Pzena Investment Management, Inc. (NYSE: PZN) reported the
following U.S. Generally Accepted Accounting Principles (GAAP) and
non-GAAP basic and diluted net income and earnings per share for
the three and twelve months ended December 31, 2018 and 2017
(in thousands, except per-share amounts):
|
|
GAAP Basis |
|
|
Non-GAAP Basis1 |
|
|
|
For the Three Months EndedDecember 31, |
|
|
For the Three Months EndedDecember 31, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
Basic Net Income |
|
$ |
2,537 |
|
|
$ |
(1,046 |
) |
|
$ |
2,783 |
|
|
$ |
3,597 |
|
Basic Earnings Per
Share |
|
$ |
0.15 |
|
|
$ |
(0.06 |
) |
|
$ |
0.16 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net
Income2 |
|
$ |
2,537 |
|
|
$ |
(1,046 |
) |
|
$ |
11,560 |
|
|
$ |
13,633 |
|
Diluted Earnings Per
Share2 |
|
$ |
0.15 |
|
|
$ |
(0.06 |
) |
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Basis |
|
|
Non-GAAP Basis1 |
|
|
|
For the Twelve Months EndedDecember 31, |
|
|
For the Twelve Months EndedDecember 31, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
Basic Net Income |
|
$ |
13,794 |
|
|
$ |
6,908 |
|
|
$ |
14,040 |
|
|
$ |
11,551 |
|
Basic Earnings Per
Share |
|
$ |
0.78 |
|
|
$ |
0.40 |
|
|
$ |
0.79 |
|
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net
Income2 |
|
$ |
55,347 |
|
|
$ |
6,908 |
|
|
$ |
55,593 |
|
|
$ |
44,706 |
|
Diluted Earnings Per
Share2 |
|
$ |
0.77 |
|
|
$ |
0.40 |
|
|
$ |
0.77 |
|
|
$ |
0.63 |
|
1 Please refer to the GAAP to Non-GAAP Reconciliations on
Page 12 of this release for a reconciliation to the GAAP financial
measures. 2 During the three months ended December 31, 2018
and the three and twelve months ended December 31, 2017, the
calculation of GAAP diluted earnings per share resulted in an
increase in earnings per share. Therefore, diluted net income and
diluted earnings per share are assumed to be equal to basic net
income and basic earnings per share.
GAAP diluted net income and GAAP diluted
earnings per share were $2.5 million and $0.15 respectively, for
the three months ended December 31, 2018, and $(1.0) million
and $(0.06), respectively, for the three months ended
December 31, 2017. GAAP diluted net income and GAAP diluted
earnings per share were $55.3 million and $0.77, respectively, for
the twelve months ended December 31, 2018, and $6.9 million
and $0.40, respectively, for the twelve months ended
December 31, 2017.
In evaluating the results of operations,
management also reviews non-GAAP measures of earnings, which are
adjusted to exclude accounting items that add a measure of
non-operational complexity which obscures the underlying
performance of the business. For the three and twelve months
ended December 31, 2018 and 2017, earnings were adjusted to
exclude changes to the deferred tax asset and corresponding
liability to the Company's selling and converting shareholders
during the fourth quarters of 2018 and 2017, and the impact of the
Tax Cuts and Jobs Act enacted in the fourth quarter of 2017.
As adjusted, non-GAAP diluted net income and non-GAAP diluted
earnings per share were $11.6 million and $0.16, respectively, for
the three months ended December 31, 2018, and $55.6 million and
$0.77, respectively, for the twelve months ended December 31, 2018.
As adjusted, non-GAAP diluted net income and non-GAAP diluted
earnings per share were $13.6 million and $0.19, respectively, for
the three months ended December 31, 2017, and $44.7 million
and $0.63, respectively, for the twelve months ended
December 31, 2017. Management uses the non-GAAP measures to
assess the strength of the underlying operations of the
business. It believes the non-GAAP measures provide
information to further analyze the Company's operations between
periods and over time. Investors should consider the non-GAAP
measures in addition to, and not as a substitute for, financial
measures prepared in accordance with GAAP.
Net income for diluted earnings per share
generally assume all operating company membership units are
converted into Company stock at the beginning of the reporting
period, and the resulting change to Company net income associated
with its increased interest in the operating company is taxed at
the Company's effective tax rate, exclusive of the adjustments
noted above and other adjustments. When this conversion
results in an increase in earnings per share or a decrease in loss
per share, diluted net income and diluted earnings per share are
assumed to be equal to basic net income and basic earnings per
share for the reporting period.
