ZAIS Group Holdings, Inc. Reports Third Quarter 2017 Results
RED BANK, N.J., Nov. 13, 2017 /PRNewswire/ -- ZAIS Group Holdings, Inc. (NASDAQ: ZAIS) ("ZAIS"), today reported financial results for the three and nine months ended September 30, 2017. 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, 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.
THIRD QUARTER 2017 HIGHLIGHTS
A summary of the Company's results for the three and nine months ended September 30, 2017 and September 30, 2016 are set forth below. All dollar amounts are presented in millions, with the exception of figures presented on a per share basis.
| Three Months Ended |
Nine Months Ended |
|||
| September 30, |
September 30, |
September 30, |
September 30, |
|
| U.S. GAAP |
||||
|
Net income/(loss) |
$1.6 |
$1.6 |
$(3.4) |
$(9.7) |
|
Net income/(loss) per diluted weighted average share outstanding applicable to ZAIS GroupHoldings, Inc. |
$0.03 |
$(0.02) |
$(0.31) |
$(0.66) |
| Net income/(loss) before income taxes |
$1.6 |
$1.6 |
$(3.4) |
$(9.7) |
| Non-GAAP |
||||
| Net income/(loss) (excluding Consolidated Funds of ZAIS Group) |
$0.6 |
$(0.3) |
$(6.6) |
$(13.4) |
| Net income/(loss) (excluding Consolidated Funds of ZAIS Group) per diluted weighted average share outstanding |
$0.03 |
$(0.02) |
$(0.31) |
$(0.66) |
|
Adjusted EBITDA |
$0.8 |
$1.1 |
$(5.1) |
$(9.5) |
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.
CONSOLIDATED GAAP RESULTS
Operating Results – Third Quarter Ended September 30, 2017
The Company recorded GAAP net income for the three months ended September 30, 2017 of $1.6 million compared with GAAP net income of $1.6 million for the three months ended September 30, 2016. For the quarter ending September 30, 2017, there was an increase in revenues of $2.0 million, a decrease in expenses of $0.2 million, offset by a decrease in other income of $2.2 million, as compared to the same period ending September 30, 2016. The GAAP results include the results of funds and structured financing entities which are consolidated by the Company (the "Consolidated Funds").
Total revenues increased by $2.0 million primarily due to a $0.9 million increase in incentive income that was primarily driven by an increase of $1.9 million for certain funds that were crystalized during the current quarter, offset by a decrease of $1.0 million in incentive fees attributable to a fund that generated incentive fees in the prior year period, but was liquidated in the prior year so no incentive fees were realized in the current period. Management fees increased by $0.6 million due to $0.9 million of fees recognized for certain ZAIS managed CLOs that were not recognized in the comparable prior year period and $0.6 million driven by increased performance of certain ZAIS Managed Entities in the current quarter. These favorable management fee variances were offset by a decrease of $0.7 million due to the termination of the management agreement between ZAIS REIT Management and ZFC REIT and a decrease of $0.2 million due to the liquidation of certain managed accounts. Revenues also increased due to a $0.4 million increase in reimbursement revenue relating to the reimbursement from certain ZAIS Managed Entities for research and data services expenses incurred by ZAIS Group during the current quarter and paid directly to vendors by ZAIS Group and a $0.1 million increase in income of Consolidated Funds related to ZAIS Zephyr A-6 LP's ("Zephyr A-6") investments in unconsolidated ZAIS managed CLOs.
Total expenses decreased by $0.2 million primarily due to a $1.1 million decrease in compensation and benefits offset, by a $0.7 million increase in general, administrative and other expenses and a $0.2 million increase in expenses of Consolidated Funds. Compensation and benefits decreased primarily due to a $1.2 million decrease in equity compensation expense relating to the reduction in outstanding equity compensation units resulting from the cancellation in December 2016 of all of ZGP's Class B-0 Units held by certain employees in consideration of the receipt by such employees in substitution therefor (as elected by each employee) of RSUs (which fully vested on March 17, 2017) or the right to receive cash (which was paid on March 22, 2017). General, administrative and other expenses increased by $0.7 million primarily due to an increase of $0.4 million in expenses relating to research and data services borne by ZAIS Group and paid directly by ZAIS Group to vendors which are reimbursable from certain ZAIS Managed Entities, an increase of $0.1 million in expenses relating to research and data services incurred by ZAIS Group and paid directly to vendors by ZAIS Group relating to the management of the ZAIS Managed Entities and an increase of $0.3 million relating to legal fees offset, by a net decrease of $0.1 million in other general and administrative costs.
