Attached files
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| 8-K - EDELMAN FINANCIAL GROUP INC. | v176610_8k.htm |
| EX-99.1 - EDELMAN FINANCIAL GROUP INC. | v176610_ex99-1.htm |
Exhibit 99.2
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Three
Months Ended
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Year
Ended
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December
31,
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December
31,
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2009
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2008
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2009
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2008
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Revenue:
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Wealth
Management
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$ | 28,850 | $ | 21,909 | $ | 100,941 | $ | 101,950 | ||||||||
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Institutional
Services:
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Institutional
brokerage
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986 | (63 | ) | 4,814 | 6,574 | |||||||||||
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Prime
brokerage services
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14,032 | 26,358 | 60,961 | 61,658 | ||||||||||||
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Institutional
Services Total
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15,018 | 26,295 | 65,775 | 68,232 | ||||||||||||
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Corporate
Support
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14,937 | 292 | 17,430 | 1,759 | ||||||||||||
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Total
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$ | 58,805 | $ | 48,496 | $ | 184,146 | $ | 171,941 | ||||||||
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Income
(loss) from continuing operations before equity in
income (loss) of limited
partnerships and income taxes:
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Wealth
Management
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$ | 7,630 | $ | 6,383 | $ | 26,683 | $ | 35,276 | ||||||||
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Institutional
Services:
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Institutional
brokerage
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(114 | ) | (1,935 | ) | (638 | ) | (1,823 | ) | ||||||||
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Prime
brokerage services
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(84 | ) | 101 | 277 | 2,851 | |||||||||||
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Institutional
Services Total
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(198 | ) | (1,834 | ) | (361 | ) | 1,028 | |||||||||
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Corporate
Support
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5,988 | (65,020 | ) | (21,656 | ) | (76,659 | ) | |||||||||
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Total
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$ | 13,420 | $ | (60,471 | ) | $ | 4,666 | $ | (40,355 | ) | ||||||
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Equity
in income (loss) of limited partnerships:
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Wealth
Management
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$ | (99 | ) | $ | (296 | ) | $ | (898 | ) | $ | 51,901 | |||||
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Institutional
Services:
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||||||||||||||||
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Institutional
brokerage
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- | - | - | - | ||||||||||||
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Prime
brokerage services
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- | - | - | - | ||||||||||||
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Institutional
Services Total
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- | - | - | - | ||||||||||||
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Corporate
Support
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(4,009 | ) | (7,629 | ) | (450 | ) | (13,270 | ) | ||||||||
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Total
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$ | (4,108 | ) | $ | (7,925 | ) | $ | (1,348 | ) | $ | 38,631 | |||||
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Gain
on step acquisition:
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Wealth
Management
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$ | - | $ | - | $ | - | $ | - | ||||||||
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Institutional
Services:
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Institutional
brokerage
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- | - | - | - | ||||||||||||
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Prime
brokerage services
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- | - | - | - | ||||||||||||
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Institutional
Services Total
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- | - | - | - | ||||||||||||
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Corporate
Support
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- | - | 3,000 | - | ||||||||||||
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Total
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$ | - | $ | - | $ | 3,000 | $ | - | ||||||||
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Income
(loss) from continuing operations before income taxes:
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Wealth
Management
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$ | 7,531 | $ | 6,087 | $ | 25,785 | $ | 87,177 | ||||||||
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Institutional
Services:
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Institutional
brokerage
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(114 | ) | (1,935 | ) | (638 | ) | (1,823 | ) | ||||||||
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Prime
brokerage services
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(84 | ) | 101 | 277 | 2,851 | |||||||||||
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Institutional
Services Total
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(198 | ) | (1,834 | ) | (361 | ) | 1,028 | |||||||||
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Corporate
Support
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1,979 | (72,649 | ) | (19,106 | ) | (89,929 | ) | |||||||||
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Total
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$ | 9,312 | $ | (68,396 | ) | $ | 6,318 | $ | (1,724 | ) | ||||||
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Net
(income) loss attributable to the noncontrolling interest inconsolidated
companies:
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Wealth
Management
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$ | (1,447 | ) | $ | 115 | $ | (5,112 | ) | $ | (6,896 | ) | |||||
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Institutional
Services:
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||||||||||||||||
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Institutional
brokerage
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- | - | - | - | ||||||||||||
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Prime
brokerage services
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- | - | - | - | ||||||||||||
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Institutional
Services Total
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- | - | - | - | ||||||||||||
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Corporate
Support
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- | - | - | - | ||||||||||||
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Total
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$ | (1,447 | ) | $ | 115 | $ | (5,112 | ) | $ | (6,896 | ) | |||||
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Introduction:
George L. Ball (GLB), Chairman of Sanders Morris Harris
Group
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GLB
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Thank
you, Operator, and good morning everyone. Welcome to Sanders
Morris Harris Group’s earnings release conference call for the fourth
quarter of 2009. With us today, by phone or in person,
are:
Ric
Edelman, President (RE)
Bruce
McMaken, Executive Vice President
Rick
Berry, Chief Financial Officer (RB)
Steve
Cordill, President of Wealth Management (SRC)
John
Unger, Senior Vice President and General Counsel
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GLB
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In
a moment, I will turn the call over to Rick Berry. He will
discuss our financial results for the fourth quarter of
2009. It will be followed by a question and answer
session. Before we begin, remember that during the course of
this conference call we may discuss some non-GAAP measures in talking
about our Company’s performance. If we do, you can find a reconciliation
of those measures to GAAP measures in our earnings press
release. Rick –.
