Duff & Phelps Reports 2012 Fourth Quarter Results, and Declares Quarterly Dividend
Duff & Phelps Reports 2012 Fourth Quarter Results, and Declares Quarterly Dividend
FOURTH QUARTER HIGHLIGHTS:
Quarterly revenue of $145.1 million including reimbursable expenses (representing a $20.6 million or 16.5% increase over the corresponding prior year quarter) and $139.9 million excluding reimbursable expenses (representing a $20.9 million or 17.6% increase over the corresponding prior year quarter)
Adjusted EBITDA(1) of $27.1 million, representing a 19.3% margin and a $2.9 million or 11.9% increase over the corresponding prior year quarter
Adjusted Pro Forma Net Income(1) of $0.34 per share, compared to $0.32 per share for the corresponding prior year quarter
Declares a quarterly dividend of $0.09 per share of Class A common stock
FULL YEAR HIGHLIGHTS:
Full year revenue of $484.7 million including reimbursable expenses (representing a $87.8 million or 22.1% increase over the prior year) and $469.2 million excluding reimbursable expenses (representing a $85.2 million or 22.2% increase over the prior year)
Adjusted EBITDA(1) of $83.7 million, representing a 17.9% margin and a $19.0 million or 29.4% increase over the prior year
Adjusted Pro Forma Net Income(1) of $1.01 per share, compared to $0.82 per share for the prior year
NEW YORK--(BUSINESS WIRE)-- Duff & Phelps Corporation (NYS: DUF) , a leading independent financial advisory and investment banking firm, today announced its fourth quarter 2012 financial results and declared a quarterly dividend.
Results
For the quarter ended December 31, 2012, revenue excluding reimbursable expenses increased $20.9 million or 17.6% to $139.9 million, compared to $119.0 million for the corresponding prior year quarter. Adjusted EBITDA(1) for the quarter was $27.1 million, representing 19.3% of revenue excluding reimbursable expenses, compared to $24.2 million for the corresponding prior year quarter, representing 20.3% of revenue excluding reimbursable expenses. Net income attributable to Duff & Phelps Corporation was $6.1 million, or $0.16 per share of Class A common stock on a fully diluted basis, compared to $7.0 million, or $0.23 per share for the corresponding prior year quarter. Adjusted Pro Forma Net Income(1) was $13.4 million, or $0.34 per share on a fully exchanged, fully diluted basis, compared to $12.4 million, or $0.32 per share, for the corresponding prior year quarter.
For the year ended December 31, 2012, revenue excluding reimbursable expenses increased $85.2 million or 22.2% to $469.2 million, compared to $383.9 million for the prior year. Adjusted EBITDA(1) for the year was $83.7 million, representing 17.9% of revenue excluding reimbursable expenses, compared to $64.7 million for the prior year, representing 16.9% of revenue excluding reimbursable expenses. Net income attributable to Duff & Phelps Corporation was $22.3 million, or $0.62 per share of Class A common stock on a fully diluted basis, compared to $18.6 million, or $0.63 per share for the prior year. Adjusted Pro Forma Net Income(1) was $39.3 million, or $1.01 per share on a fully exchanged, fully diluted basis, compared to $31.7 million, or $0.82 per share, for the prior year.
"The strong fourth quarter results reflect continued momentum in several of our businesses including dispute consulting, complex asset valuations and middle market investment banking, as well as the positive impact specifically related to the anticipated tax changes resulting from the fiscal cliff discussions—such as transaction opinions provided for dividend recapitalizations," commented Noah Gottdiener, chief executive officer. "Overall, I am pleased with our 2012 results."
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(1) Adjusted EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per share are non-GAAP financial measures. See definitions and disclosures herein.
Declaration of Quarterly Dividend
The Company also announced today that its board of directors has declared a quarterly dividend of $0.09 per share on its outstanding Class A common stock. The dividend is payable on March 19, 2013 to shareholders of record on March 8, 2013.
About Duff & Phelps
As a leading global financial advisory and investment banking firm, Duff & Phelps balances analytical skills, deep market insight and independence to help clients make sound decisions. The firm provides expertise in the areas of valuation, transactions, financial restructuring, alternative assets, disputes and taxation, with more than 1,000 employees serving clients from offices in North America, Europe and Asia. Investment banking services in the United States are provided by Duff & Phelps Securities, LLC; Pagemill Partners; and GCP Securities, LLC. Member FINRA/SIPC. M&A advisory services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd. Duff & Phelps Securities Ltd. is authorized and regulated by the Financial Services Authority. For more information, visit www.duffandphelps.com. (NYS: DUF)
Earnings Call Webcast
As a result of the pending merger, the Company will not be holding an earnings conference call. Please refer to the Company's Annual Report on Form 10-K that will be filed subsequent to this press release for additional discussion of the Company's results.
Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted Pro Forma Net Income, and Adjusted Pro Forma Net Income per share are non-GAAP financial measures. We believe these measures provide a relevant and useful alternative measure of our ongoing profitability and performance. We believe the Adjusted EBITDA, Adjusted Pro Forma Net Income, and Adjusted Pro Forma Net Income per share, in addition to GAAP financial measures, provide a relevant and useful benchmark for investors, in order to assess our financial performance, ongoing operating results and comparability to other companies in our industry. These measures are utilized by our senior management to evaluate our overall performance.
