ZAIS Group Holdings, Inc. Reports Fourth Quarter And Full Year 2016 Results
RED BANK, N.J., March 24, 2017 /PRNewswire/ -- ZAIS Group Holdings, Inc. (NASDAQ: ZAIS) ("ZAIS"), today reported financial results for the three and twelve months ended December 31, 2016. ZAIS conducts substantially all of its operations through ZAIS Group, LLC ("ZAIS Group"). ZAIS Group provides investment advisory and asset management services to private funds, separately managed accounts, structured vehicles and, until October 31, 2016, to ZAIS Financial Corp. ("ZFC REIT"), a publicly traded real estate investment trust (collectively, the "ZAIS Managed Entities"). References to the "Company" herein refer to ZAIS, together with (where the context requires) its consolidated subsidiaries and affiliates.
Michael F. Szymanski, Chief Executive Officer, said "In 2016, we produced strong investment performance for our clients across our Securitized Credit, Leveraged Finance, and Credit Trading products and platforms. Our fourth quarter results, while positive, reflect one material non-recurring item, our receipt of an $8.0 million termination fee as a result of the termination of our investment management agreement with ZFC REIT in connection with the merger of ZFC REIT with Sutherland Asset Management Corp. ("SAM"). We believe that we are making progress with our fund raising activities as a result of our investment in business development staffing and our strong investment performance. Our return to sustained profitability remains challenging and will depend on our success in attracting and retaining assets under management."
FOURTH QUARTER 2016 HIGHLIGHTS
A summary of the Company's results for the three and twelve months ended December 31, 2016 and December 31, 2015 are below. All dollar amounts are presented in millions, with the exception of figures presented on a per share basis.
| Three Months Ended |
Twelve Months Ended |
|||
| December 31, |
December 31, |
December 31, |
December 31, |
|
| U.S. GAAP |
||||
|
Net income/(loss) |
$5.9 |
$(11.8) |
$(3.8) |
$(23.9) |
|
Net Income/(loss) per diluted |
$0.29 |
$(0.68) |
$(0.37) |
$(1.37) |
| Net Income/(loss)before income |
$5.9 |
$(7.5) |
$(3.8) |
$(23.7) |
| Non-GAAP |
||||
| Net income/(loss) (excluding |
$6.1 |
$(11.9) |
$(7.3) |
$(24.0) |
| Net income/(loss) (excluding |
$0.29 |
$(0.68) |
$(0.37) |
$(1.37) |
|
Adjusted EBITDA |
$7.5 |
$(3.4) |
$(1.9) |
$(14.3) |
The consolidated financial statements include non-controlling interests of the members of ZAIS Group Parent, LLC ("ZGP") (the "ZGP Founder Members") which represent Class A Units of ZGP held by the ZGP Founder Members. ZGP, a majority-owned consolidated subsidiary of ZAIS, is the sole member, and owns all of the equity, of ZAIS Group.
STRATEGIC REVIEW
The Company's Board of Directors has been undertaking a strategic review of the Company's business in order to enhance shareholder value and has engaged a financial advisor for this purpose. Various alternatives have been and are being considered, including a possible sale, combination or other similar transaction or going private transaction which would result in the termination of the registration of our Class A Shares so as to cease periodic and other public company compliance and reporting. The Company has received from and provided to potential counterparties certain due diligence information. In addition, the Company's management and financial advisor have held and expect to continue to hold preliminary discussions with potential counterparties and participants. There is no assurance that any of the preliminary discussions which have taken place or may in the future take place will result in any transaction or that any of the strategic alternatives under consideration will be implemented. The Company does not intend to provide updates on any of these matters unless and until there is a definitive agreement or action by the Board of Directors with respect thereto.
CONSOLIDATED GAAP RESULTS
Operating Results – Fourth Quarter Ended December 31, 2016
The Company recorded GAAP net income for the three months ended December 31, 2016 of $5.9 million compared with a GAAP net loss of $(11.8) million for the three months ended December 31, 2015. The increase of $17.7 million in net income was driven by an increase in revenues of $11.7 million, an increase in other income of $2.0 million and a decrease in tax expense of $4.3 million, offset by an increase in expenses of $0.3 million.
The $11.7 million increase in revenues was comprised of a net increase of $7.4 million in management fee income and $4.3 million in incentive income. The net increase in management fee income was primarily due to receiving an $8.0 million termination fee as a result of terminating the management agreement with ZFC REIT upon completion of the merger between ZFC REIT and SAM on October 31, 2016, partially offset by a decrease in management fee income resulting from a year-over-year reduction in average AUM. The net increase of $4.3 million in incentive income was primarily driven by increased performance results during the three months ended December 31, 2016 as compared to the three months ended December 31, 2015 for certain funds and accounts, offset by incentive income recognized during the three months ended December 31, 2015 that was not recognized during the three months ended December 31, 2016 for certain accounts which liquidated during 2015.
