Attached files
| file | filename |
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| 8-K - 8-K - RCS Capital Corp | v409775_8k.htm |
| EX-99.2 - EXHIBIT 99.2 - RCS Capital Corp | v409775_ex99-2.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
RCS Capital Corporation Announces First Quarter 2015 Operating Results
Adjusted Net Income of
$17.4 Million, or $0.19 per Fully Diluted Share for the First Quarter1
Adjusted EBITDA of $28.4
Million for the First Quarter;
Retail Adjusted EBITDA of $35.7 Million, up 38.5% from the Prior Quarter
Assets Under Administration (“AUA”) of $240.3 Billion; up 15.4% from the Year-Ago Quarter2
9,539 Total Advisors at the End of First Quarter;
96.9% Annualized Advisor Retention3; Robust Advisor Recruiting Pipeline
345 Advisors Recruited
in the First Quarter excluding VSR and Girard, Representing $38.1 Million in Gross GDC;
$23.5 Million Increase in Net GDC for the Quarter
$1.1 Billion Wholesale
Distribution Equity Sales for the First Quarter; $457 Million Equity Sales for April;
$1.54 Billion in Equity Sales Year-to-Date Representing Continuing Growth in Capital Raise
Investment Banking and
Capital Markets Revenues of $18.8 Million for the First Quarter;
Pipeline Remains Solid with 3 Liquidity Events and 3 Fund Closings Underway
Re-Affirms 2015 Adjusted EBITDA Guidance of $244 Million - $268 Million, Excluding Wholesale Distribution Segment;
Re-Affirms 2015 Adjusted
Net Income per Fully Diluted Share of $1.43 - $1.59;
Continue to Expect Wholesale Adjusted EBITDA to be Positive for Full Year 2015
NEW YORK, May 7, 2015 -- RCS Capital Corporation (“RCS Capital” or the “Company”) (NYSE: RCAP) announced today operating results for the three months ended March 31, 2015. Operating highlights are provided below. All per share results are expressed on a fully diluted basis.
“We delivered steady improvements in our business as reflected in our key performance indicators across the platform during the first quarter,” said Michael Weil, Chief Executive Officer of RCS Capital. “Focused operational execution, prudent investments in growth initiatives and our continuing commitment to innovation, have positioned the Company to capitalize on the many long-term opportunities we see in the industry. We look forward to the meaningful growth in coming quarters as we continue to operate the business at a high level.”
Mr. Weil continued, “As expected, our retail division made deliberate progress on all fronts as we continue to build what we believe is the preeminent independent financial advisory platform in the industry. Cetera Financial Group is generating solid results including the recruitment of top advisors, retention rates that remain among the highest in the industry, and incremental earnings growth. In addition, we are continuing to recognize previously identified synergies that have meaningful impacts on operating results. Our wholesale division raised $1.1 billion in total equity for the first quarter and $457 million in April, bringing our year-to-date sales to $1.54 billion. We currently have a record 1,880 selling agreements in place with an average 5.5 selling agreements per selling group member, up from 4.8 per firm in the prior quarter. We believe that increased equity sales in conjunction with focused restructuring and expense reduction are all part of our path to profitability for the wholesale business. Our Investment Banking and Capital Markets group continued to execute on current engagements and construct a forward pipeline of advisory engagements through announced and pending liquidity events. We also made progress in our syndication business, where we acted as underwriter or selling group member in fourteen new issue offerings during the first quarter. Finally, our Investment Management business continues to penetrate the independent broker-dealer space and build out its wirehouse channels.
________________________
1 2015 results include impact of VSR Group Inc. and Girard Securities acquisitions which closed on March 11, 2015 and March 18, 2015, respectively
2 1Q 2014 comparisons are on a pro forma basis
3 Based on trailing 12 month regrettable gross dealer concession
| 1 |
Commenting on the Department of Labor’s recently proposed rule regarding fiduciary duties owed by financial advisors who provide retirement advice, Mr. Weil concluded, “We have always sought to further the best interests of all investors and to maintain best practices. As a business with an interest in both product distribution and retail advice, we think it important for our voice to be heard in Washington. Having led the direct participation program industry toward significantly enhanced levels of transparency, accountability and liquidity, we see and understand the need for retirement savers across the age and demographic spectrum to gain exposure to assets that are uncorrelated with broader financial markets. In our opinion, we need to work with the Department of Labor to adopt a rule that allows retail investors and their financial advisors access to all of the investment products and tools to reach their financial goals. We look forward to working with the Department of Labor and others in the industry during the comment period and throughout the entire process.”