Assets Under
Management (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Twelve Months Ended |
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
20181 |
|
|
2018 |
|
|
2017 |
|
|
20181 |
|
|
2017 |
|
Separately Managed
Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of Period |
|
$ |
14.6 |
|
|
$ |
13.8 |
|
|
$ |
14.3 |
|
|
$ |
15.0 |
|
|
$ |
12.5 |
|
Inflows |
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.3 |
|
|
|
1.6 |
|
|
|
1.4 |
|
Outflows |
|
|
(0.2 |
) |
|
|
(0.3 |
) |
|
|
(0.5 |
) |
|
|
(1.8 |
) |
|
|
(1.6 |
) |
Net
Flows |
|
|
(0.1 |
) |
|
|
0.5 |
|
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
Market
Appreciation/(Depreciation) |
|
|
(1.9 |
) |
|
|
0.3 |
|
|
|
0.9 |
|
|
|
(2.2 |
) |
|
|
2.7 |
|
End of
Period |
|
$ |
12.6 |
|
|
$ |
14.6 |
|
|
$ |
15.0 |
|
|
$ |
12.6 |
|
|
$ |
15.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-Advised
Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of Period Assets |
|
$ |
22.2 |
|
|
$ |
21.2 |
|
|
$ |
19.7 |
|
|
$ |
21.8 |
|
|
$ |
16.3 |
|
Inflows |
|
|
0.6 |
|
|
|
1.0 |
|
|
|
1.3 |
|
|
|
3.0 |
|
|
|
3.5 |
|
Outflows |
|
|
(0.6 |
) |
|
|
(0.5 |
) |
|
|
(0.7 |
) |
|
|
(2.4 |
) |
|
|
(1.8 |
) |
Net
Flows |
|
|
— |
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
|
1.7 |
|
Market
Appreciation/(Depreciation) |
|
|
(3.4 |
) |
|
|
0.5 |
|
|
|
1.5 |
|
|
|
(3.6 |
) |
|
|
3.8 |
|
End of
Period |
|
$ |
18.8 |
|
|
$ |
22.2 |
|
|
$ |
21.8 |
|
|
$ |
18.8 |
|
|
$ |
21.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pzena Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of Period Assets |
|
$ |
2.1 |
|
|
$ |
1.9 |
|
|
$ |
1.4 |
|
|
$ |
1.7 |
|
|
$ |
1.2 |
|
Inflows |
|
|
0.3 |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.9 |
|
|
|
0.5 |
|
Outflows |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
— |
|
|
|
(0.3 |
) |
|
|
(0.3 |
) |
Net
Flows |
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.6 |
|
|
|
0.2 |
|
Market
Appreciation/(Depreciation) |
|
|
(0.3 |
) |
|
|
0.1 |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
0.3 |
|
End of
Period |
|
$ |
2.0 |
|
|
$ |
2.1 |
|
|
$ |
1.7 |
|
|
$ |
2.0 |
|
|
$ |
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of Period |
|
$ |
38.9 |
|
|
$ |
36.9 |
|
|
$ |
35.4 |
|
|
$ |
38.5 |
|
|
$ |
30.0 |
|
Inflows |
|
|
1.0 |
|
|
|
2.0 |
|
|
|
1.9 |
|
|
|
5.5 |
|
|
|
5.4 |
|
Outflows |
|
|
(0.9 |
) |
|
|
(0.9 |
) |
|
|
(1.2 |
) |
|
|
(4.5 |
) |
|
|
(3.7 |
) |
Net
Flows |
|
|
0.1 |
|
|
|
1.1 |
|
|
|
0.7 |
|
|
|
1.0 |
|
|
|
1.7 |
|
Market
Appreciation/(Depreciation) |
|
|
(5.6 |
) |
|
|
0.9 |
|
|
|
2.4 |
|
|
|
(6.1 |
) |
|
|
6.8 |
|
End of
Period |
|
$ |
33.4 |
|
|
$ |
38.9 |
|
|
$ |
38.5 |
|
|
$ |
33.4 |
|
|
$ |
38.5 |
|
1 Approximately $0.2 billion in assets under management
have been reclassified from Separately Managed Accounts to
Sub-Advised Accounts from amounts reported in the Company’s 8-K and
press release filed on January 7, 2019.
