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Rodman Reports First Quarter 2011 Financial Results

^{Published on 2011-05-03 18:20:21 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Rodman & Renshaw Capital Group, Inc. (NASDAQ: RODM) today announced financial results for the first quarter ended March 31, 2011.

Edward Rubin, Rodman & Renshawa™s CEO said, aOverall we are pleased with the progress we have made during the first quarter. We completed the strategic acquisition of Hudson Holding Corporation, broadening our scope of products and services and solidifying our position as a full service investment bank. At the same time, we saw significant revenue contribution from the sectors we have expanded into, including oil and gas, further evidencing the diversification of our business platform.a

aDuring the first quarter of 2011, we completed 33 deals raising $1.1 billion, of which approximately $750 million was in the oil and gas space, including a $144 million sole managed follow-on public offering for Hyperdynamics Corporation. Our pipeline remains solid including 10 prospective public offerings that our capital markets group has in registration. Despite a difficult market environment, we continue to advance Rodman as the go-to investment bank for growth companies. 2011 will be driven by our ability to monetize our current pipeline in spite of these challenging conditions,a concluded Mr. Rubin.

First Quarter 2011 Highlights:

• Investment banking revenue of $27.5 million, compared to $29.3 million and $22.1 million in the first quarter of 2010 and the fourth quarter of 2010, respectively.
• Revenue, excluding principal transactions, of $29.7 million, compared to $30.5 million and $23.5 million in the first quarter of 2010 and the fourth quarter of 2010, respectively.
• Net loss of $0.2 million, or $0.01 per diluted share.
• Non-GAAP net operating income of $1.6 million, or $0.05 per diluted share, and an 8% non-GAAP pre-tax operating margin. For the fourth quarter of 2010, the Company reported non-GAAP operating net gain of $2.0 million, or $0.05 per diluted share. A reconciliation between GAAP results and non-U.S. GAAP measures is contained in the tables that accompany this release, under aNon-U.S. GAAP Financial Measuresa.
• 33 financing transactions were completed raising $1.1 billion in the first quarter of 2011, compared to 36 financing transactions raising $0.9 billion in the first quarter of 2010 and 41 financing transactions raising $1.4 billion in the fourth quarter of 2010.
• The Company was once again ranked the number one investment bank in PIPE and Registered Direct transactions by deal volume for the quarter.¹

The Company will hold a conference call this morning, May 3, 2011, at 10:00 AM Eastern Time to discuss these results (see aConference Call Informationa below).

Hudson Holding Corporation Merger

On April 8, 2011, the Company completed its previously announced acquisition of Hudson Holding Corporation (aHudsona). The transaction was valued at approximately $5.3 million, based upon a $2.06 valuation per share of the Companya™s common stock.

BUSINESS HIGHLIGHTS

Investment Banking

Investment banking revenue was $27.5 million for the first quarter of 2011, which included $4.3 million related to warrants received as compensation for activities as underwriter or placement agent valued using Black-Scholes, compared to $29.3 million in investment banking revenue, which included $6.1 million related to warrants received, for the first quarter of 2010 and $22.1 million in investment banking revenue, which included $3.4 million related to warrants received, for the fourth quarter of 2010. Private placement and underwriting revenue for the first quarter of 2011 was $25.7 million, compared to $21.0 million for the fourth quarter of 2010. Strategic advisory fees for the first quarter of 2011 were $1.8 million, compared to $1.1 million for the fourth quarter of 2010.

Merchant Banking

Merchant banking revenue, consisting ofgains (or losses) on investments by the Companya™s Aceras BioMedical joint venture and other principal investments activity, was $0.6 million. The values at which the Companya™s investments are carried on its books are adjusted to estimated fair value at the end of each quarter.

Sales & Trading

• Commissions for the first quarter were $1.2 million, compared to $1.0 million for the first quarter of 2010 and $1.2 million for the fourth quarter of 2010.
• Principal transactions revenue (which predominantly represents changes in the value of the Companya™s warrant portfolio) for the first quarter was a $2.3 million loss, compared to a $2.8 million loss for the first quarter of 2010 and a $1.4 million loss for the fourth quarter of 2010. Since the fluctuation in value is outside of the Companya™s control, it excludes such revenue or loss when recording income on a non-GAAP basis.

Operating Expenses

Compensation Expense

• Employee compensation and benefits expense for the first quarter of 2011 was $17.9 million, compared to $13.5 million for the first quarter of 2010 and $14.1 million for the fourth quarter of 2010.
• Employee compensation and benefits expense represented 60% of transaction related revenue (revenue excluding principal transaction loss) for the first quarter of 2011, respectively, compared to 44% for the first quarter of 2010. Employee compensation and benefits expense for the first quarter of 2010 was impacted by the reversals of stock-based compensation related to several large RSU forfeitures.
• The Company had 123 full-time employees at March 31, 2011, compared to 131 full-time employees at December 31, 2010. Approximately 75% of the Companya™s employees at March 31, 2011 were client facing employees.

Non-Compensation Expense

Non-compensation expense for the first quarter was $9.8 million, compared to $9.9 million for the first quarter of 2010 and $6.4 million for the fourth quarter of 2010. The first quarter of 2011 includes Hudson acquisition related costs of $0.4 million.