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RB
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I
would like to remind you that statements made during the course of this
call that are not purely historical are forward-looking statements
regarding the company or management’s future intentions, hopes, beliefs,
expectations, and strategies for the future. Because such statements deal
with future events, they are subject to various risks and uncertainties,
and actual results might differ materially from those projected in the
forward-looking statements. Important factors that could cause actual
results to differ materially from those in the forward-looking statements
are discussed in today’s press release and in our annual report on Form
10-K and quarterly reports on Form 10-Q filed with the SEC. You should not
unduly rely on any forward-looking statements, and we assume no
responsibility to update them.
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RB
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You
should have had a chance to review our earnings release. It outlines
in some detail the components of our fourth quarter results. I will
not cover that material at any length, therefore, but will answer any
questions later.
We
had a good quarter. Stripping out discontinued operations, our
continuing businesses earned $4.9 million, or $0.17 per share, in the
quarter. Obviously, changes in the markets and therefore client
assets can have a leverage effect on earnings. Nonetheless, we
have a core of comparatively less volatile fee-based revenue producing
assets that will serve us well in the future, we believe.
GLB
next comment
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Selected
Condensed Operating Information
(in
thousands)
(unaudited)
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GLB
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We
cannot control the markets. We can control our marketing
results to some considerable degree. In the quarter, we added a
net of $224 million. In the year 2009 overall, the total was
$684 million. That represented 8% of client assets at the start
of 2009.
The
marketing growth last year – again, this excludes stock market gains – was
in both our high net worth and mass affluent or Edelman Financial
sectors. The former added $288 million of client assets and the
latter $396 million in 2009. Our priority this year, of course,
is the growth of Edelman Financial.
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RE
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This
is Ric Edelman; Our first six offices were opened in greater New York City
in September 2009. Four others, in the New York and Washington vicinities,
have been opened thus far in 2010. An additional 14 are planned for this
year, to be located in New York and Washington plus Boston, Chicago,
Detroit, and Miami.
Draft
3 - 3/8/2010 11:02 AM
Each
office has an average capital cost of approximately $250,000 and an
expected maximum cash burn of one half million dollars ($500,000) before
becoming cash flow positive, which is estimated to occur between the 12th
and 15th month of operation. After three years, a branch – generally
containing two financial planners and two support persons – is projected
to net over $500,000 of pretax profit before corporate overhead. The early
results of our expansion offices are going as expected and actually a bit
better. We do not yet have enough metrics to claim victory, but all of the
financial planners, all of the financial planners, the offices and all of
the data points to date are progressing as we had
hoped.
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RB
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At
year-end, the Company had $41.9 million of cash and equivalents, or $1.40
per share. It has reduced its debt from $35 million at the beginning
of 2009 to $20.2 million at the end of the year. In addition, the Company
has a remaining balance of $75.9 million on receivables from Salient
Partners, L.P. and Endowment Advisers, L.P., the manager of The Endowment
Fund, the largest SEC-registered fund of hedge funds product for retail
investors. The larger of these receivables is payable at the greater of
$12 million a year or 23% of the distributions from Endowment Advisers.
Sanders Morris Harris has a book value of $7.50 per share including
goodwill and $118.5 million of tangible book value.
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SRC
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We
also expanded in our high net worth area. On January 1, 2010, we bought
50% of Investor Solutions Group, a California-based high net worth firm.
We are looking at other high net worth platforms as well, both independent
contractor representatives and employee representatives. Our
partnership with Alkeon Capital Management, the new ACAP Fund, is a
promising investment program we think will have considerable appeal to our
financial advisors and wealth managers. Alkeon was organized in 2001 and
manages approximately $1.5 billion in client assets.
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GLB
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In
short, we have become a wealth management company. We are also
integrating a number of the support functions between SMH and Edelman
Financial. HR and Accounting are already
consolidated. IT will be combined in the near future, and we
are studying all of the other administrative sectors as
well. Our goal is not just cost reduction, but better, more
efficient operations.
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RE
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As
part of integration, our Board recently approved an Executive Incentive
Plan covering 21 of our senior managers company-wide, both Sanders Morris
Harris and Edelman. For the first time, all of us have on identical set of
corporate goals, and personal compensation of all executives and
management are dependent on us achieving those goals. This new
compensation plan is not a giveaway — In fact, at our budgeted level of
earnings; it generates slightly less compensation than the previous
formula. What it does, however, is to give all of us a unified
target, whether we work in Houston, Fairfax or
elsewhere.
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GLB
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We
think the Company has made considerable progress over the last
year. We survived the ravages of the 2007-2008 market extremely
well compared to other financial firms. We have a clear plan to
grow both our high net worth and Edelman Financial sectors with or without
market improvement. That plan is moving forward well and we
think the future is bright. With that, we’ll be pleased to
answer any questions.
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