MINNEAPOLIS--(BUSINESS WIRE)--Feb. 5, 2015-- Piper Jaffray Companies (NYSE: PJC) today announced its financial results for the quarter and year ended December 31, 2014.

Financial Highlights

• Adjusted net income from continuing operations⁽¹⁾ was $14.7 million, or $0.90 per diluted common share⁽¹⁾, in the fourth quarter of 2014, compared to $30.5 million, or $1.91 per diluted common share, in the fourth quarter of 2013, and $16.9 million, or $1.03 per diluted common share, in the third quarter of 2014.
• Adjusted net revenues from continuing operations⁽¹⁾ were $148.4 million in the fourth quarter of 2014, compared to $182.6 million and $155.9 million in the fourth quarter of 2013 and the third quarter of 2014, respectively.
• Adjusted pre-tax operating margin⁽¹⁾ was 15.9% in the fourth quarter of 2014, compared to 23.1% and 17.3% in the fourth quarter of 2013 and the third quarter of 2014, respectively.
• Record advisory services revenues of $186.2 million for the year ended December 31, 2014.
• Assets under management were $11.5 billion at December 31, 2014, compared to $11.2 billion in the year-ago period and $12.2 billion at the end of the third quarter of 2014.
• Rolling 12 month return on average common shareholders' equity increased to 8.1% at December 31, 2014, compared to 6.2% at December 31, 2013. Our rolling 12 month return on average tangible common shareholders' equity⁽²⁾ increased to 11.8% at December 31, 2014, compared to 9.3% at December 31, 2013.
• Book value per share increased 5% from December 31, 2013 to $53.71 a share at December 31, 2014.

For the fourth quarter of 2014, on a U.S. GAAP basis, net revenues from continuing operations were $150.5 million, and net income from continuing operations was $12.5 million, or $0.77 per diluted common share.

For the twelve months ended December 31, 2014, net revenues from continuing operations on a U.S. GAAP basis were $648.1 million. Net income from continuing operations on a U.S. GAAP basis was $63.2 million, or $3.87 per diluted common share, in 2014.

"With our strong finish to the year, we produced the best results for our shareholders since we reemerged as a public company a decade ago,” said Andrew S. Duff, Chairman and Chief Executive Officer. “Our prudent management coupled with targeted investments in our businesses generated an ROE of 8.1% for the year, an improvement of nearly 600 basis points over the past three years.”

Fourth Quarter Results from Continuing Operations – Non-GAAP Basis
Throughout the Adjusted Consolidated Results and Business Segment Results sections of this press release we present financial measures that are not prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The non-GAAP financial measures include adjustments to exclude (1) revenues and expenses related to noncontrolling interests, (2) amortization of intangible assets related to acquisitions, (3) compensation for acquisition-related agreements, and (4) restructuring and acquisition integration costs. Management believes that presenting results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information."

Adjusted Consolidated Results
For the fourth quarter of 2014, adjusted net revenues were $148.4 million, down 19% compared to $182.6 million in the fourth quarter of 2013 due primarily to lower equity financing revenues, lower asset management performance fees, and lower investment gains from our merchant banking and firm investments. Adjusted net revenues decreased 5% compared to the third quarter of 2014 due to lower advisory services revenues, partially offset by higher equity and debt financing revenues and higher equity institutional brokerage revenues.

For the fourth quarter of 2014, adjusted compensation and benefits expenses were $92.6 million, down 16% compared to the fourth quarter of 2013 due to lower revenues and operating income. Adjusted compensation and benefits expenses decreased 4% compared to the third quarter of 2014.

For the fourth quarter of 2014, adjusted compensation and benefits expenses were 62.4% of adjusted net revenues, compared to 60.6% and 61.5% for the fourth quarter of 2013 and the third quarter of 2014, respectively. The adjusted compensation ratio increased compared to both periods due to a lower revenue base. Our compensation ratio was also higher in the fourth quarter of 2014 as we made adjustments to reflect our business activity for the full year.

Adjusted non-compensation expenses were $32.3 million for the fourth quarter of 2014, up 8% compared to the year-ago period and down slightly compared to the third quarter of 2014. Adjusted non-compensation expenses were higher compared to the fourth quarter of 2013 due primarily to higher third party marketing fees associated with our asset management business.

Business Segment Results
The firm has two reportable business segments: Capital Markets and Asset Management. Consolidated net revenues and expenses are fully allocated to these two segments. The operating results of our Hong Kong capital markets business, which we shut down in 2012, and FAMCO, an asset management subsidiary sold in 2013, are presented as discontinued operations for all periods presented.

Capital Markets
For the quarter, Capital Markets generated adjusted pre-tax operating income of $18.0 million, compared to $31.1 million and $19.8 million in the fourth quarter of 2013 and the third quarter of 2014, respectively.

Adjusted net revenues were $129.7 million, down 16% and 5% compared to the year-ago period and the third quarter of 2014, respectively.