Highlights for the First Quarter 2015:
Revenue4: $602.2 million for the first quarter, down 11.0% over the year-ago quarter primarily due to lower equity capital raised in the Wholesale division
Adjusted Net Income: $17.4 million for the first quarter, or $0.19 per fully diluted share
Net Income/(Loss) (GAAP): ($15.4) million for the first quarter, or ($0.47) per fully diluted share
Adjusted EBITDA: $28.4 million for the first quarter, or $38.6 million excluding the Wholesale division
Retail Advice Assets Under Administration: Up 15.4% from the year-ago quarter to $240.3 billion
Retail Advice Assets Under Management: Up 31.7% from the year-ago quarter to $46.5 billion
Advisors: 9,539 independent retail financial advisors as of March 31, 2015 servicing approximately 2.5 million clients
Advisor Retention: 96.9% advisor retention for the first quarter based on trailing 12-month GDC
Advisor Recruitment: 823 total financial advisors added in the first quarter, inclusive of advisors from VSR and Girard acquisitions; 345 financial advisors recruited in the first quarter representing $38.1 million in trailing 12-month GDC; GDC from advisors recruited in the first quarter 160% higher than GDC of advisors who left the platform; $23.5 million in net recruited GDC in the first quarter compared to $20.9 million in the fourth quarter 2014
Net Debt: Net secured debt increased by $15.8 million during the quarter as a result of net new borrowings under the secured revolver; the Company remains compliant under its debt covenants as of March 31, 2015
Cash5: $189.3 million of cash and equivalents at the end of the first quarter, inclusive of regulatory capital
Re-Affirm 2015 Guidance:
Adjusted EBITDA of approximately $244 million - $268 million, which excludes the impact of the Wholesale division and reflects Retail Advice Adjusted EBITDA of $190 million - $210 million, which excludes $10 million of annualized corporate overhead expenses. Guidance does not take into consideration the meaningful potential impact associated with rising interest rates on cash sweep programs
Adjusted Net Income of approximately $137 million - $153 million on a fully diluted basis (excluding impact of the Wholesale division)
Adjusted Net Income per share of $1.43 - $1.59 (which excludes the impact of the Wholesale division) based on approximately 96 million fully diluted shares outstanding, reflecting shares issued and issuable in connection with recent acquisitions, including the completed VSR and Girard transactions
________________________________
4 Excludes $23.4 million non-cash revenue for the first quarter 2015, recognized from fair market value accounting of embedded derivatives in securities issued in connection with the Cetera financing
5 Includes restricted cash, segregated under federal and other regulations and cash equivalents
| 2 |
| Three Months Ended | ||||||||||||
| ProForma | ||||||||||||
| March 31, 2015 | March 31, 2014 | % Change | ||||||||||
| Revenue ($ million) (a) | $ | 625.6 | $ | 676.5 | -8 | % | ||||||
| AUA ($ billion) | $ | 240.3 | $ | 208.3 | 15 | % | ||||||
| Number of Advisors | 9,539 | 9,165 | 4 | % | ||||||||
| Equity Sales ($ billion)(b) | $ | 1.1 | $ | 2.4 | -54 | % | ||||||
| Net Loss | - | $13.5 | - | $7.4 | -82 | % | ||||||
| Net Loss per diluted share | - | $0.14 | - | $0.09 | 60 | % | ||||||
| Adjusted Net Income ($ million) | $ | 17.4 | $ | 38.0 | -54 | % | ||||||
| Adjusted Net Income per diluted share | $ | 0.19 | $ | 0.44 | -58 | % | ||||||
| Adjusted EBITDA ($ million) | $ | 28.4 | $ | 64.2 | -56 | % | ||||||
| Adjusted EBITDA per diluted share | $ | 0.30 | $ | 0.74 | -59 | % | ||||||
| Fully Diluted Shares Outstanding (million) | 93.7 | 87.1 | 8 | % | ||||||||
| Three Months Ended | ||||||||||||
| ProForma | ||||||||||||
| March 31, 2015 | March 31, 2014 | % Change | ||||||||||
| Retail Advice | ||||||||||||
| AUA ($ billion) | $ | 240.3 | $ | 208.3 | 15 | % | ||||||
| AUM ($ billion) | $ | 46.5 | $ | 35.3 | 32 | % | ||||||
| Net New Advisory Assets ($ million) | $ | 724.0 | $ | 1,152.0 | -37 | % | ||||||
| Revenue ($ million) | $ | 503.6 | $ | 464.3 | 8 | % | ||||||
| Number of Advisors | 9,539 | 9,165 | 4 | % | ||||||||
| Adjusted EBITDA | $ | 35.7 | $ | 23.8 | 50 | % | ||||||
| Wholesale Distribution | ||||||||||||
| Equity Sales ($ billion) (b) | $ | 1.1 | $ | 2.4 | -54 | % | ||||||
| Revenue ($ million) | $ | 89.1 | $ | 177.9 | -50 | % | ||||||
| Adjusted EBITDA | ($ | 10.3 | ) | $ | 0.2 | -6276 | % | |||||
| Investment Banking and Capital Markets | ||||||||||||
| Revenue ($ million) | $ | 18.8 | $ | 48.5 | -61 | % | ||||||
| Adjusted EBITDA | $ | 5.8 | $ | 38.0 | -85 | % | ||||||
| Investment Management | ||||||||||||
| AUM ($ billion) | $ | 2.2 | $ | 2.7 | -18 | % | ||||||
| Revenue ($ million) | $ | 13.4 | $ | 14.0 | -5 | % | ||||||
| Adjusted EBITDA | $ | 1.4 | $ | 2.6 | -46 | % | ||||||
