EX-99 2 q32016ex99earningspressrel.htm EARNINGS PRESS RELEASE Exhibit
Exhibit 99
pjclogo_q22016.jpg

Piper Jaffray Companies Announces
2016 Third Quarter Results

MINNEAPOLIS – October 27, 2016 – Piper Jaffray Companies (NYSE: PJC) today announced its financial results for the quarter ended September 30, 2016.

“We produced record revenues of nearly $200 million for the quarter,” said Andrew S. Duff, Chairman and CEO of Piper Jaffray. “Our results reflect strength across the firm, particularly in our advisory and underwriting businesses. The increase in operating-leverage at these revenue levels drove a substantial margin expansion in our results.”
 
Financial Highlights
 
 Three Months Ended
 
 Percent Inc/(Dec)
(Amounts in thousands, except per share data)
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
U.S. GAAP
 
 
 
 
 
 
 
 
 
Net revenues
$
200,847

 
$
170,483

 
$
149,617

 
17.8
%
 
34.2
%
Compensation ratio
67.3
%
 
68.7
%
 
64.3
%
 
 
 
 
Non-compensation ratio
23.5
%
 
27.5
%
 
31.2
%
 
 
 
 
Pre-tax operating margin
9.2
%
 
3.8
%
 
4.5
%
 
 
 
 
Net income
$
10,658

 
$
1,938

 
$
4,831

 
449.9
%
 
120.6
%
Earnings per diluted common share
$
0.70

 
$
0.12

 
$
0.32

 
483.3
%
 
118.8
%
 
 
 
 
 
 
 
 
 
 
Non-GAAP(1)
 
 
 
 
 
 
 
 
 
Adjusted net revenues
$
199,001

 
$
167,188

 
$
148,394

 
19.0
%
 
34.1
%
Adjusted compensation ratio
63.8
%
 
64.1
%
 
64.3
%
 
 
 
 
Adjusted non-compensation ratio
19.4
%
 
23.1
%
 
28.7
%
 
 
 
 
Adjusted pre-tax operating margin
16.8
%
 
12.9
%
 
7.0
%
 
 
 
 
Adjusted net income
$
20,976

 
$
13,938

 
$
7,250

 
50.5
%
 
189.3
%
Adjusted earnings per diluted common share
$
1.37

 
$
0.88

 
$
0.48

 
55.7
%
 
185.4
%
Strong performance in our equity investment banking businesses, driven by our expansion into energy and financial institutions coupled with market share gains, drove an increase in revenues compared to both of the prior periods. Our fixed income businesses also contributed higher revenues compared to the prior-year period due to robust public finance results and our acquisition of BMO Capital Markets GKST Inc. ("BMO GKST") in the fourth quarter of 2015.
Pre-tax operating margin on both a GAAP and Non-GAAP basis improved compared to the third quarter of 2015 primarily due to a $9.8 million charge resulting from settlement of a legal matter in the prior-year period. Higher revenue levels drove increased operating leverage and improved the operating margin both sequentially and year over year.
Our rolling 12 month return on average common shareholders' equity was 3.6% at September 30, 2016 and our adjusted return on average common shareholders' equity(2) was 8.4% at September 30, 2016.
Our U.S. GAAP results were adversely impacted by acquisition-related compensation and intangible asset amortization expenses, and restructuring and integration costs, which are excluded from our non-GAAP results.


(1)     A non-U.S. GAAP ("non-GAAP") measure. 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." We believe that presenting our results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across periods.
(2)    A non-GAAP measure. See the "Additional Shareholder Information" section for an explanation of the calculation of this non-GAAP measure. We believe that the adjusted rolling 12 month return on average common shareholders' equity provides a meaningful measure of our return on the core operating results of the business.
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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 variance explanations for net revenues and adjusted revenues are consistent on both a U.S. GAAP and non-GAAP basis.

U.S. GAAP Results and Commentary

Capital Markets
The following table summarizes our Capital Markets business segment results on a U.S. GAAP basis for the periods presented:
 
 Three Months Ended
 
 Percent Inc/(Dec)
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
(Amounts in thousands)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
Net revenues
$
186,483

 
$
156,739

 
$
137,660

 
19.0
%
 
35.5
%
Operating expenses
$
169,745

 
$
152,028

 
$
129,224

 
11.7
%
 
31.4
%
Pre-tax operating income
$
16,738

 
$
4,711

 
$
8,436

 
255.3
%
 
98.4
%
Pre-tax operating margin
9.0
%
 
3.0
%
 
6.1
%
 
 
 
 

Advisory services revenues were $75.2 million, an increase of 60% and 56% compared to the third quarter of 2015 and the sequential quarter, respectively. Contributions from our expansion into the energy and financial institutions sectors, coupled with market share gains in our core business, drove strong, relative performance. Our results reflect significant market share gains as our revenue increased over 50% compared to both of the prior periods while M&A markets were flat to declining.
Equity financing revenues of $30.5 million increased 26% and 82% compared to the year-ago period and the sequential quarter, respectively. The equity capital raising environment continues to improve from the trough we experienced in the first quarter of 2016, driven by low volatility and improving equity valuations. Our results reflect strong, relative performance and included contributions from the energy and financial institutions sectors.
Debt financing revenues were $30.9 million, up 51% compared to the third quarter of 2015 due to robust market conditions, driven by low interest rates and increased new money issuance volumes, combined with solid market share gains. Revenues were down 7% compared to the record levels achieved in the second quarter of 2016.
Equity institutional brokerage revenues of $20.5 million increased 2% compared to the year-ago period and decreased 9% compared to the second quarter of 2016. The decrease compared to the sequential quarter was due to a decline in client trading volumes as extremely low volatility led to lower market volumes. We continue to focus on leveraging our energy and financial institutions resources to drive revenues from greater client relevance.
Fixed income institutional brokerage revenues were $25.8 million, up 41% compared to the third quarter of 2015 due to increased market volumes, particularly in the municipal asset class, as well as incremental revenues resulting from our acquisition of BMO GKST in the fourth quarter of 2015. Revenues decreased 11% compared to the second quarter of 2016 due to reduced trading opportunities in municipals. Higher trading volumes and improved capabilities attributed to the GKST acquisition have enabled us to reduce both capital deployed and interest rate risk in our fixed income business.