Other income decreased by $2.2 million primarily due to a $2.8 million decrease in net gain (loss) on Consolidated Funds' investments related to Zephyr A-6 offset by a $0.6 million increase in net gain on beneficial interest of consolidated collateralized financing entity which relates to Zephyr A-6's investment in ZAIS CLO 5.
Operating Results – Nine Months Ended September 30, 2017
The Company recorded GAAP net loss for the nine months ended September 30, 2017 of $(3.4) million compared with a GAAP net loss of $(9.7) million for the nine months ended September 30, 2016. The decrease of $6.3 million in GAAP net loss was primarily driven by an increase in revenues of $5.8 million and a decrease in expenses of $2.7 million, offset by a decrease in other income of $2.3 million.
ACQUISITION PROPOSAL
On September 5, 2017, Z Acquisition LLC entered into a share purchase agreement with Ramguard LLC pursuant to which Z Acquisition LLC will acquire 6,500,000 shares of Class A Common Stock of the Company at a purchase price of $4.00 per share for a combination of cash and a note (the "Ramguard Agreement"). After giving effect to the Ramguard Agreement, Christian Zugel would hold, directly or indirectly, 6,800,000 shares of the Class A Common Stock and 3,325,000 Class A Units of ZGP.
On September 5, 2017, the Special Committee of the Board of Directors of the Company received a letter (the "Letter") from Christian Zugel seeking to pursue discussions with the Special Committee to take the Company private by acquiring the issued and outstanding shares of Class A Common Stock of the Company, other than shares held by Christian Zugel and his affiliates, at $4.00 per share in an all cash transaction by way of a merger. A copy of the Letter is included as Exhibit 99.1 in the 8K filed with the SEC on September 7, 2017. Discussions between Christian Zugel and the Special Committee are continuing. There is no assurance that an agreement will be reached.
CONSOLIDATED NON-GAAP RESULTS
Please see the discussion of "Non-GAAP Financial Measures", including the definitions of net income (loss) (excluding Consolidated Funds of ZAIS Group) and Adjusted EBITDA, and reconciliations of such Non-GAAP financial measures to the respective 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 September 30, 2017, the Company had cash and cash equivalents, on an unconsolidated basis, of $16.2 million and no debt obligations.
THIRD QUARTER 2017 SUPPLEMENTAL INFORMATION
The Company's Third Quarter 2017 Supplemental Information – September 30, 2017, 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 (Unaudited) |
||||||||
| September 30, 2017 |
December 31, 2016 |
|||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ |
16,241 |
$ |
38,712 |
||||
| Income and fees receivable |
6,264 |
8,805 |
||||||
| Investments in affiliates, at fair value |
10,153 |
5,273 |
||||||
| Due from related parties |
958 |
734 |
||||||
| Property and equipment, net |
222 |
274 |
||||||
| Prepaid expenses |
1,457 |
906 |
||||||
| Other assets |
371 |
348 |
||||||
| Assets of Consolidated Funds |
||||||||
| Cash and cash equivalents |
37 |
37,080 |
||||||
| Investments, at fair value |
63,607 |
404,365 |
||||||
| Due from broker |
— |
16,438 |
||||||
| Receivable for securities sold |
38,700 |
— |
||||||
| Other assets |
1,620 |
1,210 |
||||||
| Total Assets |
$ |
139,630 |
$ |
514,145 |
||||
| Liabilities and Equity |
||||||||
| Liabilities |
||||||||
| Notes payable |
$ |