The $2.0 million increase in other income was primarily due to a $2.7 million decrease in impairment loss on goodwill relating to an impairment loss recognized in 2015 as a result of the decline in fair value of ZAIS Group which was not recognized in 2016 and a $0.2 million increase in net gain on investments as a result of gains on the Company's investments. These amounts totaling $2.9 million are offset by $0.8 million of loss due to a change in net gain (loss) on beneficial interest that the Company's Consolidated Fund, ZAIS Zephyr A-6, LP ("Zephyr A-6"), has in ZAIS CLO 5 Limited, a structured vehicle for which a wholly owned subsidiary of ZAIS Group serves as the collateral manager.
The $4.3 million decrease in tax expense was primarily the result of a full valuation allowance recorded in the fourth quarter of 2015 on deferred tax assets as the Company did not project taxable income for the next several years.
Operating Results – Year Ended December 31, 2016
For the full year 2016, GAAP net loss was $(3.8) million compared with GAAP net loss of $(23.9) million for the full year of 2015. The year over year decrease in the Company's net loss of $20.1 million was driven primarily by an $8.4 million increase in revenues, a $1.0 million decrease in expenses, a $10.5 million increase in other income/(loss), and a $0.2 million increase in income tax benefit.
The $8.4 million increase in revenues was comprised of a net increase of $6.2 million in management fee income and $2.2 million in incentive income. The net increase in management fee income was primarily due to receiving an $8.0 million termination fee as a result of terminating the management agreement with ZFC REIT upon completion of the merger between ZFC REIT and SAM on October 31, 2016, partially offset by a decrease in management fee income resulting from a year-over-year reduction in average AUM. The net increase of $2.2 million in incentive income was primarily driven by increased performance results during 2016 as compared to 2015 for certain funds and accounts, offset by incentive income recognized during 2015 that was not recognized during 2016 for certain accounts which liquidated during 2015 and residual incentive income received during 2015 which related to 2014 fund performance.
The $1.0 million decrease in expenses was primarily due to a $4.4 million increase in compensation and benefits, a $4.8 million decrease in general, administrative and other expenses and a $0.5 million decrease in depreciation and amortization. The $4.4 million increase in compensation and benefits was primarily due to a $9.6 million increase in incentive compensation relating to the accrual for the year-end and guaranteed bonuses in 2016 and the payment of retention and sign-on bonuses during 2016. This was offset by a $3.9 million decrease in salaries and associated payroll taxes and other employee benefits due to a reduction in force and other restructuring during 2016 and a $0.8 million decrease in equity compensation relating to an increase in the estimated forfeiture rate on ZGP Class B-0 Units. Employee holders cancelled all outstanding ZGP Class B-0 Units on December 30, 2016 in consideration, at the election of the employee, of cash paid by ZGP or restricted stock units of the Company provided by the Company. The $4.8 million decrease in general, administrative and other expenses was due to a $3.3 million decrease in professional fees and a $1.5 million decrease primarily related to a focused expense reduction during 2016. The $0.5 million decrease in depreciation and amortization was due to a change in the useful life assumptions for leasehold improvements in 2015.
The $10.5 million increase in other income/(loss) was primarily comprised of a net increase of $7.8 million in net gain on Consolidated Funds' investments related to a Consolidated Fund, Zephyr A-6, which launched in the fourth quarter of 2015 and a $2.7 million decrease in impairment loss on goodwill relating to an impairment loss recognized in 2015 due to the decline in fair value of ZAIS Group which was not recognized in 2016.
CONSOLIDATED NON-GAAP RESULTS
Please see the discussion of "Non-GAAP Financial Measures", including the definitions of net income (loss) (excluding Consolidating Funds of ZAIS Group) and Adjusted EBITDA, and reconciliations of such Non-GAAP financial measures to the respective GAAP net income (loss) and pre-tax GAAP net income (loss) measures for the periods discussed above at the end of this press release.
The Company's GAAP net income (loss) and non-GAAP measures of income (loss) may fluctuate materially depending upon the performance of ZAIS Managed Entities as well as other factors. Accordingly, the GAAP net income (loss) and non-GAAP measures of income (loss) in any particular period should not be expected to be indicative of future results.
LIQUIDITY & CAPITAL RESOURCES
As of December 31, 2016, the Company had cash and cash equivalents of $38.7 million and debt obligations of $1.3 million.