2


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Investment income, which includes realized and unrealized gains and losses on investments (including amounts attributable to noncontrolling interests) in our merchant banking fund, and firm investments, were $4.5 million for the quarter, compared to $7.3 million and $7.5 million in the year-ago period and the sequential quarter, respectively. We recorded higher gains on our merchant banking portfolio in both of the prior periods, as well as higher gains on other firm investments in the sequential quarter.
Operating expenses for the third quarter of 2016 were $169.7 million, up 31% and 12% compared to the third quarter of 2015 and the second quarter of 2016, respectively, due to higher compensation expenses arising from increased revenues. Also, the increase compared to the prior-year period was due to higher non-compensation expenses related to our recent acquisitions, which were partially offset by a $9.8 million settlement of a legal matter in the prior-year period.
Segment pre-tax operating margin was 9.0% compared to 6.1% in the year-ago period and 3.0% in the second quarter of 2016. Pre-tax operating margin increased compared to the third quarter of 2015 due to lower non-compensation costs resulting from a legal settlement in the prior-year period. Higher acquisition-related costs in the current quarter partially offset the impact of the legal settlement. Pre-tax operating margin improved compared to the sequential quarter due to operating leverage as a result of higher revenues.
Asset Management
The following table summarizes our Asset Management business segment results on a U.S. GAAP basis for the periods presented:
 
 Three Months Ended
 
 Percent Inc/(Dec)
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
(Amounts in thousands)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
Management and performance fees
$
13,903

 
$
12,801

 
$
17,053

 
8.6
 %
 
(18.5
)%
Investment income/(loss)
$
461

 
$
943

 
$
(5,096
)
 
(51.1
)%
 
(109.0
)%
Operating expenses
$
12,651

 
$
11,946

 
$
13,605

 
5.9
 %
 
(7.0
)%
Pre-tax operating income/(loss)
$
1,713

 
$
1,798

 
$
(1,648
)
 
(4.7
)%
 
(203.9
)%
Pre-tax operating margin
11.9
%
 
13.1
%
 
(13.8
)%
 
 
 
 

Management and performance fees of $13.9 million decreased 19% compared to the year-ago period due to lower management fees from both our value equity and MLP product offerings. The decrease was primarily driven by lower assets under management (AUM) resulting from net client outflows from our value equity products. The majority of these outflows were in the first quarter of 2016, and have stabilized as the year progressed with significantly lower net outflows in the last two quarters. Management fees increased 9% compared to the second quarter of 2016 due to increased AUM from net market appreciation and our investment performance.
Investment income/(loss) on firm capital invested in our strategies was income of $0.5 million for the current quarter, compared with a loss of $5.1 million in the third quarter of 2015 and income of $0.9 million in the second quarter of 2016. We expect the magnitude and volatility of investment income/(loss) on firm capital invested in our strategies to decrease meaningfully on a prospective basis compared to 2015 due to reduced level of investment.
Operating expenses for the current quarter were $12.7 million, down 7% compared to the year-ago period due to lower compensation expenses attributable to a decline in net revenues. Operating expenses were up 6% compared to the second quarter of 2016 due to higher compensation expenses related to higher revenues.
Segment pre-tax operating margin was 11.9% in the third quarter of 2016, compared to a negative 13.8% in the year-ago period and 13.1% in the sequential quarter. The variability in investment income/(loss) drove the majority of the variance in segment pre-tax operating margin compared to both of the prior periods.


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AUM was $8.4 billion at the end of the third quarter of 2016, compared to $9.4 billion in the year-ago period and $8.1 billion at the end of the second quarter of 2016. The increase in AUM in the third quarter of 2016 was due to net market appreciation for both our value equity and MLP product offerings, which more than offset modest net client outflows.

Non-GAAP Results and Commentary
Throughout this section of the 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 this adjusted basis alongside U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods, and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance 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."

Capital Markets
The following table summarizes our Capital Markets business segment results on a non-GAAP basis for the periods presented:
 
 Three Months Ended
 
 Percent Inc/(Dec)
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
(Amounts in thousands)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
Adjusted net revenues
$
184,637

 
$
153,444

 
$
136,437

 
20.3
%
 
35.3
%
Adjusted operating expenses
$
154,378

 
$
135,106

 
$
125,936

 
14.3
%
 
22.6
%
Adjusted pre-tax operating income
$
30,259

 
$
18,338

 
$
10,501

 
65.0
%
 
188.2
%
Adjusted pre-tax operating margin
16.4
%
 
12.0
%
 
7.7
%
 
 
 
 

The variance explanations for adjusted net revenues on a non-GAAP basis are consistent with those for net revenues on a U.S. GAAP basis.
Adjusted operating expenses for the third quarter of 2016 were $154.4 million, up 23% and 14% compared to the third quarter of 2015 and the second quarter of 2016, respectively, primarily due to higher compensation expenses as a result of increased revenues. Also, on a year-over-year basis, the higher compensation expenses were partially offset by lower non-compensation expenses resulting from a $9.8 million legal settlement in the year-ago period.
Adjusted segment pre-tax operating margin was 16.4% compared to 7.7% in the year-ago period and 12.0% in the second quarter of 2016. Adjusted pre-tax operating margin was higher compared to the third quarter of 2015 as non-compensation expenses decreased as a result of a legal settlement in the prior-year period, and higher compared to the sequential quarter primarily due to operating leverage as a result of higher revenues. Adjusted net revenues increased 20% and adjusted operating expenses increased 14% compared to the second quarter of 2016, reflecting the operating leverage and expense discipline.



