- Investment banking revenue of $25.8 million, compared to $42.2 million in the first half of 2011.
- Revenue, excluding principal transactions, of $34.5 million, compared to $50.8 million in the first half of 2011.
- Net loss of $7.0 million, or ($0.19) per diluted share.
- 32 financing transactions were completed raising $1.2 billion in the first half of 2012, compared to 59 financing transactions raising $1.7 billion in the first half of 2011.
- Investment banking revenue of $2.3 million, compared to $14.7 million and $23.5 million in the second quarter of 2011 and the first quarter of 2012, respectively.
- Revenue, excluding principal transactions, of $9.3 million, compared to $21.1 million and $25.2 million in the second quarter of 2011 and the first quarter of 2012, respectively.
- Net loss of $9.0 million, or ($0.25) per diluted share.
- 10 financing transactions were completed, raising $0.1 billion in the second quarter of 2012, compared to 26 financing transactions raising $0.7 billion in the second quarter of 2011 and 22 financing transactions raising $1.1 billion in the first quarter of 2012.
Sales & TradingBrokerage revenue for the second quarter was approximately $6.6 million, net of $0.5 million of soft dollar expense, compared to $6.5 million, net of $1.1 million of soft dollar expense, for the second quarter of 2011 and $6.5 million, net of $0.5 million of soft dollar expense, for the first quarter of 2012. Principal Transactions Principal transactions revenue (which predominantly represents changes in the value of the Company’s warrant/derivative portfolio) for the second quarter was a $2.5 million loss, compared to a $5.2 million loss for the second quarter of 2011 and $0.2 million for the first quarter of 2012. Merchant Banking Revenue Merchant banking revenue for the second quarter was a $0.1 million loss, compared to an insignificant loss for the second quarter of 2011 and $5.0 million loss for the first quarter of 2012. Operating Expenses Compensation Expense
- Employee compensation and benefits expense for the second quarter of 2012 was $7.5 million, compared to $15.2 million for the second quarter of 2011 and $13.9 million for the first quarter of 2012.
- Employee compensation and benefits expense for the second quarter of 2012, excluding the $2.5 million principal transactions loss from revenue, represented 81% of transaction-related revenue (revenue excluding principal transactions), compared to 64% in the comparable 2011 period. The Company targets a compensation ratio of 55% to 60% of transaction-related revenue on an annualized basis.
- The Company had 141 and 191 full-time employees at June 30, 2012 and December 31, 2011, respectively.
- The founding executives did not receive a year end 2011 bonus and no bonuses for such founding executives were accrued as of June 30, 2012.
- In July 2012, the Company suspended all sales and trading activities and reduced total headcount from 141 as of June 30, 2012 to 74 as of August 13, 2012 due to financial and market conditions.
Income TaxesDue to the uncertainty in the current operating environment we continue to record a full valuation allowance on our deferred tax assets. Capital Liquid assets were approximately $12.2 million at June 30, 2012, consisting of cash and cash equivalents, “Level 1” assets less “Level 1” liabilities, “Level 2” assets less “Level 2” liabilities and net current receivables, compared to $15.5 million at December 31, 2011. The decrease in liquid assets primarily relates to cash inflows from operations less year-end bonuses and severance paid during the first and second quarters of 2012 and the cost of treasury stock purchases. The following table sets forth the calculation of liquid assets (non-GAAP) as of June 30, 2012 and December 31, 2011 (in millions of dollars):
|June 30, 2012||December 31, 2011|
|Total cash and cash equivalents||6.2||7.4|
|Financial instruments owned, at fair value (Level 1 and Level 2)||3.0||6.1|
|Private placement and other fees receivable||1.1||1.8|
|Receivable from brokers, dealers & clearing agencies||2.2||1.8|
|Financial instruments sold, not yet purchased, at fair value (Level 1)||(0.3||)||(1.6||)|
|Liquid Assets (non-GAAP)||12.2||15.5|
We have experienced recurring losses from operations, and such losses may continue for the foreseeable future. As of August 13, 2012, the Company had approximately $7 million in liquid assets. If the Company cannot generate revenue in the near term, it will need to raise additional capital to continue to fund its operating activities. The Company is currently exploring several financing and strategic options; however, there can be no assurance that the Company will be able to complete any such transaction in a timely manner, if at all, and cannot predict what the terms of any such transaction will be. Any financing or strategic transaction may be dilutive to existing stockholders and may include covenants restricting the Company’s ability to operate freely or make it more difficult for the Company to raise money in the future. If the Company’s capital raising and/or strategic initiative efforts are unsuccessful, its inability to finance ongoing operations could have a material adverse effect on the Company’s financial position, results of operations and business and the Company may have to curtail its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.About Direct Markets Holdings Corp. Direct Markets Holdings Corp. (MKTS) is a holding company with a number of direct and indirect subsidiaries, including Direct Markets, Inc. and Rodman & Renshaw, LLC. About Direct Markets, Inc. Direct Markets, Inc. will provide a broker-neutral technology platform where public companies interact directly with investors to gain exposure, receive sentiment, build relationships and perform capital markets transactions. The result is a new paradigm where participants gain control over the capital raising process with greater visibility, transparency and cost savings. For more information, please visit www.directmkts.com. About Rodman & Renshaw, LLC Rodman & Renshaw, LLC is a full-service investment bank dedicated to providing corporate finance, strategic advisory and related services to public and private companies across multiple sectors and regions. The company also provides research and sales and trading services to institutional investors. Rodman is a leader in the PIPE (private investment in public equity) and RD (registered direct offering) transaction markets. According to Sagient Research Systems, Rodman has been ranked the #1 Placement Agent by deal volume of PIPE and RD financing transactions completed every year since 2005. For more information, please visit www.rodm.com. MEMBER FINRA, SIPC Cautionary Note Regarding Forward Looking Statements This press release contains forward-looking statements regarding future events and financial performance including, but not limited to the timing and success of the roll-out of the DirectMarkets platform. In some cases, you can identify these statements by words such as “may,” “might,” “will,” “should,” “except,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of these terms and other comparable terminology. These statements involve a number of risks and uncertainties and are based on numerous assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. There are or may be important factors that could cause our actual results to materially differ from our historical results or from any future results expressed or implied by such forward looking statements.