FOURTH QUARTER 2016 SUPPLEMENTAL INFORMATION
The Company's Fourth Quarter 2016 Supplemental Information – December 31, 2016, is available on ZAIS's website at www.zaisgroupholdings.com. To access the information, go to the "ZAIS Shareholders" section of the website.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with generally accepted accounting principles ("GAAP"), this press release includes certain non-GAAP financial information, including net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA (and per share measures). Net income (loss) (excluding Consolidated Funds of ZAIS Group) is a non-GAAP financial measure that the Company defines as GAAP net income (loss) excluding the consolidating effects of the Consolidated Funds of ZAIS Group. Adjusted EBITDA is a non-GAAP financial measure that the Company defines as GAAP net income (loss), excluding consolidating effects of Consolidated Funds of ZAIS Group, compensation expense related to a portion of net operating income of ZAIS Group payable to certain employees of ZAIS Group, compensation expense related to incentive income in the form of percentage interests being recorded before related incentive income is recognized, equity-based compensation, severance, taxes, interest expense, depreciation and amortization expenses, goodwill impairment, foreign currency and certain other non-cash and non-operating items.
The Company believes that providing investors with this non-GAAP financial information, in addition to the related GAAP measures, gives investors greater transparency to the information used by management in its financial and operational decision-making. However, because net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA are incomplete measures of the Company's financial performance and involve differences from net income (loss) computed in accordance with GAAP, they should be considered along with, but not as alternatives to, the Company's net income (loss) computed in accordance with GAAP as a measure of the Company's financial performance. In addition, because not all companies use identical calculations, the Company's presentation of net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA may not be comparable to other similarly-titled measures of other companies.
| ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
| Consolidated Statements of Financial Condition |
||||||||
| (Dollars in thousands, except share amounts) |
||||||||
| December 31, |
||||||||
| 2016 |
2015 |
|||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ |
38,712 |
$ |
44,351 |
||||
| Income and fees receivable |
8,805 |
2,529 |
||||||
| Investments, at fair value |
— |
8,169 |
||||||
| Investments in affiliates, at fair value |
5,273 |
5,242 |
||||||
| Due from related parties |
734 |
748 |
||||||
| Property and equipment, net |
274 |
544 |
||||||
| Prepaid expenses |
906 |
776 |
||||||
| Other assets |
348 |
310 |
||||||
| Assets of Consolidated Funds |
||||||||
| Cash and cash equivalents |
37,080 |
33 |
||||||
| Investments, at fair value |
404,365 |
30,509 |
||||||
| Due from broker |
16,438 |
— |
||||||
| Other assets |
1,210 |
— |
||||||
| Total Assets |
$ |
514,145 |
$ |
93,211 |
||||
| Liabilities and Equity |
||||||||
| Liabilities |
||||||||
| Notes payable |
$ |
1,263 |
$ |
1,255 |
||||
| Compensation payable |
7,836 |
3,575 |
||||||
| Due to related parties |
31 |
175 |
||||||
| Fees payable |
2,439 |
756 |
||||||
| Other liabilities |
1,127 |
1,546 |
||||||
| Liabilities of Consolidated Funds |
||||||||
| Notes payable of consolidated CLO, at fair value |
384,901 |
— |
||||||
| Due to broker |
24,462 |
— |
||||||
| Other liabilities |
2,121 |
101 |
||||||
| Total Liabilities |
424,180 |
7,408 |
||||||
| Commitments and Contingencies |
||||||||
| Equity |
||||||||
| Preferred Stock, $0.0001 par value; 2,000,000 shares authorized; 0 shares issued and |
— |
— |
||||||
| Class A Common Stock, $0.0001 par value; 180,000,000 shares authorized; 13,900,917 and |
1 |
1 |
||||||
| Class B Common Stock, $0.000001 par value; 20,000,000 shares authorized; 20,000,000 shares |
— |
— |
||||||
| Additional paid-in capital |
63,413 |
60,817 |
||||||
| Retained earnings (Accumulated deficit) |