Financial Discussion
Revenue
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
($ thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
Separately Managed
Accounts |
|
$ |
18,324 |
|
|
$ |
19,578 |
|
|
$ |
20,416 |
|
Sub-Advised
Accounts |
|
|
14,832 |
|
|
|
16,616 |
|
|
|
15,565 |
|
Pzena Funds |
|
|
3,243 |
|
|
|
3,386 |
|
|
|
2,928 |
|
Total |
|
$ |
36,399 |
|
|
$ |
39,580 |
|
|
$ |
38,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Separately Managed
Accounts |
|
|
|
|
|
$ |
77,144 |
|
|
$ |
76,419 |
|
Sub-Advised
Accounts |
|
|
|
|
|
|
64,155 |
|
|
|
55,003 |
|
Pzena Funds |
|
|
|
|
|
|
12,280 |
|
|
|
9,873 |
|
Total |
|
|
|
|
|
$ |
153,579 |
|
|
$ |
141,295 |
|
Revenue was $36.4 million for the fourth quarter
of 2018, a decrease of 8.0% from $39.6 million for the third
quarter of 2018 and a decrease of 6.5% from $38.9 million for the
fourth quarter of 2017.
Included in these amounts for the fourth quarter
of 2018 were performance fees recognized of $0.3 million, compared
to $0.8 million for the third quarter of 2018 and $1.5 million for
the fourth quarter of 2017.
Average assets under management for the fourth
quarter of 2018 were $36.1 billion, decreasing 5.7% from $38.3
billion for the third quarter of 2018, and 1.9% from $36.8 billion
for the fourth quarter of 2017. The decrease from the third
quarter of 2018 and the fourth quarter of 2017 primarily reflects
market depreciation. The decrease from the fourth quarter of
2017 was partially offset by net inflows.
The weighted average fee rate was 0.404% for the
fourth quarter of 2018, decreasing from 0.413% for the third
quarter of 2018, and decreasing from 0.423% for the fourth quarter
of 2017.
The weighted average fee rate for separately
managed accounts was 0.541% for the fourth quarter of 2018,
decreasing from 0.547% for the third quarter of 2018, and
decreasing from 0.560% for the fourth quarter of 2017. The
decrease from third quarter of 2018 and fourth quarter of 2017
reflects an increase in large client relationships that generally
carry lower fee rates. The decrease from the fourth quarter of 2017
also reflects a decrease in performance fees recognized during the
fourth quarter of 2018.
The weighted average fee rate for sub-advised
accounts was 0.289% for the fourth quarter of 2018, decreasing from
0.302% for the third quarter of 2018, and from 0.302% for the
fourth quarter of 2017. The decrease from third quarter of 2018 and
fourth quarter of 2017 reflects a decrease in performance fees
recognized during the fourth quarter of 2018. In addition, certain
accounts related to one retail client relationship have fulcrum fee
arrangements. These fee arrangements require a reduction in
the base fee or allow for a performance fee if the relevant
investment strategy underperforms or outperforms, respectively, the
agreed-upon benchmark over the contract's measurement period, which
extends to three years. During the fourth quarter of 2018 a
reduction in base fees related to these fee arrangements was
recognized. A reduction in base fees was not recognized
during the third quarter of 2018 or fourth quarter of 2017.
To the extent the three-year performance records of these accounts
fluctuate relative to their relevant benchmarks, the amount of base
fees recognized may vary.
The weighted average fee rate for Pzena funds
was 0.644% for the fourth quarter of 2018, decreasing from 0.668%
for the third quarter of 2018, and from 0.737% for the fourth
quarter of 2017. The decrease from the fourth quarter of 2017
reflects the adoption of the new revenue recognition standard,
which requires fund expense cap reimbursements to be presented net
against revenue. The Company adopted the new revenue recognition
standard as of January 1, 2018 using a modified retrospective
approach, and thus prior periods have not been restated. Excluding
the impact of the revenue recognition presentation change, the
weighted average fee rate for Pzena funds was 0.692% for the fourth
quarter of 2018, decreasing from 0.703% for the third quarter of
2018 and from 0.737% for the fourth quarter of 2017. The decrease
from the fourth quarter of 2017 reflects a decrease in performance
fees recognized during the fourth quarter of 2018. The decrease
from the third quarter of 2018 reflects an increase in assets in
products that generally carry higher fee rates.