(a) Includes $23.4 million non-cash revenue for the first quarter 2015 recognized from fair market value accounting of embedded derivatives
(b) Includes Strategic Capital, Hatteras, and ARC Income Funds distributed through Realty Capital Securities
Note: Pro forma reflects results as if all acquisitions consummated in 2014
| 3 |
Retail Advice
| · | 9,539 independent financial advisors currently servicing approximately 2.5 million clients nationwide |
| · | $240.3 billion Assets Under Administration, up 15.4% from the year-ago quarter |
| · | $46.5 billion Assets Under Management, up 31.7% from the year-ago quarter |
| · | 96.9% annualized advisor retention for the first quarter3 |
| · | 823 total financial advisors added in the first quarter, inclusive of advisors from VSR and Girard acquisitions |
| · | 345 financial advisors recruited representing $38.1 million in trailing 12-month gross GDC |
| · | Net GDC recruited was $23.5 million for the first quarter compared to $20.9 in the prior quarter3 |
| · | GDC from advisors recruited in the first quarter 160% higher than GDC of advisors who left the platform3 |
| · | 60.5% recurring revenue; 31.2% fee-based revenue |
| · | Closed previously announced acquisitions of VSR Group and Girard Securities, adding $21.0 billion AUA to Cetera Financial Group’s eleven member network of independent broker-dealers |
Retail Advice revenue for
the first quarter was $503.6 million, up 8.5% compared to the year-ago quarter driven primarily
by higher commissions income, including trails, and higher advisory, asset-based and transaction and other fees.
Adjusted EBITDA for the first quarter was $35.7 million, up 49.8% from the year-ago quarter and 38.5% from the prior quarter.
Advisory Fee and Services revenue, which includes both client advisory fees and administrative fees, was $144.7 million for the first quarter, up 7.5% from the year-ago quarter.
Commission-Based revenue, which includes transactional commissions and “trails,” was $295.2 million for the first quarter, up 4.0% from the year-ago quarter.
Asset-Based Fee revenue, which includes strategic partner, cash sweep, and mutual fund networking fees, was $12.5 million for the first quarter, up 52.1% from the year-ago quarter.
Transaction-Based and Other revenue, which includes ticket and other trading charges, advisor fees, other account fees (e.g., IRA fees) and other revenue, was $51.2 million for the first quarter, up 35.9% from the year-ago quarter.
RCS Capital’s average cash sweep balance for the first quarter was $8.2 billion, compared to $7.6 billion for the prior quarter.
“We are very pleased with the performance of the retail business in the first quarter,” said Lawrence “Larry” Roth, Chief Executive Officer of Cetera Financial Group. “We remain committed to leveraging our industry-leading scale and resources into the people, platforms and tools that financial advisors want and need to grow their businesses. This commitment is evidenced by the key technology initiatives we rolled-out during the quarter including Pentameter - a technology-enabled practice management system and integrated business consulting process tool that provides advisors with an innovative, centralized reporting dashboard enabling them to effectively assess the strengths and weaknesses of their practices, set goals and develop business plans. Finally, we were happy to have closed the acquisitions of VSR Group and Girard Securities, adding 478 talented advisors and $21.0 billion of assets under administration to the Cetera Financial Group family.”
| 4 |
Wholesale Distribution
| · | $1.1 billion of Equity Capital raised
for the first quarter6; $972 million in non-traded direct investment sales; $106 million in liquid alternatives sales, including Hatteras Funds and other income funds |
| · | $457 million Equity Capital raised for April 2015 compared to $476 million for March 20156 |
| · | $1.54 billion Equity Capital raised year-to-date as of the end of April 20156 |
| · | Added 288 selling agreements in the first quarter to record 1,880 total active selling agreements |
| · | Added 8 new firms to our over 250 broker dealers and 125 RIA’s |
| · | Average of 5.5 selling agreements per selling group firm, up from 4.8 in the prior quarter |
| · | 30 direct investment programs and registered investment companies currently in distribution, offering approximately $39 billion in equity |
| · | 13 programs sponsored or co-sponsored by affiliates of RCS Capital are currently in distribution with affiliated programs representing approximately 61% of total registered equity |
| · | 21.8% in the first quarter 2015 market share among managing broker-dealers7 |
Wholesale Distribution revenue for the first quarter was $89.1 million on $972 million in total direct investment sales compared to $177.9 million on $1.98 billion in total direct investment sales for the year-ago quarter.
