SOURCE: Thomas Weisel Partners Group, Inc.

Thomas Weisel Partners Group, Inc.

October 28, 2009 16:15 ET

Thomas Weisel Partners Group Reports 2009 Third Quarter Results

SAN FRANCISCO, CA--(Marketwire - October 28, 2009) - Thomas Weisel Partners Group, Inc. (NASDAQ: TWPG) today released results for the three and nine months ended September 30, 2009.

The firm reported a net loss of $14.4 million, or $0.44 per share, for the third quarter of 2009 compared with a net loss of $109.2 million, or $3.41 per share, for the third quarter of 2008. For the nine months ended September 30, 2009, the firm reported a net loss of $48.5 million, or $1.49 per share, compared with a net loss of $137.1 million, or $4.22 per share, for the nine months ended September 30, 2008. The results for the three and nine months of 2008 include a non-cash goodwill impairment charge of $92.6 million or $2.89 per share and $2.84 per share, respectively.

Total net revenues decreased 11% to $43.6 million for the third quarter of 2009 versus $49.0 million for the third quarter of 2008. For the nine months ended September 30, 2009, total net revenues were $134.9 million, a decline of 15% compared with $158.0 million for the nine months ended September 30, 2008.

Adjusting for the non-cash amortization of intangible assets acquired in the purchase of Westwind Partners, the firm reported a non-GAAP net loss of $12.8 million, or $0.39 per share, for the third quarter of 2009 and a non-GAAP net loss of $43.4 million, or $1.34 per share, for the nine months ended September 30, 2009. A reconciliation of GAAP results to these non-GAAP measures is discussed below under "Non-GAAP Financial Measures."

"We are encouraged by the sequential growth in investment banking revenues and by the continued level of activity across every growth vertical in which we operate. We believe that companies with strong fundamentals, particularly those in the technology and resource sectors, will lead us out of this cycle," said Thomas W. Weisel, Chairman and CEO of Thomas Weisel Partners. "A main focus of ours has been on reducing our operating cost structure while maintaining the scale, breadth and depth of our platform in order to be an impact player as the capital markets activity returns."

Business Overview

--  Investment Banking Revenues.  Investment banking revenues were $15.6
    million in the third quarter of 2009 compared with $17.5 million in the
    third quarter of 2008 and $14.3 million in the second quarter of 2009, a
    decrease of 11% and an increase of 9%, respectively.  Total transactions
    for the third quarter of 2009 were 23 compared with 13 in the year-ago
    quarter and 28 in the second quarter of 2009.  The increase in revenues
    from the second quarter of 2009 was primarily attributable to strength in
    equity capital raising activity, particularly in Canada.
    
--  Brokerage Revenues.  Brokerage revenues were $24.3 million in the
    third quarter of 2009 compared with $33.7 million in the third quarter of
    2008 and $27.7 million in the second quarter of 2009, a 28% and 13%
    decrease, respectively.  Results in the third quarter of 2009 decreased
    from the second quarter of 2009 mainly due to a decrease in U.S. equity
    commissions, which were impacted by lower market volumes, coupled with a
    decline in revenues from Electronic and Block Trading.
    
--  Asset Management Revenues.  Asset management revenues were $3.9
    million in the third quarter of 2009 compared with net losses of $2.3
    million in the third quarter of 2008 and revenues of $6.4 million in the
    second quarter of 2009.  Asset management revenues consisted of management
    fees of $3.8 million, net realized and unrealized gains in warrants and
    other securities of $0.2 million and net realized and unrealized private
    equity losses of $65 thousand.  Assets under management were $1.4 billion
    as of September 30, 2009.
    
--  Compensation and Benefits Expenses.  Compensation and benefits
    expenses were $27.3 million in the third quarter of 2009 compared with
    $36.9 million in the third quarter of 2008 and $30.1 million in the second
    quarter of 2009, a 26% and 9% decrease, respectively.
    