Total operating expenses were $17.4 million for
the fourth quarter of 2018, decreasing from $19.4 million for the
third quarter of 2018 and from $18.0 million for the fourth quarter
of 2017. The decrease in operating expenses from the third
quarter of 2018 reflects a decrease in compensation expense,
partially offset by an increase in general and administrative
costs. Compensation expense in the fourth quarter of 2018 reflects
a decrease in compensation rates. The increase in general and
administrative expenses from the third quarter of 2018 reflects an
increase in professional fees. The decrease in operating expenses
from the fourth quarter of 2017 reflects a decrease in compensation
expense, as well as a decrease in general and administrative
expenses. The decrease in general and administrative expenses
reflects a decrease in professional fees.
Operating
Expenses (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
($ thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
Compensation and
Benefits Expense |
|
$ |
13,899 |
|
|
$ |
16,122 |
|
|
$ |
14,223 |
|
General and
Administrative Expense |
|
|
3,549 |
|
|
|
3,322 |
|
|
|
3,752 |
|
Operating
Expenses |
|
$ |
17,448 |
|
|
$ |
19,444 |
|
|
$ |
17,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Compensation and
Benefits Expense |
|
|
|
|
|
$ |
61,419 |
|
|
$ |
58,904 |
|
General and
Administrative Expense |
|
|
|
|
|
|
13,405 |
|
|
|
13,337 |
|
Operating
Expenses |
|
|
|
|
|
$ |
74,824 |
|
|
$ |
72,241 |
|
As of December 31, 2018, employee headcount
was 106, down from 109 at September 30, 2018 and, up from 105 at
December 31, 2017.
The operating margin was 52.1% for the fourth
quarter of 2018, compared to 50.9% for the third quarter of 2018,
and 53.8% for the fourth quarter of 2017.
Other (expense)/ income was an expense of
approximately $3.0 million for the fourth quarter of 2018, income
of $0.6 million for the third quarter of 2018, and income of $22.2
million for the fourth quarter of 2017.
Other (expense)/ income primarily reflects the
fluctuations in the gains/ (losses) and other investment income
recognized by the Company on its direct equity investments, the
majority of which are held to satisfy obligations under its
deferred compensation plan. Other (expense)/ income also
includes a portion of gains/ (losses) and other investment income
recognized by external investors on their investments in investment
partnerships that the Company consolidates, which are offset in net
income attributable to non-controlling interests. During the
fourth quarter of 2017, other (expense)/ income included $20.8
million of income associated with the enactment of the Tax Cuts and
Jobs Act. Excluding the outside interests of the Company's
investment partnerships and the impact of the Tax Cuts and Jobs
Act, other (expense)/ income was an expense of approximately $2.9
million for the fourth quarter of 2018, income of $0.6 million for
third quarter of 2018, and income of $1.1 million for the fourth
quarter of 2017. Details of other (expense)/ income, as well
as a reconciliation of the related GAAP and non-GAAP measures, are
shown below:
Other
(Expense)/ Income (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
($ thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
Net Interest and
Dividend Income |
|
$ |
332 |
|
|
$ |
286 |
|
|
$ |
122 |
|
(Losses)/ Gains and
Other Investment Income |
|
|
(3,386 |
) |
|
|
346 |
|
|
|
1,315 |
|
Change in Liability to
Selling and Converting Shareholders1 |
|
|
87 |
|
|
|
— |
|
|
|
— |
|
Impact of the Tax Cuts
and Jobs Act on the Liability to Selling and Converting
Shareholders2 |
|
|
— |
|
|
|
— |
|
|
|
20,819 |
|
Other Income/
(Expense) |
|
|
(34 |
) |
|
|
(27 |
) |
|
|
(52 |
) |
GAAP
Other (Expense)/ Income |
|
|
(3,001 |
) |
|
|
605 |
|
|
|
22,204 |
|
Change in Liability to
Selling and Converting Shareholders1 |
|
|
(87 |
) |
|
|
— |
|
|
|
— |
|
Impact of the Tax Cuts
and Jobs Act on the Liability to Selling and Converting
Shareholders2 |
|
|
— |
|
|
|
— |
|
|
|
(20,819 |
) |
Outside Interests of
Investment Partnerships3 |
|
|
221 |
|
|
|
(16 |
) |
|
|
(271 |
) |
Non-GAAP
Other (Expense)/ Income, Net of Outside Interests |
|
$ |
(2,867 |
) |
|
$ |
589 |
|
|
$ |
