GMP Capital Inc. Reports Third Quarter 2017 Results

For further information about GMP Capital Inc., our results for third quarter 2017 and the meaning of certain references, this earnings release should be read in conjunction with our unaudited interim condensed consolidated financial statements as at and for the three and nine months ended September 30, 2017 (Third Quarter 2017 Financial Statements) and our management's discussion and analysis for the three and nine months ended September 30, 2017 (Third Quarter 2017 MD&A), which can be accessed on our website at gmpcapital.com and on SEDAR at sedar.com. Unless otherwise indicated, all dollar amounts are expressed in Canadian dollars and have been taken from our Third Quarter 2017 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

FINANCIAL HIGHLIGHTS

Third Quarter 2017 vs. Third Quarter 2016

• Revenue of $34.3 million decreased from $43.5 million.
• Net loss of $2.8 million improved from a net loss of $10.6 million.
• On an adjusted basis¹, net income of $0.5 million decreased from $2.2 million.
• Diluted loss per share of $0.06 increased from a diluted loss per share of $0.18.
• On an adjusted basis¹, diluted loss per share of $0.01 decreased from earnings per share (EPS) of $0.01.

First Nine Months 2017 vs. First Nine Months 2016

• Revenue of $127.6 million decreased from $130.9 million.
• Non-cash goodwill impairment charge of $44.3 million (after-tax) and deferred-tax asset write-down of $7.7 million recorded in second quarter 2017.
• Net loss of $53.5 million increased from a net loss of $14.9 million.
• On an adjusted basis¹, net income of $9.1 million increased from a net loss of $1.5 million.
• Diluted loss per share of $0.82 decreased from a diluted loss per share of $0.28.
• On an adjusted basis¹, EPS of $0.08 increased from a diluted loss per share of $0.08.

TORONTO, Nov. 3, 2017 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $34.3 million in third quarter 2017, down 21% compared with the same period a year ago.   Third quarter 2017 net loss was $2.8 million and diluted loss per share was $0.06, compared with a net loss of $10.6 million and diluted loss per share of $0.18 in third quarter 2016.  On an adjusted basis¹, third quarter 2017 net income was $0.5 million and diluted loss per share was $0.01.

"Business activity in the quarter remained stubbornly low.  The ongoing malaise in commodities and the low level of activity in small- to mid-cap names in general made for a daunting revenue environment and a disappointing quarter," said Harris Fricker, President and CEO of GMP.

Commenting further, Mr. Fricker said, "Despite the challenging conditions in the quarter, there were a couple bright spots including the strength demonstrated by our Canadian and international advisory franchises and the ongoing performance of our Wealth Management business. Further we note that capital markets activity has been more robust in the fourth quarter with a particular focus in our blockchain practice."

1.

Considered to be a non-GAAP financial measure. This measure does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) under IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. This data should be read in conjunction with the "Non-GAAP Measures" section at the end of this press release and the "Presentation of Financial Information and Non-GAAP Measures" section in the Third Quarter 2017 MD&A.

THIRD QUARTER 2017 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets
Third quarter 2017 vs. Third quarter 2016

Revenue
Revenue of $25.8 million decreased 37% primarily due to lower investment banking fees and lower principal transaction net gains.

• Investment banking revenue of $13.4 million decreased 39% primarily driven by lower underwriting fees which declined 74% to $5.2 million largely reflecting an industry-wide decrease in the dollar value of completed mining and energy transactions of 73% and 100%, respectively. (Source: FP Informart)
• M&A advisory fees increased 257% to $8.2 million largely due to higher revenues in our Canadian and international franchises.
• Principal transactions generated net gains of $3.0 million, representing a decrease of 58% primarily due to lower U.S. client-related fixed income trading activity and lower returns on principal inventories.
• Commission revenue of $6.9 million decreased 32% on lower client trading activity.
• Interest revenue increased 113% to $2.4 million on higher activity in stock borrowing and lending.

Expenses
Expenses of $29.7 million decreased 40% largely due to lower employee compensation and benefits, which decreased 43%, and lower transaction-related expenses commensurate with lower revenue generation. Third quarter 2016 included $13.2 million in restructuring and integration charges.  The decrease was partly offset by the inclusion of incremental operating expenses since the acquisition of the GMP FirstEnergy business.

• Share-based compensation expense declined 39% in connection with the expiration of certain incentive arrangements.
• The ratio of total employee compensation and benefits to revenues decreased to 74.6% in third quarter 2017 compared with 82.6%.

Loss before income taxes

• Loss before income taxes of $3.9 million compared with a loss before income taxes of $8.6 million.
• On an adjusted basis¹, net loss before income taxes of $3.6 million compared with income before income taxes of $4.6 million.

Wealth Management
Third quarter 2017 vs. Third quarter 2016

• Wealth Management reported income before income taxes of $5.7 million compared with $0.8 million.
• Third quarter 2017 revenues include $5.6 million in dividends received in connection with GMP's preferred share investments in Richardson GMP.
• Share of Richardson GMP net income of $0.1 million compared with $0.8 million.

