This is a summary of the fourth quarter fiscal 2007 earnings conference call conducted by Piper Jaffray Companies (PJC: chart) on January 23, 2008.
Management:
Chairman of the Board and CEO: Andrew S. Duff
Vice Chairman of the Board and CFO: Thomas P. Schnettler
Key Investor Issues:
- Piper Jaffray earned $15.1 million, or 91 cents per share, in the fourth quarter, compared with profit of $20.6 million, or $1.15 per share, in the fourth quarter of 2006.
- Revenue declined marginally to $146.5 million from $146.6 million.
- Revenue from selling and trading of bonds lost 42% as fixed income suffered from the unfavourable market conditions.
- For 2007, Piper Jaffray earned $45 million, or $2.59 per share, compared with profit of $62.9 million, or $3.32 per share.
Fourth Quarter Highlights
The company generated net revenues of $146.5 million, essentially the same as the fourth quarter of 2006 and up 58% compared to the third quarter of 2007.
The equities related businesses and advisory services were strong and more than offset weaker performance in the fixed income businesses. Equity financings were strong in the fourth quarter and generated net revenues of $43 million up 30% from the fourth quarter of 2006 and up 136% from the third quarter of 2007. The equity backlog was strong heading into the fourth quarter and the financings remained active throughout the period.
Compared to the third quarter of 2007, the company nearly tripled the number of completed transactions and the amount of capital raised.
Currently, the equity financing backlog consists of 11 transactions as compared to 22 when the company announced its third quarter earnings.
Advisory services revenues were also strong in the fourth quarter.
Net revenues were $36.7 million up 6% compared to the year ago period and up 128% compared to the third quarter of 2007. The stronger performance was driven by improved results from the US business and contributions from Europe and Asia.
Equity sales and trading also performed well in the quarter.
Net revenues were $35 million up 19% from the year ago period and up 39% compared to the sequential third quarter. This performance was driven by stronger commissions and improved trading performance in US equities and the solid contribution from the Hong Kong equities business.
Fixed income financing revenues were $16.8 million, the majority of which represent public finance underwriting revenues.
Net revenues from this business were down 37% compared to a year ago when the company generated near record public finance underwriting revenues. Compared to the third of 2007 overall fixed income financing revenues were down 8%. However, public finance underwriting revenues were consistent holding up well in a turbulent environment.
Fixed income sales and trading revenues were $11.1 million, down 42% from the fourth quarter of 2006 and down 19% compared to the third quarter 2007.
The declines were primarily driven by lower revenues from high yield and structured products which continued to generate weaker revenues due to challenging market conditions.
For the fourth quarter of 2007, compensation and benefit expenses were $85.7 million, down 3% from a year ago and up 58% from the sequential third quarter.