4


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Asset Management
The following table summarizes our Asset Management business segment results on a non-GAAP basis for the periods presented:
 
 Three Months Ended
 
 Percent Inc/(Dec)
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
(Amounts in thousands)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
Adjusted management and performance fees
$
13,903

 
$
12,801

 
$
17,053

 
8.6
 %
 
(18.5
)%
Adjusted investment income/(loss)
$
461

 
$
943

 
$
(5,096
)
 
(51.1
)%
 
(109.0
)%
Adjusted operating expenses
$
11,264

 
$
10,559

 
$
12,095

 
6.7
 %
 
(6.9
)%
Adjusted pre-tax operating income/(loss)
$
3,100

 
$
3,185

 
$
(138
)
 
(2.7
)%
 
N/M

Adjusted pre-tax operating margin
21.6
%
 
23.2
%
 
(1.2
)%
 
 
 
 
Adjusted segment pre-tax operating margin excluding investment income/(loss) *
19.0
%
 
17.5
%
 
29.1
 %
 
 
 
 
N/M — Not meaningful
* Management believes that presenting adjusted segment pre-tax operating margin excluding investment income/(loss) provides the most meaningful basis for comparison of the operating results for the Asset Management segment across periods.

The variance explanations for adjusted net revenues, adjusted operating expenses and adjusted margin on a non-GAAP basis are consistent with those for the corresponding measures on a U.S. GAAP basis. The difference between our operating expenses on a U.S. GAAP basis and our adjusted operating expenses on a non-GAAP basis is due to intangible asset amortization expense. See the discussion above on AUM.

Other Matters
During the third quarter of 2016, we repurchased $8.3 million, or 207,000 shares of our common stock, at an average price of $40.03 per share.





5


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Additional Shareholder Information
 
For the Quarter Ended
 
Sept. 30, 2016
 
June 30, 2016
 
Sept. 30, 2015
Full time employees
1,299
 
1,299
 
1,094
Equity financings
 
 
 
 
 
# of transactions
25
 
16
 
22
Capital raised
$4.9 billion
 
$3.5 billion
 
$3.0 billion
Municipal negotiated issuances
 
 
 
 
 
 # of transactions
180
 
192
 
159
Par value
$3.8 billion
 
$5.0 billion
 
$3.3 billion
Advisory transactions
 
 
 
 
 
# of transactions
46
 
22
 
23
Aggregate deal value
$5.8 billion
 
$2.4 billion
 
$7.0 billion
Asset Management
 
 
 
 
 
AUM
$8.4 billion
 
$8.1 billion
 
$9.4 billion
Common shareholders’ equity
$784.5 million
 
$775.0 million
 
$795.4 million
Number of common shares outstanding (in thousands)
12,275
 
12,425
 
13,947
Rolling 12 month return on average common shareholders’ equity *
3.6%
 
2.8%
 
6.3%
Adjusted rolling 12 month return on average common shareholders’ equity †
8.4%
 
6.7%
 
7.3%
Book value per share
$63.91
 
$62.38
 
$57.03
Tangible book value per share ‡
$37.80
 
$35.94
 
$39.36
*
Rolling 12 month return on average common shareholders' equity is computed by dividing net income applicable to Piper Jaffray Companies' for the last 12 months by average monthly common shareholders' equity.
Adjusted rolling 12 month return on average common shareholders' equity, a non-GAAP measure, is computed by dividing adjusted net income for the last 12 months by average monthly common shareholders' equity. For a detailed explanation of the components of adjusted net income, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information." Management believes that the adjusted rolling 12 month return on average common shareholders' equity provides a meaningful measure of our return on the core operating results of the business.
‡    Tangible book value per share, a non-GAAP measure, is computed by dividing tangible common shareholders’ equity by common shares outstanding. Tangible common shareholders’ equity equals total common shareholders’ equity less goodwill and identifiable intangible assets. Management believes that tangible book value per share is a meaningful measure of the tangible assets deployed in our business. Shareholders’ equity is the most directly comparable GAAP financial measure to tangible shareholders’ equity. The following is a reconciliation of shareholders’ equity to tangible shareholders’ equity:    
 
As of
 
As of
 
As of
(Amounts in thousands)
Sept. 30, 2016
 
June 30, 2016
 
Sept. 30, 2015
Common shareholders’ equity
$
784,480

 
$
775,011

 
$
795,385

Deduct: goodwill and identifiable intangible assets
320,480

 
328,491

 
246,362

Tangible common shareholders’ equity
$
464,000

 
$
446,520

 
$
549,023



6


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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., Oct. 27 at 9 a.m. ET (8 a.m. CT). The earnings release will be available on or after Oct. 27 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 #91060185. 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. ET Oct. 27 at the same Web address or by calling (855)859-2056 and referencing reservation #91060185.

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, Aberdeen, Hong Kong and Zurich. www.piperjaffray.com

Investor Relations Contact
Tom Smith
Tel: (612)303-6336
 
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, capital markets and public finance transactions (including our performance in specific sectors and the outlook for future quarters), anticipated financial results generally (including expectations regarding our noncompensation 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), financial results for our asset management segment (including our performance in specific sectors, e.g. energy-based MLPs), the liquidity of fixed income markets and impact on our related inventory, our strategic priorities (including growth in public finance, asset management, and corporate advisory), the expected benefits of our expansion into the financial institutions and energy sectors, including the expected benefits of the integration of Simmons and Company International, River Branch Holdings LLC, and BMO Capital Markets GKST Inc. 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 equity and debt financings 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;
asset management revenue may vary based on product trends favoring passive investment products, and investment performance and market factors, with market factors impacting certain sectors that are more heavily weighted to our business, e.g. energy-based MLP funds;
interest rate volatility, especially if the changes are rapid or severe, could negatively impact our fixed income institutional business and the negative impact could be exaggerated by reduced liquidity in the fixed income markets;  


7


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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;
we may not be able to effectively integrate any business or groups of employees we acquire or hire, and the expected benefits (e.g. cost and revenue synergies) of any acquisitions or strategic hires, including that of Simmons and Company International, River Branch Holdings LLC and BMO Capital Markets GKST Inc., may take longer than anticipated to achieve and may not be achieved in their entirety or at all;
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, 2015 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, 2015, 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.