We define Adjusted EBITDA as operating income before depreciation and amortization, equity-based compensation originating prior to our IPO and associated with grants of ownership units of D&P Acquisitions and stock options granted in conjunction with our IPO and other items which are generally not part of our ongoing operations, including but not limited to restructuring charges and acquisition related expenses. We define Adjusted Pro Forma Net Income as net income before equity compensation associated with grants of ownership units of D&P Acquisitions and stock options granted in conjunction with our IPO, and certain items which are generally not part of our ongoing operations, including but not limited to restructuring charges and acquisition related expenses, less pro forma corporate income tax applied at an assumed effective corporate tax rate. Adjusted Pro Forma Net Income per share consists of Adjusted Pro Forma Net Income divided by the fully dilutive weighted average number of the Company's Class A and Class B shares for the applicable period. These measures are reconciled in the tables below.
Adjusted EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Net Income per share are non-GAAP financial measures which are not prepared in accordance with, and should not be considered a substitute for or superior to measurements required by GAAP. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, these non-GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.
Reconciliation of Adjusted EBITDA | |||||||||||||||||
Quarter Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||||
Net income attributable to Duff & Phelps Corporation | $ | 6,065 | $ | 7,045 | $ | 22,264 | $ | 18,614 | |||||||||
Net income attributable to noncontrolling interest | 590 | 4,110 | 4,037 | 11,115 | |||||||||||||
Provision for income taxes | 7,630 | 5,566 | 20,022 | 13,841 | |||||||||||||
Other expense/(income), net | (292 | ) | 1,591 | 1,069 | 1,703 | ||||||||||||
Operating income | 13,993 | 18,312 | 47,392 | 45,273 | |||||||||||||
Depreciation and amortization | 5,128 | 3,230 | 18,138 | 11,164 | |||||||||||||
Equity-based compensation associated with Legacy Units and IPO Options(1) | — | (34 | ) | 22 | 207 | ||||||||||||
Acquisition retention expenses(2) | 3,029 | 1,024 | 9,536 | 1,624 | |||||||||||||
Restructuring charges(3) | (28 | ) | 95 | 1,796 | 4,090 | ||||||||||||
Acquisition, integration and corporate development costs(4) | 4,951 | 1,571 | 6,865 | 2,372 | |||||||||||||
Adjusted EBITDA | $ | 27,073 | $ | 24,198 | $ | 83,749 | $ | 64,730 | |||||||||
Reconciliation of Adjusted Pro Forma Net Income | ||||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||
Net income attributable to Duff & Phelps Corporation | $ | 6,065 | $ | 7,045 | $ | 22,264 | $ | 18,614 | ||||||||||
Net income attributable to noncontrolling interest | 590 | 4,110 | 4,037 | 11,115 | ||||||||||||||
Equity-based compensation associated with Legacy Units and IPO Options(1) | — | (34 | ) | 22 | 207 | |||||||||||||
Acquisition retention expenses(2) | 3,029 | 1,024 | 9,536 | 1,624 | ||||||||||||||
Restructuring charges(3) | (28 | ) | 95 | 1,796 | 4,090 | |||||||||||||
Acquisition, integration and corporate development costs(4) | 4,951 | 1,571 | 6,865 | 2,372 | ||||||||||||||
Loss from the write off of an investment(5) | — | 1,500 | 376 | 1,500 | ||||||||||||||
Adjustment to provision for income taxes(6) | (1,197 | ) | (2,910 | ) | (5,621 | ) | (7,824 | ) | ||||||||||
Adjusted Pro Forma Net Income, as defined | $ | 13,410 | $ | 12,401 | $ | 39,275 | $ | 31,698 | ||||||||||
Fully diluted weighted average shares of Class A common stock | 37,245 | 27,674 | 34,585 | 27,832 | ||||||||||||||
Weighted average New Class A Units outstanding | 2,002 | 10,650 | 4,466 | 10,883 | ||||||||||||||
Pro forma fully exchanged, fully diluted shares outstanding | 39,247 | 38,324 | 39,051 | 38,715 | ||||||||||||||
Adjusted Pro Forma Net Income per fully exchanged, fully diluted share outstanding | $ | 0.34 | $ | 0.32 | $ | 1.01 | $ | 0.82 | ||||||||||
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(1) | Represents elimination of equity-compensation expense from Legacy Units associated with ownership units of D&P Acquisitions ("Legacy Units") and stock options granted in conjunction with our IPO ("IPO Options"). See further detail in the Notes to the Consolidated Financial Statements. | |
(2) | Acquisition retention expenses include expense associated with equity or cash-based retention incentives to certain individuals who became employees of the Company through an acquisition. Equity-based incentives are typically subject to certain annual or cliff vesting provisions over three years contingent upon certain conditions which include employment. Cash-based incentives are generally subject to certain annual or cliff vesting provisions up to four years contingent upon certain conditions which may include employment. Cash-based retentive incentives may also include incentives paid to acquired employees upon the closing of an acquisition. These incentives may be in addition to future grants or cash bonuses awarded as a component of ongoing incentive compensation. | |