• Equity financing revenues of $23.1 million decreased 33% compared to the fourth quarter of 2013 due to fewer completed transactions. Revenues increased 62% compared to the sequential quarter due to more completed transactions and higher revenue per transaction.
• Debt financing revenues were $19.6 million, down 12% compared to the year-ago period due to fewer completed transactions, and up 36% compared to the third quarter of 2014 due to more completed transactions.
• Advisory services revenues were $40.4 million, up 15% compared to the fourth quarter of 2013 and down 39% compared to the third quarter of 2014. Revenues were favorable compared to the year-ago period due to more completed transactions. Revenues decreased compared to the third quarter of 2014 due to lower revenue per transaction.
• Equity institutional brokerage revenues of $22.9 million decreased 12% compared to the fourth quarter of 2013 due to lower gains from our equity strategic trading activities. Revenues increased 37% compared to the third quarter of 2014 due to higher client trading volumes and gains from our equity strategic trading activities.
• Fixed income institutional brokerage revenues were $23.1 million, down 13% compared to the fourth quarter of 2013 and up 2% compared to the third quarter of 2014. Revenues decreased compared to the year-ago period due to less attractive trading conditions.
• Management and performance fees earned from managing our alternative asset management funds were $0.9 million, compared to $1.2 million and $1.4 million in the year-ago period and the sequential quarter, respectively.
• Adjusted investment income, which includes gains and losses on our investments in the merchant banking fund and the municipal bond fund that we manage for third-party investors, and other firm investments, was $1.3 million, compared to $11.3 million in the year-ago period and $1.6 million in the third quarter of 2014. In the fourth quarter of 2013, we recorded higher gains on our merchant banking investments.
• Long-term financing expenses, which primarily represents interest paid on the firm's variable rate senior notes, were $1.6 million, down slightly compared to $1.8 million in the fourth quarter of 2013 and essentially flat compared to the third quarter of 2014.
• Adjusted operating expenses for the fourth quarter of 2014 were $111.7 million, down 10% compared to the fourth quarter of 2013. The decrease resulted from lower compensation expenses due to decreased operating results. Compared to the third quarter of 2014, adjusted operating expenses decreased 4%.
• Adjusted segment pre-tax operating margin was 13.9% compared to 20.1% in the year-ago period and 14.6% in the third quarter of 2014. Adjusted pre-tax operating margin declined compared to both periods due to lower net revenues.

Asset Management
For the quarter ended December 31, 2014, Asset Management generated adjusted pre-tax operating income of $5.6 million, compared to $11.0 million and $7.1 million in the fourth quarter of 2013 and the third quarter of 2014, respectively.

Net revenues were $18.7 million, down 32% and 6% compared to the fourth quarter of 2013 and the third quarter of 2014, respectively. The decline compared to the year-ago period was due to lower performance fees, the majority of which are recorded in the fourth quarter if earned. Also, investment income/(loss) was a loss of $0.6 million for the current quarter, compared with income of $1.4 million in the fourth quarter of 2013.

• Adjusted operating expenses for the current quarter were $13.1 million, down 21% compared to the year-ago period and essentially flat compared to the third quarter of 2014. Adjusted operating expenses decreased compared to the fourth quarter of 2013 due to lower compensation expenses, partially offset by higher third party marketing fees.
• Adjusted segment pre-tax operating margin was 29.9%, compared to 39.8% in the fourth quarter of 2013 and 35.7% in the third quarter of 2014. Adjusted segment pre-tax operating margin declined relative to the fourth quarter of 2013 due to lower net revenues and higher non-compensation expenses, and declined from the sequential quarter due to higher non-compensation expenses.
• Assets under management (AUM) were $11.5 billion at the end of the fourth quarter of 2014, compared to $11.2 billion in the year-ago period and $12.2 billion at the end of the third quarter of 2014. The decrease in AUM compared to the sequential quarter was due to market depreciation, especially in our MLP and energy strategies, and net client outflows in our value equity strategies.

Other Matters
In the fourth quarter of 2013, we reversed the full amount of our U.K. subsidiary's deferred tax asset valuation allowance resulting in a $4.0 million, or $0.25 per diluted common share, tax benefit to our results of operations for the quarter.

Full-Year 2014 Results from Continuing Operations – Non-GAAP Basis

Adjusted Consolidated Results
For 2014, adjusted net revenues were $632.4 million, up 23% compared to $516.4 million in 2013 due primarily to higher advisory services revenues.

For 2014, adjusted compensation and benefits expenses were $389.3 million, up 22% compared to 2013, due to improved financial performance. Adjusted compensation and benefits expenses were 61.6% of adjusted net revenues in 2014, down from 61.9% in 2013.

Adjusted non-compensation expenses were $129.5 million in 2014, up 17% compared to 2013. The increase was due to higher expenses from increased business activity, and incremental costs associated with the acquisitions of Seattle-Northwest and Edgeview. Additionally, non-compensation expenses from continuing operations were reduced in 2013 due to the receipt of insurance proceeds for the reimbursement of prior legal settlements.