© 2016 Piper Jaffray Companies, 800 Nicollet Mall, Suite 1000, Minneapolis, Minnesota 55402-7020
###


8


Piper Jaffray Companies
Preliminary Results of Operations (U.S. GAAP – Unaudited)
 
Three Months Ended
 
Percent Inc/(Dec)
 
Nine Months Ended
 
 
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
 
Sept. 30,
 
Sept. 30,
 
Percent
(Amounts in thousands, except per share data)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
 
2016
 
2015
 
Inc/(Dec)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment banking
$
136,682

 
$
97,414

 
$
91,640

 
40.3
 %
 
49.2
 %
 
$
338,034

 
$
284,786

 
18.7
 %
Institutional brokerage
42,189

 
48,185

 
34,182

 
(12.4
)
 
23.4

 
122,423

 
106,879

 
14.5

Asset management
15,256

 
14,595

 
18,951

 
4.5

 
(19.5
)
 
43,699

 
58,730

 
(25.6
)
Interest
7,343

 
7,922

 
9,128

 
(7.3
)
 
(19.6
)
 
24,094

 
32,755

 
(26.4
)
Investment income
4,806

 
8,276

 
831

 
(41.9
)
 
478.3

 
14,019

 
10,123

 
38.5

Total revenues
206,276

 
176,392

 
154,732

 
16.9

 
33.3

 
542,269

 
493,273

 
9.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
5,429

 
5,909

 
5,115

 
(8.1
)
 
6.1

 
17,383

 
17,719

 
(1.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
200,847

 
170,483

 
149,617

 
17.8

 
34.2

 
524,886

 
475,554

 
10.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
135,186

 
117,148

 
96,132

 
15.4

 
40.6

 
356,770

 
295,543

 
20.7

Outside services
10,288

 
10,184

 
9,316

 
1.0

 
10.4

 
28,923

 
26,385

 
9.6

Occupancy and equipment
8,743

 
8,850

 
7,025

 
(1.2
)
 
24.5

 
25,311

 
20,791

 
21.7

Communications
7,845

 
7,294

 
6,234

 
7.6

 
25.8

 
22,469

 
17,650

 
27.3

Marketing and business development
7,629

 
9,171

 
6,965

 
(16.8
)
 
9.5

 
23,804

 
21,186

 
12.4

Trade execution and clearance
2,008

 
1,916

 
1,982

 
4.8

 
1.3

 
5,686

 
5,956

 
(4.5
)
Restructuring and integration costs

 
3,433

 
1,496

 
N/M

 
N/M

 
10,206

 
1,496

 
582.2

Intangible asset amortization expense
8,010

 
4,094

 
1,773

 
95.7

 
351.8

 
15,400

 
5,319

 
189.5

Other operating expenses
2,687

 
1,884

 
11,906

 
42.6

 
(77.4
)
 
7,915

 
17,289

 
(54.2
)
Total non-interest expenses
182,396

 
163,974

 
142,829

 
11.2

 
27.7

 
496,484

 
411,615

 
20.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income tax expense
18,451

 
6,509

 
6,788

 
183.5

 
171.8

 
28,402

 
63,939

 
(55.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
6,515

 
1,996

 
1,573

 
226.4

 
314.2

 
8,767

 
20,605

 
(57.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
11,936

 
4,513

 
5,215

 
164.5

 
128.9

 
19,635

 
43,334

 
(54.7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to noncontrolling interests
1,278

 
2,575

 
384

 
(50.4
)
 
232.8

 
4,602

 
4,532

 
1.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to Piper Jaffray Companies (a)
$
10,658

 
$
1,938

 
$
4,831

 
449.9
 %
 
120.6
 %
 
$
15,033

 
$
38,802

 
(61.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to Piper Jaffray Companies’ common shareholders (a)
$
8,582

 
$
1,577

 
$
4,448

 
444.2
 %
 
92.9
 %
 
$
12,476

 
$
35,908

 
(65.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.70

 
$
0.12

 
$
0.32

 
483.3
 %
 
118.8
 %
 
$
0.98

 
$
2.46

 
(60.2
)%
Diluted
$
0.70

 
$
0.12

 
$
0.32

 
483.3
 %
 
118.8
 %
 
$
0.97

 
$
2.46

 
(60.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
12,282

 
12,927

 
13,938

 
(5.0
)%
 
(11.9
)%
 
12,787

 
14,568

 
(12.2
)%
Diluted
12,298

 
12,942

 
13,952

 
(5.0
)%
 
(11.9
)%
 
12,801

 
14,594

 
(12.3
)%
N/M — Not meaningful
(a)
Net income applicable to Piper Jaffray Companies is the total net income earned by the Company. Piper Jaffray Companies calculates earnings per common share using the two-class method, which requires the allocation of consolidated net income between common shareholders and participating security holders, which in the case of Piper Jaffray Companies, represents unvested restricted stock with dividend rights.



9


Piper Jaffray Companies
Preliminary Segment Data (U.S. GAAP – Unaudited)
 
Three Months Ended
 
Percent Inc/(Dec)
 
Nine Months Ended
 
 
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
 
Sept. 30,
 
Sept. 30,
 
Percent
(Dollars in thousands)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
 
2016
 
2015
 
Inc/(Dec)
Capital Markets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment banking
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
30,479

 
$
16,786

 
$
24,290

 
81.6
 %
 
25.5
 %
 
$
53,831

 
$
94,621

 
(43.1
)%
Debt
30,898

 
33,325

 
20,446

 
(7.3
)
 
51.1

 
80,195

 
69,082

 
16.1

Advisory services
75,230

 
48,112

 
47,135

 
56.4

 
59.6

 
204,971

 
121,653

 
68.5

Total investment banking
136,607

 
98,223

 
91,871

 
39.1

 
48.7

 
338,997

 
285,356

 
18.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institutional sales and trading
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
20,492

 
22,612

 
20,026

 
(9.4
)
 
2.3

 
62,773

 
59,338

 
5.8

Fixed income
25,812

 
28,952

 
18,259

 
(10.8
)
 
41.4

 
71,818

 
59,958

 
19.8

Total institutional sales and trading
46,304

 
51,564

 
38,285

 
(10.2
)
 
20.9

 
134,591

 
119,296

 
12.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management and performance fees
1,353

 
1,794

 
1,898

 
(24.6
)
 
(28.7
)
 