— |
$ |
1,263 |
||||
| Compensation payable |
7,162 |
7,836 |
||||||
| Due to related parties |
31 |
31 |
||||||
| Fees payable |
61 |
2,439 |
||||||
| Other liabilities |
1,251 |
1,127 |
||||||
| Liabilities of Consolidated Funds |
||||||||
| Notes payable of consolidated CLO, at fair value |
— |
384,901 |
||||||
| Payables for securities purchased |
38,034 |
— |
||||||
| Due to broker |
— |
24,462 |
||||||
| Other liabilities |
236 |
2,121 |
||||||
| Total Liabilities |
46,775 |
424,180 |
||||||
| Commitments and Contingencies |
||||||||
| Equity |
||||||||
| Preferred Stock, $0.0001 par value; 2,000,000 shares authorized; 0 shares issued and outstanding. |
— |
— |
||||||
| Class A Common Stock, $0.0001 par value; 180,000,000 shares authorized; 14,480,782 and 13,900,917 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively. |
1 |
1 |
||||||
| Class B Common Stock, $0.000001 par value; 20,000,000 shares authorized; 20,000,000 shares issued and outstanding. |
— |
— |
||||||
| Additional paid-in capital |
64,278 |
63,413 |
||||||
| Retained earnings (Accumulated deficit) |
(23,376) |
(18,965) |
||||||
| Accumulated other comprehensive income (loss) |
(49) |
(70) |
||||||
| Total stockholders' equity, ZAIS Group Holdings, Inc. |
40,854 |
44,379 |
||||||
| Non-controlling interests in ZAIS Group Parent, LLC |
19,609 |
22,258 |
||||||
| Non-controlling interests in Consolidated Funds |
32,392 |
23,328 |
||||||
| Total Equity |
92,855 |
89,965 |
||||||
| Total Liabilities and Equity |
$ |
139,630 |
$ |
514,145 |
||||
| ZAIS GROUP HOLDINGS, INC. AND SUBSIDIARIES |
||||||||||||||||
| Consolidated Statements of Comprehensive Income (Loss) (Unaudited) |
||||||||||||||||
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 2017 |
2016 |
2017 |
2016 |
|||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
4,223 |
$ |
3,654 |
$ |
11,019 |
$ |
10,794 |
||||||||
| Incentive income |
4,559 |
3,614 |
7,740 |
3,909 |
||||||||||||
| Reimbursement revenue |
418 |
— |
1,295 |
— |
||||||||||||
| Other revenues |
77 |
79 |
247 |
238 |
||||||||||||
| Income of Consolidated Funds |
85 |
— |
489 |
— |
||||||||||||
| Total Revenues |
9,362 |
7,347 |
20,790 |
14,941 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
5,775 |
6,908 |
18,808 |
23,914 |
||||||||||||
| General, administrative and other |
3,712 |
2,963 |
11,260 |
9,123 |
||||||||||||
| Depreciation and amortization |
118 |
79 |
229 |
206 |
||||||||||||
| Expenses of Consolidated Funds |
210 |
16 |
283 |
64 |
||||||||||||
| Total Expenses |
9,815 |
9,966 |
30,580 |
33,307 |
||||||||||||
| Other income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
81 |
46 |
195 |
83 |
||||||||||||
| Other income (expense) |
32 |
53 |
48 |
745 |
||||||||||||
| Net gain (loss) of Consolidated Funds' investments |
1,304 |
4,115 |
4,018 |
7,808 |
||||||||||||
| Net gain (loss) on beneficial interest of consolidated |
620 |
— |
2,118 |
— |
||||||||||||
| Total Other Income (Loss) |
2,037 |
4,214 |
6,379 |
8,636 |
||||||||||||
| Income (loss) before income taxes |
1,584 |
1,595 |
(3,411) |
(9,730) |
||||||||||||
| Income tax (benefit) expense |
9 |
(21) |
19 |
(12) |
||||||||||||
| Consolidated net income (loss), net of tax |
1,575 |
1,616 |
(3,430) |
(9,718) |
||||||||||||
| Other comprehensive income (loss), net of tax: |
||||||||||||||||
| Foreign currency translation adjustment |
(8) |
(61) |
31 |
(262) |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
1,567 |
$ |
1,555 |
$ |
(3,399) |