Consistent with lower year-over-year equity sales, Adjusted EBITDA for the first quarter was ($10.3) million, which includes certain promotional selling concessions. Excluding these and other costs that are not expected to be incurred going forward, Adjusted EBITDA would have been ($7.8) million for the first quarter.
“We are encouraged by our equity capital raise results for the first quarter, as well as the progress we’ve made on other initiatives as we position the business for profitability,” said Bill Dwyer, Chief Executive Officer of Realty Capital Securities. “In April, we again saw solid demand with total April sales coming in at $457 million through 30 direct investment programs and registered investment companies with continued strong sales of alternatives and non-traded REITs. April was a good start to the quarter and the performance over the past five months demonstrates our ability to capitalize on the positive trends across the alternative investment industry. We believe the remainder of the year presents a compelling opportunity with three announced and anticipated program liquidity events on the RCS platform and a number of programs set to close during the second quarter. These events, coupled with over $50 billion of closed funds expected to monetize in the industry over the next 36 months, present tremendous opportunities for our business. In addition to improvements in equity sales, we will continue to further reduce and refine our overall cost structure throughout the entire business where appropriate.”
Investment Banking and Capital Markets
Investment Banking and Capital Markets revenues were $18.8 million for the first quarter compared to $48.5 million for the year-ago quarter. Adjusted EBITDA for the first quarter was $5.8 million, representing an improvement of $1.9 million over the fourth quarter.
Performance within the Investment Banking and Capital Markets segment was as follows:
| · | Investment Banking revenue was $6.1 million for the first quarter |
| · | Transaction Management revenue was $7.0 million for the first quarter |
| · | Transfer Agent revenue was $4.4 million for the first quarter |
“Equity markets continued to demonstrate strong momentum during the quarter, bolstered by a high level of M&A deal flow, providing a solid platform for the continued growth in our capital markets activities,” said Brian Jones, RCS Capital’s Chief Financial Officer. “First quarter revenues were supported by the successful completion of the American Realty Capital Healthcare Trust, Inc. acquisition, and we stand well positioned to benefit from three anticipated liquidity events in our pipeline targeted for the second and third quarters, in addition to a number of additional expected program closings that provide future pipeline opportunities. We continue to expand and diversify our investment banking model revenue as we grow our unaffiliated syndicate and private placement business. We participated as underwriter or selling group member in fourteen new issue offerings during the first quarter and see the opportunity to serve issuers as well as our retail financial advisors and their clients with higher transaction volume in future quarters.”
_________________________
6 Includes Strategic Capital, Hatteras, and ARC Income Funds distributed through Realty Capital Securities
7 According to Robert A. Stanger & Co. – March 2015 Market Pulse
| 5 |
Investment Management
| · | Investment platform provides eleven open-end mutual funds and three closed-end funds as of the end of the first quarter |
| · | Hatteras Funds Assets Under Management was $2.2 billion as of March 31, 2015, compared to $2.5 billion as of December 31, 2014 |
Investment Management Revenue and Adjusted EBITDA were $13.4 million and $1.4 million, respectively for the first quarter, compared to $14.0 million and $2.6 million for the year ago period.
Conference Call Details
RCS Capital will host an earnings conference call reviewing these results and its operations beginning at 11:00 a.m. E.T. today. The participant for the call will include Mr. Weil, Chief Executive Officer of RCS Capital, Mr. Jones, Chief Financial Officer of RCS Capital, Mr. Roth, Chief Executive Officer of Cetera Financial Group, Mr. Dwyer, Chief Executive Officer of Realty Capital Securities, John H. Grady, Chief Strategy and Risk Officer of RCS Capital, and Andrew G. Backman, Managing Director, Investor Relations and Public Relations for RCS Capital.
Live Call
Dial In (Toll Free): 1-888-317-6003
International Dial In (Toll Free): 1-412-317-6061
Canada Dial In (Toll Free): 1-866-284-3684
Participant Elite Entry Number: 1524888
Conference Replay*
US Dial In (Toll Free): 1-877-344-7529
International Dial In (Toll Free): 1-412-317-0088
Canada Dial In (Toll Free): 1-855-669-9658
Conference Number: 10064236
*Available one hour after the end of the conference call through August 5, 2015 at 9:00 a.m. E.T.
About RCS Capital
RCS Capital Corporation (NYSE: RCAP) is a full-service investment firm expressly focused on the individual retail investor. With operating subsidiaries including retail advice services, wholesale distribution, investment banking, capital markets, investment research, investment management and crowdfunding, RCS Capital's business is designed to capitalize, support, grow and maximize value for the investment programs it distributes and the independent advisors and clients it serves. Additional information about RCS Capital can be found on its website at www.rcscapital.com. RCS Capital may disseminate information about itself, including the results of its operations and financial information, via social media platforms such as Facebook, LinkedIn and Twitter.