4,112

 
3,926

 
4.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment income
4,472

 
7,451

 
7,274

 
(40.0
)
 
(38.5
)
 
14,009

 
22,194

 
(36.9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term financing expenses
(2,253
)
 
(2,293
)
 
(1,668
)
 
(1.7
)
 
35.1

 
(6,838
)
 
(4,781
)
 
43.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
186,483

 
156,739

 
137,660

 
19.0

 
35.5

 
484,871

 
425,991

 
13.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
169,745

 
152,028

 
129,224

 
11.7

 
31.4

 
460,628

 
369,114

 
24.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income
$
16,738

 
$
4,711

 
$
8,436

 
255.3
 %
 
98.4
 %
 
$
24,243

 
$
56,877

 
(57.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating margin
9.0
%
 
3.0
%
 
6.1
 %
 
 
 
 
 
5.0
%
 
13.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset Management
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management and performance fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fees
$
13,903

 
$
12,801

 
$
17,053

 
8.6
 %
 
(18.5
)%
 
$
39,587

 
$
54,596

 
(27.5
)%
Performance fees

 

 

 

 

 

 
208

 
N/M

Total management and performance fees
13,903

 
12,801

 
17,053

 
8.6

 
(18.5
)
 
39,587

 
54,804

 
(27.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment income/(loss)
461

 
943

 
(5,096
)
 
(51.1
)
 
(109.0
)
 
428

 
(5,241
)
 
(108.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
14,364

 
13,744

 
11,957

 
4.5

 
20.1

 
40,015

 
49,563

 
(19.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
12,651

 
11,946

 
13,605

 
5.9

 
(7.0
)
 
35,856

 
42,501

 
(15.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income/(loss)
$
1,713

 
$
1,798

 
$
(1,648
)
 
(4.7
)%
 
(203.9
)%
 
$
4,159

 
$
7,062

 
(41.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating margin
11.9
%
 
13.1
%
 
(13.8
)%
 
 
 
 
 
10.4
%
 
14.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
$
200,847

 
$
170,483

 
$
149,617

 
17.8
 %
 
34.2
 %
 
$
524,886

 
$
475,554

 
10.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
182,396

 
163,974

 
142,829

 
11.2

 
27.7

 
496,484

 
411,615

 
20.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax operating income
$
18,451

 
$
6,509

 
$
6,788

 
183.5
 %
 
171.8
 %
 
$
28,402

 
$
63,939

 
(55.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax operating margin
9.2
%
 
3.8
%
 
4.5
 %
 
 
 
 
 
5.4
%
 
13.4
%
 
 
N/M — Not meaningful


10


Piper Jaffray Companies
Preliminary Selected Summary Financial Information (Non-GAAP – Unaudited) (1)
 
Three Months Ended
 
Percent Inc/(Dec)
 
Nine Months Ended
 
 
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
 
Sept. 30,
 
Sept. 30,
 
Percent
(Amounts in thousands, except per share data)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
 
2016
 
2015
 
Inc/(Dec)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment banking
$
136,682

 
$
97,414

 
$
91,640

 
40.3
 %
 
49.2
 %
 
$
338,034

 
$
284,786

 
18.7
 %
Institutional brokerage
42,128

 
47,776

 
34,182

 
(11.8
)
 
23.2

 
122,240

 
106,879

 
14.4

Asset management
15,256

 
14,595

 
18,951

 
4.5

 
(19.5
)
 
43,699

 
58,730

 
(25.6
)
Interest
6,811

 
7,409

 
7,885

 
(8.1
)
 
(13.6
)
 
22,582

 
25,244

 
(10.5
)
Investment income
3,373

 
5,721

 
631

 
(41.0
)
 
434.5

 
8,682

 
7,932

 
9.5

Total revenues
204,250

 
172,915

 
153,289

 
18.1

 
33.2

 
535,237

 
483,571

 
10.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
5,249

 
5,727

 
4,895

 
(8.3
)
 
7.2

 
16,841

 
15,559

 
8.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net revenues (2)
$
199,001

 
$
167,188

 
$
148,394

 
19.0
 %
 
34.1
 %
 
$
518,396

 
$
468,012

 
10.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest expenses:


 


 


 


 


 


 


 


Adjusted compensation and benefits (3)
$
127,010

 
$
107,086

 
$
95,442

 
18.6
 %
 
33.1
 %
 
$
335,226

 
$
292,698

 
14.5
 %
Ratio of adjusted compensation and benefits to adjusted net revenues
63.8
%
 
64.1
%
 
64.3
%
 
 
 
 
 
64.7
%
 
62.5
%
 
 
 
 
 
 
 
 
 


 


 
 
 
 
 


Adjusted non-compensation expenses (4)
$
38,632

 
$
38,579

 
$
42,589

 
0.1
 %
 
(9.3
)%
 
$
112,220

 
$
106,247

 
5.6
 %
Ratio of adjusted non-compensation expenses to adjusted net revenues
19.4
%
 
23.1
%
 
28.7
%
 
 
 
 
 
21.6
%
 
22.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted income before adjusted income tax expense (5)
$
33,359

 
$
21,523

 
$
10,363

 
55.0
 %
 
221.9
 %
 
$
70,950

 
$
69,067

 
2.7
 %
Adjusted operating margin (6)
16.8
%
 
12.9
%
 
7.0
%
 
 
 
 
 
13.7
%
 
14.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted income tax expense (7)
12,383

 
7,585

 
3,113

 
63.3

 
297.8

 
25,427

 
24,364

 
4.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income (8)
$
20,976

 
$
13,938

 
$
7,250

 
50.5
 %
 
189.3
 %
 
$
45,523

 
$
44,703

 
1.8
 %
Effective tax rate (9)
37.1
%
 
35.2
%
 
30.0
%
 
 
 
 
 
35.8
%
 
35.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income applicable to Piper Jaffray Companies’ common shareholders (10)
$
16,890

 
$
11,349

 
$
6,676

 
48.8
 %
 
153.0
 %
 
$
37,781

 
$
41,369

 
(8.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings per diluted common share
$
1.37

 
$
0.88

 
$
0.48

 
55.7
 %
 
185.4
 %
 
$
2.95

 
$
2.83

 
4.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
12,298

 
12,942

 
13,952

 
(5.0
)%
 
(11.9
)%
 
12,801

 
14,594

 
(12.3
)%
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."