    The non-GAAP compensation ratio, which is defined in note (1) below,
    decreased to 63% in the third quarter of 2009 compared with the non-
    GAAP ratio of 68% in the year-ago period and increased slightly from
    the second quarter of 2009.  A reconciliation of GAAP results to these
    non-GAAP measures is discussed below under "Non-GAAP Financial
    Measures."
    
--  Non-compensation Expenses.  Non-compensation expenses were $30.3
    million in the third quarter of 2009, which included a non-cash facilities
    charge of $2.6 million or $0.08 per share as result of further downsizing
    the firm's real estate footprint in San Francisco.  This compares with non-
    compensation expenses of $39.1 million in the third quarter of 2008,
    excluding the goodwill impairment charge, and $29.1 million in the second
    quarter of 2009.  Excluding the facilities charge, non-compensation
    expenses would have totaled $27.7 million, a decrease of 29% from the year-
    ago quarter, excluding the goodwill impairment, and a decrease of 5% from
    the second quarter of 2009.
    
--  Provision for Taxes.  The firm recorded a tax expense of $0.3 million
    or a negative 2.4% effective tax rate in the third quarter of 2009.  As of
    December 31, 2008, the firm recorded a full valuation allowance on its U.S.
    and U.K. deferred tax assets and, therefore, did not recognize a tax
    benefit on its net loss in these tax jurisdictions.   The third quarter tax
    expense related entirely to taxable income attributable to the firm's
    Canadian operations.
    
--  Capital.  As of September 30, 2009, the firm's cash and cash
    equivalents were $66.3 million, shareholders' equity and book value per
    share were $140.3 million and $4.43, respectively, and tangible
    shareholders' equity and tangible book value per share were $122.9 million
    and $3.88, respectively.
    
    The firm is planning to file a universal shelf registration statement
    on Form S-3 with the Securities and Exchange Commission to register up
    to $100 million in securities.  The firm has no immediate plans to
    raise capital under the shelf registration statement.  The shelf
    registration statement will provide the firm with the flexibility to
    raise capital or to take advantage of growth opportunities as they
    occur.
    
    It is the firm's intention to file the shelf registration statement as
    soon as practicable, but there can be no assurance that the firm will
    actually make such a filing or that the SEC will declare the
    registration statement effective.  The firm's intention to file a shelf
    registration statement is a forward-looking statement as defined by the
    "safe harbor" provisions of the Private Securities Litigation Reform
    Act of 1995.  A number of factors may occur that would cause actual
    results to differ materially from the forward-looking statements
    contained herein.  The statements above shall not constitute an offer
    to sell or the solicitation of an offer to buy any securities.
    
--  New Board Member.  The firm was pleased to announce that Robert E.
    Grady joined the Board of Directors in September 2009.  Mr. Grady's venture
    capital experience developed at both Carlyle and as Chairman of the
    National Venture Capital Association, as well as his extensive capital
    markets and M&A expertise, will be important as the firm continues to
    refine its strategy for future growth.  With Mr. Grady's addition, the
    firm's Board of Directors increased to eight members, including seven
    independent directors.
    
    Additionally, the firm established the position of Lead Director to the
    Board, appointing Matthew R. Barger in this capacity.  Mr. Barger is
    currently a Senior Advisor to Hellman & Friedman, a private equity
    firm, where he spent more than 20 years holding positions including
    Chairman of the Investment Committee and Managing General Partner.  Mr.
    Barger is a Director of a number of investment advisory firms,
    including Hall Capital Partners.
    
--  Strategic New Hires.  Over the course of the third quarter, Matthew
    Allard joined the firm as a Managing Director in Investment Banking focused
    on financial sponsors, Hank Lammens joined the firm as a Managing Director
    in Trading and Kevin Travis joined the firm as a Director in Trading
    focused on the middle markets.
    