(3) | In June 2011, the Company identified opportunities for cost savings through office consolidations of underutilized space and workforce reductions of non-client service professionals. The Company incurred restructuring charges of $4,090 during the year ended December 31, 2011 related to these initiatives. In March 2012, the Company identified opportunities for cost savings through the elimination of our M&A Advisory practice in France and certain Investment Banking positions in France. The Company incurred restructuring charges of $1,796 during the year ended December 31, 2012 related to these initiatives and for changes in estimates of original assumptions. | |
(4) | Acquisition, integration and corporate development costs include fees and charges associated with acquisitions and ongoing corporate development initiatives, including costs resulting from the pending merger. These costs are primarily comprised of (i) professional fees from legal, accounting, investment banking and other services, (ii) integration costs principally related to marketing, information technology, finance and real estate that are incremental and one-time in nature, (iii) gains or losses resulting from the recalculation of contingent consideration, (iv) foreign currency gains or losses from the translation of acquisition-related intercompany loans and (v) other charges such as regulatory filing fees and travel and entertainment expenses that are incremental in nature. | |
(5) | Reflects a charge from the write off of a minority investment. The charge is reflected in "Other expense" on the Company's Consolidated Statements of Operations. | |
(6) | Represents an adjustment to reflect an assumed annual effective corporate tax rate of approximately 39.5% and 40.6% as applied to the years ended December 31, 2012 and 2011, respectively, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state, local and/or foreign jurisdiction. Assumes (i) full exchange of existing unitholders' partnership units and Class B common stock of the Company into Class A common stock of the Company, (ii) the Company has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate rates and (iii) all deferred tax assets related to foreign operations are fully realizable. | |
Disclosure Regarding Forward-Looking Statements
Statements in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), which reflect the Company's current views with respect to, among other things, future events and financial performance. The Company generally identifies forward looking statements by terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "could," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of those words or other comparable words. Any forward-looking statements contained in this discussion are based upon our historical performance and on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us, or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and the risk factors section that are included in our Annual Report on Form 10-K for the year ended December 31, 2012 and any subsequent filings of our Quarterly Reports on Form 10-Q. The forward-looking statements included in this press release are made only as of the date this press release was issued. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
DUFF & PHELPS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) | ||||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||
Revenue | $ | 139,917 | $ | 118,980 | $ | 469,164 | $ | 383,940 | ||||||||||
Reimbursable expenses | 5,218 | 5,573 | 15,537 | 12,934 | ||||||||||||||
Total revenue | 145,135 | 124,553 | 484,701 | 396,874 | ||||||||||||||
Direct client service costs | ||||||||||||||||||
Compensation and benefits (includes $4,259 and $3,705 of equity- | 77,070 | 62,934 | 256,089 | 209,606 | ||||||||||||||
Other direct client service costs | 4,476 | 4,089 | 13,119 | 9,048 | ||||||||||||||
Acquisition retention expenses (includes $734 and $454 of equity- | 3,029 | 1,024 | 9,536 | 1,624 | ||||||||||||||
Reimbursable expenses | 5,361 | 5,589 | 15,734 | 13,073 | ||||||||||||||
89,936 | 73,636 | 294,478 | 233,351 | |||||||||||||||
Operating expenses | ||||||||||||||||||
Selling, general and administrative (includes $824 and $633 of | 31,155 | 27,709 | 116,032 | 100,624 | ||||||||||||||
Depreciation and amortization | 5,128 | 3,230 | 18,138 | 11,164 | ||||||||||||||
Restructuring charges | (28 | ) | 95 | 1,796 | 4,090 | |||||||||||||
Acquisition, integration and corporate development costs | 4,951 | 1,571 | 6,865 | 2,372 | ||||||||||||||
41,206 | 32,605 | 142,831 | 118,250 | |||||||||||||||
Operating income | 13,993 | 18,312 | 47,392 | 45,273 | ||||||||||||||
Other expense/(income), net | ||||||||||||||||||
Interest income | (22 | ) | (8 | ) | (59 | ) | (77 | ) | ||||||||||
Interest expense | 256 | 97 | 748 | 275 | ||||||||||||||
Other expense/(income) | (526 | ) | 1,502 | 380 | 1,505 | |||||||||||||
(292 | ) | 1,591 | 1,069 | 1,703 | ||||||||||||||
Income before income taxes | 14,285 | 16,721 | 46,323 | 43,570 | ||||||||||||||
Provision for income taxes | 7,630 | 5,566 | 20,022 | 13,841 | ||||||||||||||
Net income | 6,655 | 11,155 | 26,301 | 29,729 | ||||||||||||||
Less: Net income attributable to noncontrolling interest | 590 | 4,110 | 4,037 | 11,115 | ||||||||||||||
Net income attributable to Duff & Phelps Corporation | $ | 6,065 | $ | 7,045 | ||||||||||||||