11


Piper Jaffray Companies
Preliminary Adjusted Segment Data (Non-GAAP – Unaudited)
 
Three Months Ended
 
Percent Inc/(Dec)
 
Nine Months Ended
 
 
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
 
Sept. 30,
 
Sept. 30,
 
Percent
(Dollars in thousands)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
 
2016
 
2015
 
Inc/(Dec)
Capital Markets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment banking
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
30,479

 
$
16,786

 
$
24,290

 
81.6
 %
 
25.5
 %
 
$
53,831

 
$
94,621

 
(43.1
)%
Debt
30,898

 
33,325

 
20,446

 
(7.3
)
 
51.1

 
80,195

 
69,082

 
16.1

Advisory services
75,230

 
48,112

 
47,135

 
56.4

 
59.6

 
204,971

 
121,653

 
68.5

Total investment banking
136,607

 
98,223

 
91,871

 
39.1

 
48.7

 
338,997

 
285,356

 
18.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institutional sales and trading
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
20,492

 
22,612

 
20,026

 
(9.4
)
 
2.3

 
62,773

 
59,338

 
5.8

Fixed income
25,399

 
28,212

 
18,259

 
(10.0
)
 
39.1

 
70,665

 
59,958

 
17.9

Total institutional sales and trading
45,891

 
50,824

 
38,285

 
(9.7
)
 
19.9

 
133,438

 
119,296

 
11.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management and performance fees
1,353

 
1,794

 
1,898

 
(24.6
)
 
(28.7
)
 
4,112

 
3,926

 
4.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment income
3,039

 
4,896

 
6,051

 
(37.9
)
 
(49.8
)
 
8,672

 
14,652

 
(40.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term financing expenses
(2,253
)
 
(2,293
)
 
(1,668
)
 
(1.7
)
 
35.1

 
(6,838
)
 
(4,781
)
 
43.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net revenues (2)
184,637

 
153,444

 
136,437

 
20.3

 
35.3

 
478,381

 
418,449

 
14.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating expenses (12)
154,378

 
135,106

 
125,936

 
14.3

 
22.6

 
415,760

 
361,188

 
15.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment pre-tax operating income (5)
$
30,259

 
$
18,338

 
$
10,501

 
65.0
 %
 
188.2
 %
 
$
62,621

 
$
57,261

 
9.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment pre-tax operating margin (6)
16.4
%
 
12.0
%
 
7.7
 %
 
 
 
 
 
13.1
%
 
13.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continued on next page


12


 
Three Months Ended
 
Percent Inc/(Dec)
 
Nine Months Ended
 
 
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
3Q '16
 
3Q '16
 
Sept. 30,
 
Sept. 30,
 
Percent
(Dollars in thousands)
2016
 
2016
 
2015
 
vs. 2Q '16
 
vs. 3Q '15
 
2016
 
2015
 
Inc/(Dec)
Asset Management
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management and performance fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fees
$
13,903

 
$
12,801

 
$
17,053

 
8.6
 %
 
(18.5
)%
 
$
39,587

 
$
54,596

 
(27.5
)%
Performance fees

 

 

 

 

 

 
208

 
N/M

Total management and performance fees
13,903

 
12,801

 
17,053

 
8.6

 
(18.5
)
 
39,587

 
54,804

 
(27.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment income/(loss)
461

 
943

 
(5,096
)
 
(51.1
)
 
(109.0
)
 
428

 
(5,241
)
 
(108.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
14,364

 
13,744

 
11,957

 
4.5

 
20.1

 
40,015

 
49,563

 
(19.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating expenses (13)
11,264

 
10,559

 
12,095

 
6.7

 
(6.9
)
 
31,686

 
37,757

 
(16.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment pre-tax operating income/(loss) (13)
$
3,100

 
$
3,185

 
$
(138
)
 
(2.7
)%
 
N/M

 
$
8,329

 
$
11,806

 
(29.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment pre-tax operating margin (6)
21.6
%
 
23.2
%
 
(1.2
)%
 
 
 
 
 
20.8
%
 
23.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment pre-tax operating margin excluding investment income/(loss) *
19.0
%
 
17.5
%
 
29.1
 %
 
 
 
 
 
20.0
%
 
31.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net revenues (2)
$
199,001

 
$
167,188

 
$
148,394

 
19.0
 %
 
34.1
 %
 
$
518,396

 
$
468,012

 
10.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating expenses (12)
165,642

 
145,665

 
138,031

 
13.7

 
20.0

 
447,446

 
398,945

 
12.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted pre-tax operating income (5)
$
33,359

 
$
21,523

 
$
10,363

 
55.0
 %
 
221.9
 %
 
$
70,950

 
$
69,067

 
2.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted pre-tax operating margin (6)
16.8
%
 
12.9
%
 
7.0
 %
 
 
 
 
 
13.7
%
 
14.8
%
 
 
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."
* Management believes that presenting adjusted segment pre-tax operating margin excluding investment income/(loss) provides the most meaningful basis for comparison of the operating results for the Asset Management segment across periods.