    The firm is also pleased to announce that Abi Subramanian will join the
    firm as a Managing Director in Capital Markets focused on private
    capital.  Mr. Subramanian brings detailed industry knowledge in all
    aspects of the emerging growth economy with respect to private
    placements for leading private and public companies.  Mr. Subramanian
    was previously a senior banker at Jefferies and Cowen and brings deep
    client relationships across venture capital, private equity and
    corporate clients developed over 15 years of investment banking
    experience.
    

THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
        (Dollar amounts in thousands, except book value per share)
                                (Unaudited)





                           Three Months Ended         Nine Months Ended
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------

Revenue Detail:
  Investment banking
    Capital raising     $    10,429  $     3,962  $    27,162  $    25,204
    Strategic advisory        5,139       13,569       13,700       26,762
                        -----------  -----------  -----------  -----------
      Total investment
       banking               15,568       17,531       40,862       51,966
  Brokerage                  24,256       33,652       81,455      104,646
  Asset management
    Management fees           3,778        3,754       10,701       10,883
    Private equity
     realized and
     unrealized gains and
     (losses) - net             (65)      (2,375)      (1,762)      (4,133)
    Other securities
     realized and
     unrealized gains and
     (losses) - net             219       (3,708)       4,163       (6,865)
                        -----------  -----------  -----------  -----------
      Total asset
       management             3,932       (2,329)      13,102         (115)
  Interest income                198        1,828          743        6,701
                        -----------  -----------  -----------  -----------
        Total revenues       43,954       50,682      136,162      163,198
                        -----------  -----------  -----------  -----------
  Interest expense             (400)      (1,636)      (1,223)      (5,214)
                        -----------  -----------  -----------  -----------
        Net revenues    $    43,554  $    49,046  $   134,939  $   157,984
                        ===========  ===========  ===========  ===========

Investment Banking
 Transactions:
   Capital raising               17            8           50           53
   Strategic advisory             6            5           16           15
                        -----------  -----------  -----------  -----------
     Total transactions          23           13           66           68
                        -----------  -----------  -----------  -----------
   Average revenue per
    transaction         $       677  $     1,349  $       618  $       764

Other Metrics:
  Non-GAAP compensation
   ratio(1)                    62.6%        68.5%        64.3%
  Non-compensation
   ratio(2)                    69.6%                     70.3%
  Assets under
   management           $ 1,360,175  $ 1,392,211  $ 1,360,175  $ 1,392,211
  Shareholders' equity  $   140,293  $   237,048  $   140,293  $   237,048
  Less: Other intangible
   assets                   (17,402)     (31,167)     (17,402)     (31,167)
                        -----------  -----------  -----------  -----------
  Tangible shareholders'
   equity               $   122,891  $   205,881  $   122,891  $   205,881
                        ===========  ===========  ===========  ===========
  Common shares
   outstanding(3)            31,695       30,806       31,695       30,806
  Book value per share  $      4.43  $      7.69  $      4.43  $      7.69
  Tangible book value
   per share            $      3.88  $      6.68  $      3.88  $      6.68

(1) The firm's non-GAAP compensation ratio is the ratio of the firm's
compensation and benefits expenses (excluding expenses associated with
the initial grant of restricted stock units) to net revenues (excluding
investment gains and losses attributable to investments in private equity).
Without excluding these amounts, the firm's ratio of compensation and
benefits expenses to net revenues is 62.7% and 75.2% for the three months
ended September 30, 2009 and 2008, respectively, and 65.3% and 75.4% for
the nine months ended September 30, 2009 and 2008, respectively.

(2) The firm's non-compensation ratio is the ratio of total expenses
(other than compensation and benefits expense) to net revenues.

(3) Includes 6,260,618 exchangeable shares issued by TWP Acquisition
Company (Canada), Inc., the firm's wholly-owned subsidiary. Each
exchangeable share is exchangeable at any time into a share of common
stock of the firm, entitles the holder to dividend and other rights
substantially economically equivalent to those of a share of common
stock, and, through a voting trust, entitles the holder to a vote along
with shares of common stock on matters presented to shareholders of the
firm.