Richardson GMP Highlights
The following information sets forth an overview of the consolidated financial results of Richardson GMP Limited, on a 100% basis; noting, however, that GMP owns an approximate 32% non-controlling interest of Richardson GMP as at September 30, 2017.

• Revenue of $66.2 million, representing a 6% decrease largely on lower commission revenue.
• Adjusted EBITDA² of $8.5 million decreased 22%.
• Assets under administration of $29.4 billion as at September 30, 2017, a 4% increase compared with $28.3 billion as at September 30, 2016.

2.	Considered to be a non-GAAP financial measure. This data should be read in conjunction with the "Supplemental Information" section at the end of this press release and in the Third Quarter 2017 MD&A.

SUBSEQUENT EVENT

On October 31, 2017, GMP announced that it expects to receive approximately $28.0 million in connection with Richardson GMP's refinancing of its indebtedness. Richardson GMP entered into a four-year $80.0 million credit facility agreement with a syndicate of chartered banks and intends to use the initial proceeds from this facility to refinance its existing long-term indebtedness.  The proceeds will also be used to redeem a portion of Richardson GMP's Class B preferred shares, at par, and to repay fully its $5.0 million subordinated loan facility made available by GMP. These transactions will reduce GMP's investment in associate by approximately $23.0 million, representing the partial redemption of GMP's investment in Richardson GMP's Class B preferred shares.  Subject to customary regulatory approvals, GMP expects to receive the funds in the fourth quarter of 2017.

DIVIDENDS

On November 2, 2017, the board of directors of GMP approved a quarterly cash dividend of $0.2257 per Cumulative 5-Year Rate Reset Preferred Share, Series B, and $0.2289 per Cumulative Floating Rate Preferred Shares, Series C, payable on January 2, 2018, to preferred shareholders of record on December 15, 2017.

CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's third quarter 2017 results will be held this morning at 10:00 a.m.  (EST). Interested parties are invited to access the quarterly conference call on a listen-only basis by dialing 416-340-2216 or 1-800-273-9672 (toll free) or via live audio webcast at http://gmpcapital.com/Investor-Relations/Quarterly-Information. A recording of the conference call will be available until Friday, November 10, 2017, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 1337313#. The webcast will be archived at http://gmpcapital.com/Investor-Relations/Quarterly-Information.

NON-GAAP MEASURES

We use certain measures to assess our financial performance that are not GAAP measures under IFRS. These measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of GMP's performance, liquidity, cash flows and profitability. For further information, refer to the "Presentation of Financial Information and Non-GAAP Measures" section in the Third Quarter 2017 MD&A.

The following table provides a reconciliation of GMP's reported results to its adjusted measures including the composition of the adjusted measures for the periods presented.

($000, except as otherwise noted)		Three months ended September 30		Nine months ended September 30
		2017	2016	2017	2016
Reported Results
Loss before income taxes		(3,169)	(11,358)	(54,062)	(14,797)
Net loss		(2,789)	(10,559)	(53,544)	(14,881)
Net loss attributable to common shareholders		(3,817)	(12,104)	(56,615)	(18,421)
Reported Measures
Net loss per common share (dollars):
	Basic	(0.06)	(0.18)	(0.82)	(0.28)
	Diluted	(0.06)	(0.18)	(0.82)	(0.28)
ROE ^1		(8.7)%	(21.8)%	(35.1)%	(11.2)%
Pre-Tax Impact of Adjusting Items:
	Transaction Shares	3,100	—	10,165	—
	Amortization of intangible asset	217	—	651	—
	Goodwill impairment charge	—	—	52,000	—
	Restructuring and integration charge	—	15,106	—	15,106
	Bond forwards	—	—	—	945
Impact of adjusting items on loss before income taxes		3,317	15,106	62,816	16,051
After-Tax Impact of Adjusting Items:
	Transaction Shares	3,100	—	10,165	—
	Amortization of intangible asset	159	—	477	—
	Goodwill impairment charge	—	—	44,261	—
	Deferred tax asset write-down	—	—	7,739	—
	Restructuring and integration charge	—	12,716	—	12,716
	Bond forwards	—	—	—	696
Impact of adjusting items on net loss		3,259	12,716	62,642	13,412
Adjusted Results ^1
Income (loss) before income taxes		148	3,748	8,754	1,254
Net income (loss)		470	2,157	9,098	(1,469)
Net (loss) income attributable to common shareholders		(558)	612	6,027	(5,009)
Adjusted Measures ^1
Net (loss) income per common share (dollars):
	Basic	(0.01)	0.01	0.09	(0.08)
	Diluted	(0.01)	0.01	0.08	(0.08)
ROE		(0.9)%	1.1%	3.5%	(3.0)%

1.	Considered to be non-GAAP financial measures. These measures do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

SUPPLEMENTAL INFORMATION

The following supplemental information reflects how management of Richardson GMP assesses the financial performance of Richardson GMP.