13


Piper Jaffray Companies
Reconciliation of U.S. GAAP to Selected Summary Financial Information (1) (Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
Sept. 30,
 
Sept. 30,
(Amounts in thousands, except per share data)
2016
 
2016
 
2015
 
2016
 
2015
Consolidated
 
 
 
 
 
 
 
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Net revenues – U.S. GAAP basis
$
200,847

 
$
170,483

 
$
149,617

 
$
524,886

 
$
475,554

Adjustments:
 
 
 
 
 
 
 
 
 
Revenue related to noncontrolling interests (11)
(1,846
)
 
(3,295
)
 
(1,223
)
 
(6,490
)
 
(7,542
)
Adjusted net revenues
$
199,001

 
$
167,188

 
$
148,394

 
$
518,396

 
$
468,012

 
 
 
 
 
 
 
 
 
 
Compensation and benefits:
 
 
 
 
 
 
 
 
 
Compensation and benefits – U.S. GAAP basis
$
135,186

 
$
117,148

 
$
96,132

 
$
356,770

 
$
295,543

Adjustments:
 
 
 
 
 
 
 
 
 
Compensation from acquisition-related agreements
(8,176
)
 
(10,062
)
 
(690
)
 
(21,544
)
 
(2,845
)
Adjusted compensation and benefits
$
127,010

 
$
107,086

 
$
95,442

 
$
335,226

 
$
292,698

 
 
 
 
 
 
 
 
 
 
Non-compensation expenses:
 
 
 
 
 
 
 
 
 
Non-compensation expenses – U.S. GAAP basis
$
47,210

 
$
46,826

 
$
46,697

 
$
139,714

 
$
116,072

Adjustments:
 
 
 
 
 
 
 
 
 
Non-compensation expenses related to noncontrolling interests (11)
(568
)
 
(720
)
 
(839
)
 
(1,888
)
 
(3,010
)
Restructuring and integration costs

 
(3,433
)
 
(1,496
)
 
(10,206
)
 
(1,496
)
Amortization of intangible assets related to acquisitions
(8,010
)
 
(4,094
)
 
(1,773
)
 
(15,400
)
 
(5,319
)
Adjusted non-compensation expenses
$
38,632

 
$
38,579

 
$
42,589

 
$
112,220

 
$
106,247

 
 
 
 
 
 
 
 
 
 
Income before income tax expense:
 
 
 
 
 
 
 
 
 
Income before income tax expense – U.S. GAAP basis
$
18,451

 
$
6,509

 
$
6,788

 
$
28,402

 
$
63,939

Adjustments:
 
 
 
 
 
 
 
 
 
Revenue related to noncontrolling interests (11)
(1,846
)
 
(3,295
)
 
(1,223
)
 
(6,490
)
 
(7,542
)
Expenses related to noncontrolling interests (11)
568

 
720

 
839

 
1,888

 
3,010

Compensation from acquisition-related agreements
8,176

 
10,062

 
690

 
21,544

 
2,845

Restructuring and integration costs

 
3,433

 
1,496

 
10,206

 
1,496

Amortization of intangible assets related to acquisitions
8,010

 
4,094

 
1,773

 
15,400

 
5,319

Adjusted income before adjusted income tax expense
$
33,359

 
$
21,523

 
$
10,363

 
$
70,950

 
$
69,067

 
 
 
 
 
 
 
 
 
 
Income tax expense:
 
 
 
 
 
 
 
 
 
Income tax expense – U.S. GAAP basis
$
6,515

 
$
1,996

 
$
1,573

 
$
8,767

 
$
20,605

Tax effect of adjustments:
 
 
 
 
 
 
 
 
 
Compensation from acquisition-related agreements
2,752

 
3,439

 
268

 
7,477

 
1,107

Restructuring and integration costs

 
557

 
582

 
3,192

 
582

Amortization of intangible assets related to acquisitions
3,116

 
1,593

 
690

 
5,991

 
2,070

Adjusted income tax expense
$
12,383

 
$
7,585

 
$
3,113

 
$
25,427

 
$
24,364

 
 
 
 
 
 
 
 
 
 
Net income applicable to Piper Jaffray Companies:
 
 
 
 
 
 
 
 
 
Net income applicable to Piper Jaffray Companies – U.S. GAAP basis
$
10,658

 
$
1,938

 
$
4,831

 
$
15,033

 
$
38,802

Adjustments:
 
 
 
 
 
 
 
 
 
Compensation from acquisition-related agreements
5,424

 
6,623

 
422

 
14,067

 
1,738

Restructuring and integration costs

 
2,876

 
914

 
7,014

 
914

Amortization of intangible assets related to acquisitions
4,894

 
2,501

 
1,083

 
9,409

 
3,249

Adjusted net income
$
20,976

 
$
13,938

 
$
7,250

 
$
45,523

 
$
44,703

 
 
 
 
 
 
 
 
 
 
Continued on next page


14


 
Three Months Ended
 
Nine Months Ended
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
Sept. 30,
 
Sept. 30,
(Amounts in thousands, except per share data)
2016
 
2016
 
2015
 
2016
 
2015
Net income applicable to Piper Jaffray Companies' common shareholders:
 
 
 
 
 
 
 
 
 
Net income applicable to Piper Jaffray Companies' common stockholders – U.S. GAAP basis
$
8,582

 
$
1,577

 
$
4,448

 
$
12,476

 
$
35,908

Adjustments:
 
 
 
 
 
 
 
 
 
Compensation from acquisition-related agreements
4,367

 
5,393

 
389

 
11,675

 
1,608

Restructuring and integration costs

 
2,343

 
842

 
5,821

 
846

Amortization of intangible assets related to acquisitions
3,941

 
2,036

 
997

 
7,809

 
3,007

Adjusted net income applicable to Piper Jaffray Companies' common stockholders
$
16,890

 
$
11,349

 
$
6,676

 
$
37,781

 
$
41,369

 
 
 
 
 
 
 
 
 
 
Earnings per diluted common share:


 


 


 


 


Earnings per diluted common share – U.S. GAAP basis
$
0.70

 
$
0.12

 
$
0.32

 
$
0.97

 
$
2.46

Adjustments:
 
 
 
 
 
 
 
 
 
Compensation from acquisition-related agreements
0.36

 
0.42

 
0.03

 
0.91

 
0.11

Restructuring and integration costs

 
0.18

 
0.06

 
0.45

 
0.06

Amortization of intangible assets related to acquisitions
0.32

 
0.16

 
0.07

 
0.61

 
0.21

Adjusted earnings per diluted common share
$
1.37

 
$
0.88

 
$
0.48

 
$
2.95

 
$
2.83

 
 
 
 
 
 
 
 
 
 
Continued on next page


15


 
Three Months Ended
 
Nine Months Ended
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
Sept. 30,
 