Non-GAAP Financial Measures

The firm has reported in this press release its net loss and basic and diluted loss per share for the three months ended September 30, 2009 on a non-GAAP basis by:

--  using a net loss of $12.8 million as the numerator of its non-GAAP
    basic and diluted loss per share calculations, which amount is calculated
    by adjusting its GAAP net loss of $14.4 million to exclude the after-tax
    non-cash expense associated with the amortization of intangible assets
    acquired as a result of its acquisition of Westwind Partners of $1.6
    million; and
    
--  using as the denominator of its non-GAAP basic and diluted loss per
    share calculations the basic and diluted weighted average shares used,
    respectively, as the denominator of its GAAP basic and diluted loss per
    share calculations.
    

The firm has reported in this press release its net loss and basic and diluted loss per share for the nine months ended September 30, 2009 on a non-GAAP basis by:

--  using a net loss of $43.4 million as the numerator of its non-GAAP
    basic and diluted loss per share calculations, which amount is calculated
    by adjusting its GAAP net loss of $48.5 million to exclude (i) the after-
    tax non-cash expense associated with its initial grant of restricted stock
    units of $0.1 million and (ii) the after-tax non-cash expense associated
    with the amortization of intangible assets acquired as a result of its
    acquisition of Westwind Partners of $5.0 million; and
    
--  using as the denominator of its non-GAAP basic and diluted loss per
    share calculations the basic and diluted weighted average shares used,
    respectively, as the denominator of its GAAP basic and diluted loss per
    share calculations.
    

A reconciliation of the firm's GAAP net loss to its non-GAAP net loss for the three and nine months ended September 30, 2009 is set forth below (in millions):


                                  Three Months Ended    Nine Months Ended
                                  September 30, 2009   September 30, 2009
                                  -------------------  -------------------
                                               (in millions)
Net loss                          $             (14.4) $             (48.5)
Exclusion of the after-tax
 non-cash expense associated with
 the initial grant of restricted
 stock units                                        -                  0.1
Exclusion of the after-tax
 non-cash expense associated with
 the amortization of intangible
 assets acquired as a result of
 the firm's acquisition of
 Westwind Partners                                1.6                  5.0
                                  -------------------  -------------------
Non-GAAP net loss                 $             (12.8) $             (43.4)
                                  ===================  ===================

Basic net loss and diluted net loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. The following table sets forth the firm's GAAP basic and diluted weighted average shares outstanding and its GAAP basic and diluted net loss per share for the three and nine months ended September 30, 2009, as well as the non-GAAP net loss per share after applying the adjustments described above:


                                  Three Months Ended    Nine Months Ended
                                  September 30, 2009   September 30, 2009
                                  -------------------  -------------------
Weighted average shares used in
 computation of net loss per
 share:
   Basic (in thousands)                        32,703               32,464
   Diluted (in thousands)                      32,703               32,464

Net loss per share:
   Basic                          $             (0.44) $             (1.49)
   Diluted                        $             (0.44) $             (1.49)

Non-GAAP net loss per share:
   Basic                          $             (0.39) $             (1.34)
   Diluted                        $             (0.39) $             (1.34)

The firm's non-GAAP compensation ratio is the ratio of the firm's compensation and benefits expenses (excluding expenses relating to the initial grant of restricted stock units) to net revenues (excluding investment gains and losses attributable to investments in private equity). Without excluding these amounts, the firm's ratio of compensation and benefits expenses to net revenues is 62.7% and 75.2% for the three months ended September 30, 2009 and 2008, respectively, and 65.3% and 75.4% for the nine months ended September 30, 2009 and 2008, respectively.