1,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Net Interest and
Dividend Income |
|
|
|
|
|
$ |
841 |
|
|
$ |
523 |
|
(Losses)/ Gains and
Other Investment Income |
|
|
|
|
|
|
(3,530 |
) |
|
|
4,117 |
|
Change in Liability to
Selling and Converting Shareholders1 |
|
|
|
|
|
|
87 |
|
|
|
— |
|
Impact of the Tax Cuts
and Jobs Act on the Liability to Selling and Converting
Shareholders2 |
|
|
|
|
|
|
— |
|
|
|
20,819 |
|
Other Income |
|
|
|
|
|
|
(56 |
) |
|
|
149 |
|
GAAP
Other (Expense)/ Income |
|
|
|
|
|
|
(2,658 |
) |
|
|
25,608 |
|
Change in Liability to
Selling and Converting Shareholders1 |
|
|
|
|
|
|
(87 |
) |
|
|
— |
|
Impact of the Tax Cuts
and Jobs Act on the Liability to Selling and Converting
Shareholders2 |
|
|
|
|
|
|
— |
|
|
|
(20,819 |
) |
Outside Interests of
Investment Partnerships3 |
|
|
|
|
|
|
208 |
|
|
|
(863 |
) |
Non-GAAP
Other (Expense)/ Income, Net of Outside Interests |
|
|
|
|
|
$ |
(2,537 |
) |
|
$ |
3,926 |
|
1 Reflects the change in the liability to the Company’s
selling and converting shareholders associated with the
deferred tax asset generated by the Company’s initial public
offering and subsequent unit conversions.2 Reflects the
change in the liability to the Company's selling and converting
shareholders associated with the re-measurement of the deferred tax
asset upon enactment of the Tax Cuts and Jobs Act in the fourth
quarter of 2017.3 Represents the non-controlling interest
allocation of the income of the Company's
consolidated investment partnerships to its external
investors.
The Company recognized income tax expenses of
$2.1 million for the fourth quarter of 2018, $1.3 million for the
third quarter of 2018, and $28.1 million for the fourth quarter of
2017. Third quarter 2018 income tax expense reflects a $0.5
million benefit associated with the reversal of uncertain tax
position liabilities and interest related to unincorporated and
other business tax expenses due to the expiration of the statute of
limitations. Income taxes for the fourth quarter of 2017
included $26.5 million in income tax expense resulting from the
re-measurement of the deferred tax asset related to the Tax Cuts
and Jobs Act enacted in the United States.
Details of the income tax expense, as well as a
reconciliation of the related GAAP and non-GAAP measures, are shown
below:
Income Tax
Expense (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
($ thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
GAAP Income Tax
Expense |
|
$ |
2,101 |
|
|
$ |
1,294 |
|
|
$ |
28,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Corporate
Income Tax Expense |
|
$ |
993 |
|
|
$ |
867 |
|
|
$ |
1,775 |
|
Non-GAAP Unincorporated
and Other Business Tax Expense |
|
|
775 |
|
|
|
427 |
|
|
|
815 |
|
Non-GAAP
Income Tax Expense |
|
|
1,768 |
|
|
|
1,294 |
|
|
|
2,590 |
|
Impact of
Tax Cuts and Jobs Act1 |
|
|
— |
|
|
|
— |
|
|
|
26,468 |
|
Change
due to Prior Period Adjustments2 |
|
|
333 |
|
|
|
— |
|
|
|
(1,006 |
) |
GAAP
Income Tax Expense |
|
$ |
2,101 |
|
|
$ |
1,294 |
|
|
$ |
28,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
GAAP Income Tax
Expense |
|
|
|
|
|
$ |
7,778 |
|
|
$ |
34,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Corporate
Income Tax Expense |
|
|
|
|
|
$ |
4,667 |
|
|
$ |
6,188 |
|
Non-GAAP Unincorporated
and Other Business Tax Expense |
|
|
|
|
|
|
2,778 |
|
|
|
2,862 |
|
Non-GAAP
Income Tax Expense |
|
|
|
|
|
|
7,445 |
|
|
|
9,050 |
|
Impact of
Tax Cuts and Jobs Act1 |
|
|
|
|
|
|
— |
|
|
|
26,468 |
|
Change
due to Prior Period Adjustments2 |
|
|
|
|
|
|
333 |
|
|
|
(1,006 |
) |
GAAP
Income Tax Expense |
|
|
|
|
|
$ |
7,778 |
|
|
$ |
34,512 |
|
1 Reflects income tax expense resulting from the
re-measurement of the deferred tax asset related to the Tax Cuts
and Jobs Act enacted in the United States during the fourth quarter
of 2017. 2 Reflects the impact of a prior period
adjustment to the deferred tax asset established as part of the
Company’s initial public offering and subsequent unit conversions
recognized during the fourth quarter of 2018, and the net impact of
a prior period adjustment to the deferred tax asset and
corresponding liability to selling and converting shareholders
recognized during the fourth quarter of 2017.