$ |
(9,980) |
||||||||
| Allocation of Consolidated Net Income (Loss), net of tax |
||||||||||||||||
| Non-controlling interests in Consolidated Funds |
$ |
977 |
$ |
1,902 |
$ |
3,184 |
$ |
3,688 |
||||||||
| Stockholders' equity, ZAIS Group Holdings, Inc. |
403 |
(286) |
(4,411) |
(9,196) |
||||||||||||
| Non-controlling interests in ZAIS Group Parent, LLC |
195 |
— |
(2,203) |
(4,210) |
||||||||||||
| Total Allocation of Consolidated Net Income (Loss), net of tax |
$ |
1,575 |
$ |
1,616 |
$ |
(3,430) |
$ |
(9,718) |
||||||||
| Allocation of Total Comprehensive Income (Loss) |
||||||||||||||||
| Non-controlling interests in Consolidated Funds |
$ |
977 |
$ |
1,902 |
$ |
3,184 |
$ |
3,688 |
||||||||
| Stockholders' equity, ZAIS Group Holdings, Inc. |
398 |
(326) |
(4,390) |
(9,370) |
||||||||||||
| Non-controlling interests in ZAIS Group Parent, LLC |
192 |
(21) |
(2,193) |
(4,298) |
||||||||||||
| Total Allocation of Total Comprehensive Income (Loss) |
$ |
1,567 |
$ |
1,555 |
$ |
(3,399) |
$ |
(9,980) |
||||||||
| Consolidated Net Income (Loss), net of tax per Class A common |
$ |
0.03 |
$ |
(0.02) |
$ |
(0.31) |
$ |
(0.66) |
||||||||
| Consolidated Net Income (Loss), net of tax per Class A common |
$ |
0.03 |
$ |
(0.02) |
$ |
(0.31) |
$ |
(0.66) |
||||||||
| Weighted average shares of Class A common stock outstanding: |
||||||||||||||||
| Basic |
14,480,782 |
13,900,917 |
14,315,387 |
13,887,997 |
||||||||||||
| Diluted |
21,480,782 |
20,900,917 |
21,315,387 |
20,887,997 |
||||||||||||
The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial position and results of operations:
| September 30, 2017 |
||||||||||||||||
| ZAIS |
Consolidated |
Consolidating Entries |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
$ |
16,241 |
— |
— |
16,241 |
|||||||||||
| Income and fees receivable |
6,264 |
— |
— |
6,264 |
||||||||||||
| Investments in affiliates, at fair value |
43,868 |
— |
(33,715) |
10,153 |
||||||||||||
| Due from related parties |
958 |
— |
— |
958 |
||||||||||||
| Property and equipment, net |
222 |
— |
— |
222 |
||||||||||||
| Prepaid expenses |
1,457 |
— |
— |
1,457 |
||||||||||||
| Other assets |
371 |
— |
— |
371 |
||||||||||||
| Assets of Consolidated Funds |
||||||||||||||||
| Cash and cash equivalents |
— |
37 |
— |
37 |
||||||||||||
| Investments, at fair value |
— |
63,607 |
— |
63,607 |
||||||||||||
| Receivable for securities sold |
— |
38,700 |
— |
38,700 |
||||||||||||
| Other assets |
— |
2,033 |
(413) |
1,620 |
||||||||||||
| Total Assets |
$ |
69,381 |
104,377 |
(34,128) |
139,630 |
|||||||||||
| Liabilities and Equity |
||||||||||||||||
| Liabilities |
||||||||||||||||
| Compensation payable |
$ |
7,162 |
— |
— |
7,162 |
|||||||||||
| Due to related parties |
31 |
— |
— |
31 |
||||||||||||
| Fees payable |
474 |
— |
(413) |
61 |
||||||||||||
| Other liabilities |
1,251 |
— |
— |
1,251 |
||||||||||||
| Liabilities of Consolidated Funds |
||||||||||||||||
| Notes payable of consolidated CLO |
— |
— |
— |
— |
||||||||||||
| Payables for securities purchased |
— |
38,034 |
— |
38,034 |
||||||||||||
| Other liabilities |
— |
236 |
— |
236 |
||||||||||||
| Total Liabilities |
8,918 |
38,270 |
(413) |
46,775 |
||||||||||||
| Commitments and Contingencies |
||||||||||||||||
| Equity |
||||||||||||||||
| Preferred Stock |
||||||||||||||||
| Class A Common Stock |
1 |
— |
— |
1 |
||||||||||||
| Class B Common Stock |
— |
— |
— |
— |
||||||||||||
| Additional paid-in-capital |
64,278 |
— |