(18,965) |
(13,805) |
||||||
| Accumulated other comprehensive income (loss) |
(70) |
158 |
||||||
| Total stockholders' equity, ZAIS Group Holdings, Inc. |
44,379 |
47,171 |
||||||
| Non-controlling interests in ZAIS Group Parent, LLC |
22,258 |
23,716 |
||||||
| Non-controlling interests in Consolidated Funds |
23,328 |
14,916 |
||||||
| Total Equity |
89,965 |
85,803 |
||||||
| Total Liabilities and Equity |
$ |
514,145 |
$ |
93,211 |
||||
| ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES |
||||||||||||||||
| Consolidated Statements of Comprehensive Income (Loss) |
||||||||||||||||
| (Dollars in thousands, except share and per share amounts) |
||||||||||||||||
| Three |
Three |
Year Ended |
Year Ended |
|||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
11,221 |
$ |
3,793 |
$ |
22,015 |
$ |
15,802 |
||||||||
| Incentive income |
5,437 |
1,140 |
9,346 |
7,131 |
||||||||||||
| Other revenues |
78 |
80 |
316 |
298 |
||||||||||||
| Income of Consolidated Funds |
— |
— |
— |
— |
||||||||||||
| Total Revenues |
16,736 |
5,013 |
31,677 |
23,231 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
7,466 |
6,552 |
31,380 |
26,971 |
||||||||||||
| General, administrative and other |
3,140 |
3,593 |
12,263 |
17,064 |
||||||||||||
| Depreciation and amortization |
61 |
77 |
267 |
730 |
||||||||||||
| Expenses of Consolidated Funds |
18 |
206 |
82 |
206 |
||||||||||||
| Total Expenses |
10,685 |
10,428 |
43,992 |
44,971 |
||||||||||||
| Other income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
190 |
(2) |
273 |
32 |
||||||||||||
| Other income (expense) |
17 |
59 |
762 |
147 |
||||||||||||
| Impairment loss on goodwill |
— |
(2,655) |
— |
(2,655) |
||||||||||||
| Net gains (losses) of Consolidated |
525 |
509 |
8,333 |
509 |
||||||||||||
| Net gain (loss) on beneficial interest of |
(842) |
— |
(842) |
— |
||||||||||||
| Total Other Income (Loss) |
(110) |
(2,089) |
8,526 |
(1,967) |
||||||||||||
| Income (loss) before income taxes |
5,941 |
(7,504) |
(3,789) |
(23,707) |
||||||||||||
| Income tax (benefit) expense |
7 |
4,267 |
(5) |
155 |
||||||||||||
| Consolidated net income (loss), net of tax |
5,934 |
(11,771) |
(3,784) |
(23,862) |
||||||||||||
| Other comprehensive income (loss), net of |
||||||||||||||||
| Foreign currency translation adjustment |
(81) |
(85) |
(343) |
238 |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
5,853 |
$ |
(11,856) |
$ |
(4,127) |
$ |
(23,624) |
||||||||
| Allocation of Consolidated Net Income |
||||||||||||||||
| Non-controlling interests in Consolidated |
$ |
(183) |
$ |
149 |
$ |
3,505 |
$ |
149 |
||||||||
| Stockholders' equity, ZAIS Group |
4,036 |
(9,468) |
(5,160) |
(13,805) |
||||||||||||
| Non-controlling interests in ZAIS Group |
2,081 |
(2,452) |
(2,129) |
(10,206) |
||||||||||||
| $ |
5,934 |
$ |
(11,771) |
$ |
(3,784) |
$ |
(23,862) |
|||||||||
| Allocation of Total Comprehensive |
||||||||||||||||
| Non-controlling interests in Consolidated |
$ |
(183) |
$ |
149 |
$ |
3,505 |
$ |
149 |
||||||||
| Stockholders' equity, ZAIS Group |
3,982 |
(9,525) |
(5,388) |
(13,647) |
||||||||||||
| Non-controlling interests in ZAIS Group |
2,054 |
(2,480) |
(2,244) |
(10,126) |
||||||||||||
| $ |
5,853 |
$ |
(11,856) |
$ |
(4,127) |
$ |
(23,624) |
|||||||||
| Consolidated Net Income (Loss), net of |
$ |
0.29 |
$ |
(0.68) |
$ |
(0.37) |
$ |
(1.26) |
||||||||
| Consolidated Net Income (Loss), net of |
$ |
0.29 |
$ |
(0.68) |
$ |
(0.37) |
$ |
(1.37) |
||||||||
| Weighted average shares of Class A |
||||||||||||||||
| Basic |
13,900,917 |
13,870,917 |
13,891,245 |
10,982,726 |
(1) |
|||||||||||
| Diluted |
21,033,275 |
20,870,917 |
(1) |
20,891,245 |
17,982,726 |
(1) |
||||||||||
| (1) Pro-rated based on the portion of the period preceding and following the Business Combination |
||||||||||||||||
The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial position and results of operations:
| At December 31, 2016 |
||||||||||||||||
| ZAIS |
Consolidated |
Eliminations |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
$ |
38,712 |
$ |
— |
$ |
— |
$ |
38,712 |
||||||||
| Income and fees receivable |
8,805 |
— |
— |
8,805 |
||||||||||||
| Investments, at fair value |
— |
— |