Sept. 30,
(Amounts in thousands, except per share data)
2016
 
2016
 
2015
 
2016
 
2015
Capital Markets
 
 
 
 
 
 
 
 
 
Net revenues:
 
 
 
 
 
 
 
 
 
Net revenues – U.S. GAAP basis
$
186,483

 
$
156,739

 
$
137,660

 
$
484,871

 
$
425,991

Adjustments:
 
 
 
 
 
 
 
 
 
Revenue related to noncontrolling interests (11)
(1,846
)
 
(3,295
)
 
(1,223
)
 
(6,490
)
 
(7,542
)
Adjusted net revenues
$
184,637

 
$
153,444

 
$
136,437

 
$
478,381

 
$
418,449

 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
Operating expenses – U.S. GAAP basis
$
169,745

 
$
152,028

 
$
129,224

 
$
460,628

 
$
369,114

Adjustments:
 
 
 
 
 
 
 
 
 
Expenses related to noncontrolling interests (11)
(568
)
 
(720
)
 
(839
)
 
(1,888
)
 
(3,010
)
Compensation from acquisition-related agreements
(8,176
)
 
(10,062
)
 
(690
)
 
(21,544
)
 
(2,631
)
Restructuring and integration costs

 
(3,433
)
 
(1,496
)
 
(10,197
)
 
(1,496
)
Amortization of intangible assets related to acquisitions
(6,623
)
 
(2,707
)
 
(263
)
 
(11,239
)
 
(789
)
Adjusted operating expenses
$
154,378

 
$
135,106

 
$
125,936

 
$
415,760

 
$
361,188

 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income:
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income – U.S. GAAP basis
$
16,738

 
$
4,711

 
$
8,436

 
$
24,243

 
$
56,877

Adjustments:
 
 
 
 
 
 
 
 
 
Revenue related to noncontrolling interests (11)
(1,846
)
 
(3,295
)
 
(1,223
)
 
(6,490
)
 
(7,542
)
Expenses related to noncontrolling interests (11)
568

 
720

 
839

 
1,888

 
3,010

Compensation from acquisition-related agreements
8,176

 
10,062

 
690

 
21,544

 
2,631

Restructuring and integration costs

 
3,433

 
1,496

 
10,197

 
1,496

Amortization of intangible assets related to acquisitions
6,623

 
2,707

 
263

 
11,239

 
789

Adjusted segment pre-tax operating income
$
30,259

 
$
18,338

 
$
10,501

 
$
62,621

 
$
57,261

 
 
 
 
 
 
 
 
 
 
Asset Management
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
Operating expenses – U.S. GAAP basis
$
12,651

 
$
11,946

 
$
13,605

 
$
35,856

 
$
42,501

Adjustments:
 
 
 
 
 
 
 
 
 
Compensation from acquisition-related agreements

 

 

 

 
(214
)
Restructuring and integration costs

 

 

 
(9
)
 

Amortization of intangible assets related to acquisitions
(1,387
)
 
(1,387
)
 
(1,510
)
 
(4,161
)
 
(4,530
)
Adjusted operating expenses
$
11,264

 
$
10,559

 
$
12,095

 
$
31,686

 
$
37,757

 
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income/(loss):
 
 
 
 
 
 
 
 
 
Segment pre-tax operating income/(loss) – U.S. GAAP basis
$
1,713

 
$
1,798

 
$
(1,648
)
 
$
4,159

 
$
7,062

Adjustments:
 
 
 
 
 
 
 
 
 
Compensation from acquisition-related agreements

 

 

 

 
214

Restructuring and integration costs

 

 

 
9

 

Amortization of intangible assets related to acquisitions
1,387

 
1,387

 
1,510

 
4,161

 
4,530

Adjusted segment pre-tax operating income/(loss)
$
3,100

 
$
3,185

 
$
(138
)
 
$
8,329

 
$
11,806

 
 
 
 
 
 
 
 
 
 
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.


16


Piper Jaffray Companies
Notes to Non-GAAP Financial Schedules

(1)
Selected Summary Financial Information are non-GAAP measures. 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.
(2)
A non-GAAP measure which excludes revenues related to noncontrolling interests (see (11) below).
(3)
A non-GAAP measure which excludes compensation expense from acquisition-related agreements.
(4)
A non-GAAP measure which excludes (a) non-compensation expenses related to noncontrolling interests (see (11) below), (b) restructuring and integration costs and (c) amortization of intangible assets related to acquisitions.
(5)
A non-GAAP measure which excludes (a) revenues and expenses related to noncontrolling interests (see (11) below), (b) compensation from acquisition-related agreements, (c) restructuring and integration costs and (d) amortization of intangible assets related to acquisitions.
(6)
A non-GAAP measure which represents adjusted income before adjusted income tax expense as a percentage of adjusted net revenues.
(7)
A non-GAAP measure which excludes the income tax benefit from (a) compensation from acquisition-related agreements, (b) restructuring and integration costs and (c) amortization of intangible assets related to acquisitions.
(8)
A non-GAAP measure which represents net income earned by the Company excluding (a) compensation expense from acquisition-related agreements, (b) restructuring and integration costs, (c) amortization of intangible assets related to acquisitions and (d) the income tax expense/(benefit) allocated to the adjustments.
(9)
Effective tax rate is a non-GAAP measure which is computed based on a quotient, the numerator of which is adjusted income tax expense and the denominator of which is adjusted income before adjusted income tax expense.
(10)
Piper Jaffray Companies calculates earnings per common share using the two-class method, which requires the allocation of consolidated adjusted net income between common shareholders and participating security holders, which in the case of Piper Jaffray Companies, represents unvested stock with dividend rights.
(11)
Noncontrolling interests include revenue and expenses from consolidated alternative asset management entities that are not attributable, either directly or indirectly, to Piper Jaffray Companies.
(12)
A non-GAAP measure which excludes (a) expenses related to noncontrolling interests (see (11) above), (b) compensation from acquisition-related agreements, (c) restructuring and integration costs and (d) amortization of intangible assets related to acquisitions.
(13)
A non-GAAP measure which excludes (a) compensation from acquisition-related agreements and (b) amortization of intangible assets related to acquisitions.



17