Details of the net income attributable to non-controlling
interests of the Company's operating company and consolidated
subsidiaries are shown below:
GAAP
Non-Controlling Interests (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
($ thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
Operating Company
Allocation |
|
$ |
11,533 |
|
|
$ |
15,169 |
|
|
$ |
15,861 |
|
Outside Interests of
Investment Partnerships1 |
|
|
(221 |
) |
|
|
16 |
|
|
|
271 |
|
GAAP Net Income
Attributable to Non-Controlling Interests |
|
$ |
11,312 |
|
|
$ |
15,185 |
|
|
$ |
16,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Operating Company
Allocation |
|
|
|
|
|
$ |
54,733 |
|
|
$ |
52,379 |
|
Outside Interests of
Investment Partnerships1 |
|
|
|
|
|
|
(208 |
) |
|
|
863 |
|
GAAP Net Income
Attributable to Non-Controlling Interests |
|
|
|
|
|
$ |
54,525 |
|
|
$ |
53,242 |
|
1 Represents the non-controlling interest allocation of
the income of the Company's consolidated investment partnerships to
its external investors.
On January 29, 2019, the Company's Board of
Directors approved a year-end dividend of $0.49 per share of its
Class A common stock. The following dates apply to the
dividend:
Record
Date: February 15, 2019
Payment
Date: March 1, 2019
During the last twelve months, inclusive of the
dividend noted above, the Company declared total dividends of $0.58
per share of its Class A common stock.
Fourth Quarter and Full Year 2018 Earnings Call
Information
Pzena Investment Management, Inc. (NYSE: PZN)
will hold a conference call to discuss the Company's financial
results and outlook at 10:00 a.m. ET, Wednesday, February 6,
2019. The call will be open to the public.
Webcast Instructions: To gain access to the
webcast, which will be "listen-only," go to the Events page in the
Investor Relations area of the Company's website,
www.pzena.com.
Teleconference Instructions: To gain access to
the conference call via telephone, U.S. callers should dial
844-378-6482; Canada callers should dial 855-669-9657;
international callers should dial 412-317-5106. Please
reference the Pzena Investment Management call.
Replay: The conference call will be available
for replay through February 20, 2019, on the web using the
information given above.
About Pzena Investment Management
Pzena Investment Management, LLC, the firm's
operating company, is a value-oriented investment management
firm. Founded in 1995, Pzena Investment Management has built
a diverse, global client base. More firm and stock
information is posted at www.pzena.com.
Forward-Looking Statements
This press release may contain, in addition to
historical information, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities and Exchange Act of 1934, as
amended. Forward-looking statements provide the Company’s current
views, expectations, or forecasts of future events and performance,
and include statements about our expectations, beliefs, plans,
objectives, intentions, assumptions and other statements that are
not historical facts. Words or phrases such as “anticipate,”
“believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,”
“may,” “plan,” “potential,” “predict,” “project” or similar words
or phrases, or the negatives of those words or phrases, may
identify forward-looking statements, but the absence of these words
does not necessarily mean that a statement is not
forward-looking.
Among the factors that could cause actual
results to differ from those expressed or implied by a
forward-looking statement are those described in the sections
entitled “Risk Factors” and “Management's Discussion and Analysis
of Financial Condition and Results of Operations” in the Company's
Annual Report on Form 10-K, as filed with the SEC on March 9, 2018
and in the Company's Quarterly Reports on Form 10-Q as filed with
the SEC. In light of these risks, uncertainties, assumptions,
and factors, actual results could differ materially from those
expressed or implied in the forward-looking statements. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date stated, or if no date
is stated, as of the date of this release.