— |
— |
||||||||||||
| Investments in affiliates, at fair value |
29,554 |
— |
(24,281) |
5,273 |
||||||||||||
| Due from related parties |
734 |
— |
— |
734 |
||||||||||||
| Property and equipment, net |
274 |
— |
— |
274 |
||||||||||||
| Prepaid expenses |
906 |
— |
— |
906 |
||||||||||||
| Other assets |
348 |
— |
— |
348 |
||||||||||||
| Assets of Consolidated Funds |
||||||||||||||||
| Cash and cash equivalents |
— |
37,080 |
— |
37,080 |
||||||||||||
| Investments, at fair value |
— |
423,871 |
(19,506) |
404,365 |
||||||||||||
| Due from broker |
— |
16,438 |
— |
16,438 |
||||||||||||
| Other assets |
— |
1,254 |
(44) |
1,210 |
||||||||||||
| Total Assets |
$ |
79,333 |
$ |
478,643 |
$ |
(43,831) |
$ |
514,145 |
||||||||
| Liabilities, and Equity |
||||||||||||||||
| Liabilities |
||||||||||||||||
| Notes payable |
$ |
1,263 |
$ |
— |
$ |
— |
$ |
1,263 |
||||||||
| Compensation payable |
7,836 |
— |
— |
7,836 |
||||||||||||
| Due to related parties |
31 |
— |
— |
31 |
||||||||||||
| Fees payable |
2,439 |
— |
— |
2,439 |
||||||||||||
| Other liabilities |
1,127 |
— |
— |
1,127 |
||||||||||||
| Liabilities of Consolidated Funds |
||||||||||||||||
| Notes payable of Consolidated CLO |
— |
404,407 |
(19,506) |
384,901 |
||||||||||||
| Due to broker |
— |
24,462 |
— |
24,462 |
||||||||||||
| Other liabilities |
— |
2,165 |
(44) |
2,121 |
||||||||||||
| Total Liabilities |
12,696 |
431,034 |
(19,550) |
424,180 |
||||||||||||
| Commitments and Contingencies |
||||||||||||||||
| Equity |
||||||||||||||||
| Preferred Stock |
— |
— |
— |
— |
||||||||||||
| Class A Common Stock |
1 |
— |
— |
1 |
||||||||||||
| Class B Common Stock |
— |
— |
— |
— |
||||||||||||
| Additional paid-in-capital |
63,413 |
— |
— |
63,413 |
||||||||||||
| Retained earnings (Accumulated deficit) |
(18,965) |
— |
— |
(18,965) |
||||||||||||
| Accumulated other comprehensive income (loss) |
(70) |
— |
— |
(70) |
||||||||||||
| Total stockholders' equity, ZAIS Group Holdings, Inc. |
44,379 |
— |
— |
44,379 |
||||||||||||
| Non-controlling interests in ZAIS Group Parent, LLC |
22,258 |
— |
— |
22,258 |
||||||||||||
| Non-controlling interests in Consolidated Funds |
— |
47,609 |
(24,281) |
23,328 |
||||||||||||
| Total Equity |
66,637 |
47,609 |
(24,281) |
89,965 |
||||||||||||
| Total Liabilities and Equity |
$ |
79,333 |
$ |
478,643 |
$ |
(43,831) |
$ |
514,145 |
||||||||
| At December 31, 2015 |
||||||||||||||||
| ZAIS |
Consolidated |
Eliminations |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
$ |
44,351 |
$ |
— |
$ |
— |
$ |
44,351 |
||||||||
| Income and fees receivable |
2,529 |
— |
— |
2,529 |
||||||||||||
| Investments, at fair value |
8,169 |
— |
— |
8,169 |
||||||||||||
| Investments in affiliates, at fair value |
20,767 |
— |
(15,525) |
5,242 |
||||||||||||
| Due from related parties |
748 |
— |
— |
748 |
||||||||||||
| Property and equipment, net |
544 |
— |
— |
544 |
||||||||||||
| Prepaid expenses |
776 |
— |
— |
776 |
||||||||||||
| Other assets |
310 |
— |
— |
310 |
||||||||||||
| Assets of Consolidated Funds |
||||||||||||||||
| Cash and cash equivalents |
— |
33 |
— |
33 |
||||||||||||
| Investments, at fair value |
— |
30,509 |
— |
30,509 |
||||||||||||
| Total Assets |
$ |
78,194 |
$ |
30,542 |
$ |
(15,525) |
$ |
93,211 |
||||||||
| Liabilities, Equity |
||||||||||||||||
| Liabilities |
||||||||||||||||
| Notes payable |
$ |
1,255 |
$ |
— |
$ |
— |
$ |
1,255 |
||||||||
| Compensation payable |
3,575 |
— |
— |
3,575 |
||||||||||||
| Due to related parties |
175 |
— |
— |
175 |
||||||||||||
| Fees payable |
756 |
— |
— |
756 |
||||||||||||
| Other liabilities |
1,546 |
— |
— |
1,546 |
||||||||||||
| Liabilities of Consolidated Funds |
||||||||||||||||
| Other liabilities |
— |
101 |
— |
101 |
||||||||||||
| Total Liabilities |
7,307 |
101 |
— |
7,408 |
||||||||||||
| Commitments and Contingencies |
||||||||||||||||
| Equity |
||||||||||||||||
| Preferred Stock |
— |
— |
— |
— |
||||||||||||
| Class A Common Stock |
1 |
— |
— |
1 |
||||||||||||
| Class B Common Stock |
— |
— |
— |
— |
||||||||||||
| Additional paid-in-capital |
60,817 |
— |
— |
60,817 |
||||||||||||
| Retained earnings (Accumulated deficit) |
(13,805) |
— |
— |
(13,805) |
