three months ended June 30, 2016. Non-compensation operating expenses, excluding depreciation and amortization, were $8.7 million for the six months ended June 30, 2017, compared to $7.5 million for the six months ended June 30, 2016.
  • Interest expense was $1.1 million for the quarter ended June 30, 2017, compared to $1.6 million for the quarter ended March 31, 2017, and $1.0 million for the quarter ended June 30, 2016. Interest expense was $2.7 million for the six months ended June 30, 2017, compared to $2.0 million for the six months ended June 30, 2016.

Lester Brafman, Chief Executive Officer of IFMI, said, “We were pleased with IFMI’s results in the second quarter. Despite a weak environment for our domestic capital markets business, we were able to post our sixth consecutive quarter of profitability. We continue to explore various business development opportunities in both our capital markets and asset management segments. We remain committed to enhancing stockholder value, and in the second quarter continued to pay our quarterly dividend.”

Total Equity and Dividend Declaration

  • At June 30, 2017, total equity was $48.2 million, compared to $46.8 million as of December 31, 2016.
  • The Company’s Board of Directors has declared a dividend of $0.02 per share. The dividend will be payable on August 31, 2017, to stockholders of record on August 17, 2017.

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 54956674, 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 54956674.

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, Asset Management, and Principal Investing. The Capital Markets segment consists of fixed income sales, trading, and matched book repo 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 Asset Management segment manages assets through collateralized debt obligations, managed accounts, and investment funds. As of June 30, 2017, IFMI managed approximately $3.6 billion in fixed income assets in a variety of asset classes including US and European trust preferred securities, subordinated debt, and corporate loans. As of June 30, 2017, almost all of IFMI’s assets under management, or 91.7%, were in collateralized debt obligations that IFMI manages, which were all securitized prior to 2008. 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. 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) the possibility that payments to the Company of subordinated management fees from its European CLO will continue to be deferred or will be discontinued, and (l) 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 Six Months Ended
6/30/17 3/31/17 6/30/16 6/30/17 6/30/16
Revenues
Net trading$ 6,095 $ 8,075 $ 11,285 $ 14,170 $ 21,487
Asset management 1,731 2,692 1,569 4,423 3,881
New issue and advisory 868 1,112 984 1,980 1,365
Principal transactions 21 469 56 490 182
Other revenue 2,659 2,144 471 4,803 1,185
Total revenues 11,374 14,492 14,365 25,866 28,100
Operating expenses
Compensation and benefits 5,549 7,185 8,388 12,734 16,928
Business development, occupancy, equipment 697 586 651 1,283 1,315
Subscriptions, clearing, and execution 1,667 1,713 1,502 3,380 3,024
Professional services and other operating 1,674 2,354 1,542 4,028 3,205
Depreciation and amortization 61 66 72 127 154
Total operating expenses 9,648 11,904 12,155 21,552 24,626
Operating income (loss) 1,726 2,588 2,210 4,314 3,474
Non-operating income (expense)
Interest expense, net (1,112) (1,612) (992) (2,724) (1,982)
Income (loss) before income taxes 614 976 1,218 1,590 1,492
Income tax expense (benefit) 2 5 17 7 27
Net income (loss) 612 971 1,201 1,583 1,465
Less: Net income (loss) attributable to the noncontrolling interest 186 299 371 485 436
Net income (loss) attributable to IFMI$ 426 $ 672 $ 830 $ 1,098 $ 1,029
Earnings per share
Basic
Net income (loss) attributable to IFMI$ 426 $ 672 $ 830 $ 1,098 $ 1,029
Basic shares outstanding 12,167 11,992 11,906 12,080 12,589
Net income (loss) attributable to IFMI per share$ 0.04 $ 0.06 $ 0.07 $ 0.09 $ 0.08
Fully Diluted
Net income (loss) attributable to IFMI$ 426 $ 672 $ 830 $ 1,098 $ 1,029
Net income (loss) attributable to the noncontrolling interest 186 299 371 485 436
Interest and amortization on Convertible $15M, 8% Notes 354 80 - 435 -
Adjustment (1) - - (1) - (2)
Enterprise net income (loss)$ 966 $ 1,051 $ 1,200 $ 2,018 $ 1,463
Basic shares outstanding 12,167 11,992 11,906 12,080 12,589
Unrestricted Operating LLC membership units exchangeable into IFMI shares 5,324 5,324 5,324 5,324 5,324
Additional Convertible $15M, 8% Notes 10,345 2,529 - 6,437 -
Additional dilutive shares 78 200 62 138 71
Fully diluted shares outstanding 27,914 20,045 17,292 23,979 17,984
Fully diluted net income (loss) per share$ 0.03 $ 0.05 $ 0.07 $ 0.08 $ 0.08
(1) An adjustment is included because 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.


INSTITUTIONAL FINANCIAL MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2017
(unaudited) December 31, 2016
Assets
Cash and cash equivalents$ 10,716 $ 15,216
Receivables from brokers, dealers, and clearing agencies 121,925 81,178
Due from related parties 53 57
Other receivables 5,618 5,225
Investments - trading 134,935 157,178
Other investments, at fair value 5,986 8,303
Receivables under resale agreements 410,309 281,821
Goodwill 7,992 7,992
Other assets 1,875 4,301
Total assets$ 699,409 $ 561,271
Liabilities
Payables to brokers, dealer, and clearing agencies$ 50,953 $ 85,761
Due to related parties - 50
Accounts payable and other liabilities 10,010 9,618
Accrued compensation 3,121 4,795
Trading securities sold, not yet purchased 118,178 85,183
Securities sold under agreements to repurchase 421,166 295,445
Deferred income taxes 4,105 4,134
Debt 43,647 29,523
Total liabilities 651,180 514,509
Equity
Voting nonconvertible preferred stock 5 5
Common stock 12 12
Additional paid-in capital 69,871 69,415
Accumulated other comprehensive loss (955) (1,074)
Accumulated deficit (28,980) (29,576)
Total stockholders' equity 39,953 38,782
Noncontrolling interest 8,276 7,980
Total equity 48,229 46,762
Total liabilities and equity$ 699,409 $ 561,271


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