The Company is not under any obligation and does
not intend to make publicly available any update or other revisions
to any forward-looking statements to reflect circumstances existing
after the date of this release or to reflect the occurrence of
future events even if experience or future events make it clear
that any expected results expressed or implied by those
forward-looking statements will not be realized.
Contact: Gary Bachman, 212-583-0225 or bachman@pzena.com.
PZENA INVESTMENT MANAGEMENT,
INC.
CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION(in thousands)
|
|
As of |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
|
|
(unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and
Cash Equivalents |
|
$ |
38,099 |
|
|
$ |
63,414 |
|
Restricted Cash |
|
|
1,028 |
|
|
|
1,017 |
|
Due from
Broker |
|
|
64 |
|
|
|
1,875 |
|
Advisory
Fees Receivable |
|
|
32,590 |
|
|
|
32,531 |
|
Investments |
|
|
50,470 |
|
|
|
21,737 |
|
Prepaid
Expenses and Other Assets |
|
|
6,099 |
|
|
|
2,575 |
|
Deferred
Tax Asset |
|
|
38,317 |
|
|
|
39,639 |
|
Property
and Equipment, Net of Accumulated |
|
|
|
|
|
|
|
|
Depreciation of $3,724 and $3,063, respectively |
|
|
5,394 |
|
|
|
6,259 |
|
TOTAL
ASSETS |
|
$ |
172,061 |
|
|
$ |
169,047 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Accounts
Payable and Accrued Expenses |
|
$ |
37,266 |
|
|
$ |
31,983 |
|
Due to
Broker |
|
|
360 |
|
|
|
144 |
|
Liability
to Selling and Converting Shareholders |
|
|
32,389 |
|
|
|
36,441 |
|
Deferred
Compensation Liability |
|
|
1,845 |
|
|
|
918 |
|
Other
Liabilities |
|
|
108 |
|
|
|
272 |
|
TOTAL
LIABILITIES |
|
|
71,968 |
|
|
|
69,758 |
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Total
Pzena Investment Management, Inc.'s Equity |
|
|
34,087 |
|
|
|
32,304 |
|
Non-Controlling Interests |
|
|
66,006 |
|
|
|
66,985 |
|
TOTAL
EQUITY |
|
|
100,093 |
|
|
|
99,289 |
|
TOTAL
LIABILITIES AND EQUITY |
|
$ |
172,061 |
|
|
$ |
169,047 |
|
|
PZENA INVESTMENT MANAGEMENT,
INC.
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except share and
per-share amounts)
|
|
For the Three Months Ended |
|
|
For the Twelve Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
REVENUE |
|
$ |
36,399 |
|
|
$ |
38,909 |
|
|
$ |
153,579 |
|
|
$ |
141,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
Benefits Expense |
|
|
13,899 |
|
|
|
14,223 |
|
|
|
61,419 |
|
|
|
58,904 |
|
General and
Administrative Expense |
|
|
3,549 |
|
|
|
3,752 |
|
|
|
13,405 |
|
|
|
13,337 |
|
TOTAL
OPERATING EXPENSES |
|
|
17,448 |
|
|
|
17,975 |
|
|
|
74,824 |
|
|
|
72,241 |
|
Operating Income |
|
|
18,951 |
|
|
|
20,934 |
|
|
|
78,755 |
|
|
|
69,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
|
|
(3,001 |
) |
|
|
22,204 |
|
|
|
(2,658 |
) |
|
|
25,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Taxes |
|
|
15,950 |
|
|
|
43,138 |
|
|
|
76,097 |
|
|
|
94,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
|
2,101 |
|
|
|
28,052 |
|
|
|
7,778 |
|
|
|
34,512 |
|
Consolidated Net
Income |
|
|
13,849 |
|
|
|
15,086 |
|
|
|
68,319 |
|
|
|
60,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net Income
Attributable to Non-Controlling Interests |
|
|
11,312 |
|
|
|
16,132 |
|
|
|
54,525 |
|
|
|
53,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable
to Pzena Investment Management, Inc. |
|
$ |
2,537 |
|
|
$ |
(1,046 |
) |
|
$ |
13,794 |
|
|
$ |
6,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share -
Basic and Diluted Attributable to Pzena Investment Management, Inc.