Financial and Operating Highlights
First quarter 2015 results shown below are on an actual basis. In addition, RCS Capital reports certain non-GAAP financial metrics, including pro forma Adjusted EBITDA and Adjusted Net Income. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section and the accompanying tables titled, “Reconciliation of GAAP to Non-GAAP (“Adjusted”) Measures.” RCS Capital uses a 40% tax rate to estimate the tax impact in its earnings. RCS Capital believes Adjusted Net Income remains a useful indicator of its performance. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods; as such, we believe it is useful for investors to understand the effects of these items on our results of operations.
| 6 |
Important Notice
The statements in this press release include statements regarding the intent, belief or current expectations of RCS Capital and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should,” “look forward” or similar expressions. The statements in this press release also include statements regarding the projections of RCS Capital that were based on estimates. These projections were not prepared in accordance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections. This information is not fact and should not be relied upon as being necessarily indicative of future results. The projections were prepared in good faith by management and are based on numerous assumptions that may prove to be wrong. The estimates also reflect assumptions as to certain business decisions that are subject to change. This press release also contains estimates and information concerning our industry, including market position, market size, and growth rates of the markets in which we participate, that are based on industry publications and reports. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these projections. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. Actual results may differ materially from those contemplated by such forward-looking statements and projections due to certain factors, including RCS Capital’s ability to integrate pending acquisitions and businesses acquired in recent acquisitions into RCS Capital’s existing businesses. Additional factors that may affect future results are contained in RCS Capital’s filings with the Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K filed with the SEC on April 2, 2015, which are available at the SEC’s website at www.sec.gov. Further, forward-looking statements, estimates or projections speak only as of the date they are made, and RCS Capital undertakes no obligation to update or revise forward-looking statements or estimates to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
|
Contacts
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|
|
Jonathan Keehner Mahmoud Siddig Joele Frank, Wilkinson Brimmer Katcher |
Brian D. Jones, CFO RCS Capital Corporation bjones@rcscapital.com |
| jkeehner@joelefrank.com | (646) 937-6903 |
| msiddig@joelefrank.com | |
| (212) 355-4449 | |
| Andrew G. Backman, Managing Director | |
| Investor Relations / Public Relations | |
| RCS Capital Corporation | |
| abackman@rcscapital.com | |
(917) 475-2135 | |
| 7 |
| RCS Capital Corporation and Subsidiaries | ||||
| Condensed Consolidated Statements of Operations | ||||
| (unaudited) | ||||
| (Dollars in thousands, except share and per share data) |
| Three Months Ended March 31, | ||||||||
| 2015 | 2014 | |||||||
| Revenues: | ||||||||
| Retail commissions | $ | 278,068 | $ | 47,889 | ||||
| Selling commissions | 57,776 | 92,577 | ||||||
| Dealer manager fees | 26,920 | 44,510 | ||||||
| Investment banking fees | 5,414 | 31,732 | ||||||
| Advisory and asset-based fees | 157,265 | 31,711 | ||||||
| Transfer agency revenue | 4,266 | 3,386 | ||||||
| Services revenue | 9,635 | 8,181 | ||||||
| Reimbursable expenses | 489 | 6,063 | ||||||
| Investment fee revenue | 12,166 | - | ||||||
| Transaction fees | 47,987 | 6,581 | ||||||
| Other revenue | 25,598 | 738 | ||||||
| Total revenues | 625,584 | 273,368 | ||||||
| Expenses: | ||||||||
| Retail commissions and advisory | 385,877 | 68,470 | ||||||
| Wholesale commissions | 40,827 | 87,153 | ||||||
| Wholesale reallowance | 6,669 | 12,850 | ||||||
| Investment fee expense | 6,886 | - | ||||||
| Internal commissions, payroll and benefits | 82,276 | 43,359 | ||||||
| Conferences and seminars | 8,870 | 6,996 | ||||||
| Travel | 4,043 | 2,492 | ||||||
| Marketing and advertising | 4,166 | 3,074 | ||||||
| Professional fees | 12,083 | 4,600 | ||||||
| Data processing | 10,446 | 3,777 | ||||||
| Quarterly fee | - | 1,782 | ||||||
| Acquisition-related costs | 2,456 | 6,717 | ||||||