||||||||||||
| Accumulated other comprehensive income (loss) |
158 |
— |
— |
158 |
||||||||||||
| Total stockholders' equity, ZAIS Group Holdings, Inc. |
47,171 |
— |
— |
47,171 |
||||||||||||
| Non-controlling interests in ZAIS Group Parent, LLC |
23,716 |
— |
— |
23,716 |
||||||||||||
| Non-controlling interests in Consolidated Funds |
— |
30,441 |
(15,525) |
14,916 |
||||||||||||
| Total Equity |
70,887 |
30,441 |
(15,525) |
85,803 |
||||||||||||
| Total Liabilities and Equity |
$ |
78,194 |
$ |
30,542 |
$ |
(15,525) |
$ |
93,211 |
||||||||
| Three months Ended December 31, 2016 |
||||||||||||||||
| ZAIS |
Consolidated |
Eliminations |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
11,258 |
$ |
— |
$ |
(37) |
$ |
11,221 |
||||||||
| Incentive income |
5,437 |
— |
— |
5,437 |
||||||||||||
| Other revenues |
78 |
— |
— |
78 |
||||||||||||
| Income of Consolidated Funds |
— |
— |
— |
— |
||||||||||||
| Total Revenues |
16,773 |
— |
(37) |
16,736 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
7,466 |
— |
— |
7,466 |
||||||||||||
| General, administrative and other |
3,140 |
— |
— |
3,140 |
||||||||||||
| Depreciation and amortization |
61 |
— |
— |
61 |
||||||||||||
| Expenses of Consolidated Funds |
— |
55 |
(37) |
18 |
||||||||||||
| Total Expenses |
10,667 |
55 |
(37) |
10,685 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
— |
— |
190 |
190 |
||||||||||||
| Other income (expense) |
17 |
— |
— |
17 |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
(316) |
841 |
525 |
||||||||||||
| Net gain (loss) on beneficial interest of collateralized |
— |
— |
(842) |
(842) |
||||||||||||
| Total Other Income (Loss) |
17 |
(316) |
189 |
(110) |
||||||||||||
| Income (loss) before income taxes |
6,123 |
(371) |
189 |
5,941 |
||||||||||||
| Income tax (benefit) expense |
7 |
— |
— |
7 |
||||||||||||
| Consolidated net income (loss), net of tax |
6,116 |
(371) |
189 |
5,934 |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
— |
— |
— |
— |
||||||||||||
| Foreign currency translation adjustment |
(81) |
— |
— |
(81) |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
6,035 |
$ |
(371) |
$ |
189 |
$ |
5,853 |
||||||||
| Three months Ended December 31, 2015 |
||||||||||||||||
| ZAIS |
Consolidated |
Eliminations |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
3,793 |
$ |
— |
$ |
— |
$ |
3,793 |
||||||||
| Incentive income |
1,140 |
— |
— |
1,140 |
||||||||||||
| Other revenues |
80 |
— |
— |
80 |
||||||||||||
| Income of Consolidated Funds |
— |
— |
— |
— |
||||||||||||
| Total Revenues |
5,013 |
— |
— |
5,013 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
6,552 |
— |
— |
6,552 |
||||||||||||
| General, administrative and other |
3,593 |
— |
— |
3,593 |
||||||||||||
| Depreciation and amortization |
77 |
— |
— |
77 |
||||||||||||
| Expenses of Consolidated Funds |
— |
206 |
— |
206 |
||||||||||||
| Total Expenses |
10,222 |
206 |
— |
10,428 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
152 |
— |
(154) |
(2) |
||||||||||||
| Other income (expense) |
59 |
— |
— |
59 |
||||||||||||
| Impairment loss on goodwill |
(2,655) |
— |
— |
(2,655) |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
509 |
— |
509 |
||||||||||||
| Net gain (loss) on beneficial interest of collateralized |
— |
— |
— |
— |
||||||||||||
| Total Other Income (Loss) |
(2,444) |
509 |
(154) |
(2,089) |
||||||||||||
| Income (loss) before income taxes |
(7,653) |
303 |
(154) |
(7,504) |
||||||||||||
| Income tax (benefit) expense |
4,267 |
— |
— |
4,267 |
||||||||||||
| Consolidated net income (loss), net of tax |
(11,920) |
303 |
(154) |
(11,771) |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
— |
— |
— |
— |
||||||||||||
| Foreign currency translation adjustment |
(85) |
— |
— |
(85) |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
(12,005) |
$ |
303 |
$ |
(154) |
$ |
(11,856) |
||||||||
| Year Ended December 31, 2016 |
||||||||||||||||
| ZAIS |
Consolidated |
Eliminations |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
22,271 |
$ |
— |
$ |
(256) |
$ |
22,015 |
||||||||
| Incentive income |
9,346 |
— |
— |
9,346 |
||||||||||||
| Other revenues |
316 |
— |
— |
316 |
||||||||||||
| Income of Consolidated Funds |
— |
— |