— |
64,278 |
||||||||||||
| Retained earnings (Accumulated deficit) |
(23,376) |
— |
— |
(23,376) |
||||||||||||
| Accumulated other comprehensive income (loss) |
(49) |
— |
— |
(49) |
||||||||||||
| Total stockholders' equity, ZAIS Group Holdings, Inc. |
40,854 |
— |
— |
40,854 |
||||||||||||
| Non-controlling interests in ZAIS Group Parent, LLC |
19,609 |
— |
— |
19,609 |
||||||||||||
| Non-controlling interests in Consolidated Funds |
— |
66,107 |
(33,715) |
32,392 |
||||||||||||
| Total Equity |
60,463 |
66,107 |
(33,715) |
92,855 |
||||||||||||
| Total Liabilities and Equity |
$ |
69,381 |
104,377 |
(34,128) |
139,630 |
|||||||||||
| December 31, 2016 |
||||||||||||||||
| ZAIS |
Consolidated |
Consolidating Entries |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Assets |
||||||||||||||||
| Cash and cash equivalents |
$ |
38,712 |
$ |
— |
$ |
— |
$ |
38,712 |
||||||||
| Income and fees receivable |
8,805 |
— |
— |
8,805 |
||||||||||||
| 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 |
||||||||
| Three Months Ended September 30, 2017 |
||||||||||||||||
| ZAIS |
Consolidated |
Consolidating Entries |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
4,401 |
— |
(178) |
4,223 |
|||||||||||
| Incentive income |
4,559 |
— |
— |
4,559 |
||||||||||||
| Reimbursement revenue |
418 |
— |
— |
418 |
||||||||||||
| Other revenues |
77 |
— |
— |
77 |
||||||||||||
| Income of Consolidated Funds |
— |
2,163 |
(2,078) |
85 |
||||||||||||
| Total Revenues |
9,455 |
2,163 |
(2,256) |
9,362 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
5,775 |
— |
— |
5,775 |
||||||||||||
| General, administrative and other |
4,085 |
— |
(373) |
3,712 |
||||||||||||
| Depreciation and amortization |
118 |
— |
— |
118 |
||||||||||||
| Expenses of Consolidated Funds |
— |
210 |
— |
210 |
||||||||||||
| Total Expenses |
9,978 |
210 |
(373) |
9,815 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
1,098 |
— |
(1,017) |
81 |
||||||||||||
| Other income (expense) |
32 |
— |
— |
32 |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
41 |
1,263 |
1,304 |
||||||||||||
| Net gain (loss) on beneficial interest of consolidated |
— |
— |
620 |
620 |
||||||||||||
| Total Other Income (Loss) |
1,130 |
41 |
866 |
2,037 |
||||||||||||
| Income (loss) before income taxes |
607 |
1,994 |
(1,017) |
1,584 |
||||||||||||
| Income tax (benefit) expense |
9 |
— |
— |
9 |
||||||||||||
| Consolidated net income (loss), net of tax |
598 |
1,994 |
(1,017) |
1,575 |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
||||||||||||||||
| Foreign currency translation adjustment |
(8) |
— |
— |
(8) |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
590 |
1,994 |
(1,017) |
1,567 |
|||||||||||
| Three months Ended September 30, 2016 |
||||||||||||||||
| ZAIS |
Consolidated |
Consolidating Entries |
Consolidated |
|||||||||||||
| ( Dollars in Thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
3,872 |
$ |
— |
$ |
(218) |
$ |
3,654 |
||||||||
| Incentive income |
3,614 |
— |
— |
3,614 |
||||||||||||
| Other revenues |
79 |
— |
— |
79 |
||||||||||||
| Total Revenues |
7,565 |
— |
(218) |
7,347 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
6,908 |
— |
— |
6,908 |
||||||||||||
| General, administrative and other |
2,963 |
— |
— |
2,963 |
||||||||||||
| Depreciation and amortization |
79 |
— |
— |
79 |
||||||||||||
| Expenses of Consolidated Funds |
— |
234 |
(218) |
16 |
||||||||||||
| Total Expenses |
9,950 |
234 |
(218) |