| Interest expense | 18,442 | 231 | ||||||
| Occupancy | 7,744 | 3,039 | ||||||
| Depreciation and amortization | 29,350 | 2,017 | ||||||
| Clearing and exchange fees | 10,178 | 1,988 | ||||||
| Outperformance bonus | - | 7,150 | ||||||
| Other expenses | 17,691 | 2,621 | ||||||
| Total expenses | 648,004 | 258,316 | ||||||
| Income (loss) before taxes | (22,420 | ) | 15,052 | |||||
| Provision (benefit) for (from) income taxes | (7,039 | ) | 2,903 | |||||
| Net (loss) income | (15,381 | ) | 12,149 | |||||
| Less: net income (loss) attributable to non-controlling interests | (1,226 | ) | 8,864 | |||||
| Less: preferred dividends | 6,601 | - | ||||||
| Net (loss) income attributable to Class A common stockholders | $ | (20,756 | ) | $ | 3,285 | |||
| Per Share Data | ||||||||
| Net (loss) income per share attributable to Class A common stockholders | ||||||||
| Basic | $ | (0.29 | ) | $ | 0.11 | |||
| Diluted | $ | (0.47 | ) | $ | 0.11 | |||
| Weighted-average basic shares | 71,129,912 | 26,831,762 | ||||||
| Weighted-average diluted shares | 85,554,546 | 28,156,762 | ||||||
| Cash dividend declared per common share | $ | - | $ | 0.18 | ||||
| 8 |
RCS Capital Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP ("Adjusted") Measures
(unaudited)
(Dollars in thousands, except share and per share data)
| Three Months Ended | ||||||||
| March 31, 2015 | March 31, 2014 | |||||||
| Net (loss) income attributable to RCS Capital Corporation (GAAP) | $ | (15,381 | ) | $ | 12,149 | |||
| Add back: Interest expense | 18,442 | 231 | ||||||
| Add back: Provision (benefit) for income taxes | (7,039 | ) | 2,903 | |||||
| Add back: Depreciation and amortization expense | 29,350 | 2,017 | ||||||
| EBITDA (Non-GAAP) | $ | 25,372 | $ | 17,300 | ||||
| Add back: Non-cash equity compensation | 4,847 | 4,026 | ||||||
| Add back: Acquisition related expenses | 7,259 | 6,963 | ||||||
| Add back: Capitalized advisor compensation | 3,323 | 590 | ||||||
| Add back: Change in contingent and deferred consideration | 3,656 | 7 | ||||||
| Add back: Change in the fair value of embedded derivative contracts | (23,427 | ) | - | |||||
| Add back: Other | 7,338 | 9,081 | ||||||
| Adjusted EBITDA (Non-GAAP) | $ | 28,368 | $ | 37,967 | ||||
| Net (loss) income attributable to RCS Capital Corporation (GAAP) | $ | (15,381 | ) | $ | 12,149 | |||
| After-tax EBITDA adjustments: | ||||||||
| Add back: Non-cash equity compensation | 3,325 | 3,249 | ||||||
| Add back: Acquisition related expenses | 4,980 | 5,620 | ||||||
| Add back: Capitalized advisor compensation | 2,280 | 476 | ||||||
| Add back: Change in contingent and deferred consideration | 2,508 | 6 | ||||||
| Add back: Change in the fair value of embedded derivative contracts | (16,071 | ) | - | |||||
| Add back: Other | 5,033 | 7,329 | ||||||
| Total EBITDA Adjustments | 2,055 | 16,680 | ||||||
| Amortization of intangible assets | 27,204 | 1,767 | ||||||
| Adjusted net income (Non-GAAP) | $ | 13,878 | $ | 30,596 | ||||
| Average shares outstanding | ||||||||
| Class A common stock | 71,130 | 13,765 | ||||||
| Class B common stock | - | 24,000 | ||||||
| Adjusted Shares (GAAP) | 71,130 | 37,765 | ||||||
| Net Income (loss) per share (GAAP) | $ | (0.29 | ) | $ | 0.11 | |||
| EBITDA per adjusted share (Non-GAAP) | $ | 0.36 | $ | 0.46 | ||||
| Adjusted EBITDA per adjusted share (Non-GAAP) | $ | 0.40 | $ | 1.01 | ||||
| Adjusted net income per adjusted share (Non-GAAP) | $ | 0.20 | $ | 0.81 | ||||
| 9 |
RCS Capital Corporation and Subsidiaries
Pro Forma Condensed Consolidated Statements of Operations
(unaudited)
(Dollars in thousands)
| Three Months Ended March 31, | ||||||||
| 2015 | 2014 | |||||||
| Revenues | ||||||||
| Retail commissions | $ | 278,068 | $ | 268,168 | ||||
| Selling commissions | 57,776 | 118,026 | ||||||
| Dealer manager fees | 26,920 | 45,629 | ||||||
| Investment banking fees | 5,414 | 31,732 | ||||||
| Advisory and asset-based fees | 157,265 | 134,867 | ||||||
| Transfer agency revenue | 4,266 | 3,386 | ||||||
| Services revenue | 9,635 | 8,629 | ||||||
| Reimbursable expenses | 489 | 6,082 | ||||||
| Investment fee revenue | 12,166 | 12,707 | ||||||
| Other | 73,585 | 47,261 | ||||||
| Total revenues | 625,584 | 676,487 | ||||||
| Expenses | ||||||||
| Retail commissions and advisory | 385,877 | 366,175 | ||||||
| Wholesale commissions | 40,827 | 90,155 | ||||||
| Wholesale reallowance | 6,669 | 18,380 | ||||||
| Investment fee expense | 6,886 | 7,175 | ||||||
| Internal commissions, payroll and benefits | 82,276 | 84,952 | ||||||
| Conferences and seminars | 8,870 | 6,018 | ||||||
