JMP Group LLC (JMP) CEO Joseph Jolson on Q4 2020 Results - Earnings Call Transcript

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JMP Group LLC (JMP) Q4 2020 Earnings Conference Call February 19, 2021 10:00 AM ET

Company Participants

Andrew Palmer - Investor Relations

Joe Jolson - Chief Executive Officer

Ray Jackson - Chief Financial Officer

Mark Lehmann - CEO, JMP Securities


Welcome to JMP Group's Fourth Quarter 2020 Earnings Conference Call. Please note that today's call is being recorded. [Operator Instructions] I'll now turn the call over to Andrew Palmer, the company's Head of Investor Relations.

Andrew Palmer

Good morning. On the line with me today are Joe Jolson, JMP Group's Chairman and Chief Executive Officer; Ray Jackson, the company's Chief Financial Officer; and Mark Lehmann, CEO of JMP Securities.

Before we begin, please note that some of this morning's comments may contain forward-looking statements about future events that are out of JMP's control. Actual results may differ materially from those indicated or implied. For a discussion of the uncertainties that could affect the company's future performance, please review the risk factors detailed in our most recent 10-K.

With that, I'll turn things over to JMP's Chairman and CEO, Joe Jolson.

Joe Jolson

Thanks, Andrew. This is our first earnings call in 1.5 years. We paused these calls mid-2019 as we started thinking through some strategic changes for the company. Much of that work is now behind us, and we felt it was time to discuss the results of our efforts.

One of the key changes since our last conference call was the elevation of Mark Lehmann to the role of CEO of JMP Securities. That occurred this past summer, when we also named Tom Wright Chief Operating Officer of JMP Securities and made Jon Dever and Gavin Slader, co-heads of our Investment Banking Group and members of our Executive Committee.

In addition, we have simplified our balance sheet, shedding noncore businesses such as Harvest Capital Credit Corp., resulting in a simpler story to tell and a simpler company to run once that deal closes in the second quarter. We'll continue to look to monetize our corporate investments and work aggressively to pay down long-term debt after just redeeming $10 million of our senior notes 2 weeks ago, leaving us with roughly $71 million of long-term debt outstanding.

In 2020, the wind was at our back. It was an unprecedented and challenging year in many respects. But amazingly, we ended the year with record results. Net revenues for the fourth quarter were $53.6 million, up 125% from the $23.8 million for the fourth quarter of 2019. For the full year, net revenues were $115.5 million versus $100 million for 2019. Operating earnings per share were $0.42 for the fourth quarter, by far, a record, and $0.63 for the year, also a record for the firm. I'll ask Mark to add some thoughts about JMP Securities before I finish up. Mark?

Mark Lehmann

Thanks, Joe. JMP Securities is one of the few remaining independent equity capital markets platforms of meaningful scale in the United States. That said, we are firm believers in the full-service model, which pairs capital markets expertise with our strategic advisory capabilities. We've completed -- I'm sorry, competed successfully to establish JMP as a more recognizable brand in the middle market and a more sought-after strategic advisory partner to growth companies.

In 2020, we had our best year ever. Total revenues of nearly $119 million and a record operating profit of $0.68 per share. Investment banking revenues hit record levels for December, for the fourth quarter and for the entire year, finishing 2020 at $100 million, up 53% from 2019. 60% of that amount came from public equity and debt capital raising and 40% from strategic advisory and private placements. Capital markets revenues, which combined fees from equity and debt origination with net brokerage revenues were up 32% year-over-year to $79 million for 2020.

Our net brokerage revenues were also up 10% last year to $19 million. We were a lead or co-manager on 1/3 of all U.S. tech IPOs priced last year, compared to just 10% in 2014 and 8% in 2007, the peak years of the 2 prior market cycles. We are gaining market share. At the same time, some of the senior M&A professionals we've hired recently proved to be our biggest producers in 2020, contributing to record advisory fee of $40.5 million. Those fees accounted for over 1/3 of JMP Securities' revenues last year compared to just 14% in 2015.

We will look to add other M&A professionals to further expand this footprint. Our pipeline in advisory is as strong as ever and growing, and we anticipate a year ahead that could possibly outpace the one that we just had in 2020. We completed a total of 126 investment banking transactions in 2020, with 45% of the fees from health care, 35% from tech and 20% from financial services and real estate. Already, in 2021, JMP Securities has underwritten 15 equity offerings, including 5 IPOs.

In all, we completed 22 investment banking transactions year-to-date. Last year, we invested in 3 growth initiatives that should have lasting impacts for our firm. First, we added two senior research analysts and one senior investment banking to our already highly regarded life sciences practice, which should further enhance our competitive footprint in 2021 and beyond.

Second, we focused on being more active on the front end of SPACs, which we think will enhance our strategic advisory and private placement business going forward. Lastly, we've laid the foundation to enter the cannabis space, initially within our financial services and real estate verticals, but allowing for expansion into technology and health care as 2021 progresses. And now back to you, Joe.

Joe Jolson

Thanks, Mark. In the past few years, we have proactively sold or spun out all asset management strategies that did not present synergies with JMP Securities' industry coverage. As a result, we have completely exited the hedge fund business and narrowed our focus to venture and private capital strategies that leverage the domain expertise that exists across our firm. We also took steps last year to reduce our structural costs, which allowed for highly positive operating margin leverage in the fourth quarter. Our objective is to sustain a top-tier return on equity at our operating platforms through varying market cycles.

With our company more streamlined than ever before, its future value will hinge on the continued success of our investment banking platform, in addition to a conservatively stated and growing book value per share. We are optimistic about JMP's prospects for 2021, but we'll leave it to the market itself to judge. With that, operator, we'd be happy to try to answer any questions. Thank you.

Question-and-Answer Session


Mark Lehmann

Joe, I'll start first of all by thanking everybody at JMP and most importantly, to the almost 200 people who through 2020 and all the personal and professional challenges that COVID has had us all face, the hard work and dedication and loyalty were extraordinary. And most importantly, the health and safety of our employees is paramount. And I just want to thank everybody for that support for 2020, and I'll leave it to Joe for some concluding comments.

Joe Jolson

Well, I was -- that's very well said, Mark. I'd reiterate that. And we're -- everyone's really busy here. We're working hard, fully at capacity, and we look forward to reporting our results to everybody in late April, so in a couple of months. Thank you very much. Have a great day.

Mark Lehmann

Thanks all.


This concludes today's conference call. You may now disconnect.

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