                                  Three Months Ended    Nine Months Ended
                                  September 30, 2009   September 30, 2009
                                  -------------------- --------------------
                                                (in millions)

Compensation and benefits
 expenses                         $               27.3 $               88.1
Exclusion of the pre-tax non-cash
 expense associated with the
 initial grant of restricted
 stock units                                         -                  0.2
                                  -------------------- --------------------
Non-GAAP compensation and
 benefits expense                 $               27.3 $               87.9
                                  ==================== ====================

Net revenues                      $               43.6 $              134.9
Exclusion of investment (gains)
 losses in private equity                          0.0                  1.8
                                  -------------------- --------------------
Non-GAAP net revenues             $               43.6 $              136.7
                                  ==================== ====================

The firm's non-compensation expenses are calculated by adjusting its total expenses excluding interest minus compensation and benefits expenses.


                                  Three Months Ended    Nine Months Ended
                                  September 30, 2009   September 30, 2009
                                  -------------------- --------------------
                                               (in millions)
Total expenses excluding interest $               57.6 $              182.9
Less compensation and benefits
 expenses                                         27.3                 88.1
                                  -------------------- --------------------
Non-compensation expenses         $               30.3 $               94.8
                                  ==================== ====================

The firm views its grant of restricted stock units in connection with its initial public offering and the expense associated with the amortization of intangible assets acquired as a result of its acquisition of Westwind Partners as non-cash events. Additionally, the firm views the exclusion of its grant of restricted stock units from compensation and benefits expense as a non-GAAP compensation and benefits expense and the exclusion of investment gains and losses in its private equity portfolios from net revenues as non-GAAP net revenues for calculating the firm's non-GAAP compensation ratio. The firm's management has utilized non-GAAP calculations of its compensation ratio, net revenues and net loss and non-GAAP calculations of basic and diluted loss per share that are adjusted in the manner described above as an additional device to aid in understanding and analyzing the firm's financial results in the three and nine months ended September 30, 2009. The firm's management believes that these non-GAAP measures will allow for a better evaluation of the operating performance of its business and facilitate meaningful comparison of its results in the current period to those in prior periods and future periods. The firm's reference to these measures should not, however, be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the firm's current financial performance and its prospects for the future. Specifically, the firm's management believes that the non-GAAP measures provide useful information to both management and investors by excluding certain items that may not be indicative of the firm's core operating results and business outlook.

A limitation of utilizing these non-GAAP measures is that the GAAP accounting effects of these events do in fact reflect the underlying financial results of the firm's business, and these effects should not be ignored in evaluating and analyzing the firm's financial results. Therefore, management believes that both the firm's GAAP measures and these non-GAAP measures of the firm's financial performance should be considered together.

Quarterly Earnings Conference Call

Thomas Weisel Partners will host its third quarter conference call on Wednesday, October 28, 2009 at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). The conference call may include forward-looking statements, including guidance as to future results. All interested parties are invited to listen to Thomas Weisel Partners' Chairman and Chief Executive Officer, Thomas W. Weisel; President and Chief Operating Officer, Lionel F. Conacher; and Chief Financial Officer, Ryan Stroub, by dialing (866) 746-9599 (domestic) or (702) 696-4728 (international). The confirmation code for both the domestic and international lines is: 36120830.

A live audio webcast of the call, as well as the company's results, will be available through the Investor Relations/Webcasts section of the company's website, www.tweisel.com, which can also be accessed directly at: http://www.tweisel.com/AboutUs/InvestorRelations/Webcasts. To listen to the live audio webcast of the call, please go to the website at least 15 minutes early to register, download and install any necessary audio software.