| Travel | 4,043 | 2,883 | ||||||
| Marketing and advertising | 4,166 | 7,028 | ||||||
| Professional fees | 12,083 | 9,145 | ||||||
| Data processing | 10,446 | 9,038 | ||||||
| Quarterly fee | - | - | ||||||
| Acquisition-related costs | 2,456 | 11,493 | ||||||
| Interest expense | 18,442 | 18,639 | ||||||
| Occupancy | 7,744 | 6,353 | ||||||
| Depreciation and amortization | 29,350 | 28,031 | ||||||
| Clearing and exchange fees | 10,178 | - | ||||||
| Outperformance bonus | - | 6,860 | ||||||
| Other | 17,691 | 16,539 | ||||||
| Total expenses | 648,004 | 688,864 | ||||||
| Loss before taxes | (22,420 | ) | (12,377 | ) | ||||
| Benefit from income taxes | (8,968 | ) | (4,951 | ) | ||||
| Net loss | $ | (13,452 | ) | $ | (7,426 | ) | ||
| 10 |
RCS Capital Corporation and Subsidiaries
Reconciliation of Pro Forma GAAP to Non-GAAP ("Adjusted") Measures
(unaudited)
(Dollars in thousands, except share and per share data)
| Three Months Ended | ||||||||
| March 31, 2015 | March 31, 2014 | |||||||
| Net loss attributable to RCS Capital Corporation (Non-GAAP) | $ | (13,452 | ) | $ | (7,426 | ) | ||
| Add back: Interest | 18,442 | 18,639 | ||||||
| Add back: Provision (benefit) for income taxes | (8,968 | ) | (4,951 | ) | ||||
| Add back: Depreciation and amortization expense | 29,350 | 27,425 | ||||||
| EBITDA (Non-GAAP) | $ | 25,372 | $ | 33,687 | ||||
| Add back: Non-cash equity compensation | 4,847 | 6,539 | ||||||
| Add back: Acquisition and integration related expenses | 7,259 | 11,421 | ||||||
| Add back: Capitalized advisor compensation | 3,323 | 3,921 | ||||||
| Add back: Change in contingent and deferred consideration | 3,656 | - | ||||||
| Add back: Change in the fair value of embedded derivative contracts | (23,427 | ) | - | |||||
| Add back: Other | 7,338 | 8,594 | ||||||
| Adjusted EBITDA (Non-GAAP) | $ | 28,368 | $ | 64,162 | ||||
| Net loss attributable to RCS Capital Corporation (Non-GAAP) | $ | (13,452 | ) | $ | (7,426 | ) | ||
| After-tax EBITDA adjustments: | ||||||||
| Add back: Non-cash equity compensation | 2,908 | 3,923 | ||||||
| Add back: Acquisition and integration related expenses | 4,356 | 6,853 | ||||||
| Add back: Capitalized advisor compensation | 1,994 | 2,353 | ||||||
| Add back: Change in contingent and deferred consideration | 2,194 | - | ||||||
| Add back: Change in the fair value of embedded derivative contracts | (14,056 | ) | - | |||||
| Add back: Other | 6,214 | 7,202 | ||||||
| Total EBITDA Adjustments | 3,610 | 20,331 | ||||||
| Amortization of intangible assets | 27,203 | 25,110 | ||||||
| Adjusted net income (Non-GAAP) | $ | 17,361 | $ | 38,015 | ||||
| Adjusted fully diluted shares (Non-GAAP) | 93,693 | 87,102 | ||||||
| Net loss per share (Non-GAAP) | $ | (0.14 | ) | $ | (0.09 | ) | ||
| EBITDA per adjusted share (Non-GAAP) | $ | 0.27 | $ | 0.39 | ||||
| Adjusted EBITDA per adjusted share (Non-GAAP) | $ | 0.30 | $ | 0.74 | ||||
| Adjusted net income per adjusted share (Non-GAAP) | $ | 0.19 | $ | 0.44 | ||||
| 11 |
RCS Capital Corporation and Subsidiaries
Consolidated Statements of Financial Condition
(Dollars in thousands, except shares and par value amounts)
| March 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 170,232 | $ | 199,435 | ||||
| Cash and securities segregated under federal and other regulations | 19,051 | 19,030 | ||||||
| Available-for-sale securities | 2,791 | 11,473 | ||||||
| Trading securities | 14,085 | 10,242 | ||||||
| Accounts receivable | 188,879 | 172,889 | ||||||
| Prepaid expenses and other assets | 89,250 | 85,674 | ||||||
| Property and equipment (net of accumulated depreciation) | 26,892 | 24,746 | ||||||
| Deferred compensation plan investments | 85,551 | 83,456 | ||||||
| Notes receivable (net of allowance) | 72,760 | 68,989 | ||||||
| Deferred financing fees | 26,283 | 27,808 | ||||||
| Intangible assets (net of accumulated amortization) | 1,250,155 | 1,243,525 | ||||||
| Goodwill | 577,742 | 519,361 | ||||||
| Total assets | $ | 2,523,671 | $ | 2,466,628 | ||||
| LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY | ||||||||
| Payable to customers | $ | 22,199 | $ | 13,832 | ||||
| Commissions payable | 115,345 | 102,056 | ||||||
| Accrued expenses and accounts payable | 88,002 | 96,377 | ||||||
| Derivative contracts | 64,361 | 81,032 | ||||||
| Other liabilities | 47,142 | 37,036 | ||||||
| Deferred compensation plan accrued liabilities | 86,619 | 84,963 | ||||||
| Net deferred tax liability | 269,259 | 266,202 | ||||||
| Contingent and deferred consideration | 159,681 | 145,430 | ||||||
| Long-term debt | 814,987 | 804,411 | ||||||
| Total liabilities | 1,667,595 | 1,631,339 | ||||||