These factors include, but are not limited to, those discussed under the section entitled “Risk Factors” in our Annual Report on Form 10-K, filed March 15, 2012, which is available at the U.S. Securities and Exchange Commission website at www.sec.gov. The forward-looking statements in this press release are based upon management's reasonable belief as of the date hereof. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.DIRECT MARKETS HOLDINGS CORP. AND SUBSIDIARIES
|Consolidated Statements of Financial Condition as of June 30, 2012 (Unaudited) and December 31, 2011 Dollars in Thousands, Except Per Share Amounts|
|June 30, 2012||December 31, 2011|
|Cash and cash equivalents:|
|Total cash and cash equivalents||6,195||7,391|
|Financial instruments owned, at fair value:|
|Corporate equity securities||2,679||5,064|
|Merchant banking investments||4,645||9,559|
|Total financial instruments owned, at fair value||12,806||21,862|
|Private placement and other fees receivable||1,077||1,766|
|Receivable from brokers, dealers & clearing agencies||2,176||1,828|
|Property and equipment, net||2,347||3,027|
|Goodwill and other intangible assets, net||215||-|
|Liabilities and Stockholders’ Equity|
|Accrued compensation payable||$||2,632||5,924|
|Accounts payable and accrued expenses||4,219||4,610|
|Financial instruments sold, not yet purchased, at fair value|
|Corporate equity securities||267||1,643|
|Total financial instruments sold, not yet purchased, at fair value||338||1,643|
|Long term convertible debt||5,910||5,997|
|Common stock, $0.001, par value; 100,000,000 shares|
|authorized; 32,582,499 and 33,672,699 issued as of|
|June 30, 2012 and December 31, 2011, respectively||33||34|
|Preferred stock, $0.001 par value; 1,000,000 authorized;|
|Additional paid-in capital||75,606||74,221|
|Treasury stock, no shares and 100,000 shares as of|
|June 30, 2012 and December 31, 2011, respectively||-||(46||)|
|Total Stockholders’ Equity||15,070||20,652|
|Total Liabilities and Stockholders’ Equity||$||28,169||38,826|
|DIRECT MARKETS HOLDINGS CORP. AND SUBSIDIARIES|
|Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2012 and 2011 (Unaudited) Amounts in Thousands, Except Per Share Amounts|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Interest and other income||428||14||719||25|
|Compensation and benefits||7,525||15,231||21,407||33,094|
|Professional and consulting||836||2,529||3,524||4,103|
|Occupancy and equipment rentals||816||1,068||1,639||1,841|
|Advertising and marketing||243||150||430||457|
|Communication and market research||1,750||1,980||3,633||2,894|
|Execution and clearing||833||1,140||1,843||1,218|
|Depreciation and amortization||406||397||809||794|
|Bad debt expense||197||10||197||48|
|Hudson acquisition related expense||-||794||-||1,212|
|Total operating expenses||15,798||26,447||39,264||54,081|
|Operating income (loss)||(9,077)||(10,549)||(7,099)||(10,838)|
|Income tax expense (benefit)||(87)||(2,666)||(87)||(2,769)|
|Net income (loss)||$||(8,990)||(7,883)||(7,012)||(8,069)|
|Net income (loss) per common share:|
|Weighted average common shares outstanding:|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Earnings (loss) for basic earnings per share||(8,990||)||(7,883||)||(7,012||)||(8,069||)|
|Addback: Convertible debt related interest||-||-||-||-|
|Earnings (loss) for diluted earnings per share||(8,990||)||(7,883||)||(7,012||)||(8,069||)|
|Unearned restricted stock||(2||)||-||-||-||(23||)|
|Shares outstanding, basic||36,460||37,637||36,440||36,427|
|Shares outstanding, diluted||36,460||37,637||36,440||36,427|
|Earnings (loss) per share:|
|(1||)||Shares outstanding represents shares issued less shares repurchased in treasury stock.|
|(2||)||As restricted stock is contingent upon a future service condition, unearned shares are removed from shares outstanding in the calculation of basic EPS as the Company’s obligation to issue these shares remains contingent.|
|(3||)||As earned RSUs are no longer contingent upon a future service condition and are issuable upon a certain date in the future, earned restricted stock units are added to shares outstanding in the calculation of basic EPS.|
|(4||)||Calculated using the “if converted” method. The “if converted” method assumes the conversion of the outstanding convertible debt at the beginning of the period. Related interest expense is added back to the diluted EPS numerator.|
|(5||)||Calculated under the treasury stock method. The treasury stock method assumes the issuance of only a net incremental number of shares as proceeds from issuance are assumed to be used to repurchase shares at the average stock price for the period.|