KBW, Inc. (NYSE: KBW), a full-service investment bank that specializes in the financial services sector, today announced revenues of $55.4 million and a non-GAAP operating net loss of $4.7 million, or $0.16 per diluted share, for the quarter ended June 30, 2012. This compares with total revenues of $64.0 million and a net loss of $4.2 million, or $0.14 per diluted share, for the quarter ended June 30, 2011 and total revenues of $69.2 million and non-GAAP operating net income of $2.0 million, or $0.06 per diluted share, for the first quarter of 2012. See “Non-GAAP Financial Measures” below for a reconciliation of our non-GAAP operating results to our GAAP results. The GAAP net loss for the second quarter of 2012 was $5.4 million, or $0.19 per diluted share. GAAP net income for the first quarter of 2012 was $0.5 million, or $0.01 per diluted share.
Tom Michaud, Chief Executive Officer and President said, “While the timing of the recovery in our sector continues to be uncertain, this is the second consecutive quarter positively impacted by M&A and advisory transactions revenue. Unfortunately, current market conditions negatively impacted our other businesses. We continue to examine and implement steps on the expense side of our business to adjust to this continuing environment. Some of the benefits of these steps were evident in the second quarter as our annual run rate of non-compensation expenses continued to decline, the firm’s headcount was reduced while maintaining talent in the areas that offer the best growth opportunities. We remain very well capitalized with no long term debt and a large portion of our assets in cash and liquid securities.”
Key points for the quarter include:
- Investment banking revenue increased $10.1 million, or 66.2%, to $25.3 million compared with $15.2 million for the second quarter of 2011, primarily due to higher M&A and advisory revenue. Investment banking revenue decreased $1.8 million, or 6.5%, compared with $27.0 million for the first quarter of 2012, primarily due to lower M&A and advisory revenue partially offset by higher capital markets revenue.
- Commissions revenue was $24.6 million compared with $32.2 million for the second quarter of 2011, a decrease of $7.5 million, or 23.4%, reflecting lower trading volumes for financial services companies’ stocks in 2012 compared to 2011. Commissions revenue decreased $4.6 million, or 15.7%, compared with $29.2 million for the first quarter of 2012, primarily due to lower traded volume.
- Principal transactions revenue was $3.5 million compared with $12.0 million for the second quarter of 2011, a decrease of $8.5 million, or 70.9%, primarily due to lower fixed income revenue. Principal transactions revenue decreased $7.0 million, or 66.9%, compared with $10.5 million for the first quarter of 2012.
- Non-GAAP operating total expenses (excludes restructuring charges) decreased $8.0 million, or 11.2%, to $62.9 million compared with $70.9 million for the second quarter of 2011, primarily due to a decrease in non-compensation expenses excluding restructuring charges of 30.3%. Non-GAAP operating total expenses decreased $3.4 million, or 5.1%, compared with non-GAAP operating total expenses of $66.3 million for the first quarter of 2012 with non-compensation expenses excluding restructuring charges decreasing 4.5%.
- As of June 30, 2012, preliminary stockholders’ equity, which was all tangible, amounted to $380.4 million and preliminary book value per share was $12.61.
Total revenues for the first half of 2012 were $124.7 million with a non-GAAP operating net loss of $2.8 million, or $0.11 per diluted share. This compares with total revenues of $159.2 million and net income of $0.4 million, for the first half of 2011. The GAAP net loss for the first half of 2012 was $5.0 million, or $0.18 per diluted share.
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