Business Segment Results

Capital Markets
For 2014, Capital Markets generated adjusted pre-tax operating income of $84.9 million, up 62% from $52.3 million in 2013. Adjusted net revenues were $552.1 million in 2014, up 27% compared to $434.5 million in the prior year, driven by higher advisory services revenues.

Adjusted operating expenses were $467.2 million in 2014, up 22% compared to 2013, due primarily to higher compensation expenses from increased operating results. Adjusted segment pre-tax operating margin increased from 12.0% in 2013 to 15.4% in 2014 due to operating leverage gained from increased revenues.

Asset Management
For 2014, Asset Management generated adjusted pre-tax operating income of $28.8 million, down 14% compared to $33.5 million in 2013. Net revenues were $80.3 million in 2014, down 2% compared to 2013.

Adjusted operating expenses were $51.6 million in 2014, up 7% compared to 2013, due to higher non-compensation expenses. Adjusted segment pre-tax operating margin declined from 40.9% in 2013 to 35.8% in 2014 due to higher non-compensation expenses. Non-compensation expenses were higher due to an increase in third party marketing fees.

* Number of employees, transaction data, and AUM reflect continuing operations; other numbers reflect continuing and discontinued results.

Conference Call

Andrew S. Duff, chairman and chief executive officer, and Debbra L. Schoneman, chief financial officer, will hold a conference call to review the financial results on Thur., Feb. 5 at 9 a.m. ET (8 a.m. CT). The earnings release will be available on or after Feb. 5 at the firm's Web site at www.piperjaffray.com. The call can be accessed via webcast or by dialing (888)810-0209 or (706)902-1361 (international) and referencing reservation #69387923. Callers should dial in at least 15 minutes prior to the call time. A replay of the conference call will be available beginning at approximately 12 p.m. ETFeb. 5 at the same Web address or by calling (855)859-2056 and referencing reservation #69387923.

About Piper Jaffray

Piper Jaffray is an investment bank and asset management firm serving clients in the U.S. and internationally. Proven advisory teams combine deep industry, product and sector expertise with ready access to capital. Founded in 1895, the firm is headquartered in Minneapolis and has offices across the United States and in London, Hong Kong and Zurich. www.piperjaffray.com

Cautionary Note Regarding Forward-Looking Statements

This press release and the conference call to discuss the contents of this press release contain forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are subject to significant risks and uncertainties that are difficult to predict. These forward-looking statements cover, among other things, statements made about general economic and market conditions (including the outlook for equity markets and the interest rate environment), the environment and prospects for corporate advisory transactions and capital markets (including our performance in specific sectors), anticipated financial results generally (including expectations regarding our non-compensation expenses, compensation and benefits expense, compensation ratio, revenue levels, operating margins, earnings per share, effective tax rate, and return on equity), current deal pipelines (or backlogs), our strategic priorities (including growth in public finance, asset management, and corporate advisory), potential acquisitions or strategic hires, or other similar matters.

Forward-looking statements involve inherent risks and uncertainties, both known and unknown, and important factors could cause actual results to differ materially from those anticipated or discussed in the forward-looking statements. These risks, uncertainties and important factors include, but are not limited to, the following:

• market and economic conditions or developments may be unfavorable, including in specific sectors in which we operate, and these conditions or developments, such as market fluctuations or volatility, may adversely affect our business, revenue levels and profitability;
• net revenues from capital markets and corporate advisory engagements may vary materially depending on the number, size, and timing of completed transactions, and completed transactions do not generally provide for subsequent engagements;
• the volume of anticipated investment banking transactions as reflected in our deal pipelines (and the net revenues we earn from such transactions) may differ from expected results if there is a decline in macroeconomic conditions or the financial markets, or if the terms of any transactions are modified;
• interest rate volatility, especially if the changes are rapid or severe, could negatively impact our fixed income institutional business;
• strategic trading activities comprise a meaningful portion of our fixed income institutional brokerage revenue, and results from these activities may be volatile and vary significantly, including the possibility of incurring losses, on a quarterly and annual basis;
• potential acquisitions targets or strategic hires may not be available on reasonable terms or at all, and we may not be able to effectively integrate any business or groups of employees we acquire or hire; and
• our stock price may fluctuate as a result of several factors, including but not limited to, changes in our revenues and operating results.

A further listing and description of these and other risks, uncertainties and important factors can be found in the sections titled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013 and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013, and updated in our subsequent reports filed with the SEC (available at our Web site at www.piperjaffray.com and at the SEC Web site at www.sec.gov).

Forward-looking statements speak only as of the date they are made, and readers are cautioned not to place undue reliance on them. We undertake no obligation to update them in light of new information or future events.

© 2015 Piper Jaffray Companies, 800 Nicollet Mall, Suite 1000, Minneapolis, Minnesota 55402-7020

Segment pre-tax operating income and segment pre-tax operation margin exclude the results of discontinued operations.

N/M — Not meaningful

This presentation includes non-GAAP measures. The non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information."

This presentation includes non-GAAP measures. The non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information."

N/M — Not meaningful