Supplemental Financial Information - Richardson GMP

Richardson GMP's management assesses performance on both a reported and an adjusted basis and considers both bases to be useful in assessing underlying, ongoing business performance. Presenting results on both bases also permits readers to assess the impact of specified items on financial results. Richardson GMP's management uses certain measures to assess the financial performance of Richardson GMP that are not GAAP measures under IFRS. EBITDA and adjusted EBITDA do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of Richardson GMP's performance, liquidity, cash flows and profitability. Richardson GMP's management believes adjusting results by excluding the impact of the specified items is more reflective of ongoing financial performance and cash generating capabilities and provides readers with an enhanced understanding of how management views Richardson GMP's core performance. For further information, refer to the "Supplemental Information" section in the Third Quarter 2017 MD&A.

The following table sets forth an overview of the consolidated financial results of Richardson GMP for the periods indicated, on a 100% basis; noting, however, that GMP owns an approximate 32% non-controlling interest of Richardson GMP as at September 30, 2017.

($000, except as otherwise noted)		Three months ended September 30		% increase/	Nine months ended September 30		% increase/
		2017	2016	(decrease)	2017	2016	(decrease)
Revenue		66,238	70,664	(6)	214,034	200,814	7
Expenses		63,078	65,730	(4)	198,987	191,354	4
Employee compensation and benefits		46,965	48,663	(3)	99,446	138,656	(28)
Non-compensation expenses		16,113	17,067	(6)	99,541	52,698	89
Deferred Income tax		925	—	n.m.	3,377	—	n.m.
Net income - reported		2,235	4,934	(55)	10,745	9,460	n.m.
Pre-tax impact of adjusting items
	Interest	792	792	—	2,269	2,414	(6)
	Deferred income tax	925	—	n.m.	3,377	—	n.m.
	Depreciation and amortization	1,247	1,313	(5)	3,747	3,980	(6)
	Transition assistance loan amortization	2,885	3,519	(18)	8,648	10,646	(19)
EBITDA^1		8,084	10,558	(23)	28,786	26,500	9
	Share-based compensation	461	355	30	1,621	1,899	(15)
Adjusted EBITDA^1		8,545	10,913	(22)	31,332	28,399	10
Number of advisory teams		183	198	(8)
AUA at period-end ($ millions)		29,412	28,334	4

n.m. = not meaningful
1.	Considered to be non-GAAP financial measures. These measures do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

FORWARD-LOOKING INFORMATION

This press release contains "forward-looking information" as defined under applicable Canadian securities laws.   This information includes, but is not limited to, statements concerning our objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.

Forward-looking information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in this press release. GMP's primary business activities are both competitive and subject to various risks. These risks include market, credit, liquidity, operational and legal and regulatory risks and other risk factors including, without limitation: variation in the market value of securities, volatility and liquidity of equity and fixed income trading markets, volume of new financings and mergers and acquisitions, dependence on key personnel and sustainability of fees. Other factors, such as general economic conditions, including interest rate and exchange rate fluctuations, may also have an effect on GMP's results of operations. Many of these risks and uncertainties can affect GMP's actual results and could cause its actual results to materially differ from those expressed or implied in any forward-looking information disclosed by management or on its behalf.  For a description of additional risks that could cause our actual results to materially differ from our current expectations, see "Risk Management" and "Risk Factors" in the Third Quarter 2017 MD&A and "Risk Factors" in GMP's annual information form. These risks and uncertainties are not the only ones facing GMP together with its consolidated operations controlled by it and its predecessors (GMP Group).  Additional risks and uncertainties not currently known to us or that we currently consider immaterial may also impair the operations of the GMP Group.  Material assumptions or factors underlying the forward-looking information contained in this press release include, but are not limited to, "Third Quarter 2017 Financial Highlights", "Segment Results" and "Liquidity and Capital Resources" sections of the Third Quarter 2017 MD&A. Although forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information. Certain statements included in this press release may be considered a "financial outlook" for purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for purposes other than this press release. The forward-looking information contained in this press release is made as of the date of this press release, and should not be relied upon as representing GMP's views as of any date subsequent to the date of this press release. Except as required by applicable law, management and GMP's Board of Directors undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

ABOUT GMP CAPITAL INC.

GMP is a leading independent diversified financial services firm headquartered in Toronto, Canada, providing a wide range of financial products and services to a global client base that includes corporate clients, institutional investors and high-net-worth individuals in two integrated reporting segments. The Capital Markets segment provides investment banking, including advisory and underwriting services, institutional sales and trading and research through offices in Canada, the United States, the United Kingdom, the Bahamas and Asia. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited. Richardson GMP Limited, Canada's largest independent wealth management firm, is focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. GMP is listed on the Toronto Stock Exchange under the symbol "GMP". For further information, please visit our corporate website at gmpcapital.com.

SOURCE GMP Capital Inc.

please contact: GMP Capital Inc., Rocco Colella, Director, Investor Relations, 145 King Street West, Suite 300, Toronto, Ontario M5H 1J8, Tel: [phone]; Fax: [phone], [email protected] or [email protected]

Related Links

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