Common Stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for Basic
Earnings per Share1 |
|
$ |
2,537 |
|
|
$ |
(1,046 |
) |
|
$ |
13,794 |
|
|
$ |
6,908 |
|
Basic Earnings per
Share1 |
|
$ |
0.15 |
|
|
$ |
(0.06 |
) |
|
$ |
0.78 |
|
|
$ |
0.40 |
|
Basic Weighted Average
Shares Outstanding |
|
|
17,460,942 |
|
|
|
17,392,946 |
|
|
|
17,678,874 |
|
|
|
17,338,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for Diluted
Earnings per Share1 |
|
$ |
2,537 |
|
|
$ |
(1,046 |
) |
|
$ |
55,347 |
|
|
$ |
6,908 |
|
Diluted Earnings per
Share1 |
|
$ |
0.15 |
|
|
$ |
(0.06 |
) |
|
$ |
0.77 |
|
|
$ |
0.40 |
|
Diluted Weighted
Average Shares Outstanding |
|
|
71,945,413 |
|
|
|
71,252,063 |
|
|
|
71,934,144 |
|
|
|
70,934,362 |
|
1 During the three months ended December 31, 2018 and the
three and twelve months ended December 31, 2017, the calculation of
GAAP diluted earnings per share resulted in an increase in earnings
per share. Therefore, diluted net income and diluted earnings per
share are assumed to be equal to basic net income and basic
earnings per share.
PZENA INVESTMENT MANAGEMENT,
INC.
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except share and per-share
amounts)
|
|
For the Three Months Ended |
|
|
For the Twelve Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
GAAP Net Income/
(Loss) |
|
$ |
2,537 |
|
|
$ |
(1,046 |
) |
|
$ |
13,794 |
|
|
$ |
6,908 |
|
Net
Expense as a result of Tax Cuts and Jobs Act |
|
|
— |
|
|
|
5,649 |
|
|
|
— |
|
|
|
5,649 |
|
Change
due to Prior Period Adjustments |
|
|
246 |
|
|
|
(1,006 |
) |
|
|
246 |
|
|
|
(1,006 |
) |
Non-GAAP Net
Income |
|
$ |
2,783 |
|
|
$ |
3,597 |
|
|
$ |
14,040 |
|
|
$ |
11,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted Average
Shares Outstanding |
|
|
17,460,942 |
|
|
|
17,392,946 |
|
|
|
17,678,874 |
|
|
|
17,338,348 |
|
GAAP Basic Earnings per
Share |
|
$ |
0.15 |
|
|
$ |
(0.06 |
) |
|
$ |
0.78 |
|
|
$ |
0.40 |
|
Net
Expense as a result of Tax Cuts and Jobs Act |
|
|
— |
|
|
|
0.32 |
|
|
|
— |
|
|
|
0.33 |
|
Change
due to Prior Period Adjustments |
|
|
0.01 |
|
|
|
(0.05 |
) |
|
|
0.01 |
|
|
|
(0.06 |
) |
Non-GAAP Basic Earnings
per Share |
|
$ |
0.16 |
|
|
$ |
0.21 |
|
|
$ |
0.79 |
|
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income for
Diluted Earnings per Share |
|
$ |
11,314 |
|
|
$ |
8,990 |
|
|
$ |
55,347 |
|
|
$ |
40,063 |
|
Net
Expense as a result of Tax Cuts and Jobs Act |
|
|
— |
|
|
|
5,649 |
|
|
|
— |
|
|
|
5,649 |
|
Change
due to Prior Period Adjustments |
|
|
246 |
|
|
|
(1,006 |
) |
|
|
246 |
|
|
|
(1,006 |
) |
Non-GAAP Net Income for
Diluted Earnings per Share |
|
$ |
11,560 |
|
|
$ |
13,633 |
|
|
$ |
55,593 |
|
|
$ |
44,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Weighted
Average Shares Outstanding |
|
|
71,945,413 |
|
|
|
71,252,063 |
|
|
|
71,934,144 |
|
|
|
70,934,362 |
|
GAAP Diluted Earnings
per Share |
|
$ |
0.16 |
|
|
$ |
0.13 |
|
|
$ |
0.77 |
|
|
$ |
0.56 |
|
Net
Expense as a result of Tax Cuts and Jobs Act |
|
|
— |
|
|
|
0.08 |
|
|
|
— |
|
|
|
0.08 |
|
Change
due to Prior Period Adjustments |
|
|
— |
|
|
|
(0.02 |
) |
|
|
— |
|
|
|
(0.01 |
) |
Non-GAAP Diluted
Earnings per Share |
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
$ |
0.77 |
|
|
$ |
0.63 |
|
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