| MEZZANINE EQUITY | ||||||||
| 11% Series B Preferred Stock $0.001 par value, 100,000,000 shares authorized, 5,800,000 issued and outstanding as of March 31, 2015, and December 31, 2014 | 147,849 | 146,700 | ||||||
| 7% Series C Convertible Preferred Stock $0.001 par value, 100,000,000 shares authorized, 4,400,000 issued and outstanding as of March 31, 2015, and December 31, 2014 | 111,912 | 111,288 | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Class A common stock, $0.001 par value, 100,000,000 shares authorized, 77,159,269 issued and outstanding as of March 31, 2015, and 100,000,000 shares authorized, 70,571,540 issued and outstanding as of December 31, 2014 | 77 | 71 | ||||||
| Class B common stock, $0.001 par value, 100,000,000 shares authorized, 1 issued and outstanding as of March 31, 2015, and December 31, 2014 | - | - | ||||||
| Additional paid-in capital | 757,250 | 723,113 | ||||||
| Accumulated other comprehensive income (loss) | 132 | (120 | ) | |||||
| Retained deficit | (193,959 | ) | (179,804 | ) | ||||
| Total stockholders' equity | 563,500 | 543,260 | ||||||
| Non-controlling interest | 32,815 | 34,041 | ||||||
| Total liabilities, mezzanine equity and equity | $ | 2,523,671 | $ | 2,466,628 | ||||
| 12 |
We use earnings before interest, taxes, depreciation and amortization, or EBITDA, pro forma Adjusted EBITDA and Pro forma Adjusted Net Income, which are non-GAAP measures, as supplemental measures of our performance that are not required by, or presented in accordance with GAAP. None of the non-GAAP measures should be considered as an alternative to any other performance measure derived in accordance with GAAP. We use EBITDA, pro forma Adjusted EBITDA and Pro Forma Adjusted Net Income as an integral part of our report and planning processes and as one of the primary measures to, among other things:
| • | Our ability to integrate the acquired businesses into our existing businesses; |
| • | Monitor and evaluate the performance of our business operations; |
| • | Facilitate management’s internal comparisons of the historical operating performance of our business operations; |
| • | Facilitate management’s external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels; |
| • | Analyze and evaluate financial and strategic planning decisions regarding future operating investments; |
| • | Provide useful information to investors regarding financial and business trends related to our results of operations; and |
| • | Plan for and prepare future annual operating budgets and determine appropriate levels of operating investments. |
We define EBITDA as earnings before non-controlling interest, interest, taxes, depreciation and amortization. Pro forma Adjusted EBITDA represents earnings on a pro forma basis before interest, taxes, depreciation and amortization, share-based compensation, acquisition and integration related costs (including integration-related employee compensation and related costs) and other non-recurring charges. We define adjusted net income as net income attributable to RCS Capital (using a 40% tax rate to illustrate the tax impact for comparative purposes) and adjusted to exclude acquisition related expenses and equity-based compensation and other items. We believe similarly titled measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, many of which present EBITDA, Pro forma Adjusted EBITDA, pro forma Adjusted Net Income and other similar metrics when reporting their financial results. Our presentation of Pro forma Adjusted EBITDA and Pro forma Adjusted Net Income should not be construed to imply that our future results will be unaffected by unusual or nonrecurring items.
The non-GAAP measures have limitations as analytical tools, and you should not consider any of these measures in isolation or as a substitute for analyses of our income or cash flows as reported under GAAP.
Some of these limitations are:
| • | They do not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments; |
| • | They do not reflect changes in, or cash requirements for, our working capital needs; |
| • | They do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and depreciation and amortization are non-cash expense items that are reflected in our statements of cash flows. |
In addition, other companies in our industry may calculate these measures differently than we do, limiting their usefulness as a comparative measure. We compensate for these limitations by relying primarily on our GAAP results and using the non-GAAP measures only for supplemental purposes. Please see our financial statements and the related notes thereto.
| 13 |