For those who cannot listen to the live broadcast, a replay of the conference call will be available through the above-referenced website beginning one hour following the completion of the call through November 13, 2009.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, which are subject to risks, uncertainties and assumptions about us. In some cases, you can identify these statements by forward-looking words such as "may", "might", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "optimistic", "potential", "future" or "continue", the negative of these terms and other comparable terminology. These statements are only predictions based on our current expectations about future events. There are important factors that could cause actual results, level of activity, performance or achievements or other events or circumstances to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to, the state of the financial markets and the economy, particularly as they relate to the growth sectors that the firm is focused on, Thomas Weisel Partners' ability to implement its strategic initiatives and achieve the expected benefits of the acquisition of Westwind Partners, retain its professionals, as well as other competitive, economic, political, and market conditions and fluctuations, government and industry regulation, risks relating to the acquisition of Westwind Partners, including the effect of the completion of the transaction on the companies' business relationships, operating results and business generally and other factors. Some of the other factors are those that are discussed in Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2008 and in our Quarterly Reports on Form 10-Q filed with the SEC thereafter. We do not assume responsibility for the accuracy or completeness of any forward-looking statement and you should not rely on forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements to conform them to actual results or revised expectations.

About Thomas Weisel Partners Group, Inc.

Thomas Weisel Partners Group, Inc. is an investment bank, founded in 1998, focused principally on the growth sectors of the economy. Thomas Weisel Partners generates revenues from three principal sources: investment banking, brokerage and asset management. The investment banking group is comprised of two disciplines: corporate finance and strategic advisory. The brokerage group provides equity and convertible debt securities sales and trading services to institutional investors, and offers brokerage, advisory and cash management services to high-net-worth individuals and corporate clients. The asset management group consists of: private equity, public equity and distribution management. Thomas Weisel Partners is headquartered in San Francisco with additional offices in Baltimore, Boston, Calgary, Chicago, Denver, New York, Portland, Toronto, London and Zurich. For more information, please visit www.tweisel.com.

            THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share data)
                                (Unaudited)




                              Three Months Ended      Nine Months Ended
                                September 30,           September 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------

Revenues:
  Investment banking        $   15,568  $   17,531  $   40,862  $   51,966
  Brokerage                     24,256      33,652      81,455     104,646
  Asset management               3,932      (2,329)     13,102        (115)
  Interest income                  198       1,828         743       6,701
                            ----------  ----------  ----------  ----------
    Total revenues              43,954      50,682     136,162     163,198
  Interest expense                (400)     (1,636)     (1,223)     (5,214)
                            ----------  ----------  ----------  ----------
    Net revenues                43,554      49,046     134,939     157,984
                            ----------  ----------  ----------  ----------

Expenses excluding
 interest:
  Compensation and benefits     27,312      36,869      88,051     119,046
  Brokerage execution,
   clearance and account
   administration                6,123       7,461      19,027      20,333
  Communications and data
   processing                    4,171       5,502      13,226      17,101
  Depreciation and
   amortization of property
   and equipment                 1,835       1,901       6,364       5,721
  Amortization of other
   intangible assets             2,664       3,833       8,530      11,564
  Goodwill impairment                -      92,597           -      92,597
  Marketing and promotion        2,083       3,329       5,387      11,151
  Occupancy and equipment        7,206       7,588      15,874      18,249
  Other expenses                 6,215       9,445      26,464      25,039
                            ----------  ----------  ----------  ----------
    Total expenses
     excluding interest         57,609     168,525     182,923     320,801
                            ----------  ----------  ----------  ----------
Loss before taxes              (14,055)   (119,479)    (47,984)   (162,817)
Provision for taxes (tax
 benefit)                          336     (10,300)        470     (25,706)
Net loss                    $  (14,391) $ (109,179) $  (48,454) $ (137,111)
                            ==========  ==========  ==========  ==========

Net loss per share:
   Basic net loss per share $    (0.44) $    (3.41) $    (1.49) $    (4.22)
   Diluted net loss per
    share                   $    (0.44) $    (3.41) $    (1.49) $    (4.22)

Weighted average shares
 used in computation of per
 share data:
   Basic weighted average
    shares outstanding          32,703      31,992      32,464      32,498
   Diluted weighted average
    shares outstanding          32,703      31,992      32,464      32,498