Capital

Liquid assets were $26.0 million at March 31, 2011, consisting of cash and cash equivalents, aLevel Ia assets less aLevel Ia liabilities and current receivables, compared to $30.7 million at December 31, 2010. The decrease in liquid assets primarily relates to 2010 year-end bonus payments and the cost of treasury stock purchases partially offset by cash inflows from operations. Adjusted book value per common share at March 31, 2011 was $1.29. Adjusted book value per common share is based on common shares outstanding including unvested and vested restricted stock and restricted stock units.

Conference Call Information

In conjunction with the earnings release, Rodman & Renshaw will hold a conference call on May 3, 2011 at 10:00 AM Eastern Time, hosted by Mr. Edward Rubin, Chief Executive Officer and Mr. David Horin, Chief Financial Officer. Investors and analysts can participate in the conference call by dialing 1-877-407-9205 (United States) or 1-201-689-8054 (International).

The conference will be replayed in its entirety beginning at approximately 2:00 PM Eastern Time on May 3, 2011, through to 11:59 PM Eastern Time on May 10, 2011. To access the replay of this conference call, please dial 1-877-660-6853 (United States) or 1-201-612-7415 (International) and use Account #286, Conference # 371853.

The conference call will also be simultaneously broadcast live over the Internet, as well as for replay, and can be accessed through the webcasts and presentations tab of the investor relations section of the Rodman & Renshaw Capital Group, Inc. website located at [ www.rodm.com ]. Please allow for some time following the completion of the conference call to access the archive of the Webcast. Allow for time prior to the conference call Webcast to visit the web site and download the streaming media software required to listen to the Internet broadcast.

AboutRodman & Renshaw Capital Group, Inc.

Rodman & Renshaw Capital Group, Inc. (NASDAQ: RODM) is a holding company with a number of direct and indirect subsidiaries, including Rodman & Renshaw, LLC and Hudson Securities, Inc.

Rodman & Renshaw, LLC is a full-service investment bank dedicated to providing corporate finance, strategic advisory and related services to public and private companies across multiple sectors and regions. The company also provides research and sales and trading services to institutional investors. Rodman is the leader in the PIPE (private investment in public equity) and RD (registered direct offering) transaction markets. According to Sagient Research Systems, Rodman has been ranked the #1 Placement Agent by deal volume of PIPE and RD financing transactions completed every year since 2005.

For more information visit Rodman & Renshaw on the Internet at [ www.rodm.com ].

MEMBER FINRA, SIPC

Cautionary Note Regarding Forward Looking Statements

This press release contains forward-looking statements regarding future events and financial performance. In some cases, you can identify these statements by words such as amay,a amight,a awill,a ashould,a aexcept,a aplan,a aintend,a aanticipate,a abelieve,a aestimate,a apredict,a apotential,a or acontinue,a the negative of these terms and other comparable terminology. These statements involve a number of risks and uncertainties and are based on numerous assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Companya™s control. There are or may be important factors that could cause our actual results to materially differ from our historical results or from any future results expressed or implied by such forward looking statements.

These factors include, but are not limited to, those discussed under the section entitled aRisk Factorsa in our Annual Report on Form 10-K, filed March 15, 2011, which is available at the U.S. Securities and Exchange Commission website at [ www.sec.gov ]. The forward-looking statements in this press release are based upon management's reasonable belief as of the date hereof. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

¹ Source: Sagient Research Systems, a leading publisher of independent research for the financial services and institutional investment communities.

The table below reconciles weighted average number of common shares outstanding, basic and diluted, for the three months ended March 31, 2011 and 2010 (weighted average shares in thousands):

Non-U.S. GAAP Financial Measures

The Company has utilized the non-GAAP information set forth below as an additional device to aid in understanding and analyzing its financial results for the three months ended March 31, 2011, December 31, 2010, and March 31, 2010. Management believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the Companya™s business and facilitate meaningful comparison of the results in the current period to those in prior and future periods. Reference to these non-GAAP measures should not be considered a substitute for results that are presented in a manner consistent with GAAP.

A limitation of utilizing these non-GAAP measures is that GAAP accounting does in fact reflect the underlying financial results of the Companya™s business. Therefore, management believes that the GAAP measures as well as the corresponding non-GAAP measures of the Companya™s financial performance should be considered together.

A reconciliation of the Companya™s GAAP net income (loss) for the first quarter of 2011, the fourth quarter of 2010, and the first quarter of 2010 its non-GAAP net operating income (loss) for the first quarter of 2011, the fourth quarter of 2010, and the first quarter of 2010 is set forth below (in millions of dollars):

Basic and diluted income (loss) per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period.

The following table sets forth the Companya™s GAAP basic and diluted weighted average shares outstanding and its GAAP basic and diluted income (loss) per share for the first quarter of 2011, the fourth quarter of 2010, and the first quarter of 2010 after applying the adjustments described above:

** Diluted EPS weighted average shares for the quarter ended March 31, 2011 is not the same as the diluted EPS weighted average shares on a non-GAAP basis. The amount of non-GAAP diluted EPS weighted average shares for the quarter ended March 31, 2011 is 36,449,000.

Pre-tax operating margin is calculated by dividing (a) operating income, with non-GAAP adjustments, less non-cash principal transaction revenue, net of compensation and non-controlling interest, by (b) total revenues, less non-cash principal transaction revenue and non-controlling interest.