— |
— |
||||||||||||
| Total Revenues |
31,933 |
— |
(256) |
31,677 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
31,380 |
— |
— |
31,380 |
||||||||||||
| General, administrative and other |
12,263 |
— |
— |
12,263 |
||||||||||||
| Depreciation and amortization |
267 |
— |
— |
267 |
||||||||||||
| Expenses of Consolidated Funds |
— |
338 |
(256) |
82 |
||||||||||||
| Total Expenses |
43,910 |
338 |
(256) |
43,992 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
3,921 |
— |
(3,648) |
273 |
||||||||||||
| Other income (expense) |
762 |
— |
— |
762 |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
7,491 |
842 |
8,333 |
||||||||||||
| Net gain (loss) on beneficial interest of collateralized |
— |
— |
(842) |
(842) |
||||||||||||
| Total Other Income (Loss) |
4,683 |
7,491 |
(3,648) |
8,526 |
||||||||||||
| Income (loss) before income taxes |
(7,294) |
7,153 |
(3,648) |
(3,789) |
||||||||||||
| Income tax (benefit) expense |
(5) |
— |
— |
(5) |
||||||||||||
| Consolidated net income (loss), net of tax |
(7,289) |
7,153 |
(3,648) |
(3,784) |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
||||||||||||||||
| Foreign currency translation adjustment |
(343) |
— |
— |
(343) |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
(7,632) |
$ |
7,153 |
$ |
(3,648) |
$ |
(4,127) |
||||||||
| Year Ended December 31, 2015 |
||||||||||||||||
| ZAIS |
Consolidated |
Eliminations |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
15,802 |
$ |
— |
$ |
$ |
15,802 |
|||||||||
| Incentive income |
7,131 |
— |
— |
7,131 |
||||||||||||
| Other revenues |
298 |
— |
— |
298 |
||||||||||||
| Income of Consolidated Funds |
— |
— |
— |
— |
||||||||||||
| Total Revenues |
23,231 |
— |
23,231 |
|||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
26,971 |
— |
— |
26,971 |
||||||||||||
| General, administrative and other |
17,064 |
— |
— |
17,064 |
||||||||||||
| Depreciation and amortization |
730 |
— |
— |
730 |
||||||||||||
| Expenses of Consolidated Funds |
— |
206 |
— |
206 |
||||||||||||
| Total Expenses |
44,765 |
206 |
— |
44,971 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
186 |
— |
(154) |
32 |
||||||||||||
| Other income (expense) |
147 |
— |
— |
147 |
||||||||||||
| Impairment loss on goodwill |
(2,655) |
— |
— |
(2,655) |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
509 |
— |
509 |
||||||||||||
| Total Other Income (Loss) |
(2,322) |
509 |
(154) |
(1,967) |
||||||||||||
| Income (loss) before income taxes |
(23,856) |
303 |
(154) |
(23,707) |
||||||||||||
| Income tax (benefit) expense |
155 |
— |
— |
155 |
||||||||||||
| Consolidated net income (loss), net of tax |
(24,011) |
303 |
(154) |
(23,862) |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
||||||||||||||||
| Foreign currency translation adjustment |
238 |
— |
— |
238 |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
(23,773) |
$ |
303 |
$ |
(154) |
$ |
(23,624) |
||||||||
The following tables present the reconciliation of the Company's consolidated GAAP net income (loss), net of tax to its non-GAAP financial measure of net income (loss) (excluding Consolidated Funds of ZAIS Group) for the periods presented in this Earnings Release.
| Three Months Ended |
Year Ended |
|||||||||||||||||
| 2016 |
2015 |
2016 |
2015 |
|||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||
| Consolidated net income (loss), net of tax (GAAP |
$ |
5,934 |
$ |
(11,771) |
$ |
(3,784) |
$ |
(23,862) |
||||||||||
| Addback: Elimination of Management fee income |
37 |
— |
256 |
— |
||||||||||||||
| Addback: Elimination of net gain (loss) on |
(190) |
154 |
3,684 |
154 |
||||||||||||||
| Addback: Expenses of Consolidated Funds |
18 |
206 |
82 |
206 |
||||||||||||||
| Net (gain) loss on Consolidated Funds' |
(525) |
(509) |
(8,333) |
(509) |
||||||||||||||
| Net gain (loss) on beneficial interest of |
842 |
— |
842 |
— |
||||||||||||||
| Net income (loss) (excluding Consolidated Funds |
$ |
6,116 |
$ |
(11,920) |
$ |
(7,289) |
$ |
(24,011) |
||||||||||
The following tables present the reconciliations of the Company's GAAP pre-tax consolidated net income (loss) to its non-GAAP financial measures of Adjusted EBITDA for the periods presented in this Earnings Release.