9,966 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
2,025 |
— |
(1,979) |
46 |
||||||||||||
| Other income (expense) |
53 |
— |
— |
53 |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
4,115 |
— |
4,115 |
||||||||||||
| Total Other Income (Loss) |
2,078 |
4,115 |
(1,979) |
4,214 |
||||||||||||
| Income (loss) before income taxes |
(307) |
3,881 |
(1,979) |
1,595 |
||||||||||||
| Income tax (benefit) expense |
(21) |
— |
— |
(21) |
||||||||||||
| Consolidated net income (loss), net of tax |
(286) |
3,881 |
(1,979) |
1,616 |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
||||||||||||||||
| Foreign currency translation adjustment |
(61) |
— |
— |
(61) |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
(347) |
$ |
3,881 |
$ |
(1,979) |
$ |
1,555 |
||||||||
| Nine Months Ended September 30, 2017 |
||||||||||||||||
| ZAIS |
Consolidated |
Consolidating Entries |
Consolidated |
|||||||||||||
| ( Dollars in thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
11,526 |
— |
(507) |
11,019 |
|||||||||||
| Incentive income |
7,740 |
— |
— |
7,740 |
||||||||||||
| Reimbursement revenue |
1,295 |
— |
— |
1,295 |
||||||||||||
| Other revenues |
247 |
— |
— |
247 |
||||||||||||
| Income of Consolidated Funds |
— |
5,781 |
(5,292) |
489 |
||||||||||||
| Total Revenues |
20,808 |
5,781 |
(5,799) |
20,790 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
18,808 |
— |
— |
18,808 |
||||||||||||
| General, administrative and other |
11,924 |
— |
(664) |
11,260 |
||||||||||||
| Depreciation and amortization |
229 |
— |
— |
229 |
||||||||||||
| Expenses of Consolidated Funds |
— |
283 |
— |
283 |
||||||||||||
| Total Expenses |
30,961 |
283 |
(664) |
30,580 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
3,510 |
— |
(3,315) |
195 |
||||||||||||
| Other income (expense) |
48 |
— |
— |
48 |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
1,001 |
3,017 |
4,018 |
||||||||||||
| Net gain (loss) on beneficial interest of consolidated |
— |
— |
2,118 |
2,118 |
||||||||||||
| Total Other Income (Loss) |
3,558 |
1,001 |
1,820 |
6,379 |
||||||||||||
| Income (loss) before income taxes |
(6,595) |
6,499 |
(3,315) |
(3,411) |
||||||||||||
| Income tax (benefit) expense |
19 |
— |
— |
19 |
||||||||||||
| Consolidated net income (loss), net of tax |
(6,614) |
6,499 |
(3,315) |
(3,430) |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
||||||||||||||||
| Foreign currency translation adjustment |
31 |
— |
— |
31 |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
(6,583) |
6,499 |
(3,315) |
(3,399) |
|||||||||||
| Nine months Ended September 30, 2016 |
||||||||||||||||
| ZAIS |
Consolidated |
Consolidating Entries |
Consolidated |
|||||||||||||
| ( Dollars in Thousands ) |
||||||||||||||||
| Revenues |
||||||||||||||||
| Management fee income |
$ |
11,012 |
$ |
— |
$ |
(218) |
$ |
10,794 |
||||||||
| Incentive income |
3,909 |
— |
— |
3,909 |
||||||||||||
| Other revenues |
238 |
— |
— |
238 |
||||||||||||
| Total Revenues |
15,159 |
— |
(218) |
14,941 |
||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
23,914 |
— |
— |
23,914 |
||||||||||||
| General, administrative and other |
9,123 |
— |
— |
9,123 |
||||||||||||
| Depreciation and amortization |
206 |
— |
— |
206 |
||||||||||||
| Expenses of Consolidated Funds |
— |
282 |
(218) |
64 |
||||||||||||
| Total Expenses |
33,243 |
282 |
(218) |
33,307 |
||||||||||||
| Other Income (loss) |
||||||||||||||||
| Net gain (loss) on investments |
3,921 |
— |
(3,838) |
83 |
||||||||||||
| Other income (expense) |
745 |
— |
— |
745 |
||||||||||||
| Net gains (losses) of Consolidated Funds' investments |
— |
7,808 |
— |
7,808 |
||||||||||||
| Total Other Income (Loss) |
4,666 |
7,808 |
(3,838) |
8,636 |
||||||||||||
| Income (loss) before income taxes |
(13,418) |
7,526 |
(3,838) |
(9,730) |
||||||||||||
| Income tax (benefit) expense |
(12) |
— |
— |
(12) |
||||||||||||
| Consolidated net income (loss), net of tax |
(13,406) |
7,526 |
(3,838) |
(9,718) |
||||||||||||
| Other Comprehensive Income (Loss), net of tax |
||||||||||||||||
| Foreign currency translation adjustment |
(262) |
— |
— |
(262) |
||||||||||||
| Total Comprehensive Income (Loss) |
$ |
(13,668) |
$ |
7,526 |
$ |
(3,838) |
$ |
(9,980) |
||||||||
The following tables present the reconciliations of our consolidated GAAP net income, net of tax, to (i) our non-GAAP financial measure of net income (loss) (excluding Consolidated Funds of ZAIS Group) and (ii) our non-GAAP financial measure of Adjusted EBITDA:
| Three Months Ended |
||||||||
| 2017 |
2016 |
|||||||
| (Dollars in thousands) |
||||||||
| Consolidated net income (loss), net of tax (GAAP Net Income (Loss)) |
$ |
1,575 |
$ |
1,616 |
||||
| Add back: Elimination of Management fee income |
178 |
218 |
||||||
| Less: Income of Consolidated Funds |
(85) |
— |
||||||
| Less: Elimination of rebate expense |
(373) |
— |
||||||
| Add back: Elimination of Net gain (loss) on investments |
1,017 |
1,979 |
||||||
| Add back: Expenses of Consolidated Funds |
210 |
16 |
||||||
| Net (gain) loss on Consolidated Funds' investments |
(1,304) |
(4,115) |
||||||
| Net (gain) loss on beneficial interest of consolidated collateralized financing entity |
(620) |
— |
||||||
| Net income (loss) (excluding Consolidated Funds of ZAIS Group) – Non-GAAP |
598 |
(286) |
||||||
| Add back: Tax expense |
9 |
(21) |
||||||
| Add back: Compensation attributable to equity compensation |
68 |
1,269 |
||||||
| Add back: Severance costs |
— |
27 |
||||||
| Add back: Depreciation and amortization |
118 |
79 |
||||||
| Adjusted EBITDA – Non-GAAP |
$ |
793 |
$ |
1,068 |
||||
| Nine Months Ended |
||||||||
| 2017 |
2016 |
|||||||
| (Dollars in thousands) |
||||||||
| Consolidated net income (loss), net of tax (GAAP Net Income (Loss)) |
$ |
(3,430) |
$ |
(9,718) |
||||
| Add back: Elimination of Management fee income |
507 |
218 |
||||||
| Less: Income of Consolidated Funds |
(489) |
— |
||||||
| Less: Elimination of fee rebate expense |
(664) |
— |
||||||
| Add back: Elimination of Net gain (loss) on investments |
3,315 |
3,838 |
||||||
| Add back: Expenses of Consolidated Funds |
283 |
64 |
||||||
| Net (gain) loss on Consolidated Funds' investments |
(4,018) |
(7,808) |
||||||
| Net (gain) loss on beneficial interest of consolidated collateralized financing entity |
(2,118) |
— |
||||||
| Net income (loss) (excluding Consolidated Funds of ZAIS Group) – Non-GAAP |
(6,614) |
(13,406) |
||||||
| Add back: Tax expense |
19 |
(12) |
||||||
| Add back: Compensation attributable to equity compensation |
1,236 |
2,951 |
||||||
| Add back: Severance costs |
72 |
789 |
||||||
| Add back: Depreciation and amortization |
229 |
206 |
||||||
| Adjusted EBITDA – Non-GAAP |
$ |
(5,058) |
$ |
(9,472) |
||||
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 $4.144 billion of assets under management as of September 30, 2017. 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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