| Three Months Ended |
Year Ended |
||||||||||||||||||
| 2016 |
2015 |
2016 |
2015 |
||||||||||||||||
| (Dollars in thousands) |
|||||||||||||||||||
| Adjusted EBITDA - Non GAAP |
|||||||||||||||||||
| Pre-tax Consolidated Net Income (loss) (GAAP pre-tax net |
$ |
5,941 |
$ |
(7,504) |
$ |
(3,789) |
$ |
(23,707) |
|||||||||||
| Addback: Elimination of Management fee income |
37 |
— |
256 |
— |
|||||||||||||||
| Addback: Elimination of Net gain (loss) on investments |
(190) |
154 |
3,648 |
154 |
|||||||||||||||
| Addback: Expenses of Consolidated Funds |
18 |
206 |
82 |
206 |
|||||||||||||||
| Net (gain) loss on Consolidated Funds' investments |
(525) |
(509) |
(8,333) |
(509) |
|||||||||||||||
| Net gain (loss) on beneficial interest of collateralized financing |
842 |
— |
842 |
— |
|||||||||||||||
| Addback: Compensation attributable to Income Unit Plan |
— |
— |
— |
198 |
|||||||||||||||
| Addback: Compensation attributable to equity compensation |
1,138 |
1,574 |
4,089 |
4,862 |
|||||||||||||||
| Addback: Severance costs |
206 |
29 |
995 |
1,116 |
|||||||||||||||
| Addback: Impairment of Goodwill |
— |
2,655 |
— |
2,655 |
|||||||||||||||
| Reclassification of incentive compensation |
— |
(33) |
— |
(33) |
|||||||||||||||
| Addback: Depreciation and amortization |
61 |
77 |
267 |
730 |
|||||||||||||||
| Adjusted EBITDA – Non-GAAP |
$ |
7,528 |
$ |
(3,351) |
$ |
(1,943) |
$ |
(14,328) |
|||||||||||
ABOUT ZAIS GROUP HOLDINGS, INC.
ZAIS (NASDAQ: ZAIS) owns a majority interest in, and is the managing member of, ZGP. ZGP is the sole member of ZAIS Group, an investment advisory and asset management firm focused on specialized credit strategies with approximately $3.444 billion of assets under management as of December 31, 2016. Based in Red Bank, New Jersey with operations in London, ZAIS Group employs professionals across investment management, client relations, information technology, analytics, finance, law, compliance, risk management and operations. To learn more, visit www.zaisgroupholdings.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute "forward-looking statements," as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. These statements are generally identified by the use of words such as "outlook," "believe," "expect," "potential," "continue," "may," "will," "should," "could," "would," "seek," "approximately," "predict," "intend," "plan," "estimate," "anticipate," "opportunity," "pipeline," "comfortable," "assume," "remain," "maintain," "sustain," "achieve" or the negative version of those words or other comparable words. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to: the inability of the Company to realize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, and retain its management and key employees; the ability to rationalize our expense structure and specifically to exit the residential whole loan related businesses in an orderly fashion, or at all; the outcome of the strategic review of the Company's business and availability of suitable strategic options; the ability of the Company to negotiate and enter into an agreement for a potential sale, business combination, going private or other strategic transaction; the ability of the Company to consummate any potential strategic transaction and to realize any anticipated benefits of such transaction; the outcome of any legal proceedings that may be instituted against the Company or others; the inability to continue to be listed on the NASDAQ Stock Market; operational expenses and costs related to being a public company; changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; the relative and absolute investment performance of advised or sponsored investment products; the availability of suitable investment opportunities; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability and terms of financing; conditions in the market for mortgage-related investments; the impact of capital improvement projects; the impact of future acquisitions or divestitures; the impact, extent and timing of technological changes and the adequacy of intellectual property protection; the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to the Company; terrorist activities and international hostilities, which may adversely affect the general economy, financial and capital markets, specific industries, and the Company; the ability to attract and retain highly talented professionals; the impact of changes to tax legislation and, generally, the tax position of the Company; legislative and regulatory changes that could adversely affect the business of the Company; and other factors, including those set forth in the Risk Factors section of the Company's Annual Report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission (the "SEC"), copies of which are available on the SEC's website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.
SOURCE ZAIS Group Holdings, Inc.
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